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-15  UNAUDITED FINANCIAL INFORMATION            
|EX-99  COMP. OF RATIO OF EARNINGS TO FIXED CHARGES



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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 September 30, 2001

OR

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

For the transition period
from to

Commission file number 1-2384



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


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



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




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


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes
X      No

As of November 2, 2001, there were 126,286,307 shares of
TRW Common Stock, $0.625 par value, outstanding.





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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial
Statements

Statements of Operations
(unaudited)
TRW Inc. and subsidiaries

|                                               |                                  |         |       |                     |       |                   |       |      |       |   |        |       |       |   |        |      |       | 
|---------------------------------------------- | -------------------------------- | ------- | ----- | ------------------- | ----- | ----------------- | ----- | ---- | ----- | - | ------ | ----- | ----- | - | ------ | ---- | ----- | 
|                                               |                                  |         |       | Third quarter ended |       | Nine months ended
|                                               |                                  |         |       | September 30        |       | September 30     
|In millions except per share data              |                                  | 2001    |       | 2000                |       | 2001              |       | 2000
|                                               |                                  |         |       |                     |       |                   |       |     
|Sales                                          |                                  | $       | 3,862 |                     |       | $                 | 4,053 |      |       | $ | 12,305 |       |       | $ | 13,094 |     
|Cost of sales                                  |                                  |         | 3,261 |                     |       |                   | 3,479 |      |       |   | 10,467 |       |       |   | 10,985 |     
|                                               |                                  |         |       |                     |       |                   |       |      |       |   |        |       |       |   |        |     
|Gross profit                                   |                                  |         | 601   |                     |       |                   | 574   |      |       |   | 1,838  |       |       |   | 2,109  |     
|                                              
|Administrative and selling expenses            |                                  |         | 260   |                     |       |                   | 237   |      |       |   | 795    |       |       |   | 815    |     
|Research and development expenses              |                                  |         | 117   |                     |       |                   | 117   |      |       |   | 353    |       |       |   | 340    |     
|Interest expense                               |                                  |         | 117   |                     |       |                   | 131   |      |       |   | 368    |       |       |   | 393    |     
|Amortization of goodwill and intangible assets |                                  |         | 44    |                     |       |                   | 38    |      |       |   | 108    |       |       |   | 106    |     
|Other (income)expense-net                      |                                  |         | 179   |                     |       |                   | 1     |      |       |   | 222    |       |       |   | (251   | )   
|                                               |                                  |         |       |                     |       |                   |       |      |       |   |        |       |       |   |        |     
|Earnings(loss) before income taxes             |                                  |         | (116  | )                   |       |                   | 50    |      |       |   | (8     | )     |       |   | 706    |     
|Income taxes                                   |                                  |         | (36   | )                   |       |                   | 18    |      |       |   | 14     |       |       |   | 265    |     
|                                               |                                  |         |       |                     |       |                   |       |      |       |   |        |       |       |   |        |     
|Net earnings(loss)                             |                                  | $       | (80   | )                   |       | $                 | 32    |      |       | $ | (22    | )     |       | $ | 441    |     
|                                               |                                  |         |       |                     |       |                   |       |      |       |   |        |       |       |   |        |     
|Per share of common stock                      |                                  |         |       |                     |       |                   |       |      |       |   |        |       |       |   |        |     
|                                               | Diluted earnings(loss) per share |         | $     | (0.65               | )     |                   | $     | 0.26 |       |   | $      | (0.18 | )     |   | $      | 3.52 |      
|                                               | Basic earnings(loss) per share   |         |       | (0.65               | )     |                   |       | 0.26 |       |   |        | (0.18 | )     |   |        | 3.58 |      
|                                               | Dividends declared               |         |       | 0.35                |       |                   |       | 0.33 |       |   |        | 0.70  |       |   |        | 0.66 |      
|                                               |                                  |         |       |                     |       |                   |       |      |       |   |        |       |       |   |        |     
|Shares used in computing per share
amounts     |                                  |         |       |                     |       |                   |       |      |       |   |        |       |       |   |        |     
|                                               |                                  | Diluted |       |                     | 125.2 |                   |       |      | 125.0 |   |        |       | 124.5 |   |        |      | 125.1 | 
|                                               |                                  | Basic   |       |                     | 125.2 |                   |       |      | 123.5 |   |        |       | 124.5 |   |        |      | 123.0 | 
|                                               |                                  |         |       |                     |       |                   |       |      |       |   |        |       |       |   |        |     

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Balance Sheets (unaudited)TRW Inc. and subsidiaries

|                                                   |                                                |      |              |       |             |   |        |       | 
|-------------------------------------------------- | ---------------------------------------------- | ---- | ------------ | ----- | ----------- | - | ------ | ----- | 
|                                                   |                                                |      | September 30 |       | December 31
|In millions                                        |                                                | 2001 |              | 2000 
|                                                   |                                                |      |              |       |            
|Assets                                             |                                                |      |              |       |             |   |        |      
|Current assets                                     |                                                |      |              |       |             |   |        |      
|                                                   | Cash and cash equivalents                      |      | $            | 242   |             |   | $      | 267   | 
|                                                   | Accounts receivable                            |      |              | 2,201 |             |   |        | 2,328 | 
|                                                   | Inventories                                    |      |              | 871   |             |   |        | 870   | 
|                                                   | Prepaid expenses                               |      |              | 147   |             |   |        | 149   | 
|                                                   | Deferred income taxes                          |      |              | 210   |             |   |        | 353   | 
|                                                   |                                                |      |              |       |             |   |        |      
|Total current assets                               |                                                |      | 3,671        |       |             |   | 3,967  |      
|                                                  
|Property, plant and equipment-on the basis of cost |                                                |      | 8,206        |       |             |   | 7,915  |      
|                                                   | Less accumulated depreciation and amortization |      |              | 4,720 |             |   |        | 4,328 | 
|                                                   |                                                |      |              |       |             |   |        |      
|Total property, plant and equipment-net            |                                                |      | 3,486        |       |             |   | 3,587  |      
|                                                  
|Intangible assets                                  |                                                |      |              |       |             |   |        |      
|                                                   | Goodwill                                       |      | 3,606        |       |             |   | 3,547  |      
|                                                   | Other intangible assets                        |      |              | 964   |             |   |        | 975   | 
|                                                   |                                                |      |              |       |             |   |        |      
|                                                   |                                                |      | 4,570        |       |             |   | 4,522  |      
|                                                   | Less accumulated amortization                  |      |              | 661   |             |   |        | 510   | 
|                                                   |                                                |      |              |       |             |   |        |      
|Total intangible assets-net                        |                                                |      | 3,909        |       |             |   | 4,012  |      
|                                                  
|Investments in affiliated companies                |                                                |      | 453          |       |             |   | 1,040  |      
|Other notes and accounts receivable                |                                                |      | 244          |       |             |   | 283    |      
|Prepaid pension cost                               |                                                |      | 3,014        |       |             |   | 2,902  |      
|Other assets                                       |                                                |      | 573          |       |             |   | 676    |      
|                                                   |                                                |      |              |       |             |   |        |      
|                                                   |                                                | $    | 15,350       |       |             | $ | 16,467 |      
|                                                   |                                                |      |              |       |             |   |        |      
|Liabilities and shareholders investment           |                                                |      |              |       |             |   |        |      
|Current
liabilities                                |                                                |      |              |       |             |   |        |      
|                                                   | Short-term debt                                | $    | 809          |       |             | $ | 1,450  |      
|                                                   | Trade accounts payable                         |      |              | 1,744 |             |   |        | 1,795 | 
|                                                   | Current portion of long-term debt              |      |              | 731   |             |   |        | 489   | 
|                                                   | Other current liabilities                      |      |              | 2,100 |             |   |        | 2,126 | 
|                                                   |                                                |      |              |       |             |   |        |      
|Total current liabilities                          |                                                |      | 5,384        |       |             |   | 5,860  |      
|Long-term liabilities                              |                                                |      | 1,925        |       |             |   | 2,038  |      
|Long-term debt                                     |                                                |      | 4,942        |       |             |   | 4,765  |      
|Deferred income taxes                              |                                                |      | 702          |       |             |   | 1,030  |      
|Minority interests in subsidiaries                 |                                                |      | 71           |       |             |   | 123    |      
|                                                  
|Capital stock                                      |                                                |      | 79           |       |             |   | 78     |      
|Other capital                                      |                                                |      | 480          |       |             |   | 472    |      
|Retained earnings                                  |                                                |      | 2,426        |       |             |   | 2,565  |      
|Treasury shares-cost in excess of par value        |                                                |      | (390         | )     |             |   | (472   | )    
|Accumulated other comprehensive income (loss)      |                                                |      | (269         | )     |             |   | 8      |      
|                                                   |                                                |      |              |       |             |   |        |      
|Total shareholders investment                     |                                                |      | 2,326        |       |             |   | 2,651  |      
|                                                   |                                                |      |              |       |             |   |        |      
|                                                   |                                                | $    | 15,350       |       |             | $ | 16,467 |      
|                                                   |                                                |      |              |       |             |   |        |      

