Press Release

AlliedSignal Publishes Presdient's Speech on Industry Outlook

12/13/96

AlliedSignal Automotive President Presents/ 'Automotive Outlook --
1997 and Beyond'

DETROIT, Dec. 9 -- The following remarks were prepared
for delivery by John W. Barter, president of AlliedSignal Automotive,
at the Economic Club of Detroit's 31st Annual Economic Outlook Meeting
in Detroit on Monday, Dec. 9, 1996.  (AlliedSignal Automotive is a
$3.8 billion global automotive supplier based in Southfield, Mich. It
is a unit of AlliedSignal Inc. of Morristown, N.J.):

Thank you, Tom (Ricketts).

It's an honor to be asked to provide an outlook on Detroit's -- and
Michigan's -- largest and most visible industry.

History has shown that making predictions about the auto industry can
be risky.

The oil embargo of 1973 and the Iran crisis of 1979 are two examples
of unexpected events that plunged our industry into recession.

Last week, Federal Reserve Chairman Alan Greenspan gave a less-than-
definitive response to a question about the stock market possibly
being overvalued. In response, financial markets around the world
opened sharply lower the next day. While the markets are recovering,
this incident illustrates how even a perception of doubt about the
economy can throw our expectations off course. Fortunately, today, we
don't see any major surprises on the horizon.

In fact, with the close of 1996 in sight, we can safely say the
U.S. auto industry is about to record one of its best years in
history.

When the totals are in for 1996, automakers in the United States will
have sold between 15.1 and 15.2 million cars and trucks -- their third
or fourth best year ever.  Including heavy trucks, total U.S. sales in
1996 should reach 15.5 million units. Chrysler, with the year not yet
over, has already set a new annual sales record. Sales for GM and Ford
are close to last year's levels. Collectively, Detroit's Big Three are
headed for their second most profitable year in history.

Nearly every European automaker selling vehicles in the U.S. is aiming
for its best sales year in this country since 1986. Likewise, the
Asian automakers are rebounding.  Only the heavy-truck market remains
in a downturn -- and it's expected to hit bottom and start to recover
next year.

So what's ahead for 1997? Barring those unforeseen landmines, 1997
looks like it will at least equal 1996.

Our Big Three customers predict U.S. light vehicle sales between 15.0
and 15.5 million units next year. We expect sales will be in the low
end of that range -- around 15.1 or 15.2 million units. Still, 1997
should be one of the top five sales years for cars and light trucks in
our history.

Beyond 1997, the U.S. auto industry faces a prolonged period of market
stability and modest growth. We see sales remaining at or above the
15- million mark annually for the near future.

We're enjoying one of the longest economic recoveries in
U.S. history -- nearly six years of steady economic
growth, low inflation, strong job creation, resurgent
international competitiveness and a rising stock market.

Few economic experts foresee interest rates or gasoline prices
soaring; layoffs accelerating; or high levels of household debt
dampening the economy and car sales dramatically. And automakers are
keeping inventories in check.

Stable, steady growth is good news for the automakers, their
suppliers, Detroit and Michigan -- where motor vehicles account for
nearly one-fifth of the state's economy. But Michigan and the U.S. are
only part of the story. The real news is thousands of miles away -- in
emerging overseas markets.

Vehicle sales and production in the U.S., Europe, and even Japan, will
grow less than 3 percent per year. In contrast, annual growth rates in
South America and Asia are expected to increase by double digits.

In China, light vehicle production is expected to increase by 25
percent annually through the turn of the century.  The number of cars
and trucks on the road in China will more than double over that period
-- from 3 million to at least 7 million.

How big is the growth potential in China? In the U.S., there are about
470 cars for every 1,000 people; in China, there are only three cars
per 1,000 people. Considering China has 1.2 billion people, there's
room for tremendous growth.

Like many automakers and suppliers, AlliedSignal is moving quickly to
capitalize on this opportunity. We recently established two wholly
owned manufacturing plants in China -- one for turbochargers that's up
and running, and one for disc brake pads.

India is another country with tremendous potential.  Vehicle
production in India will grow more than 10 percent annually. Like
China, it only has about three vehicles per 1,000 people. AlliedSignal
has a new joint venture plant in New Delhi that will produce up to 1
million seat belts each year for the Asian market.

Still, automakers and their suppliers face significant challenges as
we approach the next century.

In the U.S., the auto industry has been buoyed by strong sales of
light trucks -- including sport utility vehicles, pickups and
minivans. These versatile and fun-to-drive vehicles now account for
over 40 percent of all light vehicle sales -- rising to 46 percent by
the year 2000.  Chrysler today sells twice as many light trucks as
passenger cars in the U.S.

The most important vote on our industry's future is cast in dealer
showrooms -- by consumers. Affordability of new cars is a growing
issue, despite aggressive cost-containment efforts by automakers and
suppliers.  Today, half of all new vehicles sold in the U.S. are
purchased by consumers in the top 20 percent of income earners -- a
much higher percentage than even 10 years ago.

Automakers are turning to their suppliers to help control costs while
adding even greater value. At AlliedSignal, we've responded with one
of the most extensive training efforts in the supplier
community. We've trained and certified nearly 300 manufacturing
process experts who are deployed in our plants worldwide to improve
quality and efficiency.

We've also sent our experts to our supplier facilities -- and are
offering them the same training -- because we know that bolstering our
own supply chain is critical to our future.

Thanks to these and other quality improvements, cars today are lasting
longer than ever. In 1970, the average car on the road was 5.6 years
old; today, it's more than eight years old. And drivers today put
3,000 more miles on their vehicles each year than they did 20 years
ago.

Consequently, consumers need more replacement parts.  That's good news
for companies like AlliedSignal that also serve the aftermarket. We
predict steady growth for our global replacement parts business,
including FRAM filters, Autolite spark plugs and Bendix brake
components.

Increasing fuel efficiency and reducing emissions will continue to be
an industry goal.

We see our turbocharger business growing significantly in view of this
trend. Our new-generation turbos help smaller displacement engines
perform like larger ones, while providing the desired fuel economy and
emissions benefits. We're also developing turbos for micro cars such
as the two-cylinder gasoline-powered "Smart" car from the
Mercedes-Benz/SMH joint venture.

One issue that hasn't changed in consumers' minds is safety. In a
recent survey by the Insurance Institute for Highway Safety, seven out
of 10 new vehicle buyers said safety was an important factor in their
vehicle choice.

AlliedSignal will be supplying many automakers with advanced
side-impact airbags. We're also one of the companies developing
"smart" restraint systems, which can adjust to the severity of the
crash and the size and position of the occupants. These systems, we
believe, will address recent concerns over air bag safety --
especially for children and small adults. The air bag manufacturing
industry supports amendments to federal regulations that will lessen
the force of air bag deployments. This can be done relatively quickly,
and is directionally correct in reducing forces on vehicle
occupants. However, we view this action only as an interim step while
we work with automakers to develop smart systems.

As always, our industry is subject to unforeseen events on the
economic and global stage. None of us can say for sure that 1997 will
be immune from the forces that have affected our industry in the past.

Today, however, the auto industry is smarter, leaner and better at
anticipating change than ever before in its 100-year history.

As we look ahead to 1997, one thing is certain -- just as it has been
for the past century: It will be a challenging and exciting time.

I, for one, look forward to the ride.

Thank you.