Federal Mogul Business report FY2007

Business Highlights

Financial overview
in million
FY2007 FY2006 Rate of
Sales 6,913.9 6,326.4 +9.3% (1), (2)
Net Income 1,412.3 (549.6) -  

Sales Results
(1) Consolidated net sales increased by $588 million, or 9.3%, to $6,914 million for the year ended December 31, 2007. Approximately 60% of the Company’s 2007 sales originated outside the United States; therefore the weakening of the U.S. dollar, primarily against the euro, resulted in increased reported sales from non-U.S. operations of $275 million, representing 4.3% of sales growth. The remainder of the increase of $313 million, representing 5% annual growth, is due to a combination of gains in global market share across all segments and growth in global market demand, as follows:
-Increased share with global OEMs of $133 million due to new program launches.
-Increased market demand for existing applications and programs of $93 million due to increased global vehicle production. The impact of decreased North American production in both light vehicle and heavy duty markets was more than offset by increased production of light and commercial vehicles in EMEA and Asia.
-Increased share within the global independent aftermarket of $100 million due to increased penetration with new product offerings to existing customers and the broadening of the customer base.
-A decrease in the underlying global market demand for aftermarket parts of $16 million
(2)The impact of the May 2006 acquisition of a controlling interest in Federal-Mogul Goetze (“FMG”) of $49 million more than offsets the unfavorable impact of price reductions, net of commodity price escalators, of $42 million

In January 2007, the Company announced to supply components or systems for seven of Ward's "10 Best Engines" for 2007 model year vehicles. It has designed and manufactured parts for 32 of the 50 engines recognized as the "10 Best" by Ward's in the past five years.

Significant restructuring activities
- In January 2006, the Company announced a global restructuring plan (“Restructuring 2006”). It has incurred expenses of $119.9 million under this program associated with the closures of its facilities located in Alpignano, Italy; Upton, United Kingdom; Malden, Missouri; Pontoise, France; Rochdale, United Kingdom; Slough, United Kingdom; St. Johns, Michigan; St. Louis, Missouri; and Bretten, Germany. It also transferred production with high labor content from its facilities in Nuremberg, Germany; Wiesbaden, Germany; and Orleans, France to existing facilities in best cost countries. The finalization of this program is expected to be completed in late 2008, will affect approximately 3 additional facilities, and will reduce workforce by an additional 1%.

Closure, relocation and transfer of Facilities
North America engine bearing operations Transfer certain low volume production with high labor content to best cost geographies, specifically Mexico Restructuring activities and associated payments are expected to continue into 2006.
LaGrange (GA),
piston manufacturing facility Transfer to existing manufacturing facilities with available capacity or with lower manufacturing costs in the US and Mexico Restructuring activities and associated payments are expected to continue into 2006.
Alpiginano, Italy piston operations

Close and relocate the operations to other existing European facilities with available capacity

Restructuring activities and associated payments are expected to be completed in 2006.
South Africa
piston facility Close and relocate the facility to other facilities with available capacity The restructuring activity was completed during the fourth quarter of 2005.


Total expenditure for R&D

  FY2007 FY2006 FY2005
in million dollars 178 162 170

R&D Structure
The Company's research and development activities are conducted at the Company's major research centers in Burscheid, Germany; Nuremberg, Germany; Wiesbaden, Germany; Bad Camberg, Germany; Chapel, United Kingdom; Crepy, France; Plymouth, Michigan; Skokie, Illinois, Ann Arbor, Michigan; Exton, Pennsylvania; Toledo, Ohio and Yokohama, Japan.

Product Development
- In February 2007, ANCO introduced ANCO Contour, an innovative premium profile-type blade that delivers exceptional all-season performance on late-model passenger cars and light trucks. ANCO wiper blades are manufactured and marketed by Federal-Mogul Corporation. The ANCO Contour wiper blade features a next-generation one-piece design.
-In March 2007, Abex brake products announced the expansion of the Abex line of commercial-grade brake products for medium-duty vehicles to include more than 3,500 premium hard parts isuch as wheel cylinders, master cylinders, rotors, drums, remanufactured calipers, etc.

Investment Activities

Capital expenditures
$ in million FY2007 FY2006 FY2005
Powertrain Energy 147 88 67
Powertrain Sealing and Bearings 65 51 48
Vehicle Safety and Protection 45 39 40
Automotive Products 23 25 25
Global Aftermarket
6 7 7
Corporate 24 27 26
Total 310 237 213