wescast industries inc. - Canadian Stocks

wescast industries inc. 

ANNUAL INFORMATION FORM 

For the Year Ended January 1, 2012 

March 29, 2012


Presentation of Information 

Unless otherwise indicated, all information in this Annual Information Form (“AIF”) is 

presented as at and for the year ended January 1, 2012 (“Fiscal 2011”) and amounts are 

expressed in Canadian dollars. Financial information is presented in accordance with 

International Financial Reporting Standards. 

Documents Incorporated by Reference 

The following documents of Wescast Industries Inc. are incorporated by reference into this AIF: 

(i) Management’s Discussion and Analysis for the year ended January 1, 2012 (“MD&A”); and 

(ii) audited consolidated financial statements and accompanying notes for the year ended January 

1, 2012. These documents have been filed with applicable securities regulators in Canada and 

may be accessed at www.sedar.com. 

Forward-Looking Statements 

The contents of this AIF contain statements which, to the extent that they are not recitations of historical fact, may 

constitute forward-looking statements based on certain assumptions. Forward-looking statements are provided for 

the purpose of providing information about management’s current expectations and plans relating to the future. 

Persons reading this AIF are cautioned that such information may not be appropriate for other purposes. Such 

forward-looking statements may include financial and other projections as well as statements regarding Wescast’s 

future plans, objectives or performance for the current fiscal year and subsequent periods and regarding the markets 

for our products. The words “may”, “would”, “could”, “will”, “likely”, “expect”, “anticipate”, “estimate”, “intend”, 

“plan”, “forecast”, “project” and “believe” or other similar words and phrases (including negative variations) are 

intended to identify forward-looking statements. These statements are not guarantees of future performance and 

Wescast’s actual future results or performance may be materially different. 

This information is based upon certain material factors or assumptions that were applied in drawing a conclusion or 

making a forecast or projection as reflected in the forward-looking statements, including our perception of historical 

trends, current conditions and expected future developments as well as other factors we believe are appropriate in 

the circumstances. 

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may 

cause actual results to differ materially from those expressed or implied by such forward-looking statements. These 

risks and uncertainties principally relate to the risks associated with the automotive industry and include, but are not 

limited to: the result of Wescast's review of strategic alternatives and consummation of any transaction, our 

operating and/or financial performance, including the effect of new accounting standards on our reported financial 

results, fluctuations in interest rates, changes in consumer and business confidence levels, consumers’ personal debt 

levels, vehicle prices, the extent and nature of purchasing or leasing incentive campaigns offered by automotive 

manufacturers, environmental emission regulations, fuel prices and availability, the continuation and extent of 

outsourcing by automotive manufacturers, changes in raw material and other input costs, our ability to continue to 

meet customer specifications relating to product performance, cost, quality, delivery and service, industry cyclicality 

or seasonality, trade and/or labour issues or disruptions, customer pricing pressures, pricing concessions and cost 

absorptions, actual levels of program production volumes by our customers compared to original expectations, 

including program cancellations or delays, price reduction pressures, dependence on certain engine programs and 

the market success and consumer acceptance of the vehicles into which such powertrain products are installed, our 

relationship with and dependence on certain customers, currency exposure, failures in implementing Wescast’s 

strategy, technological developments by Wescast’s competitors and customers, government and regulatory policies 

and changes in the competitive environment in which Wescast operates. 

Wescast does not undertake any obligation to update or release any revisions to these forward-looking statements to 

reflect events or circumstances after the date of this AIF or to reflect the occurrence of unanticipated events, except 

as required by law. 

Annual Information Form

TABLE OF CONTENTS 

-i- 

Page 

1. CORPORATE STRUCTURE ........................................................................................... 1 

1.1 Name and Incorporation ........................................................................................ 1 

1.2 Intercorporate Relationships .................................................................................. 1 

2. GENERAL DEVELOPMENT OF THE BUSINESS........................................................ 2 

2.1 Overview ................................................................................................................ 2 

2.2 Three Year History of the Business ....................................................................... 2 

2.3 Trends in the Automotive Industry ........................................................................ 5 

2.4 Company’s Business Strategy.............................................................................. 11 

3. DESCRIPTION OF THE BUSINESS ............................................................................. 13 

3.1 Products................................................................................................................ 13 

3.2 Stainless Steel Technologies ................................................................................ 14 

3.3 Business Unit Segments ....................................................................................... 15 

3.4 Credit Facilities .................................................................................................... 17 

3.5 Sales and Marketing ............................................................................................. 18 

3.6 Sources, Pricing and Availability of Raw Materials ............................................ 19 

3.7 Seasonality ........................................................................................................... 22 

3.8 Intellectual Property Rights ................................................................................. 22 

3.9 Competition.......................................................................................................... 22 

3.10 Research and Development Activities ................................................................. 24 

3.11 Engineering & Design.......................................................................................... 24 

3.12 Technical Development Centre............................................................................ 25 

3.13 Economic/Contract Dependence .......................................................................... 25 

3.14 Environmental, Health & Safety .......................................................................... 27 

3.15 Human Resources ................................................................................................ 28 

3.16 Principal Properties .............................................................................................. 29 

4. RISK FACTORS ............................................................................................................. 30 

5. DESCRIPTION OF CAPITAL STRUCTURE ............................................................... 30 

5.1 Authorized Capital ............................................................................................... 30 

5.2 Dividends ............................................................................................................. 30 

5.3 Dissolution ........................................................................................................... 30

TABLE OF CONTENTS 

(continued) 

-ii- 

Page 

5.4 Voting Rights ....................................................................................................... 31 

5.5 Conversion Rights ................................................................................................ 31 

5.6 Takeover Bid Protection ...................................................................................... 31 

6. DIVIDEND POLICY....................................................................................................... 31 

7. MARKET FOR SECURITIES ........................................................................................ 32 

7.1 Trading Price and Volume ................................................................................... 32 

8. DIRECTORS AND OFFICERS ...................................................................................... 33 

8.1 Directors ............................................................................................................... 33 

8.2 Officers ................................................................................................................ 35 

9. LEGAL PROCEEDINGS ................................................................................................ 36 

10. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL 

TRANSACTIONS ........................................................................................................... 36 

11. TRANSFER AGENT AND REGISTRAR ...................................................................... 36 

12. MATERIAL CONTRACTS ............................................................................................ 36 

13. NAMES AND INTERESTS OF EXPERTS ................................................................... 37 

14. CODE OF CONDUCT .................................................................................................... 37 

15. ADDITIONAL INFORMATION .................................................................................... 37 

APPENDIX A .............................................................................................................................. 40


1. CORPORATE STRUCTURE 

1.1 Name and Incorporation 

Pursuant to articles of amalgamation dated October 31, 1994, Wescast Industries Inc. 

amalgamated with Western Machining Inc. and LFT Investments Ltd. under the Business 

Corporations Act (Ontario) to form Wescast Industries Inc. References to “Wescast”, the 

“Company”, “our” or “we” in this AIF include Wescast Industries Inc. and its subsidiaries. 

Wescast’s head office, which is also our registered office, is located at 150 Savannah Oaks 

Drive, Brantford, Ontario, N3T 5L8. 

1.2 Intercorporate Relationships 

The following is a list of the subsidiaries of Wescast Industries Inc. as of January 1, 2012 and 

their respective jurisdictions of incorporation. 

Subsidiaries of Wescast 

1102734 Ontario Inc. Ontario 

1277521 Ontario Inc. Ontario 

Jurisdiction of 

Incorporation 

Wescast Industries GmbH Germany 

Wescast U.K. Limited England 

Wescast Japan, K.K. Japan 

Wescast France SARL France 

Weslin Industries Inc. Ontario 

Wescast Hungary Zrt. Hungary 

Wescast Holdings USA, Inc. Delaware 

Wescast (USA) Inc. Delaware 

United Machining Inc. Michigan 

Wescast Industries of Georgia, Inc. Delaware 

o Wescast Industries Cordele, LLC Delaware 

Wescast Holdings (Barbados) Inc. Barbados 

Wescast (Barbados) Inc. Barbados 

o Wescast Industries (China) Co., Ltd. China 

Wescast owns directly and indirectly, 100% of the outstanding shares of all subsidiaries listed 

above. 

Annual Information Form Page 1


2. GENERAL DEVELOPMENT OF THE BUSINESS 

2.1 Overview 

Wescast is a global automotive parts supplier that primarily designs, engineers, casts, machines 

and assembles high-quality engineered exhaust system components, including exhaust 

manifolds, turbocharger housings and integrated turbomanifolds, as well as various other 

components, for the car and light truck markets. The Company supplies a diversified group of 

global original equipment manufacturers (“OEMs”) and Tier 1 customers in North America, 

Europe, Asia, Africa, South America and Australia. 

The Company employs approximately 2,000 people in our regionally-based operations and sales 

and design centres in Canada, the United States, Hungary, China, Germany, Japan, the United 

Kingdom and France. 

The Company's resources are strategically located by geographic business units in North 

America, Europe and Asia. The Company believes that it provides its customers with a strong 

value proposition through best in class manufacturing, engineering, design and testing 

capabilities. The Company believes this is the reason that it is the world's leading supplier of 

cast exhaust manifolds for passenger cars and light truck applications. 

The Company’s resources in North America are well established and consist of 6 production 

facilities. The Company’s North American objectives are to expand our stainless steel 

operations, grow through product diversification and remain cost-competitive in an effort to 

grow and preserve our leading market position. The European operations are conducted from an 

integrated foundry and machining facility in Hungary through a subsidiary, Wescast Hungary 

Zrt. These operations continue to focus on strengthening Wescast’s market position in Europe. 

The Company’s newest integrated foundry and machining facility located in Wuhan, China 

continues to secure and launch a number of new customer programs. 

The Company is focused on developing and delivering products and materials that meet coming 

automotive trends, including vehicle weight reduction and improved efficiency of the internal 

combustion engine. The Company believes that developments in these key areas should allow 

the Company to grow with new products, materials and with new customers globally. 

2.2 Three Year History of the Business 

Through its global expansion, Wescast believes that it has established its position as the only 

manufacturer of cast exhaust system components with manufacturing capability in the three 

major automotive regions of the world (North America, Europe and Asia). 

The Company has undergone significant restructuring activity which began in 2008 including the 

closure of the Company’s Wingham North Huron foundry. These restructuring activities were 

carried out to adjust the Company’s cost structure, to streamline various support activities and to 



“right-size” the Company’s manufacturing North American footprint, to address the current and 

expected market conditions and ultimately improve the profitability of the Company. Total 

restructuring charges incurred in 2008 and 2009 totalled $75 million. The Company recorded a 

net restructuring recovery of approximately $0.7 million in 2010 and $0.1 million in 2011 related 

to our North American operations due to fewer employee terminations than planned under the 

original restructuring plan as a result of improved North American automotive market 

conditions. 

The use of stainless steel exhaust manifolds and turbocharger housings as a significant growth 

opportunity continues to be a focus of the Company. In 2009, the Company launched production 

for two key customers from the stainless steel facility in Stratford, Ontario. In Stratford, the 

Company utilizes a patented and licensed technology to design and manufacture stainless steel 

products that have a thinner wall and smoother surface, which provides both lighter-weight and 

superior air-flow in manifold or turbocharger housing alternatives for our customers. We believe 

Wescast is the only company with stainless steel manufacturing capability for our types of 

products and characteristics in North America. 

Since launching production in 2009, the Company continued to ramp-up production for two key 

customers from our stainless steel facility in North America and also continued its development 

and validation activities for more complex and advanced designs for thin walled, lightweight 

castings. During 2011, the Company began a significant expansion of its North American 

stainless steel facility’s capacity. As the market for stainless steel components continues to 

grow, the Company believes that it is well positioned to participate and be recognized as a leader 

in this segment in North America and globally. 

