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|     |  |                                                                                    |  |     
|---- |  | ---------------------------------------------------------------------------------- |  | ----
|LOGO |  | UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-K |  | LOGO



FOR ANNUAL AND
TRANSITION REPORTS

PURSUANT TO SECTION 13 OR 15(d) of the

SECURITIES EXCHANGE ACT OF 1934



|xANNUAL | REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|------- | -----------------------------------------------------------------------------

For the Fiscal Year Ended December 31, 2004

or

| ̈TRANSITION | REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----------- | -----------------------------------------------------------------------------

For the Transition Period from  to
.

Commission File Number
1-13683



REMY INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)



|                                         |  |                    
|---------------------------------------- |  | -------------------
|Delaware                                 |  | 35-1909253         
|(State or other jurisdiction of          |  | (I.R.S. Employer   
|incorporation or organization)           |  | Identification No.)
|2902 Enterprise Drive                    |  |                    
|Anderson, Indiana                        |  | 46013              
|(Address of principal executive offices) |  | (Zip Code)         



REGISTRANTS
TELEPHONE NUMBER, INCLUDING AREA CODE: (765) 778-6499

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE



INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

YES x                          NO ̈



INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT
FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANTS KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR
ANY AMENDMENT TO THIS FORM 10-K. x



INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN EXCHANGE ACT RULE 12B-2).

YES ̈NO x



STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON
EQUITY HELD BY NON-AFFILIATES COMPUTED BY REFERENCE TO THE PRICE AT WHICH THE COMMON EQUITY WAS LAST SOLD, OR THE AVERAGE BID AND ASKED PRICE OF SUCH COMMON EQUITY, AS OF THE LAST BUSINESS DAY OF THE REGISTRANTS MOST RECENTLY COMPLETED SECOND
FISCAL QUARTER. Not Applicable



INDICATE THE NUMBER OF
SHARES OUTSTANDING OF EACH OF THE REGISTRANTS CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.



|                       |  |                                
|---------------------- |  | -------------------------------
|                       |  | Outstanding as ofMarch 15, 2005
|Common Stock  Class B |  | 2,503,024.48                   



DOCUMENTS INCORPORATED BY
REFERENCE: None.



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##### Table of Contents

REMY INTERNATIONAL, INC.

FORM 10-K

DECEMBER 31, 2004



TABLE OF CONTENTS



|         |      |                                                                                       |  |   
|-------- | ---- | ------------------------------------------------------------------------------------- |  | --
|        
|PART I   | Page
|         |      |                                                                                      
|Item 1.  |      | Business                                                                              |  | 3 
|Item 2.  |      | Properties                                                                            |  | 11
|Item 3.  |      | Legal Proceedings                                                                     |  | 12
|Item 4.  |      | Submission of Matters to a Vote of Security Holders                                   |  | 14
|         |      |                                                                                       |  |   
|        
|PART II 
|         |      |                                                                                      
|Item 5.  |      | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 15
|Item 6.  |      | Selected Financial Data                                                               |  | 15
|Item 7.  |      | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 16
|Item 7A. |      | Quantitative and Qualitative Disclosures About Market Risk                            |  | 29
|Item 8.  |      | Financial Statements and Supplementary Data                                           |  | 30
|Item 9.  |      | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure  |  | 74
|Item 9A. |      | Controls and Procedures                                                               |  | 74
|         |      |                                                                                       |  |   
|        
|PART III
|         |      |                                                                                      
|Item 10. |      | Directors and Executive Officers of the Registrant                                    |  | 75
|Item 11. |      | Executive Compensation                                                                |  | 77
|Item 12. |      | Security Ownership of Certain Beneficial Owners and Management                        |  | 79
|Item 13. |      | Certain Relationships and Related Transactions                                        |  | 82
|Item 14. |      | Principal Accountant Fees and Services                                                |  | 82
|         |      |                                                                                       |  |   
|        
|PART IV 
|         |      |                                                                                      
|Item 15. |      | Exhibits and Financial Statement Schedules                                            |  | 83
|         |      |                                                                                      
|         |      | SIGNATURES                                                                            |  | 88



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PART I



CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING INFORMATION



From time to time, Remy
International, Inc. (formerly known as (fka) Delco Remy International, Inc.), which we refer to as the Company, makes oral and written statements that may constitute forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995, which we refer to as the Act, or by the Securities and Exchange Commission, which we refer to as the SEC, in its rules, regulations and releases. We desire to take advantage of the safe harbor
provisions in the Act for forward-looking statements made from time to time, including, but not limited to, the forward-looking statements relating to our future performance contained in this Form 10-K and in other filings with the SEC.



Any statements set forth below or otherwise made in writing or orally by
us with regard to our expectations as to financial results and other aspects of our business may constitute forward-looking statements. These statements relate to our future plans, objectives, expectations and intentions and may be identified by
words like believe, expect, may, will, should, seek, or anticipate, and similar expressions.



We caution readers that any such forward-looking statements are based on assumptions that we believe are reasonable, but are
subject to a wide range of risks including, but not limited to, risks associated with the uncertainty of future financial results, acquisitions, additional financing requirements, development of new products and services, the effect of competitive
products or pricing, costs and difficulties related to integration of acquired businesses, pending and future legal proceedings, including environmental regulatory matters, reliance upon or loss of a major customer, international operating and
supply risks, weather conditions, including their impact on demand for our aftermarket products, raw material and energy costs, including the cost of steel and availability, foreign exchange rate changes, transportation and related fuel costs,
effectiveness of restructuring and cost saving initiatives, labor relations, the ability to obtain and maintain adequate prices for our products, our substantial indebtedness and limitations under debt agreements, costs for pension and post
retirement benefit plans, the effect of economic conditions and other uncertainties. Due to these uncertainties, we cannot assure readers that any forward-looking statements will prove to have been correct and we do not intend to review or update
any particular forward-looking statement in light of future events.



|ITEM 1 |  | BUSINESS
|------ |  | --------

---



On August 1, 2004, we changed our name from Delco Remy International, Inc. to Remy International, Inc. We continue to market certain starters and
heavy-duty alternators for original equipment and aftermarket customers under the Delco Remy brand name, which is licensed to us by General Motors Corporation, which we refer to as GM.



We are a leading global manufacturer and remanufacturer of aftermarket and original equipment electrical components and
aftermarket powertrain components for automobiles, light trucks, heavy-duty trucks, industrial, construction and agricultural applications and other heavy-duty applications. We sell our products worldwide primarily under the Remy brand
name, first used in 1896, the Delco Remy brand name, first used in 1918, the World Wide Automotive brand name, first used in 1986, and our customers widely recognized private label brand names. Our products include
starters, alternators, engines, turbo chargers, and fuel systems. We also provide exchange services for used components, commonly known as cores, for remanufacturers. In 2004, approximately 54% of our sales were to the aftermarket and approximately
46% were to the original equipment market. We supply numerous highly engineered products to over 3,500 customers, principally in North America, Europe, Latin America and Asia.



We believe we are North Americas largest producer of remanufactured starters and alternators for the aftermarket.
Remanufacturing is a process through which cores are disassembled into their sub-components, cleaned, inspected, combined with new subcomponents, reassembled into finished products and tested to original equipment specifications. We believe
remanufactured products can be produced at a lower cost than a traditionally manufactured product, and with higher quality than an individually repaired product. Our expanding aftermarket business benefits from the non-deferrable nature of the
repairs for which many of our products are used. We believe we are also North Americas largest supplier of original equipment starters for automobiles and light trucks and starters and alternators for heavy-duty vehicles.



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At the time of our separation from GM in August 1994, we were predominantly a North American original
equipment manufacturer, with over 56% of our fiscal year 1995 sales derived from GM. Through strategic capital investments, acquisitions, joint ventures and facility and workforce rationalization, we have become a low cost, global manufacturer and
remanufacturer with a more balanced business and product mix between the aftermarket and original equipment market. Since fiscal year 1995, we have increased our sales, broadened our product line, expanded our manufacturing and remanufacturing
capabilities, diversified our customer base and end markets, lowered our cost base and extended our participation in international markets.



We changed our fiscal year end to December 31, effective August 1, 2000. Prior to August 1, 2000, our fiscal year ended on July 31. References to
fiscal year other than fiscal year 2004, 2003, 2002 and 2001 pertain to years ending July 31 of such year.



Industry Overview



In general, our business is influenced by the underlying trends in the automobile, light truck, and heavy-duty truck, construction and industrial markets.
However, we believe that we are reducing our dependence on the cyclical original equipment manufacturer, which we refer to as OEM, business by focusing on expanding our remanufacturing capabilities and placing greater importance on balancing our
aftermarket business with our global OEM business.



Aftermarket



The aftermarket consists of the production and sale of
both new and remanufactured parts used in the maintenance and repair of automobiles, trucks and other vehicles.



Remanufacturing is a process through which cores are disassembled into their sub-components, cleaned, inspected, combined with new subcomponents,
reassembled into finished products and tested to original equipment specifications. We believe a remanufactured product can be produced at a lower cost than an originally manufactured product and with higher quality than an individually repaired
product due to effective salvage technology methods, high volume precision manufacturing techniques and rigorous inspection and testing procedures. The ability to procure cores is critical to the remanufacturing process.



Aftermarket parts are supplied principally through three distribution
channels:



| |  |  | car and truck dealers that obtain parts through their OEM parts organizations (e.g., GM Service Parts Operations, which we refer to as GM SPO, Ford Parts and Service Division,
Freightliner, Caterpillar Service Parts, and International Truck Parts Organization) or directly from an OEM-authorized remanufacturer;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | retail automotive parts chains and mass merchandisers; and
| | - |  | ----------------------------------------------------------



| |  |  | independent warehouse distributors and jobbers who supply independent service stations, installers, specialty and general repair shops, farm equipment dealers, car dealers and small
retailers.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe that the aftermarket and
our opportunity in the aftermarket have been, and will continue to be, impacted by the following trends:



| |  |  | the increasing number and average age of vehicles in use and the number of miles driven annually;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | the increasing demands of customers that their aftermarket suppliers meet high quality and service standards;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | the increasing use of remanufactured parts for OEM warranty and extended service programs, especially on larger, more complex components such as engines and fuel system components;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the growth and consolidation of large retail automotive parts chains and warehouse distributors requiring larger, nationally capable suppliers;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the increasing engine output and durability demands related to the high temperatures at which engines operate;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | the increased high-technology content of replacement components, which requires more factory manufacturing, compared with in-vehicle repair;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the increasing service lives of automotive parts; and
| | - |  | -----------------------------------------------------



| |  |  | the increasing demands by customers to move to a pay on scan program.
| | - |  | ---------------------------------------------------------------------



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Recently, large retail automotive parts chains offering a broad range of new and remanufactured products
have experienced rapid growth at the expense of small, independent retail and wholesale stores. We believe that further increasing our sales to retail chains offers a significant opportunity for growth. We believe retail chains generally prefer to
deal with large, national suppliers capable of meeting their cost, quality, volume and service requirements.



OEM Markets



The OEM
market consists of the production and sale of new component parts for use in the manufacture of new vehicles. The OEM market includes two major classes of customers:



| |  |  | automobile and light truck manufacturers, marine and industrial manufacturers; and
| | - |  | ----------------------------------------------------------------------------------



| |  |  | heavy-duty truck and engine manufacturers and other heavy-duty vehicle manufacturers.
| | - |  | -------------------------------------------------------------------------------------



The OEM market has been impacted by fundamental changes in the OEMs sourcing strategies. OEMs are consolidating their
supplier base, demanding that their suppliers provide technologically advanced product lines, greater systems engineering support and management capabilities, just-in-time sequenced delivery and lower system costs. OEMs are increasingly requiring
that their preferred suppliers establish global production capabilities to meet their needs as they expand internationally and increase platform standardization across multiple markets. As OEM global alliances increase, global pricing for automotive
components is becoming the norm.



OEMs continue to outsource
component manufacturing in response to competitive pressures on OEMs to improve quality and reduce capital outlays, production costs, overhead and inventory levels. In addition, OEMs are increasingly purchasing integrated systems from suppliers who
provide the design, engineering, manufacturing and project management support for a complete package of integrated products. By purchasing complete systems, OEMs are able to shift design, engineering and product management to fewer and more capable
suppliers. Integrated systems suppliers are generally able to design, manufacture and deliver components at a lower cost than the OEMs due to:



| |  |  | their lower labor costs and other manufacturing efficiencies;
| | - |  | -------------------------------------------------------------



| |  |  | their ability to spread research and development and engineering costs over products provided to multiple OEMs; and
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | other economies of scale inherent in high volume manufacturing such as the ability to leverage global purchasing capabilities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



Business Strategy



Focus on Operating Efficiency and Reinvest for Growth



We continue to pursue cost savings opportunities and reinvesting for
sustained future growth. In 2003, we closed six manufacturing facilities and transferred production to lower cost facilities primarily in Mexico, South Korea, China, Poland, Brazil and Hungary. We have also continued to implement lean manufacturing
principles and global purchasing initiatives to provide additional opportunities to improve our operating cash flow. We have invested in regional technical centers in the United States, Mexico, Europe and Asia. These centers include a broad range of
on-site engineering, purchasing, supplier development and product testing operations designed to provide quick-to-market, leading-edge products and stronger customer relationships for Remy and the Delco Remy branded products. We believe our cost
savings efforts, combined with organic sales growth and the payment in 2004 of substantially all of our related remaining contingent acquisition costs, will position us to improve cash flow and invest in engineering and technology.



Enhance our Share in the Growing Remanufacturing Market



We intend to leverage our leading position as a supplier of remanufactured
components to the automotive aftermarket. Remanufactured products have significant advantages over traditionally manufactured and individually repaired products. The use of remanufactured components for warranty and extended service repairs is
common practice as OEMs have sought to reduce warranty and extended service costs by using remanufactured components, which generally offer the same degree of quality and reliability as OEM products at a lower cost. This trend has also resulted in
independent aftermarket customers requiring higher quality standards for remanufactured products. We plan to exploit our leading position and strengthen our customer relationships in the remanufacturing market.



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In March 2005, we acquired substantially all of the assets and assumed certain liabilities of Unit Parts
Company, which we refer to as UPC, based in Oklahoma City. UPC is a major supplier to the automotive aftermarket for new and remanufactured starters and alternators, offering custom branding, packaging and logistics solutions as well as complete
engineering and support services.



Increase our Share in the Global Original
Equipment Market



Following the 2003 acquisition of Delphi
Corporations light vehicle alternator business, we have significantly increased our share in the original equipment market, particularly in the European and Asian light vehicle markets, where customers increasingly look for suppliers with both
starter and alternator technology. We are in the process of developing and expanding our sales infrastructure in Europe and Asia to support additional business. We also expect to benefit from anticipated growth in Latin America, Eastern Europe and
Asia Pacific, where demand for light vehicles is expected to increase.



We have formed a wholly foreign-owned enterprise, Remy Electricals (China) Company Limited, in Shajing in the Guangdong Province of China to expand our manufacturing capabilities in China. Our new facility is expected to begin operation in
the second quarter of 2005 and is designed to meet new business demand in Chinas emerging markets. We will invest in China to transfer our new global technologies and best-in-class quality to the OEM vehicle platforms, which our existing
customers have designated for domestic and export markets.



Existing facilities in China include an alternator operation, Remy Electricals Hubei Company, Ltd., in Jingzhou, Hubei Province, which we acquired from Delphi Corporation in March 2003. We established a Shanghai Representative Office in
March 2003 that is the base for our domestic sales and purchasing activity.



Capitalize on Growth in the Heavy Duty Truck Market



We intend to capitalize on the expected growth in the original equipment market and aftermarket for heavy-duty truck components. Heavy Duty OEM sales increased in 2004 due to strong industry demand from North American Class 5-8 customers.
We believe that the demand for original equipment heavy-duty truck replacement components is expected to grow over the next few years.



We are also investing in the heavy-duty supply system in China in response to the expanding demand for components used by trucks, construction,
agriculture and off-road vehicles resulting from a growing economy. As the largest supplier of original equipment and aftermarket starters and alternators to the North American heavy-duty truck market, we believe we are well positioned to benefit
from these positive trends.



Increase Focus on Technologically Advanced
Products



We continue to produce technologically advanced
products by regularly updating and enhancing our product line, which helps us to compete successfully in our markets. In 2003, we launched a new family of next-generation starters and alternators. We are also in various stages of development on a
number of new products including:



| |  |  | high technology products in the distributed generation and hybrid electric vehicle markets;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | a new family of gear reduction starters for the heavy duty truck and industrial markets;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | a new line of alternators specifically tailored to the requirements of the latest Heavy-duty engine technology;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | a new family of light duty passenger car / light truck alternators; and
| | - |  | -----------------------------------------------------------------------



| |  |  | a small gear reduction starter specifically designed for application on world automobile platforms.
| | - |  | ---------------------------------------------------------------------------------------------------



Products



Our product line includes a diverse range of manufactured and remanufactured products for the aftermarket and OEM markets, which we sell under the
Delco Remy brand name, the World Wide Automotive brand name or under our customers private-label brand names. We also provide core acquisition services for third party aftermarket remanufacturers as well as our own
subsidiaries. Our product line is classified into five product categories: automotive OEM, heavy-duty OEM, electrical aftermarket, powertrain, and core services.



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The following table sets forth the approximate composition by product category of our revenues for the
fiscal years ended December 31, 2004, 2003 and 2002:



|                       |  |                        |   |  |       |   |  |       |  
|---------------------- |  | ---------------------- | - |  | ----- | - |  | ----- | -
|                       |  | Year Ended December 31 |  
|Product Categories     |  | 2004                   |   |  | 2003  |   |  | 2002  |  
|Automotive OEM         |  | 29.1                   | % |  | 27.2  | % |  | 27.5  | %
|Heavy-duty OEM         |  | 17.2                   |   |  | 15.0  |   |  | 15.1  |  
|Electrical aftermarket |  | 40.6                   |   |  | 44.4  |   |  | 45.2  |  
|Powertrain             |  | 7.5                    |   |  | 6.7   |   |  | 6.3   |  
|Core services          |  | 5.6                    |   |  | 6.7   |   |  | 5.9   |  
|Total                  |  | 100.0                  | % |  | 100.0 | % |  | 100.0 | %



Products within the
automotive OEM and heavy-duty OEM categories include manufactured starters and alternators. Our starters and alternators are used in automobiles, light trucks, heavy-duty trucks, industrial, construction and agricultural applications and other
heavy-duty applications by OEMs globally and are also used in marine and industrial applications.



Products within the electrical aftermarket include remanufactured starters, alternators, and locomotive power assemblies and turbo chargers. Products
within the powertrain category include diesel engines, fuel injectors, injection pumps, fuel pumps, fuel valves and turbo chargers. Products within the core services category include third party core acquisition services.



Research and Development



Our engineering staff works both independently and with OEMs to design new
products, improve performance and technical features of existing products and develop methods to lower manufacturing costs. In support of our engineering efforts, we have formed technical alliances with engineering and technology firms to identify
long-term engineering opportunities. We are a participant in Electricore Incorporated, a consortium for advanced transportation technologies through which we are implementing technical alliances to develop next generation starters and alternators.
We are developing a family of belt driven alternator starters, which we refer to as BAS, for mild hybrid gas applications.



We have obtained business with Allison Electric Drive, a unit of GM Powertrain, for the electric machine integral to the development of the transmission
used in hybrid vehicles and have begun low volume production. We have plans to expand this product line to include similar products for higher volume automotive applications.



We plan to launch an ultra-capacitor module for the delivery vehicle market. The ultra-capacitor module is an energy storage
device, which eliminates jump-starts, improves battery life and improves cold start capability.



Consistent with our strategy to introduce technologically advanced and improved products, we spent approximately $19.3 million in 2004, $15.9 million in
2003, and $13.5 million in 2002 on research and development activities including program engineering. We funded all research and development expenditures.



Customers



Our principal customers include automotive and heavy duty OEMs, OEM dealer networks, leading automotive parts retail chains and warehouse distributors.
Our major customers include GM, International Truck and Engine Corporation, Advance Auto Parts, DaimlerChrysler, Caterpillar, Ford, Delphi, PACCAR, Cummins, Volvo/Mack Trucks, Pep Boys, Hyundai and Kia.



We have long-term agreements, with terms typically ranging from three to five
years, to supply heavy-duty starters and alternators to GM, DaimlerChrysler Commercial Trucks, and Volvo/Mack Trucks. In 2004, total sales to GM and related affiliates accounted for approximately 28% of our sales and International Truck and Engine
accounted for approximately 10% or our sales. No other customer accounted for more than 10% of consolidated net sales.



In connection with our separation from GM in July 1994, GM entered into long-term contracts with us to purchase 100% of its North American requirements
for automotive starters (other than for Saturn and Geo) and 100% of its U.S.



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and Canadian requirements for heavy duty starters and alternators, at fixed prices which are scheduled to decline over the life of the contracts. GMs
obligations to purchase our automotive starters and heavy-duty starters and alternators under these agreements are subject to those products remaining competitive as to price, technology and design. In 1999, we extended the terms of these agreements
with GM for us to supply automotive starters to July 31, 2008. In April 2002 we reduced our prices in accordance with the competitive clause of the original agreement. The supply agreement relating to heavy-duty products terminated on July 31, 2000,
although we continue to supply GM with heavy-duty products.



In
1994, GM also entered into a long-term contract with us to distribute exclusively our automotive aftermarket products. The market drives prices we may charge to GM under this agreement. In April 2002 we reduced our prices in accordance with the
competitive clause of the original agreement. This agreement terminates on July 31, 2008.



Distribution



Our products are distributed to our customers primarily by common carrier. However, we have an extensive distribution and logistics network to supply our global manufacturing footprint.



We employ our own direct sales force, which develops and maintains sales
relationships with major North American truck fleet operators as well as our OEM, retail, warehouse, distributor and aftermarket customers. A network of field service engineers and product service engineers supplements these sales efforts.



Competition



The automotive parts market is highly competitive. Competition is based
primarily on quality of products, service, delivery, technical support and price. Most OEMs and aftermarket distributors source parts from one or two suppliers and we compete with a number of companies who supply automobile manufacturers throughout
the world. In the automotive market, our principal competitors include Bosch, Denso, Hitachi, Mitsubishi, Motorcar Parts & Accessories, Rayloc, Valeo and Visteon. In the heavy-duty truck market, our competitors include Bosch, Denso, Mitsubishi
and Prestolite. In the powertrain category, our principal competitors include Cummins, Caterpillar and Jasper Engine.



Patents, Trademarks and Licenses



Pursuant to a Trademark License Agreement between us and GM, GM has granted us an exclusive license to use the Delco Remy trademark on and in
connection with automotive starters and heavy duty starters and alternators until July 31, 2004, extendable indefinitely at our option upon payment of a fixed $0.1 million annual licensing fee to GM. We have also been granted a perpetual,
royalty-free license to use the Remy trademark. The Delco Remy and Remy trademarks are registered in the United States, Canada and Mexico and in most major markets worldwide. GM has agreed with us that, upon our
request, GM will register the trademarks in any jurisdiction where they are not currently registered.



GM has granted us a perpetual license to use the Remy name as a tradename and corporate name worldwide.



As part of our acquisition of Delphi Corporations light duty alternator
business, we and Delphi Technologies, Inc., which we refer to as Delphi Technologies, entered into a license agreement dated November 30, 2002, by which we licensed from Delphi Technologies certain patents and technical information used in the
manufacture and remanufacture of belt-driven automotive generators and alternators.



We own and/or have obtained licenses to various domestic and foreign patents and patent applications related to our products and processes. The patents expire at various times over the next 17 years. While these
patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us.



Purchased Materials



We have redefined our global sourcing strategy by applying a best in class approach that aims to identify and develop a global supply base
that delivers best in class quality, cost and technology for our products and services. Part of this strategy is to find and develop suppliers that are either local to the region, share our global footprint or have local



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##### Table of Contents

production on high labor content components or assemblies. The strategy drives the focus to point-of use sourcing, utilizing value stream
principles and developing standardized processes to result in decisions that result in the lowest total cost in materials, freight and logistics for our global locations.



Principal purchased materials for our business include: aluminum castings, gray and ductile iron castings, armatures,
solenoids, copper wire, injectors, electronics, steel shafts, forgings, bearings, commutators, pumps and carbon brushes. All materials are readily available from a number of suppliers, and we do not foresee any difficulty in obtaining adequate
inventory supplies. We generally follow the North American industry practice of passing on to our customers the costs or benefits of fluctuation in copper and aluminum prices on an annual or semi-annual basis. In some cases, steel price fluctuations
are not passed on to our customers.



Employees



As of December 31, 2004, we employed approximately 6,800
people, 1,400 of whom were salaried and administrative employees and 5,400 of whom were hourly employees. Approximately 2,000 of our employees are based in the United States, none of whom are unionized.



As of December 31, 2004, approximately 262 of our hourly employees at Remy
Automotive Hungary kft. (fka Delco Remy Hungary kft.) are affiliated with the Hungarian Steel Industry Workers Union. The agreement was signed July 17, 1996 and is perpetual, subject to termination upon three months notice from either party.



As of December 31, 2004, approximately 400 of our hourly
workers at our Polish facilities are affiliated with the Intercompany Trade Union or the Intercompany Union Organization NSZZ. Agreements with these unions were signed on August 23, 2000 and are perpetual.



As of December 31, 2004, approximately 1,900 of our hourly employees at our
Mexican facilities were affiliated with the Confederacion Regional Obrera Mexicana SLP. Agreements with this union expire at various times in 2006 and 2007.



Our other facilities are primarily non-union. We are not aware of any current efforts to organize the employees in our other facilities. There can be no
assurance that there will not be any labor union efforts to organize employees at facilities that are not currently unionized. At the present time, we believe that our relations with our employees are satisfactory.



Foreign Operations



Information about our foreign operations is set forth in tables relating to
geographic information in Note 17 to our consolidated financial statements, Business Segments and Geographic Area Information in Item 8.



Environmental Regulation



Our subsidiaries facilities and operations are subject to a wide variety of federal, state, local and foreign environmental laws, regulations,
ordinances and directives, including those related to air emissions, wastewater discharges and chemical and hazardous waste management and disposal, which we refer to as environmental laws. Our subsidiaries operations also are governed by laws
relating to workplace safety and worker health, primarily the Occupational Safety and Health Act, and foreign counterparts to such laws, which we refer to as employee safety laws. We believe that we and our subsidiaries operations are in
compliance with current requirements under environmental laws and employee safety laws, except for non-compliance where the cost that might be incurred to resolve the non-compliance would not have a material adverse effect on our results of
operations, business or financial condition. The nature of our and our subsidiaries operations, however, exposes us to the risk of liabilities or claims with respect to environmental and worker health and safety matters. There can be no
assurance that such costs will not be incurred in connection with such liabilities or claims.



Based on our experience to date, we believe that the future cost of compliance with existing environmental laws (or liability for known environmental claims) will not have a material adverse effect on our business,
financial condition or results of operations. However, future events, such as changes in existing environmental laws or their interpretation or the discovery of presently unknown conditions, may give rise to additional compliance costs or
liabilities for the subsidiaries that could have a material adverse effect on our business, financial condition or results of operations.



9



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##### Table of Contents

Certain environmental laws hold current owners or operators of land or businesses liable for their own
and for previous owners or operators releases of hazardous substances. Because of their operations, the long history of industrial uses at some of our facilities, the operations of predecessor owners or operators of certain of the
businesses, and the use, production and release of hazardous substances at these sites, our subsidiaries are affected by such liability provisions of environmental laws. Various of our subsidiaries facilities have experienced in the past or
are currently undergoing some level of regulatory scrutiny and are, or may become, subject to further regulatory inspections, future requests for investigation or liability for past disposal practices.



For example, Franklin Power Products, Inc. (our subsidiary) in Franklin,
Indiana has been undergoing a Resource Conservation and Recovery Act (RCRA) site investigation and clean-up of volatile organic compounds in the soil and groundwater pursuant to an Environmental Protection Agency Administrative Order on Consent,
which we refer to as the EPA order, issued to both Franklin Power Products and Amphenol Corporation, a prior owner of the property. Pursuant to the EPA order, Franklin Power Products and Amphenol Corporation are jointly addressing this matter.
Amphenol indemnified Franklin Power Products for certain liabilities associated with the EPA order and Amphenol has satisfied and continues to satisfy the requirements of the EPA order. Based on our experience to date and the indemnities from
Amphenol and the sellers of Franklin Power Products to us, we believe that future costs associated with this site will not have a material adverse effect on our results of operations, business or financial condition.



The Mississippi Department of Environmental Quality, which we refer to as
MDEQ, issued Notices of Violation regarding alleged violations of state air laws by two of the Remy Reman facilities in Mississippi. Remy Reman resolved this liability through payment in January 2005 of approximately $0.2 million.



In September 2000, one of Franklin Power Products, Inc.s Indiana
facilities received a Finding of Violation and Order for Compliance from the EPA requiring the facility to correct violations of its wastewater discharge permits. Franklin Power Products, Inc. has installed wastewater treatment equipment and is in
compliance with the terms of the order and has eliminated the discharge. In July 2004, we and Franklin Power Products, Inc. entered into an agreement with the U.S. Department of Justice on behalf of the EPA, which tolled the statute of limitations
on the EPAs potential claim for penalties. Since that time, we have been cooperating with the EPA by providing additional information and entered into settlement negotiations with EPA and the Department of Justice.



Backlog



The majority of our products are not on a backlog status.



Seasonality



Our business is seasonal, as our major OEM customers historically have one to two week shutdowns of operations during July and December. Our sales results
in the third and fourth quarters reflect the effects of these shutdowns. Our working capital requirements also are affected by seasonality, as we build inventory for the summer sales month in the aftermarket. Typically our working capital
requirements are highest from April through August and the change from the highest month to the lowest month (typically December) for accounts receivable, inventory and accounts payable has averaged $40.0 million over the past three years. Refer to
Note 20 to our consolidated financial statements in Item 8, which presents certain quarterly (unaudited) financial information.



Acquisitions



We made cash earn-out payments totaling $13.5 million in 2004 relative to the 2000 acquisition of M&M Knopf Auto Parts, L.L.C., which we refer to as
Knopf. These payments were based on the achievement of certain earnings goals by Knopf during the period August 2000 to December 2003. In December 2003, $13.5 million was accrued and recorded as an adjustment to the purchase price of Knopf,
resulting in a corresponding increase in goodwill.



In
connection with settlement of the arbitration between certain of our affiliates and our former partner at our operations in Mexico (see Note 2 to our consolidated financial statements), we recorded the purchase of the remaining shares of the Mexico
joint venture from the minority shareholders. The net purchase portion of the arbitration award of approximately $5.5 million in cash was paid in the third quarter of 2004 and resulted in an approximately $5.1 million increase in goodwill.



10



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##### Table of Contents

We made the final cash payment of approximately $4.8 million in 2004 on notes issued in 2002 in
connection with our acquisition of the remaining shares from the minority shareholders of Remy Korea Limited (formerly Delco Remy Korea Limited), which was acquired in 1999.



We also made cash payments totaling approximately $1.8 million in 2004 relative to the acquisition of Delphi
Corporations light vehicle alternator business.



Discontinued Operations



On September 1,
2004, we completed a stock sale of two of our wholly owned subsidiaries, Williams Technologies, Inc., which we refer to as Williams, and JAX Reman, L.L.C., which we refer to as JAX, to Caterpillar, Inc., which we refer to as CAT, for net cash
proceeds of approximately $104.3 million and recorded an estimated gain of approximately $45.1 million, net of income taxes and deal-related costs and subject to future adjustment. In the third quarter of 2004, we also completed plans for the
disposition of a related business.



The historical results for
these companies are treated as discontinued operations beginning in the third quarter of 2004 and all prior periods have been reclassified.



|ITEM 2 |  | PROPERTIES
|------ |  | ----------

---



Properties



Our world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana 46013. We lease our headquarters. The following table sets forth certain
information regarding manufacturing and certain other facilities operated by us as of December 31, 2004.



|                               |  |                    |  |                                |  |             
|------------------------------ |  | ------------------ |  | ------------------------------ |  | ------------
|Location                       |  | NumberOfFacilities |  | Use                            |  | Owned/Leased
|Anderson, IN                   |  | 6                  |  | Office/Manufacturing/Testing   |  | Leased      
|Atlanta, GA                    |  | 1                  |  | Warehouse/Office               |  | Leased      
|Bagsvaerd, Denmark             |  | 1                  |  | Manufacturing                  |  | Leased      
|Brooklyn, NY                   |  | 2                  |  | Warehouse/Office               |  | Leased      
|Brusque, Brazil                |  | 1                  |  | Manufacturing                  |  | Leased      
|Budapest, Hungary              |  | 1                  |  | Warehouse                      |  | Owned       
|Buffalo, NY                    |  | 2                  |  | Office/Warehouse               |  | Leased      
|Chantilly, VA                  |  | 2                  |  | Manufacturing/Office/Warehouse |  | Leased      
|Cradley Health, United Kingdom |  | 1                  |  | Manufacturing                  |  | Leased      
|Detroit, MI                    |  | 1                  |  | Office                         |  | Leased      
|Dulmen, Germany                |  | 1                  |  | Office                         |  | Leased      
|Findlay, OH                    |  | 1                  |  | Retail                         |  | Leased      
|Flint, MI                      |  | 1                  |  | Warehouse/Office               |  | Leased      
|Fort Wayne, IN                 |  | 1                  |  | Manufacturing/Warehouse        |  | Leased      
|Fradley, United Kingdom        |  | 2                  |  | Manufacturing/Warehouse        |  | Leased      
|Franklin, IN                   |  | 4                  |  | Manufacturing/Office/Warehouse |  | Leased/Owned
|Hancock, MD                    |  | 1                  |  | Warehouse/Office               |  | Leased      
|Heverlee, Belgium              |  | 1                  |  | Office                         |  | Leased      
|Heist Op Den Berg, Belgium     |  | 3                  |  | Office/Manufacturing/Warehouse |  | Leased      
|Jemmel, Tunisia                |  | 1                  |  | Manufacturing                  |  | Leased      
|Jingzhou, P.R. China           |  | 1                  |  | Manufacturing                  |  | Leased      
|Kaleva, MI                     |  | 1                  |  | Manufacturing                  |  | Leased      
|Kings Winford, United Kingdom  |  | 1                  |  | Manufacturing                  |  | Leased      
|Kyoungnam, South Korea         |  | 1                  |  | Manufacturing/Warehouse        |  | Owned       
|Laredo, TX                     |  | 1                  |  | Warehouse                      |  | Leased      
|Lavant, United Kingdom         |  | 1                  |  | Manufacturing                  |  | Leased      



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|                          |  |                    |  |                                |  |             
|------------------------- |  | ------------------ |  | ------------------------------ |  | ------------
|Location                  |  | NumberOfFacilities |  | Use                            |  | Owned/Leased
|Leicester, United Kingdom |  | 1                  |  | Manufacturing/Warehouse        |  | Leased      
|Mansfield, TX             |  | 1                  |  | Manufacturing                  |  | Leased      
|Marion, MI                |  | 1                  |  | Manufacturing                  |  | Leased      
|Matehuala, Mexico         |  | 1                  |  | Manufacturing/Office           |  | Leased      
|Memphis, TN               |  | 1                  |  | Warehouse                      |  | Leased      
|Meridian, MS              |  | 2                  |  | Manufacturing/Office           |  | Leased      
|Mezokovesd, Hungary       |  | 1                  |  | Manufacturing                  |  | Owned       
|Miskolc, Hungary          |  | 1                  |  | Manufacturing/Warehouse        |  | Leased      
|Noida, India              |  | 1                  |  | Manufacturing/Office           |  | Owned       
|Peru, IN                  |  | 4                  |  | Office/Manufacturing/Warehouse |  | Leased      
|Philadelphia, PA          |  | 1                  |  | Office/Warehouse               |  | Leased      
|Piscataway, NJ            |  | 1                  |  | Office/Warehouse               |  | Leased      
|Pondicherry, India        |  | 1                  |  | Manufacturing                  |  | Owned       
|Raleigh, MS               |  | 4                  |  | Manufacturing/Warehouse        |  | Leased      
|Reed City, MI             |  | 1                  |  | Office                         |  | Leased      
|San Luis Potosi, Mexico   |  | 6                  |  | Manufacturing/Office/Warehouse |  | Leased      
|Sao Pavlo, Brazil         |  | 1                  |  | Office                         |  | Leased      
|Seoul, South Korea        |  | 1                  |  | Office                         |  | Leased      
|Shanghai, P.R. China      |  | 1                  |  | Office                         |  | Leased      
|Shenzen, P.R. China       |  | 1                  |  | Office                         |  | Leased      
|Shubuta, MS               |  | 1                  |  | Manufacturing                  |  | Leased      
|Soeborg, Denmark          |  | 1                  |  | Manufacturing/Office           |  | Leased      
|Spartanburg, SC           |  | 1                  |  | Warehouse/Office               |  | Owned       
|Swidnica, Poland          |  | 1                  |  | Manufacturing/Office/Warehouse |  | Owned       
|Taylorsville, MS          |  | 1                  |  | Manufacturing/Warehouse        |  | Leased      
|Toledo, OH                |  | 1                  |  | Retail                         |  | Leased      
|Troy, MI                  |  | 1                  |  | Office                         |  | Leased      
|Winchester, VA            |  | 2                  |  | Office/Manufacturing/Warehouse |  | Leased      
|Winnepeg, Canada          |  | 2                  |  | Manufacturing/Warehouse        |  | Leased/Owned



We believe all
facilities are suitable for their intended purpose, are being efficiently utilized and provide adequate capacity to meet demand for the next several years.



|ITEM 3 |  | LEGAL PROCEEDINGS
|------ |  | -----------------

---



Legal Proceedings



From time to time, we are a party to various legal actions in the normal course of our business, including those related to commercial transactions,
product liability, safety, health, taxes, environmental and other matters.



Remy Mexico, S. de R.L. de C.V. Arbitration



Remy Mexico Holdings, S. de R.L. de C.V., which we refer to as RMH, our indirect subsidiary, and GCID Autopartes, S.A. de C.V., which we refer to as GCID, were parties to a series of agreements, including a partnership agreement. The
partnership agreement created Remy Mexico, S. de R.L. de C.V. (formerly Delco Remy Mexico, S. de R.L. de C.V.), which we refer to as RM, which operates certain manufacturing facilities in Mexico. GCID was the minority partner with a 24% ownership
interest. An affiliate of ours and RMH, Remy Componentes, S. de R.L. de C.V., which we refer to as RC and RM, were parties to a services agreement with an affiliate of GCID relating to the partnership, which, among other things, required the payment
of fees in connection with the provision of employees to the partnership. That agreement terminated as of April 3, 2004. Another affiliate of GCID was the partnerships landlord until April 30, 2004.



RMH and GCID signed a letter of intent on or about May 3, 2000, whereby GCID
agreed to terminate certain of the agreements with RMH and to sell its partnership interest to RMH in exchange for a $13 million termination payment by RMH to GCID, but the transaction was never finalized. In June 2001, GCID declared RMH in default
under the



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partnership agreement, alleging that RMH had failed to conduct the business of the partnership in accordance with that agreement. In August 2001, GCID
instituted an arbitration proceeding before the American Arbitration Association against RMH and later added RC and our wholly owned subsidiary, Remy, Inc. (formerly Delco Remy America, Inc.), who together with RMH and RC are referred to as the
named parties. GCID and its affiliates sought damages for the alleged (i) breaches of the partnership agreement, including a requirement under the partnership that RMH buy out GCIDs partnership interest; (ii) breaches of fiduciary duty; (iii)
breaches of various other contracts between and among the various parties and (iv) tortious interference with contractual relations. RM terminated the lease agreement as of September 27, 2003. RM and RC relocated all operations to another facility
in San Luis Potosi, Mexico as of April 30, 2004. In accordance with an interim award from the arbitration panel on March 10, 2004, RM and RC hired the employees previously provided by GCIDs affiliate under the services agreement as of April 3,
2004.



The arbitration panel issued its final award on June 25,
2004. In accordance with the final award, on July 6, 2004 GCID transferred its interest in RM to RMH and RMH, RM and RC paid GCID and its affiliates approximately $17.3 million for GCIDs minority interest, the award for past services fees for
the period of 1997 through 2004, and other claims, including interest. RMH, RM and RC also paid approximately $1.8 million in VAT as a result of these payments.



