1. November 27, 2009 Global: Automobiles
November 27, 2009
Global: Automobiles
Identifying global long-term winners: Toyota, Volkswagen and Fiat
Three key structural trends to 2020 Introducing our GS Autos Scorecard Global Automotive Research Team
We see BRICs growth and the carbon challenge as To identify long-term industrial winners within EMEA
Stefan Burgstaller | Goldman Sachs International
key influences on the next cycle. We identify and global autos we have measured our coverage Shane McKenna | Goldman Sachs International
quantify three key structural trends the global against six key success factors (the GS Autos Tim Rothery | Goldman Sachs International
Maty Ndiaye | Goldman Sachs International
automotive industry will face in the next decade: Scorecard). We highlight Toyota, VW, Fiat, Anton Farlenkov | OOO Goldman Sachs Bank
Hyundai, and Honda as well positioned. Artyom Golodnov | OOO Goldman Sachs Bank
(1) Global economic realignment: we expect this US
to drive up global car sales by 70% over the next Patrick Archambault | Goldman Sachs & Co.
ten years, an US$86 bn/€60 bn opportunity.
Attractive annual return potential Aditya Oberoi | Goldman Sachs & Co.
Asia
Despite a track record of underperformance, the Rajeev Das | Goldman Sachs Japan Co., Ltd.
(2) The cost of CO2 compliance: we estimate a automotive sector has provided investors with Kota Yuzawa | Goldman Sachs Japan Co., Ltd.
Yuichiro Isayama | Goldman Sachs Japan Co., Ltd.
US$117 bn/€80 bn headwind to industry profits significant annual performance opportunities. The Yukihiro Koike | Goldman Sachs Japan Co., Ltd.
over the next decade. spread between the annual top and bottom Rosa Kim | Goldman Sachs (Asia) L.L.C., Seoul Branch
Sandeep Pandya | Goldman Sachs India SPL.
(3) Negative mix-shift: emerging market growth performer has been an average 102% since 1973.
GS SUSTAIN Research Team
and changing consumer behavior could reduce Sarah Forrest, CFA | Goldman Sachs (Singapore) Pte
industry profits by US$26 bn/€18 bn we believe. Long-term winners: Toyota, VW and Fiat Andrew Howard | Goldman Sachs International
Marc Fox | Goldman, Sachs & Co.
Our investment framework identifies Toyota Melissa Epperly | Goldman Sachs International
Consolidation to pursue 'relevant scale' (rated Buy), VW (Conviction Buy) and Fiat (Buy) as Sara Finan | Goldman Sachs International
To offset profit headwinds over the next decade, attractive long-term winners.
we estimate the industry must double annualized In addition, we highlight Ford (Conviction Buy) as Coverage views
net cost savings to 200 bp pa vs. the last cycle. our preferred global restructuring play. Europe: Attractive
US: Attractive
We believe consolidation will be part of the
Japan: Attractive
industry’s response, given limits to cost cutting. Given volatile returns, no auto company qualifies
Asia: Attractive
Our analysis highlights Fiat, PSA and Suzuki as for inclusion in our GS SUSTAIN focus list.
attractive industrial partners.
Stefan Burgstaller The Goldman Sachs Group, Inc. does and seeks to do business with
+44(20)7552-5784 | stefan.burgstaller@gs.com Goldman Sachs International companies covered in its research reports. As a result, investors should
Tim Rothery, CFA be aware that the firm may have a conflict of interest that could affect
+44(20)7774-6987 | tim.rothery@gs.com Goldman Sachs International the objectivity of this report. Investors should consider this report as
Patrick Archambault, CFA only a single factor in making their investment decision. For Reg AC
(212) 902-2817 | patrick.archambault@gs.com Goldman, Sachs & Co. certification, see the end of the text. Other important disclosures follow
Kota Yuzawa the Reg AC certification, or go to www.gs.com/research/hedge.html.
+81(3)6437-9863 | kota.yuzawa@gs.com Goldman Sachs Japan Co., Ltd. Analysts employed by non-US affiliates are not registered/qualified as
research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc. Global Investment Research
Goldman Sachs Global Investment Research 1

