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Agenda

Agenda. S.Milwaukee Update Customer Protection - Fill Rate, Inventory Status, Pipeline Customer Protection - Current Outsourcing Efforts Casting Profile Overview of Casting Market – US & Mexico Supplier Overview Outsourcing Options – Open, Closed, TBD Equipment Requirements & Timing

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Agenda

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  1. Agenda S.Milwaukee Update Customer Protection - Fill Rate, Inventory Status, Pipeline Customer Protection - Current Outsourcing Efforts Casting Profile Overview of Casting Market – US & Mexico Supplier Overview Outsourcing Options – Open, Closed, TBD Equipment Requirements & Timing Projected FY11 Financial Impact
  2. S.Milwaukee Building Repair Timeline
  3. Customer ProtectionUS DISA Outsourcing – Moved Quickly, Production Flowing, Must Address Premium Pricing
  4. Foundry Outsourcing Supplier ProfileDISA US / Airset Mexico Frazer & Jones Syracuse,NY Torrance Lacrosse,WI DISA Suppliers Castwell Skokie,IL Urick (Ridge) Erie,PA Donsco Anvil Buck York,PA Pemjusa Juarez Industrial Link (FDC) Chihuahua Airset Suppliers Herro Gris (HGM) FundicionQualy Monterrey Fycomex Puebla
  5. Airset Outsourcing Airset castings transferred in Oct’09 to S.Milwaukee from Birch Hill Airset Molding Line suffered significant damage in 6/26 Fire Airset Molding Line never achieved required output levels Large, low-volume Horizontal molds play to the sweet spot of Mexico Foundries - Cast Boxes & Moguls / Houston & Monterrey Shipped 200 Patterns to EGS Monterrey Plant on July 2nd Met with Emerson preferred casting suppliers - patterns gone by Jul 9th Production Status HGM 18 PO’s all with shipping date Qualy 29 PO’s and 28 have shipping date Industrial Link 30 PO’s and 21 with shipping date, shared Alum patterns Fycomex 14 PO’s only 3 with shipping date, shared Iron patterns Costs & Lead-time better than S.Milwaukee Recommendation – leave the Airset patterns with Mexico suppliers
  6. Crouse-Hinds is the Primary Competitor in the Industrial and Hazardous Market Segement Cable & Conduit Fitting Product Offering by Manufacturer Iron & Aluminum preferred for Industrial & Hazardous Segments T&B and Hubbell / Killark with Short Product Offerings do not compete effectively in the Industrial & Hazardous Segments T&B is the Primary Competitor in the Commercial Market Segment Selling a Complete/Full Line of Steel Products & Limited Line of Cast Products
  7. Castings Directly Impact 20% of Total Sales
  8. K-Items Represent 12% of Cast Product Sales For cast products, K-items represent made to order items but typically not made to engineer 60% of K-item SKUs have repeat sales from year to year the remaining 40% are unique in a given year Depending on the type of molding technology, Suppliers may be unwilling to run low quantities for K-items
  9. S.Milwaukee Historical PerformanceLead-time Performance is 12 Calendar Days + 7 Days In-transit = 19 Days Outsourced Supply Base should Target 20 Days delivered to Machining Plant
  10. Supply Chain Shifts Current Where Consumed 65% Columbus (Grind / Plate In House) 30% Atizapan (Grind / Plating Outsourced) 5% Houston (DISA 130) 19 Day Lead-time Inventory Turns X COGS Y Fill Rate Z Future Where Consumed 65% Monterrey (Foundry Grinds / Paint In House) 30% Atizapan (Foundry Grinds / Plate Outsourced) 5% Houston (Hunter / Sintos) 21 Day Lead-time Inventory Turns X COGS Y Fill Rate Z Milwaukee, WI X X Columbus, NE Houston, TX Chihuahua, MX Monterrey, MX Atizapan, MX
  11. Outsourcing Challenges Low Volume vertical DISA jobs Run Quantity expectations 500 Molds / 2 Hours Shared Aluminum + Iron patterns – Outside Foundries pour either Aluminum or Iron, never both Only 2 US Suppliers pour Malleable, none in Mexico Potential Outsource Suppliers lack the appropriate equipment and metal technology, requires: Equipment Transfer or Sale Facility modification to accommodate Molding Machines / Sand Systems Expanding metal pouring technology – Grey to Ductile, Malleable? Knowledge Transfer Complexity Reduction necessary to allow closing S.Milwaukee within a reasonable timeframe
