Honeywell 2008 Annual Report Download - page 49

Systems sells its products to original equipment ("OE") automotive and truck manufacturers (e.g., BMW,
Caterpillar, Daimler, Renault, Ford, and Volkswagen), wholesalers and distributors and through the retail
aftermarket.
Economic and Other Factors
Transportation Systems operating results are principally driven by:
• Financial strength and stability of automotive OE manufacturers;
•
Global demand for automobile and truck production;
•
Turbo penetration rates for new engine platforms;
•
Global consumer preferences for boosted diesel passenger cars;
•
Degree of volatility in raw material prices, including nickel and steel;
•
Automotive aftermarket trends such as consumer confidence, miles driven, and consumer preference for
branded vs. private label aftermarket and car care products;
•
Regulations mandating lower emissions and improved fuel economy; and
•
Consumers' ability to obtain financing for new vehicle purchases.
Results of Operations
2008 2007 2006
(Dollars in millions)
Net sales $ 4,622 $ 5,009 $ 4,592
% change compared with prior year (8%) 9%
Segment profit $ 406 $ 583 $ 574
% change compared with prior year (30%) 2%
2008 compared with 2007
Transportation Systems sales decreased by 8 percent in 2008 compared with 2007, primarily due to lower
volumes, most significantly in the second half of 2008, partially offset by the favorable impact of foreign
exchange.
• Turbo Technologies sales decreased by 9 percent primarily due to decreased volume from a broad decline
in vehicle production due to challenging automotive industry conditions in the U.S. and Europe, which
accelerated in the second half of 2008, impacting sales to both our commercial and light vehicle engine
manufacturers, partially offset by the favorable impact of foreign exchange. We also continue to see a shift
in consumer preference towards lower displacement engines, as well as the delay of new platform launches.
•
Consumer Products Group ("CPG") sales decreased by 10 percent primarily due to lower sales of
automotive aftermarket products reflecting lower miles driven and the impact of lower consumer confidence
on discretionary spending, partially offset by higher prices (including the pass through of ethylene glycol cost
increases).
•
Friction Materials sales were essentially unchanged, primarily due to the favorable impact of foreign
exchange and increased pricing offset by lower original equipment and aftermarket product sales volume.
Transportation Systems segment profit decreased by 30 percent in 2008 compared with 2007 primarily due
to volume declines, as discussed above, material and non-material cost inflation and investments in product
development to support future Turbo platforms. These factors were partially offset by increased productivity and
the favorable impact of foreign exchange.
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