TABLE OF CONTENTS




|                                                   |                                                                                               |  |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                     
|                                                   | Item 1. Financial Statements                                                                 
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                   | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|PART II. OTHER INFORMATION                        
|                                                   | Item 1. Legal Proceedings.                                                                   
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders.                                 
|                                                   | Item 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                                        
|EX-10(A) Amend to 1997 Long Term Incentive Plan   
|EX-10(B) Amend to 2000 Long Term Incentive Plan   
|EX-10(C) Form Nonqualified Stock Option Agreement 
|EX-10(D) Transferable Nonqualified Stock Opt Agrmt
|EX-10(E) Direct. Transferable Non-Qual Stk Opt Agr
|EX-10(F) Stk Opt Agrmt Qualified/Rules of France  
|EX-10(G) TRW Supplemental Executive Retirement Pl 
|EX-10(H) 2001-02 Strategic Incentive Program Grant
|EX-10(I) 2001-03 Strategic Incentive Program Grant
|EX-10(J) Am & Res Employment Agrmt/TRW & DM Cote  
|EX-15 Letter Re: Unaudited Financial Information  
|EX-99 Comput. of Ratio - Earnings to Fixed Charges



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##### Table of Contents



FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

(Mark One)

[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2001

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 1-2384

TRW Inc.
(Exact name of registrant as specified in its charter)

|                                |  |                    
|------------------------------- |  | -------------------
|Ohio                            |  | 34-0575430         
|                               
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

1900 Richmond Road, Cleveland, Ohio 44124
(Address of principal executive offices)
(Zip Code)

(216) 291-7000
(Registrants telephone number, including area code)

|                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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                                                                                                                                                                                                                                                                                                                                                

As of July 23, 2001, there were 125,880,366 shares of
TRW Common Stock, $0.625 par value, outstanding.





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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements

Statements of Operations (unaudited)
TRW Inc. and subsidiaries

---

|                                               |                            |      |               |       |                  |      |       |       |  |   |       |       |  |   |       |       | 
|---------------------------------------------- | -------------------------- | ---- | ------------- | ----- | ---------------- | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                               |                            |      | Quarter ended |       | Six months ended
|                                               |                            |      | June 30       |       | June 30         
|In millions except per share data              |                            | 2001 |               | 2000  |                  | 2001 |       | 2000 
|                                              
|Sales                                          |                            | $    | 4,276         |       |                  | $    | 4,476 |       |  | $ | 8,443 |       |  | $ | 9,041 |      
|                                              
|                                              
|                                              
|                                              
|Cost of sales                                  |                            |      | 3,640         |       |                  |      | 3,696 |       |  |   | 7,206 |       |  |   | 7,506 |      
|                                              
|Gross profit                                   |                            |      | 636           |       |                  |      | 780   |       |  |   | 1,237 |       |  |   | 1,535 |      
|                                              
|                                              
|                                              
|                                              
|Administrative and selling expenses            |                            |      | 270           |       |                  |      | 275   |       |  |   | 535   |       |  |   | 578   |      
|                                              
|                                              
|                                              
|                                              
|Research and development expenses              |                            |      | 115           |       |                  |      | 113   |       |  |   | 236   |       |  |   | 223   |      
|                                              
|                                              
|                                              
|                                              
|Interest expense                               |                            |      | 122           |       |                  |      | 126   |       |  |   | 251   |       |  |   | 262   |      
|                                              
|                                              
|                                              
|                                              
|Amortization of goodwill and intangible assets |                            |      | 32            |       |                  |      | 36    |       |  |   | 64    |       |  |   | 68    |      
|                                              
|                                              
|                                              
|                                              
|Purchased in-process research and development  |                            |      |              |       |                  |      | 12    |       |  |   |      |       |  |   | 12    |      
|                                              
|                                              
|                                              
|                                              
|Other (income)expense-net                      |                            |      | 62            |       |                  |      | (97   | )     |  |   | 43    |       |  |   | (264  | )    
|                                              
|Earnings before income taxes                   |                            |      | 35            |       |                  |      | 315   |       |  |   | 108   |       |  |   | 656   |      
|                                              
|                                              
|                                              
|                                              
|Income taxes                                   |                            |      | 32            |       |                  |      | 115   |       |  |   | 50    |       |  |   | 247   |      
|                                              
|Net earnings                                   |                            | $    | 3             |       |                  | $    | 200   |       |  | $ | 58    |       |  | $ | 409   |      
|                                              
|                                              
|                                              
|Per share of common stock                     
|                                              
|                                              
|                                              
|                                              
|                                               | Diluted earnings per share |      | $             | .02   |                  |      | $     | 1.59  |  |   | $     | .47   |  |   | $     | 3.27  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Basic earnings per share   |      |               | .02   |                  |      |       | 1.62  |  |   |       | .47   |  |   |       | 3.33  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Dividends declared         |      |               | .35   |                  |      |       | .33   |  |   |       | .35   |  |   |       | .33   | 
|                                              
|                                              
|                                              
|Shares used in computing per share amounts    
|                                              
|                                              
|                                              
|                                              
|                                               | Diluted                    |      |               | 125.6 |                  |      |       | 125.6 |  |   |       | 125.2 |  |   |       | 125.1 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Basic                      |      |               | 124.5 |                  |      |       | 123.2 |  |   |       | 124.1 |  |   |       | 122.8 | 
|                                              

2



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##### Table of Contents



Balance Sheets (unaudited)
TRW Inc. and subsidiaries

---

|                                                   |                                                |      |         |       |             |   |        |       | 
|-------------------------------------------------- | ---------------------------------------------- | ---- | ------- | ----- | ----------- | - | ------ | ----- | 
|                                                   |                                                |      | June 30 |       | December 31
|In millions                                        |                                                | 2001 |         | 2000 
|                                                  
|Assets                                            
|                                                  
|                                                  
|                                                  
|                                                  
|Current assets                                    
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash and cash equivalents                      |      | $       | 261   |             |   | $      | 267   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts receivable                            |      |         | 2,331 |             |   |        | 2,328 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Inventories                                    |      |         | 810   |             |   |        | 870   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Prepaid expenses                               |      |         | 139   |             |   |        | 149   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Deferred income taxes                          |      |         | 258   |             |   |        | 353   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|Total current assets                               |                                                |      | 3,799   |       |             |   | 3,967  |      
|                                                  
|Property, plant and equipment-on the basis of cost |                                                |      | 7,936   |       |             |   | 7,915  |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Less accumulated depreciation and amortization |      |         | 4,516 |             |   |        | 4,328 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|Total property, plant and equipment-net            |                                                |      | 3,420   |       |             |   | 3,587  |      
|                                                  
|Intangible assets                                 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Goodwill                                       |      |         | 3,497 |             |   |        | 3,547 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other intangible assets                        |      |         | 941   |             |   |        | 975   | 
|                                                  
|                                                   |                                                |      | 4,438   |       |             |   | 4,522  |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Less accumulated amortization                  |      |         | 614   |             |   |        | 510   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|Total intangible assets-net                        |                                                |      | 3,824   |       |             |   | 4,012  |      
|                                                  
|Investments in affiliated companies                |                                                |      | 1,054   |       |             |   | 1,040  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Other notes and accounts receivable                |                                                |      | 241     |       |             |   | 283    |      
|                                                  
|                                                  
|                                                  
|                                                  
|Prepaid pension cost                               |                                                |      | 2,830   |       |             |   | 2,902  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Other assets                                       |                                                |      | 627     |       |             |   | 676    |      
|                                                  
|                                                   |                                                | $    | 15,795  |       |             | $ | 16,467 |      
|                                                  
|                                                  
|Liabilities and shareholders investment          
|                                                  
|                                                  
|                                                  
|                                                  
|Current liabilities                               
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Short-term debt                                |      | $       | 1,031 |             |   | $      | 1,450 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Trade accounts payable                         |      |         | 1,818 |             |   |        | 1,795 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current portion of long-term debt              |      |         | 731   |             |   |        | 489   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other current liabilities                      |      |         | 1,941 |             |   |        | 2,126 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|Total current liabilities                          |                                                |      | 5,521   |       |             |   | 5,860  |      
|                                                  
|Long-term liabilities                              |                                                |      | 2,044   |       |             |   | 2,038  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Long-term debt                                     |                                                |      | 4,930   |       |             |   | 4,765  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Deferred income taxes                              |                                                |      | 768     |       |             |   | 1,030  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Minority interests in subsidiaries                 |                                                |      | 76      |       |             |   | 123    |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|Capital stock                                      |                                                |      | 78      |       |             |   | 78     |      
|                                                  
|                                                  
|                                                  
|                                                  
|Other capital                                      |                                                |      | 494     |       |             |   | 472    |      
|                                                  
|                                                  
|                                                  
|                                                  
|Retained earnings                                  |                                                |      | 2,563   |       |             |   | 2,565  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Treasury shares-cost in excess of par value        |                                                |      | (438    | )     |             |   | (472   | )    
|                                                  
|                                                  
|                                                  
|                                                  
|Accumulated other comprehensive income(loss)       |                                                |      | (241    | )     |             |   | 8      |      
|                                                  
|Total shareholders investment                     |                                                |      | 2,456   |       |             |   | 2,651  |      
|                                                  
|                                                   |                                                | $    | 15,795  |       |             | $ | 16,467 |      
|                                                  

