Toronto - Future Directions - 2015

Agenda
Welcome
Paul Sampson
Keynote Speaker
Alex Sammut
Base Oil Trends
Patrick Mosier
Driveline
Ping Zhu
Engine Oils
Keith Corkwell
2015 The Lubrizol Corporation, all rights reserved.
Era of Efficiency:
Trends & Implications
Lubrizol Future Directions Toronto Ontario
April 23, 2015
Agenda
Era of Efficiency
Industry Trends
New Testing
Lubricant Response
The Era of Efficiency

Gain improvements in efficiency
in production and transportation
Efficiency gain to help to reduce
CO2 emission into the
atmosphere
Todays efficiency requires

continuous yearly improvements
not single event regulatory
compliance
All partners of the transportation
supply chain must work together
to deliver efficiency
Its more than achieving efficiency; its about maximizing it

4
2015
2015 The
The Lubrizol
Lubrizol Corporation,
Corporation, all
all rights
rights reserved.
reserved.
Efficiency Driving New Insights and Products
Opportunities
Value
proposition
Products &
differentiation
Legislation creates opportunity to extract value from new product offerings

5
Industry Trends
Passenger Car Regulatory Trends

CO2 / Fuel Consumption
Passenger Car
220
200
gCO2 /km
180
160
140
120
100
80
1991
1996
U.S.
2001
China
2006
2011
EU
2016
2021
2026
Canada
The entire industry must do its part to help meet the drive to efficiency
7
Global Emission Complexity Heavy Duty Truck

8000000 C H I N A E M I S S I O N S I N U S E T R U C K S
6000000
China - Euro II
4000000
China - Euro III

China - Euro IV
2000000
China - Euro V
China - Euro VI
2012
Euro I
Euro II
2021
6%
3%
Euro III
Euro IV
Euro V
*Brazil P7 aligns with Euro V. US EPA 201 aligns with Euro VI

Information base upon Integer Research Limited, http://www.integerresearch.com/contact/#sthash.LckJJzRz.dpuf
Euro VI
US 2010
35%
47%
53%
56%
Emission regulations drive unique hardware and lubricant additive performance

8
Global Hardware and Fuel Trends
Vehicle
Powertrain
Low viscosity lubricants

HCCI
GDI and lean burn GDI
Emissions SCR / DPF/ GPF
Electric lubricant pumps
Variable displacement lubricant pump
Turbo charging
High temperature turbo
Exhaust energy recovery truck
Increased use of roller element bearings
Hydraulic variable timing
Mechanical/electric variable timing
CVT DCT and increased number of gears
Aerodynamic improvements fairing and tail on trailers

Weight reductions aluminum and composites
Durability
Hybrid
Hybridization
Stop start in non hybrids
City bus series full hybrids
Car Plug-in hybrids
All electric vehicle
Emissions
Systems
Protection
Efficiency
Evolution
Fuel
Hydrogen
Liquefied natural gas / natural gas
More bio-fuels
Low sulfur gasoline
Car dieselization
2010
2015
2020
2025
Source: Lubrizol & Ricardo

roadmaps and
technology planning
OEMs are addressing the drive to efficiency in many ways

9
Passenger Car Evolution

Biggest change since carburation to Port Fuel Injection
1991
2014
Engine
4.0L V-6 PFI (RWD)
2.0L I-4 TGDI

(FWD)
50% smaller engine
Power
145 HP/220 ft-lbs
240 HP / 270 ft-lbs
65 % more power
Transmission
4 Speed Automatic
6 Speed Automatic
50% more gears
Curb weight
4060 lbs
4557 lbs
12% heavier
0-60 mph (sec)
10.8 (AWD V-6)
6.0 sec (AWD V-6)
44% faster
Interior Volume
104.9 ft3
172.7 ft3
65% larger
Fuel Economy
15/20/16 mpg
20/28/23 mpg
43% more fuel efficient
Modern engines are smaller, more powerful, lower emissions

10
Thinner Viscosity Benefits

What is the Benefit:
Commercial and environmental

concerns about fuel economy
A 1% saving on fuel economy for

a 250 truck fleet equals over
$160,000 annually
For OEM fleet a 1% saving could

mean the difference in paying
thousands of dollars per vehicle
in credits or fines
Developing tools which can

quantify the financial benefit from
efficient lubricant
The economic impact can be significant

11
Lubricant Part in Overall Efficiency

HD Efficiency*
100
90
Exhaust
30%
80
70
60
50
Fuel
Energy
Cooling
20%
Aux 4%
Braking
9%
40
30
20
10
0
Mechanical
Work
50%
Trans 7%
Engine 9%
Aero/Rolling
losses
24%
*Source = Tribology International (Global energy consumption due to friction Kenneth Holmberg) Chart shows
HD efficiency as an average across all truck and bus fleets.
The small impact of lubricant efficiency is increasingly important

12
New Testing
13
Measuring the Value of Efficiency
Field testing needs to

precisely measure
lubricant efficiency
New bench tests that
are more relevant to
modern engine and
transmission hardware
Lubricant efficiency measurements that are understood by the customer

14
Improved Fuel Economy Testing

Fully instrumented heavy
duty engine that
measure BSFC testing
on over the road
efficiency
Driveline real world drive
cycle evaluated on
motorized rigs
Testing beyond specification to deliver quantifiable efficiency gains

15
Updating Traditional Bench Testing

New OEM hardware is
changing how we
screen and evaluate
new chemistry and
formulation
Unique surface and
contacts demand new
methods beyond
traditional tribological
testing
Better testing leads to improved insights
16
Insights Lead to New Understanding

SAAS Layer Technology:
Produce thick protective films on
powertrain hardware
Advanced analytical methods now
allow visualization of
macro layer composite
additive systems
17
Lubricant Response
18
Emission Age to Efficiency Age