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

|                                                                                          |                                        |      |                   |      |   |   |        |      |   |  |  |  | 
|----------------------------------------------------------------------------------------- | -------------------------------------- | ---- | ----------------- | ---- | - | - | ------ | ---- | - |  |  |  | 
|                                                                                          |                                        |      | Nine months ended |     
|                                                                                          |                                        |      | September 30     
|In millions                                                                               |                                        | 2001 |                   | 2000 |   |   |        |     
|                                                                                          |                                        |      |                   |      |   |   |        |      |  
|Operating activities                                                                      |                                        |      |                   |      |   |   |        |     
|Net earnings(loss)                                                                        |                                        | $    | (22               | )    |   | $ | 441    |     
|Adjustments to reconcile net earnings(loss) to net cash
provided by operating activities: |                                        |      |                   |      |   |   |        |     
|                                                                                          | Depreciation and amortization          |      |                   | 558  |   |   |        | 620  |  
|                                                                                          | Pension income                         |      |                   | (185 | ) |   |        | (190 | )
|                                                                                          | Asset impairment charges               |      |                   | 346  |   |   |        | 52   |  
|                                                                                          | Pending and threatened litigation      |      |                   | 97   |   |   |        | 25   |  
|                                                                                          | Net gain on sale of assets             |      |                   | (204 | ) |   |        | (262 | )
|                                                                                          | Gain on Endwave merger                 |      |                   |     |   |   |        | (57  | )
|                                                                                          | Deferred income taxes                  |      |                   | (51  | ) |   |        | 72   |  
|                                                                                          | Other-net                              |      |                   | 83   |   |   |        | 44   |  
|Changes in assets and liabilities, net of effects of
businesses acquired or sold:         |                                        |      |                   |      |   |   |        |     
|                                                                                          | Accounts receivable                    |      |                   | 67   |   |   |        | (64  | )
|                                                                                          | Inventories                            |      |                   | (29  | ) |   |        | 3    |  
|                                                                                          | Trade accounts payable                 |      |                   | (16  | ) |   |        | 130  |  
|                                                                                          | Prepaid expenses and other liabilities |      |                   | (84  | ) |   |        | 7    |  
|                                                                                          | Other-net                              |      |                   | 121  |   |   |        | (28  | )
|                                                                                          |                                        |      |                   |      |   |   |        |     
|Net cash provided by operating activities                                                 |                                        |      | 681               |      |   |   | 793    |     
|                                                                                          |                                        |      |                   |      |   |   |        |     
|Investing activities                                                                      |                                        |      |                   |      |   |   |        |     
|Capital expenditures including other intangibles                                          |                                        |      | (499              | )    |   |   | (475   | )   
|Net proceeds from divestitures                                                            |                                        |      | 196               |      |   |   | 1,431  |     
|Other-net                                                                                 |                                        |      | (88               | )    |   |   | (58    | )   
|                                                                                          |                                        |      |                   |      |   |   |        |     
|Net cash (used in) provided by investing activities                                       |                                        |      | (391              | )    |   |   | 898    |     
|                                                                                          |                                        |      |                   |      |   |   |        |     
|Financing activities                                                                      |                                        |      |                   |      |   |   |        |     
|Decrease in short-term debt                                                               |                                        |      | (392              | )    |   |   | (964   | )   
|Proceeds from debt in excess of 90 days                                                   |                                        |      | 998               |      |   |   | 1,283  |     
|Principal payments on debt in excess of 90 days                                           |                                        |      | (812              | )    |   |   | (1,897 | )   
|Dividends paid                                                                            |                                        |      | (132              | )    |   |   | (123   | )   
|Other-net                                                                                 |                                        |      | 21                |      |   |   | 40     |     
|                                                                                          |                                        |      |                   |      |   |   |        |     
|Net cash used in financing activities                                                     |                                        |      | (317              | )    |   |   | (1,661 | )   
|                                                                                          |                                        |      |                   |      |   |   |        |     
|Effect of exchange rate changes on cash flows                                             |                                        |      | 2                 |      |   |   | 40     |     
|                                                                                          |                                        |      |                   |      |   |   |        |     
|(Decrease) increase in cash and cash equivalents                                          |                                        |      | (25               | )    |   |   | 70     |     
|Cash and cash equivalents at beginning of period                                          |                                        |      | 267               |      |   |   | 228    |     
|                                                                                          |                                        |      |                   |      |   |   |        |     
|Cash and cash equivalents at end of period                                                |                                        | $    | 242               |      |   | $ | 298    |     
|                                                                                          |                                        |      |                   |      |   |   |        |     

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NOTES TO FINANCIAL STATEMENTS
(unaudited)

Basis of Presentation

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

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

Reclassifications

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

Restructurings

The Company has recorded severance costs and plant closing accruals related to
restructuring actions of $70 million before tax as of December 31, 2000.
During the nine months ended September 30, 2001, the Company recorded
additional before tax charges of $86 million, primarily for headcount
reductions, of which $26 million was recorded in the third quarter. Charges of
$52 million were recorded in administrative and selling expenses and $34
million in cost of sales. The Company used $17 million and $80 million in the
third quarter and nine months ended September 30, 2001, respectively, for
severance payments and plant closings. The balance at September 30, 2001 of
$76 million is expected to be used by the fourth quarter of 2002.

Asset Impairments

During 1999, the Company, along with Lockheed Martin Global Telecommunications,
Telespazio, a Telecom Italia Group Company and Liberty Media Group formed a
joint venture, Astrolink International, LLC (Astrolink), to provide
satellite-based global broadband services. The equity partners made an initial
investment of $1.3 billion. The Astrolink business plan and the Companys
assessment of impairment of its investment contemplated obtaining additional
funding of $2.4 billion. The Company has invested $255 million and accounts
for its 19% interest in Astrolink on the equity method of accounting.

At September 30, 2001 Astrolink was in discussions with additional equity
partners and with current shareholders to raise the necessary funding through
2001. On October 25, 2001 Lockheed Martin Global Telecommunications announced
that it would not provide additional financing beyond its initial $400 million
investment. Concurrently, the Company also decided it will not provide
additional funding. The future viability of Astrolink is contingent upon
additional funding. Astrolinks Board is considering several options including
whether to significantly delay the projects launch date or cancel the venture.

As a result of these events, the Companys assessment of impairment changed and
the Company concluded that the carrying amount of its investment will not be
recoverable and therefore, recognized an impairment loss of approximately $242
million at September 30, 2001.

Also in the third quarter of 2001, the Company recorded asset impairment
charges of $25 million related to the write-down of identifiable intangible
assets, capitalized software and other assets. In addition, as a result of a
loss of several existing and future contracts at two Chassis components
facilities, the Company recorded asset impairment charges of $14 million. A
comparison of projected undiscounted future cash flows for the facilities to
their carrying value indicated that the assets were impaired. Assets were
written down to fair value.

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Other (Income)Expense-Net

|                                     |  |                     |      |                   |  |      |     |      |  |   |      |   |  |   |      |  
|------------------------------------ |  | ------------------- | ---- | ----------------- |  | ---- | --- | ---- |  | - | ---- | - |  | - | ---- | -
|                                     |  | Third quarter ended |      | Nine months ended
|In millions                          |  | September 30        |      | September 30     
|                                     |  |                     |      |                  
|                                     |  | 2001                |      | 2000              |  | 2001 |     | 2000
|                                     |  |                     |      |                   |  |      |     |     
|Net gain on sale of assets           |  | $                   | (174 | )                 |  | $    |    |      |  | $ | (204 | ) |  | $ | (262 | )
|Asset impairments                    |  |                     | 257  |                   |  |      |    |      |  |   | 322  |   |  |   |     |  
|Pending and threatened litigation    |  |                     | 97   |                   |  |      |    |      |  |   | 97   |   |  |   | 25   |  
|(Earnings)loss of affiliates         |  |                     | 5    |                   |  |      | (1  | )    |  |   | 26   |   |  |   | (6   | )
|Foreign currency exchange            |  |                     | (1   | )                 |  |      | 23  |      |  |   | (4   | ) |  |   | 66   |  
|Gain on Endwave merger               |  |                     |     |                   |  |      | (2  | )    |  |   |     |   |  |   | (57  | )
|Miscellaneous other (income) expense |  |                     | (5   | )                 |  |      | (19 | )    |  |   | (15  | ) |  |   | (17  | )
|                                     |  |                     |      |                   |  |      |     |      |  |   |      |   |  |   |      |  
|                                     |  | $                   | 179  |                   |  | $    | 1   |      |  | $ | 222  |   |  | $ | (251 | )
|                                     |  |                     |      |                   |  |      |     |      |  |   |      |   |  |   |      |  

During the third quarter of 2001, the Company recorded net gain on sale of
assets which primarily included the sales of RF Micro Devices, Inc. (RFMD)
common stock, and asset impairment charges of $257 million, primarily related to
its investment in Astrolink. In addition to the third quarter asset impairment
charges, the Company recorded asset impairment charges of $65 million related
to its investment in, and its share of asset impairment recorded by Endwave
Corporation (Endwave) in the nine months ended September 30, 2001. During the
first nine months of 2000, the net gain on sale of assets included the sale of
RFMD common stock, the Companys Nelson Stud Welding and Australian steering
businesses and the exchange of the Companys interest in Paracel Inc., an
affiliate, for shares in Applera Genomics Corporation-Celera Group (Celera).
In addition, the Company recorded other income of $57 million during the first
nine months of 2000 relating to the merger of TRW Milliwave Inc., a wholly
owned subsidiary, with Endgate Corporation to form Endwave.

