New plant in USA opens up new opportunities for Tognum

• Engine plant in Aiken/South Carolina to replace assembly plant in Detroit
• Expandable property with factory building to be the basis for profitable growth and flexibility
• Important step taken towards the internationalization of production
• Strategic medium-term investment of 45 million US dollars on favourable terms

Friedrichshafen/Aiken, 5 March 2010. The specialist for propulsion and power solutions Tognum is expanding its production network to make it more international and to this end is setting up a new engine assembly and manufacturing plant for Tognum’s mtu brand in Aiken County, South Carolina (USA). It will replace the existing assembly plant in Detroit and now offers Tognum the opportunity to produce engine parts in the US dollar region, develop new markets and respond more flexibly to changing market requirements. Production is scheduled to begin at the end of 2010.

The new plant in Graniteville in Aiken County means that the Tognum Group has now implemented the plan that had been announced in autumn 2008, but shelved due to the global economic crisis, of expanding its presence in the USA. It has now purchased an existing building and the associated premises for this purpose from the drive component manufacturing company SKF. The final contracts were signed a few days ago in the USA. The company will benefit from the currently favourable price levels on the industrial property market for this strategic investment. In addition to the assembly of engines, the plant will be used for the manufacture of engine components such as cylinder heads and high-volume engine attachments and fittings. The premises also include the possibility of increasing production capacity if warranted by market requirements and the order situation.

“For a global group like Tognum, a global production network is absolutely essential, and the plant in Aiken has an important role to play. By manufacturing parts in the USA, we are less vulnerable to exchange-rate fluctuations between the US dollar and the euro, have production facilities located close to the customer, fewer parts in an advanced stage of manufacture to be transported from Europe to North America and will subsequently reduce high import duties. The higher value added in the USA also increases our chances when competing for public contracts offered by U.S. authorities,“ said Volker Heuer, Chairman of the Executive Board and CEO of Tognum AG, explaining the reasons behind the move.

As early as autumn 2008, Tognum had announced that it would be looking for a new location in the USA, but shelved the idea due to the effects of the global financial and economic crisis. “We have promised on a number of occasions that we will exploit the opportunities offered by the crisis. And we are doing precisely that now. Due to the drop in price levels for purchasing industrial sites, the new plan is cheaper than building a new plant on a greenfield site as originally envisioned,“ said Dr. Ulrich Dohle, Member of the Tognum Executive Board for Technology & Operations, who will be presenting details of the new location today in Aiken.

In the medium term, the Tognum Group will be investing some 45 million US dollars (around 33 million euros) in the 100 acres (40 hectare) site, which includes a 270,000 square foot (25,000 square meters) production building, and in assembly, inspection and production facilities. The U.S. State of South Carolina, Aiken County and state authorities are supporting the development of the new location with subsidies, tax relief, and the donation of an additional site. The sales organization, management and the entire office staff of Tognum’s North American subsidiary MTU Detroit Diesel will remain in Detroit in the U.S. State of Michigan.

Aiken was selected on the basis of a competitive tender as the most economically favourable location. The attractive site, which is located close to Interstate 20, offers ideal conditions for the transport of goods throughout North America. The seaport of Charleston for shipments overseas is just over 127 miles (200 kilometres) away.

The Tognum Group currently has over eleven manufacturing and assembly sites worldwide, two of which are located in the USA. Just recently, in autumn 2009, production of cylinder liners went into operation in Istanbul (Turkey). In summer 2010, the joint venture with the Chinese Norinco Group will start production of emergency power gensets in Datong in northern China.