Lubricant Specifications Evolve in Response to Emission Regulations
Efficiency Age
LUBRICANT SPECIFICATIONS
Emission Age
N American
PCMO
N American
Diesel
EMISSION REGULATIONS
GF-5
CI-4 (PC-9)
European
ACEA 02
PCMO & Diesel
Japanese
Diesel
TIMELINE
19
GF-4
CI-4 Plus
ACEA 04
CJ-4 (PC-10)
ACEA 06
2003
2004
2005
2006
PC-11
ACEA 15
ACEA 10
ACEA 08
Update JASO
DH2
JASO DH-1
DH-2/DL-1-2005
2002
GF-6
2007
2008
ACEA 17
Update JASO
DH2
2009
2010
2011
2012
2013
2014
2015
2016
Japan GHG/FE
Japan 2004
Japan 2010
EURO IV
EURO V
EURO VI
USA GHG/FE
USA 2000
USA 2007
USA 2010
2017
Significant Upgrade to Lubricant Specification

Specifications are coming
thicker and faster:
Numerous major industry
lubricant upgrades are
forthcoming
ACEA 2014 F Series

PC-11 A&B
GF-6 A&B
Increased need for application
specific drivetrain, transmission
and axle lubricants
Maintaining a quality lubricant portfolio is increasingly complex for the overall industry
20
Introduction of Low Ash CJ-4 Lubricants
2007
Lubricant requirements change as a result

of market and hardware changes
Market Changes
EPA regulates lower

particulate emissions
from heavy duty diesel
trucks
21
Hardware Changes
Engine manufacturer
add diesel particulate
filter to on highway
trucks
New low sulfur fuel

is required by DPF
equipped vehicles
New lower ash
additives developed
Cross industry coordinated change to have hardware, fuel, and lubricant changes
available to support the industry
Lubricant additives were changed to support the ash limit yet maintain the wear and
cleanliness performance of previous formulations
Efficiency is Unique for Each Application
Engine Oils:
Driveline:
It means advanced protection and
It means delivering more

power as a function of energy
exerted, and delivering more
torque while reducing fuel
consumption, CO2
and transmission wear.
reduced friction, while

maintaining integrity of smaller,
hotter, more demanding engines
that consume less fuel and
produce less CO2
Industrial:
It means equipment running
longer, faster and more
effectively. This added
productivityeven
in more demanding
environments for lubricants
means more customer profit.
Fuels:
It means technology that
enables flexibility in use of

increasing complex fuel options
while still optimizing engine
performance.
Era of Efficiency Legislative Demands
Efficiency demands continuous yearly improvement

23
How Lubricants are Delivering Efficiency
Whiskey
90
85W
75W
Engine lubricants are moving, 5W-30

(passenger car) and SAE 15W-40
(Heavy Duty) to 0W-20 and 0W-16
and 10W-30 and 5W-30
Gear oils that traditionally have been

85W-140 now use 75W-85
By moving lubricants to thinner

viscosity, churning and pumping
loses are minimized
Macro Trend: Thinner lubes reduce frictional losses, but

24
Understanding the Challenge
Lubricants are required to protect in all regions of operation

25
Fluid Protection
Lubricant physical
properties are critical
Additives work to maintain
viscosity
Disperse soot and
sludge
Reduce oxidation
Prevent shear
Maintain flow when
cold
Maintaining lubricant physical properties are key

26
Surface and Compression Protection
With increased load, lower

speeds and thinner
viscosity, surfaces of the
moving parts begin to
interact
Without a lubricant film,

additives must react and
form on the surfaces to
protect
Lubricant must focus on Surface Protection and limit friction increase

27
Era of Efficiency
Thinner lubricants
Efficient drivetrains
Downsizing
Downspeeding
GDI
Turbo
More gears
Era of Efficiency is moving our focus to surface and compression protection

28
Friction
Impact of Viscosity Bench Testing
Viscosity decreasing
Speed
As oils get thinner friction increases occur sooner

29
Thinner Lubricants Increase Wear in Engine Test
Industry testing shows cam wear

increases with thinner lubricants
Small amounts of cam wear reduces

valve lift, airflow, and engine output
Engine wear and decreased

performance can negate the benefits
of lower viscosity:
More repair cost
Lower torque, less work, decreased
fuel efficiency
Simply lowering viscosity without other changes will not work

30
Where Do Additives Deliver Performance?
31
Friction
Preventing Friction Gain
Speed
Additive technology can return lubricant performance

32
Delivering Complete Protection
Protect surfaces in thinner

lubricants
Main fluid flow in high soot
tests
Reduced fuel consumption
Lubricant additives provide complete protection

33
Reduced Wear
Era of Efficiency testing

has led to new
formulations:
Summary
Efficiency performance mandates continue to

affect the entire industry
Engine designs are smaller and more

powerful; thus, thinner lubricants with robust
additive chemistries are needed to cope with
efficiency demands
Surface Activated Additive Systems (SAAS)

Technology provide new levels of protection,
particularly in the challenging boundary
lubrication regime
Proposed ILSAC GF-6 oils will need to be

designed to help improve engine fuel efficiency
while still delivering on overall engine durability
Lubricant technology enables efficiency gains for future market needs
34
Working together, achieving great things

When your company and ours combine energies, great things can happen.
You bring ideas, challenges and opportunities. Well bring powerful additive and
market expertise, unmatched testing capabilities, integrated global supply and
an independent approach to help you differentiate and succeed.
The Outlook for Base Oils

Lubrizol Future Directions Toronto, Ontario
April 23, 2015
2015The Lubrizol Corporation, all rights reserved.
Overview
Global lubricant and base oil demand

Supply drivers
New supply
Supply / demand balance
Conclusions
Global Demand
GDP vs. Lubricants Growth

38
10
36
8
6
34
32
2
30
0
28
-2
26
-4
24
-6
22
20
-8
2000
2001
2002
2003 2004 2005

Lube Demand (MT)
2006
2007 2008 2009 2010

Lube Demand Change (%)
2011
2012 2013 2014

GDP Change (%)
-10
Source: Fuchs Petrolube SE; 19th ICIS World Base Oils and Lubricants Conference, February 19, 2015
Lube demand tracks GDP (average 4% offset)

4
Global Lubricant Demand Forecast
IMFs five year forecast with 4.0% lubes gap
Global
2012
Actual
2013
GDP Growth (%)
3.4
3.3
3.3
3.8*
4.0*
4.1*
4.0*
4.0*
Lube Growth (%)
-0.5
1.0
0.5
-0.1
0.1
0.2
0.1
0.1
2014
2015
Projections
2016
2017
2018
2019
Model predicts:
Continued flat to modest expansion
Base oil demand tracks with modest lubricant growth
Or a more optimistic outlook:

