2. Agenda Why Manufacture in China Types of Manufacturers Finding a Manufacturer What to Expect Prepare for the Unexpected Risks & Rewards Experiences

3. Larry Butz 25 years with Trane specializing in – Product Development –Technology & Product Globalization –Technology Transfer & Factory Start-up –Environmental Sciences Headed Intl Service Division Five Years as Engineering Manager for Trane Europe/Middle East (France) Technology Director for Trane Intl Technology Director for Trane Intl Environmental & Technology Spokesman

4. China 1982-84 Two Shanghai Factories –Customized Products –Equipment Selection –Process Optimization –Quality Standards –Training –Supplier Qualification –Factory Layout –Product Testing Capabilities

5. China 1995 - 96 Large Chiller JV Ligang, China Ligang, China –Customization –Technology Transfer –Training –Lean/Simple Processes –Supplier Development

6. China & Asia 1997 - 2002 Technology Globalization & Environmental Spokesman

7. Why Manufacture in China? Lower Cost Product Access to China Market

8. What to Expect Lower labor costs Lower raw material prices Lower component/sub- assemblies costs Range of quality levels available Fewer constraints (regulations) on factories

9. Types of Manufacturers State Companies Wholly Owned Locally Joint Ventures Wholly owned Foreign Your Own – Build or Buy

10. Where to Find Heavy Industries Light Industries

11. How to Find Government Agencies Industry Directories Web Bidding Networking Shows & Exhibitions

12. Be Prepared for Change Longer Pipeline Reduced Flexibility Change Control Cultural Differences Societal Value Systems Business Customs National Laws

13. Be Prepared For Change More Administrative Personnel Logistics-Import/Export Banking/LC/Currency International Law Communication Time Difference Language

14. Insight & Advice The relative cost of equipment vs. labor is significantly different in China. Expensive labor saving equipment used in the US will not be the best choice in China. Be prepared to make minor changes in your design specifications to obtain best results.

15. Risks Currency Variations Proprietary Design Info Political

16. Environmental Considerations Fewer Regulations Fewer Regulations Reduced Use of Coal Reduced Use of Coal Clean Air & Clean Water Clean Air & Clean Water Water Shortage Water Shortage Green Beijing Olympics Green Beijing Olympics Environmental Costing

17. Thank You for Your Time Larry Butz GEA Consulting, Inc 2420 N. Pine Creek Rd. LaCrescent, MN 55947 Tel: 1-507-895-6826 Fax: 1-507-895-4001 Email: LButz@gea-consulting.com www.gea-consulting.com