3



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##### Table of Contents



Statements of Cash Flows (unaudited)
TRW Inc. and subsidiaries

---

|                                                                                    |                                               |      |                  |      |   |   |        |      |  
|----------------------------------------------------------------------------------- | --------------------------------------------- | ---- | ---------------- | ---- | - | - | ------ | ---- | -
|                                                                                    |                                               |      | Six months ended
|                                                                                    |                                               |      | June 30         
|In millions                                                                         |                                               | 2001 |                  | 2000
|                                                                                   
|Operating activities                                                               
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Net earnings                                                                        |                                               | $    | 58               |      |   | $ | 409    |     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Adjustments to reconcile net earnings to net cash
provided by operating activities:
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Depreciation and amortization                 |      |                  | 382  |   |   |        | 427  |  
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Pension income                                |      |                  | (120 | ) |   |        | (128 | )
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Net gain on sale of assets                    |      |                  | (30  | ) |   |        | (262 | )
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Investment in Endwave                         |      |                  | 70   |   |   |        | (55  | )
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Deferred income taxes                         |      |                  | 24   |   |   |        | 57   |  
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Purchased in-process research and development |      |                  |     |   |   |        | 12   |  
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Other-net                                     |      |                  | 56   |   |   |        | 23   |  
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Changes in assets and liabilities, net of effects of
businesses acquired or sold:  
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Accounts receivable                           |      |                  | (110 | ) |   |        | (240 | )
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Inventories                                   |      |                  | 17   |   |   |        | 48   |  
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Trade accounts payable                        |      |                  | 92   |   |   |        | 126  |  
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Prepaid expenses and other liabilities        |      |                  | (115 | ) |   |        | (54  | )
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                    | Other-net                                     |      |                  | 120  |   |   |        | 39   |  
|                                                                                   
|Net cash provided by operating activities                                           |                                               |      | 444              |      |   |   | 402    |     
|                                                                                   
|Investing activities                                                               
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Capital expenditures including other intangibles                                    |                                               |      | (335             | )    |   |   | (312   | )   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Net proceeds from divestitures                                                      |                                               |      | 6                |      |   |   | 1,396  |     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Acquisitions, net of cash acquired                                                  |                                               |      |                 |      |   |   | 21     |     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Other-net                                                                           |                                               |      | (67              | )    |   |   | (29    | )   
|                                                                                   
|Net cash (used in) provided by investing activities                                 |                                               |      | (396             | )    |   |   | 1,076  |     
|                                                                                   
|Financing activities                                                               
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Decrease in short-term debt                                                         |                                               |      | (139             | )    |   |   | (944   | )   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Proceeds from debt in excess of 90 days                                             |                                               |      | 910              |      |   |   | 1,113  |     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Principal payments on debt in excess of 90 days                                     |                                               |      | (742             | )    |   |   | (1,623 | )   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Dividends paid                                                                      |                                               |      | (87              | )    |   |   | (82    | )   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Other-net                                                                           |                                               |      | 6                |      |   |   | 38     |     
|                                                                                   
|Net cash used in financing activities                                               |                                               |      | (52              | )    |   |   | (1,498 | )   
|                                                                                   
|Effect of exchange rate changes on cash                                             |                                               |      | (2               | )    |   |   | 27     |     
|                                                                                   
|(Decrease)increase in cash and cash equivalents                                     |                                               |      | (6               | )    |   |   | 7      |     
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Cash and cash equivalents at beginning of period                                    |                                               |      | 267              |      |   |   | 228    |     
|                                                                                   
|Cash and cash equivalents at end of period                                          |                                               | $    | 261              |      |   | $ | 235    |     
|                                                                                   

4



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##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
(unaudited)

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States for interim financial information. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
and six-month periods ended June 30, 2001 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2001.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys annual report on Form 10-K for the
year ended December 31, 2000.

Reclassifications

Certain amounts in the prior year financial statements and related notes have
been reclassified to conform to the current year presentation.

Restructuring

The Company has recorded severance costs and plant closings accruals related to
restructuring actions, including costs associated with the integration of
LucasVarity, of $70 million as of December 31, 2000. During the six months
ended June 30, 2001, the Company recorded additional before tax charges of $60
million, primarily for headcount reductions, of which $23 million was recorded
in the second quarter. Charges of $31 million were recorded in administrative
and selling expenses and $29 million in cost of sales. The Company used $23
million and $63 million in the second quarter and six months ended June 30,
2001, respectively, for severance payments and plant closings. The balance at
June 30, 2001 of $67 million is expected to be used by the third quarter of
2002.

Other (Income)Expense-Net

|                                    |  |                      |     |                  |  |      |     |      |  |   |     |   |  |   |      |  
|----------------------------------- |  | -------------------- | --- | ---------------- |  | ---- | --- | ---- |  | - | --- | - |  | - | ---- | -
|(In millions)                       |  | Second quarter ended |     | Six months ended
|                                    |  | June 30              |     | June 30         
|                                    |  |                      |     |                 
|                                    |  | 2001                 |     | 2000             |  | 2001 |     | 2000
|                                    |  |                      |     |                  |  |      |     |     
|Investment in Endwave               |  | $                    | 70  |                  |  | $    | (55 | )    |  | $ | 70  |   |  | $ | (55  | )
|                                   
|                                   
|                                   
|                                   
|Foreign currency exchange           |  |                      | (2  | )                |  |      | 33  |      |  |   | (3  | ) |  |   | 43   |  
|                                   
|                                   
|                                   
|                                   
|Net gain on sale of assets          |  |                      |    |                  |  |      | (66 | )    |  |   | (30 | ) |  |   | (262 | )
|                                   
|                                   
|                                   
|                                   
|(Earnings)loss of affiliates        |  |                      | 6   |                  |  |      | (6  | )    |  |   | 16  |   |  |   | (5   | )
|                                   
|                                   
|                                   
|                                   
|Claims and litigation               |  |                      |    |                  |  |      |    |      |  |   |    |   |  |   | 25   |  
|                                   
|                                   
|                                   
|                                   
|Miscellaneous other (income)expense |  |                      | (12 | )                |  |      | (3  | )    |  |   | (10 | ) |  |   | (10  | )
|                                    |  |                      |     |                  |  |      |     |      |  |   |     |   |  |   |      |  
|                                    |  | $                    | 62  |                  |  | $    | (97 | )    |  | $ | 43  |   |  | $ | (264 | )
|                                    |  |                      |     |                  |  |      |     |      |  |   |     |   |  |   |      |  

During the second quarter of 2001, the Company recorded an asset impairment
charge related to its investment in, and its share of asset impairment and
restructuring charges recorded by, Endwave Corporation (Endwave) of $70
million. During the second quarter of 2000, the Company recorded other income
of $55 million relating to the merger of TRW Milliwave Inc., a wholly owned
subsidiary, with Endgate Corporation to form Endwave. Net gain on sale of
assets in the second quarter of 2000 included the sale of RF Micro Devices,
Inc. (RFMD) common stock and exchange of the Companys interest in Paracel
Inc., an affiliate, for shares in Applera Genomics Corporation-Celera Group
(Celera). During the six months ended June 30, 2000, net gain on sale of
assets included the sale of RFMD

5



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##### Table of Contents



common stock, the Companys Nelson Stud
Welding and Australian steering businesses and the exchange of Paracel shares.

Operating Segments

Effective January 2001, the Other Automotive segment was combined with the
Chassis Systems segment. Financial information in prior periods related to
these segments has been restated to reflect such combination. In April 2001,
Systems & Information Technology changed its name to Systems.

|                                              |                         |      |               |       |                  |      |       |       |  |   |       |       |   |   |       |       | 
|--------------------------------------------- | ----------------------- | ---- | ------------- | ----- | ---------------- | ---- | ----- | ----- |  | - | ----- | ----- | - | - | ----- | ----- | 
|                                              |                         |      | Quarter ended |       | Six months ended
|                                              |                         |      | June 30       |       | June 30         
|In millions                                   |                         | 2001 |               | 2000  |                  | 2001 |       | 2000 
|                                             
|Sales                                        
|                                             
|                                             
|                                             
|                                             
|                                              | Systems                 |      | $             | 799   |                  |      | $     | 837   |  |   | $     | 1,588 |   |   | $     | 1,611 | 
|                                             
|                                             
|                                             
|                                             
|                                              | Space & Electronics     |      |               | 529   |                  |      |       | 467   |  |   |       | 1,013 |   |   |       | 953   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Aeronautical Systems    |      |               | 270   |                  |      |       | 279   |  |   |       | 535   |   |   |       | 549   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Chassis Systems         |      |               | 1,602 |                  |      |       | 1,728 |  |   |       | 3,156 |   |   |       | 3,531 | 
|                                             
|                                             
|                                             
|                                             
|                                              | Occupant Safety Systems |      |               | 704   |                  |      |       | 728   |  |   |       | 1,412 |   |   |       | 1,488 | 
|                                             
|                                             
|                                             
|                                             
|                                              | Automotive Electronics  |      |               | 372   |                  |      |       | 437   |  |   |       | 739   |   |   |       | 909   | 
|                                             
|Sales                                         |                         | $    | 4,276         |       |                  | $    | 4,476 |       |  | $ | 8,443 |       |   | $ | 9,041 |      
|                                             
|Profit (loss) before taxes                   
|                                             
|                                             
|                                             
|                                             
|                                              | Systems                 |      | $             | 53    |                  |      | $     | 77    |  |   | $     | 101   |   |   | $     | 124   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Space & Electronics     |      |               | (40   | )                |      |       | 143   |  |   |       | (6    | ) |   |       | 370   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Aeronautical Systems    |      |               | 35    |                  |      |       | 39    |  |   |       | 64    |   |   |       | 66    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Chassis Systems         |      |               | 80    |                  |      |       | 135   |  |   |       | 136   |   |   |       | 273   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Occupant Safety Systems |      |               | 8     |                  |      |       | 59    |  |   |       | 32    |   |   |       | 73    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Automotive Electronics  |      |               | 20    |                  |      |       | 33    |  |   |       | 38    |   |   |       | 65    | 
|                                             
|                                              |                         |      | 156           |       |                  |      | 486   |       |  |   | 365   |       |   |   | 971   |      
|                                             
|                                             
|                                             
|                                             
|                                             
|Corporate expense and other                   |                         |      | (50           | )     |                  |      | (85   | )     |  |   | (109  | )     |   |   | (149  | )    
|                                             
|                                             
|                                             
|                                             
|Pension income                                |                         |      | 52            |       |                  |      | 54    |       |  |   | 105   |       |   |   | 111   |      
|                                             
|                                             
|                                             
|                                             
|Financing costs                               |                         |      | (123          | )     |                  |      | (128  | )     |  |   | (253  | )     |   |   | (265  | )    
|                                             
|                                             
|                                             
|                                             
|Purchased in-process research and
development |                         |      |              |       |                  |      | (12   | )     |  |   |      |       |   |   | (12   | )    
|                                             
|Earnings before income taxes                  |                         | $    | 35            |       |                  | $    | 315   |       |  | $ | 108   |       |   | $ | 656   |      
|                                             

Corporate expense and other included $36 million of unrealized foreign exchange
losses in the second quarter of 2000. Corporate expense and other for the six
months ended June 30, 2001 included $6 million of restructuring charges and in
2000 $48 million of unrealized foreign exchange losses.