Annual growth more like boom / bubble years (2004-07)
Averaged 0.8% annually
No dramatic economic downturn
*Source: IMF World Economic Outlook
Canada /US Lubricant Demand

Five year forecast for Canada / US projection
Canada / US
Actual
2013
2014
Canada GDP
21.0
2.3
2.4
2.4
2.2
2.1
2.0
US GDP
2.2
2.2
3.1
3.0
3.0
2.7
2.6
-1.5
-1.2
-1.1
-1.1
-1.3
-1.3
-1.4
-1.6
-1.6
-0.7
-0.8
-0.9
-0.9
-1.1
Canada Lube
Growth (%)
US Lube
Growth (%)
2015
Projections
2016
2017
2018
Observed:
Continued moderate decline in 2013-14

Expect:
Slower rate of decline thereafter
Sources: IMF World Economic Outlook October 2012 w/January 2013 update
GDP-Lubes Gap from SBA Consulting LLC
6
2019
North American Lube & Base Oil Projection
Thousand tons per annum (ktpa)
8,600
8,400
8,200
8,000
7,800
7,600
7,400
7,200
2014
2015
2016
Lubricant Demand
2017
2018
2019
Base Oil Demand
Project ~240 ktpa decline in base oil demand by 2019

7
Base Oil Supply / Demand
Base Oil Drivers

Base oil demand is not driven by lubricant business needs
Primary / long term drivers:
The technology paradox
Highest quality / lowest cost of production
Legislation
Clean fuels, re-refined mandates, ODI mandates
Secondary / near term drivers:
Refinery upgrading
optimization
Heavier crude slates and greater diesel

output
Refinery viability
Reduced crude oil demand in the Atlantic Basin
Refinery divestments
Ownership changes and differing

strategic outlooks
Product mix continues to upgrade

9
Base Oil Capacity and Expansion
Group I base oil capacity remains dominant globally

North America remains dominant Group II producer
Group III production concentrated in Asia
All future expansions / re-fits dedicated to Group II / III
Source: Arthur D. Little; 2015 ICIS Conference

10
Global Base Oil Supply / Demand
2014
2015
2016
2017
2018
2019
Nameplate Capacity (mtpa)
48,862
48,835
48,852
48,862
48,884
48,875
Sustainable Capacity
42,658
42,822
42,980
43,023
43,125
43,173
Global Lube Demand
36,385
36,367
36,419
36,479
36,533
36,586
Global Base Oil Demand
34,850
34,840
34,900
34,950
35,000
35,050
Observed
Global base oil production has leveled off

Expect
Very modest increase in sustainable capacity
Maintain 8,000 mtpa buffer
Source: SBA Consulting
11
Base Oil Group Supply

2014
2015
2016
2017
2018
2019
5-Yr Change
Group I
(mtpa)
21,304
17,951
15,540
14,962
13,407
12,461
(8,843)
Group II
16,575
18,712
21,095
21,407
22,517
23,475
6,900
Group III
5,601
6,316
6,295
6,575
6,557
6,542
941
PAO
568
536
533
528
514
508
(60)
Naphthenic
4,814
5,319
5,389
5,389
5,889
5,889
1,075
Totals
48,862
48,835
48,852
48,862
48,884
48,875
48,862
Total nameplate base oil capacity virtually unchanged

Expect continued reduction in global Group I capacity
Significant introduction of Group II capacity
Slow down in Group III expansion
12
North America Supply Balance
Group I
Group II Group III*
PAO
Naphtic
Total
13,804
2014
Nameplate
3,115
7,789
99
294
2,508
Sustainable
2,617
7,010
90
290
2,207
12,214
demand overhang
8,160
4,054
33%
2019
Nameplate
1,890
9,176
421
256
2,508
14,251
Sustainable
1,588
8,258
379
250
2,207
12,682
demand overhang
7824
4,858
Based on stream day factors: 84% Group I, 90% Groups II/III, 88% naphthenics
* Excludes Group III imports
* Excludes Group III imports
Significant over-capacity in US/Canada without export of Group II
13
60%
New Base Oil Supply

Outcomes
Growing oversupply
Project delays / cancellations?
Probable, but most in process will proceed
Technology paradox
New capacity lower cost / higher margin than displaced
capacity
Additional projects are likely in the post-2015 period
Re-refining legislatively driven

Override supply/demand issues governing virgin base oils
14
New Base Oil Supply (cont.)

Outcomes
Higher OEM specifications / global platforms
Increasing requirement for higher quality base oils
By 2020 large majority of on-highway automotive lubricants
globally will be formulated with Group II and Group III base
oils
Fuel technology pull

Market upgrade drives refining strategy
15
Base Oil Supply / Demand

The likely outcomes
16
Group I Demand
Demand for cost effective base oils
Technical drivers for Group I still in play (MD, off-highway)
Group I not necessarily most cost effective
Group II increasingly competitive
Regional cost effectiveness
New Group II / III capacity increases downward pressure on
cost
Group I production not purely cost driven

Regional / economics
Security of supply
17
Impact of Over Supply
Group I base oil production impacted

Technology limitations
Crude oil availability specific feedstocks required
Compatibility with fuel production optimization
Outsized impact: only 8-12% yield on crude
Low value co-products

Yields of distillate aromatic extract (DAE) and bitumen can be larger than
base oil
Typically valued at High Sulfur Furnace Oil (HSFO)
Contracting market / demand for Group I quality

Latest PCMO and HDDEO are predominantly Group II / III formulated
Nearly fully displaced from North American automotive engine oils
Other regions, declining with the replacement of the on-road fleet
Victim of the technology paradox

Large cost of production disadvantage versus many higher quality Group II
and Group III base oils
18
Impact of Over Supply

Group II base oil impact
Cost advantage over Group I not universal
Applies mainly to lube hydrocracking operations
Derived from higher value byproducts, scale and lower opex
Some retrofit operations with Group I type costs

Same co-products, similar opex still requires lube crudes
Some retrofit capacity subject to reduced utilization or even closure
Most used in-house and to supply contract customers
Re-refined Group II has an entirely different cost structure and

varies widely by location and waste oil collection area
Group III supply unbalanced in the near term

