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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







| |  |            |  |                                                                                                                                        |  | 
| |  | ---------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | 
| |  | (Mark One) |  |                                                                                                                                       
| |  | x          |  | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  For the Quarterly Period Ended June 30, 2008. |  | 
| |  |            | 
| |  |  ̈          |  | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  For the Transition Period From
 to .         |  | 

Commission File No. 333-128166-10





LOGO

Affinia Group Intermediate Holdings Inc.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 34-2022081                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



|                                           |  |           
|------------------------------------------ |  | ----------
|1101 Technology Drive, Ann Arbor, Michigan |  | 48108     
|(Address of Principal Executive Offices)   |  | (Zip Code)



|                                                    
|----------------------------------------------------
|(734)
827-5400                                      
|(Registrants Telephone Number, Including Area Code)



|                                                                                  
|----------------------------------------------------------------------------------
|N/A                                                                               
|(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)





Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  | x  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

There were 1,000 shares outstanding of the registrants common stock as of August 13, 2008 (all of which are privately owned and not traded on a public market).









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##### Table of Contents

Index

Affinia Group Intermediate Holdings Inc.



|         |  |                                                                                                               |  |   
|-------- |  | ------------------------------------------------------------------------------------------------------------- |  | --
|Part I   |  | FINANCIAL INFORMATION                                                                                         |  |   
|         |  |                                                                                                              
|Item 1.  |  | Financial Statements (unaudited)                                                                              |  | 4 
|         |  |                                                                                                              
|         |  | Condensed Consolidated Balance SheetsDecember 31, 2007 and June 30, 2008 (unaudited)                         |  | 4 
|         |  |                                                                                                              
|         |  | Condensed Consolidated Statements of OperationsThree and Six Months Ended June 30, 2007 and 2008 (unaudited) |  | 5 
|         |  |                                                                                                              
|         |  | Condensed Consolidated Statements of Cash FlowsSix Months Ended June 30, 2007 and 2008 (unaudited)           |  | 6 
|         |  |                                                                                                              
|         |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                              |  | 7 
|         |  |                                                                                                              
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                         |  | 24
|         |  |                                                                                                              
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                    |  | 34
|         |  |                                                                                                              
|Item 4.  |  | Controls and Procedures                                                                                       |  | 35
|         |  |                                                                                                              
|Part II  |  | OTHER INFORMATION                                                                                             |  |   
|         |  |                                                                                                              
|Item 1.  |  | Legal Proceedings                                                                                             |  | 36
|         |  |                                                                                                              
|Item 1A. |  | Risk Factors                                                                                                  |  | 36
|         |  |                                                                                                              
|Item 5.  |  | Other Information                                                                                             |  | 36
|         |  |                                                                                                              
|Item 6.  |  | Exhibits                                                                                                      |  | 37
|         |  |                                                                                                              
|         |  | Signatures                                                                                                    |  | 38



2



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the
Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These forward-looking statements may include comments concerning our plans, objectives, goals, strategies, future
events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical. When used in this report, the words estimates,
expects, anticipates, projects, plans, intends, believes, forecasts, or future or conditional verbs, such as will, should, could
or may, and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, managements examination of historical operating trends
and data are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there is no assurance that these
expectations, beliefs and projections will be achieved. With respect to all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements
contained in this report. Such risks, uncertainties and other important factors include, among others: our substantial leverage; limitations on flexibility in operating our business contained in our debt agreements; pricing and import pressures; the
shift in demand from premium to economy products; our dependence on our largest customers; changing distribution channels; increasing costs for manufactured components, raw materials, crude oil and energy; our ability to achieve cost savings from
our restructuring; increased costs in imported products from China and other low cost sources; the consolidation of distributors; risks associated with our non-U.S. operations; product liability and customer warranty and recall claims; changes to
environmental and automotive safety regulations; risk of impairment to intangibles and goodwill; risk of successful refinancing if required; non-performance by, or insolvency of, our suppliers or our customers; work stoppages or similar difficulties
could significantly disrupt our operations, and other labor disputes; challenges to our intellectual property portfolio; and our exposure to a recession. Additionally, there may be other factors that could cause our actual results to differ
materially from the forward-looking statements.



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PART I

FINANCIAL INFORMATION



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

Affinia Group Intermediate Holdings Inc.

Unaudited Condensed Consolidated Balance Sheets

(Dollars in Millions)



|                                                                              |  |                  |       |   |              |   |       |  
|----------------------------------------------------------------------------- |  | ---------------- | ----- | - | ------------ | - | ----- | -
|                                                                              |  | December 31,2007 |       |   | June 30,2008 |  
|Assets                                                                        |  |                  |       |   |              |   |       |  
|Current assets:                                                               |  |                  |       |   |              |   |       |  
|Cash and cash equivalents                                                     |  | $                | 59    |   |              | $ | 63    |  
|Trade accounts receivable, less allowances of $4 million in 2007 and 2008     |  |                  | 361   |   |              |   | 446   |  
|Inventories, net                                                              |  |                  | 506   |   |              |   | 499   |  
|Other current assets                                                          |  |                  | 44    |   |              |   | 75    |  
|                                                                              |  |                  |       |   |              |   |       |  
|Total current assets                                                          |  |                  | 970   |   |              |   | 1,083 |  
|Property, plant and equipment, net                                            |  |                  | 183   |   |              |   | 187   |  
|Goodwill                                                                      |  |                  | 30    |   |              |   | 27    |  
|Other intangible assets, net                                                  |  |                  | 164   |   |              |   | 159   |  
|Deferred financing costs                                                      |  |                  | 15    |   |              |   | 13    |  
|Deferred income taxes                                                         |  |                  | 74    |   |              |   | 79    |  
|Investments and other assets                                                  |  |                  | 21    |   |              |   | 22    |  
|                                                                              |  |                  |       |   |              |   |       |  
|Total assets                                                                  |  | $                | 1,457 |   |              | $ | 1,570 |  
|                                                                              |  |                  |       |   |              |   |       |  
|                                                                              |  |                 
|Liabilities and shareholders equity                                          |  |                  |       |   |              |   |       |  
|Current liabilities:                                                          |  |                  |       |   |              |   |       |  
|Accounts payable                                                              |  | $                | 240   |   |              | $ | 305   |  
|Other accrued expenses                                                        |  |                  | 134   |   |              |   | 171   |  
|Accrued payroll and employee benefits                                         |  |                  | 27    |   |              |   | 32    |  
|                                                                              |  |                  |       |   |              |   |       |  
|Total current liabilities                                                     |  |                  | 401   |   |              |   | 508   |  
|Long-term debt                                                                |  |                  | 597   |   |              |   | 597   |  
|Deferred employee benefits and other non-current liabilities                  |  |                  | 25    |   |              |   | 23    |  
|                                                                              |  |                  |       |   |              |   |       |  
|Total liabilities                                                             |  |                  | 1,023 |   |              |   | 1,128 |  
|Minority interest in consolidated subsidiaries                                |  |                  | 2     |   |              |   |      |  
|Contingencies and commitments                                                 |  |                  |       |   |              |   |       |  
|Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding |  |                  |      |   |              |   |      |  
|Additional paid in-capital                                                    |  |                  | 408   |   |              |   | 408   |  
|Accumulated deficit                                                           |  |                  | (34   | ) |              |   | (49   | )
|Accumulated other comprehensive income                                        |  |                  | 58    |   |              |   | 83    |  
|                                                                              |  |                  |       |   |              |   |       |  
|Shareholders equity                                                          |  |                  | 432   |   |              |   | 442   |  
|                                                                              |  |                  |       |   |              |   |       |  
|Total liabilities and shareholders equity                                    |  | $                | 1,457 |   |              | $ | 1,570 |  
|                                                                              |  |                  |       |   |              |   |       |  

The accompanying notes are an integral part of the

unaudited condensed consolidated financial statements.



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Affinia Group Intermediate Holdings Inc.

Unaudited Condensed Consolidated Statements of Operations

(Dollars in Millions)



|                                                                               |  |                               |      |   |                               |   |      |                             |  |   |                             |   |  |   |       |  
|------------------------------------------------------------------------------ |  | ----------------------------- | ---- | - | ----------------------------- | - | ---- | --------------------------- |  | - | --------------------------- | - |  | - | ----- | -
|                                                                               |  | Three MonthsEndedJune 30,2007 |      |   | Three MonthsEndedJune 30,2008 |   |      | Six MonthsEndedJune 30,2007 |  |   | Six MonthsEndedJune 30,2008 |  
|Net sales                                                                      |  | $                             | 574  |   |                               | $ | 603  |                             |  | $ | 1,076                       |   |  | $ | 1,132 |  
|Cost of sales                                                                  |  |                               | (477 | ) |                               |   | (503 | )                           |  |   | (885                        | ) |  |   | (937  | )
|                                                                               |  |                               |      |   |                               |   |      |                             |  |   |                             |   |  |   |       |  
|Gross profit                                                                   |  |                               | 97   |   |                               |   | 100  |                             |  |   | 191                         |   |  |   | 195   |  
|Selling, general, and administrative expenses                                  |  |                               | (79  | ) |                               |   | (98  | )                           |  |   | (162                        | ) |  |   | (175  | )
|Loss on disposition of affiliate                                               |  |                               |     |   |                               |   | (1   | )                           |  |   |                            |   |  |   | (1    | )
|                                                                               |  |                               |      |   |                               |   |      |                             |  |   |                             |   |  |   |       |  
|Operating profit                                                               |  |                               | 18   |   |                               |   | 1    |                             |  |   | 29                          |   |  |   | 19    |  
|Other income, net                                                              |  |                               | 2    |   |                               |   | 1    |                             |  |   | 3                           |   |  |   | 1     |  
|Interest expense                                                               |  |                               | (15  | ) |                               |   | (14  | )                           |  |   | (30                         | ) |  |   | (28   | )
|                                                                               |  |                               |      |   |                               |   |      |                             |  |   |                             |   |  |   |       |  
|Income (loss) before income tax provision, equity income and minority interest |  |                               | 5    |   |                               |   | (12  | )                           |  |   | 2                           |   |  |   | (8    | )
|Income tax provision                                                           |  |                               | 1    |   |                               |   | 6    |                             |  |   | 1                           |   |  |   | 7     |  
|Equity in income, net of tax                                                   |  |                               |     |   |                               |   |     |                             |  |   |                            |   |  |   |      |  
|Minority interest, net of tax                                                  |  |                               |     |   |                               |   |     |                             |  |   |                            |   |  |   |      |  
|                                                                               |  |                               |      |   |                               |   |      |                             |  |   |                             |   |  |   |       |  
|Net (loss) income                                                              |  | $                             | 4    |   |                               | $ | (18  | )                           |  | $ | 1                           |   |  | $ | (15   | )
|                                                                               |  |                               |      |   |                               |   |      |                             |  |   |                             |   |  |   |       |  

The accompanying notes are an integral part of the

unaudited condensed consolidated financial statements.



