Client profile of TRW Automotive by klutzfu59

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									             Annual Report 2006




Client Profile: TRW Automotive
     TRW Automotive has been an FM Global client for 56 years.
     Like many of its peers, the company has expanded its production capabilities to other
     parts of the world, such as China, South America and Eastern Europe, where there
     has been explosive growth in manufacturing. FM Global’s WorldReach capabilities
                                                                            ®



     are helping TRW overcome risk management challenges by protecting the continuity
     of TRW’s business operations. Through successful communication with its facilities,
     TRW has also reduced its loss potential in recent years. The company continues to
     commit resources to risk improvement (taking a multi-year approach), with heightened
     awareness of interdependencies between core facilities and its position as a key
     supplier to the automotive industry.




                                              Participating in this interview:
                                              TRW > Mark Baker (MB), director, risk management; Rob Milligan (RM), risk manager;
                                              and Sandra Maben (SM), risk analyst
                                              FM Global > Dave Smolko (DS), senior account manager ; John Murar (JM), senior




                              Q
                                              account engineer; and Michael Wagner (MW), senior account engineer



                                              Why is loss prevention so critical to TRW?      global sales and operations. This is
                                                                                              also true in the auto industry, where
                                              MB: We believe in economies of scale,
                                                                                              U.S. and European manufacturers
                                              and in order for us to succeed as a
                                                                                              have more and rapidly changing global
                                              company, we need to have a majority—
                                                                                              competition. To the extent that TRW is
                                              if not all—of our supply for critical
                                                                                              affected by these trends, we’ve changed
                                              components utilize dual sourcing,
                                                                                              our manufacturing and sourcing glob-
                                              whereby we have at least two suppliers
                                                                                              ally, including the use of local sources,
                                              for each component in the supply chain.
                                                                                              to maintain our competitiveness, and
                                              In turn, we provide products that are
                                                                                              FM Global has been able to mirror
                                              unique for individual vehicle lines.
                                                                                              these global changes. FM Global is
                                              So, we have a supply chain where our
                                                                                              everywhere we are, and has been able




                               A
                                              goal is to minimize any interruptions.
                                                                                              to provide the same consistent capacity
                                              The level of competition on a global            and loss prevention advice it has
                                              basis has resulted in some U.S. and             provided historically. >
                                              European manufacturers pursuing

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               TRW Automotive ranks among the world’s largest and most diversified suppliers
               of automotive systems, modules and components to global vehicle manufacturers
               and related aftermarkets. The company produces advanced active systems in
               braking, steering and suspension and sophisticated occupant safety systems for
               inflatable restraints, seat belts and steering wheels.

               Occupancy: Highly engineered automotive product manufacturing.

               Company size: More than 200 locations, including more than 145 production
               facilities spread over five continents; 2006 sales: US$13.1 billion; 2006 operating
               income: US$636 million; number of employees; 63,800

               Company type: Public

               Years with FM Global: 56 (TRW Automotive or its predecessors)




     Michael, how is it FM Global can be           How has FM Global helped you gain                JM: We’ve had to struggle a little with
     everywhere TRW is?                            acceptance of loss prevention concepts in        the business culture—in that some of
                                                   parts of the world where these concepts          the facilities are partnerships or joint
     MW: It’s because we have offices in
                                                   are still considered unconventional?             ventures. The Shanghai plant was
     every region and engineers embedded
                                                                                                    selected for several reasons. First, it
     in those different cultures. They are able    RM: FM Global has provided us
                                                                                                    was wholly owned by TRW and it was
     to translate the philosophy and actions       with training support on a global basis,
                                                                                                    a new construction project, resources
     TRW and we would like them to take.           from Mexico to China, for the past
                                                                                                    were available, and local management
     They speak the local language, live in        several years.
                                                                                                    realized their exposures. Also, it
     the same time zone, and know the ways
                                                                                                    produces electronic components that
     of doing business in those areas. And,        It appears there is still much to be done,       are critical to TRW clients in China,
     our service is consistent because we          particularly in China, where you have at         and we did not want to risk any business
     apply consistent training and standards
                                                   least 10 facilities.                             interruption. FM Global was in on the
     for all locations.
                                                                                                    project from the beginning, which
                                                   MB: China is a rapidly maturing
     RM: The changes in the supply chain                                                            helped us tremendously. When man-
                                                   marketplace that’s evolved from internal
     have put a greater emphasis on mon-                                                            aging change, two key elements include
                                                   competition on a local level, to being a
     itoring and managing change within                                                             getting involved early in the process and
                                                   center for outsourcing, to manufacturing
     our organization. The pace of change is                                                        then putting the recommendations on
                                                   on a competitive global basis where
     incredible, and we strive to keep up with                                                      the table before the budget is set. The
                                                   suppliers are expected to be world-
     projects that are going on or are in the                                                       timing of it was perfect, and Mark and I
                                                   class. So, there’s a real challenge there
     planning stage. FM Global’s reach helps                                                        recently went to Shanghai to present the
                                                   to have the facilities meet that global
     us there—because what we don’t pick                                                            plant with a loss prevention award. >
                                                   competitive standard. We believe we’ve
     up in corporate risk management we pick       accomplished that recently in Shanghai
     up in the field through interaction with       with the facility achieving highly
     FM Global engineers at our locations.         protected risk status, and it’s our goal
     SM: We do rely on one another to make         to have all our facilities in China meet
     sure we’re on track and can connect all       the same loss control standard.
     the pieces of the puzzle.



