# Potential Stranded Capital Analysis on EPA Light

- Duty Technology Cost AnalysisNOTICE

This technical report does not necessarily represent final EPA decisions or positions. It is intended to present technical analysis of issues using data that are currently available. The purpose in the release of such reports is to facilitate the exchange of technical information and to inform the public of technical developments.

EPA-420-R-11-019

November 2011 Assessment and Standards Division Office of Transportation and Air Quality U.S. Environmental Protection Agency

Prepared for EPA by FEV, Inc.
EPA Contract No. EP-C-07-069

Work Assignment No. 3-3 

# Potential Stranded Capital Analysis on EPA Light

- Duty Technology Cost AnalysisCONTENTS

Section Page

Executive Summary ............................................................................................................. ........ 1-1

1 Introduction ................................................................................................................ ........ 1-3

1.1 Objectives ................................................................................................................ . 1-3

1.2 Capital Investment and Tooling Definitions ............................................................ 1-5

1.3 Case Studies Evaluated ............................................................................................. 1-6

2 Methodology for Developing Stranded Capital Investment and Tooling Values .............. 2-7

2.1 Analysis Set-up: ........................................................................................................ 2 -7

2.2 Stranded Capital & Tooling Case Study Steps ....................................................... 2-11

3 Key Assumptions in the Stranded Capital and Tooling Analysis .................................... 3-13

4 Case Study Results .......................................................................................................... . 4-13

5 Glossary of Terms ........................................................................................................... . 5-15



### iLIST OF FIGURES

Number Page Figure 2-1: Sample Stranded Capital Section of SCTA Worksheet ............................................ 2-9

Figure 2-2: Sample Stranded Tooling Section of SCTA Worksheet ......................................... 2-10

Figure 2-3: Stranded Capital and Tooling Case Study Steps ..................................................... 2-12



### ii

### iii LIST OF TABLES

Number Page

Table ES-1: Potential Stranded Capital Analysis Results ($/New Vehicle Technology Configuration)

.............................................................................................................................. 1-2

Table 4-1: Summary of Potential Stranded Capital and Tooling Estimates .............................. 4-14

### Potential Stranded Capital Analysis on EPA Light-Duty Technology Cost Analyses

Executive Summary

The United States Environmental Protection Agen cy (EPA) contracted with FEV, Inc. to determine incremental direct manufacturing costs (IDMC) for a set of advanced lightduty vehicle technologies. Th e technologies selected are on the leading edge for reducing emissions of greenhouse gases in the future, primarily in the form of tailpipe carbon dioxide (CO2). Examples of t echnologies evaluated include: downsized turbocharged gasoline direct-injection (GDI) engines, advanced transmissions (e.g., 8- speed automatic, 6-speed dual clut ch), and hybrid electric vehicles.

To develop incremental direct manufact uring costs, advance vehicle technology configurations were evaluated against baseline vehicle tec hnology configurations, representative of the current state of design, and having si milar overall driving performance. For each case st udy, both the new and baseline configurations utilized a common set of boundary cond itions for the analysis (e.g., technology maturity, production year, production volumes, manufacturi ng location, equipment life). Using the same boundary conditions for both analyses, a c onsistent framework for all costing work

was established. A detailed description of the costing me thodology used to develop the incremental direct manufacturing costs can be found in EPA report “Light-Duty Technology Cost Analysis P ilot Study (EPA-420-R-09-020).”

In selected cases where the boundary conditions and parameters assumed in the primary analysis differ, an adjustment can be made to the incremental dire ct manufacturing cost accounting for these differences. Examples of case study specific parameter adjustments are volume differences, technology maturity differences, timeframe differences, and production duration differences.

Using conservative assumptions, this report i nvestigates the potential saddling of cost onto a new technology c onfiguration as a result of th e production equipment and/or tooling for the baseline configuration be ing abandoned before the planned fully depreciated life. An applicable scenario is when a new tec hnology configuration is launched into production forcing a baseline t echnology out of production prematurely. In this case any production equipmen t and/or tooling, which can only be used to produce the baseline technology, and which cannot be redispositioned to another plant continuing to make the baseline technology, would be removed from service and sold for scrap. It is

assumed the financial loss associated with abandoning capital inve stment and tooling from the baseline technology configuration w ould indirectly be recovered by the new replacing technology over some number of years of its production.