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Affinia Group Intermediate Holdings Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(Dollars in Millions)



|                                                                                                   |  |                               |     |   |                               |   |     |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------------- | --- | - | ----------------------------- | - | --- | -
|                                                                                                   |  | Six Months EndedJune 30, 2007 |     |   | Six Months EndedJune 30, 2008 |  
|Operating activities                                                                               |  |                               |     |   |                               |   |     |  
|Net income (loss)                                                                                  |  | $                             | 1   |   |                               | $ | (15 | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                               |     |   |                               |   |     |  
|Depreciation and amortization                                                                      |  |                               | 16  |   |                               |   | 17  |  
|Stock-based compensation                                                                           |  |                               | 1   |   |                               |   |    |  
|Loss on disposition of affiliate                                                                   |  |                               |    |   |                               |   | 1   |  
|Provision for deferred income taxes                                                                |  |                               | (12 | ) |                               |   | (4  | )
|Change in trade accounts receivable                                                                |  |                               | (75 | ) |                               |   | (74 | )
|Change in inventories                                                                              |  |                               | (32 | ) |                               |   | 19  |  
|Change in other current operating assets                                                           |  |                               | 16  |   |                               |   | (28 | )
|Change in other current operating liabilities                                                      |  |                               | 30  |   |                               |   | 95  |  
|Change in other                                                                                    |  |                               | 30  |   |                               |   |    |  
|                                                                                                   |  |                               |     |   |                               |   |     |  
|Net cash provided by (used in) operating activities                                                |  |                               | (25 | ) |                               |   | 11  |  
|                                                                                                   |  |                              
|Investing activities                                                                               |  |                               |     |   |                               |   |     |  
|Proceeds from sales of assets                                                                      |  |                               | 6   |   |                               |   | 1   |  
|Proceeds from sales of affiliates                                                                  |  |                               |    |   |                               |   | 6   |  
|Investment in affiliate                                                                            |  |                               |    |   |                               |   | (3  | )
|Additions to property, plant and equipment                                                         |  |                               | (14 | ) |                               |   | (12 | )
|                                                                                                   |  |                               |     |   |                               |   |     |  
|Net cash used in investing activities                                                              |  |                               | (8  | ) |                               |   | (8  | )
|                                                                                                   |  |                              
|Financing activities                                                                               |  |                               |     |   |                               |   |     |  
|Proceeds from debt                                                                                 |  |                               | 10  |   |                               |   |    |  
|                                                                                                   |  |                               |     |   |                               |   |     |  
|Net cash provided by financing activities                                                          |  |                               | 10  |   |                               |   |    |  
|Effect of exchange rate changes on cash                                                            |  |                               | (3  | ) |                               |   | 1   |  
|Change in cash and cash equivalents                                                                |  |                               | (26 | ) |                               |   | 4   |  
|Cash and cash equivalents at beginning of the period                                               |  |                               | 70  |   |                               |   | 59  |  
|                                                                                                   |  |                               |     |   |                               |   |     |  
|Cash and cash equivalents at end of the period                                                     |  | $                             | 44  |   |                               | $ | 63  |  
|                                                                                                   |  |                               |     |   |                               |   |     |  
|Supplemental cash flows information                                                                |  |                               |     |   |                               |   |     |  
|Cash paid during the period for:                                                                   |  |                               |     |   |                               |   |     |  
|Interest                                                                                           |  | $                             | 27  |   |                               | $ | 26  |  
|Income taxes                                                                                       |  | $                             | 8   |   |                               | $ | 17  |  

The accompanying are an integral part of the

unaudited condensed consolidated financial statements.



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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Description of Business

Affinia Group Inc. (Affinia) is a global leader in the on and off-highway replacement
products and services industry. We derive approximately 96% of our sales from this industry and, as a result, are not directly affected by the market cyclicality of the automotive original equipment manufacturers. Our broad range of brake,
filtration, chassis and other products are sold in North America, Europe, South America, Asia, Australia and Africa. Our brands include WIX®, Raybestos®, McQuay-Norris®, Nakata®, Filtron®,
BrakePro® and Quinton Hazell®. Additionally, we provide private label offerings for NAPA®, CARQUEST®, ACDelco®, and other customers; together with co-branded offerings for Federated Auto
Parts and Automotive Distribution Network. Affinia is wholly-owned by Affinia Group Intermediate Holdings Inc., which, in turn, is wholly-owned by Affinia Group Holdings Inc., a company controlled by affiliates of The Cypress Group L.L.C.
(Cypress).

Affinia Group Inc., a Delaware corporation formed on June 28, 2004, entered into a stock and asset purchase
agreement, as amended (the Purchase Agreement), with Dana Corporation (Dana). The Purchase Agreement provided for the acquisition by Affinia Group Inc. of substantially all of Danas aftermarket business operations (the
Acquisition).

Note 2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Affinia Group Intermediate Holdings Inc. and its subsidiaries. In these notes to the condensed consolidated financial
statements, the terms the Company, we, our and us refer to Affinia Group Intermediate Holdings Inc. and its subsidiaries on a consolidated basis.

The interim financial information is prepared in conformity with accounting principles generally accepted in the United States of America and such
principles are applied on a basis consistent with information reflected in our Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations promulgated by the United States Securities and
Exchange Commission. In the opinion of management, the interim financial information includes all adjustments and accruals, consisting only of normal recurring adjustments, which are necessary for a fair presentation of results for the respective
interim period.

Note 3. New Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 163, Accounting for Financial Guarantee Insurance
Contracts  an interpretation of FASB Statement No. 60 (SFAS No. 163). SFAS No. 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is
evidence that credit deterioration has occurred in an insured financial obligation. SFAS No. 163 also clarifies how Statement No. 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used
to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. SFAS No. 163 requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure requirements of SFAS No. 163 will improve the quality of information provided to users of financial statements. SFAS No. 163 will be effective for financial statements
issued for fiscal years beginning after December 15, 2008. The Company is assessing what impact, if any, adoption of this statement would have on its consolidated financial position, results of operations and cash flows.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS
No. 162), which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S.
GAAP. SFAS No. 162 is effective sixty days following the SECs approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles. The Company is assessing what impact, if any, adoption of this statement would have on its consolidated financial position, results of operations and cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities(SFAS
No. 161), which amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities(SFAS No. 133), to provide an enhanced understanding of
an entitys use of derivative instruments, how they are accounted for under SFAS No. 133 and their effect on the entitys financial position, financial performance and cash flows. The provisions of SFAS No. 161 are effective as
of the beginning of our 2009 fiscal year. The Company is assessing what impact, if any, adoption of this statement would have on its consolidated financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB
No. 51 (SFAS No. 160). SFAS No. 160 establishes accounting and reporting standards that require that the



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ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of
financial position within equity, but separate from the parents equity; the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated
statement of income; and changes in a parents ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently. SFAS No. 160 also requires that any retained noncontrolling
equity investment in the former subsidiary be initially measured at fair value when a subsidiary is deconsolidated. SFAS No. 160 sets forth the disclosure requirements to identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS No. 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling
interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited.
SFAS No. 160 must be applied prospectively as of the beginning of the fiscal year in which SFAS No. 160 is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements are applied
retrospectively for all periods presented. The Company is assessing what impact, if any, adoption of this statement would have on its consolidated financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141R). SFAS
No. 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill
acquired. SFAS No. 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141R is effective for financial statements issued for fiscal years
beginning after December 15, 2008. The Company is assessing what impact, if any, adoption of this statement would have on its consolidated financial position, results of operations and cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities (SFAS
No. 159). SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value, and establishes presentation and disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and liabilities. The new guidance is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a material effect on the
Companys consolidated financial position, results of operations or cash flows.

In September 2006, the FASB issued SFAS
No. 157, Fair Value Measurements (SFAS No. 157), which defines fair value, establishes a framework for measuring fair value within United States generally accepted accounting principles, and expands
disclosures about fair value measurements. Adoption is required for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. However, the FASB deferred the effective date of SFAS No. 157, until
the beginning of our 2009 fiscal year, as it relates to fair value measurement requirements for nonfinancial assets and liabilities that are not remeasured at fair value on a recurring basis. We adopted SFAS No. 157 for financial assets and
liabilities at the beginning of our 2008 fiscal year and our adoption did not have a material effect on our consolidated financial position, results of operations or cash flows. The adoption of SFAS No. 157 for nonfinancial assets and
liabilities in 2009 is not expected to have a material effect on the Companys consolidated financial position, results of operations or cash flows.

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure
of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:



| |  |  | Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted
prices for identical assets or liabilities in inactive markets.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Unobservable inputs reflecting managements own assumptions about the inputs used in pricing the asset or liability.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

Our financial assets and liabilities consist of interest rate swaps and currency forward contracts. The fair value
measurement of derivatives is based upon Level 2 inputs consisting of observable current market data as applicable to determine market rates of similar assets and liabilities. Many of our derivative contracts are valued utilizing publicly available
pricing data of contracts with similar terms. In other cases, the contracts are valued using current spot market data adjusted for the appropriate current forward curves provided by external financial institutions. We enter into hedging transactions
with banking institutions that have strong credit ratings, and thus the credit risk associated with these contracts is not considered significant. Our Level 2 derivatives are a net liability of $5 million as of June 30, 2008.



