AMERICAN STANDARDwww.americanstandard.com/KB.asp

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Contents

Short description of the company Short overview of Bath & Kitchen SWOT Key learnings and overall objectives Strategy Where is American Standard vulnerable?

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A. Overall company overview

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SHORT COMPANY PROFILE A.S. (1/2)

• Founded in 1872 as the Pierce Steam Heating Company

• Stock-listed company since 1929, after the merge with the Standard Sanitary Manufacturing Company

• Global company with 3 B.U.: Air Conditioning Systems and Services (brand: TRANE), Bath & Kitchen, and Vehicle Control Systems (brand: WABCO)

• Each B.U. is a market leader worldwide

• 61,000 employees in 50 countries

• 10 billion $ turnover in 2005 (+8% vs. 2004)

• Main events in past 10 years: in 1988, AS escaped a hostile takeover via a leveraged buy-out and became debt-burdened. This explains why AS is less inclined to acquisitions than most of its competitors. Therefore the focus is on organic growth and the sanitation of the balance sheet

• All company processes based on Six Sigma

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SHORT COMPANY PROFILE A.S. (2/2)

Repartition of Sales 2005 / EBIT 2005by Business unit (%)

Air conditioning

58% / 66%

Bath & Kitchen

24% / 10%

Vehicle Control Systems

18% / 24%

Repartition of Sales 2005by region

America's59%

Europe30%

Asia/Pacific/Others

11%

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Concentrate /focus on a few/strongest Brand(s)

A irco nd it io n in g S ys te m s(5 9 % )

P rem ium :Ja do

P o rch er

M ass m arke t:A m erica n S tan d a rd

A m ericas

P rem ium :Ja do

M ass m arketA m erica n S tan d a rd

A sia

P rem ium :Ja do

M ass m arke t:Id e a l S ta nd a rd

V a lueA rm ita g e S ha n ks

C e ra m ica D o lo m ite

E urope

B ath & K itch enp rod ucts (2 3 % )

V e h ic le C o n tro l sys te m s(1 8 % )

Am erican S tandard C om panies

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B. Business Unit „Bath & Kitchen“

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SHORT PROFILE OF BATH & KITCHEN (1/2)

• World‘s largest global manufacturer of B&K products, incl. CSW, taps, wellness products and „accessories“ (furniture incl.)

• Total 2005 sales: $ 2.418 billion = 24% of total sales = 10% of company‘s income

20% 22%31%

80% 78%69%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

America's Europe Asia

Residential

Commercial

45%

5%8%

55%

95% 92%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

America's Europe Asia

Classical Distri / Wholesale

DIY

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Americ'a

40%

Europe

53%

Asia

7%

Fixtures

(CSW)

50%

Fittings

26%

Acrylic +

Wellness

13%

Accessories/

Furniture

11%

SHORT PROFILE OF BATH & KITCHEN (2/2)

Sales by region 2005 Sales by segment 2005

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America Europe Asien

All brands of the B& K Division

Ideal StandardArmitage Shanks

Ceramice DolomiteSottini, Venesta

Venlo SanitairPorcher, Jado

Senesi, Piel

Sangra,Vidima

Senesi, BØrma

American Standard

Porcher

Jado

American Standard

Jado

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Sales have developed well in all segments, but the profitability especially for Bath & Kitchen is worrying

Sales in USD x mln

1.813 1.994 2.235 2.440

2.419 7.465

7.795 8.568

9.509 10.364

0

2.000

4.000

6.000

8.000

10.000

12.000

2001 2002 2003 2004 2005

Air conditioning Bath & Kitchen

Vehicle Control Total

EBIT in USD x mln

148 155 140 197

102

787 831 838

984 1.013

0

200

400

600

800

1.000

1.200

2001 2002 2003 2004 2005

Air conditioning Bath & Kitchen

Vehicle Control Total

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Bath & Kitchen has never been up to the level of our two other segments, but the performance in 2003 and 2005 calls for stern measures

0%

2%

4%

6%

8%

10%

12%

14%

2001 2002 2003 2004 2005

Ebi

t mar

gin

in %

Air conditioning Bath & Kitchen Vehicle Control Total

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Just as AS, most of our international competitors cover almost the entire spectrum of bathroom products

Source: ASD research

Legend: X = minor weight in sales of companyXX = medium weight in sales of companyXXX = great weight in sales of company

Presence of main suppliers:by product group Power base

Bathtubs & trays

Showerenclosures Whirlpools

CeramicSanitaryware Hydrotherapy

Taps &Mixers

Bathroomfurniture

Installationsystems

CeramicTiles

American Standard World XX (x) (x) XXX (x) XX (x)

Duravit Europe X (x) XXX (x) XX

Grohe Europe XXX XX

Inax Asia XX X X XXX X X XX XX XX

Kohler N-America XX (x) X XXX X X XX X (x)