1-1

### Within the context of this report, the term stranded capital and st randed tooling will be used to define capital investment and too ling which has been decommissioned prior to the end of its fully depreciated life. In th e FEV analysis, the fully depreciated life and

useful life are assumed to be the same as a means of simplifying the analysis.

The foundation for the stranded cap ital and tooling analysis are the previously completed EPA Light-Duty Vehicle Technology Cost Anal ysis case studies. For each case study, the FEV manufacturing team assembled a cost estimate for the total capital investment and tooling, which could only be used to manufacture the baseline technology. Any baseline technology capital investme nt or tooling, or portion of capital investment or tooling, which could be used to manufacture other products, was not included in the cost estimate. Using a straight-line depreciati on method, the estimated stranded capital and tooling impact was calculated for three, five , and eight years. The average useful life

used in the calculation was ten years with an assumption of ze ro residual value. The sum of the stranded capital and tooling for each of the evaluated periods (i.e., 3, 5, and 8 years) was then divided by 2,250,000 new technology vehicle un its; 2,250,000 vehicle units representing the sale of 450,000 un its/year over five years (450,000 x 5).

Table ES-1 the results for six case studies are presented, showing the potential stranded capital impact at three, five and eights years of product life, based on the methodology and set of conservative assumptions describe d in the report. The table includes the

results for two dual clutch transmissi on (DCT) studies, an 8-speed automatic transmission (AT) study, two downsized (DS), turbocharged (T), gasoline direct injection (GDI) studies, and a powersplit hybrid electrical vehicle (HEV) study.

Table ES- 1: Potential Stranded Capital Analysis Results ($/New Vehicle Technology Configuration)

Replaced Technology New technology Potential Stranded capital cost per vehicle with new technology, with product life ended after: 3 years 5 years 8 years

Conventional V6 DSTGDI I4 $56 $40 $16

Conventional V8 DSTGDI V6 $60 $43 $17 6-speed AT 6-speed DCT $55 $39 $16 6-speed AT 8-speed AT $48 $34 $14 6-speed DCT 8-speed DCT $28 $20 $8

Conventional V6 Power-split HEV $111 $79 $32



### 1-2

### 1 Introduction

1.1 Objectives

The objective of this work assignment is to determine the potential magnitude of stranded capital investment and tooling costs, associ ated with the launch of a new advanced vehicle technology configura tions, prematurely replaci ng existing/baseline technology configurations. The case studi es investigated in this an alysis are based on advanced technologies considered leadi ng edge for reducing emissions of greenhouse gases in the future. Further, the case studies selected for this analysis are the same for which FEV has previously developed incremental direct manufacturing costs as part of prior work assignments completed for EPA.

In the original incremental direct ma nufacturing case studies, the same boundary conditions and parameters were employed for both the baselin e and new technology configurations evaluated. This methodology provides a common framework for costing, allowing a good means of compar ison. As part of these established boundary conditions,

it was assumed both the baseline and new te chnology configurations would run their planned full production life cycle. Additional details on the incremental cost analyses can be found in the following published repor ts and in reports being prepared for subsequent case studies.

• Light-Duty Vehicle Technology Cost Anal ysis – Pilot Study (EPA-420-R-09-020)

• Light-Duty Vehicle Technology Cost An alysis – Report on Additional Case Studies (EPA-420-R-10-010)

• Light-Duty Technology Cost Analysis, Power-Split and P2 HEV Case Studies (EPA-420-R-11-015)

To understand the tooling and capital investment financial impact of the baseline technology not running a full production life cycle, th e potential result of a new advance replacement technology being regulated into production too quickly , EPA contracted with FEV to conduct a potential stranded capital investment and tooling analysis. It is recognized that an accurate analysis woul d need to know just how quickly the new technologies (government standard s) were phasing in, and would also be very specific to individual companies, factories, and manufacturing processes, particularly in regard to finding alternative uses for equipment and fa cilities. Such a thor ough analysis would be a prohibitively large undertaking. Nevertheless, in order to account for the possibility of stranded capital costs, FEV has performed a bounding analysis, using conservative assumptions, of the potential stranded capital costs associated with rapid phase-in of technologies due to new standa rds, using data from FEV’s primary teardown-based cost analyses.