|                   |                         |      |   |               |  |                  |   |      |  |  |   |    |  |  |   |    |  | 
|------------------ | ----------------------- | ---- | - | ------------- |  | ---------------- | - | ---- |  |  | - | -- |  |  | - | -- |  | 
|                   |                         |      |   | Quarter ended |  | Six months ended
|                   |                         |      |   | June 30       |  | June 30         
|In millions        |                         | 2001 |   | 2000          |  | 2001             |   | 2000
|                  
|Intersegment sales
|                  
|                  
|                  
|                  
|                   | Systems                 |      | $ | 53            |  |                  | $ | 34   |  |  | $ | 95 |  |  | $ | 65 | 
|                  
|                  
|                  
|                  
|                   | Space & Electronics     |      |   | 15            |  |                  |   | 17   |  |  |   | 30 |  |  |   | 26 | 
|                  
|                  
|                  
|                  
|                   | Aeronautical Systems    |      |   |              |  |                  |   |     |  |  |   |   |  |  |   |   | 
|                  
|                  
|                  
|                  
|                   | Chassis Systems         |      |   | 2             |  |                  |   | 6    |  |  |   | 3  |  |  |   | 13 | 
|                  
|                  
|                  
|                  
|                   | Occupant Safety Systems |      |   |              |  |                  |   | 1    |  |  |   |   |  |  |   | 2  | 
|                   | Automotive Electronics  |      |   | 28            |  |                  |   | 26   |  |  |   | 57 |  |  |   | 47 | 
|                  

6



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##### Table of Contents



Inventories

|                                      |  |         |     |             |  |   |     | 
|------------------------------------- |  | ------- | --- | ----------- |  | - | --- | 
|                                      |  | June 30 |     | December 31
|(In millions)                         |  | 2001    |     | 2000       
|                                      |  |         |     |            
|Finished products and work in process |  | $       | 500 |             |  | $ | 513 | 
|                                     
|                                     
|                                     
|                                     
|Raw materials and supplies            |  |         | 310 |             |  |   | 357 | 
|                                      |  |         |     |             |  |   |     | 
|                                      |  | $       | 810 |             |  | $ | 870 | 
|                                      |  |         |     |             |  |   |     | 

Financial Instruments

The Company manufactures and sells its products in countries throughout the
world. As a result, it is exposed to fluctuations in foreign currency exchange
rates. The Company enters into forward contracts and, to a lesser extent,
purchased currency options to hedge portions of its foreign currency
denominated forecasted revenues, purchases, and the subsequent cash flows. The
critical terms of the hedges are the same as the underlying forecasted
transactions and the hedges are considered to be perfectly effective to offset
the changes in fair value of cash flows from the hedged transactions. These
cash flow instruments mature at various dates through April 2007.

The Company enters into interest rate swaps to manage the risks and costs
associated with its financing activities. At June 30, 2001, the Company had
$100 million notional principal amount of interest rate swaps outstanding that
converted a portion of its variable rate debt to a fixed rate for the next four
years. These interest rate swaps have a fair market value loss of $7 million.

On occasion, the Company hedges equity investments in publicly traded
companies. These instruments protect the forecasted cash flows resulting from
the sale of shares in the Companys investments in RFMD and Celera. These
hedges were redesignated to cash flow hedges during the second quarter 2001.
Prior to their redesignation, the ineffective portion, recorded in Other
(income)expense-net, was a $5 million gain and $10 million
gain for the second quarter and six months ended June 30,
2001, respectively. The fair market value of these hedges as of June 30, 2001 is a $110
million gain.

Gains/losses on these cash flow instruments are generally recorded in other
comprehensive income(loss) until the underlying transaction is recognized in
net earnings. The earnings impact is reported in either Sales, Cost of sales,
or Other (income)expense-net, to match the underlying transaction.

In addition, the Company enters into certain forward currency exchange
contracts that are not treated as hedges under Statement of Financial
Accounting Standards No. 133 to hedge recognized foreign currency transactions.
Gains and losses on these contracts are recorded in earnings and are
substantially offset by the earnings effect of the revaluation of the
underlying foreign currency denominated transaction.

7



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##### Table of Contents



Debt and Credit Agreements

The Company amended and restated its revolving credit agreement that expired on
January 23, 2001. The amended and restated agreement, in an aggregate amount
of $1.8 billion with 26 banks, has a new expiration date of January 22, 2002
with an option to extend the maturity of outstanding borrowings at that time to
January 22, 2003. The interest rate under the agreement is either the prime
rate or a rate based on the London Interbank Offered Rate (LIBOR), at the
option of the Company. The Company also canceled a revolving credit agreement
for use by its Brazilian operations.

During the first quarter of 2001, the Company issued $500 million of 7.625%
Notes due March 2006, utilizing its universal shelf registration statement.
The proceeds were used to reduce short-term borrowings. At June 30, 2001, $1.2
billion remained available under TRWs universal shelf registration statement.

During the second quarter of 2001, the Company refinanced $100 million of
commercial paper borrowings by entering into a debt agreement due April 2003.
The interest rate under the agreement is a floating rate based on three-month
LIBOR.

At June 30, 2001, $400 million of short-term obligations were reclassified to
long-term obligations, as the Company intends to refinance the obligations on a
long-term basis and has the ability to do so under its revolving credit
agreements.

Earnings Per Share

|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |      |      |       |    |   |      |       |     | 
|----------------------------------- | ------------------------------------------------------------------------------------------------------ | --------------------------- | ---- | ------------- | -- | ---------------- | ---- | ----- | --- | ---- | ---- | ----- | -- | - | ---- | ----- | --- | 
|                                    |                                                                                                        |                             |      | Quarter
ended |    | Six months ended
|(In millions except per share data) |                                                                                                        | June 30                     |      | June 30      
|                                    |                                                                                                        |                             |      |              
|                                    |                                                                                                        |                             |      | 2001          |    | 2000             |      | 2001  |     | 2000
|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |     
|Numerator                          
|                                   
|                                   
|                                   
|                                   
|                                    | Net earnings                                                                                           |                             | $    | 3.0           |    |                  | $    | 199.5 |     |      | $    | 58.5  |    |   | $    | 408.8 |    
|                                   
|                                   
|                                   
|                                   
|                                    | Preferred stock dividends                                                                              |                             |      | .1            |    |                  |      | .1    |     |      |      | .3    |    |   |      | .3    |    
|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |      |      |       |    |   |      |      
|                                    | Numerator for basic earnings per sharenet earnings
available to common shareholders                   |                             |      | 2.9           |    |                  |      | 199.4 |     |      |      | 58.2  |    |   |      | 408.5 |    
|                                   
|                                   
|                                   
|                                   
|                                    | Effect of dilutive securities                                                                         
|                                    |                                                                                                        | Preferred stock dividends   |      |               | .1 |                  |      |       | .1  |      |      |       | .3 |   |      |       | .3  | 
|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |      |      |       |    |   |      |      
|                                    | Numerator for diluted earnings per share
net earnings available to common
shareholders                |                             | $    | 3.0           |    |                  | $    | 199.5 |     |      | $    | 58.5  |    |   | $    | 408.8 |    
|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |      |      |       |    |   |      |      
|Denominator                        
|                                   
|                                   
|                                   
|                                   
|                                    | Denominator for basic earnings per share
weighted-average common shares                               |                             |      | 124.5         |    |                  |      | 123.2 |     |      |      | 124.1 |    |   |      | 122.8 |    
|                                   
|                                   
|                                   
|                                   
|                                    | Effect of dilutive securities                                                                         
|                                   
|                                   
|                                   
|                                   
|                                    |                                                                                                        | Convertible preferred stock |      |               | .7 |                  |      |       | .8  |      |      |       | .7 |   |      |       | .8  | 
|                                   
|                                   
|                                   
|                                   
|                                    |                                                                                                        | Employee stock options      |      |               | .4 |                  |      |       | 1.6 |      |      |       | .4 |   |      |       | 1.5 | 
|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |      |      |       |    |   |      |      
|                                    | Dilutive potential common shares                                                                       |                             |      | 1.1           |    |                  |      | 2.4   |     |      |      | 1.1   |    |   |      | 2.3   |    
|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |      |      |       |    |   |      |      
|                                    | Denominator for diluted earnings per share
adjusted weighted-average shares after
assumed conversions |                             |      | 125.6         |    |                  |      | 125.6 |     |      |      | 125.2 |    |   |      | 125.1 |    
|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |      |      |       |    |   |      |      
|Basic earnings per share            |                                                                                                        | $                           | 0.02 |               |    | $                | 1.62 |       |     | $    | 0.47 |       |    | $ | 3.33 |      
|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |      |      |       |    |   |      |      
|Diluted earnings per share          |                                                                                                        |                             | 0.02 |               |    |                  | 1.59 |       |     |      | 0.47 |       |    |   | 3.27 |      
|                                    |                                                                                                        |                             |      |               |    |                  |      |       |     |      |      |       |    |   |      |      

8



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##### Table of Contents



Supplemental Cash Flow Information

|                                          |  |                  |      |      |      |  |  | 
|----------------------------------------- |  | ---------------- | ---- | ---- | ---- |  |  | 
|                                          |  | Six months ended
|(In millions)                             |  | June 30         
|                                          |  |                 
|                                          |  | 2001             |      | 2000
|                                          |  |                  |      |     
|Interest paid (net of amount capitalized) |  |                  | $231 |      | $257 | 
|                                         
|                                         
|                                         
|                                         
|Income taxes paid (net of refunds)        |  |                  | 48   |      | 115 

Comprehensive Income(Loss)

The components of comprehensive income(loss), net of related tax, for the
second quarter and six months of 2001 and 2000 are as follows:

|                                       |  |               |     |                  |  |      |      |      |  |   |      |   |  |   |      |  
|-------------------------------------- |  | ------------- | --- | ---------------- |  | ---- | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                                       |  | Quarter ended |     | Six months ended
|(In millions)                          |  | June 30       |     | June 30         
|                                       |  |               |     |                 
|                                       |  | 2001          |     | 2000             |  | 2001 |      | 2000
|                                       |  |               |     |                  |  |      |      |     
|Net earnings                           |  | $             | 3   |                  |  | $    | 200  |      |  | $ | 58   |   |  | $ | 409  |  
|                                      
|                                      
|                                      
|                                      
|Effect of foreign currency changes     |  |               | (70 | )                |  |      | (57  | )    |  |   | (189 | ) |  |   | (210 | )
|                                      
|                                      
|                                      
|                                      
|Unrealized gains(losses) on securities |  |               | 238 |                  |  |      | (362 | )    |  |   | (3   | ) |  |   | 58   |  
|                                      
|                                      
|                                      
|                                      
|Deferred cash flow hedges              |  |               | (26 | )                |  |      |     |      |  |   | (57  | ) |  |   |     |  
|                                       |  |               |     |                  |  |      |      |      |  |   |      |   |  |   |      |  
|Comprehensive income(loss)             |  | $             | 145 |                  |  | $    | (219 | )    |  | $ | (191 | ) |  | $ | 257  |  
|                                       |  |               |     |                  |  |      |      |      |  |   |      |   |  |   |      |  

