Steve Fisher, President and CEO, Novelis Inc.

Good morning, and thank you, Dean Ayers, for that wonderful introduction. I found out, John, that I've been sandwiched in between a great session last month with Ed Bastian and then Kirby Smart obviously coming next month, so I'll do my best to hold it up. Wonderful Terry Third Thursdays. Very honored to be here with you this morning. As Dean Ayers said, to share with you a little bit about a very large company called Novelis that is right here in Atlanta. So by show of hands, who has been to the beautiful new Mercedes-Benz Stadium this past season? Many, many of you—beautiful stadium. And I wonder how many of you have looked up at the beautiful halo as you stood there and saw Novelis and scratched your head and thought, 'Who the heck is Novelis?' Certainly, we're not the biggest brands in Atlanta. I get it—we're not Coca-Cola, we're not Home Depot. But my goal today is to educate you all on who Novelis is, and I'm hopeful that when you go back to the stadium and you're watching a United game or a Falcons game and this comes up again, you'll be in a place to educate the person standing next to you who's going to be scratching their head. It seems like a lofty goal, but I don't think it's actually all that lofty. Certainly everyone knows Coca-Cola right here in the hometown and everywhere around the world. What you probably don't know is that Novelis actually supplies 95% of all the aluminum to Coca-Cola here in North America. And for those of you that like something a little bit stronger, AB InBev is another significant customer of Novelis. Quite frankly, we actually supply pretty much every beverage can filler and can maker around the world. 40% of all beverage cans in North America are made out of Novelis aluminum, and one out of every three globally are made out of Novelis aluminum—a significant global position in beverage can. But Novelis isn't just about beverage cans. We're about supplying aluminum to beautiful vehicles. Here you see the flagship vehicle of Land Rover, the Range Rover—100% of this is Novelis aluminum. We've been working with Jaguar Land Rover for decades around bringing aluminum into their vehicles. You see a lot of these on the road. I can't tell you how proud I am when I see one of these and I know absolutely all that aluminum—on that vehicle, which is a lot—is coming from our factories in Europe. We took 900 pounds of weight off the Range Rover, gave it better performance from a braking standpoint, allowed them to bring the engine size down but have the exact same performance, and made it even safer than the previous steel version. A big customer to us. We also have been supplying for decades to our new neighbor down at the airport, Porsche—again, a strong customer of Novelis. But it's not just about these European high-end vehicles. Aluminum is coming here in North America as well. Three years ago, Ford launched an aluminum-intensive F-150 and Super Duty, and Novelis has the largest share supply of aluminum onto this vehicle. They sell over 100 vehicles per hour—think about that. Every minute, more than one truck is rolling off a lot somewhere, 24 hours a day, 365 days a year. 900,000 F-150s alone plus the Super Duties sold in 2017. We took 700 pounds of weight off this vehicle. We made the towing performance better, the braking performance better. The overall safety rating went up—it's the only five-star rated safety truck in the marketplace. It is the highest-selling truck for 40 straight years, and a significant relationship for us. But it's not just Detroit and European. It's also electric vehicles. Here you see a beautiful Tesla Model 3—they have struggled to get production up, but I do believe they'll get them up. When you think about electric vehicles, in order to get the range that consumers want, to put in all of the electronics and gadgets that consumers want and that you need from a safety standpoint, you need to lightweight the vehicle. The best way to lightweight these vehicles, to get the distance from the OEMs themselves, is aluminum. So you can see a significant amount of aluminum going into these electric vehicles, including Tesla. But even a bigger play for us is in China, where the Chinese government for regulatory purposes is trying to leapfrog the combustion engine. They want to be the leaders in electric vehicles, and they will be. They've put the infrastructure in China, they are pushing OEMs to move in this direction. Here we see one of our strategic partners, a company called NIO. This is the first model they rolled out this past fall, called the ES8, a seven-seat SUV that actually has the performance of Tesla Model X and S. Fantastic vehicle selling very well right now in China. Again, just a huge opportunity for aluminum sheet going into penetrating autos. But it's not just beverage cans and autos. We also sell many other products that we put under a banner called specialty products—it's building and construction, it's electronics, it's industrial applications of aluminum. We sell to 225 current models of automobiles on the road today—basically, we have relationships with just about every auto manufacturer in the world. Here you see the Titanic Museum in Belfast, Ireland. The facade of this is 100% Novelis aluminum. This is a beautiful building, but it's more than just beauty. The aluminum has attributes of deflecting lightning, absorbing energy, and actually providing a benefit to bring buildings to LEED certification. So we see a huge application here. And then everyone has probably in this room one of these, if not more—if you look at the back, you'll see that beautiful aluminum, and most likely you're looking at Novelis aluminum, because Novelis sells to many consumer electronics brands, including Apple, LG, Samsung, and the likes.

