federal mogul 9e16462a-2277-45cf-98d1-fd0f18782c97_q408_presentation

Strictly Confidential

Federal-Mogul CorporationQ4 and 2008 Financial Results

Conference CallFebruary 24, 2009

2Public February 24, 2009Federal-Mogul Corporation 2008 Financial Results

Today’s Presenters

José

Maria Alapont President and Chief Executive Officer

Jeff Kaminski Senior Vice President and Chief Financial Officer


Safe Harbor Statement

Statements contained in this presentation, which are not historical fact, constitute "Forward-Looking Statements." Actual results may differ materially due to numerous important factors that are described in Federal-Mogul's most recent report to the SEC on Form 10-K, which may be revised or supplemented in subsequent reports to the SEC on Forms 10- Q and 8-K. Such factors include, among others, the cost and timing of implementing restructuring actions, Federal-Mogul’s ability to generate cost savings or manufacturing efficiencies to offset or exceed contractually or competitively required price reductions or price reductions to obtain new business, conditions in the automotive industry, and certain global and regional economic conditions. Federal-Mogul does not intend or assume any obligation to update any forward-looking statement to reflect events or circumstances after the date of this presentation.


AgendaOpening Remarks / Business SummaryJosé

Maria Alapont President and Chief Executive Officer

Q4 and Full Year Financial ReviewJeff KaminskiSenior Vice President and Chief Financial Officer

Closing Remarks

Q & A


•

Quarterly sales of $1.3 billion versus $1.7 billion in Q4 2007. The 25% reduction is due to the unprecedented macro-economic and automotive market and downturn

•

Gross margin of $183 million, or 13.9% of sales, compared to $275 million, or 15.7% of sales in Q4 2007

•

Reduced total SG&A cost by $40 million during Q4 versus prior year

•

Operational EBITDA of $114 million or 8.7% of sales versus $186 million or 10.5% in Q4 2007

•

Restructuring charge of $118 million as part of Federal-Mogul’s global restructuring program announced during the second half of 2008

•

Non-cash, intangible assets impairment of $451 million due to the global economic downturn

•

Net loss of $530 million driven by intangible assets impairment and restructuring charges

•

Adjusted net loss of $24 million in Q4 2008 compared to an adjusted net income of $11 million in Q4 2007

•

Positive cash flow of $180 million versus negative cash flow of $(193) million in Q4 2007

Q4 Highlights


2008 Highlights•

Sales of $6.9 billion versus $6.9 billion in 2007 demonstrating record first half performance and continued actions to gain market share in 2008

•

Gross margin of $1.12 billion, or 16.4% of sales, compared to $1.19 billion, or 17.1% of sales in 2007

•

Reduced total SG&A cost by $72 million before the impact of exchange. SG&A of 11.3% of sales, compared to 12% of sales in 2007

•

Operational EBITDA of $754 million or 11% versus $763 million or

11% of sales in 2007

•

Restructuring charge of $132 million as part of Federal-Mogul’s global restructuring program

•

Non-cash, intangible assets impairment of $451 million due to global

economic downturn

•

Net loss of $468 million driven by intangible assets impairment and restructuring charges

•

Adjusted net income of $113 million in 2008 versus adjusted net income of $75 million in 2007

•

Positive cash flow of $321 million versus negative cash flow of $(228) million in 2007


Driving the Future While Crossing the Desert•

Federal-Mogul is facing the challenge of crossing the desert of this downturn with efficient action plans, urgency, strength and relentless execution

•

Federal-Mogul reported stable 2008 sales, solid operating margins and EBITDA, with strong cash flow as a result of aggressive actions to reduce Q4 operating costs by 23%, in line with the market downturn

•

We put in place a global restructuring and cost reduction plan including the consolidation of our five business segments into four with further streamlining of operating and support staffs


Driving the Future While Crossing the Desert•

Federal-Mogul is managing the market challenge by reinforcing our strategy with a stronger drive in key performance areas:–

Global OE/OES market share growth –

Increasing global Aftermarket sales and services–

Variable cost company model

•

We are positioned to capitalize on acquisition opportunities with our strong liquidity and no financial maintenance covenants

•

Federal-Mogul remains fully committed to its sustainable global profitable growth strategy through the market’s downturn


$393$387$333$319

$0

$100

$200

$300

$400

2005 2006 2007 2008

$624$763

$554

$754

$0

$400

$800

2005 2006 2007 2008

Strong Financial PerformanceEBITDA($ millions)

Free cash flow = EBITDA less capital expenditures and cash restructuring payments