Demand increasing but not keeping up with supply
New capacity increasing at a reduced rate
Limited formulation overlap with Group I and II
Operation at reduced levels forced
19
Global Base Oil Pool Composition

Continued migration away from Group I ..
Naphthenic
10%
PAO
1%
Naphthenic
9%
PAO
1%
Group III
11%
Group III
11%
Group I
44%
Group I
51%
Group II
28%
Group II
34%
2012

20
PAO
1%
2014
Naphthenic
12%
Group I
26%
Group III
13%
Group II
48%
2019 (proj)
North American Base Oil Trends

Group I outlook
Global surplus pressure on all base oils margins in near to
medium term
North America vulnerability of Group I producers limited
Structural differences from other regions
Few large players w/broad geographic separation
Low cost natural gas provides NA refiners fuel opex advantage
Access to low cost crudes; $13-24/bbl less than Brent

ExxonMobil strongly advantaged in scale, integration
benefits, retrofit options, global supply network
Lubricant technical drivers already integrated

N. American market has adjusted and stabilized
21

Group II outlook
Global gains at Group I expense
Group II satisfies most Group I technical demand often with cost
savings
Growing market outside of NA for non-fuel economy automotive engine
oils
Gains from Group I closures/reduced utilization
North America is Group II dominant market

Further penetration not expected unless/until Group I capacity closes
Volume losses to Group III
Move towards fuel economy HDDEO
Turnover of the car parc
Greater 4 cSt Group II+ ameliorates potential losses
Most NA growth from exports to Group II deficit areas

Chevron (Pascagoula) volume targets European and SA markets
Many specifications more cost effective with Group II/III blends than all
Group III
22

Group III outlook
Sustainable global capacity expected to add 15-20% by 2019
Increase from 5.6 mtpa to 6.6 mtpa
Asia and ME remain dominant supply areas
Europe improved self sufficiency with new capacity in Spain
(SK/Repsol)
Global demand to continue increase

Capacity overhang likely over the medium term
Some producers at reduced throughput but remain economically
viable
No closures expected
NA to increasingly rely on imports from the Middle East and Asia

NA demand (including Mexico) forecast to grow
No significant virgin Group III capacity on the horizon;
Some re-refiners/biolube producers targeting GpIII quality
Imports to rise with growth in demand

Could exceed 1.5 mtpa by 2017
23
API Group Supply By Region - 2019
12,000
million tons per annum
10,000
8,000
6,000
4,000
2,000
N. America
S. America
Group I
24
Europe
Group II
ME & Africa
Group III
Asia Pacific
Conclusions
25
Conclusions
The outlook for lubricants
Lubricants are an operating cost and their demand has a
strong correlation to global GDP
Based on IMF projections
Weak to modest growth in global lubricant demand
Assumes no major OECD fiscal issues
Primary growth in the emerging economies

OECD demand to continue its modest decline
Canadian and US demand continues modest rate of decline

Totaling up to ~5% for the 5 year period
Opportunities prevail in the emerging markets and for advanced, high specification and
eco lubricants
26
Conclusions
The outlook for base oils
Little change in base oil demand;
Drivers continue to be mainly external to the lubricants business
Technology paradox & clean fuels investment having greatest impact
Fuel refining/capacity/technology/demand sets the stage
Impact of $40/bbl crude oil
Additional global capacity expected
9 mtpa of Group II/III and naphthenics

New Group II capacity
Capacity creep - mostly Group II/III
Some Group I Group II upgrades
By 2019, Group I is projected at of the global base oil pool, down

from 51% in 2012
Expect significant reduction of high cost capacity to close or operate
at reduced levels
Predominantly Group I, but also some high cost Group II
Group III to likely operate at reduced utilization - none likely to close
North America impact minimized due to its structural advantages
27
Conclusions Implications for Lubes
Demand for thinner oils

Moving from GP I to II / III
Improved volatility
Improved fuel economy
Seal compatibility
Product compatibility
Global increase in utilization of higher quality basestocks
28

Driveline Drivers and Trends:

North America
Lubrizol Future Directions Toronto Ontario
April 23, 2015
Agenda
Scope:
Automotive gear oils
Automatic transmission fluids
Market drivers
Hardware trend
Lubricant requirements and trends
Lubricant development and validation for
efficiency
Market Drivers and Hardware Trends
Driveline Lubricant Drivers
Global
Environmental
/ Chemical
regulations
Extended
filled-for-life
Drain interval
Fuel
Economy
Emission
regulations
Performance
/Safety
Durability /
Uptime
Global
Availability /
Supply
reliability
Driveline Hardware Trends
Increased transmission design options:

Automatic and manual: 6 to 9 (10) speed
CVT (Continuously Variable Transmission): belt, chain
DCT (Dual Clutch Transmission): dry, wet
Automated manual
Greater use of AWD / FWD, limited slip devices
Electrification:
Hybrids
eDrive
Diversified materials and surface finish:

Friction materials
Synchronizer materials
Seals
Increased power density / reduced oil sump:

Higher operating temperature
Fuel Efficiency Drives New Transmission Design
Market Trends of ATF
1940s Present
Conventional
(AT)
Mid 1990s
Belt & Chain Drive
(CVT)
2002
6-Speed
Conventional
(AT)
2004
Dual Clutch
Transmission
(DCT)
2007
ZF 8-Speed
Conventional
(AT)*
2011-2014
9 (10) Speed
Conventional
(AT)*
Moving towards automation (no longer a simple question of manual vs. automatic)
Resulted in fragmented market in both hardware and lubricants
Higher lubricant technical investment

Test development
Fluid development
Pace of change are increasing / development cycle are shortened
* Copyright ZF Friedrichshafen AG
Unprecedented era in automatic transmission design options

6
New Transmission Designs are Growing Share

of Global Production
North American Light Vehicle

Transmission Forecast
2013 Production
2020 NA Production Forecast

2.7%
3.5%
8.7%
9.6%
7.4%
18.5%
71.3%
78.3%
MT
AT
CVT
DCT
MT
AT
CVT
DCT
Source: IHS January 2014
Observations:
Conventional stepped automatic will remain the transmission of choice with speeds
increasing from 6 to 8 and even higher
Loss of share from ATs to CVTs, thanks to significant push from Honda and Nissan
DCTs may not grow as much as expected due to reduced momentum at Ford, though
potential for growth from imports e.g. VW Group
Asian and US Brands Dominate

