Welcome to MTD

Leading through innovation and continuous improvement.

About our Company• Leading manufacturer of

consumer products for the lawn & garden power equipment industry

• Founded in 1932• Privately held• World Headquarters in Cleveland,

Ohio

MTD N. American OperationsMTD N. American Operations

Veszprem, Hungary

Saarbrucken, Germany

Kitchener, Ontario

Industrial Plastics

Shelby, OH

Leitchfield, KY Martin, TN

Tupelo, MS

Willard, OH

Brownsville, TN

Chandler, AZ

Nogales, Mexico

CTP

Where we are located Globally• Australian Operation

– Dandenong, Victoria• Canadian Operation

– Kitchener, Ontario• European Operations

– Saarbrucken, Germany– Nemesvamos, Hungary

• Mexican Operation– Nogales, Sonora, Mexico

• New Zealand Operation– Wanganui, New Zealand

• China Operation– Suzhou, China

Our Brands• Cub Cadet• Cub Cadet Commercial• Cub Cadet - Yanmar• Troy-Bilt• White Outdoor• Yard-Man by MTD• Yard Machines by MTD• Nature’s Touch• GardenWay by MTD• Arnold by MTD• MTD Gold

Our Customers• Mass Sales

– Lowes– The Home Depot– Tractor Supply – Sears– Wal-Mart

• Independent Retail– Dealers– Distributors– ACE Hardware

Specializing in gas, electric & battery powered hand held products:•Trimmers•Attachments and Accessories•Blowers•Chain Saws•Garden Cultivators

MTD Southwest Product Line

MTD Southwest – Locations &Buildings

Tempe, AZMain Office

Approx. 116 miles – (about

2 hours)

Tucson, AZMain Receiving Warehouse

Approx. 80 miles (about 1 hour, 25 min)

NogalesManufacturing

• Business office• Emissions Lab• Plastics R&D Shop• Machine Shop

Tempe, AZ

• Distribution Center– 330,000 square feet in two buildings.

Tucson, AZ

• Manufacturing & Assembly Facility– 190,000 sq ft

• Plastics Mfg – 27,000 sq ft

Nogales, Mexico

China Sourcing vs.

Maquiladora Manufacturing

China Sourcing vs. Nogales Mexico Manufacturing

• Cost Considerations:– Labor Rates; Hourly & Salary– Freight Cost, “Landed”– Duty & Fees– Delivery Lead Times & Carrying Costs– Cost of Quality – Ease of Business Development

Wage Comparison

Position USA Mexico ChinaLabor (typical) (Nogales) (Suzhou)

$/hr Handwork 13.52$ 1.81$ 0.77$ Machine Operator 17.15$ 2.96$ 0.97$ $/yr process Engineer 53,560$ 32,136$ 16,068$ Buyer 47,214$ 22,250$ 14,164$ Operations Manager 95,983$ 57,590$ 28,795$

Comparative Wages (including benefits & taxes)

Freight Comparison

To Phoenix from: Shanghai, CN Nogales, MX40' HC Container 1,800$ -$ OTR 1,100$ 500$ Duty 0-3% -$ Fees 150$ 85$ Total per Load 3,050$ 585$ Based on $50k Value 6.1% 1.2%

Duties / Fees

• Duties & Fees– Mexico = NAFTA no duty

• However does require inventory tracking– China has duty depending on commodity,

our experience is 2.5% average – Border & Customs fees:

• China import fees average $215 per container• Mexico import fees average $130 per load

Delivery Lead Times

• MEXICO– Mexico to Phoenix: 5 - 24 hours – Mexico to Anywhere, USA: 5 days or less – No vessel booking delays in Mexico

• CHINA– Shanghai to LA: 20 days (best scenario)

• Add 1 to 5 days for customs and delivery within USA– Smaller Chinese cities: 28-30 days plus inland

transit time of 3-7 days.

Carrying Costs

• Costs of Inventory due to Lead Times:– China = 6 weeks vs. Mexico = 2 weeks– Increased obsolescence due to Engineering

changes when carrying more inventory.– Expedite charges from China, consider 10%

more annually, 25% more for new product start ups.

Cost of Quality

• Cost of Quality– Must establish & continuously monitor well-

documented, precise quality systems. – Resources to travel for design changes,

audits, approvals.– Literal translations: communicating meaning

and needs vs exactly what is written.

Business Development

• Business Development Considerations– Port Cities (CN) or Border Towns (MEX)

• Part costs are higher in Developed areas but save transit & travel lead times

• Have better developed quality systems• Typically have better educated labor talent

– Inland Cities • Businesses have lesser quality programs• Greater language barrier• More costly freight, longer lead times to port

Business Development

• Ease Of Business Development in Mexico:– Demographics

• Visits are more often and less costly– Time Zone in China is detrimental– Language Barrier is lesser hurdle in Mexico– Closer Technical Support in Mexico– Greater Control of R&D in Mexico due to

proximity– Exchange Rate is more stable in Mexico

Product Cost ComparisonUSA MEXICO CHINA

Sample ItemParts 46.66$ 33.66$ 31.09$ Labor 6.96$ 2.77$ 0.93$ Freight 2.19$ 1.06$ 2.54$ Total Part Cost 55.81$ 37.49$ 34.56$

Carrying Cost 8,284$ 16,075$ 133,703$ 0.082 0.120 0.430

Total Comparative Landed Cost 55.90$ 37.61$ 34.99$

Other Issues: Startup Costs, Patent Rights, Lead Time for Expedites & Changes

Challenges

China Business Challenges

• Language Barrier is more difficult• Demographics, travel time with key R&D,

Engineering• Customs Clearance & Releases take 12 hrs to 2

days• Container Freight Costs & Availability • Must monitor & budget for exchange rate

fluctuation.• More costly pilot production: time, feedback and

changes, air freight

Mexico Business Challenges • Customs Crossing not 24/7

– Import 8am to 7pm and Export 9am to 5:30pm• Reduced carrier availability in Mexico• Increased employee security measures• Employee Labor Contracts• Tracking inventory ~ “Pedimentos”• Heavy taxing for imported MRO items • Must monitor & budget for exchange rate fluctuation.• Limited cooperation with local government and

utilities

Benefits

China Business Benefits • Variety of Manufacturing Commodity types• Labor surplus• Best for high labor content items• Tooling is 20-70% cheaper• Raw materials typically 3-5% cheaper• Geography to other world markets: AUS, EU…• Hi volume, repetitive parts with low to medium

R&D difficulty is best advantage

Mexico Business Benefits

• Why MTDSW is in Nogales– Freight costs for our goods are lower– Labor force is excellent, dedicated, low cost– Great team collaboration with Design &

Engineering in Tempe - DAILY– Ability for quicker reaction to market demand

changes.– Excellent opportunity for lower cost degreed &

high skill positions, engineers, customs, clerical, production managers, inventory control.

Summary• Top focus when determining what is best

for your company:

– Direct Costs – typically less in China for Materials & Labor

– Freight Intensity – Indirect Costs – travel, duplicate positions

needed for “on the ground support” in China.– Business Development Complexity – due to

physical proximity is typically easier in Mexico.

Contact Information

Nogales Contacts

• Contacts in Nogales:• Jesus Montoya – Executive Director

Maquiladores Association of Sonara(631) 314-0111, 314-1228

direccion@amsnogales.com.mx

• Thayne Hardy – AMS President and GM of Amphenol Optimize

Questions &

Discussion