AMERICAN STANDARD www americanstandard com KB asp Contents

AMERICAN STANDARD www. americanstandard. com/KB. asp

Contents · · · Short description of the company Short overview of Bath & Kitchen SWOT Key learnings and overall objectives Strategy Where is American Standard vulnerable? 2

A. Overall company overview 3

SHORT COMPANY PROFILE A. S. (1/2) • • Founded in 1872 as the Pierce Steam Heating Company • Global company with 3 B. U. : Air Conditioning Systems and Services (brand: TRANE), Bath & Kitchen, and Vehicle Control Systems (brand: WABCO) Each B. U. is a market leader worldwide • • • Stock-listed company since 1929, after the merge with the Standard Sanitary Manufacturing Company 61, 000 employees in 50 countries 10 billion $ turnover in 2005 (+8% vs. 2004) Main events in past 10 years: in 1988, AS escaped a hostile takeover via a leveraged buy-out and became debtburdened. This explains why AS is less inclined to acquisitions than most of its competitors. Therefore the focus is on organic growth and the sanitation of the balance sheet All company processes based on Six Sigma 4

SHORT COMPANY PROFILE A. S. (2/2) Repartition of Sales 2005 / EBIT 2005 by Business unit (%) Repartition of Sales 2005 by region Asia/Pacific/Others Vehicle Control Systems 18% / 24% Bath & Kitchen 24% / 10% 11% Air conditioning 58% / 66% 5 Europe 30% America's 59%

Concentrate /focus on a few/strongest Brand(s) 6

B. Business Unit „Bath & Kitchen“ 7

SHORT PROFILE OF BATH & KITCHEN (1/2) • World‘s largest global manufacturer of B&K products, incl. CSW, taps, wellness products and „accessories“ (furniture incl. ) Total 2005 sales: $ 2. 418 billion = 24% of total sales = 10% of company‘s income • 100% 90% 80% 70% 60% 80% 78% 55% 70% 69% 60% 50% 40% 92% 40% 30% 95% 50% 30% 20% 10% 22% 45% 20% 31% 10% 0% 5% 0% America's Europe Asia America's Residential Europe Classical Distri / Wholesale Commercial DIY 8 8% Asia

SHORT PROFILE OF BATH & KITCHEN (2/2) Sales by segment 2005 Sales by region 2005 Accessories/ Asia Furniture 7% 11% Acrylic + Americ'a Wellness 40% Fixtures 13% (CSW) 50% Europe 53% Fittings 26% 9

All brands of the B& K Division America Europe Asien Ideal Standard Armitage Shanks American Standard Porcher Jado Ceramice Dolomite Sottini, Venesta Venlo Sanitair Porcher, Jado Senesi, Piel Sangra, Vidima Senesi, BØrma 10 American Standard Jado

Sales have developed well in all segments, but the profitability especially for Bath & Kitchen is worrying 11

Bath & Kitchen has never been up to the level of our two other segments, but the performance in 2003 and 2005 calls for stern measures 12

Just as AS, most of our international competitors cover almost the entire spectrum of bathroom products Legend: X XX XXX Source: ASD research = minor weight in sales of company = medium weight in sales of company = great weight in sales of company 13

Global presence of the main competitors in CSW (year 2004) 500 400 300 200 100 Europe Ceramics (incl. sinks and showers) Size (m€) DE FR 278 320 UK/IE 378 IT 350 Asia BNL Sca ES/PT RU 102 165 253 173 Oth EUR 372 America JP CN IN Rest S+OA US CA MX Rest S-Am 475 702 186 >700 1. 209 100 124 >240 Villeroy & Boch American Standard Duravit Eczacibasi Grohe Inax Jacuzzi brands Kludi Kohler Masco Roca Sanitec Toto Legend: Market share (volume): > 15% Market share (volume): >5% - <15% Market share (volume): >2% - <5% Market share (volume): <2% 14

On the world ranking list, we estimate that we rank #1 Total value as basis: 5, 2 billion Euro (ASP) World-wide shares of main suppliers of CSW* - year 2003; coverage approx. 80% of the total world market * V&B incl. Vitromex, Roca incl. acquisitions 2006 * Due to lacking data inclusive ceramic shower trays and kitchen sinks Source: BSRIA - Consult - ASD research 15

In Europe, however, we are ranked # 2 Total value as basis: 2, 2 billion Euro (ASP) Shares of the main supliers of CSW* in Europe - year 2003 * Inclusive acquisitions of Roca 2006 *Ceramic Sanitaryware exclusive ceramic shower trays and kitchen sinks Source: Consult and ASD research 16

