Business with suppliers and customers should always be conducted in an atmosphere of mutual respect and in keeping with irreproachable standards of business and professional ethics. The giving and/or receipt of gifts (including the use of property) may raise questions of propriety concerning the relationship between the giver and receiver of the gift.

Accordingly, and excepting only non-cash gifts of insignificant value (under $25 USD), no employee or member of the employee’s family may accept a gift from any supplier of goods or services to Federal-Mogul or from any customer of Federal-Mogul, without prior disclosure to the Plant Manager or appropriate management. Not withstanding the disclosure requirement, no employee or family members may receive a cash equivalent from any supplier or customer. Employees should in no way benefit financially due to transactions between Federal-Mogul and any third party with or without prior approval from the Plant Manager or appropriate management.

Entertainment provided or funded by Federal-Mogul suppliers or customers for Federal-Mogul employees or members of their families must be reasonably related to the business at hand and must not be so lavish as to give rise to even the impression that special influence is being sought. All offers of unreasonable lavish entertainment, and all questions relating to the propriety of entertainment, should be directed to the Plant Manager or appropriate management.

Inevitably, there will be gray areas that our employees will address using their common sense and good judgment. This policy is based upon the NAPM (National Association of Purchasing Management) “Principles & Standards of Purchasing Practice” guidelines.

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Introduction

Realizing that communication and cooperation are key elements in maintaining high-quality standards, this manual has been developed as a guide for aiding suppliers to understand Federal-Mogul requirements. The Supplier Requirements Manual outlines the minimum practices that you must be effectively implementing at your facility. By outlining common global policies, Federal-Mogul hopes to simplify procedures for suppliers.

The Supplier Requirements Manual applies to all suppliers, distribution centers, internal and external suppliers of production materials, production or service parts, and manufacturers of machinery or any component thereof. Machinery consists of tooling and equipment to perform such processes as assembly, plating, machining, casting, stamping, measuring, molding, forming, packaging, gauging, welding, painting/coating or other related manufacturing technologies.

Increasing quality and delivery expectations, cost reduction pressures from automakers and globalization of markets are putting tremendous pressures on our business to identify new ways to deliver high quality products and systems and to continually improve on our processes.

It is Federal-Mogul’s mission to globally supply our customers with zero defects and the lowest total cost. The goal is simple — be the benchmark supplier in every market in which we participate. This goal can only be achieved with the support and commitment of you, our supplier. Clear and concise expectations and requirements should make the supplier-customer relationship more productive.

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• Customer satisfaction — Providing our customers with products and services that meet or exceed their requirements.
• Continual Improvement — Measurable improvement of the effectiveness of our quality management system.
• Employees — Providing training to employees to promote continual improvement. Empowering our employees to use their skills and talents to achieve the quality policy and business plan objectives.
• Management System — Maintaining a management system compliant to ISO/TS 16949:2002, ISO 9001:2000 and ISO 14001:1996. Reviewing our management system on a continual basis for robustness. Setting and reviewing quality objectives to meet our business goals.
• Environment — Maintaining operations that protect the environment and natural resources of our communities, our states and our nations.
• Safety — Providing a safe work environment for our employees and visitors.

As a global manufacturer of automotive components and sub-systems to original equipment manufacturers and the aftermarket, Federal-Mogul must meet the requirements set forth by the ISO/TS 16949:2002 Quality System. This system is based on the process approach of ISO 9001:2000. We will meet these requirements by January 1, 2005. The first step toward this goal is ensuring that all Federal-Mogul suppliers are registered to a minimum of ISO 9001:2000 by December 31, 2005.

Certification to ISO 9001:2000 and compliance to the Supplier Requirements Manual is mandatory.

Federal-Mogul requires notification of the shipment of suspect material. Suppliers are to notify the Supplier Quality organization at the receiving Federal-Mogul facility.

The ordering Federal-Mogul plant defines packaging and labeling requirements. The supplier must ensure satisfactory protection against damage, contamination and corrosion during shipment. Suppliers are encouraged to consider using returnable containers where possible and to provide internal separation/lining, if necessary, to maintain cleanliness, integrity and appearance requirements.

Federal-Mogul-owned returnable packaging that is lost, damaged or otherwise unsuitable for use shall be reported to the Materials organization of the Federal-Mogul location which provides the returnable packaging.

The supplier shall establish and maintain documented procedures for identifying the product by suitable means from receipt and during all stages of production, delivery and installation.

In order to avoid premium freight charges, suppliers are required to utilize cartage companies Federal-Mogul has approved. The appropriate Federal-Mogul personnel must authorize all proposed shipping deviations and/or changes. Where extra charges or costs are incurred that exceed the norm (e.g. existing cartage contracts) the supplier shall track and keep good record of such premium “freight costs.” These may be resultant of such events as poor scheduling and quality or production inefficiencies. The need for premium freight could be caused by the customer, Federal-Mogul or the supplier.

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• To recognize exceptional supplier performance
• To promote & encourage improved communication on performance issues
• To provide objective data for use in supplier management & sourcing decisions
• To identify continuous improvement opportunities

Supplier ratings are assigned based on the Global Supplier Score Card Overall Rating. Annual supplier awards are issued to suppliers achieving prescribed targets, and corrective action is requested when unacceptable performance exists. Persistent poor performance or recurrence of the same issues may be cause for supplier development activities or for Purchasing to resource a product.

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Program Planning (APQP)

Process parameters and product characteristics shall be managed to ensure that the initial process capability is Ppk > 1.67 and then ongoing process control shall be maintained. Ongoing process control is demonstrated by the application of control charts or other statistical methods that demonstrate the process has not changed.