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Note 4. Inventories, net

Inventories, net consist of the following (Dollars in Millions):



|                |  |                     |     |   |                 |   |     |  
|--------------- |  | ------------------- | --- | - | --------------- | - | --- | -
|                |  | At December 31,2007 |     |   | At June 30,2008 |  
|Raw materials   |  | $                   | 110 |   |                 | $ | 118 |  
|Work-in-process |  |                     | 33  |   |                 |   | 31  |  
|Finished goods  |  |                     | 418 |   |                 |   | 400 |  
|Reserve         |  |                     | (55 | ) |                 |   | (50 | )
|                |  |                     |     |   |                 |   |     |  
|                |  | $                   | 506 |   |                 | $ | 499 |  
|                |  |                     |     |   |                 |   |     |  

Note 5. Comprehensive Income

The elements of comprehensive income are presented in the following table (Dollars in Millions):



|                                                               |  |                               |    |                               |   |     |                             |  |                             |    |  |   |     |  
|-------------------------------------------------------------- |  | ----------------------------- | -- | ----------------------------- | - | --- | --------------------------- |  | --------------------------- | -- |  | - | --- | -
|                                                               |  | Three MonthsEndedJune 30,2007 |    | Three MonthsEndedJune 30,2008 |   |     | Six MonthsEndedJune 30,2007 |  | Six MonthsEndedJune 30,2008 |   
|Net (loss) income                                              |  | $                             | 4  |                               | $ | (18 | )                           |  | $                           | 1  |  | $ | (15 | )
|Interest rate swap, net of tax                                 |  |                               |   |                               |   | 2   |                             |  |                             |   |  |   |    |  
|Change in foreign currency translation adjustments, net of tax |  |                               | 9  |                               |   | 12  |                             |  |                             | 13 |  |   | 25  |  
|                                                               |  |                               |    |                               |   |     |                             |  |                             |    |  |   |     |  
|Comprehensive income                                           |  | $                             | 13 |                               | $ | (4  | )                           |  | $                           | 14 |  | $ | 10  |  
|                                                               |  |                               |    |                               |   |     |                             |  |                             |    |  |   |     |  

Note 6. Goodwill

The following table summarizes goodwill activity, which is related to the On and Off-Highway segment for the first six months of 2008 (Dollars in Millions):



|                             |  |                             |    |  
|---------------------------- |  | --------------------------- | -- | -
|                             |  | Six MonthsEndedJune 30,2008 |   
|Balance at December 31, 2007 |  | $                           | 30 |  
|Tax benefit reduction        |  |                             | (5 | )
|Acquisition                  |  |                             | 2  |  
|                             |  |                             |    |  
|Balance at June 30, 2008     |  | $                           | 27 |  
|                             |  |                             |    |  

In accordance with SFAS No. 109, Accounting for Income Taxes, the tax
benefit for the excess of tax-deductible goodwill over the reported amount of goodwill is applied to first reduce the goodwill. The tax benefit for the excess of tax deductible goodwill will reduce reported goodwill by approximately $2 million in
each quarter of 2008. Once the reported amount of goodwill is reduced to zero, the remaining tax benefit reduces the basis of the intangible assets. Any remaining tax benefit reduces the income tax provision. During the second quarter of 2008, we
purchased the remaining 40% interest in Wix Helsa Company. The purchase price exceeded the fair value of the assets and the liabilities acquired by approximately $2 million, which was recorded to goodwill.



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Note 7. Commitments and Contingencies

At June 30, 2008, the Company had purchase commitments for property, plant and equipment of approximately $3 million.

A reconciliation of the changes in our return reserves is as follows (Dollars in Millions):



|                           |  |                             |     |   |                             |   |     |  
|-------------------------- |  | --------------------------- | --- | - | --------------------------- | - | --- | -
|                           |  | Six MonthsEndedJune 30,2007 |     |   | Six MonthsEndedJune 30,2008 |  
|Beginning balance          |  | $                           | 18  |   |                             | $ | 20  |  
|Amounts charged to expense |  |                             | 29  |   |                             |   | 31  |  
|Returns processed          |  |                             | (28 | ) |                             |   | (29 | )
|                           |  |                             |     |   |                             |   |     |  
|                           |  | $                           | 19  |   |                             | $ | 22  |  
|                           |  |                             |     |   |                             |   |     |  

Note 8. Income Taxes

The total amount of unrecognized tax benefits as of December 31, 2007 and June 30, 2008 was $2 million, and if recognized, would affect the effective tax rate. The Company recognizes interest
related to unrecognized tax benefits in interest expense and penalties as part of the income tax provision. As of June 30, 2008 the Companys accrual for interest and penalties was less than $1 million. The Company is subject to taxation
in the U.S. and various state and foreign jurisdictions. For jurisdictions in which the Company transacts significant business, tax years ended December 31, 2004 and later remain subject to examination by tax authorities. We do not
anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

The income tax
provision was $6 million and $1 million for the second quarter of 2008 and 2007, respectively. While the tax provision increased by $5 million, the income before tax decreased by $17 million in the second quarter of 2008 in comparison to the second
quarter of 2007. During the second quarter of 2008, a higher tax valuation allowance was recorded due to losses in Spain and Belgium. Additionally, the tax provision increased due to certain international restructuring activities. The effective tax
rate on ordinary income, which excludes the valuation entity losses and restructuring activities, was similar for both 2008 and 2007. The income tax provision was $7 million and $1 million for the first six months of 2008 and 2007, respectively. The
increase was also due to the higher tax valuation and certain international tax restructuring activities.

Note 9. Legal Proceedings

Various claims, lawsuits and administrative proceedings are pending or threatened against us and our subsidiaries, arising from the ordinary course of
business with respect to commercial, intellectual property, product liability and environmental matters. We believe that the ultimate resolution of the foregoing matters will not have a material effect on our financial condition or results of
operations.

On April 20, 2006, Heritage Equity Group (Heritage) and Beck Arnley Worldparts Corporation (Beck
Arnley) filed suit against Affinia in the Rutherford County Chancery Court for the State of Tennessee. The suit arose out of Affinias sale of Beck Arnley to Heritage and damages allegedly that arose from a tax election which Affinia was
required to make under the Purchase Agreement with Dana. On June 28, 2007, as part of a settlement agreement, Beck Arnley dismissed its suit in Tennessee and agreed to pay the original loan and royalty on a modified basis. However,
immediately after signing the settlement agreement, Beck Arnley refused to make payment and Affinia was forced to sue for default on the loan in Delaware. That suit, filed in October 2007 has been dismissed. The parties entered into a
settlement agreement as of March 2008. The settlement agreement increased the amount of the loan, which is due from Beck Arnley, from $3 million to $3.4 million and provided for interest to accrue annually initially at a rate of 10%. During the
second quarter of 2008, Uni-Select Inc. purchased Beck Arnley. As part of that purchase, the full outstanding amount of the loan was paid to Affinia.

On December 12, 2007, Visteon Corporation filed suit in state court in Wayne County, Michigan against Affinia and various Wix legal entities for contribution to a claim that Visteon Corporation settled with
Ford Motor Company related to the recall of allegedly defective air filters sold by Wix. Affinia believes that it has a number of legal and factual defenses available to it and intends to vigorously defend itself in this matter. The suit claimed $10
million in damages; however, given the unclear nature of Visteons settlement with Ford over several matters that lead to this damage claim, the possible exposure is not reasonably estimable at this time.

On March 31, 2008 a class action lawsuit was filed by S&E Quick Lube Distributors, Inc. of Utah against several auto parts manufacturers for
allegedly conspiring to fix prices for replacement oil, air, fuel and transmission filters. Several auto parts companies are named as defendants, including Champion Laboratories, Inc., Purolator Filters NA LLC, Honeywell International Inc,



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Wix Filtration Products, Cummins Filtration Inc., Donaldson Company, Baldwin Filters Inc., Bosch USA., Mann + Hummel USA Inc., Arvinmeritor Inc. and United
Components Inc. The lawsuit was filed in US District Court for the District of Connecticut and seeks damages and injunctive relief on behalf of a nationwide class of direct purchasers of filters. Since this initial complaint was filed, over 30
tag-along suits have been filed in various jurisdictions. As a result, the case has been sent to the Joint Panel for Multidistrict Litigation and will be consolidated in one court. Affinia believes that Wix did not have significant sales
in this particular market so we expect any potential exposure to be immaterial.

The Company has various accruals for civil, environmental,
product liability and other costs. If there is a range of equally probable outcomes, we accrue the lower end of the range. The Company has $3 million and $4 million accrued as of December 31, 2007 and June 30, 2008. There are no
recoveries expected from third parties.

Note 10. Restructuring of Operations

In 2005, we announced two restructuring plans: (i) a restructuring plan that we announced at the beginning of 2005 as part of the Acquisition, also
referred to herein as the acquisition restructuring and (ii) a restructuring plan that we announced at the end of 2005, also referred to herein as the comprehensive restructuring. We have completed the acquisition restructuring and we are in
the third year of the comprehensive restructuring program.