During 2011, the Company successfully launched stainless steel in China; numerous successful 

prototype projects were completed and the operations in China won their first two stainless steel 

programs. In Europe, capital investments were completed to enable the use of NiResist and 

stainless steel materials; the operation is currently launching its first program in stainless steel. 

Over the past few years, two key technical trends have been shaping the global automotive 

industry and in turn serving as the foundation for Wescast’s market focus moving forward. They 

are fuel economy and reduced emissions, specifically with a focus on turbochargers, 

turbomanifolds and waste energy recovery. In order to take advantage of these market trends, 

Wescast formed an Innovation Council in 2009 comprised of Wescast executive and senior 

technical personnel to review new innovative ideas for growth and to support internal research 

and development as well as product development initiatives. In 2011 certain key innovative 

products were further advanced in response to customer requirements for improved fuel 

economy, lower emissions and to respond to regulatory requirements and the need for lower cost 

materials and products that deal with higher exhaust temperatures. These innovative products 

have applications in the followings areas: 

a. Exhaust energy recovery: The use of waste heat energy in product applications helps 

improve fuel economy and increases in-cabin passenger comfort. Rapidly heating engine 



coolant and engine and transmission oils helps decrease the fluid viscosity, thus 

providing a potential benefit to OEMs of a 3% to 5% improvement in fuel economy. The 

Company has entered into agreements with certain OEMs to provide prototypes for 

testing and evaluation. The Company believes this will result in a new product offering 

for the Company. 

b. Water cooled exhaust manifolds and turbocharger housings: Due to emissions legislation 

requirements and engine performance optimization, exhaust gas temperatures continue to 

increase and water cooling for durability is an effective way for OEMs to obtain durable 

exhaust manifolds or turbocharger housings using lower cost materials. The Company 

has entered into agreements with certain OEMs to provide prototypes for testing and 

evaluation. 

The Company believes that innovative new products being developed will preserve and grow its 

market share and that these actions will continue to position Wescast as a market leader with the 

ability to support its customers globally with cost competitive innovative products. 

Throughout 2011, the Company continued to look for revenue diversification opportunities, 

booking more than $125 million in average annualized new and replacement business across all 

of the business units. Of this new and replacement business, 48% of the revenue is related to 

turbocharger housings and turbomanifolds which continue to be an exciting avenue for growth as 

the automotive industry is trending toward the production of smaller turbocharged engines. 

In North America, the Company’s strategy is to continue to develop and expand its product 

offerings and to leverage its stainless steel operations to secure and maintain a market leadership 

position in exhaust manifolds and turbocharger housings and integrated turbomanifolds. 

The Company’s European operations continue to focus on expanding its customer and product 

base by leveraging its capability in multiple materials including NiResist and stainless steel. 

The Company’s Asian operations continue to focus on growing its domestic sales in exhaust 

manifolds, turbocharger housings and integrated turbomanifolds in multiple materials. 

The Company believes that its strategies of expanding its global manufacturing capabilities, 

continuing to develop and commercialize new technologies and innovation, expansion of its 

stainless steel capabilities in North America, development and expansion of product offerings 

and continued pursuit of operational excellence position it well for profitable sales growth. 

In the first quarter of 2011, the Company announced that the Board of Directors was undertaking 

a review of strategic alternatives for the Company with the objective of enhancing shareholder 

value. A Special Committee of the Board of Directors was established to assist with the process 

and Canaccord Genuity was retained to act as the Board of Directors’ financial adviser. 



As part of the strategic alternative review, the Company was in discussion with several parties 

regarding possible alternatives and, on September 6, 2011, announced that it had entered into a 

Memorandum of Understanding with Sichuan Bohong Industry Co., Ltd. ("Bohong") regarding 

Bohong's proposed acquisition of 100% of the issued and outstanding capital of Wescast. The 

Memorandum of Understanding terminated automatically in December 2011 in accordance with 

its terms when Bohong did not obtain a financing commitment letter by a specified date. The 

Board of Directors is continuing with its review of strategic alternatives but does not intend to 

comment further regarding its evaluation of strategic alternatives unless a specific transaction or 

process is concluded, or it otherwise deems further disclosure is appropriate or required. 

For additional information regarding the general development of Wescast’s business, see pages 1 

to 11 of the MD&A, which pages are incorporated herein by reference. 

2.3 Trends in the Automotive Industry 

Automotive Industry - General 

2011 marked a continued recovery in most global markets with global light vehicle sales 

increasing in every major market in 2011 compared to 2010. 

Light vehicle sales in North America continued to recover as consumer confidence increased and 

the US economy stabilized. Light vehicle sales in North America finished the year 9.3% higher 

than in 2010 and recorded a second consecutive year of strong growth. 

Europe continues to work through several financial crises in certain countries which saw the 

overall devaluation of the Euro. Even with this uncertainty, the European market grew with light 

vehicle sales in Europe increasing 4.4% in 2011 compared to 2010. 

Asia, led by China, has grown to become the largest automotive market in the last decade. In 

China specifically, overall light vehicle sales growth was less robust than in previous years; with 

lower vehicle purchase incentives and increased government restrictions on the number of 

vehicle licences issued, growth was restrained. Nevertheless, China light vehicle sales grew by 

3.3% in 2011 as compared to 2010. 

The market charts outlined below indicate continued recoveries in light vehicle engine 

production in North America and Europe and forecasted continued growth in Asia for the next 3 

to 5 years. In 2012, Europe is expected to contract slightly; however, the long term view is that 

the market will continue to recover. 



European Light Vehicle Engine Production (Millions units) 

Asian Light Vehicle Engine Production (Millions units) 

North American Light Vehicle Engine Production (Millions units) 

16 

14 

12 

10 

- 

8 

6 

4 

2 

30 

25 

20 

15 

10 

- 

5 

50 

45 

40 

35 

30 

25 

20 

15 

10 

- 

5 

Expected North American Market Recovery 

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 

Source: IHS Global Inc. 

Expected European Market Recovery 

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 


Expected Asian Market Growth 

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 




With strong sales growth in 2011, continued growth expected in 2012 in North America and 

Asia, and automakers’ renewed focus on emissions, fuel economy, safety, and technology, 

automotive suppliers such as Wescast will be expected to ramp up production and bring new 

innovative technologies to market to meet post-recession demands. 

In 2011 the automotive sector returned to higher production levels in each of the key markets. 

The Company believes it is well positioned to grow due to our ability to ramp-up production in 

our global network. 

The Company remains focused on its long-term strategy of diversifying and growing sales by 

region, customer and product type while maintaining its market share with existing customers. 

Fuel Economy, Higher Engine Operating Temperatures and Reduced Emissions 

The Company is committed to providing full-service engineering solutions in partnership with its 

customers from its Technical Development Centre in Canada which houses all of the Company's 

research and development, product design and diversification initiatives in one state-of-the-art 

facility. This allows the Company to accelerate its product development activities, provide 

advanced process development, and carry out focused and innovative research and development 

to support its growth initiatives. 

The Company believes that our engineering and design capabilities are well suited to meet the 

changing technical needs of our current and future customers. These customers are facing many 

challenges with which we believe Wescast can specifically help, including: 

The need to reduce engine emission levels and fuel consumption; 

The need to deal with higher engine operating temperatures; 

The need to meet customer-driven demand for high horsepower levels, given the 

constraints above; and 

The potential for an increased focus on diesel and hybrid-electric vehicles globally, to 

meet upcoming government mandated emissions and fuel economy targets. 

Wescast’s engineering and design efforts are aimed at developing innovations that it believes 

will help customers meet these future needs. These efforts include the continued development of 

new higher-temperature alloys, such as various grades of stainless steel and NiResist; the 

continued development of advanced waste energy recovery systems to improve fuel economy; 

and innovations to improve durable, lighter weight, and cost competitive high-temperature 

exhaust designs. 

The development and commercialization potential of innovative ideas is managed by the 

Company’s Innovation Council which includes cross-functional leaders from across the 



organization. In 2011 certain key innovative products were further advanced in response to 

customer requirements for improved fuel economy, lower emissions to respond to regulatory 

requirements and the need for lower cost materials and products that deal with higher exhaust 

temperatures. As discussed above, these innovation products have applications in the following 

areas: 

Exhaust energy recovery: The use of waste heat energy in product applications helps 

improve fuel economy and increases in-cabin passenger comfort. Rapidly heating engine 

coolant and engine and transmission oils help decrease the fluid viscosity, thus providing 

a potential benefit to OEMs of a 3% to 5% improvement in fuel economy. The Company 

has entered into agreements with certain OEMs to provide prototypes for testing and 

evaluation. 

Water cooled exhaust manifolds and turbocharger housings: Due to emissions 

requirements and engine calibration, exhaust gas temperatures continue to increase and 

water cooling for durability is an effective way for OEMs to have durable exhaust 

manifolds or turbocharger housings using lower cost materials. The Company has entered 

into agreements with certain OEMs to provide prototypes for testing and evaluation. 

The Company believes that these actions will continue to position Wescast as a market leader 

with the ability to support our customers globally with cost competitive innovative products. 

Global Supply on a Regional Basis 

A significant cost for OEMs and suppliers arises from shipping automotive parts and vehicles. 

Due to the materials used in their production, manifolds, turbocharger housings and integrated 

turbomanifolds can be expensive to ship, which can impact the profitability of contracts. In 

addition, foreign exchange risks can have a significant impact on the profitability of cross-border 

contracts. The Company’s global production facilities allow it to manufacture products 

regionally, which the Company believes provides it with a significant competitive advantage 

over peers with a lesser geographic reach. 

In North America growth from stainless steel products and other components in this region 

remains a significant opportunity upon which the Company intends to capitalize. 

Wescast’s European operations provide access to: (i) strong global brands, (ii) a fast growing 

market for turbochargers through Wescast’s turbocharger housings and turbomanifolds, and (iii) 

growing markets in Eastern Europe and Russia. 

The Company’s Asian operations provide access to the largest and one of the fastest growing 

automobile consumer markets in the world and the Company is able to leverage its customer 

relationships established in North America and Europe to support further growth. 



Increased Global Turbocharger Demand 

The automotive industry is trending toward the production of smaller vehicles. These vehicles 

have smaller engines, and a turbocharger increases the density of air entering the engine to create 

more power. Global turbocharger demand is anticipated to show significant growth over the 

next several years as automakers work to install new cost effective engine technology to boost 

fuel economy while also maintaining consumer’s desire for power performance. Wescast has 

devoted significant resources to the development of our turbocharger housing business. As 

illustrated by the chart below, it is anticipated that global turbocharger demand for light vehicles 

will increase from 21.6 million units in 2011 to more than 41.5 million units in 2019. 

We believe Wescast’s production of turbocharger housings for the turbocharger market provides 

both a revenue diversification opportunity and an avenue for significant growth. 

45,000,000 

40,000,000 

35,000,000 

30,000,000 

25,000,000 

20,000,000 

15,000,000 

10,000,000 

5,000,000 

- 


Projected Global Light Vehicle Turbochargers 

CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 

Europe Asia North America 

Historically, high volume turbocharger applications have been found on diesel engines, but a 

large percentage of the anticipated growth in turbocharger demand is expected to come from an 

increase in forced induction gasoline engines. 



25,000,000 

20,000,000 

15,000,000 

10,000,000 

5,000,000 

- 


Projected Global Turbocharged Gasoline Engines 

CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 

Europe Asia North America 

This increase in turbocharger demand, in addition to demand for other new “lean-burn” 

technologies, is driving up the exhaust temperatures in future powertrain offerings at many 

automakers. We believe that this trend is not only leading to more potential turbocharger 

business, but also an increase in demand for higher-temperature cast iron, NiResist and stainless 

steel alloys for both turbochargers and exhaust manifolds. Due to Wescast’s capabilities in these 

materials globally, as well as potential new developments in material alloys from our Technical 

Development Centre, we believe that we are well positioned to support our customers. 