North American Sales
Passenger Car and Light Truck Sales 2014
Parent Origin
Market Share
North America
45%
Asia
46%
Europe
9%
Total vehicles: 18,350,875

~ 80% AT type transmission
Source: IHS January 2015
Chrysler classed as North America even though now officially FCA

Subaru parent company is Fuji Heavy
North American sales exclude Mexico
9
North America Vehicle Parc 2013

Passenger Car and Light Truck Sales 2014
Source: Polk 2013
Total vehicles 249,418,837

Average vehicle age 11.4 year
10
Brand Origin
% of market
North America
59%
Asia
34%
Europe
7%
European DCT Production
11
North America there are an estimated 2M DCT vehicles

DCTs are split 50 / 50 wet / dry clutch
Dry DCTs are exclusive to Ford
North American Wet DCT Production Data

**
Including imports total wet DCT vehicle population in NA is

estimated to be ~1 million vehicles*
*Lubrizol 2013
** IHS 2013
12
Continuously Variable Transmissions

Manufacturer
CVT Start Year
Honda
1996
General Motors
2002
Volkswagen/Audi
2002
Nissan
2003
Mitsubishi
2003
Ford
2005
Chrysler/Dodge
2007
Subaru
2010
Source: Motor Information Services: ChekChart
CVTs have been in the North American market for many years
CVT production in North America is forecast to double between 2013 and 2020
There is a growing market for a multi-vehicle CVTF in North America
13
CVT Specifications
Vehicle / CVT Fluid
Audi/VW (TL 52180; G 052 180; G 052 516)
Chain
Ford (CFT30/WSS-M2C933-A/Motorcraft XT-7-QCFT, MERCON C)
Chain
Subaru (i-CVTF, Lineartronic CVTF, K0425Y0710, CV-30)
Chain
BMW 8322 0 136 376 / 8322 0 429 154 (EZL 799A)
Belt
Daihatsu Amix CVTF-DC, Daihatsu Amix CVTF-DFE*
Belt
Dodge / Jeep (NS-2, CVTF+4/MOPAR CVT 4)
Belt
Ford (CVT23)
Belt
GM/Saturn (DEX-CVT, CVTF I-Green2*)
Belt
Honda (HMMF, HCF-2)
Belt
Hyundai / Kia (SP-CVT 1)
Belt
Mazda CVTF 3320
Belt
Mercedes Benz CVT28/MB-Approval 236.20
Belt
Mini Cooper (EZL 799A/ ZF CVT V1)
Belt
Mitsubishi DiaQueen (CVTF-J1, CVTF-J4*)
Belt
Nissan (NS-1, NS-2, NS-3*)
Belt
Punch (EZL 799A)
Belt
Shell Green 1V
Belt
Subaru e-CVTF
Belt
Suzuki (CVTF 3320, TC, NS-2, CVTF Green 1, CVTF Green 2*)
Belt
Toyota/Lexus (TC, FE*)
Belt
* Low viscosity
14
CVT Type
Hybrid CVTs usually use an

E-CVT, this is not a
traditional CVT
It uses a wet start clutch and

does not have a belt / chain
OEMs (Toyota, Ford, Honda)

usually recommend their low
viscosity ATF in these
applications
North American Light Vehicle AWD
2001
2011
2006
FWD/ RWD
AWD
4.85%
11.92%
24.95%
95.15%
88.08%
75.05%
Source: CSM Automotive, 2012
AWD are projected to continue to grow

15
North American Production FWD vs. RWD

2011
2006
2001
RWD
FWD
32.72%
42.94%
45.32%
54.68%
57.06%
67.28%
Source: CSM Automotive, 2012
FWD continue to grow market share

16
Heavy Duty 10 Year Sales Trend

2013
2003
Class 4
3%
Class 4
12%
Class 5
17%
Class 5
9%
Class 8
43%
Class 6
16%
Class 7
20%
Class 8
53%
Class 6
13%
Class 7
14%
Source: ATA Trends 2014, pg. 30
Growth in Class 5 and 8, Class 4 shrunk considerably

17
Heavy Duty Truck Sales

By Brand
Western Star
0.9%
Mitsubishi
Fuso
0.6%
UD Trucks
0.1%
Volvo Truck
6.3%
Peterbilt
9.1%
Ford
13.6%
Mack
5.0%
Kenworth
9.3%
Freightliner
34.0%
Isuzu
3.5%
International
15.4%
Hino
2.3%
18
Class 8 Commercial Vehicle OEM Market Share

By Brand
By OEM
Western Star
1.6%
Volvo Truck
11.2%
Volvo
20.0%
Mack
8.8%
Freightliner
36.6%
Daimler
38.2%
Peterbilt
13.4%
PACCAR
27.4%
Kenworth
14.0%
International
14.4%
19
Navistar
14.4%
Commercial Vehicle Transmission Market Share

Class 4-8 Truck Transmission Market Share 2010
13%
5%
Allison
47%
Eaton
OEM
35%
Source: Frost & Sullivan
20
Other
Commercial Vehicle Axle Market Share
Class 6-8 Truck Axle Market Share 2011
24%
39%
Dana
Meritor
37%
Source: 2008 | Frost & Sullivans Strategic Analysis of the North American Class 6-8 Truck OE Ride
Systems Markets
21
Other
Driveline Lubricant Trend
22
Driveline Market Trend - Lubricant
Extended drain interval
Average vehicle age increasing
Lower viscosity for efficiency
Improved durability
Better wear protection
Better thermal / oxidative stability
Improved anti-shudder performance
Friction performance
Application specific
ATF, CVT, DCT, MT, LS, AWD
Increasing use of group II, III, and synthetic

Additive compatibility
Seal compatibility
Dedicated driveline fluids - complexity
23
ATF; CVTF; DCTF; MTF; Axle fluids
North American Gear Oil Market