SG&A Free Cash Flow

SG&A as a % of Sales

$774$828$848

$884

$500

$600

$700

$800

$900

$1,000

2005 2006 2007 20089%

11%

13%

15%

$6,286 $6,326$6,914 $6,866

$3,000

$4,000

$5,000

$6,000

$7,000

2005 2006 2007 2008

Sales


Full Year Sales by Region

US & Canada

$2.9

42%

ROW $.9

Europe $3.1

46%

12%

US & Canada

$2.740%

ROW $1.0

Europe $3.2

46%

14%

$6.9 billion$6.9 billion

20082007($ billions)


Federal-Mogul Global OE and Aftermarket Advantages

•

Leading technology and innovation together with knowledge from mechanics/installers used to develop world-class OE and Aftermarket designs for easy installation, repair and maintenance

•

Federal-Mogul is a leader in offering new full product ranges to the worldwide Aftermarket

•

Federal-Mogul’s OE and Aftermarket business model with 62% OE and 38% Aftermarket in 2008 minimizes revenue fluctuation

•

Efficient Federal-Mogul capacity utilization to flex with OE and Aftermarket customer requirements

•

Premium Brands, OE Replacement and Entry Level products provide single source coverage for all global customers


Vehicle Utilization

Source: RL Polk, F-M Estimates

Federal-Mogul’s global aftermarket business is well positioned considering current financial and automotive market dynamics, increasing average age of vehicles on the road and resulting repair activity.

Average Vehicle Age - Global

6.36

7.407.69

8.29 8.41 8.49 8.62 8.69 8.77 8.84 8.91

5.05.56.06.57.07.58.08.59.09.5

10.0

2000 2002 2004 2006 2008 2010Actual Forecast

Average Vehicle Age - U.S.

7.60 7.62 7.65 7.71 7.83 7.92 8.01 8.098.35 8.50 8.62

5.05.56.06.57.07.58.08.59.09.5

10.0

2000 2002 2004 2006 2008 2010Actual ForecastActual Forecast


Financing and Capital Structure

•

$3.5 billion long-term debt facility–

Low interest costs–

Minimal annual debt amortization until after 2013–

No financial maintenance covenants–

Provides flexibility to deploy capital globally

•

More than $1.3 billion of available liquidity as of December 31, 2008

•

$1.2 billion in interest rate swaps reduces exposure to LIBOR volatility


Debt Maturity Profile

Debt Maturity Profile as of December 31, 2008

$-

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

2009 2010 2011 2012 2013 Thereafter

Mill

ions

Tranche B term loan Tranche C term loan Other, primarily non-U.S. debt


Strategic Acquisitions•

We are evaluating potential acquisitions to enhance technology portfolio, expand footprint, increase market share and strengthen revenue diversification while meeting financial requirements

•

2008/2009 economic conditions bring new realism in the marketplace for acquisition opportunities

•

Federal-Mogul Recent M&A Activity : –

Increased DongShuh China equity from 50% to 75.5%–

Acquired Shanghai Compound Material Co. 60% ownership–

Increased F-M Goetze India equity from 57% to 74.9%–

Acquired 64% ownership in F-M Bearing India Ltd. –

Established F-M Naberezhnye Chelny controlled JV in Russia


Global Cost Reduction & Restructuring•

Federal-Mogul has implemented global programs to restructure operating capacity, streamline SG&A, reduce materials consumption, purchased services and discretionary spending

•

During 2008 Federal-Mogul implemented or announced planned restructuring actions including:–

Workforce reduction of 26% since July 2008–

Manufacturing plant and distribution center closures–

Global capacity flexing to adjust to market downturn–

Shortened work weeks and modified shift patterns with no premiums–

Streamlining SG&A and support staffs–

Anticipated cost of the restructuring programs is $160 million

•

Recorded restructuring charge of $132 million in 2008


Global Cost Reduction & Restructuring•

The consolidation of our five business segments into four includes the following benefits:–

Federal-Mogul structure closer to customers and markets served –

Better coordination of product engineering and manufacturing competencies across business units

–

Reduction in operating and functional staffs required to support

product lines within business units–

Facilitates realignment of business structure in corporate, regional and product groups to further optimize SG&A throughout the company


Powertrain Energy (PTE)Automotive and industrial pistons, rings, pins, liners, valvetrain and ignition

Powertrain Sealing and Bearings (PTSB)Dynamic and bonded seals, hot and static gaskets, bearings & bushings, industrial bearings, heat shields and transmission components

Vehicle Safety and Protection (VSP)Brake disc pads, linings and components, halfblocks, wipers, lighting, chassis components, system protection and flexible shields