The components of accumulated other comprehensive income(loss), net of tax, at
June 30, 2001 and December 31, 2000 are as follows:

|                                             |  |         |      |             |  |   |      |  
|-------------------------------------------- |  | ------- | ---- | ----------- |  | - | ---- | -
|                                             |  | June 30 |      | December 31
|(In millions)                                |  | 2001    |      | 2000       
|                                             |  |         |      |            
|Effect of foreign currency changes           |  | $       | (612 | )           |  | $ | (423 | )
|                                            
|                                            
|                                            
|                                            
|Unrealized gains on securities               |  |         | 450  |             |  |   | 453  |  
|                                            
|                                            
|                                            
|                                            
|Deferred cash flow hedges                    |  |         | (57  | )           |  |   |     |  
|                                            
|                                            
|                                            
|                                            
|Minimum pension liability adjustments        |  |         | (22  | )           |  |   | (22  | )
|                                             |  |         |      |             |  |   |      |  
|Accumulated other comprehensive income(loss) |  | $       | (241 | )           |  | $ | 8    |  
|                                             |  |         |      |             |  |   |      |  

New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141, Business Combinations and
SFAS No. 142, Goodwill and Intangible Assets. Statement 141 requires
companies to account for acquisitions entered into after June 30, 2001 using
the purchase method and establishes criteria to be used in determining whether
acquired intangible assets are to be recorded separately from goodwill. This
criterion is to be applied to business combinations completed after June 30,
2001. Statement 142 sets forth the accounting for goodwill and intangible
assets after the completion of a business acquisition. Goodwill will no longer
be amortized, rather, tested for impairment by comparing the assets fair value
to its carrying value. Statement 142 is effective January 1, 2002.

Management is in the process of analyzing and assessing the impact of the
adoption of these statements. The amount of a cumulative adjustment for an
accounting change, and the effect on the Companys consolidated results of
operations and financial position during 2002 will depend on the valuations
made at the reporting unit level, which are not determinable at this time.

9



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##### Table of Contents



Contingencies

During 1996, the United States Department of Justice (DOJ) advised the Company
that it had been named as a defendant in lawsuits brought by a former employee
of the Company originally filed under seal in 1994 and 1995 in the United
States District Court for the Central District of California under the qui tam
provisions of the civil False Claims Act. The DOJ subsequently advised that it
would intervene in the litigation. In a consolidated complaint filed jointly
by the former employee and the DOJ, it is alleged that the Company
misclassified various costs and improperly charged those costs to certain of
its federal contracts, that the United States has incurred substantial damages,
and that the Company is liable for treble damages, penalties, post-judgment
interest, costs (including attorneys fees) and all other proper relief. All
substantive allegations against the Company have been denied in the Companys
answer to the consolidated complaint. The Company cannot presently predict the
outcome of this lawsuit, although management believes its ultimate resolution
will not have a material effect on the Companys financial condition or results
of operations.

On March 31, 2000, VSSI was served with a putative class action lawsuit filed
on behalf of everyone living within a five-mile radius of the Companys air bag
manufacturing plant in Mesa, Arizona. The lawsuit alleges that emissions from
the plant have caused health problems for residents living near the plant, that
the Company concealed information about the potential health risks of its
emissions and that animals and plant life have been injured or destroyed
through exposure to toxic emissions. Plaintiffs are asking the court to
require the Company to institute medical monitoring for the claimants, to
conduct various studies regarding, among other things, the risks of sodium
azide, to cease operations that release toxic substances into the air and to
create a supervised fund to pay for medical screening and monitoring.
Plaintiffs also are seeking attorneys fees and punitive damages. The Company
believes there is no valid scientific basis for these claims and is defending
itself vigorously. The case has been removed to the U.S. District Court for
the District of Arizona, where the Company is vigorously opposing class
certification. The Company is not able to predict the outcome of this lawsuit
at this time.

In October 2000, Kelsey-Hayes Company (formerly known as Fruehauf Corporation)
was served with a grand jury subpoena relating to a criminal investigation
being conducted by the U.S. Attorney for the Southern District of Illinois.
The U.S. Attorney has informed the Company that the investigation relates to
possible wrongdoing by Kelsey-Hayes Company and others involving certain loans
made by Kelsey-Hayes Companys then parent corporation to Fruehauf Trailer
Corporation, the handling of the trailing liabilities of Fruehauf Corporation
and actions in connection with the 1996 bankruptcy of Fruehauf Trailer
Corporation. Kelsey-Hayes Company became a wholly-owned subsidiary of TRW upon
TRWs acquisition of LucasVarity in 1999. The Company is cooperating with the
investigation and is unable to predict the outcome of the investigation at this
time.

10



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##### Table of Contents



Independent Accountants Review Report

Audit Committee of the
Board of Directors
TRW Inc.

We have reviewed the accompanying unaudited balance sheet of TRW Inc. and
subsidiaries as of June 30, 2001, and the related unaudited statements of
operations for the three-month and six-month periods ended June 30, 2001 and
2000, and statements of cash flows for the six-month periods ended June 30,
2001 and 2000, included in the Form 10-Q of TRW Inc. for the quarterly period
ended June 30, 2001. These financial statements are the responsibility of the
Companys management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet of TRW Inc. as of December 31,
2000, and the related statements of operations, cash flows, and changes in
shareholders investment for the year then ended not presented herein, and in
our report dated January 22, 2001, we expressed an unqualified opinion on those
financial statements. Those financial statements and our report on them are
included in the Form 10-K of TRW Inc. for the year ended December 31, 2000. In
our opinion, the information set forth in the accompanying balance sheet as of
December 31, 2000, included in the Form 10-Q of TRW Inc. for the quarterly
period ended June 30, 2001, is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Cleveland, Ohio
July 19, 2001

11



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##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

(In millions except per share data)

|                           |  |                      |       |                  |  |        |       |           |  |      |       |      |  |         |     |           |  |   |       |   |  |   |       |   |  |   |       |         |  |  |     |   
|-------------------------- |  | -------------------- | ----- | ---------------- |  | ------ | ----- | --------- |  | ---- | ----- | ---- |  | ------- | --- | --------- |  | - | ----- | - |  | - | ----- | - |  | - | ----- | ------- |  |  | --- | --
|                           |  | Second quarter ended |       | Six months ended
|                           |  | June 30              |       | June 30         
|                           |  |                      |       |                 
|                           |  |                      |       |                  |  |        |       |           |  |      |       |      |  | Percent |     |           |  |   |       |   |  |   |       |   |  |   |       | Percent
|                           |  | 2001                 |       | 2000             |  | Change |       | Inc (Dec) |  | 2001 |       | 2000 |  | Change  |     | Inc (Dec)
|                           |  |                      |       |                  |  |        |       |           |  |      |       |      |  |         |     |          
|Sales                      |  | $                    | 4,276 |                  |  | $      | 4,476 |           |  | $    | (200  | )    |  |         | (5  | %)        |  | $ | 8,443 |   |  | $ | 9,041 |   |  | $ | (598  | )       |  |  | (7  | %)
|                          
|                          
|                          
|                          
|Profit before taxes        |  |                      | 156   |                  |  |        | 486   |           |  |      | (330  | )    |  |         | (68 | %)        |  |   | 365   |   |  |   | 971   |   |  |   | (606  | )       |  |  | (62 | %)
|                          
|                          
|                          
|                          
|Net earnings               |  |                      | 3     |                  |  |        | 200   |           |  |      | (197  | )    |  |         | (99 | %)        |  |   | 58    |   |  |   | 409   |   |  |   | (351  | )       |  |  | (86 | %)
|                          
|                          
|                          
|                          
|Diluted earnings
per share |  |                      | .02   |                  |  |        | 1.59  |           |  |      | (1.57 | )    |  |         | (99 | %)        |  |   | .47   |   |  |   | 3.27  |   |  |   | (2.80 | )       |  |  | (86 | %)
|                          
|                          
|                          
|                          
|Effective tax rate         |  |                      | 91.5  | %                |  |        | 36.7  | %         |  |      |       |      |  |         |     |           |  |   | 45.9  | % |  |   | 37.7  | %

The second quarter 2001 sales decreased 5 percent compared with second quarter
2000 sales. The decrease is the result of the effects of foreign currency
exchange of approximately $100 million; lower volumes, primarily in North
America of approximately $70 million; price reductions of approximately $45
million; and divestitures of approximately $40 million, primarily in the
automotive segments, somewhat offset by increased sales of approximately $60
million due to higher volume on several core satellite programs.

Net earnings and diluted earnings per share for the second quarter 2001 were
$3 million, or $0.02 per share, compared with $200 million, or $1.59 per
share, in 2000.

For the second quarter 2001, unusual items resulted in a net loss of $79
million, or $.63 per share. The unusual items for the second quarter 2001
included after tax charges of $58 million for an asset impairment related to
Endwave and other charges, primarily automotive restructuring of approximately
$21 million.

For the second quarter 2000, unusual items resulted in a net gain of $33
million, or $0.26 per share. The unusual items for the second quarter 2000
included after tax gains of $28 million, primarily from the sale of RFMD
common stock; approximately $22 million relating to the merger of TRW
Milliwave Inc., a wholly owned subsidiary, with Endgate Corporation to form
Endwave; and $15 million for the exchange of TRWs interest in Paracel Inc.
for shares in Celera. These gains were partially offset by approximately $9
million after tax of automotive restructuring charges and $23 million after
tax of unrealized losses on foreign currency hedges.

Gross profit of $636 million in the second quarter of 2001 decreased 18
percent from $780 million in 2000 primarily due to lower pricing, decreased
volume, unfavorable product mix and a seatbelt recall of approximately $120
million, the effects of foreign currency exchange of approximately $25
million, divestitures of approximately $15 million, offset by net cost
reductions of approximately $30 million. Gross profit, as a percentage of
sales, was 14.9 percent for the second quarter 2001, compared to 17.4 percent
in the second quarter 2000.