2. November 27, 2009 Global: Automobiles
Table of contents
Executive summary 13
Industry analysis: Global economic realignment 33
Industry analysis: CO2 challenge 49
Industry analysis: Mix-shift 69
Industry analysis: GS Autos Scorecard 75
Industry analysis: Consolidation 93
Investment framework 105
GS SUSTAIN: Overview 121
GS SUSTAIN: ESG framework 131
Company profiles 149
Disclosures 227
Analyst Contributors
Anthony Ling, Global CIO, Keith Hayes DOR Asia, Anthony Carpet DOR Americas
EUROPE AUTOS AMERICAS AUTOS ASIA AUTOS GS SUSTAIN GLOBAL ECONOMICS
Stefan Burgstaller Patrick Archambault Rajeev Das Sarah Forrest, CFA Puneet Gambhir Jim O’Neill
stefan.burgstaller@gs.com patrick.archambault@gs.com rajeev.das@gs.com sarah.forrest@gs.com puneet.gambhir@gs.com jim.oneill@gs.com
Shane McKenna Aditya Oberoi Kota Yuzawa Andrew Howard Louise Nankiinga Dominic Wilson
shane.mckenna@gs.com aditya.oberoi@gs.com kota.yuzawa@gs.com andrew.howard@gs.com louise.nankiinga@gs.com dominic.wilson@gs.com
Tim Rothery Yuichiro Isayama Marc Fox Peter Berezin
tim.rothery@gs.com yuichiro.isayama@gs.com marc.fox@gs.com SPECIAL SITUATIONS peter.berezin@gs.com
Maty Ndiaye Yukihiro Koike Melissa Epperly Charles Burrows Anna Stupnytska
maty.ndiaye@gs.com yukihiro.koike@gs.com melissa.epperly@gs.com charles.burrows@gs.com anna.stupnytska@gs.com
Sherri Malek
Rosa Kim Sara Finan
sherri.malek@gs.com
rosa.kim@gs.com sara.finan@gs.com
Anton Farlenkov
Sandeep Pandya Stian Obrestad
anton.farlenkov@gs.com
sandeep.pandya@gs.com stian.obrestad@gs.com
Artyom Golodnov
Kristina Obrtacova
artyom.golodnov@gs.com Yipeng Yang
kristina.obrtacova@gs.com
yipeng.yang@ghsl.cn
We would like to thank Brian J. Jacoby and Ashik Kurian for their help with and contributions to this report. The prices in the body of this report are based on the market close of November
24, 2009 unless otherwise indicated.
Goldman Sachs Global Investment Research 2

3. November 27, 2009 Global: Automobiles
A comprehensive investment framework for the global automotive sector
Global autos offers significant annual performance potential in our view. As capital returns have converged in the wake of
the economic crisis, we believe the sector now provides attractive investment opportunities at the bottom of the cycle. We
believe the next business cycle will be dominated by BRIC growth and the carbon challenge. We identify and quantify three
key structural trends: (1) global economic realignment; (2) the CO2 challenge; and, (3) negative mix-shift. Against this
backdrop, we consider industry positioning a key proxy for long-term return potential. To capture this potential, we
introduce the GS Auto Scorecard. This measures relative company positions against six key success factors.
We believe that consolidation is also likely to become a part of the industry’s answer to substantial profit headwinds
through the next cycle, as companies will pursue ‘relevant scale’ in terms of geographical exposure, economies of scale and
technology. Our investment framework identifies Toyota (Buy), Volkswagen (Conviction Buy) and Fiat (Buy) as potential
long-term winners among our global coverage. In addition to potential long-term winners, we highlight Ford (Conviction
Buy) as our preferred global restructuring play.
The credit crisis has hit the global automotive industry hard, leading to a convergence of industry
margins and returns and creating attractive investment opportunities
The global automotive industry was hit hard by the economic crisis, suffering unprecedented levels of demand destruction.
Monthly annualised global sales fell 19% from peak levels in October 2007 to trough levels in March 2009, while global automotive
production fell even further, down 34%. As a consequence of the impact of the credit crisis and significant foreign exchange
movements, the cash returns of the automotive companies has converged over the last 18 months, accelerating a trend evident
since 1999 (when the difference between the highest- and lowest-return company was 28.4%).
We forecast that this spread will compress to 5.6% in 2011 as macro economic factors dominate. In our view, this will create an
attractive investment opportunity at the bottom of the automotive cycle: we believe that the relative competitive positioning of
individual automotive companies will lead to a divergence in returns thereafter, as the industry emerges from the crisis, prompting
divergent equity performance.
We expect the next business cycle to be dominated by BRIC growth and the carbon challenge and
see three key structural trends facing the global automotive industry
The automotive industry is at the centre of two significant developments: (1) significant economic growth in BRIC countries, and (2)
the carbon challenge: to significantly reduce CO2 emissions. Against this backdrop, we identify, discuss and quantify three key
structural trends facing the global automotive industry:
Goldman Sachs Global Investment Research 3