Conventional vs. Synthetic
Commercial Vs. Consumer
32%
9%
Commercial
68%
Conventional
Consumer
Synthetic
91%
Commercial Gear Oil by Viscosity
Commercial Gear Oil by Country
5%
9%
28%
16%
58%
80W-90
85W-140
Other Conventional
Synthetic
Kline
LubesNet
Database
2013
24Source:
2015 The
Lubrizol
Corporation, all rights
reserved.
15%
United States
69%
Canada
Mexico
Unlicensed ATFs Dominate Service Fill Market
Source: Estimated by Lubrizol 2014
Driven by end-user needs for rationalization

25
Equipment Design Change Increases

Operating Temperature
Lower Oil
Levels
Changes in
Equipment
Design
Increased
Power Density
Increased
Operating
Temperatures
Improved
Aerodynamics
Noise
Shielding
Desired lubricants:
Better thermal stability
Reduced Air
Flow and
Cooling
Reduce break-in temperature

Reduce operating temperature
26
Extended Drain Intervals Gear Oils

DAF
Daimler
Eaton
Increasing oil drain intervals
Iveco
1990 / 1995
MAN
2008
Renault
Increasing lubricant durability
Scania
Volvo
ZF
100
200
300
400
500
600
Drain interval, 000s of km
OEMs are extending oil drain intervals - a worldwide fact:

Passenger vehicles manual transition and axle are filled-for-life
Commercial vehicle manual transmissions and axles require oil drain intervals
Driving force is extended warranty in competitive market
Use of mineral base oils will move to Group III or synthetic
27
Fill-for-Life Increasingly Common for ATF

Top Selling Models 2014
2014
Rank
Make / Model
Year
Recommend Inspect
Interval Miles
Recommended Change
Miles
1
2
3
4
Ford F-Series (F150 data)
15,000
150,000
97,500
60,000 (non 8HP)
Toyota Camry
2014
2014*
2014
2014*
Honda Accord
2014***
15,000
Toyota Corolla/Matrix
2014*
30,000; 60,000; 90,000;

120,000; 150,000 (CVT)
Nissan Altima
2014*
Every 10,000 miles to

150,000 miles (CVT)
8
9
10
Honda CR-V
2014*
Chevrolet Silverado
Dodge Ram Pickup
Ford Fusion (4 cyl)

Ford Escape
Every 10,000 miles (8HP)*

30,000; 60,000; 90,000; and
120,000
30,000; 60,000; 90,000; and

120,000
120,000
150,000
150,000
Sales data source: goodcarbadcar.net

* Source: AllData
** 60,000 miles for Cube, Murano, Altima, Altima Coupe, Maxima, Rogue, Sentra, and Versa CVT fluid. Automatic transmission fluid for 370Z is
maintenance free.
*** Recent Honda models use an in-dash system- Honda does not publish maintenance intervals for these. This information is from
www.driverside.com
28
Gear Oil Technology Evolution

Axle fluid
Sulfur Phosphorus
API GL-5
Mineral Based
Axle Lubes
Wide Span
Multi Grade
Fuel Efficient
Dedicated Axle Fluids
1991
SAE 80W-90
1995
SAE 75W-90
2012
SAE 75W-85
1960
SAE 90
KV@100C:
13.5-18.5 cSt
11.0-13.5 cSt
Manual transmission fluid

Sulfur Phosphorus
API GL-4
1960
SAE 90
KV@100C: 13.5-18.5 cSt
Dedicated MTF
Gen I
Dedicated MTF
Gen II
1991
SAE 80W-90
1995
SAE 75W-80
2009
SAE 75W-80
13.5-18.5 cSt
11.0-13.5 cSt
11.0-13.5 cSt
Total Driveline
Fluid
Dedicated MTF
PC
<7cSt
New hardware design requires dedicated axle and MT fluid technology

29
Fuel Efficiency Drives Fluid Viscosity Lower
Automatic Transmission Fluids
Automotive Gear Oils
Fuel Consumption
Emerging market, moving to

lower viscosity
Axle
MTF
Conventional
7.0-8.0 cSt
ATF+4, T-IV, Dex III / Merc,

LT 71141, MERCON V, Z1, SP-III,
LA2634, Matic-J, N402, G 052 162,
etc.
Leading global OEM, pushing for super

low viscosity
Low Viscosity
5.5-6.2 cSt
SAE 140
SAE 90
SAE 80
SAE 75W140
SAE 75W90
SAE75W90
SAE 75W85
SAE75W80
Lower viscosity
SAE 75W80
SAE75W, 5-7cSt
DEXRON -VI, MERCON LV,

MERCON SP, WS, DW-1,
Matic-S, SP-IV, M-1375.4, G 055
005, etc.
Ultra-low
viscosity
4.5cSt
MB 236.15
* Source Lubrizol
OEMs are increasingly using lower viscosity fluids to realize further efficiency improvement
30
Balancing Demands
OEMs and end users are demanding improved fuel economy
Reduce vehicle operating costs
Reduced legislative penalties
Reduce environmental impact
Hardware design/materials now more complex

However, component durability is essential
A balanced approach is needed
Fuel Economy without Compromise Durability
31
Balancing Demands
OEMs and end users are demanding improved fuel economy
Reduce vehicle operating costs
Reduced legislative penalties
Reduce environmental impact
Hardware design/materials now more complex

However, component durability is essential
A balanced approach is needed
Fuel Economy without Compromise Durability

Maximize Fuel
Economy
32
Hardware
Durability
Unique Fluid Performance for AT, CVT and DCT
Stable shift clutch friction across multiple materials

Strong anti-shudder torque converter durability
Emphasis on anti-wear with increased gear ratios along
with lower viscosity
Pump efficiency and reduced aeration with lower viscosity
Continuously Variable
Transmission
High metal to metal friction

Strong antifoam performance
Shear stable viscosity modifier
Strong anti-wear for belt/chain
Dual Clutch
Transmission
Strong anti-wear for gear wear

Strong anti-shudder durability
Synchronizer friction stability
Stepped Automatic
Transmission
Fluids need to be tailored for hardware / OEM to achieve optimum performance

33
Market Trends of Driveline Lubricants
Hardware diversification
requires the use of dedicated
fluid which leads to complexity
and fragmentation in driveline
lubricant market
End Users and oil marketers are

looking for simplified product
lines to meet a wide range of
OEM AT applications and for
supply reliability, BCP, and cost
management
How to balance the needs continue to be a challenge

