Financial Overview

(in million dollars)

	FY2008	FY2007	Rate of change (%)	Factors
Overall
Sales	6,866	6,914	(0.7)
Net Income	(467.9)	1,412.3	-
Powertrain Energy(PTE)
Sales	2,085	2,054	1.5	-PTE generates over 80% of its revenue outside the United States and, as a result, the weakening of the U.S. dollar, primarily against the euro, increased reported sales by $81 million. -Sales volumes decreased by $48 million due to OE production volume decreases in Europe and North America. -The November 2007 acquisition of a controlling interest in a joint venture in China contributed additional sales of $20 million. -Continued customer pricing pressure reduced sales by $22 million.
Powertain Sealing and Bearings(PTSB)
Sales	1,043	1,054	(1.1)	-Approximately 65% of PTSB's revenues are generated outside the United States and the resulting foreign currency movements increased sales by $35 million. -Reduced light vehicle OE production in North America and Europe outweighed increases in market share and OE production volume in Asia, resulting in a net volume decline of $80 million. -Customer prices were increased by a net $27 million. -The March 2008 acquisition of FMBIL increased sales by $12 million.
Vehicle Safety and Protection (VSP)
Sales	717	793	(9.6)	-Approximately 80% of VSP's sales are generated outside the United States where foreign currency movements, primarily the weakening of the U.S. dollar against the euro, increased sales by $32 million. -Sales volumes fell by $104 million as significant market share gains in Asia were more than offset by the decline in light vehicle and OE production in North America and Europe. -Customer price reductions were $4 million.
Automotive Products
Sales	379	334	13.5	-The Automotive Products group generates about 55% of its revenue outside the United States and the corresponding impact of exchange movements increased sales by $12 million. -New business in all regions, including the North American market, accounted for increased sales of $32 million.
Global Aftermarket
Sales	2,637	2,679	(1.6%)	-This decrease was due to sales volume decreases of $119 million, partially offset by favorable foreign currency of $37 million and customer price increases of $40 million.

Contracts
-The Company is supplying components or systems for nine of Ward's "10 Best Engines" for 2008 model year vehicles. The Company provides a wide range of power-cylinder, sealing and heat insulation components for the award-winning engines, including pistons, rings, liners, bearings, bushings, valve seats, valve guides, cylinder head gaskets, intake and exhaust manifold gaskets, oil pan gaskets and engine wiring heat insulators.The engines that feature Federal-Mogul products are:

-Audi: FSI 2.0L Turbocharged DOHC I-4
-BMW: 3.0L Turbocharged DOHC I-6
-Daimler: 3.0L DOHC V-6 Turbodiesel
-Ford: 4.6L SOHC V-8
-GM: 3.6L DOHC V-6
-GM: 6.0L OHV V-8 Hybrid
-Honda: 3.5L SOHC V-6
-Mazda: DISI 2.3L Turbocharged DOHC I-4
-Nissan: 3.7L DOHC "VQ" V-6
(From a press release on Jan. 16, 2008)


Restructuring
-The Company announced, in September 2008 and December 2008, restructuring actions, called "Restructuring 2009"

-This plan, when combined with other workforce adjustments, is expected to reduce the Company's global workforce by approximately 8,600 positions.

-During 2008, the Company has recorded $127 million in restructuring charges associated with Restructuring 2009, and expects to incur additional restructuring charges up to $37 million through 2010.


Overseas Development
-In Oct. 2008, Federal-Mogul System Protection and Federal-Mogul KK, two of Japanese arms of the Company, announced that they will merge into one new company, Federal-Mogul Japan as of December 1, 2008. in order to improve their operational efficiency and business establishment in Japan. (From an article in the Nikkan Jidosha Shimbun on Oct. 16, 2008)

R&D Expenditure

(in million dollars)

	FY2008	FY2007	FY2006
Total	173	178	162

R&D Structure
The Company's research and development activities are conducted at the following locastions:.
-Within the United States, these centers are located in Plymouth, Michigan; Skokie, Illinois; Ann Arbor, Michigan; Exton, Pennsylvania; and Toledo, Ohio.

-Internationally, the Company's research and development centers are located in Burscheid, Germany; Nuremberg, Germany; Wiesbaden, Germany; Bad Camberg, Germany; Chapel, United Kingdom; Crepy, France; and Yokohama, Japan.

-The newest technical center in Shanghai, China is expected to open during the second quarter of 2009.

Capital Expenditures

(in million dollars)

	FY2008	FY2007	FY2006
Powertrain Energy	131	147	88
Powertrain Sealing and Bearings	69	65	51
Vehicle Safety and Protection	40	45	39
Automotive Products	41	23	25
Global Aftermarket	4	6	7
Corporate	35	24	27
Total	320	310	237

Investment outside USA
<Brazil>
-In Jul. 2008, the Company announced that it started production at its new Powertrain Energy business segment facility in Araras, Brazil. The 10,300-square-meter facility produces pistons, camshafts, and valve seats and guides. The facility was built to accommodate a high-tech piston line and relocation of the operations from a former facility in Araras. A second piston line is expected to be in operation by the end of 2008. (From a press release on Jul 7, 2008)

<India>
-In Aug. 2008, the Company announced it is planning to build a new facility in Chennai, India, for the manufacture of friction components for Original Equipment and Aftermarket segments. The operation is scheduled to begin production of light vehicle brake and friction components, commercial vehicle friction products by September 2009. The Company currently manufactures products at six operations in India. (From a press release on Aug 7, 2008)