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Rob Milligan
Risk Manager
TRW
               +   Sandra Maben
                   Risk Analyst
                   TRW
                                  +   Mark Baker
                                      Director, Risk Management
                                      TRW
+   Michael Wagner
    Senior Account Engineer
    FM Global
                              +   Dave Smolko
                                  Senior Account Manager
                                  FM Global
                                                           +   John Murar
                                                               Senior Account Engineer
                                                               FM Global
                                                                                         >
“We provide highly engineered safety products, and we need                                    act economically and otherwise
                                                                                              responsibly. To have FM Global take
 to be able to protect our physical assets so we can deliver                                  a long-term view with TRW, and for
 those products in a timely manner.”                                                          both of us to realize our economic and
                                                                                              other goals, is really the most important
                                               Mark Baker, Director, Risk Management, TRW     aspect of the partnership. Also, we both
                                                                                              have a financial role in the success of
                                                                                              each other’s company. As FM Global
                                                                                              helps us prevent loss, we can reap the
                                                                                              benefit, most recently by sharing in the
 MB: As a company, we decided, with               How does risk improvement play into
                                                                                              membership credit.
 FM Global’s support and input, to                TRW’s strategic objectives?
 establish the award process. Many
                                                  MB: TRW has four strategic priorities
 times, the financial community within                                                         TRW has made quite an investment
                                                  that make us successful—best quality,
 TRW sees the benefits of risk man-                                                            in its captive insurance company. In
                                                  lowest cost, global reach and innovative
 agement, but people at the facilities                                                        what way do we add value in protecting
                                                  technology. We must make products
 involved in production on a daily basis                                                      that investment?
                                                  right the first time, relentlessly drive
 do not always have this opportunity,
                                                  down costs, position ourselves globally     RM: The TRW captive retains a per-
 and it helps to remind them. This award
                                                  to serve key customers and offer            centage of any loss on an occurrence
 honors those facilities that meet the
                                                  leading-edge systems and products.          and aggregate basis; therefore, the vast
 standard we’re asking them to set.
                                                  Preventing loss at our facilities is a      majority of FM Global’s recommen-
                                                  major component of meeting these            dations serve to protect our captive, and
 What are some loss control challenges            strategic objectives.                       subsequently, our bottom line. That’s
 in other parts of the world, Eastern Europe                                                  the message we convey to our plant
 for example?                                     Moreover, we are the global leader
                                                                                              managers, to make sure they are aware
                                                  supplying safety products in the auto-
                                                                                              that we retain a significant amount of
 DS: One challenge is infrastructure.             motive industry. We provide highly
                                                                                              risk on any loss.
 Some countries don’t have a good public          engineered safety products and we need
 water supply, which merely means                 to be able to protect our physical assets   FM Global also supports just-in-time
 inadequate water pressure. We often              so we can deliver those products in a       delivery in the event of a loss. When
 recommend an on-site pump and water              timely manner. Sources of investment        we experienced a fire loss in Poland in
 storage tank, which can be expensive             capital also recognize the significance      2003, the FM Global loss adjustment
 to install and is not always necessary           of this exposure—from the property          team was on the scene within 12 hours,
 if the facility is not completely uti-           and business interruption point of view.    assisting our management in salvage
 lized, production is ramping up or the                                                       efforts, cleaning machinery and locat-
 occupancy is not in its final form. To                                                        ing equipment in other facilities, to get
                                                  You’ve made a significant investment
 offset this cost at the early stage of an                                                    production up and running within a
                                                  in loss prevention over the years.
 investment plan and in compliance                                                            very short time.
                                                  What type of commitment do you
 with local requirements, we focus on
                                                  expect from FM Global?                      MB: Had the loss caused a business
 getting sprinklers where necessary,
 which may be just a few heads fed by                                                         interruption, our reputation would have
                                                  MB: We view risk transfer as a long-
 a pressure tank. I see this as common-                                                       suffered. So, FM Global helps to protect
                                                  term commitment. As part of that
 sense engineering—we provide required                                                        our reputational risk with our customers.
                                                  long-term relationship with our insurer,
 protection for certain processes, while                                                      And that’s significant to us, because the
                                                  we wouldn’t expect either side to take
 working together to achieve more                                                             damage to our reputation from business
                                                  advantage of short-term or fluctuating
 comprehensive protection.                                                                    interruption could exceed the possible
                                                  market conditions. That’s tough to do,
                                                                                              economic loss either of us may realize
                                                  generally, in the insurance marketplace
                                                                                              from an insured event.
                                                  where businesses have an obligation to




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