UAW Litigation



On April 16, 2003, the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America, which we refer to as UAW, and its
Local Union 662 filed suit against the Company and RI, in Federal District Court in the Southern District of Indiana, Indianapolis Division. The lawsuit was filed under Section 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185, seeking
enforcement of an expired Supplemental Unemployment Benefits plan, which we refer to as the SUB Plan. The plaintiffs allege that the SUB plan provides supplemental unemployment benefits for 52 weeks and separation pay in an amount exceeding $20.0
million for employees who were terminated as a result of the closure of RIs Anderson, Indiana production facilities at the end of March 2003. The plaintiffs also seek to enforce terminated provisions of a health care program which the
plaintiffs allege provides the terminated employees with 25 months of continued hospital, surgical, medical, hearing aid, prescription drug, mental health, substance abuse and vision insurance coverage. The terminated employees were represented by
the UAW and its Local Union 662 under various agreements, which expired on March 31, 2003. The lawsuit was filed shortly after the UAW membership failed to ratify RIs last, best and final offer for a Shutdown Agreement. The UAW filed an
amended complaint on July 8, 2003 to which the Company filed an answer on July 24, 2003. The trial was previously expected to begin in January 2005, however, that date was continued and has not been reset as of this time. We deny the material
allegations of the complaint, deny any wrongdoing and intend to defend ourselves vigorously, but are unable to predict whether the proceedings will have a material adverse effect.



Prison Labor Matter



In January 2004, a class action on behalf of all prisoners who worked in a South Carolina Department of Corrections, which we refer to as SCDC, Services
Training Program at Lieber Correctional Institute was brought against our former subsidiary Williams, which was sold to CAT in September 2004, and the SCDC. The plaintiffs claim they should have been paid industry prevailing wage under a South
Carolina prison industries authorization statute, that the SCDC and Williams violated the Payment of Wages Act and that the SCDC and Williams committed at tort under the South Carolina Tort Claims Act. Under the terms of the sale of Williams to CAT,
we retained liability and responsibility for this claim. We deny the material allegations of the complaint, deny any wrongdoing and intend to defend ourselves vigorously, but are unable to predict whether the proceedings will have a material adverse
effect.



Remy Reman Facilities



The Remy Reman facilities in Mississippi identified certain possible
violations of state air laws and notified the state environmental agency under the state voluntary audit disclosure rules. The MDEQ issued Notices of Violation regarding alleged violations of state air laws by two of the Remy Reman facilities in
Mississippi. Remy Reman resolved this liability through payment in January 2005 of approximately $0.2 million.



Franklin Power Products Facility



In September 2000, one of Franklin Power Products, Inc.s Indiana facilities received a Finding of Violation and Order for Compliance from the EPA requiring the facility to correct violations of its wastewater discharge permits.



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Franklin Power Products, Inc. has installed wastewater treatment equipment and is in compliance with the terms of the Order and has eliminated the discharge.
In July 2004, the Company and Franklin Power Products, Inc. entered into an agreement with the U.S. Department of Justice on behalf of the EPA, which tolled the statute of limitations on the EPAs potential claim for penalties. Since that time,
we have been cooperating with the EPA by providing additional information and have entered into settlement negotiations with the EPA and the Department of Justice.



|ITEM 4 |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------ |  | ---------------------------------------------------

---



There were no matters submitted to a vote of security holders during the
quarter ended December 31, 2004.



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##### Table of Contents

PART II



|ITEM 5 |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------ |  | ---------------------------------------------------------------------

---



Market Information



There is currently no established public market for our outstanding common
equity.



Holders



The approximate number of record holders of each of our classes of common
stock as of March 15, 2005 was as follows:



|                     |  |  
|-------------------- |  | -
|Class B Common Stock |  | 1



Dividends



Our ability to pay dividends is restricted by certain
covenants contained in our senior credit facilities, as well as certain restrictions contained in our indentures relating to our senior notes and our subordinated notes.



|ITEM 6 |  | SELECTED FINANCIAL DATA
|------ |  | -----------------------

---



The following table presents our selected consolidated financial data for the fiscal year ending July 31, 2000, the five
month transition period ended December 31, 2000, and the years ended December 31, 2004, 2003, 2002 and 2001 (dollars in thousands).



|                                            |  |                        |           |      |                              |          |                   |  |   |         |   |  |             |         |      |  |   |         |  |   |        
|------------------------------------------- |  | ---------------------- | --------- | ---- | ---------------------------- | -------- | ----------------- |  | - | ------- | - |  | ----------- | ------- | ---- |  | - | ------- |  | - | -------
|                                            |  | Year Ended December 31 |           |      | Five MonthsEnded December 31 |          | YearEnded July 31
|                                            |  | 2004                   |           | 2003 |                              |          | 2002              |  |   | 2001    |   |  | 2000        |         | 2000
|                                            |  |                        |           |      |                              |          |                   |  |   |         |   |  | (Unaudited) |         |     
|Net sales                                   |  | $                      | 1,051,165 |      | $                            | 972,794  |                   |  | $ | 932,636 |   |  | $           | 877,296 |      |  | $ | 389,884 |  | $ | 952,942
|Net income (loss) fromcontinuing operations |  |                        | 11,359    |      |                              | (180,926 | )                 |  |   | (3,831  | ) |  |             | (44,992 | )    |  |   | 9,330   |  |   | 11,804 
|Total assets                                |  |                        | 755,758   |      |                              | 723,976  |                   |  |   | 852,819 |   |  |             | 947,231 |      |  |   | 924,470 |  |   | 889,240
|Long-term debt, net                         |  |                        | 610,330   |      |                              | 593,003  |                   |  |   | 596,282 |   |  |             | 593,178 |      |  |   | 516,719 |  |   | 481,468
|Redeemable preferredstock                   |  |                        |          |      |                              | 306,969  |                   |  |   | 274,074 |   |  |             | 244,699 |      |  |   |        |  |   |       
|Cash dividends declaredper common share     |  |                        | NA        |      |                              | NA       |                   |  |   | NA      |   |  |             | NA      |      |  |   |        |  |   |       
|Other items:                                |  |                        |           |      |                              |          |                   |  |   |         |   |  |             |         |      |  |   |         |  |   |        
|Restructuring charges(credits)              |  | $                      | 942       |      | $                            | 48,968   |                   |  | $ | (4,375  | ) |  | $           | 30,098  |      |  | $ |        |  | $ | 30,831 
|Special charges                             |  |                        |          |      |                              | 118,240  |                   |  |   |        |   |  |             | 30,026  |      |  |   |        |  |   |       



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##### Table of Contents

|ITEM 7 |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------ |  | -------------------------------------------------------------------------------------

---



The following discussion and analysis should be read in conjunction with and
is qualified in its entirety by reference to our consolidated financial statements and accompanying notes. Except for historical information, the discussions in this section contain forward-looking statements that involve risks and uncertainties.
Future results could differ materially from those discussed below.



General



We are a leading global
manufacturer and remanufacturer of aftermarket and original equipment electrical components and aftermarket powertrain components for automobiles, light trucks, heavy-duty trucks, industrial, construction and agricultural applications and other
heavy-duty applications. Our products include starters, alternators, engines, turbo chargers, and fuel systems. We also provide exchange services for used components, commonly known as cores, for remanufacturers. We supply numerous highly engineered
products to over 3,500 customers, principally in North America, Europe, Latin America and Asia.



The aftermarket is highly fragmented and competitive. We believe that aftermarket suppliers are consolidating. We believe that this consolidation is
occurring, in part, because of higher quality standards for remanufactured products, which may be more expensive or technically difficult for smaller remanufacturers to meet. We plan to exploit our leading position in the aftermarket for electrical
components and to grow our share through internal growth and acquisitions.



The demand for components in the original equipment manufacturer, which we refer to as OEM, market is cyclical. We believe that opportunities for growth in the OEM market will continue to come primarily through the
introduction of new products and expansion of our global operations. We believe that our aftermarket and OEM products are complementary and provide us with a competitive advantage in meeting customer needs and maintaining the high levels of
expertise necessary to compete successfully in both markets. We believe that the high capability and expertise required to meet the stringent technology and quality requirements of OEM customers provides us with a competitive advantage in the
development and production of products for the aftermarket.



The primary elements of cost of goods sold in our products include component parts, material, labor costs and overhead. The availability of cores may impact our cost of goods sold. While the availability and cost of cores fluctuate based on
supply and demand, our relationships with dealers and our customers have historically provided us with sufficient access to cores at favorable prices.



With our 2003 acquisition of Delphi Corporations light vehicle alternator business, we believe we have now established the principal capabilities,
geographic positions, cost base and customer base that we sought to achieve following our separation from GM over ten years ago. We believe we are now well-positioned to capitalize on our achievements by increasing our sales through organic growth,
strategic transactions, pursuing cost savings opportunities and focusing on cash flow generation.



On March 18, 2005 we acquired substantially all of the assets and assumed certain liabilities of Unit Parts Company, which we refer to as UPC, based in
Oklahoma City (See Note 22 to our financial statements in Item 8). UPC is a major supplier to the automotive aftermarket for new and remanufactured starters and alternators, offering custom branding, packaging and logistics solutions as well as
complete engineering and support services. UPC had estimated net sales of approximately $150 million for the year 2004.



General Motors Corporation, which we refer to as GM, accounted for about 54% of our total OEM sales in 2004. In connection with our separation from GM, GM
entered into long-term contracts to purchase from us 100% of GMs North American requirements for automotive starters (other than for Saturn and Geo) and 100% of GMs U.S. and Canadian requirements for heavy-duty starters and alternators.
GMs obligations to purchase our products in the future are subject to such products remaining competitive as to price, technology and design. GMs obligation to purchase automotive starters



16



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##### Table of Contents

from us terminates on July 31, 2008. Our exclusivity agreement with GM for heavy-duty vehicles expired in 2000, although we continued to supply GMs
heavy-duty starters and alternators in 2004. We cannot be sure that GM will not develop alternative sources for components currently produced by us and purchase some or all of its requirements from alternative sources.



In addition, GM Service Parts Organization, which we refer to as GM SPO, has
been designated as an exclusive distributor of a significant amount of our automotive aftermarket products and as a distributor of our heavy-duty aftermarket products. In April 2002 we reduced our prices in accordance with the competitive clause of
the agreement. Our exclusive distribution arrangement with GM SPO for our automotive aftermarket products terminates on July 31, 2008. Our distribution arrangement with GM SPO is renewable on an annual basis for our heavy-duty aftermarket products.



During the past four years, we have taken actions to improve
our cost structure, delivery, quality and price, some of which have resulted in significant charges to income. The restructuring and other special or unusual charges discussed below were significant factors contributing to the net losses reported in
2001 through 2003. Events affecting the past four fiscal years include:



| |  |  | Additional expenditures in 2004 and late 2003 on product engineering, systems and marketing programs, in part related to our new alternator product lines and new sales awards. These
expenditures contributed to the 17% year over year increase in selling, general and administrative expenses in 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A special charge of $103.9 million in 2003 for a change in estimate for the valuation of core inventory from primarily customer core acquisition cost to core broker prices. This
change enhances purchasing and manufacturing decisions and provides more flexibility to adjust inventory levels and improve liquidity.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A special charge of $14.3 million in 2003 for the estimated cost of the past service fees, other claims, interest and costs relating to the arbitration award regarding the dispute
with our Mexican joint venture partner, GCID Autopartes, S.A. de C.V. In 2004, the final award was determined and we made cash payments totaling $19.1 million relative to this matter.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Various restructuring actions to align our cost structure with market requirements (net charges totaling $75.6 million in 2004, 2003, 2002 and 2001) and implementation of rigorous
continuous improvement and lean manufacturing programs throughout our operations to further reduce cost and improve productivity.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A charge of $24.7 million in 2003 to provide a valuation allowance for certain domestic deferred income tax assets established prior to 2003, and the establishment of a valuation
allowance for the deferred tax assets arising from 2003 domestic losses.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sale of our remanufactured transmission business in 2004. This action resulted net cash proceeds of $104.3 million, a gain of $45.1 million and the commitment to a plan to dispose
of a related business with a resulting loss of $2.2 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Disposal of other non-core businesses, which were primarily generating losses, to focus resources on core operations (net losses on disposal totaling $24.9 million in 2004, 2003 and
2002 and cash proceeds on the sale totaling $30.4 million in 2004 and 2003).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A $74.2 million charge for the write-down of goodwill in connection with the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
(SFAS No. 142) in 2002.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A charge of $16.1 million in 2001 to write-off various disputed items related to our separation from GM.
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | Costs of $4.2 million associated with our going private and leveraged recapitalization transaction in 2001. An additional $105.2 million charge to retained earnings was recorded in
connection with this transaction.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe
that the actions and associated charges discussed above, combined with organic growth and new business, have provided the foundation for improved operating performance in future years. The initial impact of the restructuring and other cost reduction
actions are reflected in our 2004 and 2003 operating performance. Gross margins, excluding the special charges for the change in estimate for core valuation and the Mexican Arbitration discussed above, improved to 19.1% in 2004 compared with 18.7%
in 2003 and 16.5% in 2002.



17



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##### Table of Contents

Results of Operations



The following table sets forth selected statements of operations data expressed as a percentage of sales:



|                                                    |  |                        |   |  |       |   |  |       |  
|--------------------------------------------------- |  | ---------------------- | - |  | ----- | - |  | ----- | -
|                                                    |  | Year Ended December 31 |  
|                                                    |  | 2004                   |   |  | 2003  |   |  | 2002  |  
|Net sales                                           |  | 100.0                  | % |  | 100.0 | % |  | 100.0 | %
|Cost of goods sold                                  |  | 80.9                   |   |  | 81.3  |   |  | 83.5  |  
|Special charges                                     |  |                       |   |  | 12.2  |   |  |      |  
|Gross profit                                        |  | 19.1                   |   |  | 6.5   |   |  | 16.5  |  
|Selling, general and administrative expenses        |  | 10.8                   |   |  | 9.9   |   |  | 10.2  |  
|Restructuring charges (credits)                     |  | 0.1                    |   |  | 5.0   |   |  | (0.5  | )
|Operating income (loss)                             |  | 8.2                    |   |  | (8.4  | ) |  | 6.8   |  
|Interest expense, net                               |  | 6.3                    |   |  | 5.7   |   |  | 5.4   |  
|Income tax expense                                  |  | 0.5                    |   |  | 3.8   |   |  | 0.9   |  
|Minority interest                                   |  | 0.3                    |   |  |      |   |  | 0.5   |  
|Loss from unconsolidated joint ventures             |  | 0.1                    |   |  | 0.7   |   |  | 0.4   |  
|Discontinued operations                             |  | 4.3                    |   |  | (0.6  | ) |  | (5.8  | )
|Cumulative effect of change in accounting principle |  |                       |   |  |      |   |  | 8.0   |  
|Net income (loss)                                   |  | 5.3                    |   |  | (19.2 | ) |  | (14.2 | )



Year Ended December
31, 2004 Compared To Year Ended December 31, 2003



Net
Sales



|                       |  |      |         |      |   |                      |  |   |         |   |  |      |  
|---------------------- |  | ---- | ------- | ---- | - | -------------------- |  | - | ------- | - |  | ---- | -
|Product Categories     |  | 2004 |         | 2003 |   | Increase/ (Decrease) |  |   | %Change |  
|Automotive OEM         |  | $    | 305.9   |      | $ | 263.8                |  | $ | 42.1    |   |  | 16.0 | %
|Heavy duty OEM         |  |      | 181.0   |      |   | 145.8                |  |   | 35.2    |   |  | 24.1 |  
|Electrical aftermarket |  |      | 426.7   |      |   | 432.3                |  |   | (5.6    | ) |  | (1.3 | )
|Powertrain             |  |      | 78.8    |      |   | 65.7                 |  |   | 13.1    |   |  | 19.9 |  
|Core services          |  |      | 58.8    |      |   | 65.2                 |  |   | (6.4    | ) |  | (9.8 | )
|Total Net Sales        |  | $    | 1,051.2 |      | $ | 972.8                |  | $ | 78.4    |   |  | 8.1  | %



Automotive OEM sales
increased due primarily to higher automotive volume, including new business awards, which were partially offset by customer price reductions. Heavy-duty OEM sales increased due to strong demand from Class 5  8 truck customers. OEM sales were
also favorably impacted by currency exchange rates in Europe and Korea. Electrical aftermarket sales were down due to soft market conditions during 2004 and the loss of a U.S. retail customer, partially offset by favorable currency exchange rates in
Europe and strong sales of locomotive power assemblies. Powertrain sales increased due to increased diesel engine and parts volume. Third party sales in the core services business decreased due to general market conditions.



Gross Profit



Gross profit of $200.5 million in 2004 compares with gross profit of $63.2
million in 2003. Gross profit in 2003 reflected the special charges totaling $118.2 million, consisting of the $103.9 million charge for the change in estimate of the valuation of our core inventory and the $14.3 million charge relative to the
Mexico arbitration settlement. The special charges are discussed in more detail below. Excluding the special charges in 2003, gross profit and gross profit as a percentage of net sales improved in 2004 compared with 2003. Total OEM gross profit
increased $22.5 million in 2004 compared with 2003. OEM gross profit in 2003 was negatively impacted by the $14.3 million arbitration settlement, which is excluded in the following discussion. Automotive OEM gross profit decreased $22.4 million in
2004 due to costs associated with new alternator product lines, higher material costs and price reductions, partially offset by higher sales volume and the benefits of restructuring and cost reduction actions. Heavy-duty OEM gross profit increased
$30.6 million in 2004 due to sales volume growth and the benefits of restructuring and cost reduction actions, partially offset by higher material costs. Higher material costs reflect increased prices for metals. Electrical aftermarket gross profit,
excluding the impact of the $88.7 million special core valuation charge in 2003, increased $11.8 million in 2004. This improvement



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reflected cost benefits associated with restructuring actions and improved material and warranty costs, partially offset by lower sales. Powertrain gross
profit, excluding the impact of the $15.3 million special core valuation charge in 2003, increased $5.0 million in 2004. This improvement reflected higher sales and cost benefits associated with restructuring actions and improved factory
efficiencies. Gross profit on core services decreased $6.0 million due to sales volume and product mix. Gross profit on aftermarket products was negatively impacted in 2004 by an $8.2 million charge for the decline in the value of its core
inventory. Freight surcharges reflecting escalating fuel oil prices, primarily during the third and fourth quarters of 2004, negatively affected profitability in all product categories.



Selling, General and Administrative Expenses



Selling, general and administrative, which we refer to as SG&A, expenses increased $16.5 million, to $113.3 million in
2004, compared to $96.8 million in 2003. As a percentage of net sales, SG&A expenses were 10.8% in 2004 compared with 9.9% in 2003. The year over year increase in SG&A expenses primarily reflects higher expenditures on product engineering,
systems and marketing programs, in part related to our new alternator product lines and new sales awards, principally in the OEM sector. We expect to continue our investment in resources necessary to support our global expansion and new product
development, resulting in increases in SG&A expenses during 2005.



Restructuring Charges



We recorded a net
restructuring charge of $0.9 million in 2004 primarily related to the actions taken in prior years discussed below. The 2004 charge consisted of employee termination benefits of $1.3 million and $1.4 million of other costs, partially offset by a
$1.8 million reduction in the reserve established in 2003 for the impairment of operating leases, as we reached an agreement to transfer our lease obligation for an Anderson-based facility to a third party.



In 2003, we recorded restructuring charges totaling $49.0 million related to:
(i) the closure of our starter and alternator manufacturing operations in Anderson, Indiana; (ii) the closure of our electrical aftermarket remanufacturing and distribution facilities in Reed City, Michigan; (iii) the consolidation of two of our
remanufacturing operations in Mississippi; and (iv) the consolidation of certain of our operations in Europe. The charges consisted of employee separation programs of $14.4 million, an asset impairment charge of $29.2 million, operating lease
impairment charges of $9.1 million, a pension plan curtailment charge of $1.8 million and other costs of $1.7 million. These charges were offset by a post-employment benefit plan curtailment gain of $7.2 million.



Operating Income (Loss)



Operating income of $86.3 million in 2004 compares with an operating loss of
$82.5 million in 2003. The loss in 2003 was impacted by the special ($118.2 million) and restructuring ($49.0 million) charges discussed below. The remaining $2.5 million year over year increase was due to the increase in gross profit offset by the
increase in SG&A expense discussed above.



Interest
Expense, Net



Interest expense, net, increased $2.7 million
to $58.2 million in 2004 compared to $55.5 million in 2003. This increase reflects approximately $3.4 million of interest expense charged to continuing operations in 2004 that was charged to discontinued operations in 2003, additional interest
expense for the period between the call and redemption dates of $1.3 million relative to redemption of the 10 5/8% Senior Subordinated Notes recorded in 2004 and interest expense associated with the Second Priority Senior Secured Floating Rate Notes
issued in 2004, partially offset by lower interest expense on our senior credit facility and other borrowings. Our senior credit facility was paid down on September 1, 2004 with proceeds received from the sale of Williams and JAX.



Loss on Early Extinguishment of Debt



In connection with our refinancing actions during 2004 (discussed below), we
recorded a loss on the early extinguishment of debt totaling $7.9 million. This loss consisted of: (i) a call premium of $2.5 million and write off of deferred financing costs of $1.4 million on redemption of the 10 5/8% Senior Subordinated Notes;
(ii) a prepayment penalty of $1.8 million and write off of deferred financing costs of $0.7 million on prepayment of the term loan; and (iii) a write off of deferred financing costs of $1.2 million and other fees of $0.3 million.



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Income Taxes



The income tax provision of $5.4 million in 2004 consisted of taxes in various foreign jurisdictions totaling $5.0 million
and provisions for domestic state and local taxes of $0.4 million. In accordance with SFAS No. 109, we established a valuation allowance for domestic U.S. deferred tax assets in 2003, which resulted in no domestic U.S. tax provision on 2004 domestic
income. The income tax provision of $36.7 million in 2003 consisted of the $24.7 million increase to the valuation allowance as discussed below, a $2.9 million provision related to withholding taxes on intercompany dividends declared in 2003 and
provisions in various foreign jurisdictions totaling $9.1 million. Our consolidated effective income tax rate of 26.7% in 2004 and (26.6%) in 2003 reflects the above issues.



Minority Interest in Income or Loss of Subsidiaries



Minority interest in income of subsidiaries of $2.8 million in 2004 compares with a $0.1 million credit in 2003. Minority
interest in 2004 included minority shareholders interests in the earnings of Hubei Delphi Automotive Generators Company, Ltd., which we refer to as Hubei, Remy Mexico, S. de R.L. de C.V. (formerly Delco Remy Mexico, S. De R.L. de C.V.), which
we refer to as RM, and our joint venture with International Truck and Engine Corporation. The $0.1 million credit in 2003 includes minority shareholders interests in the earnings of Hubei, RM, World Wide Automotive, L.L.C., which we refer to
as World Wide, Power Investments, Inc., which we refer to as Power, and our joint venture with International Truck and Engine Corporation. A $2.5 million credit was recorded in 2003 related to minority shareholders share of the $103.9 million
charge for the change in estimate in the valuation of core inventory. We purchased the remaining minority shareholders interests in World Wide and Power under contractual put agreements in 2003 and the remaining interest in RM in 2004 in
connection with finalization of the Mexico Arbitration.



Loss From Unconsolidated Joint Ventures



The loss from unconsolidated joint ventures of $0.6 million in 2004 compares with a loss of $6.4 million in 2003. The loss in 2004 consisted of losses recognized related to additional capital contributions we made into iPower Technologies,
L.L.C., which we refer to as iPower, and losses recorded by Hitachi Remy Automotive GmbH, partially offset by earnings recorded by Sahney Paris Rhone Ltd. Our share of losses related to Hitachi Remy Automotive GmbH in 2004 reduced the carrying value
to zero. Accordingly, we have discontinued recognition of losses related to this joint venture. The loss in 2003 consisted of the write off of our investment in iPower and losses recorded by Hitachi Remy Automotive GmbH, partially offset by earnings
recorded by Sahney Paris Rhone Ltd.



Discontinued
Operations



Income from discontinued
operations of $1.2 million in 2004, related primarily to the remanufactured transmission business, reflects operating income of $5.7 million, net of restructuring charges of $0.4 million, and interest expense of $4.5 million. The loss from
discontinued operations of $8.0 million in 2003 reflects restructuring charges of $0.9 million and interest expense of $7.8 million. The loss from discontinued operations in 2003 includes the results of the remanufactured transmission business,
Tractech, Kraftube and the contract remanufacturing and retail aftermarket gas engine businesses.



We recorded a $45.1 million gain, net of income taxes and deal-related costs, on the sale of Williams Technologies, Inc., which we refer to as Williams,
and JAX Reman, L.L.C., which we refer to as JAX, to Caterpillar, Inc., which we refer to as CAT, in 2004. An estimated loss of $2.2 million was recorded in 2004 in connection with the commitment to dispose of a related business. An additional net
gain of $1.0 million was recorded in 2004 on the sale of Tractech, Kraftube and the gas engine businesses. An initial gain of $2.3 million was recorded in 2003 on the sale of Tractech and Kraftube.



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Year Ended December 31, 2003 Compared To Year Ended December 31, 2002



Net Sales



|                       |  |      |       |      |   |          |  |         |      |  |      |  
|---------------------- |  | ---- | ----- | ---- | - | -------- |  | ------- | ---- |  | ---- | -
|Product Categories     |  | 2003 |       | 2002 |   | Increase |  | %Change |     
|Automotive OEM         |  | $    | 263.8 |      | $ | 256.3    |  | $       | 7.5  |  | 2.9  | %
|Heavy duty OEM         |  |      | 145.8 |      |   | 140.9    |  |         | 4.9  |  | 3.5  |  
|Electrical aftermarket |  |      | 432.3 |      |   | 421.8    |  |         | 10.5 |  | 2.5  |  
|Powertrain             |  |      | 65.7  |      |   | 58.8     |  |         | 6.9  |  | 11.7 |  
|Core services          |  |      | 65.2  |      |   | 54.8     |  |         | 10.4 |  | 18.9 |  
|Total Net Sales        |  | $    | 972.8 |      | $ | 932.6    |  | $       | 40.2 |  | 4.3  | %



Automotive OEM sales
increased due primarily to shipments of alternators from Hubei and increased demand from non-GM customers. Heavy-duty OEM sales increased due to strong demand from Class 5  8 truck customers, primarily in the fourth quarter. OEM sales were
also favorably impacted by currency exchange rates in Europe and Korea. Electrical aftermarket sales were up due to new business wins, partially offset by reduced sales to GM SPO and, in the first quarter, customer inventory reductions. Electrical
aftermarket sales were also favorably impacted by currency exchange rates in Europe. Powertrain sales increased due to increased diesel engine and parts volume. Third party sales in the core services business increased due to higher volumes.



Gross Profit



Gross profit of $63.2 million in 2003 includes the special charges totaling
$118.2 million discussed below and compares with gross profit of $153.7 million in 2002. Excluding the special charges, gross profit and gross profit as a percentage of net sales improved in 2003 compared with 2002. Total OEM gross profit decreased
$5.0 million in 2003 compared with 2002. OEM gross profit in 2003 was negatively impacted by the $14.3 million arbitration settlement, which is excluded in the following discussion. Automotive OEM gross profit declined $0.8 million in 2003 as a
result of start-up costs in new facilities, strengthening foreign currencies on costs in foreign production facilities and costs arising from the shut down and transfer of operations, largely offset by higher sales and the benefits of cost reduction
and restructuring actions. Heavy-duty OEM gross profit increased $10.1 million due to higher sales and the benefits of cost reduction and restructuring actions. Electrical aftermarket gross profit, excluding the impact of the $88.7 million special
core valuation charge in 2003, increased $6.1 million in 2003. This improvement was due primarily to increased sales volume, partially offset by unfavorable product mix. Powertrain gross profit, excluding the impact of the $15.3 million special core
valuation charge in 2003, increased $5.3 million in 2003. This improvement reflected an overall increase in remanufactured diesel engine and parts volume and lower warranty cost. Gross profit on core services increased $7.1 million due to sales
volume growth and improved product mix.



Selling, General
and Administrative Expenses



SG&A expenses increased
$1.7 million, to $96.8 million in 2003, compared to $95.1 million in 2002. As a percentage of net sales, SG&A expenses improved to 9.9% in 2003 from 10.2% in 2002. The year over year increase in spending primarily reflects investments in product
engineering, distribution and marketing programs, largely offset by overall cost reduction and control efforts.



Special Charges



We recorded a special charge to cost of goods sold of $103.9 million in 2003 for a change in estimate of the valuation of our core inventory. This change
in estimate establishes a new inventory value for core inventory, from primarily customer core deposit value to core broker price. It also aligns us with the majority of companies that use core broker prices for inventory valuation and with market
trends indicating that the long-term recovery of core prices is unlikely. This non-cash charge did not materially impact our liquidity or borrowing base. We believe that this change will drive better purchasing and manufacturing decisions and
provide additional flexibility to adjust inventory levels.



We
recorded a $14.3 million charge in 2003 in connection with an interim decision entered by the arbitration panel in a proceeding brought against certain of our affiliates by the minority partner of our Mexico joint venture. The arbitration panel
issued its final award on June 25, 2004. In accordance with this award, we paid approximately $17.3 million for the



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remaining minority interest, the award for past services fees and other claims, including interest. In addition, we paid approximately $1.8 million in value
added tax as a result of these payments. The final award did not affect the special charge recorded in 2003.



Restructuring Charges and Credits



In 2003, we recorded restructuring charges totaling $49.0 million related to: (i) the closure of our starter and alternator manufacturing operations in Anderson, Indiana; (ii) the closure of our electrical aftermarket
remanufacturing and distribution facilities in Reed City, Michigan; (iii) the consolidation of two of our remanufacturing operations in Mississippi; and (iv) the consolidation of certain of our operations in Europe. The charges consisted of employee
termination benefits of $14.4 million, an asset impairment charge of $29.2 million, operating lease impairment charges of $9.1 million, a pension plan curtailment charge of $1.8 million and other costs of $1.7 million. These charges were offset by a
post-employment benefit plan curtailment gain of $7.2 million.



In 2002, we recorded a non-cash net restructuring credit of $4.4 million consisting of a $4.9 million post-employment benefit curtailment gain and a $0.5 million pension curtailment charge related to employee separation programs associated
with our 2001 restructuring actions.



Operating Income
(Loss)



The $82.5 million operating loss in 2003 includes
the special charges totaling $118.2 million and $49.0 million in restructuring charges discussed above and operating profit of $63.0 million in 2002 includes the $4.4 million net curtailment gain. Year over year performance was also impacted by the
other sales, gross profit and SG&A expense factors discussed above.



Interest Expense, Net



Interest expense,
net, increased $5.0 million to $55.5 million in 2003 compared to $50.5 million in 2002. This increase reflects approximately $8.8 million of interest expense charged to continuing operations in 2003 that was charged to discontinued operations in
2002, and a $0.5 million increase in deferred financing costs related to the senior credit facilities. These increases were partially offset by $2.7 million of reductions including lower borrowings under the senior credit facilities and other items.
Interest expense in 2002 includes a $1.8 million loss on the write off of deferred financing costs in connection with the early retirement of our then existing $200.0 million revolving credit facility.



Income Taxes



The income tax provision of $36.7 million in 2003 includes a $24.7 million
increase to the deferred tax valuation allowance recorded in the fourth quarter for certain unreserved domestic income tax assets established prior to 2003. This valuation allowance was provided in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS No. 109), primarily as a result of recording three consecutive years of domestic losses. The 2003 provision also includes a $2.9 million provision related to withholding tax on
intercompany dividends declared in 2003 and provisions in various foreign jurisdictions totaling $9.1 million. A valuation allowance was also established on the deferred tax assets arising from 2003 domestic losses. Our consolidated effective income
tax rate of 66.0% in 2002 reflects taxable intercompany dividends paid in 2002, which are not deductible for financial reporting purposes.



Minority Interest in Income or Loss of Subsidiaries



Minority interest in income or loss of subsidiaries of a $0.1 million credit in 2003, compares with a $4.2 million charge in 2002. The year over year
change reflects (i) a $2.5 million credit in 2003 related to minority shareholders share of the $103.9 million charge for the change in estimate in the valuation of core inventory and (ii) our purchase of additional shares from the minority
shareholders of World Wide, Power, and Delco Remy Korea, partially offset by the minority interest of Hubei, which was acquired in March 2003.



Loss From Unconsolidated Joint Ventures



The loss from unconsolidated joint ventures of $6.4 million in 2003 compares with a loss of $3.8 million in 2002. This increased loss primarily reflects
the write-off of our investment in iPower and increased losses recorded by Hitachi



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Remy Automotive GmbH, partially offset by higher earnings at Sahney Paris Rhone Ltd. and the termination in 2002 of our joint venture, Continental ISAD
Electrical Systems GmbH & Co., formed with Continental AG in 2002.



Discontinued Operations



The loss from
discontinued operations of $8.0 million in 2003 reflects restructuring charges of $0.9 million and interest expense of $7.8 million. The loss from discontinued operations of $26.3 million in 2002 consisted of operating losses of $11.3 million,
including restructuring charges of $2.8 million, interest expense of $16.7 million and an income tax benefit of $1.7 million. The loss from discontinued operations in 2003 and 2002 includes the results of the remanufactured transmission business,
Tractech, Kraftube and the contract remanufacturing and retail aftermarket gas engine businesses.



Cumulative Effect of Change in Accounting Principle



In accordance with the provisions of SFAS No. 142, we recorded a $74.2 million charge to write down goodwill in certain of our operations in the first
quarter of 2002. There was no income tax effect on this charge.



Liquidity and Capital Resources



Our
short-term liquidity needs include required debt service (including capital lease payments), day-to-day operating expenses, working capital requirements and the funding of capital expenditures, contingent acquisition payments for recently completed
acquisitions and restructuring actions. Cash interest payments are expected to approximate $62.0 million in 2005. In 2005, we will be required to make payments in connection with the previous acquisitions of portions of Delphi Corporations
light vehicle alternator business. Long-term liquidity requirements include principal payments of long-term debt and payments in connection with the acquisition of our light vehicle alternator business of about $2.0 million in 2006. Our contractual
obligations are provided in the table under the section Contractual Obligations and Contingent Liabilities and Commitments. Our principal payments on long-term lease obligations are presented in Note 9 to our consolidated financial
statements.



In March 2005 we entered into Amendment No. 2 to
the Second Amended and Restated Loan and Security Agreement to reflect, among other matters, the acquisition of substantially all of the assets and the assumption of certain liabilities of UPC. Additionally, the Amendment increases the maximum draw
under our asset based Senior Credit Facility from $120.0 million to $145.0 million, eliminates the Earnings Before Interest, Taxes, Depreciation and Amortization, which we refer to as EBITDA, and Fixed Charge covenants from the facility and extends
the maturity of the facility to June 30, 2008 with provisions for annual extensions thereafter. The amendment is discussed below.



On April 23, 2004, we issued $125.0 million principal amount of Second Priority Senior Secured Floating Rate Notes due 2009, which we refer to as the
Floating Rate Notes, bearing an interest rate of LIBOR plus 4.00%, and $150.0 million principal amount of 93/8%
Senior Subordinated Notes due 2012, which we refer to as the 93/8% Senior Subordinated Notes. The net proceeds
from the issuance of these notes were used to pay down existing indebtedness under our senior credit facilities, including repayment of the $60.0 million term loan discussed below and relevant prepayment premium, and to finance the redemption of our
outstanding 10 5/8% senior subordinated notes due 2006 issued on August 1, 1996, including the call premium and accrued interest. The 10 5/8% notes were called for redemption in their entirety on April 23, 2004 at a redemption price of 101.771% of
their face amount plus accrued but unpaid interest up to, but not including, the redemption date of May 24, 2004.



On June 28, 2002, we entered into a $250.0 million secured, asset based, revolving credit facility, which we refer to as the Senior Credit Facility, with
a syndicate of banks led by Wachovia Bank, National Association and its subsidiary Congress Financial Corporation. The Senior Credit Facility replaced our then-existing $200.0 million secured revolving credit facility, which was due to expire on
March 31, 2003. The interest is payable at the end of each month.



The Senior Credit Facility is collateralized by liens on substantially all of our assets and substantially all of the assets of our domestic and certain of our foreign subsidiaries and by the capital stock of such subsidiaries.



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On October 3, 2003, we amended and restated our Senior Credit Facility. The $250.0 million amended and
restated facility consisted of a $190.0 million secured, asset-based, revolving facility, and a $60.0 million term loan facility. Proceeds from the new term loan were used to reduce outstanding debt under our asset-based revolving credit facility,
thereby increasing our total borrowing capacity under the Senior Credit Facility by approximately $60.0 million. The interest rate on the term loan facility is Wachovia Banks prime rate plus 4.5% subject to a minimum interest rate of 8.5%. The
applicable interest rate on the amount borrowed under the revolving credit facility remains unchanged and floats at rates above Wachovia Banks prime rate and/or Eurodollar rates.



On September 1, 2004, we amended our senior credit facility to change certain definitions and to adjust certain financial
covenants to reflect the sale of Williams and JAX. The revised covenant calculation for EBITDA was lowered from $108.0 million to $99.0 million for the rolling twelve-month period ending December 31, 2004, reflecting the sale of our transmission
business.



In connection with the various amendments in 2004
and 2005, we amended our senior credit facilities to reflect the extinguishment of the $60.0 million term loan, provide for borrowings of up to $145.0 million under our asset based revolving credit facility, and extend the maturity date to June 30,
2008 with provisions for annual extensions thereafter.



At
December 31, 2004, there were no borrowings under our Senior Credit Facility and utilization of letters of credit totaled $6.55 million. Based on the collateral supporting the senior credit facility at December 31, 2004, $113.45 million was
available under the Facility. Had we had borrowings outstanding under our revolving credit facility at December 31, 2004, the interest rate would have been between 5.15% and 5.5%.



The Senior Credit Facility contains various restrictive covenants, which include, among other things: (i) limitations on
additional borrowings and encumbrances; (ii) the maintenance of certain financial ratios and compliance with certain financial tests and limitations; (iii) limitations on cash dividends paid; (iv) limitations on investments and capital expenditures;
and (v) limitations on leases and sales of assets.



During
2003, certain of our Mexican subsidiaries entered into a machinery and equipment sale-leaseback financing transaction with GE Mexico. Cash proceeds were $10.3 million, net of security deposits of $5.4 million. Under the terms of this agreement, the
relevant subsidiaries must maintain certain net worth, earnings before interest, taxes, depreciation and amortization (as defined) and sales levels, in addition to other requirements normally associated with this type of financing. We have accounted
for these transactions as a financing transaction in accordance with SFAS No. 66 and SFAS No. 98. Accordingly, we have recorded an obligation of $15.7 million. The obligation at December 31, 2004 and 2003 was $12.2 million and $15.1 million,
respectively. We also continue to explore additional financing options, both in the U.S. and abroad, in an effort to further enhance liquidity and assure continued compliance with the covenants of all existing financing arrangements.



We participate in two programs that accelerate the collection of accounts
receivable. Under one program we sell the accounts of one of our aftermarket customers to a bank, on a non-recourse basis, at a discount. At December 31, 2004, the amount of receivables under this program was $21.1 million. The second program is an
early pay plan under which a third party acts as paying agent for one of our customers. The accounts are paid, at a discounted rate, in 5 to 7 days after shipment instead of the regular terms. This program is also without recourse. The amount
covered by this plan at December 31, 2004 was $6.6 million.



We
believe that cash generated from operations, together with the amounts available under the senior credit facilities and other borrowings, will be adequate to meet our debt service, capital expenditure, contingent acquisition payment, restructuring
and working capital requirements for at least the next twelve months, although no assurance can be given in this regard.



Year Ended December 31, 2004



Cash used in operating activities of continuing operations in 2004 of $9.4 million includes cash restructuring payments of $9.0 million and a litigation
payment of $13.6 million. Accounts receivable increased $10.8 million in 2004 due primarily to stronger Automotive and Heavy-Duty OEM and Powertrain sales, in addition to a decrease in accelerated collections under the receivables programs discussed
above. Days of sales outstanding were essentially unchanged year over year. Inventories increased $19.5 million in 2004 due primarily to builds in support of higher future Heavy-Duty OEM



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sales, builds for the launch of an additional remanufactured diesel engine and the impact of foreign currency exchange rates. Accounts payable increased
$15.3 million in 2004 primarily as a result of the inventory builds discussed above. Other current assets and liabilities, net, increased $22.2 million year over year due primarily to a reduction in accrued expenses, including product warranty,
employee salaries and benefits, interest and the payment of certain transaction fees. Cash restructuring payments consisted of employee termination benefits, leases and other costs. The litigation payment of $13.6 million (including value added tax
of $1.8 million) was made in connection with the settlement of the services agreement component of the arbitration with the former minority shareholders of RM.