2011 Turbocharger Housings Market Share 

Europe Asia 



The Company currently holds an estimated 13% market share of turbocharger housings in 

Europe, and our continued focus on global sales and engineering support is designed to assist in 

penetrating this market segment in other global regions. As an example, the Company holds an 

esimated 2% market share of turbocharger housings in Asia. With continued focus, the 

Company believes that this market share will increase. 

The Company also produces a large number of integrated turbomanifolds, where the exhaust 

manifold and turbocharger housing are cast as one combined part. Growth in integrated 

turbomanifolds is anticipated as automakers work to reduce complexity and improve part 

packaging within the engine compartment. The Company currently holds an estimated 9% share 

of the integrated turbomanifold market in Europe and looks to build on this market share in other 

markets globally. 

2.4 Company’s Business Strategy 

2011 Integrated Turbomanifolds Market Share 

Europe 

The Company’s goal is to diversify and grow sales by region, customer and product type while 

maintaining market share with existing customers and generating attractive growth and strong 

financial returns for its shareholders. The following strategies and actions are planned to deliver 

this goal: 

Continue to expand our global manufacturing capabilities to: 

Participate in growth in specific geographic regions; 

Grow with OEMs as they increase their requirement for global supply 

partners; and 

Position the Company with strategic manufacturing capabilities regionally to 

service the needs and wants of key customers in materials, processes and 



products and to offset risks associated with foreign exchange and 

transportation costs. 

Develop and commercialize new technologies and innovation to address market trends 

for vehicle weight reductions and improved efficiency of the internal combustion engine. 

The Company expects to achieve this by: 

Leveraging multi material capabilities including NiResist and stainless steel; 

Continue developing new lower cost materials that have the ability to 

withstand higher engine temperatures; and 

The commercialization of innovation platforms related to exhaust energy 

recovery and water cooled exhaust manifolds and turbocharger housings. 

Expand stainless steel capabilities in North America and establish a market leadership 

position in this rapid high growth segment. 

Complete the expansion of the existing North American stainless steel 

operating facility’s capacity and successfully launch customer awarded 

programs to utilize the expanded capacity; and 

Implement a stainless steel strategy to supply the North American market 

beyond the existing facility’s capacity. 

Continue to develop and expand the Company’s product offerings to address expected 

declines in demand for bolt-on manifolds in North America. 

Grow turbocharger housing and integrated turbomanifold sales; and 

Develop and grow other components for the car and light truck market where 

the Company can leverage its metallurgical and engineering expertise. 

The Company expects that sales growth in new products and materials in Asia, Europe 

and North America will significantly outpace the forecasted penetration of manifolds 

integrated into cylinder heads and the decline in bolt-on iron manifold market share. 

Continue the development and implementation of operational excellence in all operations 

to reduce costs, leverage technologies and processes, and enhance best practices globally. 

Continue to improve and enhance product launch and management 

capabilities. 

The Company believes that these strategies and actions position the Company to benefit from the 

market trends in the car and light truck market, while managing the risks that are inherent in the 

automotive industry and the business of the Company itself. We expect that these strategies, 

combined with strong new and replacement business that the Company has successfully booked 

for future years, will provide the potential for significant growth in revenue and earnings. 



3. DESCRIPTION OF THE BUSINESS 

3.1 Products 

Companies which supply products directly to automotive OEMs and which design, engineer and 

manufacture such products are generally referred to in the automotive industry as “Tier 1” 

suppliers. Tier 1 suppliers may be awarded longer term purchase orders by OEMs as a result of 

their involvement in the development and design of the product with the OEM. Tier 1 suppliers 

generally have the capability to supply these components on a just-in-time basis which helps the 

OEMs reduce or better manage inventory levels. 

As primarily a Tier 1 supplier, Wescast designs, casts, machines and assembles high-quality 

engineered exhaust system components including exhaust manifolds, turbocharger housings and 

integrated turbomanifolds for the car and light truck markets in North America, Europe and Asia. 

Manifolds 

The exhaust manifold is a critical engine component because its 

design affects overall engine performance, including fuel 

efficiency, horsepower, effectiveness of the catalytic converter, 

environmental emissions and engine sound volume. The production of cast iron exhaust 

manifolds is essentially a two-step process consisting of: (1) casting, which is the pouring 

of molten metal into moulds; and (2) machining, which is the finishing of the raw exhaust 

manifold by milling, drilling, tapping, assembling and testing by highly-automated 

machines to prepare the exhaust manifold for final assembly on the engine. Wescast’s 

exhaust manifolds are made of ductile iron, SiMo, CGI, NiResist and stainless steel in 

order to meet diverse global customer needs. 

Turbocharger Housings 

The turbocharger housing is a significant component of a 

turbocharger assembly. The turbocharger is positioned 

downstream of the manifold within the exhaust system, and is 

driven by hot exhaust gases exiting the engine through the exhaust 

manifold. As the hot exhaust gas enters through the turbine, it 

drives a shaft connected to the compressor. This rotation of the 

compressor impeller draws cool air into the compressor housing 

and forces it into the intake manifold under higher pressure. By 

raising the pressure of the intake air, the turbocharger can help to achieve higher power 

output for a given engine displacement. This allows for the use of smaller and lighter 

engines, which can result in improved vehicle performance and potential improvements 

in fuel economy and total emissions output. Wescast currently supplies turbo charger 



housings to the largest global turbo charger systems manufacturers such as Mitsubishi 

Heavy Industries, Borg Warner, IHI and Honeywell Turbo Technologies. Wescast’s 

global footprint allows the Company to be positioned to offer these products with 

flexibility where supply is needed. Wescast’s turbocharger housings are made of SiMo, 

CGI, NiResist and stainless steel in order to meet diverse global customer needs. 

Integrated Turbomanifolds 

An integrated turbomanifold is a manifold and a turbocharger 

housing designed as one single component. The European 

market demands compact exhaust solutions and turbocharging 

for its smaller gas and diesel engines and Wescast can provide a 

cast “turbo-manifold” all in one cast piece. This integrated 

approach yields benefits where tight packaging constraints exist 

in the engine compartment, eliminates an assembly operation as 

well as reduces the potential for leakage between exhaust components. This 

turbomanifold also offers great flexibility to optimize the manifold design to enhance 

turbocharger performance. Wescast’s turbomanifolds are made of SiMo, CGI, Ni-Resist 

and stainless steel in order to meet diverse global customer needs. 

3.2 Stainless Steel Technologies 

Wescast utilizes two types of manufacturing technologies for the production of stainless 

steel products. 

In Stratford, Ontario, the Company utilizes a patented and licensed technology to develop 

and manufacture stainless steel products that have a thinner wall and smoother surface, 

which provides both lighter-weight and superior air-flow in manifold or turbocharger 

housing alternatives for our customers. These products are intended to capitalize on an 

industry trend toward lighter, more fuel-efficient vehicles. In 2011, the Company began 

an expansion to increase the capacity of the Stratford facility in order to meet production 

requirements that are expected to ramp up in early 2012. 

In addition, the Company will produce stainless steel components using its sand casting 

process in its operations located in Hungary and China to support customer demand for a 

conventional stainless steel product. 



The manifolds, turbocharger housings and integrated turbomanifolds are designed, engineered 

and manufactured in close collaboration with the Company’s customers to meet their 

performance, quality and pricing requirements. 

Wescast’s exhaust manifolds, turbocharger housings and integrated turbomanifolds are produced 

in Wingham and Stratford Ontario; Oroszlany Hungary and Wuhan China. They are machined 

at the Company’s facilities in Wingham, Stratford and Strathroy Ontario, Sterling Heights and 

Macomb Township in Michigan, Oroszlany Hungary and Wuhan China. 

3.3 Business Unit Segments 

Significant economic recovery continued during 2011, but for some regions of the world, in 

particular Europe where various financial crises cast greater uncertainty in local economies, it is 

expected that a full recovery will take a number of years. For the automotive industry, abundant 

growth in vehicle sales is anticipated globally as the middle class in China, Brazil, and India 

continue to grow at unprecedented levels. In more developed regions, more modest growth is 

anticipated but significant opportunities are available for companies that can provide innovative 

solutions to meet upcoming safety, emissions, and fuel economy regulations. 

In Fiscal 2011, Wescast’s operations were conducted primarily in Canada, the United States, 

Hungary and China. For Fiscal 2011, consolidated sales to the Company’s three largest 

customers, amounted to 57% of consolidated sales, compared to 60% of consolidated sales, in 

2010. 

The North American powertrain segment is focused on the design and manufacture of exhaust 

system components primarily for sale to the Detroit 3 automakers as well as Tier 1 customers for 

car and light truck markets in North America and Europe. As a result, it is exposed to any loss in 

market share or less-than-projected light vehicle sales by the Detroit 3 automakers, for whom the 

Company supplies powertrain components. The Company’s powertrain operations in North 

America are well established and in fiscal 2011 represented approximately 49% of our 

consolidated gross sales including inter-segment sales compared to 57% in the preceding fiscal 

year. The Company continues to pursue a diversification strategy that has led to new products 

and securing business with new customers. 

Sales by the Company’s North American operations, including inter-segment sales, excluding 

prototype and tooling sales, were $140.3 million in fiscal 2011, a decrease of 9.0% compared to 

the $154.1 million reported in 2010. The North American operations experienced a year-overyear 

decrease in casting unit sales of 12.8% and machining volumes of 5.3% compared to 2010. 

According to industry estimates, North American light vehicle production increased by 9.8% in 

2011 and the Detroit 3 increased light vehicle production by 14.7% over the same time period. 

The decrease in sales experienced by the Company was the result of customer programs ending 

production while the start up of significant new programs that the Company was awarded were 

delayed by the customer and are in the lower volume stages of production. Also, sales to 

Chrysler decreased significantly in 2011 as certain programs that Wescast supplied in 2010 have 



ended and Chrysler in certain cases has moved to engine designs that no longer require bolt-on 

manifolds. The Company believes that new program launches in stainless steel and the 

implementation of technologies in growth areas will offset these declines in the future. The 

Company launched 26 new customer parts in North America during 2011. The Company’s 

expansion of its stainless steel capacity is progressing well with new programs expected to 

launch in 2012. The stronger Canadian dollar against the U.S. dollar compared to 2010 

negatively impacted sales by $1.7 million. In addition, higher raw material pricing positively 

impacted the Company’s sales prices to its customers resulting in an increase in sales of $1.2 

million compared to 2010. 

The European powertrain segment is conducted through the Company’s subsidiary, Wescast 

Hungary Zrt. In Fiscal 2011, the European operation comprised approximately 33% of the 

Company’s consolidated gross sales including inter-segment sales compared to 29% in the 

preceding fiscal year. The operation experienced a year-over-year increase in casting unit sales 

volume of 1.7% compared to 2010. Total units machined in 2011 were 11.3% higher than 2010 

as the Company’s European operations launched a considerable number of new customer 

programs during the year and will continue to grow given the business unit’s recently expanded 

material offerings to customers. 

Sales generated by the Company’s European operations, including inter-segment sales, excluding 

prototype and tooling sales, were $95.1 million in 2011 compared to $78.6 million in 2010, an 

increase of 21.0%. Sales increased by $11.8 million or 15.0% due to increased volumes and 

changes in product mix and pricing compared to the prior year. The foreign exchange impact of 

a stronger Euro against the Canadian dollar compared to the prior year increased the Canadian 

dollar amount of sales by $1.6 million. Pricing adjustments due to higher raw material prices 

that the Company passed on to its customers resulted in an increase in sales of $3.1 million. 