34
Driveline Lubricant Development

Durability and Efficiency
35
Durability Testing and Validation

Vehicle Testing
Chassis dyno testing
Davis Dam / Baker Grade, etc.
Field testing
Laboratory Simulation Testing

Baker grade simulation
Full transmission and axle
durability
Component Level Evaluation (NonStandard)
Wheel hub testing
Stationary axle testing
Gear durability
Bearing wear and life
Standard Testing
Lab testing
Industry ASTM/ L- bench tests
Friction test
36
Efficiency Testing and Validation
Vehicle Testing
Chassis dyno testing
Baker grade
Vehicle mpg validation
37
VM
tempera
ture
Coefficient of friction
Laboratory Testing
Viscometric
Reological
Tribological
Thermal testing
Log
(Viscosity)
Laboratory Simulation Testing

Axle and transmission efficiency
Baker grade simulation
AT spin loss
(viscosityspeed)
load
Durability
Efficiency
Testing Strategies for Gear Oil Development
38
Fundamental Fluid
Properties
Dyno Performance
Viscosity
Viscosity Index (VI)
Low Temperature Behavior
Traction
Electric Driven
Engine-Fired
Staged FTP-75/NEDC Sim
Road Course Sim
Film Thickness under

Pressure (Optical EHD)
Shear Stability (KRL)
Staged High Torque

Durability Simulation
Material Compatibility
Bearing Durability
Thermal Stability
Ultimate
Proof-ofPerformance:
Field Testing
Lubrizol Commercial Vehicle Efficiency Test Rig

Axle Efficiency @ 60 C
Additive system, performance polymers and quality base oil work together
39
New Additive Development for Improved Durability
0.10
Antiwear 1
Antiwear 2
Iron Concentration (%)
0.08
Antiwear 3
0.06
0.04
More durable tribofilm

for AW 2 and 3
0.02
0.00
40
-2
10 12 14 16 18 20 22 24 26 28 30 32 34 36
Test Duration (h)
VM Operating Temperature Performance
SAE 75W90
Viscosity modifier system 1
SAE 75W90
Viscosity modifier system 2
Specially designed viscosity modifier can significantly reduce operating temperature

41
VM Oxidative Stability
Meridian
PAO100
New viscosity modifier is designed to have better cleanliness than PAO100

42
Friction Modification is Specific for Each Application
AT
CVT
Belt/
Chain
and
Pulley
Torque
Converter
Clutch or
Launch
Clutch
Composite
(Paper)
material-onsteel
Friction
Components
Shifting
Clutches and
Torque
Converter
Clutch
Materials
Composite
(Paper)
material-onsteel Friction
Steel on
Steel
Performance
Stable clutch
friction across
multiple
materials as
well as strong
anti-shudder
durability
Stable
friction
between
the belt
or chain
and the
pulley
43
Stable
clutch
friction
across
multiple
materials
DCT
Wet Start
(Launch
Clutch)
Axle
Limited
Slip
All-Wheel Drive
Synchronizers
Limited Slip
Device
Some examples:
Transfer case
Torque
Vectoring
Coupling
Molybdenum,
carbon
fiber,
sintered
bronze
Composite
(Variety)
materialon-steel
Friction
Variety
depends on
specific
component
Stable
friction, low
NVH,
Friction
durability
Depends on the
component
Low viscosity
low drag torque
on disconnect
system (e.g.
coupling)
MT
Synchronizers
Composite
(Paper)
material-onsteel Friction
Molybdenum,
carbon
fiber,
bronze
Stable clutch
friction across
multiple
materials as
well as strong
anti-shudder
durability
Smooth
gear
engagement, low
wear rate
Smooth
gear
engagement, low
wear rate
Summary
Moving to automated manual or automatic transmission
Increasing use of filled-for-life lubricants
Fuel efficiency drives hardware design changes:
More options: CVT, DCT, etc.
AT: more speed: 6 to 8 to 9 (10) speed
Market fragmentation in both hardware and lubricants

Driveline lubricants are moving to lower viscosity
Need stronger additives / chemistry / formulation to provide protection at
lower viscosity
Friction plays a key role in delivering shift quality and driver experience
Friction modification is application specific
Increasing investment in testing and fluid development for tailored
performance
44

The Move to Lower Viscosity Engine Oils

Lessons from Social Science
Lubrizol Future Directions Toronto, Ontario
April 23, 2015
Agenda
New Engine Oil Categories:
GF-6
PC-11
Recent Engine Oil Viscosity Changes

The Social Science of Adoption and
Diffusion
Viscosity changes understanding and predicting

2
CAFE Changes Driving GF-6
54.5 mpg is
the new goal
The lubricant
industry must
do its part to
help meet this
goal
C. Richardson. SAE Fuels and Lubricants Open Forum, April 16, 2013.
Lubricant is one piece of the puzzle that can help bridge the gap
3
GF-6A Performance Comparison
Direct contributor to
CAFE improvements
Enables the use of
GDI / TDGI
Lubricants enables next generation hardware and fuel economy

4
ILSAC Fuel Economy (FE) Evolution Over Time
FE Improvement
FE Durability
*Except GF-6B (xW-16)
GF-6 is a major upgrade on fuel economy

5
Fuel Economy 2016
Era of Efficiency Driving to PC-11
What Is PC-11?
New category (1/1/2016) split by HTHS:
High HTHS Backwards compatible to replace CJ-4
Low HTHS Fuel Economy grade for new engines
Key drivers:
Fuel efficiency and green house gas emissions

Bio-diesel fuel
Oil foaming concerns
Higher engine operating temperatures
Oil shear down
The fragmentation of the US market continues and grows
New Viscosity Grades

CI-4 Plus
CJ-4
High HTHS
High HTHS
High HTHS
15W-40
15W-40
15W-40
15W-40
10W-40
10W-40
10W-40
5W-40
5W-40
5W-40
10W-30
10W-30
10W-30
10W-30
10W-30
5W-30
5W-30
5W-30
5W-30
PC-11 Diesel
Low HTHS
PC-11 Universal
High HTHS
Low HTHS
More viscosity grade choices for marketers

