Level 4 is an on-site Quality Management System audit by the Nexteer SQE.

This includes TFS

activities of level 3. Entry into level 4 is based on risk related to: 1) Number of problem cases, 2)
Quality certification status, 3) Supplied parts contain safety critical or regulatory features, and 4) Other
additional risk factors as appropriate (e.g. financial health, program life, etc.).

Each supplier’s improvement plan is tailored to the specific needs of the supplier and will be based off
the problem cases and gaps identified during the improvement process. The SQEP process is not
punitive; it is a focused effort to improve performance and build a stronger relationship between the
supplier and Nexteer. Some suppliers may remain in Level 3 due to criticality of the commodity and/or
the need to maintain strong supplier relationships at all levels.

Nexteer has the right to pursue systemic corrective action from IATF 16949 certified suppliers by filing a
performance complaint to the supplier’s certification body in accordance with the Rules; Automotive
certification scheme for IATF 16949 - Rules for achieving and maintaining IATF Recognition.

Suppliers of calibration services, sorting and rework, software development, and service packaging are
subject to a supplier evaluation which is taken into consideration for future business awards.

8.4.2.4.1 Second-party audits

Nexteer follows IATF 16949 2nd party audit requirements. Where a Nexteer OEM customer has
additional requirements (e.g. annual audits, scope and duration per IATF Rules), those requirements
will apply and will be communicated to the affected supplier.

8.4.2.5 Supplier development

For existing direct material suppliers, Nexteer utilizes the Intelex based Problem Case Management
System (PCMS), Balanced Scorecard, and Supplier Quality Escalation Process (SQEP) to
document/escalate performance issues (reference 8.4.2.4 Supplier Monitoring) and pursue opportunities
for continual improvement.

In addition, we proactively conduct development activities with select potential new supplier/supplier
locations prior to sourcing and APQP. The development process ensures new suppliers are
trained/understand how to do business with Nexteer (including navigation of Nexteer Systems), implement
a World Class Automotive Quality system aligned with the IATF standard, and create a foundation for a
strong business relationship/partnership between the supplier and Nexteer.

During the development process, we jointly work with our new supplier/supplier locations on items such as
but not limited to the review/agreement of Nexteer Terms and Conditions, Nexteer Supplier Requirements
(NSR), Non-Disclosure Agreement (NDA), Cost Model, Manufacturing Capability Assessment (MCA), and
other development training modules. A cadence of regular reviews, training, and support with the new
supplier cross functional team ensures QMS action plan closure prior to launch/start of production.

8.4.3 Information for External Providers

8.4.3.1 Information for External Providers – Supplemental

No Nexteer specific requirements for this section

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