PRIVATE AND CONFIDENTIAL

Bombardier Transportation PortugalDivision Services

TRAM Service Provider Overview

Lisbon, Portugal – 10th May 2012

2

Bombardier Transportation Portugal – ServicesTRAM Service Provider Overview - Contents

Introduction/Overview The Market Size Market Requirements The Approach Known Difficulties and Benefits Make vs Buying Decision A Case Study Local Know-How The Need for a Centre of Competence The Expected Benefits to Bombardier The Model The Empowerment

3

Bombardier Transportation Portugal – ServicesTRAM Service Provider Overview – Introduction/Overview

There are some 5000 Trams running across Europe operated and maintained by a variety of Customers, some are Private Organisations while others are Government Dependent (Municipalities and State Owned Organisations).

Throughout the cycle life these Organisations will have different needs of support which can vary from simple consulting/recommendations to optimise daily activities to major component overhaul and refurbishment.

Normally these Organisations are small and do not have the resources to carry out component repair and major overhauls. They are mainly supported by OEM’s.

There is an obvious business opportunity for those who can, in a competitive way, provide services and repair facilities to these Customers and hence cutting the market share of OEM’s.

Bombardier doesn’t have a Centre of Competence to address these requirements and hence the need to think over.

4

Bombardier Transportation Portugal – ServicesTRAM Service Provider Overview – Market Size (1 / 2)

Countries/Market Areas Alstom BT CAF Siemens Stadler RailAnsaldo

Breda VKGrand Total

Central Europe 820 1131 27 779 282   16 3055

Benelux 185 371   40     50 646

Iberia 143 146 92 24       405

Mediterranean Europe 37 134 14     186   371

North Africa & Middle East 287             287

Northern Europe   36 15   52 40   143

UK + Ireland 88 95 46   6     235

Eastern Europe   74 30 50   18   172Grand Total 1560 1987 224 893 340 244 66 5314

5

Bombardier Transportation Portugal – ServicesTRAM Service Provider Overview – Market Size (2 / 2)

Sales per Year

6

Bombardier Transportation Portugal – ServicesTRAM Service Provider Overview – Market Requirement’s

Optimisation of Maintenance Plan and Maintenance Procedures.

Implementation of Best Practices. Management Tools like “Maximo”. Data Collection and Treatment (Reliability and

Availability issues). Planning Daily Tasks and Vehicle allocation. Workshop Layout and Handling Tools to

maximise efficiency. Development of dedicated Special Tools. Implementation of KPI to monitor

improvements. Benchmarking to measure efficiency. Material/Equipment Strategy Make vs Buy

Decision. Obsolescence Management. Overhauls and Middle Life Upgrades. Warehouse Management.

7

Bombardier Transportation Portugal – ServicesTRAM Service Provider Overview – The Approach (1 / 2)

8

Bombardier Transportation Portugal – ServicesTRAM Service Provider Overview – The Approach (2 / 2)

9

Bombardier Transportation Portugal – ServicesTRAM Service Provider – Difficulties and BenefitsKnown Benefits:

The whole Repair/Overhaul activities will be controlled by the Project (Risk Avoidance).

Smaller Turnaround Time (no transport/handling costs).

Lower Labour Rate (More Labour Hours, increased workload).

Lower Material Costs (purchase Kits rather than the whole repaired unit).

No need for Rotation Stock (since there is no need to send back equipment to Supplier’s).

Corrective Equipment can be repaired in-house (using acquired capacity to handle corrective activities).

Lower Repair/Overhaul Costs (since we cut Supplier’s Margin and have no transport/insurance/handling costs).

Improved Image in front of Customer (by handling the whole asset value, throughout its life, we pass the image of being a truly Maintainer Entity).

Known Difficulties:

Supplier’s reluctance to transfer their technology (they see the repair activity as part of their core business).

Reduced Supplier’s Revenue (they provide kits rather than full repaired units).

Extra Documentation and Training means some initial investment being required.

Certification of our employee is advisable to ensure Quality and Safety compliance.

Requires Tough Negotiation with Supplier’s (During Vehicle Manufacturing phase a clause, safeguarding Supplier’s obligation to TOT, would facilitate SER negotiation afterwards) .

10

Bombardier Transportation Portugal – ServicesTRAM Service Provider – Make vs Buying DecisionMake or Buy Decision:

  In order to optimize Project Execution there is a stage were a decision “to make” or “to buy”

equipment has to be made. Often, due to Supplier’s interest/resistance, the equipment is sent back to supplier’s for repair/overhaul thus making the Project dependent on Supplier’s behavior/performance.

  To avoid this dependence the alternative is to repair/overhaul the equipment in our

premises/facilities. This brings many benefits and few challenges.

The “Make Decision” can be extended to nearly all equipment on the vehicle, such us, Brake Actuators, Brake Panels, Gearboxes, Hydraulic Brake Units, HVAC, Electrical Motors, Bogies, Pantographs, Traction/Auxiliary Converters, Electronic Cards, Electrical Equipment, Etc.

Customer Satisfaction:

  The other “tangible” benefit is associated with improved image in front of Customer whom

sees us as a true Partner that adds value to the whole process (empowering local people, being in control of activities, fast return of repaired components, visibility, and so on) with Quality and Safety Requirements in place.