Cash provided by investing activities of continuing operations in 2004 of $53.8 million included acquisition payments totaling $25.5 million,
consisting of earn-out payments relative to the 2000 acquisition of M&M Knopf Auto Parts, L.L.C. ($13.4 million), the final cash payment on notes issued in 2002 in connection with the acquisition of the remaining shares from the minority
shareholders of Remy Korea Limited ($4.8 million), purchase of the remaining shares from the minority shareholders of the Mexico joint venture ($5.5 million) and payments made in connection with the acquisition of Delphi Corporations light
vehicle alternator business ($1.8 million). In 2004 we recorded proceeds on the sale of Williams and JAX of $104.3 million, net of income taxes and deal-related costs, and proceeds on the sale of Tractech and Kraftube of $0.4 million. Capital
expenditures of $25.3 million in 2004 consisted primarily of production, engineering and distribution equipment and systems. We have planned capital expenditures of approximately $35.0 million to $40.0 million in 2005. Capital expenditures are
expected to increase in 2005 as a result of expenditures for the launch of new products and the establishment of new technology centers in Europe and Asia.



Cash used in financing activities of continuing operations in 2004 of $3.7 million included proceeds from the issuance of long-term debt ($275.0 million),
payments for the retirement of long-term debt ($200.0 million) and payment of related financing costs ($12.5 million). We also made a $2.5 million payment to CVC Management LLC in 2004 relative to services provided in connection with the refinancing
of our senior credit facility in 2002. Net repayments of other debt included the pay down of our senior credit facility with proceeds from the sale of Williams and JAX. In addition, cash dividends of $1.0 million were paid to the minority
shareholders of Hubei.



Cash outflows of discontinued
operations of $0.9 million in 2004, primarily related to the remanufactured transmission business, reflects operating income excluding restructuring charges of $6.0 million, an increase in net working capital and other assets and liabilities of $5.4
million, cash restructuring payments of $1.0 million and capital expenditures of $0.5 million.



Year Ended December 31, 2003



Cash provided by operating activities of continuing operations in 2003 of $25.1 million reflected net income from continuing operations, excluding non-cash and other reconciling items, of $31.9 million, a reduction in
net working capital, excluding the effect of acquisitions and the change in estimate for core inventory valuation, of $8.5 million and cash restructuring payments of $15.3 million. Accounts receivable increased by $8.6 million, primarily due to
increased sales volume in the OEM markets in the fourth quarter of 2003 and extended terms with certain customers in the core services business. Days of sales outstanding improved year over year. Inventories increased $28.3 million, excluding the
change in estimate for core inventory valuation, reflecting launch of the new light-duty alternator product line, higher core returns from our customers and the exchange impact of the weaker dollar. Inventory turns improved year over year. Accounts
payable increased by $24.5 million in 2003 due primarily to strong fourth quarter sales and the resulting increased inventory purchases, and changes in terms with certain foreign vendors. A $20.9 million decrease in other net current assets and
liabilities primarily reflects increases in accrued wages, interest, warranty and other accrued liabilities. Cash restructuring payments consisted of employee termination benefits and lease termination costs.



Cash used in investing activities of continuing operations of $5.3 million
included acquisition payments totaling $18.9 million, consisting of payments under contractual put agreements for World Wide ($5.9 million), Remy Korea Limited ($5.3 million) and Power ($5.2 million), and the acquisition of Delphi Corporations
light vehicle alternator business ($6.1 million, including $3.6 million of cash acquired). In the fourth quarter of 2003, we recorded an estimated contingent earn-out liability of $13.5 million related to the acquisition of Knopf (as discussed
above). The liability was based on the achievement of certain earnings goals by Knopf during the period August 2000 to December 2003 and was paid in 2004. This adjustment to the purchase price of Knopf resulted in a $13.5 million increase in
goodwill. In the fourth quarter of 2003, we reversed an estimated contingent earn-out liability and recorded a corresponding reduction in goodwill in the amount of $4.3 million, which had been established relating to the acquisition of Mazda NA. We
determined that it was unlikely that Mazda NA would achieve certain sales goals during the period June 2001 to



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December 2005. Net proceeds of $30.1 million were recorded on the sale of Tractech and Kraftube. Capital expenditures of $16.3 million consisted primarily of
production, engineering and distribution equipment.



Cash used
in financing activities of continuing operations was $4.2 million in 2003. Net proceeds of $10.3 million were recorded in connection with the sale-leaseback financing transaction with GE Mexico. These proceeds were used to reduce borrowings under
the revolving line of credit. Net borrowings under the revolving line of credit and other debt instruments of $12.5 million were used to fund investing activities and discontinued operations. Cash payments of $2.0 million were made in connection
with the amendments to the senior credit facilities as discussed above.



Cash outflows of discontinued operations of $7.7 million in 2003 primarily reflected capital expenditures in the remanufactured transmission business of $3.7 million and cash restructuring payments of $2.6 million.



Year Ended December 31, 2002



Cash provided by operating activities of continuing operations of $38.0
million in 2002 reflected net income from continuing operations, excluding non-cash and other reconciling items, of $33.3 million, a reduction in working capital of $20.5 million and cash restructuring payments of $15.8 million. Accounts receivable
declined $5.5 million in 2002 due to accelerated collections through arrangements with certain financial institutions ($16.7 million), partially offset by increased fourth quarter sales. Inventories increased $4.9 million in 2002 due primarily to
higher product returns in the aftermarket during the fourth quarter, largely offset by increased core usage and other inventory management efforts. Accounts payable increased $15.2 million year over year due to timing of vendor payments. Cash
restructuring payments consisted primarily of employee termination benefits.



Cash used in investing activities of continuing operations included payments under contractual put agreements for Power ($5.6 million), World Wide ($5.4 million) and Remy Korea Limited ($5.5 million) and $0.3 million
related to the acquisition of Delphi Corporations light vehicle alternator business. Capital expenditures of $18.5 million consisted primarily of production equipment and tooling. In 2002, we contributed $3.0 million to our iPower joint
venture.



Cash provided by financing activities of continuing
operations in 2002 of $5.6 million consisted of net borrowings under our revolving line of credit and increased borrowings in certain foreign operations. Deferred financing cost payments totaling $7.8 million were made in 2002 in conjunction with
the replacement of our prior senior credit facility. Cash payments of $1.8 million were made to the minority shareholders of Remy Korea Limited in 2002.



Cash outflows of discontinued operations of $17.8 million in 2002 reflected operating losses of $8.5 million, excluding impairment and restructuring
charges, cash restructuring payments of $5.1 million and a $1.5 million increase in working capital.



Contractual Obligations, Contingent Liabilities and Commitments



Our contractual obligations as of December 31, 2004 are provided in the following table (dollars in millions):



|                                       |  |                        |     |                 |   |    |            |  |            |     |                  |   |     |  |   |    
|-------------------------------------- |  | ---------------------- | --- | --------------- | - | -- | ---------- |  | ---------- | --- | ---------------- | - | --- |  | - | ---
|                                       |  | Payments Due by Period
|Contractual Obligations                |  | Total                  |     | Less than1 year |   |    | 1  3years |  | 4  5years |     | More than5 Years
|Long-Term Debt(1)                      |  | $                      | 618 |                 | $ | 22 | (2)        |  | $          | 154 |                  | $ | 292 |  | $ | 150
|Capital Lease Obligations              |  |                        | 16  |                 |   | 1  |            |  |            | 7   |                  |   | 5   |  |   | 3  
|Pension Funding(3)                     |  |                        | 5   |                 |   | 5  |            |  |            |    |                  |   |    |  |   |   
|Other Post Retirement Benefits Funding |  |                        | 10  |                 |   | 1  |            |  |            | 2   |                  |   | 2   |  |   | 5  
|Operating Leases                       |  |                        | 63  |                 |   | 10 |            |  |            | 27  |                  |   | 14  |  |   | 12 
|Acquisition Payments(4)                |  |                        | 6   |                 |   | 4  |            |  |            | 2   |                  |   |    |  |   |   
|Employee Termination Benefits          |  |                        | 5   |                 |   | 5  |            |  |            |    |                  |   |    |  |   |   
|Other                                  |  |                        | 11  |                 |   | 8  |            |  |            | 2   |                  |   |    |  |   | 1  
|Total Contractual Cash Obligations     |  | $                      | 734 |                 | $ | 56 |            |  | $          | 194 |                  | $ | 313 |  | $ | 171

|(1) | These amounts include indebtedness outstanding under our senior notes, senior subordinated notes, senior secured floating rate notes and other debt.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes $11 million related to foreign revolving credit agreements which will be renewed in 2005 with maturity dates of one year.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(3) | Amounts beyond 2005 are not currently estimable.
|--- | ------------------------------------------------

|(4) | Payments in connection with the acquisition of Delphi Corporations light vehicle alternator business, including purchasing its machinery and equipment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



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In addition to the contractual obligations disclosed above, we also have a variety of other contractual
agreements related to the procurement of materials and other commitments. With respect to these agreements, we are not subject to any contracts that commit us to significant non-cancelable commitments. With respect to agreements related to the
procurement of inventory used in our manufacturing and remanufacturing processes, we had approximately $70 million to $80 million of open purchase orders at December 31, 2004.



Contingencies



We are a party to various legal actions and administrative proceedings and subject to various claims arising in the ordinary course of business, including
those relating to commercial transactions, product liability, safety, health, taxes, environmental and other matters. For more information, see Business  Legal Proceedings, and Note 16 to our financial statements in Item 8.



Seasonality



Our business is seasonal, as our major OEM customers historically have one to
two week shutdowns of operations during July and December. Our sales results in the third and fourth quarters reflect the effects of these shutdowns. Our working capital requirements also are affected by seasonality, as we build inventory for the
summer sales months in the aftermarket. Typically our working capital requirements are highest from April through August and the change from the highest month to the lowest month (typically December), for accounts receivable, inventory and accounts
payable has averaged $40.0 million over the past three years. Refer to Note 20 to our consolidated financial statements, which pertains to quarterly (unaudited) financial information.



Effects of Inflation



We believe that the relatively moderate inflation over the last few years has not had a significant impact on our revenues or profitability and that we
have been able to offset the effects of inflation by realizing improvements in operating efficiency. We have commodity price risk with respect to purchases of certain raw materials. However, we have provisions in many of our contracts, which provide
for the pass through of fluctuations in the price of certain raw materials, such as copper and aluminum.



Foreign Sales



Approximately 27%, 26% and 22% of our net sales from continuing operations in 2004, 2003 and 2002, respectively, were derived from sales made to customers in foreign countries. Because of these foreign sales, our business is subject to the
risks of doing business abroad, including currency exchange rate fluctuations, limits on repatriation of funds, compliance with foreign laws and other economic and political uncertainties.



Accounting Pronouncements



For a discussion of pending accounting pronouncements that may affect us, see
Note 1 to our financial statements in Item 8.



Critical
Accounting Policies



Our accounting policies, including
those described below, require management to make significant estimates and assumptions using information available at the time the estimates are made. Actual amounts could differ significantly from these estimates. See Note 1 to our consolidated
financial statements in Item 8 for a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. We believe the following are some of the more critical judgment areas in the
application of accounting policies that currently affect the consolidated financial position and results of operations.



Inventory



Inventories are valued at the lower of cost or market determined by the first-in, first-out (FIFO) method. Estimates of lower of cost or market value of
inventory are determined at the operating unit level and are based upon the inventory at that location taken as a whole. In the fourth quarter of 2003, we changed our estimate for the valuation of core inventory



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from primarily customer acquisition cost to primarily core broker prices and recorded a special charge of $103.9 million. Of this charge $94.8 million
related to the write down of the core component of inventory and $9.1 million related to the establishment of an estimated liability for core returns. Effective in 2004, the value of cores are estimated over the expected remaining life of the core
and are evaluated on an ongoing basis by comparing the estimate to broker prices.



We evaluate inventories on a regular basis to identify inventory on hand that may be obsolete or in excess of current and future projected market demand. For inventory deemed to be obsolete, we provide a reserve on
the full value of the inventory. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates the estimate of future demand.



Goodwill And Other Intangible Assets



We adopted SFAS No. 142, effective January 1, 2002. Under SFAS No. 142, goodwill is no longer amortized; however, it
must be tested for impairment at least annually. Amortization continues to be recorded for other intangible assets with definite lives. We are subject to financial statement risk to the extent that goodwill and indefinite-lived intangible assets
become impaired.



Warranty



The Company provides an allowance for the estimated future cost of product
warranties and other defective product returns based on managements estimate of product failure rates and customer eligibility. If these factors differ from managements estimates, revisions to the estimated warranty liability may be
required.



Core Liability



The Company records a liability for core returns based on cores expected to
be returned. The liability represents the difference between the core deposit value to be credited to the customer and the core inventory value for the core being returned. Core inventory values decline over the expected remaining life of the core
family. Core inventory values decline on the basis of several economic factors, including market availability, seasonality and demand. If estimated returns and/or core market value differ from managements estimates, revisions to the estimated
core liability may be required.



Employee Benefit Plans



We provide a range of benefits to our employees and
retired employees, including pensions and post-retirement healthcare. We record annual amounts relating to these plans based on calculations specified by U.S. Generally Accepted Accounting Principles, which we refer to as U.S. GAAP, which include
various actuarial assumptions such as discount rates, assumed rates of return, compensation increases, turnover rates and healthcare cost trend rates. The expected return on plan assets is based on our expectation of the long-term average rate of
return on assets in the pension funds, which is reflective of the current and projected asset mix of the funds and considers the historical returns earned on the funds. We review our actuarial assumptions on an annual basis and make modifications to
the assumptions based on current rates and trends when appropriate. As required by U.S. GAAP, the effects of the modifications are recorded currently or amortized over future periods. Based on information provided by our independent actuaries and
other relevant sources, we believe that the assumptions used are reasonable.



Income Taxes



We account for income
taxes in accordance with SFAS No. 109. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. We record a valuation allowance that represents operating loss carryforwards for which utilization is uncertain. Management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities
and the valuation allowance recorded against our net deferred tax assets. The valuation allowance would need to be adjusted in the event future taxable income is materially different than amounts estimated.



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In the fourth quarter of 2003, we recorded a charge of $28.3 million for a deferred tax valuation
allowance for substantially all unreserved domestic income tax assets established prior to 2003. Of this total, $24.7 million was charged to income tax provision and $3.6 million was charged to other comprehensive loss.



|ITEM 7A |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- |  | ----------------------------------------------------------

---



In the normal course of business, our operations are exposed to continuing
fluctuations in foreign currency values, interest rates and commodity prices that can affect the cost of operating, investing and financing. Accordingly, we address a portion of these risks through a controlled program of risk management that
includes the use of derivative financial instruments. Our objective is to reduce earnings and cash flow volatility associated with these fluctuations. Our derivative activities, all of which are for purposes other than trading, are initiated within
the guidelines of established policies and procedures designed to manage market risk. We do not enter into any derivative transactions for speculative purposes. For further information on these matters see Note 1 to our financial statements in Item
8.



Our primary interest rate risk exposure results from
changes in short-term U.S. dollar interest rates. In an effort to manage interest rate exposures, we strive to achieve an acceptable balance between fixed and variable rate debt positions. In order to limit the effect of interest rate changes on
earnings and cash flows, we maintain a significant percentage of fixed rate debt (77% at December 31, 2004). As such, we are exposed to U.S. changes in interest rates on the senior credit facilities and the Floating Rate Notes. A 100 basis point
increase in U.S. market interest rates on the amounts outstanding at December 31, 2004 under the senior credit facilities would result in an increase in our annual interest expense of approximately $1.3 million.



Our foreign currency risk exposure results from fluctuating currency exchange
rates, primarily changes in the U.S. dollar against the South Korean Won and certain European currencies. We face transactional currency exposures that arise when our foreign subsidiaries (or ourselves) enter into transactions, generally on an
intercompany basis, denominated in currencies other than their local currency. We also face currency exposure that arises from translating the results of our global operations to the U.S. dollar at exchange rates that have fluctuated from the
beginning of the period. Exposure to variability in foreign currency exchange rates is managed primarily through the use of natural hedges, whereby funding obligations and assets are both denominated in the local currency. From time to time, we
enter into exchange agreements to manage our exposure arising from fluctuating exchange rates related to specific transactions. A hypothetical 10 percent weakening in the exchange rates of foreign currencies over a one-year period would increase
earnings by approximately $0.9 million. A hypothetical 10 percent weakening in exchange rates of foreign currencies would reduce the carrying value of our net investment in our foreign subsidiaries at December 31, 2004 by approximately $9.3 million.



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|ITEM 8 |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------ |  | -------------------------------------------

---



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                      |  |     
|----------------------------------------------------------------------------------------------------- |  | ----
|Financial Statements of Remy International, Inc.:                                                     |  | Page
|                                                                                                      | 
|Report of Independent Registered Public Accounting Firm                                               |  | 31  
|                                                                                                      | 
|Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002            |  | 32  
|                                                                                                      | 
|Consolidated Balance Sheets at December 31, 2004 and 2003                                             |  | 33  
|                                                                                                      | 
|Consolidated Statements of Stockholders Deficit for the years ended December 31, 2004, 2003 and 2002 |  | 34  
|                                                                                                      | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002            |  | 35  
|                                                                                                      | 
|Notes to Consolidated Financial Statements                                                            |  | 36  



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Shareholders and

Board of Directors of

Remy
International, Inc.



We have audited the accompanying
consolidated balance sheets of Remy International, Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders deficit, and cash flows for each of the three years in the period
ended December 31, 2004. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.



In our opinion, the financial statements referred
to above present fairly, in all material respects, the consolidated financial position of Remy International, Inc. and subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.



As discussed in Note 4 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142 Goodwill
and Other Intangible Assets in 2002.



/S/ ERNST & YOUNG LLP



Indianapolis, Indiana

March 18, 2005



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                                                                                                                                 |  |      |           |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | -------- | ---- |  | - | -------- | -
|IN THOUSANDS, Years ended December 31                                                                                                                                            |  | 2004 |           | 2003 |   |          | 2002 | 
|NET SALES                                                                                                                                                                        |  | $    | 1,051,165 |      | $ | 972,794  |      |  | $ | 932,636  |  
|Cost of goods sold                                                                                                                                                               |  |      | 850,672   |      |   | 791,322  |      |  |   | 778,976  |  
|Cost of goods soldspecial charges:                                                                                                                                              |  |      |           |      |   |          |      |  |   |          |  
|Core inventory valuation                                                                                                                                                         |  |      |          |      |   | 103,930  |      |  |   |         |  
|Mexican arbitration award                                                                                                                                                        |  |      |          |      |   | 14,310   |      |  |   |         |  
|Gross profit                                                                                                                                                                     |  |      | 200,493   |      |   | 63,232   |      |  |   | 153,660  |  
|                                                                                                                                                                                 |  |      |          
|Selling, general and administrative expenses                                                                                                                                     |  |      | 113,263   |      |   | 96,770   |      |  |   | 95,036   |  
|Restructuring charges (credits)                                                                                                                                                  |  |      | 942       |      |   | 48,968   |      |  |   | (4,375   | )
|OPERATING INCOME (LOSS)                                                                                                                                                          |  |      | 86,288    |      |   | (82,506  | )    |  |   | 62,999   |  
|                                                                                                                                                                                 |  |      |          
|Interest expense, net                                                                                                                                                            |  |      | 58,237    |      |   | 55,454   |      |  |   | 50,529   |  
|Loss on early extinguishment of debt                                                                                                                                             |  |      | 7,939     |      |   |         |      |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest, loss from unconsolidated joint ventures and cumulative effect
of change in accounting principle |  |      | 20,112    |      |   | (137,960 | )    |  |   | 12,470   |  
|                                                                                                                                                                                 |  |      |          
|Income tax expense                                                                                                                                                               |  |      | 5,367     |      |   | 36,682   |      |  |   | 8,226    |  
|Minority interest                                                                                                                                                                |  |      | 2,798     |      |   | (143     | )    |  |   | 4,245    |  
|Loss from unconsolidated joint ventures                                                                                                                                          |  |      | 588       |      |   | 6,427    |      |  |   | 3,830    |  
|Net income (loss) from continuing operations before cumulative effect of change in accounting
principle                                                                          |  |      | 11,359    |      |   | (180,926 | )    |  |   | (3,831   | )
|                                                                                                                                                                                 |  |      |          
|Discontinued operations:                                                                                                                                                         |  |      |           |      |   |          |      |  |   |          |  
|Income (loss) from discontinued operations, net of tax                                                                                                                           |  |      | 1,154     |      |   | (8,019   | )    |  |   | (26,281  | )
|Gain (loss) on disposal of discontinued operations, net of tax                                                                                                                   |  |      | 43,911    |      |   | 2,320    |      |  |   | (28,248  | )
|Net income (loss) from discontinued operations, net of tax                                                                                                                       |  |      | 45,065    |      |   | (5,699   | )    |  |   | (54,529  | )
|                                                                                                                                                                                 |  |      |          
|Cumulative effect of change in accounting principle, net                                                                                                                         |  |      |          |      |   |         |      |  |   | (74,176  | )
|NET INCOME (LOSS)                                                                                                                                                                |  |      | 56,424    |      |   | (186,625 | )    |  |   | (132,536 | )
|                                                                                                                                                                                 |  |      |          
|Accretion for redemption of preferred stock                                                                                                                                      |  |      | 27,367    |      |   | 32,895   |      |  |   | 29,375   |  
|Net income (loss) attributable to common stockholders                                                                                                                            |  | $    | 29,057    |      | $ | (219,520 | )    |  | $ | (161,911 | )



See notes to consolidated financial
statements.



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                |  |      |          |   |      |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA, At December 31                                                                                               |  | 2004 |          |   | 2003 |  
|ASSETS:                                                                                                                                                         |  |      |          |   |      |   |          |  
|Current assets:                                                                                                                                                 |  |      |          |   |      |   |          |  
|Cash and cash equivalents                                                                                                                                       |  | $    | 62,545   |   |      | $ | 21,207   |  
|Trade accounts receivable (less allowance for doubtful accounts of $2,784 and $6,202)                                                                           |  |      | 154,333  |   |      |   | 143,439  |  
|Other receivables                                                                                                                                               |  |      | 19,097   |   |      |   | 14,806   |  
|Inventories                                                                                                                                                     |  |      | 217,912  |   |      |   | 198,400  |  
|Assets of discontinued operations                                                                                                                               |  |      | 356      |   |      |   | 67,397   |  
|Other current assets                                                                                                                                            |  |      | 11,214   |   |      |   | 13,712   |  
|Total current assets                                                                                                                                            |  |      | 465,457  |   |      |   | 458,961  |  
|                                                                                                                                                                |  |     
|Property, plant and equipment                                                                                                                                   |  |      | 329,637  |   |      |   | 292,332  |  
|Less accumulated depreciation                                                                                                                                   |  |      | 192,344  |   |      |   | 167,529  |  
|Property, plant and equipment, net                                                                                                                              |  |      | 137,293  |   |      |   | 124,803  |  
|Deferred financing costs, net                                                                                                                                   |  |      | 14,842   |   |      |   | 13,968   |  
|Goodwill, net                                                                                                                                                   |  |      | 106,400  |   |      |   | 100,862  |  
|Investments in joint ventures                                                                                                                                   |  |      | 5,706    |   |      |   | 5,721    |  
|Other assets                                                                                                                                                    |  |      | 26,060   |   |      |   | 19,661   |  
|Total assets                                                                                                                                                    |  | $    | 755,758  |   |      | $ | 723,976  |  
|LIABILITIES AND STOCKHOLDERS DEFICIT:                                                                                                                          |  |      |          |   |      |   |          |  
|Current liabilities:                                                                                                                                            |  |      |          |   |      |   |          |  
|Accounts payable                                                                                                                                                |  | $    | 170,776  |   |      | $ | 154,350  |  
|Accrued interest                                                                                                                                                |  |      | 8,210    |   |      |   | 9,837    |  
|Accrued restructuring                                                                                                                                           |  |      | 6,451    |   |      |   | 10,402   |  
|Liabilities of discontinued operations                                                                                                                          |  |      | 2,799    |   |      |   | 11,453   |  
|Deferred income taxes                                                                                                                                           |  |      | 3,065    |   |      |   | 644      |  
|Other liabilities and accrued expenses                                                                                                                          |  |      | 84,157   |   |      |   | 121,499  |  
|Current maturities of long-term debt                                                                                                                            |  |      | 22,890   |   |      |   | 31,397   |  
|Total current liabilities                                                                                                                                       |  |      | 298,348  |   |      |   | 339,582  |  
|                                                                                                                                                                |  |     
|Long-term debt, net of current portion                                                                                                                          |  |      | 610,330  |   |      |   | 593,003  |  
|Post-retirement benefits other than pensions                                                                                                                    |  |      | 16,302   |   |      |   | 16,431   |  
|Accrued pension benefits                                                                                                                                        |  |      | 13,511   |   |      |   | 13,073   |  
|Accrued restructuring                                                                                                                                           |  |      | 4,407    |   |      |   | 8,801    |  
|Other non-current liabilities                                                                                                                                   |  |      | 4,962    |   |      |   | 6,918    |  
|Commitments and contingencies                                                                                                                                   |  |      |          |   |      |   |          |  
|Minority interest                                                                                                                                               |  |      | 10,498   |   |      |   | 15,193   |  
|Redeemable preferred stock (Note 12)                                                                                                                            |  |      |         |   |      |   | 306,969  |  
|Stockholders deficit:                                                                                                                                          |  |      |          |   |      |   |          |  
|Common stock:                                                                                                                                                   |  |      |          |   |      |   |          |  
|Class A Shares par value $.001; At December 31, 2004 authorized 1,000; issued 0; At December 31, 2003 authorized 1,000; issued
1,000                            |  |      | NA       |   |      |   |         |  
|Class B Shares par value $.001; At December 31, 2004 authorized 12,001,000; issued 2,503,024.48; At December 31, 2003 authorized 6,000,000;
issued 2,485,337.48 |  |      | 3        |   |      |   | 3        |  
|Class C Shares par value $.001; At December 31, 2004 authorized 6,000,000; issued 0; At December 31, 2003 authorized 6,000,000; issued
16,687                   |  |      | NA       |   |      |   |         |  
|Paid-in capital (Note 12)                                                                                                                                       |  |      | 334,336  |   |      |   |         |  
|Retained deficit                                                                                                                                                |  |      | (531,136 | ) |      |   | (560,193 | )
|Accumulated other comprehensive loss                                                                                                                            |  |      | (5,803   | ) |      |   | (15,804  | )
|Total stockholders deficit                                                                                                                                     |  |      | (202,600 | ) |      |   | (575,994 | )
|Total liabilities and stockholders deficit                                                                                                                     |  | $    | 755,758  |   |      | $ | 723,976  |  



See notes to consolidated
financial statements.



33



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##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT



|                                            |  |                    |   |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   |          |  
|------------------------------------------- |  | ------------------ | - | ------------------ | - | ------------------ |  | --------------- | - | ------------------------- | - | ------- | ------------------------------------------ | - | -------- | ----- |  | - | ------- | - |  | - | -------- | -
|IN THOUSANDS                                |  | Class ACommonStock |   | Class BCommonStock |   | Class CCommonStock |  | Paid-in Capital |   | RetainedEarnings(Deficit) |   |         | AccumulatedOtherComprehensiveIncome (Loss) |   |          | Total | 
|Balances at December 31, 2001               |  | $                  |  |                    | $ | 3                  |  | $               |  |                           | $ |        |                                            | $ | (178,762 | )     |  | $ | (23,440 | ) |  | $ | (202,199 | )
|                                            |  |                    |   |                    |   |                    | 
|Accretion for redemption of preferred stock |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   | (29,375  | )     |  |   |        |   |  |   | (29,375  | )
|Net loss                                    |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   | (132,536 | )     |  |   |        |   |  |   | (132,536 | )
|Foreign currency translation                |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   |         |       |  |   | 7,739   |   |  |   | 7,739    |  
|Unrealized gains on derivative instruments  |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   |         |       |  |   | 2,832   |   |  |   | 2,832    |  
|Minimum pension liability                   |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   |         |       |  |   | (3,199  | ) |  |   | (3,199   | )
|                                            |  |                    |   |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   |          |  
|Total comprehensive loss                    |  |                    |   |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   | (125,164 | )
|                                            |  |                    |   |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   |          |  
|Balances at December 31, 2002               |  |                    |  |                    |   | 3                  |  |                 |  |                           |   |        |                                            |   | (340,673 | )     |  |   | (16,068 | ) |  |   | (356,738 | )
|                                            |  |                    |   |                    |   |                    | 
|Accretion for redemption of preferred stock |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   | (32,895  | )     |  |   |        |   |  |   | (32,895  | )
|Net loss                                    |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   | (186,625 | )     |  |   |        |   |  |   | (186,625 | )
|Foreign currency translation                |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   |         |       |  |   | 2,593   |   |  |   | 2,593    |  
|Unrealized loss on derivative instruments   |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   |         |       |  |   | (691    | ) |  |   | (691     | )
|Minimum pension liability                   |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   |         |       |  |   | (1,638  | ) |  |   | (1,638   | )
|                                            |  |                    |   |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   |          |  
|Total comprehensive loss                    |  |                    |   |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   | (186,361 | )
|                                            |  |                    |   |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   |          |  
|Balances at December 31, 2003               |  |                    |  |                    |   | 3                  |  |                 |  |                           |   |        |                                            |   | (560,193 | )     |  |   | (15,804 | ) |  |   | (575,994 | )
|                                            |  |                    |   |                    |   |                    | 
|Recapitalization                            |  |                    |  |                    |   |                   |  |                 |  |                           |   | 334,336 |                                            |   |         |       |  |   |        |   |  |   | 334,336  |  
|Accretion for redemption of preferred stock |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   | (27,367  | )     |  |   |        |   |  |   | (27,367  | )
|Net income                                  |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   | 56,424   |       |  |   |        |   |  |   | 56,424   |  
|Foreign currency translation                |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   |         |       |  |   | 9,840   |   |  |   | 9,840    |  
|Unrealized gains on derivative instruments  |  |                    |   |                    |   |                   |  |                 |  |                           |   |        |                                            |   |         |       |  |   | 795     |   |  |   | 795      |  
|Minimum pension liability                   |  |                    |  |                    |   |                   |  |                 |  |                           |   |        |                                            |   |         |       |  |   | (634    | ) |  |   | (634     | )
|                                            |  |                    |   |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   |          |  
|Total comprehensive income                  |  |                    |  |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   | 66,425   |  
|                                            |  |                    |   |                    |   |                    |  |                 |   |                           |   |         |                                            |   |          |       |  |   |         |   |  |   |          |  
|Balances at December 31, 2004               |  | $                  |  |                    | $ | 3                  |  | $               |  |                           | $ | 334,336 |                                            | $ | (531,136 | )     |  | $ | (5,803  | ) |  | $ | (202,600 | )



See notes to consolidated financial
statements.





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##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                              |  |      |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|IN THOUSANDS, Years Ended December 31                                                                         |  | 2004 |          |   | 2003 |   |          | 2002 | 
|Cash Flows from Operating Activities:                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Net income (loss) attributable to common stockholders                                                         |  | $    | 29,057   |   |      | $ | (219,520 | )    |  | $ | (161,911 | )
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:            |  |      |          |   |      |   |          |      |  |   |          |  
|Cumulative effect of change in accounting principle                                                           |  |      |         |   |      |   |         |      |  |   | 74,176   |  
|Discontinued operations                                                                                       |  |      | (45,065  | ) |      |   | 5,699    |      |  |   | 54,529   |  
|Depreciation and amortization                                                                                 |  |      | 23,046   |   |      |   | 22,581   |      |  |   | 25,211   |  
|Non-cash interest expense                                                                                     |  |      | 3,855    |   |      |   | 4,473    |      |  |   | 4,093    |  
|Loss on early extinguishment of debt                                                                          |  |      | 7,939    |   |      |   |         |      |  |   |         |  
|Accretion for redemption of preferred stock                                                                   |  |      | 27,367   |   |      |   | 32,895   |      |  |   | 29,375   |  
|Minority interest and loss from unconsolidated joint ventures, net                                            |  |      | 3,386    |   |      |   | 6,284    |      |  |   | 8,075    |  
|Deferred income taxes                                                                                         |  |      | 2,592    |   |      |   | 28,085   |      |  |   | 4,796    |  
|Accrued pension and post-retirement benefits, net                                                             |  |      | 308      |   |      |   | (8,476   | )    |  |   | 1,952    |  
|Restructuring charges (credits)                                                                               |  |      | 942      |   |      |   | 48,968   |      |  |   | (4,375   | )
|Cash payments for restructuring charges                                                                       |  |      | (9,027   | ) |      |   | (15,333  | )    |  |   | (15,815  | )
|Special charges                                                                                               |  |      |         |   |      |   | 118,240  |      |  |   |         |  
|Mexico arbitration settlement                                                                                 |  |      | (13,622  | ) |      |   |         |      |  |   |         |  
|Changes in operating assets and liabilities, net of acquisitions, restructuring and non-cash special charges: |  |      |          |   |      |   |          |      |  |   |          |  
|Accounts receivable                                                                                           |  |      | (10,766  | ) |      |   | (8,581   | )    |  |   | 5,465    |  
|Inventories                                                                                                   |  |      | (19,532  | ) |      |   | (28,278  | )    |  |   | (4,864   | )
|Accounts payable                                                                                              |  |      | 15,312   |   |      |   | 24,538   |      |  |   | 15,212   |  
|Other current assets and liabilities                                                                          |  |      | (22,205  | ) |      |   | 20,839   |      |  |   | 4,748    |  
|Other non-current assets and liabilities, net                                                                 |  |      | (2,938   | ) |      |   | (7,325   | )    |  |   | (2,652   | )
|Net cash (used in) provided by operating activities of continuing operations                                  |  |      | (9,351   | ) |      |   | 25,089   |      |  |   | 38,015   |  
|                                                                                                              |  |      |         
|Cash Flows from Investing Activities:                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Acquisitions, net of cash acquired                                                                            |  |      | (25,517  | ) |      |   | (18,919  | )    |  |   | (16,761  | )
|Net proceeds on sale of businesses                                                                            |  |      | 104,653  |   |      |   | 30,058   |      |  |   |         |  
|Purchases of property, plant and equipment                                                                    |  |      | (25,347  | ) |      |   | (16,305  | )    |  |   | (18,501  | )
|Investments in joint ventures                                                                                 |  |      |         |   |      |   | (115     | )    |  |   | (3,000   | )
|Net cash provided by (used in) investing activities of continuing operations                                  |  |      | 53,789   |   |      |   | (5,281   | )    |  |   | (38,262  | )
|                                                                                                              |  |      |         
|Cash Flows from Financing Activities:                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Proceeds from issuance of long-term debt                                                                      |  |      | 275,000  |   |      |   | 10,297   |      |  |   | 144,769  |  
|Retirement of long-term debt                                                                                  |  |      | (200,000 | ) |      |   |         |      |  |   | (144,769 | )
|Net (repayments) borrowings under revolving line of credit and other                                          |  |      | (62,654  | ) |      |   | (12,547  | )    |  |   | 15,236   |  
|Deferred financing costs                                                                                      |  |      | (15,032  | ) |      |   | (1,980   | )    |  |   | (7,816   | )
|Distributions to minority interests                                                                           |  |      | (1,010   | ) |      |   |         |      |  |   | (1,800   | )
|Net cash (used in) provided by financing activities of continuing operations                                  |  |      | (3,696   | ) |      |   | (4,230   | )    |  |   | 5,620    |  
|                                                                                                              |  |      |         
|Effect of exchange rate changes on cash                                                                       |  |      | 1,510    |   |      |   | 967      |      |  |   | 2,217    |  
|                                                                                                              |  |      |         
|Cash flows of discontinued operations                                                                         |  |      | (914     | ) |      |   | (7,653   | )    |  |   | (17,829  | )
|Net increase (decrease) in cash and cash equivalents                                                          |  |      | 41,338   |   |      |   | 8,892    |      |  |   | (10,239  | )
|                                                                                                              |  |      |         
|Cash and cash equivalents at beginning of year                                                                |  |      | 21,207   |   |      |   | 12,315   |      |  |   | 22,554   |  
|Cash and cash equivalents at end of year                                                                      |  | $    | 62,545   |   |      | $ | 21,207   |      |  | $ | 12,315   |  



See notes to consolidated financial
statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



REMY INTERNATIONAL, INC. AND SUBSIDIARIES



AMOUNTS IN THOUSANDS, EXCEPT AS INDICATED



Years Ended December 31, 2004, 2003 and 2002



1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

---



Business



In July 2004, the Board of Directors of Delco Remy International, Inc. approved changing the name of the company from Delco Remy International, Inc. to
Remy International, Inc. (the Company or RII). The name change became effective on August 1, 2004. The Company will continue to market certain starters and heavy-duty alternators for original equipment and aftermarket
customers under the Delco Remy brand name, which is licensed to the Company by General Motors Corporation (GM).



The Company is a leading global vehicular parts designer, manufacturer, remanufacturer, marketer and distributor of aftermarket and original equipment
electrical components and aftermarket powertrain components for automobiles, light trucks, heavy-duty trucks and other vehicles. The Company also provides core exchange services. The Company sells its products worldwide primarily under the
Delco Remy brand name, the Remy brand name, the World Wide Automotive brand name and our customers widely recognized private label brand names. The Companys products include starters, alternators,
remanufactured engines, and fuel systems which are principally sold or distributed to original equipment manufacturers (OEMs) for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and
retail automotive parts chains. The Company sells its products principally in North America, Europe, Latin America and Asia-Pacific.



The Company believes it is the largest producer in the world of remanufactured starters and alternators for the aftermarket. The Companys
remanufacturing operations obtain failed products, commonly known as cores, from its customers as returns. These cores are an essential material needed for the remanufacturing operations. The Company also provides exchange services for cores for
third party aftermarket remanufacturers. At the time of the Companys separation from GM in August 1994, the Company was predominantly a North American original equipment manufacturer with a majority of the 1995 sales derived from GM. Through
strategic capital investments, acquisitions, divestitures, joint ventures and facility and workforce rationalization, the Company has become a low cost, global manufacturer and remanufacturer with a more balanced business and product mix between the
aftermarket and the original equipment market. Since fiscal year 1995 the Company has increased sales, broadened its product line, expanded manufacturing and remanufacturing capabilities, diversified its customer base and end markets, lowered its
cost base and extended its participation in international markets.



The automotive parts market is highly competitive. Competition is based primarily on quality of products, service, delivery, technical support and price. Most OEM manufacturers and aftermarket distributors source parts from one or two
suppliers and the Company competes with a number of companies who supply automobile manufacturers throughout the world.



Basis of Presentation and Principles of Consolidation



The consolidated financial statements include the accounts of RII and its subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation. RII is a wholly owned subsidiary of Remy Worldwide Holdings, Inc. See Note 12 for further discussion.



Certain prior year amounts have been reclassified to conform to the current years presentation.



Use of Estimates



Preparation of the consolidated financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the



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financial statements, and the reported amounts of revenue and expense during the year. Actual results could differ from those estimates.



Revenue Recognition



Substantially all of the Companys revenue is recognized at the time
product is shipped to customers. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sellers price to the buyer is fixed and determinable and collectability is
reasonably assured. When the Companys remanufacturing operations sell remanufactured product, the customer is charged a deposit for the core. The deposit charged to the customer is not included in revenue. Core deposits charged to customers
and not included in revenue totaled $233,735, $300,576, and $276,376, for the years ended December 31, 2004, 2003 and 2002, respectively. On receipt of a core the Company grants the customer a credit based on the core deposit value. The Company
generally limits core returns based on the number of similar cores previously sold to each customer.



Research and Development



The Company incurs costs in connection with research and development programs that are expected to contribute to future earnings. Such costs are charged to selling, general and administrative expenses as incurred.
Research and development expenses were approximately $19,300, $15,900 and $13,500 for the years ended December 31, 2004, 2003 and 2002, respectively.



