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Merrill Lynch Investor Meeting Ash Gupta / Krishna Mikkilineni March 20, 2006

Honeywell Honeywell in India (Merrill Lynch Presentation)

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Page 1: Honeywell  Honeywell in India (Merrill Lynch Presentation)

Merrill Lynch Investor MeetingAsh Gupta /Krishna MikkilineniMarch 20, 2006

Page 2: Honeywell  Honeywell in India (Merrill Lynch Presentation)

2 Honeywell India Investor Meeting – March 20, 2006

These materials contain certain statements that may be deemed “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. The forward-looking statements included in these materials are also subject to a number of material risks and uncertainties, including but not limited to economic, competitive, governmental, and technological factors affecting our operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements.

Forward Looking Statements

Page 3: Honeywell  Honeywell in India (Merrill Lynch Presentation)

3 Honeywell India Investor Meeting – March 20, 2006

Automation & Control

Specialty Materials

Aerospace

Transportation

34%

15%

36%

15%

• 118,000 employees in nearly 100 countries

• A Fortune 75 company – $30 billion in sales in 2006

• One of 30 select companies in the DJIA

Honeywell Today

* Pie Chart calculated using 2006E Sales

Page 4: Honeywell  Honeywell in India (Merrill Lynch Presentation)

4 Honeywell India Investor Meeting – March 20, 2006

India Overview

• Economy experiencing rapid growth- Annual growth averaged 6% last 20 years- GDP expected to grow 6-8%- Growth in attractive commercial and industrial segments- Recognition by government to foster investment and trade

• Honeywell tapping opportunity for domestic market and procurement- Commercial trade ~$500M- Leverage engineering and back office resources- Engaged in local manufacturing for domestic and exports

Page 5: Honeywell  Honeywell in India (Merrill Lynch Presentation)

5 Honeywell India Investor Meeting – March 20, 2006

India Economy

Projected GDP*, $B

… a Trillion by 2010 and $2-3 Trillion in 2 decades

1150

2100

1994 2004 2014 2024

1400

3000

350

16th 8th 4thWorld Rank

650

10th

6%

8%6%

8%

6.3%

6% annual growth (2005 - 2025)• Consistent 6% in last two decades • Demand driven and led by private sector

Likely to grow faster • Focus on investments in infrastructure

and administrative reform• Industrialization process is real

- Industrial capacities peaked … new investment cycle

• Competition, tariff reductions, income velocity and financing major drivers

• New growth engines – tourism, organized retail, aviation…

• Strong inflows from overseas

Services: 8.0 - 8.5%Industry: 6.5 - 7.0%Agriculture: 0 - 2.5%Inflation: 4.5 - 5.5%

Services: 8.0 - 8.5%Industry: 6.5 - 7.0%Agriculture: 0 - 2.5%Inflation: 4.5 - 5.5%

Forecast (2006 - 2010)Forecast (2006 - 2010)

Note: * Assuming 6%+ growth rateSource: Goldman Sachs BRICS Report; CERG Advisory

India Economy Has Significant Momentum… Opportunities for all our businesses

GDP Expected To Grow 6-8% Over Foreseeable FutureGDP Expected To Grow 6-8% Over Foreseeable Future

Page 6: Honeywell  Honeywell in India (Merrill Lynch Presentation)

6 Honeywell India Investor Meeting – March 20, 2006

Area 2000 – 2004 2005 -2010 (P) Key Drivers

ENERGY Power Gen $10B $32 - $40B Shortages, 6-10,000 MW

to be added annuallyWATERWaste Treatment, $25B $40 - 45B Poor quality of drinking water;Supply, Irrigation shortages

TRANSPORT Roads $7B $25 - 30B 14,000 Km highways program

Ports $3B $8 - 10B 23 New ports; modernizationof existing infrastructure

Airports $1B $8 - 10B Modernization, expansionnew airports

Railways $11B $30 - 40B Dedicated freight corridor between key cities

TELECOM $12B $25B Low teledensity ~ 14%

Source: BCG analysis; IMA Asia Forecasting; Planning Commission of India; CMIE

Projected Infrastructure Spend

Massive Infrastructure Growth

$130-170B

Page 7: Honeywell  Honeywell in India (Merrill Lynch Presentation)

