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

Today, we sit at about 50-50 in terms of our manufacturing (inaudible) best cost countries, it's not just about cost it's also about being efficient for growth and that’s a big movement in the right direction and we also, on the application engineering are about 60% now high cost instead of 2% or 40% best cost countries.

You would expect that emerging markets with their higher growth rates, that those percentages will continue to favor the best cost split. So that’s one of the things in terms of getting cost right and also positioning for growth for the future.

The other thing that we did in the business was to transform how we build these systems. Arguably, we were the originator of infotainment with the acquisition back in 1995 of the Becker Radio Company, the premium company in Germany, sole supplier to Daimler since the 50s, basically to fancy radios and DVD players with stocks and turn by turn navigation to them and that really became the beginnings of what, today, we know as the sophisticated embedded infotainment systems.

So with that, basically, that basically that business had always been developed in a semicustom way, two and half years to three years, $50 million to $70 million per program and with their scalable platform which was a reinvention of how we build these systems where we modulize large sections of the component tree, but allow customization of the GUI, the graphical user interface and the human mechanical interface where the consumer really interfaces with the vehicle but not necessarily rewriting all of the software that underlies it, both middleware as well as applications.

That allowed us to reduce that R&D time from two and half years to three years to twelve months to eighteen months and also reduce the R&D investment from $50 million to $70 million roughly, down to about $15 million to $30 million. So these are some of the major transformational changes over the last four years that the new management team has conducted with Harman.

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