McLaughlin Body Company

John Deere

February 21, 2005

Company History

McLaughlin Body CompanyCorporate Office

East Moline Operations1400 5th Street(250,000 square feet / 23,225 square meters)

Rock Island Operations350-44th Street(450,000 sq. ft. / 32,516 sq. meters)

Most Valuable Resource

Dedicated employees at McLaughlin Body Co. 235 Hourly 83 Salaried

Renewed relationship with U.A.W 1414 Newly signed 6 year contract Lessons learned on both sides from a 4 week

work stoppage

Committed to being the premier supplier of cabs and attachments by providing products and services of the highest quality and value to our customers.

Our Vision

Our Mission

Our mission is to be the Quality, Service, Technology and Value leader in our industry. The focus on leading in all these areas will allow McLaughlin to exceed our customer’s expectations and mutually prosper.

Our ValuesThe integration of our people and processes to provide products of high value and high quality.

The continual support of our community by providing valued jobs and participating in charitable activities.

Continuous improvement through employee development, training and education.

Our Mission / Value Statement

McLaughlin Body Company is a supplier of cabs, bodies and attachments to the ag, construction, industrial, military, mining, municipal and truck markets Expertise in

Design and development Program management Prototyping ROPS certification Fabrication Weld Paint Assembly Delivery JIT to line set

Competencies

Fabrication Capabilities

Various lasers including a Mazak FMS (Flexible Manufacturing System) featuring (2) 4000 watt lasers

2500 watt Mazak multi-axis laser with sheet loader

CNC controlled press brakes nearly eliminate setup

5” OD capacity CNC controlled roll bender for complex sweeps

Straight side and double action draw presses to 1000 tons – bed sizes up to 144” X 90” and 56” shut height

Robotic Welding

13 Existing robotic weld stations ABB Panasonic Fanuc

9 integrated weld positioners 3 flexible cells Continued dedication to

expansion of automation

Paint Capabilities

Current dual paint systems handle parts of any size Current E-coat Cab line

8 stage zinc phosphate pretreatment with non-chrome seal 8th generation low cure cathodic epoxy e-coat material

Minimal shrink / edge pull Reduced VOCs and improved performance

Acrylic top coat 6’ X 8’ X 6’ part size 2000# capacity

Large line 5 stage iron phosphate pretreatment Polyester top coat over thermally cured spray primer 10’ X 10’ X 50’ part size 10,000# capacity

All new cab line will be operational in April of 2005

MBC Customers

Quality

Quality Delivery

Customer A 5.1σ 6.0σ

Customer B 6.0σ 6.0σ

Customer C 4.8σ 6.0σ

Customer D 6.0σ 6.0σ

Customer E 98%

All Others 99% (MBC, VOC Report Ratings)

Customer Quality Metrics

Supplier of the Year Award

Deere & Company, North American Ag Division, 2004 Supplier of the Year Award

Customer Quality Status Reports (VOC) Internal quality rating system Quality Engineers communicate with customers and report to

the McLaughlin organization on a weekly basis.

NetMeeting or WebEx Capabilities Provides the opportunity for the design, process, manufacturing

and quality engineers plus supply management to work as a team on cost reduction, corrective and preventive activities from multiple remote locations.

Caterpillar Connect / Deere Supplier Collaboration Customer specific web based access to specs, drawings,

quality performance reports and other communication information.

Electronic posting of PPAP documentation

Customer Communications Tools

Two local certified laboratories for chemical and physical testing of metals.

Chemical supplier performs periodic system audits of cleaning and phosphating processes

Paint supplier performs monthly analysis of E-coat bath.

