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 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                                      
|EX 10-Form of Restricted Stock Unit Agreement   
|EX 15-Letter Re:Unaudited Financial Information 
|EX 99-Comput.-Ratio of Earnings to Fixed Charges



---



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 March 31, 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.

---



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

1900 Richmond Road, Cleveland, Ohio 44124

---




(216) 291-7000

---




|                                                                                                                                                                                                                                                                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 April 24, 2001, there were 124,913,325 shares of
TRW Common Stock, $0.625 par value, outstanding.



---



##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements

Statements of Operations (unaudited)
TRW Inc. and subsidiaries

|                                               |                            |               |       |       |  |   |       |       | 
|---------------------------------------------- | -------------------------- | ------------- | ----- | ----- |  | - | ----- | ----- | 
|                                              
|                                               |                            | Quarter ended
|                                               |                            | March 31     
|In millions except per share data              |                            | 2001          |       | 2000 
|                                              
|Sales                                          |                            | $             | 4,167 |       |  | $ | 4,565 |      
|                                              
|                                              
|                                              
|                                              
|Cost of sales                                  |                            |               | 3,566 |       |  |   | 3,810 |      
|                                              
|Gross profit                                   |                            |               | 601   |       |  |   | 755   |      
|                                              
|Administrative and selling expenses            |                            |               | 265   |       |  |   | 303   |      
|                                              
|                                              
|                                              
|                                              
|Research and development expenses              |                            |               | 121   |       |  |   | 110   |      
|                                              
|                                              
|                                              
|                                              
|Interest expense                               |                            |               | 129   |       |  |   | 136   |      
|                                              
|                                              
|                                              
|                                              
|Amortization of goodwill and intangible assets |                            |               | 32    |       |  |   | 32    |      
|                                              
|                                              
|                                              
|                                              
|Other (income)expense-net                      |                            |               | (19   | )     |  |   | (167  | )    
|                                              
|Earnings before income taxes                   |                            |               | 73    |       |  |   | 341   |      
|                                              
|                                              
|                                              
|                                              
|Income taxes                                   |                            |               | 18    |       |  |   | 132   |      
|                                              
|Net earnings                                   |                            | $             | 55    |       |  | $ | 209   |      
|                                              
|                                              
|                                              
|Per share of common stock                     
|                                              
|                                              
|                                              
|                                              
|                                               | Diluted earnings per share |               | $     | .44   |  |   | $     | 1.68  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Basic earnings per share   |               |       | .45   |  |   |       | 1.71  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Dividends declared         |               |       | .00   |  |   |       | .00   | 
|                                              
|                                              
|                                              
|Shares used in computing per share amounts    
|
|                                               | Diluted                    |               | 124.9 |       |  |   | 124.7 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Basic                      |               |       | 123.8 |  |   |       | 122.3 | 
|                                              

2



---



##### Table of Contents



Balance Sheets (unaudited)
TRW Inc. and subsidiaries

|                                                   |                                                |      |          |       |             |   |        |       | 
|-------------------------------------------------- | ---------------------------------------------- | ---- | -------- | ----- | ----------- | - | ------ | ----- | 
|                                                  
|                                                   |                                                |      | March 31 |       | December 31
|In millions                                        |                                                | 2001 |          | 2000 
|                                                  
|Assets                                            
|                                                  
|                                                  
|                                                  
|                                                  
|Current assets                                     |                                                |      |          |       |             |   |        |      
|                                                   | Cash and cash equivalents                      |      | $        | 268   |             |   | $      | 267   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts receivable                            |      |          | 2,427 |             |   |        | 2,328 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Inventories                                    |      |          | 835   |             |   |        | 870   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Prepaid expenses                               |      |          | 177   |             |   |        | 149   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Deferred income taxes                          |      |          | 306   |             |   |        | 353   | 
|                                                  
|Total current assets                               |                                                |      | 4,013    |       |             |   | 3,967  |      
|                                                  
|Property, plant and equipment-on the basis of cost |                                                |      | 7,861    |       |             |   | 7,915  |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Less accumulated depreciation and amortization |      |          | 4,389 |             |   |        | 4,328 | 
|                                                  
|Total property, plant and equipment-net            |                                                |      | 3,472    |       |             |   | 3,587  |      
|                                                  
|Intangible assets                                  |                                                |      |          |       |             |   |        |      
|                                                   | Goodwill                                       |      |          | 3,499 |             |   |        | 3,547 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other intangible assets                        |      |          | 969   |             |   |        | 975   | 
|                                                  
|                                                   |                                                |      | 4,468    |       |             |   | 4,522  |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Less accumulated amortization                  |      |          | 578   |             |   |        | 510   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|Total intangible assets-net                        |                                                |      | 3,890    |       |             |   | 4,012  |      
|                                                  
|Investments in affiliated companies                |                                                |      | 725      |       |             |   | 1,040  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Other notes and accounts receivable                |                                                |      | 240      |       |             |   | 283    |      
|                                                  
|                                                  
|                                                  
|                                                  
|Prepaid pension cost                               |                                                |      | 2,835    |       |             |   | 2,902  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Other assets                                       |                                                |      | 627      |       |             |   | 676    |      
|                                                  
|                                                   |                                                | $    | 15,802   |       |             | $ | 16,467 |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|Liabilities and shareholders investment          
|                                                  
|                                                  
|                                                  
|                                                  
|Current liabilities                                |                                                |      |          |       |             |   |        |      
|                                                   | Short-term debt                                |      | $        | 776   |             |   | $      | 1,450 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Trade accounts payable                         |      |          | 1,768 |             |   |        | 1,795 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current portion of long-term debt              |      |          | 758   |             |   |        | 489   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other current liabilities                      |      |          | 1,920 |             |   |        | 2,126 | 
|                                                  
|Total current liabilities                          |                                                |      | 5,222    |       |             |   | 5,860  |      
|                                                  
|Long-term liabilities                              |                                                |      | 2,022    |       |             |   | 2,038  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Long-term debt                                     |                                                |      | 5,344    |       |             |   | 4,765  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Deferred income taxes                              |                                                |      | 757      |       |             |   | 1,030  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Minority interests in subsidiaries                 |                                                |      | 126      |       |             |   | 123    |      
|                                                  
|Capital stock                                      |                                                |      | 78       |       |             |   | 78     |      
|                                                  
|                                                  
|                                                  
|                                                  
|Other capital                                      |                                                |      | 481      |       |             |   | 472    |      
|                                                  
|                                                  
|                                                  
|                                                  
|Retained earnings                                  |                                                |      | 2,613    |       |             |   | 2,565  |      
|                                                  
|                                                  
|                                                  
|                                                  
|Treasury shares-cost in excess of par value        |                                                |      | (458     | )     |             |   | (472   | )    
|                                                  
|                                                  
|                                                  
|                                                  
|Accumulated other comprehensive income(loss)       |                                                |      | (383     | )     |             |   | 8      |      
|                                                  
|Total shareholders investment                     |                                                |      | 2,331    |       |             |   | 2,651  |      
|                                                  
|                                                   |                                                | $    | 15,802   |       |             | $ | 16,467 |      
|                                                  

