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5. Federal-Mogul Holdings Corporation Business Report FY ended 2015

Factors
1) Net Sales
-For the fiscal year ended December 31, 2015, the Company's net sales increased by 1.4% over the previous year to USD 7,419 million. The increase in sales was caused primarily by an increase in sales volumes of USD 734 million, which included a USD 657 million gain from prior acquisitions. This was partially offset by negative foreign currency exchange effects of USD 642 million.

2) Powertrain segment sales
-The Company's Powertrain segment sales increased by 0.5% in the fiscal year ended December 31, 2015 to USD 4,450 million. Factors contributing to the increase in sales include an increase in sales volumes and increased business from acquisitions. These gains were partially offset by negative foreign currency exchange effects and lowered pricing.

3) Motorparts segment sales
-Sales for the Company's Motorparts segment were USD 3,253 million in the fiscal year ended December 31, 2015, an increase of 1.9% over the previous year. Sales in the segment increased due to an increase in sales volumes, additional business from acquisitions, and positive commercial actions and pricing effects. Negative currency exchange effects partially offset the increase in sales.

Acquisitions

-The Company announced that it purchased TRW's ownership shares in two engine components joint ventures, completing its acquisition of TRW's Engine Components business. The shares were acquired for a base purchase price of approximately USD 56 million. The transaction completes the acquisition process with the addition of the valvetrain operations in Tennessee, U.S. and Thailand. (From a press release on July 7, 2015)

-In February 2015, the Company announced that it has closed on material portions of the previously announced acquisition of TRW's engine valve business, with a purchase price of approximately USD 309 million. The acquired business, headquartered in Barsinghausen, Germany, employs nearly 4,000 people globally. The closing did not include the sale of TRW's joint ventures involved in the business with the exception of a joint venture in Venezuela. Assets in the acquisition include 15 production facilities across nine countries, and three technical centers in North America, Europe, and Asia. In addition, a significant proportion of TRW's sales are from Japanese OEMs, which the Company will now gain. The acquisition is expected to add approximately USD 500 million a year in additional sales, with additional growth in the future. (From a press release on February 9, 2015)

Joint Ventures

<China>
-Federal-Mogul Huangxin (Anqing) Powder Metallurgy Co., Ltd. officially opened on October 28, 2015. The new company is a joint venture between the Company and Anqing Huanxin Group Co., Ltd. The production company is located on 17,000 square meters of land in Anqing, Anhui Province, China, and will become the world's largest production base for valve seat inserts and valve guides. These components will be used in turbocharged engines, non-turbo engines, and industrial engines with and without exhaust gas recirculation systems. The joint venture's annual production volume is expected to reach 17 million by 2017. (From news releases issued by multiple sources on November 9, 2015)

<India>
-Anand India and the Company have announced that they have entered into an agreement to convert Anand's Sealing and Piston Ring businesses into joint venture operations. The new joint ventures will be known as Federal-Mogul Anand Sealings India Limited and Anand I-Power Limited. The Company will hold a 51% stake of the new sealing joint venture; Anand, along with smaller shareholders, will own 49% of the operation. Anand will hold a majority stake in the piston ring joint venture, Anand I-Power Limited. (From a press release on March 10, 2015)

Contracts

-Since its launch in 2010, the Company's MicroTorq elastomeric engine seals have been featured on or are in development on more than 14 engine programs, including General Motors' Ecotec small displacement engine family, which began production earlier in 2015. The MicroTorq seal reduces frictional losses by up to 80% versus comparable designs, and enables CO2 reduction of up to 1.5 g/km per engine. With annual production volume slated to grow from two million units in 2015 to over 10 million units in the next five years, the Company has planned for additional capacity of MicroTorq seals at its plants in Mexico, Hungary and China. (From a press release on September 30, 2015)