In-house testing: Dry film paint thickness Zinc phosphate pre-treatment coating weights Specular gloss of topcoat paints Cross hatch paint adhesion, ASTM B117 salt fog accelerated corrosion resistance GM9540P cyclic accelerated corrosion resistance Ultra phonic leak testing Ultra sonic weld evaluation Surface hardness of metals (Rb)

Materials Testing

CQTS Completed Checklist

CQTS Component Pareto Analysis

New reports automatically sent via internal e-mail to specific employees

Focus on Direct & Root Causal factors, Mistake Proofing and other Prevention Activities

Complete sort capability by date range, originator or report status

Completed reports are electronically transmitted to the customer

Corrective & preventive action

Cost Containments

A specific formula is applied that both MBC and our customer know and understand

Separate markups for purchased content vs. manufactured content

Departmental overhead rates are applied for press room, weld, trim, and paint

Changes are processed at variable cost only

Pricing Methodology

Cost Benchmarking Initiatives

John Deere Steel

Cat Logistics

MRO Supplies

Cost Containment Analysis

McLaughlin Enterprise

McLaughlin Body Company Cab Manufacturer

Bee Line Company Laser Alignment

McLaughlin Motors Auto Dealership

SE National Bank Banking

MBC Financial Leasing

Major investments in equipment

Info Systems Initiatives

Continuous improvement initiatives

Monthly cost reduction meetings

Consolidation efforts

MBC Working to reduce costs?

Operations Consolidation

Rock Island facility has been selected as the primary manufacturing facility Operations centered around world-class paint

system Integration of all weld, paint and assembly

operations Streamlined material flow between processes Integrated fabrication of components Operational in 4-6 months

New system capabilities

System will be isolated in separate, pressurized building Provide superior pretreatment

15 Stage immersion pretreatment with Zinc Phosphate Alkaline / Acid / Alkaline w/reverse polarity cleaning

stages for best in class laser oxide and weld smut removal Include powder coat in addition to e-coat and wet

spray top coat capabilities 8th Generation improved performance e-coat Low-E powder for reduced VOC emissions and reduce

energy consumption

Consolidation Goals

Increased competitiveness Reduce waste associated with non-value

added activities Reduce overhead by establishing multi-

functional focus teams Accelerate throughput and reduced

inventories Improve quality through streamlined

processes and direct communication between functional groups

Consolidation Goals

Improved communication Integration of product support personnel Electronic data collection and online access

to process instructions and drawings Open layout without “departmental” barriers Committed team focused with clear mission

for the future

Consolidation Goals

Establish positive image within QCIC complex

Segregation and distinction of MBC Exterior revitalization New visitor center and product showroom Clean and comfortable work areas for all

employees Renewed emphasis on housekeeping

What are the results?

Material burden reduced 20%

Paint costs reduced 5%

Laser costs reduced 17%

Improved quality and capabilities

Freight costs reduced 19%

Representative Price History – 1

PRICE WITH INFLATION

ACTUAL PRICE

ACTUAL LESS IMPROVEMENTS

Base Price

5%

15%

5%

15%

25%

35%

45%

Representative Price History – 2

Inflation Price

Actual Price

Base Price

7.5%

2.5%

2.5%

7.5%

12.5%

17.5%

22.55%

12.5%

Forecasting Customer forecast and order requirements

Delivery PPM scores In the past 12 months, of the 8092 trimmed and sequenced

cabs produced, 100% were delivered on time

Sequencing of delivered cabs to machine line set Releases for fully trimmed cabs with a wide variety of options

are received into the planning system via EDI Electronic configuration of models and options (EDI data / web

portal) Unique BOMs generated for each cab serial number Build card system for assembly instructions

Inventory Controls

Order Process – Trimmed Cab

Order Received

EDI

MBC Create Work Order

with Sequence #

Build TicketSoftware and

Test

Download

Daily Shipments to

Customer

• Sequence #• Options

Required• 30 Day Ship

Notice• 7 Day Firm

Notice

• Details Optional Equipment

• Creates Sub-Ass’y Reports

• Reviews Inventory Requirements

• Software Downloaded

• Test Requirements

• Sub-Assembly Test Documented

• Daily Shipments by Customer Ass’y Sequence

• Invoiced

• Software Program Review Available Options for Acceptance

Supplier Forecasting Requirements Quarterly forecasting meeting with suppliers to review our

estimated requirements for the next six months

Expedited Freight From MBC suppliers Unscheduled customer volume increases Customer controller supplier late shipments Customer expedites cab shipments