  12. Cifunsa Response to EGS BusinessSome Mexico Vertical DISA Suppliers Not Interested in Emerson Business From:Sadurni Garcia de Quevedo Marcela [mailto:marcela.sadurni@gis.com.mx] Sent:Lunes, 16 de Agosto de 2010 05:23 p.m.To: Diaz, Benjamin [CORP/MX]; Ortega, Daniel [CLIMATE/LA/MONT]Subject: RV: Emerson Visit / Thank you Good Afternoon Benjamin and Daniel: In this case unfortunately we have to decline the presented Emerson RFQ`s due to the current Cifunsas operational strategy which focus in Medium and High Volume. The volumes shown per part number are below the minimum volumes required (250 Tons per year per Part Number). Still, due to our interest to establish a commercial relationships with Emerson (EGS), the decision was to review the Higher Volume Castings from the package even though the Minimum Annual Volume was not met. The problem is that the high volume castings are under the Minimum Casting Weigh (minimum 2.0 Lbs). Thank you for EGS/Emerson team Visit to Cifunsa, please don’t hesitate to contact me in case of any question or concern. Regards Marcela Sadurní Garcia de Quevedo Ejecutivo de Administración de Ventas Sales Administration Executive
  13. South MilwaukeeConversion from Malleable Iron to Other Irons Competition: Crouse-Hinds Crouse pours only Grey Iron G30 in-house Crouse also provides products in malleable/ductile utilizing outside foundries Example: EYSX Seal Fittings “Feralloy iron alloy and/or ductile” 10 skus: ½‘” thru 4” 4 skus are in grey and 6 skus in ductile Ductile needed to meet pressure requirement; Groups B, C, D ratings Malleable to Grey “Lower Strength & Elongation” Need to redesign parts with thicker walls to compensate for lower tensile strength Explosion-proof parts and parts subject to mechanical stresses (i.e. conduit body hub) Even with increased wall thickness, may not be able to maintain current certifications on some products – Groups C,D only versus Groups A,B,C,D Grey iron is not suitable for parts that undergo repeated stresses Beam Clamps, Conduit Clamps, Squeeze Connectors, Fixture Hangars 3rd Party Agencies will require re-testing & re-certification Malleable to Ductile “Ability to Pour” Ductile more difficult to cast in thin sections vs. malleable Ductile below .140” offers challenges; may require heat treating to eliminate carbides Requires more process controls vs. malleable Carbide formation – can generate hard/brittle parts that cannot be machined Ductile’s higher physical properties facilitates conversion from malleable Minimal part redesign and 3rd party certification issues
  14. S.MilwaukeeConversion from Malleable to Other Irons Actions Evaluated malleable parts to determine suitability of alternate materials Wall thickness, part geometry, part function Reviewed selection of malleable parts with outside ductile foundry No “show stoppers” identified so far – “should be okay – let’s do trial run” Engineering approved ductile as alternate based on earlier comparative testing on end products Ductile samples passed hydrostatic pressure test, assembly/torque test, load test, environmental tests Identifying additional grey iron candidates Classifying product in two categories – “As is” versus “Redesign/Retesting Required” “As is” candidates – ordinary location, suitable wall thickness, simple geometry Examples: FS/FD boxes, conduit body covers could be converted to grey iron
  15. DISA Casting Profile (excludes Airset)
  16. S.Milwaukee Molding CapacityLarger Plate Size maximizes Flexibility – Real Capacity less than Nameplate Capacity due to Frequent Setups
  17. Casting ProfileAverage Casting Weight 3.3 Lbs / Average Pour Weight 17.7 Lbs Total # of SKU and Total Annual Tons within a Weight Range
  18. Casting ProfileTop 50 Patterns by Metal in Molds / Year Molds / Year
  19. Casting ProfileBottom 2,500 Patterns by Metal in Molds / Year Molds / Year
  20. Overview of Casting MarketUS & Mexico Mexico Open to Strategic Partnership Horizontal Suppliers Small 3K – 35K Tons / Year 300 to 2,000 Patterns Okay with Low Volume Vertical Suppliers Large 80K to 400K Tons / Year 100 to 200 Patterns Only High Volume (> 5K Molds / Year) No foundries pouring malleable today, last poured in 1992 Vertical DISA foundries heavily focused on Automotive Pricing $0.60/lbs - $1.25/lbs US Current Premium probably not reflective of Market Pricing Very few financially stable Malleable limited to 2 Foundries Low / Medium volumes Bad Fit EGS tooled Vertically with Horizontal volumes