3



---



##### Table of Contents



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

|                                                     |                                            |      |                                        |      |               |      |        |   |  |      |  
|---------------------------------------------------- | ------------------------------------------ | ---- | -------------------------------------- | ---- | ------------- | ---- | ------ | - |  | ---- | -
|                                                    
|                                                     |                                            |      |                                        |      | Quarter ended
|                                                     |                                            |      |                                        |      | March 31     
|In millions                                          |                                            | 2001 |                                        | 2000
|                                                    
|                                                    
|Operating activities                                
|                                                    
|                                                    
|                                                    
|                                                    
|Net earnings                                         |                                            | $    | 55                                     |      |               | $    | 209    |  
|                                                    
|                                                    
|                                                    
|                                                    
|Adjustments to reconcile net earnings to net cash   
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | (used in)provided by operating activities:
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Depreciation and amortization          |      |               | 200  |        |   |  | 212  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Pension income                         |      |               | (61  | )      |   |  | (66  | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Net gain on sale of assets             |      |               | (30  | )      |   |  | (196 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Deferred income taxes                  |      |               | 12   |        |   |  | 42   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Other-net                              |      |               | 21   |        |   |  | 15   |  
|                                                    
|                                                    
|                                                    
|                                                    
|Changes in assets and liabilities, net of effects of
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | businesses acquired or sold:              
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Accounts receivable                    |      |               | (153 | )      |   |  | (313 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Inventories                            |      |               | 14   |        |   |  | 30   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Trade accounts payable                 |      |               | 9    |        |   |  | 50   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Prepaid expenses and other liabilities |      |               | (197 | )      |   |  | (17  | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            |      | Other-net                              |      |               | 118  |        |   |  | 36   |  
|                                                    
|Net cash (used in)provided by operating activities   |                                            |      | (12                                    | )    |               |      | 2      |  
|                                                    
|                                                    
|Investing activities                                
|                                                    
|                                                    
|                                                    
|                                                    
|Capital expenditures including other intangibles     |                                            |      | (167                                   | )    |               |      | (153   | )
|                                                    
|                                                    
|                                                    
|                                                    
|Net proceeds from divestitures                       |                                            |      | 19                                     |      |               |      | 1,351  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Other-net                                            |                                            |      | (7                                     | )    |               |      | (67    | )
|                                                    
|Net cash (used in)provided by investing activities   |                                            |      | (155                                   | )    |               |      | 1,131  |  
|                                                    
|Financing activities                                
|                                                    
|                                                    
|                                                    
|                                                    
|Decrease in short-term debt                          |                                            |      | (299                                   | )    |               |      | (622   | )
|                                                    
|                                                    
|                                                    
|                                                    
|Proceeds from debt in excess of 90 days              |                                            |      | 626                                    |      |               |      | 449    |  
|                                                    
|                                                    
|                                                    
|                                                    
|Principal payments on debt in excess of 90 days      |                                            |      | (125                                   | )    |               |      | (972   | )
|                                                    
|                                                    
|                                                    
|                                                    
|Dividends paid                                       |                                            |      | (44                                    | )    |               |      | (41    | )
|                                                    
|                                                    
|                                                    
|                                                    
|Other-net                                            |                                            |      | (3                                     | )    |               |      | 36     |  
|                                                    
|Net cash provided by(used in) financing activities   |                                            |      | 155                                    |      |               |      | (1,150 | )
|                                                    
|Effect of exchange rate changes on cash              |                                            |      | 13                                     |      |               |      | 50     |  
|                                                    
|Increase in cash and cash equivalents                |                                            |      | 1                                      |      |               |      | 33     |  
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents at beginning of quarter    |                                            |      | 267                                    |      |               |      | 228    |  
|                                                    
|Cash and cash equivalents at end of quarter          |                                            | $    | 268                                    |      |               | $    | 261    |  
|                                                    

4



---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
(unaudited)

Basis of Presentation

The accompanying unaudited condensed 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 period ended March 31, 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 taken restructuring actions intended to enhance the automotive
businesses profit margin. The severance costs and plant closings accruals
related to these actions, including costs associated with the integration of
LucasVarity, were $70 million at December 31, 2000. During the first quarter
of 2001, the Company recorded an additional before tax charge of $37 million
for headcount reductions, which were recorded in administrative and selling
expenses and cost of sales. The Company used $40 million for severance
payments and plant closings. The balance at March 31, 2001 of $67 million is
expected to be used by the first half of 2002.