Global Aftermarket (GA)Full range portfolio of leading aftermarket products for global automotive, commercial vehicle and industrial replacement markets

Portfolio and Reporting Segments

Green typeface signifies product groups realigned


Safety and Quality Excellence in Products and Services

2117

9

29

2005 2006 2007 2008

Quality Performance

Parts Per Million (PPM)

1.5

1.0

1.4

2.0

2005 2006 2007 2008

Safety Incident Rate

Annual Injuries per 200,000 Hours Worked

Federal-Mogul is World-class in Safety and Quality Performance


2003 2005 2008

Global Manufacturing Capacity by Region

N. America 40%

Europe50%

Best Cost 11%

N. America 40%

Europe45%

Best Cost 10%

Best Cost 15%

N. America 31%

Europe44%

Best Cost 25%

All periods stated at 2008 exchange rate to $US


Global Supply Base Optimization

$455

$553

$805$69023%

27%

36%33%

$0$100$200$300$400$500$600$700$800

2005 2006 2007 20080%

5%

10%

15%

20%

25%

30%

35%

40%

% of Spend

Best Cost Country Sourcing – Direct Materials($ millions)


•

Federal-Mogul reported in 2008 solid sales performance of $6.9 billion, in line with 2007, despite downturn in Q4

•

Proactive restructuring and aggressive cost reductions in line with lower sales, preserving operating performance with gross margin of $1.1 billion or 16.4% of sales

•

Reduced total SG&A expense by $72 million excluding unfavorable impact of exchange of $18 million. Continued implementation of measures to reorganize company structure for further savings

•

Maintained solid operational EBITDA of $754 million or 11 percent of sales, in spite of Q4 market decline

•

Net loss of $468 million impacted by intangible assets impairment of $451 million and restructuring charges of $132 million in response to macro-economic and automotive market downturn

•


•

Cash flow is a Federal-Mogul strength with $321 million in 2008 versus cash outflow of $(228) million in 2007

2008 Federal-Mogul Highlights


Q4 Financial ResultsJeff Kaminski, CFO


Q4 Financial Results *($ millions)

*Includes a reconciliation of “As Reported”

and “Adjusted”

results

2008 As Reported Adjustments

Adjusted 2008


Adjusted 2007

Adjusted B/(W)

Net sales 1,319$ -$ 1,319$ 1,749$ -$ 1,749$ (430)$

Gross margin 183 - 183 275 - 275 (92) pct. of sales 13.9% 13.9% 15.7% 15.7% (1.8) pts

SG&A (161) - (161) (201) - (201) 40 pct. of sales -12.2% -12.2% -11.5% -11.5% (0.7) pts

Interest expense, net (43) - (43) (47) - (47) 4 Amortization expense (19) - (19) (5) - (5) (14) Chapter 11 expense (2) - (2) (24) - (24) 22 Joint venture equity earnings 3 - 3 10 - 10 (7) Restructuring charges (118) 118 - (9) 9 - - Impairment charges (451) 451 - (54) 54 - - Bankruptcy Emergence gains - - - 1,717 (1,717) - - Other income (expense), net 26 - 26 14 - 14 12

(Loss) income before income taxes (583) 569 (13)$ 1,676 (1,654) 22 (35)

Income tax (expense) benefit 53 (64) (11)$ (286) 275 (11) -

Net (loss) income (530)$ 505$ (24)$ 1,390$ (1,379)$ 11$ (35)


Q4 Operational EBITDA Reconciliation($ millions)

2008 2007

Net (loss) income - As Reported (530)$ 1,390$ Restructuring charges 118 9 Impairment charges 451 54 Bankruptcy Emergence gains - (1,717) Income tax (expense) benefit on adjustments (64) 275

Adjusted net (loss) income (24)$ 11$

Chapter 11 related reorganization costs 2 24 Interest expense, net 43 47 Income tax expense 11 11 Depreciation and amortization 84 92 Other (2) (0)

Operational EBITDA 114$ 186$


$(172) $186

$18

$35

$69 $(22) $0 $114

Q4 EBITDA Bridge 2007 – 2008

Volume &Mix

Market Share Gains

Pricing

Productivity

Exchange& OtherQ4 2007

EBITDA

Sales$1,749

Q4 2008EBITDA

Sales$1,319

($ millions)

Sales Δ (429) $69 $35 $(110)

PPV

$5


Full Year and Q4 Results Powertrain Energy (PTE)

Q4•

US/Canada down (21)%, Europe down (39)%, ROW down (19)%

•

Reduced market volumes•

Continued market share gains in all regions•

Includes $(49) million of exchange impact

Q4•

Volume/mix $(55) million •

Higher productivity and lower depreciation $25 million

•

Material prices and customer pricing $(6) million•

Exchange $(4) million

($ millions)

Full Year•

US/Canada down (6)%, Europe up 1%, ROW up 16%

•


Continued market share gains in all regions•

$81m favorable exchange

Full Year•

Volume/mix $(28) million•

Higher productivity and lower depreciation $74 •

Material prices and customer pricing $(23) million

•

Exchange impact $(2)

* Gross Margin adjusted to exclude the one-time, fresh-start inventory adjustment.

