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5. Linamar Corporation Business Report FY ended Dec. 2014

Linamar Corporation Business Report FY ended Dec. 2014

Factors
1) Powertrain/Driveline Segment
-In 2014, sales for Powertrain/Driveline increased by 14.7% compared with 2013. The sales increase for 2014 was driven by additional increased European sales due to volume increases on mature programs and new German camshaft business acquired in Q4 2013.

-The recent sales growth for Powertrain/Driveline has resulted from the continued trend for OEMs to outsource to suppliers a greater proportion of the supply of components, assemblies, modules and systems within the powertrain.

Growth Strategy: Diversification, Globalization, and Green Technologies

Diversification
-In September 2014, the Company signed a definitive agreement with the majority shareholders of Seissenschmidt AG ("SEI") for the Company's purchase of 66% of the shares of SEI. SEI, a Germany specialist in high-volume hot forgings, has three primary locations in Germany, Hungary and the United States. In November 2014, the Company signed a definitive agreement to acquire the remaining 34% of SEI shares. The entire transaction closed on January 15, 2015. In September 2014, the Company signed a definitive agreement with Carolina Forge Company, LLC ("CFC") for the Company's purchase of CFC's business of high volume hot-forged product, located in Wilson, North Carolina. The purchase of CFC closed on September 30, 2014.

-With the acquisitions of CFC and SEI, the Company is now able to offer integrated metal forming/machined solutions to its customers in certain targeted products such as gears. These acquisitions will supplement its core powertrain business and enable the Company to address market trends in light weighting and Noise Vibration Harshness design for products such as gears, differentials, wheel bearings, hubs and sprockets with high-speed forging processes.

Globalization
-Growth is prioritized in Europe and Asia. In Europe, with the newly acquired forging business, the Company now has seven manufacturing plants in Germany and four in Hungary. Including three facilities in France, there are a total of 14 in the region. In 2014, the Company opened a new facility in Reinsdorf, Germany, to produce various engine components for OEM customers. In India, the Company has rented and renovated a small facility, built a team and started launching some business; production will start late 2015.

-The Company has a new plant getting ready to launch in North Carolina, in the U.S., to manufacture a variety of gear products. In Guelph, Canada, a new plant will be established in an existing building to house some of the new programs.

Green Technologies
-The Company focuses on developing products that are more fuel efficient, drive lower emissions or are environmentally beneficial. The Company has specifically targeted the smaller engines and multi speed or dual clutch technology transmissions. The priority in product development is around light weighting, smaller packages and noise reduction, all of which help improve fuel economy.

-Design ideas for clutch modules and differential assemblies are also playing an important role in helping win business on new nine and 10 speed transmissions, another key driver of improved fuel efficiency. These transmissions are key to the future in North America where they will eventually displace the four, five and six speed transmissions currently in production. The Company's target is to significantly increase its content on these platforms compared to existing ones.

Order Backlog

-The Company has a order backlog of more than CAD 3.4 billion in annualized sales still under launch. 2014 was close to a record year in new business wins. New business wins in total for the year exceeded CAD 1.1 billion, with particular success seen around products for new nine and 10 speed transmissions launching in North America to drive improved fuel efficiency, complex gear machining programs and continued penetration around global engine platforms in key products such as cylinder heads, blocks, camshafts and connecting rods. The Company has nearly CAD 5.8 billion of annual sales based on booked business already lined up to be reached in the next three to four years.

R&D Structure

-The Company has McLaren Performance development center and other R&D centers in Ontario, Canada, Michigan, U.S., Germany and Hungary.

-As of December 31, 2014, McLaren Performance, plus the engineering and design staff consisted of approximately 1,235 people in all Company plants.