Other (Income)Expense-Net

|                                    |  |               |     |      |  |   |      |  
|----------------------------------- |  | ------------- | --- | ---- |  | - | ---- | -
|(In millions)                       |  | Quarter ended
|                                    |  | March 31     
|                                    |  |              
|                                    |  | 2001          |     | 2000
|                                    |  |               |     |     
|Net gain on sale of assets          |  | $             | (30 | )    |  | $ | (196 | )
|                                   
|                                   
|                                   
|                                   
|Claims and litigation               |  |               |    |      |  |   | 25   |  
|                                   
|                                   
|                                   
|                                   
|Miscellaneous other (income)expense |  |               | 11  |      |  |   | 4    |  
|                                    |  |               |     |      |  |   |      |  
|                                    |  | $             | (19 | )    |  | $ | (167 | )
|                                    |  |               |     |      |  |   |      |  

The net gain on sale of assets in 2000 included the sale of RF Micro Devices,
Inc. (RFMD) common stock and the Companys Nelson Stud Welding and Australian
steering businesses.

5



---



##### Table of Contents



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
|                             |                         |      | March 31     
|                             |                         |      |              
|In millions                  |                         | 2001 |               | 2000 
|                            
|                            
|Sales                       
|                            
|                            
|                            
|                            
|                             | Systems                 |      | $             | 789   |  |   | $     | 774   | 
|                            
|                            
|                            
|                            
|                             | Space & Electronics     |      |               | 484   |  |   |       | 486   | 
|                            
|                            
|                            
|                            
|                             | Aeronautical Systems    |      |               | 265   |  |   |       | 270   | 
|                            
|                            
|                            
|                            
|                             | Chassis Systems         |      |               | 1,554 |  |   |       | 1,803 | 
|                            
|                            
|                            
|                            
|                             | Occupant Safety Systems |      |               | 708   |  |   |       | 760   | 
|                            
|                            
|                            
|                            
|                             | Automotive Electronics  |      |               | 367   |  |   |       | 472   | 
|                            
|Sales                        |                         | $    | 4,167         |       |  | $ | 4,565 |      
|                            
|                            
|Profit before taxes         
|                            
|                            
|                            
|                            
|                             | Systems                 |      | $             | 48    |  |   | $     | 47    | 
|                            
|                            
|                            
|                            
|                             | Space & Electronics     |      |               | 34    |  |   |       | 227   | 
|                            
|                            
|                            
|                            
|                             | Aeronautical Systems    |      |               | 29    |  |   |       | 27    | 
|                            
|                            
|                            
|                            
|                             | Chassis Systems         |      |               | 56    |  |   |       | 138   | 
|                            
|                            
|                            
|                            
|                             | Occupant Safety Systems |      |               | 24    |  |   |       | 14    | 
|                            
|                            
|                            
|                            
|                             | Automotive Electronics  |      |               | 18    |  |   |       | 32    | 
|                            
|                             |                         |      | 209           |       |  |   | 485   |      
|                            
|Corporate expense and other  |                         |      | (59           | )     |  |   | (64   | )    
|                            
|                            
|                            
|                            
|Pension income               |                         |      | 53            |       |  |   | 57    |      
|                            
|                            
|                            
|                            
|Financing costs              |                         |      | (130          | )     |  |   | (137  | )    
|                            
|Earnings before income taxes |                         | $    | 73            |       |  | $ | 341   |      
|                            

Corporate expense and other included approximately $6 million of restructuring
charges in the first quarter of 2001 and approximately $12 million of
unrealized foreign exchange losses in the first quarter of 2000.

|                   |                         |      |               |      |  |  |   |    | 
|------------------ | ----------------------- | ---- | ------------- | ---- |  |  | - | -- | 
|                   |                         |      | Quarter ended
|                   |                         |      | March 31     
|                   |                         |      |              
|In millions        |                         | 2001 |               | 2000
|                  
|Intersegment sales
|                  
|                  
|                  
|                  
|                   | Systems                 |      | $             | 42   |  |  | $ | 31 | 
|                  
|                  
|                  
|                  
|                   | Space & Electronics     |      |               | 15   |  |  |   | 9  | 
|                  
|                  
|                  
|                  
|                   | Aeronautical Systems    |      |               |     |  |  |   |   | 
|                  
|                  
|                  
|                  
|                   | Chassis Systems         |      |               | 1    |  |  |   | 7  | 
|                  
|                  
|                  
|                  
|                   | Occupant Safety Systems |      |               |     |  |  |   | 1  | 
|                  
|                  
|                  
|                  
|                   | Automotive Electronics  |      |               | 29   |  |  |   | 21 | 
|                  

