Financial Overview

(in million dollars)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	Rate of change (%)	Factors
Overall
Sales	16,444	16,244	1.2	-This increase was driven primarily by a higher demand for active and passive safety products, increased vehicle production in North America and Asia Pacific, and increased module sales globally, partially offset by lower vehicle production in Europe and the negative effects of foreign currency movements between the two periods.
Net earnings	1,008	1,157	(12.9)	-
Chassis Systems
Sales	10,324	9,960	3.7	-This increase was driven primarily by higher production volume and increased global module sales, together totaling 912 million dollars, partially offset by the unfavorable impact of foreign currency exchange of 450 million dollars and lower sales of 104 million dollars related to assets divested in the third quarter of 2012 and the fourth quarter of 2011.
Occupant Safety Systems
Sales	3,287	3,580	(8.2)	-This decrease was driven primarily by the unfavorable impact of foreign currency exchange of 201 million dollars and price reductions provided to customers of 86 million dollars, partially offset by higher volume of 34 million dollars.
Electronics
Sales	1,015	842	20.5	-This increase was driven primarily by higher volume of 240 million dollars, partially offset by the unfavorable impact of foreign currency exchange of 19 million dollars.
Automotive Components
Sales	1,818	1,862	(2.4)	-This decrease was driven primarily by the unfavorable impact of foreign currency exchange of 101 million dollars, partially offset by higher volume of 59 million dollars.

Contracts

-The Company has announced that it has won initial business awards for its integrated Electric Park Brake (EPBi) and Electronic Stability Control (ESC) system. The integration of the two technologies eliminates the need for a separate electronic control unit in the system network. The combined system will launch in Europe and Asia Pacific with major vehicle manufacturers commencing in 2014 and later in North America. The system will launch on C, D, E and MPV vehicle segments in Europe and in China. The new vehicle platforms will feature the Company's EBC460 slip control technology. (From a press release on October 29, 2012)

-The Company announced that it will supply its Integrated Electronic Control Panel (IECP) by the Body control systems business for the Ford "Fiesta" and the Ford "Focus". It is further enhancing IECP technology with intuitive interfaces and customizable trim options including: Projected graphics, Reconfigurable icons, Capacitive touch panel and Display screen Integration, Touch pad with script recognition, Capacitive touch sensing, Color on demand, Membrane switch technology, Anti finger print and Anti scratch surface technologies, and Haptic integration. (From a press release on May 17, 2012)

-The Company has been awarded new business for its next-generation Electric Park Brake (EPB) technology with two major North American based vehicle manufacturers. The new EPB systems, which feature the Company's next-generation technology including its Gen 5 Electronic Control Unit (ECU), are expected to be installed in the 2013 model year. The EPB system utilizes electrical cables and a control switch instead of a typical foot pedal or hand lever. Other benefits include an auto-apply option – if the driver were to exit the vehicle and mistakenly leave the vehicle in gear – the EPB system can be activated automatically when the driver opens the door or releases their seatbelt. (From a press release on April 17, 2012)

-The Company announced the first production contract for its Active Buckle Lifter (ABL) seat belt technology. The contract is with a major European vehicle manufacturer and will start production in 2013. The system will be launched on the rear seats, but is also available for front seat applications. The ABL can help drivers and passengers to fasten their seat belts easier by raising the buckle by up to 70mm – bringing it to a more convenient location if the buckle is difficult to access. Once fastened, the buckle then returns to its normal position. The ABL offers support in driving situations such as hard braking or quickly driven curves. Using data from the onboard active safety sensors, it can retract the buckle which can reduce belt slack around the pelvis and chest. Additionally, the seat belt can be tightened, by up to 80mm - helping to maintain proper occupant position for airbag deployment if a crash is deemed to be imminent. (From a press release on March 7, 2012)