But Novelis isn't just about all the aluminum that we're selling to our customers. It's also about the aluminum that we bring into Novelis. As Dean Ayers said, we are the largest recycler of aluminum in the world. We recycle 65 billion U.S. beverage cans on an annual basis at Novelis, and it's a huge part of our business. We used to 10 years ago have about 25% of all of our metal inputs come from recycled aluminum. We've moved that up to 55%, moving closer to 60% of all of our aluminum that we purchase being from recycled aluminum. Why is that important? Because when you bring in recycled aluminum, you use 95% less energy than if you were to smelt primary aluminum—and 95% less energy means 95% less greenhouse gas emissions going into the environment, which is huge for our customers and for the environment itself. Something we're very proud of. It's not just about beverage cans—we find many ways to get recycled content back into Novelis. We've set up two of the largest closed-loop recycling systems in the world, one with Ford and one with Jaguar Land Rover. When we deliver our aluminum coils to Ford, they take the coils, stamp the parts—doors, hoods, fenders—about 40 to 60% of that aluminum hits the floor. Traditionally they would sell that in the scrap markets, and it would get pushed back into steel or different products. What we've done with Ford and JLR is continue to segregate that scrap. The truck that drops off the coil goes to the other side of the stamping plant, picks up the scrap, brings it right back to our plant—we remelt it, make another coil, and send it back to Ford. This allows us to make an additional 30,000 F-150s per month out of recycled aluminum coming back from their plants through ours. At JLR, we've been able to collect 50,000 metric tons already in this closed-loop recycling system, which is equivalent to 200,000 XE body bodies or 500,000 reduced greenhouse gas emissions going back into the environment. A huge benefit to our customers and to the environment as a whole. We're not just proud of recycling—it's a huge part of what Novelis does for society. But there's many other things we do across the world in the communities and neighborhoods we exist in. Here in Atlanta, you can see some of the areas we're focused on. We focus our time and effort around STEM, safety, and other initiatives inside our communities. We're huge advocates of the Westside Future Fund. We build a house every year in a rapid build with Habitat—we build it in one week. It's a great event for our employees. We also build a house with the Atlanta Falcons, trying to get the recycled content back out of the stadium, collect that, and build a house with it. Huge supporters of FIRST Robotics, where we take our time and effort to help the students and provide the aluminum to build their robots—a young generation learning about technology, engineering, mathematics. Great program. And smaller with a gap down on Marietta Boulevard, where we help with younger children in underserved communities. These are just a few. We're hugely proud of what we do at Novelis. We've got great people that want to get out in the community—it's really something that's core to Novelis.