7 Honeywell India Investor Meeting – March 20, 2006

Honeywell India: 2006

Rapid progress since 2002• From ~ $60M, 2002 to $500M, 2006E

Sourcing3%

Services32%

External Sales65%

Total Trade $500M

Internal to Honeywell

ACS46%

SM29%

Aero19%

TS6%

External Sales

Q2 Q4 Q1 Q2Q1 Q2

GBS Turbo FireQ3

Tata-HON

2003 2004

Q1

SecurityQ3

NovarQ4

UOP

2005

HON Trade ~$500M In India* Note – All numbers in US Dollars

Page 8: Honeywell  Honeywell in India (Merrill Lynch Presentation)

8 Honeywell India Investor Meeting – March 20, 2006

Honeywell India: Footprint

ManufacturingNOVAR India

Honeywell Automation IndiaHoneywell Turbo Technologies

Honeywell Life SafetyBPO, Corporate

Honeywell Technology Solutions Lab Labs

Key Sales Offices, Excluding 15 additional sales offices

Page 9: Honeywell  Honeywell in India (Merrill Lynch Presentation)

9 Honeywell India Investor Meeting – March 20, 2006

Turbo Plant In Pune

HTT Production For Domestic And Exports

Page 10: Honeywell  Honeywell in India (Merrill Lynch Presentation)

10 Honeywell India Investor Meeting – March 20, 2006

Honeywell Opportunities (2006 – 2010)

• Cumulative Demand– Cars: 9 - 10M– Diesel Cars: 2 - 3M

• Key Drivers

– Rising incomes, retail credit, tougher emissions standards

Cars: 4% household ownership 2006, 9% by 2010

Retail Credit: competition and low interest rates

– Diesel 30% cheaper than gasoline

Automotive• Cumulative Demand

– Refrigerators: 40 - 50M– Room ACs: 15 - 20M

• Key Drivers

– Refrigerators: 14% household ownership 2006, 20% by 2010

– Availability of power, competitive pricing, retail credit, improving quality of life

– Lifecycle cost of ownership, health and potential regulatory focus to drive demand for next generation fluorocarbons, sensors

Consumer Durables

Increased Quality Of Life Driving Growth OpportunitiesSource: Synovate Business Consulting; CMIE; NCAER; Literature Review

Page 11: Honeywell  Honeywell in India (Merrill Lynch Presentation)

11 Honeywell India Investor Meeting – March 20, 2006

Honeywell Opportunities (2006 – 2010)

• Cumulative Demand– Expansion 50 - 60 MTPA– Modernization

• Key Drivers

– Projected demand

2005 demand 112 MT, growing to 150 MT in 2010

– New emission norms

Refineries

• Cumulative Demand– 30 - 40,000 MW capacity addition

• Key Drivers

– 7% shortage today, (12% peak time)

– Privatization of distribution and new electricity act increases bank-ability of power projects

Power Generation

Capacity Limitations Create OpportunitiesSource: Synovate Business Consulting; CMIE; NCAER; Literature Review

Page 12: Honeywell  Honeywell in India (Merrill Lynch Presentation)

12 Honeywell India Investor Meeting – March 20, 2006

Honeywell Opportunities (2006 – 2010)

• Cumulative Demand– 300+ new aircraft to be delivered

by 2010

• Key Drivers– Deregulation of sector, private

airlines permitted to fly abroad

– Emergence of latent demand, low cost carriers

25% traffic growth Y-O-Y

Aviation• Cumulative Demand

– 400M+ sq ft premium real estate, special economic zones

• Key Drivers– IT, BPO sector driving premium

office space1.5-2.5M new jobs projected (2006-2010) @ 80 sq ft per employeeBanking call centers, back office, telecom offices, manufacturing

– Organized retail to grow to 5% of market by 2010 (from 2% in 2004)

25M sq ft of space under development in top 14 cities

Real Estate

Strong Aircraft And Construction CyclesSource: Synovate Business Consulting; CMIE; NCAER; Literature Review

Page 13: Honeywell  Honeywell in India (Merrill Lynch Presentation)

13 Honeywell India Investor Meeting – March 20, 2006

Honeywell In India – Our Businesses• AEROSPACE

- Leading supplier of safety avionics such as TCAS, EGPWS and APUs on commercial airliners …serving all commercial airlines in India

- Licensor for TPE 331 engines and radars to HAL- Supplier of Video Docking Guidance Systems at Chennai airport