4. November 27, 2009 Global: Automobiles
1. Global economic realignment: Given our economists’ forecast of a continued realignment in global economic output, we
expect wealth levels in emerging economies to rise quickly, bringing a huge global population into the consumer class. As a
result, we believe large new markets should open to the automotive industry over the coming decade. As consumers in those
markets grow wealthier, the experience of already-developed economies suggests vehicle penetration could rise rapidly in
these economies. The result will potentially be a significant expansion in the size of the global car market: we forecast an
increase of 73% to 107 mn units in 2020, relative to the 2010E level or a 5.7% CAGR. On our forecasts, BRICs countries will
account for almost 70% of this growth, growing at an 11% CAGR, with China becoming the world’s largest car market by 2020
(with car and light commercial vehicle sales of 30 mn units pa). In contrast, we expect the Triad (the US, Europe and Japan)
markets to remain fairly stagnant over this period, given a lack of forecast population growth, relatively static income
distribution and limited increases in per capita vehicle penetration. We estimate that the 45 mn unit global growth we forecast
(allowing for incremental capacity investment) will present the global automotive industry with a potential US$86 bn (€60 bn)
profit opportunity over the next decade.
2. The CO2 challenge: Passenger vehicle emissions account for 10% of current global emissions of greenhouse gases (GHG),
roughly half the emissions generated by transportation in total. Faced with the challenge of achieving significant reductions in
global GHG emissions, policy makers have focused their attention on the automotive industry through CO2 emissions targets.
The announced regulations and indicated plans aim to significantly reduce emissions per vehicle over the next decade, as
emissions regulations in the USA, Japan, Europe and China begin to converge. Regulators’ targets in Europe, North America
and Japan look for an average 17% improvement in CO2 emissions from current levels by 2015/16, we estimate. This, we
believe, can be achieved through improvements to the efficiency of the internal combustion engine, via improvements to
engine technologies, transmission systems and accessories, and changed material use. However, the acceleration in vehicle
demand we forecast will likely intensify pressure to develop alternative powertrain technologies, particularly electrification
solutions. We estimate an incremental cost of US$117 bn (€80 bn) to the industry of complying with tightening CO2 emissions
standards by 2020, representing US$2,400/€1,640 per vehicle in Europe, and US$2,100/€1,400 per vehicle in the USA. This
estimate includes both additional R&D costs, and higher variable-cost spend, adjusted for a volume-led learning curve as the
penetration of CO2 reducing technologies is expected to increase through the next 10 years.
3. The negative mix-shift: The global automotive industry is facing the threat of significant negative mix-shift towards smaller
cars from: (1) economic realignment and associated growth in emerging markets, and (2) a downsizing trend within developed
markets. We see the majority of incremental growth in demand through to 2020 coming from emerging economies, including
the BRICs, where sales are typically more biased towards more affordable, smaller vehicles. Assuming that the current segment
mix in each of the BRIC countries remains stable, we believe the growth in these markets should lead to a global shift towards
smaller cars over the next 10 years. Data from developed economies also suggests consumers in those markets are
increasingly turning to smaller cars, exacerbating the pace of change in the global mix. Government regulation will likely
influence consumer behaviour, adding to the global mix-shift pressure. We estimate that the industry faces a potential
headwind from this move to smaller cars of around US$26 bn (€18 bn), over and above CO2 reduction costs, and represents a
shift which will potentially reposition the traditional profit centres of the industry away from the C/D/E segments.
Goldman Sachs Global Investment Research 4

5. November 27, 2009 Global: Automobiles
GS Autos Scorecard ranks across six key success factors; we highlight Toyota, Volkswagen, Fiat,
Hyundai and Honda as well positioned
To identify potential long-term winners within the global automotive industry, we have assessed our coverage universe against six
key success factors. We highlight Toyota, Volkswagen, Fiat, Hyundai and Honda as well positioned global car companies.
1. Price/mix are key building blocks with which automotive companies can create a sustainable competitive advantage. The
realized average price per unit sold can vary significantly by car company. Product mix in particular is one key factor explaining
differences in average prices. We attempt to isolate this to get a better reading on individual brand equity and price premium
potential.
2. Low-cost position: The automotive industry is a highly competitive industry which must cope with overcapacity, low pricing
power and raw material and foreign exchange headwinds. To determine the relative cost position of the companies across our
coverage universe, we have analyzed eight key factors: (1) theoretical average labor costs; (2) units per employee; (3) revenues
per employee; (4) empirical break-even point; (5) capacity utilization; (6) growth-adjusted capex/depreciation; (7) revenues/net
assets; and, (8) research and development/sales.
3. Economies of scale: As the industry faces structural challenges, we believe economies of scale are becoming more
important. To establish relative scale, we focus on: (1) unit sales; (2) revenues; (3) the average capacity of the plants accounting
for 80% of production; (4) percentage of cars produced from top-five platforms; and, (5) total numbers of cars produced from
top-five platforms.
4. Financial health: Global winners are likely to benefit from good profitability, cash generation and strong balance sheets, as
these factors provide a good basis for companies to invest in new technologies, maintain product development levels and
manage the cyclical and structural challenges facing the industry.
5. Growth: Access to growth regions and segments will be a key factor driving relative growth profiles over the next ten years,
we believe. We attempt to measure the exposure of business models to these two key drivers: (1) we calculate a theoretical
organic sales growth rate, based on 2008 sales split by geography and our 2010-2020 regional growth forecasts; (2) we derive a
theoretical organic growth profile for each company, based on 2008 segment exposures and our forecast mix-shift by segment
to 2020.
6. CO2 efficiency: This part of our GS Auto Scorecard is meant to quantify the impact of tighter CO2 regulations facing the global
automotive industry. We calculate the distance to required targets for each manufacturer in the US and Europe. In addition, we
analyze by how much a manufacturer has improved its fleet CO2 emission over the last three years.
Goldman Sachs Global Investment Research 5