Sales 2008 2007 B/(W) Gross Margin 2008 2007 B/(W) Full Year 2,085$ 2,054$ 31$ Full Year * 279$ 258$ 21$

pct change +2% pct of sales 13.4% 12.5% 0.8 pts

Q4 359$ 541$ (182)$ Q4 27$ 67$ (40)$ pct change -34% pct of sales 7.6% 12.3% (4.8) pts


Full Year and Q4 Results Powertrain Sealing and Bearings (PTSB)

Q4•


•



Q4•


Customer pricing $16 million •


($ millions)

Full Year•

US/Canada down (15)%, Europe up 8%, ROW up 10%

•

Reduced market volumes in the Americas and Europe and a slight increase in ROW

•

Includes $35 million favorable exchange impact

Full Year•




•

Material prices $(2) million•

Exchange $4 million


Sales 2008 2007 B/(W) Gross Margin 2008 2007 B/(W) Full Year 1,047$ 1,055$ (8)$ Full Year * 70$ 54$ 16$

pct change -1% pct of sales 6.7% 5.1% 1.6 pts

Q4 189$ 264$ (75)$ Q4 (8)$ 6$ (14)$ pct change -28% pct of sales -4.4% 2.2% (6.7) pts


Full Year and Q4 Results Vehicle Safety and Protection (VSP)

Q4•

US/Canada down (42)%, Europe down (37)%, ROW down (29)% in Q4

•

Reduced market volumes •


Q4•


Higher productivity / lower depreciation $17 million •

Material prices $(9) million •


($ millions)

Full Year

•

US/Canada down (30)%,

Europe down (4)%, ROW up 17%

•



Full Year•


Customer pricing $(4) million•


•


Exchange $4 million favorable impact


Sales 2008 2007 B/(W) Gross Margin 2008 2007 B/(W) Full Year 717$ 793$ (76)$ Full Year * 176$ 192$ (16)$

pct change -10% pct of sales 24.6% 24.3% 0.3 pts

Q4 123$ 195$ (72)$ Q4 23$ 43$ (20)$

pct change -37% pct of sales 18.5% 21.9% (3.4) pts


Full Year•


Customer pricing $1 million•


•


Exchange impact of $2 million

Full Year and Q4 Results Automotive Products (AP)

Q4•


•


Market share gains in the Americas and ROW •


Q4•



Higher productivity / lower depreciation $8million•



($ millions)


Full Year•

US/Canada up 12%, Europe up 18%, ROW up 13%

•

Reduced market volumes in the Americas and ROW, a slight increase in market volumes in Europe

•

Market share gains in the Americas and Europe•


Sales 2008 2007 B/(W) Gross Margin 2008 2007 B/(W) Full Year 379$ 334$ 45$ Full Year * 83$ 73$ 10$

pct change +13% pct of sales 21.8% 21.7% 0.1 pts

Q4 77$ 90$ (13)$ Q4 18$ 20$ (2)$ pct change -14% pct of sales 23.5% 22.7% 0.8 pts


Full Year and Q4 Results Global Aftermarket (GA)

Q4•


•


Market share gains in Americas and Europe•


Q4•


Product mix $(9) million •


Material prices, productivity $5 million •


($ millions)

Full Year•

US/Canada down (3)%, Europe down (2)%, ROW up 8%

•

Reduced market volumes •

Market share gains in Americas and Europe•


Full Year•


Product mix $(35) million •


Material prices, productivity $4 million•



Sales 2008 2007 B/(W) Gross Margin 2008 2007 B/(W) Full Year 2,637$ 2,678$ (41)$ Full Year * 575$ 611$ (36)$

pct change -2% pct of sales 21.8% 22.8% (1.0) pts

Q4 571$ 659$ (88)$ Q4 120$ 140$ (20)$ pct change -13% pct of sales 21.0% 21.2% (0.2) pts


Full Year Financial Results*

*Includes a reconciliation of “As Reported”

and “Adjusted”

results

($ millions)