-The Company announced it supplies products for nine of Ward's 10 Best Engines for 2015 model year vehicles. 2015 award-winning engines featuring the Company's technologies include:
・BMW 127-kW Electric Motor (BMW "i3" Electric Vehicle)
・BMW 1.5L Turbocharged DOHC I-3 ("Mini Cooper")
・FCA 6.2L Supercharged OHV Hemi V-8 ("Dodge Challenger SRT Hellcat")
・FCA 3.0L Eco Diesel DOHC V-6 ("Ram 1500")
・Ford 1.0L Eco Boost DOHC DI I-3 (Ford "Fiesta")
・GM 6.2L LT1 OHV DI V-8 ("Chevrolet Corvette Stingray")
・Subaru 2.0L Turbocharged DOHC DI H-4 Boxer (Subaru "WRX")
・VW 1.8L TSI Turbocharged DOHC I-4 (Volkswagen "Golf")
・Volvo 2.0L Turbocharged T5 DOHC DI I-4 (Volvo "S60")  
(From a press release on January 14, 2015)

Awards

-The Company was presented a 2015 "Supplier of the Year" award from Lear Corporation. (From a press release on December 2, 2015)

-The Company won a 2015 Automotive News PACE Award for its low-friction DuroGlide piston ring pack. (From news releases issued by multiple sources on April 20, 2015)

R&D Facilities

<U.S.>
-Michigan: Plymouth, Ann Arbor
-Illinois: Skokie
-Pennsylvania: Exton
-Missouri: St. Louis
-Wisconsin: Waupun

<Outside U.S.>
-Brazil: Araras
-Germany: Burscheid, Nuremberg, Wiesbaden, Bad Camberg, Glinde
-Belgium: Aubange
-UK: Chapel-en-le Frith, Coventry
-Czech Republic: Kostelec
-China: Shanghai

Product Developments

Unipiston with integrated springs
-The Company has introduced the latest development of its Unipiston technology: the Unipiston with integrated springs. The Unipiston with integrated springs eliminates separate spring carriers, thus reducing the axial length requirement in pistons for multi-plate clutch packs. The new technology is suitable for clutch packs in dual-clutch transmissions, conventional automatic transmissions and limited slip differentials. (From a press release on December 1, 2015)

Diesel piston aluminum alloy
-The Company announced that it has developed a new premium diesel piston aluminum alloy, called DuraForm-G91. In benchmarking tests, the new alloy provides between three and five times the component life of established as-cast materials in modern, highly loaded, diesel engines. The increased strength of the new material also supports higher mechanical loads, allowing engines to operate at higher specific power and more efficiently. (From a press release on August 13, 2015)

Sodium-cooled hollow stem valves
-The Company will exhibit its newly acquired engine valve technology for the first time at the 2015 IAA Show in Frankfurt in September. Among the components produced by the Company's Global Valvetrain business are sodium-cooled valves with exceptionally small stem diameters that deliver both reduced weight and greater resistance to high temperatures that can be a limiting factor in downsized engines. Unlike a conventional valve with a solid stem, which conducts almost 75% of its heat away through the head and seat, the Company's hollow stem technology reduces the heat flow through the valve head to around 50% of the total by transmitting a greater share through the stem and guide. This allows the valve head to run between 80°C and 150°C cooler. Primarily applied to exhaust valves to facilitate temperature reduction, the hollow valves can also be used on the intake side to save weight. (From a press release on July 23, 2015)

Patents

-As of December 31, 2015, the Company has more than 6,300 patents and patent applications globally, including over 1,200 which have been filed in the U.S.

-The Company expects to invest between USD 390 million and USD 440 million on capital expenditures during the fiscal year ended December 31, 2016.

Investments outside U.S.

<China>
-The Company announced that it will build a new facility for sealing and gasket products in Nanchang, Jiangxi Province, China to satisfy the growing demand from Chinese OEMs to meet stringent environmental regulations. The new 24,000-square-meter facility will double the capacity of the Company's current sealing manufacturing operations in Nanchang and will be located in the Nanchang Economic and Technological Development Zone. Production is expected to begin in 2016. (From a press release on March 31, 2015)