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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.

|                                   |                         |      |                     |       |                   |      |       |       |   |   |        |       |   |   |        |       | 
|---------------------------------- | ----------------------- | ---- | ------------------- | ----- | ----------------- | ---- | ----- | ----- | - | - | ------ | ----- | - | - | ------ | ----- | 
|                                   |                         |      | Third quarter ended |       | Nine months ended
|                                   |                         |      | September 30        |       | September 30     
|In millions                        |                         | 2001 |                     | 2000  |                   | 2001 |       | 2000 
|                                   |                         |      |                     |       |                   |      |       |      
|Sales                              |                         |      |                     |       |                   |      |       |       |   |   |        |       |   |   |        |      
|                                   | Systems                 |      | $                   | 761   |                   |      | $     | 836   |   |   | $      | 2,349 |   |   | $      | 2,447 | 
|                                   | Space & Electronics     |      |                     | 505   |                   |      |       | 463   |   |   |        | 1,518 |   |   |        | 1,416 | 
|                                   | Aeronautical Systems    |      |                     | 269   |                   |      |       | 257   |   |   |        | 804   |   |   |        | 806   | 
|                                   | Chassis Systems         |      |                     | 1,381 |                   |      |       | 1,480 |   |   |        | 4,537 |   |   |        | 5,011 | 
|                                   | Occupant Safety Systems |      |                     | 622   |                   |      |       | 639   |   |   |        | 2,034 |   |   |        | 2,127 | 
|                                   | Automotive Electronics  |      |                     | 324   |                   |      |       | 378   |   |   |        | 1,063 |   |   |        | 1,287 | 
|                                   |                         |      |                     |       |                   |      |       |       |   |   |        |       |   |   |        |      
|Sales                              |                         | $    | 3,862               |       |                   | $    | 4,053 |       |   | $ | 12,305 |       |   | $ | 13,094 |      
|                                   |                         |      |                     |       |                   |      |       |       |   |   |        |       |   |   |        |      
|Profit(loss) before taxes          |                         |      |                     |       |                   |      |       |       |   |   |        |       |   |   |        |      
|                                   | Systems                 |      | $                   | 40    |                   |      | $     | 57    |   |   | $      | 141   |   |   | $      | 181   | 
|                                   | Space & Electronics     |      |                     | (47   | )                 |      |       | 41    |   |   |        | (53   | ) |   |        | 411   | 
|                                   | Aeronautical Systems    |      |                     | 22    |                   |      |       | 35    |   |   |        | 86    |   |   |        | 101   | 
|                                   | Chassis Systems         |      |                     | 60    |                   |      |       | 74    |   |   |        | 196   |   |   |        | 347   | 
|                                   | Occupant Safety Systems |      |                     | 26    |                   |      |       | (19   | ) |   |        | 58    |   |   |        | 54    | 
|                                   | Automotive Electronics  |      |                     | 6     |                   |      |       | 11    |   |   |        | 44    |   |   |        | 76    | 
|                                   |                         |      |                     |       |                   |      |       |       |   |   |        |       |   |   |        |      
|                                   |                         |      | 107                 |       |                   |      | 199   |       |   |   | 472    |       |   |   | 1,170  |      
|                                  
|Corporate expense and other        |                         |      | (164                | )     |                   |      | (69   | )     |   |   | (273   | )     |   |   | (230   | )    
|Pension income                     |                         |      | 59                  |       |                   |      | 52    |       |   |   | 164    |       |   |   | 163    |      
|Financing costs                    |                         |      | (118                | )     |                   |      | (132  | )     |   |   | (371   | )     |   |   | (397   | )    
|                                   |                         |      |                     |       |                   |      |       |       |   |   |        |       |   |   |        |      
|Earnings(loss) before income taxes |                         | $    | (116                | )     |                   | $    | 50    |       |   | $ | (8     | )     |   | $ | 706    |      
|                                   |                         |      |                     |       |                   |      |       |       |   |   |        |       |   |   |        |      

Corporate expense and other included charges for pending and threatened
litigation of $105 million and restructuring and asset impairment charges of
$19 million in third quarter 2001 and $22 million of unrealized foreign
exchange loss on hedges of anticipated transactions in 2000. Corporate expense
and other for the nine months ended September 30, 2001 included
charges for pending and
threatened litigation of $105 million, restructuring and asset impairment
charges of $25 million and in 2000, $70 million of unrealized foreign exchange
loss on hedges of anticipated transactions.

|                   |                         |      |                     |      |                   |      |   |      |  |  |   |     |  |  |   |    | 
|------------------ | ----------------------- | ---- | ------------------- | ---- | ----------------- | ---- | - | ---- |  |  | - | --- |  |  | - | -- | 
|                   |                         |      | Third quarter ended |      | Nine months ended
|                   |                         |      | September 30        |      | September 30     
|In millions        |                         | 2001 |                     | 2000 |                   | 2001 |   | 2000
|                   |                         |      |                     |      |                   |      |   |     
|Intersegment sales |                         |      |                     |      |                   |      |   |      |  |  |   |     |  |  |   |   
|                   | Systems                 |      | $                   | 44   |                   |      | $ | 32   |  |  | $ | 139 |  |  | $ | 97 | 
|                   | Space & Electronics     |      |                     | 15   |                   |      |   | 15   |  |  |   | 45  |  |  |   | 41 | 
|                   | Aeronautical Systems    |      |                     |     |                   |      |   |     |  |  |   |    |  |  |   |   | 
|                   | Chassis Systems         |      |                     |     |                   |      |   | 3    |  |  |   | 3   |  |  |   | 16 | 
|                   | Occupant Safety Systems |      |                     |     |                   |      |   |     |  |  |   |    |  |  |   | 2  | 
|                   | Automotive Electronics  |      |                     | 29   |                   |      |   | 22   |  |  |   | 86  |  |  |   | 69 | 
|                   |                         |      |                     |      |                   |      |   |      |  |  |   |     | 

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Inventories

|                                      |  |              |     |             |  |   |     | 
|------------------------------------- |  | ------------ | --- | ----------- |  | - | --- | 
|                                      |  | September 30 |     | December 31
|In millions                           |  | 2001         |     | 2000       
|                                      |  |              |     |            
|Finished products and work in process |  | $            | 536 |             |  | $ | 513 | 
|Raw materials and supplies            |  |              | 335 |             |  |   | 357 | 
|                                      |  |              |     |             |  |   |     | 
|                                      |  | $            | 871 |             |  | $ | 870 | 
|                                      |  |              |     |             |  |   |     | 

Financial Instruments

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

The Company enters into interest rate swaps to manage the risks and costs
associated with its financing activities. At September 30, 2001, the Company
had $100 million notional principal amount of interest rate swaps outstanding
that converted a portion of its variable rate debt to a fixed rate for the next
four years. These interest rate swaps have a fair market value loss of $11
million.

The Company hedges certain equity investments in publicly traded companies.
These instruments protect the forecasted cash flows resulting from the sale of
shares in the Companys investments in RFMD and Celera. These hedges were
redesignated to cash flow hedges during the second quarter 2001. Prior to
their redesignation, the ineffective portion of a $10 million gain was recorded
in Other (income)expense-net. The fair market value of these hedges as of
September 30, 2001 is a $155 million gain.

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

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

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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 an expiration date of January 22, 2002 with
an option to extend the maturity of outstanding borrowings at that time to
January 22, 2003. The interest rate under the agreement is either the prime
rate or a rate based on the London Interbank Offered Rate (LIBOR), at the
option of the Company. The Company also canceled a revolving credit agreement
for use by its Brazilian operations during the first quarter of 2001.

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

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

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

Earnings Per Share

|                                    |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |       |       | 
|----------------------------------- | ----------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----- | ------------------- | ----- | ----------------- | ---- | ----- | ---- | - | ----- | ----- | ----- | - | ---- | ----- | ----- | 
|                                    |                                                                                                       |                                                 |       | Third quarter ended |       | Nine months ended
|(In millions except per share data) |                                                                                                       | September 30                                    |       | September 30       
|                                    |                                                                                                       |                                                 |       |                    
|                                    |                                                                                                       | 2001                                            |       | 2000                |       | 2001              |      | 2000 
|                                    |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |  
|Numerator                           |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |      
|                                    | Net earnings(loss)                                                                                    |                                                 | $     | (80.8               | )     |                   | $    | 32.0  |      |   | $     | (22.3 | )     |   | $    | 440.8 |      
|                                    | Preferred stock dividends                                                                             |                                                 |       | .1                  |       |                   |      | .1    |      |   |       | .4    |       |   |      | .4    |      
|                                    |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |      
|                                    | Numerator for basic earnings per sharenet                                                            |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |       |      
|                                    |                                                                                                       | earnings(loss) available to common shareholders |       |                     | (80.9 | )                 |      |       | 31.9 |   |       |       | (22.7 | ) |      |       | 440.4 | 
|                                    | Effect of dilutive securities                                                                        
|                                    |                                                                                                       | Preferred stock dividends                       |       |                    |       |                   |      | .1    |      |   |       |      |       |   |      | .4    |      
|                                    |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |      
|                                    | Numerator for diluted earnings per sharenet earnings(loss) available to common shareholders          |                                                 | $     | (80.9               | )     |                   | $    | 32.0  |      |   | $     | (22.7 | )     |   | $    | 440.8 |      
|                                    |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |      
|Denominator                         |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |      
|                                    | Denominator for basic earnings per shareweighted-average common shares                               |                                                 |       | 125.2               |       |                   |      | 123.5 |      |   |       | 124.5 |       |   |      | 123.0 |      
|                                    | Effect of dilutive securities                                                                         |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |       |      
|                                    |                                                                                                       | Convertible preferred stock                     |       |                    |       |                   |      | .8    |      |   |       |      |       |   |      | .8    |      
|                                    |                                                                                                       | Employee stock options                          |       |                     |      |                   |      |       | .7   |   |       |       |      |   |      |       | 1.3   | 
|                                    |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |      
|                                    | Dilutive potential common shares                                                                      |                                                 |       |                    |       |                   |      | 1.5   |      |   |       |      |       |   |      | 2.1   |      
|                                    | Denominator for diluted earnings per shareadjusted weighted-average shares after
assumed conversions |                                                 |       | 125.2               |       |                   |      | 125.0 |      |   |       | 124.5 |       |   |      | 125.1 |      
|                                    |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |      
|Basic earnings(loss) per share      |                                                                                                       | $                                               | (0.65 | )                   |       | $                 | 0.26 |       |      | $ | (0.18 | )     |       | $ | 3.58 |      
|                                    |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |      
|Diluted earnings(loss) per share    |                                                                                                       | $                                               | (0.65 | )                   |       | $                 | 0.26 |       |      | $ | (0.18 | )     |       | $ | 3.52 |      
|                                    |                                                                                                       |                                                 |       |                     |       |                   |      |       |      |   |       |       |       |   |      |      