Dean Ayers went through this a little bit—just some statistics on Novelis. We are right here, right down the street. Our world headquarters is at Two Alliance, right on the corner of 400 and Windy Hill. We have about 600 employees in the Atlanta community, between our global headquarters and our North American headquarters based here, and then our Global Research and Technology Center up in Kennesaw. We have approximately 12,000 employees throughout 10 countries, 24 facilities, revenues greater than $10 billion, EBITDA greater than $1.2 billion—a very healthy business. As you think about who Novelis is in our industry, we are the world's leader. We have 17% share of the global flat-rolled products market, one-third share of the beverage can market on a global basis, and currently almost 50% share in the automotive space. We truly were the first mover from an innovation and technology standpoint in that space. How we stack against our competitors won't surprise you—with that market share, we are two times larger than the next competitor. We are the leader by far as it relates to flat-rolled aluminum products. And we continue to grow. Dean Ayers talked about the $2 billion that we spent while I was CFO—we continue to invest. We just announced an investment in January where we will put a greenfield facility into Kentucky—Guthrie, Kentucky—with state-of-the-art processes to serve our auto customers, primarily in the Southeast region. So we continue to grow, continue to look for more opportunities, and I think we'll continue to be in a great place. The product portfolio has shifted over the last eight to nine years quite dramatically. We try and always be in high-end, high-conversion-margin business. Auto and beverage can certainly provide that. You can see where we've moved out of the oil space, which became a commodity with a lot of imports from China, and moved dramatically into the auto space—moving up from 4% back in 2009 to 18%, and we'll get that to 25% in the next few years as we ramp up current assets. We want to keep can in that 50 to 60% space because the beverage can business is very recession-resistant. When the 2008-09 crisis occurred, our beverage can business did not come down because consumers, instead of drinking at restaurants, decide to bring it home in the form of six-packs and twelve-packs. It is a nice counter-cyclical business during downturns.

We have our headwinds, though. Every business does. We have great performance, great customers, and great people at Novelis, but we do have to deal with the same things everyone else does. Some of the headwinds we see—if you look around the tables this morning—is the PET water trend. Everyone wants to be healthier now, particularly in North America. You see this trend towards healthier drinks, particularly water. For whatever reason, people want to consume water out of a PET bottle—they want to see it, they trust it when it's Coke, when it's beer, but for some reason they don't trust it when it's water. We'll continue to work with our customers to see if we can get that change. We have to continually work with customers on finding new package types to compete with PET bottles. Steel is fighting back—we took the prime, highest-margin business from them in the auto sector. They were shocked when Ford went to an all-aluminum F-150. They're fighting back hard with ultra-high-strength steel applications to try and take business back from Ford. We think we'll hold that business, but a lot of innovation we have to get into to continue to advance our material properties and penetration of aluminum. Of course, CAFE standards—you've seen the administration potentially move back to roll back some CAFE standards in the United States. We think this could provide some mild relief for OEMs, but not broad relief, because auto manufacturers have global supply chains and global models. The rest of the world is not rolling back regulatory standards. California says they're not going to move back, and many northeastern states follow California—20% of the auto market. Are automakers going to make a steel car and an aluminum car? Or are they going to go ahead and move forward, knowing that long-term, you'll end up with these standards coming in, whether in 2025 or 2030? Obviously, we are in the biggest bull run in the auto space since the creation of the automobile. At some point, we're going to see a recession and a pullback in auto builds, which will have some impact on our business. We counter that with a good diverse portfolio with beverage can. And then the trade wars and tariffs on steel and aluminum—we're not in favor of these tariffs. We think they're the wrong solution. We think the issue is China and should be dealt with at the China border with our allies, not just us. Bring other countries in, because the rest of the world is acting responsibly. Making this just about the U.S. and China is the wrong message. There have also been sanctions on Russian oligarchs, specifically on the largest aluminum producer outside of China, which is putting a lot of chaos into the aluminum market. Aluminum prices are skyrocketing right now, and that's not good for our customers or long-term viability and penetration of aluminum versus other metals. We think that's more short-term—we'll get through that, but certainly something big we're dealing with now.