11

Bombardier Transportation Portugal – ServicesTRAM Service Provider – A Case Study Portugal Experience:

Table shows Savings per Vehicle, during Overhaul, when comparing costs of Buy vs Make!

If Savings are extrapolated for the whole fleet (72) we have a net Fleet Savings of 7.560.796 €

The above doesn’t take into account Savings in Corrective Maintenance as a result of acquired capacity to repair locally rather than sending it to Suppliers!

Equipment / component Buy Option Make Option Total Savings Percentage

Caliper 30.528 €         23.104 €        7.424 €              24%HPU 16.864 €         14.221 €        2.643 €              16%Pneumatic valves (bogie + sanding system) 12.395 €         8.873 €          3.522 €              28%Air production unit 17.410 €         6.869 €          10.541 €            61%AVAC cab 5.449 €           2.313 €          3.136 €              58%AVAC saloon 12.265 €         7.262 €          5.003 €              41%Automatic coupler 22.312 €         10.476 €        11.836 €            53%Pantograph 2.434 €           1.764 €          670 €                 28%Gearbox 111.096 €       50.861 €        60.235 €            54%

Total Per Vehicle =  230.753 €    125.742 €  105.011 €       46%

12

Bombardier Transportation Portugal – ServicesTRAM Service Provider – Local Know-How (1 / 2)

 

13

Bombardier Transportation Portugal – ServicesTRAM Service Provider – Local Know-How (2 / 2)

 

14

Bombardier Transportation Portugal – ServicesTRAM Service Provider – Centre of Competence (1 / 2)

15

Bombardier Transportation Portugal – ServicesTRAM Service Provider – Centre of Competence (2 / 2)

16

Bombardier Transportation Portugal – ServicesTRAM Service Provider – Potential Benefits to Bombardier

If we consider that:

Europe Tram Population is approximately 5314 vehicles

Bombardier's Tram Population is approximately 2000 vehicles

Major Overhauls occurs every 7 to 10 years

Corrective Equipment Market is approximately 7 to 10% of Fleet Costs

Then the Market/Potential is:

Therefore, depending on the success of implementation, Quota Achievement, there must be an Opportunity to Bombardier that can be estimated, conservatively, at 10 to 15 Meuro a year!

Then: Total If 10% Quota If 20% Quota If 30% Quota If 40% Quota If 50% QuotaEurope Yearly Market Potential must be 104.902.862 €  10.490.286 €  20.980.572 €       31.470.859 €         41.961.145 €         52.451.431 €   Bombardier Yearly Market Potential must be 39.483.019 €    3.948.302 €    7.896.604 €         11.844.906 €         15.793.208 €         19.741.510 €   

17

Bombardier Transportation Portugal – ServicesTRAM Service Provider – The Model (1 / 2)Proposed Organisation Structure:

 

18

Bombardier Transportation Portugal – ServicesTRAM Service Provider – The Model (2 / 2) 

Therefore the Model can be Self Supported as long as Sales are in the order o 3 and 4,5 Meuro!

During Start-up the Local Projects will manage the Organisation Structure until Sales justifies its own dedicated Team.

Markup 1,50 1,75 2,00 1,50 1,75 2,00 1,50 1,75 2,00CS (Cost Structure) 735.525  735.525       735.525       367.763          367.763       367.763            183.881          183.881       183.881      X (Materials+Labour) 9.641.358  2.615.604  1.513.038  4.820.679  1.307.802  756.519  2.410.340  653.901  378.260 TC (Total Costs) 11.854.132  3.751.892   2.480.391   5.927.066  1.875.946   1.240.195        2.963.533  937.973       620.098      S (Sales) 14.462.037  4.577.307   3.026.076   7.231.019  2.288.654   1.513.038        3.615.509  1.144.327   756.519      BreakEven(X) 2.121.013  1.232.489   868.614       1.060.507  616.245       434.307            530.253  308.122       217.154      BreakEven(S) 3.181.520  2.156.856   1.737.228   1.590.760  1.078.428   868.614            795.380  539.214       434.307      GM=22% 0,22  0,22              0,22              0,22                 0,22              0,22                   0,22                 0,22              0,22             

How to Make the Organisation Self Supported:

1. The Cost of Organisation, if full time dedicated, will be 735.525 Euro. It would be Self Supported if Annual Sales are between 3 and 4,5 Meuro.

2. To facilitate start-up initial the Structure can be supported by existing Projects and as Sales builds up the costs of Structure/Organisation could also be paid in steps of 25% (Sales 756.519 Euro), 50% (Sales 1.513.038 Euro) and fully supported when Sales are in the order of 3 to 4,5 Meuro.

19

Bombardier Transportation Portugal – ServicesTRAM Service Provider – The Empowerment (1 / 2)

Based on Presentation one can identify a BUSINESS OPPORTUNITY and a Need for a Center of Competence, “TRAM Service Provider”, given that:

 

20

Bombardier Transportation Portugal – ServicesTRAM Service Provider – The Empowerment (2 / 2)

A Decision is Needed: