Automotive Industry

White Paper

Challenges and opportunities

October 2003
 CONTENTS

I. INTRODUCTION: AN INDUSTRY ON THE MOVE

II. CHALLENGES AND CUSTOMER EXPECTATIONS

III. NEXANS: A GLOBAL LEADER IN THE INDUSTRY

IV. APPENDIX: i) Is competitive pricing stalling the automotive industry? Q&A

ii) Winding Wires and the automotive market

Synopsis
This report is intended to give a general overview of the global automotive market, and
provide information about how Nexans is serving this market.

It opens with a brief introduction which explains the positive and negative forces
operating within the complex world of automobiles which ultimately affect the supply
industry; then focuses on some major challenges. It also draws up a comprehensive list of
what the automotive industry expects from a cable supplier. The third section presents
Nexans’ overall product offer and explains Nexans’ service approach.

This report is followed by an Appendix containing a Q&A on why many innovations seem
to be stalled for the moment, and a presentation of Nexans’ Winding Wire offer.

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I. INTRODUCTION: AN INDUSTRY ON THE MOVE

“We can’t make cars anymore that are three differently sized slices of the same sausage.”
Helmut Panke, Chief Executive Officer, BMW

Some old and recent trends

In the primitive days of motoring, the cable content in a car was absolutely minimal. For instance, the old
1916 hand-cranked Model T Ford had four coils, and a magneto to power the lights. There was only a
handful of wire pairs. Once the engine was running, the driver switched from a little “hot-shot” battery to
the magneto.

Over the years cable content in cars went up dramatically. By 1948, a Chevrolet contained 42 meters of
cable, with six harnesses, 55 leads, and 32 connectors, weighing overall some 4.5 kilograms. Today’s
Chevrolet Suburban contains 1.5 kilometers of cable, with 20 harnesses, 804 leads and 326 sealed and
non-sealed connectors, all of this weighing in at some 23 kilos. If one adds the winding wires that are used
for alternators, starters ignitions, relays and the many motors in a modern automobile the weight goes up
by another 3 kilos. This largely copper and copper-alloy mass continues to rise.1

Depending on the model and the conveniences under the hood and in the cabin, the amount of cable can
attain 3.5 to 5 kilometers . A tremendous array of cables exist for control and monitoring vehicle behavior;
guidance, navigation and telematics; and driving assistance, automation, comfort and entertainment
(infotainment).

In the near future, apart from regulating these many functions, an onboard PC will be in constant contact
with a central server, to assure continuous automatic control. This will allow for “platoons” or electronically
coupled “trains,” where a group of 20 cars will travel at high speed one meter apart. Accelerometers linked
to various actuators will govern steering, braking and throttle to maintain ideal speed and car position. In
addition, there will be 360 radars, lasers or video cameras to constantly monitor obstacles and dangers
and make sure that the car is in a constant position relative to surrounding traffic.

Along with overall body design, features like this are highlighted at every major car fair. What purchasers
and the automobile press sometimes forget is that much of this new technology is based on cables: special
cables for heated seats, automated windows and ABS systems; plastic optical fiber cables for multimedia
applications; power and control cables for energy; instrumentation cables; and coaxial cables for
communications and GPS navigation.

Virtually all of these cables are manufactured by Nexans, the only manufacturer to have an equivalent
range of cable products, connectivity, accessories and services.

The reason behind the proliferation of cables in automobiles is that customers want cheaper and safer
cars, with increasing intelligence and eco-friendliness. There are also wider conservational and
demographic factors. Gas reserves are limited, and the six billion-plus world population is clamoring for
private transportation.

In fact, in the first decade of the millennium, overall vehicles sales are slated to grow by 27%, from 58
million to 74 million vehicles. Growth in the developed world will be steady, but increasing only by 7.7%.
More significantly, developing markets will increase by over 80% over the same time period. This shift in
demand has given rise to an important trend among automobile manufacturers, or Original Equipment
Manufacturers (OEMs).

1
In 1999 there were 2.6 kg of winding wire in an automobile; by 2003, this had risen to 3.2 kg, and by
2006, it will reach 3.6 kg.
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A merger, acquisition and alliance wave in the international automobile industry has gained momentum
ever since the DaimlerChrysler merger in 1998. As a result of that wave:

• six big players control 80% of global automobile production (GM, DaimlerChrysler, Ford, Toyota,
VW, Renault)

• nine of the largest OEMs control over 95% of global production (add Honda, PSA and BMW)

This fact has enormous implications, not only for the way OEMs operate, but also for the role suppliers play
in the manufacturing process. Generally speaking, there are three supply levels in the car industry: third tier
(basic materials), second tier (parts), and first tier (components and systems).

Nexans is present at all three of these levels: from simple winding wires, to completely engineered
harnesses.

Standardization, outsourcing and niche manufacturing

Concentration among the big seven or nine OEMs has had several important effects. Since there are fewer
major manufacturers serving a widely-scattered public, synergetic efforts are needed to unify products so
that cars can be serviced wherever they are, whether in Europe, the US, South America or the Far East. This
calls for global presence; but it also means standardization and a unification of parts numbers. This
especially applies to cables which serve a dual energy/data function in an automobile. Whatever the
system, they are generic elements and need to be easily interchangeable.

Increasingly, manufacturers are outsourcing what is not a core competence in many areas. A growing
percentage of the value added to any car is coming from suppliers, who are involved even at the initial
design stage. In fact, it is unlikely that any major OEM could build a complete car without the input of the
entire supply community, who are expected to take responsibility for research, design, testing, and
assembly line processes. We are moving away from a product approach to an integrated systems
approach in which R&D, customized services and logistics are important. Today’s door or front end is no
longer merely “assembled.” It is a geometrically closed unit (system) incorporating cables, contacts, motors,
etc. A brake system is no longer perceived as the wheels, but includes the brake pedal, the leads, the
sensors, and onboard computer with a harness stretching through the entire car. Once again, cables play
a key role in making these modules and systems work.

As Helmut Panke remarked in the quote at the top of this paper, customers are increasingly demanding
variety in their automobiles they purchase. They no longer want basic models with a change of color to
differentiate them; they expect an extremely wide choice of models from every manufacturer (minivan, full-
sized van, large van, hard-top, convertible, etc.) They also want to customize their car in terms of
conveniences and comfort. Thus, in seeming contradiction to the trend towards standardization, there is a
real move towards splitting up the product into niches to create highly individualized automobiles. This has
a high impact on the production process and logistics. For example, when a car is being built with a sliding
roof, followed by one with a solid roof, or with or without climate control, customized cables and harnesses
have to be delivered in-line and in the right sequence.

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The ultimate product differentiation is the so-called “reconfigurable vehicle 2.” By using Internet
Reconfigurable Logic (IRL) the automotive manufacturer will build variety and upgradeability into a single
car. For example, it would be possible to upgrade or enhance the performance of the family car for the
weekend by paying for the engine management system to be “race-tuned” to enhance performance, thus
transforming it into a de facto sports car for the weekend. At the end of the prepaid period, the car’s
“personality” could be changed back to its original settings. The same approach allows an automobile to
be regularly upgraded, the way software packages are periodically improved through patches provided via
the Internet. Once again, flexible, modular cabling will play a key role in making the new world of
automotive electronics systems, computer, and software applications a reality.

2
See Karen Parnell’s article “Reconfigurable Vehicles” at www.xilinx.com
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II. CHALLENGES AND CUSTOMER EXPECTATIONS
This new automotive environment, driven by OEM concentration, increased outsourcing, customization and
niche products, and advanced IT-based technologies has created a number of challenges.

First, cost pressures will continue to be strong in developed markets for both OEMs and their suppliers.
As with other consumer products, buyers will continue to want to get more technology for less money. On
the other hand, in the developing market, sales will strongly depend on the surplus income of the buyer,
which will be lower than in the developed world. Bringing down costs will not be easy if the number of
variables continue to explode (due to model differentiation). However, the industry is going to have to keep
cars affordable, if they are to continue to sell them worldwide. Rather than think in dollars or euros, it is
important to reason in terms of how many hours a person in the developing world has to work to afford a
car. If we want to maintain mass motorization, and sell 500 million vehicles worldwide, we will have to
have access to this market, and that means keeping costs at minimum.

Secondly, since the market is increasingly international and consolidated, major players in the industry are
going to have to have a global footprint to be competitive. Suppliers will have to follow the OEMs
wherever they choose to go. Sometimes, this will mean strong supply chain management with the ability to
keep inventories low, while delivering to far-flung points from multiple sources of provisioning. This can be
achieved by new Internet-based supply management platforms (e.g. SAP) which will eventually incorporate
planning, distribution, warehousing, manufacturing, quality control, purchasing, plant maintenance, etc. in
one consolidated system. In addition, since local presence and technology transfer are important matters
for governments in the developing world, first, second and third tier suppliers must have resources on the
ground, including production facilities, to serve their customers.

Thirdly, customers will expect equal quality and performance from a car, wherever they happen to live.
Even though they may have to work more hours in order to purchase it, they want to experience the pride
of driving the same automobile that is used in Europe, or elsewhere. This is the prestige factor. Thus, OEMs
and their suppliers are bound to find ways of keeping quality uniform, even though production is done in
countries where labor conditions and costs can vary greatly. In addition, quality standards and certification
are essential if uniformity and consistency are to be achieved, especially in the key area of automobile
service and repair. In the past, the industry has worked according to QS9000 standards. However, it is
time to apply the new (2002) ISO/TS 16949 standards which were developed to unify European, American
and Japanese production. Product quality and performance require that we move away from country-
specific to truly universal quality standards if tapping into the new developing markets is to be achieved.

Fourthly, integration is a must, not only from the point of view of product, but also in terms of
cooperation among suppliers, and suppliers and OEMs. As mentioned earlier, there is a definite move
from parts and products towards modules and systems. This more flexible approach requires an increasing
exchange of information among the automotive community, and means getting everyone involved early in
the engineering and development process, long before serial/series production takes place. Supplier-OEM
integration is based on shared databases, Computer Assisted Design (CAD), and integrated supply-chain
management systems. It will require a new spirit of cooperation among companies who may have
previously seen themselves as competitors.

The fifth challenge is innovation. Few sectors have been as creative as the automotive sector, in terms of
manufacturing processes, logistics and product. It has long been recognized that (like clothing)
automobiles make a strong appeal to taste and preference, and these tend to change regularly.
Innovations in areas like IT, the Internet, and new satellite technologies are having a tremendous impact on
the industry, as well. Today’s advanced technologies are already pointing to a new form of “sustainable”
car travel in the future, which will reduce needless delays and traffic jams, save precious resources, and
safeguard people and the environment. Transport is the key to our social and economic life. We spend six
entire years of our lives doing it, and 16% of our income on it. Instead of hard fixes that generate noise,
pollution and waste, the automotive world is moving towards soft, data-based solutions, in which
information-rich and energy-efficient cars are seamlessly integrated with Intelligent Transport Systems. In
biological terms, cables provide the blood (energy) and nervous system (data) that makes this happen.

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Customer expectations of cable suppliers

Automakers (OEMs) and their first, second and third tier suppliers have several general expectations of a
cable manufacturer

• because of the diversity of cabling in cars and trucks, cable manufacturers must have a full range
of products, literally every cable

• rather than just being a reactive supplier of off-the-shelf products, they want a proactive partner
who can co-design and manufacture cabling systems with a high value-added component

• given the need to cut costs and improve designs, they want intensified R&D to develop light-weight
and modular solutions

• since electricity and data are often twinned under the hood and in the passenger compartment,
they demand a complete mastery of both worlds

• in keeping with the globalization of the industry, they want common systems that can meet
international standards

• so as to meet high standards of public safety, protection of equipment, and environmental

friendliness, a cable supplier must have a full range of fire-safe cabling and safe manufacturing
and recycling processes

• as a part of cost-savings, a cable supplier must be able to guarantee cable durability, easy
upgrades, and low or no maintenance

• to meet the special challenges of the automotive environment (tough road conditions, vibration,
oil, corrosion, etc.), the industry expects a full knowledge of materials and special industry-tailored
designs

• to satisfy the increasingly international nature of the industry, cable producers must have a full
mastery of standards locally, nationally, and internationally

In addition, to these general expectations, the automotive industry has a number of specific expectations
concerning the cable itself:

• increased electrical/electronic capability to handle multimedia, drive-by-wire, safety features, and

conveniences
• lighter cables: every reduction of 100 kilos of weight equals one less liter of fuel; it also reduces
wear on equipment, and improves engine performance
• thinner insulations
• smaller diameter cables: more space for passengers and equipment
• more heat resistance: quieter cars means more insulation and thus more heat; today’s standard is
105°C, tomorrow’s will probably be 125°C
• environmentally-friendly products
• onboard and roadside radio and broadband solutions

III. NEXANS: A GLOBAL LEADER IN THE INDUSTRY

Nexans provides a wide range of automotive products: electrical harnesses; precision wires for sensors;
winding wires for electrical motors, generators and transformers; power and control cables; protected
cables for instrumentation, communications and navigation. Passenger safety and comfort are assured by
its reliable ABS cables, and special cables used in heated seats and automated windows, for instance. As
car intelligence rises, so do the number of chips, cables and connectors, as well as power requirements.
The eventual upgrade to 42 volts will enable more effective steer-by-wire, ride control, power-breaking and
heating. Recent Nexans innovations meet the challenges of heat, space, data capacity, weight, resistance to

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electromagnetic interference (EMI) and electrical current load. Nexans new plastic coatings resist 125°C
temperatures and beyond (to 185°C), while thinner and flat cables resolve the problem of limited space.
Higher onboard data capacity is delivered by EMI-free Plastic Optical Fibers (POFs) and a new generation
of copper cables for multiplexing. As for growing power needs, thinner copper cables will carry more
current. Through a mastery of both energy and information cables, Nexans is helping the automotive
industry to replace mechanical systems by electrical ones so as to build a safer, smarter car.

A wide range of products for the automotive industry

• Nexans designs, engineers, and produces efficient automotive harnesses of up to 300 wires that
link information and energy systems for lights, air-condition and new generation dashboard
intelligence.

• Controlling all production processes, from melting the copper cathodes to drawing or rolling the
material, we manufacture rods and conductors from copper, brass, bronze or aluminum, with
diameters ranging from 0.030 to 12 mm, or flat wires for flexible flat cable (FFC) applications. The
surface can be bare or tin, silver or nickel-plated, depending on the final usage. Nexans provides
multi-wire bunching and stranding products and all automotive conductors from 0.22 to 70 mm2.
A special bronze wire for contactors provides higher mechanical characteristics.

• Nexans durable winding wires are present throughout the automobile, especially in the
passenger cabin in the dozens of small motors and servos used for safety comfort and
conveniences. Nexans assures that electronic coils can be wound quickly and smoothly by applying
a special enamel which provides insulation and resistance to heat, mechanical shock and
chemicals. Coils are found in engine-related items, and all instruments and dials for speed and
fuel, etc. Nexans’ high-precision manufacturing techniques and secure insulation guarantee fail-
safe performance. A new generation of Magnebond® self-bonding wires, using a special thermal
adherent coating, saves manufacturers a step in motor production.

• Many types of special power and control cables are used wherever energy or information are
needed − for example in battery leads, heated seats or control functions. Nexans products are
known for being extremely light, oil-resistant and safe. To safeguard the environment and to
reduce the effects of a possible accident, Nexans developed a variety of halogen-free cables that
are flame-retardant and produce low smoke in the case of fire.

• Since there is now far more heat under the hood, Nexans has been working on cross-linked,
polyethylene, polypropylene, and copolymer instrumentation cables that can handle
temperatures of up to 150°C and beyond. In fact, a robust cable for oxygen sensors (which
measure unburned fuel in the exhaust to help provide a cleaner burn) are thermal rated up to
300°C. Nexans also provides cables used on brake-pad wear sensors.

• Nexans produces a wide range of communication and navigation cables. High-frequency

coaxial cables are used for all multimedia aspects of cars: connection with antennas and
navigation systems (GPS), connection between the antenna and hands-free GSM, radio links,
remote door control. Nexans produces an entire range of EMI-protected RG58, RG174 and
RG179, RG142 and RG316 cables, plus box duplexers. It designs customized versions to meet the
specific needs of the automobile industry. Nexans was among the first to develop CAN bus cables
which rapidly became an industry standard, while at the same time introducing a new generation
of multiplex copper solutions for data transmission.

The service dimension

Nexans operates as a full-service supplier, not just a producer. This preferred supplier-customer
integration, based on shared databases and Computer Assisted Design (CAD) continues right through
manufacturing and installation. Nexans also has the authority to qualify sub-suppliers on certain items not
produced in-house. Nexans manages its end of the supply chain completely, often integrating 40-50 cores

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suppliers, while assuring consistent quality and variable delivery logistics. Not only does it deliver just-in-
time to a given customer or plant, but takes into account specific models or even a variation of a model by
sequencing deliveries in-order so that customers can receive cables and harnesses in the right sequence on
the production line. Enterprise Resource Planning (ERP) systems make it possible manage supplies in real
time. Rather then sending orders, customers submit “call offs,” or changing orders. Thus, flexibility and
versatility make it possible to market cars in shorter timeframes.

Nexans is continuing to innovate in the automotive sector. For example, to prepare for the transition to 42
volts, it finding ways to improve the efficiency of current 12V motors, and is developing winding wires for a
new generation of hybrid and all-electric vehicles. It’s Magnebond® self-bonding technology allows
components, like alternators, to greatly increase electrical output without an increase in cost or weight.
Nexans is number one worldwide in cables of all kinds, but the automotive unit is adaptable enough to
provide customer-specific solutions. Thus, global resources, including plants located in both developed and
developing countries, make it possible to have the presence and responsiveness of a medium-sized
company.

Nexans sees its role in the next quarter of a century as a “preferred supplier” to the automotive industry as
it continues to more towards global procurement policy, integrated buying and shared responsibilities.
More than ever before, Nexans believes that there is a need to go “beyond cable” in order to add value to
products, do innovative research, and provide a host of behind-the-scenes services − ranging from new
product design to the kind of long-term support that automakers and their suppliers need to meet future
opportunities.

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IV. APPENDIX:

1) Is competitive pricing stalling the automotive industry? Q&A

Seemingly inevitable automotive innovations, many of them closely connected to cable manufacturing,
seem to be on hold, in a transition phase, or permanently postponed. This is largely due to the expense
involved in changing any major, basic technology, but there are some other factors, as well.

Why has the move from 14 to 42 volts not already arrived?

Given the higher voltages required for “drive-by-wire” technologies, control and safety functions, and
infotainment, 42 volts is widely admitted as the ideal solution for the industry. However, 14/12 volts still
has a number of advantages. First, it is not dangerous; while 42 volts comes into the voltage range where
getting a shock is a possibility. Secondly, people (including mechanics) are very familiar with 14/12 volts;
and nearly all equipment has been designed around it. They are naturally reluctant to make a big jump to
a new power system, which would eventually render the old one redundant. Thirdly, a good number of
components are being redesigned to make them work more efficiently on the old standard voltage (e.g.
self-bonding winding wires for alternators; smaller more powerful electric motors, etc.) All the same,
Nexans is continuing to prepare for this major technological shift, which will not generate problems from
the cable side. One definite advantage of 42 volts is that it will make it possible to use smaller cables to
carry more current.

What are the advantages of flexible flat cable?

Flexible flat cable definitely saves a lot of space in the car environment, since round cable does not always
fit into small areas and compartments. It is somewhat more expensive than classical round wire, and may
not be suitable for certain areas of the car because of limited heat resistance.

Is plastic optical fiber (POF) going to replace copper in automobiles?

With its toughness and flexibility, POF seems ideal for cars. To meet the need for higher onboard data
capacity, it provides high capacity for all multimedia applications. POFs are not fragile like glass fibers,
and are bendable, heat-resistant and inexpensive to joint and repair (in the event of an accident) They
solve the weight problem by being able to replace a multitude of traditional copper wires, and are immune
to EMI, a growing problem in automobiles. Given all of these benefits, their use in cars seems certain.
However, OEMs are sticking to the status quo for the moment.

Is multiplexing an alternative to cable proliferation?

Yes. Multiplexing would use one cable to substitute about 350 separate cables, vastly simplifying
installation, and resolving many weight and space problems. However, it is improbable for the moment
that any one cable will completely replace traditional cabling (and this is partly because of the multiple
energy/data functions required in a car: it is not just a question of moving data, but often using the
energized cable activate a motor/servo). In specialized applications, some multiplexing will simplify certain
tasks, but it is likely to be a question of evolution and not revolution in the car environment.

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Do hybrid or electric cars pose any special problems for cable manufacturers?

Hybrid cars are likely to be the transitional stage to the fully-electric automobile. For cable manufacturers,
this poses no real problem since the biggest difference will be a large cable between the batteries and the
engine, and the power supply and the electrical system. Once this bridge is made, the rest functions very
much the same as in a conventional car. For fully electric cars, there will be innovations, especially in the
area of winding wires. One very interesting power train prototype places four electric motors (which
function as generators when braking) inside the hub of each wheel. The advantages: high torque, fast
acceleration, energy efficiency, with no drive train, no differential and no transmission.

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ii) Winding wires and the automotive market

The automotive sector is of key and growing importance to the winding wires industry, with estimates that
the automotive sector's winding wire requirements will grow at a rate of about 10 per cent per year,
compared to a total growth for the winding wire market of around 2 to 3 per cent per year. Nexans’ market
share in Europe of the automotive industry is around 35%. The nearest competitor is Italy’s Irce, which has
about 15 percent. Nexans believes that the main reason for this success in Europe is that its Europe-based
plants have the QS 9000 automotive quality standard, as well as ISO 9001. In North America, Nexans’
market share is around 15 percent.

Nexans supplies and works closely with all the top, first tier suppliers of the equipment supplied to car
manufacturers around the world. These suppliers include top names such as Bosch, Delphi and Valeo. In
addition, the global automotive equipment supplier Valeo has chosen Nexans as its main provider of about
70 percent of the winding wire destined for products to be used by automotive manufacturers in Europe,
Asia and the Americas. Nexans is one of only about 30 suppliers so far selected by Valeo to be one of its
300 main providers, and expects to be well placed to guide Valeo on its future specifications for winding
wire (“Panel 300”).

The winding wire market will be affected by many new technologies in the automotive sector, with those
likely to have the most impact being:

• The evolution of vehicles from 14/12 volt electrical systems to 42/36 volt ones, and
• Research into and development of hybrid electric/gasoline vehicles.

Evolution to 42 volts

The automotive sector is moving from 14/12 to 42/36 volt car systems, with which technologies that were
previously impractical or impossible will in future be not only feasible but practical and realistic.

"Power limits of current automobiles are almost maxed-out," explained Norman Traub, director of the USA-
based Society of Automotive Engineers' (SAE) 42-Volt Initiative, at the SAE World Congress. "Consumers
want advanced safety, entertainment and communication features in their vehicles, and 14-volt systems
cannot deliver enough electricity. Forty-two volt systems will become a prerequisite for improved safety,
comfort and convenience, as well as for regulatory requirements for reduced emissions and fuel
consumption."

For example, higher voltages will enable more effective and efficient use of "drive-by-wire" technologies,
ride control systems, electro-magnetic valve-trains, and integrated starter/generators. In addition, wiring
bundles and semiconductors could be made smaller, while at the same time transferring more power.

The current standard for cars' electrical systems is 14 volts, which is the amount of voltage from the
alternator needed to keep a 12 volt battery charged; a 42 volt system is able to charge a 36-volt battery.

The impact of the move to 42-volt systems is expected to be particularly beneficial for suppliers of winding
wire, as finer and higher performance wires will be required. And the move is happening quickly, with
some estimates claiming that up to 35 percent of the light vehicles produced in North America, Europe and
Japan will have 42-volt systems by 2010.

The Society of Automotive Engineers predicts dual voltage electrical systems will begin appearing in
vehicles by 2005, with full implementation on all cars possibly taking up to 20 years. But despite this,
France's Renault has said that it aims to produce new models with a combination of 14 and 42 volt power
as early as 2004, and believes it may have complete 42-volt systems as early as 2007.
Automotive manufacturers are switching from the 14 to 42 volt electrical systems for a number of reasons
in addition to the increasing comfort and safety demands of drivers, but particularly because the higher
voltage systems will produce great savings in fuel economy and a reduction in emissions.

With a determined Organization of Petroleum Exporting Countries (OPEC) pushing oil prices higher, and
an awareness in most industrialized and developing countries of the urgent need to reduce carbon dioxide

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(CO2) emissions, the fuel economy technologies enabled by 42 volt electrical systems are believed by many
experts in the field to be considerable. Some automotive manufacturers, for example, even feel that the 42-
volt systems will enable fuel consumption savings of 10 per cent or more.

Apart from environmental issues, fuel savings are of great interest to consumers, since European countries,
in particular, are imposing greater tax burdens both on the price of gasoline at the pump and on vehicles
which produce the most CO2. Drivers in Europe and Japan pay about three times as much for their
gasoline as do motorists in the USA.

The systems will also enable car makers to improve the overall passenger comfort and safety, which in the
more industrialized countries is ever more important as auto-makers struggle to compete in a crowded
marketplace.

Raising the level of comfort and convenience the automotive industry can offer its customers will force
investment in the new technologies required, particularly motors and electronic devices using winding wire.

The new 42-volt systems will certainly bring many new components to cars, and make more predominant
existing technologies, such as: power steering (known as steer-by-wire in the automotive sector) and power
braking (or brake-by-wire), in which braking is assisted by electrical motors.

And more and more motors, which of course use winding wire, are going to be used in cars through the
greater predominance of electric sliding doors, windows, sun-roofs, etc. Electrical-assisted seating will also
increase the demand for motors. With the so-called “power seat,” there are typically six or more electrical
motors inside each seat to make the necessary adjustments, while on some of the latest models each seat
has 12 motors. The next evolution will be the thermal control of each seat.

Other benefits for passengers will be the ability of the 42-volt systems to heat cars more quickly than ever
before, and the availability of more power for better audio and video systems, mobile phones, navigation
systems, on-board computers and other multi-media equipment.

High-voltage automotive electrical systems have been debated by the automotive industry for about 20
years, and it has been felt for some time that the total onboard power demand would eventually exceed the
capabilities of 14-volt electrical generators. The 42-volt system was seen as the best because it would be
the most appropriate for conventional passenger cars and vans.

According to Norman Traub of the Society of Automotive Engineers, transition to the 42-volt system will
take an unprecedented, collaborative effort on behalf of the global automotive industry and its suppliers.
"Hundreds of automotive components will need to be re-engineered to become 42-volt adaptable," he
says. "Batteries, circuit protection devices, switches, wiring harness − you name it − will need redesigning."

A good example, and one which shows why winding wire suppliers will see their market grow so much, is
the move towards combining alternators and starters. These are currently two different components that
use about 1.4 kg of wire: 1 kg for the alternator and 400 g for the starter. The combined unit is expected
to use around 2.2 kg of winding wire.

Another example is that camshafts will start to disappear with the move away from mechanical cams to
cams operated using about 16 electrical actuators, all of which will require specialized winding wire.

Nexans believes that the increasing use of fine winding wires will enable many of the main components of
vehicles to be reduced in size. And the finer the wire, the higher the price winding wire producers can
charge. For example, a 0.5 or 0.6 mm diameter winding wire would cost about 30 percent more than a 1
mm diameter wire.

The move to 42-volt systems has also meant that automotive manufacturers are switching to more complex
winding wires, such as Nexans' self-bonding wires. These combine conventional film-insulated winding wire
with the addition of a thermobonding adhesive coating. The main advantage in manufacturing is the ability
to construct free-standing coils (coils without bobbins). The adhesive coatings are designed to be activated
by heat. Further information on the various winding wire types can be found in Appendix 1.

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Edition : October 2003
Hybrid electric/gasoline vehicles

The automotive industry is developing hybrid electric/gasoline vehicles with better fuel efficiency and lower
pollutant emissions in response to governments around the world strengthening and implementing their
clean-air standards.

The large electrical motors typically required by these hybrid vehicles use between 6 and 12 kg of winding
wire, compared to a modern combustion-engine vehicle which uses a total of about only 3 kg for all its
components.

Nexans believes the hybrid vehicles of the future will use roughly three times the weight of winding wire
than today's conventional internal-combustion vehicles.

So important is the emphasis placed on this development that Nexans Winding Wire has made a working
team agreement with Renault, which is working with its tier two suppliers to see what winding wire types it
may wish to source worldwide in future.

Hybrid engines switch between a traditional internal-combustion engine and an electric motor, depending
on driving conditions, and can travel as far as 113 km/h (70 miles) on 3.8 liters (one US gallon) of
gasoline. They are the pragmatic version of the long-dreamed-of electric car, which has the major
drawback of being limited to low distances between charges (at best up to 130 km/h, or 80 miles).

Honda and Toyota already sell such hybrids, and Ford says it will start selling a hybrid version of its Escape
small sport-utility vehicle in the USA in 2003.

General Motors plans to start making electric/gasoline versions of its Chevrolet Silverado and GMC Sierra
full-size pickup trucks by 2004 and all other major motor manufacturers are following suit.
DaimlerChrysler, for example, has recently created a new engineering division to develop electric/gasoline
vehicles, following similar moves by other major makers.

A hybrid electric/gasoline vehicle is one that has a small internal-combustion engine as well as an electric
generator to charge the electrical system's batteries either continuously, or when they are low.

So, a hybrid can work as an electric vehicle for short commutes, yet has the abilities of a conventional car
when longer distances are to be traveled.

Although a hybrid electric/gasoline vehicle, when its internal-combustion engine is running, emits more
pollutants than a pure electric, it is much cleaner than a conventional car and can be made almost as
“clean” as an electric-only one.

When pollution from the generator that charges its batteries is taken into account, an electric-only vehicle is
about one tenth as “dirty” as a conventional car when it is running well. A hybrid electric/gasoline vehicle,
in comparison, can be about one eighth as polluting. And good design is said to enable hybrid
electric/gasoline vehicles to achieve several times the fuel efficiency of a gasoline-powered vehicle.

There are many potential configurations for the engine and battery combinations of hybrid
electric/gasoline vehicles, but they all tend to fall into one of two categories: series or parallel.

In a series version, the internal-combustion engine drives a generator that charges the batteries, which in
turn power an electric motor which then directly turns the drive-shaft. A series hybrid is generally more
efficient but less powerful than a parallel version. This means that the car is most suited for use on relatively
short daily commutes and the occasional longer trip. This hybrid version can also have quite a long range
with a fairly small engine-generator set.

In a parallel system either the engine or the motor can directly turn the drive-shaft.

A parallel hybrid electric/gasoline vehicle does not need a generator, as the motor serves this function and
so can also charge the batteries. For drivers wishing to have the sort of performance they get from a
conventional internal-combustion engine, then a parallel hybrid is generally seen as the better option.
White Paper – Automobile Industry 14/15
Edition : October 2003
Both the parallel and the series versions can be operated with propulsion coming from the battery alone,
with power supplied either by the internal-combustion engine alone, or with power from both sources. This
provides a key advantage of the parallel scheme − a smaller engine and motor − because these two
components can work together.

Of the models currently easily available, probably the best known is Honda's Insight in the USA, which has
for the second year recently received praise in the US Environmental Protection Agency's annual report on
automotive fuel economy, averaging a little more than 100 km (64 miles) per 3.8 liters (one US gallon).

The Insight uses Honda's innovative integrated motor assist (IMA) hybrid technology, combining a one-liter,
three-cylinder gasoline engine with electric motor assist for improved efficiency. The electric motor is
powered by nickel metal hydride batteries which are recharged by regenerative braking during normal
driving.

White Paper – Automobile Industry 15/15

Edition : October 2003