Cash and Cash Equivalents



All cash balances and highly liquid investments with maturity of ninety days or less when acquired are considered cash and cash equivalents. The carrying
amount of cash equivalents approximates fair value.



Concentrations of Credit Risk and Other Risks



Substantially all of the Companys trade accounts receivable are due from customers in the original equipment and aftermarket automotive industries, both in the U.S. and internationally. The Company performs periodic credit evaluations
of its customers financial condition and generally does not require collateral. The Company maintains allowances for doubtful customer accounts for estimated losses resulting from the inability of its customers to make required payments. The
allowance for doubtful accounts is developed based on several factors including customers credit quality, historical write-off experience and any known specific issues or disputes which exist as of the balance sheet date. If the financial
condition of the Companys customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.



The Company conducts a significant portion of its business with GM. For more information, see Note 14.



The Company records a liability for core returns based on cores expected to
be returned. This liability is recorded in other liabilities and accrued expenses. The liability represents the difference between the core deposit value to be credited to the customer and core inventory value for the core being returned. Core
inventory values decline over the expected remaining life of the core family. Core inventory values decline on the basis of several economic factors, including market availability, seasonality and demand. If estimated returns and/or core value
differ from managements estimates, revisions to the estimated core liability may be required.



Inventories



Inventories are carried at lower of cost or market determined on the first-in, first-out (FIFO) method. The Company obtains cores, primarily from its customers as returns and by purchasing them from vendors (core brokers). In the fourth
quarter of 2003, the Company changed its estimate for the valuation of core inventory from primarily customer acquisition cost to primarily core broker prices and recorded a special charge of $103,930. Of this charge $94,856 related to the write
down of the core component of inventory and $9,074 related to the establishment of an estimated liability for core returns. The value of cores is estimated to decline over the expected remaining life of the core family, which is



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considered and evaluated on an ongoing basis by comparing it to broker prices. Inventory costs include core value, material and core components, labor and
overhead. The Company provides an allowance for potentially excess and obsolete inventory based on usage. In 2004, the Company recorded an $8,256 charge to cost of goods sold for a reduction in the value of its core inventory.



For the Company, raw materials also include supplies and repair parts, which
consist of materials consumed in the manufacturing process, but not directly incorporated into the finished products. Inventories consist of the following:



|                |  |      |         |      |   |        
|--------------- |  | ---- | ------- | ---- | - | -------
|                |  | 2004 |         | 2003
|Raw materials   |  | $    | 116,807 |      | $ | 108,275
|Work-in-process |  |      | 7,577   |      |   | 7,696  
|Finished goods  |  |      | 93,528  |      |   | 82,429 
|Total inventory |  | $    | 217,912 |      | $ | 198,400



Property and
Equipment



Property and equipment are stated at cost and
include certain expenditures for leased facilities. Major improvements that materially extend the useful life of property are capitalized. Expenditures for repairs and maintenance are expensed as incurred. Depreciation is calculated primarily using
the straight-line method over the estimated useful lives of the related assets, including leased facilities (15 to 40 years for buildings and 3 to 15 years for machinery and equipment). Leasehold improvements are amortized over the period of the
lease or the life of the property, whichever is shorter.



Valuation of Long-Lived Assets



The
Company periodically evaluates the carrying value of long-lived assets to be held and used, including definite lived intangible assets, when events or circumstances warrant such a review. The carrying value of a long-lived asset to be held and used
is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a write-down of the asset would be recorded through a charge to operations,
based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. For assets held for sale, such loss is further increased by costs to sell. Fair market value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Long-lived assets to be disposed of other than by sale are considered held and used until disposal.



Asset Retirement Obligations



In accordance with Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations, the
company recognizes liabilities for asset retirement obligations primarily related to leased facilities. These recorded liabilities are not material. No Company assets are legally restricted for the purposes of settling asset retirement obligations.



Tooling



Tooling, which is included in machinery and equipment in the accompanying
consolidated balance sheets, represents the costs to design and develop tools, dies, jigs and other items owned by the Company and used in the manufacture of customer components under long term supply agreements. Tooling is amortized over the
tools expected life. Tooling that involves new technology is expensed as incurred. Engineering, testing and other costs incurred in the design and development of production parts are expensed as incurred.



Goodwill and Other Intangible Assets



Goodwill represents the excess of purchase price over fair value of the net
assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill and other intangible assets are not amortized, but are tested for impairment at least annually. The Company performs its annual impairment
review in the fourth quarter of each fiscal year, unless circumstances dictate more frequent assessments. For more information, see Note 4.



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The cost of other intangible assets with determinable useful lives is amortized on a straight-line basis
to reflect the pattern of economic benefit consumed, ranging from 5 to 20 years.



Foreign Currency Translation



Each of our foreign subsidiaries functional currency is its local currency, with the exception of our subsidiaries in Mexico, for whom the U.S. dollar is the functional currency because substantially all of their purchases and sales
are denominated in U.S. dollars. Financial statements of foreign subsidiaries for which the functional currency is its local currency are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and
at the average exchange rate for each year for revenue and expenses. Translation adjustments are recorded as a separate component of stockholders equity and reflected in other comprehensive income (loss) (OCI). For more
information, see Note 13. For each of our foreign subsidiaries, gains and losses arising from transactions denominated in a currency other that the functional currency are included in income.



Derivative Financial Instruments



The Company reports all derivative instruments on the consolidated balance
sheet at fair value and establishes criteria for the designation and effectiveness of hedging relationships.



In the normal course of business, operations of the Company are exposed to continuing fluctuations in foreign currency values, interest rates and
commodity prices that can affect the cost of operating, investing and financing. Accordingly, the Company addresses a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments.
The Company uses derivative financial instruments for the purpose of hedging currency and interest rate exposures, which exist as a part of ongoing business operations. As a policy, the Company does not engage in speculative or leveraged
transactions, nor does the Company hold or issue financial instruments for trading purposes. Management routinely reviews the effectiveness of the use of derivative instruments.



Currency Rate Hedging



The Company primarily utilizes forward exchange contracts with maturities generally within 12 months, which qualify as cash flow hedges. In order to hedge
anticipated U.S. dollar-denominated intercompany sales of inventory by its South Korean subsidiary to a U.S. subsidiary against fluctuations between the South Korean Won and U.S. dollar, the Company entered into a series of currency forward
contracts. Additionally, an European subsidiary, whose functional currency is the Euro, entered into a series of forward contracts to purchase US dollars in order to hedge U.S. payments to suppliers. The critical terms of the hedges are the same as
the underlying forecasted transactions, and the hedges are considered highly effective to offset the changes in the fair value of the cash flows from the hedged transactions. At maturity, each contract is settled at the difference between fair value
and contract value, with a corresponding charge to the statement of operations. These derivative contracts are designated as cash flow hedges and, accordingly, changes in fair value prior to settlement of the underlying transaction are charged to
OCI. Any derivative instrument terminated, designated but no longer effective as a hedge or initially not effective as a hedge would be recorded at fair value and the related gains and losses are recognized in earnings. However, all hedges were
effective for all periods presented. Derivatives not designated as hedges are adjusted to fair value through the consolidated statement of operations.



The Companys foreign exchange contracts are summarized as follows:



|         |  |                |        |                |   |                |  |                  |        |  |   |      |  
|-------- |  | -------------- | ------ | -------------- | - | -------------- |  | ---------------- | ------ |  | - | ---- | -
|         |  | 2004           |        | 2003           |  
|         |  | NotionalAmount |        | Fair ValueGain |   | NotionalAmount |  | Fair Value(Loss) |       
|Forwards |  | $              | 41,620 |                | $ | 1,248          |  | $                | 60,557 |  | $ | (507 | )



Interest Rate
Hedging



The Company is exposed from time to time to
interest rate risk through its corporate borrowing activities. The Company currently has no interest rate hedges. The Company previously had one swap, which expired in November 2002.



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##### Table of Contents

Net Investments Hedging



The Company may enter into foreign-denominated debt to be used as a non-derivative instrument to hedge the Companys
net investment in foreign subsidiaries. The changes in carrying amount of the foreign-denominated debt on the Companys books, attributable to changes in the spot foreign exchange rate, is a hedge of the net investment in its foreign
subsidiaries.



Commodity Purchases



The Company purchases certain commodities during the normal course of
business, which result in physical delivery and hence, are excluded from SFAS No. 133, as amended.



Warranty



The Company provides an allowance for the estimated future cost of product warranties and other defective product returns based on managements estimate of product failure rates and customer eligibility. If these factors differ from
managements estimates, revisions to the estimated warranty liability may be required. The specific terms and conditions of the warranties vary depending upon the customer and the product sold. Changes to the Companys warranty liability,
excluding discontinued operations, are summarized as follows:



|                                         |  |      |         |   |      |   |         |      |  |   |         |  
|---------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                         |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Balance at beginning of period           |  | $    | 20,471  |   |      | $ | 15,261  |      |  | $ | 15,580  |  
|Provision for warranty                   |  |      | 39,665  |   |      |   | 51,166  |      |  |   | 50,267  |  
|Payments and charges against the accrual |  |      | (42,503 | ) |      |   | (48,383 | )    |  |   | (50,586 | )
|Other (including acquisitions)           |  |      |        |   |      |   | 2,427   |      |  |   |        |  
|Balance at end of period                 |  | $    | 17,633  |   |      | $ | 20,471  |      |  | $ | 15,261  |  



Investments in
Joint Ventures



Investments in companies in which the
Company holds an ownership interest of 20% to 50% over which the Company exercises significant influence and to which Financial Accounting Standard Board (FASB) Interpretation 46, Consolidation of Variable Interest Entities (revised
December 2003, FIN 46R) does not apply, are accounted for by the equity method. Currently, the Company accounts for all 20% to 50% owned entities under the equity method. At December 31, 2004, the Companys ownership interest and
carrying value of such investments consisted of Sahney Paris Rhone Ltd., India (47.5%, $5,557). In 2004, the Company reduced its ownership interest in Hitachi Remy Automotive GmbH from 49% to 24.6%. The Companys share of losses related to this
joint venture in 2004 reduced the carrying value of that investment to zero. Accordingly, the Company has discontinued recognition of losses related to Hitachi Remy Automotive Gmbh.



At December 31, 2003, the Companys ownership interests and carrying value of these instruments consisted of Sahney
Paris Rhone Ltd. (47.5%, $5,230), Hitachi Remy Automotive Gmbh (49%, $382) and Nikko Electric Industry Co., Inc. (1%, $109). During 2003, the Company wrote-off its investment in iPower Technologies, L.L.C.



Income Taxes



The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes (SFAS No. 109), which requires deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and
liabilities. SFAS No. 109 also requires deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.



The Company periodically evaluates the realizability of its deferred tax
assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are the Companys forecast of future taxable income and available tax planning
strategies that could be implemented to support the realization of certain deferred tax assets.



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Failure to achieve forecasted taxable income may affect the ultimate realization of certain deferred tax
assets. Factors that may affect the Companys ability to achieve sufficient forecasted taxable income include, but are not limited to, general economic conditions, increased competition, or delays in product availability. For more information,
see Note 11.



Pension and Post-Retirement Plans



The Company sponsors various defined benefit pension and
post-retirement plans, which produce significant costs developed from actuarial valuations. Inherent in these valuations are key assumptions regarding discount rates, expected return on plan assets, rates of compensation increases, and the rates of
health care benefit increases. The Company is required to consider current market conditions in determining these assumptions. If future trends in these assumptions prove to differ from managements assumptions, revisions to the plan assets,
benefit obligations and components of expense may be required. For more information, see Note 10.



Earnings Per Share



The Companys common stock is not publicly traded. Accordingly, disclosure of earnings per share is not required.



Fair Value of Financial Instruments



The Companys financial instruments generally consist of cash and cash equivalents, trade and other receivables, accounts payable and long-term debt.
The fair value of the Companys fixed rate debt was estimated using the closing market price of each security as of December 31, 2004 and 2003. With the exception of our debt instruments included in the table below, the carrying amounts of
these financial instruments approximated their fair value at December 31, 2004 and 2003. The face value and estimated fair value of the Companys Senior Notes and Senior Subordinated Notes at December 31, 2004 and 2003 are as follows:



|                                   |  |           |         |      |   |         |  |   |        
|---------------------------------- |  | --------- | ------- | ---- | - | ------- |  | - | -------
|                                   |  | FaceValue |         | 2004 |   | 2003   
|Senior Secured Floating Rate Notes |  | $         | 125,000 |      | $ | 127,031 |  | $ | NA     
|85/8%
Senior Notes                 |  |           | 145,000 |      |   | 147,175 |  |   | 148,263
|105/8% Senior Subordinated Notes   |  |           | 140,000 |      |   | NA      |  |   | 140,700
|11% Senior Subordinated Notes      |  |           | 165,000 |      |   | 175,725 |  |   | 170,775
|93/8%
Senior Subordinated Notes    |  |           | 150,000 |      |   | 153,750 |  |   | NA     



Implementation of
New Financial Accounting Pronouncements



In December 2004,
the FASB issued SFAS No. 153, Exchange of Nonmonetary Assets (SFAS No. 153). SFAS No. 153 amends the guidance in APB No. 29 to require measurement at fair value for exchanges of similar productive assets unless the exchange lacks
commercial substance. This statement will be effective for the Company in 2006.



In November 2004, the FASB issued SFAS No. 151, Inventory Costs (SFAS No. 151). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of so
abnormal. In addition, this Statement requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. This statement will be effective for the Company in 2006. We
do not expect the adoption of the statement to have a material effect on our financial statements.



In 2004, the FASB issued FASB Staff Position No. FAS 106-2 (FSP 106-2). FSP 106-2 provides guidance on the accounting for and disclosure of
the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 for employers that sponsor postretirement health care plans that provide prescription drug benefits. The Company adopted FSP 106-2 in 2004 and the required
disclosures are provided in Note 10, Employee Benefit Plans.



In 2003, the FASB issued FASB Interpretation (FIN) 46, Consolidation of Variable Interest Entities (revised December 2003, FIN 46R). FIN 46R defines a variable interest entity (VIE) as a corporation,
partnership, trust, or any other legal structure that does not have equity investors with a controlling financial interest or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46R
requires consolidation of a VIE



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##### Table of Contents

by the primary beneficiary of the assets, liabilities, and results of activities. FIN 46R also requires certain disclosures by all holders of a significant
variable interest in a VIE that are not the primary beneficiary. The adoption in 2003 of this interpretation did not effect the Companys consolidated financial position or results of operations.



In December 2003, the FASB revised SFAS No. 132 Employers Disclosures
about Pensions and Other Postretirement Benefits (SFAS No. 132). This Statement retains the disclosures required by the original SFAS No. 132 and requires additional disclosures about the assets, obligations, cash flows and net periodic
benefit cost of defined benefit pension and postretirement plans. In addition, this statement requires interim period disclosure of the components of net period benefit cost and contributions if significantly different from previously reported
amounts. The Company adopted SFAS No. 132, as revised, in the fourth quarter of 2003.



In 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (SFAS No. 149). SFAS No. 149 amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133 and is to be applied prospectively to contracts entered into or modified after June 30, 2003. The Company adopted SFAS No. 149 in the
third quarter of 2003. Adoption of this statement did not have a material impact on the Companys consolidated financial position or results of operation.



In 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS No.
150). SFAS No. 150 established standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Adoption of SFAS No. 150 did not have an impact on the Companys
consolidated financial position or results of operations.



In
2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145). SFAS No. 145 eliminates the classification of debt extinguishments as
extraordinary items. The provisions of SFAS No. 145 related to rescission of FASB Statements No. 44 and No. 64 and amendment of SFAS No. 13 and Technical Corrections were adopted by the Company in the second quarter of 2002. Adoption of these
provisions did not have a material effect on the Companys results of operations, financial position or cash flows. The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 were adopted effective January 1, 2003, and the
extraordinary items resulting from debt extinguishments in 2002 and 2001 were reclassified to interest expense. Accordingly, interest expense, net, increased approximately $1,800 and income from continuing operations decreased approximately $1,100
in 2002.



In 2002, the FASB issued SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities (SFAS No. 146). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Severance pay under SFAS No.
146, in many cases, is recognized over the remaining service period rather than at the time the plan is communicated. The provisions of SFAS No. 146 are effective for exit or disposal activities that were initiated after December 31, 2002. The
Company adopted SFAS No. 146 effective January 1, 2003.



In
2002, the FASB issued FIN 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires an issuer of a guarantee to recognize an initial
liability for the fair value of the obligations covered by the guarantee. FIN 45 also addresses the disclosures required by a guarantor in interim and annual financial statements regarding obligations under guarantees. Accordingly, the Company has
provided additional disclosures relating to product warranties. The Company does not have any other guarantees under FIN 45; therefore the adoption of this interpretation did not have an impact on the Companys consolidated financial position
or results of operations.



2.    ORGANIZATION AND
ACQUISITIONS

---



Remy Inc. Acquisition



On July 31, 1994,
the Company, through a wholly owned subsidiary, Remy Inc. (formerly known as (fka) Delco Remy America, Inc.), purchased substantially all of the assets, other than facilities, and assumed certain liabilities of specific business
activities of the Delco Remy Division of GM (the GM Acquisition). The specific business activities purchased are engaged in the design, manufacture, remanufacture and sale of heavy-duty starters and alternators, automotive starters, and
related components.



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Concurrent with the GM Acquisition, the Company entered into certain supply agreements with GM whereby
the Company would be the sole-source supplier to GM for component parts manufactured by the Company at the date of the GM Acquisition. The supply agreement for automotive starters had an initial term of ten years, while the supply agreement for
heavy-duty starters and alternators had an initial term of six years. In 1999, the Company and GM amended the agreement for the Companys price of automotive products and extended the agreement term to July 31, 2008. In April 2002, price and
product offering was adjusted (as to price, technology and design) in accordance with the competitive clause of the original agreement. The Supply Agreement for heavy-duty products terminated on July 31, 2000. Sales to GM were not adversely affected
by the termination and the Company now has the ability to provide an expanded heavy- duty product offering to GM and other customers. GMs obligation to distribute the Companys automotive aftermarket products terminates on July 31, 2008.



2004 Acquisitions



The Company made cash earn-out payments totaling $13,454 in 2004 relative to
the 2000 acquisition of M&M Knopf Auto Parts, L.L.C. (Knopf), a provider of core acquisition services. These payments were based on the achievement of certain earnings goals by Knopf during the period August 2000 to December 2003. In
December 2003, $13,500 was accrued and recorded as an adjustment to the purchase price of Knopf, resulting in a corresponding increase in goodwill.



In connection with settlement of the arbitration between certain of the Companys affiliates and its former partner at its operations in Mexico (see
Note 16), the Company recorded the purchase of the remaining shares of the Mexico joint venture from the minority shareholders. The net purchase portion of the arbitration award of $5,488 in cash was paid in the third quarter of 2004 and resulted in
a $5,101 increase in goodwill.



The Company made the final cash
payment of $4,786 in 2004 on notes issued in 2002 in connection with the Companys acquisition of the remaining shares from the minority shareholders of Remy Korea Limited (fka Delco Remy Korea Limited), which was acquired in 1999. Remy Korea
Limited is a manufacturer of automotive starters and parts for the U.S. original equipment market, as well as customers in Asian markets.



The Company made cash payments totaling $1,789 in 2004 relative to the acquisition of Delphi Corporations (Delphi) automotive generator
business.



2003 Acquisitions



The Company completed the acquisition of certain parts of the Delphi
automotive generator business for cash payments totaling $6,061 in 2003, including cash acquired of $3,600. This acquisition included 51% of Hubei Delphi Automotive Generators Company, Ltd. (Hubei), a manufacturer of automotive and
heavy-duty generators for the original equipment market and aftermarket based in China ($3,600); Delphi Automotive Systems Poland ($1,461); and other items ($1,000). The purchase price was funded through proceeds from the Companys Senior
Credit Facility. The acquisition was accounted for as a purchase with no resulting goodwill. The amount by which the estimated fair value of the assets acquired exceeded the total purchase price, including expenses, was applied as a ratable
reduction in the value of non-current assets in accordance with SFAS No. 141.



The Company made cash payments totaling $5,923 in 2003 under contractual put agreements to purchase the remaining shares from the minority shareholders of World Wide Automotive, L.L.C. (World Wide), an
aftermarket remanufacturer and supplier of light duty starters which was acquired in 1997. Goodwill of $2,749 was recorded in connection with these payments and the Companys ownership of World Wide increased from 94.0% to 100.0%.



The Company made cash payments totaling $5,298 in 2003 on notes issued in
2002 in connection with the Companys acquisition of the remaining shares from the minority shareholders of Remy Korea Limited.



Payments totaling $5,237 were made in 2003 under contractual put agreements to purchase the remaining shares from the minority shareholder of Power
Investments, Inc. (Power), primarily a remanufacturer of diesel engines which was acquired in 1996. Goodwill of $1,303 was recorded in connection with these payments and the Companys ownership percentage of Power increased from
93.4% to 100.0%.



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##### Table of Contents

2002 Acquisitions



The Company made payments totaling $5,398 in 2002 under contractual put agreements to purchase additional shares from the
minority shareholders of World Wide. Goodwill of $4,224 was recorded in connection with these payments and the Companys ownership percentage of World Wide increased from 88.2% to 94.0%.



The Company made payments totaling $5,625 in 2002 under contractual put
agreements to purchase additional shares from the minority shareholders of Power. Goodwill of $1,384 was recorded in connection with these payments and the Companys ownership percentage of Power increased from 85.8% to 93.4%.



The Company made cash payments totaling $5,485 and issued notes in the amount
of $9,918 in 2002, which were paid in 2003 and 2004, to purchase additional shares from the minority shareholders of Remy Korea Limited. Goodwill of $4,310 was recorded. This transaction increased the Companys ownership percentage in Remy
Korea Limited from 81.0% to 100%.



The Company acquired
intellectual property rights for the light duty alternator product line and certain other assets in connection with the acquisition of certain parts of the Delphi automotive generator business. Cash payments in 2002 totaled $253.



3.    DISCONTINUED OPERATIONS

---



Over the past three years, the Company has
disposed of various non-core businesses, some of which were generating operating losses, to focus its resources on core operations.



In the third quarter of 2004, the Company completed the sale of its wholly owned remanufactured transmission subsidiaries, Williams Technologies, Inc.
(Williams) and JAX Reman, L.L.C. (JAX), to Caterpillar, Inc. (CAT) for $107,164 in cash. In 2004, the Company realized net cash proceeds of $104,270 and recorded a gain of $45,135, net of income taxes and
deal-related costs. In the third quarter of 2004, the Company also committed to a plan to dispose of a related business. An estimated loss of $2,246 was recorded in connection with this action. As a result of the sale of Williams and JAX and the
plan of disposition for the related business, the operating results, balance sheets and cash flows of these businesses were classified as discontinued operations effective in the third quarter of 2004 and all prior periods were reclassified
accordingly.



In the first quarter of 2003, the Company
completed the sale of Tractech Inc. and Kraftube Inc. These businesses manufactured traction control devices and components for the air-conditioning industry, respectively. In connection with the sale, the Company recorded net cash proceeds of
$30,058 and $383 in 2003 and 2004, respectively, and a gain of $2,320 and $383 in 2003 and 2004 respectively, with no income tax effect. Additional gains may be recognized based on the financial performance of these businesses in 2005 through 2008.
The operating results, balance sheets and cash flows of these businesses were reported as discontinued operations beginning in the first quarter of 2003 and all prior periods were reclassified accordingly.



In the first quarter of 2003, the Company completed plans to exit its
contract remanufacturing operation for gas engines in Beaumont, Texas. A charge of $618 for the write down of assets and the cost of employee separation programs relative to the exit of this operation was charged to discontinued operations in 2003.
The operating results, balance sheets and cash flows of this business were reported as discontinued operations beginning in the first quarter of 2003 and all prior periods were reclassified accordingly.



In the second quarter of 2002, the Company completed plans to exit its retail
aftermarket gas engine business in Dallas, Texas, Kansas City, Missouri and Toronto, Canada. A charge of $28,248 was recorded in 2002 for the write down of the relevant assets to their estimated realizable value. This charge was reduced by $639 in
2004 as fully reserved receivables were collected. An additional charge of $2,824 was recorded in 2002 for the estimated cost of employee termination benefits and other exit costs. For more information on this matter see Note 5. A valuation
allowance was established in 2002 for the income tax effect of these charges. The operating results, balance sheets and cash flows of this business were reported as discontinued operations beginning in the second quarter of 2002 and all prior
periods were reclassified accordingly.



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##### Table of Contents

The wind down of both the contract and aftermarket gas engine remanufacturing operations was essentially
complete at December 31, 2003. The Company currently expects to make additional cash payments, which have been fully accrued, of approximately $600 in 2005.



Operating results of discontinued operations are as follows:



|                             |  |      |        |      |   |        |      |  |   |         |  
|---------------------------- |  | ---- | ------ | ---- | - | ------ | ---- |  | - | ------- | -
|                             |  | 2004 |        | 2003 |   |        | 2002 | 
|Net sales                    |  | $    | 63,291 |      | $ | 90,171 |      |  | $ | 146,243 |  
|Interest expense             |  |      | 4,473  |      |   | 7,880  |      |  |   | 16,727  |  
|Income (loss) before tax     |  |      | 1,214  |      |   | (7,888 | )    |  |   | (27,998 | )
|Income tax expense (benefit) |  |      | 60     |      |   | 131    |      |  |   | (1,717  | )
|Net income (loss)            |  | $    | 1,154  |      | $ | (8,019 | )    |  | $ | (26,281 | )



Assets and liabilities
of discontinued operations are as follows:



|                                             |  |      |       |      |   |       
|-------------------------------------------- |  | ---- | ----- | ---- | - | ------
|                                             |  | 2004 |       | 2003
|Current assets                               |  | $    | 356   |      | $ | 24,672
|Property, plant and equipment, net           |  |      |      |      |   | 10,944
|Other assets                                 |  |      |      |      |   | 31,781
|Total assets of discontinued operations      |  | $    | 356   |      | $ | 67,397
|Current liabilities                          |  | $    | 2,727 |      | $ | 11,358
|Non-current liabilities                      |  |      | 72    |      |   | 95    
|Total liabilities of discontinued operations |  | $    | 2,799 |      | $ | 11,453



4.    GOODWILL
AND OTHER INTANGIBLE ASSETS

---



The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142) effective January 1, 2002. During 2002, the Company, with the assistance of an outside valuation firm, performed the
transitional impairment tests of its goodwill required by SFAS No. 142. As a result of this assessment, the Company recorded a charge of $74,176, to reduce the carrying value of its goodwill to its estimated fair value. In accordance with SFAS No.
142, the charge is presented as a cumulative effect of change in accounting principle in the consolidated statement of operations in the first quarter of 2002. The Company performs an impairment review on an annual basis, or more frequently if
impairment indicators arise.



The Company completed its annual
impairment test during the fourth quarter of 2002, 2003 and 2004, as required under SFAS No. 142 and determined that goodwill was not impaired.



At December 31, 2004, the Company had goodwill of $106,400 and other intangible assets of approximately $12,300, net of accumulated amortization. In 2004,
the Company recorded additional goodwill of $5,101 for the purchase of the remaining shares of the Mexico joint venture from the minority shareholders and $404 in connection with the true up of the contingent earn-out liability relative to the
acquisition of Knopf. Intangibles at December 31, 2004 included approximately $7,800 for customer inducements, approximately $3,500 for an intellectual property license agreement and approximately $1,000 for a pension intangible. Customer
inducements are amortized over the life of the contract and recorded as cost of sales.



At December 31, 2003, the Company had goodwill of $100,862 and other intangible assets of approximately $3,800, net of accumulated amortization. In 2003, the Company recorded additional goodwill of $13,500 in
connection with the estimated contingent earn-out liability relative to the acquisition of Knopf and a total of $4,052 in connection with the acquisition of the remaining shares from the minority shareholders of World Wide and Power.
Intangibles at December 31, 2003 included approximately $1,700 for customer inducements, approximately $1,800 for an intellectual property license agreement and approximately $300 for a pension intangible.



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##### Table of Contents

5.    RESTRUCTURING CHARGES

---



The Company has taken various facility and workforce rationalization actions
to improve its cost structure, productivity, delivery, quality and price. The Companys restructuring activities are accounted for in accordance with SFAS No. 146.



Continuing Operations



In 2004, the Company completed plans for the closure and consolidation of certain manufacturing and distribution facilities in Mexico and Europe. These
plans included the termination of approximately 55 employees.



In 2003, the Company completed plans for the following restructuring actions and transfers of production to lower-cost facilities:



| | 1. | Closure of its starter and alternator manufacturing operations in Anderson, Indiana.
| | -- | ------------------------------------------------------------------------------------



| | 2. | Consolidation of its alternator and starter remanufacturing operations in Mississippi.
| | -- | --------------------------------------------------------------------------------------



| | 3. | Closure of its aftermarket remanufacturing and distribution facilities in Reed City, Michigan.
| | -- | ----------------------------------------------------------------------------------------------



| | 4. | Consolidation of certain operations in Europe.
| | -- | ----------------------------------------------



A total net charge of $942 was recorded in 2004 for the estimated cost of the 2004 and 2003 actions. This charge consisted of $1,357 for the cost of
voluntary and involuntary employee separation programs associated with the resulting workforce reductions of approximately 770 employees, $120 for the impairment of leasehold improvements and other miscellaneous costs of $1,247, partially offset by
a $1,782 reduction in the reserve for the impairment of operating leases, as the Company reached an agreement to transfer its lease obligation for an Anderson-based facility to a third party.



A total charge of $48,968 was recorded in 2003 for the estimated cost of the
2003 actions. This charge consisted of $14,381 for the estimated cost of employee separation programs; $29,233 for the impairment of fixed assets and capital leases; $9,066 for the impairment of operating leases; a post-employment benefit
curtailment gain of $7,216; a pension plan curtailment charge of $1,835; and other miscellaneous costs of $1,669.



In 2002, the Company recorded a net restructuring credit of $4,375 consisting of a $4,916 post-employment benefit curtailment gain and a $541 pension
curtailment charge related to the closure and realignment of certain manufacturing operations announced in 2001 as discussed below.



In 2001, the Company recorded a restructuring charge of $30,098 in conjunction with plans for the closure and realignment of certain manufacturing
facilities and administrative functions in the U.S., Canada and Europe. This charge consisted of $23,328 for the estimated cost of various voluntary and involuntary employee separation programs associated with workforce reductions of approximately
800 production and administrative employees and asset impairment and other miscellaneous costs totaling $6,770.



The Company expects to pay approximately $5,300 in 2005 related to the employee termination programs.



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##### Table of Contents

The following table summarizes the activity in the restructuring accrual for continuing operations:



|                             |  |                     |         |   |                      |   |        |       |  |   |         |  
|---------------------------- |  | ------------------- | ------- | - | -------------------- | - | ------ | ----- |  | - | ------- | -
|                             |  | TerminationBenefits |         |   | Exit/ImpairmentCosts |   |        | Total | 
|Reserve at December 31, 2001 |  | $                   | 25,496  |   |                      | $ | 373    |       |  | $ | 25,869  |  
|Payments in 2002             |  |                     | (15,640 | ) |                      |   | (175   | )     |  |   | (15,815 | )
|Other                        |  |                     | (271    | ) |                      |   | 29     |       |  |   | (242    | )
|Reserve at December 31, 2002 |  |                     | 9,585   |   |                      |   | 227    |       |  |   | 9,812   |  
|Provision in 2003            |  |                     | 14,381  |   |                      |   | 9,066  |       |  |   | 23,447  |  
|Payments in 2003             |  |                     | (13,315 | ) |                      |   | (2,020 | )     |  |   | (15,335 | )
|Other                        |  |                     | 62      |   |                      |   | 1,217  |       |  |   | 1,279   |  
|Reserve at December 31, 2003 |  |                     | 10,713  |   |                      |   | 8,490  |       |  |   | 19,203  |  
|Provision in 2004            |  |                     | 1,357   |   |                      |   | (415   | )     |  |   | 942     |  
|Payments in 2004             |  |                     | (6,729  | ) |                      |   | (2,298 | )     |  |   | (9,027  | )
|Other                        |  |                     | (56     | ) |                      |   | (204   | )     |  |   | (260    | )
|Reserve at December 31, 2004 |  | $                   | 5,285   |   |                      | $ | 5,573  |       |  | $ | 10,858  |  



The following table
reconciles the restructuring provisions appearing in the above table with the total charges (credits) appearing in the consolidated statements of operations:



|                                              |  |      |     |      |   |        |      |  |   |        |  
|--------------------------------------------- |  | ---- | --- | ---- | - | ------ | ---- |  | - | ------ | -
|                                              |  | 2004 |     | 2003 |   |        | 2002 | 
|Provision charged to accrual                  |  | $    | 942 |      | $ | 23,447 |      |  | $ |       |  
|Write-down of fixed assets and capital leases |  |      |    |      |   | 29,233 |      |  |   |       |  
|Post-employment benefit curtailment gain      |  |      |    |      |   | (7,216 | )    |  |   | (4,916 | )
|Pension plan curtailment charge               |  |      |    |      |   | 1,835  |      |  |   | 541    |  
|Other                                         |  |      |    |      |   | 1,669  |      |  |   |       |  
|Total provision                               |  | $    | 942 |      | $ | 48,968 |      |  | $ | (4,375 | )



Discontinued
Operations



The restructuring charges, payments and
liabilities relative to discontinued operations are classified as discontinued operations in the Companys consolidated financial statements. The restructuring liabilities of these operations are included in the Balance Sheet as liabilities of
discontinued operations. For additional information on discontinued operations, see Note 3.



The Company has substantially completed the following restructuring actions in its discontinued operations.



| | 1. | Closure of its aftermarket transmission remanufacturing facility in Jacksonville, Florida, resulting in a workforce reduction of approximately 40 production employees. This action
was initiated in 2003.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Closure of the manufacturing and administrative functions of its retail aftermarket gas engine business, resulting in a workforce reduction of approximately 165 production and
administrative employees. This action was initiated in 2002.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table summarizes the activity in the restructuring accrual for discontinued operations:



|                             |  |                     |        |   |                      |   |        |       |  |   |        |  
|---------------------------- |  | ------------------- | ------ | - | -------------------- | - | ------ | ----- |  | - | ------ | -
|                             |  | TerminationBenefits |        |   | Exit/ImpairmentCosts |   |        | Total | 
|Reserve at December 31, 2001 |  | $                   | 2,261  |   |                      | $ | 3,970  |       |  | $ | 6,231  |  
|Provision in 2002            |  |                     | 1,053  |   |                      |   | 1,771  |       |  |   | 2,824  |  
|Payments in 2002             |  |                     | (2,592 | ) |                      |   | (2,471 | )     |  |   | (5,063 | )
|Other                        |  |                     | 345    |   |                      |   | (504   | )     |  |   | (159   | )
|Reserve at December 31, 2002 |  |                     | 1,067  |   |                      |   | 2,766  |       |  |   | 3,833  |  
|Provision in 2003            |  |                     | 646    |   |                      |   | 283    |       |  |   | 929    |  
|Payments in 2003             |  |                     | (1,012 | ) |                      |   | (1,542 | )     |  |   | (2,554 | )
|Other                        |  |                     | (277   | ) |                      |   | (1,149 | )     |  |   | (1,426 | )
|Reserve at December 31, 2003 |  |                     | 424    |   |                      |   | 358    |       |  |   | 782    |  
|Provision in 2004            |  |                     | 293    |   |                      |   | 75     |       |  |   | 368    |  
|Payments in 2004             |  |                     | (758   | ) |                      |   | (254   | )     |  |   | (1,012 | )
|Other                        |  |                     | 41     |   |                      |   | 115    |       |  |   | 156    |  
|Reserve at December 31, 2004 |  | $                   |       |   |                      | $ | 294    |       |  | $ | 294    |  



6.    SPECIAL
CHARGES

---



In March 2004, prior to the issuance of the 2003 financial statements, the Company received an interim decision from the panel of arbitrators regarding the dispute with its Mexican joint venture partner, GCID Autopartes, S.A. de C.V.
(GCID). In the fourth quarter of 2003, the Company recorded a special charge to cost of sales for the estimated cost of the past service fee, other claims, interest and other costs totaling $14,310. The arbitration panel issued its final
award on June 25, 2004. In accordance with the final award, on July 6, 2004 GCID transferred its interest in Remy Mexico, S. de R.L. de C.V. (fka Delco Remy Mexico, S. de R.L. de C.V. (RM) to Remy Mexico Holdings, S. de R.L. de C.V.
(RMH), and RMH, RM and Remy Componentes, S. de R.L. de C.V. (RC) paid GCID and its affiliates approximately $17,300 for GCIDs minority interest, the award for past services fees for the period of 1997 through 2004, and
other claims, including interest. RMH, RM and RC also paid approximately $1,800 in value added tax as a result of these payments. The results of the final award did not affect the special charge recorded in the fourth quarter of 2003. For more
information, see Notes 2 and 16.



In the fourth quarter of
2003, the Company changed its estimate for the valuation of core inventory from primarily customer acquisition cost to primarily core broker prices and recorded a special charge of $103,930. Of this charge, $94,856 related to the write down of the
core component of inventory and $9,074 related to the establishment of an estimated liability for core returns. The Company estimated broker values by considering, in order of preference, direct purchases from brokers, purchase quotes from brokers,
and appraisals. Multiple reference sources were used to establish a core familys inventory value, to ensure the determination of fair market value. The Company made the decision to change the valuation estimate after weighing the changes in
the market place, concluding that the long term recovery of core prices was unlikely, considering the desired consistency between Company valuations and lender valuations, conducting a market survey that indicated a trend toward core broker
valuations, and examining the 2003 IRS ruling allowing the use of core broker prices for inventory valuation. The Company believes this change better reflects current market and competitive conditions. The new values of cores brings inventory more
in line with the appraised values under the asset based lending arrangement. The Company believes this change enhances purchasing and manufacturing decisions, provides more flexibility to adjust inventory levels and improves liquidity. For more
information, see Note 1.



7.    ACCOUNTS RECEIVABLE AND
ALLOWANCE FOR DOUBTFUL ACCOUNTS

---



The Company participates in two programs that accelerate the collection of accounts receivable. Under one program, the Company sells the accounts of certain of its aftermarket customers to banks, on a non-recourse
basis, at a discount. At December 31, 2004 and 2003, the amount of receivables under this program was approximately $21,100 and $25,700, respectively. The second program is an early pay plan under which a third party acts as paying agent for one of
the Companys customers. The accounts are paid, at a discounted rate, in five to seven days after shipment instead of the regular terms. This program is also without recourse. The amount covered by this plan at December 31, 2004 and 2003 was
approximately $6,600 and $9,900, respectively.



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The activity in the allowance for doubtful accounts is as follows:



|                                                      |  |      |        |   |      |   |        |      |  |   |        |  
|----------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                      |  | 2004 |        |   | 2003 |   |        | 2002 | 
|Balance at beginning of period                        |  | $    | 6,202  |   |      | $ | 4,871  |      |  | $ | 2,772  |  
|Additions charged to costs and expenses               |  |      | 894    |   |      |   | 4,589  |      |  |   | 4,189  |  
|Uncollectible accounts written off, net of recoveries |  |      | (4,312 | ) |      |   | (3,258 | )    |  |   | (2,090 | )
|Balance at end of period                              |  | $    | 2,784  |   |      | $ | 6,202  |      |  | $ | 4,871  |  



The allowance does not
include amounts related to discontinued operations of $0, $800, and $4,309 for the years ending December 31, 2004, 2003 and 2002, respectively.



8.    PROPERTY, PLANT AND EQUIPMENT

---



Property, plant and equipment consist of the following:



|                                    |  |      |         |      |   |        
|----------------------------------- |  | ---- | ------- | ---- | - | -------
|                                    |  | 2004 |         | 2003
|Land and buildings                  |  | $    | 31,000  |      | $ | 28,092 
|Buildings under capital leases      |  |      | 18,356  |      |   | 25,338 
|Leasehold improvements              |  |      | 8,728   |      |   | 4,338  
|Machinery and equipment             |  |      | 271,553 |      |   | 234,564
|Total property, plant and equipment |  | $    | 329,637 |      | $ | 292,332



9.    LONG-TERM
DEBT

---



Borrowings under long-term debt arrangements consist of the following:



|                                                       |  |      |         |      |   |        
|------------------------------------------------------ |  | ---- | ------- | ---- | - | -------
|                                                       |  | 2004 |         | 2003
|Senior Credit FacilityDue June 30, 2008               |  | $    |        |      | $ | 111,630
|Senior Secured Floating Rate NotesDue April 15, 2009  |  |      | 125,000 |      |   |       
|85/8%
Senior NotesDue December 15, 2007               |  |      | 145,000 |      |   | 145,000
|105/8% Senior Subordinated NotesRedeemed May 24, 2004 |  |      |        |      |   | 140,000
|11% Senior Subordinated NotesDue May 1, 2009          |  |      | 163,857 |      |   | 163,583
|93/8%
Senior Subordinated NotesDue April 15, 2012     |  |      | 150,000 |      |   |       
|Other, including capital lease obligations             |  |      | 49,363  |      |   | 64,187 
|                                                       |  |      | 633,220 |      |   | 624,400
|Less current portion                                   |  |      | 22,890  |      |   | 31,397 
|Total long-term debt                                   |  | $    | 610,330 |      | $ | 593,003



In March 2005 the
Company entered into Amendment No. 2 to the Second Amended and Restated Loan and Security Agreement to reflect, among other matters, the acquisition of substantially all of the assets and the assumption of certain liabilities of Unit Parts Company
(UPC). Additionally, the Amendment increases the maximum draw under the asset based Senior Credit Facility from $120,000 to $145,000, eliminates the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and
Fixed Charge covenants from the facility and extends the maturity of the facility to June 30, 2008 with provisions for annual extensions thereafter. The amendment is discussed below.



Floating Rate Notes and 9 3/8% Senior Subordinated Notes



On April 23, 2004, the Company issued $125,000 principal amount of Second
Priority Senior Secured Floating Rate Notes due 2009 (the Floating Rate Notes), bearing an interest rate of LIBOR plus 4.00%, and $150,000 principal amount of 93/8% Senior Subordinated Notes due 2012 (the 93/8% Senior Subordinated Notes). The net proceeds from the issuance of these notes were used to pay down existing indebtedness under the Companys senior credit facilities, including repayment of the $60,000 term loan
discussed below and relevant prepayment premium, and to finance the redemption of the Companys outstanding 105/8% senior subordinated notes due 2006 issued on August 1, 1996, including



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the call premium and accrued interest. The 105/8% notes were called for redemption in their entirety on April 23, 2004 at a redemption price of 101.771% of their face amount plus accrued but unpaid interest up to, but not including, the
redemption date of May 24, 2004.



The Floating Rate
Notes mature on April 15, 2009. Interest is due each January 15, April 15, July 15 and October 15 commencing July 15, 2004. The interest rate at December 31, 2004 was 6.07%. The Floating Rate Notes are guaranteed by substantially all of the
Companys domestic subsidiaries (the Guarantors). The Floating Rate Notes and the related guarantees are senior obligations secured by a second-priority lien, subject to certain exceptions and permitted liens, on all of the
Companys and the Guarantors existing and future property and assets that secure the Companys obligations under its existing credit facilities. In the event of enforcement of the lien securing the Floating Rate Notes and the related
guarantees, the proceeds thereof will first be applied to repay obligations secured by the first-priority liens, including the Companys obligations under its senior credit facilities.



The 93/8% Senior Subordinated Notes mature on April 15, 2012. Interest is due each April 15 and October 15, commencing October 15, 2004. The 93/8% Senior Subordinated Notes are guaranteed by the Guarantors on a senior subordinated basis and, with the related
guarantees, are unsecured senior subordinated obligations, ranking junior to all the Companys senior debt, including borrowings under its credit facilities, the Floating Rate Notes and the Companys outstanding 85/8% Senior Notes due in 2007.



The indenture pursuant to which the 93/8% Senior Subordinated Notes and the Floating Rate Notes were issued contains certain covenants that, among other things, limit the ability of the Company and its restricted
subsidiaries to (i) incur additional indebtedness unless a coverage ratio is met; (ii) make restricted payments, as defined; (iii) make dividend payments or make other distributions on its capital stock; (iv) sell assets of the Company or its
restricted subsidiaries; (v) enter into certain transactions with affiliates; (vi) create certain liens and (vii) enter into certain mergers and consolidations.



Senior Credit Facility



On June 28, 2002, the Company entered into a $250,000 secured, asset based, revolving credit facility (the Senior Credit Facility) with a
syndicate of banks led by Wachovia Bank, National Association and its subsidiary Congress Financial Corporation. The Senior Credit Facility replaced the Companys then-existing $200,000 secured revolving credit facility, which was due to expire
on March 31, 2003. The interest is payable at the end of each month.



The Senior Credit Facility is collateralized by liens on substantially all assets of the Company and its domestic and certain foreign subsidiaries and by the capital stock of such subsidiaries.



On October 3, 2003, the Company amended and restated its Senior Credit
Facility. The $250,000 amended and restated facility consists of a $190,000 secured, asset-based, revolving facility, and a $60,000 term loan facility. Proceeds from the new term loan were used to reduce outstanding debt under the Companys
asset-based revolving credit facility, thereby increasing the Companys total borrowing capacity under the Senior Credit Facility by approximately $60,000. The interest rate on the term loan facility is Wachovia Banks prime rate plus 4.5%
subject to a minimum interest rate of 8.5%. The applicable interest rate on the amount borrowed under the revolving credit facility remains unchanged and floats at rates above Wachovia Banks prime rate and/or Eurodollar rates.



On September 1, 2004, the Company amended its senior credit facility to
change certain definitions and to adjust certain financial covenants to reflect the sale of Williams and JAX. The revised covenant calculation for EBITDA was lowered from $108,000 to $99,000 for the rolling twelve-month period ending December 31,
2004, reflecting the sale of the transmission business.



In
connection with the various amendments in 2004 and 2005, the Company amended its senior credit facilities to reflect the extinguishment of the $60,000 term loan, provide for borrowings of up to $145,000 under its asset based revolving credit
facility, and extend the maturity date to June 30, 2008 with provisions for annual extensions thereafter.



At December 31, 2004, there were no borrowings under the Senior Credit Facility and utilization of letters of credit totaled $6,550. Based on the
collateral supporting the senior credit facility at December 31, 2004, $113,450 was available under the Facility. Had the Company had borrowings outstanding under its revolving credit facility at December 31, 2004 the interest rate would have been
between 5.15% and 5.5%.



50



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The Senior Credit Facility contains various restrictive covenants, which include, among other things: (i)
limitations on additional borrowings and encumbrances; (ii) the maintenance of certain financial ratios and compliance with certain financial tests and limitations; (iii) limitations on cash dividends paid; (iv) limitations on investments and
capital expenditures; and (v) limitations on leases and sales of assets.



Senior Notes



On December 22, 1997, the
Company issued $145,000 of 85/8% Senior Notes due December 15, 2007 (the Senior Notes). The proceeds
from the Senior Notes were $141,375, net of issuance costs. The proceeds were used to repay higher interest bearing debt.



The Senior Notes are general unsecured senior obligations of the Company and rank pari passu in right of payment with all existing and future senior
indebtedness of the Company and senior in right of payment to all of the Companys existing and future subordinated obligations. In addition, the Companys obligations under the Senior Notes will be fully and unconditionally guaranteed on
a joint and several basis by each of the Companys existing and future domestic restricted subsidiaries. The subsidiary guarantees will rank pari passu in right of payment with all existing and future senior indebtedness of the subsidiary
guarantors and senior in right of payment to all existing and future subordinate obligations of the subsidiary guarantors. The Senior Notes and the subsidiary guarantees will be effectively subordinated to all existing and future secured
indebtedness of the Company and the subsidiary guarantors as well as to any liabilities of subsidiaries other than subsidiary guarantors.



The Senior Notes are redeemable at the Companys option, in whole or in part, at any time on or after December 15, 2002, at the redemption prices set
forth in the note agreement plus accrued and unpaid interest, if any, to the date of redemption. Interest is payable semi-annually on June 15 and December 15 of each year.



Upon the occurrence of a change of control (as defined), each holder of the Senior Notes will have the right to require the
Company to purchase all or a portion of such holders notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase.



The indenture pursuant to which the Senior Notes were issued contains certain
covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to (i) incur additional indebtedness; (ii) pay dividends or make other distributions with respect to the capital stock (as defined) of the Company
or its restricted subsidiaries; (iii) sell the assets of the Company or its restricted subsidiaries; (iv) issue or sell restricted subsidiary stock; (v) enter into certain transactions with affiliates; (vi) create certain liens; (vii) enter into
certain mergers and consolidations and (viii) incur indebtedness which is subordinate to senior indebtedness and senior to the Senior Subordinated Notes.



11% Senior Subordinated Notes



On April 26, 2001, the Company issued $165,000 of 11% Senior Subordinated Notes due May 1, 2009 (the 11% Senior Subordinated Notes). Net
proceeds (after discounts, commissions, and expenses) of approximately $157,000 were used to retire the GM Subordinated Debenture of approximately $19,000 and repay approximately $138,000 outstanding under the Companys then existing secured
revolving credit facility.



The 11% Senior Subordinated Notes
are unsecured senior subordinated obligations of the Company and are subordinated in right of payment to all existing and future senior indebtedness, pari passu with all present and future senior subordinated indebtedness and senior to all present
and future subordinated indebtedness of the Company or the relevant subsidiary guarantor, as defined in the indenture. The 11% Senior Subordinated Notes are also effectively subordinated to any secured indebtedness to the extent of the value of the
assets securing such indebtedness.



The 11% Senior Subordinated
Notes are redeemable at the Companys option, in whole or in part, at any time on or after May 1, 2005, at the redemption prices set forth in the note agreement plus accrued and unpaid interest, if any, to the redemption date. Interest is
payable semi-annually in arrears on May 1 and November 1, and commenced on November 1, 2001.



Upon the occurrence of a change in control, each holder of the 11% Senior Subordinated Notes will have the right to require the Company to purchase all or a portion of such holders notes at a price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.



51



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The indenture pursuant to which the 11% Senior Subordinated Notes were issued contains certain covenants
that, among other things, limit the ability of the Company and its restricted subsidiaries to (i) incur additional indebtedness unless a coverage ratio is met; (ii) make restricted payments, as defined; (iii) make dividend payments or make other
distributions on its capital stock; (iv) sell assets of the Company or its restricted subsidiaries; (v) enter into certain transactions with affiliates; (vi) create certain liens and (vii) enter into certain mergers and consolidations.



Sale-Leaseback Financing Transactions



In 2003, certain of the Companys Mexican subsidiaries entered into a
series of machinery and equipment sale-leaseback financing transactions with GE Mexico. Under the terms of this agreement, the relevant subsidiaries must maintain certain net worth, earnings before interest, taxes, depreciation and amortization (as
defined) and sales levels, in addition to other requirements normally associated with this type of financing. Net cash proceeds from these transactions in 2003 were $10,297, net of security deposits totaling $5,425. The Company has accounted for
these transactions as financing transactions in accordance with SFAS No. 66 and SFAS No. 98. Accordingly, an obligation of $15,722 was recorded relative to these transactions. The obligation at December 31, 2004 and 2003 was $12,214 and $15,099,
respectively.



Capital Lease Obligations



Capital leases have been capitalized using nominal interest rates ranging
from 12.5% to 14.2%. The net book value of assets under capital leases was $3,805 and $5,950 at December 31, 2004 and 2003, respectively.



Other



Required principal payments of long-term debt and capitalized leases are as follows:



|                         |  |   |        
|------------------------ |  | - | -------
|2005                     |  | $ | 22,890 
|2006                     |  |   | 5,460  
|2007                     |  |   | 149,974
|2008                     |  |   | 5,333  
|2009                     |  |   | 294,036
|Thereafter               |  |   | 155,527
|Total principal payments |  | $ | 633,220



10.    EMPLOYEE
BENEFIT PLANS

---



Agreements with GM



In connection with
the GM Acquisition, the Company and GM agreed to allocate the responsibility for employee pension benefits and post-retirement health care and life insurance on a pro-rata basis between RI and GM. The allocation is primarily determined upon years of
service with RI and aggregate years of service with RI and GM. Effective August 1, 1994, RI established hourly and salaried pension and post-retirement health care and life insurance plans which are similar to the respective GM plans.



Pension and Post-Retirement Health Care and Life Insurance Plans



RI has defined benefit pension plans covering
substantially all employees. The plan covering salaried employees provides benefits that are based upon years of service and final estimated average compensation. Benefits for hourly employees are based on stated amounts for each year of service.
RIs funding policy is to contribute amounts to provide the plans with sufficient assets to meet future benefit payment requirements consistent with actuarial determinations of the funding requirements of federal laws. Plan assets are primarily
invested in mutual funds, which invest in both debt and equity instruments.



RI maintains hourly and salaried benefit plans that provide post-retirement health care and life insurance to retirees and eligible dependents. The benefits are payable for life, although RI retains the right to
modify or terminate the plans providing these benefits. The salaried plan has cost sharing features such as deductibles and co-payments. Salaried



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##### Table of Contents

employees who were not GM employees prior to 1992 are not eligible for the above-described post-retirement benefits. It is RIs policy to fund these
benefits as claims are incurred.



The changes in benefit
obligations and plan assets, components of expense, and assumptions for the plans are as follows:



|                                                                 |  |                  |         |   |                                                     |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|---------------------------------------------------------------- |  | ---------------- | ------- | - | --------------------------------------------------- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - | ---- | - | ------- | - |  | - | ------- | -
|                                                                 |  | Pension Benefits |         |   | Post-Retirement Health Careand Life Insurance Plans |  
|                                                                 |  | 2004             |         |   | 2003                                                |   |         | 2002 |  |   | 2004    |   |  | 2003 |         |   | 2002 |  
|Change in benefit obligations                                    |  |                  |         |   |                                                     |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Benefit obligation at beginning of year                          |  | $                | 39,848  |   |                                                     | $ | 36,561  |      |  | $ | 32,676  |   |  | $    | 19,903  |   |      | $ | 36,069  |   |  | $ | 23,297  |  
|Service cost                                                     |  |                  | 1,770   |   |                                                     |   | 1,519   |      |  |   | 1,913   |   |  |      | 308     |   |      |   | 374     |   |  |   | 2,081   |  
|Interest cost                                                    |  |                  | 2,340   |   |                                                     |   | 2,204   |      |  |   | 2,221   |   |  |      | 1,091   |   |      |   | 1,159   |   |  |   | 1,407   |  
|Amendments                                                       |  |                  | 897     |   |                                                     |   | 114     |      |  |   |        |   |  |      |        |   |      |   |        |   |  |   | 3,832   |  
|Actuarial loss                                                   |  |                  | 1,985   |   |                                                     |   | 4,497   |      |  |   | 2,562   |   |  |      | 639     |   |      |   | 2,283   |   |  |   | 6,282   |  
|Benefits paid                                                    |  |                  | (1,838  | ) |                                                     |   | (1,807  | )    |  |   | (2,811  | ) |  |      | (1,566  | ) |      |   | (1,512  | ) |  |   | (830    | )
|Medicare Prescription Drug Act of 2003 (gain)                    |  |                  | NA      |   |                                                     |   | NA      |      |  |   | NA      |   |  |      | (1,359  | ) |      |   | NA      |   |  |   | NA      |  
|Curtailment gains                                                |  |                  |        |   |                                                     |   | (3,240  | )    |  |   |        |   |  |      |        |   |      |   | (18,470 | ) |  |   |        |  
|Benefit obligation at end of year                                |  | $                | 45,002  |   |                                                     | $ | 39,848  |      |  | $ | 36,561  |   |  | $    | 19,016  |   |      | $ | 19,903  |   |  | $ | 36,069  |  
|                                                                 |  |                  |         |   |                                                     |  
|Change in plan assets                                            |  |                  |         |   |                                                     |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Fair value of plan assets at beginning of year                   |  | $                | 22,319  |   |                                                     | $ | 18,521  |      |  | $ | 19,531  |   |  | $    |        |   |      | $ |        |   |  | $ |        |  
|Actual return on plan assets                                     |  |                  | 2,291   |   |                                                     |   | 3,568   |      |  |   | (1,762  | ) |  |      |        |   |      |   |        |   |  |   |        |  
|Employer contributions                                           |  |                  | 3,754   |   |                                                     |   | 2,037   |      |  |   | 2,382   |   |  |      | 1,584   |   |      |   | 1,512   |   |  |   | 830     |  
|Benefits paid                                                    |  |                  | (1,838  | ) |                                                     |   | (1,807  | )    |  |   | (1,630  | ) |  |      | (1,584  | ) |      |   | (1,512  | ) |  |   | (830    | )
|Fair value of plan assets at end of year                         |  | $                | 26,526  |   |                                                     | $ | 22,319  |      |  | $ | 18,521  |   |  | $    |        |   |      | $ |        |   |  | $ |        |  
|                                                                 |  |                  |         |   |                                                     |  
|Funded status                                                    |  | $                | (18,476 | ) |                                                     | $ | (17,529 | )    |  | $ | (18,040 | ) |  | $    | (19,016 | ) |      | $ | (19,903 | ) |  | $ | (36,069 | )
|Unrecognized actuarial loss (gain)                               |  |                  | 12,891  |   |                                                     |   | 11,833  |      |  |   | 12,887  |   |  |      | 2,714   |   |      |   | 3,472   |   |  |   | 12,516  |  
|Unrecognized prior service cost                                  |  |                  | 1,339   |   |                                                     |   | 539     |      |  |   | 2,356   |   |  |      |        |   |      |   |        |   |  |   |        |  
|Net amount recognized (accrued) / prepaid                        |  | $                | (4,246  | ) |                                                     | $ | (5,157  | )    |  | $ | (2,797  | ) |  | $    | (16,302 | ) |      | $ | (16,431 | ) |  | $ | (23,553 | )
|                                                                 |  |                  |         |   |                                                     |  
|Amounts recognized in the consolidated balance sheet consist of: |  |                  |         |   |                                                     |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Accrued benefit liability                                        |  | $                | (13,511 | ) |                                                     | $ | (13,073 | )    |  | $ | (14,427 | ) |  | $    | (16,302 | ) |      | $ | (16,431 | ) |  | $ | (23,553 | )
|Intangible asset                                                 |  |                  | 1,059   |   |                                                     |   | 344     |      |  |   | 2,061   |   |  |      |        |   |      |   |        |   |  |   |        |  
|Accumulated other comprehensive loss                             |  |                  | 8,206   |   |                                                     |   | 7,572   |      |  |   | 9,569   |   |  |      |        |   |      |   |        |   |  |   |        |  
|Net amount recognized (accrued) / prepaid                        |  | $                | (4,246  | ) |                                                     | $ | (5,157  | )    |  | $ | (2,797  | ) |  | $    | (16,302 | ) |      | $ | (16,431 | ) |  | $ | (23,553 | )
|                                                                 |  |                  |         |   |                                                     |  
|Components of expense                                            |  |                  |         |   |                                                     |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Service costs                                                    |  | $                | 1,770   |   |                                                     | $ | 1,521   |      |  | $ | 1,913   |   |  | $    | 308     |   |      | $ | 374     |   |  | $ | 2,081   |  
|Interest costs                                                   |  |                  | 2,339   |   |                                                     |   | 2,204   |      |  |   | 2,221   |   |  |      | 1,091   |   |      |   | 1,159   |   |  |   | 1,407   |  
|Expected return on plan assets                                   |  |                  | (1,736  | ) |                                                     |   | (1,564  | )    |  |   | (1,772  | ) |  |      |        |   |      |   |        |   |  |   |        |  
|Amortization of prior service cost                               |  |                  | 96      |   |                                                     |   | 96      |      |  |   | 231     |   |  |      |        |   |      |   |        |   |  |   |        |  
|Recognized net actuarial loss (gain)                             |  |                  | 370     |   |                                                     |   | 307     |      |  |   | 334     |   |  |      | 37      |   |      |   | 72      |   |  |   |        |  
|Curtailments                                                     |  |                  |        |   |                                                     |   | 1,835   |      |  |   | 541     |   |  |      |        |   |      |   | (7,216  | ) |  |   | (4,916  | )
|Net periodic pension cost                                        |  | $                | 2,839   |   |                                                     | $ | 4,399   |      |  | $ | 3,468   |   |  | $    | 1,436   |   |      | $ | (5,611  | ) |  | $ | (1,428  | )
|                                                                 |  |                  |         |   |                                                     |  
|Weighted-average assumptions                                     |  |                  |         |   |                                                     |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Discount rate for benefit obligation                             |  |                  | 5.75    | % |                                                     |   | 6.00    | %    |  |   | 6.75    | % |  |      | 5.75    | % |      |   | 6.75    | % |  |   | 6.75    | %
|Discount rate for net periodic benefit cost                      |  |                  | 6.00    | % |                                                     |   | 6.75    | %    |  |   | 7.25    | % |  |      | 6.00    | % |      |   | 6.75    | % |  |   | 7.25    | %
|Rate of compensation increase                                    |  |                  | 5.00    | % |                                                     |   | 5.00    | %    |  |   | 5.00    | % |  |      | 5.00    | % |      |   | 5.00    | % |  |   | 5.00    | %
|Expected return on plan assets                                   |  |                  | 7.50    | % |                                                     |   | 8.50    | %    |  |   | 9.00    | % |  |      | NA      |   |      |   | NA      |   |  |   | NA      |  



To develop the
expected long-term rate of return on assets assumption, the Company considered the historical returns and future expectations for returns for each asset class, as well as the target asset allocation of the present portfolio. This resulted in the
selection of the 7.5% long-term rate of return on asset assumption.



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The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was
signed into law on December 8, 2003. The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially
equivalent to Medicare Part D. The Company has determined that the prescription drug benefits available under its plan to certain retirees over age 65 are at least actuarially equivalent to the benefits provided under Medicare Part D and thus
qualify for the subsidy under the Act beginning in 2006. This subsidy will reduce the Companys share of the cost of underlying post-retirement prescription drug coverage on which the subsidy is based. The expected effect of the subsidy is as
follows:



|                                                                               |  |   |      
|------------------------------------------------------------------------------ |  | - | -----
|Reduction in accumulated post-retirement benefit obligation at January 1, 2004 |  | $ | 1,359
|Effect on net periodic post-retirement benefit cost for 2004                   |  |   |      
|Reduction in service cost                                                      |  |   | 32   
|Reduction in interest cost                                                     |  |   | 82   



In 2003, the Company
recorded a post-employment benefit curtailment gain of $7,216 and a pension plan curtailment charge of $1,835 related to restructuring activities. For more information, see Note 5.



In 2002, the Company recorded a post-employment benefit curtailment gain of $4,916 and a pension plan curtailment charge of
$541 related to restructuring activities in 2001. For more information, see Note 5.



The Companys investment strategies with respect to pension assets are:



| | 1. | The assets are managed in compliance with provisions of the Employee Retirement Income Security Act.
| | -- | ----------------------------------------------------------------------------------------------------



| | 2. | The assets are to be invested with expectations of achieving real growth with respect to inflation, the belief that the U.S capital markets will remain viable, maintaining a level
of liquidity to meet timely payment of benefits to participants and minimizing risk and achieving growth through prudent diversification of assets among investment categories.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The target plan asset allocation is:



|                                |  |                  
|------------------------------- |  | -----------------
|                                |  | Target Allocation
|Equity Investments              |  | 60%  70%        
|Fixed Income Investments        |  | 30%  40%        
|Cash and Short Term Investments |  | 0%  10%         



|                                                    |  |      |        |   |  |       |      |  |  |  |   |        |   |  |       |  
|--------------------------------------------------- |  | ---- | ------ | - |  | ----- | ---- |  |  |  | - | ------ | - |  | ----- | -
|                                                    |  | 2004 |        |   |  |       | 2003 | 
|Asset Allocation for Plan Assets                    |  |      |        |   |  |       |      |  |  |  |   |        |   |  |       |  
|Interest-bearing cash                               |  | $    | 384    |   |  | 1.5   | %    |  |  |  | $ | 257    |   |  | 1.2   | %
|Bond Mutual Funds                                   |  |      | 9,476  |   |  | 35.7  | %    |  |  |  |   | 8,317  |   |  | 37.2  | %
|Equity Mutual Funds                                 |  |      | 16,555 |   |  | 62.4  | %    |  |  |  |   | 13,683 |   |  | 61.3  | %
|Receivables                                         |  |      | 111    |   |  | 0.4   | %    |  |  |  |   | 62     |   |  | 0.3   | %
|Total plan assets                                   |  | $    | 26,526 |   |  | 100.0 | %    |  |  |  | $ | 22,319 |   |  | 100.0 | %
|                                                    |  |      |        |   | 
|Accumulated Benefit Obligation                      |  | $    | 40,038 |   |  |       |      |  |  |  | $ | 35,393 |   |  |       |  
|                                                    |  |      |        |   | 
|Assumed Health Care Cost Trend Rates                |  |      |        |   |  |       |      |  |  |  |   |        |   |  |       |  
|Health care cost trend rate assumed for next year   |  |      | 11.00  | % |  |       |      |  |  |  |   | 12.00  | % |  |       |  
|Rate to which the cost trend is expected to decline |  |      | 5.00   | % |  |       |      |  |  |  |   | 5.00   | % |  |       |  
|Year that the rate reaches the ultimate trend rate  |  |      | 2010   |   |  |       |      |  |  |  |   | 2010   |   |  |       |  



Sensitivity
Analysis



An increase and decrease of one-percentage-point
in the assumed health care trends would have the following effects in the year ended December 31, 2004:



|                                                                                                                 |  |             |       |             |   |        |  
|---------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- | ----------- | - | ------ | -
|                                                                                                                 |  | 1% Increase |       | 1% decrease |  
|Effect on total of service and interest cost components of net periodic post-retirement health care benefit cost |  | $           | 208   |             | $ | (167   | )
|Effect on the health care component of the accumulated post-retirement benefit obligation                        |  | $           | 2,841 |             | $ | (2,299 | )



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Cash Flows



In 2005, the Company plans to contribute between $3,900 and $5,000 to its pension plans. The benefits of the post-retirement
health care plan are funded on a pay as you go basis and are funded on a cash basis as benefits are paid.



The following reflects the estimated future benefit payments to be paid:



|                |  |         |        |       |   |      
|--------------- |  | ------- | ------ | ----- | - | -----
|                |  | Pension |        | Other
|2005            |  | $       | 2,269  |       | $ | 695  
|2006            |  |         | 2,274  |       |   | 780  
|2007            |  |         | 2,401  |       |   | 861  
|2008            |  |         | 2,343  |       |   | 956  
|2009            |  |         | 2,300  |       |   | 1,047
|Years 2010-2014 |  |         | 12,749 |       |   | 5,954



Defined
Contribution Plans



The Company sponsors two voluntary
savings plans. One plan is for eligible salaried employees and the other plan is for UAW hourly employees. These plans allow participants to make contributions pursuant to section 401(k) of the Internal Revenue Code. The salaried plan has Company
matching contribution provisions, while the hourly UAW plan does not. Charges to operations were $1,900, $1,847, and $1,910 for the years ending December 31, 2004, 2003, and 2002 respectively.



Profit Sharing Plans



RI sponsors a profit sharing plan covering UAW union employees. Distributions
are determined based upon formulas established by management and are made annually. Profit sharing expense for the years ended December 31, 2004, 2003 and 2002, was $0, $0, and $198, respectively.



11.    INCOME TAXES

---



The following is a summary of the components
of the provision for income tax expense:



|                   |  |      |       |      |   |        |      |  |   |        |  
|------------------ |  | ---- | ----- | ---- | - | ------ | ---- |  | - | ------ | -
|                   |  | 2004 |       | 2003 |   |        | 2002 | 
|Current:           |  |      |       |      |   |        |      |  |   |        |  
|Federal            |  | $    |      |      | $ |       |      |  | $ |       |  
|State and local    |  |      | 369   |      |   | 238    |      |  |   | 923    |  
|Foreign            |  |      | 2,043 |      |   | 12,800 |      |  |   | 6,466  |  
|Deferred:          |  |      |       |      |   |        |      |  |   |        |  
|Federal            |  |      |      |      |   | 20,896 |      |  |   | (5,026 | )
|State and local    |  |      |      |      |   | 3,697  |      |  |   | (918   | )
|Foreign            |  |      | 2,955 |      |   | (949   | )    |  |   | 6,781  |  
|Income tax expense |  | $    | 5,367 |      | $ | 36,682 |      |  | $ | 8,226  |  



Income (loss) from
continuing operations before income taxes, minority interest and loss from unconsolidated joint ventures, was taxed in the following jurisdictions:



|         |  |      |        |   |      |   |          |      |  |   |         |  
|-------- |  | ---- | ------ | - | ---- | - | -------- | ---- |  | - | ------- | -
|         |  | 2004 |        |   | 2003 |   |          | 2002 | 
|Domestic |  | $    | (2,812 | ) |      | $ | (160,413 | )    |  | $ | (18,172 | )
|Foreign  |  |      | 22,924 |   |      |   | 22,453   |      |  |   | 30,642  |  
|         |  | $    | 20,112 |   |      | $ | (137,960 | )    |  | $ | 12,470  |  



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##### Table of Contents

A reconciliation of income taxes at the United States federal statutory rate to the effective income tax
rate follows:



|                                                                        |  |       |   |  |       |    |  |      |  
|----------------------------------------------------------------------- |  | ----- | - |  | ----- | -- |  | ---- | -
|                                                                        |  | 2004  |   |  | 2003  |    |  | 2002 |  
|Federal statutory income tax rate                                       |  | 35.0  | % |  | 35.0  | %  |  | 35.0 | %
|State and local income taxes, net of Federal tax benefit, if applicable |  | 1.8   |   |  | (0.2  | )  |  |     |  
|Foreign operations                                                      |  | (15.0 | ) |  | (2.9  | )  |  | (6.9 | )
|Goodwill                                                                |  |      |   |  |      |    |  |     |  
|Provision for valuation allowance for deferred tax assets               |  |      |   |  | (58.4 | )  |  |     |  
|Settlement of IRS audit                                                 |  |      |   |  |      |    |  | (7.5 | )
|Sub part F and other permanent items                                    |  | .3    |   |  |      |    |  | 24.2 |  
|Other items                                                             |  | 4.6   |   |  | (.1   | )  |  | 21.2 |  
|Effective income tax rate                                               |  | 26.7  | % |  | (26.6 | )% |  | 66.0 | %



State and local income
taxes may include provisions for Indiana and Michigan, which do not provide proportional benefit in loss years.



The following is a summary of the significant components of the Companys deferred tax assets and liabilities:



|                                               |  |      |          |   |      |   |          |  
|---------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                               |  | 2004 |          |   | 2003 |  
|Deferred tax assets:                           |  |      |          |   |      |   |          |  
|Restructuring charges                          |  | $    | 4,356    |   |      | $ | 10,689   |  
|Employee benefits                              |  |      | 12,383   |   |      |   | 12,061   |  
|Inventories                                    |  |      | 3,876    |   |      |   | 4,984    |  
|Warranty                                       |  |      | 5,483    |   |      |   | 4,499    |  
|Alternative minimum tax credits                |  |      | 3,101    |   |      |   | 2,905    |  
|Foreign deferred assets                        |  |      | 2,176    |   |      |   | 3,113    |  
|Net operating loss carryforwards               |  |      | 94,307   |   |      |   | 108,747  |  
|Other                                          |  |      | 14,181   |   |      |   | 23,933   |  
|Total deferred tax assets                      |  |      | 139,863  |   |      |   | 170,931  |  
|Valuation allowance                            |  |      | (114,404 | ) |      |   | (140,645 | )
|Deferred tax assets net of valuation allowance |  |      | 25,459   |   |      |   | 30,286   |  
|Deferred tax liabilities:                      |  |      |          |   |      |   |          |  
|Depreciation                                   |  |      | (2,284   | ) |      |   | (2,342   | )
|Foreign deferred liabilities                   |  |      | (5,241   | ) |      |   | (3,758   | )
|Research expenses                              |  |      | (3,846   | ) |      |   | (5,054   | )
|Other                                          |  |      | (17,153  | ) |      |   | (19,776  | )
|Total deferred tax liabilities                 |  |      | (28,524  | ) |      |   | (30,930  | )
|Net deferred tax liability                     |  | $    | (3,065   | ) |      | $ | (644     | )



At December 31, 2004,
the Company had unused Federal net operating loss carryforwards of approximately $208,930 that expire during 2019 through 2023. The Company also had unused alternative minimum tax credit carryforwards of $3,101 that may be carried forward
indefinitely. Income tax payments, including state taxes, for the years ended December 31, 2004, 2003 and 2002 were $5,957, $9,397 and $5,332, respectively.



No provision has been made for United States federal and state or foreign taxes that may result from future remittances of undistributed earnings of
foreign subsidiaries ($105,668 at December 31, 2004) because it is expected that such earnings will be reinvested in these foreign operations indefinitely. It is not practical to estimate the amount of taxes that might be payable on the eventual
remittances of such earnings.



In the fourth quarter of 2003,
the Company recorded a charge of $28,320 for a deferred tax valuation allowance for substantially all unreserved domestic income tax assets established prior to 2003. Of this total, $24,685 was charged to income tax provision and $3,635 was charged
to other comprehensive loss.



In March 2003, the Company filed
a request for a bilateral advance pricing agreement between Remy International, Inc and Remy Korea Ltd. In 2003 and 2004 the Company operated under this proposal and recorded income tax provision in Korea on its terms. The Company expects the United
States and Korean authorities to finalize this transfer pricing matter in 2005.



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##### Table of Contents

12.    STOCKHOLDERS EQUITY

---



2004 Corporate Reorganization



Effective September 30, 2004, the stockholders of the Company formed a
new holding company, Remy Worldwide Holdings, Inc. (RWH), to own all of the outstanding stock of Remy International, Inc. The Companys stockholders exchanged all of their stock for identical shares in RWH with the same number and
class of shares and percentage ownership of RWH and the same relative rights and preferences in the equity value of RWH, as they previously held in the Company. As a result, the Company is now a wholly owned subsidiary of RWH and the stockholders of
the Company became stockholders of RWH. The Company will continue to be the issuer of its outstanding notes and the reporting company with the Securities and Exchange Commission.



In conjunction with the formation of the new holding company, all of the outstanding shares of the Companys Series A
Preferred Stock were cancelled. The cancellation is reflected in the condensed consolidated balance sheet as a reclassification of the Preferred Stock to Paid-in Capital, which increased stockholders equity by $334,336 and was the amount
attributable to the outstanding Series A Preferred Stock as of September 30, 2004. Since the Companys Preferred Stock was cancelled, the accretion of Preferred Stock dividends will no longer be reflected in the Companys financial
statements, effective October 1, 2004. Although the Companys Series A preferred stock was cancelled, the Companys former stockholders now hold preferred stock in RWH that continues to accrete at 12.0%. RWH has no assets or operations
other than its 100% ownership of the Company.



Common Stock



The Companys Second Amended and Restated Certificate
of Incorporation provides for the issuance of 12,001,000 shares of common stock, divided into three classes consisting of 1,000 shares of Class A Common Stock, 6,000,000 shares of Class B Common Stock and 6,000,000 shares of Class C Common Stock.
Under the Companys Second Amended and Restated Certificate of Incorporation, shares of Class A Common Stock are convertible into an equal number of shares of Class B Common Stock. Shares of Class B Common Stock are convertible into an equal
number of shares of Class C Common Stock. Shares of Class C Common Stock are convertible into an equal number of shares of Class B Common Stock. In the case of a conversion from Class C Common Stock, which is nonvoting, into Class B Common Stock,
which is voting, the holder of shares to be converted would be permitted under applicable law to hold the total number of shares of Class B Common Stock which would be held upon conversion.



As a result of the reorganization the Companys Class A and Class C
Common Stock were converted into the same number of shares of Class B Common Stock. Accordingly, as of December 31, 2004, the Company had an aggregate of 2,503,024.48 shares of Class B Common Stock outstanding, consisting of 1,000.00 shares of
converted Class A Common Stock, 16,687.00 shares of converted Class C Common Stock, and 2,485,337.48 shares of Class B Common Stock previously outstanding. All of the outstanding shares are owned by RWH.



The holders of Class A Common Stock were entitled to vote on all matters
submitted to a vote of the stockholders. The number of votes to be cast by the holder of Class A Common Stock may vary and is determined, in each instance, prior to a vote of stockholders. If at any time the aggregate principal amount of
indebtedness outstanding under the Indenture dated December 22, 1997 among the Company, certain of the Companys subsidiary guarantors and United States Trust Company of New York is less than $50,000,000, the holder of Class A Common Stock will
be entitled to one vote for each share of Class A Common Stock held. So long as the holders of the Class A Common Stock are entitled to more than one vote per share, in any election of Company directors, 21% (rounded up to the nearest whole
director) of the directors to be elected shall be elected by a majority of the votes cast by the holders of shares of outstanding Class B Common Stock other than Court Square or any person that is or is deemed to be in the consolidated tax group of
which Court Square is a member.



The holders of Class B Common
Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. The Company cannot amend the Second Amended and Restated Certificate of Incorporation, enter into any plan of liquidation,
recapitalization, reorganization, reclassification, consolidation or merger, sell all or substantially all of the Companys assets or stock or enter into any other business combination without the approval of a majority of the holders of Class
B Common Stock. Except as required by law, the holders of Class C Common Stock have no voting rights.



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##### Table of Contents

2001 Going Private Transaction



On February 7, 2001, the Company agreed to a going private transaction with its largest stockholder, Court Square Limited
(Court Square), pursuant to which Court Square made a cash tender offer for all of the Companys common stock not owned by it. Following completion of the merger on March 14, 2001, the New York Stock Exchange delisted the
Companys common stock and the Company terminated the registration of its common stock under the Exchange Act. For financial accounting purposes the transaction was treated as a leveraged recapitalization whereby the assets are not revalued and
the excess purchase price of the redeemed shares over the par value and paid-in capital of the common stock and the redemption value of the preferred stock ($105,164) was charged to the Companys retained earnings.



Redeemable Preferred Stock



Effective as of July 1, 2003, holders of substantially all of the
Companys common stock and preferred stock agreed to amend the terms of the Companys outstanding preferred stock. The Companys Second Amended and Restated Certificate of Incorporation provided for the issuance of 3,500,000 shares of
preferred stock, all of which are designated as 12% Series A Accreting Preferred Stock. The preferred stock had a stated value of $100 per share and was entitled to receive dividends when, as and if declared by the Board of Directors in such amounts
as the Board of Directors may determine at the time of declaration, provided that the aggregate amount of dividends per share do not exceed the compounded annual rate of 12% of the stated value per share from the date of original issue. As indicated
above the Companys Series A Accreting Preferred Stock was cancelled in connection with the 2004 corporate reorganization.



The amount accreted on the preferred stock from the issue date through September 30, 2004 (the cancellation date) is reported as Accretion for
redemption of preferred stock on the Consolidated Statements of Operations. The dividends accrued on the preferred stock prior to the adoption of the restated terms were never declared or paid to the holders of the preferred stock and are also
reported as Accretion for redemption of preferred stock.



Dividends



The Companys ability to
pay cash dividends is subject to restrictions contained in the senior credit facility, the 85/8% Senior Notes
due 2007, the 11% Senior Subordinated Notes due 2009, the Floating Rate Notes due 2009, and the 93/8% Senior
Subordinated Notes due 2012.