Universal oil phosphorus waiver not available for PC-11:
Forces reformulation
Challenging in T13 and wear tests
Creates market fragmentation
8
Recent Engine Oil Viscosity Changes

European On Highway
HD Market
US PCMO
Market
100%
100%
90%
90%
80%
80%
70%
70%
60%
5W-30
5W-20
60%
50%
5W-30
50%
10W-40
40%
10W-30
40%
15W-40
30%
20W-50
30%
20%
10W-30
20%
10%
10%
0%
2004
2005
2006
2007
2008
2009
2010
2011
0%
2008
2009
2010
2011
Viscosity changes follow a pattern

9
2012
2013
2014
2015
North American HD Market Viscosity Changes

100%
0W-40
90%
5W-30
5W-40
Market Share
80%
10W-30
70%
15W-40
60%
50%
40%
30%
20%
10%
0%
2010
2013
2016
North American HD market changing

10
Learnings From Behavioral Science

Prediction adoption rates of new technology,
is not new:
Clothes dryers
Diesel locomotives
VCRs
Cell phones
What can this work teach us about engine oil changes:

Timing of market changes
Who to target with new products
A greater understanding of the market advances your business

11
Key Behavioral Research Findings Rogers

Everett Rogers' Diffusion of Innovations:
Relative advantage
How big of a change is it?
Compatibility
Does it work with my existing
systems?
Complexity
Is it difficult to implement?
Trial-ability
Can I give it a try?
Observability
Can I see the benefit?
Does it apply to engine oils?

12
HD Engine Oil Example
2010
10W-30
2.5%
Innovators
34%
Early Majority
13.5%
Early Adopters
13
16%
Lagards
34%
Late Majority
2016
10W-30
5W-30
2.5%
Innovators
34%
Early Majority
13.5%
Early Adopters
14
16%
Lagards
34%
Late Majority
2020
10W-30
5W-30
2.5%
Innovators
34%
Early Majority
13.5%
Early Adopters
15
16%
Lagards
34%
Late Majority
Key Behavioral Research Findings Bass
Frank Bass "A new product growth

model for consumer durables" in 1969
First-time Use
25
20
p the coefficient of innovation

Q the the coefficient of imitation
15
10
5
0
0
5
New adopters
Year
Imitators
Building mathematical models to predict markets

16
10
15
Innovators

2010
10W-30
17
2016
10W-30 5W-30
2020
10W-30 5W-30
Key Behavioral Research Findings Gladwell

Malcolm Gladwell The Tipping Point
The law of the few connectors:

Who can help spread your message?
Connected people with wide-spread
connections
Influencers
6 Degrees from Kevin Bacon
The stickiness factor:

How infectious is your message?
How memorable is your message?
Sesame Street and Blues Clues
The power of context:

Catch your audience at the right time and in the
right mood
The Good Samaritan
What are your messages?

18
Implications for Engine Oil Marketers

Know your markets and your position in them:
Whether you are an industry leader, fast follower, or general
marketer, you need to understand where a market currently stands
and where it is going.
Level of diffusion depends on product:

5W-30 Innovators
10W-30 Early majority?
Overall business strategy implications

19
Implications for Engine Oil Marketers Part 2

If you are marketing products early in
the adoption process, consider:
Where are you in the process
Innovators, early adopters, majority, laggards
Rogers
Relative advantage, compatibility, complexity,
trial-ability, observability
Bass
Innovation, imitation
Gladwell
Connectors, stickiness, context
Product marketing and sales implications

20


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Agenda

Base Oil Trends

2015 The Lubrizol Corporation, all rights reserved.

2015 The Lubrizol Corporation, all rights reserved.

The Era of Efficiency

Todays efficiency requires

Its more than achieving efficiency; its about maximizing it

Efficiency Driving New Insights and Products

Legislation creates opportunity to extract value from new product offerings

2015 The Lubrizol Corporation, all rights reserved.

2015 The Lubrizol Corporation, all rights reserved.

Passenger Car Regulatory Trends

2015 The Lubrizol Corporation, all rights reserved.

Global Emission Complexity Heavy Duty Truck

China - Euro III

*Brazil P7 aligns with Euro V. US EPA 201 aligns with Euro VI

Emission regulations drive unique hardware and lubricant additive performance

2015 The Lubrizol Corporation, all rights reserved.

Global Hardware and Fuel Trends

Low viscosity lubricants

Aerodynamic improvements fairing and tail on trailers

Source: Lubrizol & Ricardo

OEMs are addressing the drive to efficiency in many ways

2015 The Lubrizol Corporation, all rights reserved.

Passenger Car Evolution

4.0L V-6 PFI (RWD)

2.0L I-4 TGDI

50% smaller engine

145 HP/220 ft-lbs

240 HP / 270 ft-lbs

50% more gears

0-60 mph (sec)

10.8 (AWD V-6)

6.0 sec (AWD V-6)

43% more fuel efficient

Modern engines are smaller, more powerful, lower emissions

2015 The Lubrizol Corporation, all rights reserved.

Thinner Viscosity Benefits

Commercial and environmental

A 1% saving on fuel economy for

For OEM fleet a 1% saving could

Developing tools which can

The economic impact can be significant

2015 The Lubrizol Corporation, all rights reserved.

Lubricant Part in Overall Efficiency

The small impact of lubricant efficiency is increasingly important

2015 The Lubrizol Corporation, all rights reserved.

2015 The Lubrizol Corporation, all rights reserved.

Measuring the Value of Efficiency

Field testing needs to

Lubricant efficiency measurements that are understood by the customer

2015 The Lubrizol Corporation, all rights reserved.

Improved Fuel Economy Testing

Testing beyond specification to deliver quantifiable efficiency gains

2015 The Lubrizol Corporation, all rights reserved.

Updating Traditional Bench Testing

2015 The Lubrizol Corporation, all rights reserved.

Insights Lead to New Understanding

2015 The Lubrizol Corporation, all rights reserved.

2015 The Lubrizol Corporation, all rights reserved.

Emission Age to Efficiency Age

2015 The Lubrizol Corporation, all rights reserved.

Significant Upgrade to Lubricant Specification

ACEA 2014 F Series