1-3

### A planned production life of 10 years was assu med for all equipment and tooling. The cost impact of canceling production of the ba seline technology after th ree, five and eight years was evaluated. For eac h production run scenario (i.e., 3, 5, and 8 years) total potential stranded capital invest ment and tooling values we re developed. For this analysis, the assumption is the early introduction of th e new advance technology is responsible for prematurely ending the pr oduction life of the baseline technology. Therefore, the new technology should be accountable for rec overing the stranded capital investment and tooling from the baseline technology configurati on. Amortizing the combined total stranded capital investme nt and tooling by 2,250,000 new advance vehicle units (450,000 units per ye ar x 5 years), an added cost per vehicle was established for each production run scenario.

A simple, three-year baseline product canc ellation example to illustrate the above:

• $100,000,000 of dedicated base line technology production equipment is identified to produce part “ABC.”

• Assuming a straight line depreciation, and 10-year useful life, depreciated value per year is equal to $10,000,000.

• Following three years of manufacturing, the baseline technology is replaced by a new technology confi guration “XYZ.”

• Part “ABC” is used in no ot her product made at this f actory or another factory, and the equipment used to make part “ABC” is not reconfigurable to make some other part.

• Remaining value of baseline equipment at point of canc ellation $70,000,000 (7 years x $10,000,000 depreci ation expense/year).

• Amortization volume based on estimated new vehicle technol ogy configuration sales over five years equals 2,250,000 vehi cle units (450,000 units/year x 5 years).

• Estimated additional cost per new vehicl e technology unit, accounting for baseline stranded capital and tooling equals $31.11/vehicle ($70,000, 000 stranded capital and tooling /2,250,000 vehicle units).

1-4

### 1.2 Capital Investment and Tooling Definitions

Capital investment is defined as the facilities, machines, and other e quipment used in the manufacturing process that are not directly in contact with the part produced. Simple examples of capital investment include st amping presses, injection mold machines, welding equipment, and diecas t machines. Tooling, on the other hand, is generally the part-contacting components of th e manufacturing process. In relationship to the example listed for capital investment, a stamping die, in jection mold, weld tips, and diecast molds would all be examples of too ling. There are grey areas as to what constitutes tooling versus capital equipment, especially for com ponent assembly processes. Generally, the OEM (original equipment manufacturer) will ha ve detailed definitions for the less clearcut manufacturing operations. For this anal ysis, a deeper unders tanding of what is considered capital investment ve rsus tooling is not required.

All capital investment and tooling has a us eful life expectancy, typically based on anticipated service hours or units produced. For example, assume a progressive stamping die has a purchased financed value of $250,000. The life expectancy of the stamping die is eight years, producing 450,000 engine brackets per year with a zero dollar residual value at end of the die’s life. The company that owns the die is using a straight-line depreciation method to expense the die. If, af ter four years, the part produced by the die is considered obsolete, approximately half the value of the die ($125,000) is unrecoverable (i.e., stranded too ling). Because the majority of tooling is generally considered dedicated, stranded tooling is generally more prevalent in comparison to stranded capital investment. This is especi ally true when automotive part and vehicle manufactures purchase producti on equipment with higher fl exibility; a trend which has been growing over the last several decades. For the incremental direct manufacturing case studies, FEV assumed a flexible manuf acturing environment when developing the cost models. FEV also assumed multiple manufacturing facilities and/or production lines existed, producing similar products, facilita ting the ramping down of baseline production components and the ramping up of new technology components.

In the previous engine bracket example, th e progressive stamping die would be run on a 400-ton stamping press (capital investment). Since the stamping press can run several different parts, simply by switching out the production dies, the stam ping press would not become stranded upon deletion of the engine bracket. The terminology used within this analysis to identify capital investment, which can be utilized to produce several different parts, is referred to as flexible capital investment.

In comparison, dedicated capital investment is production equipmen t constructed to only manufacture one part. If the part becomes obs olete, independent the reason, the capital becomes stranded. In some cases where a por tion of the capital equipment can be reused, the equipment is considered semi-dedicated . Therefore, only a defined portion becomes

stranded.

