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TheStreet Open House

Harman International Industries' Management Presents At Credit Suisse 2012 Automotive & Transportation Conference (Transcript)

So, this is a little bit of an overview of what we just accomplished in the past year. We will blast through those pretty fast and then we will move into some of these secular drivers of growth, it will appear in a moment.

We had a very good year. No question about that. Just sort of to sum it up, everything in our business, in terms of infotainment, as well as in our professional audio business and even the consumer electronics business to a large degree is really about innovation in technology. It is a business that faces a lot of competitive pressure, you have got particularly in the automotive space, very strong buyers that exert a lot of power relative to the suppliers in the space and therefore technology really comes today at the end of it.

We like to think that the infotainment business, in spite of its high R&D, is a unique business in the sense that it is differentiable, it does drive purchase behavior on the part of the consumer behavior and the OEMs recognize that and that’s why we feel very confident that we can march along in terms of our trajectory of expanding margins in what is a difficult business out of the 5% to 6% EBIT margin levels that we had, pretty downturn, I might add, which is a business that we inherited from four and half years, five years ago, to EBIT margins in the 10% plus range.

A couple of things really drove that. It was the fundamental restructuring of the business from a cost standpoint. To get cost right was one of our four strategic pillars. We had 86% of our manufacturing cost base in high cost countries, read that as principally, Germany and the U.S. We had 985 of our application engineering, software engineers, approximately 3,000 plus individuals also in high cost countries, again, Germany and the U.S.

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