Honeywell Turbo Technologies Rob Gillette President and CEO Transportation Systems Forward Looking Statements 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. Scottsdale, AZ Dec. 2004 Page 2 Today’s Review • Transportation Systems • Turbo Technologies Overview • Ride & Drive Preview • Ride & Drive Scottsdale, AZ Dec. 2004 Page 3 Honeywell Today Aerospace Automation 38% 32% 16% 14% Specialty Transportation Materials • 108,000 employees in nearly 100 countries • A Fortune 60 company – $25 billion in sales • One of 30 select companies in the DJIA Scottsdale, AZ Dec. 2004 Page 4 Transportation Systems ProfileProfile 2004E Revenue: $4.2 - 4.3B 13 - 14% Op. Margin StrengthsStrengths:: • Turbo Technology • Strong Brands • Global Presence • Installed Base TurboTurbo TechnologiesTechnologies ConsumerConsumer ProductsProducts GroupGroup FrictionFriction MaterialsMaterials 51%51% 28%28% 21%21% Strong Growth Driven By Turbo Technology Scottsdale, AZ Dec. 2004 Page 5 Turbo Technologies Sales by Sales Turbo Volume Region by Segment in millions 15.8% CAGR Europe 9.1 Comm’lOE 7.2 64% Diesel85% 6.3 33% 4.7 Passenger Americas Vehicles 2.7 Asia 2.1 22% 12% 67% . 1994 1996 1998 2000 2002 2004E • $2.4 billion in sales (est 2004) • Leader in technology and innovation • Aerospace heritage and synergy Global Leader in Engine Boosting Scottsdale, AZ Dec. 2004 Page 6 What is Turbocharging? Compressed Air Flow Engine Cylinder Charge Air Cooler Turbine Compressor Engine EGR Cooler Gas Discharge Ambient Air Inlet Engine Exhaust Gas • Turbine driven compressor • Propelled by engine exhaust gas • Increases air flow and density Increases Power Density Scottsdale, AZ Dec. 2004 Page 7 Boosting Opportunity Turbocharged Segment Boosted/Non-Boosted Vehicles (Million) 24.7 25 10% CAGR BMW 15.5 Hyundai Significant Boosting Peugeot Opportunity DaimlerChrysler 0 ’04 ’09 Volkswagen Overall Auto Market Renault-Nissan (Million) 71.8 Toyota 75 63.5 2.5% CAGR Boosted Ford Non-Boosted 63% Gas 67% GM 4% Other 3% 0 2 4 6 8 10 12 33% Diesel 30% Comm’l Vehicles 0 ’04 ’09 Volumes (Millions) Source: Power System Research Untapped Opportunity for Turbocharging Scottsdale, AZ Dec. 2004 Page 8 Turbo Applications • Heavy Duty • Light Trucks • Passenger Cars Fuel Economy, Emissions and Performance Scottsdale, AZ Dec. 2004 Page 9 Why Turbocharge? Turbo Benefits TurboTurbo DieselDiesel TurboTurbo GasolineGasoline Great driving experience 10 - 20% better mileage with 30 - 50% better compared to non-boosted mileage than gasoline engines with equal or better vehicles performance Performance and Fuel Economy Scottsdale, AZ Dec. 2004 Page 11 Turbo Benefits - A Comparison EuropeanEuropean VWVW GolfGolf Acceleration Fuel Consumption 0-60 miles in seconds (city 45%, highway 55%) MPG Seconds 50 45.9 12 10.6 45 40 10 8.8 8.6 35 28.3 8 7.2 30 25.7 26.4 25 6 20 4 15 10 2 5 0 0 2.3L I5 1.8T 1.9TDI 2.0 2.3L I5 1.8T 1.9TDI 2.0 Source: Auto Motor und Sport; Car and Driver Fun to Drive and Fuel Efficient Scottsdale, AZ Dec. 2004 Page 12 Turbo Benefits - “The Turbo Effect” TurboTurbo DieselDiesel TurboTurbo GasolineGasoline Engine HP 0-60 Fuel Economy Engine HP Torque Fuel Economy city/highway city/highway VW Golf 150 8.8 sec 18/32 BMW 325 184 175 19/27 2.3L I5 Gas 2.8L NA VW Golf 150 8.6 sec 33/54 Saab 9.3 205 209 23/33 1.9L I4 TDI 2 L Turbo “Turbo _ .2 sec +83% / +69% “Turbo +11% +19% +21% / +22% Effect” Effect” Source: VW Turbochargers Enable Performance and Fuel Economy Scottsdale, AZ Dec. 2004 Page 13 Why Now? Legislation Converging European CO Reduction Objectives 180 2 165g/km 160 140g/km [g/km] 140 2 120g/km CO 120 -15% -27% 100 2002 2008 2012 NOx & Particulates PM Japan PM Europe PM US [g/Km] [g/Km] [g/Km] 0.10 0.10 0.10 Japan 2000 Euro II (1996) Tier I (1994) Euro III (2001) 0.05 0.05 0.05 Japan 2005 Euro IV (2005) Tier II (2004) Euro V (2010) Tier III (2007) NOx (g/Km) Nox (g/km) 0.0 0.5 0.8 NOx (g/Km) 0.0 0.5 0.8 0.0 0.5 0.8 Increasing Requirement For Clean Technologies Scottsdale, AZ Dec. 2004 Page 15 Global Engine Downsizing Trend WW Average (Passenger Car and Light Truck) Size, Weight, Engine Size Europe Asia US Performance (Liter) (Hp) Avg. Displacement 1.9L 1.8L 3.6L 180 5.0 Avg. Horsepower 72Hp/L 71Hp/L 58Hp/L 170 152 Hp 160 4.0 • Average engine size decreases 3.0 L 150 +18% globally (except in the US) 3.0 140 • Average engine Hp increases 2.5 L 130 Increased engine power density in 129 Hp • 120 2.0 -16% Europe and Asia 110 1.0 100 1990 2000+ Boosting / Turbo is a Key Enabler Scottsdale, AZ Dec. 2004 Page 16 Diesel - Our Foundation for Growth Diesel Penetration Over 20 Years 70 % Korea: 62% 60 % Europe: 56% 50 % 40 % 30 % China: 20 % 22% 10 % US: 7% 0 % 90 92 94 96 98 00 02 04 06 08 10 VNT™ for AVNT™ for light and Double Axle VNT™ for Passenger Car medium duty trucks heavy duty trucks Latest Generation Debuted in 2005 BMW 120D Diesel Penetration Continues to Increase Worldwide Scottsdale, AZ Dec. 2004 Page 17 Modern Clean Diesel Before Now • Old technologies • New technologies Polluting, dirty – Common rail fuel injection, Variable • injection timing, VNT™ technology – Particulate matter (PM) – Nitrogen dioxides (NOx) • Environmentally friendly – Sulfur fuel – 83% PM reduction since 1988 – 63% NOx reduction since 1988 Consumer rejection • – Ultra low sulfur fuel available in 2006 – Bad impression – Unsatisfactory performance • Increasing consumer acceptance – Superior performance and no turbo lag – 1/3 of Americans would consider purchasing a clean diesel vehicle*. * J.D Powers & Associates New Diesel Technology Drives Consumer Acceptance Scottsdale, AZ Dec. 2004 Page 18 North America Heavy Duty Truck Segment Heavy Duty Truck Shipments 300 200 100 Volumes (000) 0 '01 '02 '03 '04 '05 '06 Source: WARD’s Communications & ACT Research • Strong growth driven by economic recovery • Variable geometry needed to meet US emissions requirements • “Pre-buy” cycle boosts shipments through 2006 Technology and Strong Market Drive Growth Scottsdale, AZ Dec. 2004 Page 19 US Dieselization US Diesel Growth 1800 PV 1600 LT < 8500 3% Penetration 1400 LT > 8500 *New 1200 Growth 1000 800 8% Penetration 600 Existing 400 Market Diesel Sales (K Units) (K Sales Diesel 200 75% Penetration LT>8500 0 2004 2005 2006 2007 2008 2009 2010 *Domestics + Imports • Ability to charge a premium in premium car and light truck/SUV • Real world fuel economy meets expectations • Efficiency without compromising performance • Torque benefit for larger vehicles • Strong vehicle residual values Diesel Now Associated with Ultimate Driveability Scottsdale, AZ Dec. 2004 Page 20 Gasoline - Growing Interest Worldwide 9 8 Global Turbo Gasoline Segment 8M Turbo (20% of gas engines) 7 6 5 3.4M Turbo 5M Turbo (12% of gas engines) 4 1.6M Turbo 3 Million Units Million 2 1 0 ’01 ’03 ’08 ’10 Source: PRI, PSR, Martec Future Direction Wastegate Variable Geometry Technology Breakthrough will Lift Gas Turbo Adoption Scottsdale, AZ Dec. 2004 Page 21 Asia Growth Overall Boosting Demand China (Units) • Light duty truck growth CAGR • Adoption of Euro II standards 13% 6M • Fuel consumption regulations to be 3.3M increased 15% by 2010 Japan 2003 2008 • Strong overseas growth in diesel • Gasoline boosting opportunity driven Honeywell Turbo Forecast by CO2 regs beyond ‘08 (Units) • New long-term emission standard CAGR from 2H/05 18% 3M Korea 1.3M • Continued increase in passenger car diesel adoption • Tax incentives fuel diesel growth 2003 2008 Diesel Adoption, Emissions Drive Growth Scottsdale, AZ Dec. 2004 Page 22 India Turbodiesel Vehicle Production Honeywell Turbo in India 600 501K 500 03-08 CAGR • Business won with Tata and 400 28% Mahindra 300 • Developing facility in Pune 200 143K • 300K unit volume opportunity 100 0 2003 2008 Commercial Vehicles Light Vehicles • Favorable fuel price differential • 2005 Euro III implementation • Focus on export market • Euro IV favors VNT technology Fast Growing Diesel Segment Scottsdale, AZ Dec. 2004 Page 23 Why Honeywell? Technology Evolution Step Change: Control and Response Step Change: e-Turbo™ Compressor Electrically Side Assisted Turbo Variable Geometry 2-Stage Compressor Turbos Turbos Performance Step Change: Turbine Side Step 3 Step 2 Step 1 VNT™ Variable Nozzle Turbine Wastegate Entering Market 2004 2008 Robust Technology Roadmap Scottsdale, AZ Dec. 2004 Page 25 Latest Generation VNT Simulated Torque Curve Variable Nozzle Turbo (VNT™) Wastegate Naturally Aspirated Engine Torque 1000 2000 3000 4000 Engine RPM • Improved power • Lower fuel consumption and emissions • Higher torque and improved transient response • Improved braking power Continued Improvement of Groundbreaking Technology Scottsdale, AZ Dec. 2004 Page 26 Two-Stage Turbo Simulated Torque Curve 2-Stage VNT™ Wastegate Naturally Aspirated Engine Torque 1000 2000 3000 4000 Engine RPM • Employs twin turbos to boost low- and high-end performance • Significantly increases power density of engine • Higher power, transient response Increasing Performance Through Staged Boosting Scottsdale, AZ Dec.