6. November 27, 2009 Global: Automobiles
Consolidation to pursue ‘relevant scale’; Fiat, Peugeot and Suzuki offer strategic value
In this report, we demonstrate that the global automotive industry has worked hard to realize cost savings and efficiency gains, to
offset headwinds to profits from raw material price inflation, regulatory costs and currency. We calculate the global industry
realized an average 100 bp net cost saving pa through the last cycle (1998-2007). Over the next cycle, however, and based on our
analysis of global industry headwinds, we estimate that annual net cost savings will have to double to 200 bp pa for the industry to
maintain its average annual operating profit margin of 5%. Given our estimates for significant cost pressure over the next cycle, we
believe that consolidation to pursue ‘relevant scale’ is likely to become part of the industry’s answer to the substantial headwinds to
industry profitability. We believe car manufacturers need to achieve ‘relevant scale’ in terms of growth, size and technology, and
see industry consolidation as a means of: (1) companies accessing growth markets; (2) improved cost positions from better fixed
cost absorption; and, (3) funding the development of CO2-efficient internal combustion engine concepts, as well as the development
of alternative powertrain solutions, such as electrification. Using the GS Global Auto Scorecard, we assess the potential benefits
from combinations of companies within the industry: we consider potential improvement in industrial positioning, through
improved economies of scale, lower-cost positions, and access to stronger CO2 technology portfolios (while allowing fro negative
revenue synergies). We identify Fiat, Peugeot and Suzuki as of strategic value: all three companies are potentially attractive
partners to five or more companies on the basis of this methodology.
Comprehensive framework: industry position, M&A potential, Director’s Cut and GS SUSTAIN
To identify long-term attractive global automotive companies, we have developed a comprehensive investment framework. This
includes four key elements:
1. Industry positioning: We believe that the relative competitive positioning of any automotive company is a good proxy for its
long-term return potential. We use our GS Global Auto Scorecard results to assess the competitive positioning of each
company in our coverage. Toyota, Volkswagen, Fiat, Honda and Hyundai screen as best positioned in our scorecard.
2. M&A potential: Given our view that consolidation is likely to become part of the industry’s answer to significant profit
headwinds over the next decade, we recognize the strategic value companies might offer to potential partners. Fiat, Peugeot
and Suzuki screen as having strategic value to potential partners in our framework.
3. Director’s Cut: We use our Director’s Cut framework to identify relative valuation opportunities within our global coverage
group. We find that returns-based measures of financial performance show a stronger relationship to valuation than other,
more traditional financial measures (such as growth-based metrics). By focusing on cash flow rather than earnings, and gross
rather than net assets, CROCI avoids the distorting influences of different accounting policies on reported earnings and asset
values. Consequently, we find a closer correlation between CROCI and EV/GCI (enterprise value/gross cash invested) than
between other measures of return on capital and earnings multiples.
4. GS SUSTAIN: The GS SUSTAIN framework for mature industries identifies the companies in each global industry best placed
to sustain competitive advantage and superior returns on capital over the long term (3-5 years). Our analysis shows that
companies able to sustain industry-leading returns on capital for three years or longer have consistently delivered equity
market outperformance. The GS SUSTAIN framework is designed to identify those companies in each industry best positioned
to sustain those returns in the future. That framework integrates analysis of the key drivers of corporate performance: (1)
returns on capital; (2) industry positioning; and, (3) management quality with respect to environmental, social and governance
(ESG) issues.
Goldman Sachs Global Investment Research 6

7. November 27, 2009 Global: Automobiles
Identifying long-term winners: Toyota, Volkswagen and Fiat
Exhibit 1: Identifying long-term winners: Toyota, Volkswagen and Fiat
The credit crisis resulted in an unprecedented Significant demand growth and rising strategic
The industry has historically struggled to
Turning point generate attractive returns
downturn in demand and intensified financial challenges will drive bifurcation in performance
stress across the industry
Global demand growth & realignment The carbon challenge Negative mix shift
Consumer classes are expanding rapidly in Global CO2 emission standards must toughen Growth will be fastest for smaller vehicles, in which
emerging economies, driving rapid growth in substantially and converge across regions if long- segments the industry has historically generated
auto demand term global emissions targets are to be met lower levels of profitability
Themes
Consolidation: Required cost savings to offset headwinds over the next decade and allow the auto industry to cover its cost of capital are forecasts to be
double those of the last decade driving more structural solutions and consolidation
Investment Industry positioning
Directors
M&A Potential GS SUSTAIN
Framework Cut
M&A Analysis EV/ Return on Industry Management
Low cost Economies GCI Capital Positioning Quality
Pricing / mix
position of scale =
CROCI/ CROCI Scorecard ESG
WACC
Auto OEMs Cash return Assessment of Environmental,
Return on on cash relative social and
capital based invested industry governance
Financial Growth CO2 valuation positioning issues
health exposure efficiency approach
Fiat, PSA, Renault, Fiat, No GS SUSTAIN Winners
Leading Companies Toyota, Volkswagen, Fiat, Honda, Hyundai
Suzuki Watchlist stocks: Toyota, Fiat and VW
Ford, VW
Global Winners Fiat, Toyota, Volkswagen
Global Restructuring Ford
Source: Goldman Sachs Research.
Goldman Sachs Global Investment Research 7