Adjusted 2008


Adjusted 2007

Adjusted B/(W)

Net sales 6,866$ -$ 6,866$ 6,914$ 6,914$ (48)$

Gross margin 1,124 68 1,192 1,185 - 1,185 7 pct. of sales 16.4% 17.4% 17.1% 17.1% 0.2 pts

SG&A (774) - (774) (828) - (828) 54 pct. of sales -11.3% -11.3% -12.0% -12.0% 0.7 pts

Interest expense, net (180) - (180) (199) - (199) 19 Amortization expense (76) - (76) (19) - (19) (57) Chapter 11 expense (17) - (17) (81) - (81) 64 Joint venture equity earnings 24 - 24 38 - 38 (14) Restructuring charges (132) 132 - (48) 48 - - Impairment charges (451) 451 - (61) 61 - - Bankruptcy Emergence gains - - - 1,717 (1,717) - - Other income (expense), net 34 - 34 41 - 41 (7)

(Loss) income before income taxes (449) 652 202 1,744 (1,608) 136 66

Income tax (expense) benefit (19) (71) (90) (332) 270 (62) (28)

Net (loss) income (468)$ 581$ 113$ 1,413$ (1,338)$ 75$ 38$


Full Year Operational EBITDA Reconciliation($ millions)

2008 2007

Net (loss) income - As Reported (468)$ 1,413$ Fresh-start valuation charge 68 - Restructuring charges 132 48 Impairment charges 451 61 Bankruptcy Emergence gains - (1,717) Income tax (expense) benefit on adjustments (71) 270

Adjusted net income 113$ 75$

Chapter 11 related reorganization costs 17 81 Interest expense, net 180 199 Income tax expense 90 62 Depreciation and amortization 350 354 Other 5 (7)

Operational EBITDA 754$ 763$


Full Year EBITDA Bridge 2007-2008

$754$43$(27) $134

$43$80

$(282) $763

Volume &Mix

Market Share Gains

PricingProductivity

Exchange & Other

2007EBITDA

2007 Sales$6,914

2008EBITDA

2008 Sales$6,866

($ millions)

Sales Δ $(604) $285 $43 $228

PPV


Full Year Cash Flow ($ millions) 2008 2007

Net (loss) income (468)$ 1,413$ Bankruptcy Emergence gains - (1,717) Payments from (to) U.S. Asbestos Trust 225 (140) Other Emergence related payments (23) (176) Impairment charges 451 61 Depreciation and amortization 350 354 Changes in operating assets and liabilities:Accounts receivable 90 (47) Inventories 122 15 Accounts payable (61) 124 Other assets and liabilities (58) 149 Cash Provided From Operating Activities 627$ 35$ Expenditures for property, plant and equipment (320) (310) Other investing 14 47 Cash Used By Investing Activities (306)$ (263)$ Cash Provided From (Used By) Operating and Investing Activities

$ 321 $ (228)

Cash Provided From Financing Activities 197$ 265$ Effect of foreign currency exchange rate fluctuations on cash (55) 29 Increase in cash and equivalents 462$ 66$ Cash and equivalents at beginning of year 425 359 Cash and equivalents at end of year 888$ 425$


2008 Financial Summary•

Sales of $6.9 billion versus $6.9 billion in 2007 demonstrating record first half performance and continued actions to gain market share in 2008

•

Gross margin of $1.1 billion, or 16.4% of sales

•

Reduced total SG&A cost by $72 million before the impact of exchange. SG&A of 11.3% of sales, compared to 12% of sales in 2007

•

Operational EBITDA of $754 million or 11%

•

Restructuring charge of $132 million as part of Federal-Mogul’s global restructuring program

•


•

Positive cash flow of $321 million versus negative cash flow of $(228) million in 2007


The Challenge of Driving Sustainable Global Profitable Growth•

Federal-Mogul successfully adapting to compete in difficult market downturn

•

Well-positioned to simultaneously support OE and Aftermarket customer requirements and trends

•

Continued migration to best cost sourcing and manufacturing structure

•

World-class safety and quality performance

•

Strong market, customer and product diversification is a Federal-Mogul strength with no single customer representing more than 6% of sales

•

Leading technology and innovation to improve fuel economy, reduce emissions, enable alternative energies and improve vehicle safety

•

Capital structure and liquidity to pursue Global Sustainable Profitable Growth


Thank YouInvestor Relations Contact:David Pouliot (248) 354-7967

Media Relations Contact:Steve Gaut (248) 354-7826

federal mogul 9e16462a-2277-45cf-98d1-fd0f18782c97_q408_presentation

Economy & Finance