ww

w.r

ica

rdo

.co

m

©R

icard

o p

lc 2

00

9

Federal Reserve Automotive Symposium

June 4, 2009

2©

Ric

ard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Agenda

–2:0

0 W

elc

om

e &

Ove

rvie

wD

ave S

hem

mans, C

EO

Ric

ard

o p

lc

Dean H

arlow

, P

resid

ent, N

ort

h A

merica

–2:1

0 S

trate

gic

Consultin

gA

ndy C

hie

n, P

resid

ent, S

trate

gic

Consultin

g

–2:2

5 F

uel E

conom

y O

verv

iew

–T

ota

l V

ehic

le F

uel E

conom

y S

andy S

tojk

ovski, D

irecto

r

–V

ehic

le E

lectr

ific

ation

–E

thanol B

ooste

d D

irect In

jection

Engin

e (

EB

DI)

Rod B

eazle

y, D

irecto

r

–2:5

5 Q

uestions

–F

acili

ty T

ou

rT

hre

e facili

ty tou

r g

roups

ww

w.r

ica

rdo

.co

m

©R

icard

o p

lc 2

00

9

Welcome

Dave Shemmans

CEO

Ricardo plc

ww

w.r

ica

rdo

.co

m

©R

icard

o p

lc 2

00

9

Ricardo Overview

Dean Harlow

President

Ricardo, Inc.

5©

Ric

ard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Ricardo is an Eco-innovation Technology Company Offering:

-Product Engineering/R&D

-Software

-Management Consulting

Governmental Agencies

Oil Companies

and Utilities

Financial Firms

Clean Energy

DefenseSector

Suppliers

and Afterm

arket

On/Off Highway

Automotive

UK

Mo

DT

AC

OM

Global Client Base

Partial List

6©

Ric

ard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Ricardo is on the leading edge of new technologies……

The Ricardo Advantage

Clean

Energy

Vehicle

Engineering

Driveline

Systems

Advanced

Technology

Controls and

Electronics

Ricardo Product Areas

Diesel and

Gasoline Engines

Hybrid

Systems

to h

ere

…

Rapid Prototypes

Advanced Hybrid Systems and

Battery Technology

Efficient Power

……adapting to real world needs…….

5.7L HEMI®Engine

BugattiVeyronTransmission

……and looking towards the future.

Vehicle To Grid

Unmanned Vehicles

RICARDO

RICARDO

7©

Ric

ard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Automotive Has Collapsed Overnight, But Still

ProfitablePrior FY Order

Intake

Order Intake to Date

July ’07 -June ’08

July ’08 –April ‘09

Marg

ins &

Mix

=$ Profitability Maintained

Volu

me

Costs

8©

Ric

ard

o p

lc 2

00

9R

D.0

8/#

###

##.#

�M

ilita

ry f

ue

l re

ductio

n

ag

en

da

–#

2 p

rio

rity

fo

r g

roun

d

fle

et

�S

tate

le

gis

lation

-R

en

ew

ab

le P

ort

folio

S

tan

da

rds

�E

ffic

ien

cy

issue

s e

xplo

din

g

in a

dja

ce

nt

mark

ets

�A

uto

s s

till

90

%+

ga

s–

Do

wn

siz

ing

, D

I, turb

o‘s

, V

VT

, D

CT

‘s�

Fu

el p

rice s

pik

es

�C

AF

E s

tan

dard

s -

35

% F

E

imp

rove

me

nt

requir

ed

�A

cce

lera

tes g

row

th o

f a

lte

rna

tive

pro

pu

lsio

n–

Ve

hic

le E

lectr

ific

atio

n -

hyb

rid

ve

rsio

n o

f eve

ry

mo

de

l–

$2

B a

dva

nce

d b

atte

ry

pa

ck m

ark

et b

y 2

01

1�

Ve

hic

le to G

rid

�O

ff-H

wy

reg

ula

tion

s

�$

40

B in D

OE

fu

ndin

g�

Oil

Ind

ep

end

ence

–

1M

PH

EV

’sb

y 2

01

5�

Fu

el d

ive

rsity

–B

io-f

ue

ls lik

e e

than

ol –

EB

DI

�C

lea

n E

ne

rgy

-w

ind

& s

ola

r

Key Business Drivers are Strong

Strategy Go W

here the Money Is

Global Climate Change

CAFE/CO2 Regulations

Government Stimulus

Sourc

e:

Ricardo is in the Sweet SpotNew

ww

w.r

ica

rdo

.co

m

©R

icard

o p

lc 2

00

9

Emerging Strategic Issues That Will Help

Shape the North American Auto Industry

Andy Chien

President and Managing Director –RSC North America

10

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

On top of the macro-economic slowdown, the auto industry

faces additional disruptors that will reshape the industry

Economic Volatility

Sector "Ecosystem" Damage

Product Mix Uncertainty

Disruptive Technologies

�N

early

unpre

cedente

dvo

latilit

y in

exc

hange r

ate

s, fa

cto

r in

puts

(ste

el,

copper,

pre

cio

us m

eta

ls)

and e

nerg

y im

pacting b

oth

costs

and r

eve

nues

�A

uto

motive

valu

e c

hain

(supply

chain

, dis

trib

ution)

seve

rely

dis

rupte

d b

y dow

ntu

rn a

nd r

estr

icte

d c

apita

l flow

s;

may

constr

ain

recove

ry

�R

apid

ly s

hift

ing c

onsum

er

pre

fere

nces a

nd e

volv

ing federa

l and

sta

te leve

l re

gula

tions leadin

g to

his

toric leve

ls o

f pro

duct uncert

ain

ty

�G

reen (

CO

2, ta

ilpip

e e

mis

sio

ns),

and

energ

y security

legis

lation

drivi

ng a

ccele

rate

d a

doption o

f dis

ruptive

technolo

gie

s

Future

State

Industr

y challe

nges

11

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Emerging

Issues

Automakers need to be form

ulate a response to these future

issues C

ritical Supplier

Viability

�O

pe

rational im

pro

vem

ent support

to a

ssis

t critical

supplie

rs w

ith a

part

icula

r fo

cus o

n "

chokepoin

t"

supplie

rs w

ith fe

w v

iable

altern

atives d

ue to t

echn

olo

gy

or

pro

duct

capabili

ties

Portfolio Optimization

�P

ort

folio

and technolo

gy

div

ers

ific

ation s

trate

gie

s t

o

reduce r

isk a

ssocia

ted w

ith u

ncert

ain

energ

y p

rices,

consum

er

pre

fere

nces, changin

g r

egula

tory

environm

ent

Scalable Energy

Optimized Vehicle PD

Process/Practices

�R

ein

venting the P

roduct D

evelo

pm

ent

(PD

) p

rocess to

facili

tate

the d

evelo

pm

ent and p

roduction o

f energ

y optim

ized v

ehic

les

Em

erg

ing is

sues

Product Development

Cycle Time Reduction

�D

ram

atic p

roduct

cyc

le tim

e r

eductions to b

ett

er

matc

h

develo

pm

ent tim

es w

ith f

utu

re m

ark

et vola

tilit

y

12

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

A fundamental disconnect exists between development and

market cycle times, adding additional risk to the enorm

ous

cost of new vehicle development

Current Automotive Development is a High

Investment, Long Lead Activity

Shifts in Market Drivers Can Occur in Far

Less Time

�A

vera

ge p

rogra

m c

ost

–M

Y U

pdate

(~

5%

of conte

nt)

: <

$10M

–M

id-C

ycle

Enhancem

ent/M

inor

Upgra

de

(~20%

): $

100M

to $

150M

–M

ajo

r U

pgra

de (

~50%

): $

150M

to $

250M

–N

ew

Vehic

le (

~90%

): $

500M

to $

1B

�A

vera

ge D

eve

lopm

ent tim

e

–M

odel Y

ear

Update

: 9 to 1

2 m

onth

s

–M

id-C

ycle

Enhancem

ent/M

inor

Upgra

de:

12 to 1

8 m

onth

s

–M

ajo

r U

pgra

de: 18 to 2

4 m

onth

s

–N

ew

Vehic

le: 36 to 6

0 m

onth

s

Sourc

e: W

arr

anty

Week,

Auto

loan

Daily

, Japan T

imes,

EIA

, R

icard

o A

naly

sis

Issue D

eep D

ive: P

D c

ycle

tim

e c

om

pre

ssio

n

Direct cost of poorly

deve

loped v

ehic

les a

re

enorm

ous: $24B

in industr

y w

arr

anty

costs

, 10.8

M

vehic

les r

ecalle

d in 2

008

During the 5

4 m

onth

Gen III P

rius

deve

lopm

ent cyc

le, oil

prices/b

arr

el w

ent fr

om

$40 to $

140, and b

ack to $

36

!

