1

SUMMARY

1. Terms and Definitions ............................................................................................................... 4

2. Introduction / Purpose .............................................................................................................. 6
3. Content Guidelines of HMB Supplier Quality Manual............................................................... 6
3.1. Supplier Responsibilities ........................................................................................................ 6
3.2. Code of Ethics and Conduct ................................................................................................... 8
4. Quality Management System .................................................................................................... 8
4.1. Documentation Requirements ............................................................................................... 8
4.2. Control of Records.................................................................................................................. 8
5. Management Responsibility ...................................................................................................... 9
5.1. Quality Objectives .................................................................................................................. 9
5.2. Supplier Representative / Contact Information ..................................................................... 9
5.3. Management Review ........................................................................................................... 10
5.3.1. Development Capability Evaluation .................................................................................. 10
5.4. Layout/Regular Inspection ................................................................................................... 11
6. Resource Management ........................................................................................................... 12
6.1. Competencies Development ................................................................................................ 12
6.2. Plant, Facility and Equipment Planning ................................................................................ 12
6.3. Contingency Plans ................................................................................................................ 13
6.4. Premises of Cleanliness ........................................................................................................ 14
6.5. Sub-Tier Supplier Control ..................................................................................................... 14
7. Product Development ............................................................................................................. 16
7.1. Planning of Product Development ....................................................................................... 16
7.2. PSO ....................................................................................................................................... 17
7.3. ISIR ........................................................................................................................................ 17
7.4. Confidentiality ...................................................................................................................... 18
7.5. Control of Product / Process Changes.................................................................................. 18
7.5.1. HMB Originated Changes .................................................................................................. 18
7.5.2. Supplier Originated Changes ............................................................................................. 19
7.6. Pricing / Payment ................................................................................................................. 20
7.7. Multidisciplinary approach................................................................................................... 20

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7.8. Supplier Manufacturing Process .......................................................................................... 20
7.9. Special Characteristics .......................................................................................................... 21
7.9.1. Pass-Through Characteristics (PTC) ................................................................................... 22
7.10. Design and Development Verification ............................................................................... 22
7.11. Prototype Program ............................................................................................................. 22
7.12. Production Approval Process (PSO/ ISIR) ........................................................................... 23
7.13. Purchasing .......................................................................................................................... 24
7.13.1. Regulatory Conformity .................................................................................................... 24
7.14. Supplier Quality Performance Monitoring ......................................................................... 24
7.15. FMEA and Control Plan ...................................................................................................... 27
7.16. Work instructions ............................................................................................................... 28
7.17. Verification of job set-ups .................................................................................................. 28
7.18. Preventive and Predictive Maintenance ............................................................................ 29
7.19. Delivery Scheduling ............................................................................................................ 29
7.20. Identification and Traceability ........................................................................................... 29
7.21. HMB ownership.................................................................................................................. 29
7.22. IMDS ................................................................................................................................... 30
7.23. Preservation of Product ..................................................................................................... 30
8. Measurements, Analysis and Improvements .......................................................................... 30
8.1. Tools of Statistics Control ..................................................................................................... 30
8.2. Customer Satisfaction (OEM) ............................................................................................... 31
8.3. Internal Audit of Suppliers ................................................................................................... 31
8.4. Control of Non-Conform Product ......................................................................................... 31
8.4.1. Supplier visitors ................................................................................................................. 33
8.5. Cost of Poor Quality ............................................................................................................. 33
8.6. Customer waiver (Management Deviation) ......................................................................... 34
8.7. Corrective Action .................................................................................................................. 34
8.8. Warranty Cost ...................................................................................................................... 35
9. Sustainability ........................................................................................................................... 36
10. Environmental Health and Safety (EHS) ................................................................................ 36

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1. Terms and Definitions

4M - Machine, Man, Material, Method

5S – Sort, Straighten, Shine, Standardize, Sustain
AQL - Acceptable Quality Level
ASN – Advanced Shipping Notification
CP – Process Capability
CPK – Process Capability Index
CQDM – Cost, Quality, Delivery and Management
CTQ - Critical to Quality
DFMEA – Design Failure Mode & Effect Analysis
EO – Engineering Order
FPSC – First Production Shipment Certification
GQMS – Global Quality Management System
HIVIS - High Integrated Vehicle Inspection System
IMDS - International Material Data System
IQIS – Important Quality Issues System
ISIR – Initial Sample Inspection Report
LP – Local Parts (Supplier)
MD – Management Deviation
MSA - Measurement System Analysis
MSDS – Material Safety Data Sheet
MTBF – Mean Time Between Failures
MTTR – Mean Time To Repair
OEM – Original Equipment Manufacturer
PC – HMB Production Control
PD – HMB Part Development
PFMEA – Process Failure Mode & Effect Analysis
PO – Purchase Order
PPM – Parts per Million (Defects)
PPR – Parts Problem Report

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PD – Parts Development
QA – Quality Assurance
QC – Quality Control
QIR – Quality Information Report (from warranty, QA)
SQ-VOC – Safety Quality - Voice of Customers
RNCL - Nonconformity Logistics Report
SAP – Supplier Access Portal
SOP – Start of Production
SPA – Supplier Process Audit
SPC - Statistical Process Control
SQD – Supplier Quality Development (subgroup in Parts Development Team)
Standard Inspection - List of all characteristics according to the Inspection Agreement and
Drawing.
VAATZ – Value Advanced Automotive Trade Zone
VAVE - Value Analysis Value Engineering

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2. Introduction / Purpose

This Supplier Quality Manual is intended for those suppliers who directly or indirectly supply
parts / components to Hyundai Motor Brazil (HMB) and sets forth the quality, purchasing,
development and logistic requirements under which the Supplier will provide prototype,
production and service material.

This manual enhances / provides clarification, but does not replace any other agreed automotive
standards.

In support of HMB commitment to excel as a world-class operating OEM, Suppliers are expected
to commit to excellence by operating with the intent of exceeding HMB´s expectations.

As HMB continues its quality leadership in being a world-class OEM, a total commitment with
the principles of continuous improvement and zero defects is needed from our Suppliers.

Supplier visits are encouraged at HMB. As Suppliers are considered HMB partners, Suppliers
must provide valuable solutions to concerns/ issues that may arise.

3. Content Guidelines of HMB Supplier Quality Manual

This publication should serve as a guideline for an effective customer-supplier relationship to

enhance the communication needed to continue the path of operating as a world-class OEM.

3.1. Supplier Responsibilities

It is the responsibility of all suppliers including distributors and each Tier-1 Supplier’s, sub-
tier/sub-contract/services suppliers, to review, understand and ensure compliance with this
manual as part of doing business with HMB.
HMB Suppliers are responsible for the development and quality management of their supply
chain according ISIR / Suppliers approved by HMB.

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HMB understands that our businesses are different in nature and in many cases have unique
supplier quality requirements that are market specific. However, the processes and tools
represented in this manual represent the core expectations and requirements of our business.

All exceptions must be submitted to HMB Parts Development.

HMB requests to suppliers some specific requirements nominated as [Quality Objectives

Documents] which must be fulfilled and submitted to HMB according to the frequency described
in this manual.

Business Changes: Any significant changes (4M Change or Contingency Plan) in business climate
such as acquisitions, divestitures, pending litigation, or any activity that may change the financial
viability of the Supplier’s organization, or which may affect the quality of our products, must be
communicated to HMB.

Certifications: Suppliers (Tiers 1) must be IATF 16949 and ISO 14001 certified, or planning to
certify IATF 16949 and ISO 14001 approved by HMB Parts Development. The certification ISO
45001 / OHSAS 18001 is desirable requirement.

Suppliers without ISO 14001 Certification, the following documents must be provided, together
the planning for certification the AVCB (Inspection Auto Fire Brigade) and Operational License
(CETESB or Secretary of Environment) or License Exemption Certificate.

Suppliers without ISO 45001 / OHSAS 18001 Certification must submit to HMB Parts
Development in the first quarter of year their OH&S management systems controls. The [Quality
Objective Document] to be fulfilled is “OH&S Management Systems of Occupational Health and
Safety”.

Suppliers must forward copies of their current certifications or implementation schedule to HMB
Parts Development. Should a Supplier’s accreditation be placed on hold, the Supplier shall notify
immediately the HMB Parts Development.

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Supplier of non-automotive product should contact their buyer for specific requirements.

Suppliers (Tiers 2 and below) must be certified ISO 9001 or IATF 16949 and for exceptions must
be submitted to HMB Parts Development.

Calibration Requirement: For External and Internal Laboratory, the Suppliers must follow the
IATF 16949 Requirements and for exceptions must be submitted to HMB Parts Development for
critical analysis.

3.2. Code of Ethics and Conduct

The HMB's Code of Ethics and Conduct aims to direct and instruct employees, suppliers, service
providers, dealers and other partners to make the best choices in situations that are out of the
ordinary. The HMB´s Code of Ethics and Conduct and is available to upload in
https://www.hyundai.com.br/ahyundai/eticaecompliance/.

4. Quality Management System

4.1. Documentation Requirements

The Supplier shall keep a Quality Manual that is in accordance with the IATF 16949, ISO 9001
requirements and specific requirements of HMB.

4.2. Control of Records

All part approval records, purchasing record orders, and tooling record orders must be
maintained by the Supplier for the duration of the component production lifetime and plus
fifteen years.

Production inspection records (i.e. control plan checks, Standard Sample, Inspection Agreement
results) must be maintained in a legible format for the duration of fifteen years after creation.

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5. Management Responsibility

5.1. Quality Objectives

The Supplier shall define its internal quality objectives needed to address and achieve customer
expectations within a specified time period, to be aligned with HMB’s target thereof.

Supplier must inform HMB about its commitment to quality performance in the first quarter of
year or whenever HMB requests. The [Quality Objective Document] to be fulfilled is
“Performance Agreement”.

5.2. Supplier Representative / Contact Information

The Supplier shall provide to HMB a contact list and ensure it is updated when any organization
changes are made. The contact list must contain:

• (CEO, COO, PD, QA, QC, M&L) – Name, position, extension, cellphone number and e-
mail.
• 24 Hour Contact – This list should also provide the cellphone numbers that can be
contacted if necessary during non-production hours, extraordinary situations or
circumstances.
• Human Resources contact.

The Supplier is responsible to review the contact information to ensure it is up to date HMB at
least once every six months. The [Quality Objective Document] to be fulfilled is “Organization
Chart”.

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5.3. Management Review

The Supplier is responsible for holding its internal regular scheduled reviews of management
systems (minimum one time per year) to ensure that the goals and objectives of HMB are being
met. The reviews should capture goals from development, manufacturing, logistics, customer
satisfaction, sub-supplier performance, and new business development. The Supplier shall also
be able to, upon HMB request, demonstrate the achievement of goals and objectives.

Supplier shall inform HMB in the first quarter of year, its plan about IATF 16949/ ISO 14001 and
ISO 45001 (or OHSAS 18001) and Production Capacity Study. The [Quality Objective Documents]
to be fulfilled are “Certification Plan” and “Production Capacity”.

In Management Review of supplier shall on monthly basis perform critical analysis of the
Supplier Scorecard sent by HMB.

5.3.1. Development Capability Evaluation

Suppliers shall provide their Development Capability Evaluation in the first quarter of year to
HMB Parts Development. The categories evaluation including Development Experience with
OEM, International Standard Certification, Labor Management, Organization for part
Development, Development Process, Operation of the Pilot and Prototype room, Production
and Procurement Management System, Inventory Management and Emergency Management.
The [Quality Objective Document] to be fulfilled is “Development Capability Evaluation”.

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5.4. Layout/Regular Inspection

For Regular Inspection plan the supplier must provide evidence of fulfillment of specified quality
requirements according to the Parts Inspection Agreement and Inspection Standard from start
of production (SOP) until the end of production.

After ISIR approved, according to the frequency defined at the Inspection Standard the supplier
shall submit to HMB the Regular Inspection report which shall contain the results of the tests
performed when required by HMB. The inspection interval must be decided on the inspection
standard based on parts classification, and regular inspections shall be performed by the
following intervals. However, inspection intervals may be adjusted according to the overall parts
inspection condition, parts characteristics, or the time necessary to perform the test and after
HMB Quality Control agreement.

Safety Critical part General part

Classification Inflammable
(Regulation) part (HB) (HA,NV)

Inspection Every Every Every

Every 3 months
frequency 6 months 12 months 12 months

If the part is inflammable the regular inspection frequency shall be every 3 months, however
just the flammability test shall be performing every 3 months. The other tests shall be performed
according to the frequency defined at the inspection standard.

Is mandatory the supplier submits to HMB Quality Control and HMB Parts Development in the
first quarter of year their Layout/Regular Inspection Plan for all parts purchased. The [Quality
Objective Documents] to be fulfilled is “Layout/Regular Inspection Plan”.

Based on annual plan HMB will select the suppliers randomly to follow regular inspection
activity.

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6. Resource Management

6.1. Competencies Development

The Supplier shall have documented procedures for the training of its employees made by
instructors that are proficient in the area being taught. An emphasis should be applied on the
subject name “customer focus”.

The Supplier keeps professionals trained in Core Quality Tools, using the last version of the
manuals issued by AIAG – Automotive Industry Action Group (According IATF 16949):

• IATF 16949 – Internal Auditor

• Advanced Product Quality Planning (APQP)
• Product Part Approval Process (PPAP)
• Failure Mode & Effect Analysis (FMEA)
• Statistical process Control (SPC)
• Measurement System Analysis (MSA)

It is important to adopt the tools below to analyze root cause of possible failures found: 7 Basic
Quality Tools (Ishikawa, Check Sheet, Control Chart, Histogram, Pareto Chart, Scatter Diagram,
Stratification Diagram), Lean Six Sigma, PDCA, 5WHY, 5W2H, other problem solving
methodologies and 5S.

6.2. Plant, Facility and Equipment Planning

Plant layouts should employ Lean Management Principles to optimize operational efficiency, as
example: Value Stream Mapping, Continuous Flow, Pull System, Set-Up Reduction, Standard
Work, 5S, Error Proofing, Standard Work, etc.

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6.3. Contingency Plans

HMB’s supply chain has become increasingly complex, global, diversified and subject to a variety
of risks that could jeopardize the continuity of the operations. In this environment, our
customers have challenged us to establish Business Continuity Plans within our businesses,
operations and supply chain, as these are more important than ever before.

Similarly, HMB is challenging its Suppliers to establish Supply Chain Risk Management and
Contingency Plans. While it is clear that contingency plans cannot be developed for all potential
scenarios, HMB is asking Suppliers to establish recovery plans and steps that will facilitate quick
response, reaction and resumption of parts and services in the event of disruptions.

The Supplier shall prepare contingency plans to satisfy HMB requirements in the event of an
emergency such as force majeure, utility interruptions, labor shortages, key equipment failure,
and field returns. Once the Supplier is aware of a possible interruption to HMB production, the
supplier shall contact Production Control and Parts Development immediately. HMB Suppliers
are expected to establish a comprehensive crisis management approach to deal with potential
disruptions (proactive) and disasters (reactive). The approach should include plan of action,
checklist of activities, communication plans, escalation procedures, and organization with
teams, roles, and responsibilities.
Suppliers must plan for the following (as applicable) disruptions:

• Business Continuity to deal with event-based risks such as fires, chemical spills, natural
disasters, terrorist threats, medical emergencies, and human resources issues (Example:
strikes, political unrest).

• Supplier must have a robust risk analysis plan to prevent delivery disruptions to HMB.
Pandemics Preparedness Plan (Example: Covid-19 Pandemic).

• IT Disaster Recovery and IT Security for Supplier telecommunications, data, systems and
infrastructure (Example: Invoice (Nota Fiscal) issues, Sub Material Logistics
Management).

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 • Confidentiality Policy (including protection of HMB Intellectual Property), as applicable
• Contingency plan of systemic quality issues that impact critical characteristics as: safety,
regulation and product and process critical characteristics.

Supplier must also perform trainings of the Contingency Plans including all topics listed above
(example: risk analysis plan to prevent delivery disruptions, IT Security for invoice (Nota Fiscal)
issues, Sub Material Logistics Management, etc) to the employees and demonstrate the
evidence of trainings application when requested by HMB.

6.4. Premises of Cleanliness

HMB strongly encourages the use of Lean Management Principles or similar to support the
overall goal of process efficiency and effectiveness within the Supplier’s organization. Progress
toward this goal should be an input to the Supplier’s Management Review.

All Supplier’s members must have and be measured by their mindset of cleanliness. It is proven
that process and product quality failures have origin in contamination. Thus, HMB requires
Suppliers’ special attention on that topic.

5S - The Supplier shall implement and maintain a 5S program for its premises for the purpose of
maintaining a state of order, cleanliness, and repair consistent with the product and
manufacturing process needs. Suppliers are encouraged to have an incentive(s) for the
employees to participate in the 5S system.

6.5. Sub-Tier Supplier Control

The Supplier must maintain sub-tier suppliers/contractors qualification records along with
ongoing, quality, performance test data and process validation data as applicable on products
purchased through these sub-tier suppliers.

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Supplier shall flow down requirements to their sub-tier suppliers that enable Supplier to meet
HMB product print, specification, quality expectations, and any contractual agreement. HMB
reserves the right to specify or approve sub-tier suppliers contracted by its Suppliers for work
performed on HMB material. This applies to all Suppliers including special process (Non-
Destructive Testing, Heat Treating, Welding, Chemical Processing, Plating and Coatings),
material testing services and distributors.

All Sub-Tiers related to product, including services must be must be certified ISO 9001 or IATF
16949 and for exceptions must be submitted to HMB Parts Development.

Supplier shall inform HMB quarterly a year, its control in the sub-tier suppliers regarding the
Logistics Strategy and Quality System. The [Quality Objective Documents] to be fulfilled is
“Supply Chain Management”.

HMB SQ-Mark Program

The Supplier is responsible to audit Tier 2 Suppliers and other tiers according to HMB SQ-Mark
Program and report the audit results to HMB Parts Development, beyond to ensure the
commitment to continuous improvement of the processes such as: rubber, electronics, electric
assembly, painting, plating, welding, heat treatment, compounded rubber, wiring, plastic
injection, casting & forging, sewing, plastic mold, press mold and hardware.

The sub-tiers processes according to HMB SQ-Mark Program must be also identified by suppliers
and demonstrated to HMB. The [Quality Objective Document] to be fulfilled is the same “Supply
Chain Management”.

Supplier need to achieve the minimum score of 84 points to be SQ Mark Program Certified or
have a validated action plan for scores below 84 points. Annually, HMB might use sampling to
audit Tier 2 suppliers with Tier 1 Supplier (Co-Audit) according to HMB Quality Strategy.

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7. Product Development

7.1. Planning of Product Development

The Suppliers must follow electronic PSO/ISIR procedure according to main events describes
below:

Activities Phase Details Country Requirements

3D Design and First Car to Analysis
Proto Prototype Korea -
(Fit, Form and Function)
Define Master Car – Quantity
M/ Car Prototype Korea -
agreed in project review meeting
Tooling in Final Condition and
SP1
All Tool 100% within Dimensional Korea -
AP
Specification
Quality Development
Tooling in Final Condition and
LP1 Master Plan,
All Tool 100% within Dimensional Brazil
Pre LP Dimensional Report and
Specification
Inspection Results
LP2 Reliability Test,
Full Tool Definitive Tooling/Process Brazil
E-LP Dimensional Report
Pre Assembly Representative Sample/ Pre-Production Audit/
M Brazil
Production 4Ms and ISIR Approved ISIR Approved
Ramp-up Production (Restudy –
Series Supplier must control
SOP Capacity, Capability and Measure Brazil
Production the 100 days after SOP
System)

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7.2. PSO

PSO (Process Sign Off) is a special process when new products of HMB are launched aimed at
ensuring quality and performance through planning. HMB suppliers must develop appropriate
prevention and detection controls for new products supporting the corporate quality effort
according the six steps below of parts quality securement process:

• Design (Development Plan)

• Proto (Proto Parts Examination)
• P1 (4M Establishment)
• P2 (Manufacturing Process)
• M (Full CAPA Production Approval/ Process Audit)
• SOP (Initial Quality Stabilization – 100 Days Monitoring Performance)

During FPSC to check the process capacity and key process features should be checked through
the production of 500 mass-production samples and 8 hours-non-stop-production. The
exceptions must be approved by Parts Development of HMB.

7.3. ISIR

All purchased parts are analyzed and validated by HMB during development stage. Supplier has
the obligation to submit the required ISIR (Initial Sample Inspection Report) documentation
through the VAATZ system, which then must be approved by responsible departments. The
development plan is applied according to the tables below.

New Vehicle:
# Item Input Approve
1 Quality SE Supplier Korea
2 Supplier Analysis Supplier QC
3 Part Quality Assurance Agreement Supplier QC
4 A/Tool Inspection Supplier QC
5 F/Tool Inspection Supplier QC
6 Supplier Process Audit Supplier PD/QC
7 ISIR Valid Supplier QD/PD

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Mass Production (EO and 4M):
# Item Input Approve
1 Supplier Developing Supplier PD/QC
2 Inspection Agreement Supplier QC
3 Parts Verification Supplier QC
4 System Quality Verification QA QA
5 Customized Supplier Supplier PD/QC
6 Customized Function PE PE
7 Vehicle Quality Check QC ASSY QC ASSY
8 ISIR Validation Supplier PD/QC

The manual for ISIR steps “Integrated ISIR System User Manual” is available for supplier at Vaatz
system in procedure HB-PD-MA-004.

7.4. Confidentiality

Suppliers must ensure confidentiality of HMB specific products and projects under
development, and related product information. No information must be communicated to any
external parties without the previous written approval of HMB.

7.5. Control of Product / Process Changes

7.5.1. HMB Originated Changes

All Plan of Change Management must be submitted to HMB (4M Document).

EO (design changed, design improved, innovation, etc.) – Many changes implemented at HMB
are driven with an Engineering Order. When requested, the Supplier must submit an ISIR
warrant and any supporting data as deemed appropriate by the Parts Development and Quality
Control.

4M Change - Some changes may not require an Engineering Order. All modifications related:
man, machine, material and method changed by Supplier that impact the process must be
submitted by Supplier to HMB approval by Vaatz System according 4M Procedure.

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Others Conditions requiring HMB notification include, but are not limited to the following:
# 4M Contents

1 Change more than 30% of the operators of the process (Ex. Create new shift, new
production line, operations rotation and others).
2 Man Support of the temporary employees (Change more than 30%).
3 New operators (Change more than 30%).
4 Employee in training (Change more than 30%).
6 Change the concept the machine.
7 New machine.
8 Adjust / Repair of equipment.
9 Machine Adjust / Repair of data (software) of machine.
10 Adjust / maintenance of tooling (rolls, punches, chucks and other dies).
11 Changing of equipment / measuring tooling (Ex. micrometer for caliper).
12 Repair / Maintenance of equipment or jig.
14 Changing of the material.
15 Material shortage / repaired.
Material
16 Engineering change (Minor or Major).
17 Change of supplier of the material or others.
19 Change the place of the production (factory, department e subcontract).
20 Change more than 20% of the layout.
21 Changing of the operation sequence.
22 Change methods or conditions established in standards and procedures.
Methods
23 Change inspections method or standards.
24 Change of delivery route, recipient or packing of finished goods.
25 Change of recipients of WIP (Work In Process).
26 Using the equipment and tooling stopped 6 months over.

All exceptions must be submitted to HMB Parts Development following an official agreement,
example: meeting minutes, e-mail, etc.

7.5.2. Supplier Originated Changes

The Supplier shall have an internal 4M procedure in place to handle changes. The Supplier will
make the determination based upon their 4M procedure on whether HMB should be contacted
for the 4M change.

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In case changes are made by sub-suppliers (i.e – all tiers), the Supplier will control the submission
process from their respective suppliers and then submit an ISIR or 4M change to HMB in the
Vaatz System.

7.6. Pricing / Payment

Suppliers shall remain globally competitive and are expected to work with HMB Parts
Development buyers towards implementing cost saving / VAVE ideas. The Suppliers are also
expected to have an internal cost reduction system to manage their costs.

Suppliers must use cost innovation template to submit proposal about cost reduction to HMB
Parts Development.

7.7. Multidisciplinary approach

The Supplier shall use a multidisciplinary approach to prepare for product development
including the development of special characteristics (development, monitoring and finalization),
development and review of DFMEA / PFMEA (including actions to reduce potential risk), and the
development of control plans.

7.8. Supplier Manufacturing Process

Supplier manufacturing process shall review details of the equipment necessary to manufacture
the products according to HMB requirements, the costs involved to use the equipment
necessary to maintain robust quality levels while sustaining HMB production capacity, and also
reviewing best practices from past programs to ensure that the proper error proofing systems
are in place commensurate to the risks encountered.

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7.9. Special Characteristics

Supplier must ensure that HMB designated special characteristics are identified and are being
monitored by inclusion on the control plan and all associated product and processing
documentation, including, but not limited to, process diagrams, FMEA, work instructions, visual
aids, etc.

If HMB does not specify special characteristics, the Supplier shall specify the appropriate internal
special characteristics for the purpose of monitoring product and process control to assure
conformity product shipped to HMB.

SPC techniques shall be used to monitor the special characteristics as they are process driven.
The SPC measurements must demonstrate the component’s process stability, normal curve (CP
/ CPK data) and process capability at a minimum value of 1.67.

If SPC criterions are not satisfied, Supplier shall contact HMB with a corrective action plan and a
modified control plan providing for 100% inspection and/or error-proofing mechanism upon
HMB approval table. Efforts to reduce variation shall continue until the acceptance criterions
are met, or until approval is obtained from HMB.

The appropriate designation listed below shall denote those characteristics determined by HMB
to be critical:

CTQ Characteristics Control Plan

Pass Through Characteristics (PTC)
Touch Point - Assembly interference
Safety or Government Regulations
Critical Specification to Process
Critical Specification to Product
PFMEA → Severity 9 or 10
CP/ CPK 1,67 Or Error Proofing
CP/ CPK 1,67 Or Error Proofing
Error Proofing
CP/ CPK 1,67 Or 100% inspection
CP/ CPK 1,67 Or 100% inspection
CP/ CPK 1,67 Or Error Proofing

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7.9.1. Pass-Through Characteristics (PTC)

Pass-Through Characteristics (PTC) are part characteristics that are not controlled or functionally
tested in the supply chain and would have a significant impact on customer satisfaction or
warranty. PTC may or may not be designated as a “Special” characteristic. Examples include
threaded holes (nuts), pins (stud bolts), clips and in general Form, Fit or Function features.

Direct or sub-tier supplier should agree the appropriate action, e.g. error-proofing or other
controls to ensure that no defects reach to HMB. Quality System Documentation, for example
procedures, FMEAs, Control Plans and/or Work Instructions must include PTCs.

If requested by HMB, the supplier must fulfill the “PTC Hyundai Matrix” and submit to SQD Parts
Development.

7.10. Design and Development Verification

The Supplier must perform design verifications to ensure consistency to HMB requirements.

7.11. Prototype Program

The Supplier shall have a comprehensive prototype program which includes DFMEA/PFMEA,
Control Plans and associated documentation necessary to produce and deliver parts for SP1, LP1
and LP2 prototype phases to HMB. The Supplier is responsible for the quality of all parts
delivered to HMB.

For LPs events the following basic requirements are necessary: reliability tests, inspection report
and 100% inspection, according to HMB requirements. For each event, the parts shall be sent to
HMB identified (requester name, part name, part number, EO, date and event). The packing
type, box labels and other logistics information are in accordance with procedure HB-ML-OP-
008 available at Vaatz system.

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7.12. Production Approval Process (PSO/ ISIR)

The Supplier shall comply with the content presented in the ISIR check sheet.

The Supplier will submit the PSO/ ISIR documentation containing all the required information as
specified by HMB. The contents of the PSO/ ISIR will be reviewed to ensure all requirements
have been successfully completed. Formal approval of the PSO/ ISIR is a mandatory requirement
for each supplier of parts. Contact your assigned QC quality analyst/ PD analyst or Specialist for
additional details if necessary.

For production parts, the Supplier shall perform process capability studies on any special
characteristics deemed critical by HMB. The process capability study must contain a minimum
quantity of 125 (one hundred and twenty-five) parts per mold, cavity, etc. or any other agreed
by HMB number. Unless specified by Parts Quality, the process capability number (CP/ CPK) must
be 1.67 at a minimum.

The work practices, tools, and analytical techniques describing (taking as reference the latest
version of the AIAG - Automotive Industry Action Group), some of the most important items are
listed below:

• ISIR
• PSO
• Technical and specification review

• DFMEA
• PFMEA
• Process flow diagram

• Control plan

• MSA studies
• Process capability

• Full dimensional layout

• Pass through characteristics

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 • Touch point characteristics
• Reliability test
• Inspection report
• Inspection agreement
• Inspection standard

7.13. Purchasing

7.13.1. Regulatory Conformity

DUNS Number: It is required that every Supplier has it’s our DUNS Number, for consultation
purposes.

7.14. Supplier Quality Performance Monitoring

Supplier Scorecard - HMB evaluates the Suppliers according to Supplier Scorecard (Supplier
Quality Performance). The monthly Scorecard is based upon Quality, Delivery and Warranty
Performance categories.

After critical analysis by HMB Parts Development leadership, HMB may request action plans to
the worst suppliers or classify them as business hold status which prohibits them to participate
in new projects.

HMB may conduct regular visits to check the effectiveness of action plans pending related to
Quality Issues and TFT Teams (HMB Team divided by QA, QC and PD) may be created to solve
the main quality issues.

All suppliers must control the effectiveness of all countermeasures during 90 days to guarantee
that the quality issues were solved. Otherwise, the efforts must be kept until issue resolution.

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HMB 5 Star Evaluation

HMB also utilizes the 5-Star evaluation as a Supplier monitoring tool. This evaluation, specific to
Hyundai, is used to review Suppliers’ quality management aspect and performance.

The Quality 5 Star Audit Program provides an objective method for evaluating supplier quality
level divided in main four elements: Quality management System, HMB Incoming PPM
Performance, Field Performance and Quality Management. This Supplier Evaluation happens
one time per year.

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Ranking Evaluation scores will be classified according to the table below:

PLA*
750 700 600 Under

points↑ points↑ points↑ 600 points

Total Score

5+
95 points↑ G
(adjusted grade) 4+

90 points↑ 5+ (adjusted
3+
85 points↑ 5 grade)
(adjusted
80 points↑ 5-
grade)
75 points↑ 4+

70 points↑ 4

65 points↑ 4-

60 points↑ 3+

55 points↑ 3

50 points↑ 3-

45 points↑ 2+

40 points↑ 2

35 points↑ 2-

30 points↑ 1+

20 points↑ 1

Under 20 points 1-

*PLA: Production Line Audit

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The 5-Star evaluation is an integral part of the evaluation process as Suppliers’ future award of
business may be determined upon the results of the evaluation.

The sections of the Production Line Audit of 5-Star Audit are:

• Outsourced Management
• Process Management
• Production/Preservation Management
• Finished Product Management
• Quality Check and Motivate

Annually, HMB might use sampling to audit Tier 1 using guideline of Quality management System
according to HMB Quality Strategy.

When requested by an Auditor, the action plan must be submitted to HMB no later than 30 days
(as standard of audit). Complete plans of action are required (5 whys, pictures, videos, samples,
etc.)

7.15. FMEA and Control Plan

Suppliers can utilize their company specific template as long as the template is IATF 16949
compliant. Suppliers shall prepare FMEA for all part numbered products that are directly shipped
to HMB.

For new HMB projects the supplier must apply the FMEA VDA AIAG Manual for respective
products and processes.

When the supplier needs to update older FMEA´s for current products and processes, it is
allowed previous handbooks versions, but HMB encourages the application of FMEA VDA AIAG
Manual.

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Suppliers shall use IATF16949 content Control Plan and provide Control Plans for prototype, pre-
launch, and volume production levels. The Control Plan should be the evaluation measurement
criteria of ensuring or detecting compliance of proposed process failure modes captured in the
PFMEA.

A direct relationship shall exist between the process documentation (i.e. PFMEA, Control Plan,
and Work Instructions). Suppliers shall maintain these documents to ensure they represent
current approved operations.

7.16. Work instructions

Operators must utilize the most recent work instructions (standard) applicable to their
respective workstations that have an impact on product quality. The instructions must be
accessible for use at the workstation.

The history of quality issues must be maintained and Quality Alerts must be kept and evidenced
through work instructions updates.

7.17. Verification of job set-ups

Setup instructions of the jobs will be performed and records will be maintained. The suppliers
need to control the parts batch produced and keep the evidences related the initial, middle and
final parts produced for all batches.

Error proofing audits must be completed once per shift. This action should be performed at the
beginning of each shift. Compliance sheets must be maintained for verification of the audits
performed.

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7.18. Preventive and Predictive Maintenance

The Supplier shall have an established and documented system for addressing preventive and
predictive maintenance. Techniques for improvements in equipment efficiency and
effectiveness should be utilized (MTBF/ MTTR/ Spare Parts Control/ Lifecycle of Tools/ Devices).