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Supplemental Cash Flow Information

|                                          |  |                   |     |      |  |   |     | 
|----------------------------------------- |  | ----------------- | --- | ---- |  | - | --- | 
|                                          |  | Nine months ended
|(In millions)                             |  | September 30     
|                                          |  |                  
|                                          |  | 2001              |     | 2000
|                                          |  |                   |     |     
|Interest paid (net of amount capitalized) |  | $                 | 317 |      |  | $ | 341 | 
|Income taxes paid (net of refunds)        |  |                   | (2  | )    |  |   | 135 | 

Comprehensive Income(Loss)

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

|                                        |  |                     |      |                   |  |      |      |      |  |   |      |   |  |   |      |  
|--------------------------------------- |  | ------------------- | ---- | ----------------- |  | ---- | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                                        |  | Third quarter ended |      | Nine months ended
|(In millions)                           |  | September 30        |      | September 30     
|                                        |  |                     |      |                  
|                                        |  | 2001                |      | 2000              |  | 2001 |      | 2000
|                                        |  |                     |      |                   |  |      |      |     
|Net earnings(loss)                      |  | $                   | (80  | )                 |  | $    | 32   |      |  | $ | (22  | ) |  | $ | 441  |  
|Effect of foreign currency changes      |  |                     | 145  |                   |  |      | (87  | )    |  |   | (44  | ) |  |   | (297 | )
|Unrealized gains (losses) on securities |  |                     | (228 | )                 |  |      | (142 | )    |  |   | (231 | ) |  |   | (84  | )
|Deferred cash flow hedges               |  |                     | 55   |                   |  |      |     |      |  |   | (2   | ) |  |   |     |  
|                                        |  |                     |      |                   |  |      |      |      |  |   |      |   |  |   |      |  
|Comprehensive income(loss)              |  | $                   | (108 | )                 |  | $    | (197 | )    |  | $ | (299 | ) |  | $ | 60   |  
|                                        |  |                     |      |                   |  |      |      |      |  |   |      |   |  |   |      |  

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

|                                             |  |              |      |             |  |   |      |  
|-------------------------------------------- |  | ------------ | ---- | ----------- |  | - | ---- | -
|                                             |  | September 30 |      | December 31
|(In millions)                                |  | 2001         |      | 2000       
|                                             |  |              |      |            
|Effect of foreign currency changes           |  | $            | (467 | )           |  | $ | (423 | )
|Unrealized gains on securities               |  |              | 222  |             |  |   | 453  |  
|Deferred cash flow hedges                    |  |              | (2   | )           |  |   |     |  
|Minimum pension liability adjustments        |  |              | (22  | )           |  |   | (22  | )
|                                             |  |              |      |             |  |   |      |  
|Accumulated other comprehensive income(loss) |  | $            | (269 | )           |  | $ | 8    |  
|                                             |  |              |      |             |  |   |      |  

New Accounting Pronouncements

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

The Company has approximately $3.3 billion of goodwill recorded in its balance
sheet as of September 30, 2001. Amortization expense related to goodwill for
the first nine months of 2001 was approximately $74 million before taxes, $65
million after taxes. Management is currently evaluating the impact of the
adoption of these statements. The effect on the Companys results of
operations and financial position during 2002 and any cumulative effect as a
result of adopting Statement 142 are not determinable at this time.

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The FASB also recently issued SFAS No. 143, Accounting for Asset Retirement
Obligations and SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.

Statement 143 requires companies to record the fair value of a liability for
asset retirement obligations in the period in which they are incurred. The
statement applies to a companys legal obligations associated with the
retirement of a tangible long-lived asset that results from the acquisition,
construction, and development or through the normal operation of a long-lived
asset.

When a liability is initially recorded, the company would capitalize the cost,
thereby increasing the carrying amount of the related asset. The capitalized
asset retirement cost is depreciated over the life of the respective asset
while the liability is accreted to its present value. Upon settlement of the
liability, the obligation is settled at its recorded amount or the company
incurs a gain or loss. The statement is effective for fiscal years beginning
after June 30, 2002.

Statement 144 addresses the accounting and reporting for the impairment or
disposal of long-lived assets. The statement provides a single accounting
model for long-lived assets to be disposed of. New criteria must be met to
classify the asset as an asset held-for-sale. This statement also focuses on
reporting the effects of a disposal of a segment of a business. This statement
is effective for fiscal years beginning after December 15, 2001.

The Company believes that the adoption of SFAS No. 143 and 144 will not have a
material impact on its financial position or results of operations.

Contingencies

Various claims, lawsuits and administrative proceedings are pending or
threatened against the Company or its subsidiaries, arising from the ordinary
course of business with respect to commercial, product liability and
environmental matters. Taking into account established reserves, management
believes that the ultimate resolution of each of the following lawsuits will
not have a material effect on the Companys financial condition or results of
operations. The resolution of one or more of such claims may have a material
effect on cash flow for the period in which such claims are resolved.

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.

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 cannot presently predict the outcome of the investigation.

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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 September 30, 2001, and the related unaudited statements of
operations for the three-month and nine-month periods ended September 30, 2001
and 2000, and the unaudited statements of cash flows for the nine-month periods
ended September 30, 2001 and 2000, included in the Form 10-Q of TRW Inc. for
the quarterly period ended September 30, 2001. These financial statements are
the responsibility of the Companys management.

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

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

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet of TRW Inc. as of December 31,
2000, and the related statements of operations, cash flows, and changes in
shareholders investment for the year then ended (not presented herein), and in
our report dated January 22, 2001, we expressed an unqualified opinion on those
financial statements. Those financial statements and our report on them are
included in the Form 10-K of TRW Inc. for the year ended December 31, 2000. In
our opinion, the information set forth in the accompanying balance sheet as of
December 31, 2000, 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
November 7, 2001

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

RESULTS OF OPERATIONS

(In millions except per share data)

|                          |  |                     |       |                   |  |        |       |           |  |      |       |      |  |         |        |           |  |   |        |   |  |   |        |  |  |   |       |         |  |  |     |   
|------------------------- |  | ------------------- | ----- | ----------------- |  | ------ | ----- | --------- |  | ---- | ----- | ---- |  | ------- | ------ | --------- |  | - | ------ | - |  | - | ------ |  |  | - | ----- | ------- |  |  | --- | --
|                          |  | Third quarter ended |       | Nine months ended
|                          |  | September 30        |       | September 30     
|                          |  |                     |       |                  
|                          |  |                     |       |                   |  |        |       |           |  |      |       |      |  | Percent |        |           |  |   |        |   |  |   |        |  |  |   |       | Percent
|                          |  | 2001                |       | 2000              |  | Change |       | Inc (Dec) |  | 2001 |       | 2000 |  | Change  |        | Inc (Dec)
|                          |  |                     |       |                   |  |        |       |           |  |      |       |      |  |         |        |          
|Sales                     |  | $                   | 3,862 |                   |  | $      | 4,053 |           |  | $    | (191  | )    |  |         | (5     | %)        |  | $ | 12,305 |   |  | $ | 13,094 |  |  | $ | (789  | )       |  |  | (6  | %)
|Profit before taxes       |  |                     | 107   |                   |  |        | 199   |           |  |      | (92   | )    |  |         | (47    | %)        |  |   | 472    |   |  |   | 1,170  |  |  |   | (698  | )       |  |  | (60 | %)
|Net earnings(loss)        |  |                     | (80   | )                 |  |        | 32    |           |  |      | (112  | )    |  |         |       |           |  |   | (22    | ) |  |   | 441    |  |  |   | (463  | )       |  |  |    |   
|Earnings (loss)
per share |  |                     | (0.65 | )                 |  |        | 0.26  |           |  |      | (0.91 | )    |  |         |       |           |  |   | (0.18  | ) |  |   | 3.52   |  |  |   | (3.70 | )       |  |  |    |   
|Effective tax rate        |  |                     | 30.4  | %                 |  |        | 36.0  | %         |  |      |       |      |  |         | (178.8 | %)        |  |   | 37.6   | % |  |   |        |  |  |   |       |        

The third quarter 2001 sales decreased 5 percent compared with third quarter
2000 sales as a result of lower volumes of approximately $70 million;
divestitures of approximately $59 million; price reductions of approximately
$30 million; and the effect of foreign currency exchange of approximately $24
million.

Net earnings(loss) and earnings per share for the third quarter of 2001 were a
loss of $80 million after tax, or $0.65 per share, compared with net earnings
of $32 million, or $0.26 per share, in 2000.

For the third quarter 2001, unusual items resulted in a net loss of $234
million before tax, $155 million after tax, or $1.24 per share. The unusual
items in the third quarter 2001 included after tax charges of $184 million for
asset impairments, $63 million for pending and threatened litigation, and
restructuring costs of $19 million, offset by after tax gains from the sales of
assets, primarily RFMD common stock, of $111 million.

For the third quarter of 2000, unusual items resulted in a net loss of $90
million before tax, $59 million after tax, or $0.47 per share. The unusual
items for the third quarter of 2000 primarily included after tax charges
related to the consolidation of two air bag manufacturing operations of
approximately $36 million, unrealized losses on foreign currency hedges of $14
million and automotive restructuring charges of $10 million.

Gross profit of $601 million in the third quarter of 2001 increased
approximately 5 percent from $574 million in 2000. Gross profit in the third
quarter 2001 included unusual items related to restructuring of $5 million and
asset impairment charges of $14 million. Gross profit in the third quarter of
2000 included amounts primarily for asset impairment charges related
to the consolidation of two air bag manufacturing operations, of approximately $55
million and automotive restructuring expenses of $4 million. Excluding the
effects of these charges in both years, gross profit declined $13 million
primarily due to pricing pressure of approximately $30 million, lower volume
and adverse product mix of approximately $30 million and divestitures of
approximately $15 million, partially offset by net cost reductions of
approximately $55 million, including a product recall and inventory adjustments
of approximately $20 million. Excluding unusual items, gross profit, as a
percentage of sales, was 16.1 percent for the third quarter 2001, compared to
15.6 percent in the third quarter 2000.