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13.    ACCUMULATED OTHER COMPREHENSIVE LOSS

---



The Companys other comprehensive loss consists of
unrealized net gains and losses on the translation of the assets and liabilities of its foreign operations, currency instruments and interest rate swaps and minimum pension liability adjustments. The before tax income (loss), related income tax
effect and accumulated balance are as follows:



|                                  |  |                                      |         |     |                                                  |   |       |                                        |  |   |                                    |   |  |                                            |        |      |  |   |         |  
|--------------------------------- |  | ------------------------------------ | ------- | --- | ------------------------------------------------ | - | ----- | -------------------------------------- |  | - | ---------------------------------- | - |  | ------------------------------------------ | ------ | ---- |  | - | ------- | -
|                                  |  | ForeignCurrencyTranslationAdjustment |         |     | UnrealizedGains/(Losses)on DerivativeInstruments |   |       | UnrealizedLosses onInterest Rate Swaps |  |   | MinimumPensionLiabilityAdjustments |   |  | AccumulatedOtherComprehensiveIncome (Loss) |       
|Balances at December 31, 2001     |  | $                                    | (18,208 | )   |                                                  | $ |      |                                        |  | $ | (2,497                             | ) |  | $                                          | (2,735 | )    |  | $ | (23,440 | )
|Before tax income (loss)          |  |                                      | 7,739   | (1) |                                                  |   | 398   |                                        |  |   | 4,027                              |   |  |                                            | (5,159 | )    |  |   | 7,005   |  
|Income tax effect                 |  |                                      |        |     |                                                  |   | (63   | )                                      |  |   | (1,530                             | ) |  |                                            | 1,960  |      |  |   | 367     |  
|Other comprehensive income (loss) |  |                                      | 7,739   |     |                                                  |   | 335   |                                        |  |   | 2,497                              |   |  |                                            | (3,199 | )    |  |   | 7,372   |  
|                                  |  |                                      |         |     |                                                 
|Balances at December 31, 2002     |  |                                      | (10,469 | )   |                                                  |   | 335   |                                        |  |   |                                   |   |  |                                            | (5,934 | )    |  |   | (16,068 | )
|Before tax income (loss)          |  |                                      | 2,593   |     |                                                  |   | (905  | )                                      |  |   |                                   |   |  |                                            | 1,997  |      |  |   | 3,685   |  
|Income tax effect                 |  |                                      |        |     |                                                  |   | 214   |                                        |  |   |                                   |   |  |                                            | (3,635 | )(2) |  |   | (3,421  | )
|Other comprehensive income (loss) |  |                                      | 2,593   |     |                                                  |   | (691  | )                                      |  |   |                                   |   |  |                                            | (1,638 | )    |  |   | 264     |  
|                                  |  |                                      |         |     |                                                 
|Balances at December 31, 2003     |  |                                      | (7,876  | )   |                                                  |   | (356  | )                                      |  |   |                                   |   |  |                                            | (7,572 | )    |  |   | (15,804 | )
|Before tax income (loss)          |  |                                      | 9,840   |     |                                                  |   | 1,201 |                                        |  |   |                                   |   |  |                                            | (634   | )    |  |   | 10,407  |  
|Income tax effect                 |  |                                      |        |     |                                                  |   | (406  | )                                      |  |   |                                   |   |  |                                            |       |      |  |   | (406    | )
|Other comprehensive income (loss) |  |                                      | 9,840   |     |                                                  |   | 795   |                                        |  |   |                                   |   |  |                                            | (634   | )    |  |   | 10,001  |  
|                                  |  |                                      |         |     |                                                 
|Balances at December 31, 2004.    |  | $                                    | 1,964   |     |                                                  | $ | 439   |                                        |  | $ |                                   |   |  | $                                          | (8,206 | )    |  | $ | (5,803  | )

|(1) | Includes a loss of $3,394 associated with the substantial liquidation of the discontinued retail aftermarket gas engine business.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(2) | Reflects the establishment of a valuation allowance for domestic income tax assets. See Note 11.
|--- | ------------------------------------------------------------------------------------------------



The Companys total comprehensive income (loss) is as follows:



|                            |  |      |        |      |   |          |      |  |   |          |  
|--------------------------- |  | ---- | ------ | ---- | - | -------- | ---- |  | - | -------- | -
|                            |  | 2004 |        | 2003 |   |          | 2002 | 
|Net income (loss)           |  | $    | 56,424 |      | $ | (186,625 | )    |  | $ | (132,536 | )
|Other comprehensive income  |  |      | 10,001 |      |   | 264      |      |  |   | 7,372    |  
|Comprehensive income (loss) |  | $    | 66,425 |      | $ | (186,361 | )    |  | $ | (125,164 | )



14.    TRANSACTIONS WITH GM

---



The Company has entered into several transactions and agreements with GM and certain of its subsidiaries related to their respective businesses. In
addition to the transactions disclosed elsewhere in the accompanying consolidated financial statements and related notes, the Company entered into the following transactions with GM and certain of its subsidiaries:



|                                          |  |      |         |      |   |         |  |   |        
|----------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                          |  | 2004 |         | 2003 |   | 2002   
|Sales                                     |  | $    | 291,525 |      | $ | 245,419 |  | $ | 241,475
|Material purchases and costs for services |  |      | 18,749  |      |   | 9,394   |  |   | 6,604  



In addition, the
Company had the following balances with GM:



|                          |  |      |        |      |   |       
|------------------------- |  | ---- | ------ | ---- | - | ------
|                          |  | 2004 |        | 2003
|Trade accounts receivable |  | $    | 20,148 |      | $ | 15,479



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15.    LEASE COMMITMENTS

---



The Company occupies space and uses certain equipment under lease
arrangements. Rent expense was $10,775 for 2004, $16,167 for 2003, and $11,012 for 2002. Rental commitments at December 31, 2004 for long-term non-cancelable operating leases (not reflected as a restructuring reserve) were as follows:



|                 |  |   |       
|---------------- |  | - | ------
|Year ending 2005 |  | $ | 10,351
|Year ending 2006 |  |   | 9,715 
|Year ending 2007 |  |   | 9,090 
|Year ending 2008 |  |   | 7,910 
|Year ending 2009 |  |   | 7,199 
|Thereafter       |  |   | 18,219
|Total payments   |  | $ | 62,484



16.    COMMITMENTS AND CONTINGENCIES

---



The Company is party to various legal actions and administrative proceedings and subject to various claims arising in the ordinary course of business,
including those relating to commercial transactions, product liability, safety, health, taxes, environmental and other matters. The Company believes that the ultimate liability, if any, in excess of amounts already provided for in the financial
statements or covered by insurance on the disposition of these matters and the matters discussed below will not have a material adverse effect on the financial position, results of operations or cash flows of the Company except as otherwise
indicated.



Remy Mexico, S. de R.L. de C.V. Arbitration



Remy Mexico Holdings, S. de R.L. de C.V., which we refer
to as RMH, our indirect subsidiary, and GCID Autopartes, S.A. de C.V., which we refer to as GCID, were parties to a series of agreements, including a partnership agreement. The partnership agreement created Remy Mexico, S. de R.L. de C.V. (formerly
Delco Remy Mexico, S. de R.L. de C.V.) (RM), which operates certain manufacturing facilities in Mexico. GCID was the minority partner with a 24% ownership interest. An affiliate of ours and RMH, Remy Componentes, S. de R.L. de C.V.,
which we refer to as RC and RM, were parties to a services agreement with an affiliate of GCID relating to the partnership, which, among other things, required the payment of fees in connection with the provision of employees to the partnership.
That agreement terminated as of April 3, 2004. Another affiliate of GCID was the partnerships landlord until April 30, 2004.



RMH and GCID signed a letter of intent on or about May 3, 2000, whereby GCID agreed to terminate certain of the agreements with RMH and to sell its
partnership interest to RMH in exchange for a $13,000 termination payment by RMH to GCID, but the transaction was never finalized. In June 2001, GCID declared RMH in default under the partnership agreement, alleging that RMH had failed to conduct
the business of the partnership in accordance with that agreement. In August 2001, GCID instituted an arbitration proceeding before the American Arbitration Association against RMH and later added RC and our wholly owned subsidiary, Remy, Inc.
(formerly Delco Remy America, Inc.), who together with RMH and RC are referred to as the named parties. GCID and its affiliates sought damages for the alleged (i) breaches of the partnership agreement, including a requirement under the partnership
that RMH buy out GCIDs partnership interest; (ii) breaches of fiduciary duty; (iii) breaches of various other contracts between and among the various parties and (iv) tortious interference with contractual relations. RM terminated the lease
agreement as of September 27, 2003. RM and RC relocated all operations to another facility in San Luis Potosi, Mexico as of April 30, 2004. In accordance with an interim award from the arbitration panel on March 10, 2004, RM and RC hired the
employees previously provided by GCIDs affiliate under the services agreement as of April 3, 2004.



The arbitration panel issued its final award on June 25, 2004. In accordance with the final award, on July 6, 2004 GCID transferred its interest in RM to
RMH and RMH, RM and RC paid GCID and its affiliates approximately $17,300 for GCIDs minority interest, the award for past services fees for the period of 1997 through 2004, and other claims, including interest. RMH, RM and RC also paid
approximately $1,800 in VAT as a result of these payments.



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UAW Litigation



On April 16, 2003, the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America
(UAW) and its Local Union 662 filed suit against the Company and Remy, Inc. (RI) (formerly Delco Remy America, Inc.), in Federal District Court in the Southern District of Indiana, Indianapolis Division. The lawsuit was filed
under Section 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185, seeking enforcement of an expired Supplemental Unemployment Benefits plan (SUB plan). The plaintiffs allege that the SUB plan provides supplemental unemployment
benefits for 52 weeks and separation pay in an amount exceeding $20,000 for employees who were terminated as a result of the closure of RIs Anderson, Indiana production facilities at the end of March 2003. The plaintiffs also seek to enforce
terminated provisions of a health care program which the plaintiffs allege provides the terminated employees with 25 months of continued hospital, surgical, medical, hearing aid, prescription drug, mental health, substance abuse and vision insurance
coverage. The terminated employees were represented by the UAW and its Local Union 662 under various agreements, which expired on March 31, 2003. The lawsuit was filed shortly after the UAW membership failed to ratify RIs last, best and final
offer for a Shutdown Agreement. The UAW filed an amended complaint on July 8, 2003 to which the Company filed an answer on July 24, 2003. The trial was previously expected to begin in January 2005, however, that date was continued and has not been
reset as of this time. The Company denies the material allegations of the complaint, denies any wrongdoing and intends to defend itself vigorously, but is unable to predict whether the proceedings will have a material adverse effect on the Company.



Prison Labor Matter



In January 2004, a class action on behalf of all prisoners who worked in a
South Carolina Department of Corrections (SCDC) Services Training Program at Lieber Correctional Institute was brought against our former subsidiary Williams, which was sold to Caterpillar, Inc in September 2004, and the SCDC. The
plaintiffs claim they should have been paid industry prevailing wage under a South Carolina prison industries authorization statute, that the SCDC and Williams violated the Payment of Wages Act and that the SCDC and Williams committed at tort under
the South Carolina Tort Claims Act. Under the terms of the sale, the Company retained liability and responsibility for this claim. The Company denies the material allegations of the complaint, denies any wrongdoing and intends to defend itself
vigorously, but is unable to predict whether the proceedings will have a material adverse effect on the Company.



Import/Export Matters



During 2004 the Company continued to expand globally to take advantage of global economic conditions and related cost structures. The Company is
subject to various duties and import/export taxes. The Company is in the process of reviewing its import/export processes in North America, Europe and parts of Asia to verify the appropriate import duty classification, value and duty rate, including
import value added tax.



Remy Reman Facilities



The Remy Reman facilities in Mississippi identified
certain possible violations of state air laws and notified the state environmental agency under the state voluntary audit disclosure rules. The Mississippi Department of Environmental Quality (MDEQ) issued Notices of Violation regarding alleged
violations of state air laws by two of the Remy Reman facilities in Mississippi. Remy Reman resolved this liability through payment in January 2005 of approximately $170.



Franklin Power Products Facility



In September 2000, one of Franklin Power Products, Inc.s Indiana facilities received a Finding of Violation and Order
for Compliance from the EPA requiring the facility to correct violations of its wastewater discharge permits. Franklin Power Products, Inc. has installed wastewater treatment equipment and is in compliance with the terms of the Order and has
eliminated the discharge. In July 2004, the Company and Franklin Power Products, Inc. entered into an agreement with the U.S. Department of Justice on behalf of the EPA, which tolled the statute of limitations on the EPAs potential claim for
penalties. Since that time, the Company has been cooperating with the EPA by providing additional information and has entered into settlement negotiations with EPA and the Department of Justice.



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17.    BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION

---



The Company is a leading global vehicular
parts designer, manufacturer, remanufacturer, marketer and distributor, and a provider of core exchange services. Products include starters, alternators, remanufactured engines, and fuel systems which are principally sold or distributed to OEMs for
both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. It manages its business and operates in a single reportable business segment. Because of the similar economic
characteristics of the operations, including the nature of products, production processes, customers and methods of distribution, those operations have been aggregated following the provisions of SFAS No. 131 for segment reporting purposes.



The Company is a multi-national corporation with operations in
many countries, including the United States, Canada, Mexico, Brazil, China, Hungary, Poland, Germany, South Korea, the United Kingdom, Belgium, Tunisia and the Netherlands. As a result, the Companys financial results could be significantly
affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company distributes its products. The Companys operating results are exposed to changes in exchange rates
between the U.S. dollar and the South Korean Won, the Chinese Yuan, the Mexican Peso and various European currencies. Exposure to variability in foreign currency exchange rates is managed primarily through the use of natural hedges, whereby funding
obligations and assets are both denominated in the local currency. From time to time, the Company enters into exchange agreements to manage its exposure arising from fluctuating exchange rates related to specific transactions. Sales are attributed
to geographic locations based on the point of sale.



|                                 |  |      |           |      |   |         |  |   |        
|-------------------------------- |  | ---- | --------- | ---- | - | ------- |  | - | -------
|                                 |  | 2004 |           | 2003 |   | 2002   
|Net sales to external customers: |  |      |           |      |   |         |  |   |        
|United States                    |  | $    | 840,303   |      | $ | 792,909 |  | $ | 793,280
|Europe                           |  |      | 106,461   |      |   | 99,135  |  |   | 80,212 
|Canada                           |  |      | 705       |      |   | 2,165   |  |   | 3,655  
|Asia Pacific                     |  |      | 51,376    |      |   | 41,436  |  |   | 22,210 
|Mexico and Brazil                |  |      | 52,320    |      |   | 37,149  |  |   | 33,279 
|Total net sales                  |  | $    | 1,051,165 |      | $ | 972,794 |  | $ | 932,636



|                        |  |      |         |      |   |        
|----------------------- |  | ---- | ------- | ---- | - | -------
|                        |  | 2004 |         | 2003
|Long-lived assets:      |  |      |         |      |   |        
|United States           |  | $    | 161,897 |      | $ | 149,633
|Europe                  |  |      | 37,093  |      |   | 35,690 
|Canada                  |  |      | 320     |      |   | 239    
|Asia Pacific            |  |      | 40,384  |      |   | 36,487 
|Mexico and Brazil       |  |      | 50,607  |      |   | 42,966 
|Total long-lived assets |  | $    | 290,301 |      | $ | 265,015



Customers that
accounted for a significant portion of consolidated net sales were as follows:



|                                           |  |      |         |      |   |         |  |   |        
|------------------------------------------ |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                           |  | 2004 |         | 2003 |   | 2002   
|General Motors Corporation                 |  | $    | 291,525 |      | $ | 245,419 |  | $ | 241,475
|International Truck and Engine Corporation |  |      | 109,393 |      |   | 94,013  |  |   | 84,584 



Following is a summary
of the composition by product category of the Companys sales to external customers. Third-party sales for core exchange services are included in the Other category.



|                   |  |      |           |      |   |         |  |   |        
|------------------ |  | ---- | --------- | ---- | - | ------- |  | - | -------
|                   |  | 2004 |           | 2003 |   | 2002   
|Electrical systems |  | $    | 913,630   |      | $ | 841,950 |  | $ | 818,977
|Powertrain         |  |      | 78,741    |      |   | 65,650  |  |   | 58,792 
|Core services      |  |      | 58,794    |      |   | 65,194  |  |   | 54,867 
|Total              |  | $    | 1,051,165 |      | $ | 972,794 |  | $ | 932,636



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18.    SUPPLEMENTAL CASH FLOW INFORMATION

---



|                                                    |  |      |        |     |      |   |        |      |  |   |         |  
|--------------------------------------------------- |  | ---- | ------ | --- | ---- | - | ------ | ---- |  | - | ------- | -
|                                                    |  | 2004 |        |     | 2003 |   |        | 2002 | 
|Cash paid for interest                              |  | $    | 60,232 |     |      | $ | 58,097 |      |  | $ | 63,298  |  
|Cash paid for income taxes, net of refunds received |  |      | 5,957  |     |      |   | 9,397  |      |  |   | 5,332   |  
|Detail of acquisitions:                             |  |      |        |     |      |   |        |      |  |   |         |  
|Fair value of assets acquired                       |  | $    | 1,789  |     |      | $ | 12,524 |      |  | $ | 1,774   |  
|Liabilities assumed                                 |  |      |       |     |      |   | (3,641 | )    |  |   |        |  
|Notes paid (issued)                                 |  |      | 4,786  |     |      |   | 6,759  |      |  |   | (11,439 | )
|Prepayments                                         |  |      | (5,930 | )   |      |   |       |      |  |   |        |  
|Goodwill recorded                                   |  |      | 18,555 | (1) |      |   | 4,052  |      |  |   | 9,918   |  
|Minority interest                                   |  |      | 6,317  |     |      |   | 2,825  |      |  |   | 16,508  |  
|Cash acquired                                       |  |      |       |     |      |   | (3,600 | )    |  |   |        |  
|Net cash paid for acquisitions                      |  | $    | 25,517 |     |      | $ | 18,919 |      |  | $ | 16,761  |  

|(1) | Includes $13,500 recorded in 2003 for accrual of the contingent earn-out liability relative to the acquisition of Knopf.
|--- | ------------------------------------------------------------------------------------------------------------------------



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|19. | FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR SUBSIDIARIES
|--- | ------------------------------------------------------------------------------

---



The Company conducts a significant portion of its business through its
subsidiaries. The Companys 8 5/8% Senior Notes Due 2007, 11% Senior Subordinated Notes Due 2009, Floating Rate Notes, and the 9 3/8% Senior Subordinated Notes are fully and unconditionally guaranteed, jointly and severally, by certain direct
and indirect subsidiaries of the Company (the Subsidiary Guarantors). Certain of the Companys subsidiaries do not guarantee the notes (the Non-Guarantor Subsidiaries). The claims of creditors of Non-Guarantor
Subsidiaries have priority over the rights of the Company to receive dividends or distributions from such subsidiaries.



Presented below is condensed consolidating financial information for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at December
31, 2004 and 2003 and for the years ended December 31, 2004, 2003 and 2002.



The equity method has been used by the Company with respect to investments in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in Non-Guarantor Subsidiaries. Separate
financial statements for Subsidiary Guarantors are not presented.



The following table sets forth the Guarantor and direct Non-Guarantor Subsidiaries:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                         |                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------
|Subsidiary Guarantors                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                         | Non-Guarantor Subsidiaries                                                                                        
|·Ballantrae Corporation ·Franklin Power Products, Inc. ·International Fuel Systems, Inc. ·M &
M Knopf Auto Parts, L.L.C. ·Marine Corporation of America ·Nabco, Inc. ·Power Investments, Inc. ·Power Investments Marine, Inc. ·Powrbilt
Products, Inc. ·Reman Holdings, L.L.C. ·Remy Inc. (fka Delco Remy America, Inc.) ·Remy International Holdings, Inc. (fka Remy International, Inc.) ·Remy
Powertrain, L.P. ·Remy Reman, L.L.C. ·World Wide Automotive, L.L.C. |                                                                                         | ·AutoMatic
Transmission International A/S                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Central Precision
Limited                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Remy Automotive
Germany GmbH (fka Delco Remy Germany GmbH)                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Delco Remy
International (Europe) GmbH, iL                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Electro Diesel
Rebuild BVBA                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Electro-Rebuild
Tunisia S.A.R.L.                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Magnum Power
Products, L.L.C.                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Publitech,
Inc.                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Remy Automotive
Brasil Ltda. (fka Delco Remy Brasil Ltda.)                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Remy Automotive
Europe BVBA (fka Delco Remy Belgium BVBA)                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Remy Automotive
Mexico, S. de R.L. de C.V. (fka Delco Remy Mexico, S. de R.L. de C.V.)
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Remy Automotive
Poland, Sp.zo.o.                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Remy Automotive UK
Limited (fka Delco Remy UK Limited)                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Remy Componentes
S. de R. L. de C. V.                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ·Remy Automotive
Hungary kft (fka Delco Remy Hungary kft.)                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                         | ·Remy India
Holdings, Inc.                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                         | ·Remy Korea
Holdings, Inc.                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                         | ·Remy
Remanufacturing de Mexico, S. de R.L. de C.V. (fka Delco Remy Remanufacturing de Mexico, S. de R.L. de C.V.)
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                         | ·World Wide
Automotive Distributors, Inc.                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                         | ·Remy Electricals
Hubei Company Limited                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                         |                                                                                                                   



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATING BALANCE SHEET



|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS,December 31, 2004                       |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS:                                              |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                           | 40,740   |   |                      | $ | 689     |                           |  | $ | 21,116       |   |  | $            |         |      |  | $ | 62,545   |  
|Trade accounts receivable, net                       |  |                                             |         |   |                      |   | 109,923 |                           |  |   | 44,410       |   |  |              |         |      |  |   | 154,333  |  
|Other receivables                                    |  |                                             | 1,685    |   |                      |   | 3,584   |                           |  |   | 13,828       |   |  |              |         |      |  |   | 19,097   |  
|Inventories                                          |  |                                             |         |   |                      |   | 149,338 |                           |  |   | 69,925       |   |  |              | (1,351   | )(c) |  |   | 217,912  |  
|Assets of discontinued operations                    |  |                                             |         |   |                      |   | (7      | )                         |  |   | 363          |   |  |              |         |      |  |   | 356      |  
|Other current assets                                 |  |                                             | 1,700    |   |                      |   | 1,919   |                           |  |   | 7,595        |   |  |              |         |      |  |   | 11,214   |  
|Total current assets                                 |  |                                             | 44,125   |   |                      |   | 265,446 |                           |  |   | 157,237      |   |  |              | (1,351   | )    |  |   | 465,457  |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Property, plant and equipment                        |  |                                             | 2,610    |   |                      |   | 181,525 |                           |  |   | 145,502      |   |  |              |         |      |  |   | 329,637  |  
|Less accumulated depreciation                        |  |                                             | 203      |   |                      |   | 134,842 |                           |  |   | 57,299       |   |  |              |         |      |  |   | 192,344  |  
|Property, plant and equipment, net                   |  |                                             | 2,407    |   |                      |   | 46,683  |                           |  |   | 88,203       |   |  |              |         |      |  |   | 137,293  |  
|Deferred financing costs, net                        |  |                                             | 14,842   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 14,842   |  
|Goodwill, net                                        |  |                                             | (12      | ) |                      |   | 94,255  |                           |  |   | 12,157       |   |  |              |         |      |  |   | 106,400  |  
|Investment in subsidiaries and joint ventures        |  |                                             | 426,358  |   |                      |   |        |                           |  |   |             |   |  |              | (420,652 | )(a) |  |   | 5,706    |  
|Other assets                                         |  |                                             | 4,531    |   |                      |   | 12,456  |                           |  |   | 9,073        |   |  |              |         |      |  |   | 26,060   |  
|Total assets                                         |  | $                                           | 492,251  |   |                      | $ | 418,840 |                           |  | $ | 266,670      |   |  | $            | (422,003 | )    |  | $ | 755,758  |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY:      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                           | 1,583    |   |                      | $ | 110,434 |                           |  | $ | 58,759       |   |  | $            |         |      |  | $ | 170,776  |  
|Intercompany accounts                                |  |                                             | 64,243   |   |                      |   | (92,507 | )                         |  |   | 28,865       |   |  |              | (601     | )(c) |  |   |         |  
|Accrued interest                                     |  |                                             | 8,105    |   |                      |   |        |                           |  |   | 105          |   |  |              |         |      |  |   | 8,210    |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 6,074   |                           |  |   | 377          |   |  |              |         |      |  |   | 6,451    |  
|Liabilities of discontinued operations               |  |                                             |         |   |                      |   | 436     |                           |  |   | 2,363        |   |  |              |         |      |  |   | 2,799    |  
|Deferred income taxes                                |  |                                             |         |   |                      |   |        |                           |  |   | 3,065        |   |  |              |         |      |  |   | 3,065    |  
|Other liabilities and accrued expenses               |  |                                             | 8,010    |   |                      |   | 62,289  |                           |  |   | 13,858       |   |  |              |         |      |  |   | 84,157   |  
|Current maturities of long-term debt                 |  |                                             |         |   |                      |   | 1,455   |                           |  |   | 21,435       |   |  |              |         |      |  |   | 22,890   |  
|Total current liabilities                            |  |                                             | 81,941   |   |                      |   | 88,181  |                           |  |   | 128,827      |   |  |              | (601     | )    |  |   | 298,348  |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Long-term debt, net of current portion               |  |                                             | 583,857  |   |                      |   | 15,249  |                           |  |   | 11,224       |   |  |              |         |      |  |   | 610,330  |  
|Post-retirement benefits other than pensions         |  |                                             | 16,302   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 16,302   |  
|Accrued pension benefits                             |  |                                             | 13,510   |   |                      |   |        |                           |  |   | 1            |   |  |              |         |      |  |   | 13,511   |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 4,407   |                           |  |   |             |   |  |              |         |      |  |   | 4,407    |  
|Other non-current liabilities                        |  |                                             | 1,561    |   |                      |   | 2,370   |                           |  |   | 1,031        |   |  |              |         |      |  |   | 4,962    |  
|Minority interest                                    |  |                                             |         |   |                      |   | 2,055   |                           |  |   | 8,443        |   |  |              |         |      |  |   | 10,498   |  
|Redeemable preferred stock                           |  |                                             |         |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   |         |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Stockholders (deficit) equity:                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Class B Shares                                       |  |                                             | 3        |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 3        |  
|Paid-in-capital                                      |  |                                             | 334,336  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 334,336  |  
|Retained (deficit) earnings                          |  |                                             | (531,136 | ) |                      |   | 37,002  |                           |  |   | (981         | ) |  |              | (36,021  | )(b) |  |   | (531,136 | )
|Subsidiary investment                                |  |                                             |         |   |                      |   | 270,048 |                           |  |   | 115,333      |   |  |              | (385,381 | )(a) |  |   |         |  
|Accumulated other comprehensive loss                 |  |                                             | (8,123   | ) |                      |   | (472    | )                         |  |   | 2,792        |   |  |              |         |      |  |   | (5,803   | )
|Total stockholders (deficit) equity                 |  |                                             | (204,920 | ) |                      |   | 306,578 |                           |  |   | 117,144      |   |  |              | (421,402 | )    |  |   | (202,600 | )
|Total liabilities and stockholders (deficit) equity |  | $                                           | 492,251  |   |                      | $ | 418,840 |                           |  | $ | 266,670      |   |  | $            | (422,003 | )    |  | $ | 755,758  |  

|(a) | Elimination of investments in subsidiaries.
|--- | -------------------------------------------

|(b) | Elimination of investments in subsidiaries earnings.
|--- | -----------------------------------------------------

|(c) | Elimination of intercompany profit in inventory.
|--- | ------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS



|                                                                                                                                                                          |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | ---------
|IN THOUSANDS,For the Year Ended December 31, 2004                                                                                                                         |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated
|NET SALES                                                                                                                                                                 |  | $                                           |        |   |                      | $ | 975,284 |                           |  | $ | 447,797      |   |  | $            | (371,916 | )(a) |  | $ | 1,051,165
|Cost of goods sold                                                                                                                                                        |  |                                             | 630     |   |                      |   | 810,135 |                           |  |   | 411,823      |   |  |              | (371,916 | )(a) |  |   | 850,672  
|Gross profit                                                                                                                                                              |  |                                             | (630    | ) |                      |   | 165,149 |                           |  |   | 35,974       |   |  |              |         |      |  |   | 200,493  
|                                                                                                                                                                          |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          
|Selling, general and administrative expenses                                                                                                                              |  |                                             | 18,768  |   |                      |   | 69,278  |                           |  |   | 25,217       |   |  |              |         |      |  |   | 113,263  
|Restructuring charges (credits)                                                                                                                                           |  |                                             | 250     |   |                      |   | (73     | )                         |  |   | 765          |   |  |              |         |      |  |   | 942      
|OPERATING (LOSS) INCOME                                                                                                                                                   |  |                                             | (19,648 | ) |                      |   | 95,944  |                           |  |   | 9,992        |   |  |              |         |      |  |   | 86,288   
|                                                                                                                                                                          |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          
|Interest expense, net                                                                                                                                                     |  |                                             | 54,475  |   |                      |   | 2,458   |                           |  |   | 1,304        |   |  |              |         |      |  |   | 58,237   
|Loss on early extinguishment of debt                                                                                                                                      |  |                                             | 7,939   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 7,939    
|Income (loss) from continuing operations before income taxes (benefit), minority interest, loss from unconsolidated joint ventures and equity
in earnings of subsidiaries |  |                                             | (82,062 | ) |                      |   | 93,486  |                           |  |   | 8,688        |   |  |              |         |      |  |   | 20,112   
|                                                                                                                                                                          |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          
|Income tax (benefit) expense                                                                                                                                              |  |                                             | (1,146  | ) |                      |   | 1,455   |                           |  |   | 5,058        |   |  |              |         |      |  |   | 5,367    
|Minority interest                                                                                                                                                         |  |                                             |        |   |                      |   | 2,073   |                           |  |   | 725          |   |  |              |         |      |  |   | 2,798    
|Loss from unconsolidated joint ventures                                                                                                                                   |  |                                             |        |   |                      |   |        |                           |  |   | 588          |   |  |              |         |      |  |   | 588      
|Equity in earnings of subsidiaries                                                                                                                                        |  |                                             | (92,206 | ) |                      |   |        |                           |  |   |             |   |  |              | 92,206   | (b)  |  |   |         
|Net income (loss) from continuing operations                                                                                                                              |  |                                             | 11,290  |   |                      |   | 89,958  |                           |  |   | 2,317        |   |  |              | (92,206  | )    |  |   | 11,359   
|                                                                                                                                                                          |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          
|Discontinued Operations:                                                                                                                                                  |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          
|Income (loss) from discontinued operations, net of tax                                                                                                                    |  |                                             |        |   |                      |   | 1,821   |                           |  |   | (667         | ) |  |              |         |      |  |   | 1,154    
|Gain (loss) on disposal of discontinued operations, net of tax                                                                                                            |  |                                             | 45,134  |   |                      |   | 1,023   |                           |  |   | (2,246       | ) |  |              |         |      |  |   | 43,911   
|Income (loss) from discontinued operations, net of tax                                                                                                                    |  |                                             | 45,134  |   |                      |   | 2,844   |                           |  |   | (2,913       | ) |  |              |         |      |  |   | 45,065   
|NET INCOME (LOSS)                                                                                                                                                         |  |                                             | 56,424  |   |                      |   | 92,802  |                           |  |   | (596         | ) |  |              | (92,206  | )    |  |   | 56,424   
|                                                                                                                                                                          |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          
|Accretion for redemption of preferred stock                                                                                                                               |  |                                             | 27,367  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 27,367   
|Net income (loss) attributable to common stockholders                                                                                                                     |  | $                                           | 29,057  |   |                      | $ | 92,802  |                           |  | $ | (596         | ) |  | $            | (92,206  | )    |  | $ | 29,057   

|(a) | Elimination of intercompany sales and cost of sales.
|--- | ----------------------------------------------------

|(b) | Elimination of equity in net loss of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS



|                                                                                                   |  |                                             |          |   |                      |   |          |                           |  |   |              |   |              |   |             |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | -------- | ------------------------- |  | - | ------------ | - | ------------ | - | ----------- |  | - | -------- | -
|IN THOUSANDS, For the Year Ended December 31, 2004                                                 |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |          | Non-GuarantorSubsidiaries |  |   | Eliminations |   | Consolidated |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |  |                                             |          |   |                      |   |          |                           |  |   |              |   |              |   |             | 
|Net income (loss) attributable to common stockholders                                              |  | $                                           | 29,057   |   |                      | $ | 92,802   |                           |  | $ | (596         | ) |              | $ | (92,206)(a) |  | $ | 29,057   |  
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |  |                                             |          |   |                      |   |          |                           |  |   |              |   |              |   |             |  |   |          |  
|Discontinued operations                                                                            |  |                                             | (45,134  | ) |                      |   | (2,844   | )                         |  |   | 2,913        |   |              |   |            |  |   | (45,065  | )
|Depreciation and amortization                                                                      |  |                                             | 1,252    |   |                      |   | 10,462   |                           |  |   | 11,332       |   |              |   |            |  |   | 23,046   |  
|Non-cash interest expense                                                                          |  |                                             | 3,855    |   |                      |   |         |                           |  |   |             |   |              |   |            |  |   | 3,855    |  
|Loss on early extinguishment of debt                                                               |  |                                             | 7,939    |   |                      |   |         |                           |  |   |             |   |              |   |            |  |   | 7,939    |  
|Accretion for redemption of preferred stock                                                        |  |                                             | 27,367   |   |                      |   |         |                           |  |   |             |   |              |   |            |  |   | 27,367   |  
|Minority interest and loss from unconsolidated joint ventures, net                                 |  |                                             |         |   |                      |   | 2,073    |                           |  |   | 1,313        |   |              |   |            |  |   | 3,386    |  
|Equity in earnings of subsidiaries                                                                 |  |                                             | (92,206  | ) |                      |   |         |                           |  |   |             |   |              |   | 92,206(a)   |  |   |         |  
|Deferred income taxes                                                                              |  |                                             |         |   |                      |   |         |                           |  |   | 2,592        |   |              |   |            |  |   | 2,592    |  
|Post-retirement benefits other than pensions and accrued pension benefits, net                     |  |                                             | 307      |   |                      |   |         |                           |  |   | 1            |   |              |   |            |  |   | 308      |  
|Restructuring charges                                                                              |  |                                             | 250      |   |                      |   | (73      | )                         |  |   | 765          |   |              |   |            |  |   | 942      |  
|Cash payments for restructuring charges                                                            |  |                                             | (250     | ) |                      |   | (7,775   | )                         |  |   | (1,002       | ) |              |   |            |  |   | (9,027   | )
|Mexico arbitration settlement                                                                      |  |                                             |         |   |                      |   |         |                           |  |   | (13,622      | ) |              |   |             |  |   | (13,622  | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring:                |  |                                             |          |   |                      |   |          |                           |  |   |              |   |              |   |             |  |   |          |  
|Accounts receivable                                                                                |  |                                             |         |   |                      |   | (3,390   | )                         |  |   | (7,376       | ) |              |   |            |  |   | (10,766  | )
|Inventories                                                                                        |  |                                             |         |   |                      |   | (18,445  | )                         |  |   | (1,087       | ) |              |   |            |  |   | (19,532  | )
|Accounts payable                                                                                   |  |                                             | (1,188   | ) |                      |   | 36,406   |                           |  |   | (19,906      | ) |              |   |            |  |   | 15,312   |  
|Intercompany accounts                                                                              |  |                                             | 51,717   |   |                      |   | (121,324 | )                         |  |   | 69,607       |   |              |   |            |  |   |         |  
|Other current assets and liabilities                                                               |  |                                             | 2,500    |   |                      |   | (19,324  | )                         |  |   | (5,381       | ) |              |   |            |  |   | (22,205  | )
|Other non-current assets and liabilities, net                                                      |  |                                             | (48,882  | ) |                      |   | 58,550   |                           |  |   | (12,606      | ) |              |   |            |  |   | (2,938   | )
|Net cash (used in) provided by operating activities of continuing operations                       |  |                                             | (63,416  | ) |                      |   | 27,118   |                           |  |   | 26,947       |   |              |   |            |  |   | (9,351   | )
|                                                                                                   |  |                                             |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |  |                                             |          |   |                      |   |          |                           |  |   |              |   |              |   |             | 
|Acquisition, net of cash acquired                                                                  |  |                                             | (5,488   | ) |                      |   | (14,435  | )                         |  |   | (5,594       | ) |              |   |            |  |   | (25,517  | )
|Net proceeds on sale of businesses                                                                 |  |                                             | 104,269  |   |                      |   | 384      |                           |  |   |             |   |              |   |            |  |   | 104,653  |  
|Purchases of property, plant and equipment                                                         |  |                                             | (2,553   | ) |                      |   | (12,543  | )                         |  |   | (10,251      | ) |              |   |            |  |   | (25,347  | )
|Investments in joint ventures                                                                      |  |                                             |         |   |                      |   |         |                           |  |   |             |   |              |   |            |  |   |         |  
|Net cash provided by (used in) investing activities of continuing operations                       |  |                                             | 96,228   |   |                      |   | (26,594  | )                         |  |   | (15,845      | ) |              |   |            |  |   | 53,789   |  
|                                                                                                   |  |                                             |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                              |  |                                             |          |   |                      |   |          |                           |  |   |              |   |              |   |             | 
|Proceeds from issuances of long-term debt                                                          |  |                                             | 275,000  |   |                      |   |         |                           |  |   |             |   |              |   |            |  |   | 275,000  |  
|Retirement of long-term debt                                                                       |  |                                             | (200,000 | ) |                      |   |         |                           |  |   |             |   |              |   |            |  |   | (200,000 | )
|Net (repayments) borrowings under revolving line of credit and other                               |  |                                             | (52,041  | ) |                      |   | (1,159   | )                         |  |   | (9,454       | ) |              |   |            |  |   | (62,654  | )
|Deferred financing costs                                                                           |  |                                             | (15,032  | ) |                      |   |         |                           |  |   |             |   |              |   |            |  |   | (15,032  | )
|Distributions to minority interests                                                                |  |                                             |         |   |                      |   |         |                           |  |   | (1,010       | ) |              |   |            |  |   | (1,010   | )
|Net cash provided by (used in) financing activities of continuing operations                       |  |                                             | 7,927    |   |                      |   | (1,159   | )                         |  |   | (10,464      | ) |              |   |            |  |   | (3,696   | )
|                                                                                                   |  |                                             |          |   |                     
|Effect of exchange rate changes on cash                                                            |  |                                             |         |   |                      |   |         |                           |  |   | 1,510        |   |              |   |            |  |   | 1,510    |  
|                                                                                                   |  |                                             |          |   |                     
|Cash flows of discontinued operations                                                              |  |                                             |         |   |                      |   | 1,075    |                           |  |   | (1,989       | ) |              |   |            |  |   | (914     | )
|Net increase in cash and cash equivalents                                                          |  |                                             | 40,739   |   |                      |   | 440      |                           |  |   | 159          |   |              |   |            |  |   | 41,338   |  
|                                                                                                   |  |                                             |          |   |                     
|Cash and cash equivalents at beginning of year                                                     |  |                                             | 1        |   |                      |   | 249      |                           |  |   | 20,957       |   |              |   |            |  |   | 21,207   |  
|Cash and cash equivalents at end of year                                                           |  | $                                           | 40,740   |   |                      | $ | 689      |                           |  | $ | 21,116       |   |              | $ |            |  | $ | 62,545   |  

|(a) | Elimination of equity in earnings of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATING BALANCE SHEET



|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS, December 31, 2003                      |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS:                                              |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                           | 1        |   |                      | $ | 249     |                           |  | $ | 20,957       |   |  | $            |         |      |  | $ | 21,207   |  
|Trade accounts receivable, net                       |  |                                             |         |   |                      |   | 106,532 |                           |  |   | 36,907       |   |  |              |         |      |  |   | 143,439  |  
|Other receivables                                    |  |                                             |         |   |                      |   | 2,982   |                           |  |   | 11,824       |   |  |              |         |      |  |   | 14,806   |  
|Inventories                                          |  |                                             |         |   |                      |   | 130,893 |                           |  |   | 68,776       |   |  |              | (1,269   | )(c) |  |   | 198,400  |  
|Assets of discontinued operations                    |  |                                             |         |   |                      |   | 67,151  |                           |  |   | 246          |   |  |              |         |      |  |   | 67,397   |  
|Other currents assets                                |  |                                             | 5,529    |   |                      |   | 1,702   |                           |  |   | 6,481        |   |  |              |         |      |  |   | 13,712   |  
|Total current assets                                 |  |                                             | 5,530    |   |                      |   | 309,509 |                           |  |   | 145,191      |   |  |              | (1,269   | )    |  |   | 458,961  |  
|                                                     |  |                                             |          |   |                     
|Property, plant and equipment                        |  |                                             | 57       |   |                      |   | 172,683 |                           |  |   | 119,592      |   |  |              |         |      |  |   | 292,332  |  
|Less accumulated depreciation                        |  |                                             | 47       |   |                      |   | 126,077 |                           |  |   | 41,405       |   |  |              |         |      |  |   | 167,529  |  
|Property, plant and equipment, net                   |  |                                             | 10       |   |                      |   | 46,606  |                           |  |   | 78,187       |   |  |              |         |      |  |   | 124,803  |  
|Deferred financing costs, net                        |  |                                             | 13,968   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 13,968   |  
|Goodwill, net                                        |  |                                             |         |   |                      |   | 93,854  |                           |  |   | 7,008        |   |  |              |         |      |  |   | 100,862  |  
|Investment in subsidiaries and joint ventures        |  |                                             | 348,934  |   |                      |   |        |                           |  |   |             |   |  |              | (343,213 | )(a) |  |   | 5,721    |  
|Other assets                                         |  |                                             | 5,326    |   |                      |   | 5,658   |                           |  |   | 8,677        |   |  |              |         |      |  |   | 19,661   |  
|Total assets                                         |  | $                                           | 373,768  |   |                      | $ | 455,627 |                           |  | $ | 239,063      |   |  | $            | (344,482 | )    |  | $ | 723,976  |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY:      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                           | 2,771    |   |                      | $ | 74,028  |                           |  | $ | 77,551       |   |  | $            |         |      |  | $ | 154,350  |  
|Intercompany accounts                                |  |                                             | 12,526   |   |                      |   | 28,817  |                           |  |   | (40,742      | ) |  |              | (601     | )(c) |  |   |         |  
|Accrued interest                                     |  |                                             | 9,750    |   |                      |   |        |                           |  |   | 87           |   |  |              |         |      |  |   | 9,837    |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 9,787   |                           |  |   | 615          |   |  |              |         |      |  |   | 10,402   |  
|Liabilities of discontinued operations               |  |                                             |         |   |                      |   | 10,154  |                           |  |   | 1,299        |   |  |              |         |      |  |   | 11,453   |  
|Deferred income taxes                                |  |                                             |         |   |                      |   |        |                           |  |   | 644          |   |  |              |         |      |  |   | 644      |  
|Other liabilities and accrued expenses               |  |                                             | 15,325   |   |                      |   | 75,349  |                           |  |   | 30,825       |   |  |              |         |      |  |   | 121,499  |  
|Current maturities of long-term debt                 |  |                                             | 684      |   |                      |   | 1,170   |                           |  |   | 29,543       |   |  |              |         |      |  |   | 31,397   |  
|Total current liabilities                            |  |                                             | 41,056   |   |                      |   | 199,305 |                           |  |   | 99,822       |   |  |              | (601     | )    |  |   | 339,582  |  
|                                                     |  |                                             |          |   |                     
|Long-term debt, net of current portion               |  |                                             | 560,214  |   |                      |   | 16,692  |                           |  |   | 16,097       |   |  |              |         |      |  |   | 593,003  |  
|Post-retirement benefits other than pensions         |  |                                             | 16,431   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 16,431   |  
|Accrued pension benefits                             |  |                                             | 13,073   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 13,073   |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 8,801   |                           |  |   |             |   |  |              |         |      |  |   | 8,801    |  
|Other non-current liabilities                        |  |                                             | 3,788    |   |                      |   | 1,804   |                           |  |   | 1,326        |   |  |              |         |      |  |   | 6,918    |  
|Minority interest                                    |  |                                             |         |   |                      |   | 11      |                           |  |   | 15,182       |   |  |              |         |      |  |   | 15,193   |  
|Redeemable preferred stock                           |  |                                             | 306,969  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 306,969  |  
|Stockholders (deficit) equity:                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Class A Shares                                       |  |                                             |         |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   |         |  
|Class B Shares                                       |  |                                             | 3        |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 3        |  
|Class C Shares                                       |  |                                             |         |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   |         |  
|Retained (deficit) earnings                          |  |                                             | (560,193 | ) |                      |   | (55,800 | )                         |  |   | (385         | ) |  |              | 56,185   | (b)  |  |   | (560,193 | )
|Subsidiary investment                                |  |                                             |         |   |                      |   | 286,316 |                           |  |   | 113,750      |   |  |              | (400,066 | )(a) |  |   |         |  
|Accumulated other comprehensive loss                 |  |                                             | (7,573   | ) |                      |   | (1,502  | )                         |  |   | (6,729       | ) |  |              |         |      |  |   | (15,804  | )
|Total stockholders (deficit) equity                 |  |                                             | (567,763 | ) |                      |   | 229,014 |                           |  |   | 106,636      |   |  |              | (343,881 | )    |  |   | (575,994 | )
|Total liabilities and stockholders (deficit) equity |  | $                                           | 373,768  |   |                      | $ | 455,627 |                           |  | $ | 239,063      |   |  | $            | (344,482 | )    |  | $ | 723,976  |  

|(a) | Elimination of investments in subsidiaries.
|--- | -------------------------------------------

|(b) | Elimination of investments in subsidiaries earnings.
|--- | -----------------------------------------------------

|(c) | Elimination of intercompany profit in inventory.
|--- | ------------------------------------------------