In the second quarter of 2008, we announced the closure of our water pump
manufacturing facility in Barcelona, Spain and our brake manufacturing facilities in Dallas, TX; Litchfield, IL; and Milton, ON. Our Barcelona facility is expected to close by the end of 2008 and the Dallas and Milton facilities are expected to
close by the end of the first quarter of 2009 with the Litchfield facility closing coming shortly thereafter. These actions are expected to result in the Company incurring pre-tax charges of approximately $32.5 million of which $17 million was
recorded in the second quarter of 2008. The following chart summarizes the timing of the comprehensive restructuring activity to date:



|                            |  |                          |  |              
|--------------------------- |  | ------------------------ |  | -------------
|Facility                    |  | ClosureAnnouncement Date |  | Date Closed  
|Southampton (UK)            |  | December 2005            |  | 2nd Qtr. 2006
|Erie (PA)                   |  | March 2006               |  | 4th Qtr. 2006
|North East (PA)             |  | March 2006               |  | 4th Qtr. 2006
|McHenry (IL)                |  | March 2006               |  | 4th Qtr. 2006
|St. Catharines (ON, Canada) |  | June 2006                |  | 4th Qtr. 2006
|Cambridge (ON, Canada)      |  | September 2006           |  | 1st Qtr. 2007
|Cuba (MO)                   |  | October 2006             |  | 2nd Qtr. 2007
|Mississauga (ON, Canada)    |  | November 2006            |  | 4th Qtr. 2006
|Sudbury (ON, Canada)        |  | March 2007               |  | 2nd Qtr. 2007
|Mishawaka (IN)              |  | October 2007             |  | 2nd Qtr. 2008
|El Talar (Argentina)        |  | April 2008               |  | 2nd Qtr. 2008
|Barcelona (Spain)           |  | May 2008                 |  | Open         
|Litchfield (IL)             |  | June 2008                |  | Open         
|Dallas (TX)                 |  | June 2008                |  | Open         
|Milton (ON, Canada)         |  | June 2008                |  | Open         

In other comprehensive restructuring activity, we announced our intent to sell our Waupaca (WI)
facility. In addition, Quinton Hazell Automotive Limited (a UK subsidiary) entered into a warehousing and distribution agreement with Caterpillar Logistics Services (UK) Limited in 2006. The transition to the new warehousing and distribution center
occurred during the second and third quarters of 2007. In October 2007, we finalized the sale of the Nuneaton (UK) distribution facility.

In connection with the comprehensive restructuring, we have recorded $130 million in restructuring costs to date. We recorded $23 million in 2005, $40 million in 2006, $38 million for 2007, and $29 million during the first six months of
2008. The charges relating to the first six months of 2008 were recorded in selling, general and administrative expense, which consists of employee termination costs and other exit costs. Severance costs are being accounted for in accordance with
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities and SFAS No. 112, Employers Accounting for Postemployment Benefits  an amendment of FASB Statements No. 5 and
43.We currently estimate that we will incur approximately $22 million more of cash and non-cash restructuring costs in 2008 and 2009, aggregating to $152 million of total cash and non-cash restructuring costs.



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The following summarizes the restructuring charges and activity for all the Companys restructuring
programs (Dollars in Millions):



|                                    |  |   |     |  
|----------------------------------- |  | - | --- | -
|Balance at December 31, 2007        |  | $ | 10  |  
|Charges to expense:                 |  |   |     |  
|Employee termination benefits       |  |   | 24  |  
|Other expenses                      |  |   | 5   |  
|                                    |  |   |     |  
|Total restructuring expenses        |  |   | 29  |  
|Cash payments and asset write-offs: |  |   |     |  
|Cash payments                       |  |   | (12 | )
|Asset retirements and other         |  |   | (4  | )
|                                    |  |   |     |  
|Balance at June 30, 2008            |  | $ | 23  |  
|                                    |  |   |     |  

At June 30, 2008, $23 million of restructuring charges remained in other accrued liabilities,
relating to wage and healthcare continuation for severed employees and other termination costs. These remaining benefits are expected to be paid during 2008 and 2009.

Note 11. Segment and Geographic Information

The Filtration segment, Brake North America and Asia
segment, Commercial Distribution South America segment, and the Chassis segment have been aggregated into one reportable business segment, which is the On and Off-Highway segment. The products, customer base, distribution channel, manufacturing
process, procurement, and economic characteristics are similar throughout these operations. The Company also has two other reportable segments, which are Commercial Distribution Europe and Brake South America. Segment net sales, operating profit,
total assets, depreciation and capital expenditures were as follows (Dollars in Millions):



|                                       |  |                               |     |   |                               |   |     |                             |  |   |                             |   |  |   |       |  
|-------------------------------------- |  | ----------------------------- | --- | - | ----------------------------- | - | --- | --------------------------- |  | - | --------------------------- | - |  | - | ----- | -
|                                       |  | Net Sales                     |    
|                                       |  | Three MonthsEndedJune 30,2007 |     |   | Three MonthsEndedJune 30,2008 |   |     | Six MonthsEndedJune 30,2007 |  |   | Six MonthsEndedJune 30,2008 |  
|On and Off-Highway segment             |  | $                             | 500 |   |                               | $ | 526 |                             |  | $ | 932                         |   |  | $ | 982   |  
|Commercial Distribution Europe segment |  |                               | 74  |   |                               |   | 74  |                             |  |   | 143                         |   |  |   | 146   |  
|Brake South America segment            |  |                               | 7   |   |                               |   | 9   |                             |  |   | 14                          |   |  |   | 16    |  
|Corporate, eliminations and other      |  |                               | (7  | ) |                               |   | (6  | )                           |  |   | (13                         | ) |  |   | (12   | )
|                                       |  |                               |     |   |                               |   |     |                             |  |   |                             |   |  |   |       |  
|                                       |  | $                             | 574 |   |                               | $ | 603 |                             |  | $ | 1,076                       |   |  | $ | 1,132 |  
|                                       |  |                               |     |   |                               |   |     |                             |  |   |                             |   |  |   |       |  
|                                       | 
|                                       |  | Operating Profit              |    
|                                       |  | Three MonthsEndedJune 30,2007 |     |   | Three MonthsEndedJune 30,2008 |   |     | Six MonthsEndedJune 30,2007 |  |   | Six MonthsEndedJune 30,2008 |  
|On and Off-Highway segment             |  | $                             | 29  |   |                               | $ | 27  |                             |  | $ | 53                          |   |  | $ | 54    |  
|Commercial Distribution Europe segment |  |                               | (1  | ) |                               |   | (12 | )                           |  |   | (3                          | ) |  |   | (13   | )
|Brake South America segment            |  |                               | (2  | ) |                               |   | (6  | )                           |  |   | (3                          | ) |  |   | (7    | )
|Corporate, eliminations and other      |  |                               | (8  | ) |                               |   | (8  | )                           |  |   | (18                         | ) |  |   | (15   | )
|                                       |  |                               |     |   |                               |   |     |                             |  |   |                             |   |  |   |       |  
|                                       |  | $                             | 18  |   |                               | $ | 1   |                             |  | $ | 29                          |   |  | $ | 19    |  
|                                       |  |                               |     |   |                               |   |     |                             |  |   |                             |   |  |   |       |  



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|                                       |  |                  |       |              |   |      
|-------------------------------------- |  | ---------------- | ----- | ------------ | - | -----
|                                       |  | Total Assets    
|                                       |  | December 31,2007 |       | June 30,2008
|On and Off-Highway segment             |  | $                | 1,186 |              | $ | 1,309
|Commercial Distribution Europe segment |  |                  | 156   |              |   | 163  
|Brake South America segment            |  |                  | 17    |              |   | 14   
|Corporate, eliminations and other      |  |                  | 98    |              |   | 84   
|                                       |  |                  |       |              |   |      
|                                       |  | $                | 1,457 |              | $ | 1,570
|                                       |  |                  |       |              |   |      



|                                       |  |                               |   |                               |   |                             |  |                             |    |  |   |   
|-------------------------------------- |  | ----------------------------- | - | ----------------------------- | - | --------------------------- |  | --------------------------- | -- |  | - | --
|                                       |  | Depreciation and Amortization
|                                       |  | Three MonthsEndedJune 30,2007 |   | Three MonthsEndedJune 30,2008 |   | Six MonthsEndedJune 30,2007 |  | Six MonthsEndedJune 30,2008
|On and Off-Highway segment             |  | $                             | 4 |                               | $ | 5                           |  | $                           | 9  |  | $ | 10
|Commercial Distribution Europe segment |  |                               | 1 |                               |   |                            |  |                             | 2  |  |   | 1 
|Brake South America segment            |  |                               |  |                               |   |                            |  |                             |   |  |   |  
|Corporate, eliminations and other      |  |                               | 2 |                               |   | 3                           |  |                             | 5  |  |   | 6 
|                                       |  |                               |   |                               |   |                             |  |                             |    |  |   |   
|                                       |  | $                             | 7 |                               | $ | 8                           |  | $                           | 16 |  | $ | 17
|                                       | 
|                                       |  | Capital Expenditures         
|                                       |  | Three MonthsEndedJune 30,2007 |   | Three MonthsEndedJune 30,2008 |   | Six MonthsEndedJune 30,2007 |  | Six MonthsEndedJune 30,2008
|On and Off-Highway segment             |  | $                             | 6 |                               | $ | 4                           |  | $                           | 11 |  | $ | 9 
|Commercial Distribution Europe segment |  |                               | 1 |                               |   | 1                           |  |                             | 1  |  |   | 1 
|Brake South America segment            |  |                               | 1 |                               |   |                            |  |                             | 1  |  |   | 1 
|Corporate, eliminations and other      |  |                               |  |                               |   | 1                           |  |                             | 1  |  |   | 1 
|                                       |  |                               |   |                               |   |                             |  |                             |    |  |   |   
|                                       |  | $                             | 8 |                               | $ | 6                           |  | $                           | 14 |  | $ | 12

Net sales by geographic region were as follows (Dollars in Millions):



|                |  |                               |     |                               |   |                             |  |                             |       |  |   |      
|--------------- |  | ----------------------------- | --- | ----------------------------- | - | --------------------------- |  | --------------------------- | ----- |  | - | -----
|                |  | Three MonthsEndedJune 30,2007 |     | Three MonthsEndedJune 30,2008 |   | Six MonthsEndedJune 30,2007 |  | Six MonthsEndedJune 30,2008
|United States   |  | $                             | 316 |                               | $ | 316                         |  | $                           | 594   |  | $ | 592  
|Canada          |  |                               | 53  |                               |   | 42                          |  |                             | 100   |  |   | 76   
|Brazil          |  |                               | 72  |                               |   | 94                          |  |                             | 130   |  |   | 179  
|Other Countries |  |                               | 133 |                               |   | 151                         |  |                             | 252   |  |   | 285  
|                |  |                               |     |                               |   |                             |  |                             |       |  |   |      
|                |  | $                             | 574 |                               | $ | 603                         |  | $                           | 1,076 |  | $ | 1,132
|                |  |                               |     |                               |   |                             |  |                             |       |  |   |      



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Long-lived assets by geographic region were as follows (Dollars in Millions):



|                |  |                  |     |              |   |    
|--------------- |  | ---------------- | --- | ------------ | - | ---
|                |  | December 31,2007 |     | June 30,2008
|United States   |  | $                | 293 |              | $ | 283
|Canada          |  |                  | 18  |              |   | 15 
|Brazil          |  |                  | 7   |              |   | 7  
|Other Countries |  |                  | 74  |              |   | 81 
|                |  |                  |     |              |   |    
|                |  | $                | 392 |              | $ | 386
|                |  |                  |     |              |   |    

Net sales by geographic region were determined based on origin of sale. Geographic data on
long-lived assets are comprised of property, plant and equipment, goodwill, other intangible assets and deferred financing costs.