Administrative and selling expenses of $270 million in the second quarter 2001
decreased $5 million compared with the second quarter of 2000. Administrative
and selling expenses included unusual items of $15 million and $5 million in
the second quarters of 2001 and 2000, respectively, related to restructuring
charges, which was more than offset by cost reductions of approximately $10
million and divestitures of approximately $10 million in 2001.

12



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Interest expense of $122 million in the second quarter 2001 decreased $4
million compared with the second quarter of 2000, primarily due to lower
average debt outstanding and lower short-term interest rates in the United
States, offset by higher interest rates on fixed rate debt issuances.

Amortization of goodwill and intangible assets was $32 million in the second
quarter of 2001 and $36 million in 2000. The decrease of $4 million primarily
resulted from goodwill amortization from Endwave which was consolidated in
2000.

In the second quarter of 2000, the Company recorded a $12 million charge for
the fair value of in-process research and development in connection with the
merger of TRW Milliwave Inc., a wholly owned subsidiary, with Endgate
Corporation to form Endwave.

Other (income)expense-net was expense of $62 million in the second quarter
2001 compared to income of $97 million in 2000. Included in 2001 is an asset
impairment charge related to Endwave of $70 million. Included in 2000 were
the following items: other income on Endwave merger of $55 million, gains on
sales of shares of RFMD common stock of $43 million, gain on exchange of
Paracel stock of $23 million and a loss of $33 million related to foreign
currency exchange.

The effective income tax rate was 91.5 percent in the second quarter of 2001
compared with 36.7 percent in the second quarter of 2000. Excluding unusual
items, the effective income tax rate would have been 36.1 percent in the second
quarter of 2001 and 35.7 percent in the second quarter of 2000.

Sales for the first half of 2001 decreased $598 million, or 7 percent compared
with 2000 sales. The decrease in sales is due to lower sales volumes,
primarily in North America, of approximately $230 million, foreign currency
exchange of approximately $210 million, divestitures of approximately $110
million, and lower pricing of approximately $85 million, primarily in the
automotive segments, somewhat offset by sales increases of approximately $35
million due to higher volume on several core satellite programs.

Net earnings and diluted earnings per share for the first half of 2001 were
$58 million, or $0.47 per share, compared with $409 million, or $3.27 per
share, in 2000.

For the first half of 2001, unusual items resulted in a net loss of $75
million, or $0.60 per share. The unusual items for the first half of 2001
included a charge of $58 million after tax for an asset impairment related to
Endwave and other charges, primarily automotive restructuring, of
approximately $48 million after tax. These charges were partially offset by
after tax gains from asset sales of approximately $31 million.

For the first half of 2000, unusual items resulted in net gains of $90 million,
or $0.72 per share. The unusual items for the first half of 2000 included
gains of $154 million from asset sales, including sales of shares of RFMD
common stock and of the Companys Nelson Stud Welding and Australian Steering
businesses; $22 million relating to the formation of Endwave; and $15 million
on the exchange of TRWs interest in Paracel Inc. for shares in Celera. These
gains were partially offset by a $49 million charge for warranty reserves,
claims, and threatened litigation; a $21 million charge for severance and plant
closing costs for the automotive restructuring program and $31 million of
unrealized losses on foreign currency hedges.

Gross profit of $1,237 million for the first six months of 2001 decreased $298
million, or approximately 19 percent from $1,535 million in 2000. Gross
profit for the first half of 2001 decreased as compared to the prior year,
primarily due to the combination of lower volume, unfavorable product mix and
the effect of a seatbelt recall totaling $175 million, price reductions of
approximately $85 million, the effects of foreign currency exchange of
approximately $45 million and divestitures of approximately $25 million offset
by lower unusual items of $30 million. Gross profit in 2001 included unusual
items for automotive restructuring charges of approximately $30 million.
Gross profit in 2000 included unusual items for warranty reserves, claims, and
threatened litigation, of $40 million and automotive

13



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##### Table of Contents



restructuring expenses of
$20 million. Gross profit, as a percentage of sales, was 14.7 percent for the
first half of 2001, compared to 17.0 percent in 2000.

Administrative and selling expenses of $535 million for the first half of 2001
decreased $43 million from 2000. Excluding unusual items in 2001 and 2000
related to restructuring charges of approximately $30 million and $9 million,
respectively, administrative and selling expenses decreased $64 million. The
decrease was primarily due to cost reductions of approximately $25 million and
the effect of divestitures of approximately $30 million.

Research and development expenses of $236 million for the first half of 2001
increased $13 million from $223 million in 2000, primarily due to increased
spending in Space & Electronics for initiatives focused on commercializing the
Companys defense technologies.

Interest expense of $251 million for the first half of 2001 decreased $11
million from $262 million in 2000, due to lower average debt outstanding and
lower short-term interest rates in the United States offset by higher interest
expense on fixed rate debt issuances.

The Company recorded a $12 million charge for the first half of 2000 for the
fair value of in-process research and development for the valuation of Endwave
Corporation.

Other (income)expense-net was expense of $43 million in the first half of 2001
and income of $264 million in 2000. Included in 2001 was an asset impairment
charge related to the Companys investment in Endwave of $70 million, offset
by net gains on the sale of assets of approximately $30 million. Included in
2000 were the following items: gains on sales of shares of RFMD common stock
of $217 million, other income on Endwave merger of $55 million, gain on the
exchange of Paracel stock of $23 million and a loss of $43 million related to
foreign exchange.

The effective income tax rate was 45.9 percent for the six months ended June
30, 2001 compared to 37.7 percent in 2000. Excluding unusual items, the
effective income tax rate would have been approximately 36.0 percent for the
six months ended June 30, 2001 and 2000.

RESULTS OF SEGMENTS

Systems (formerly known as Systems & Information Technology)

|                    |  |                      |     |                  |  |        |     |           |  |      |     |      |  |         |     |           |  |   |       |  |  |   |       |  |  |   |     |         |  |  |     |   
|------------------- |  | -------------------- | --- | ---------------- |  | ------ | --- | --------- |  | ---- | --- | ---- |  | ------- | --- | --------- |  | - | ----- |  |  | - | ----- |  |  | - | --- | ------- |  |  | --- | --
|                    |  | Second quarter ended |     | Six months ended
|(In millions)       |  | June 30              |     | June 30         
|                    |  |                      |     |                 
|                    |  |                      |     |                  |  |        |     |           |  |      |     |      |  | Percent |     |           |  |   |       |  |  |   |       |  |  |   |     | Percent
|                    |  | 2001                 |     | 2000             |  | Change |     | Inc (Dec) |  | 2001 |     | 2000 |  | Change  |     | Inc (Dec)
|                    |  |                      |     |                  |  |        |     |           |  |      |     |      |  |         |     |          
|Sales               |  | $                    | 799 |                  |  | $      | 837 |           |  | $    | (38 | )    |  |         | (5  | %)        |  | $ | 1,588 |  |  | $ | 1,611 |  |  | $ | (23 | )       |  |  | (1  | %)
|                   
|                   
|                   
|                   
|Profit before
taxes |  |                      | 53  |                  |  |        | 77  |           |  |      | (24 | )    |  |         | (32 | %)        |  |   | 101   |  |  |   | 124   |  |  |   | (23 | )       |  |  | (19 | %)

Sales for the second quarter of 2001 decreased $38 million compared to the
second quarter of 2000, primarily due to lower volume on several contracts
completed, including the U.S. Census Bureau and the TRW Environmental Safety
Systems programs, of approximately $100 million, offset by higher volume on existing core programs, including missile and
battlefield digitization programs, of approximately $70 million.

Profit before taxes of $53 million for the second quarter 2001 decreased $24
million from the prior year due to the gain on exchange of the Companys
interest in Paracel Inc. for shares in Celera of $23 million recognized in the
second quarter of 2000.

14



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##### Table of Contents



Sales for the six months ended June 30, 2001 of $1,588 million decreased $23
million from $1,611 million in 2000, primarily due to lower volume on programs
nearing completion or completed during the year of approximately $165 million,
offset by higher volume on new and existing core programs of approximately $145
million.

Profit before taxes for the six months ended June 30, 2000 of $124 million
included an unusual item related to a gain on exchange of the Companys
interest in Paracel Inc. for shares in Celera of $23 million. Without this
unusual item, profit before taxes in 2001 was even with the prior year.

Space & Electronics

|                           |  |                      |     |                  |  |        |     |           |  |      |      |      |  |         |      |           |  |   |       |   |  |   |     |  |  |   |      |         |  |  |      |   
|-------------------------- |  | -------------------- | --- | ---------------- |  | ------ | --- | --------- |  | ---- | ---- | ---- |  | ------- | ---- | --------- |  | - | ----- | - |  | - | --- |  |  | - | ---- | ------- |  |  | ---- | --
|                           |  | Second quarter ended |     | Six months ended
|(In millions)              |  | June 30              |     | June 30         
|                           |  |                      |     |                 
|                           |  |                      |     |                  |  |        |     |           |  |      |      |      |  | Percent |      |           |  |   |       |   |  |   |     |  |  |   |      | Percent
|                           |  | 2001                 |     | 2000             |  | Change |     | Inc (Dec) |  | 2001 |      | 2000 |  | Change  |      | Inc (Dec)
|                           |  |                      |     |                  |  |        |     |           |  |      |      |      |  |         |      |          
|Sales                      |  | $                    | 529 |                  |  | $      | 467 |           |  | $    | 62   |      |  |         | 13   | %         |  | $ | 1,013 |   |  | $ | 953 |  |  | $ | 60   |         |  |  | 6    | % 
|                          
|                          
|                          
|                          
|Profit (loss)
before taxes |  |                      | (40 | )                |  |        | 143 |           |  |      | (183 | )    |  |         | (128 | %)        |  |   | (6    | ) |  |   | 370 |  |  |   | (376 | )       |  |  | (102 | %)

Sales for the second quarter of 2001 of $529 million increased 13 percent
compared to the second quarter of 2000. Increased sales, primarily due to
higher volume on several core satellite programs of $70 million, were partially
offset by lower volume on existing programs nearing completion or completed
during the quarter of approximately $10 million.

Profit (loss) before taxes of a loss of $40 million for the second quarter of
2001 decreased $183 million compared to the second quarter of 2000. During the
second quarter of 2001, unusual items included a charge of $70 million for an
asset impairment charge related to its investment in, and its share of asset
impairment and restructuring charges recorded by, Endwave. Unusual items
resulting in a gain of $94 million were recorded in 2000, consisting of gains
on the sales of shares of RFMD common stock of $43 million and the formation of
Endwave of approximately $51 million. Excluding these unusual items, profit
(loss) before taxes in 2001 decreased $19 million mainly due to an increase in
losses from partially owned technology companies of $9 million and increased
investment in the commercialization of its defense technologies of
approximately $7 million.