Administrative and selling expenses of $260 million in the third quarter 2001
increased $23 million compared with the third quarter of 2000. Administrative
and selling expenses included unusual items of $21 million and $10 million in
the third quarters of 2001 and 2000, respectively, related to restructuring
charges. Excluding the effects of unusual items, administrative and selling
expenses increased $12 million, primarily as a result of higher expenses on
reimbursable government contracts, which more than offset net reductions in
the automotive segments.

Interest expense of $117 million in the third quarter of 2001 decreased $14
million from $131 million in 2000, primarily due to lower average debt
outstanding and lower short-term interest rates in the United States,
partially offset by higher interest rates on fixed-rate debt issuances.

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Amortization of goodwill and intangible assets of $44 million in the third
quarter of 2001 increased from $38 million in 2000 as a result of asset
impairment charges relating to intangible assets of $10 million.

Other (income)expense-net was expense of $179 million in the third quarter of
2001 and expense of
$1 million in the third quarter of 2000. Included in 2001 were gains on sales
of assets, primarily sales of shares of RFMD common stock, of $174 million,
net charges related to pending and threatened litigation of $97 million and
asset impairments of $257 million, primarily related to the Companys
investment in Astrolink. Included in 2000 was $22 million related to foreign
currency exchange losses on hedges of anticipated transactions.

The effective income tax rate was 30.4 percent in the third quarter of 2001
compared with 36.0 percent in the third quarter of 2000. Excluding unusual
items, the effective income tax rates were 36.1 percent in the third quarter
of 2001 and 34.6 percent in the third quarter of 2000.

Sales for the first nine months of 2001 decreased $789 million, or 6 percent
compared with 2000 sales. The decrease in sales is due to lower volumes of
approximately $260 million, the effect of foreign currency exchange of
approximately $230 million, divestitures of approximately $165 million, and
lower pricing of approximately $120 million.

Net earnings(loss) and earnings per share for the first nine months of 2001
were a loss of $22 million after tax, or $0.18 per share, compared with net
earnings of $441 million, or $3.52 per share, in 2000.

For the first nine months of 2001, unusual items resulted in a net loss of $333
million before tax, $230 million after tax, or $1.85 per share. The unusual
items for the first nine months of 2001 included a $236 million after tax
charge for asset impairments, other after tax charges, primarily automotive
restructuring, of approximately $73 million and pending and threatened
litigation of $63 million. These charges were partially offset by after tax
gains from asset sales of approximately $142 million.

For the first nine months of 2000, unusual items resulted in net gains of $31
million after tax, or $0.24 per share. The unusual items for the first nine
months of 2000 included after tax gains from asset sales, including sales of
shares of RFMD common stock and of the Companys Nelson Stud Welding and
Australian Steering businesses of $154 million, income relating to the merger
of TRW Milliwave Inc., with Endgate Corporation to form Endwave Corporation of
$23 million and on the exchange of TRWs interest in
Paracel Inc. for shares in Celera of $15 million.
These gains were partially offset by after tax charges for warranty reserves,
claims, and threatened litigation of $49 million, unrealized losses on foreign
currency hedges of $45 million, charges relating to the consolidation of two
air bag manufacturing operations of approximately $36 million, and severance
and plant closing costs for the automotive restructuring program of $31
million.

Gross profit of $1,838 million for the first nine months of 2001 decreased
$271 million, or approximately 13 percent from $2,109 million in 2000, due to
the combination of lower volume, unfavorable product mix and the effect of a
seatbelt recall totaling $205 million, price reductions of approximately $120
million, the effect of foreign currency exchange of approximately $55 million
and divestitures of approximately $45 million, partially offset by net cost
reductions of approximately $80 million and by lower unusual items of $71
million. Gross profit in 2001 included unusual items for restructuring
charges of approximately $34 million and asset impairment charges of $14
million. Unusual items in 2000 included amounts primarily for asset
impairment charges related to
the consolidation of two air bag manufacturing operations, of approximately $55
million, warranty reserves, and claims of $40 million and automotive
restructuring expenses of $24 million. Excluding unusual items, gross profit,
as a percentage of sales, was 15.3 percent for the first nine months of 2001,
compared to 17.0 percent in 2000.

Administrative and selling expenses of $795 million for the first nine months
of 2001 decreased $20 million from $815 million in 2000. Excluding unusual
items in 2001 and 2000 related to restructuring charges of approximately $52
million and $19 million, respectively, administrative and selling expenses
decreased $53 million. The decrease was primarily due to the effect of
divestitures of approximately $42 million and the effect of foreign currency
exchange of $16 million.

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Research and development expenses of $353 million for the first nine months of
2001 increased $13 million from $340 million in 2000, primarily due to
increased spending in Space & Electronics for initiatives focused on
commercializing the Companys defense technologies.

Interest expense of $368 million for the first nine months of 2001 decreased
$25 million from $393 million in 2000, due to lower average debt outstanding
and lower short-term interest rates in the United States, partially offset by
higher interest expense on fixed rate debt issuances.

Other (income)expense-net was expense of $222 million in the first nine months
of 2001 and income of $251 million in 2000. Included in 2001 were the
following items: gains on sales of assets, primarily sales of shares of RFMD
common stock, of approximately $204 million, a charge related to pending and
threatened litigation of $97 million and asset impairment charges of $322
million, primarily related to the Companys investment in Astrolink. Included
in 2000 were the following items: gains on sales of shares of RFMD common
stock of $217 million, gain on the sale of Nelson Stud Welding of
approximately $31 million, gain on the exchange of Paracel stock of $23
million, gain on the Endwave merger of $57 million and $70 million related to
foreign currency exchange losses on hedges of anticipated transactions.

The effective tax rate was 178.8 percent for the nine months ended September
30, 2001 compared to
37.6 percent in 2000. Excluding unusual items, the effective tax rates were
36.0 percent and 35.6 percent for the nine months ended September 30, 2001 and
2000, respectively.

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##### Table of Contents



RESULTS OF SEGMENTS

Systems (formerly known as Systems
& Information Technology)

|                    |                     |      |                   |      |  |        |     |           |  |      |     |      |  |         |     |          |  |   |       |  |  |   |       |  |  |   |     |         |  |  |     |   
|------------------- | ------------------- | ---- | ----------------- | ---- |  | ------ | --- | --------- |  | ---- | --- | ---- |  | ------- | --- | -------- |  | - | ----- |  |  | - | ----- |  |  | - | --- | ------- |  |  | --- | --
|                    | Third quarter ended |      | Nine months ended
|(In millions)       | September 30        |      | September 30     
|                    |                     |      |                  
|                    |                     |      |                   |      |  |        |     |           |  |      |     |      |  | Percent |     |          |  |   |       |  |  |   |       |  |  |   |     | Percent
|                    |                     | 2001 |                   | 2000 |  | Change |     | Inc (Dec) |  | 2001 |     | 2000 |  | Change  |     | Inc(Dec)
|                    |                     |      |                   |      |  |        |     |           |  |      |     |      |  |         |     |         
|Sales               |                     | $    | 761               |      |  | $      | 836 |           |  | $    | (75 | )    |  |         | (9  | %)       |  | $ | 2,349 |  |  | $ | 2,447 |  |  | $ | (98 | )       |  |  | (4  | %)
|Profit before
taxes |                     |      | 40                |      |  |        | 57  |           |  |      | (17 | )    |  |         | (30 | %)       |  |   | 141   |  |  |   | 181   |  |  |   | (40 | )       |  |  | (22 | %)

Sales for the third quarter of 2001 decreased 9 percent compared to the third
quarter of 2000, primarily due to lower volume from the completion of several
contracts early in 2001, including the U.S. Census Bureau and the TRW
Environmental Safety Systems (TESS) programs of approximately $130 million.
These decreases were partially offset by higher volume on existing core
programs, including space and missile systems contracts of $56 million.

Profit before taxes of $40 million in the third quarter 2001 decreased $17
million from the prior year. Excluding unusual items in 2001 of $13 million
relating to asset impairment charges for the write-down of intangible assets,
profit before taxes decreased $4 million, which was primarily due to lower
volume.

Sales for the nine months ended September 30, 2001 decreased $98 million from
2000, primarily due to lower volume on contracts nearing completion or
completed during the year of $306 million, offset by higher volume on existing
programs of $175 million and new business of $34 million.

Profit before taxes of $141 million for the nine months ended September 30,
2001 included unusual items related to asset impairment charges of $13 million.
Profit before taxes for the nine months ended September 30, 2000 included an
unusual item related to a gain on exchange of the Companys interest in Paracel
Inc. for shares in Celera of $23 million. Excluding unusual items, profit
before taxes for the nine months ended September 30, 2001 decreased $4 million
primarily due to lower volume.

Space & Electronics

|                           |                     |      |                   |      |  |        |     |           |  |      |     |      |  |         |   |          |  |   |       |   |  |   |       |  |  |   |      |         |  |  |   |  
|-------------------------- | ------------------- | ---- | ----------------- | ---- |  | ------ | --- | --------- |  | ---- | --- | ---- |  | ------- | - | -------- |  | - | ----- | - |  | - | ----- |  |  | - | ---- | ------- |  |  | - | -
|                           | Third quarter ended |      | Nine months ended
|(In millions)              | September 30        |      | September 30     
|                           |                     |      |                  
|                           |                     |      |                   |      |  |        |     |           |  |      |     |      |  | Percent |   |          |  |   |       |   |  |   |       |  |  |   |      | Percent
|                           |                     | 2001 |                   | 2000 |  | Change |     | Inc (Dec) |  | 2001 |     | 2000 |  | Change  |   | Inc(Dec)
|                           |                     |      |                   |      |  |        |     |           |  |      |     |      |  |         |   |         
|Sales                      |                     | $    | 505               |      |  | $      | 463 |           |  | $    | 42  |      |  |         | 9 | %        |  | $ | 1,518 |   |  | $ | 1,416 |  |  | $ | 102  |         |  |  | 7 | %
|Profit(loss)
 before
taxes |                     |      | (47               | )    |  |        | 41  |           |  |      | (88 | )    |  |         |  |          |  |   | (53   | ) |  |   | 411   |  |  |   | (464 | )       |  |  |  |  

Sales for the third quarter of 2001 increased 9 percent compared to the third
quarter of 2000, primarily due to higher volume on core programs of $57
million, offset in part by $11 million in sales from a previously consolidated
subsidiary now accounted for under the equity method.

