Tomkins Annual Report

Industrial & Automotive

Richard Bell, Chief Operating Officer

“Because of the diversity of its end markets, the Industrial & Automotive group delivered a robust performance in 2007.”

What do we do?

Because of their technological product leadership, quality and service offering, Tomkins’ Industrial & Automotive (I&A) businesses have market-leading positions in most of their operating regions.

The I&A group services a wide range of industries with its products and systems:
– Power transmission systems, comprised of belts, pulleys and tensioners, drive industrial appliances and equipment as well as light duty and heavy duty engines.
– Fluid power systems, including hydraulic hoses and fittings, operate agricultural and heavy duty equipment. Transfer hoses transport liquids ranging from petroleum products to food and beverages.
– Remote tyre pressure monitoring systems (RTPMS) measure tyre air pressure levels and communicate to a vehicle’s dashboard computer to warn of pressure loss.
– Oil pumps and water pumps operate in a variety of engines.
– Axles, trailers and frames equip motor homes and mobile trailers.

Market overview

Industrial market growth continued with gains in original equipment and replacement segments. Global agricultural markets and domestic durable goods led to original equipment (‘OE’) increases for power transmission and fluid power products. Increases in energy production, mining and oilfield operations generated growth for the industrial replacement market.

Our automotive aftermarket in North America and Europe outperformed the market with new products, new distribution and promotional efforts focused on educating professional installers. Efforts in Asia continued to increase with the pace of the market. Technology drove record levels of business awards in the automotive OE segment. Schrader Electronics’ tyre pressure monitoring systems, Gates/Stackpole’s variable vane technology for oil pumps and Gates’ new hybrid technology all address safety and environmental concerns.

Strategic progress
Operations

Lean process implementation continues to drive manufacturing efficiencies, material cost reductions and increased output in I&A facilities. Fit Office processes, which aim to improve processes in the office by making them leaner, were launched in all administrative areas globally. Internal successes led to initiatives with key customers to further eliminate waste in shipping and product handling. Because of its quality and service, our axle and trailer business was given a vendor recognition award by Jayco, the largest recreational vehicle manufacturer in the US.

Organic growth: new products

I&A continued its focus on innovative technology development. Schrader Electronics doubled sales as the US legislative mandate for RTPMS on OE vehicles began. As the market leader, Schrader anticipates further growth with the adoption of snap-in applications and remains the first and only supplier of this technology. Outside of North America, momentum grows for similar mandatory use of RTPMS, particularly in Europe where there is a major focus on lowering CO₂emissions and improving safety. Several European vehicles are adopting RTPMS as an option. Schrader Electronics pioneered new fuel sensing technology, which detects fuel level and type, and signed its first contract with a major German OEM. Opportunities for growth will continue, especially as alternative fuel use increases.

Power Transmission launched Poly Chain^® GT^® Carbon™ belts in the industrial markets. Demand for improved fuel economy and reduced emissions propelled Electro-Mechanical Drive™ technology and spurred numerous automotive application projects in Asia.

Fluid Power engineers continued to drive innovation through hose connector interface technology that provides customers with added product safety, reliability and core product enhancements such as the new Xtreme™ Heat hose. Ntableew operations in India are well positioned to manufacture belt and tensioner products as well as hoses for local markets.

Our new water pump line from China drove significant growth for I&A’s automotive aftermarket, with product implementation at NAPA, one of North America’s largest automotive distributors, and the first water pump awards in Australia and Canada.

Geographic expansion

The I&A group grew in geographic product reach and extended its manufacturing and distribution capability.

In Eastern Europe, where market growth is double digit, I&A added a sales office in Moscow to respond to increased market demand. Activities in India, the Middle East and South Africa continued to focus on building local presence and developing staff to support growth.

Where oilfield and mining operations are strong, I&A grew through products supporting these industries. Heavy-duty belts and oilfield hoses supported equipment in Australia, the Gulf Area and Canada.

During the year, we opened a new Power Transmission manufacturing facility in Chennai, India and expanded hose production in Chandigarh, India. In Suzhou, China, we invested for increased capacity at our clamp manufacturing facility. Investment in other geographic regions includes Aachen, Germany; Glade Springs, Virginia; and Springfield, Tennessee.

Strategic acquisitions

Schrader Electronics acquired Swindon Silicon Systems, providing it with a technology platform for new applications. Gates Winhere is expanding its manufacturing capacity by constructing a new plant in Yantai, China. The joint venture united the manufacturing and operational expertise of Winhere with the marketing and sales network capabilities of Gates. Going forward, I&A acquisitions will focus on the industrial space, particularly in rapidly developing regions, such as Eastern Europe and Asia.

Future priorities

The I&A group will continue to expand and leverage its diverse global position and strong brands by focusing on customer service, delivery of new products, geographic expansion and entering new, untapped market segments. Strategic initiatives will promote solutions in the areas of mass transit, energy savings and environment. I&A’s priority for 2008 is to grow the industrial business with products and services adjacent to its core processes and product offering and expand its reach in emerging markets.