Sales for the six months ended June 30, 2001 of $1,013 million increased $60
million from $953 million in 2000, primarily due to higher volume on existing
core programs of approximately $85 million, offset in part by lower volume on
several defense programs nearing completion or completed during the year of
approximately $30 million.

Profit (loss) before taxes for the six months ended June 30, 2001 of a loss of
$6 million decreased from a profit of $370 million in 2000. Profit before
taxes for the six months ended June 30, 2001, included an unusual item of a
charge of $70 million related to the Companys investment in Endwave. Unusual
items in 2000 included the gains from the sale of RFMD stock of $217 million
and on the Endwave merger of approximately $51 million. Excluding the effect
of the unusual items, profit before taxes in 2001 decreased $38 million, which
related to increased equity losses for the six months in 2001 of $18 million,
increased investment in the commercialization of its defense technologies of
approximately $10 million and lower volume on contracts completed or near
completion of $4 million.

15



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##### Table of Contents



Aeronautical Systems

|                    |  |                      |     |                  |  |        |     |           |  |      |    |      |  |         |     |           |  |   |     |  |  |   |     |  |  |   |     |         |  |  |    |   
|------------------- |  | -------------------- | --- | ---------------- |  | ------ | --- | --------- |  | ---- | -- | ---- |  | ------- | --- | --------- |  | - | --- |  |  | - | --- |  |  | - | --- | ------- |  |  | -- | --
|                    |  | Second quarter ended |     | Six months ended
|(In millions)       |  | June 30              |     | June 30         
|                    |  |                      |     |                 
|                    |  |                      |     |                  |  |        |     |           |  |      |    |      |  | Percent |     |           |  |   |     |  |  |   |     |  |  |   |     | Percent
|                    |  | 2001                 |     | 2000             |  | Change |     | Inc (Dec) |  | 2001 |    | 2000 |  | Change  |     | Inc (Dec)
|                    |  |                      |     |                  |  |        |     |           |  |      |    |      |  |         |     |          
|Sales               |  | $                    | 270 |                  |  | $      | 279 |           |  | $    | (9 | )    |  |         | (3  | %)        |  | $ | 535 |  |  | $ | 549 |  |  | $ | (14 | )       |  |  | (3 | %)
|                   
|                   
|                   
|                   
|Profit before
taxes |  |                      | 35  |                  |  |        | 39  |           |  |      | (4 | )    |  |         | (10 | %)        |  |   | 64  |  |  |   | 66  |  |  |   | (2  | )       |  |  | (4 | %)

Sales for the second quarter of 2001 decreased 3 percent compared to the second
quarter of 2000. Sales were impacted by the effects of foreign currency
exchange of $13 million and decreased volume relating to a customers decision
to in-source certain aerostructure work of $13 million, offset by increased
volume on other programs of $16 million.

Profit before taxes for the second quarter of 2001 decreased 10 percent
compared to the second quarter of 2000. The lower profit before taxes resulted
primarily from the change in mix of programs and a customers decision to
in-source certain aerostructure work of $6 million.

Sales for the six months ended June 30, 2001 decreased 3 percent compared to
2000. The lower sales were primarily due to the effects of foreign currency
exchange of $28 million, offset by increased sales volume of $12 million.

Profit before taxes for the six months ended June 30, 2001 decreased 4 percent
compared to 2000. Excluding approximately $4 million of unusual items in 2001,
consisting of a gain on sale of assets, profit before taxes decreased $6
million. The lower profit before taxes resulted from a change in program mix
and a customers decision to in-source certain aerostructure work of $11
million, offset by net cost reductions of $7 million.

As of December 31, 2000, the Company had recorded reserves of approximately $7
million for severance and other costs to close certain facilities of the
Aeronautical Systems segment. During the six months ended June 30, 2001, the
reserve was reduced by $1 million for severance costs. The remaining balance
will be used by the first quarter of 2002.

16



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##### Table of Contents



Automotive Segments

|                        |  |                      |       |                  |  |        |       |           |  |      |      |      |  |         |     |           |  |   |       |  |  |   |       |  |  |   |      |         |  |  |     |   
|----------------------- |  | -------------------- | ----- | ---------------- |  | ------ | ----- | --------- |  | ---- | ---- | ---- |  | ------- | --- | --------- |  | - | ----- |  |  | - | ----- |  |  | - | ---- | ------- |  |  | --- | --
|                        |  | Second quarter ended |       | Six months ended
|(In millions)           |  | June 30              |       | June 30         
|                        |  |                      |       |                 
|                        |  |                      |       |                  |  |        |       |           |  |      |      |      |  | Percent |     |           |  |   |       |  |  |   |       |  |  |   |      | Percent
|Sales                   |  | 2001                 |       | 2000             |  | Change |       | Inc (Dec) |  | 2001 |      | 2000 |  | Change  |     | Inc (Dec)
|                        |  |                      |       |                  |  |        |       |           |  |      |      |      |  |         |     |          
|Chassis Systems         |  | $                    | 1,602 |                  |  | $      | 1,728 |           |  | $    | (126 | )    |  |         | (7  | %)        |  | $ | 3,156 |  |  | $ | 3,531 |  |  | $ | (375 | )       |  |  | (11 | %)
|                       
|                       
|                       
|                       
|Occupant Safety Systems |  |                      | 704   |                  |  |        | 728   |           |  |      | (24  | )    |  |         | (3  | %)        |  |   | 1,412 |  |  |   | 1,488 |  |  |   | (76  | )       |  |  | (5  | %)
|                       
|                       
|                       
|                       
|Automotive Electronics  |  |                      | 372   |                  |  |        | 437   |           |  |      | (65  | )    |  |         | (15 | %)        |  |   | 739   |  |  |   | 909   |  |  |   | (170 | )       |  |  | (19 | %)
|                        |  |                      |       |                  |  |        |       |           |  |      |      |      |  |         |     |           |  |   |       |  |  |   |       |  |  |   |      |         |  |  |     |   
|Total                   |  | $                    | 2,678 |                  |  | $      | 2,893 |           |  | $    | (215 | )    |  |         | (7  | %)        |  | $ | 5,307 |  |  | $ | 5,928 |  |  | $ | (621 | )       |  |  | (11 | %)

Second quarter sales in the automotive businesses declined 7% to $2.7 billion.
Sales declined primarily due to effects of foreign currency exchange, pricing
pressure, divestitures and lower volumes, primarily in North America.

Automotive sales for the six months ended June 30, 2001 declined $621 million
to $5.3 billion compared to 2000. Sales declined primarily due to lower
volumes, mainly in North America, the effects of foreign currency exchange,
divestitures and lower pricing.

Second quarter variances by segment:

|              |  |         |      |         |  |             |     |            |  |   |     |       |  |   |      |  
|------------- |  | ------- | ---- | ------- |  | ----------- | --- | ---------- |  | - | --- | ----- |  | - | ---- | -
|              |  |         |      |         |  | Occupant    |     |            |  |   |     | Total
|              |  | Chassis |      | Safety  |  | Automotive  |     | Automotive
|(In millions) |  | Systems |      | Systems |  | Electronics |     | Segments  
|              |  |         |      |         |  |             |     |           
|Volume        |  | $       | (47  | )       |  | $           | 26  |            |  | $ | (20 | )     |  | $ | (41  | )
|             
|             
|             
|             
|Translation   |  |         | (57  | )       |  |             | (22 | )          |  |   | (8  | )     |  |   | (87  | )
|             
|             
|             
|             
|Divestitures  |  |         | (6   | )       |  |             |    |            |  |   | (33 | )     |  |   | (39  | )
|             
|             
|             
|             
|Price         |  |         | (16  | )       |  |             | (28 | )          |  |   | (4  | )     |  |   | (48  | )
|              |  |         |      |         |  |             |     |            |  |   |     |       |  |   |      |  
|Total         |  | $       | (126 | )       |  | $           | (24 | )          |  | $ | (65 | )     |  | $ | (215 | )

Six month variances by segment:

|              |  |         |      |         |  |             |     |            |  |   |      |       |  |   |      |  
|------------- |  | ------- | ---- | ------- |  | ----------- | --- | ---------- |  | - | ---- | ----- |  | - | ---- | -
|              |  |         |      |         |  | Occupant    |     |            |  |   |      | Total
|              |  | Chassis |      | Safety  |  | Automotive  |     | Automotive
|(In millions) |  | Systems |      | Systems |  | Electronics |     | Segments  
|              |  |         |      |         |  |             |     |           
|Volume        |  | $       | (194 | )       |  | $           | 18  |            |  | $ | (72  | )     |  | $ | (248 | )
|             
|             
|             
|             
|Translation   |  |         | (116 | )       |  |             | (42 | )          |  |   | (21  | )     |  |   | (179 | )
|             
|             
|             
|             
|Divestitures  |  |         | (40  | )       |  |             |    |            |  |   | (67  | )     |  |   | (107 | )
|             
|             
|             
|             
|Price         |  |         | (25  | )       |  |             | (52 | )          |  |   | (10  | )     |  |   | (87  | )
|              |  |         |      |         |  |             |     |            |  |   |      |       |  |   |      |  
|Total         |  | $       | (375 | )       |  | $           | (76 | )          |  | $ | (170 | )     |  | $ | (621 | )