8. November 27, 2009 Global: Automobiles
Exhibit 2: Comprehensive framework: industry position, M&A potential, Director’s Cut and GS SUSTAIN
GS SUSTAIN
Industry Positioning Director's
Cut 2011E Return Management
Low cost Economies Financial Growth CO2 M&A (EV/GCI vs. on capital Quality
Price-mix position of scale Health exposure efficiency Overall Potential CROCI/WACC) 2009-2011E ESG Score
Toyota ●●● ●●●●● ●●●●● ●●●● ●● ●●●●● ●●●●● ● ● ●●●●● ●●●
Volkswagen ●●●●● ●● ●●●●● ●●●● ●●●● ● ●●●●● ●● ●●●● ● ●●●
Fiat ●●● ●●●●● ●● ●●● ●●●● ●●● ●●●● ●●●●● ●●●●● ●● ●●●
Honda ●● ●●● ●●● ●●●●● ●●● ●●● ●●●● ●● ●● ●●●●● ●●
Hyundai ● ●●●● ●●● ●● ●●●● ●●●●● ●●●● ● ● ●●●● ●
BMW ●●●●● ● ● ●●●●● ● ●●● ●●● ● ●●●● ●●● ●●●●●
Daimler ●●●●● ●●● ● ●●●●● ● ● ●●● ●● ●● ●●● ●●●●●
Suzuki ● ●●●●● ● ●● ●●●●● ●● ●●● ●●●●● ● ●●●● ●
Nissan ●●● ● ●●●● ●● ●● ●●● ●● ●●● ●●● ●●●●● ●
Ford ●● ●● ●●●● ●● ● ●●●● ●● ●●● ●●●●● ●● ●●
Peugeot ●● ●●● ●● ● ●● ●●●●● ●● ●●●●● ●●● ● ●●●●●
Renault ●●● ● ●●●● ● ●●● ●● ●● ●●● ●●●●● ● ●●●
Source: Company data, Goldman Sachs Research estimates.
Exhibit 3: Director’s Cut (on 2011 estimates) Exhibit 4: GS Autos Scorecard: a useful proxy for long-term return potential
1.0x 1.0x
y = 0.6113x - 0.3193
0.9x R2 = 0.4104 0.9x
y = 0.3362x
0.8x 0.8x
Honda Motor Suzuki Motor Honda Motor
0.7x Suzuki Motor 0.7x
Hyundai Motor Hyundai Motor
0.6x 0.6x
Toyota Motor
EV/GCI
Daimler AG
EV/GCI
0.5x Daimler AG Toyota Motor
0.5x
Ford
0.4x Nissan 0.4x Ford
BMW BMW
0.3x Nissan
Fiat 0.3x
Peugeot Fiat
0.2x Volksw agen 0.2x Peugeot
Volksw agen
0.1x 0.1x
Renault Renault
0.0x 0.0x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
10
12
14
16
18
20
22
24
26
CROCI/WACC Scorecard
Source: Company data, Goldman Sachs Research estimates. Source: Company data, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 8

9. November 27, 2009 Global: Automobiles
Toyota
Investment view Exhibit 5: Toyota scorecard spider
Toyota achieved 24 points on the GS Autos Scoreboard, scoring as a long-
term winner (in keeping with its reputation). The company is under short-
term earnings pressure, amid a slump in global auto demand, but
continues to leverage its solid balance sheet and invest for the long term, 1. Pricing/mix
steadily extending its lead over competitors. 5
4
Toyota achieved the maximum five points in the economies of scale, low-
cost position, and CO2 efficiency categories. In the area of CO2 emissions, 3
6. CO2 Efficiency 2. Low cost position
Toyota was the first maker to commercialize hybrid technologies and has 2
built on these to develop expertise in a range of powertrain technologies
1
(from plug-in hybrids to fuel cells and electric vehicles). Hybrid vehicles
now account for over 15% of Toyota’s annual sales, and it is the only maker 0
for which hybrids represent a stable earnings stream. In contrast, funding
constraints have forced most automakers to pick and choose the types of
next-generation powertrains they invest in, giving Toyota a strong 5. Grow th 3. Economies of scale
advantage. We believe it may benefit from providing its hybrid and other
technologies and parts to other firms in the future. The company achieved
a low score in the growth category, reflecting its regional sales structure
and its already large-scale production. Still, it is moving rapidly to develop 4. Financial health
low-cost vehicles to be launched in emerging markets in 2010-2011 and is
making efforts to expand production capacity in the growth markets of
China and India. We believe customers in emerging markets are likely to
demand more high-end vehicles as car ownership increases, and that
Toyota’s market presence being relatively low should not be an obstacle to Analyst: Kota Yuzawa
future growth. Rating: Buy
We expect production momentum to dip temporarily in April-June 2010 on 12-month price target: ¥4,400
the end of government incentives, but Toyota has implemented a series of
Price target methodology: Our ¥4,400 price target is based on an ROE-P/B
restructuring measures—exiting Formula One, closing the US NUMMI
correlation and our FY3/11 estimates.
plant, and rearranging Japanese dealerships—in addition to the kaizen
process that underpins its competitiveness, and we believe it can maintain Key risks to our price target: Key risks to our price target include a higher
stable earnings. FY3/11 CROCI/WACC analysis puts Toyota’s expected yen/US$ exchange rate and an increase in US recall-related costs.
return around the average for global automakers, but we consider it an
attractive medium-term investment given its cash flow generating
capabilities. We rate Toyota Buy.
Source: Company data, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 9

