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Components – Stampings History

Components – Stampings History. ‘03-06 Focused on ES Velocity ‘06-08 Preferred Supplier Development ’09-10 Risk Mitigation & Market Differentiators. *Suppliers w/ Purchases over $1,000. Components - Stampings Market Segmentation. * US Market Only.

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Components – Stampings History

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  1. Components – Stampings History • ‘03-06 Focused on ES Velocity • ‘06-08 Preferred Supplier Development • ’09-10 Risk Mitigation & Market Differentiators *Suppliers w/ Purchases over $1,000

  2. Components - Stampings Market Segmentation * US Market Only

  3. Components - Stampings Market Update Stamping Industry facing significant financial stress: Avg. Supplier seeing 30-40% decline in utilization Closing Facilities / Chapter 7 Bankruptcies Market Value of Assets are worthless Financial Issues contained mostly to USA Stampers: EU/Asia suppliers faring a little better Fabrication/Enclosures revenue down 10-20% Risk Mitigation for Stamping Suppliers is Critical 3

  4. Components – Stamping Supplier Financial Analysis ~$100M in Purchases w/ Highly Leveraged Suppliers / Dual-Sourcing is Required Note: Financial Data based upon received Surveys from 93 Preferred Suppliers

  5. Components – Stamping Supplier Financial Analysis Enclosure/Fab Suppliers have better financials Stamping Suppliers are more exposed to Automotive; thus facing more financial issues than other Preferred Suppliers Note: Financial Data based upon received Surveys from 93 Preferred Suppliers

  6. Components – Stamping Market Outlook No Relief Until 2012 Excess Capacity *White Goods -21.5% Auto Industry Volume Growth: US EU AP ‘04-’08 CAGR -1.7% 0.9% 8.4% ‘08-’13 CAGR -0.9% 3.3% 5.8% • Massive Consolidation is Expected (capacity must come offline) • Buyer Power may decrease slightly (but not significantly!) • FY’10 Outlook: more bankruptcies Source Data: DataMonitor June 2009

  7. Components – Stamping Technology Improvements • Very Slow Technological Growth over past 50 years • Latest Advancements may prove significant though • Servo-Motor • Hydraulic • Press • Shorter Stroke increases Productivity • Smaller Press Required • 20-40% Energy Savings • In-die Sensors for Improved Quality • Quiet / Improved working condition • Hydraulic • Press • Improved Stroke Velocity • Quick Die Changeover Productivity • Mechanical Press • Mechanical Motion / Flywheel Design • Requires large space • Frequent Maintenance 2005+ 1930s-1990s 1990s-2005 • Supplier Costs will be Decreasing • Suppliers that have the financial resources to invest will survive

  8. Components – Stampings FY’10 Initiatives Risk Mitigation: Quarterly Updates of Financial Assessments Contingency Plans Preferred Supplier Development Develop “Future” Marquee Suppliers Material Price Management (Deal Management) DPO 100% of Preferred with 5th/3rd Prox or equivalent Inventory Improvement thru Regionalization

  9. Components - Stampings Preferred Supplier Development Enclosure ($142M) Niche Stamping ($84M) Strategic Relationships: Conghua, KBL, Prince, Hoffman, Rittal Focus Areas: Mexico, India Strategic Relationships: Valfsan Focus Areas: LASCO, APSCO Sheet Metal Fab ($120M) Traditional Stamping ($303M) Strategic Relationships: Danco, Everyday, JM Kappa, Ningbo Spring, Kirac Focus Areas: E. Europe Strategic Relationships: ICE, Brittany, ISIL, E&W, Lide, Ulus, Sesan Semak, Clairon Focus Areas: E. Europe FY’10 Focus: Building Stronger Relationships & Demonstrating Value of Preferred Supplier Program 9

  10. Components - Stampings Material Adjustment Strategies Team will continue to utilize all four strategies to meet divisional requirements & strategy.

  11. Components – Stampings Opportunities in Latin America Total Current Demand North & L. America Sites = $277M N. America Sourced $193M ROW Sourced $30M L. America Sourced $54M Exported to Mexico $48M FY’10 Focus: Process – MMI & Rosemount Flow ($2M) MAC – Appliance Control ($1.5M) ENP – ASCO Power ($2M)

  12. Components – Stampings Opportunities in Eastern Europe Total Current Demand For European Sites = $97M W. Europe Sourced $60M ROW Sourced $6M E. Europe Sourced $31M FY’10 Focus: Process – Rosemount Measurement ($2M) IA – Leroy-Somer ($1M) ENP – Liebert Europe ($2M)

  13. Components - Stampings Strategy by Market Segment Niche Stamping ($84M) Supplier Size: Large Value: Technical Competency Key Strategies: Develop BCC Suppliers Enclosure ($142M) Supplier Size: Large Value: Automation and Secondary Ops Key Strategies: Localization (where applicable) Two-tier approach to high/low volume Lean (Reduce Lead-time) High Complexity Sheet Metal Fab ($120M) Supplier Size: Small-Medium Value: Low Volume / High Mix Key Strategies: Consolidate Supply Base Localization Traditional Stamping ($303M) Supplier Size: Medium-Large Value: Efficiency and Steel Price Key Strategies: Chase the Best Price of Steel! Dual-Sourcing / Risk Mitigation Low Low High Volume 13

  14. Components - Stampings Market Differentiators Material Standardization: Leverage Common Grades/Gauges across Business Groups Material Optimization: Scrap Reduction thru tool & part design Material Price Management Strategic Use of Steel-Pass Thru Program Portfolio Approach of 3, 6, 12-month fixed price contracts Tooling Standardization Utilize common sizes/design to increase ease of transferability Execution of these strategies will differentiate Emerson from the competition. 14

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