With a customer list that includes Mercedes, BMW, Audi, Renault, Honeywell TT, BorgWarner 

TS, IHI, Volkswagen, Ford of Europe, PSA, Mitsubishi Heavy Industries, the Company believes 

the European powertrain segment represents Wescast’s best near-term opportunity to expand our 

customer base, on the basis of the Company’s ability to design, cast and machine manifolds, 

integrated turbomanifolds and turbocharger housings. The European business unit continues to 

focus on expanding its customer and product base by broadening its capability in multiple 

materials. The Company has been successful in winning new stainless steel and NiResist 

programs and is currently launching its first program in stainless steel. 

In Europe, a moderate decline is anticipated in 2012 and industry estimates anticipate a decrease 

of approximately 2.5% or 500,000 less vehicles being produced, for an estimated total of 19.3 

million vehicles in 2012. 

The Asian powertrain segment is conducted through the Company’s subsidiary, Wescast 

Industries (China) Co., Ltd. The Asian operation provides production and prototype parts for a 

number of customers within Asia (China, Japan and Malaysia) as well as exporting to other 

regions in support of our global customers (North America, Europe, Africa and South America). 



The Asian operation comprised approximately 18% of consolidated sales, including intersegment 

sales in fiscal 2011, compared to 14% in the preceding year. 

Sales generated by the Company’s Asian operations, excluding prototype and tooling sales, were 

$55.1 million in 2011 compared to $39.2 million 2010. This increase in sales was related to 

increased volumes. The operation experienced a year-over-year increase in casting unit sales 

volume of 11.9% compared to 2010. Total units machined in 2011 were 25.4% higher than 

2010. In addition, the product mix sold during fiscal 2011 versus fiscal 2010 was favourable to 

the Company and pricing adjustments due in part to higher raw material prices that the Company 

passed on to its customers resulted in an increase in sales. 

3.4 Credit Facilities 

North America 

The Company’s revolving term facility provided for $30.0 million in committed revolving 

advances, subject to the Company maintaining certain financial covenants and adhering to 

limitations on specified activities. Availability under the facility was also subject to a borrowing 

base comprised of a percentage of eligible receivables and inventory, certain real estate as well 

as the credit amount of advances outstanding to a maximum of the credit amount of balances on 

deposit with the lenders. At January 1, 2012, drawings under the facility including bank 

indebtedness and outstanding letters of credit amounted to $1.7 million. At January 1, 2012, 

considering the borrowing base calculation, the bank indebtedness and the outstanding letters of 

credit, the Company had $23.4 million of unutilized credit available under the facility. 

At January 1, 2012 the Company was not in compliance with one financial covenant under the 

facility constituting an event of default. The event of default was subsequently waived by the 

lenders. 

On March 27, 2012, the Company’s revolving term facility was amended and extended to 

March, 2013. This credit facility provides for a maximum of $25.0 million in committed 

revolving advances, subject to the Company maintaining certain financial covenants and 

adhering to limitations on specified activities, including the payment of dividends. Substantially 

all of the Company’s assets have been charged as security in favour of the Company’s lenders. 

Availability under the facility is also subject to a borrowing base comprised of a percentage of 

eligible receivables and inventory as well as the credit amount of advances outstanding to a 

maximum of the credit amount of balances on deposit with the lenders. The new facility 

includes a leverage covenant that more appropriately matches the global nature of the 

Company’s operations and is guaranteed by certain material subsidiaries. 

The Company’s revolving term facility includes a swingline which allows for an overdraft limit 

up to $5.0 million. The swingline bears interest at the lender’s prime bank rate, plus an 

applicable margin. The swingline does not have a fixed maturity date; however, it must be fully 

repaid by the expiry date of the revolving term facility. 



Hungary 

The Company’s Hungarian subsidiary had an overdraft facility available of Euro 1.5 million 

($1.9 million CAD) that was drawn for Euro 0.3 million ($0.4 million CAD) as at January 1, 

2012. The overdraft facility was secured by a mortgage on the Hungarian real property, which 

had a carrying value of $24.2 million at January 1, 2012, and a guarantee from the Company. 

On March 23, 2012, the overdraft facility was cancelled and replaced by a new facility which 

provides for overdraft in Euros and Hungarian forints up to a total of Euro 3.0 million. The 

facility is secured by a mortgage on the Hungarian real property and a guarantee from the 

Company and bears interest at the rate of 1-day EURIBOR plus 2% or BUBOR + 1.5%. The 

facility expires in April, 2013. 

China 

At January 1, 2012 the Company’s Chinese subsidiary had a working capital line of credit 

available for a maximum of RMB 50 million ($8.1 million CAD) that was drawn for an amount 

of RMB 45 million ($7.3 million CAD). The line of credit bears interest based on the People’s 

Bank of China benchmark lending rate, which at January 1, 2012 was 6.56%, plus applicable 

margin and is secured by a mortgage on the Chinese real property which had a carrying value of 

$18.4 million at January 1, 2012. The facility provides 1 year term loans and matures in 

February, 2013. 

3.5 Sales and Marketing 

Wescast sells its products to North American OEMs located in Canada and the U.S., through its 

sales personnel located at a U.S. sales and distribution office in Michigan. Sales to OEMs in 

Europe are made through the Company’s sales office located in Germany. Sales to OEMs in 

Asia are made through its sales offices in China and Japan. Wescast also has a sales and design 

office in Canada, and sales representation in the United Kingdom and France. 

The Company typically receives a purchase order to produce a particular product for several 

model years. However, volume orders generally come into existence when Wescast receives 

releases from its customers under such purchase orders, authorizing the Company to produce and 

deliver specific quantities of the product. After a purchase order is received by the Company 

from an OEM, the actual volume produced under the purchase order in any given year is 

dependent upon the actual number of engines produced or planned to be produced by the OEM. 

Actual OEM production levels of a particular engine program may vary from OEM estimates 

and programs may be delayed or cancelled. 

The Company continues to see changes in the sourcing practices of its OEM customers as they 

relate to the Company’s products. Historically, a customer awarded a supplier with the 

commercial production requirements for a product related to a specific engine program. 

Assuming delivery, quality, and other performance criteria were maintained, the supplier would 



retain and supply the product over the life of the engine program. Now, customers from time to 

time, and during the life of the engine program, market test their purchasing requirements 

globally to ensure they are continuing to receive globally competitive pricing. This accelerates 

the timeframe over which the Company’s current business can be impacted by global 

competition, including the Company’s ability to recover capital invested. 

Continuing price reduction pressures from the Company’s customers could reduce profit 

margins. Historically, the Company has entered into, and will continue to enter into, supply 

agreements with its customers that provide for, among other things, price concessions over the 

term of the agreement. To the extent that price reductions continue in the future that are not 

offset through cost reductions, there could be an adverse affect on the Company’s future profit 

margins. 

3.6 Sources, Pricing and Availability of Raw Materials 

The Company’s production costs are dependent on the price of certain raw materials. 2011 

proved to be a challenging year for the Company as most raw material prices experienced 

upward pressure. We are expecting these prices to stabilize in 2012. Price increases in scrap 

steel, molybdenum, and nickel raw materials will cause the cost of production to rise. The 

Company has agreements in place with the majority of its customers that will help mitigate the 

impact of price fluctuations on these raw materials. As raw material prices rise and fall, the 

difference between the payment of these changes to the Company’s suppliers and the adjusted 

selling prices to the customers is subject to some delay effect. The Company believes the 

average scrap steel prices for 2012 will be similar to the averages experienced in 2011. Industry 

publications for molybdenum are predicting upward pricing as markets recover and demand 

increases. Supply side fundamentals are tight, any increase in demand could increase price. The 

Company believes the average molybdenum price for 2012 will be higher than the averages 

experienced in 2011. 

The charts on the next page illustrate the changes in molybdenum, scrap steel and scrap stainless 

steel prices since the end of 2009. (Note: index price is the average price in effect at the end of the 

quarter.) 



Molybdenum Prices in North America, Europe and China: 

While molybdenum is found in many areas of the world, three regions account for over 70 % of 

the world’s supply (North America, Chile and China). Our primary molybdenum supplier for our 

Canadian and Hungarian operations is North America based, with our facility in China buying 

from a local source. Our current supply agreements and a surplus in molybdenum inventories 

worldwide due to the current global economic situation are expected to ensure the Company of 

continued supply without interruption. With the current supply agreements that are in place, 

forecasted volumes are protected to ensure the continued supply to the Company without 

interruption. 

Scrap Steel Prices in North America, Europe and China: 



Scrap Stainless Steel Prices in North America: 

Since Ontario is a net exporter of scrap steel, the Company believes that there is no overall 

supply risk. The Company obtains the majority of our scrap steel from two of the largest scrap 

processors in Ontario. The supply of scrap steel in Hungary is protected by the use of three 

suppliers, the largest of which has sufficient availability of scrap steel to supply well over 100% 

of the Company’s requirements. Current scrap steel requirements in China remain well below 

the capacity of the Company’s current supplier. 

The costs of raw materials used in the Company’s stainless steel facility in Stratford, Ontario are 

expected to remain stable through 2012, with the exception of Zircon Sand and Flour. Industry 

publications indicate that Zircon demand is double the available supply. China consumes 50% 

of the world’s supply. We have seen prices increase in 2011 and we expect the increases to 

continue in 2012. 

Total Rare Earth (TRE) are raw materials found in some of the alloys used in the Company's 

manufacturing process. China currently produces 97% of the world's supply of TRE, and the 

price rose drastically in 2011 as China reduced export quotas. With such restrictions, world 

demand for TRE currently exceeds world supply. The Company expects that the combination of 

higher prices and current demand will result in new mines opening to supply market demand. 

Pricing levels have recently declined but not to the levels seen prior to 2011. 

The Company continues to implement risk management strategies to help mitigate supply 

concerns on all raw materials. 



3.7 Seasonality 

Historically, Wescast’s sales and production volumes are generally lower in the months of July 

and August of each year due to summer shutdowns and model changeovers by the OEMs. Also, 

production volumes are usually lower during the months of December and January of each year 

due to the shutdowns associated with the holiday seasons in North America, Europe and Asia. 

3.8 Intellectual Property Rights 

Wescast is licensed to use third party, intellectual property. The Company’s intellectual property 

rights are an important asset, but the loss of any particular right would not have a material effect 

on its business. 

In addition, the Company utilizes a licensed and patented production process in Stratford, 

Ontario. As this operation expands, a loss of this license could become material. This license is 

subject to termination by the licensor upon bankruptcy or insolvency of Wescast or of a material 

breach of the terms of the license if not remedied by Wescast. 

3.9 Competition 

Wescast is the world’s leading manufacturer of bolt-on cast exhaust manifolds. However, the 

exhaust manifold business is highly competitive. The Company believes that the primary 

elements of this competition are price, quality, performance and service, including delivery time. 

Historically, the worldwide demand for manifolds has been satisfied by bolt-on manifold 

designs. However, sales of manifolds integrated into the cylinder head of the engine (integrated 

manifolds) continue to grow with the greatest impact felt in North America with a market share 

of 22% in 2011. 

Wescast’s manifold production continues to be focused on bolt-on cast manifolds. The demand 

for bolt-on exhaust manifolds is satisfied by two distinct types of designs: cast and fabricated. A 

cast manifold is produced using various grades of metal alloys, with different temperature and 

performance characteristics. Fabricated manifolds are manufactured by bending and welding 

steel tubes and stampings to meet the shape and style of the product design. 