10. November 27, 2009 Global: Automobiles
Volkswagen
Investment view Exhibit 6: Volkswagen scorecard spider
We highlight Volkswagen as a global long-term winner in the automotive
industry, achieving the second highest score on our GS Auto Scorecard
analysis of six key success factors. Additionally, we see substantial
potential upside to our price target for VW’s preferred shares. VW is a 1. Pricing/mix
Conviction Buy with a 12-month price target of €107. We view VW as 5
structurally well positioned within the global automotive industry. VW 4
comprises a portfolio of strong brands, enjoys a price premium, is well
3
positioned to participate in BRICs growth (particularly China), and enjoys a 6. CO2 Efficiency 2. Low cost position
2
competitive advantage from its sector-leading modular component
strategy in our view. VW score highest in terms of price/mix, reflecting its 1
position as the ‘desirable’ volume brand, realizing a 5%-7% price premium 0
over other competitors. With group sales of more than 6 mn units in 2009E,
VW scores highly on economies of scale, particularly given the company’s
leading component strategies. VW pioneered the platform sharing concept
5. Grow th 3. Economies of scale
in the 1990s, and was one of the first auto makers in Europe to talk about
component sharing to optimize economies of scale. In the next evolution of
its component strategy, most likely with the launch of the new Golf in
2011/12, VW aims to use two generic platforms to optimize economies of 4. Financial health
scale.
With net cash of €9.8 bn in 2010E, VW scored well in terms of financial
health, and with almost 30% of sales exposed to the BRIC market, VW is
well positioned to participate in structural emerging market growth. VW
has particularly strong market positions in Brazil and China, but is Analyst name: Stefan Burgstaller
developing footholds in Russia and India. In addition, VW is focusing on Rating: Buy (on the European Conviction Buy List)
the US market with the start-up of a new factory and the launch of a US
12-month price target: €107
specific D-segment vehicle. Despite significant structural changes to VW’s
cost structure (particularly in Germany) in the years ahead of the financial Price target methodology: Mid-cycle EV/EBIT framework applied to our
crisis, VW has significant potential to improve further its cost positioning 2010 forecasts.
relative to peers. VW ranks comparatively poor in terms of CO2 efficiency
Key risks to our price target: Lower volumes in 2010, CO2 compliance costs
on 2008 data, as the group has made below-average progress towards
and a value-destructive merger are key downside risks to our rating and
achieving 2015/16 targets in Europe and the US (compared to other
price target.
manufacturers). VW’s score is most likely negatively impacted by its
premium Audi brand, which naturally would inflate the CO2 data. As we
move towards 2012, we expect VW to improve significantly the CO2
performance of its fleet.
Source: Company data, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 10