Masco N-America X XXX XX XX XXX

Roca/Laufen Europe XX(ES/PT)

X X XXX X(ES/PT)

X(ES/PT)

X(ES/PT)

X(ES/PT)

X(ES/PT)

Sanitec Europe XX X X XXX X X

Toto Asia XX X X XXX X XX XX XX X

Villeroy & Boch Europe XX X X XXX X XX X XX

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Global presence of the main competitors in CSW (year 2004)

100

200

300

400

500

Europe Asia AmericaDE FR UK/IE IT BNL Sca ES/PT RU Oth

EUR JP CN IN Rest

S+OA US CA MX Rest

S-Am

Size (m€) 278 320 378 350 102 165 253 173 372 475 702 186 >700 1.209 100 124 >240

Villeroy & BochAmerican StandardDuravitEczacibasiGroheInaxJacuzzi brandsKludiKohlerMascoRocaSanitecToto

Legend: Market share (volume): > 15% Market share (volume): >2% - <5%Market share (volume): >5% - <15% Market share (volume): <2%

Ceramics(incl. sinks and

showers)

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15,4%

14,2%

11,0%

10,6%

8,3%

6,5%

3,0%

2,9%

2,9%

1,8%

1,4%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

American Standard

Kohler

Roca

Sanitec

Toto

Villeroy & Boch

Jacuzzi

Inax

Crane

CISA

Duravit

Market shares CSW - World

On the world ranking list, we estimate that we rank #1

Total value as basis:5,2 billion Euro (ASP)

* Due to lacking data inclusive ceramic shower trays and kitchen sinks Source: BSRIA - Consult - ASD research

* V&B incl. Vitromex, Roca incl. acquisitions 2006

World-wide shares of main suppliers of CSW* - year 2003; coverage approx. 80% of the total world market

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21,4%

19,0%

14,7%

10,2%

3,5%

2,7%

2,1%

1,8%

1,6%

0% 5% 10% 15% 20% 25%

Sanitec

American Standard

Roca

Villeroy & Boch

Duravit

Kohler

Eczasibasi

Qualceram Shires

Jacuzzi Brands

Market shares CSW - Europe

In Europe, however, we are ranked # 2

Total value as basis:2,2 billion Euro (ASP)

*Ceramic Sanitaryware exclusive ceramic shower trays and kitchen sinksSource: Consult and ASD research

* Inclusive acquisitions of Roca 2006

Shares of the main supliers of CSW* in Europe - year 2003 -

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More details on our market shares (1/2)

Share of volume AT BE CH DE DK ES FI FR GR IE IT NL NO PT UK BG CZ HR HUCeramic Sanitary Ware 7% 13% 6% 8% 4% 10% 1% 16% 29% 28% 45% 3% 2% 4% 25% 47% 10% 10% 4%Baths: Synthetic 4% 11% 5% 2% 15% 16% 24% 22% 3% 2% 14% 33% 1%Baths: Steel 2% 8% 6%Baths: Cast Iron 14% 21% 5%Hydromassage Baths 3% 0% 5% 4% 4% 13% 6% 1% 0% 3%Shower Trays: Synthetic 8% 17% 9% 1% 1% 4% 1% 0% 0%Shower Trays: Ceramic 25% 24% 18% 28% 45% 11% 83% 32% 68%Shower Trays: Plastic 6%Shower Trays: Polyconcrete 8% 4%Shower Trays: Steel/C. Iron 4%Shower Enclosures 1% 4% 1% 1% 0% 2% 4%Bath Screens 0% 5%Conv. Shower CubiclesShower Panels 0% 0% 4%Bathroom furniture 0% 1% 4%Taps and Mixers 11% 5% 12% 13% 1% 14% 12% 15% 14% 26% 0% 11% 94% 2% 2% 1%Inst. Electric ShowersMixer Showers 6% 6%Power Showers 8%Commercial Showers 3%

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More details on our market shares (2/2)

Share of volume LT LV PL RO RU SI SK UA Cent-Am CA MX US AE BH CN KW OM QT SACeramic Sanitary Ware 1% 6% 1% 5% 1% 15% 9% 0% 35% 25% 29% 16% 6% 6% 2% 12% 6% 26%Baths: Synthetic 1% 6% 0% 1% 1% 7% 2% 13% 2% 13% 3% 33% 4% 8% 21%Baths: Steel 9% 9% 4%Baths: Cast Iron 2% 4% 6%Hydromassage Baths 1% 2% 1% 1% 8% 10% 11%Shower Trays: Synthetic 2% 1% 1% 1% 8% 8% 53% 10% 15% 9%Shower Trays: Ceramic 45% 63%Shower Trays: PlasticShower Trays: PolyconcreteShower Trays: Steel/C. IronShower Enclosures 0% 0% 1% 2% 2%Bath Screens 9%Conv. Shower Cubicles 0%Shower PanelsBathroom furnitureTaps and Mixers 0% 2% 1% 5% 2% 2% 8% 10% 3% 8% 4% 4% 2% 13% 3% 10% 9%Inst. Electric ShowersMixer ShowersPower ShowersCommercial Showers