  21. Vertical Molding in Mexico 2010 Footprint of Vertical DISA Machines CIFUNSA Irapuato IRAPUATO Machine: DISA 2013 MK2 DISA 230 Alloy: Ductile CIFUNSA Saltillo – SALTILLO Machine: DISA 2013 MK5 DISA 2013 MK2 Alloy: Gray/Ductile TISAMATIC – SAN LUIS POTOSI Machine: DISA 2013 MK5X DISA 2013 MK5B DISA 2013 MK3A Alloy: Gray EGS Monterrey Fundicion de OccidenteGUADALAJARA Machine: DISA 2110 MK3 Alloy: Gray Nissan Mexicana AGUASCALIENTES Machine: DISA 2070 A Alloy: Unknown Atizapan CuerposEsfericos CHALCO Machine: DISA 2110 MK3 (2) Alloy: Ductile Rassini Frenos – PUEBLA Machine: DISA 2070 MK2 DISA 2013 MK2B DISA 2013 ALC DISA 230 (2) Alloy: Gray Industrias Memper MEXICO CITY Machine: DISA 2110 MK3 Alloy: Gray/Ductile Industrias Unidas PastejePASTEJE Machine: DISA 2013 MK Alloy: Gray/Ductile Autometales MEXICO CITY Machine: DISA 2070 MK1 Alloy: Gray/Ductile Volkswagen – PUEBLA Machine: DISA 2013 LPA Alloy: Unknown Supplier Eliminated Captive, not interested Potential Supplier Supplier TBD
  22. Supplier Profile – Tisamatic Potential Vertical Partner – High Volume Focus
  23. Horizontal Molding in Mexico2010 Hunter & Sinto Horizontal Machine Footprint Hierro Gris de Monterrey MONTERREY Machine: HMP 20 Alloy: Gray Industrial Link (FDC) CHIHUAHUA Machine: HMP 20 (2) Alloy: Gray Fundicion Qualy MONTERREY Machine: HMP 20 Alloy: Gray, Ductile TEKNIK MONTERREY Machine: HMP 20 (2) Alloy: Gray/Ductile EGS Monterrey Moldanz MONTERREY Machine: HMP 20 Alloy: Ductile Fabricacion de MaquinasMonterrey Machine: HMP 20 Alloy: Gray/Ductile Atizapan Art. Metalicos de Cadereyta(AMC) Monterrey Machine: FBS -1 FBM-1 FBO-II FBO-III-A Alloy: Grey Fundidora Ind. de Tlaxcala Tlaxcala Machine: FBO -III Alloy: Iron Fundidora Tlajomulco Guadalajara Machine: FBM - 1 Alloy: Iron Supplier Eliminated Captive, not interested Potential Supplier Supplier TBD
  24. Supplier Profile - ArticulosMetalicos de Cadereyta (AMC) Potential Horizontal Partner – Grey Iron
  25. Supplier Profile - Qualy Potential Horizontal Partner – Grey, Ductile
  26. Supplier Profile - Industrial Link (FDC) Potential Horizontal & Vertical Partner Initially Looked Promising – Serious Concerns about their Ability to Execute
  27. DISA Casting Profile (excludes Airset)
  28. S.Milwaukee Outsourcing AlternativesProposed Options
  29. SM Outsourcing AlternativesPreferred Strategy Description Option 1 Award all Vertical jobs to Vertical strategic partner (Tisamatic), horizontal and aluminum jobs to normal suppliers Option 3 Award all high volume Vertical jobs to Vertical strategic partner (Tisamatic); award low volume Vertical jobs and horizontal jobs to horizontal strategic partner and award aluminum jobs to normal suppliers Option 5 Split Vertical and Horizontal jobs between 2 horizontal Strategic Partners and aluminum jobs to normal suppliers Pros No learning curve Actively seeking to Diversify Fast implementation Some vertical options long-term Volume mis-match risk lower 2 machines available Fallback if 1 Partner Chokes # of patterns split equally Dedicated DISA machines Used To Low Volume Cons Risk high of volume mis-match No quick options if thrown out Poor service when Busy Vertical learning curve Building modifications Vertical learning curve x 2 Requires more equipment transfer Building modifications x 2 Ductile skill limited 1 machine per supplier (Recommend further investigation) (Recommend further investigation)
  30. Potential Path Identified This is a Highly Complex Project Execution will require 1 to 2 Years Meeting April deadline would require selling S.Milwaukee which will not shorten the Supply Chain Next Steps require detailed Tooling & Equipment information Launch dedicated Aluminum patterns now, it’s a seperate Project under any Scenario Any Outsourcing potentially triggers S.Milwaukee Union Risk Horizontal Supplier needs to fully develop their business plan for adding Vertical Machines and/or retooling to Horizontal Vertical Supplier needs to better understand EGS equipment and begin quoting to establish real understanding of savings
  31. Outsourcing Project TimelineUsing Option 3 as a Baseplan
  32. EGS Foundry Capabilties & EquipmentSome Assets Could be Relocated Readily
  33. EGS Foundry Capabilities & EquipmentSome Assets Could Be Relocated
  34. Next Steps Flush out Supplier Proposals – will require S.Milwaukee site visits Make decision on Restarting S.Milwaukee Execute Complexity reduction initiative Prepare Aluminum plan – identify suppliers and develop tooling strategy Review financial impact and review plan with SPX and Emerson at Financial Review
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