Recent Developments Outside USA

<France>
-The Company said it has started to produce its AC100 24GHz forward-looking radar at its plant in Autocruise in the suburbs of Brest, France. The radar technology designed for truck and production vehicle applications, offers improved cost efficiency without compromising on performance levels. The AC100 radar supports a wide range of driving safety technology, including the inter-vehicular distance warning system, the forward collision warning system, the adaptive cruise control system, and the automatic emergency brake system. In addition to achieving significantly improved cost efficiency, the AC100 provides various high functions that are comparable to those of the conventional AC20 77GHz radar due to the lower operating frequency range and optimized functional capabilities. It can detect vehicles within 150 meters, while properly responding to road conditions even driving in foggy weather and heavy rains. In Europe, the automatic emergency braking (AEB) system is set to become mandatory on trucks, starting in November 2013. The Company will initially supply the AC100 technology to trucks, looking to expand use of the product to C-segment passenger vehicles sold in Europe. (From an article in the Nikkan Jidosha Shimbun on Oct. 10, 2012)

Settlement with U.S. Department of Justice (DOJ) regarding antitrust violations

-The Company announced that its German subsidiary, TRW Deutschland Holding GmbH, has entered into a settlement with the U.S. Department of Justice (DOJ) regarding certain antitrust violations. The subsidiary has agreed to plead guilty to one count of conspiracy in restraint of trade involving sales of occupant safety products. Under the terms of the agreement, TRW Deutschland Holding will pay a fine of 5.1 million USD. (From a press release on July 30, 2012)

Outlook for FY2013

-The Company expect full year 2013 sales to be in the range of 16.4 billion- to 16.7 billion dollars, including first quarter sales of approximately 4.1 billion dollars. These sales figures are based on expected 2013 production levels of 15.8 million units in North America, 18.3 million units in Europe, continued expansion in vehicle production volumes in China and the other rest of world regions, and its expectations for foreign currency exchange rates.

R&D Expenditure

(in million dollars)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	FY ended Dec. 31, 2010
Overall	834	827	669

R&D Facilities

(As of Dec. 31, 2012)

	North America	Europe	Asia Pacific	Other	Total
Chassis Systems	3	4	4	1	12
Occupant Safety Systems	2	3	-	-	5
Electronics	2	-	-	-	2

Technological Alliance

-Showa Corporation announced on March 30 that it is mulling the possibility of forming a strategic business alliance with TRW Automotive of the U.S. in the area of electric power steering technology. Leveraging technological expertise of each company, the two companies aim to provide products and services that better meet the needs of customers in Japan. Details of the collaboration will be discussed later. (From an article in the Nikkan Jidosha Shimbun on April 2, 2012)

R&D Activities

-The Company unveiled its 'S-Cam' video camera sensor as well as outlining plans to invest in a third generation camera. The Company's next generation camera will build on the current feature set of its production S-Cam (headlight control, lane detection, traffic sign recognition and vehicle detection & classification for automatic emergency braking), with focus on improved pedestrian detection functionality. The development is a continuation of the partnership between the Company and Mobileye in place for the Company's current production S-Cam forward-looking camera, available today in the European and Asian markets and within the next year in the U.S. market. (From a press release on September 17, 2012)

-The Company is developing a new Electronic Horn System (EHS) which is activated by touching a conductive area on the steering wheel airbag cover. Special coatings enable the airbag cover to be turned into a 3D electrical conductive surface. This can detect the position of a finger or hand and send a signal to an ECU, resulting in the horn actuation. No force is required to activate the system. The design of the cover also helps to prevent the horn being activated by accident. Using smaller sensor fields connected to the ECU, it is possible to detect if the driver's hand approaches the cover from the side (accidentally), or from the top (activation by the driver). The Company expects that its EHS will be ready for production in 2014. (From a press release on September 12, 2012)

-The Company announced on March 5 that it has started developing its second-generation scalable airbag control unit (ACU) for the growing low-cost vehicle and emerging markets. The new technology allows the ACU to be adapted within a vehicle platform to offer two options, standard and enhanced, for models sold within emerging countries and also for those exported to developed markets. The standard ACU is designed for cost-effective frontal crash protection with one to four squib outputs and no satellite interfaces, while providing the flexibility to be upgraded for use in an enhanced safety system. The enhanced ACU supports up to twelve squibs and four satellite interfaces to provide front and side impact detection and protection. It includes the option to add a sensor unit to support electronic stability control systems. (From an article in the Nikkan Jidosha Shimbun on March 6, 2012)