020406080100

120

140

Gen III PriusProgram

AvgOil Price ($/Barrel)

2001 to 2

010 (

month

ly)

Average Crude Oil Price/Barrel (2001 –present)

13

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

As automakers regroup and seek competitive advantage,

cycle time reduction needs to be aggressively addressed

Resource front loading:

Bu

ild the

blu

ep

rin

t an

d

exe

cu

te to

it

Requirements

Optimization:

Elim

ina

te

wa

ste

fro

m o

ver/

unde

r spe

cific

ation

Simulation vsTrial &

Error Experimentation:

Acce

lera

te c

ycle

s o

f le

arn

ing

Commonality:

Re

use

vs

con

tinua

l R

e-in

ven

tion

Evolutionary

Development:

Sin

gle

s/

Doub

les v

s.

Hom

e

Run

s/G

rand

Sla

ms

Technology Portfolio

Development:

Bo

oksh

elf

pro

du

ctio

n r

ea

dy

techno

logy

Earlier Supplier

Integration:

Pre

-se

lectio

n a

nd

ea

rly

co

-de

velo

pm

en

t

New Product Development ("V-Model") Cycle Time Reduction Levers

Issue D

eep D

ive: P

D c

ycle

tim

e r

eductio

n le

vers

ww

w.r

ica

rdo

.co

m

©R

icard

o p

lc 2

00

9

Total Vehicle Fuel Economy

Sandy Stojkovski

Director

ww

w.r

ica

rdo

.co

m

©R

icard

o p

lc 2

00

9

Vehicle Electrification

16

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Hybrid and Electric Vehicles are Completely

Electrifying the Vehicle

12V

Battery

DC/DC

Converter Automated

Manual

Transmission

Main

E-

Machine

Inverter

For Main

E-Machine

Battery

Engine

Starter /

Generator

Starter /

Generator

Inverter

Electric A/C

Compressor

High-Voltage

Junction and

Fuse Box

17

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Batteries are Key to the Electric Vehicle Solution

�C

om

ple

te,

outs

ourc

ed b

att

ery

pack d

esig

n a

nd inte

gra

tion

�S

eam

less e

xte

nsio

n o

f custo

mer’s b

att

ery

sys

tem

develo

pm

ent

�E

valu

ation in o

ur

Batt

ery

Sys

tem

Develo

pm

ent

Cente

r

Cells

Vehic

les

Packs

Module

s

18

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

A new generation of electronic technology is

required to help meet these challenges

Cutting

Emissions/

Pollution

Reducing

Congestion

Improving Road

Safety

�Recent advances in Electronics technology

provides increased inform

ation

–G

PS

/ M

ap s

yste

ms for

navi

gation, Long a

nd

Short

range r

adar,

RD

S/T

MC

Tra

ffic

info

, T

ele

matics info

rmation…

�These systems can be used to improve

Environmental Perform

ance:

–R

eduction o

f F

uel C

onsum

ption, C

O2

em

issio

ns

and P

ollu

tant em

issio

ns v

ia b

etter

pow

ert

rain

contr

ol

–T

he m

ore

fle

xible

the futu

re p

ow

ert

rain

, th

e b

igger

the p

ote

ntial gain

..

�They can also provide inform

ation for improved

Safety…

–W

arn

ings for

Pro

xim

ity,

Lane D

epart

ure

, A

dve

rse

Conditio

ns,

Appro

achin

g H

azard

; In

puts

to

Sta

bili

ty C

ontr

ol /

Active

Chassis

pro

gra

ms

–P

ossib

le futu

re s

ourc

e o

f in

form

ation for

Safe

D

rivi

ng E

nfo

rcem

ent and A

uto

mate

d A

ccid

ent

Avo

idance

�Congestion can be reduced by better traffic

management & reducing accidents.

ww

w.r

ica

rdo

.co

m

©R

icard

o p

lc 2

00

9

Ethanol Boosted Direct Injection Engine

“EBDI”

Rod Beazley

Director

20

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Ricardo Ethanol Boosted Direct Injection

(EBDI®)

Research Engine

Environment

Reduce CO2Emissions

21

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Future Engine Challenges -Drivers of Change