17



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##### Table of Contents



|                        |  |                      |     |                  |  |        |     |           |  |      |      |      |  |         |     |           |  |   |     |  |  |   |     |  |  |   |      |         |  |  |     |   
|----------------------- |  | -------------------- | --- | ---------------- |  | ------ | --- | --------- |  | ---- | ---- | ---- |  | ------- | --- | --------- |  | - | --- |  |  | - | --- |  |  | - | ---- | ------- |  |  | --- | --
|                        |  | Second quarter ended |     | Six months ended
|(In millions)           |  | June 30              |     | June 30         
|                        |  |                      |     |                 
|                        |  |                      |     |                  |  |        |     |           |  |      |      |      |  | Percent |     |           |  |   |     |  |  |   |     |  |  |   |      | Percent
|Profit before taxes     |  | 2001                 |     | 2000             |  | Change |     | Inc (Dec) |  | 2001 |      | 2000 |  | Change  |     | Inc (Dec)
|                        |  |                      |     |                  |  |        |     |           |  |      |      |      |  |         |     |          
|Chassis Systems         |  | $                    | 80  |                  |  | $      | 135 |           |  | $    | (55  | )    |  |         | (40 | %)        |  | $ | 136 |  |  | $ | 273 |  |  | $ | (137 | )       |  |  | (50 | %)
|                       
|                       
|                       
|                       
|Occupant Safety Systems |  |                      | 8   |                  |  |        | 59  |           |  |      | (51  | )    |  |         | (87 | %)        |  |   | 32  |  |  |   | 73  |  |  |   | (41  | )       |  |  | (57 | %)
|                       
|                       
|                       
|                       
|Automotive Electronics  |  |                      | 20  |                  |  |        | 33  |           |  |      | (13  | )    |  |         | (38 | %)        |  |   | 38  |  |  |   | 65  |  |  |   | (27  | )       |  |  | (41 | %)
|                        |  |                      |     |                  |  |        |     |           |  |      |      |      |  |         |     |           |  |   |     |  |  |   |     |  |  |   |      |         |  |  |     |   
|Total                   |  | $                    | 108 |                  |  | $      | 227 |           |  | $    | (119 | )    |  |         | (52 | %)        |  | $ | 206 |  |  | $ | 411 |  |  | $ | (205 | )       |  |  | (50 | %)

Profit before taxes for the second quarter 2001, excluding unusual items, for
the automotive businesses declined to $131 million from $241 million in 2000.
The decline in profit before taxes resulted from lower volume primarily in
North America, unfavorable product mix and the effect of a seatbelt recall,
price reductions, the effects of foreign currency exchange and divestitures,
which were partially offset by net cost reductions.

Profit before taxes for the six months ended June 30, 2001, excluding unusual
items, for the automotive businesses declined to $234 million from $483 million
in 2000. The decline in profit before taxes resulted from lower volume
primarily in North America, unfavorable product mix and the effect of a
seatbelt recall, price reductions, the effects foreign currency exchange and
divestitures, which were partially offset by net cost reductions.

Second quarter variances by segment:

|                    |  |         |     |         |  |             |     |            |  |   |     |       |  |   |      |  
|------------------- |  | ------- | --- | ------- |  | ----------- | --- | ---------- |  | - | --- | ----- |  | - | ---- | -
|                    |  |         |     |         |  | Occupant    |     |            |  |   |     | Total
|                    |  | Chassis |     | Safety  |  | Automotive  |     | Automotive
|(In millions)       |  | Systems |     | Systems |  | Electronics |     | Segments  
|                    |  |         |     |         |  |             |     |           
|Volume/Mix/Recall   |  | $       | (30 | )       |  | $           | (27 | )          |  | $ | (7  | )     |  | $ | (64  | )
|                   
|                   
|                   
|                   
|Price               |  |         | (16 | )       |  |             | (28 | )          |  |   | (4  | )     |  |   | (48  | )
|                   
|                   
|                   
|                   
|Translation         |  |         | (6  | )       |  |             | (5  | )          |  |   |    |       |  |   | (11  | )
|                   
|                   
|                   
|                   
|Divestitures        |  |         | (2  | )       |  |             |    |            |  |   | (4  | )     |  |   | (6   | )
|                   
|                   
|                   
|                   
|Net Cost Reductions |  |         | 12  |         |  |             | 15  |            |  |   | 8   |       |  |   | 35   |  
|                   
|                   
|                   
|                   
|Unusual Items       |  |         | (5  | )       |  |             | (3  | )          |  |   | (1  | )     |  |   | (9   | )
|                   
|                   
|                   
|                   
|All Other  Net     |  |         | (8  | )       |  |             | (3  | )          |  |   | (5  | )     |  |   | (16  | )
|                    |  |         |     |         |  |             |     |            |  |   |     |       |  |   |      |  
|Total               |  | $       | (55 | )       |  | $           | (51 | )          |  | $ | (13 | )     |  | $ | (119 | )

Unusual items by segment for the second quarter are as follows:

|                        |  |      |     |      |  |        |     |   |  |   |    |  
|----------------------- |  | ---- | --- | ---- |  | ------ | --- | - |  | - | -- | -
|(In millions)           |  | 2001 |     | 2000 |  | Change
|                        |  |      |     |      |  |       
|Chassis Systems         |  | $    | (15 | )    |  | $      | (10 | ) |  | $ | (5 | )
|                       
|                       
|                       
|                       
|Occupant Safety Systems |  |      | (3  | )    |  |        |    |   |  |   | (3 | )
|                       
|                       
|                       
|                       
|Automotive Electronics  |  |      | (5  | )    |  |        | (4  | ) |  |   | (1 | )
|                        |  |      |     |      |  |        |     |   |  |   |    |  
|Total                   |  | $    | (23 | )    |  | $      | (14 | ) |  | $ | (9 | )

Unusual items in 2001 and 2000 included restructuring costs, primarily
severance.

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Six months variances by segment:

|                    |  |         |      |         |  |             |     |            |  |   |     |       |  |   |      |  
|------------------- |  | ------- | ---- | ------- |  | ----------- | --- | ---------- |  | - | --- | ----- |  | - | ---- | -
|                    |  |         |      |         |  | Occupant    |     |            |  |   |     | Total
|                    |  | Chassis |      | Safety  |  | Automotive  |     | Automotive
|(In millions)       |  | Systems |      | Systems |  | Electronics |     | Segments  
|                    |  |         |      |         |  |             |     |           
|Volume/Mix/Recall   |  | $       | (105 | )       |  | $           | (32 | )          |  | $ | (24 | )     |  | $ | (161 | )
|                   
|                   
|                   
|                   
|Price               |  |         | (25  | )       |  |             | (52 | )          |  |   | (10 | )     |  |   | (87  | )
|                   
|                   
|                   
|                   
|Translation         |  |         | (10  | )       |  |             | (7  | )          |  |   |    |       |  |   | (17  | )
|                   
|                   
|                   
|                   
|Divestitures        |  |         | (3   | )       |  |             |    |            |  |   | (8  | )     |  |   | (11  | )
|                   
|                   
|                   
|                   
|Net Cost Reductions |  |         | 12   |         |  |             | 26  |            |  |   | 13  |       |  |   | 51   |  
|                   
|                   
|                   
|                   
|Unusual Items       |  |         | 6    |         |  |             | 30  |            |  |   | 8   |       |  |   | 44   |  
|                   
|                   
|                   
|                   
|All Other  Net     |  |         | (12  | )       |  |             | (6  | )          |  |   | (6  | )     |  |   | (24  | )
|                    |  |         |      |         |  |             |     |            |  |   |     |       |  |   |      |  
|Total               |  | $       | (137 | )       |  | $           | (41 | )          |  | $ | (27 | )     |  | $ | (205 | )

Unusual items by segment for the six months ended are as follows:

|                        |  |      |     |      |  |        |     |   |  |   |    | 
|----------------------- |  | ---- | --- | ---- |  | ------ | --- | - |  | - | -- | 
|(In millions)           |  | 2001 |     | 2000 |  | Change
|                        |  |      |     |      |  |       
|Chassis Systems         |  | $    | (17 | )    |  | $      | (23 | ) |  | $ | 6  | 
|                       
|                       
|                       
|                       
|Occupant Safety Systems |  |      | (11 | )    |  |        | (41 | ) |  |   | 30 | 
|                       
|                       
|                       
|                       
|Automotive Electronics  |  |      |    |      |  |        | (8  | ) |  |   | 8  | 
|                        |  |      |     |      |  |        |     |   |  |   |    | 
|Total                   |  | $    | (28 | )    |  | $      | (72 | ) |  | $ | 44 | 

Unusual items in 2001 included restructuring costs in all segments partially
offset by gains on the sale of non-strategic assets primarily Chassis. Unusual
items in 2000 included restructuring costs in all segments, threatened
litigation in Occupant Safety Systems and warranty costs in Chassis partially
offset by gains on asset sales, mainly in Chassis.

Automotive Restructuring

The Company has taken actions to enhance the automotive businesses profit
margin, including the integration of LucasVarity. The severance costs and
plant closings accruals related to these actions were $63 million at December
31, 2000. During the six months ended June 30, 2001, the Company recorded
additional before tax charges of $54 million, primarily for headcount
reductions, of which $23 million was recorded in the second quarter. Charges
of $25 million were recorded in administrative and selling expenses and $29
million in cost of sales. During the first six months of 2001, these actions
resulted in a permanent reduction of approximately 1,500 automotive salaried
positions. The Company used $56 million for severance payments and plant
closings. The balance at June 30, 2001 of $61 million is expected to be used
by the third quarter of 2002.

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LIQUIDITY AND FINANCIAL POSITION

In the six months ended June 30, 2001, cash from operating activities of $444
million, an increase in debt of $29 million, and proceeds from the sale of
nonstrategic assets of $6 million were used primarily for capital expenditures
of $335 million, dividend payments of $87 million and other items of $63
million. As a result, cash and cash equivalents decreased $6 million. In the
six months ended June 30, 2000, cash from operating activities of $402 million,
proceeds from the sale of nonstrategic assets of $1,396 million, and other
items of $57 million were used primarily for capital expenditures of $312
million, debt payments of $1,454 million and dividend payments of $82 million.
As a result, cash and cash equivalents increased $7 million.

Net debt (short-term debt, the current portion of long-term debt and long-term
debt, less cash and cash equivalents) was $6.4 billion at June 30, 2001 and at
December 31, 2000. The ratio of net debt to total capital (net debt, minority
interests and shareholders investment) was 72 percent at June 30, 2001 and 70
percent at December 31, 2000. The percentage of fixed rate debt to total debt
was 73 percent at June 30, 2001 compared to 66 percent at the end of 2000.

The Company amended and restated the revolving credit agreement that expired
January 23, 2001 in an aggregate amount of $1.8 billion with 26 banks to
establish a new expiration date of January 22, 2002 with an option to extend
the maturity of outstanding borrowings at that time to January 22, 2003. The
interest rate under the agreement is either the prime rate or a rate based on
LIBOR, at the option of the Company. The Company also canceled a revolving
credit agreement for use by the Companys Brazilian operations.

During the first quarter of 2001, the Company issued $500 million of 7.625%
Notes due March 2006, utilizing the universal shelf registration statement.

During the second quarter of 2001, the Company refinanced $100 million of
commercial paper borrowings by entering into a debt agreement due April 2003.
The interest rate under the agreement is a floating rate based on three-month
LIBOR.

