Johnson Controls & China: Lithium-Lined Path to the Electric Car

1. Johnson Controls & China:Lithium-Lined Path to the Electric Car International Business Environment May 3, 2010 Evelyn Furia, Kristen Gunthardt, Ben Kelly, Erica Pilarski, and Amy Schatz

2. Overview • Johnson Controls • Milwaukee-based auto parts and commercial building parts manufacturing company • Position • Cutting edge lithium battery innovator • Leading producer of electric car batteries • Research Investments • Stimulus grant for lithium research facility in U.S. • Increased presence in China • FDI Proposal • Secure affordable lithium supply as Johnson Control’s dependence on this raw material is expected to increase • Make a long-term investment to improve vertical integration of operations • $125 MM investment in China’s Tibet Mineral Company for a 50% stake The JV Lithium Market Political Issues Political Issues Costs/ Currency Costs & Currency Risk & Reward Risks & Reward Overview 2 2

3. The Investment • Tibet Mineral Development Corp • Parent holding company of target lithium subsidiary, Shenzhen ZBY Lithium Trading Company Johnson Controls Financial Position • 2009 recession led to net loss of $338 MM • Reduced investment expenditures resulted in higher cash position. • Investment expenditures typically exceed $1B • Holds exclusive mining rights to brine lithium extraction from Zhabuye Salt Lake in Tibet • $954 MM USD market cap • Lithium Subsidiary Investment Estimate • Based on capital costs of other companies’ lithium projects • Capital costs range from $90MM up to $500MM • Vertical integration of operations into lithium ion manufacturing • Hedging risks of increased demand by securing raw material supply through joint venture. • Investment could cost between $125MM and $477MM USD The JV Lithium Market Political Issues Political Issues Costs/ Currency Costs & Currency Risk & Reward Risks & Reward Overview 3 3

4. Lithium Market The JV Lithium Market Political Issues Political Issues Costs/ Currency Costs & Currency Risk & Reward Risks & Reward Overview 4 4

5. Doing Business in China • Timing • First mover advantage to secure dependable lithium supply • Government incentives for green technologies • Lithium Reserves in China • 3rd largest supply of brine reserves in the world • Higher processing costs lead to reliance on lithium imports • Risks to Investing in Tibet • Political & PR risks • Geographic challenges • Foreign Direct Investment in China • Johnson Controls has China manufacturing facilities and experience operating in country • FDI would be in form of a Cooperative Joint Venture, which provides limited liability and profits/risks can be established under contract. The JV Lithium Market Political Issues Costs/ Currency Costs & Currency Risk & Reward Risks & Reward Overview 5 5

6. Costs & Currency Analysis • Supply and Demand • Demand is predicted to rise • Hybrid electric vehicles • Alloys, pharmaceutical, etc. • Supply is also predicted to rise • Excess capacity • Higher cost capacity coming back online • Relatively stable prices • Currency Risk • Less risk in changing value of the Yuan – pegged to the dollar • Currency value of major producing country currencies can effect lithium price • Balance of payments weighted by market share • Argentina – above 0 since 2001 • Chile – stable around 0 since 2001 • Australia – deficit continues • Downward pressure on prices due to currency valuations • Lithium accounts for only ~3% of total battery costs The JV Lithium Market Political Issues Political Issues Costs & Currency Risk & Reward Risks & Reward Overview 6 6

7. Risk and Reward At this time, Johnson Controls should not invest in Tibet Mineral Company The JV Lithium Market Lithium Market Political Issues Political Issues Costs/ Currency Costs & Currency Risk & Reward Overview 7 7