Any machine using open tools owned by Hyundai must comply with all applicable items of NR-
12 (Safety at work in machines and equipment’s).

Molds management of HMB owner tools must be informed every six months to HMB Parts
Development representative. The [Quality Objective Documents] to be fulfilled is “Molds
Management”.

7.19. Delivery Scheduling

HMB Suppliers will receive electronic delivery scheduling. The requested release must totally
meet (right part at the right time in the right amount) HMB’s demand.

Extraordinary Freight

Incidents with freight deliveries shall be monitored by the Supplier and reported to HMB
Production Control.

7.20. Identification and Traceability

Follow guidelines provided in the HMB Material Control and IATF 16949 requirements.

7.21. HMB ownership

Returnable containers and other tooling ownership of HMB shall observe the terms and
conditions of the agreements.

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7.22. IMDS

Supplier must entry of product data into IMDS according the procedure HB-PD-MA-002 available
at Vaatz system and in http://www.mdsystem.com/. It is HMB’s full expectation of supplier
cooperation and agreement to fully enter product data into the IMDS and to manage that data
as required. If necessary, HMB may provide assistance to Suppliers not otherwise enabled to
engage the IMDS. The time to submit IMDS is during ISIR step.

7.23. Preservation of Product

Packaging

Suppliers shall provide packaging in accordance to the procedure HB-ML-OP-008 available at

Vaatz system. All standard packing should be approved by HMB Materials department.

Storage and Inventory

Suppliers shall follow FIFO (first-in-first-out) system to minimize product deterioration and
inventory obsolescence as well as to ensure a reliable traceability of their parts

8. Measurements, Analysis and Improvements

8.1. Tools of Statistics Control

Reference the latest manuals of AIAG SPC for utilizing proper manufacturing process tools or
equivalent and AIAG MSA for details on measurement system management or equivalent.

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8.2. Customer Satisfaction (OEM)

Suppliers must share quality results for all teams involved and implement visual management
of results and action plans.

HMB PD/QA/QC may create a multifunctional team to work with Suppliers based on the criteria
stated in the Supplier Development section of this manual. However, HMB requires all of its
Suppliers to pursue continuous improvement initiatives and the deployment of these initiatives
are the responsibility of HMB’s Suppliers.

HMB requires supplier-initiated cost reduction and improvement suggestions. HMB wants open,
forthright dialogue with Suppliers so that, in collaboration, we can reduce waste and improve
quality. HMB seeks creativity, innovation and ingenuity in improving how we do business
together.

HMB makes available to suppliers the Cost Innovation program as a method to submit
continuous improvement suggestions.

8.3. Internal Audit of Suppliers

Qualified Suppliers Internal Auditors should be in place to assess quality management related
processes on annual schedule. Suppliers Management should ensure that actions are taken to
quickly remedy any findings and observations which require corrective action.

8.4. Control of Non-Conform Product

The Supplier shall have processes and systems (containment procedure) in place to prevent the
shipping of non-conforming material intended for HMB production. Segregation Area must have
restricted access and only authorized persons.

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Supplier must contact HMB Part Quality for the proper guidance and instructions before
commencing any containment. In case of need to start a containment process, the supplier must
follow the following rules:

1. In Line (Problems detected during assembly process):

Defect
Class Reaction Management
1 2 3
1. Clear B/P definition. Immediate start
Safety Start inspection at HMB stock
inspection since first defect part.
Regulation Start inspection HMB Stock
2. Rules to inspection according standard below:
General Start inspection HMB Stock

2. Inspection part process Standard:

Lot Failure Period of

Actions
Ratio inspection
1% ~4% • Keep lot inspection at HMB plant Full lot

• Keep HMB Plant inspection ( 3rd Company)

- Supplier stabilize fire wall at plant
Improve
5% ~9% ( Self- inspection)
applied
• Containment failure 3rd part start inspection
process at Supplier Plant

Improve
• 10% lot is segregated
applied
~10% - Supplier produce new lot
1st batch
- Suspicious lot return to Supplier
confirmation

Suppliers with high failure ratio during sorting actions will be re-audited by HMB Quality Control
member to check weakness and improvement points to enhance part quality management.

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Suppliers with low Quality Performance shall be keeping one member each shift to support
incoming inspection.

Production Downtime

Should the production line be interrupted due to a Supplier related quality issue (i.e. component
defect, delivery issue), the Supplier will be financially charged for any production downtime in
which they are duly responsible. As downtime will also be monitored according to Supplier main
metrics and the Suppliers usually have 3 days to refute (according HMB template of
countermeasure) a downtime once notified by HMB.

8.4.1. Supplier visitors

Supplier shall ensure its employees comply with HMB internal rules and policies according
described below. Supplier is fully responsible for its employees and their actions, and any
activities executed at HMB premises shall not be interpreted as creation of any employment
bond between HMB and Suppliers’ employees.

8.5. Cost of Poor Quality

All costs incurred by HMB that are associated with the failure of a supplier to meet HMB’s quality
requirements will be charged back to the supplier. Supplier shall pay for any Parts Problem
Report (PPR) issued regardless of the value of rejected Lot received or number of parts being
rejected.

Costs incurred beyond this administration fee will be assessed separately; below is a sample list
of Cost of Poor Quality charges:

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 Sorting
Premium product cost paid to
support production
Rework i.e. labor, tooling, and
fixturing
Added inspection, certification of
product, etc.
Line Disruption / Speed Reduction Premium Freight
Overtime Outside processing &
testing required
Scrap Reimbursement of all
charges from customer
Warranty costs -

8.6. Customer waiver (Management Deviation)

When the Supplier requires a deviation permit to ship product that does not conform the ISIR
approval (i.e. different process, different component, product does not meet dimensional print,
product does not meet validation results), the Supplier must previously obtain an HMB
Management Deviation (MD) approved by (QC/PD) and with a maximum expiration date of 1
month. The Supplier shall not ship non-conforming product without Management Deviation
(MD) approved.