So as we think about headwinds and how we take these on at Novelis—what is it that we do to continue to differentiate ourselves, be competitive, and weather these storms? We break it down into three fundamental things. The first is innovation. We have to continue to innovate alongside our customers. We have to understand where they're going, get better with our products, and continue to create the next alloys—lighter alloys, safer alloys, more formidable alloys for automobiles—so we can stay a step ahead of competition, primarily steel. But it's not just about big innovation with customers. It's also about what we call everyday innovation. Every process has to get better—everything we do from a manufacturing standpoint, from a functional standpoint, whether finance or HR. How do we get better day in and day out and make this a competitive advantage for Novelis on a long-term basis? The second big theme is digitalization. We are in a very healthy place versus our competition and can invest heavily into this. It means something different to every company. What we know at Novelis, it's very much about getting more out of our operations. For our customers, we want to focus at the shop floor—whether with advanced robotics, data collection that we can share on a real-time basis to make their plants more efficient, so we can be stickier with our customers long-term. It's AI, machine learning—making sure the quality of our products is the best in the industry. We're starting this journey, but we truly believe that if we do this right and put the right processes in around digital, this will be a competitive advantage for us five years out. And then finally, the third pillar is culture. We've worked very hard at Novelis on culture. Every company has a culture—many just don't define it. We've decided we're absolutely going to define the culture we want. It's not defined by a few people at the top—it's been defined with large input from individuals throughout Novelis. We've worked on this with outside help, provided tools to our employees all the way down to the shop floor on how to recognize people for living our cultural beliefs. We've taught them how to give focused feedback—people aren't naturally good at giving feedback, but we need it to get better. It's a journey we're still on. We've done this through creating a set of cultural beliefs that every employee is expected to show up to work living. I've got to tell you, this is driving tremendous value. Everyone's heard the saying 'culture eats strategy'—it's absolutely true. When we started on this journey, even Novelis employees didn't believe it. But we had a leadership meeting with 150 people about a month ago, and the number of times people talked about culture and what it meant to performance was unbelievable, because people have really bought into this.

We've put this into a unified framework: how we think about how we go about things, what we're focused on, where we're going, and why we're at Novelis. It starts with the How—our cultural beliefs: doing it right, say anything, own it, get focused, win together. There's more behind each one that I can't go into today. That's how we show up to work, how we do our jobs every day, and we expect each other to do that. The second is our What—our KPIs at the highest level, what we're focused on day in and day out. For us, it's called our Focus Five: the safety of our employees—we have very dangerous operations, and we want every single employee to go home without any injury every day. Second is delighting our customers—the quality of our products, getting better from an operational excellence standpoint every single day—and ultimately improving our return on capital employed per share. Then our Vision—where we're going. This is the five to ten-year view of where we want to be at Novelis: to lead the aluminum industry as the partner of choice for innovative solutions. We want to stay focused on aluminum for the next five to ten years, keep our leadership position, and the only way to do that is through innovative solutions and being the preferred partner to our customers. Finally, it's the Why—our purpose. We spent a lot of time on purpose over the last year and a half. I know many companies go out and pursue purpose in different ways. The way we did it, the way we believe in purpose—it's not about a tagline. It's not about an executive committee putting something out and saying this is our purpose. It has to be excavated from the community of employees—it has to be authentic, it has to be who the company is when it's at its best. So we interviewed thousands of employees, did workshops, understood going back into history how we have shown up and how we are the best at what we do. We correlated that with what is our purpose in society as a whole. What does Novelis do for society, and how does that blend together? What we know, and statistics absolutely prove it—recent surveys show 87% of employees are disengaged worldwide at work, and 52% are completely checked out. Without an engaged workforce, you're not going to get what you want out of your business. We know that this intersection of personal purpose and corporate purpose, if you can get that right, employees will be engaged—you'll get more innovation, more ownership, more performance. Employees do not want to work for a company that only is concerned about the bottom line—they want more. We've gone through this journey and are just launching our purpose and starting to cascade it to our 11,500 employees. Part of it is creating a story and making sure people understand the story of Novelis. We have a film we've created to share that story—of who Novelis is and what our purpose is in society. So what I thought I'd do is share with you this morning that video, and then afterwards be open to any of your questions. So please, if you could go ahead and roll the video.

