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President's Letter for 2004 Annual Report
To Our Shareholders:
We began 2004 knowing that there were significant challenges ahead, but we felt a
greater sense of optimism knowing that we were taking important strides towards
addressing the realities of competing in a global open economy. Over the past several
years, we have decommissioned and repositioned productive assets, invested in new
products and technologies, and started the process of globalizing how we do business. In
2004, we achieved some goals and we missed some others, but the effects of
unprecedented inflation in the cost of commodities and the weakness of the U.S. dollar
overwhelmed our accomplishments. In addition, the costs of complying with the Section
404 of the Sarbanes-Oxley Act of 2002 were substantial. Out-of-pocket costs approached
$6 million dollars in addition to countless internal hours spent by employees throughout
the Company.
We again stand at the beginning of a new year, flush with optimism that we will improve
our results, but cognizant of the uncertainties we face. Our optimism reflects the
accomplishments we are making towards fulfilling our strategies to yield growth in
revenues, profits and knowledge. We are keenly focused on being our customers’
supplier of choice by delivering best-in-class value. What does this entail? It means
utilizing new technologies to improve the performance of our products. It means
packaging our products and services into higher value-added solutions that better serve
our customers needs. It means delivering six sigma quality through a world class supply
chain. There is no mystery to the ingredients for success, the devil is in the details of
execution.
To that end, we are proud of many of our accomplishments in 2004. Our state of the art,
environmentally friendly, hydrocarbon compressors powered beverage coolers at the
summer Olympics, and a range of CO2 compressors are ready for customers to apply. Our
variable speed DC powered compressors are creating new applications, like climate
controlled golf carts to extend the golfing season and provide a solution to new diesel
engine no idle laws. Our world economy electric motor is winning placement on new
automotive platforms. We took action to put legacy environmental issues behind us and
expect to have all of our global manufacturing facilities ISO 14001 certified by the end of
2005. On March 1, 2005, we went live on our new global ERP system at our first
implementation location.
We have also enhanced our knowledge and skill base in many areas. Among other
actions, Al Koch, was added to our Board of Directors in August, 2004. Mr. Koch, as a
managing partner in AlixPartners, brings us expertise in turn around situations like that
faced by the Engine & Power Train Group.
Looking forward, 2005 should bring the introduction of several new and important
products. Our Compressor group will be introducing a scroll compressor to serve
commercial and air conditioning markets throughout the globe, and production of a new,
expanded range rotary compressor will begin in India. The Electrical Components Group
will expand our range of BLDC variable speed motor products. The Engine & Power
Train group will be introducing enhanced engine models with new features and the Pump
group will be selling a range of new energy saving pump models.
But once again, we face uncertainties and variables that are out of our immediate control.
Energy costs continue to rise, commodity prices and currencies remain unpredictable, and
there continues to be potential conflict throughout the world. Our job is to build an
organization that is flexible and nimble enough to adapt to these changing conditions and
to take appropriate steps to mitigate potentially unfavorable impacts. During 2005, we
will be enhancing the balance of our global manufacturing footprint through increased
investment in new product capacities in both the west and the east. We will be realigning
our management structure to create a more global focus and to speed our concept to
market capabilities.
Lastly, I would like to reiterate the values of this Company. While the improper corporate
behavior of some has resulted in legislation and a new focus on good corporate
governance, Tecumseh Products Company has always operated under the values of my
grandfather, the Company’s founder, Ray Herrick. Our values speak to all of our
stakeholders including employees, customers, suppliers, investors, and the communities
within which we operate.
Our Values:
- Ethical integrity is never compromised! We pursue our business interests
worldwide in a socially responsible manner, adhering to the highest standards of
legal and ethical conduct; expecting the same of those with whom we do business.
- Accountability - We take responsibility for our decisions at the individual, team
and company levels.
- Excellence – We strive for excellence in all we do; from product quality and
performance to customer service and the internal processes that support these
ends.
- Teamwork – We value the power of teamwork and evaluate results on a team
basis.
- Profits – Profits are the ultimate measure of how efficiently we provide our
customers with the best products for their needs. They are required to survive and
grow.
Todd W. Herrick
Chairman of the Board of Directors,
CEO and President
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