More details on our market shares (1/2) 17

More details on our market shares (2/2) 18

CURRENT STRATEGY 19

Current key lernings Business impact Production Pricing Distribution • B&K represents 23% of the business but only 10% from EBIT • CSW is with 50% the biggest business field • Fitting business represents 26% of sales • Wellness business makes 13% • 57 factories worldwide (33 for CSW), mostly on low cost basis • aggressive pricing policy Image • 50% of sales in Europe, 42% in the Americas and 8% in Asia Orga/General • High brand awareness, but unclear positioning • Strong in commercial/professional business due to plumber heritage • many personal fluctuations 20

Current key B &K objectives • Increase our value added revenues by: – optimize rebate structures – increasing the share of value added products (features to benefits like water saving, easy installation, easy clean) – improving product availability and time to market – increasing investments in marketing support • Improving productivity by: – Plant by plant: assortment alignment – Plant to plant : stabilization of output – Use plants as logistic turntables – Enhance cost control and cost reduction • Simplify our business by: – Reducing models and SKU’s – Standardizing and simplifying global processes => We will keep improving our performance 21

SWOT (only AS team) 22

Strengths Brand/Image: • • World‘s largest Bathroom & Kitchen manufacturer with international, well-known brands (high brand awareness, e. g. 84% in their core markets) Long history and american heritage, coming originally from the plumbing sector, enables to communicate tradition, experience and technical competence Assortment: • • • Market: • • Good image as complete, innovative bathroom supplier with interior designers, decorators, consumers and plumbers, due to – complete multi-category product lines – high competence in style and technical features (products with real USP‘s)* – userfriendly marketing supports (trainings, website, . . . ) Wide and deep assortment in CSW and fittings, which make 50% / 26% of the business Work with internationally well-known designers and architects to meet the tastes and styles of all markets and offer a tailored portfolio (NME, APAC) strong in the segments “value” (e. g. Arm. Shanks, Cera. Dolomite) and “mass” (AS/IS, private labels), therefore particularly price-aggressive and strong in project business Strong own sales organisation in most regions with vertical market specialists Competitive cost positioning thanks to international production facilities and standardized processes (e. g. reducing number of factories from 66 to 58) High market shares in I, UK, BUL, US 23 * a few examples: Cadet 3 Toilets, Lifetime Whirlpools, Ever. Clean Faucets

Weaknesses Business: • • Worst performing division within the company >> restricts investment opportunity (shareholder value mentality!) Decreasing sales in 2005 versus 2004 (-0, 9%), and significant decline in profits (-48%), particularly in Europe due to unfavorable mix, as sales migrated to economy products Big, fluctuant organization (risk of work stoppage, frequent management changes, . . . ) • • • Unclear strategy for a positioning/segmentation: try to be everybody‘s darling No clear alignment in the portfolio, distribution, production and pricing policies Multi-brand strategy and huge assortment = costly + complex >> lack of synergy, loss of focus „Standard“ doesn‘t sound very exclusive and could be a disadvantage for a premium positioning Limited assortment in furniture and Wellness Synergy potentials due to leadership of TRANE (Air Cond. ) in project business are not used • Strategy: Market: • • • Low marketing support in the past = no inspirational brand image Overdistributed and dependant on big customers with focus on DIY or mass market, except with Wolseley Production/manufacturing problems: product unavailability/supply difficulties, increased energy costs 24

Opportunities • Growth in home ownership • Development of a strong elderly target market worldwide • Higher spending on bathrooms • Bathrooms per house increasing • Housing stock continues to age > growth in the replacement, repair and remodeling, particularly in the U. S. • Growth in developing countries, particularly in Asia • Positive development in worldwide logistics Threats • Fluctuations in currency exchange rates • Development at the N. Y. Stock Exchange • Development of aggressive main competitors (for e. g Roca) • Aggressive competition of low-cost suppliers in Asia • Kohler’s relationships with Wolseley • Distribution concentration of the wholesale and the DIY (e. g. The Home Depot/Hughes) • Increasing costs for energy and raw materials • Purchasing high numbers of various components • Political risks related to operations in many foreign countries • Labor cost inflation, especially in low cost countries 25

FUTURE STRATEGY 26

FUTURE STRATEGY to be defined: Strategic goals Brands Communication Distribution & Logistics Strategic Alliances 27