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5. Federal-Mogul Holdings LLC Business Report FY ended Dec. 2016

Federal-Mogul Holdings LLC Business Report FY ended Dec. 2016

Factors
1) Net Sales
-For the fiscal year ended December 31, 2016, the Company's net sales increased by 0.2% over the previous year to USD 7,434 million. The increase was primarily driven by a 1.9% increase in sales volumes of USD 143 million (which included a USD 91 million benefit from acquisitions) and was substantially offset by a USD 107 million unfavorable effect of foreign currency exchange.

Restructuring

Company name change
-On February 14, 2017, Federal-Mogul Holdings Corporation was converted to a single member limited liability corporation in the U.S. and changed its name to Federal-Mogul Holdings LLC.

Termination of spinoff
-On January 15, 2016, the Company announced a termination of the previously announced spin-off of its Motorparts division. On September 3, 2014, the Company announced a plan to separate its Powertrain and Motorparts divisions into two independent, publicly-traded companies serving the global original equipment and aftermarket industries.

Acquisitions

-On December 1, 2016, the Company acquired the assets and liabilities of IEH BA LLC (Beck Arnley), an entity owned by a subsidiary of Icahn Enterprises L.P. (IEP). Beck Arnley is a provider of premium OE quality parts and fluids for foreign nameplate vehicles in North America and was acquired for a purchase price of USD 14 million. Beck Arnley's products complement the foreign nameplate coverage of the Company's current aftermarket offerings, while adding several new product lines, including fluids, engine management, cooling, electrical parts, and electronic components.

-On May 26, 2016, the Company completed the acquisition of the assets of a filter manufacturing business in Mexico, which primarily serves the Mexican market, for a purchase price of USD 25 million.

Divestitures

-In December 2016, the Company entered into an agreement to sell 80.1% of the shares of one of its subsidiaries in Brazil in the Motorparts segment for a sale price of one Brazilian Real. The sale is expected to close in the second half of 2017.

-In December 2016, the Company entered into stock and asset purchase agreement to sell certain assets and liabilities related to its wipers business in the Motorparts segment for a sale price of USD 8 million. The sale is expected to close in the first half of 2017.

-During 2015, the Company entered into a share agreement to sell 100% of the shares of one of its subsidiaries in the Powertrain segment for a sale price of one euro. Prior to December 31, 2015, the Company contributed USD 12 million in cash to the subsidiary. The sale closed on January 1, 2016.

Recent Developments

-During 2016, the Company began mass production with its DuroGlide piston ring technology for both passenger cars and commercial trucks and are seeing rapidly growing demand from customers.

-In addition to the TRW valvetrain acquisition during 2015, the Company also made investments in joint ventures in India, as well as entered into two new joint ventures, one in Thailand and one in China focused on automotive aftermarket vehicle repair business.

Recent Development Outside U.S.

-The Company completed the acquisition of a filter manufacturing business in Mexico, which primarily serves the Mexican market and Beck Arnley, a provider of premium OE quality parts and fluids for foreign nameplate vehicles in North America, within Motorparts segment during 2016.


-The Company announced that its original equipment (OE) engine technologies for Euro 6 emission standards are also available for India’s vehicle and engine manufacturers, who are tasked with meeting BS VI emissions requirements by 2020. The Company is already producing these components in large quantities for Euro 6 engines in Europe and for engines with comparable emissions standards in North America. The Company has created manufacturing capacity in India to produce some of its Euro 6 components there. Its Euro 6 expertise covers engine components for both passenger cars as well as heavy-duty vehicles. (From a press release on February 4, 2016)