Emissions Legislation

Tie

r 4

Re

trofit e

mis

sio

ns

20

10

C0

2le

gis

latio

n

FUEL

FUEL

FUEL

FUEL

Die

sel vs

ga

s c

ost d

iffe

ren

tial

Va

riab

ility

/ V

ola

tility

of

fue

l co

sts

Ava

ilab

ility

of

alte

rna

tive

fue

ls

Technology Advancement

Em

issio

ns d

rive

n a

fte

rtre

atm

en

t co

mple

xity

Ga

solin

e /

SI eff

icie

ncy

ad

van

cem

en

tW

ast

e h

ea

t re

cove

ry

Increasing Customer Demands

Co

st

redu

ctio

nR

edu

ced

co

st

of

ow

ne

rsh

ipIn

cre

asin

g e

ngin

e o

utp

ut

5

ww

w.r

ica

rdo

.co

m

©R

icard

o p

lc 2

00

9

DE

LIV

ER

ING

VA

LU

E T

HR

OU

GH

IN

NO

VA

TIO

N &

TE

CH

NO

LO

GY

Fuel econom

y im

pro

vem

ent

solu

tions

for

multip

le a

pplic

ations:

Passenger cars

Truck and medium duty vehicles

Off road applications: Agricultural and Construction

3.2

L S

park

Ignited e

ngin

e r

unnin

g o

n E

85 e

thanol w

ith p

erf

orm

ance o

f 6-7

L D

iese

l engin

e

Fully

fle

xib

le p

ow

ert

rain

optim

ized f

or

opera

tion o

n s

tandard

pum

p g

aso

line to E

85

0

100

200

300

400

500

600

700

800

900

1000

01000

2000

3000

4000

5000

6000

Engine Speed (rpm)

Torque (Nm)

EBDI E85 - Target

6,000lb Gas Engine

8,500lb Diesel Engine

6,000lb Diesel Engine

700 Nm available across 3,600 rpm range

Downsizing = “Doing More W

ith Less”

Ethanol Boosted Direct Injection (EBDI)®

EBDI=

EXTREME

Downsizing

Unprecedented Spark

Unprecedented Spark

Unprecedented Spark

Unprecedented Spark- ---Ignited Performance

Ignited Performance

Ignited Performance

Ignited Performance

A scaleable SI engine technology package

Vastly Reduced CO

Vastly Reduced CO

Vastly Reduced CO

Vastly Reduced CO2 222Emission

Emission

Emission

Emission

100

150

200

250

300

350

400

450

500

550

600

FTP75

US06

HFET

Test Cycle

CO2 emission (g/km)

Current Diesel

Current NA Gas

EBDI Gas

EBDI E85

Ric

ard

o C

onfide

ntial

25 F

ebru

ary

20

09

©R

icard

o p

lc 2

00

9

23

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

EBDI®–Regulated Cycle CO2Reduction

�In

itia

l sim

ula

tion p

erf

orm

ed

on 8

,000 lb tru

ck s

ho

ws e

xcelle

nt re

sults for

the

E

BD

I®concept

�F

urt

he

r im

pro

ve

ment po

tential w

ith fin

al drive r

atio

adju

stm

ent

Gasoline

Diesel

Ratio

4.027

3.1

1.30

2.364

1.81

1.31

1.532

1.41

1.09

1.152

11.15

0.852

0.71

1.20

0.667

0.61

1.09

TransmissionsFTP 75

HWFET

US06

NA GAS

-60

40

140

240

340

440

540

640

740

840

940 550

1550

2550

3550

4550

Vehicle Speed

Engine Torque

US06

FTP75

HWFET

Diesel

-60

40

140

240

340

440

540

640

740

840

940 550

1550

2550

3550

4550

Engine Speed

Engine Torque

US06

FTP75

HWFET

EBDI 3.2L

-60

40

140

240

340

440

540

640

740

840

940 550

1550

2550

3550

4550

Engine Speed

Engine Torque

US06

FTP75

HWFET

100

150

200

250

300

350

400

450

500

550

600

FTP75

US06

HFET

Test Cycle

CO2 emission (g/km)

Current Diesel

Current NA Gas

EBDI Gas

EBDI E85

Engine Speed

24

©R

icard

o p

lc 2

00

9R

D.0

8/#

###

##.#

Thank You