In North America, the use of cast manifolds has traditionally dominated the marketplace. Cast 

manifold designs are currently estimated by the Company to represent approximately 53% of the 

overall demand for manifolds in North America. In other parts of the world, cast manifold 

designs are less dominant due to customer preferences and specific engine applications. In North 

America, Wescast holds a market share currently estimated at approximately 29% of the overall 

exhaust manifold market compared to 35% in 2010. Wescast experienced a reduced cast exhaust 

manifold market share in North America during 2011 compared to 2010. Several customer 

programs ended production while the start up of significant new programs that the Company was 

awarded were delayed by the customer and are in the lower volume stages of production. Also, 

sales to Chrysler decreased significantly in 2011 as certain programs that Wescast supplied in 



2010 have ended and Chrysler in certain cases has moved to engine designs that no longer 

require bolt-on manifolds. 

North American OEM’s began implementing low cost country strategies in the early 2000’s to 

deal with the economic uncertainty in the automotive industry as well as emerging global low 

cost alternative supply. Although price still remains an important factor in the minds of the 

OEMs, reliability, quality, logistics costs and foreign exchange are now also major 

considerations for them. 

In Europe, the Company continues to hold a strong position and its manifold market share was 

12% in 2011 where the Company is the market leader in cast manifolds. 

The following charts illustrate the Company’s estimated share of total the exhaust manifold 

market in North America, Europe, and Asia: 

2011 Exhaust Manifold Market Share 

North America Europe Asia 

The supply base for fabricated manifolds in areas such as Europe, where historically, the market 

comprised of a larger number of automakers with smaller individual platform volumes, has 

evolved to include a larger number of suppliers than is the case in North America. The European 

market is not dominated by any one supplier. 

The Company’s European operations continue to focus on expanding its customer and product 

base by broadening its capability in multiple materials. The Company has leveraged its 

experience in both NiResist and stainless steel from its China operations and Technical 

Development Centre in Canada in order to expand these capabilities in Europe and take 

advantage of a large and growing market for both NiResist and stainless steel applications. The 

Company acted on this strategic decision and invested in capital to manufacture these materials 



in its existing facility. The Company has subsequently been successful in winning new stainless 

steel and NiResist programs and is launching its first stainless steel program. 

In Asia, the Company holds a minor share of the local markets; however, we anticipate this 

market share to increase in future years as certain new programs begin to serve the China 

domestic market. The Company’s Asian facility in Wuhan, China is successfully providing 

production and prototype parts for numerous customers including a number of Asian customers. 

In addition, the China operation expanded its material capabilities to successfully supply 

prototypes for stainless steel products to several customers in anticipation of production of 

turbocharger housings in 2012. It is vital to expand our material offerings in order to compete in 

the rapidly growing requirement for higher temperature engine applications which require these 

more durable materials. 

3.10 Research and Development Activities 

Wescast’s research and development efforts are focused on exhaust components, materials 

research and process improvements. The Company’s technical development facility includes 

metallurgical and materials testing laboratories. These labs are used to support customers’ 

metallurgical needs and to test and evaluate high temperature materials. This knowledge is being 

integrated with advanced analytical engineering techniques to provide superior modeling 

capabilities and innovative technical solutions. 

Exploration of new ideas and concepts for improving the Company’s products is an ongoing 

process. The research and development team at Wescast also works very closely with the 

manufacturing team to collaborate and identify process improvements within the Company’s 

production environment. Wescast takes pride in utilizing our leadership in product design, 

engineering and manufacturing to quickly resolve complex technical issues. 

Research, development and design expenses were $4.2 million in Fiscal 2011 compared to $3.9 

million in fiscal 2010. The Company remains committed to being able to offer our customers the 

highest quality, technologically advanced products at globally competitive prices. As a result, 

the Company will maintain its commitment to fund research and development activities so that it 

may respond with innovative product technology solutions through the use of innovative 

manufacturing techniques. 

The development and commercialization potential of innovative ideas is managed by the 

Company’s Innovation Council which includes cross-functional leaders from across the 

organization. Through this effort Wescast expects to commercialize new products and processes 

focused on future growth. 

3.11 Engineering & Design 

Employees at Wescast are committed to technical innovation in design and manufacturing and 

the Company works closely with our customers to find creative, cost-effective solutions. 



Wescast’s global sales and design centres provide local support to the OEMs, assisting in the 

development of advanced products that maximize engine, system and vehicle performance. 

Wescast’s research teams are continually striving to improve upon metallurgical alloy 

compositions and material properties to support higher exhaust gas temperatures while 

optimizing durability, weight and packaging characteristics. 

Wescast understands the need to be flexible and efficient as OEMs continue to demand quicker 

turnaround times in all development phases - concept through production. Wescast is able to 

employ innovative computer simulations, rapid prototyping and product testing, thereby 

improving product durability and air-flow management along with reducing customer 

developmental and testing lead-time. 

3.12 Technical Development Centre 

Wescast provides full-service engineering solutions in partnership with our customers from our 

Technical Development Centre (“TDC”) in Brantford, Ontario which houses the Company’s 

research and development, product design and diversification initiatives in one state-of-the-art 

facility. This allows the Company to accelerate our product development activities, provide 

advanced process development, and carry out focused and innovative research and development 

to support our growth initiatives. The TDC provides the capabilities to advance several of the 

Company’s initiatives including welding, waste energy recovery, hybrid engine systems, as well 

as several other proprietary product initiatives. The building also houses a mini-foundry and a 

machine shop for making prototypes and for advanced engineering projects. 

3.13 Economic/Contract Dependence 

The Company is largely dependent upon three customers in North America, the Detroit 3 

automakers. As a result, it is exposed to any loss in market share or less-than-projected light 

vehicle sales by the Detroit 3 automakers, for whom the Company supplies powertrain 

components. The Company has pursued a diversification strategy that has led to securing 

business with new customers and products. 

The Company’s top five North American programs, as currently projected for 2012 based on unit 

production, are represented by the following OEM platforms: 

OEM Platform/Program 

Representative Vehicle Applications (Exhaust 

Manifolds, unless otherwise noted) 

GM GEN IV V8 Truck Silverado, Sierra, Suburban, Yukon, Avalanche, Escalade 

Ford 3.5L D35 V6 Taurus, Fusion, Edge, Flex, MKX, MKS, CX9, 6 

GM 3.6L Lambda/Epsilon V6 Acadia, Enclave, Traverse, Malibu 

Ford 5.0L Modular V8 F150 

Ford 6.7L Scorpion V8 F250, F350 



Further penetration of non-Detroit 3 customers would assist Wescast in diversifying our sales 

base and reducing this concentration of risk in North America. The Company believes the 

expansion of our global business structure and product mix will aid in these diversification 

efforts. 

The Company’s top five programs in Europe, as currently projected for 2012 based on unit 

production, are represented by the following OEM platforms: 

OEM Platform/Program Representative Vehicle Applications (Exhaust 


MHI 1.6L DV6 4V DOHC I4 DV Turbocharger housing for Peugeot (207, Partner), Citroen 

(C3, C4) 

Ford 2.2/ 2.4L PUMA Peugeot (Boxer), Fiat (Ducato), Ford (Transit) 

Audi 2.5/2.8/3.0L TFSI 4V Audi A4, A6 

Renault 1.5L K9K III/IV/Gen 5/6 I4 Renault (Cleo, Laguna, Megane, Kangoo), Dacia Logan 

Renault 1.5L K9K 4V I4 Gen 6 Turbocharger housing for Renault (Laguna, Megane) 

The Company’s top five programs produced in Asia, as currently projected for 2012 based on 

unit production, are represented by the following OEM platforms: 

OEM Platform/Program 

Representative Vehicle Applications (Exhaust 


Ford 3.7L Duratec V6 Ford F150, Mustang, Land Rover Discovery 

Ford FSAO ROCAM Ford Ka, Fiesta 

GM GMT 900 Gen II Chevrolet Silverado, Express, GMC Sierra, Savannah 

PSA 1.6L Prince I4 Mini, Mini Cooper, Mini Countryman 

VW 1.4L 4V I4 Turbomanifold for VW Golf, Jetta, Beetle 

The Company believes it could be negatively impacted by government regulations, including 

U.S. Corporate Average Fuel Economy standards or emissions regulations and Canadian, 

European, Asian and U.S. federal, provincial, state and local environmental laws and regulations 

that have an adverse impact on the automotive industry or that promote the adoption of 

alternative powertrains. New product research at Wescast is focused on innovations that will 

allow the Company to take advantage of any such changes. 

The Company’s consolidated financial results are reported in Canadian dollars. A portion of the 

Company’s sales, operating costs and capital investment requirements are realized in U.S. 

dollars, Euros, Hungarian forints, Chinese renminbi, and other currencies. As a result, 

fluctuations in the exchange rate between foreign currencies and the Canadian dollar could affect 

the Company’s profitability. The Company has agreements in place with some of our customers 



to help protect against currency fluctuations and the resulting impact on the consolidated 

financial results. 

To the extent the Company is unable to negotiate freight adjustment agreements with its 

customers; the Company bears the impact of increasing shipping costs. 

During 2011, the Company launched a number of programs for customers in North America, 

Europe and Asia. In addition, the Company’s expansion of it stainless steel capacity in Stratford, 

Ontario is progressing well with new programs launched in the fourth quarter of 2011 and 

additional programs expected to launch in 2012. Similarly, the European business unit continue 

to focus on expanding its customer and product base by leveraging its capability in multiple 

materials including NiResist and stainless steel. The Asian business unit continues to focus on 

growing its domestic sales in exhaust manifolds, turbocharger housings and integrated 

turbomanifolds in multiple materials. Financial performance of the business units has been and 

will continue to be impacted by the timeliness and the efficiency of these program launches. 

3.14 Environmental, Health & Safety 

Wescast believes it has established and maintains sound environmental practices. The ISO 

14001 Environmental Management System International Standard is now integrated into the 

culture of Wescast. The most significant benefit from implementing ISO 14001 is the ability to 

demonstrate, through third party verification, Wescast’s degree of success in continuous 

environmental improvement, prevention of pollution and compliance with applicable 

environmental laws. The Company monitors and controls the impact of all production processes, 

and has developed policies with the objective of assuring a safe and healthy environment for our 

employees and communities. For example, Wescast has indoor air and noise monitoring 

programs in place to ensure employee protection and shares those results with employees. 

External stack emissions are regulated by the local jurisdiction and Wescast’s ventilation systems 

have been designed to maintain external emissions below regulated limits. Wescast strives to 

reduce water usage wherever possible through maintaining and optimizing equipment and 

discharges are monitored to ensure compliance. 

The Company strives to recycle materials wherever possible. In order to be environmentally 

conscious and help offset rising raw material costs, metal chips from our machining facilities are 

re-melted in our foundry operations wherever possible. Wescast recycles or reuses almost 100% 

of the spent foundry materials either in-house or off-site. 

In addition to external third party verification audits, Environmental Compliance and 

Management System audits are conducted each year. Quarterly Environmental Management 

Reports to the Board of Directors and the Wescast Executive Leadership Team form part of the 

review of environmental performance of the Company which assists with the development and 

refinement of future environmental objectives. Through the Company’s standardized 

environmental key performance indicators at all of our facilities, it monitors opportunities to 

maximize recycling, reduce waste, and encourage the sharing of management’s best practices. 



Ongoing continuous improvement initiatives provide opportunities for energy efficiency, raw 

material usage and other environmental aspects and impacts. 

Wescast believes that existing environmental laws and regulations have not had a material effect 

on Wescast’s capital expenditures, earnings or competitive position. Wescast intends to continue 

environmental monitoring and measurement and maintaining emission control equipment, as 

well as making capital improvements related to environmental practice. 