11. November 27, 2009 Global: Automobiles
Fiat
Investment view Exhibit 7: Fiat Scorecard spider
We highlight Fiat as long-term structural winner in the global automotive
industry. Fiat ranks third on our GS Auto Scorecard of key success factors,
in which we include potential scale benefits from Fiat’s close tie-up with
1. Pricing/mix
Chrysler. Fiat has been the only global car maker with a strategic response 5
to the challenges of the credit crisis. We believe the Chrysler deal allows
4
Fiat to address its core weakness, a lack of economies of scale, and gives
3
the Italian car maker access to one of the largest car markets in the world. 6. CO2 Efficiency 2. Low cost position
2
Although Fiat has invested management time and talent in Chrysler, Fiat’s
1
ultimate 35% stake will be funded by sunk costs (i.e. sharing of platforms
and technologies Fiat had already developed and expensed). 0
Fiat offers attractive potential upside to our price target. We rate Fiat Buy,
with a 12-month price target of €14, including €2 bn for Fiat’s stake in 5. Grow th 3. Economies of scale
Chrysler. Not surprisingly, Fiat achieved only an average score in terms of
price/mix. Fiat is a small, no thrills car maker with a modest price point
realization. Acknowledging this, Fiat’s strategy has been to offer the
4. Financial health
appropriate level price point and up-sell to customers through options.
Perhaps surprisingly, Fiat scored highly in terms of low-cost position
compared to other car makers. Fiat operates in Tichy (Fiat 500, Panda), one
of the most efficient car plants in Europe and is implementing its Japanese
inspired world-class manufacturing programme. Even including Chrysler,
the combined entity still ranks below par in terms of economies of scale. In
the context of the automotive industry, Fiat has an average score in terms Analyst name: Stefan Burgstaller
of financial health, but screens as attractively positioned in terms of
growth. Fiat is the market leader in Brazil, and is developing its market Rating: Buy
presence in Russia and India. To date, China remains Fiat’s weakness. 12-month price target: €14
Despite being a small car manufacturer, Fiat scores only in line with the
average in terms of CO2 efficiency, based on our analysis of recent
Price target methodology: Mid-cycle EV/EBIT framework applied to our
improvements in CO2 and the distance to target levels set in Europe. 2010 forecasts.
However, we believe that Fiat is developing a number of powertrain Key risks to our price target: Lower volumes, further cash burn and
changes to improve its compliance with future CO2 requirements. In value-destructive M&A are key risks to our price target.
addition to a good Scorecard score, Fiat screens as an attractive partner
within the global automotive industry. Given the transformational changes
achieved at Fiat, we are more optimistic for Chrysler’s performance
potential under Fiat.
Source: Company data, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 11

12. November 27, 2009 Global: Automobiles
Ford
Investment view Exhibit 8: Ford scorecard spider
While Ford lags its best-in-class peers (e.g. Toyota, Volkswagen and Fiat) in
terms of its long-term positioning (as measured by our scorecard), we
consider it as the most attractive restructuring opportunity in our coverage.
Firstly, we expect it to move up the ranks on a number of the metrics that 1. Pricing/mix
make up the scorecard quite quickly. We highlight three areas in particular 5
in which it ranks below average, but where its shortcomings are being 4
addressed: (1) regarding price/mix, we expect significant improvement as
3
the company has moved away from a discount strategy in favour of 6. CO2 Efficiency 2. Low cost position
smaller but more profitable market share. Indeed, the benefit of this model 2
has been evident in the last few quarters’ results; (2) we expect its low-cost 1
positioning to improve significantly, driven by the sizable restructuring it 0
has undertaken over the last 18 months. This has significantly lowered its
fixed costs and reduced excess capacity; and, (3) we expect material
growth improvement as the company continues to shift its footprint to
5. Grow th 3. Economies of scale
flexible or car-based capacity to service what we expect will be a growing
demand for passenger cars.
We also see a growth advantage over the next 12 months from its high
exposure to the North American market, were we expect sales to outpace 4. Financial health
the global average. Our preference for Ford also reflects low market
expectations, given its very challenged history which leads some to doubt
it can ever attain even average sector profitability. As such, Ford screens
well within our stock selection framework versus global peers. Our Analyst name: Patrick Archambault
Director’s Cut framework identifies Ford as one of the more attractive
stocks, the valuation of which is not fully discounting our expectations for Rating: Buy (on the Americas Conviction Buy List)
cash flow and profitability. This is implicit in the enterprise value that is 6-month price target: US$11
implied by the sector’s CROCI/WACC trend line, which implies 25%
potential upside for Ford. We also note Ford has among the largest
Price target methodology: We value Ford’s shares using 2012 EBITDAP and
expected changes in ROIC in our auto universe, albeit from a very low EPS, discounted back to the present at a 15% cost of equity.
base, toward the industry mean: changes in ROIC have statistically been a Key risks to our price target: The greatest downside risk to our price target
very good indicator of share price performance. would be prolonged weakness in US auto demand and a large downturn in
Europe post government scrappage programs.
Source: Company data, Goldman Sachs Research estimates..
Goldman Sachs Global Investment Research 12