At June 30, 2001, $400 million of short-term obligations were reclassified to
long-term obligations as the Company intends to refinance the obligations on a
long-term basis and has the ability to do so under its existing credit
agreements.

At June 30, 2001, the Company has $1.2 billion available under its universal shelf registration statement for issuance of securities.

At June 30, 2001, the Company had a working capital deficiency of approximately
$1.7 billion primarily due to the issuance of debt incurred to purchase
LucasVarity. Management believes that sufficient resources from funds
generated by operations, dispositions and existing borrowing capacity, are
available to maintain liquidity.

OTHER MATTERS

Refer to the Contingencies note to Financial Statements for discussion of legal
matters.

FORWARD-LOOKING STATEMENTS

Statements in this filing that are not statements of historical fact may be
forward-looking statements. In addition, from time to time, the Company and
its representatives make statements that may be forward-looking. This section
provides readers with cautionary statements identifying, for purposes of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
important factors

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that could cause the Companys actual results to differ
materially from those contained in forward-looking statements made in this
filing or otherwise made by, or on behalf of, the Company.

The Companys consolidated results could be affected by: unanticipated events
and circumstances that may occur and render the Companys acquisition of
LucasVarity less beneficial to the Company than anticipated; the ability to
continue technical innovation and the development of and demand for new
products and contract awards; pricing pressures from customers; the ability to
reduce the level of outstanding debt from cash flow from operations and the
proceeds from asset dispositions; the introduction of competing products or
technology by competitors; the financial results of companies in which we have
made technology investments; the availability of funding for research and
development; the economic, regulatory and political instability of certain
emerging countries; fluctuations in currency exchange rates; and the ability to
attract and retain skilled employees with high-level technical competencies.

The Companys aerospace and information systems businesses also could be
affected by: the level of defense funding by the government; the termination of
existing government contracts; and the ability to develop and market products
and services for customers outside of the traditional aerospace and information
systems markets.

The Companys automotive businesses also could be affected by: changes in
consumer debt levels and interest rates; moderation or decline in the
automobile build rate; work stoppages; customer recall and warranty claims;
product liability issues; and changes to the regulatory environment regarding
automotive safety.

The above list of important factors is not exclusive. We caution that any
forward-looking statement reflects only the beliefs of the Company or its
management at the time the statement is made. The Company undertakes no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement was made.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is subject to inherent risks attributed to operating in a global
economy. It is the Companys policy to utilize derivative financial
instruments to manage its interest rate and foreign currency exchange rate
risks. When appropriate, the Company uses derivatives to hedge its exposure to
short-term interest rate changes as a lower cost substitute for the issuance of
fixed rate debt and as a means of securing long-term, floating-rate debt.
Also, the Company may use interest rate agreements in the management of
interest rate exposure on debt issuances. The Company manages cash flow
transactional foreign exchange risk pursuant to a written corporate policy.
Forward contracts and, to a lesser extent, options are utilized to protect the
Companys cash flow from adverse movements in exchange rates.

The Company is exposed to credit loss in the event of nonperformance by the
other party to the derivative financial instruments. The Company limits this
exposure by entering into agreements with a number of major financial
institutions that meet credit standards established by the Company and that are
expected to satisfy fully their obligations under the contracts. Derivative
financial instruments are viewed by the Company as a risk management tool and
are not used for speculative or trading purposes.

Based on the Companys interest rate exposure on variable rate borrowings at
June 30, 2001, a one-percentage-point increase in the average interest rate on
the Companys variable rate borrowings would increase future interest expense
by approximately $2 million per month.

Based on the Companys exposure to foreign currency exchange rate risk
resulting from derivative foreign currency instruments outstanding at June 30,
2001, a 10 percent uniform strengthening in the value of the U.S. dollar
relative to the currencies in which those derivative foreign currency
instruments are denominated would result in a $124 million loss in fair value.

The Companys sensitivity analyses of the effects of changes in interest rates
and foreign currency exchange rates do not reflect the effect of such changes
on the related hedged transactions or on other operating transactions. The
Companys sensitivity analyses of the effects of changes in interest rates and
foreign currency exchange rates do not factor in a potential change in the
level of variable rate borrowings or derivative instruments outstanding that
could take place if these hypothetical conditions prevailed.

Management believes the Companys current financial position and financing
arrangements allow flexibility in worldwide financing activities and permit the
Company to respond to changing conditions in credit markets. Management
believes that funds generated from operations and existing borrowing capacity
are adequate to fund debt service requirements, capital expenditures, working
capital including tax requirements, company-sponsored research and development
programs and dividend payments to shareholders.

Refer to the Financial Instruments note to Financial Statements for further
discussion of derivative instruments as of June 30, 2001.

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##### Table of Contents






PART II. OTHER INFORMATION




Item 1. Legal Proceedings.

Except as described in Part II, Item 1 of TRWs Form 10-Q filing for the
quarter ended March 31, 2001, there have been no material developments in legal
proceedings involving TRW or its subsidiaries since those reported in TRWs
Annual Report on Form 10-K for the year ended December 31, 2000.




Item 4. Submission of Matters to a Vote of Security Holders.



|(a) |  | The Company held its 2001 Annual Meeting of Shareholders on April 25,
2001.                                                                                                                                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Proxies for the Annual Meeting of Shareholders were solicited pursuant to
Regulation 14 under the Act; there was no solicitation in opposition to
managements nominees as listed in the proxy statement; and all of such
nominees were elected.                                                                                                                   
|   
|(c) |  | Michael H. Armacost was elected a Director of the Company with
113,106,999 votes for election, 1,410,292 votes withheld from voting and
9,968,612 shares not voted, including broker non-votes.                                                                                                                                                                    
|   
|    |  | George H. Heilmeier was elected a Director of the Company with
107,395,522 votes for election, 7,121,769 votes withheld from voting and
9,968,612 shares not voted, including broker non-votes.                                                                                                                                                                    
|   
|    |  | John D. Ong was elected a Director of the Company with 107,163,469 votes
for election, 7,353,822 votes withheld from voting and 9,968,612 shares
not voted, including broker non-votes.                                                                                                                                                                            
|   
|    |  | The shareholders ratified the appointment of Ernst & Young LLP as the
Companys independent auditors for the 2001 fiscal year with 113,047,632
votes for, 839,863 votes against, 629,796 votes abstaining and
9,968,612 shares not voted, including broker non-votes.                                                                                              
|   
|    |  | The shareholders defeated a proposal raised by a shareholder from the
floor of the meeting that 75 to 100 percent of Directors attend each
future annual meeting of shareholders with 6,570 votes for, 114,492,370
votes against, 2,856 votes abstaining, and 9,968,612 shares not voted,
including broker non-votes.                                              
|   
|    |  | The shareholders defeated a proposal to report the percentage of
Directors attending the 2000 annual shareholder meeting with 6,359 votes
for, 114,492,570 votes against, 2,856 votes abstaining, and 9,968,612
shares not voted, including broker non-votes.                                                                                                      
|   
|    |  | The shareholders defeated a proposal raised by a shareholder from the
floor of the meeting to report the percentage of Directors attending a
board or committee meeting within 24 hours of the 2000 annual
shareholder meeting with 6,352 votes for, 114,492,577 votes against,
2,856 votes abstaining, and 9,968,612 shares not voted, including broker
non-votes.
|   
|    |  | The shareholders defeated a proposal raised by a shareholder from the
floor of the meeting that future shareholder meetings start between the
hours of 10:00 a.m. and 3:00 p.m. with 6,359 votes for, 114,492,570
votes against, 2,856 votes abstaining, and 9,968,612 shares not voted,
including broker non-votes.                                               

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| |  | The shareholders defeated a proposal raised by a shareholder from the
floor of the meeting to report whether trustees appointed by the Company
vote employee stock and the percentage of outstanding stock that these
trustees vote with 6,559 votes for, 114,492,370 votes against, 2,856
votes abstaining, and 9,968,612 shares not voted, including broker
non-votes.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 6. Exhibits and Reports on Form 8-K.



|(a) |  | Exhibits
|--- |  | --------



| | 10(a) |  | Amendment dated as of May 11, 2001 to 1997 TRW Long-Term Incentive Plan                                                                                                                                  
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10(b) |  | Amendment dated as of May 11, 2001 to 2000 TRW Long-Term Incentive Plan                                                                                                                                  
|
| | 10(c) |  | Form of Nonqualified Stock Option Agreement                                                                                                                                                              
|
| | 10(d) |  | Form of Transferable Nonqualified Stock Option Agreement                                                                                                                                                 
|
| | 10(e) |  | Form of Director Transferable Nonqualified Stock Option Agreement                                                                                                                                        
|
| | 10(f) |  | Form of Stock Option Agreement Qualified under the laws of France                                                                                                                                        
|
| | 10(g) |  | TRW Inc. Supplemental Executive Retirement Plan dated as of January 1, 2001                                                                                                                              
|
| | 10(h) |  | Form of 2001  2002 Strategic Incentive Program Grant                                                                                                                                                    
|
| | 10(i) |  | Form of 2001  2003 Strategic Incentive Program Grant                                                                                                                                                    
|
| | 10(j) |  | Amended and Restated Employment Agreement by and between TRW Inc. and
Dave M. Cote, dated as of April 25, 2001.                                                                                          
|
| | 15    |  | Letter re: Unaudited Financial Information                                                                                                                                                               
|
| | 99    |  | Computation of Ratio of Earnings to Fixed Charges 
Unaudited (Supplement to Exhibit 12 of the following Registration
Statements of the Company: No. 333-89133 on Form S-3 and No.
333-48443 on Form S-3)



|(b) |  | Reports on Form 8-K
|--- |  | -------------------
|   
|    |  | None.              

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SIGNATURES

Pursuant to the requirements 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.

|                    |  |  |  |          |  |                                  
|------------------- |  |  |  | -------- |  | ---------------------------------
|                   
|                    |  |  |  | TRW Inc.
|                   
|Date: July 31, 2001 |  |  |  | By:      |  | /s/ W. B. Lawrence               
|                    |  |  |  |         
|                    |  |  |  |          |  | W. B. Lawrence                   
|                    |  |  |  |          |  | Executive Vice President, General
|                    |  |  |  |          |  | Counsel and Secretary            
|                   
|                    |  |  |  | By:      |  | /s/ T.A. Connell                 
|                    |  |  |  |         
|                    |  |  |  |          |  | T.A. Connell                     
|                    |  |  |  |          |  | Vice President
and Controller    

25