We offer
primarily three types of products: brake products, which include brake drums, rotors, pads and shoes and hydraulic brake system components; filtration products, which include oil, fuel, air and other filters; and chassis products, which include
steering, suspension and driveline components. Additionally, we have our Commercial Distribution South America products and Commercial Distribution Europe products which offer brake, chassis, filtration and other products. The Commercial
Distribution Europe products includes our Quinton Hazell European parts operation. Quinton Hazell designs, manufactures, purchases and

distributes a wide
range of aftermarket replacement motor vehicle components for customers throughout Europe, primarily under the Quinton Hazell brand name. Brake products are segregated below into Brake North America and Asia products and Brake South America
products. The Companys sales by group of similar products are as follows:



|                                               |  |                               |     |   |                               |   |     |                             |  |   |                             |    |  |   |       |  
|---------------------------------------------- |  | ----------------------------- | --- | - | ----------------------------- | - | --- | --------------------------- |  | - | --------------------------- | -- |  | - | ----- | -
|                                               |  | Three MonthsEndedJune 30,2007 |     |   | Three MonthsEndedJune 30,2008 |   |     | Six MonthsEndedJune 30,2007 |  |   | Six MonthsEndedJune 30,2008 |   
|Filtration products                            |  | $                             | 189 |   |                               | $ | 197 |                             |  | $ | 367                         |    |  | $ | 380   |  
|Brake North America and Asia products          |  |                               | 196 |   |                               |   | 191 |                             |  |   | 353                         |    |  |   | 340   |  
|Commercial Distribution South America products |  |                               | 75  |   |                               |   | 97  |                             |  |   | 136                         |    |  |   | 184   |  
|Commercial Distribution European products      |  |                               | 74  |   |                               |   | 74  |                             |  |   | 143                         |    |  |   | 146   |  
|Chassis products                               |  |                               | 40  |   |                               |   | 41  |                             |  |   | 76                          |    |  |   | 78    |  
|Brake South America products                   |  |                               | 7   |   |                               |   | 9   |                             |  |   | 14                          |    |  |   | 16    |  
|Corporate, eliminations and other              |  |                               | (7  | ) |                               |   | (6  | )                           |  |   | (13                         | )) |  |   | (12   | )
|                                               |  |                               |     |   |                               |   |     |                             |  |   |                             |    |  |   |       |  
|                                               |  | $                             | 574 |   |                               | $ | 603 |                             |  | $ | 1,076                       |    |  | $ | 1,132 |  

Note 12. Stock Option Plans

On July 20, 2005, we adopted a stock incentive plan with a maximum of 227,000 shares of common stock subject to awards. As of June 30, 2008, 205,219 shares had been awarded, which included 58,150 vested
shares and 147,069 unvested shares. Additionally, at June 30, 2008 there were 21,781 shares available for future stock option grants. Each option expires August 1, 2015. One-half of the options vest based on the performance of the Company
and the remaining portion vests at the end of each year ratably over the period from the year of the grant until December 31, 2009. The exercise price is $100 per option.

We account for our employee stock options under the fair value method of accounting using a Black-Scholes model to measure stock-based compensation
expense at the date of grant. Dividend yields were not a factor because there were no cash dividends declared during 2007 and the first six months of 2008. Our weighted-average Black-Scholes fair value assumptions include:



|                                                             |  |      |           |   |      |   |           |  
|------------------------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                                                             |  | 2007 |           |   | 2008 |  
|Weighted-average effective term                              |  |      | 5.5 years |   |      |   | 5.4 years |  
|Weighted-average risk free interest rate                     |  |      | 4.39      | % |      |   | 4.38      | %
|Weighted-average expected volatility                         |  |      | 39.6      | % |      |   | 39.8      | %
|Weighted-average fair value of options (Dollars in millions) |  | $    | 6         |   |      | $ | 6         |  



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The fair value of the stock option grants is amortized to expense over the vesting period. The Company
reduces the overall compensation expense by a turnover rate consistent with historical trends. Stock-based compensation expense, which was recorded in selling, general and administrative expenses, and related income tax benefits were less than $1
million for each of the six month periods ending June 30, 2007 and 2008. A summary of our stock-based compensation activity for the quarter ended June 30, 2008 is presented below:



|                                 |  |         |  
|-------------------------------- |  | ------- | -
|Outstanding at December 31, 2006 |  | 149,260 |  
|Granted                          |  | 82,050  |  
|Forfeited/expired                |  | (13,800 | )
|                                 |  |         |  
|Outstanding at December 31, 2007 |  | 217,510 |  
|Granted                          |  | 2,500   |  
|Forfeited/expired                |  | (14,791 | )
|                                 |  |         |  
|Balance at June 30, 2008         |  | 205,219 |  
|                                 |  |         |  

Note 13. Acquisitions and Disposals of Business

On June 30, 2008, Affinia entered into a Shares Transfer Agreement with Mr. Zhang Haibo for the purchase by Affinia of 85% of the equity
interests (the Acquired Shares) in HBM Investment Limited (HBM). HBM is the sole owner of Longkou Haimeng Machinery Company Limited, a drum and rotor manufacturing company located in Longkou City, China. Affinia has agreed to
pay $49.2 million for the Acquired Shares, subject to satisfaction of certain conditions precedent and certain post-closing purchase price adjustments. The transaction is expected to be completed in the third quarter of 2008.

In April 2008, we completed the purchase of the remaining 40% interest in Wix Helsa Company. The purchase price of $2.5 million exceeded the fair value
of the assets and the liabilities by approximately $2 million, which was recorded to goodwill.

In April 2008, we completed the sale of our
Quinton Hazell Belgium business to Kuhne Automotive B.V (Kuhne) for total consideration of $3 million. The sale covered substantially all of the Quinton Hazell Belgium business. The sale included $4 million in assets and less than $1
million in liabilities. This transaction resulted in a loss of $1 million and was recorded within selling, general and administrative expenses on the statement of operations for the second quarter of 2008. Products previously sold by the Quinton
Hazell Belgium business will prospectively be sold to Kuhne from our other European businesses. Since the related cash flows previously generated from the Belgian operations will be replaced by these other European businesses, this sale did not
constitute a discontinued operation. Through the date of sale, Quinton Hazell Belgium is included in the Commercial Distribution Europe segment.

Included within the proceeds from affiliates on our cash flow statement is $3 million from the above described sale of our Belgian operations and $3 million for the collection on a note relating to the March 31, 2005 sale of our former
subsidiary Beck Arnley.

Note 14. Financial Information for Guarantors and Non-Guarantors

On November 30, 2004, the Company issued 9.0% senior subordinated notes due 2014 in the principal amount of $300 million. The senior subordinated
notes were offered only to qualified institutional buyers and certain persons in offshore transactions. The senior subordinated notes were subsequently registered under the Securities Act of 1933 pursuant to an exchange offer completed on
November 2, 2005. The senior subordinated notes are general obligations of Affinia Group Inc. and guaranteed by Affinia Group Intermediate Holdings Inc. (Parent) and all of the wholly owned current and future domestic subsidiaries.
These guarantors jointly and severally guarantee Affinias obligations under the senior subordinated notes and the guarantees represent full and unconditional obligations.

The following unaudited information presents Condensed Consolidating Statements of Operations for the three months and six months ended June 30,
2007 and 2008, Condensed Consolidating Statements of Cash Flows for the six months ended June 30, 2007 and 2008 and Condensed Consolidating Balance Sheets as of December 31, 2007 and June 30, 2008 to arrive at the information for the
Company on a consolidated basis. Other separate financial statements and other disclosures concerning the Parent and the Guarantors are not presented because management does not believe that such information is material to investors.



15



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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor

Condensed Consolidating Balance Sheet

December 31, 2007

(Dollars in Millions)



