Borgwarner morse tec mexico profits pools

BorgWarner Morse Tec Mexico “Profits Pools” on Time System Hemi 5.7 for Chrysler Engine

October, 2008

Step 1 - Define the pool
Determine which value-chain activityinfluence profits now and in the future: Logistic and Row Material Acquisition Components Manufacturing Time Systems Assembly Scrap and waste Expedite Freight OEM Sales toAutomotive Industry Time System Hemi 5.7 for Chrysler Engine $69.45 $9.16 $18.22 $4.85 $3.39 $79.33 $185.00

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MORSE TEC MEXICO

Step 2 - Determine the size of the poolDevelop a baseline estimate of cumulative profits generated by all profit pool activities Time System Hemi 5.7 for Chrysler Engine
$79.93 43.21%

$185.00

$18.22 $9.16 $69.454.95% 9.85%

$4.85 2.62%

$3.39 1.83%

$105.07
100%

56.79%
37.54%

Logistic and Row Material Acquisition

Components Manufacturing

Time Systems AssemblyScrap and waste

Expedite Freight

Manufacturing Sub-Total

OEM Sales to Automotive Industry

Time System Hemi 5.7 for Chrysler Engine
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MORSE TEC MEXICO

Step 3 -Determine profit distribution
Develop estimate of the profits generated by each activity
50%

Operating margin

Logistic and Row Material Acquisition

ComponentsManufacturing

Scrap and waste

Expedited Freight

Time Systems Assembly

OEM Sales to Automotive Industry

0%

Share of industry revenue

100%
MORSE TEC MEXICO

4Step 4 - Reconcile the estimates
 According to the profit distribution the system assembly is the activity that gives the greater return of investment for the product, andit is true because it reduces a significant part of the assembly time of the engine in the motor assembly plant of Chrysler in Ramos Arizpe.

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MORSE TEC MEXICO