6



---



##### Table of Contents



Inventories

|                                      |  |          |     |             |  |   |     | 
|------------------------------------- |  | -------- | --- | ----------- |  | - | --- | 
|                                      |  | March 31 |     | December 31
|(In millions)                         |  | 2001     |     | 2000       
|                                      |  |          |     |            
|Finished products and work in process |  | $        | 502 |             |  | $ | 513 | 
|                                     
|                                     
|                                     
|                                     
|Raw materials and supplies            |  |          | 333 |             |  |   | 357 | 
|                                      |  |          |     |             |  |   |     | 
|                                      |  | $        | 835 |             |  | $ | 870 | 
|                                      |  |          |     |             |  |   |     | 

Financial Instruments

Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, which requires companies to recognize all derivative
instruments as either assets or liabilities at fair value. The effect of the
adoption had an immaterial impact on the Companys financial position and net
earnings.

Under SFAS No. 133, for derivative instruments that have been designated and
qualify as hedging the exposure to changes in the fair value of an asset or a
liability, the gain or loss on the derivative as well as the offsetting
gain/loss on the hedged item are recognized in net earnings during the period
of the change in fair values. For derivative instruments that have been
designated and qualify as hedging the exposure to variability in expected
future cash flows, the gain/loss on the derivative is initially reported as a
component of other comprehensive income(loss) and reported as earnings when the
hedged transaction affects earnings. The remaining gain/loss on the derivative
in excess of the cumulative change in the present value of future cash flows of
the hedged item, if any, is recognized in net earnings during the period of
change. For derivative instruments that are a hedge of a net investment in a
foreign currency, the gain or loss is reported in other comprehensive
income(loss) as part of the cumulative translation adjustment. Derivatives not
designated as hedges are adjusted to fair value through net earnings.

Cash Flow Hedges

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.
Gains/losses on these instruments, which mature at various dates through April
2007, 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 SFAS 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.

No foreign currency cash flow hedges were discontinued during the quarter ended
March 31, 2001. Foreign currency cash flow hedges with a combined fair value
of a $10 million loss after tax at March 31, 2001 are expected to be recognized
in net earnings in the next twelve months.

The Company enters into interest rate swaps to manage the risks and costs
associated with its financing activities. At March 31, 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 $8 million.

7



---



##### Table of Contents



Fair Value Hedges

On occasion, the Company hedges equity investments in publicly traded
companies. These instruments protect the Company from changes in the market
value of a portion of the Companys investments in RF Micro Devices, Inc. and
Applera Corporation  Celera Genomics Group. The fair market value of these
hedges as of March 31, 2001 is a $161 million gain. The ineffective portion,
recorded in Other (income)expense-net, was a $5 million gain for the quarter
ending March 31, 2001.

At March 31, 2001, the Company had a $425 million notional principal amount
interest rate swap to receive a fixed rate amount in exchange for variable rate
interest payments. This hedge is considered perfectly effective to offset the
changes in fair value of the hedged item and has a fair value of zero at March
31, 2001.

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 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 the universal shelf registration statement.
The proceeds were used to reduce short-term borrowings.

At March 31, 2001, $500 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.

8



---



##### Table of Contents



Earnings Per Share

|                                    |                                                     |                                                            |     |               |       |      |      |       |       | 
|----------------------------------- | --------------------------------------------------- | ---------------------------------------------------------- | --- | ------------- | ----- | ---- | ---- | ----- | ----- | 
|                                    |                                                     |                                                            |     | Quarter ended
|(In millions except per share data) |                                                     | March 31                                                  
|                                    |                                                     |                                                           
|                                    |                                                     |                                                            |     | 2001          |       | 2000
|                                    |                                                     |                                                            |     |               |       |     
|Numerator                          
|                                   
|                                   
|                                   
|                                   
|                                    | Net earnings                                        |                                                            | $   | 55.5          |       |      | $    | 209.3 |      
|                                   
|                                   
|                                   
|                                   
|                                    | Preferred stock dividends                           |                                                            |     | .2            |       |      |      | .2    |      
|                                    |                                                     |                                                            |     |               |       |      |      |       |      
|                                    | Numerator for basic earnings per sharenet earnings
|                                   
|                                   
|                                   
|                                   
|                                    |                                                     | available to common shareholders                           |     |               | 55.3  |      |      |       | 209.1 | 
|                                   
|                                   
|                                   
|                                   
|                                    | Effect of dilutive securities                      
|                                   
|                                   
|                                   
|                                   
|                                    |                                                     | Preferred stock dividends                                  |     |               | .2    |      |      |       | .2    | 
|                                    |                                                     |                                                            |     |               |       |      |      |       |      
|                                    | Numerator for diluted earnings per share          
|                                   
|                                   
|                                   
|                                   
|                                    |                                                     | net earnings available to common shareholders              |     | $             | 55.5  |      |      | $     | 209.3 | 
|                                    |                                                     |                                                            |     |               |       |      |      |       |      
|Denominator                        
|                                   
|                                   
|                                   
|                                   
|                                    | Denominator for basic earnings per share          
|                                   
|                                   
|                                   
|                                   
|                                    |                                                     | weighted-average common shares                             |     |               | 123.8 |      |      |       | 122.3 | 
|                                   
|                                   
|                                   
|                                   
|                                    | Effect of dilutive securities                      
|                                   
|                                   
|                                   
|                                   
|                                    |                                                     | Convertible preferred stock                                |     |               | .7    |      |      |       | .8    | 
|                                   
|                                   
|                                   
|                                   
|                                    |                                                     | Employee stock options                                     |     |               | .4    |      |      |       | 1.6   | 
|                                    |                                                     |                                                            |     |               |       |      |      |       |      
|                                    | Dilutive potential common shares                    |                                                            |     | 1.1           |       |      |      | 2.4   |      
|                                    |                                                     |                                                            |     |               |       |      |      |       |      
|                                    | Denominator for diluted earnings per share        
|                                   
|                                   
|                                   
|                                   
|                                    |                                                     | adjusted weighted-average shares after assumed conversions |     |               | 124.9 |      |      |       | 124.7 | 
|                                    |                                                     |                                                            |     |               |       |      |      |       |      
|Basic earnings per share            |                                                     | $                                                          | .45 |               |       | $    | 1.71 |      
|                                    |                                                     |                                                            |     |               |       |      |      |       |      
|Diluted earnings per share          |                                                     |                                                            | .44 |               |       |      | 1.68 |      
|                                    |                                                     |                                                            |     |               |       |      |      |       |      