|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|----------------------------------------------------- |  | ------ | --- | ------ | - | ----- | --------- |  | ------------- | ----- | ------------ | - | --- | ----------------- | - | ------ | - |  | - | -----
|                                                      |  | Parent |     | Issuer |   |       | Guarantor |  | Non-Guarantor |       | Eliminations |   |     | ConsolidatedTotal
|Assets                                                |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Current assets:                                       |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Cash and cash equivalents                             |  | $      |    |        | $ | 20    |           |  | $             | 1     |              | $ | 38  |                   | $ |       |   |  | $ | 59   
|Accounts receivable                                   |  |        |    |        |   | 29    |           |  |               | 176   |              |   | 156 |                   |   |       |   |  |   | 361  
|Inventories                                           |  |        |    |        |   |      |           |  |               | 298   |              |   | 208 |                   |   |       |   |  |   | 506  
|Other current assets                                  |  |        |    |        |   | 15    |           |  |               | 2     |              |   | 27  |                   |   |       |   |  |   | 44   
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total current assets                                  |  |        |    |        |   | 64    |           |  |               | 477   |              |   | 429 |                   |   |       |   |  |   | 970  
|Investments and other assets                          |  |        |    |        |   | 252   |           |  |               | 31    |              |   | 21  |                   |   |       |   |  |   | 304  
|Intercompany investments                              |  |        | 432 |        |   | 1,063 |           |  |               | 418   |              |   | 287 |                   |   | (2,200 | ) |  |   |     
|Intercompany receivables                              |  |        |    |        |   | (270  | )         |  |               | 227   |              |   | 43  |                   |   |       |   |  |   |     
|Property, plant and equipment, net                    |  |        |    |        |   | 11    |           |  |               | 89    |              |   | 83  |                   |   |       |   |  |   | 183  
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total assets                                          |  | $      | 432 |        | $ | 1,120 |           |  | $             | 1,242 |              | $ | 863 |                   | $ | (2,200 | ) |  | $ | 1,457
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|                                                      |  |        |     |        |   |      
|Liabilities and Equity                                |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Current liabilities:                                  |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Accounts payable                                      |  | $      |    |        | $ | 12    |           |  | $             | 122   |              | $ | 106 |                   | $ |       |   |  | $ | 240  
|Accrued payroll and employee benefits                 |  |        |    |        |   | 8     |           |  |               | 6     |              |   | 13  |                   |   |       |   |  |   | 27   
|Other accrued liabilities                             |  |        |    |        |   | 55    |           |  |               | 33    |              |   | 46  |                   |   |       |   |  |   | 134  
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total current liabilities                             |  |        |    |        |   | 75    |           |  |               | 161   |              |   | 165 |                   |   |       |   |  |   | 401  
|Deferred employee benefits and noncurrent liabilities |  |        |    |        |   | 9     |           |  |               |      |              |   | 16  |                   |   |       |   |  |   | 25   
|Long-term debt                                        |  |        |    |        |   | 597   |           |  |               |      |              |   |    |                   |   |       |   |  |   | 597  
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total liabilities                                     |  |        |    |        |   | 681   |           |  |               | 161   |              |   | 181 |                   |   |       |   |  |   | 1,023
|Minority interest in consolidated subsidiaries        |  |        |    |        |   |      |           |  |               | 2     |              |   |    |                   |   |       |   |  |   | 2    
|Shareholders equity                                  |  |        | 432 |        |   | 439   |           |  |               | 1,079 |              |   | 682 |                   |   | (2,200 | ) |  |   | 432  
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total liabilities and equity                          |  | $      | 432 |        | $ | 1,120 |           |  | $             | 1,242 |              | $ | 863 |                   | $ | (2,200 | ) |  | $ | 1,457
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      



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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor

Condensed Consolidating Balance Sheet

June 30, 2008

(Dollars in
Millions)



|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|----------------------------------------------------- |  | ------ | --- | ------ | - | ----- | --------- |  | ------------- | ----- | ------------ | - | --- | ----------------- | - | ------ | - |  | - | -----
|                                                      |  | Parent |     | Issuer |   |       | Guarantor |  | Non-Guarantor |       | Eliminations |   |     | ConsolidatedTotal
|Assets                                                |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Current assets:                                       |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Cash and cash equivalents                             |  | $      |    |        | $ | 40    |           |  | $             |      |              | $ | 23  |                   | $ |       |   |  | $ | 63   
|Accounts receivable                                   |  |        |    |        |   | 36    |           |  |               | 216   |              |   | 194 |                   |   |       |   |  |   | 446  
|Inventories                                           |  |        |    |        |   |      |           |  |               | 273   |              |   | 226 |                   |   |       |   |  |   | 499  
|Other current assets                                  |  |        |    |        |   | 17    |           |  |               | 2     |              |   | 56  |                   |   |       |   |  |   | 75   
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total current assets                                  |  |        |    |        |   | 93    |           |  |               | 491   |              |   | 499 |                   |   |       |   |  |   | 1,083
|Investments and other assets                          |  |        |    |        |   | 248   |           |  |               | 28    |              |   | 24  |                   |   |       |   |  |   | 300  
|Intercompany investments                              |  |        | 442 |        |   | 1,081 |           |  |               | 417   |              |   | 322 |                   |   | (2,262 | ) |  |   |     
|Intercompany receivables                              |  |        |    |        |   | (293  | )         |  |               | 236   |              |   | 57  |                   |   |       |   |  |   |     
|Property, plant and equipment, net                    |  |        |    |        |   | 10    |           |  |               | 88    |              |   | 89  |                   |   |       |   |  |   | 187  
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total assets                                          |  | $      | 442 |        | $ | 1,139 |           |  | $             | 1,260 |              | $ | 991 |                   | $ | (2,262 | ) |  | $ | 1,570
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|                                                      |  |        |     |        |   |      
|Liabilities and Equity                                |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Current liabilities:                                  |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Accounts payable                                      |  | $      |    |        | $ | 14    |           |  | $             | 157   |              | $ | 134 |                   | $ |       |   |  | $ | 305  
|Accrued payroll and employee benefits                 |  |        |    |        |   | 10    |           |  |               | 6     |              |   | 16  |                   |   |       |   |  |   | 32   
|Other accrued liabilities                             |  |        |    |        |   | 53    |           |  |               | 41    |              |   | 77  |                   |   |       |   |  |   | 171  
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total current liabilities                             |  |        |    |        |   | 77    |           |  |               | 204   |              |   | 227 |                   |   |       |   |  |   | 508  
|Deferred employee benefits and noncurrent liabilities |  |        |    |        |   | 8     |           |  |               |      |              |   | 15  |                   |   |       |   |  |   | 23   
|Long-term debt                                        |  |        |    |        |   | 597   |           |  |               |      |              |   |    |                   |   |       |   |  |   | 597  
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total liabilities                                     |  |        |    |        |   | 682   |           |  |               | 204   |              |   | 242 |                   |   |       |   |  |   | 1,128
|Minority interest in consolidated subsidiaries        |  |        |    |        |   |      |           |  |               |      |              |   |    |                   |   |       |   |  |   |     
|Shareholders equity                                  |  |        | 442 |        |   | 457   |           |  |               | 1,056 |              |   | 749 |                   |   | (2,262 | ) |  |   | 442  
|                                                      |  |        |     |        |   |       |           |  |               |       |              |   |     |                   |   |        |   |  |   |      
|Total liabilities and equity                          |  | $      | 442 |        | $ | 1,139 |           |  | $             | 1,260 |              | $ | 991 |                   | $ | (2,262 | ) |  | $ | 1,570



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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2007

(Dollars in Millions)



|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|------------------------------------------------ |  | ------ | - | ------ | - | --- | --------- |  | - | ------------- | - |  | ------------ | ---- | - | ----------------- | - | --- | - |  | - | ---- | -
|                                                 |  | Parent |   | Issuer |   |     | Guarantor |  |   | Non-Guarantor |   |  | Eliminations |      |   | ConsolidatedTotal |  
|Net sales                                        |  | $      |  |        | $ |    |           |  | $ | 325           |   |  | $            | 330  |   |                   | $ | (81 | ) |  | $ | 574  |  
|Cost of sales                                    |  |        |  |        |   |    |           |  |   | (260          | ) |  |              | (298 | ) |                   |   | 81  |   |  |   | (477 | )
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|Gross profit                                     |  |        |  |        |   |    |           |  |   | 65            |   |  |              | 32   |   |                   |   |    |   |  |   | 97   |  
|Selling, general and administrative expenses     |  |        |  |        |   | (9  | )         |  |   | (38           | ) |  |              | (32  | ) |                   |   |    |   |  |   | (79  | )
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|Operating (loss) profit                          |  |        |  |        |   | (9  | )         |  |   | 27            |   |  |              |     |   |                   |   |    |   |  |   | 18   |  
|Other income (loss), net                         |  |        |  |        |   | 10  |           |  |   | (10           | ) |  |              | 2    |   |                   |   |    |   |  |   | 2    |  
|Interest expense                                 |  |        |  |        |   | (15 | )         |  |   |              |   |  |              |     |   |                   |   |    |   |  |   | (15  | )
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|(Loss) income before taxes and minority interest |  |        |  |        |   | (14 | )         |  |   | 17            |   |  |              | 2    |   |                   |   |    |   |  |   | 5    |  
|Income tax (benefit) provision                   |  |        |  |        |   | (2  | )         |  |   |              |   |  |              | 3    |   |                   |   |    |   |  |   | 1    |  
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|(Loss) income from continuing operations         |  |        |  |        |   | (12 | )         |  |   | 17            |   |  |              | (1   | ) |                   |   |    |   |  |   | 4    |  
|Equity interest in income, net of tax            |  |        | 4 |        |   | 18  |           |  |   | 8             |   |  |              | 18   |   |                   |   | (48 | ) |  |   |     |  
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|Net income (loss)                                |  | $      | 4 |        | $ | 6   |           |  | $ | 25            |   |  | $            | 17   |   |                   | $ | (48 | ) |  | $ | 4    |  
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  



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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2007

(Dollars in Millions)



|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|------------------------------------------------ |  | ------ | - | ------ | - | --- | --------- |  | - | ------------- | - |  | ------------ | ---- | - | ----------------- | - | ---- | - |  | - | ----- | -
|                                                 |  | Parent |   | Issuer |   |     | Guarantor |  |   | Non-Guarantor |   |  | Eliminations |      |   | ConsolidatedTotal |  
|Net sales                                        |  | $      |  |        | $ |    |           |  | $ | 614           |   |  | $            | 619  |   |                   | $ | (157 | ) |  | $ | 1,076 |  
|Cost of sales                                    |  |        |  |        |   |    |           |  |   | (481          | ) |  |              | (561 | ) |                   |   | 157  |   |  |   | (885  | )
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|Gross profit                                     |  |        |  |        |   |    |           |  |   | 133           |   |  |              | 58   |   |                   |   |     |   |  |   | 191   |  
|Selling, general and administrative expenses     |  |        |  |        |   | (19 | )         |  |   | (76           | ) |  |              | (67  | ) |                   |   |     |   |  |   | (162  | )
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|Operating (loss) profit                          |  |        |  |        |   | (19 | )         |  |   | 57            |   |  |              | (9   | ) |                   |   |     |   |  |   | 29    |  
|Other income (loss), net                         |  |        |  |        |   | 19  |           |  |   | (19           | ) |  |              | 3    |   |                   |   |     |   |  |   | 3     |  
|Interest expense                                 |  |        |  |        |   | (30 | )         |  |   |              |   |  |              |     |   |                   |   |     |   |  |   | (30   | )
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|(Loss) income before taxes and minority interest |  |        |  |        |   | (30 | )         |  |   | 38            |   |  |              | (6   | ) |                   |   |     |   |  |   | 2     |  
|Income tax (benefit) provision                   |  |        |  |        |   | (4  | )         |  |   |              |   |  |              | 5    |   |                   |   |     |   |  |   | 1     |  
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|(Loss) income from continuing operations         |  |        |  |        |   | (26 | )         |  |   | 38            |   |  |              | (11  | ) |                   |   |     |   |  |   | 1     |  
|Equity interest in income, net of tax            |  |        | 1 |        |   | 32  |           |  |   | 9             |   |  |              | 23   |   |                   |   | (65  | ) |  |   |      |  
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|Net income (loss)                                |  | $      | 1 |        | $ | 6   |           |  | $ | 47            |   |  | $            | 12   |   |                   | $ | (65  | ) |  | $ | 1     |  
|                                                 |  |        |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  