68



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS



|                                                                                                                                                                          |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS, For the Year Ended December 31, 2003                                                                                                                        |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|NET SALES                                                                                                                                                                 |  | $                                           |         |   |                      | $ | 981,813 |                           |  | $ | 514,823      |   |  | $            | (523,842 | )(a) |  | $ | 972,794  |  
|Cost of goods sold                                                                                                                                                        |  |                                             |         |   |                      |   | 847,882 |                           |  |   | 467,282      |   |  |              | (523,842 | )(a) |  |   | 791,322  |  
|Cost of goods sold  special charges:                                                                                                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Core inventory valuation                                                                                                                                                  |  |                                             |         |   |                      |   | 102,296 |                           |  |   | 1,634        |   |  |              |         |      |  |   | 103,930  |  
|Mexican arbitration award                                                                                                                                                 |  |                                             |         |   |                      |   |        |                           |  |   | 14,310       |   |  |              |         |      |  |   | 14,310   |  
|Gross profit                                                                                                                                                              |  |                                             |         |   |                      |   | 31,635  |                           |  |   | 31,597       |   |  |              |         |      |  |   | 63,232   |  
|                                                                                                                                                                          |  |                                             |          |   |                     
|Selling, general and administrative expenses                                                                                                                              |  |                                             | 11,215   |   |                      |   | 67,153  |                           |  |   | 18,402       |   |  |              |         |      |  |   | 96,770   |  
|Restructuring charges                                                                                                                                                     |  |                                             |         |   |                      |   | 48,235  |                           |  |   | 733          |   |  |              |         |      |  |   | 48,968   |  
|OPERATING (LOSS) INCOME                                                                                                                                                   |  |                                             | (11,215  | ) |                      |   | (83,753 | )                         |  |   | 12,462       |   |  |              |         |      |  |   | (82,506  | )
|                                                                                                                                                                          |  |                                             |          |   |                     
|Interest expense, net                                                                                                                                                     |  |                                             | 50,824   |   |                      |   | 2,818   |                           |  |   | 1,812        |   |  |              |         |      |  |   | 55,454   |  
|Income (loss) from continuing operations before income taxes (benefit), minority interest, loss from unconsolidated joint ventures and equity
in earnings of subsidiaries |  |                                             | (62,039  | ) |                      |   | (86,571 | )                         |  |   | 10,650       |   |  |              |         |      |  |   | (137,960 | )
|                                                                                                                                                                          |  |                                             |          |   |                     
|Income tax expense (benefit)                                                                                                                                              |  |                                             | 37,115   |   |                      |   | (9,915  | )                         |  |   | 9,482        |   |  |              |         |      |  |   | 36,682   |  
|Minority interest                                                                                                                                                         |  |                                             |         |   |                      |   | (2,332  | )                         |  |   | 2,189        |   |  |              |         |      |  |   | (143     | )
|Loss from unconsolidated joint ventures                                                                                                                                   |  |                                             | 67       |   |                      |   |        |                           |  |   | 6,360        |   |  |              |         |      |  |   | 6,427    |  
|Equity in earnings of subsidiaries                                                                                                                                        |  |                                             | 87,404   |   |                      |   |        |                           |  |   |             |   |  |              | (87,404  | )(b) |  |   |         |  
|Net (loss) income from continuing operations                                                                                                                              |  |                                             | (186,625 | ) |                      |   | (74,324 | )                         |  |   | (7,381       | ) |  |              | 87,404   |      |  |   | (180,926 | )
|                                                                                                                                                                          |  |                                             |          |   |                     
|Discontinued Operations:                                                                                                                                                  |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Loss from discontinued operations, net of tax                                                                                                                             |  |                                             |         |   |                      |   | (6,464  | )                         |  |   | (1,555       | ) |  |              |         |      |  |   | (8,019   | )
|Gain on disposal of discontinued operations, net of tax                                                                                                                   |  |                                             |         |   |                      |   | 2,320   |                           |  |   |             |   |  |              |         |      |  |   | 2,320    |  
|Loss from discontinued operations, net of tax                                                                                                                             |  |                                             |         |   |                      |   | (4,144  | )                         |  |   | (1,555       | ) |  |              |         |      |  |   | (5,699   | )
|NET (LOSS) INCOME                                                                                                                                                         |  |                                             | (186,625 | ) |                      |   | (78,468 | )                         |  |   | (8,936       | ) |  |              | 87,404   |      |  |   | (186,625 | )
|                                                                                                                                                                          |  |                                             |          |   |                     
|Accretion for redemption of preferred stock                                                                                                                               |  |                                             | 32,895   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 32,895   |  
|Net (loss) income attributable to common stockholders                                                                                                                     |  | $                                           | (219,520 | ) |                      | $ | (78,468 | )                         |  | $ | (8,936       | ) |  | $            | 87,404   |      |  | $ | (219,520 | )

|(a) | Elimination of intercompany sales and cost of sales.
|--- | ----------------------------------------------------

|(b) | Elimination of equity in net loss of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



69



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS



|                                                                                                              |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | -------- | -
|IN THOUSANDS,For the Year Ended December 31, 2003                                                             |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                         |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      | 
|Net (loss) income attributable to common stockholders                                                         |  | $                                           | (219,520 | ) |                      | $ | (78,468 | )                         |  | $ | (8,936       | ) |  | $            | 87,404  | (a)  |  | $ | (219,520 | )
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Discontinued operations                                                                                       |  |                                             |         |   |                      |   | 4,144   |                           |  |   | 1,555        |   |  |              |        |      |  |   | 5,699    |  
|Depreciation and amortization                                                                                 |  |                                             | 1,007    |   |                      |   | 12,109  |                           |  |   | 9,465        |   |  |              |        |      |  |   | 22,581   |  
|Non-cash interest expense                                                                                     |  |                                             | 4,473    |   |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | 4,473    |  
|Accretion for redemption of preferred stock                                                                   |  |                                             | 32,895   |   |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | 32,895   |  
|Minority interest and loss from unconsolidated joint ventures, net                                            |  |                                             | 67       |   |                      |   | (2,332  | )                         |  |   | 8,549        |   |  |              |        |      |  |   | 6,284    |  
|Equity in earnings of subsidiaries                                                                            |  |                                             | 87,404   |   |                      |   |        |                           |  |   |             |   |  |              | (87,404 | )(a) |  |   |         |  
|Deferred income taxes                                                                                         |  |                                             | 28,800   |   |                      |   |        |                           |  |   | (715         | ) |  |              |        |      |  |   | 28,085   |  
|Post-retirement benefits other than pensions and accrued pension benefits, net                                |  |                                             | (4,801   | ) |                      |   | (3,675  | )                         |  |   |             |   |  |              |        |      |  |   | (8,476   | )
|Restructuring charges                                                                                         |  |                                             |         |   |                      |   | 48,235  |                           |  |   | 733          |   |  |              |        |      |  |   | 48,968   |  
|Cash payments for restructuring charges                                                                       |  |                                             | (514     | ) |                      |   | (14,090 | )                         |  |   | (729         | ) |  |              |        |      |  |   | (15,333  | )
|Special charges                                                                                               |  |                                             |         |   |                      |   | 102,296 |                           |  |   | 15,944       |   |  |              |        |      |  |   | 118,240  |  
|Changes in operating assets and liabilities, net of acquisitions, restructuring and non-cash special charges: |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Accounts receivable                                                                                           |  |                                             |         |   |                      |   | (4,250  | )                         |  |   | (4,331       | ) |  |              |        |      |  |   | (8,581   | )
|Inventories                                                                                                   |  |                                             |         |   |                      |   | (11,670 | )                         |  |   | (16,608      | ) |  |              |        |      |  |   | (28,278  | )
|Accounts payable                                                                                              |  |                                             | 1,982    |   |                      |   | (4,912  | )                         |  |   | 27,468       |   |  |              |        |      |  |   | 24,538   |  
|Intercompany accounts                                                                                         |  |                                             | 20,355   |   |                      |   | (22,188 | )                         |  |   | 1,833        |   |  |              |        |      |  |   |         |  
|Other current assets and liabilities                                                                          |  |                                             | 8,648    |   |                      |   | 8,562   |                           |  |   | 3,629        |   |  |              |        |      |  |   | 20,839   |  
|Other non-current assets and liabilities, net                                                                 |  |                                             | 49,111   |   |                      |   | (38,454 | )                         |  |   | (17,982      | ) |  |              |        |      |  |   | (7,325   | )
|Net cash provided by (used in) operating activities of continuing operations                                  |  |                                             | 9,907    |   |                      |   | (4,693  | )                         |  |   | 19,875       |   |  |              |        |      |  |   | 25,089   |  
|                                                                                                              |  |                                             |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                         |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      | 
|Acquisition, net of cash acquired                                                                             |  |                                             |         |   |                      |   | (12,160 | )                         |  |   | (6,759       | ) |  |              |        |      |  |   | (18,919  | )
|Net proceeds on sale of businesses                                                                            |  |                                             |         |   |                      |   | 30,058  |                           |  |   |             |   |  |              |        |      |  |   | 30,058   |  
|Purchases of property, plant and equipment                                                                    |  |                                             |         |   |                      |   | (6,316  | )                         |  |   | (9,989       | ) |  |              |        |      |  |   | (16,305  | )
|Investments in joint ventures                                                                                 |  |                                             | (115     | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (115     | )
|Net cash (used in) provided by investing activities of continuing operations                                  |  |                                             | (115     | ) |                      |   | 11,582  |                           |  |   | (16,748      | ) |  |              |        |      |  |   | (5,281   | )
|                                                                                                              |  |                                             |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                         |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      | 
|Proceeds from issuances of long-term debt                                                                     |  |                                             |         |   |                      |   |        |                           |  |   | 10,297       |   |  |              |        |      |  |   | 10,297   |  
|Net (repayments) borrowings under revolving line of credit and other                                          |  |                                             | (7,812   | ) |                      |   | (988    | )                         |  |   | (3,747       | ) |  |              |        |      |  |   | (12,547  | )
|Deferred financing costs                                                                                      |  |                                             | (1,980   | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (1,980   | )
|Net cash (used in) provided by financing activities of continuing operations                                  |  |                                             | (9,792   | ) |                      |   | (988    | )                         |  |   | 6,550        |   |  |              |        |      |  |   | (4,230   | )
|                                                                                                              |  |                                             |          |   |                     
|Effect of exchange rate changes on cash                                                                       |  |                                             |         |   |                      |   |        |                           |  |   | 967          |   |  |              |        |      |  |   | 967      |  
|                                                                                                              |  |                                             |          |   |                     
|Cash flows of discontinued operations                                                                         |  |                                             |         |   |                      |   | (5,808  | )                         |  |   | (1,845       | ) |  |              |        |      |  |   | (7,653   | )
|Net increase in cash and cash equivalents                                                                     |  |                                             |         |   |                      |   | 93      |                           |  |   | 8,799        |   |  |              |        |      |  |   | 8,892    |  
|                                                                                                              |  |                                             |          |   |                     
|Cash and cash equivalents at beginning of year                                                                |  |                                             | 1        |   |                      |   | 156     |                           |  |   | 12,158       |   |  |              |        |      |  |   | 12,315   |  
|Cash and cash equivalents at end of year                                                                      |  | $                                           | 1        |   |                      | $ | 249     |                           |  | $ | 20,957       |   |  | $            |        |      |  | $ | 21,207   |  

|(a) | Elimination of equity in earnings of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



70



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS



|                                                                                                                                                                                                                               |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS,For the Year Ended December 31, 2002                                                                                                                                                                              |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|NET SALES                                                                                                                                                                                                                      |  | $                                           |         |   |                      | $ | 947,184 |                           |  | $ | 388,345      |   |  | $            | (402,893 | )(a) |  | $ | 932,636  |  
|Cost of goods sold                                                                                                                                                                                                             |  |                                             |         |   |                      |   | 835,240 |                           |  |   | 346,629      |   |  |              | (402,893 | )(a) |  |   | 778,976  |  
|Gross profit                                                                                                                                                                                                                   |  |                                             |         |   |                      |   | 111,944 |                           |  |   | 41,716       |   |  |              |         |      |  |   | 153,660  |  
|                                                                                                                                                                                                                               |  |                                             |          |   |                     
|Selling, general and administrative expenses                                                                                                                                                                                   |  |                                             | 18,664   |   |                      |   | 62,746  |                           |  |   | 13,626       |   |  |              |         |      |  |   | 95,036   |  
|Restructuring credits                                                                                                                                                                                                          |  |                                             |         |   |                      |   | (4,375  | )                         |  |   |             |   |  |              |         |      |  |   | (4,375   | )
|OPERATING (LOSS) INCOME                                                                                                                                                                                                        |  |                                             | (18,664  | ) |                      |   | 53,573  |                           |  |   | 28,090       |   |  |              |         |      |  |   | 62,999   |  
|                                                                                                                                                                                                                               |  |                                             |          |   |                     
|Interest expense, net                                                                                                                                                                                                          |  |                                             | 33,407   |   |                      |   | 14,737  |                           |  |   | 2,385        |   |  |              |         |      |  |   | 50,529   |  
|Income (loss) from continuing operations before income taxes (benefit), minority interest, loss from unconsolidated joint ventures, equity in
earnings of subsidiaries and cumulative effect of change in accounting principle |  |                                             | (52,071  | ) |                      |   | 38,836  |                           |  |   | 25,705       |   |  |              |         |      |  |   | 12,470   |  
|                                                                                                                                                                                                                               |  |                                             |          |   |                     
|Income tax (benefit) expense                                                                                                                                                                                                   |  |                                             | (9,773   | ) |                      |   | 6,736   |                           |  |   | 11,263       |   |  |              |         |      |  |   | 8,226    |  
|Minority interest                                                                                                                                                                                                              |  |                                             |         |   |                      |   | 2,169   |                           |  |   | 2,076        |   |  |              |         |      |  |   | 4,245    |  
|Loss from unconsolidated joint ventures                                                                                                                                                                                        |  |                                             |         |   |                      |   |        |                           |  |   | 3,830        |   |  |              |         |      |  |   | 3,830    |  
|Equity in earnings of subsidiaries                                                                                                                                                                                             |  |                                             | 90,238   |   |                      |   |        |                           |  |   |             |   |  |              | (90,238  | )(b) |  |   |         |  
|Net (loss) income from continuing operations before cumulative effect of change in accounting
principle                                                                                                                        |  |                                             | (132,536 | ) |                      |   | 29,931  |                           |  |   | 8,536        |   |  |              | 90,238   |      |  |   | (3,831   | )
|                                                                                                                                                                                                                               |  |                                             |          |   |                     
|Discontinued operations:                                                                                                                                                                                                       |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Loss from discontinued operations, net of tax                                                                                                                                                                                  |  |                                             |         |   |                      |   | (11,589 | )                         |  |   | (14,692      | ) |  |              |         |      |  |   | (26,281  | )
|Loss on disposal of discontinued operations, net of tax                                                                                                                                                                        |  |                                             |         |   |                      |   | (11,569 | )                         |  |   | (16,679      | ) |  |              |         |      |  |   | (28,248  | )
|Loss from discontinued operations                                                                                                                                                                                              |  |                                             |         |   |                      |   | (23,158 | )                         |  |   | (31,371      | ) |  |              |         |      |  |   | (54,529  | )
|                                                                                                                                                                                                                               |  |                                             |          |   |                     
|Cumulative effect of change in accounting principal, net                                                                                                                                                                       |  |                                             |         |   |                      |   | (54,890 | )                         |  |   | (19,286      | ) |  |              |         |      |  |   | (74,176  | )
|NET (LOSS) INCOME                                                                                                                                                                                                              |  |                                             | (132,536 | ) |                      |   | (48,117 | )                         |  |   | (42,121      | ) |  |              | 90,238   |      |  |   | (132,536 | )
|                                                                                                                                                                                                                               |  |                                             |          |   |                     
|Accretion for redemption of preferred stock                                                                                                                                                                                    |  |                                             | 29,375   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 29,375   |  
|Net (loss) income attributable to common stockholders                                                                                                                                                                          |  | $                                           | (161,911 | ) |                      | $ | (48,117 | )                         |  | $ | (42,121      | ) |  | $            | 90,238   |      |  | $ | (161,911 | )

|(a) | Elimination of intercompany sales and cost of sales.
|--- | ----------------------------------------------------

|(b) | Elimination of equity in net loss of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



|                                                                                          |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|----------------------------------------------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | -------- | -
|IN THOUSANDS,For the Year Ended December 31, 2002                                         |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Cash Flows from Operating Activities:                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Net (loss) income attributable to common stockholders                                     |  | $                                           | (161,911 | ) |                      | $ | (48,117 | )                         |  | $ | (42,121      | ) |  | $            | 90,238  | (a)  |  | $ | (161,911 | )
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Cumulative effect of change in accounting principal                                       |  |                                             |         |   |                      |   | 54,890  |                           |  |   | 19,286       |   |  |              |        |      |  |   | 74,176   |  
|Discontinued operations                                                                   |  |                                             |         |   |                      |   | 23,158  |                           |  |   | 31,371       |   |  |              |        |      |  |   | 54,529   |  
|Depreciation and amortization                                                             |  |                                             | 1,011    |   |                      |   | 16,355  |                           |  |   | 7,845        |   |  |              |        |      |  |   | 25,211   |  
|Non-cash interest expense                                                                 |  |                                             | 3,754    |   |                      |   | 339     |                           |  |   |             |   |  |              |        |      |  |   | 4,093    |  
|Accretion for redemption of preferred stock                                               |  |                                             | 29,375   |   |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | 29,375   |  
|Minority interest and loss from unconsolidated joint ventures, net                        |  |                                             |         |   |                      |   | 2,169   |                           |  |   | 5,906        |   |  |              |        |      |  |   | 8,075    |  
|Equity in earnings of subsidiaries                                                        |  |                                             | 90,238   |   |                      |   |        |                           |  |   |             |   |  |              | (90,238 | )(a) |  |   |         |  
|Deferred income taxes                                                                     |  |                                             | (1,187   | ) |                      |   | 705     |                           |  |   | 5,278        |   |  |              |        |      |  |   | 4,796    |  
|Post-retirement benefits other than pensions and accrued pension benefits, net            |  |                                             | 323      |   |                      |   | 2,810   |                           |  |   | (1,181       | ) |  |              |        |      |  |   | 1,952`   |  
|Restructuring credits                                                                     |  |                                             |         |   |                      |   | (4,375  | )                         |  |   |             |   |  |              |        |      |  |   | (4,375   | )
|Cash payments for restructuring charges                                                   |  |                                             |         |   |                      |   | (15,044 | )                         |  |   | (771         | ) |  |              |        |      |  |   | (15,815  | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring:       |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Accounts receivable                                                                       |  |                                             |         |   |                      |   | 12,129  |                           |  |   | (6,664       | ) |  |              |        |      |  |   | 5,465    |  
|Inventories                                                                               |  |                                             |         |   |                      |   | 5,540   |                           |  |   | (10,404      | ) |  |              |        |      |  |   | (4,864   | )
|Accounts payable                                                                          |  |                                             | (514     | ) |                      |   | (3,784  | )                         |  |   | 19,510       |   |  |              |        |      |  |   | 15,212   |  
|Intercompany accounts                                                                     |  |                                             | 51,941   |   |                      |   | (24,384 | )                         |  |   | (27,557      | ) |  |              |        |      |  |   |         |  
|Other current assets and liabilities                                                      |  |                                             | (1,323   | ) |                      |   | 15,029  |                           |  |   | (8,958       | ) |  |              |        |      |  |   | 4,748    |  
|Other non-current assets and liabilities, net                                             |  |                                             | (20,917  | ) |                      |   | 18,005  |                           |  |   | 260          |   |  |              |        |      |  |   | (2,652   | )
|Net cash (used in) provided by operating activities of continuing operations              |  |                                             | (9,210   | ) |                      |   | 55,425  |                           |  |   | (8,200       | ) |  |              |        |      |  |   | 38,015   |  
|                                                                                          |  |                                             |          |   |                     
|Cash Flows from Investing activities:                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Acquisitions, net of cash acquired                                                        |  |                                             |         |   |                      |   | (11,023 | )                         |  |   | (5,738       | ) |  |              |        |      |  |   | (16,761  | )
|Purchases of property, plant and equipment                                                |  |                                             |         |   |                      |   | (11,337 | )                         |  |   | (7,164       | ) |  |              |        |      |  |   | (18,501  | )
|Investments in joint ventures                                                             |  |                                             | (3,000   | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (3,000   | )
|Net cash used in investing activities of continuing operations                            |  |                                             | (3,000   | ) |                      |   | (22,360 | )                         |  |   | (12,902      | ) |  |              |        |      |  |   | (38,262  | )
|                                                                                          |  |                                             |          |   |                     
|Cash Flows from Financing Activities:                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Proceeds from issuance of long-term debt                                                  |  |                                             | 144,769  |   |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | 144,769  |  
|Retirement of long-term debt                                                              |  |                                             | (144,769 | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (144,769 | )
|Net borrowings (repayments) under revolving line of credit and other                      |  |                                             | 20,027   |   |                      |   | (16,386 | )                         |  |   | 11,595       |   |  |              |        |      |  |   | 15,236   |  
|Deferred financing costs                                                                  |  |                                             | (7,816   | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (7,816   | )
|Distributions to minority interests                                                       |  |                                             |         |   |                      |   |        |                           |  |   | (1,800       | ) |  |              |        |      |  |   | (1,800   | )
|Net cash provided by (used in) financing activities of continuing operations              |  |                                             | 12,211   |   |                      |   | (16,386 | )                         |  |   | 9,795        |   |  |              |        |      |  |   | 5,620    |  
|                                                                                          |  |                                             |          |   |                     
|Effect of exchange rate changes on cash                                                   |  |                                             |         |   |                      |   | 186     |                           |  |   | 2,031        |   |  |              |        |      |  |   | 2,217    |  
|                                                                                          |  |                                             |          |   |                     
|Cash flows of discontinued operations                                                     |  |                                             |         |   |                      |   | (16,817 | )                         |  |   | (1,012       | ) |  |              |        |      |  |   | (17,829  | )
|Net increase (decrease) in cash and cash equivalents                                      |  |                                             | 1        |   |                      |   | 48      |                           |  |   | (10,288      | ) |  |              |        |      |  |   | (10,239  | )
|                                                                                          |  |                                             |          |   |                     
|Cash and cash equivalents at beginning of year                                            |  |                                             |         |   |                      |   | 108     |                           |  |   | 22,446       |   |  |              |        |      |  |   | 22,554   |  
|Cash and cash equivalents at end of year                                                  |  | $                                           | 1        |   |                      | $ | 156     |                           |  | $ | 12,158       |   |  | $            |        |      |  | $ | 12,315   |  

|(a) | Elimination of equity in earnings of consolidated subsidiaries.
|--- | ---------------------------------------------------------------





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20.    QUARTERLY FINANCIAL INFORMATION(UNAUDITED)

---



|                                                       |  |         |         |   |         |   |         |         |  |   |          |   |            |   |         |  |   |          
|------------------------------------------------------ |  | ------- | ------- | - | ------- | - | ------- | ------- |  | - | -------- | - | ---------- | - | ------- |  | - | ---------
|Quarter Ended:                                         |  | 3/31/04 |         |   | 6/30/04 |   |         | 9/30/04 |  |   | 12/31/04 |   | Total Year
|Net sales                                              |  | $       | 269,028 |   |         | $ | 272,032 |         |  | $ | 254,271  |   |            | $ | 255,834 |  | $ | 1,051,165
|Gross profit                                           |  |         | 50,270  |   |         |   | 54,293  |         |  |   | 50,032   |   |            |   | 45,898  |  |   | 200,493  
|Income (loss) from continuing operations               |  |         | 5,700   |   |         |   | (85     | )       |  |   | 3,885    |   |            |   | 1,859   |  |   | 11,359   
|Income (loss) from discontinued operations, net of tax |  |         | (552    | ) |         |   | 1,543   |         |  |   | (25      | ) |            |   | 188     |  |   | 1,154    
|Gain on disposal of businesses, net of tax             |  |         | 108     |   |         |   | 107     |         |  |   | 43,162   |   |            |   | 534     |  |   | 43,911   
|Net income                                             |  |         | 5,256   |   |         |   | 1,565   |         |  |   | 47,022   |   |            |   | 2,581   |  |   | 56,424   



|                                                  |  |         |         |   |         |   |         |         |  |   |          |   |  |            |          |   |  |   |          |  
|------------------------------------------------- |  | ------- | ------- | - | ------- | - | ------- | ------- |  | - | -------- | - |  | ---------- | -------- | - |  | - | -------- | -
|Quarter Ended:                                    |  | 3/31/03 |         |   | 6/30/03 |   |         | 9/30/03 |  |   | 12/31/03 |   |  | Total Year |         
|Net sales                                         |  | $       | 230,888 |   |         | $ | 251,133 |         |  | $ | 246,677  |   |  | $          | 244,096  |   |  | $ | 972,794  |  
|Gross profit (loss)                               |  |         | 39,480  |   |         |   | 48,741  |         |  |   | 47,662   |   |  |            | (72,651  | ) |  |   | 63,232   |  
|Income (loss) from continuing operations          |  |         | (49,209 | ) |         |   | (1,250  | )       |  |   | 3,474    |   |  |            | (133,941 | ) |  |   | (180,926 | )
|Loss from discontinued operations, net of tax     |  |         | (2,292  | ) |         |   | (756    | )       |  |   | (833     | ) |  |            | (4,138   | ) |  |   | (8,019   | )
|Gain (loss) on disposal of businesses, net of tax |  |         | 2,417   |   |         |   |        |         |  |   |         |   |  |            | (97      | ) |  |   | 2,320    |  
|Net income (loss)                                 |  |         | (49,084 | ) |         |   | (2,006  | )       |  |   | 2,641    |   |  |            | (138,176 | ) |  |   | (186,625 | )



The Company restated
its statements of operations in 2003 and the first and second quarters of 2004 to give effect to the classification of the Companys transmission remanufacturing businesses as discontinued operations effective with the sale and planned sale of
those businesses in the third quarter of 2004.



21.    RELATED PARTY TRANSACTIONS

---



In 2002 the Company entered into an advisory agreement with CVC Management LLC (the Advisor), an affiliate of Court Square and CVC Equity
Partners. Under the terms of the agreement, the Advisor is required to provide executive, management, consulting and support services to the Company and certain of its subsidiaries. The Advisor is entitled to receive an initial advisory fee of $1.0
million for 2002 and an advisory fee of $1.0 million for each year thereafter, payable in equal quarterly installments. The Company made payments to the Advisor for the advisory fee in 2004 of $2.75 million for the period 2002 through the third
quarter of 2004. The advisory agreement continues until December 31, 2006 and is automatically renewed from year to year thereafter unless terminated by either of the parties. The Advisor was also entitled to receive a transaction fee of $2.5
million for services provided in connection with the refinancing of the Companys senior credit facilities in 2002. The Company paid the Advisor the $2.5 million transaction fee in 2004. The Advisor may receive additional transaction fees under
the advisory agreement in amounts to be agreed upon by the parties for services provided in connection with future financings, acquisitions and divestitures.



22.    SUBSEQUENT EVENTS

---



On March 18, 2005 the Company acquired substantially all of the assets and assumed certain liabilities of UPC, based in
Oklahoma City. UPC is a major supplier to the automotive aftermarket for new and remanufactured starters and alternators, offering custom branding, packaging and logistics solutions as well as complete engineering and support services. The purchase
price consisted of approximately $54 million in cash, the assumption of certain liabilities and a contingent earn out to be paid over a four-year period if incremental financial performance objectives above the current performance of the combined
electrical aftermarket business are attained. The Company funded this acquisition with cash on hand and borrowings available under its existing revolving credit facility. In connection with this acquisition the Company entered into an Amendment No.
2 to the Second Amended and Restated Loan and Security Agreement.



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|ITEM 9 |  | DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------ |  | ---------------------------------------------------------------------

---



There were no disagreements with the independent accountants.



ITEM 9A    CONTROLS AND PROCEDURES

---



(a) Within 90 days prior to the date of the filing of this report, we carried out an evaluation, under the supervision and with the participation of its
principal executive officer and principal financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were effective in timely alerting us to material information required to be included in our periodic SEC reports.



(b) In addition, we reviewed our internal controls, and there have been no significant changes in our internal controls or
in other factors that could significantly affect those controls subsequent to the date of their last evaluation.



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PART III



|ITEM 10 |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|------- |  | --------------------------------------------------

---



Harold K. Sperlich, Chairman of the Board of Directors. Mr. Sperlich has been
Chairman of the Board of Directors since our inception in 1994. Since retiring from Chrysler Corporation in 1988, having served as its President, Mr. Sperlich has served as a consultant to the automotive industry. Before joining Chrysler in 1977,
Mr. Sperlich held several senior administrative and operating posts with Ford Motor Company. Age: 75



Thomas J. Snyder, President, Chief Executive Officer and Director. Mr. Snyder was elected Chief Executive Officer effective January 1, 2000. He was
elected President, Chief Operating Officer and Director when we were founded in 1994. From 1973 to 1994, he held a variety of managerial and executive positions with the Delco Remy Division of GM. He is a member of the Board of the Indiana Chamber
of Commerce and of Saint Johns Health Systems. He is a member of the Board of Visitors of Hudson Institute and of Indiana Universitys Kelley School of Business in Indianapolis. Age: 60



E.H. Billig, Vice Chairman of the Board of Directors. Mr. Billig has been
Vice Chairman of the Board of Directors since our inception in 1994. Mr. Billig has been Chairman of the Board of MSX International, Inc. since 1997, where he was also Chief Executive Officer until January 2000. He was formerly President and Chief
Operating Officer of MascoTech, Inc. He is also a director of Titan Wheel International, Inc. Age: 77



Richard M. Cashin, Jr., Director. Mr. Cashin has been a director since our inception in 1994. Mr. Cashin was President from 1994 to April 2000 and a
Managing Director for more than five years of Citicorp Venture Capital Ltd., which we refer to as CVC. From April 2000 to April 2001, he was a partner of Cashin Capital Partners, a private equity investment firm. Since April 2001, he has been the
Managing Partner of One Equity Partners, the private equity arm of Bank One. In addition, Mr. Cashin serves as a director of Fairchild Semiconductor Corporation, Titan Wheel International, Inc., and Quintiles Transnational Corp. Age: 51



John P. Civantos, Director. Mr. Civantos became a director in 2004. Mr.
Civantos joined CVC as a Principal in 2004 after serving as a Principal for several years with the leveraged buyout firm Hicks, Muse, Tate & Furst. Prior to Hicks Muse, he was with Morgan Stanley & Co. Age: 37



Alexander P. Coleman, Director. Mr. Coleman has been a director since 2001.
Mr. Coleman is a Managing Investment Partner of Dresdner Kleinwort Benson Private Equity LLC, Dresdner Bank A.G.s U.S. private equity arm, and a Managing Director of Dresdner Kleinwort Wasserstein. Mr. Coleman joined Dresdner Kleinwort Benson
in January 1996. Mr. Coleman is a director of KMC Telecom, Inc. and Gardenburger, Inc. Age: 38



Michael A. Delaney, Director. Mr. Delaney has been a director since our inception in 1994. Mr. Delaney has been a Managing Director of CVC since 1995 and a Vice President for the past six years. Mr. Delaney is Vice
President and Managing Director of Court Square. He is also a director of Strategic Industries LLC, Palomar Technological Companies, IWCO Corporation, MSX International, Inc., ERICO International Corporation, and Arizant, Inc. Age: 50



James R. Gerrity, Director. Mr. Gerrity has been a director since our
inception in 1994. From 1986 to 1993, Mr. Gerrity was President and a director of Dyneer Corporation. Mr. Gerrity currently is a director of Keystone Automotive Industries and Flender AG. Age: 63



Robert J. Schultz, Director. Mr. Schultz became a director in 1997. Mr.
Schultz retired as Vice Chairman and a member of the Board of Directors of GM in 1993. Mr. Schultz joined GM in 1955 and served as General Manger of GMs Delco Electronics Division and Group Executive of Chevrolet-Pontiac-GM of Canada. Mr.
Schultz is also Chairman of the Board of Advanced Electron Beams, Inc., a director of MCT Corporation, and was Chairman of the Board of OEA, Inc. until its sale in 2002. He is also a member of the Board of Trustees of California Institute of
Technology. Age: 74



Rajesh K. Shah, Executive Vice President,
Chief Financial Officer. Mr. Shah has been our Chief Financial Officer since March 2002. Prior to joining us, Mr. Shah was the Chief Financial Officer and Executive Vice President of Finance for Collins & Aikman Corp. since 1999, and prior to
that he served as Vice President of Finance for United Technologies Automotive Division since 1994. Age: 53



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Roderick English, Senior Vice President, Human Resources and Communications. Mr. English has been Senior
Vice President of Human Resources and Communications since November 1997. Prior to that Mr. English had been Senior Vice President of Human Resources and Communications at Remy Inc. since our inception in 1994. Mr. English joined the Delco Remy
Division of GM in 1976 and became Plant Manager of plant 17 in 1992. Prior to that, Mr. English served as Divisional Manager of Labor Relations since 1989. Age: 53



Amitabh Rai, Vice President and Corporate Controller. Mr. Rai has been Vice President and Corporate Controller since July
2003. Before joining us, Mr. Rai was with Sensient Technologies Corporation since November 1990 in financial roles of increasing responsibility, most recently as Director of Accounting and Finance, Sensient Flavors Group. Age: 44



Patrick C. Mobouck, Vice President-Managing Director, Europe. Mr. Mobouck has
been Vice President-Managing Director, Europe since July 1997. He has also been Chairman of Autovill since August 1997. Before joining us, Mr. Mobouck was with Monroe Auto Equipment since 1987, most recently as Managing Director-Europe, Middle East
and Africa. Age: 50



Richard L. Stanley, President, Remy
America. Mr. Stanley has been President of Remy Inc. since November 1998. Prior to that, Mr. Stanley had been Senior Vice President, Automotive Systems since our inception in 1994. Mr. Stanley joined the Delco Remy Division of GM in 1978, serving
most recently as Director of Customer Programs since 1992 and as European Chief Engineer since 1988. Age: 48



Audit Committee Financial Expert



The Board of Directors believes that its audit committee members are financially literate and are capable of analyzing and evaluating the Companys financial statements. However, the Board has determined that
none of the audit committee members currently meet the technical requirements for being an audit committee financial expert as that term is defined under applicable rules of the Securities and Exchange Commission. As the Board of
Directors believes that the current audit committee members are qualified to carry out all of the duties and responsibilities of an audit committee, the Board does not believe that it is necessary at this time to actively search for another person
to serve on the audit committee who would qualify as an audit committee financial expert.



Code of Ethics



The Company has adopted a code of ethics applicable to the Companys principal executive officer, principal financial officer, principal accounting officer or controller, or for persons performing similar functions. The Company will
provide a copy of the code of ethics to any person, without charge, upon written request made to the Companys Corporate Secretary.



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|ITEM 11 |  | EXECUTIVE COMPENSATION
|------- |  | ----------------------

---



Executive Compensation



The following table sets forth, for the years ending December 31, 2004, 2003 and 2002, the information regarding the cash compensation paid by us, as well
as other compensation paid or accrued for that period, to each of our executive officers named below, in all capacities in which they served.



