Financial Overview

(in million dollars)

	FY2011	FY2010	Rate of change (%)	Factors
Sales	6,910	6,219	11.1	1)
EBITDA	702	671	4.6	-
Powertrain Energy
Sales	2,304	1,860	23.9	2)
Powertrain Sealing and Bearings
Sales	1,266	1,096	15.5	3)
Vehicle Safety and Protection
Sales	1,015	936	8.4	4)

Factors
1)
Overall
-Consolidated net sales increased by 691 million dollars, or 11%, to 6,910 million dollars for the year ended December 31, 2011 from 6,219 million dollars for the year ended December 31, 2010. Over 60% of the Company's sales originate outside the United States; therefore the impact of the U.S. dollar weakening in 2011, primarily against the euro, increased reported sales by 157 million dollars.

2)
Powertrain Energy (PTE)
-Sales increased by 444 million dollars, or 24%, to 2,304 million dollars for the year ended December 31, 2011 from 1,860 million dollars for the year ended December 31, 2010. Sales volumes increased by 344 million dollars due to OE production volume increases and market share gains in all regions. The acquisition of the Daros Group increased sales volume by 16 million dollars. PTE generates approximately 80% of its revenue outside the United States and the resulting currency movements increased sales by 60 million dollars. Customer pricing increased sales by 24 million dollars.

3)
Powertrain Sealing and Bearings (PTSB)
-Sales increased by 170 million dollars, or 16%, to 1,266 million dollars for the year ended December 31, 2011 from 1,096 million dollars for the year ended December 31, 2010. Sales volumes increased by 122 million dollars due to OE production volume increases and market share gains in all regions. PTSB generates approximately 70% of its revenue outside the United States and the resulting currency movements increased reported sales by 31 million dollars. Customer pricing increased sales by 17 million dollars.

4)
Vehicle Safety and Protection (VSP)
-Sales increased by 79 million dollars, or 8%, to 1,015 million dollars for the year ended December 31, 2011 from 936 million dollars for the year ended December 31, 2010. Sales volumes rose by 49 million dollars due to increased OE production and market share gains in all regions, inclusive of 1 million dollars associated with an acquisition. Approximately 70% of VSP sales are generated outside the United States and the resulting currency movements increased reported sales by 34 million dollars. Continued customer pricing pressure reduced sales by 4 million dollars.

Contracts

-The Company has jointly developed with Mercedes-Benz a piston technology for Daimler's V6 diesel engine. The design gives Mercedes-Benz a piston that fully exploits the advances in thermal and mechanical durability made possible by the Company's DuraBowl manufacturing process. (From a press release on September 1, 2011)

-The Company's QuietShield GRN insulation product will be used by General Motors to help eliminate cabin noise in the new 2012 Buick Verano. QuietShield GRN is used as acoustical material in the Verano's headliner. The product first debuted on the 2010 Buick LaCrosse. QuietShield GRN is used to fabricate linings and sound-deadening padding in headrests, headliners, door and kick panels, and trunk liner. (From a press release on June 21, 2011)

-The Company is supplying various components for the new 2011 Ford Explorer, such as main bearings, flange bearings and rod bushings as well as the cylinder head, exhaust manifold and oil turbo gaskets on the 3.5L GTDI engine. The company also provides unipistons for the 2011 Explorer's transmissions, and thermal and mechanical protection coverings for the vehicle's brake lines, fuel line, HVAC system and electrical wiring. The Company additionally supplies mini-sockets for Explorer's exterior lighting. (From a press release on January 13, 2011)

-The Company announced its contributions to the groundbreaking 2011 Chevrolet Volt electric vehicle. The Company innovations include protective coverings from the company's Systems Protection group for the lithium-ion battery pack cooling system, braking system and high voltage electrical system. The high voltage system for the Volt's lithium-ion battery pack uses the Company's FlexFit and FlexGuard hose coverings for abrasion protection, while TwistTube 2420 protects the vehicle's high-voltage cable system against abrasion. ShrinkGard provides additional abrasion protection to the brake lines. (From a press release on January 6, 2011)

R&D Expenditure

(in million dollars)

	FY2011	FY2010	FY2009
Overall	172	156	140
% of OE sales	3.8%	4.0%	4.7%

R&D Facilities

	U.S. and Canada	Europe	Rest of World
Technical centers	8	7	2

<USA>
-Plymouth, Michigan; Skokie, Illinois; Ann Arbor, Michigan; and Exton, Pennsylvania.