1-5

### More discussion on the designation of dedicate d, semi-dedicated, a nd flexible capital investment and tooling will be cove red in the methodology section (Section 2.1 ).



### 1.3 Case Studies Evaluated

The specific cases evaluated w ithin this report include those previously studied for developing incremental direct manufacturi ng costs for a set of advance light-duty technologies: technologies aime d toward reducing greenhouse ga s emissions. This work was completed by FEV for EPA.

The six advance technology confi gurations analyzed were:

• A 2.0L, I4, 4-valve, dual overhead cam (DOHC), dual variable valve timing (dVVT), turbocharged, gasoline direct inje ction (GDI) engine, compared to an equivalent conventional 3.0L, V6, 4-va lve, DOHC, d-VVT, naturally aspirated (NA), port fuel injected (PFI) engine.

• A 3.5L, V6, 4-valve, dual overhead cam (DOHC), d-VVT, turbocharged, GDI engine, compared to an equivalent conventional 5.4L, V8, 3-valve, single overhead cam (SOHC), VVT, NA, PFI engine.

• A 6-speed wet dual clutch transmission (DCT ), compared to an equivalent 6-speed

automatic transmission.

• An 8-speed automatic transm ission, compared to an equivalent 6-speed automatic

transmission.

• An 8-speed wet DCT, compared to an equivalent 6-speed wet DCT.

• An 2.5L NA PFI engine, electronically c ontrol continuously variable transmission (eCVT) power-split hybrid electric vehi cle (HEV), compared to a conventional 3.0L NA PFI engine, 6-Speed AT baseline vehicle.

1-6

### 2 Methodology for Developing Stranded Capital Investment and Tooling Values

FEV assembled a cross function team (CFT) of manufacturing experts (employees and those otherwise under contract) to perform th e analysis. The CFT, with an average relevant experience level of 24 years, em ployed technology expertise from several areas, including: design and devel opment, vehicle integrati on, production development, manufacturing engineering (supplier and OEM), cost estimating, and product benchmarking.

The core members of the CFT first deve loped the methodology a nd tools required to conduct the analysis as disc ussed in detail in Section 2.1 . Following the analysis set-up, the first case study was selected for the eval uation. The study steps are presented in Section 2.2 along with the aid of Figure 2-2. The same process steps were repeated for all technologies evaluated.



### 2.1 Analysis Set-up:

1) Determine and define the conditions for es tablishing “Stranded Capital & Tooling.” Determination based on input from EPA and other sources reviewing prior “LightDuty Vehicle Technology Cost Analysis” studi es. Examples of established analysis boundary conditions include:

• Average investment and tooling fu lly depreciated life of 10 years

• Production life duration for baseline equipment: 3, 5, and 8 years

• Total new vehicle technology configura tion amortization volume (5 years x 450,000 vehicle units/year)

2) Determine case studies to best represent the impact of Stranded Capital losses in total effort to implement emission reduction technologies.

3) Develop stranded capital and tooling analysis (SCTA) worksheet (Figure 2-1 & Figure 2-2). Key worksheet data fields include:

A. Component/Assembly Name

B. Investment & Tooling description

C. Investment & Tooling Categorization

D. Investment & Tooling Value as New (i.e., estimated purchase cost)

E. Estimated Stranded Capital Investment and Tooling Loss (3, 5, and 8 years)

4) Developed categorization of investment and tooling.

2-7

### 2-8 A. Investment Categorization Definitions:

i) Flexible <FLX>: Can be used to manufac ture parts in eith er the baseline or new technology configur ation (0% stranded)

ii) Re-Useable <RU>: Equipment can be used in alternative industries, equipment sold off at defined percent (50% stranded) of remaining value

iii) Semi-Dedicated <SD>: Approx 50% of e quipment is flexible (50% stranded)

iv) Dedicated <DD>: Custom manufact uring equipment (100% stranded)