Summary Compensation Table



|                                                                          |  |              |  |                        |  |                 |  |                             |           |  |                          |          
|------------------------------------------------------------------------- |  | ------------ |  | ---------------------- |  | --------------- |  | --------------------------- | --------- |  | ------------------------ | ---------
|                                                                          |  |              |  | Annual Compensation    |  |                 |  |                            
|Name and Principal Position                                               |  | Year         |  | Salary($)              |  | Bonus($)        |  | Other AnnualCompensation($) |           |  | All OtherCompensation($) |          
|                                                                          |  |              |  | (dollars in thousands) | 
|Thomas J. Snyder President and ChiefExecutive Officer                     |  | 200420032002 |  | 516.7500.0481.2        |  | 269.6434.9352.3 |  | 70.9                      | (1)(1)(1) |  | 128.151.450.3            | (1)(1)(1)
|                                                                          |  |              |  |                        | 
|Rajesh K. Shah Executive Vice President and Chief Financial Officer       |  | 200420032002 |  | 441.7425.0336.4        |  | 139.7229.4267.8 |  | 0.820.110.0                 | (2)(2)(2) |  | 25.524.923.3             | (2)(2)(2)
|                                                                          |  |              |  |                        | 
|Patrick C. MobouckVice President andManaging Director, Europe             |  | 200420032002 |  | 376.0347.9347.9        |  | 101.9134.9103.6 |  |                          |           |  |                       |          
|                                                                          |  |              |  |                        | 
|Richard L. StanleyPresident, Remy Inc.                                    |  | 200420032002 |  | 330.7321.0306.2        |  | 102.9167.5155.9 |  | 9.3                       | (3)       |  | 29.028.227.1             | (3)(3)(3)
|                                                                          |  |              |  |                        | 
|Roderick EnglishSenior Vice President, Human Resources and Communications |  | 200420032002 |  | 288.5281.0271.7        |  | 89.3149.2139.9  |  | 5.5                       | (4)(4)(4) |  | 23.025.026.1             | (4)(4)(4)

---

|(1) | Includes the following in fiscal years 2004, 2003 and 2002, respectively: (i) Other Annual Compensation reflects amount reimbursed for payment of taxes; (ii) All Other Compensation
reflects $116.3, $40.6 and $41.8 in life insurance premiums paid, the remainder reflects matching contributions under our 401(k) Plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes the following in fiscal years 2004, 2003 and 2002, respectively: (i) Other Annual Compensation reflects amount reimbursed for payment of taxes in 2004, and reflects
relocation benefits in 2003 and 2002; (ii) All Other Compensation reflects $24.8, $24.9 and $23.3 in life insurance premiums paid, the remainder reflects matching contributions under our 401(k) Plan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes the following in fiscal years 2004, 2003 and 2002, respectively: (i) Other Annual Compensation reflects amount reimbursed for payment of taxes; (ii) All Other Compensation
reflects $18.5, $18.6 and $19.1 in life insurance premiums paid, the remainder reflects matching contributions under our 401(k) Plan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Includes the following in fiscal years 2004, 2003 and 2002, respectively: (i) Other Annual Compensation reflects amount reimbursed for payment of taxes; (ii) All Other Compensation
reflects $16.9, $16.9 and $18.4 in life insurance premiums paid, the remainder reflects matching contributions under our 401(k) Plan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Stock Options



There are currently no options outstanding to purchase our securities. See Item 13, Certain Relationships and Related Transactions, for a
description of other agreements entered into between us and our executive officers and directors as a result of the going private transaction and the merger.



Retirement Plans



Remy Inc., our wholly owned subsidiary, established the Remy Inc. Salaried Retirement Plan, which we refer to as the retirement plan, primarily to provide
eligible salaried employees with a monthly pension benefit after retirement for



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life. As of December 31, 2004, our named executive officers have been credited with the following amounts of service under the retirement plan: Thomas J.
Snyder  42.4 years; and Richard L. Stanley  26.8 years.



Change of Control Agreements



We
executed change of control agreements with the following executive officers: Mr. Snyder, Mr. Shah, Mr. Stanley, Mr. English and Mr. Mobouck. These agreements entitle each of the eligible executive officers to receive payments and benefits upon the
occurrence of a change of control of our business followed by termination of the executives employment within the two years immediately following the change of control under specified circumstances. In case of Mr. Snyder, the total payment
will be equal to $2.7 million, and he will be entitled to receive continuation of medical, dental and life insurance benefits until his sixty-fifth birthday. Each eligible executive officer other than Mr. Snyder will receive a payment of $1.0
million (or if the termination occurs after the first two years following execution of the change of control agreements, his or her average compensation in the three full calendar years immediately preceding the termination of employment) and
continuation of medical, dental and life insurance benefits for a period of one year after the termination of employment with us.



Payments and other benefits received by Mr. Snyder will be subject to gross-up tax treatment so that we will compensate Mr. Snyder for any excise taxes
applicable to payments and other benefits, including the gross-up payment, received by him upon a change of control. Payments and other benefits received by the other eligible executives will be subject to cutback treatment so that any payments or
other benefits to be received by any of them will be reduced to a level, which eliminates any excise taxes. Under some circumstances, the present value of the payments and other benefits to be provided to the executives in connection with a change
of control will not be deductible by us.



Amendments to
Benefit Plans



As a condition to the execution of the
change of control agreements, we required the applicable executive officers to agree to amendments to our benefit plans. We amended the definition of change in control in the Remy International, Inc. Supplemental Executive Retirement
Plan, which we refer to as the executive retirement plan, to conform to the definition contained in the change of control agreements. In addition, we amended the executive retirement plan to provide that, upon a change in control, we will not be
required to place any funds in trust unless the board of directors determines in good faith that the change in control or any related or contemplated financing transaction will impair in any material respect our financial condition or
creditworthiness or any other surviving successor or entity. We further amended the executive retirement plan to remove the provision providing for accelerated vesting of benefits upon a change in control. All affected persons consented to the
amendments.



Split-Dollar Insurance Agreements



We entered into Collateral Assignment Split-Dollar
Insurance Agreements, effective as of August 1, 2000, with certain key management employees. The employees own the life insurance policies. However, they have assigned the policies to us as security for the repayment of premiums paid by us. Our
interest in the cash value of the policy is equal to the premium paid by us, and the employees have a remaining interest in the cash value. If an employee dies while the collateral assignment is in place, we have a right to receive a portion of the
death benefit equal to the amount of the premiums previously paid by us, with any excess payable to designated beneficiaries of the employee. Under the agreements, the employee is provided with life insurance protection under a universal life
insurance product, which we refer to as the policy. The collateral assignment will terminate on the first to occur of the following events:



| | · |  | total cessation of our business;
| | - |  | --------------------------------



| | · |  | our bankruptcy, receivership or dissolution;
| | - |  | --------------------------------------------



| | · |  | surrender or cancellation of the policy by the employee;
| | - |  | --------------------------------------------------------



| | · |  | employee entering into competition (as defined by the agreements) with us or an affiliated employer;
| | - |  | ----------------------------------------------------------------------------------------------------



| | · |  | the delivery by the employee of a written notice terminating the agreement;
| | - |  | ---------------------------------------------------------------------------



| | · |  | death of the employee;
| | - |  | ----------------------



| | · |  | termination of the employees employment with us for cause (as defined by the agreements); or
| | - |  | ---------------------------------------------------------------------------------------------



| | · |  | as of the date the employee turns 65 or 75, as defined.
| | - |  | -------------------------------------------------------



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Upon the occurrence of any of these events other than death of an employee, the employee has an option to
tender an amount equal to the amount of the premiums paid by us under the agreements, and upon receipt of the repayment we will release the assignment of the policy by the employee. Messrs. Snyder, Shah, English and Stanley are parties to the
agreements.



As a condition to execution of the change of
control agreements, we required the applicable executives to agree to amend the agreements to conform the definition of change in control to the definition included in the Change of Control Agreements. We also amended the agreements to provide that
our obligations to place substantial sums in trust for the benefit of the beneficiaries in connection with a change in control will be triggered only if our Board of Directors determines in good faith that the change in control or any related or
contemplated financing transaction will impair in any material respect our financial condition or creditworthiness or any other surviving or successor entity.



Employment Agreement



We entered into an employment agreement with Mr. Snyder, which provided for his employment until July 2003. In July 2003, Mr. Snyders agreement
automatically extended through July 2004 and will continue to automatically extend for successive additional 12-month periods after July 2003 until notice by either us or Mr. Snyder. Mr. Snyder receives an annual base salary of $500,000, subject to
merit increases as determined by the Board of Directors, plus annual performance bonuses as determined by the Board of Directors. The agreement provides that Mr. Snyder may not engage in any business competitive with us while employed by us and for
a period of one year thereafter. In July 2004, Mr. Snyders agreement automatically extended through July 2005.



Separation Agreement



We executed a separation agreement with Mr. Shah. If we terminate Mr. Shahs employment other than for cause or Mr. Shah terminates his employment
for good reason, Mr. Shah is entitled to receive from us his accrued salary to the date of termination, his accrued pro-rata bonus to the date of termination, reimbursement for relocation expenses, twelve months of executive outplacement services,
and, for eighteen months after the date of termination, his base salary at the date of termination, a bonus equal to 60% of his salary at the date of termination, and continued medical, dental and vision benefits.



Director Compensation



Mr. Sperlich received $309,184 in directors fees during 2004 for
services related to special projects (in connection with acquisitions and strategic alliances) undertaken by him at the direction of the Board of Directors in their capacity as Directors. Mr. Sperlichs directors fees above include a fee of
$1,200 for each Board of Directors meeting attended and a fee of $1,000 for each meeting of a committee of the Board of Directors attended.



During 2004, Mr. Billig, Mr. Schultz and Mr. Gerrity each received an annual fee of $40,000, and each received a fee of $1,200 for each Board of Directors
meeting attended and a fee of $1,000 for each meeting of a committee of the Board of Directors attended. Total directors fees to Mr. Billig, Mr. Schultz and Mr. Gerrity in 2004 were $42,200, $43,600 and $51,000, respectively.



|ITEM 12 |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|------- |  | --------------------------------------------------------------

---



Effective September 30, 2004, our stockholders formed a new holding company,
Remy Worldwide Holdings, Inc. (RWH), to own all of the outstanding stock of Remy International, Inc. Our stockholders exchanged all of their stock for identical shares in RWH with the same number and class of shares and percentage
ownership of RWH and the same relative rights and preferences in the equity value of RWH, as they previously held in us. As a result, we are now a wholly owned subsidiary of RWH and our stockholders became stockholders of RWH. We will continue to be
the issuer of our outstanding notes and the reporting company with the Securities and Exchange Commission.



In conjunction with the formation of the new holding company, all of the outstanding shares of our Series A Preferred Stock were cancelled. The
cancellation is reflected in the condensed consolidated balance sheet as a reclassification of the Preferred Stock to Paid-in Capital, which increased stockholders equity by $334,336 and was the amount attributable to the outstanding Series A
Preferred Stock as of September 30, 2004. Since our Preferred Stock was cancelled, the accretion of Preferred Stock dividends will no longer be reflected in our financial statements, effective October 1, 2004. Although



79



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our Series A Preferred Stock was cancelled, our former stockholders now hold preferred stock in RWH that continues to accrete at 12.0%. RWH has no assets or
operations other than its 100% ownership of us.



The
Certificate of Incorporation of RWH provides that it may issue 3,500,000 shares of preferred stock, all of which has been designated as 12% Series A Accreting Preferred Stock. As of December 31, 2004, 2,237,257.23 shares of preferred stock were
outstanding. The preferred stock has a stated value of $100 per share and is entitled to receive dividends when, as and if declared by the Board of Directors in such amounts as the Board of Directors may determine at the time of declaration,
provided that the aggregate amount of dividends per share do not exceed the compounded annual rate of 12% of the stated value per share from the date of original issue. The vote of a majority of the outstanding shares of the preferred stock is
required to authorize or issue any other class or series of stock entitled to a preference prior to the preferred stock or to amend the Certificate of Incorporation if the amendment would adversely affect the relative rights and preferences of the
holders of the preferred stock. The vote of not less than 75% of the outstanding shares of the preferred stock is required to amend the Certificate of Incorporation if the amendment changes the maximum dividend amount or accreting amount payable on
the preferred stock. Except as described above or as otherwise required by law, the preferred stock is not entitled to vote.



The Certificate of Incorporation of RWH provides that it may issue 12,001,000 shares of common stock, divided into three classes consisting of 1,000
shares of Class A Common Stock, 6,000,000 shares of Class B Common Stock, and 6,000,000 shares of Class C Common Stock. As of the date hereof, 1,000 shares of Class A Common Stock, 2,485,337.48 shares of Class B Common Stock and 16,687 shares of
Class C Common Stock were issued and outstanding.



The
stockholders of RWH entered into Amendment No. 3 to the Securities Transfer, Recapitalization and Holders Agreement, which we refer to as the securities holders agreement, with RWH, the Company and the stockholders signatory thereto. The securities
holders agreement is attached hereto as Exhibit 10.8 and the terms of the securities holders agreement are incorporated herein by reference. According to the securities holders agreement, so long as Court Square and its permitted
transferees owns at least 5% of the common stock outstanding, Court Square has the right to designate observers to attend meetings of RWHs Board of Directors. The securities holders agreement contains provisions, which, with certain
exceptions, restrict the ability of RWHs stockholders to transfer any of the common stock or preferred stock. If holders of at least 50% of RWHs common stock approve the sale of the business, each of RWHs stockholders has agreed to
consent to the sale and, if the sale includes the sale of stock, each of RWHs stockholders has agreed to sell all of such stockholders common stock on the terms and conditions approved by holders of a majority of the common stock then
outstanding. Subject to some limitations, certain of RWHs shareholders may not sell any of their shares of common stock without offering our other stockholders a pro rata opportunity to participate in such sale.



The securities holders agreement also provides for certain additional
restrictions on transfer of shares by RWHs stockholders, including the right to repurchase certain shares from those stockholders employed by RWH or its affiliates, upon termination of such persons employment prior to 2006 at a formula
price, and the grant of a right of first refusal in favor of RWH in the event such person elects to transfer its shares of common stock.



RWHs stockholders also entered into Amendment No. 3 to the Preferred Stockholders Agreement, which we refer to as the preferred stockholders
agreement, containing certain additional agreements among RWHs stockholders regarding its preferred stock. Subject to some limitations, certain of RWHs shareholders may not sell any of their shares of preferred stock without offering
RWHs stockholders a pro rata opportunity to participate in such sale. If holders of at least 50% of the common stock approve the sale of the business, each of RWHs stockholders has agreed to consent to the sale and, if the sale includes
the sale of stock, each of RWHs stockholders has agreed to sell all of such stockholders preferred stock on the terms and conditions approved by holders of a majority of RWHs common stock then outstanding. The preferred
stockholders agreement is attached hereto as Exhibit 10.21 and the terms of the preferred stockholders agreement are incorporated herein by reference.



80



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The following table sets forth the ownership of RWH as of March 15, 2005 and the number and percentage of
shares of each class of common stock and preferred stock beneficially owned by (i) each person or group that is known to us to be the beneficial owner of more than 5% of each class of Capital stock, (ii) each of our directors and named executive
officers and (iii) all of our directors and executive officers as a group.



|                                                                                            |  |                              |  |         |                  |  |        |                  |         |   |               |              |  |         |   |  |           |  |         |  
|------------------------------------------------------------------------------------------- |  | ---------------------------- |  | ------- | ---------------- |  | ------ | ---------------- | ------- | - | ------------- | ------------ |  | ------- | - |  | --------- |  | ------- | -
|                                                                                            |  | Number and Percent of Shares | 
|                                                                                            |  | Preferred Stock              |  |         | Class A Stock(1) |  |        | Class B Stock(1) |         |   | Class C Stock |             
|                                                                                            |  | Number                       |  | Percent |                  |  | Number |                  | Percent |   |               | Number       |  | Percent |   |  | Number    |  | Percent |  
|Citicorp Venture Capital(2) Equity Partners,
L.P. 399 Park Avenue New York, New York 10043  |  | 1,620,406.51                 |  | 72.43   | %                |  |       |                  |        |   |               | 1,735,711.17 |  | 69.84   | % |  | 16,687.00 |  | 100     | %
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Harney Investment Trust c/o Berkshire Hathaway Inc. 1440 Kiewit Plaza Omaha, Nebraska 68131 |  | 460,404.96                   |  | 20.58   | %                |  |       |                  |        |   |               | 498,098.94   |  | 20.04   | % |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Court Square Capital Limited(3) 399 Park
Avenue New York, New York 10043                    |  |                             |  |        |                  |  | 1,000  |                  | 100     | % |               |             |  |        |   |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Harold K. Sperlich                                                                          |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Thomas J. Snyder(4)                                                                         |  | 9,174.56                     |  | 0.41    | %                |  |       |                  |        |   |               | 51,425.69    |  | 2.07    | % |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Rajesh K. Shah                                                                              |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Roderick English                                                                            |  | 2,618.84                     |  | 0.12    | %                |  |       |                  |        |   |               | 14,833.25    |  | 0.60    | % |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Richard L. Keister                                                                          |  | 1,585.09                     |  | 0.07    | %                |  |       |                  |        |   |               | 4,314.86     |  | 0.17    | % |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Patrick C. Mobouck                                                                          |  | 327.36                       |  | 0.01    | %                |  |       |                  |        |   |               | 13,354.16    |  | 0.54    | % |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Richard Stanley                                                                             |  | 5,728.72                     |  | 0.26    | %                |  |       |                  |        |   |               | 19,697.73    |  | 0.79    | % |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|E.H. Billig                                                                                 |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Richard M. Cashin, Jr.                                                                      |  | 8,614.61                     |  | 0.39    | %                |  |       |                  |        |   |               | 9,319.90     |  | 0.37    | % |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Alexander P. Coleman                                                                        |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Michael A. Delaney                                                                          |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|James R. Gerrity(5)                                                                         |  | 4,307.30                     |  | 0.19    | %                |  |       |                  |        |   |               | 2,559.94     |  | 0.10    | % |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|Robert J. Schultz                                                                           |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|John P. Civantos                                                                            |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|                                                                                            |  |                              |  |         |                  |  |        |                 
|All directors and executive officers as a group                                             |  | 32,356.48                    |  | 1.45    | %                |  |       |                  |        |   |               | 115,505.53   |  | 4.65    | % |  |          |  |        |  

---

|(1) | The original holders of the voting Class A Common Stock are entitled to a number of votes equal to 51% of the total number of votes entitled to be cast by the holders collectively
owning all of the Class A Common Stock and the Class B Common Stock. The holders of Class B Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Except as required by law, the
holders of Class C Common Stock have no voting rights. The Class A Common is convertible into an equal number of shares of Class B Common Stock, the Class B Common Stock is convertible into an equal number of shares of Class C Common Stock and the
Class C Common Stock is convertible into an equal number of shares of Class B Common Stock.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Citicorp Venture Capital Equity Partners, L.P., which we refer to as CVC Equity Partners, is a Delaware limited partnership managed by CVC Management LLC, a Delaware limited
liability company. Citicorp Partners LLC, a Delaware limited liability company, which we refer to as Citicorp Partners, is the general manager of CVC Equity Partners. Citicorp Partners is owned 35% by Citigroup Venture Capital GP Holdings Ltd., a
Delaware limited partnership, which we refer to as CVC GP, and 65% by certain investment professionals employed by Citigroup Inc., a Delaware corporation, which we refer to as Citigroup. Court Square owns all of the outstanding equity interests of
CVC GP.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Court Square is a Delaware corporation principally engaged in the business of making leveraged acquisitions. Court Square is owned by Citicorp Banking Corporation, a Delaware
corporation, which we refer to as Citicorp Banking. Citicorp, a Delaware corporation, owns all of the outstanding capital stock of Citicorp Banking. Citigroup Holdings Company, a Delaware corporation, owns all of the outstanding common stock of
Citicorp. Citigroup owns all the outstanding common stock of Citigroup Holdings Company.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes 1,292.19 shares of preferred stock and 14,397.98 shares of Class B Common Stock held by Daisy Farm Limited Partnership of which Mr. Snyder is the general partner.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes 2,093.95 shares of Class B Common Stock and 3,876.57 shares of preferred stock and 465.99 shares of Class B Common Stock and 430.73 shares of preferred stock held by The
James R. Gerrity Living Trust and The Susan Gerrity Living Trust, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|ITEM 13 |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|------- |  | ----------------------------------------------

---



In 2002, we entered into to an advisory agreement with CVC Management LLC, which we refer to as the advisor, an affiliate of Court Square and CVC Equity
Partners. Under the terms of the agreement, the advisor is required to provide executive, management, consulting and support services to us and certain of our subsidiaries. The advisor is entitled to receive an initial advisory fee of $1 million for
2002 and an advisory fee of $1 million for each year thereafter, payable in equal quarterly installments. The advisory agreement continues until December 31, 2006 and is automatically renewed from year to year thereafter unless terminated by either
of the parties. The advisor is also entitled to receive a transaction fee of $2.5 million for services provided in connection with the refinancing of our senior credit facilities in 2002 and may receive additional transaction fees under the advisory
agreement in amounts to be agreed upon by the parties for services provided in connection with future financings, acquisitions and divestitures.



|ITEM 14 |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|------- |  | --------------------------------------

---



Independent Auditors Fees



The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of our annual financial statements for
the years ended December 31, 2004 and December 31, 2003, and fees billed for other services rendered by Ernst & Young LLP during those periods.



|                   |  |      |           |      |   |          
|------------------ |  | ---- | --------- | ---- | - | ---------
|                   |  | 2004 |           | 2003
|Audit Fees         |  | $    | 1,879,237 |      | $ | 1,694,497
|Audit-Related Fees |  |      | 294,497   |      |   | 287,605  
|Tax Fees           |  |      | 809,456   |      |   | 710,534  
|All Other Fees     |  |      | 36,219    |      |   | 158,571  



Audit Fees:
Fees incurred for professional services rendered by Ernst & Young LLP for auditing our annual financial statements, including Form 10-K, statutory audits of subsidiaries, and reviewing the quarterly financial statements included in our filings
on Form 10-Q, and other services normally provided by Ernst & Young in connection with statutory and regulatory filings.



Audit-Related Fees: Fees incurred for professional services rendered by Ernst & Young LLP primarily for acquisitions, dispositions and for
auditing our employee pension and benefit plans.



Tax
Fees: Fees incurred for professional services rendered by Ernst & Young LLP in connection with global tax planning, the review of the federal and state income tax returns and other compliance filings.



All Other Fees: Fees incurred for professional services rendered by
Ernst & Young LLP that are not within the scope of the above categories.



Pursuant to its charter, the Audit Committee is responsible for selection, approving compensation and overseeing the independence, qualifications and performance of the independent accountants. The Audit
Committees policy is to pre-approve all audit and permissible non-audit services provided by the independent accountants. Pre-approval is generally provided for up to one year, is detailed as to the particular service or category of services
and is generally subject to a specific budget. The Audit Committee may also pre-approve particular services on a case-by-case basis. In assessing requests for services by the independent accountants, the Audit Committee considers whether such
services are consistent with the auditors independence; whether the independent accountants are likely to provide the most effective and efficient service based upon their familiarity with us; and whether the service could enhance our ability
to manage or control risk or improve audit quality.



All of the
audit-related, tax and other services provided by Ernst & Young LLP in fiscal year 2004 (described in the footnotes to the table above) and related fees were approved in advance by the Audit Committee.



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PART IV



|ITEM 15 |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|------- |  | ------------------------------------------

---



|(a) | The following documents have been filed as a part of this report or, where noted, incorporated by reference:
|--- | ------------------------------------------------------------------------------------------------------------



| | 1. | Financial Statements
| | -- | --------------------



The Consolidated Financial Statements and related Notes thereto as set forth under Item 8 of this Report on Form 10-K are incorporated herein by
reference.



| | 2. | Financial Statement Schedules
| | -- | -----------------------------



Financial statement schedules have not been filed because they are not applicable or the required information is shown in the financial statements or the
notes thereto.



| | 3. | Exhibits
| | -- | --------



See Item 15(b) below.



|(b) | Exhibits
|--- | --------



|     |  |     |  |                                                                                                                                                                                                          
|---- |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  |  | 2.1 |  | Agreement and Plan of Merger dated as of February 7, 2001 by and among Court Square, DRI Acquisition LLC and the Company                                                                                 
|     |  |    
|(2)  |  | 2.2 |  | Amendment No. 1 to Agreement and Plan of Merger                                                                                                                                                          
|     |  |    
|(17) |  | 3.1 |  | Second Amended and Restated Certificate of Incorporation                                                                                                                                                 
|     |  |    
|(2)  |  | 3.2 |  | By-laws of the Company                                                                                                                                                                                   
|     |  |    
|(7)  |  | 4.1 |  | Indenture governing 85/8% Senior Notes Due 2007 among the
Company, the Subsidiary Guarantors named therein and United States Trust Company of New York, as trustee, dated December 22, 1997              
|     |  |    
|(13) |  | 4.2 |  | Indenture governing 11% Senior Subordinated Notes Due 2009 among the Company, the Subsidiary Guarantors named therein and First Union National Bank, as trustee, dated April 26,
2001.                   
|     |  |    
|(19) |  | 4.3 |  | Indenture governing Floating Rate Notes among the Company, the Subsidiary Guarantors named therein and Deutsche Bank National Trust Company, as trustee, dated April 23, 2004.                           
|     |  |    
|(19) |  | 4.4 |  | Indenture governing 93/8% Senior Subordinated Notes among
the Company, the Subsidiary Guarantors named therein and Deutsche Bank National Trust Company, as trustee, dated April 23, 2004.               
|     |  |    
|(21) |  | 4.5 |  | Indenture governing 93/8% Senior Subordinated Notes due
2012, dated as of April 23, 2004 by and among the Company, the Subsidiary Guarantors named therein, and Deutsche Bank Company.                   
|     |  |    
|(21) |  | 4.6 |  | Form of 93/8% Senior Subordinated Notes due 2012
(included in Exhibit 4.5).                                                                                                                              
|     |  |    
|(21) |  | 4.7 |  | Indenture governing Second-Priority Senior Secured Floating Rate Notes due 2009, dated as of April 23, 2004 by and among the Company, the Subsidiary Guarantors named therein, and Deutsche Bank
Company.
|     |  |    
|(21) |  | 4.8 |  | Form of Second-Priority Senior Secured Floating Rate Notes due 2009 (included in Exhibit 4.7).                                                                                                           



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|     |  |       |  |                                                                                                                                                                                                                                                                                                                                                                                           
|---- |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(21) |  | 4.9   |  | Registration Rights Agreement, dated as of April 23, 2004 by and among the Company, the Subsidiary Guarantors named therein, Credit Suisse First Boston LLC, Deutsche Bank Securities Inc.,
and Wachovia Capital Markets, LLC.                                                                                                                                                            
|     |  |      
|(6)* |  | 10.1  |  | Light Duty Starter Motor Supply Agreement, dated July 31, 1994, by and between Delco Remy America, Inc. (DRA) and GM.                                                                                                                                                                                                                                                                   
|     |  |      
|(6)  |  | 10.2  |  | Heavy Duty Component Supply Agreement, dated July 31, 1994, by and between DRA and GM                                                                                                                                                                                                                                                                                                     
|     |  |      
|(6)  |  | 10.3  |  | Distribution and Supply Agreement, dated July 31, 1994, by and between DRA and GM                                                                                                                                                                                                                                                                                                         
|     |  |      
|(3)  |  | 10.4  |  | Trademark License, dated July 31, 1994, by and among DRA, the Company and GM                                                                                                                                                                                                                                                                                                              
|     |  |      
|(3)  |  | 10.5  |  | Tradename License Agreement, dated July 31, 1994, by and among DRA, the Company and GM                                                                                                                                                                                                                                                                                                    
|     |  |      
|(3)  |  | 10.6  |  | Partnership Agreement of Delco Remy Mexico S. de R.L. de C.V., dated April 17, 1997                                                                                                                                                                                                                                                                                                       
|     |  |      
|(4)  |  | 10.7  |  | Joint Venture Agreement by and between Remy Korea Holdings, Inc. and S.C. Kim                                                                                                                                                                                                                                                                                                             
|     |  |      
|(2)  |  | 10.8  |  | Securities Transfer, Recapitalization and Holders Agreement dated March 14, 2001 by and among the Company, DRI Acquisition Corporation, Court Square Capital Limited, World Equity Partners,
L.P., DRI Group LLC and the Continuing Investors named therein                                                                                                                               
|     |  |      
|(2)  |  | 10.9  |  | Registration Rights Agreement for Common Stock dated March 14, 2001 by and among the Company, Court Square Capital Limited, World Equity Partners, L.P., DRI Group LLC and the Continuing
Investors named therein                                                                                                                                                                         
|     |  |      
|(5)  |  | 10.10 |  | Employment Agreement, dated July 31, 1994, by and between the Company and Thomas J. Snyder                                                                                                                                                                                                                                                                                                
|     |  |      
|(16) |  | 10.11 |  | Amended and Restated Loan and Security Agreement by and among Delco Remy International, Inc. and certain Subsidiaries of the Company named therein as Borrowers, Congress Financial
Corporation (Central), as Administrative Agent and US Collateral Agent, Wachovia Bank, National Association as Documentation Agent and the Financial Institutions named therein dated October 3, 2003.
|     |  |      
|(4)  |  | 10.15 |  | Lease by and between ANDRA L.L.C. and DRA, dated February 9, 1995                                                                                                                                                                                                                                                                                                                         
|     |  |      
|(4)  |  | 10.16 |  | Lease by and between Eagle I L.L.C. and DRA, dated August 11, 1995                                                                                                                                                                                                                                                                                                                        
|     |  |      
|(8)  |  | 10.20 |  | Starter Motor Pricing Agreement, dated March 17, 1999, by and between DRA and GM.                                                                                                                                                                                                                                                                                                         
|     |  |      
|(2)  |  | 10.21 |  | Preferred Stockholders Agreement dated March 14, 2001 by and among Court Square Capital Limited, World Equity Partners, L.P., DRI Group LLC and the Continuing Investors named
therein                                                                                                                                                                                                    



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|     |  |       |  |                                                                                                                                                                                                                                                                                                    
|---- |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  |  | 10.22 |  | Stock Purchase Warrant dated March 14, 2001 issued by the Company to World Equity Partners, L.P.                                                                                                                                                                                                   
|     |  |      
|(9)  |  | 10.23 |  | Letter Agreement by and between the Company and Thomas J. Snyder, dated as of February 6, 2001                                                                                                                                                                                                     
|     |  |      
|(10) |  | 10.24 |  | Form of Letter Agreement by and between the Company and each of J. Timothy Gargaro, Joseph P. Felicelli, Richard L. Stanley, Susan E. Goldy, Roderick English and Patrick Mobouck, each dated as
of February 6, 2001                                                                               
|     |  |      
|(11) |  | 10.25 |  | Amendment Number Two to the Delco Remy International, Inc. Supplemental Executive Retirement Plan, dated as of February 6, 2001                                                                                                                                                                    
|     |  |      
|(12) |  | 10.26 |  | Form of Amendment Number Two to the Collateral Assignment SplitDollar Insurance Agreement by and between the Company and each of Thomas J. Snyder, J. Timothy Gargaro, Joseph P. Felicelli,
Richard L. Stanley, Susan E. Goldy and Roderick English                                               
|     |  |      
|(14) |  | 10.27 |  | Amendment No. 1 to the Securities Transfer, Recapitalization and Holders Agreement, dated June 27, 2001, by and among the Company, Court Square Capital Limited, DRI Group LLC, the Individual
Investors named therein and Berkshire Hathaway Inc.                                                 
|     |  |      
|(14) |  | 10.28 |  | Amendment No. 1 to the Registration Rights Agreement, dated June 27, 2001, by and among the Company, Court Square Capital Limited, DRI Group LLC, the Individual Investors named therein and
Berkshire Hathaway Inc.                                                                               
|     |  |      
|(14) |  | 10.29 |  | Amendment No. 1 to the Preferred Stockholders Agreement, dated June 27, 2001, by and among the Company, Court Square Capital Limited, DRI Group LLC, the Individual Investors named therein
and Berkshire Hathaway Inc.                                                                            
|     |  |      
|(15) |  | 10.30 |  | Amendment No. 2 to the Securities Transfer, Recapitalization and Holders Agreement, dated November 29, 2001, by and among the Company, Court Square Capital Limited, DRI Group LLC, the Individual
Investors named therein, Berkshire Hathaway Inc. and Dresdner Kleinwort Capital Partners 2001 LP
|     |  |      
|(15) |  | 10.31 |  | Amendment No. 2 to the Registration Rights Agreement, dated November 29, 2001, by and among the Company, Court Square Capital Limited, DRI Group LLC, the Individual Investors named therein,
Berkshire Hathaway Inc. and Dresdner Kleinwort Capital Partners 2001 LP                              
|     |  |      
|(15) |  | 10.32 |  | Amendment No. 2 to the Preferred Stockholders Agreement, dated November 29, 2001, by and among the Company, Court Square Capital Limited, DRI Group LLC, the Individual Investors named therein,
Berkshire Hathaway Inc. and Dresdner Kleinwort Capital Partners 2001 LP                           
|     |  |      
|(18) |  | 10.33 |  | Letter Agreement dated March 18, 2002 by and between the Company and Rajesh K. Shah                                                                                                                                                                                                                
|     |  |      
|(18) |  | 10.34 |  | Separation Agreement and Release dated March 18, 2002 by and between the Company and Rajesh K. Shah                                                                                                                                                                                                



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|     |  |       |  |                                                                                                                                                                                                                                                                                          
|---- |  | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(18) |  | 10.35 |  | Advisory Agreement dated December 10, 2002 by and among the Company, certain of the Companys subsidiaries and CVC Management LLC                                                                                                                                                        
|     |  |      
|(18) |  | 10.36 |  | Side Letter Agreement dated December 10, 2002 by and among the Company, certain of the Companys subsidiaries and CVC Management LLC                                                                                                                                                     
|     |  |      
|(20) |  | 10.37 |  | Second Amended and Restated Loan and Security Agreement, dated as of April 23, 2004 by and among the Company, certain subsidiaries named therein, Congress Financial Corporation (Central), and
certain financial institutions named therein                                             
|     |  |      
|(21) |  | 10.38 |  | Limited Waiver and Amendment No. 1 to Second Amended and Restated Loan and Security Agreement and the Other Financing Agreements dated September 1, 2004                                                                                                                                 
|     |  |      
|     |  | 21    |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                           
|     |  |      
|     |  | 31.1  |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                   
|     |  |      
|     |  | 31.2  |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                     
|     |  |      
|     |  | 32.1  |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                    
|     |  |      
|     |  | 32.2  |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                      
|     |  |      
|*    |  |       |  | Portions of this exhibit have been omitted pursuant to a request for confidential treatment.                                                                                                                                                                                             
|     |  |      
|(1)  |  |       |  | Incorporated by reference to Exhibit (a)(8) to Amendment No. 1 to the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company on February 9, 2001                                                                                                                   
|     |  |      
|(2)  |  |       |  | Incorporated by reference to the Exhibit of the same number to the Companys Form 10-K for the transition period from August 1, 2000 to December 31, 2000 filed by the Company on March 30,
2001                                                                                         
|     |  |      
|(3)  |  |       |  | Incorporated by reference to the Exhibit of the same number to the Registration Statement on Form S-1 previously filed by the Company on October 10, 1997, registering the issuance of the
Companys Class A Common Stock, par value $.01 per share (the Equity Registration Statement)
|     |  |      
|(4)  |  |       |  | Incorporated by reference to the Exhibit of the same number to Amendment No. 1 to the Equity Registration Statement which was filed by the Company on October 22, 1997                                                                                                                   
|(5)  |  |       |  | Incorporated by reference to the Exhibit of the same number to Amendment No. 2 to the Equity Registration Statement which was filed by the Company on November 21, 1997                                                                                                                  



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|     |  |  |  |                                                                                                                                                                        
|---- |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | 
|(6)  |  |  |  | Incorporated by reference to the Exhibit of the same number to Amendment No. 3 to the Equity Registration Statement which was filed by the Company on November 26, 1997
|     |  | 
|(7)  |  |  |  | Incorporated by reference to Exhibit 4.1 to the Companys Form 10-Q for the quarter ended January 31, 1998                                                             
|     |  | 
|(8)  |  |  |  | Incorporated by reference to Exhibit 10.20 to the Companys Form 10-K for the year ended July 31, 1999                                                                 
|     |  | 
|(9)  |  |  |  | Incorporated by reference to Exhibit (e)(4) to Amendment No. 1 to the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company on February 9, 2001 
|     |  | 
|(10) |  |  |  | Incorporated by reference to Exhibit (e)(5) to Amendment No. 1 to the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company on February 9, 2001 
|     |  | 
|(11) |  |  |  | Incorporated by reference to Exhibit (e)(6) to Amendment No. 1 to the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company on February 9, 2001 
|     |  | 
|(12) |  |  |  | Incorporated by reference to Exhibit (e)(7) to Amendment No. 1 to the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company on February 9, 2001 
|     |  | 
|(13) |  |  |  | Incorporated by reference to the Exhibit of the same number to the Registration Statement on Form S-4 previously filed by the Company on July 20, 2001                 
|     |  | 
|(14) |  |  |  | Incorporated by reference to the Exhibit of the same number to Amendment No. 1 to the Registration Statement on Form S-4 filed by the Company on July 31, 2001         
|     |  | 
|(15) |  |  |  | Incorporated by reference to the Exhibit of the same number to the Companys Form 10-K for the year ended December 31, 2001                                            
|     |  | 
|(16) |  |  |  | Incorporated by reference to Exhibit 99.1 to the Companys Form 8-K dated October 8, 2003                                                                              
|     |  | 
|(17) |  |  |  | Incorporated by reference to Exhibit 3.1 to the Companys Form 10-Q for the quarter ended September 30, 2003                                                           
|     |  | 
|(18) |  |  |  | Incorporated by reference to the Exhibit of the same number to the Companys Form 10-K for the year ended December 31, 2002                                            
|     |  | 
|(19) |  |  |  | Incorporated by reference to Exhibits 4.4 and 4.5 of the Registration Statement on Form S-4 filed by the Company on April 23, 2004.                                    
|     |  | 
|(20) |  |  |  | Incorporated by reference to Exhibits 4.1, 4.2, 4.3, 4.4, 4.5 and 10.1 to the Companys Form 10-Q for the quarter ended March 31, 2004.                                
|     |  | 
|(21) |  |  |  | Incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q for the quarter ended September 30, 2004.                                                         



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



REMY INTERNATIONAL, INC.By:

/S/ Thomas J. SnyderThomas J. Snyder President, Chief Executive
Officer and DirectorDated: March 29, 2005




Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.



|    |  |                                                                                                                     |  |     |  |                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------- |  | --- |  | ------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                     | 
|By: |  | /S/ Harold K. SperlichHarold K. Sperlich Chairman of the
Board                                                      |  | By: |  | /S/ Thomas J. SnyderThomas J. Snyder President, Chief Executive Officer and Director (Principal Executive Officer)
|    |  |                                                                                                                     | 
|By: |  | /S/ Rajesh K. ShahRajesh K. Shah Executive Vice President and Chief Financial Officer (Principal Financial Officer) |  | By: |  | /S/ Amitabh RaiAmitabh Rai Vice President andCorporate
Controller(Principal Accounting Officer)                   
|    |  |                                                                                                                     | 
|By: |  | /S/ E.H. BilligE.H. Billig Vice Chairman of the Board of Directors                                                  |  |     |  | Date: March 29, 2005                                                                                              
|    |  |                                                                                                                     | 
|By: |  | /S/ Richard M. Cashin, Jr.Richard M. Cashin, Jr. Director                                                           |  |     |  |                                                                                                                   
|    |  |                                                                                                                     | 
|By: |  | /S/ Alexander P. ColemanAlexander P. Coleman Director                                                               |  |     |  |                                                                                                                   
|    |  |                                                                                                                     | 
|By: |  | /S/ Michael A. DelaneyMichael A. Delaney Director                                                                   |  |     |  |                                                                                                                   
|    |  |                                                                                                                     | 
|By: |  | /S/ James R. GerrityJames R. Gerrity Director                                                                       |  |     |  |                                                                                                                   
|    |  |                                                                                                                     | 
|By: |  | /S/ Robert J. SchultzRobert J. Schultz Director                                                                     |  |     |  |                                                                                                                   
|    |  |                                                                                                                     | 
|By: |  | /S/ John P. CivantosJohn P. Civantos Director                                                                       |  |     |  |                                                                                                                   



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SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY
REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE EXCHANGE ACT.



(a) (1) No annual report is provided to the noteholders other than copies of Registrants Annual Report on Form 10-K.



(a) (2) No proxy statement, form of proxy or other proxy soliciting material
has been sent to more than 10 of the Registrants security holders with respect to any annual or other meeting of Registrants security holders.



89