TRW Automotive TRW Automotive Holdings Corp. 12001 Tech Center Drive Livonia, Michigan 48150 2005 Annual Report (734) 855-2600 www.trwauto.com The Road Ahead: TRW advanced radar and video sensing systems work together to monitor the road ahead. Board of Directors (as of March 10, 2006) Neil P. Simpkins 2,3 Robert L. Friedman Jody G. Miller 1 Chairman of the Board; Senior Managing Director, Venture Partner with Maveron, LLC; Senior Managing Director, Chief Administrative Officer and former Executive Vice President and The Blackstone Group L.P. Chief Legal Officer, former acting President and The Blackstone Group L.P. Chief Operating Officer, Americast John C. Plant 3 President and Chief Executive Officer, Matthew Kabaker 2 Paul H. O’Neill TRW Automotive Holdings Corp. Principal, The Blackstone Group L.P. Special Advisor, The Blackstone Group L.P.; former U.S. Secretary of the Treasury Francois J. Castaing 1 J. Michael Losh 1 and former Chairman and Consultant for Castaing & Associates; Former Interim Chief Financial Officer, Chief Executive Officer, Alcoa former Executive Vice President, Vehicle Cardinal Health; former Executive Vice Engineering, and Technical Advisor to the President and Chief Financial Officer, Committee Memberships 1 Chairman, DaimlerChrysler Corporation General Motors Corporation Audit Committee 2 Compensation Committee 3 Corporate Governance and Nominating Committee Executive Officers John C. Plant David L. Bialosky Peter J. Lake President and Chief Executive Officer Executive Vice President, Executive Vice President, General Counsel and Secretary Sales and Business Development Steven Lunn Executive Vice President and Joseph S. Cantie Neil E. Marchuk Chief Operating Officer Executive Vice President and Vice President, Human Resources Chief Financial Officer Stockholder Information Annual Meeting Shareholders Account Services Stock Exchange The annual meeting of TRW Automotive Shareholders who own TRW Automotive TRW Automotive Holdings Corp. common Holdings Corp. shareholders will be held stock through a brokerage firm should stock is listed on the New York Stock at 4:00 p.m. (local time), Tuesday, May contact their broker for account-related Exchange under the symbol TRW. 16, 2006, at the Ritz Carlton New York – requests. Battery Park, Two West Street, New York, Auditors National City Bank acts as transfer agent NY 10004. Proxy materials and a formal Ernst & Young LLP Helping to protect and registrar for TRW Automotive and can notice of the meeting will be sent to Troy, Michigan assist registered shareholders with a vari- shareholders beforehand. ety of shareholder-related services, includ- Number of Holders through the evolution of safety. ing change of address, lost stock Investor Information On March 10, 2006, there were 218 certificates, transfer of stock to another At TRW Automotive, we relentlessly seek innovative solutions that help make cars and trucks Shareholders, security analysts and holders of record of our common stock. person and other related administrative investors can access Company news and safer. Our dedicated employees work to design, develop and manufacture automotive safety and services. Please contact National City events, periodic reports filed with the CEO Certification Bank by writing or calling: other systems for virtually every vehicle manufacturer in the world. The Company produces Securities and Exchange Commission On May 2, 2005, TRW Automotive’s active safety products in the chassis technology areas of braking, steering and suspension, and (“SEC”) and other related Company infor- National City Bank Chief Executive Officer (CEO) provided to mation by visiting our web site at TRW Automotive the New York Stock Exchange the annual is a major supplier of passive safety systems such as seat belts and airbags. Whether it’s a www.trwauto.com. Shareholder Services – Loc. 5352 CEO certification stating that TRW P.O. Box 92301 Automotive is in compliance with the curtain airbag system like that pictured on the front cover, or safety electronics that help to For a printed copy of this annual report or Cleveland, Ohio 44101-4301 New York Stock Exchange’s corporate for current SEC filings such as the Form make critical decisions when every millisecond counts, TRW Automotive is advancing governance listing standards. 