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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2008

(Dollars in Millions)



|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|------------------------------------------------ |  | ------ | --- | - | ------ | - | --- | --------- |  | - | ------------- | - |  | ------------ | ---- | - | ----------------- | - | --- | - |  | - | ---- | -
|                                                 |  | Parent |     |   | Issuer |   |     | Guarantor |  |   | Non-Guarantor |   |  | Eliminations |      |   | ConsolidatedTotal |  
|Net sales                                        |  | $      |    |   |        | $ |    |           |  | $ | 314           |   |  | $            | 376  |   |                   | $ | (87 | ) |  | $ | 603  |  
|Cost of sales                                    |  |        |    |   |        |   |    |           |  |   | (249          | ) |  |              | (341 | ) |                   |   | 87  |   |  |   | (503 | )
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|Gross profit                                     |  |        |    |   |        |   |    |           |  |   | 65            |   |  |              | 35   |   |                   |   |    |   |  |   | 100  |  
|Selling, general and administrative expenses     |  |        |    |   |        |   | (6  | )         |  |   | (42           | ) |  |              | (50  | ) |                   |   |    |   |  |   | (98  | )
|Loss on disposition of affiliate                 |  |        |    |   |        |   |    |           |  |   |              |   |  |              | (1   | ) |                   |   |    |   |  |   | (1   | )
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|Operating (loss) profit                          |  |        |    |   |        |   | (6  | )         |  |   | 23            |   |  |              | (16  | ) |                   |   |    |   |  |   | 1    |  
|Other income (loss), net                         |  |        |    |   |        |   | 7   |           |  |   | (7            | ) |  |              | 1    |   |                   |   |    |   |  |   | 1    |  
|Interest expense                                 |  |        |    |   |        |   | (14 | )         |  |   |              |   |  |              |     |   |                   |   |    |   |  |   | (14  | )
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|(Loss) income before taxes and minority interest |  |        |    |   |        |   | (13 | )         |  |   | 16            |   |  |              | (15  | ) |                   |   |    |   |  |   | (12  | )
|Income tax (benefit) provision                   |  |        |    |   |        |   | (2  | )         |  |   |              |   |  |              | 8    |   |                   |   |    |   |  |   | 6    |  
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|(Loss) income from continuing operations         |  |        |    |   |        |   | (11 | )         |  |   | 16            |   |  |              | (23  | ) |                   |   |    |   |  |   | (18  | )
|Equity interest in income, net of tax            |  |        | (18 | ) |        |   | 2   |           |  |   | (17           | ) |  |              | 11   |   |                   |   | 22  |   |  |   |     |  
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  
|Net (loss) income                                |  | $      | (18 | ) |        | $ | (9  | )         |  | $ | (1            | ) |  | $            | (12  | ) |                   | $ | 22  |   |  | $ | (18  | )
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |     |   |  |   |      |  



20



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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2008

(Dollars in Millions)



|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|------------------------------------------------ |  | ------ | --- | - | ------ | - | --- | --------- |  | - | ------------- | - |  | ------------ | ---- | - | ----------------- | - | ---- | - |  | - | ----- | -
|                                                 |  | Parent |     |   | Issuer |   |     | Guarantor |  |   | Non-Guarantor |   |  | Eliminations |      |   | ConsolidatedTotal |  
|Net sales                                        |  | $      |    |   |        | $ |    |           |  | $ | 591           |   |  | $            | 695  |   |                   | $ | (154 | ) |  | $ | 1,132 |  
|Cost of sales                                    |  |        |    |   |        |   |    |           |  |   | (469          | ) |  |              | (622 | ) |                   |   | 154  |   |  |   | (937  | )
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|Gross profit                                     |  |        |    |   |        |   |    |           |  |   | 122           |   |  |              | 73   |   |                   |   |     |   |  |   | 195   |  
|Selling, general and administrative expenses     |  |        |    |   |        |   | (11 | )         |  |   | (83           | ) |  |              | (81  | ) |                   |   |     |   |  |   | (175  | )
|Loss on disposition of affiliate                 |  |        |    |   |        |   |    |           |  |   |              |   |  |              | (1   | ) |                   |   |     |   |  |   | (1    | )
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|Operating (loss) profit                          |  |        |    |   |        |   | (11 | )         |  |   | 39            |   |  |              | (9   | ) |                   |   |     |   |  |   | 19    |  
|Other income (loss), net                         |  |        |    |   |        |   | 14  |           |  |   | (14           | ) |  |              | 1    |   |                   |   |     |   |  |   | 1     |  
|Interest expense                                 |  |        |    |   |        |   | (28 | )         |  |   |              |   |  |              |     |   |                   |   |     |   |  |   | (28   | )
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|(Loss) income before taxes and minority interest |  |        |    |   |        |   | (25 | )         |  |   | 25            |   |  |              | (8   | ) |                   |   |     |   |  |   | (8    | )
|Income tax (benefit) provision                   |  |        |    |   |        |   | (5  | )         |  |   |              |   |  |              | 12   |   |                   |   |     |   |  |   | 7     |  
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|(Loss) income from continuing operations         |  |        |    |   |        |   | (20 | )         |  |   | 25            |   |  |              | (20  | ) |                   |   |     |   |  |   | (15   | )
|Equity interest in income, net of tax            |  |        | (15 | ) |        |   | 18  |           |  |   | (1            | ) |  |              | 35   |   |                   |   | (37  | ) |  |   |      |  
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  
|Net (loss) income                                |  | $      | (15 | ) |        | $ | (2  | )         |  | $ | 24            |   |  | $            | 15   |   |                   | $ | (37  | ) |  | $ | (15   | )
|                                                 |  |        |     |   |        |   |     |           |  |   |               |   |  |              |      |   |                   |   |      |   |  |   |       |  



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##### Table of Contents

Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2007

(Dollars in Millions)



|                                                                                                                              |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------ | -- | - | ------ | - | --- | --------- |  | - | ------------- | - |  | ----------- | --- | - | ----------------- | - | --- | - |  | - | --- | -
|                                                                                                                              |  | Parent |    |   | Issuer |   |     | Guarantor |  |   | Non-Guarantor |   |  | Elimination |     |   | ConsolidatedTotal |  
|Operating activities                                                                                                          |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net income (loss)                                                                                                             |  | $      | 1  |   |        | $ | 6   |           |  | $ | 47            |   |  | $           | 12  |   |                   | $ | (65 | ) |  | $ | 1   |  
|Adjustments to reconcile net income (loss) from continuing operations to net cash (used in) provided by operating activities: |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Depreciation and amortization                                                                                                 |  |        |   |   |        |   | 5   |           |  |   | 6             |   |  |             | 5   |   |                   |   |    |   |  |   | 16  |  
|Stock-based compensation                                                                                                      |  |        |   |   |        |   | 1   |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   | 1   |  
|Provision for deferred income taxes                                                                                           |  |        |   |   |        |   | (6  | )         |  |   |              |   |  |             | (6  | ) |                   |   |    |   |  |   | (12 | )
|Change in current assets and liabilities:                                                                                     |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Equity in income                                                                                                              |  |        | (1 | ) |        |   | (32 | )         |  |   | (9            | ) |  |             | (23 | ) |                   |   | 65  |   |  |   |    |  
|Trade accounts receivable                                                                                                     |  |        |   |   |        |   |    |           |  |   | (33           | ) |  |             | (42 | ) |                   |   |    |   |  |   | (75 | )
|Inventories                                                                                                                   |  |        |   |   |        |   |    |           |  |   | (23           | ) |  |             | (9  | ) |                   |   |    |   |  |   | (32 | )
|Other operating assets                                                                                                        |  |        |   |   |        |   | 26  |           |  |   | 1             |   |  |             | (11 | ) |                   |   |    |   |  |   | 16  |  
|Other operating liabilities                                                                                                   |  |        |   |   |        |   | (39 | )         |  |   | 21            |   |  |             | 48  |   |                   |   |    |   |  |   | 30  |  
|Other                                                                                                                         |  |        |   |   |        |   | 25  |           |  |   | (5            | ) |  |             | 10  |   |                   |   |    |   |  |   | 30  |  
|                                                                                                                              |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net cash provided by (used in) operating activities                                                                           |  |        |   |   |        |   | (14 | )         |  |   | 5             |   |  |             | (16 | ) |                   |   |    |   |  |   | (25 | )
|                                                                                                                              |  |        |    |   |        |  
|Investing activities                                                                                                          |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Proceeds from sale of assets                                                                                                  |  |        |   |   |        |   |    |           |  |   | 2             |   |  |             | 4   |   |                   |   |    |   |  |   | 6   |  
|Additions to property, plant, and equipment                                                                                   |  |        |   |   |        |   | (1  | )         |  |   | (7            | ) |  |             | (6  | ) |                   |   |    |   |  |   | (14 | )
|                                                                                                                              |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net cash used in investing activities                                                                                         |  |        |   |   |        |   | (1  | )         |  |   | (5            | ) |  |             | (2  | ) |                   |   |    |   |  |   | (8  | )
|                                                                                                                              |  |        |    |   |        |  
|Financing activities                                                                                                          |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Proceeds from debt                                                                                                            |  |        |   |   |        |   | 10  |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   | 10  |  
|                                                                                                                              |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net cash provided by (used in) financing activities                                                                           |  |        |   |   |        |   | 10  |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   | 10  |  
|Effect of exchange rates on cash                                                                                              |  |        |   |   |        |   |    |           |  |   |              |   |  |             | (3  | ) |                   |   |    |   |  |   | (3  | )
|Change in cash and cash equivalents                                                                                           |  |        |   |   |        |   | (5  | )         |  |   |              |   |  |             | (21 | ) |                   |   |    |   |  |   | (26 | )
|Cash and cash equivalents at beginning of period                                                                              |  |        |   |   |        |   | 19  |           |  |   |              |   |  |             | 51  |   |                   |   |    |   |  |   | 70  |  
|                                                                                                                              |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Cash and cash equivalents at end of period                                                                                    |  | $      |   |   |        | $ | 14  |           |  | $ |              |   |  | $           | 30  |   |                   | $ |    |   |  | $ | 44  |  
|                                                                                                                              |  |        |    |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  



