Agreement at Behr on Restructuring of German Plants

STUTTGART, GERMANY – July 22, 2010: On November 30, 2009, Behr, the automotive air conditioning and engine cooling specialist, announced structural measures at its German plants. These are aimed at reducing permanent overcapacities and eliminating cost disadvantages of Behr compared to its competitors. The agreement which has now been negotiated with the works councils and the German metalworkers’ union, IG Metall, is a major step on the way to achieving the turnaround.

The key negotiation outcomes:

At Behr Kirchberg (Saxony/Germany), of the originally planned reduction of up to 90 jobs, two thirds have already been implemented. This was achieved through expiring fixed-term employment contracts, severance pay schemes, and partial retirement programs. For the 22 employees whose jobs are yet about to be shed, an option is available as of January 1, 2011, to relocate to a transfer company for twelve months. This offers them benefits such as participating in targeted qualification measures to improve their chances on the external job market.

In the future, Behr Thermot-tronik in Kornwestheim near Ludwigsburg, Germany, will focus primarily on manufacturing electronic map-controlled thermostats as well as pre-series production and fabrication shop activities. The production of conventional thermostats will be relocated as of June 2010 to Holysov (Czech Republic), and Berga (Thuringia/Germany). The number of unavoidable redundancies was reduced from up to 150 to currently under 50 as of December 31, 2012. The employees threatened by job cuts at this plant are also given the opportunity to relocate to a transfer company for 12 months.

Due to the massive decline in the oil cooler business and the clear cost disadvantages compared to the Behr Industry plant in Reichenbach (Saxony/Germany), there was no alternative to closing down production at the Stuttgart plant in Germany as of September 30, 2010. The remaining oil cooler production will be phased out in the Mühlacker region. In future, Mahle Behr Industry will manufacture its own products at its facility in Reichenbach/Saxony.

Redundancies at the Stuttgart plant can be avoided if the affected employees opt for

termination agreements with severance payments

individual solutions for employees approaching retirement age

currently or soon-to-be available jobs at other locations, or

relocation to a transfer company for a maximum period of three years from October 1, 2010.

Job offers for around 150 of the employees are available at other locations, including 35 in the Mühlacker region and 80 in Neustadt.

All employees of Behr Germany GmbH & Co. KG (Behr Germany), Behr Kirchberg GmbH and Behr Thermot-tronik GmbH in Kornwestheim are making an additional restructuring contribution:

The one-time payment envisaged in the collective agreement for 2010/2011 of EUR 160 in December 2010 was eliminated.

The vacation bonus for 2011-2015 wil be reduced as follows: in 2011 by 37.5%, from 2012-2014 by 50%, and in 2015by 33%.

Moreover, similar to the Mühlacker region since 2008, the Christmas bonus from 2011 to 2014 will be awarded according to success criteria in Kornwestheim and Neustadt as well. For the Kirchberg site, Mühlacker region and Stuttgart (Development and Administration) this ruling will apply for the period 2010-2014.

In June 2009, it was agreed that Behr would shed up to 300 jobs by March 31, 2011 in Development and Administration in Stuttgart. Of this figure, about half have been shed so far by not filling vacated positions, as well as through partial retirement schemes and a voluntary severance program.

Also, on account of the positive market trend, Behr sees various opportunities for a series of new projects that we did not anticipate back in 2009. For this reason, the originally agreed date onwhich redundancies would have been negotiated with the works council, i.e. June 30, 2010, is now being postponed until September 30, 2011. Hence, due to the currently positive market situation, redundancies are not being further pursued for the time being.

Following implementation of the aforementioned measures, Behr is guaranteeing job security until June 30, 2015, and has committed to a location safeguarding agreement, valid until December 31, 2015, for Behr Behr GmbH & Co. KG (i.e. the Mühlacker, Vaihingen/Enz, Pforzheim, Neustadt/Danube plants; Administration and Development in Stuttgart), for the Konrwestheim location of Behr Thermot-tronik as well as for Behr Kirchberg.

Opinions on the agreement:

Jürgen Holeksa, head of Group Human Resources and lead negotiator: “Together with the employee representatives we have mapped out a way that plays a key role in securing the future of our company. Our aim was to restructure our locations in Germany, which we were able to achieve with the negotiated measures. It was never our objective to shed as many jobs as possible, and we will do our utmost to keep the number of unavoidable redundancies as low as possible. That is why we clearly rate it as a success that, of the 440 employees originally facing potential redundancy, only around 250 at the most have to expect to relocate to a transfer company or be made redundant—but only if they do not accept any of the alternative offers, including the 150 job vacancies.”

Markus Flik, CEO:

“These cuts are very painful for us as a company, and especially painful for every affected individual. We are aware of our responsibilities and have made these decisions with sound judgement. We now have the duty toward our company to implement them consistently to allow us to adjust to the sustained changes in our industry, to return to profitability, and thus secure as many Behr jobs as possible. Following tough negotiations with the works council and IG Metall, we have thus found a viable compromise that is fair to the interests of both sides. We have succeeded in reconciling the restructuring requirements with the emerging market opportunities.”