Supplier Quality Rating Reviewed with supplier on quarterly basis

Supplier Communication

Development

Engineering Support

Current group consists of 5 Manufacturing Engineers, 4 Industrial Engineers, 4 Quality Engineers, 3 Design Engineers, 2 Tooling Engineers and 1 Weld Engineer

This group can manage any product introduction from a complete design from the ground up to a straight forward transfer

Average Quotation Lead Time 1 week turn on Engineering Changes 3 to 4 weeks Cab

Product Development Process

Contract Feasibility

Review

Design and

Develop

Prototype Validate

PilotRelease Launch

• X-functional• Capacities• Capabilities• Competencies• Strategy

• Assign Team• Develop

Project Plan• INPUT review

• Proto build• Confidentiality• Mfg validation• Tooling build• Tooling

validation

• OUTPUT review

• Key features ID• IMS

development• Preliminary

process docs (routings / process instructions)

• Control plans

• Facility prep• Training• Product

approval• FAI / Capability

Studies• Product design• Supplier

selection• Design reviews

• DFMA/ FMEA reviews

• Tooling Design• Process Plan

•Provide acceptable quotation•Establish target price

Engineering Support

Project Management Projects are tracked through production

start up with detailed Gantt chart Responsibilities defined and communicated Key milestone reviews scheduled Critical path tracked and managed

Summaries and updates are circulated to entire internal and external project team on predetermined intervals

Engineering Support

Project Management Tooling and product cost budgets are carefully

tracked using development tracking summary Products broken down by functional group such as

frame, glass, door, etc Costs tracked and monitored against initial frozen

budgets Immediate visibility to budget creep Miscellaneous items such as hardware budgeted

initially as a “kit” and tracked as defined

Design Capabilities

(7) Seats of Pro-Engineer (Maintain use of previous versions to support customer needs)

Pro-Process for Assemblies (used by IE)

Pro-Intralink (Data Management software)

Pro-Mechanica 2001 (for FEA analysis)

Ability to import IGES, STEP, DXF models

Flexible and will adapt to customer needs

Tooling design in can be done in Pro/E concurrent with product development Speed launch time, simplify changes Create permanent revision controlled

record of tools

Design Capabilities - Tooling

Linear FEA capabilities using Pro/Mechanica Analysis for potential hot spots Frame / joint optimization

Design Capabilities - FEA

Product Expertise

ROPS expertise with active members on both construction and Ag ROPS subcommittees. Bill Johnson – Advance Engineering Manager,

Current vice chair of SAE Operator Protection Technical Committee - OPTC

Active member of OPTC SC4 - Protective Structures

Active member of ASAE PM-23-2-2 Agricultural ROPS subcommittee

Change Process

Request for Change

Identify Impact

Authorization

Implement

• Customer request

• Internal Change

• New parts• ISIRs• Process Instructions• Training

• Unit cost impact• Tooling• Obsolescence

• Customer approval

• Internal approval

Standard time = 1 Week(~300 Changes in 2004)

Implementation Specificlead time requirement

Management

Retain current customer base through superior customers service Improve customer communications with quarterly reviews Position ourselves as a Key Supplier all Deere Division Supplier of the Year for Deere Ag Division 2004

Diversify business by obtaining new business in new markets and additional business from key customers Utilize adjacency strategies to grow key segments with valued

customers

Achieve high value status (low cost, high quality, exceptional services) Evaluate current supply base and look at offshore sources. Evaluate current supplier deliver process for inventory reduction Leverage supplier expertise and develop strategy for significant

reductions

2004 Five Year Strategic Plan

Operations consolidation Utilize lean tools and methods to sustain continuous improvements Pursue technology advancements to improve quality

Successfully address key management succession issues Identify key people and skills and develop appropriate plan

Achieve ongoing company wide commitment to strategic direction Schedule timely review, update and measurement against

strategic plan

2004 Five Year Strategic Plan

From McLaughlin Body Company

Thank You