All facilities are subject to annual internal health and safety audits to measure the effectiveness 

of our Health and Safety management system. As a result, Wescast believes that our global 

safety performance is better than the foundry sector industry average. Wescast’s lost time 

accident frequency (injuries per 100 employees) is approximately 45% lower than the foundry 

sector industry standard. 

3.15 Human Resources 

As at January 1, 2012, the Company had approximately 2,000 employees worldwide, working 

mainly in Canada, the United States, Hungary, and China. The Company’s manufacturing 

employees have specialized manufacturing process and tooling design expertise. The 

engineering and design staff have specialized design, analysis and testing expertise, and the 

research group has proprietary materials, process and product knowledge. 

Ultimately, the success of any company depends on the skill, commitment and engagement of its 

employees. Wescast has its own unique system for management known throughout the 

organization as the Wescast Way. The result of this is that our employees are highly engaged 

and have been effective in managing the Company through the recent downturn in the pursuit of 

excellent performance. This competitive advantage results in a winning organization that is able 

to provide the best value to our customers. We believe that best value is created by our 

employees in a lean enterprise that is innovative. Our employees operate using the four Scanlon 

Principles of: (i) Equity – fairness to all stakeholders and shared beliefs; (ii) Participation – 

working together in a team effort that creates synergy; (iii) Identity – shared purpose and values, 

knowing the current reality and doing the right job effectively; and (iv) Competence – personal, 

professional and organizational. Being a lean enterprise means we strive to eliminate waste 

through continuous improvement and innovation is defined as bringing both incremental and 

quantum improvements to products, processes and materials. 

The Company has collective labour agreements in place at three of its production facilities in 

Ontario, Canada. Two contracts were renegotiated in 2010 for 2.5 and 3 year periods. One of 

these contracts expires on August 31, 2012. The third collective agreement related to the casting 

facility in Wingham, Ontario was renegotiated in 2011 for a 3 year period. There is no collective 

labour agreement in place at the Company’s production facilities in Sterling Heights, Michigan, 

Macomb Township, Michigan or Stratford, Ontario. 



Employees in Oroszlany Hungary are covered by a labour contract that is negotiated annually. 

The agreement applies to all employees except senior management and is binding for all 

employees even though they do not have to be members of the union to work at Wescast. 

In Wuhan, China the employees have an employee association that represents all levels of 

employees where they can provide input on policies and procedures. There is no formal labour 

contract that is negotiated. 

The Company strives to maintain good relationships with its employees and has a history of 

resolving labour issues amicably. 

3.16 Principal Properties 

The Company’s principal facilities as at January 1, 2012 are listed below: 

Size 

(sq. ft.) 

225,000 

161,400 

160,000 

125,600 

121,400 

121,000 

80,000 

79,400 

78,000 

70,260 

2840 Oroszlany, 

Szent Borbala u. 16, Hungary 

Facilities Details 

Location Ownership Use 

799 Zhushanhu Ave. 

Wuhan Economic Tech. Development 

Zone, Hubei, China 

200 Water Street 

Wingham, Ontario 

R.R. #4, 


100 Water Street 


28648 Centre Road, 

Strathroy, Ontario 

6300 –18 ½ Mile Rd., 

Sterling Heights, Michigan 

130 Wright Blvd., 

Stratford, Ontario 

150 Savannah Oaks Drive, 

Brantford, Ontario 

51362 Quadrate Drive, 

Macomb Township, Michigan 

Owned 

Owned 

Cast, machine and assemble exhaust 

manifolds, turbocharger housings and 

integrated turbomanifolds 

Cast, machine and assemble exhaust 

manifolds, turbocharger housings and 

integrated turbomanifolds 

Owned Cast exhaust manifolds 

Owned 

Formerly used to cast exhaust manifolds; 

available for future production 

Owned Machine and assemble exhaust manifolds 

Owned Machine and assemble exhaust manifolds 

Leased Machine and assemble exhaust manifolds 

Owned 

Owned 

Enhanced stainless steel investment 

casting technology including manifolds 

turbocharger housings and other 

powertrain products 

Technical Development Centre and 

corporate support group 

Leased Machine and assemble exhaust manifolds 



4. RISK FACTORS 

See pages 37-40 of the 2011 MD&A which are incorporated by reference into this AIF. 

5. DESCRIPTION OF CAPITAL STRUCTURE 

5.1 Authorized Capital 

The classes and maximum number of shares that the Company is authorized to issue are: 

(i) an unlimited number of preference shares, issuable in series (the “Preference Shares”); 

(ii) an unlimited number of Class A subordinate, voting shares, no par value (“Class A 

Shares”); and 

(iii) 9,000,000 Class B Common Shares, no par value (“Class B Shares”). 

There are no Preference Shares currently issued and outstanding. As of March 29, 2012, there 

were 5,864,399 Class A Shares and 7,376,607 Class B Shares issued and outstanding. 

5.2 Dividends 

The holders of Class A Shares and Class B Shares are entitled to receive dividends and the 

Company shall pay dividends, as and when declared by the Board of Directors. All dividends 

declared on both the Class A Shares and Class B Shares shall be paid in equal amounts per share 

and at the same time. The Preference Shares are entitled to priority over the Class A Shares and 

Class B Shares and over any other shares of any other class of the Company ranking junior to the 

Preference Shares with respect to priority in the payment of dividends and the return of capital 

and the distribution of assets in the event of the liquidation, dissolution or winding-up of the 

Company, whether voluntary or involuntary, or any other distribution of the assets of the 

Company among our shareholders for the purpose of winding up its affairs. 

5.3 Dissolution 

In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or 

involuntary, or any other distribution of assets of the Company among our shareholders for the 

purpose of winding up its affairs, subject to the prior rights of the holders of any shares ranking 

senior to the Class A Shares and Class B Shares with respect to priority in the distribution of 

assets upon liquidation, dissolution or winding-up, the holders of the Class A Shares and Class B 

Shares then outstanding shall be entitled to receive the remaining property and assets of the 

Company in equal amounts per share and at the same time. 



5.4 Voting Rights 

The holders of the Class A Shares are entitled to receive notice of and to attend all meetings of 

the shareholders of the Company and have one vote for each Class A Share held at all meetings 

of the shareholders of the Company, except for meetings at which only holders of another 

specified class or series of shares of the Company are entitled to vote separately as a class. The 

holders of the Class A Shares are entitled, voting separately as a class, to elect two directors at 

each annual meeting of the shareholders of the Company. 

The holders of the Class B Shares are entitled to receive notice of and to attend all meetings of 

the shareholders of the Company and have five votes for each Class B Share held at all meetings 

of the shareholders of the Company, except for meetings at which only holders of another 

specified class or series of shares of the Company are entitled to vote separately as a class or 

series. 

13.7% of the aggregate voting rights (Class A Shares and Class B Shares together) are 

represented by Class A Shares as of March 29, 2012. 

Any holders of Preference Shares as a class shall not be entitled to receive notice of, to attend or 

to vote at any meeting of the shareholders of the Company. 

5.5 Conversion Rights 

The Class B Shares may be converted at any time by the holder or holders into fully-paid Class 

A Shares on the basis of one Class A Share for each Class B Share converted, provided, that in 

the event of liquidation, dissolution or winding-up of the Company, such right of conversion 

shall cease and expire on the date of such liquidation, dissolution or winding-up. 

5.6 Takeover Bid Protection 

The Company and all of the holders of Class B Shares entered into an agreement on November 

1, 1994 (as amended by agreement dated January 1, 1996, the “Coattail Agreement”) with a 

trustee in order to provide the holders of Class A Shares with specified rights in the event that a 

takeover bid (as defined under Ontario securities law) having certain characteristics is made for 

the Class B Shares. A takeover bid is generally defined under Ontario securities laws as an offer 

to acquire outstanding equity or voting shares by an offeror who, after the bid, would own more 

than 20% of the shares of the class which is the subject of the bid. Under securities law 

applicable in Canada, and apart from the Coattail Agreement, an offer to purchase Class B 

Shares would not necessarily require that an offer be made to purchase Class A Shares. 

6. DIVIDEND POLICY 

The declaration and payment of dividends is at the sole discretion of the Board of Directors and 

is subject to, among other things, current financial, economic, and operating conditions and other 



relevant circumstances, including future expected earnings, cash flow, capital requirements and 

the financial condition of the Company. When the Board of Directors determines that a dividend 

should be declared, the Company’s policy is to target our annual dividend to approximately 10% 

of the previous year’s net earnings. 

Other than restrictions which may be imposed by the Company’s credit facility based on loanrelated 

covenants, there are no contractual restrictions on the Company that would prevent it 

from paying a dividend. 

In light of the difficult automotive market conditions that the Company faced in 2008, the 

Company’s Board of Directors decided to suspend the payment of dividends on February 26, 

2008. 

7. MARKET FOR SECURITIES 

7.1 Trading Price and Volume 

The Class A Shares are listed and posted for trading on the TSX under the trading symbol 

WCS.A. The Class B Shares are not listed on a stock exchange. 

The following table sets forth the reported high and low prices and trading volumes of the Class 

A Shares on the TSX for the periods indicated. 

Common Shares (WCS.A) 

Month High ($) Low ($) Total Volume Traded 

2011/December 6.91 6.05 103,306 

2011/November 8.90 6.75 65,172 

2011/October 9.40 8.00 76,136 

2011/September 12.20 7.60 453,282 

2011/August 10.92 8.80 99,502 

2011/July 11.92 9.30 270,285 

2011/June 9.44 8.40 160,652 

2011/May 8.93 8.45 119,989 

2011/April 8.82 8.17 200,613 

2011/March 8.61 5.70 205,638 

2011/February 6.50 5.71 87,618 

2011/January 6.99 5.99 70,564 



8. DIRECTORS AND OFFICERS 

8.1 Directors 

The following table sets out the directors of Wescast as at March 29, 2012 and, for each director, 

his or her province or state and country of residence, principal occupation during the 5 preceding 

years and the period each director has served as a director. Each director will hold office until 

the next annual meeting of shareholders of the Company or until his or her respective successor 

is elected or appointed in accordance with applicable law and the Company’s by-laws. 

Name and Province/State 

and Country of Residence 

Edward G. Frackowiak (4) 

Ontario, Canada 

William R. LeVan 


(2) (3) 

J. Dwane Baumgardner 

(1)(3)(6)(10) 

Michigan, United States 

Hugh W. Sloan Jr. 

Michigan, United States 

James R. Barton 


(1) (2)(3) (7) (10) 

(1) (2)(3)(9)(10) 

Gerald A. Hooper (1)(3)(5)(10) 


Director 

Since Position 

1992 Chairman and 

Chief Executive 

Officer and 

Director 

Principal Occupation During the Five 

Preceding Years 

Chairman & CEO of the Company since 2004. 

Executive Chairman of the Company from 

2003 to 2004. Prior to that, Mr. Frackowiak 

was Vice President and General 

Counsel/Canada of First American Title 

Insurance Company (title insurance company). 

1991 Director Mr. LeVan is currently President of LightBoss 

Inc. (a manufacturer of energy reduction 

solutions for industrial and commercial 

lighting). Prior to that, he was Vice President, 

Technology of the Company until January 13, 

2004. 

1998 Director Retired Vice Chairman and President, Magna 

Donnelly Corporation (automotive parts 

supplier). Prior to that, Mr. Baumgardner was 

Chairman and CEO of Donnelly Corporation 

for approximately 20 years. 

1998 Director Chairman of the Board of Spartan Motors Inc. 

(a specialty vehicle & chassis manufacturer). 

Formerly, Deputy Chairman of the Board of 

Directors of Woodbridge Foam Corporation 

(automotive parts supplier) since 1998. Prior to 

that, Mr. Sloan was President of the 

Woodbridge Automotive Group (automotive 

parts supplier). 