Supplemental Cash Flow Information

|                                          |  |          |    |               |  |      |    |  |  | 
|----------------------------------------- |  | -------- | -- | ------------- |  | ---- | -- |  |  | 
|                                          |  |          |    | Quarter ended
|(In millions)                             |  | March 31
|                                          |  |         
|                                          |  |          |    | 2001          |  | 2000
|                                          |  |          |    |               |  |     
|Interest paid (net of amount capitalized) |  | $        | 65 |               |  | $    | 79 | 
|                                         
|                                         
|                                         
|                                         
|Income taxes paid (net of refunds)        |  | $        | 16 |               |  | $    | 19 | 

Comprehensive Income(Loss)



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

|                                       |  |          |      |               |  |      |      |   |  | 
|-------------------------------------- |  | -------- | ---- | ------------- |  | ---- | ---- | - |  | 
|                                       |  |          |      | Quarter ended
|(In millions)                          |  | March 31
|                                       |  |         
|                                       |  |          |      | 2001          |  | 2000
|                                       |  |          |      |               |  |     
|Net earnings                           |  | $        | 55   |               |  | $    | 209  |  
|                                      
|                                      
|                                      
|                                      
|Foreign currency exchange losses       |  |          | (119 | )             |  |      | (153 | )
|                                      
|                                      
|                                      
|                                      
|Unrealized (losses)gains on securities |  |          | (241 | )             |  |      | 420  |  
|                                      
|                                      
|                                      
|                                      
|Unrealized losses on cash flow hedges  |  |          | (31  | )             |  |      |     |  
|                                       |  |          |      |               |  |      |      |   | 
|Comprehensive income(loss)             |  | $        | (336 | )             |  | $    | 476  |  
|                                       |  |          |      |               |  |      |      |   | 

9



---



##### Table of Contents



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

|                                             |  |          |      |             |  |   |      |  
|-------------------------------------------- |  | -------- | ---- | ----------- |  | - | ---- | -
|                                             |  | March 31 |      | December 31
|(In millions)                                |  | 2001     |      | 2000       
|                                             |  |         
|Foreign currency exchange loss               |  | $        | (542 | )           |  | $ | (423 | )
|                                            
|                                            
|                                            
|                                            
|Unrealized gains on securities               |  |          | 212  |             |  |   | 453  |  
|                                            
|                                            
|                                            
|                                            
|Unrealized losses on cash flow hedges        |  |          | (31  | )           |  |   |     |  
|                                            
|                                            
|                                            
|                                            
|Minimum pension liability adjustments        |  |          | (22  | )           |  |   | (22  | )
|                                             |  |          |      |             |  |   |      |  
|Accumulated other comprehensive income(loss) |  | $        | (383 | )           |  | $ | 8    |  
|                                             |  |          |      |             |  |   |      |  

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



---



##### 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 March 31, 2001, and the related unaudited statements of
operations and cash flows for the three-month periods ended March 31, 2001 and
2000, included in the Form 10-Q of TRW Inc. for the quarterly period ended
March 31, 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 March 31, 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
April 18, 2001

11



---



##### 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)

|                           |  |               |       |      |  |        |       |           |  |   |       |   |  |  |     |   
|-------------------------- |  | ------------- | ----- | ---- |  | ------ | ----- | --------- |  | - | ----- | - |  |  | --- | --
|                           |  | Quarter ended
|                           |  | March 31     
|                           |  |              
|                           |  |               |       |      |  |        |       | Percent  
|                           |  | 2001          |       | 2000 |  | Change |       | Inc (Dec)
|                           |  |               |       |      |  |        |       |          
|Sales                      |  | $             | 4,167 |      |  | $      | 4,565 |           |  | $ | (398  | ) |  |  | (9  | %)
|                          
|                          
|                          
|                          
|Profit before taxes        |  |               | 209   |      |  |        | 485   |           |  |   | (276  | ) |  |  | (57 | %)
|                          
|                          
|                          
|                          
|Net earnings               |  |               | 55    |      |  |        | 209   |           |  |   | (154  | ) |  |  | (74 | %)
|                          
|                          
|                          
|                          
|Diluted earnings per share |  |               | .44   |      |  |        | 1.68  |           |  |   | (1.24 | ) |  |  | (74 | %)
|                          
|                          
|                          
|                          
|Effective tax rate         |  |               | 24.0  | %    |  |        | 38.6  | %        

The first quarter 2001 sales decreased 9 percent compared with first quarter
2000 sales, due to lower volumes, primarily in North America, of approximately
$170 million, foreign currency exchange of approximately $105 million, divestitures of
approximately $90 million and automotive price reductions of approximately $35 million.
Net earnings and diluted earnings per share for the first quarter 2001 were
$55 million, or $.44 per share, compared with $209 million, or
$1.68 per share, in 2000.