B. Tooling Categorization Definitions

i) Flexible <FLX>: Can be used to manufac ture parts in eith er the baseline or new technology configur ation (0% stranded)

ii) Perishable <PER>: Frequent repl acement of tooling (0% stranded)

iii) Semi-Dedicated Tooling <SDT>: Approx. 50% of tooling is dedicated (50% stranded)

iv) Dedicated <DD>: Commodity-specific (100% stranded)InvestmentCategorization3 Years5 Years8 YearsResale LossRemaining InvestmentValueRemaining InvestmentValueRemaining InvestmentValue50%70%50%20%Ford 3.5L Engine (Surrogate)-$-$-$OEM Engine Assembly-$-$-$1 Engine AssemblyAssembly EquipmentDD$ 19,500,00013,650,000$9,750,000$3,900,000$2 Piston & Rod AssemblyAssembly EquipmentDD$ 3,000,0002,100,000$1,500,000$600,000$2 Cylinder Head and Camshaft AssemblyNon-sync pallet transfer(assemble valve traincomplete and test)DD$ 4,500,0003,150,000$2,250,000$900,000$-$-$-$F Block with Plugs$ --$-$-$-$-$-$2 Block machineCNC machines, semi-flexassembly machines &washers, robot load, partpallets (rgh. Machine,assemble brg. caps, finishmachine, wash, assembleplugs, air test & inspect (V toI configuration)DD$ 13,125,0009,187,500$6,562,500$2,625,000$-$-$-$2 F Block cubed machineIncluded aboveFLX$ --$-$-$-$-$-$3 F Block-TrimmedTrim PressFLX$ --$-$-$-$-$-$4 F Block-CastDie Cast MachineFLX$ --$-$-$-$-$-$5 F Block-Raw MaterialNANA$ --$-$-$-$-$-$3 F - Liners Cylinder BlockCommodity PricingNA$ --$-$-$-$-$-$2 F Dowel, HeadsCommodity PricingNA$ --$-$-$-$-$-$2 F Dowel, HeadsCommodity PricingNA$ --$-$-$-$-$-$2 F Dowel, A/C CompressorCommodity PricingNA$ --$-$-$-$-$-$2 F Dowel, AlternatorCommodity PricingNA$ --$-$-$-$-$-$2 F Dowel, Bell HousingCommodity PricingNA$ --$-$-$-$-$-$2 F Plug, Coolant, Block, LargeCommodity PricingNA$ --$-$-$-$-$-$2 F Plug, Coolant, Block, MediumCommodity PricingNA$ --$-$-$-$-$-$2 F Plug, Coolant, Block, SmallCommodity PricingNA$ --$-$-$-$-$-$2 F Coolant DivertersStamping pressFLX$ --$-$-$-$-$-$2 F Plastic ProtectorMold pressFLX$ --$-$-$-$-$-$1F Main Bearing, Crank, TopBearing manufacturing equip.FLX$ --$-$-$-$-$-$1F Thrust Bearing, Crank, UpperBearing manufacturing equip.FLX$ --$-$-$-$-$-$F Crank$ --$-$-$5 10116789Indented Bill of MaterialsInvestmentValue"New"0123Flexible <FLX>:Re-Useable <RU>:Semi-Dedicated <SD>:Dedicated <DD>:(Definitions in Comment Box)124InvestmentDescriptionEstimated Stranded Investment LossFigure 2-1: Sample Stranded Capital Section of SCTA Worksheet2-9Tooling Categorization3 Years5 Years8 YearsRemaining ToolingValueRemaining ToolingValueRemaining ToolingValue70%50%20%Ford 3.5L Engine (Surrogate)-$-$-$OEM Engine Assembly-$-$-$1 Engine AssemblyFixtures/Pallets/MiscDD$ 20,800,00014,560,000$10,400,000$4,160,000$2 Piston & Rod AssemblyFixtures/Pallets/MiscDD$ 3,200,0002,240,000$1,600,000$640,000$2 Cylinder Head and Camshaft AssemblyAssembly part pallets,spindles, multi-spindleheads, special spindlecolumns, part feeders, airtest seals and mountingplates, gaugesDD$ 4,800,0003,360,000$2,400,000$960,000$-$-$-$F Block with Plugs$ --$-$-$-$-$-$2 Block machineMachining - part pallets,tooling, machining partprograms, inspectionprogram, special gaugesAssembly - part pallets,spindles, multi-spindleheads, special spindlecolumns, part feeders,gaugesWashers - part programsPart Handling - dunnage,robot programsDD$ 14,000,0009,800,000$7,000,000$2,800,000$-$-$-$2 F Block cubed machine$ --$-$-$-$-$-$3 F Block-TrimmedDiesDD$ 225,000157,500$112,500$45,000$-$-$-$4 F Block-CastMoldsDD$ 14,062,5009,843,750$7,031,250$2,812,500$-$-$-$5 F Block-Raw Material$ --$-$-$-$-$-$3 F - Liners Cylinder BlockCast tubeDD$ 20,00014,000$10,000$4,000$-$-$-$2 F Dowel, Heads$ --$-$-$-$-$-$2 F Dowel, Heads$ --$-$-$-$-$-$2 F Dowel, A/C Compressor$ --$-$-$-$-$-$2 F Dowel, Alternator$ --$-$-$-$-$-$2 F Dowel, Bell Housing$ --$-$-$-$-$-$2 F Plug, Coolant, Block, Large$ --$-$-$-$-$-$2 F Plug, Coolant, Block, Medium$ --$-$-$5 10116789Indented Bill of Materials0123124Tooling Value"New"Estimated Stranded Tooling LossToolingDescriptionFlexible <FLX>Perishable <PER>Semi-Dedicated Tooling <SDT>Dedicated <DD>(Definitions in Comment Box)Figure 2-2: Sample Stranded Tooling Section of SCTA Worksheet2-102.2 Stranded Capital & Tooling Case Study Steps



