11-03-12 Community & Economic Development

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They noted that their company is a 24/7 operation. Lines 8 and 9 were added in calendar year 2002 and 2003. In 2004 they added line 10 and closed their operations in the State of Georgia. This year the vast majority of their services have been for Ford and GM (90 %) and they are 10% below budget projections this year. In response to a question from Council Member Rouse, they noted that all pistons are made in South Bend. The LaGrange, Georgia operation provided services to Briggs & Stratton at "low cost or no cost"; with that operation now taking place in China. The automation line however was moved to South Bend with the small engine line moving to China. Council Member Puzzello noted that overall Federal Mogul has spend more dollars on new equipment then originally projected, however their projected employment numbers have not been met. The Federal Mogul representatives noted now they have much more complex pistons. GM has decided to out - source more. Many of their items are "passed through" and cannot be marked up. Council Member Rouse noted that raw material and labor costs have gone up. The Federal Mogul representatives noted that wage increase have averaged 3 -31/2% each year with medical benefits rising by 10 %. Annual price reductions often result in 2 -21/2% contractually, resulting in $1 million to $3 million reductions. Prices have deteriorated due to market conditions. They noted that Ford and GM have a right to resource, however when GM asked them for a 40% reduction and they responded with a 30% reduction, Federal Mogul lost the business and GM went elsewhere. They noted that if you do not value your employees, you will not be able to retain them, and they focus on retaining their workforce. In response to a question from Council Member Puzzello, the Federal Mogul representatives noted that production improvements have included automation and that they have not laid off any employees, but focused on attrition instead. In late 2007, they anticipate providing services to Chrysler- Daimler. In response to Council Member Rouse's question, the Federal Mogul representatives stated that they are in a "tough global economy ". They noted that in Mexico, where wages are $4.00 per hour and that the real threat is China where wages are $1.00 per hour. They must focus on productivity with the same level of personnel. Their overall goal is to stay here. In response to a question from Ms. Kendall, the Federal Mogul representatives stated that the quality from China is unknown and that the quality in Mexico rivals that in South Bend. Mexico has more employees and less productivity. The Federal Mogul representatives noted that they talk daily with Toyota on research and development items in the interest of trying to spread their base. Their current average payroll in $30 million and an additional $30 million are spent in Indiana with various vendors. In response to a question from Council Member Rouse, the Federal Mogul representatives stated that a technology park would be beneficial, and that there needs to be tech education locally as November 3, 2005 Community and Economic Development Committee Meeting Minutes -Page 2 of 3-