Profit(loss) before taxes of a loss of $47 million for the third quarter 2001
decreased $88 million compared to the third quarter of 2000. During the third
quarter of 2001, unusual items included an asset impairment charge related to
the Companys investment in Astrolink of $242 million, offset by net gains of
$168 million, which primarily consisted of gains on the sales of shares of RFMD
common stock. In the prior year third quarter, a gain of $2 million relating
to the Companys investment in an affiliate was recorded. Excluding unusual
items, profit before taxes for the third quarter 2001 decreased $12 million
mainly due to increased investments and costs in the commercialization of
defense technologies of approximately $21 million, partially offset by higher
volume on several core satellite programs of $11 million.

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##### Table of Contents



Sales for the nine months ended September 30, 2001 of $1,518 million increased
$102 million from $1,416 million in 2000, primarily due to higher volume on
existing core programs of approximately $130 million, offset in part by $11
million in sales from a previously consolidated subsidiary now accounted for
under the equity method and lower volume on several defense programs nearing
completion or completed of approximately $8 million.

Profit(loss) before taxes for the nine months ended September 30, 2001 was a
loss of $53 million as compared to profit of $411 million in 2000.
Profit(loss) before taxes for the nine months ended September 30, 2001 included
unusual items consisting of asset impairment charges of approximately
$242 million related to the Companys investment in Astrolink, charges of $65
million related to the Companys investment in, and its share of asset
impairment recorded by Endwave, and
restructuring charges of $6 million, partially offset by gains, primarily sales
of shares of RFMD common stock, of $169 million. Unusual items in 2000
included gains on the sales of shares of RFMD common stock of approximately
$217 million and a gain of $53 million related to the Endwave merger.
Excluding the effect of unusual items, profit before taxes for the first nine
months of 2001 decreased $50 million due to increased equity losses of $17
million and increased investments and costs in the commercialization of defense
technologies of approximately $30 million.

Asset Impairment

During 1999, the Company, along with Lockheed Martin Global Telecommunications,
Telespazio, a Telecom Italia Group Company and Liberty Media Group formed a
joint venture, Astrolink International, LLC (Astrolink), to provide
satellite-based global broadband services. The equity partners made an initial
investment of $1.3 billion. The Astrolink business plan and the Companys
assessment of impairment of its investment contemplated obtaining additional
funding of $2.4 billion. The Company has invested $255 million and accounts
for its 19% interest in Astrolink on the equity method of accounting.

At September 30, 2001 Astrolink was in discussions with additional equity
partners and with current shareholders to raise the necessary funding through
2001. On October 25, 2001 Lockheed Martin Global Telecommunications announced
that it would not provide additional financing beyond its initial $400 million
investment. Concurrently, the Company also decided it will not provide
additional funding. The future viability of Astrolink is contingent upon
additional funding. Astrolinks Board is considering several options including
whether to significantly delay the projects launch date or cancel the venture.

As a result of these events, the Companys assessment of impairment changed and
the Company concluded that the carrying amount of its investment will not be
recoverable and therefore, recognized an impairment loss of approximately $242
million before tax, $157 million after tax at September 30, 2001.

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##### Table of Contents



Aeronautical Systems

|                    |  |                     |     |                   |  |        |     |          |  |      |     |      |  |         |     |          |  |   |     |  |  |   |     |  |  |   |     |         |  |  |     |   
|------------------- |  | ------------------- | --- | ----------------- |  | ------ | --- | -------- |  | ---- | --- | ---- |  | ------- | --- | -------- |  | - | --- |  |  | - | --- |  |  | - | --- | ------- |  |  | --- | --
|                    |  | Third quarter ended |     | Nine months ended
|(In millions)       |  | September 30        |     | September 30     
|                    |  |                     |     |                  
|                    |  |                     |     |                   |  |        |     |          |  |      |     |      |  | Percent |     |          |  |   |     |  |  |   |     |  |  |   |     | Percent
|                    |  | 2001                |     | 2000              |  | Change |     | Inc(Dec) |  | 2001 |     | 2000 |  | Change  |     | Inc(Dec)
|                    |  |                     |     |                   |  |        |     |          |  |      |     |      |  |         |     |         
|Sales               |  | $                   | 269 |                   |  | $      | 257 |          |  | $    | 12  |      |  |         | 4   | %        |  | $ | 804 |  |  | $ | 806 |  |  | $ | (2  | )       |  |  |    |   
|Profit before
taxes |  |                     | 22  |                   |  |        | 35  |          |  |      | (13 | )    |  |         | (37 | %)       |  |   | 86  |  |  |   | 101 |  |  |   | (15 | )       |  |  | (15 | %)

Sales for the third quarter of 2001 increased 4 percent compared to the third
quarter of 2000 driven by growth in repair and overhaul services of
approximately $13 million.

Despite an increase in sales, profit before taxes for the third quarter of 2001
decreased $13 million as compared to the third quarter of 2000 due primarily to
an adverse mix of products sold, specifically a decline of high margin spare
parts and increased operating costs, including higher research and development
expenditures.

Sales for the nine months ended September 30, 2001 were comparable to the nine
month period in 2000. Increased sales volume of approximately $25 million was
offset by the effect of foreign currency exchange of $29 million.

Profit before taxes for the nine months ended September 30, 2001 decreased $15
million compared to 2000. Excluding approximately $4 million of unusual items
in 2001, consisting of a gain on sale of assets, profit before taxes decreased
$19 million. The lower profit before taxes resulted from an unfavorable
program mix and lower volume of higher margin spare parts totaling $12 million
and increased operating costs, including higher research and development
expenditures of $8 million.

As of December 31, 2000, the Company had recorded reserves of approximately $7
million for severance and other costs to close certain facilities of the
Aeronautical Systems segment. During the nine months ended September 30, 2001,
as a result of severance payments, the reserve was reduced by $3 million. The
remaining balance will be used by the first quarter of 2002.

In October 2001, the Company announced further restructuring actions as a
result of decreased demand for its civil aviation equipment in the Aeronautical
Systems business. Cost reduction measures are being implemented including a
reduction in the number of employees by approximately 1,100 by the end of 2002.
The Company is evaluating the impact of these actions, which cannot be
quantified at this time.

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##### Table of Contents



Automotive Segments

|                        |  |                     |       |                   |  |        |       |           |  |   |      |   |  |         |     |      |  |        |  |           |  |   |       |  |  |   |       |  |  |   |      |         |  |  |     |   
|----------------------- |  | ------------------- | ----- | ----------------- |  | ------ | ----- | --------- |  | - | ---- | - |  | ------- | --- | ---- |  | ------ |  | --------- |  | - | ----- |  |  | - | ----- |  |  | - | ---- | ------- |  |  | --- | --
|                        |  | Third quarter ended |       | Nine months ended |  |       
|(In millions)           |  | September 30        |       | September 30      |  |       
|                        |  |                     |       |                   | 
|                        |  |                     |       |                   |  |        |       |           |  |   |      |   |  | Percent |     |      |  |        |  |           |  |   |       |  |  |   |       |  |  |   |      | Percent
|Sales                   |  | 2001                |       | 2000              |  | Change |       | Inc (Dec) |  |   |      |   |  | 2001    |     | 2000 |  | Change |  | Inc (Dec)
|                        |  |                     |       |                   |  |        |       |           |  |   |      |   |  |         |     |      |  |        |  |          
|Chassis Systems         |  | $                   | 1,381 |                   |  | $      | 1,480 |           |  | $ | (99  | ) |  |         | (7  | %)   |  |        |  |           |  | $ | 4,537 |  |  | $ | 5,011 |  |  | $ | (474 | )       |  |  | (10 | %)
|Occupant Safety Systems |  |                     | 622   |                   |  |        | 639   |           |  |   | (17  | ) |  |         | (3  | %)   |  |        |  |           |  |   | 2,034 |  |  |   | 2,127 |  |  |   | (93  | )       |  |  | (4  | %)
|Automotive Electronics  |  |                     | 324   |                   |  |        | 378   |           |  |   | (54  | ) |  |         | (14 | %)   |  |        |  |           |  |   | 1,063 |  |  |   | 1,287 |  |  |   | (224 | )       |  |  | (17 | %)
|                        |  |                     |       |                   |  |        |       |           |  |   |      |   |  |         |     |      |  |        |  |           |  |   |       |  |  |   |       |  |  |   |      |         |  | 
|Total                   |  | $                   | 2,327 |                   |  | $      | 2,497 |           |  | $ | (170 | ) |  |         | (7  | %)   |  |        |  |           |  | $ | 7,634 |  |  | $ | 8,425 |  |  | $ | (791 | )       |  |  | (9  | %)

Third quarter sales in the automotive businesses declined 7% to $2.3 billion.
Sales declined primarily due to divestitures, lower volumes, primarily in North
America, lower pricing and the effect of foreign currency exchange.

Automotive sales for the nine months ended September 30, 2001 declined $791
million to $7.6 billion compared to 2000. Sales declined primarily due to
lower volumes, mainly in North America, the effect of foreign currency
exchange, divestitures and lower pricing.

