honeywell goldman sachs great china tour - honeywell transportation systems

Transportation SystemsPaolo CarmassiVP and GM, Asia PacificMay 8, 2006

2 Goldman Sachs, China Industrial Tour, May 8, 2006

This report contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on management’s assumptions and assessments in light of past experience and trends, current conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near- and long-term. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other filings with the Securities and Exchange Commission.

Forward Looking Statements


34%36%

• 118,000 employees in nearly 100 countries

• A Fortune 75 company – $30 billion in sales in 2006

• One of 30 select companies in the DJIA

Honeywell Today

•Pie Chart calculated using 2005 Sales

Americas

ChinaAPAC

EMEA

External Sales $0.6BTotal Trade $1.2B


Aero

TS

SM

ACS

HON in China

Rapid Expansion

Sales by Segment

2005 $550M

2006E $800M

V% 45%

Investment Timeline 1993 1995 19981994

ACSTianjin Ltd.SH C&KSinopec JV

AEROR&O SitesACSC&K ChinaTSFriction

1990 - 2000

2002 2005SMUOP

2001 - 2005

ACSSensorsTSHTT

AEROAPU Parts

1996AEROECS Parts

ACSFireS&C

2003SMNylon

External Sales

+4,000 employees21 Legal Entities: 11 wholly-owned10 joint ventures


China’s Contribution To Global Growth

China Share of Worldwide Global RankAbsolute size 2004 Growth 1999-2004 Size Growth

GDP 710.8%4.1% 2

Exports 36.6% 14.1% 1

Imports 36.2% 13.8% 1

Foreign Direct Investment 38.2% N.M.* 1

International Reserves** 214.7% 21.0% 2

China A Major Growth Engine For The World

* Global FDI over 1999-2004 declined at 7% annually** International reserves include foreign currency and gold reserves Source: EIU, World Bank

Capital Expenditure 331.0%8.8% 1

China represents 4% of world economy but accounts for 11% of global growth

China represents 4% of world economy but accounts for 11% of global growth


Industrial GDP Contribution

Half of industrial growth is expected to come from emerging markets

China is Leading ERs in Terms of Scale and SpeedEmerging Region

Rea

l ind

ustr

ial G

DP

1999

–201

5(1)

(US$

trill

ion)

(1) At 1996 pricesSource: EIU; World Bank; CIA; BCG estimates

1.24 1.231.19

0.41 0.40 0.38 0.350.28

0.18

0

0.2

0.4

0.6

0.8

1

1.2

1.4

NAFTA China EU SouthAmerica

SEA Japan Russia India EasternEurope


0

2,000

4,000

6,000

8,000

10,000

12,000

USA China India SE Asia Russia LatinAmerica

EU5 East-centralEurope

Japan

Long Term Global Growth Outlook: 2005-2030

Source: EIU, Global Outlook (May 2005)

Significant Economic Strength

Incremental GDP Created between 2005-2030 ($B)


Consumer Products GroupConsumer Products GroupTurbo TechnologiesTurbo Technologies

Transportation Systems

2003 2004 2005 2006E

Sales ($B) Sales by Region~4.4

3.74.3 4.5

2006E2003 2004 2005

57% 43%

Leader In Key Automotive Segments

43%

57% Europe48%

Turbo

CPG

Americas42%

Asia10%

Revenue Mix Geography Mix


Salesby Region

Salesby Segment

Turbo TechnologiesTurbo Volume

Priorities • Technology leadership• Platform wins• VPD™ and HOS as competitive advantage• Key Customers: All major OEMs

Global Leader In Turbo Technology

Europe58%

Europe58%

Americas30%

Americas30%

Asia12%Asia12%

PassengerVehicles

67%

PassengerVehicles

67%

Comm’lDiesel33%

Comm’lDiesel33%

~9Munits

2002 2003 2004 2005 2006E


Consumer Products Group

Priorities

• Win with winners • Extend brands• Global growth• Key Customers: Retailers, WD, OEM