For the first quarter 2001, unusual items resulted in net earnings of $4
million, or $.03 per share. The unusual items for the first quarter 2001
included gains from asset sales of approximately $31 million, which were
partially offset by restructuring charges of approximately $27 million.

For the first quarter 2000, unusual items resulted in net earnings of $57
million, or $.46 per share. The unusual items for the first quarter 2000
included $126 million of gains from asset sales, including sales of shares of
RFMD common stock and of the Companys Nelson Stud Welding and Australian
steering businesses, offset in part by a $49 million charge for warranty
reserves and claims and litigation, a $12 million charge for severance and
plant closing costs for the automotive restructuring program and an $8 million
charge primarily for unrealized losses on foreign currency hedges.

Gross profit of $601 million in the first quarter of 2001 decreased 20 percent
from $755 million in 2000 primarily due to decreased volume and unfavorable
product mix of approximately $95 million, lower pricing of approximately $40
million, net change in restructuring of $10 million and the absence of
warranty reserves and claims and litigation of $40 million incurred in 2000.
Gross profit, as a percentage of sales, was 14.4 percent for the first quarter
2001, compared to 16.5 percent in the first quarter 2000.

Administrative and selling expenses of $265 million in the first quarter 2001
decreased $38 million compared with the first quarter of 2000, primarily due
to cost reductions of approximately $15 million and divestitures of
approximately $11 million.

Research and development expenses of $121 million in the first quarter 2001
increased $11 million compared with the first quarter of 2000, due to
increased spending in the Space & Electronics segment of approximately $15
million, including indium phosphide integrated circuits.

Interest expense of $129 million in the first quarter 2001 decreased $7
million compared with the first quarter of 2000, primarily due to lower
average debt, offset by slightly higher short-term interest rates in the
United States and higher interest rates on new fixed rate debt issuances.

Other (income)expense-net was income of $19 million in the first quarter 2001
compared to $167 million in 2000. Included in 2001 were net gains on sale of
assets of approximately $30 million. Included in 2000 were the following
items: net gains on sale of assets, related to sales of shares of

12



---



##### Table of Contents



RFMD common stock and the Companys Nelson Stud Welding and Australian
steering businesses, of $196 million, partially offset by claims and
litigation of $25 million.

The effective income tax rate was 24 percent in the first quarter of 2001
compared with 38.6 percent in the first quarter of 2000. Excluding unusual
items, the effective income tax rate would have been approximately 36 percent
in both quarters.

RESULTS OF SEGMENTS

Systems (formerly known as Systems & Information Technology)

|                    |  |               |     |      |  |        |     |           |  |   |    |  |  |  |   |  
|------------------- |  | ------------- | --- | ---- |  | ------ | --- | --------- |  | - | -- |  |  |  | - | -
|                    |  | Quarter ended
|(In millions)       |  | March 31     
|                    |  |              
|                    |  |               |     |      |  |        |     | Percent  
|                    |  | 2001          |     | 2000 |  | Change |     | Inc (Dec)
|                    |  |               |     |      |  |        |     |          
|Sales               |  | $             | 789 |      |  | $      | 774 |           |  | $ | 15 |  |  |  | 2 | %
|                   
|                   
|                   
|                   
|Profit before taxes |  |               | 48  |      |  |        | 47  |           |  |   | 1  |  |  |  | 3 | %

Sales for the first quarter of 2001 increased 2 percent compared to the first
quarter of 2000, primarily due to higher volume on existing programs, including
space and missile defense systems contracts, of approximately $64 million. The
higher sales were offset by lower volume on contracts nearing completion or
completed during the year, including the U.S. Census Bureau and the TRW
Environmental Safety Systems programs, of approximately $53 million.

Profit before taxes for the first quarter 2001 increased 3 percent compared to
the first quarter of 2000 due to increased sales volume.

Space & Electronics

|                    |  |               |     |      |  |        |     |           |  |   |      |   |  |  |     |   
|------------------- |  | ------------- | --- | ---- |  | ------ | --- | --------- |  | - | ---- | - |  |  | --- | --
|                    |  | Quarter ended
|(In millions)       |  | March 31     
|                    |  |              
|                    |  |               |     |      |  |        |     | Percent  
|                    |  | 2001          |     | 2000 |  | Change |     | Inc (Dec)
|                    |  |               |     |      |  |        |     |          
|Sales               |  | $             | 484 |      |  | $      | 486 |           |  | $ | (2   | ) |  |  |    |   
|                   
|                   
|                   
|                   
|Profit before taxes |  |               | 34  |      |  |        | 227 |           |  |   | (193 | ) |  |  | (85 | %)

Sales for the first quarter of 2001 decreased slightly compared to the first
quarter of 2000. Lower sales, primarily due to lower volume on several defense
programs nearing completion or completed during the year of approximately $25
million, was offset by higher volume on existing core programs of approximately
$25 million.

