Sanluis Business Report FY2006 (FY ended Dec. 2006)

Business Highlights

Financial overview

in million USD FY2006 FY2005 Rate of change (%) Factors
Sales 614.9 616.8 -0.3% -
Sales by business units
Suspension business 516.6 510.4 1.2% See note 1) below.
Brake business 98.3 106.4 -7.6% See note 2) below.

(1) Suspension business
<North America>
-The Company launched 10 platforms, which combined represent $142 million in annual sales. Additional contracts for supplying suspension components for six other platforms were also obtained, adding a total of $56.3 million in revenue, of which $13.6 million is new business.
-The rise in steel prices since the last quarter of 2003, which has affected a wide range of sectors, especially the auto industry, continued unabated throughout 2006.
-To reduce logistics costs, which translate into a direct benefit for its customers, the Company increased the volume of rail shipments from Piedras Negras, Coahuila. By year's end 2006, 56% of the volume out of this facility was shipped this way.
-At the Piedras Negras coil spring plant the Company developed 250 part numbers for 18 different platforms. Five of these began production in 2006 and accounted for more than one million pieces in additional sales.
-The coil spring plant in Montpelier, Ohio notably reduced scrap and downtime indexes, while at the same time generating a 39% increase in productivity once it began supplying two new customers: Tenneco Automotive and Martinrea.

-Its Rassini - NHK Autopecas (RNA) subsidiary reconfirmed its leadership in supplying suspension components for the Brazilian heavy and light truck markets.
-While the heavy truck market, which represents 80% of revenue, registered a 10% drop with respect to 2005, the Company's objectives were reached thanks to a strategy to increase sales volumes in both exports and aftermarket, combined with its internal efforts to reduce costs and reach agreements with both steel and component suppliers.
-RNA ratified its goal to produce hi-tech suspension components by exporting 10% of production to Germany and the United States. It additionally initiated the modernization process of its coil spring plant with the technical support of its partner NHK. This will enable the Company to start producing coil springs by 2007 with the latest technology.
-The Company made its first sale of brackets, or "U-bolts", which are produced through a technical assistance agreement with the American firm CMP. With this launch it strengthened its line of complementary products.

(2) Brake business

-During 2006, sales for the Brakes business were $98.3 million, reflecting a 7.6% decline compared to the previous year. This downturn is primarily attributable to the end of the lifecycle for a General Motors light truck platform and slow SUV sales for Ford, GM and DaimlerChrysler.
-The Company launched six platforms for General Motors, DaimlerChrysler, Renault, BMW and Ford, and began machining hub assemblies for a new customer, ConMet. It obtained new platforms from the Big Three that the Company will begin supplying between 2007 and 2008. Together with Brembo, its technological partner, the Company was awarded with another platform for BMW. And it developed an in-house process for the machining of hubs for heavy trucks, classes 7 and 8.
-The Company also expanded its casting business with new products, launching 20 part numbers, specifically clutch housings, flywheels and clutch pressure plates for Eaton, Sachs and Luk, to be used by heavy vehicle customers such as Ford, Volvo and Freightliner.
-Costs for raw materials, scrap and ferroalloys in 2006 continued on the rise, with average increases of 7.1%. Energy prices, especially electricity and natural gas, were the hardest hitting throughout the year, affecting its business with increases of 14.1% and 3.9%, respectively.


R&D Structure
-Working closely with its Product Development laboratories in Mexico and Brazil , the Plymouth Office provides directional leadership for new technologies and technical initiatives.

Product Developments
In 2006, the Company continued strengthening its R&D activities through the formation of a technical team dedicated to the launch of the SDI projects. This project, the objective of which is to improve rear suspension performance, complete its first phrase. In this same vein the Company presented all of its 2005-2006 leaf spring and coil spring process innovations to Mexico's National Science and Technology Council (CONACYT), obtaining their recognition.

Investment Activities

New investments in 2006 for optimizing and expanding its plants 14 million dollars, or a 68% increase over 2005.