10-K, please send a written request to: [email protected] automotive safety for drivers and passengers everywhere. Telephone: (800) 622-6757 Investor Relations 12001 Tech Center Drive Livonia, Michigan 48150 Additionally, you can call (800) 219-7411 or send an e-mail to [email protected] to Cover: TRW’s side impact rollover protection system, and the lives it helps protect. request this information. Above: TRW’s airbag electronic control unit, and the life it helps protect. Financial Highlights (in $ millions, except where noted) Years Ended December 31 Select Income Statement Items: 2005 12004 Sales 12,643 12,011 Operating income 553 a 580 a Operating income as a % of sales 4.4 % 4.8 % Net interest and securitization expense 231 252 Debt retirement expenses 7 b 173 b Net earnings 204 29 Net earnings excluding debt retirement expenses and one-time benefits 176 b,c 173 b Common Stock Per Share Data: Weighted average diluted shares 102.3 100.5 Net earnings per diluted share 1.99 0.29 Net earnings excluding debt retirement expenses and one-time benefits per diluted share 1.72 b,c 1.72 b Capital Structure /Cash Flow: Cash and marketable securities 676 809 Gross debt 3,236 3,181 Net debt (gross debt less cash and marketable securities) 2,560 2,372 Net debt impact from Dalphimetal acquisition 244 d — Net debt excluding impact of Dalphimetal acquisition 2,316 2,372 Capital expenditures 503 493 Net cash provided by operating activities 502 787 a Operating income includes restructuring and asset impairment expenses of $107 million in 2005 and $38 million in 2004. b See the Reconciliation Section after the Report on Form 10-K herein for detail of the components included in debt retirement expenses and a reconciliation to the closest GAAP measurement. c 2005 one-time benefits include $18 million for adjustment to reserves for litigation and $17 million for a tax law change in Poland. d Reflects Dalphimetal transaction cost of $140.5 million plus year-end debt of $110.9 million less year-end cash of $7.1 million. Customer Mix Geographic Mix Other 15.7% Ford 16.1% Europe 55% Hyundai 2.1% Honda 2.6% Toyota 3.1% DaimlerChrysler 14.4% BMW 3.5% North America 36% PSA 4.1% Fiat 4.3% Renault/Nissan 8.5% Volkswagen 14.3% Rest of World 9% General Motors 11.3% Product Mix Other 1.2% Fasteners & Components 3.4% Body Controls 4.4% Steering Gears & Systems 16.3% Engine Valves 4.9% Steering Wheels 3.2% Crash Sensors & Other Electronics 5.8% Foundation Brakes 14.1% Seat Belts 7.4% ABS & Other Brake Control 9.3% Airbags 14.2% Aftermarket 7.2% Chassis Modules 3.9% Link & Suspension 4.7% Active Passive Auto Components 1 Our leading diversification improved in 2005. For the year, we generated 64 percent of our sales outside of North America, our largest customer stood at 16 percent of sales and the largest vehicle program represented just 3 percent of our sales. Further, our diversification strengthened as a result of last year’s acquisition of a majority stake in Dalphi Metal Espana, S.A. (“Dalphimetal”), which manufactures airbags and steering wheels. The integration of Dalphimetal provides increased business with leading European manufacturers and better positions us to meet the growing demand for passive safety products. There is a tremendous sense of urgency at TRW to enhance our status as a leading supplier and to improve our competitiveness in this unrelenting industry environment. We accelerated our cost reduction plans in 2005, announcing ten plant closures and raising our restructuring-related expenses above $100 million. The incremental investment in restructuring Dear Shareholders will provide a more competitive footprint by improving capacity utilization and lowering manufacturing costs. I’m pleased to say that 2005 was a year of solid achievement and significant progress for TRW. The Company performed Our focus on safety innovation has never been sharper. well in an extremely challenging industry environment, and For the third consecutive year, we increased our investment for the second consecutive year as a publicly traded company, in research, development and engineering, spending we exceeded our financial and operational targets. approximately $780 million or 6.2 percent of sales in 2005. Most of the additional investment was in technical expertise, We also made significant progress across all of our Strategic raising our engineering population worldwide to approximately Priorities (Best Quality, Lowest Cost, Global Reach and 5,000 employees. We are investing capital to grow our Innovative Technology). These Priorities, which are essential capabilities in all regions, including the acquisition of to the Company’s long-term competitiveness, have become Dalphimetal and significant investments in Asia, where we ingrained in our daily business activities and are used to now have 30 facilities, 3,600 employees and 14 joint guide our allocation of resources to support research and ventures as well as wholly owned TRW facilities. In 2005, development, manufacturing investments and growth we opened technical centers in China and Poland, and another initiatives. one is planned for Japan. During the course of the year, we experienced a number We believe TRW’s level of safety offerings has no equal in the of profit pressures, including customer demands for price marketplace. As a leader in integrated safety systems, we have reductions, erosion of market share of our largest North the unique ability to assist our customers in taking automotive American customers, rising interest rates, customer and safety to the next level. This is one reason why vehicle supplier solvency issues and significantly higher costs for manufacturers regularly seek our expertise to help them commodities such as steel, resins, energy and more recently develop advanced safety solutions.