Profit before taxes for the first quarter of 2001 decreased 85 percent compared
to the first quarter of 2000. Excluding unusual items of $174 million in 2000,
consisting of gains on the sales of shares of RFMD common stock, profit before
taxes decreased $19 million. An increase in losses from partially owned
technology companies, including Endwave Corporation and Astrolink, of
approximately $9 million and lower volume on several defense programs nearing
completion or completed during the year of approximately $5 million reduced
profit before taxes.

13



---



##### Table of Contents



Aeronautical Systems

|                    |  |               |     |      |  |        |     |           |  |   |    |   |  |  |    |   
|------------------- |  | ------------- | --- | ---- |  | ------ | --- | --------- |  | - | -- | - |  |  | -- | --
|                    |  | Quarter ended
|(In millions)       |  | March 31     
|                    |  |              
|                    |  |               |     |      |  |        |     | Percent  
|                    |  | 2001          |     | 2000 |  | Change |     | Inc (Dec)
|                    |  |               |     |      |  |        |     |          
|Sales               |  | $             | 265 |      |  | $      | 270 |           |  | $ | (5 | ) |  |  | (2 | %)
|                   
|                   
|                   
|                   
|Profit before taxes |  |               | 29  |      |  |        | 27  |           |  |   | 2  |   |  |  | 5  | % 

Sales for the first quarter of 2001 decreased 2 percent compared to the first
quarter of 2000. The lower sales were due to the effect of foreign currency
exchange of approximately $15 million and decreased volume relating to a
customers decision to in-source certain aerostructure work of approximately
$11 million, offset in part by increased volume of approximately $19 million.

Profit before taxes for the first quarter of 2001 increased 5 percent compared
to the first quarter of 2000. Excluding approximately $4 million of unusual
items in 2001, consisting of gain on sale of assets, profit before taxes
decreased $2 million. The lower profit before taxes resulted from
decreased volume primarily relating to a customers decision to in-source certain
aerostructure work of approximately $5 million and the effect of foreign
currency exchange of approximately $2 million, offset by net cost reductions of
approximately $7 million.

As of December 31, 2000, the Company had reserves of approximately $7 million
for severance and other costs to close certain facilities of the Aeronautical
Systems segment. During the first quarter of 2001, the reserve was reduced
by $2 million for severance costs. The balance of $5 million will be used by
the first quarter of 2002.

Automotive Segments

Chassis Systems

|                    |  |               |       |      |  |        |       |           |  |   |      |   |  |  |     |   
|------------------- |  | ------------- | ----- | ---- |  | ------ | ----- | --------- |  | - | ---- | - |  |  | --- | --
|                    |  | Quarter ended
|(In millions)       |  | March 31     
|                    |  |              
|                    |  |               |       |      |  |        |       | Percent  
|                    |  | 2001          |       | 2000 |  | Change |       | Inc (Dec)
|                    |  |               |       |      |  |        |       |          
|Sales               |  | $             | 1,554 |      |  | $      | 1,803 |           |  | $ | (249 | ) |  |  | (14 | %)
|                   
|                   
|                   
|                   
|Profit before taxes |  |               | 56    |      |  |        | 138   |           |  |   | (82  | ) |  |  | (59 | %)

Sales for the first quarter of 2001 decreased 14 percent compared to the first
quarter of 2000, mainly due to lower volume of approximately $135 million, the
effect of foreign currency exchange of approximately $59 million and the
effects of divestitures of approximately $47 million.

Profit before taxes for the first quarter of 2001 decreased 59 percent compared
to the first quarter of 2000. Unusual items for the first quarter of 2001
included restructuring charges of approximately $21 million and gains from
asset sales of approximately $19 million. Unusual items for the first quarter
of 2000 included warranty and restructuring charges of approximately $36
million, offset by the gain on the sale of businesses of approximately $23
million. Excluding unusual items, profit before taxes decreased $93 million.
The lower profit before taxes resulted primarily from the net effect of
decreased volume and unfavorable product mix of approximately $75 million,
lower pricing of approximately $9 million and the effect of foreign currency
exchange of approximately $5 million.

Effective January 2001, the Companys Other Automotive segment was combined
with the Chassis Systems segment. Financial information has been restated to
reflect this combination.

14



---



##### Table of Contents



Occupant Safety Systems

|                    |  |               |     |      |  |        |     |           |  |   |     |   |  |  |    |   
|------------------- |  | ------------- | --- | ---- |  | ------ | --- | --------- |  | - | --- | - |  |  | -- | --
|                    |  | Quarter ended
|(In millions)       |  | March 31     
|                    |  |              
|                    |  |               |     |      |  |        |     | Percent  
|                    |  | 2001          |     | 2000 |  | Change |     | Inc (Dec)
|                    |  |               |     |      |  |        |     |          
|Sales               |  | $             | 708 |      |  | $      | 760 |           |  | $ | (52 | ) |  |  | (7 | %)
|                   
|                   
|                   
|                   
|Profit before taxes |  |               | 24  |      |  |        | 14  |           |  |   | 10  |   |  |  | 71 | % 

Sales for the first quarter of 2001 decreased 7 percent compared to the first
quarter of 2000, due to lower pricing of approximately $24 million, the effect
of foreign currency exchange of approximately $20 million and decreased volume
of approximately $6 million.