13. November 27, 2009 Global: Automobiles
Executive summary
Goldman Sachs Global Investment Research 13

14. November 27, 2009 Global: Automobiles
Attractive investment opportunities emerge as margins and returns converge
The global automotive industry was hit hard by the economic crisis, suffering unprecedented levels of demand destruction.
Monthly annualised global sales fell 19% from peak levels in October 2007 to trough levels in March 2009, while global automotive
production fell even further, down 34%. As a consequence of the impact of the credit crisis and significant foreign exchange
movements, the cash returns of the automotive companies has converged over the last 18 months, accelerating a trend evident
since 1999 (when the difference between the highest- and lowest-return company was 28.4%).
We forecast that this spread will compress to 5.6% in 2011 as macro economic factors dominate. In our view, this will create an
attractive investment opportunity at the bottom of the automotive cycle: we believe that the relative competitive positioning of
individual automotive companies will lead to a divergence in returns thereafter, as the industry emerges from the crisis, prompting
divergent equity performance.
Exhibit 9: Company returns have converged… Exhibit 10: …from a 21.7% spread in 2001 to a forecast 5.6% in 2011
Global autos: Companies aggregate CROCI (1998-2011E) CROCI dispersion (max vs. min.) and standard deviation (1998-2011E)
35% 30% 9%
8%
30%
25%
7%
Standard deviation of CROCI
25%
20% 6%
CROCI (max-min)
20%
5%
15%
15% 4%
10% 10% 3%
2%
5% 5%
1%
0%
0% 0%
2009E
2010E
2011E
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009E
2010E
2011E
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
-5%
CROCI Low Median High CROCI
Standard deviation Dispersion (max vs min)
Source: Company data, Goldman Sachs Research estimates. Source: Company data, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 14

15. November 27, 2009 Global: Automobiles
The next cycle will be influenced by BRICs growth and the carbon challenge
The automotive industry is at the centre of two significant developments: (1) significant economic growth in BRIC countries; and, (2)
the carbon challenge to reduce significantly CO2 emissions.
BRICs growth: demand growth is migrating towards the large emerging markets and their surging middle classes, and away from
US and European consumers. Our global economists named the BRICs (Brazil, Russia, India, and China) and the N11 (the next
group of eleven large emerging economies) as key beneficiaries of this. In 2000, the BRIC economies accounted for 10% of global
GDP. We forecast this to be 18% in 2010 and expect this to accelerate to 29% in 2020 and 48% in 2050 (Exhibit 11). Over the last 10
years, the BRIC economies have contributed nearly as much as Europe, the US and Japan combined to global GDP growth. Our
global economists forecast that this trend will accelerate over the next year, with BRIC economies contributing 50% of global GDP
growth, compared to a 27% contribution from Europe, the US and Japan.
The carbon challenge: Population growth and economic development are placing mounting pressures on the global environment.
Climate change is the highest profile of those pressures. Society’s awareness of the threats climate change presents, its causes,
and its willingness to take action to drive the changes needed to avert the worst effects (whether directly or through support for
political intervention) is increasing rapidly. On a global basis, transportation accounts around 20% of global CO2 emissions, with
road traffic accounting for approximately half this.
Exhibit 11: BRIC economies taking an increasing share of global GDP Exhibit 12: Global car park
Share of global GDP by region, 1800-2050E Global car park by region, 2000, 2010E and 2020E (million units)
100% 1200
90% RoW
1000
80%
BRICs
70%
800
Car Park - mn unit
% of world GDP
60%
50% 600
40% Major
developed 400
economies
30%
20% 200
10%
0
0%
2000 2010E 2020E
1800 1850 1900 1950 2000 2010E 2020E 2050E
Triad BRIC RoW
W Europe US Japan Brazil Russia India China RoW
Source: GS Global ECS Research. Source: Global Insight, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 15

16. November 27, 2009 Global: Automobiles
Three key structural trends facing the global automotive industry over the next decade
Global economic realignment represents a US$86 bn (€60 bn) opportunity
Given our economists’ forecast of a continued realignment in global economic output, we expect wealth levels in emerging
economies to rise quickly, bringing a huge global population into the consumer class. As a result, we believe large new markets
should open to the automotive industry over the coming decade. As consumers in those markets grow wealthier, the experience of
already-developed economies suggests vehicle penetration could rise rapidly in these economies. The result will potentially be a
significant expansion in the size of the global car market: we forecast an increase of 73% to 107 mn units in 2020, relative to the
2010E level. On our forecasts, BRIC countries will account for almost 70% of this growth, growing at an 11% CAGR, with China
becoming the world’s largest car market by 2020 (with car and light commercial vehicle sales of 30 mn units pa). In contrast, we
expect the Triad (the US, Europe and Japan) markets to remain stagnant over this period, given a lack of forecast population
growth, relatively static income distribution and limited increases in per capita vehicle penetration. We estimate that the 45 mn unit
growth we forecast (allowing for incremental capacity investment) will present the global automotive industry with a potential
US$86 bn (€60 bn) profit opportunity over the next decade.
Exhibit 13: Emerging markets are set to take an increasing share of the Exhibit 14: BRICs to contribute over 70% of growth in 2010-2020E
global car market Contribution to global unit sales growth, 2010-2020E
Unit volume (mn) for Triad and emerging markets, 1990-2020E
120 80%
Contribution to global growth 2010E to 2020E
70%
100
60%
80 50%
40%
60
30%
40 20%
10%
20
0%
BRIC
China/Japan/India)
E. Europe (ex
RoW
Japan
Western Europe
Triad
Russia
India
China
Other
Brazil
USA
Russia)
0
Asia (ex
2010E
2012E
2014E
2016E
2018E
2020E
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Triad Emerging Markets
Source: Global Insight, Goldman Sachs Research estimates. Source: Global Insight, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 16