Third quarter variances by
segment:

|              |  |                 |     |         |  |                 |     |            |  |                  |     |   |  |   |      |  
|------------- |  | --------------- | --- | ------- |  | --------------- | --- | ---------- |  | ---------------- | --- | - |  | - | ---- | -
|              |  |                 |     |         |  | Occupant Safety |     | Automotive |  | Total Automotive
|(In millions) |  | Chassis Systems |     | Systems |  | Electronics     |     | Segments  
|              |  |                 |     |         |  |                 |     |           
|Volume        |  | $               | (39 | )       |  | $               | 3   |            |  | $                | (21 | ) |  | $ | (57  | )
|Translation   |  |                 | (21 | )       |  |                 | 2   |            |  |                  | (3  | ) |  |   | (22  | )
|Divestitures  |  |                 | (33 | )       |  |                 |    |            |  |                  | (26 | ) |  |   | (59  | )
|Price         |  |                 | (6  | )       |  |                 | (22 | )          |  |                  | (4  | ) |  |   | (32  | )
|              |  |                 |     |         |  |                 |     |            |  |                  |     |   |  |   |      |  
|Total         |  | $               | (99 | )       |  | $               | (17 | )          |  | $                | (54 | ) |  | $ | (170 | )

Nine month variances by segment:

|              |  |                 |      |         |  |                 |     |            |  |                  |      |   |  |   |      |  
|------------- |  | --------------- | ---- | ------- |  | --------------- | --- | ---------- |  | ---------------- | ---- | - |  | - | ---- | -
|              |  |                 |      |         |  | Occupant Safety |     | Automotive |  | Total Automotive
|(In millions) |  | Chassis Systems |      | Systems |  | Electronics     |     | Segments  
|              |  |                 |      |         |  |                 |     |           
|Volume        |  | $               | (233 | )       |  | $               | 21  |            |  | $                | (93  | ) |  | $ | (305 | )
|Translation   |  |                 | (137 | )       |  |                 | (40 | )          |  |                  | (24  | ) |  |   | (201 | )
|Divestitures  |  |                 | (73  | )       |  |                 |    |            |  |                  | (93  | ) |  |   | (166 | )
|Price         |  |                 | (31  | )       |  |                 | (74 | )          |  |                  | (14  | ) |  |   | (119 | )
|              |  |                 |      |         |  |                 |     |            |  |                  |      |   |  |   |      |  
|Total         |  | $               | (474 | )       |  | $               | (93 | )          |  | $                | (224 | ) |  | $ | (791 | )

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|                        |  |                     |    |                   |  |        |     |           |  |      |     |      |  |         |     |           |  |   |     |  |  |   |     |  |  |   |      |         |  |  |     |   
|----------------------- |  | ------------------- | -- | ----------------- |  | ------ | --- | --------- |  | ---- | --- | ---- |  | ------- | --- | --------- |  | - | --- |  |  | - | --- |  |  | - | ---- | ------- |  |  | --- | --
|                        |  | Third quarter ended |    | Nine months ended
|(In millions)           |  | September 30        |    | September 30     
|                        |  |                     |    |                  
|                        |  |                     |    |                   |  |        |     |           |  |      |     |      |  | Percent |     |           |  |   |     |  |  |   |     |  |  |   |      | Percent
|Profit before
taxes     |  | 2001                |    | 2000              |  | Change |     | Inc (Dec) |  | 2001 |     | 2000 |  | Change  |     | Inc (Dec)
|                        |  |                     |    |                   |  |        |     |           |  |      |     |      |  |         |     |          
|Chassis Systems         |  | $                   | 60 |                   |  | $      | 74  |           |  | $    | (14 | )    |  |         | (20 | %)        |  | $ | 196 |  |  | $ | 347 |  |  | $ | (151 | )       |  |  | (43 | %)
|Occupant Safety Systems |  |                     | 26 |                   |  |        | (19 | )         |  |      | 45  |      |  |         |    |           |  |   | 58  |  |  |   | 54  |  |  |   | 4    |         |  |  | 6   | % 
|Automotive Electronics  |  |                     | 6  |                   |  |        | 11  |           |  |      | (5  | )    |  |         | (50 | %)        |  |   | 44  |  |  |   | 76  |  |  |   | (32  | )       |  |  | (43 | %)
|                        |  |                     |    |                   |  |        |     |           |  |      |     |      |  |         |     |           |  |   |     |  |  |   |     |  |  |   |      |         |  | 
|Total                   |  | $                   | 92 |                   |  | $      | 66  |           |  | $    | 26  |      |  |         | 37  | %         |  | $ | 298 |  |  | $ | 477 |  |  | $ | (179 | )       |  |  | (38 | %)

Profit before taxes for the third quarter 2001, excluding unusual items, for
the automotive businesses declined to $114 million from $135 million in 2000.
The decline in profit before taxes resulted from lower volume primarily in
North America and unfavorable product mix, price reductions, the effect of
foreign currency exchange and divestitures, which were partially offset by net
cost reductions.

Profit before taxes for the nine months ended September 30, 2001, excluding
unusual items, for the automotive businesses declined to $348 million from $618
million in 2000. The decline resulted from lower volume primarily in North
America, unfavorable product mix and the effect of a seatbelt recall, price
reductions, the effect of foreign currency exchange and divestitures, which were
partially offset by net cost reductions.

Third quarter variances by segment:

|                              |  |                 |     |                 |  |             |     |                  |  |   |    |   |  |   |     |  
|----------------------------- |  | --------------- | --- | --------------- |  | ----------- | --- | ---------------- |  | - | -- | - |  | - | --- | -
|                              |  |                 |     |                 |  |             |     |                  |  |   |    |   |  |  
|                              |  |                 |     | Occupant
Safety |  | Automotive  |     | Total
Automotive
|(In millions)                 |  | Chassis Systems |     | Systems         |  | Electronics |     | Segments        
|                              |  |                 |     |                 |  |             |     |                 
|Volume/Mix                    |  | $               | (24 | )               |  | $           | 1   |                  |  | $ | (6 | ) |  | $ | (29 | )
|Price                         |  |                 | (6  | )               |  |             | (22 | )                |  |   | (4 | ) |  |   | (32 | )
|Translation                   |  |                 | (6  | )               |  |             | 1   |                  |  |   | (1 | ) |  |   | (6  | )
|Divestitures                  |  |                 | (3  | )               |  |             |    |                  |  |   | (2 | ) |  |   | (5  | )
|Net Cost Reductions           |  |                 | 34  |                 |  |             | 19  |                  |  |   | 8  |   |  |   | 61  |  
|All Other  Net               |  |                 | (6  | )               |  |             | (6  | )                |  |   | 2  |   |  |   | (10 | )
|                              |  |                 |     |                 |  |             |     |                  |  |   |    |   |  |   |     |  
|Total excluding unusual items |  |                 | (11 | )               |  |             | (7  | )                |  |   | (3 | ) |  |   | (21 | )
|Unusual Items                 |  |                 | (3  | )               |  |             | 52  |                  |  |   | (2 | ) |  |   | 47  |  
|                              |  |                 |     |                 |  |             |     |                  |  |   |    |   |  |   |     |  
|Total                         |  | $               | (14 | )               |  | $           | 45  |                  |  | $ | (5 | ) |  | $ | 26  |  

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

|                        |  |      |     |      |  |        |     |   |  |   |    |  
|----------------------- |  | ---- | --- | ---- |  | ------ | --- | - |  | - | -- | -
|(In millions)           |  | 2001 |     | 2000 |  | Change
|                        |  |      |     |      |  |       
|Chassis Systems         |  | $    | (7  | )    |  | $      | (4  | ) |  | $ | (3 | )
|Occupant Safety Systems |  |      | (5  | )    |  |        | (57 | ) |  |   | 52 |  
|Automotive Electronics  |  |      | (10 | )    |  |        | (8  | ) |  |   | (2 | )
|                        |  |      |     |      |  |        |     |   |  |   |    |  
|Total                   |  | $    | (22 | )    |  | $      | (69 | ) |  | $ | 47 |  

Unusual items in 2001 included restructuring costs of $19 million in all
segments. Unusual items also included asset impairment charges of
approximately $15 million, offset by gains on the sale of assets of

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$12 million
in Chassis. Unusual items in 2000 included asset impairment charges
of $52
million in Occupant Safety Systems and restructuring costs of $17 million in
all segments.

Nine months variances by segment:

|                              |  |                 |      |                        |  |                       |     |                          |  |   |     |   |  |   |      |  
|----------------------------- |  | --------------- | ---- | ---------------------- |  | --------------------- | --- | ------------------------ |  | - | --- | - |  | - | ---- | -
|                              |  |                 |      |                        |  |                       |     |                          |  |   |     |   |  |  
|(In millions)                 |  | Chassis Systems |      | Occupant SafetySystems |  | AutomotiveElectronics |     | Total
AutomotiveSegments
|                              |  |                 |      |                        |  |                       |     |                         
|Volume/Mix/Recall             |  | $               | (129 | )                      |  | $                     | (31 | )                        |  | $ | (30 | ) |  | $ | (190 | )
|Price                         |  |                 | (31  | )                      |  |                       | (74 | )                        |  |   | (14 | ) |  |   | (119 | )
|Translation                   |  |                 | (16  | )                      |  |                       | (6  | )                        |  |   | (1  | ) |  |   | (23  | )
|Divestitures                  |  |                 | (6   | )                      |  |                       |    |                          |  |   | (10 | ) |  |   | (16  | )
|Net Cost Reductions           |  |                 | 46   |                        |  |                       | 45  |                          |  |   | 21  |   |  |   | 112  |  
|All Other  Net               |  |                 | (18  | )                      |  |                       | (12 | )                        |  |   | (4  | ) |  |   | (34  | )
|                              |  |                 |      |                        |  |                       |     |                          |  |   |     |   |  |   |      |  
|Total excluding unusual items |  |                 | (154 | )                      |  |                       | (78 | )                        |  |   | (38 | ) |  |   | (270 | )
|Unusual Items                 |  |                 | 3    |                        |  |                       | 82  |                          |  |   | 6   |   |  |   | 91   |  
|                              |  |                 |      |                        |  |                       |     |                          |  |   |     |   |  |   |      |  
|Total                         |  | $               | (151 | )                      |  | $                     | 4   |                          |  | $ | (32 | ) |  | $ | (179 | )