Δ Control Characteristic: A Control Characteristic is a product characteristic that may affect the form, fit and/or function of the product and that requires managing its variation within the specified tolerances.

§ Safety/Regulatory Characteristic: A Safety/Regulatory Characteristic is a product characteristic that the customer or Federal-Mogul Corporation has determined is impacted by that safety, environmental or other regulatory compliance requirements.

These symbols shall be used on all appropriate documentation, unless a customer requires the use of specific customer symbols. Federal-Mogul drawings issued prior to 6/27/2000, which use other symbols, are acceptable for continued use. However, future drawings shall use the symbols above.

Every supplier of production material is required to complete a Level 3 Production Part Approval Process (PPAP) submission for each part or material prior to initial shipment, unless instructed otherwise by Federal-Mogul. If requested, suppliers will provide a layout drawing/sales print for receiving inspection purposes.

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Change Notification

All proposed design changes or modifications, whether permanent or temporary and including proprietary designs, must be reviewed and authorized in writing by the Federal-Mogul Plant Quality Manager or his designee.

The supplier or sub-suppliers shall not make any changes in part design, material, or manufacturing process without prior written Federal-Mogul authorization. A new PPAP submission may be required.

In circumstances where a supplier wishes to change manufacturing location(s), the supplier or sub-supplier must also obtain prior written authorization from Federal-Mogul, and the new manufacturing location shall be qualified (an Initial Assessment will be conducted) and material/part validation and a new PPAP submission shall be required.

Under no circumstances can verbal requests be accommodated!

Requests for change shall contain the following minimum information:

Permanent Change: Must include detailed information of the required change, its proposed timing and the reason for change, e.g. Continuous Improvement.
Temporary Change: Where component or material deviates from the F-M specification, but is considered on a temporary basis “fit for purpose” both functionally and/or cosmetically. Such temporary written Change Requests as a minimum shall include:

• The quantity or period of time the components or material are thus affected.
• The potential root cause for the out-of-specification condition.
• The containment detail and F-M SCAR reference number. (Refer to FM-TIPS under Corrective Action below.)
• The Batch or Lot number as appropriate.

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FM-TIPS

The supplier has financial responsibility for nonconforming materials and their effects, which may include warranty issues and/or cost recoveries for sorting, re-work, scrap, premium transportation, etc.

The Supplier Corrective Action Request (SCAR) application enables interactive communication and documentation of corrective actions with the supplier.

The SCAR database is used as a communication tool to notify suppliers of nonconformance and track their resolution.

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On-Site Contractor Services

All contractors working in or on Federal-Mogul premises are responsible for themselves, their employees and any sub-contractors employed by them for the following:

• Complying with all legal or Federal-Mogul EHS requirements
• Complying with all health, safety, fire security and site instruction requirements
• Ensuring that all equipment brought onto the site, including any borrowed or hired, is safe and only used in accordance with legal requirements
• Indemnifying the company against any and all loss, injury, damage or claim which may arise directly or indirectly as a result of any EHS acts or omissions on the part of the contractor. The contractor must prove adequate insurance covering this liability.
• Reporting all accidents and occurrences, as required by law, to the EHS Coordinator and Site Manager employing their services and any other such accidents or occurrences that pose a hazard to Federal-Mogul employees and/or property.
• Reporting any unsafe act or conditions that may affect the ability to meet the contract.
• Wearing appropriate safety equipment on-site.
• Notifying Federal-Mogul personnel of any chemicals to be brought on-site and disposition of any waste generated.

Continual Improvement

In response to customer demands for year-over-year cost reductions, Federal-Mogul has been forced to reduce prices by up to 5 percent every year to retain current business and gain future business. Federal-Mogul needs your efforts and help in obtaining cost reductions along with your continued commitment to year over year cost improvement.

SCSS (Supplier Cost Saving Suggestion) is a proactive cost reduction proposal mechanism that allows suppliers to be awarded credit for cost saving ideas based on feasibility and implementation. It is an approach designed to identify process cost “drivers” and to implement simple, common sense process changes and reduce overall cost. SCSS is also a means for advertising and giving credit to those suppliers who reduce price through commercial considerations. Areas of SCSS focus include:

• Payment Terms
• Material Content/Utilization
• Year-Over-Year Price Reductions 
• Scrap Reduction
• Consignment Inventory Programs 
• Inventory/Lead Time Reduction
• Negotiated Supply Agreements 
• Complexity Reduction/Part Consolidation
• Design Simplification 
• Improved Sub-Supplier Sourcing
• Process Improvement 
• Optimization of Manufacturing Location
• Alternative Materials 
• Market Competition
• New Technologies 
• Freight/FOB Changes
• Packaging 
• Multiple Sourcing
• Product Weight Reduction 
• Federal-Mogul/Supplier Business Practices

To submit a SCSS proposal, enter a SCSS Cost Reduction Proposal within the SupplyNet database and submit it electronically. Half credit will be given if a proposal is deemed feasible, with full credit upon implementation.

Credit toward SCSS is awarded as follows:

1. Part Consolidation: $1,000/part number eliminated
2. Lead Time Reduction: Time supply in dollars based on current lead time minus time supply in dollars based on new lead time
3. Consignment Inventory Program: Time supply in dollars based on current lead time minus time supply in dollars based on three days supply
4. Direct Credit for the following reductions:

• Design Simplification 
• Transportation Savings 
• Packaging Savings
• All other Tangible Proposals

Suppliers are expected to accumulate 5 percent annually in value propositions, based on purchase dollars.

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