TRW Announces Actions to Strengthen Competitiveness

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TRW provides advanced-technology products and services for the aerospace, information systems and automotive markets. (PRNewsFoto)[JL]
CLEVELAND, OH USA 08/24/2001
    CLEVELAND, Sept. 6 TRW Inc. announced today
several business actions being implemented to improve the company's
competitiveness.
    (Photo:  http://www.newscom.com/cgi-bin/prnh/20010824/TRWLOGO )

    The actions being undertaken include:

    * Modifying the dividend policy, which contemplates quarterly dividend
      payments of $0.175 cents, down from $0.35 cents per common share
    * Reducing Business Support Center (corporate headquarters) annual costs
      by 30 percent ($65 million)
    * Consolidating the company's three automotive businesses into two
      entities, saving $10 million annually, and
    * Implementing Six Sigma across the company.

    David M. Cote, recently appointed chairman, president and chief executive
officer, said, "These actions are consistent with the company's five business
priorities to meet commitments, reduce debt, drive growth, improve
productivity, and focus on people/behaviors.  They will enable us to meet
consensus earnings per share (EPS) estimates for 2001 and 2002, based on
current automotive build projections.  In addition, they will provide us more
flexibility to pursue growth and improve our balance sheet while offsetting
expected lower pension income in 2002, which is anticipated as a result of
lower returns on fund investments and reduced interest rates."
    Restructuring charges of approximately $15 million required to implement
these actions will be incurred.  In addition, charges relating to threatened
litigation and asset impairments will also be recorded in the third quarter.
These charges will be offset entirely by gains from the sale of RF Micro
Devices (RFMD) stock.  In the third quarter to date, 5.4 million RFMD shares
have been sold, generating a pre-tax gain of approximately $137 million.

    Dividend Policy Change
    A change in the quarterly dividend from $0.35 cents to $0.175 per common
share, beginning with the December 2001 payment, would save the company
approximately $85 million annually in cash flow.
    "Given the opportunities we have to invest in growth initiatives, together
with our current debt position, a rebalancing of the dividend in line with our
business fundamentals is appropriate at this time," said Cote.  "A lower
quarterly dividend will improve our ability to manage debt and grow core
businesses.  At the same time, we will maintain a payout and yield that is in
line with our peer companies and above the current average level of the
Standard & Poors 500 Index.  We believe more financial flexibility is in the
best interests of our shareholders and will increase the company's value over
time."

    Business Support Center
    Functional consolidation at the Business Support Center (BSC) operations,
primarily in Cleveland, has been under way since January 2001.  A total of
approximately 180 positions, representing 20 percent of the BSC's global
staff, will have been eliminated during the year through reduction or
attrition.  The staff reductions, combined with other budget cuts, will reduce
annual costs by $65 million.
    "The reduction of these positions is difficult, but necessary, as we
streamline the company for more rapid decision making," said Cote.  "We will,
of course, maintain key staff necessary for vital financial, shareholder,
legal and human resource functions.  The result is that we will have a
flatter, leaner organization more representative of the changing face of TRW,
with decision-making closer to our customers."

    Consolidate Three Automotive Businesses Into Two
    TRW's Automotive Electronics (AE) business will be split and its
operations integrated into the company's Occupant Safety Systems (OSS) and
Chassis Systems units.  Dr. Heinz Pfannschmidt, president and chief executive
officer of the TRW Automotive Electronics unit, will work directly with Dave
Cote to effect an orderly transition.
    AE's safety/security operations will be incorporated with OSS, headed by
James F. Smith, president and chief executive officer.  With growing demand
and increasing dependence of OSS products on sophisticated electronic sensors
and diagnostic equipment, this change will enhance the company's ability to
tap critical synergies and to leverage its competitive advantage in integrated
safety systems.
    The remaining electronics businesses will be integrated into Chassis
Systems, headed by John C. Plant, president and chief executive officer.  This
realignment will facilitate the application of electronics technology to the
development of innovative automotive products, such as electrically assisted
steering, next-generation electronic braking, integrated vehicle control
systems, and vehicle stability control systems.
    "The consolidation will decrease bureaucracy and improve the productivity
of our automotive businesses through better interaction among product groups,
and easier and consistent application of best practices, while reducing the
overall cost base," said Cote.  "For our customers, these actions are
particularly important as they will better enable us to deliver high quality
parts on time, provide better support and improve operational discipline."

    Introduction of Six Sigma
    TRW is introducing Six Sigma, a structured and disciplined data-driven
process to improve business performance, in all of its worldwide operations.
    "It is my experience that once fully adopted, Six Sigma will provide us a
significant competitive advantage in developing robust products, services, and
processes," said Cote.  "Six Sigma will create a continuous improvement
mindset, improve customer satisfaction and operations, and improve employee
satisfaction and development.  In addition, it will be a vital component of
our processes to deliver on our commitments to customers and investors.
    "Necessary steps to begin are already in process.  This includes hiring a
consulting partner to facilitate training and implementation, assigning Six
Sigma leaders in each business, and identifying key themes and projects.  We
expect to have 150 Six Sigma Black Belts assigned by year-end, and 500 by next
year.  By year-end 2002, it is our intent to have more than 12,000 employees,
starting with senior management, fully trained in Six Sigma," said Cote.

    Summary
    Cote concluded, "These actions in total create good progress toward TRW's
five priorities.  We will also continue to focus on differentiating our
company through technology and performance for our customers and investors.
From making the world's fastest semiconductor chips to providing sophisticated
systems integration, satellites, and aircraft controls, to leading the world
in electric steering systems and our automotive businesses, TRW has an
excellent stable of technologies and businesses.  These changes will enable us
to take advantage of the growth available through these technologies.  I am
excited about our future."
    TRW provides advanced-technology products and services for the aerospace,
information systems, and automotive markets.  The company's news releases are
available through TRW's corporate Web site, http://www.trw.com .
    Statements in this press release that are not historical facts, including
statements regarding anticipated financial results, are forward-looking
statements.  Important factors that could cause the Company's actual results
to differ materially from those contained in forward-looking statements made
in this release include:  our success in achieving cost reductions; the
ability to obtain new contract awards; pricing pressures from customers; the
introduction of competing products or technology by competitors; the economic,
regulatory and political domestic and international conditions; fluctuations
in currency exchange rates; and the ability to attract and retain skilled
employees with high-level technical competencies; the level of defense funding
by the government; the financial results of companies in which we have made
technology investments; the termination of existing government contracts;
moderation or decline in the automobile build rates; work stoppages; customer
recall and warranty claims; product liability and litigation issues; and
changes to the regulatory environment regarding automotive safety; and other
risks detailed in the Company's Securities and Exchange Commission filings.
We caution that any forward-looking statement reflects only the beliefs of the
Company or its management at the time the statement is made.  The Company
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement was made.

   Jay McCaffrey
   216.291.7179

   Joseph Cantie, Investor Relations
   216.291.7506