• AUTOMATION & CONTROL SOLUTIONS- Leaders in industrial process automation solutions … Over 50% of oil refineries in India use

Honeywell process solutions- India’s largest building automation solutions provider - Leader in Energy Efficiency offerings

• SPECIALTY MATERIALS- Over 50% of oil in India is refined using UOP processes and know how- Products such as fiber for armor applications, next gen fluorocarbons for air conditioning and

refrigeration applications, packaging films for food and pharma applications

• TRANSPORTATION SYSTEMS- Turbo manufacturing unit commissioned in Pune in November 2005 … for domestic market as well

as exports

• Technology Centre, Engineering & Back Office Services- HTSL at Bangalore and Madurai is one of the largest Tech centers in India- Engineering services at Pune supports and leads major Petrochemical and other projects in the

Middle East, Africa and Europe- Back office centers at Delhi and Bangalore…global customer support, employee services

Page 14: Honeywell  Honeywell in India (Merrill Lynch Presentation)

14 Honeywell India Investor Meeting – March 20, 2006

Honeywell In India – Recent Highlights

• e-Retail Solutions for Indian Oil and Hindustan Petroleum … $48M … Linking 1,300 retail outlets, 2,300 product tankers and 100+

product storage terminals

• Energy Performance Contract for the Rashtrapati Bhawan (President’s estate)

• Building Management System for Hyderabad International Airport

• Export Orders From Europe and Thailand for Turbochargers

• Business Superbrand (’04-06)

• “10 Great Places to Work”… Business World

Leveraging Technology, Brand, People To Win

Page 15: Honeywell  Honeywell in India (Merrill Lynch Presentation)

15 Honeywell India Investor Meeting – March 20, 2006

Honeywell TechnologySolutions Lab Overview

Page 16: Honeywell  Honeywell in India (Merrill Lynch Presentation)

16 Honeywell India Investor Meeting – March 20, 2006

Availability of Engineering resource pool

Growing software embedded product /

solutions market

Globalization Drivers

Fulfilling Business Needs For Technology And Cost

HTSL

Higher Engineering cost productivity

Expansion in controls’business… opportunity to

cross leverage

Increase of software content in products

Effective Globalized workforce as a differentiator

Retain knowledge by leveraging young talent

Opportunity for “Follow the sun” work & India as a

market

Page 17: Honeywell  Honeywell in India (Merrill Lynch Presentation)

17 Honeywell India Investor Meeting – March 20, 2006

2004-2006• Electronics &

Mechanical Eng’g• System Engineering• Shanghai, Brno• Great Place to work (#4

in 2005)• CMMi L5 / PCMM L5• 4,500 Employees• End to End

Engineering/Process Solutions

2001-2003• Software Design &

Development• Research &

technology• IT Support • Madurai• Beijing• CMM Level 5• Product Roadmap

1995-2000• Software Testing &

Development Focus

• Low Cost / Staff Augmentation Driven

• Bangalore

• CMM Level 4

• Created a Unique Culture

• 6 to 600 Employees

HTSL Journey

Cost + Growth Orientation = Competitive Edge

Growth Driven

CostDriven

• Founded in 1995 in Bangalore

• Cross-Company Engineering & Technology Center

• Customers –Honeywell SBUs worldwide- Aerospace- Automation

Control Solutions

- Corporate Functions (IT, HR, Finance)

Page 18: Honeywell  Honeywell in India (Merrill Lynch Presentation)

18 Honeywell India Investor Meeting – March 20, 2006

Operating Model

Globalized Execution Capabilities

HTSL-India

HTSL-China

HTSL-Brno

HON-SBUs

• Program Execution• Technology / Engineering

Center of Excellence• IT Expertise• Best of the Breed

Commercial Technologies• Partnership Ecosystem

• China Growth• Design to Cost

Capability• Supply Chain

Capabilities

• Customer Management

• Product Roadmap• Program

Management• System

Engineering & Integration

• Sales & Marketing

• Customer / Manufacturing Proximity

• Value Engineering CoE

Replicating Capabilityand Leveraging Value

Replicating Capabilityand Leveraging Value

Page 19: Honeywell  Honeywell in India (Merrill Lynch Presentation)

