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5. Brembo S.p.A. Business Report FY ended Dec. 2014

Brembo S.p.A. Business Report FY ended Dec. 2014

Factors
1) Passenger Car applications
-FY ended Dec. 2014, the Company's net sales for passenger car application increased by 18.6% year-on-year. This positive result was mainly driven by increased light vehicle sales in China, the U.S. and west European countries. For the first time after 6 consecutive years of decline, west European light vehicle market recorded sales growth of 4.8% in 2014 year-on-year.

2) Commercial Vehicle applications
-FY ended Dec. 2014, the Company's net sales for commercial vehicle application decreased by 2.2% year-on-year. It's driven by the positive performance of light vehicles uner 3.5 tonnes in Europe, which showed an increase of 10.7% over 2013. On the other hand, the market for medium and heavy commercial vehicles over 3.5 tonnes in Europe declined, closing 2014 down 7.7% overall compared to 2013.

Contract

-The Company announced that it supplies its new braking system for the new Ferrari "488 GTB". Both front and rear calipers have pistons with various diameters to guarantee that the brake pad wears evenly, as otherwise it would wear out faster on the brake disc entrance corner. Brembo CCM brake discs, which are made of a composite ceramic material, ensure a weight reduction of 50% compared to cast iron brake discs. (From a press release on March 4, 2015)

-The Company announced that its new "Extrema" caliper has been chosen for the Ferrari "458 Speciale A". The innovative design translates into a significant reduction (more than 3 kg) of non-suspended weight and a better feel through the pedal, with less power absorbed than hitherto (10% reduction). In the new "Extrema" Brembo caliper, the electric parking brake is incorporated directly in the caliper. (From a press release on October 1, 2014)

-The 84th Geneva International Motor Show will feature over 100 world and European premieres on display. And many of the cars will be equipped with Brembo brake calipers and discs. (From a press release on March 4, 2014)

R&D Structure

-Approximately 10% of the Company's total employees are engineers and product specialists that work in research and development.

-The Company has research facilities in Italy, Poland, China and the United States.

R&D Activities

-In 2014, the Company's research on cast-iron discs focused on optimizing technical and technological parameters which affect the disc's vibration properties. The Company looks to improve a vehicle's comfort performance by adjusting the disc's parameters. Additionally, the Company has continued work in optimizing materials, mass characteristics, and cooling and ventilation capacity of cast-iron discs for heavy commercial vehicles.

-In 2014, the joint development with innovative friction materials designed for light weight discs is ongoing. The Company can be considered to be the only manufacturer with the in-house expertise for this type of development.

-In 2014, advanced R&D activities focus on mechatronic systems for the brake solutions. The high level of integration will bring the brake system into dialogue with other vehicle systems, such as electric traction motors and new suspension-steering concepts. The Company is continuing to develop a Brake By Wire system, and electric parking brakes (EPB) where the electronic control is integrated in the ABS units.

Product Development

Lightweight Brake Disc
-The Company developed, in partnership with Daimler, a new brake disc which uses a combination of cast iron for the brake ring and a thin steel laminate for the disc hat to obtain 15% weight savings compared to conventional brake discs. It'll equip all the new Mercedes MRA platform. In 2014, the Company began the production of the lightweight brake discs in its plants in Europe, China and the U.S.

PVT Plus: Pillar Venting Technology Plus
-Lightweight construction, more resistance to thermal cracks and less wear on brake pads are benefits of the new ventilation chamber for brake discs. As the thermal cracking resistance is up to 30% and it ensures longer disc life. The improved air flow in the system reduces operating temperature by up to 30%, giving brake pads a longer life too. Disc's mass is reduced by up to 10%. Produced at the Mapello plant in Italy, PVT Plus is initially aimed at premium sedans like the Audi "A6", BMW "5-Series" and the Mercedes "E-Class". However this does not preclude its use at a later date on other cars. (From a press release on May 20, 2015)

Carbon Ceramic Brake
-Thanks to the Company's carbon-ceramic brakes, the Chevrolet "Corvette Z06" recorded the best braking performance of the car ever produced by GM. The carbon-ceramic brakes with 394 mm front discs and 390 mm rear discs, is able to stop the Z06 from 60mph (96.5 km/h) to zero in exactly 99.6 feet (30 meters). The Corvette's new braking system consists of the Brembo's lightweight calipers, brake pads that were developed specifically for high-performance carbon-ceramic discs and the different diameters of the pistons to make optimal distribution of force on the pads. (From a press release on November 21, 2014)

-FY ended Dec. 2014, EUR 109.4 million was invested in property, plant and equipment. The remaining EUR 17.4 million was invested in intangible assets.

-FY ended Dec. 2014, the most significant investments were concentrated in following 4 locations;

• Italy: 34%
• Poland: 22%
• Czech Republic: 18%
• North America and Brazil: 18%

Investment in Italy

-FY ended Dec. 2014, investments are chiefly involved the purchase of production plant, machinery and equipment, in addition to EUR11.0 million for development costs.

Investment Outside Italy

-The Company announced that it will build a foundry and a new production plant for aluminum calipers in Escobedo, Nuevo Leon, just outside of Monterrey, Mexico. The plant is expected to commence initial production in 2016 and be fully operational by the end of 2018. The Company's total investment in the facility from 2015 through 2017 will be USD 39 million (EUR 32 million). The foundry will have a melting capacity of 14,000 tons and the machining facility will be capable of producing two million aluminum calipers per year. Once fully operational, the plant will cover an area of 334,000 square feet (31,500 square meters), create approximately 500 new jobs and bring USD 120 million (EUR 100 million) of turnover per year to the group. The production from the plant will be destined for European, Asian and American original equipment manufacturers (OEM's) currently manufacturing or planning future manufacturing in Mexico, as well as those OEM's purchasing Brembo's products in the U.S. (From a press release on December 2, 2014)


-The Company has announced the construction of a cast iron foundry near its Homer facilities in Michigan, beginning the process of vertical integration of its production capacity in U.S. Construction will begin in 2015 and is expected to be completed in 2017. Thanks to a EUR 74 million (USD 100 million) investment, the Company will operate a modern foundry facility that, once it reaches full production capacity, will yield up to an annual output of 80,000 tons of brake disc castings. The foundry together with engineering and technical offices and warehouse space will cover an area of approximately 30,000 square meters and will create 250 jobs at the foundry and at the Company's Plymouth R&D Center and Headquarters. (From a press release on July 23, 2014)

-The Company celebrated the opening of its expanded North American manufacturing operations in Homer, Michigan. The investment, which will total more than USD 115 million (EUR 83 million) through the end of 2015, expands the facility that houses production of brake, disc, caliper and corner module manufacturing. Total manufacturing area is now approximately 440,000 square feet, employing more than 450 people. There are 47 processing lines and 12 painting lines. In 2013, the facility produced 10 million discs and 300,000 calipers and corner modules and is expected to produce 12.5 million discs and 400,000 calipers and modules in 2014. (From a press release on May 21, 2014)


-FY ended Dec. 2014, investments aimed at increasing production capacity are still underway in following locations;

• Dabrowa Gornicza, Poland: Casting and processing of brake discs for cars and commercial vehicles
• Ostrava-Hrabova, Czech Republic: Casting, processing and assembly of brake calipers and other aluminium components

-A new investment plan was also launched simultaneously and will be developed from 2014 to 2017, for a total expenditure of approximately EUR 34 million, aimed at building and starting up a new plant in Niepolomice (Poland) devoted to processing steel disc hats to be assembled onto the light discs manufactured at the Group's plants located in Poland, China and the U.S.