-The Company announced that its Body Control Systems business is developing the new multi-graphic rear projection display technology that allows different symbols to appear on a surface in the same physical space at different times. A primary example is keypad entry systems that allow a vehicle owner access to a vehicle through a security code even if they do not have their car keys. With multi-graphic display options the keypad can offer the choice to control other functions such as trunk access, interior lights, power windows and more. The symbols for these various functions automatically appear when a user touches the control panel surface and disappear after a few moments of inactivity. The Company anticipates that the new multi-graphic display technology will be ready for production in 2012. (From a press release on January 5, 2012)

Product Development

Airbags & Seatbelts
-The Company introduced various technologies at the Airbag 2012 exhibition in Germany, which include the Active Buckle Lifter (ABL) seat belt system for protecting occupants in the event of a collision, the roof air bag for rear seats, and the Dynamic Locking Tongue (DLT). The Company's exhibit was focused on occupant safety systems, which are to meet the new standard of rear seats required by Euro NCAP (European New Car Assessment Program) starting in 2015. The Company is aiming to expand the adoption of its new technologies for a wide range of vehicles. (From an article in the Nikkan Jidosha Shimbun on Dec. 13, 2012)

-The Company unveiled its new inflator technology at the Airbag 2012 exhibition in Germany. The new DI10.1G45 inflator, which is a further improvement of the DI10 family, is the Company's lightest and smallest inflator to date. The DI10.1G45 product offers a weight reduction of approximately 25 percent over previous generation technology. It has been specially developed for 'micro' airbag modules and is due to start production early 2014 at its facility in Aschau, Germany, in support of a major European business award. (From a press release on December 10, 2012)

-The Company developed its new adaptive side airbag technology. The airbags feature a 'flexi adaptive vent' which can help to enhance the protection of occupants according to different crash severity. With the Company's new side airbag system, a tether mechanism inside the airbag can close the vent during a more severe crash where the intrusion level on the side of the vehicle is typically greater. This helps to maintain pressure in the airbag for a longer duration and thus absorb more energy during a high severity impact. It also helps to reduce the probability of 'bottoming out' between the door trim and the occupant. The Company anticipates that its next generation adaptive side airbags will be ready for production in 2013. (From a press release on December 3, 2012)

-The Company has developed a new, active seat belt presenter which assists the driver to grasp the belt during the buckling up process. The system can help to support elderly or less mobile passengers, as well as act as a reminder to fasten the seat belt upon entering the vehicle. The Company's new seatbelt presenter is mounted directly on the height adjuster within the vehicle's B pillar. When the occupant is seated, the presenter – a small arm which rests within the B pillar – brings the belt forward to an 'easier to reach' position, with up to 300 mm. As soon as the occupant takes the belt, the arm simply reverts to its original park position. The Company estimates that its active seat belt presenter, which is available for 4 and 5 door vehicles, will be ready for production by 2016. (From a press release on July 5, 2012)

-The Company announced that it has developed driver airbag modules made of a new, regenerative plastic material. The bio-based material is employed in the airbag cover, retainer plate, and other components. The material reduces the vehicle's interior emissions, low-level gases that are released from trim parts, particularly at high temperatures, minimizing emissions of chemical substances designated as hazardous elements. Since the new plastic material comes from regenerative raw materials, it also contributes to saving fossil resources. The Company will start producing the new airbag modules in the middle of 2012, anticipating that the technology can replace all existing oil-based materials in driver airbags in the coming years. (From an article in the Nikkan Jidosha Shimbun on March 12, 2012)

Pedestrian detection and accident mitigation systems
-The Company announced that it has developed its next generation Pedestrian Protection System (PPS) using advanced pressure sensing technologies to accurately detect a pedestrian impact. The new safety system is expected to go into production by 2016. The technology utilizes pressure sensor satellite data measured via flexible tubing that runs the width of a vehicle's front bumper, in conjunction with remote acceleration sensors to detect an impact and identify which side of the vehicle has hit the pedestrian's body. (From an article in the Nikkan Jidosha Shimbun on August 2, 2012)

-The Company said it has developed a new modular radar platform and a next-generation camera to meet the more stringent active and pedestrian safety criteria planned to be introduced by Euro NCAP (European New Car Assessment Program) from 2014 onwards. Euro NCAP promotes a voluntary installation of Autonomous Emergency Braking (AEB) as a major contributor to achieving a Euro NCAP 5 star safety rating. The ability to protect pedestrians with AEB may become mandatory from 2016. The Company says its next-generation camera will be capable of processing higher resolution images as well as extending a sensing range and enhancing pedestrian detection functionality. Also, the new modular AC1000 radar platform will be able to expand safety functions and meet the Euro NCAP requirements. (From an article in the Nikkan Jidosha Shimbun on July 13, 2012)