If an MD is authorized, the Supplier shall maintain a record of the expiration date of the MD or
the quantity authorized by the MD. The Supplier shall ensure compliance with the original or
superseding specifications and requirements when the authorization expires.

8.7. Corrective Action

Should non-conforming product arrive at HMB, suppliers may receive a formal noncompliance
notification in the form of HIVIS, IQIS and GQMS information from the Supplier portal system.
Non-conformances can be created for any product quality, service and/or delivery issues.

Within the HIVIS, IQIS and GQMS system, the Supplier must respond with a plan for containment
of all suspect material at HMB facility, in-transit, and at Supplier manufacturing location.
Containment must be in place immediately after notification and Supplier shall, within five
working days, identify root cause and implement action plan. Suppliers shall complete the
corrective action report (HIVIS, IQR, IQIS and GQMS) as deemed appropriate by HMB Part
Quality team.

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Based on the severity of the issue:

The Supplier may be requested to present the corrective action plan at HMB. During this visit,
the Supplier may be asked to present the information in the standard format HB-QC-QR-210.

Verification of the corrective actions and countermeasures implemented by the Supplier may
be performed by HMB quality personnel at the Supplier location to ensure effectiveness.
Emphasis will be placed on error proofing techniques to avoid recurrences.

8.8. Warranty Cost

The supplier must follow HMB relevant applicable procedures, manuals and policies provided
by HMB to supplier (in the last version released, in force at the time of claim), parts supply
agreement and exhibits, and focus on:

• “Drive Defect-to-Zero” philosophy, with continuous improvement actions.

• Daily monitor VAATZ system to check the field claims.
• Commit to share only true and accurate information.
• Commit, in all activities of the Quality Assurance process: gathering parts, analyzing
failure modes, implementing containment and corrective actions, both at HMB Line and
in the field.
• Commit to examine the pieces collected from field preferably within three days.
• Participate in meetings of "HMB Repayment Process", with focus on reducing costs for
both HMB and Supplier.

The “Supplier Warranty Manual” is available for supplier at Vaatz system in procedure HB-QA-
MA-004.

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9. Sustainability

Throughout HMB, we are building a culture of responsibility that encourages every employee to
ask the questions that lead to more sustainable processes and practices, and help HMB support
a sustainable future. Delivering on this commitment requires alignment by HMB Suppliers to
principles of sustainability.

Sustainability is more than the cost of doing business for multi-national companies - it is an
integral part of everyday business. Key aspects of sustainability for supply chain management
include issues such as materials compliance, environmental responsibility, human rights and
working conditions responsibility, anti-bribery and other business ethics expectations.

10. Environmental Health and Safety (EHS)

Through our products, practices and people, HMB is helping to create a more sustainable world.
HMB’s commitment to sustainability goes far beyond a mere program. It’s woven into the fabric
of our culture. Our Suppliers are an important part of this culture. HMB requires ISO 14001 and
encourages ISO 45001 / OHSAS 18001 for all our Suppliers, and expects Suppliers to adhere to
principles of:

• Offering a safe and healthy work environment for employees (Meeting all required rules
and standards in force)

• Protection of the environment and pollution prevention

• Committing to continuous improvement in EHS performance

HMB expects all Suppliers to implement Management Systems that identify, document and
address operational risks to the environment and employee health and safety. These EHS
Management Systems should include identification of key EHS risks and impacts, development
of operational controls to address the risks and minimize the impacts and preparation of
response plans to address emergencies.

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Product Stewardship: "HMB is committed to comply with global EHS related regulatory
requirements including those governing product content, development and disposition (also
known as Product Stewardship). To that end, all Suppliers are required to comply with those
requirements as applicable for the jurisdiction involved and as set forth in any supply agreement
with HMB."

HMB expects all Suppliers to adhere to legal requirements for EHS (local, state and federal) in
all jurisdictions in which Supplier operates.

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HYUNDAI MOTOR GROUP VISION

“Together for a Better Future”

38
39
Message from Director

“This Manual intends to guide HMB and its Suppliers to reinforce the importance of the Quality,
Development, Delivery and Cost in our products. The fast pace of the innovation and respect to
customer needs will assure the survival of our companies in this very competitive business
environment.

I sincerely hope this Manual can give simple but effective guidance to all of our partners in terms
of HMB´s expectation and results".

ChunSik Hwang - Executive Director of Procurement

Rev Date Description Responsible Team Work

00 21/02/2018 Initial Issue Wilton Oliveira Fagner Oliveira
Ed.1 Ivan Carvalho Wagner Oliveira
Joel dos Anjos
Fernanda Zucoloto
Reginaldo Merejolli
01 20/02/2020 Changed: 3.1, 5.2, 5.3, 6.1, 7.2, Nathalia Ortolani Wilton Oliveira
Ed.2 7.3, 7.5, 7.7, 7.10, 7.14.2, 7.15, Olga Episheva Daniel Melloto
7.16, 7.17, 8.1, 8.4, 8.8. Reginaldo Merejolli
Included: 5.4, 8.4.1 Marina Reis Arriel
02 01/06/2021 Changed: 3.1, 3.2, 5.1, 5.2, 5.3, Nathalia Ortolani Daniel Melloto
Ed.3 5.4, 6.2, 6.3, 6.5, 7.1, 7.3, 7.14, Wilton Oliveira Reginaldo Merejolli
7.15, 8.4. Rone Bincelli
Included: 5.3.1, 7.9.1

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