With that, I think there are mics that are out and about, and I'm happy to take any questions that are on any of your minds. [Audience questions and responses follow:] Regarding the skills you're looking for in the next five years for the war on talent—we monitor a couple of different skill gaps on a real-time basis. One is the technical skill gap at our plants. The communities we're in are not necessarily the most attractive places for people to go to work, so finding technical capabilities and getting them into our manufacturing facilities is difficult. We work with different community colleges and advocacy programs to foster technical talent at an early age. The second area we're moving towards is data analytics roles—we believe these will be needed across the board throughout Novelis as we move into this new digital world. That's a skill set that's important coming out of schools, but also something that can be applied to people already in the workforce, like former Six Sigma experts and black belts. On the tariffs and defense industry justification—you cannot run one of these large manufacturing plants with just defense material. You need a healthy aluminum industry as a whole to ensure you can produce the defense products the United States needs. 97% of all employment in the United States is downstream aluminum manufacturing, not smelting. Primary aluminum is not spilling into the country from China. But if we don't address at the border of China the issue of overcapacity, that primary aluminum overcapacity will move down into beverage cans, auto, and defense. That's what we wanted to protect. We advocated using 232 as a tool to start negotiating with China with our allies. We actually believe the way they went about doing it is wrong—it's not effective at all. Ten percent on aluminum does not make China any less competitive. What's really occurred with rising prices is more recent: the sanctions on Russian oligarchs, specifically Rusal, which is 13% of the world's aluminum outside of China that no one can buy. All of a sudden, 13% of supply is gone from the market, prices are up 30% in just a week and a half, and the industry will have to work through how that metal gets replenished. Most likely, Russia with strategic alliances with China—that metal will go from Russia into China, China will disguise it, and it will come back out into the market via China. We need time to work through it. On the Rusal relationship—it's a pretty easy conversation because the U.S. Treasury Department is seizing all funds. The first call was from Rusal saying, 'Do not pay us because we know where those funds are going.' At the same time, since they can't get money, they'll stop producing immediately for Novelis. It was absolutely straightforward. The secondary challenge is the aluminum trade through houses like Glencore and Trafigura who have bought Russian metal and are sitting on it. Getting clarity that we're not getting Russian metal is more difficult. As the largest aluminum buyer in the world, we have preferential positions, but others will get caught in this. On R&D and aluminum development—we have research facilities around the world. The first thing is to work with our customers and bring insight into where they want to go. On the auto side, we're at 6000-grade alloys and customers want to go to 7000 and higher aerospace-grade alloys because they bring more strength with less weight. The other part with autos is joining capability—mixed materials on vehicles become very important. We use pilot lines and partner with other research facilities. We've moved our R&D dollars toward auto, away from can unless customers push for new formats. On growth strategy—our vision is five to ten years focused on aluminum. The biggest growth inside aluminum is penetration onto automobiles. Third-party projections show a significant increase in aluminum in autos of some 42% between now and 2028. The aluminum space can't invest quick enough to meet auto demand. Other growth areas include different forms of aluminum—extrusions as a complement to flat-rolled products. We've stayed in aluminum because we still see a lot of growth there, though inorganic opportunities to consolidate the industry have antitrust considerations. On ownership structure—In 2007, we completed the sale. We were a public company after being spun off from Alcan. We ran into issues and ultimately sold to Indian parent company Hindalco, part of the Aditya Birla Group, a $50-55 billion conglomerate. We're the largest and most global company in the group. The competitive advantage comes from access to Asian markets and the fact they're a large aluminum producer in India—we have the ability to backward integrate for metal sourcing. They're very patient, long-term-focused owners. Not a private equity model, not a public model—which allowed us to invest $2 billion, something we never would have done as a public company. On aerospace—when we were spun off from Alcan, we were prohibited from being in that space for five years. All aerospace aluminum is made by four companies in the world—it's very sophisticated product, not something you could do from a greenfield standpoint. You'd have to buy in organically. But aerospace is not as big a market as you might think—only 400 KT. We do 3,200 KT annually and will be at 1,000 KT just in auto. Global aerospace is roughly just under 400 KT. It's got good margins but isn't growing—only one to two percent over the next five to ten years. If we did an inorganic move into aerospace, it's a nice badge and helps with technology transfer into