19 Honeywell India Investor Meeting – March 20, 2006

Airline Industry Trends

Well Positioned For Catering To The Changing Landscape

Mega-TrendsMegaMega--TrendsTrends

Implications for HoneywellImplications for HoneywellImplications for Honeywell

• Increasing Commercial Air Travel

• New platforms will account for most OE sales in 10 years

• Airline profitability challenged

• Capacity and competition increasing in Aftermarket MRO

• Demographic Shifts, Rise of India & China

• War on Terror Safety and Security

• Increasing Commercial Air Travel

• New platforms will account for most OE sales in 10 years

• Airline profitability challenged

• Capacity and competition increasing in Aftermarket MRO

• Demographic Shifts, Rise of India & China

• War on Terror Safety and Security

Implications for HTSLImplications for HTSLImplications for HTSL

• Rapid Technology Evaluation

• Value/Sustenance Engineering

• Increased engineering productivity

• Core platforms development

• Next generation product development

• Deliver on local needs

• Rapid Technology Evaluation

• Value/Sustenance Engineering

• Increased engineering productivity

• Core platforms development

• Next generation product development

• Deliver on local needs

• Capture content in new platforms

• Improve relative cost position

• Grow aftermarket with customized offerings

• Technology Trends and Changes Software as a value driver; Operating efficiency vs. more features

• New Platforms

• Capture content in new platforms

• Improve relative cost position

• Grow aftermarket with customized offerings

• Technology Trends and Changes Software as a value driver; Operating efficiency vs. more features

• New Platforms

Page 20: Honeywell  Honeywell in India (Merrill Lynch Presentation)

20 Honeywell India Investor Meeting – March 20, 2006

Cabin Pressure Control Monitoring System

Improved Technology At Lower Cost

• Developed a new Product with a quick turn around design cycle

• Multiple derivatives with high reuse & low customisation

• Addresses both – Growth - New market – Productivity - Reuse

• Developed a new Product with a quick turn around design cycle

• Multiple derivatives with high reuse & low customisation

• Addresses both – Growth - New market – Productivity - Reuse

• Low cost – Design to cost• All-electric vs electro pneumatic• Electronics / software / control laws

developed and demonstrated as a proof of concept to gain customer interest

• Low cost – Design to cost• All-electric vs electro pneumatic• Electronics / software / control laws

developed and demonstrated as a proof of concept to gain customer interest

• Honeywell has a strong platform and presence, but opportunity exists in modernizing of technology, weight and cost

• Honeywell has a strong platform and presence, but opportunity exists in modernizing of technology, weight and cost

HTSL

(Before 2004)

(2004)

(2005)

Page 21: Honeywell  Honeywell in India (Merrill Lynch Presentation)

21 Honeywell India Investor Meeting – March 20, 2006

Supporting Advanced Technology Development

Enabling Technology Driven Growth Opportunities

Wireless Communication

Le gend:- Se nsors

- W ire le s s AP

- W ire le s s Ca m era

More Electric A/C

Autonomous Navigation

Vehicle Health

1. In cabin wireless2. Arc fault detection3. Perception sensing and obstacle avoidance4. Diagnostics algorithms5. Automated software verification

1. In cabin wireless2. Arc fault detection3. Perception sensing and obstacle avoidance4. Diagnostics algorithms5. Automated software verification

Dependable Software

1

4

3

2

5

Page 22: Honeywell  Honeywell in India (Merrill Lynch Presentation)

22 Honeywell India Investor Meeting – March 20, 2006

Automation And Control – Industry Trends

Emerging Market Changes Provide Critical Enabler For Growth

Mega-trendsMegaMega--trendstrends

Implications for HoneywellImplications for HoneywellImplications for Honeywell

Implications for HTSLImplications for HTSLImplications for HTSL

• Aging population • Energy efficiency• Wireless & other life style

changes• Air / emissions regulations

(Kyoto)• Homeland security• Growth in Asia

• Aging population • Energy efficiency• Wireless & other life style

changes• Air / emissions regulations

(Kyoto)• Homeland security• Growth in Asia

• Upgrading products / new products

• Customize products for emerging markets

• Accelerate new technology development

• Advanced energy efficiency technology and solutions

• Innovate new offerings in emerging security, optimization, etc.

• Upgrading products / new products

• Customize products for emerging markets

• Accelerate new technology development

• Advanced energy efficiency technology and solutions

• Innovate new offerings in emerging security, optimization, etc.

