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COMMODITY REVIEW

COMMODITY REVIEW. Buy out parts Thierry Coumert. Buy out parts. Bearings inflation. Bearings Organisation. Bearings. Market Trend Opportunities 100Cr6 steel market price decrease Increased productivity at bearing manufacturers lead to lighter labour impact on bearing manufacturing cost

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COMMODITY REVIEW

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  1. COMMODITY REVIEW Buy out parts Thierry Coumert

  2. Buy out parts

  3. Bearings inflation

  4. Bearings Organisation

  5. Bearings • Market Trend • Opportunities • 100Cr6 steel market price decrease • Increased productivity at bearing manufacturers lead to lighter labour impact on bearing manufacturing cost • Risks • Zloty/Leu & Yuan rates to € are likely to grow • Bottlenecks in production on some sizes lead to tensions on supply

  6. Zloty / € + 22%

  7. Bearings : Summary

  8. Bearings : KPI

  9. LS Bearing Spend per Origin NSK/SKF 53 % out of LCC Total Spend : 6 M€ NSK/NTN/Koyo FLT/NSK SKF/NSK/FAG

  10. Bearings : LCC FY 07 • Objectives FY 07 • Bearings : From 53 % LCC up to 65% LCC • Larger share awarded to NSK and FLT Poland • Extension of RBNV/Romanian source for taper/roller/spherical bearings • Limited introduction of Peer on small DGBB • Slide Bearings : 0% LCC (Renk – Germany)

  11. Bearings : Reverse Auction • FY 06 • WS 9682 Wind mill Bearing 1125 k€ * 7% • WS 4850 Slide Bearings 2362 k€ ** 0,12% • WS 12528 LS Eu Asia DGBB 1600 k€ 11,9% • FY 07 • Wind mill Bearing  New contract • Slide Bearing  Combined auction w Kato *2years spend **22 months spend

  12. Bearings : Main Projects • FY 06 • 2007-2009 Bearings LTAG negociation incl. RA • About 800 k€ savings out of 7,2 M€ exposed • LT sharp reduction down to 5 WD for all suppliers • Packagings revisited to match weekly qties delivered • Renk price increase ambitions stopped via RA • FY 07 • Implement LTAG at all LS plants involved • Find/Qualify/negociate an alternative reliable slide bearing source to Renk for Orléans . • Consolidate w Kato on that project • Total spend Orléans + Kato : 1,9 + 1,2 = 3,1M$

  13. Bearings : Other Projects • FY 06 • Rationalisation of Parts codification • FY 07 • Improve Renk delivery performance thru standardization of components at Orléans • Get 300 k€ additional spend codified

  14. Stamping Parts Organisation

  15. Buy out parts

  16. Sheet Metal parts inflation

  17. Sheet metal parts • Market Trend • Opportunities • Raw material price decrease • Risks • Overload of Cz supply base • LS CZ Supply base too dependant on LS • Leu/€ rate trend +10% / year • Welded part inflation in Romania

  18. Sheet Metal Parts : Summary

  19. Sheet metal Parts : KPI

  20. Sheet Metal Parts : LCC FY 06

  21. Sheet metal Parts : LCC FY 07 • Objectives FY 07 • Reach : 50%+ LCC • Complete transfer from France to Eastern Europe for PMS CA motor plants parts . Qualify new sources in Cz/H/Pl to unload current suppliers (Beran/Hanakov/Mopos/…) • Negociate price decrease to offset impact of raw material price increase from FY 05 • Source/Qualify new ukrainian base for heavy welded parts from Orléans . Transfer 300 k€ from Ro to Ukr .

  22. Sheet metal Parts : Reverse Auction • FY 06 • WS 4525 Welded Housing 3 MW 2400k$ * 48,4% • FY 07 • Large welded parts (Orléans) * incl. Machining/Stator insertion/Tests

  23. Sheet metal Parts : Main Projects • FY 06 • Transfer and sourcing in Eastern Europe of 3MW welded housing • Set up of a supplier base in Romania for Orléans large welded parts as alternative to Privod (Ru) and Electroturris (Ro) • > Vitimas/Faur/UMUC • FY 07 • Set up of a new supplier base in Ukraina for large welded parts to contain price & currency exchange rate increase from Romania

  24. Buy out parts : DPO • Bearings • DPO : 102 days • No regular suppliers below 30 days • Sheet metal parts • DPO : 63 days • 5 suppliers below 30 days : 3 czech / 2 romanian • Letovicke (Cz) 45 days from Jan 07 • Mopos (Cz) 60 days from FY07 (PS) • Beran (Cz) Negociation on course • Electroturris (Ro) 45 days from Sept 06 • Vitimas (Ro) 45 days from Sept 06

  25. DPO : Suppliers < 30j

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