auto, but going after aerospace just for aerospace isn't a hugely attractive growth market. Defense might be different. On carbon fiber—BMW bought and tried to backward integrate into carbon fiber but are changing that strategy. The OEMs say manufacturing with carbon fiber is very difficult and expensive. We see carbon fiber going into very unique parts on very high-end vehicles, not on the number of vehicles I showed you today, and we don't see that occurring over the next ten years. Many surveys show aluminum always comes out on top as the material of choice. Steel is actually fourth choice—carbon fiber is ahead of steel. On how the unified framework was created—purpose and culture were widely created with input from many people. The vision, because it's five to ten years and tied to strategy, was kept to a smaller group—what we'd call the executive committee at Novelis. We didn't need further input outside of the Strategy Group and executive committee for stating where we wanted to be. The important thing was making sure it tied into purpose and how it tied into cultural beliefs. The further input on culture and purpose allows us to cascade from the bottom up, so culture is felt first and not just a top-down exercise. It has worked very well. On international business—65% of our business is outside the U.S. or North America, already in Asia, South America, and Europe. As we think about growth from a consumer standpoint, whether beverage cans or other products, it's really outside the U.S. We see growth in South America and Asia, and having a parent company in India helps us think about further expansion there. When we prioritize dollars, the majority will be spent on growth outside the U.S. The challenge is political dynamics, particularly in China—the overcapacity that sits in China and how we think about competing with Chinese competition in five to ten years. We are in China today—we believe it's the fastest-growing and biggest auto market in the world, with 25 million vehicles produced annually versus 17 million in the U.S., and it's growing. The challenge is how to be there—standalone, joint venture—and how to ensure competitiveness if you invest significant amounts. On transitioning from CFO to CEO and taking on culture—I knew I was never going to be the operational person. I had to make sure I had other people who could do that, and that's okay with me. Strategy and culture bubbled to the top as my focus areas. I worked with many people inside the company around thoughts of culture. 'Good to Great' is a great book that started this. Another book that's one of our cultural beliefs is 'Say Anything'—I highly recommend it. We had worked with a group called Partners in Leadership about five years ago on leadership programs, and having that connection helped frame what we wanted to do. Over the three years I've been CEO, the biggest passion I've had is around culture and the belief that culture will drive performance. If you have that mindset and believe driving culture is so important to get the right performance, that's where you focus. On everyday innovation and automation—are we looking at Six Sigma training, master black belts, plant-level automation, or technology integration? The innovation where we think will pay off quickest is at the plant—automation and data analytics. Those are the individuals we want to get into the organization or retrain people into. As for black belts and Six Sigma, we want to train our people in everyday innovation without making innovation more than it needs to be. Sometimes it's just taking a problem and thinking about it from a different place, bringing someone else into the conversation. If five people have worked on one piece of equipment their whole life, they probably won't see it differently than if you brought in someone from another department and reframed the problem. We want to keep it simple. Outside of digitalization, we don't want to make it into grandiose Six Sigma black belt programs—we have plenty of those individuals already. It's about retraining the mindset around everyday innovation. Where we need experts and help is around the digitalization platform. On millennials, job displacement, and automation—it's a challenge. If you think about a new facility being built today, that's why believing employment was coming back with tariffs is just not the case. The only facilities starting up in the aluminum sector are the ones that are idle and can start quickly. When you see new facilities come onstream, a facility of our size that would traditionally have 600 to 800 employees can now run with 14. It's a big challenge—you need automation for many reasons. But how do you transition your current employee base over the next five to ten years as well as bring on what you need? Based on where our manufacturing facilities are, we're already seeing a shortage of employment coming in, so from that transitional standpoint, it'll help. Our old facilities can't go to 14 employees—we'll never get there with the old machines we have today. For all companies, it's going to be a real challenge as it relates to the transition of skill sets and where employment is really going to go. On personal drives and philanthropy—philanthropically, Habitat for Humanity on a personal level, and Cure for Childhood Cancer is another one I'm very much involved in. For fun, I've got two young daughters, 13 and 10, and it's just traveling with them. We're going to Hawaii this summer—they're at ages where I probably won't get that opportunity for much longer. That's where I stay focused right now.