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CURRENT STRATEGY

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Current key lernings

Business impact

Product

Production

Pricing

Distribution

Image

Orga/General

• B&K represents 23% of the business but only 10% from EBIT

• CSW is with 50% the biggest business field

• Fitting business represents 26% of sales

• Wellness business makes 13%

• 57 factories worldwide (33 for CSW), mostly on low cost basis

• aggressive pricing policy

• 50% of sales in Europe, 42% in the Americas and 8% in Asia

• High brand awareness, but unclear positioning

• Strong in commercial/professional business due to plumber heritage

• many personal fluctuations

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Current key B &K objectives• Increase our value added revenues by:

– optimize rebate structures

– increasing the share of value added products (features to benefits like water saving, easy installation, easy clean)

– improving product availability and time to market

– increasing investments in marketing support

• Improving productivity by:– Plant by plant: assortment alignment

– Plant to plant : stabilization of output

– Use plants as logistic turntables

– Enhance cost control and cost reduction

• Simplify our business by: – Reducing models and SKU’s

– Standardizing and simplifying global processes

=> We will keep improving our performance

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SWOT (only AS team)

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Strengths

• World‘s largest Bathroom & Kitchen manufacturer with international, well-known brands (high brand awareness, e.g. 84% in their core markets)

• Long history and american heritage, coming originally from the plumbing sector, enables to communicate tradition, experience and technical competence

• Good image as complete, innovative bathroom supplier with interior designers, decorators, consumers and plumbers, due to

– complete multi-category product lines– high competence in style and technical features (products with real USP‘s)*– userfriendly marketing supports (trainings, website, ...)

• Wide and deep assortment in CSW and fittings, which make 50% / 26% of the business• Work with internationally well-known designers and architects to meet the tastes and styles of all

markets and offer a tailored portfolio (NME, APAC)

• strong in the segments “value” (e.g. Arm. Shanks, Cera.Dolomite) and “mass” (AS/IS, private labels), therefore particularly price-aggressive and strong in project business

• Strong own sales organisation in most regions with vertical market specialists• Competitive cost positioning thanks to international production facilities and standardized processes (e.g.

reducing number of factories from 66 to 58)• High market shares in I, UK, BUL, US

* a few examples: Cadet 3 Toilets, Lifetime Whirlpools, EverClean Faucets

Brand/Image:

Assortment:

Market:

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• Worst performing division within the company >> restricts investment opportunity (shareholder value mentality!)

• Decreasing sales in 2005 versus 2004 (-0,9%), and significant decline in profits (-48%), particularly in Europe due to unfavorable mix, as sales migrated to economy products

• Big, fluctuant organization (risk of work stoppage, frequent management changes,...)

• Unclear strategy for a positioning/segmentation: try to be everybody‘s darling

• No clear alignment in the portfolio, distribution, production and pricing policies

• Multi-brand strategy and huge assortment = costly + complex >> lack of synergy, loss of focus

• „Standard“ doesn‘t sound very exclusive and could be a disadvantage for a premium positioning

• Limited assortment in furniture and Wellness

• Synergy potentials due to leadership of TRANE (Air Cond.) in project business are not used

• Low marketing support in the past = no inspirational brand image

• Overdistributed and dependant on big customers with focus on DIY or mass market, except with Wolseley

• Production/manufacturing problems: product unavailability/supply difficulties, increased energy costs

WeaknessesBusiness:

Market:

Strategy:

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Opportunities• Growth in home ownership• Development of a strong elderly target market worldwide• Higher spending on bathrooms• Bathrooms per house increasing• Housing stock continues to age > growth in the replacement, repair and remodeling, particularly in the U.S.• Growth in developing countries, particularly in Asia• Positive development in worldwide logistics

• Fluctuations in currency exchange rates• Development at the N.Y. Stock Exchange• Development of aggressive main competitors (for e.g Roca)• Aggressive competition of low-cost suppliers in Asia• Kohler’s relationships with Wolseley• Distribution concentration of the wholesale and the DIY (e.g. The Home Depot/Hughes)• Increasing costs for energy and raw materials• Purchasing high numbers of various components• Political risks related to operations in many foreign countries• Labor cost inflation, especially in low cost countries

Threats

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FUTURE STRATEGY

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FUTURE STRATEGY to be defined:Strategic goalsBrandsCommunicationDistribution & LogisticsStrategic Alliances