President's Letter for 1999 Annual Report

To Our Shareholders:

The year just passed produced widely ranging results among our divisions and subsidiaries. Despite a world economy that showed signs of strengthening, the old axiom "The rising tide lifts all ships" did not apply to all our efforts.

Our Engine and Power Train Group turned in a stellar performance, achieving a solid 24% sales gain over the previous year. Credit must go to the expansive product line created by this group for U.S. and European markets. Domestically, our engine sales were also helped by very opportune synergistic forces in the marketplace. Notable among these was the exceptional demand for larger engines to power electrical generators. This demand was fueled by uncertainty over the Y2K readiness of electric utilities and the desire by individuals to be self-sufficient should problems occur. The long 1998-99 winter and its resultant heavy snowstorms exhausted field inventories of engine-powered snow throwers requiring manufacturers to schedule aggressive restocking production. The combination of these demands together with an excellent lawn and garden equipment effort kept our engine and power train production facilities at near maximum capacity throughout 1999.

Our compressor business with its strong international bias encountered varying levels of economic recovery depending upon the countries served.

As we reported in last year's message, Brazil's budget and tax troubles became apparent at year's end and then extended well into 1999 effectively dampening Brazil's domestic economy. While government reform measures appear to have improved consumer confidence, we do not expect measurable gains there until well into 2000. Tecumseh do Brasil fortunately has a strong international component. Forward looking negotiations indicate that year 2000 should show substantially increased export activity.

Europe entered 1999 with an economic slowdown still linked to the Asia crises and unanticipated costs relating to the Yugoslavian hostilities. Our continental sales by Tecumseh Europe to consumer goods manufacturers reflected this slow down. Fortunately, the developing trends point to improvement in 2000.

Our expansion and new construction in our India operations proceeded in accordance with our long range plans. Faridabad, the original Whirlpool compressor complex, achieved substantial increases in productivity. Ballabgarh, site of our modern new compressor and motor plant, was completed and assembly training initiated for the work force. Our negotiations with present and potential customers, multinational and local India producers, have been encouraging. We are optimistic concerning our long range opportunities in this remarkable land.

In the United States our compressor sales continued to be adversely affected by severe competition from low-cost Asian imports. Until the Pacific Rim countries of Japan, Korea, Thailand and Malaysia rejuvenate their own internal domestic economies, their component manufacturers will look toward Western markets to absorb as much as possible of their excess production. We are somewhat encouraged by financial indicators showing the countries named may see economic improvement of 3.8% to 4.5% in 2000.

As we have said in past reports, we are exploring potential investment possibilities in the eastern Pacific region. These may take the form of direct acquisitions, joint ventures, or licensee relationships. During the past year many exploratory discussions were held with suitable alliance prospects, but at year's end no agreements had been concluded. We believe that as these reviews continue into year 2000 there is reason for optimism that beneficial agreements may be written.

As we enter the new year, we plan to align our global compressor sales and marketing efforts in a manner that will give our customers the best product fit at the lowest price available anywhere throughout our worldwide operations. The key will be to encourage local manufacture and consumption where practical, but if a better fit at a better price is available from another Tecumseh compressor operation anywhere in the world then this will be considered as the primary source. Our customers want and deserve to have a consistent uniform availability of our products and services wherever they market their products. This new imperative is designed to do precisely that.

Our pump product sales held up very well in 1999. This was achieved for the first three quarters without the impetus of regional flooding experienced in the preceding years. Hurricane "Floyd" on the East Coast provided the first weather related extra demand for sump and other dewatering pumps. Little Giant Pump Company maintained its leadership in Water Gardening Products throughout the year, and at the same time strengthened its position as an important participant in the sanitary plumbing, heating, and air conditioning markets.

We believe the business outlook for 2000 will follow the patterns set in 1999. The USA economy, although aging, is still in good condition. Signs point to improving circumstances in South America and the Pacific Rim countries. Our marketing programs, in place and planned, should provide opportunities for our energized efforts in global engine sales and compressor world alignments. Barring any unforeseen circumstances, our entry into the new century should be a positive one.

The Company began a stock repurchasing program late in 1997 which continued on through 1998 and 1999. During the past year, we repurchased 1,087,500 shares of Class A common stock in open market purchases. We plan to repurchase a similar amount of Class A common stock in 2000.

We owe a debt of thanks to our employees for their response to the difficulties and the opportunities that surfaced during the year. Special kudos should go to the Engine and Transmission Group for its exemplary performance.

Todd W. Herrick
President and CEO

Kenneth G. Herrick
Chairman of the Board of Directors,

January 30, 2000