2004 Lead 

Independent 

Director 

Retired Chief Operating Officer, DuPont 

Canada Inc. (a diversified science company 

serving the agricultural, electronic, 

communications, safety and protection 

markets). 

2006 Director Chairman of The Economical Insurance Group 

(a property and casualty insurance company). 




and Country of Residence 

Richard E. Legate (8) 


(1) Member of the Audit Committee. 

Director 

Since Position 

2008 Chief Operating 

Officer and 

Director 

(2) Member of the Nominating and Corporate Governance Committee. 

(3) Member of the Human Resources Committee. 

Principal Occupation During the Five 

Preceding Years 

From 2003 to 2005, Mr. Hooper was Executive 

Vice President of Maple Leaf Foods (a global 

food processing company) and prior to 2003, 

Executive Vice President and Chief Financial 

Officer of Schneider Corporation. 

Chief Operating Officer of the Company since 

January 2008. Prior to that, Mr. Legate was 

Vice President Automotive Products at Dofasco 

Tubular Product Inc., (2006-2008). From 2001 

to 2005 he was President and CEO of Tiercon 

Holdings Limited (an automotive parts 

supplier). A receiver manager was appointed to 

Tiercon Holdings Limited on or about April 15, 

2005 and Mr. Legate resigned on April 16, 

2005. 

(4) Other than the Special Committee, Mr. Frackowiak attends all committee meetings at the invitation of each 

committee. 

(5) Mr. Hooper is Chair of the Audit Committee. 

(6) Mr. Baumgardner is Chair of the Human Resources Committee. 

(7) Mr. Sloan is Chair of the Nominating and Corporate Governance Committee. 

(8) Mr. Legate attends the Audit Committee and Human Resources Committee at the invitation of each 

Committee. 

(9) Mr. Barton is Chair of the Special Committee. 

(10) Member of the Special Committee. 



8.2 Officers 

The executive officers of Wescast as at March 29, 2012 were as follows: 


and Country of Residence Position 

Edward G. Frackowiak 


Richard E. Legate 


Teresa H. Fortney 


James W. McNaughton 


Alan V. Blignaut 


Principal Occupation During the 

Five Preceding Years 

Chairman and Chief Executive Officer Chairman and CEO of the Company 

since May 2004. Executive Chairman 

of the Company from May 2003 to 

May 2004. Prior to that, Mr. 

Frackowiak was Vice President and 

General Counsel/Canada of First 

American Title Insurance Company 

(title insurance company). 

Chief Operating Officer Chief Operating Officer of the 

Company since January 2008. Prior to 

that, Mr. Legate was Vice President 

Automotive Products at Dofasco 

Tubular Product Inc., (2006-2008). 

From 2001 to 2005 he was President 

and CEO of Tiercon Holdings Limited 

(automotive parts supplier). 

Chief Financial Officer Chief Financial Officer of the 

Company since July 2010. Prior to 

that, Ms. Fortney was Vice President 

of Finance and CFO at McCormick 

Canada, (2009-2010). Prior to that she 

was Senior Vice President, Finance – 

Consumer Foods with Maple Leaf 

Foods. 

Vice President, Sales & Innovation Vice President, Sales & Innovation 

since October 2008. Vice President, 

Strategic Development of the 

Company from October 2005 to 

October 2008. Prior to that Mr. 

McNaughton was Director of 

Corporate Development of the 

Company. 

Vice President, Human Resources Vice President, Human Resources of 

the Company since July 2006. Prior to 

that Mr. Blignaut held Director, 

Human Resource positions with Maple 

Leaf Foods (2006) and Apotex Inc. 

(2003 -2005). From 1998 until 2003 

he held Senior Human Resource roles 

with Cognis Gmbh. 




and Country of Residence Position 

Thomas K. Shea 


Principal Occupation During the 

Five Preceding Years 

Director of Corporate Finance Director of Corporate Finance of the 

Company since 2005. 

The number and percentage of securities of each class of voting securities of the Company 

beneficially owned, directly or indirectly, or over which control or direction was exercised, by all 

directors and officers of the Company as a group, was 46,738 shares or 0.8% of the Class A 

Shares as at March 29, 2012. 

9. LEGAL PROCEEDINGS 

Management is not aware of any current or contemplated material legal proceedings to which the 

Company is a party or which any of our property is the subject which requires disclosure herein. 

10. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS 

In 2011, the Company paid freight for delivery of our products within North America of $2.3 

million to a related company, Wingex Limited, 30% of whose shares are owned by RyVan Inc., a 

holding company 25% of whose shares are beneficially owned by certain members of the LeVan 

family (including Mr. William R. LeVan, a director of the Corporation). Mr. Edward G. 

Frackowiak, the Chairman and Chief Executive Officer of the Company is also married to one of 

the LeVan children who owns 25% of the shares of RyVan Inc. through a personal holding 

company. RyVan Inc.’s offices are located in Brantford, Ontario. These transactions were 

measured at the exchange amount which represents fair value. 

11. TRANSFER AGENT AND REGISTRAR 

The registrar and transfer agent for the Company’s Class A Shares is Computershare Investor 

Services Inc. The register of the Class A Shares is maintained at Computershare’s office in 

Toronto (100 University Avenue, 9 th Floor, Toronto, Ontario, M5J 2Y1). The Company acts as 

its own transfer agent and registrar for the Class B Shares. The register of the Class B Shares is 

maintained at the Company’s head office in Brantford, Ontario. The Class B Shares are not 

traded or quoted on any stock exchange. 

12. MATERIAL CONTRACTS 

The Company has not entered into any material contracts, other than contracts entered into in the 

ordinary course of business, on or after January 1, 2012 or that before January 1, 2012 remains in 

effect, other than the agreements related to the Coattail agreement dated November 1, 1994 and 

the amendment of the agreement dated January 1, 1996, both of which have been filed on the 

Company’s public record at www.sedar.com. 



13. NAMES AND INTERESTS OF EXPERTS 

The Company’s auditors are Deloitte & Touche LLP, 1005 Skyview Drive, Suite 202, 

Burlington, Ontario, L7P 5B1. The Company’s consolidated financial statements as at January 

1, 2012 have been filed under National Instrument 51-102-Continuous Disclosure Obligations in 

reliance on the report of Deloitte & Touche LLP, which is independent in accordance with its 

rules of professional conduct in Ontario. 

14. CODE OF CONDUCT 

The Company has established a Code of Conduct applicable to all employees, officers and 

directors which has been filed on the Company’s public record at www.sedar.com. The Code of 

Business Conduct is available without charge by contacting the Company at 150 Savannah Oaks 

Drive, Brantford, Ontario, N3T 5L8, or by email to corp.secretary@wescast.com. 

15. ADDITIONAL INFORMATION 

Additional information about Wescast is available on the Company’s web site at 

www.wescast.com, and on SEDAR (System for Electronic Document Analysis and Retrieval) at 

www.sedar.com. 

Additional information with respect to Wescast, including directors’ and officers’ remuneration 

and indebtedness, principal holders of Wescast’s securities and securities authorized for issuance 

under equity compensation plans, where applicable, is contained in Wescast’s management 

information circular for its most recent annual meeting of shareholders that involved the election 

of directors. 

Additional financial information is provided in the Company’s comparative audited consolidated 

financial statements and MD&A in the 2011 Annual Report of Wescast for Fiscal 2011. 

Copies of the AIF, as well as copies of the most recent annual report of Wescast and the most 

recent management information circular may be obtained from: 

Wescast Industries Inc. 

150 Savannah Oaks Drive 

Brantford Ontario Canada N3T 5L8 

Telephone: 519-750-0000 

Fax: 519-720-1629 

Email: corp.secretary@wescast.com 



Additional Information Prescribed by Form 52-110F1 

1. Audit Committee Charter 

See Appendix “A” attached hereto 

2. Composition of the Audit Committee 

During Fiscal 2011, the Audit Committee of the Company was composed of the following four 

members: Gerald A. Hooper, Hugh W. Sloan, Jr., J. Dwane Baumgardner, and James R. Barton. 

The responsibilities and duties of the Committee are set out in the Committee’s charter, the text 

of which is set forth in Appendix A to this AIF. 

3. Financial Literacy 

The Board of Directors believes that the composition of the Audit Committee reflects an 

appropriate level of financial literacy and expertise. Each member of the Audit Committee has 

been determined by the Board to be “independent” and “financially literate” as such terms are 

defined under National Instrument 52-110 - Audit Committees. 

Mr. Hooper has over 30 years of financial experience. He is a Chartered Accountant and 

member of the Institute of Chartered Accountants of Ontario and was a partner with KPMG 

LLP’s predecessor, Thorne Riddell. He was a financial executive for many years, and recently 

retired as Executive Vice President, Maple Leaf Foods. Mr. Hooper is also a past lecturer in 

advanced accounting at Wilfrid Laurier University. 

Mr. Sloan joined the Woodbridge Group of companies in 1985 and retired as Deputy Chairman 

of the Board of Directors of Woodbridge Foam Corporation. He is also a director of Manulife 

Financial Corporation. Mr. Sloan is also a director of Spartan Motors Inc. 

Mr. Baumgardner served as President & Chief Operating Officer of Donnelly Corporation in 

1980 and was named Chairman of the Board and Chief Executive Officer in 1986. Magna 

Corporation acquired Donnelly Corporation in 2002. Mr. Baumgardner retired as Vice 

Chairman and President, Magna Donnelly in October 2003. 

Mr. Barton joined DuPont Canada Inc. in 1970 and retired in 2004 as Chief Operating Officer 

with accountability for the performance of the company in all aspects including the preparation 

and evaluation of financial statements. He was also a member of DuPont’s corporate pension 

management team. 

4. Audit Committee – Pre-Approval Policies and Procedures 

The Company’s Audit Committee is responsible for overseeing the work of the independent 

auditors and considering whether the provision of services, other than audit services, is 

compatible with maintaining the auditors’ independence. The Company has adopted a policy 



regarding the Audit Committee’s pre-approval of all audit and permissible non-audit services 

provided by the independent auditors. The Audit Committee determines, at least once a year, 

which audit services, audit-related services, tax services and other permissible non-audit services 

to pre-approve and creates a list of such pre-approved services, some with pre-approved fee 

thresholds. 

At each regularly scheduled Audit Committee meeting, senior management provides the Audit 

Committee with the following: 

A report summarizing the services, or grouping of related services, 

including fees, provided by the independent auditor; and 

An updated projection for the current fiscal year, presented in a manner 

consistent with the proxy disclosure requirements, of the estimated annual 

fees to be paid to the independent auditor. 

All fees paid to Wescast’s external auditors in Fiscal 2011 were approved by Wescast’s Audit 

Committee. 

5. Auditors’ Service Fees 

Deloitte & Touche LLP has been the Company’s auditor since February 26, 2003. The 

approximate fees billed for professional services rendered by Deloitte & Touche LLP, Wescast’s 

principal auditor for Fiscal 2011 and Fiscal 2010, are set out below: 

Audit Fees (1) 

Audit Related Fees (2) 

Tax Fees (3) 

Fees billed by Deloitte & 

Touche LLP in Fiscal 2011 ($) 

Fees billed by Deloitte & 

Touche LLP in Fiscal 2010 ($) 

365,229 370,781 

108,122 83,000 

272,427 313,593 

All Other Fees (4) 217,315 1,060 

Total 963,093 768,434 

(1) For the audit of Wescast’s annual financial statements and services normally provided by the principal auditor in 

connection with Wescast’s statutory and regulatory filings. 

(2) For assurance and related services that are reasonably related to the performance of the audit and are not reported 

under Audit Fees, including services in connection with IFRS audit procedures, internal controls extended audit 

services, accounting and various agreed upon procedures. 