Brake controls
-The Company developed its Integrated Brake Control (IBC) system, which is a vacuum independent technology which can simplify the brake system while enhancing performance. The IBC replaces – in a single integrated unit – the electronic stability control (ESC) system along with the vacuum booster and the associated cables, sensors, switches, electronic controllers, and vacuum pumps where they are required for low-or no-vacuum configurations. At the heart of the system is an actuator that is driven by an extremely fast-acting brushless electric motor. This is monitored by a rotary encoder that provides the control ECU with data on revolutions turned, rotational speed and position. IBC also offers considerable packaging and weight savings compared with current ESC systems – weighing just under 4kg in contrast with 7 kg for a conventional component set. It is planned that the Company's IBC will be ready for production for 2016 model year applications.  (From a press release on September 17, 2012)

-The Company is launching its new EBC 460 product family of Electronic Stability Control (ESC) systems. The Company's EBC 460 family features a standardized product design coupled with manufacturing capability in Europe, North America, South America and Asia. The product family encompasses standard, high and premium systems – all of which can offer anti-lock brake, traction control and ESC functionality with variants that support hybrid electric through to full electric vehicles. The EBC 460 includes numerous upgrades, compared to previous generation systems. It utilizes a long-life motor pump, two additional integrated pressure sensors; noise vibration and harshness reduction and increased motor lifetime through high frequency motor speed control. The EBC 460 platform also features integration of yaw and acceleration sensors within its EHCU control unit (EHCU). (From a press release on April 30, 2012)

Touchpad sensors
-The Company has unveiled its new capacitive touchpad sensor incorporating handwriting recognition software to help drivers and passengers operate a variety of functions within the car. The handwriting-recognition touch pad can be used as a standalone product or as a multifunction control panel. The user 'writes' individual characters with a single finger on the touch sensor area and this input is interpreted by software and acknowledged by an audible feedback. The touch sensor is able to recognize handwritten numbers, letters and symbols and enables the driver to operate applications such as mobile phones, navigation systems and the radio as well as sending messages, from a single point. The design and location of the multifunction controller is flexible and can be developed to suit customer needs. The Company's tests have shown that either the center console or the door armrests are the optimal locations. The new touchpad technology will be ready for production by 2012. (From a press release on April 2, 2012)

Transmission pumps
-The Company is applying its experience in the motor pump unit (MPU) technology arena to the transmission market including fuel efficient technologies such as dual clutch transmissions. The Company has already garnered business awards in Europe, North America and Asia. The transmission pump technology utilizes the Company's Electrically Powered Hydraulic Steering (EPHS) MPU design. More than 20 million EPHS systems have been delivered since the Company launched this product in 1998. Additionally, the Company has already delivered more than 3 million transmission pump units. This pump technology also offers the potential to be adapted to other transmission configurations including automatic, manual, and even supports all-wheel drive with differential switching. The Company currently manufactures pumps from its Ostellato, Italy facility to cover the European and American markets and anticipates localizing pump production in China in the near future to service the Asian market. (From a press release on May 10, 2012)

Capital Expenditure

(in million dollars)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	FY ended Dec. 31, 2010
Chassis Systems	300	302	164
Occupant Safety Systems	104	73	49
Electronics	125	127	42
Automotive Components	86	62	36
Corporate	8	7	3
Total	623	571	294

-The Company expects to spend approximately 4.5% of sales during 2013 as capital expenditures.

Investment Outside USA

<Brazil>
-The Company announced that it has begun production of Electric Power Steering (EPS) at its facilities in Limeira, Brazil, in order to expand its business in South America. In Brazil, the Company has installed equipment to manufacture mechanical gear and column power head assembly for the EPS since 2010 in order to develop its local production operations that should respond to growing EPS application by automakers. The annual line capacity is expected to be 400,000 units. Additional investment is planned for electronic control units to fully localize Column Drive EPS manufacture for the South American market. By providing the low-cost and efficient production at the regional base, the Company aims to meet the automakers' needs for local supply. (From an article in the Nikkan Jidosha Shimbun on February 20, 2012)