6 Strong Brands Focused On Growth In Asia

Salesby Brand

Salesby Region

Bendix-Jurid42%

FRAM23%

Prestone-Holts25%

Autolite10%

Europe32%

Americas62%

Asia6%


TS Asia Footprint

MONGOLIA

CHINA

THAILAND

MALAYSIA

SINGAPORE

PHILIPPINES

INDONESIA

AUSTRALIA

NEW ZEALAND

KOREA

INDIA

JAPAN

$450M Sales, 1,500 People

• CPG – Friction-Guangzhou

Manufacturing-Thailand JV – 50%

Manufacturing-Malaysia JV – 50%

Manufacturing-Ballarat JV – 51%

Manufacturing

• CPG – Holt Lloyd-Japan JV – 90%

Distribution-SE Asia / China

Branches-Australia / New Zealand

Distribution

• Turbo-China

ManufacturingGlobal Tech Center

-JapanManufacturingTechnical center

-KoreaManufacturing

- India, Opened 4Q05Manufacturing

-SydneyManufacturing


TS Aspirations for China

China Business Growth

• Growth above market• Sustain profitability

Revolutionize Global Cost Structure

Expand into New Markets &

Adjacencies

Create Global Growth Platform

Based on Key Themes

1

2

3

4

5

China As A Key Growth Platform

How we think about China: • Employees• Assets• R&D• People

• Market• Sales• Profits• Sourcing


-5,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Hw

y K

ilom

eter

s

East Central West

Auto Industry and Drivers - China

• Automotive considered pillar industry for the nation

• Emphasis on energy & environmental protection

• Coastal area GDP drives demand for private vehicles

• JVs still only path for foreign OEs to succeed

• Industry keen to build local brands

• Overseas expansion: not ‘if” but “when”0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2003 2004 2005 2006 2007 2008 2009 2010 2011

HMCV LCV PV

Vehicle Market Demand (‘000)

Highway Cargo Transportation Turnover (Bn T) / KM

2005 8322004 7622003 7102002 6782001 6332000 613

China’s Coastal Area

Third Largest Automotive Market In The World

China ’06 GDP Growth: 8%

• 35.8% of nation‘s GDP in 2005

• 30% of nation’s real investment in 2005

• 78% of nation’s real usage of foreign investment

Highway Expansion

Source: DRI


NOxNOx & Particulates& Particulates

China Set To Follow European Emission Standard

European CO2 Reduction ObjectivesEuropean CO2 Reduction ObjectivesC

O2

[g/k

m]

2002 20122008100

180

160

140

120

165g/km

140g/km

-15%120g/km

-27%

Automotive Emission Legislation

NOx (g/Km)

JapanPM[g/Km]

Japan 2000

Japan 2005

0.05

0.10

NOx (g/Km)

USA

0.0 0.5 0.8 Nox (g/km)

Tier I (1994)

Tier II (2004)

0.05

0.10

PM[g/Km]

Europe/China

0.5 0.8

Euro II (1996/2004)

Euro III (2001/2007)

Euro IV (2005/2010)

0.05

0.10

PM[g/Km]

0.0 0.5 0.8 0.0

Tier II (2007)Euro V (2009/Not decided)


YOYGRYOYGR

Diesel RateDiesel Rate

Turbo RateTurbo Rate

Automotive Market Dynamic

• China headlines, passenger car boom

• CV segment flat, broad YOY fluctuations

• LV diesel growth, turbo rate increasing with

emission standards

• PV Diesel on Government agenda

• Key Enablers: Fuel, Offer, Taxation

11%-20%34%-5%CV

5%6%10%15%LV

16%26%14%71%PV

96%95%95%93%CV

39%36%35%34%LV

1.3%0.9%0.4%0.2%PV

94%92%92%91%CV

22%19%16%10%LV

0.7%0.4%0.1%0.0%PV

Increasing Requirement For Clean Technologies Favors TS

• Improve engine efficiency: 30% less fuel burned

• Reduce CO2 emission by 30%

• Meets most stringent emission standards (Euro IV/V)

• Improve performance: power and torque

• Proven and reliable technology available, today

Benefits of “Turbo” Diesel

Segment Analysis

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2003 2004 2005 2006 2007 2008 2009 2010 2011

HMCV LCV PV

Vehicle Market Demand (‘000)

Source: DRI 2003 2004 2005 2006


“There is great disorder under heaven.The situation is excellent!”

- Chairman Mao

“The sky is high and the emperor is far!”

- Anonymous

However......

China: You Are Always Learning!


Location: Zhangjiang Hi-Tech Park, Pudong New Area

Ownership: Wholly owned

Initial Investment: US$27 million

Groundbreaking: September, 1994

Land area: 24,500 sq. m.

Building area: 8,000 sq. m.

Output (2004) 470,000 units

Employees: 350

Products: Turbochargers

Customers: Major engine manufacturer

Honeywell Turbo China

Successful Business Since 1994

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