Excluding approximately $33 million of unusual items consisting of claims and
litigation in 2000 and the net change in restructuring charges, profit before
taxes for the first quarter of 2001 decreased approximately $23 million. Lower
pricing of approximately $24 million and decreased volume of approximately $4
million were offset by net cost reductions of approximately $12 million.

Automotive Electronics

|                    |  |               |     |      |  |        |     |           |  |   |      |   |  |  |     |   
|------------------- |  | ------------- | --- | ---- |  | ------ | --- | --------- |  | - | ---- | - |  |  | --- | --
|                    |  | Quarter ended
|(In millions)       |  | March 31     
|                    |  |              
|                    |  |               |     |      |  |        |     | Percent  
|                    |  | 2001          |     | 2000 |  | Change |     | Inc (Dec)
|                    |  |               |     |      |  |        |     |          
|Sales               |  | $             | 367 |      |  | $      | 472 |           |  | $ | (105 | ) |  |  | (22 | %)
|                   
|                   
|                   
|                   
|Profit before taxes |  |               | 18  |      |  |        | 32  |           |  |   | (14  | ) |  |  | (44 | %)

Sales for the first quarter of 2001 decreased 22 percent compared to the first
quarter of 2000, primarily due to lower volume of approximately $52 million,
the effects of divestitures of approximately $34 million and the effect of
foreign currency exchange of approximately $14 million.

Profit before taxes for the first quarter of 2001 decreased 44 percent compared
to the first quarter of 2000. Excluding unusual items of approximately $9
million, consisting of gains from sales of assets in 2001 and the decrease in
restructuring charges, profit before taxes decreased $23 million. The lower
profit before taxes is due to lower volume of approximately $17 million, lower
pricing of approximately $5 million and the effects of divestitures of
approximately $4 million, offset in part by net cost reductions of
approximately $5 million.

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. In 2001, the Company recorded an additional before tax charge of $31
million for headcount reductions, which were recorded in administrative and selling
expenses and cost of sales. During the first quarter of 2001, these actions
resulted in a permanent reduction of approximately 1,000 automotive salaried
positions. During the first quarter of 2001, the Company used $32 million
for severance payments and plant closings. The balance at March 31, 2001
of $62 million is expected to be used by the first half of 2002.

15



---



##### Table of Contents



LIQUIDITY AND FINANCIAL POSITION

In the first quarter of 2001, an increase in debt of $202 million, proceeds
from the sale of nonstrategic assets of $19 million and other items of $3
million were used primarily for capital expenditures of $167 million, dividend
payments of $44 million and operating activities of $12 million. As a result,
cash and cash equivalents increased $1 million. In the first quarter of 2000,
proceeds from the sale of nonstrategic assets of $1,351 million, operating
activities of $2 million and other items of $19 million were used primarily for
debt payments of $1,145 million, capital expenditures of $153 million and
dividend payments of $41 million. As a result, cash and cash equivalents
increased $33 million.

Net debt (short-term debt, the current portion of long-term debt and long-term
debt, less cash and cash equivalents) was $6.6 billion at March 31, 2001,
compared to $6.4 billion at December 31, 2000. The ratio of net debt to total
capital (net debt, minority interests and shareholders investment) was 73
percent at March 31, 2001 and 70 percent at December 31, 2000. The percentage
of fixed rate debt to total debt was 71 percent at the end of the first quarter
2001 compared to 66 percent at the end of 2000.

The Company amended and restated the revolving credit agreement expiring on
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.

At March 31, 2001, $500 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 March 31, 2001, the Company has $1.2 billion available of the $2.5 billion
Universal Shelf Registration Statement for issuance of securities.

At March 31, 2001, the Company had a working capital deficiency of
approximately $1.2 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 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.

16



---



##### Table of Contents



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.

17



---



##### Table of Contents






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
March 31, 2001, including fixed rate borrowings exposed due to an interest rate
swap, 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 March 31,
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 an $102 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 March 31, 2001.

18



---



##### Table of Contents






PART II. OTHER INFORMATION




Item 1. Legal Proceedings.

Except as described below, 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 (the 2000 Form
10-K).

TRW Vehicle Safety Systems Inc. environmental matter  previously discussed on
page 12 of the 2000 Form 10-K: During the first quarter of 2001, TRW pled
guilty to certain Resource Conservation and Recovery Act violations and the
criminal settlement agreement was approved by the state and federal courts.
The criminal fines of $12 million will be due at the time of sentencing, which
is expected to occur sometime during the second or third quarter of 2001.




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



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



| | 10 |  | Form of Restricted Stock Unit Agreement                                                                                                                                                                  
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 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:                                                                                                                                                                                                                                                                                   
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Current Report on Form 8-K, dated January 18, 2001, regarding TRWs
announcement that its TRW Vehicle Safety Systems subsidiary had reached
proposed settlements regarding alleged environmental violations in Mesa,
Arizona.                                                                          
|   
|    |  | Current Report on Form 8-K, dated March 1, 2001, containing the
Managements Discussion and Analysis of the Results of Operations and
Financial Condition and Financial Statements included in TRWs Annual
Report mailed to shareholders in connection with TRWs 2001 Annual
Meeting of Shareholders.

19



---



##### Table of Contents






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: May 1, 2001 |  | By:      |  | /s/ William B. Lawrence
William B. Lawrence
Executive Vice President, General
Counsel and Secretary
|                 
|                  |  | By:      |  | /s/ Carl G. Miller
Carl G. Miller
Executive Vice President
and Chief Financial Officer             

20