(3) For tax compliance and advice, planning and return preparation and for services related to the submission and 

receipt of investment tax credits earned from Scientific Research and Experimental Development (SR&ED) 

qualifying expenditures. These fees include administration charges and out-of-pocket costs. 

(4) All Other Fees includes fees related to the Board’s review of strategic alternatives. 


Appendix A 

AUDIT COMMITTEE CHARTER 

By appropriate resolution of the Board of Directors of Wescast Industries Inc. (the 

“Board”), the Audit Committee (the “Committee”) has been established as a standing 

committee of the Board with the terms of reference set forth below. Unless the context 

requires otherwise, the term “Company” refers to Wescast Industries Inc. and its 

subsidiaries and the term “internal auditor” refers to the Director of Audit Services of the 

Company. 

1. PURPOSE 

1.1 The Committee’s purpose is to: 

(a) assist Board oversight of: 

(i) the integrity of the Company’s financial statements, Management’s 

Discussion and Analysis of Operating Performance (“MD&A”) 

and other financial reporting; 

(ii) the Company’s compliance with legal and regulatory requirements; 

(iii) the external auditor’s qualifications, independence and 

performance; 

(iv) the performance of the Company’s internal audit function and 

internal auditor; 

(v) the communication among the external auditor, the internal 

auditor, management and the Board; 

(vi) the review and approval of any related party transactions; and 

(vii) any other matters as defined by the Board; and 

(b) prepare and/or approve any report that is required by law or regulation to 

be included in any of the Company’s public disclosure documents relating 

to the Committee. 

2. COMMITTEE MEMBERSHIP 

2.1 Number of Members – The Committee shall consist of not fewer than three 

members. 

2.2 Independence of Members – Each member of the Committee shall: 

(a) be a member of the Board; 

(b) not be an officer or employee of the Company or any of its affiliates; 


(c) satisfy the independence requirements applicable to members of audit 

committees under Multilateral Instrument 52-110 – Audit Committees of 

the Canadian Securities Administrators (“MI 52-110”), and other 

applicable laws and regulations; and 

(d) not have participated in the preparation of the financial statements of the 

Company or any current subsidiary at any time during the past three years. 

2.3 Financial Literacy – Each member of the Committee shall satisfy the financial 

literacy requirements or definitions applicable to members of audit committees under MI 

52-110 and other applicable laws and regulations. 

2.4 Annual Appointment of Members - The Committee and its Chair shall be 

appointed annually by the Board and each member of the Committee shall serve at the 

pleasure of the Board until he or she resigns, is removed or ceases to be a Director of the 

Company. 

3. COMMITTEE MEETINGS 

3.1 Time and Place of Meetings - The time and place of the meetings of the 

Committee and the calling of meetings and the procedure in all things at such meetings 

shall be determined by the Committee; provided, however, that the Committee shall meet 

at least quarterly, a majority of the members of the Committee shall constitute a quorum, 

and the Committee shall maintain minutes or other records of its meetings and activities. 

3.2 In Camera Meetings - As part of each quarterly meeting of the Committee, and at 

such other times as the Committee deems appropriate, the Committee shall meet 

separately with each of the persons set forth below to discuss and review specific issues 

as appropriate: 

(a) management; 

(b) the external auditor; and 

(c) the internal auditor. 

4. COMMITTEE AUTHORITY AND RESOURCES 

4.1 Direct Channels of Communication - The Committee shall have direct channels of 

communication with the Company’s internal and external auditors to discuss and review 

specific issues as appropriate. 

4.2 Retaining and Compensating Advisors – The Committee, or any member of the 

Committee with the approval of the Committee, may retain at the expense of the 

Company such independent legal, accounting (other than the external auditor) or other 

advisors on such terms as the Committee may consider appropriate and shall not be 

required to obtain the approval of the Board in order to retain or compensate any such 

advisors. 


4.3 Funding – The Company shall provide for appropriate funding, as determined by 

the Committee, for payment of compensation of the external auditor and any advisor 

retained by the Committee under Section 4.2 of this Charter and for ordinary 

administrative expenses of the Committee that are necessary or appropriate in carrying 

out its duties. 

4.4 Investigations – The Committee shall have unrestricted access to Company 

personnel and documents and shall be provided with the resources necessary to carry out 

its responsibilities. 

5. REMUNERATION OF COMMITTEE MEMBERS 

5.1 Director Fees Only - No member of the Committee may accept, directly or 

indirectly, fees from the Company or any of its subsidiaries other than remuneration for 

acting as a member of the Committee, the Board, any other committee of the Board or a 

part-time chair or vice-chair of the Board or any committee of the Board. 

5.2 Other Payments - For greater certainty, no member of the Committee shall accept 

any consulting, advisory or other compensatory fee from the Company (other than the 

receipt of fixed amounts of compensation under a retirement plan (including deferred 

compensation for prior service within the Company if the compensation is not contingent 

in any way on continued service). For purposes of Section 5.1, the indirect acceptance by 

a member of the Committee of any fee includes acceptance of a fee by an individual’s 

spouse, minor child or stepchild, or child or stepchild who shares the individual’s home, 

or if the member is a partner of, member of, an officer such as a managing director 

occupying a comparable position or executive officer of, or a person who occupies a 

similar position with, an entity that provides accounting, consulting, legal, investment 

banking or financial advisory services to the Company or any of its subsidiaries, other 

than limited partners, non-managing members and those occupying similar positions 

who, in each case, have no active role in providing services to the entity. 

6. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE 

6.1 Overview - The Committee’s principal responsibility is one of oversight. The 

Company’s management is responsible for preparing the Company’s financial statements 

and the external auditor is responsible for auditing those financial statements. 

The Committee’s specific duties and responsibilities are as follows: 

(a) Financial and Related Information - 

(i) Annual Financial Statements - The Committee shall review and 

discuss with management and the external auditor the Company’s 

annual financial statements, related MD&A and related earnings 

press release and report thereon to the Board before the Board 

approves such statements and MD&A; 

(ii) Interim Financial Statements – The Committee shall review and 

discuss with management and the external auditor the Company’s 


interim financial statements, related MD&A and related earnings 

press release and report thereon to the Board before the Board 

approves such statements and MD&A; 

(iii) Forward Oriented Information and other Documents - The 

Committee shall review and discuss with management and the 

external auditor forward oriented information and other documents 

prior to its public release or filing and, if requested by the Board, 

report thereon to the Board; 

(iv) Prospectuses – The Committee shall review and discuss with 

management and the external auditor any prospectus and report 

thereon to the Board before the Board approves any such 

prospectus; 

(v) Accounting Treatment - The Committee shall review the selection 

of accounting policies and assess managements’ determination of 

significant judgments and estimates. 

(vi) Disclosure of Other Financial Information – The Committee shall 

satisfy itself that adequate procedures are in place for the review of 

the Company’s disclosure of financial information extracted or 

derived from the Company’s financial statements, other than the 

Company’s financial statements, MD&A and earnings press 

releases, and shall periodically assess the adequacy of those 

procedures. 

(vii) Risk and Internal Control – The Committee shall assess 

managements’ programs and procedures for identifying and 

managing corporate risk, including control practices. 

(b) External Auditor - 

(i) Authority with Respect to External Auditor - As representative of 

the Company’s shareholders and as a committee of the Board, the 

Committee shall be directly responsible for the appointment, 

compensation, retention, termination and oversight of the work of 

the external auditor (including, without limitation, resolution of 

disagreements between management and the auditor regarding 

financial reporting) for the purpose of preparing or issuing an audit 

report or performing other audit, review or attest services for the 

Company. In this capacity, the Committee shall have sole 

authority for recommending to the Board the person to be proposed 

to the Company’s shareholders for appointment as external auditor, 

whether at any time the incumbent external auditor should be 

removed from office, and the compensation of the external auditor. 

The Committee shall require the external auditor to confirm in an 

engagement letter to the Committee each year that the external 

auditor is accountable to the Board and the Committee as 


epresentatives of shareholders and that it will report directly to the 

Committee. 

(ii) Approval of Audit Plan - The Committee shall approve, prior to 

the external auditor’s audit, the external auditor’s audit plan 

(including, without limitation, staffing), the scope of the external 

auditor’s review and all related fees. 

(iii) Independence - The Committee shall satisfy itself as to the 

independence of the external auditor. As part of this process: 

(A) The Committee shall require the external auditor to submit 

on a periodic basis to the Committee a formal written 

statement confirming its independence under applicable 

laws and regulations and delineating all relationships 

between the auditor and the Company. 

(B) In accordance with applicable laws and good practice, the 

Committee will have a Policy respecting non-audit services 

provided by the External Auditor (Schedule A). 

(C) The Committee shall establish a policy setting out the 

restrictions on the Company hiring employees and former 

employees of the Company’s external auditor or former 

external auditor. 

(iv) Regulatory Matters - The Committee shall discuss with the 

external auditor the matters required to be discussed by Statement 

on Auditing Standards No. 61 and Section 5741 of the CICA 

Handbook – Assurance relating to the conduct of the audit. 

(c) Internal Audit Function - Controls – 

(i) Regular Reporting - The internal auditor shall report quarterly to 

the Committee. 

(ii) Oversight of Internal Controls - The Committee shall oversee 

management’s design and implementation of and reporting on the 

Company’s internal controls and review the adequacy and 

effectiveness of management’s financial information systems and 

internal controls. The Committee shall annually review and 

approve the mandate, plan, budget and staffing of the internal audit 

department. The Committee shall direct management to make any 

changes it deems advisable in respect of the internal audit function. 

(iii) Review of Audit Problems - The Committee shall review with the 

internal auditor: any problem or difficulties the internal auditor 

may have encountered; and any significant reports to management 


prepared by the internal auditing department and management’s 

responses thereto. 

(iv) Review of Internal Auditor - The Committee shall review the 

appointment, performance and replacement of the senior internal 

auditing executives and the activities, organization structure and 

qualifications of the persons responsible for the internal audit 

function. 

(d) Whistle Blowing - The Committee shall establish procedures for: 

(i) the receipt, retention and treatment of complaints received by the 

Company regarding accounting, internal accounting controls or 

auditing matters; and 

(ii) the confidential, anonymous submission by employees of the 

Company of concerns regarding questionable accounting or 

auditing matters. 

(e) Related Party Transactions – The Committee shall review and approve any 

transaction between the Company and a related party and any transaction 

involving the Company and another party in which the parties’ 

relationship could enable the negotiation of terms on other than an 

independent, arms’ length basis. 

(f) Liaison – The Committee shall review and ensure that appropriate liaison 

and co-operation exist between the external auditor and the internal 

auditor and provide a direct channel of communication between the 

external and internal auditors and the Committee. 

(g) Public Reports - The Committee shall prepare and/or approve any report 

that is required by law or regulation to be included in any of the 

Company’s public disclosure documents relating to the Committee. 

(h) Other Matters – The Committee may, in addition to the foregoing, perform 

such other functions as may be necessary or appropriate for the 

performance of its oversight function. 

7. EVALUATION OF CHARTER 

7.1 Amendments to Charter – 

(a) Review by Audit Committee - On at least an annual basis, the Committee 

shall review and discuss the adequacy of this Charter and recommend any 

proposed changes to the Nominating & Corporate Governance Committee. 

(b) Review by Board – The Board will review and reassess the adequacy and 

any changes to the Charter on an annual basis and at such other times as it 

considers appropriate. 


8. LEGISLATIVE AND REGULATORY REQUIREMENTS 

8.1 Compliance – It is the Board’s intention that this mandate shall reflect all 

legislative and regulatory requirements applicable to the Committee. 

9. CURRENCY OF CHARTER 

9.1 Currency of Charter 

This charter was last reviewed by the Audit Committee and Board of Directors in 2011.

wescast industries inc. - Canadian Stocks

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