Contracts

-The Company announced its engine technologies are in all 10 of Ward's 10 Best Engines for 2016 model year vehicles. The award-winning engines are:
・3.0L Turbocharged DOHC I-6 (BMW 340i)
・3.6L DOHC V-6 (Chevrolet Camaro/Cadillac ATS)
・1.5L DOHC 4-cyl./120-kW Drive Motor (Chevrolet Volt EREV)
・5.2L DOHC V-8 (Ford Shelby GT350 Mustang)
・2.0L DOHC 4-cyl./50-kW Drive Motor (Hyundai Sonata PHEV)
・3.5L DOHC V-6 (Nissan Maxima)
・3.0L Turbodiesel DOHC V-6 (Ram 1500 EcoDiesel)
・2.0L Turbocharged DOHC 4-cyl. Boxer (Subaru WRX)
・1.8L DOHC 4-cyl./53-kW Drive Motor (Toyota Prius HEV)
・2.0L Turbo/Supercharged DOHC 4-cyl. (Volvo XC90)
This includes Federal-Mogul Powertrain pistons, rings, liners, valve seats and guides, valvetrain products, bearings, ignition, sealing, gaskets and systems protection products. (From a press release on January 13, 2016)

Awards

-The Company was presented a 2016 Volkswagen Group Award (From a press release on June 2, 2016)

-The Company received a 2015 Pinnacle Award from Delphi Automotive PLC. Federal-Mogul Powertrain earned this award in recognition of quality, performance and delivery of its systems protection products from the company's El Paso, Texas, manufacturing facility. (From a press release on May 18, 2016)

-The Company has received the 2016 Volvo Group Purchasing Supplier Award in the Delivery Excellence category. The award for Delivery Excellence came in relation to the supply of engine bearings used in most of Volvo's truck engines produced at Federal-Mogul Powertrain's plant in Gdansk, Poland. (From a press release on February 24, 2016)

R&D Facilities

-Skokie, Illinois
-Ann Arbor, Michigan
-Plymouth, Michigan
-St. Louis, Missouri
-Exton, Pennsylvania
-Smithville, Tennessee


-Brazil: Araras
-Germany: Burscheid, Nuremberg, Wiesbaden, Bad Camberg, Glinde
-Belgium: Aubange
-UK: Chapel-en-le Frith, Coventry
-Czech Republic: Kostelec
-Poland: Gorzyce
-China: Shanghai

Product Developments

-The Company has developed a new spark plug for gasoline, high BMEP (Brake Mean Effective Pressure) stationary engines. A combination of optimum materials, unique ground electrode geometry and maximum electrode surface area gives the new 'cold' plug enhanced thermal characteristics. This results in improved electrode durability and increased service life compared with other technologies available in the market. (From a press release on November 15, 2016)

-The Company has developed an upgrade to its GOETZE Diamond Coating (GDC) for piston rings. The new coating, GDC60, features higher diamond content than the established GDC50. In rig tests, GDC60 reduced the friction coefficient up to 7 percent and first engine tests have shown the potential for wear reduction of up to 10 percent compared to GDC50 coatings. (From a press release on August 10, 2016)

-The Company has developed a world-first in piston cooling technology by creating a sealed-for-life coolant chamber within the crown of its Monosteel heavy-duty diesel piston. Branded EnviroKool, the technology allows pistons to run safely at crown temperatures in excess of 100 degrees celsius higher than today's limits, working where appropriate in conjunction with high oxidation-resistant steel alloys and protective crown coatings. (From a press release on July 12, 2016)

-The Company has introduced two innovative piston skirt coatings, EcoTough-New Generation (for gasoline engines) and EcoTough-D (for diesel engines). Building on the proven performance of previous EcoTough coatings, the new formulations further reduce engine friction, wear and noise while dealing with the increasingly challenging loads and temperatures that exist in the latest downsized, turbocharged engines. (From a press release on March 30, 2016)

Patents

-As of December 31, 2016, 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 400 million and USD 440 million on capital expenditures during the fiscal year ended December 31, 2017.

Investments Outside U.S.

-In 2016, the Company expanded the footprint of its Nanchang, China sealing facility in order to meet growing demand from OEM customers who must meet more stringent environmental regulations.


-In late 2015, the Company opened a new state-of-the-art wiper production facility in southeastern Romania serving both OE and aftermarket customers throughout Europe.

-The Company is in the process of expanding its braking production capacity in an existing braking plant in Romania and also investing in its manufacturing footprint in Mexico, Eastern Europe, and Africa.