### 1) Select case study for stranded ca pital and tooling evaluation.

2) Transfer component and asse mbly part names/descriptions from baseline Comparison Bills of Materials (CBOM) developed in th e prior tear-down studies into the SCTA

worksheet.

3) CFT team review of stranded capital and tooling SCTA worksheet. Team members are assigned subsystem and system res ponsibilities based on industry experience.

4) Using the baseline and ne w technology CBOMs (develope d in primary teardown analyses), identify potential capital investme nt and tooling in the baseline technology configuration, which is not likely to be transferable to the new technology configuration.

5) Based on Step 4 above, define manufactur ing processes in detail, identifying equipment and tooling requirements. Summarize details in SCTA worksheet.

6) From the categorization menu in the SCTA worksheet, establish categorization codes (e.g., flexible, dedicated, semi -dedicated) for investment a nd tooling items captured in Step 5 above.

7) Enter in investment value ($) for compone nts/assemblies with capital investment identified as re-useable, semi-dedicated, or dedicated. For tooling identified as dedicated or semi-dedicated, enter in tooling value ($).

8) The SCTA worksheet automatica lly calculates the stranded capital and tooling values for the three-, five-, and eight-y ear truncated production periods.

9) At the bottom of the SCTA wo rksheet, a combined total stranded capital and tooling value is calculated for each of the truncated production periods.

10) An estimated cost per new advance te chnology vehicle is calculated for each truncated production period, us ing the values derived in Step 9 along with the total estimated new advance vehicle sales during a five-year period (i.e., 450,000 units/year x 5 years = 2,250,000 vehicles)

2-11

### Figure 2-3: Stranded Capital and Tooling Case Study Steps For New and Baseline 

### Existing unit cost impact:

DEFINE OF TOOLING & INVESTMENT CBOM

DIFFERENT SAME PARTS SAME OR

DIFFERENT? 

### No
Consideration 

# $0

Tool & Investment
Estimate

Define for
TOOLING Define for
INVESTMENT

- Flexible

- Reusable DEFINE
RULES - Flexible

- Perishable

Transfer tooling and investment impact

(assuming tools were bought then scrapped)

Analysis based on 3-, 5-, and 8-year value remaining scenarios



### 2-12

### 3 Key Assumptions in the Stranded Capital and Tooling Analysis

Listed below are the key assu mptions made as part of th e stranded capital and tooling analysis.

• All manufacturing equipment was bought brand new when the baseline technology started production (i .e., no carryover of equipm ent used to make the previous components that the ba seline technology itself replaced).

• Manufacturing equipment a nd tooling used to make the baseline technology components is straight-line depreciated over a 10-year life.

• Factory managers do not optimize capital equipment phase-outs (i.e., they are assumed to routinely repair and replace equipment without regard to whether or not it will soon be scrapped due to adoption of new vehicle technology).

• Estimated stranded capital is amortized over five years of annual production at 450,000 units (of the new technology compone nts). This is the same annual production volumes used in the incremen tal direct manufacturing cost studies.



