President's Letter for 1996 Annual Report

To Our Shareholders:

In reviewing the material available to help me prepare this report of our corporate stewardship I was inexorably drawn, by comparison, to how far we have grown from the parochial views of our respected founder, my grandfather, Ray W. Herrick. In his day when contemplating the advisability of international business commitments he was always quick to say, "We made our money in this country and we'll keep it in this country." How things have changed. We clearly have recognized that company growth can only be sustained by our becoming global in our thinking and in our investments of intellectual and capital substance. Over a relatively short period of years we have put together a conglomerate of manufacturing plants strategically placed where we believe resources, human and capital, can be anticipated to grow. We are, of course, well established through North America with nineteen manufacturing locations. In South America, Tecumseh do Brazil has three impressive facilities. In Europe, Tecumseh Europa and L'Unite Hermetique combined have a total of five plants. What we have needed is increased access to Asian markets.

In Asia where conventional wisdom predicts the most vigorous and continued growth, we successfully concluded a memorandum of understanding with Whirlpool of India Ltd. in November to acquire Whirlpool's refrigeration compressor manufacturing facilities in the State of Haryana, India. This move is designed to complement our established manufacturing relationship with Kulthorn-Kirby Co. Ltd. in Bangkok, Thailand, and provide a stronger foundation for increasing our presence throughout the Far East.

As of this writing, negotiations are ongoing to conclude the previously announced joint venture with Siel Limited for the production of air conditioning and commercial refrigeration compressors in Hyderabad Andra Pradesh, India.

It is our firm belief that the future of Tecumseh Products Company is inescapably tied to our ability to expand internationally -- not with independent entities, but with foreign operations cooperating in a synergy of effort. We have seen this in instances where products may be machined in one country, assembled in another and shipped to a third country. Costs, currency exchange, time, and logistics become important parts of the decision process.

Since world economics rarely peak or fall at the same time, a global participation helps ameliorate extremes. One of the extremes we encountered in 1996 was weather.

Shareholders who have been with us for some time have heard us repeatedly caution just how much weather conditions can influence our business. The past year was no exception with an unusually wet and late spring in North America, Europe and China. This dampened demand for air conditioning compressors particularly in the smaller room cooler sizes purchased by impulse buyers. The effects from this inventory stagnation will not be apparent until the end of the second quarter of 1997.

Our unitary air conditioning compressor sales, however, held up convincingly supported by strong domestic new home construction and aggressive export sales to the Far East.

Weather at home did work in our favor for our winter engine products. Heavy snowfall during the winter of 1996 depleted retail inventories of snow throwers to such an extent that demand for our Snow KingTM engines to rebuild inventories reached historic highs.

Our weather related sales stimuli and our improving global reach, important as they are, require a foundation of superior products. As we and the rest of the world approach the millennium it is increasingly important that our product offerings reflect the best of class in everything we do. We are not just providers of efficient mechanical and electrical mechanisms, we are in effect providing the means for improving health, comfort and convenience worldwide.

In looking forward to the year ahead we have no illusions that sales will come easily, however, our present products and those scheduled for release should preserve our position as a formidable competitor.

In closing I have a keen sense of obligation and thanks to our employees and Board of Directors for the efforts, actually extra efforts, that were expended in 1996. Our appreciation must also be given to our family of shareholders for their cooperation and forbearance.

Todd W. Herrick
President and CEO

Kenneth G. Herrick
Chairman of the Board of Directors,

January 30, 1998