• Lower total installed cost• Emerging business

opportunities Industrial Wireless, Sensors, Comfort, Energy Efficiency, Emissions reduction and trading

• Industrial security/safety, critical infrastructure security, video / access / perimeter

• Lower total installed cost• Emerging business

opportunities Industrial Wireless, Sensors, Comfort, Energy Efficiency, Emissions reduction and trading

• Industrial security/safety, critical infrastructure security, video / access / perimeter

Page 23: Honeywell  Honeywell in India (Merrill Lynch Presentation)

23 Honeywell India Investor Meeting – March 20, 2006

Redefining Competitive Dynamics

Developing Solutions Quickly To Compete

Before• >70% smart field devices in

the market were HART-based

• Entry barriers through technology existed

After• Honeywell recognized as

leader in HART• Portfolio with complete range

of HART products• Effective Asset Management

/ Field Solutions

Standards Body

Customer consortium

Product/ Application Development

System Design

Product Management

HTSL

+

+

+

+

Page 24: Honeywell  Honeywell in India (Merrill Lynch Presentation)

24 Honeywell India Investor Meeting – March 20, 2006

Focus On Critical Technology Platforms

Core Technology Development In Key Areas

Video Security

Energy Solutions

Software Usability

Plant Optimization

Industrial Wireless

1. Industrial RF technology2. Video analytics3. Planning / scheduling applications4. Plant wide energy solutions5. Usability

1. Industrial RF technology2. Video analytics3. Planning / scheduling applications4. Plant wide energy solutions5. Usability

1

2

3

4

5

Page 25: Honeywell  Honeywell in India (Merrill Lynch Presentation)

25 Honeywell India Investor Meeting – March 20, 2006

Building Platforms That Can Be Used Across Businesses

Value Creation Through Cross SBU Tech Development

• Replace wired avionics with wireless• UAVs for commercial applications

Aerospace Automation & Control Solutions• RF in harsh environment• Sensor networks for wide area

surveillance

Wireless Platform• Dependable wireless• Sensor networks• Miniature systems• Power optimization

Page 26: Honeywell  Honeywell in India (Merrill Lynch Presentation)

26 Honeywell India Investor Meeting – March 20, 2006

Cycle Of Execution And Improvement … Source Of Competitive Advantage

Culture Of Innovation And Cost Efficiency

Strong Leadership

Culture of innovation

Tight linkage with SBUs

Emerging market

presence

Cross SBU leverage

Customer focus

Strong HR practices

Proximity to offshoring

models

Local ecosystem

Process excellence

50+ Patents

SEI-CMM-L5DFSS & HOS

Location COE

PlatformsReuse

Technology Leverage

PCMM-Level 5

Customer services

Global Exchange Programs

Product Roadmaps

Regional NPI

Page 27: Honeywell  Honeywell in India (Merrill Lynch Presentation)

27 Honeywell India Investor Meeting – March 20, 2006

Building Workgroups & Culture

• Multilevel employee engagement• Best Practice sharing & Technology

Forums

No. 4

Building Competencies

• Pervasive & flexible Competency framework

• Quest for Innovation• Communities of Practice

Motivating & Managing Performance

• Career profiling• Talent-at-risk engagement• Unique reward and recognition programs

Shaping the Work Force

• Cross industry talent • Tier 2 cities• Global exchange programs

Unique People Practices And Culture

Performance And Customer Driven People Culture

Great Places To Work

Page 28: Honeywell  Honeywell in India (Merrill Lynch Presentation)

28 Honeywell India Investor Meeting – March 20, 2006

A Systematic Mechanism To Replicate Success

Process Maturity

People Capabilities

Value Focus Organizational Mechanisms

Business & Operating

Model

Customer Experience

“HTSL Way” Platform

Replicate in new locations

Replicate through new offshore based

services

Multiplying The Competitive Advantage

Page 29: Honeywell  Honeywell in India (Merrill Lynch Presentation)

29 Honeywell India Investor Meeting – March 20, 2006

HTSL Summary

• Cost and Growth-driven

• Process excellence

• Culture of cost take-out

• Source of Engineering competitive advantage

• Technology engine

• Positioned to tap emerging markets

Listen to the customers

Align, influence & fit well with the

product & Biz strategy of the SBUs

Building differentiable

solutions …profitable, sustainable

Serve the customers

well

HTSL Value Creation

Built To Deliver Value