<Outside USA>
-Germany: Burscheid, Nuremberg, Wiesbaden, Bad Camberg
-UK: Chapel
-France: Crepy
-China: Shanghai
-India: Bangalore
-Japan: Yokohama

Product Developments

Light
-The Company has developed a new LED interior lamp that can be operated with a simple wave of the hand. The company's first application is a touch-free dome lamp that integrates a capacitive sensor into the vehicle's overhead console. The lamp will eliminate the driver's search for the correct mechanical switch in consoles and instrument panels, enabling more attention to remain focused on the road. Further applications for the technology could include lamps for door pockets or other storage areas. The application of this technology was developed at the Company's technical center in Ann Arbor, Michigan, U.S. (From a press release on December 12, 2011)

-The Company has developed a new ultrathin vehicle interior lighting, which combines LEDs and a new lamp lens, NovaLens to reduce the profile of interior lamps by up to 60 percent. The new lamp is 12 mm thick compared to typical interior lamp profiles of 30 mm or more. LED technology can draw less than 2W compared to 10W for the equivalent incandescent bulbs. This reduced electrical demand cuts CO2 emissions and helps reduce battery drain. NovaLens reflects and refracts the light from LEDs to produce uniform illumination from the entire lens. The company's first production applications will reach the market during 2012. The technology was developed at the Company's Lighting Technical Center in Ann Arbor, Michigan, U.S. (From a press release on December 6, 2011)

Fricton
-The Company announced that it's R&D team at Bad Camberg, Germany has produced two Ferodo friction materials for the front and rear axles of the new Mercedes-Benz Actros heavy duty truck. For Actros front axles equipped with the new Knorr-Bremse SN7-30 caliper and for rear axels equipped with the new Knorr-Bremse SN7-25 calipers, the Company developed new formulations featuring excellent thermal distribution to improve driver comfort, by preventing judder. These new formulations also provide high braking performance at high temperatures. (From a press release on September 16, 2011)

Ignition
-The Company will debut at the IAA 2011, its Advanced Corona Ignition System (ACIS), designed to provide higher energy ignition than conventional ignition coil and spark plug designs. ACIS enables lean and highly diluted combustion strategies, resulting in up to a 10 percent improvement in fuel efficiency. (From a press release on August 30, 2011)

Piston ring coating
-The Company has developed the new piston ring coating CarboGlide, which delivers a direct improvement in fuel economy and CO2 emissions by reducing ring friction by up to 20 percent as compared to nitride or other commonly used coatings. CarboGlide's high wear resistance will withstand an engine's full operational life. The coating was developed at its technical center in Burscheid, Germany. Several vehicle manufacturers will launch engines using Federal-Mogul's CarboGlide-coated piston rings beginning this year. (From a press release on August 8, 2011)

Systems protections
-The Company has developed a protective product CrushShield for high voltage cables that will help protect occupants of electric and hybrid electric vehicles in the event of a crash. The new material surrounds and protects electrical cables, keeping the electrical system isolated from the rest of the vehicle. CrushShield meets the requirements of new U.S. federal vehicle safety regulations (FMVSS305) and is already in production for a hybrid electric vehicle. CrushShield was developed by a collaborative team working in Exton, Pennsylvania, U.S.; Shonan, Japan and Crepy-en-Valois, France. (From a press release on July 13, 2011)

Fuel pump
-The Company has developed an electrical brushless diesel fuel pump and is currently supplying it to diesel engine and diesel fuel filtration manufacturers. The technology suits 12V and 24V applications and is available for diesel engines typically used in the medium- and heavy-duty on-highway sector. Durability field tests of the Company's electrical brushless pump showed that the product can last approximately 20 times longer than a conventional pump. The Company's electrical brushless fuel pumps were developed at the company's Logansport, Indiana, U.S. technical center and are produced at its manufacturing facility in Logansport. (From a press release on June 27, 2011)

Heat shield
-The Company developed a corrugated aluminum heat shield called Nimbus GII. This product is up to approximately 80 percent lighter than typical steel sandwich heat shields and achieved a 15- to 30-percent improvement in thermal protection. Nimbus GII heat shields are in production for several automakers at the Company's manufacturing facilities in Skokie, Illinois, U.S.; Port Elizabeth, South Africa; Tepotzilan, Mexico and Nanchang, Jiangxi Province, China. (From a press release on May 9, 2011)

Capital Expenditures

(in million dollars)

	FY2011	FY2010	FY2009
Powertrain Energy	177	119	76
Powertrain Sealing and Bearings	81	58	44
Vehicle Safety and Protection	69	51	38
Global Aftermarket	6	5	2
Corporate	15	18	16
Total	348	251	176

Investment Outside USA

<India>
-The Company announced that its Indian subsidiary broke ground earlier this year on a 10-acre site for construction of a new 38,000-square-meter facility to manufacture brake friction materials in Chennai, India. The Company's investment is expected to be approximately 15 million dollars. Production is scheduled to begin before the end of 2011. The new Chennai facility will initially produce non-asbestos organic disc brake pads for light vehicles and half block linings for commercial vehicles. The company expects to employ approximately 300 people when the facility is in full operation. The company has grown its revenue from its Indian operations to approximately 250 million dollars in seven manufacturing facilities in Bangalore, Bhiwadi, Parwanoo, Patiala and Radrapur. The new Chennai facility is the company's eighth manufacturing facility in India. (From a press release on September 26, 2011)