### 4 Case Study Results

The results for the stranded capital and tooling analyses for the six evaluated case studies are captured below in Table 4-1 . In the table, the total stra nded capital and tooling values are present for each technology at each production truncation pe riod. The “New” column in the table represents the estimated purch ase price of the baseline vehicle technology capital and tooling prior to a ny depreciation. This value only represents the portion of equipment and tooling which cannot be used to manufactur e any other component or assembly without extensive re work and financial burden.

A unit cost, in addition to the to tal lump sum values, is also present in the table. These values represent the total stranded capital a nd tooling lump sum values amortized over five years at 450,000 units/year of the new vehicle technol ogy configurations.

Because many of the detailed spreadsheet docum ents generated within this analysis are too large to be shown in their entirety, el ectronic copies can be accessed through EPA’s

website http://www.epa.gov/otaq/climate/publications.htm

4-13

### 4-14 Table 4-1: Summary of Potential St randed Capital and Tooling Estimates

Summary of Potential Stranded Capital & Tooling Estimates

Component Costs New @ 3 Yrs. @ 5 Yrs. @ 8 Yrs.

Engines

3.0L V6 NA PFI to 2.0L I4

Turbo GDI Inv. & Tlg. $ $181,781,500 $126,827,050 $90,590,750 $36,236,300

$/Unit $80.79 $56.37 $40.26 $16.11

5.4L V8 NA PFI to 3.5L V6

Turbo GDI Inv. & Tlg. $ $194,417,889 $135,672,522 $96,908,944 $38,763,578

$/Unit $86.41 $60.30 $43.07 $17.23

Transmissions

6-Speed AT to 6-Speed DCT Inv. & Tlg. $ $205,756,250 $123,039,875 $87,885,625 $35,154,250

$/Unit $91.45 $54.68 $39.06 $15.62

6-Speed AT to 8-Speed AT Inv. & Tlg. $ $163,786,250 $107,503,375 $76,788,125 $30,715,250

$/Unit $72.79 $47.78 $34.13 $13.65

6-Speed DCT to 8-Speed

DCT Inv. & Tlg. $ $89,553,000 $62,687,100 $44,776,500 $17,910,600

$/Unit $39.8 $27.86 $19.90 $7.96

Fusion Eng. & Trans.

Conventional V6 to Powersplit HEV Inv. & Tlg. $ $387,537,750 $249,866,925 $178,476,375 $71,390,550

$/Unit $172.24 $111.05 $79.32 $31.73

### 5 Glossary of Terms

Dedicated: Custom manufacturi ng equipment (100% Stranded). Equipment design is specific to a component design such that there is minimal opportunity to retool and little value other than scrap metal. Dedica ted hardware within the manufacturing process, while of ten generic in its component design, is in many cases confi gured in such that it is less likely to be reused.

Flexible: Can be used to manufact ure baseline or new technology parts (0% Stranded). Equipment is ge neric and oftentimes an offthe-shelf design that can be easily redeployed for other component manufacturing within some constraints (turning, milling, work envelop size, etc.)

Capital

Investment: The facilities, machines and other equipment within the manufacturing process that are not directly in contact with the part produced. Among auto manufact urers, investment is also

referred to as the facilities a nd equipment part of process (versus part-contacting tooling, cutting tools, fixtures, gauges, etc.).

Perishable: Frequent replacement of t ooling (0% Stranded). Perishable is often referring to the wearable part of the cutting tool or partcontacting components of the proc ess that are prone to wear or have a given life.

Re-Usable: Equipment can be used in alternative industries, equipment sold-off at defined percent of remaining value. Equipment can be components of either dedi cated or flexible equipment.

Semi-Dedicated: Approximately 50% of equipment is flexible and 50%

dedicated or stranded

5-15

### 5-16 Stranded Capital: The abandoned equipment co sts, either as new, or at reduced value when replaced after a pr ematurely truncated period of time in production.

Stranded Tooling: The abandoned tooling co sts, either as new, or at reduced value when replaced after a pr ematurely truncated period of time in production.

Tooling: Generally the part -contacting components of the manufacturing process, such as part-contacting cutting tools, fixtures, gauges, etc.