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

|                        |  |      |     |      |  |        |      |   |  |   |    | 
|----------------------- |  | ---- | --- | ---- |  | ------ | ---- | - |  | - | -- | 
|(In millions)           |  | 2001 |     | 2000 |  | Change
|                        |  |      |     |      |  |       
|Chassis Systems         |  | $    | (24 | )    |  | $      | (27  | ) |  | $ | 3  | 
|Occupant Safety Systems |  |      | (16 | )    |  |        | (98  | ) |  |   | 82 | 
|Automotive Electronics  |  |      | (10 | )    |  |        | (16  | ) |  |   | 6  | 
|                        |  |      |     |      |  |        |      |   |  |   |    | 
|Total                   |  | $    | (50 | )    |  | $      | (141 | ) |  | $ | 91 | 

Unusual items in 2001 included restructuring costs of $72 million in all
segments and asset impairment charges of approximately $15 million, partially
offset by gains on the sale of non-strategic assets of $37 million, primarily
in Chassis. Unusual items in 2000 included restructuring costs of $46 million
in all segments, threatened claims and litigation of $35 million and asset
impairment charges of $52 million in Occupant Safety Systems and warranty costs
of $30 million in Chassis, partially offset by net gains on asset sales of $22
million, mainly in Chassis.

Automotive Restructuring

The Company has initiated several restructuring actions within its automotive
businesses. Severance costs and plant closing accruals related to these
actions were $63 million at December 31, 2000. During the nine months ended
September 30, 2001, the Company recorded additional before tax charges of $72
million, primarily for headcount reductions, of which $18 million was recorded
in the third quarter. Charges of $38 million were recorded in administrative
and selling expenses and $34 million in cost of sales. During the first nine
months of 2001, these actions resulted in a permanent reduction of
approximately 3,100 automotive positions. The Company used $71 million for
severance payments and plant closings. The balance at September 30, 2001 of
$64 million is expected to be used by the third quarter of 2002.

In October 2001, the Company announced further restructuring actions, which
includes consolidating its Occupant Safety Systems business with Chassis
Systems to form a new automotive organization to be called TRW Automotive. The
Company plans an additional reduction in total automotive employment of
approximately 2,400. The majority of the reductions will occur in the fourth
quarter of this year. The Company is evaluating the impact of these actions,
which cannot be quantified at this time.

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LIQUIDITY AND FINANCIAL POSITION

In the nine months ended September 30, 2001, cash from operating activities of
$681 million, and proceeds from the sale of nonstrategic assets of $196 million
were used primarily for capital expenditures of $499 million, debt reductions
of $206 million, dividend payments of $132 million and other items of $65
million. As a result, cash and cash equivalents decreased $25 million. In the
nine months ended September 30, 2000, cash from operating activities of $793
million, proceeds from divestitures of $1,431 million, and other items of $22
million were used primarily for debt reductions of $1,578 million, capital
expenditures of $475 million, and dividend payments of $123 million. As a
result, cash and cash equivalents increased $70 million.

Net debt (short-term debt, the current portion of long-term debt and long-term
debt, less cash and cash equivalents) was $6.2 billion at September 30, 2001
and $6.4 billion at December 31, 2000. The ratio of net debt to total capital
(net debt, minority interests and shareholders investment) was 72 percent at
September 30, 2001 and 70 percent at December 31, 2000. The percentage of
fixed rate debt to total debt was 75 percent at September 30, 2001 compared to
66 percent at the end of 2000.

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

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

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

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

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

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

In October 2001, the Companys Board of Directors approved a reduction of its
quarterly dividend from $0.35 to $0.175 per common share beginning with the
December 2001 payment.

NEW ACCOUNTING PRONOUNCEMENTS

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

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The Company has approximately $3.3 billion of goodwill recorded in its balance
sheet as of September 30, 2001. Amortization expense related to goodwill for
the first nine months of 2001 was approximately $74 million before taxes, $65
million after taxes. Management is currently evaluating the impact of the
adoption of these statements. The effect on the Companys results of
operations and financial position during 2002 and any cumulative effect as a
result of adopting Statement 142 are not determinable at this time.

The FASB also recently issued SFAS No. 143, Accounting for Asset Retirement
Obligations and SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.

Statement 143 requires companies to record the fair value of a liability for
asset retirement obligations in the period in which they are incurred. The
statement applies to a companys legal obligations associated with the
retirement of a tangible long-lived asset that results from the
acquisition,
construction, and development or through the normal operation of a long-lived
asset.

When a liability is initially recorded, the company would capitalize the cost,
thereby increasing the carrying amount of the related asset. The capitalized
asset retirement cost is depreciated over the life of the respective asset
while the liability is accreted to its present value. Upon settlement of the
liability, the obligation is settled at its recorded amount or the company
incurs a gain or loss. The statement is effective for fiscal years beginning
after June 30, 2002.

Statement 144 addresses the accounting and reporting for the impairment or
disposal of long-lived assets. The statement provides a single accounting
model for long-lived assets to be disposed of. New criteria must be met to
classify the asset as an asset held-for-sale. This statement also focuses on
reporting the effects of a disposal of a segment of a business. This statement
is effective for fiscal years beginning after December 15, 2001.

The Company believes that the adoption of SFAS No. 143 and 144 will not have a
material impact on its financial position or results of operations.

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.

The Companys consolidated results could be affected by: the ability to obtain
new 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 domestic and international
conditions; 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; and the
termination of existing government contracts.

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The Companys automotive business 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 and litigation issues; and changes to the regulatory
environment regarding automotive safety.

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

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Item 3. Quantitative and
Qualitative Disclosures about Market Risk

The Company is subject to inherent risks attributed to operating in a global
economy. It is the Companys policy to utilize derivative financial
instruments to manage its interest rate and foreign currency exchange rate
risks. When appropriate, the Company uses derivatives to modify its exposure
to interest rate movements and to reduce borrowing costs. Interest rate swaps
hedge interest rates on certain indebtedness and involve the exchange of fixed
and floating rate interest payment obligations over the life of the related
agreement. 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
September 30, 2001, a one-percentage-point increase in the average interest
rate on the Companys variable rate borrowings would increase future interest
expense by approximately $1 million per month.

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

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

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

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

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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).

Various claims, lawsuits and administrative proceedings are pending or
threatened against the Company or its subsidiaries, arising from the ordinary
course of business with respect to commercial, product liability and
environmental matters. Taking into account established reserves, management
believes that the ultimate resolution of each of the lawsuits referred to in
the Contingencies note to Financial Statements included in Part I of this
report will not have a material effect on the Companys financial condition or
results of operations.
The resolution of one or more of such claims may have a material impact on cash
flow for the period in which such claims are resolved.

TRW Vehicle Safety Systems Inc. environmental matter  previously discussed on
page 12 of the 2000 Form 10-K and in Part II, Item 1 of TRWs Form 10-Q for the
quarter ended March 31, 2001: Sentencing took place during the third quarter
of 2001, at which time VSSI paid $12 million in fines pursuant to the criminal
plea agreements, which had been previously entered by the state and federal
courts.

Putative class action regarding alleged damage due to emissions from VSSI plant
 previously discussed on page 12 of the 2000 Form 10-K: On September 24, 2001
VSSI and the individual plaintiffs entered into an agreement to settle and
dismiss the action. Pursuant to the agreement, which must be approved by the
U.S. District Court of Arizona, the individual plaintiffs claims would be
dismissed with prejudice, the claims brought on behalf of the putative class
would be dismissed without prejudice, and VSSI would pay each of the six named
plaintiffs $7,500 and reimburse the named plaintiffs counsel up to $130,000 in
expenses. The court is expected to rule on the joint motion to approve the
settlement agreement after public notice and an opportunity for putative class
members to object.

Vinnell environmental matter  previously discussed on page 13 of the 2000 Form
10-K: On August 26, 2001, Vinnell and the U.S. Government reached an agreement
under which the U.S. Government agreed to return to Vinnell $319,750, or
one-half of the penalties previously released from escrow by Vinnell to the
Government, and the Company withdrew its appeal challenging the District
Courts ruling. In addition, the U.S. Government and Vinnell agreed that
subject to certain conditions, in the future, penalties would not be assessed
during a period of court review of a good faith dispute over reimbursement of
oversight costs.




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

|    |  |                      |  |                                                                                                                                                                                                          
|--- |  | -------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Exhibits             |  |                                                                                                                                                                                                          
|    |  | 15                   |  | Letter re: Unaudited Financial Information                                                                                                                                                               
|    |  | 99                   |  | Computation of Ratio of Earnings to Fixed Charges  Unaudited
(Supplement to Exhibit 12 of the following Registration Statements
of the Company: No. 333-89133 on Form S-3 and No. 333-48443 on Form
S-3)
|    |  |                      |  |                                                                                                                                                                                                          
|(b) |  | Reports
on Form
8-K:
|    |  | None.                |  |                                                                                                                                                                                                          

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                       |  |                                                        
|---------------------- |  | -------------------------------------------------------
|                       |  | TRW Inc.                                               
|                       |  |                                                        
|Date: November 7, 2001 |  | By: /s/ W. B. Lawrence                                 
|                       |  |                                                        
|                       |  | W. B. Lawrence                                         
|                       |  | Executive Vice President,
General Counsel and Secretary
|                      
|                       | 
|                       |  | By: /s/ R.H. Swan                                      
|                       |  |                                                        
|                       |  | R. H. Swan                                             
|                       |  | Executive Vice President                               
|                       |  | and Chief Financial Officer                            

27