Daimler Chrysler Logistics Rail OutlookhMarc A. Brazeau hManager, North American Logistics Integration hDaimlerChrysler Corporation h h Strictly ConfidentialC H R Y S L E R G R O U P2*C H R Y S L E R G R O U PC H R Y S L E R G R O U PDeliveryDeliveryTechnologyTechnologyQualityQualityCostCostPhilosophySupplyTechnologyQualityCostPhilosophyProcurement 5.8% last year alone.hIntermodal opportunity: strengthening economy truckload capacity service improvements The Transportation sector represents 8% of total rail freight revenue Rail and intermodal provide a cost effective alternative to traditional transportation for the automotive industry+5.8%Strictly ConfidentialC H R Y S L E R G R O U PDCX Parts & Materials Transportation2002 Logistics Expenditures% of Spendh70,000 part shipments per dayhDaily, we unload 7700 truckloads 140 rail cars+30% from 2001Strictly ConfidentialC H R Y S L E R G R O U PLaredoSalem, IL DetroitChicagoNetwork Optimization Chrysler Grouph Value-added partnerships provide strategic solutionsh Collaboration of multiple service providers (Ryder, CSX, Union Pacific, TFM) provides lower cost alternative unique to DCX.h Over 50 direct suppliers plus RILC material launched on stack train.h 18% savings: $14.2 million.Collaboration of Strategic PartnersNorth and Southbound Stack TrainStrictly ConfidentialC H R Y S L E R G R O U PDCX Finished Vehicle Logistics2002 Logistics Expenditures% of Spendh Ship 11,000 vehicles per day Over 2.5 million vehicles in 2002.h 75% of all vehicles move via rail during their route from manufacturing point to dealer+6% from 2001Strictly ConfidentialC H R Y S L E R G R O U PTechnologySpeedConsistencyAdvanced Planning & IntegrationNetwork ManagementInternet-based Information SystemCritical Factors for Vehicle Delivery ProcessOrigin Motor CarrierLoad FacilityOrigin RailroadDest RailroadUnload FacilityDest Motor CarrierPlantDealerTechnology Standardized Launch Planning Increased Carrier Base Extended Enterprise CAPS Modeling VIN Vision VIN Logic Route Optimization Asset Planning Performance MeasurementStrictly ConfidentialC H R Y S L E R G R O U PSupplyVisibilityPlanningExecutionNetwork ManagementNetwork Integration (Field Operations)Vehicle Delivery Process & Network Planning (Network Simulation) VesselsAssemblyFacilities & PortsRailroadsMotor Carriers Speed to Market & Reliability, Visibility Process Control & Continuous Improvement Visibility, Responsiveness & Customer SatisfactionStrictly ConfidentialC H R Y S L E R G R O U PCapacity vs. DemandIndustry volumes in North America are projected to increase by 7% per year from 2003 to 2007Introduction of trucks, SUVs and crossover vehicles will impact rail car supplyThere is a widening gap between railcar requirements and available supplyRailcar Capacity vs. DemandStrictly ConfidentialC H R Y S L E R G R O U PAsset Management Improve transit time to reduce the gap between equipment capacity and demand Make necessary capital equipment expenditures to increase capacity of bi-levels and Q2 carsRailcar Capacity vs. DemandStrictly ConfidentialC H R Y S L E R G R O U PNetwork Optimization Chrysler GroupOcean movement of finished vehicles from Mexico to east coast rampsDamage frequency reducedTransit time maintainedCost savings provided of $1.6 million per yearStrictly ConfidentialC H R Y S L E R G R O U PQuality - Damage Preventionh In 2002, Railroads paid $142.4 million for loss and damageh 38.8 %, or $55.2 million is attributed to transportation equipment 2002 Loss & Damage Payments by CommodityCoal, Ore, Minerals 3.3%Food Products 11.6%Chemicals 5.6%Misc. Mixed 18.1%Farm Products 8.7%Transportation Equipment 38.8%Metal Products & Machinery 3.9%Lumber, Wood & Paper Products 10.0%Strictly ConfidentialC H R Y S L E R G R O U PUS Auto Market ForecastMillion Units$/VehicleUnited StatesBig 3 IncentivesIndustry SAARStrictly ConfidentialC H R Y S L E R G R O U PEffectively Track FundingSource: Eno Transportation Foundation Hurdle rate of 10% for rail capital programs seems conservative Automotive commodity draws on capital: Line expansion Terminal capacity Asset Management Impact on captive shippers: Subsidizing modal competitive commodities Reduced leverageStrictly ConfidentialC H R Y S L E R G R O U PInvestment Pyramid Suggests that investment is needed to satisfy volume capacity Must consider the range of commodity needs Public funding needs to be tied to: Open access Co-production Commodity parityGrade crossings, branch & commuter linesCorridor capacity, intermodal & terminalsStrictly ConfidentialC H R Y S L E R G R O U PAutomotive Freight CorridorsAssessment of freight corridors: Report example 2: Chicago gateway connections Report example 3: Northeast congestion Report example 5: Detroit Mexico corridorAutomotive requirements: Terminal & yard capacity Regional line capacity Dimensional clearances Plan for growthStrictly ConfidentialC H R Y S