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##### Table of Contents

Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2008

(Dollars in Millions)



|                                                                                                                              |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------ | --- | - | ------ | - | --- | --------- |  | - | ------------- | - |  | ----------- | --- | - | ----------------- | - | --- | - |  | - | --- | -
|                                                                                                                              |  | Parent |     |   | Issuer |   |     | Guarantor |  |   | Non-Guarantor |   |  | Elimination |     |   | ConsolidatedTotal |  
|Operating activities                                                                                                          |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net (loss) income                                                                                                             |  | $      | (15 | ) |        | $ | (2  | )         |  | $ | 24            |   |  | $           | 15  |   |                   | $ | (37 | ) |  | $ | (15 | )
|Adjustments to reconcile net (loss) income from continuing operations to net cash provided by (used in) operating activities: |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Depreciation and amortization                                                                                                 |  |        |    |   |        |   | 6   |           |  |   | 6             |   |  |             | 5   |   |                   |   |    |   |  |   | 17  |  
|Stock-based compensation                                                                                                      |  |        |    |   |        |   |    |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   |    |  
|Loss on disposition of affiliate                                                                                              |  |        |    |   |        |   |    |           |  |   |              |   |  |             | 1   |   |                   |   |    |   |  |   | 1   |  
|Deferred income taxes                                                                                                         |  |        |    |   |        |   | (16 | )         |  |   |              |   |  |             | 12  |   |                   |   |    |   |  |   | (4  | )
|Equity in income                                                                                                              |  |        | 15  |   |        |   | (18 | )         |  |   | 1             |   |  |             | (35 | ) |                   |   | 37  |   |  |   |    |  
|Change in trade accounts receivable                                                                                           |  |        |    |   |        |   | (7  | )         |  |   | (40           | ) |  |             | (27 | ) |                   |   |    |   |  |   | (74 | )
|Change in inventories                                                                                                         |  |        |    |   |        |   |    |           |  |   | 25            |   |  |             | (6  | ) |                   |   |    |   |  |   | 19  |  
|Change in other current operating assets                                                                                      |  |        |    |   |        |   | (2  | )         |  |   |              |   |  |             | (26 | ) |                   |   |    |   |  |   | (28 | )
|Change in other current operating liabilities                                                                                 |  |        |    |   |        |   | 2   |           |  |   | 43            |   |  |             | 50  |   |                   |   |    |   |  |   | 95  |  
|Change in other                                                                                                               |  |        |    |   |        |   | 55  |           |  |   | (51           | ) |  |             | (4  | ) |                   |   |    |   |  |   |    |  
|                                                                                                                              |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net cash (used in) provided by operating activities of continuing operations                                                  |  |        |    |   |        |   | 18  |           |  |   | 8             |   |  |             | (15 | ) |                   |   |    |   |  |   | 11  |  
|Net cash provided by operating activities of discontinued operations                                                          |  |        |    |   |        |   |    |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   |    |  
|                                                                                                                              |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net cash (used in) provided by operating activities                                                                           |  |        |    |   |        |   | 18  |           |  |   | 8             |   |  |             | (15 | ) |                   |   |    |   |  |   | 11  |  
|                                                                                                                              |  |        |     |   |        |  
|Investing activities                                                                                                          |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Proceeds from sale of assets                                                                                                  |  |        |    |   |        |   |    |           |  |   |              |   |  |             | 1   |   |                   |   |    |   |  |   | 1   |  
|Proceeds from sale of affiliates                                                                                              |  |        |    |   |        |   | 3   |           |  |   |              |   |  |             | 3   |   |                   |   |    |   |  |   | 6   |  
|Investment in affiliate                                                                                                       |  |        |    |   |        |   |    |           |  |   | (3            | ) |  |             |    |   |                   |   |    |   |  |   | (3  | )
|Additions to property, plant and equipment, net                                                                               |  |        |    |   |        |   | (1  | )         |  |   | (6            | ) |  |             | (5  | ) |                   |   |    |   |  |   | (12 | )
|                                                                                                                              |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net cash used in investing activities                                                                                         |  |        |    |   |        |   | 2   |           |  |   | (9            | ) |  |             | (1  | ) |                   |   |    |   |  |   | (8  | )
|                                                                                                                              |  |        |     |   |        |  
|Financing activities                                                                                                          |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Short-term debt, net                                                                                                          |  |        |    |   |        |   |    |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   |    |  
|Net transactions with Parent                                                                                                  |  |        |    |   |        |   |    |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   |    |  
|                                                                                                                              |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net cash provided by (used in) financing activities of continuing operations                                                  |  |        |    |   |        |   |    |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   |    |  
|Net cash used in financing activities of discontinued operations                                                              |  |        |    |   |        |   |    |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   |    |  
|                                                                                                                              |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Net cash provided by (used in) financing activities                                                                           |  |        |    |   |        |   |    |           |  |   |              |   |  |             |    |   |                   |   |    |   |  |   |    |  
|Effect of exchange rates on cash                                                                                              |  |        |    |   |        |   |    |           |  |   |              |   |  |             | 1   |   |                   |   |    |   |  |   | 1   |  
|Change in cash and cash equivalents                                                                                           |  |        |    |   |        |   | 20  |           |  |   | (1            | ) |  |             | (15 | ) |                   |   |    |   |  |   | 4   |  
|Cash and cash equivalents at beginning of period                                                                              |  |        |    |   |        |   | 20  |           |  |   | 1             |   |  |             | 38  |   |                   |   |    |   |  |   | 59  |  
|                                                                                                                              |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  
|Cash and cash equivalents at end of period                                                                                    |  | $      |    |   |        | $ | 40  |           |  | $ |              |   |  | $           | 23  |   |                   | $ |    |   |  | $ | 63  |  
|                                                                                                                              |  |        |     |   |        |   |     |           |  |   |               |   |  |             |     |   |                   |   |     |   |  |   |     |  



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##### Table of Contents

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

Company Overview

Affinia is a global leader in the on and off-highway replacement products and
services industry. We derive approximately 96% of our sales from this industry and, as a result, are not directly affected by the market cyclicality of the automotive original equipment manufacturers. Our broad range of brake, filtration, chassis
products and other products are sold in North America, Europe, South America, Asia, Australia and Africa.

We believe our key
advantages as a leading on and off-highway replacement products and services company are a broad product offering, quality products, brand recognition (e.g., Wix and Raybestos), value-added services, and distribution and global sourcing
capabilities. Due to these key advantages, we believe we hold the number one market position in North America in filtration products and in brake product sales and the number two market position in North America in chassis product sales.
Additionally, we hold a significant presence in South America and Europe, which we believe is demonstrated by our number three position as a distributor of aftermarket products in Brazil, our number one position in filtration products in Poland and
a leader in various other countries. Among the value-added services we bring to our customers are a customer focused sales force, professional tech support, and e-cataloguing services to name a few. The value we bring to our customers has been
recognized with numerous awards over the last several years. We believe that these key advantages strategically position us for growth in North America and globally.

Over the last several years, our brake products have experienced intensified competition from low cost offshore suppliers. To successfully compete in todays global market-driven economy, Affinia is focused on
becoming a world class global manufacturer and distributor of on and off highway replacement products and services. Our comprehensive global restructuring plan is designed to meet the changing environment. We have closed approximately 16 Brake
facilities during the last three years and have shifted some of our manufacturing base to countries such as China, India and Mexico.

Our
broad range of raw materials includes steel and steel-related components. Global demand for steel and other raw materials has grown at an extraordinary pace driven largely by market development in China, Brazil, Russia, and India, as well as Europe
in general. As a result of these increases in demand and global pressures, steel prices have increased approximately 116% over the last two quarters. Our raw material costs, sourced product and freight costs have also increased due to the increase
in fuel and energy costs. Crude oil prices per barrel increased by approximately 98% since June 30, 2007. To mitigate these increased costs we announced selling price increases during the second quarter. However, the full benefit of these price
increases will not take full effect until the last half of 2008.

We are focusing on expanding manufacturing capabilities globally to
position us to take advantage of global growth opportunities. Currently, we have manufacturing and distribution operations in North America, South America and Europe and we also have joint ventures in India. We recently announced that we have
entered into a Shares Transfer Agreement to purchase a controlling interest in HBM Investment Limited (HBM), a Hong Kong company. HBM owns one of the worlds largest drum and rotor manufacturing companies, Longkou Haimeng Machining
Company Limited (Haimeng), which is located in China. This new business venture clearly reinforces our commitment to expanding our position as a global manufacturer.

The percentage of sales by geographic region for the three months ended June 30, 2006, 2007 and 2008 is outlined in the charts below:

LOGO



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##### Table of Contents

As shown in the charts above, we have experienced growth in our international markets over the last two
years. We continue to expand our global capabilities as we pursue our objective of becoming a world class on and off-highway replacement products and services company. Our recent progress in meeting these globalization objectives includes:



| |  |  | We had the ground-breaking ceremony of our future Affinia site in India, which will produce friction products.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Our first filter manufacturing operation in Mexico was opened in the third quarter of 2007. During 2008 the manufacturing operation will be brought up to full
capacity. This operation will serve markets in both North America and Central America.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We opened a new filter manufacturing plant in Ukraine on April 1, 2007 to help meet increased demand for filtration products in Eastern Europe.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In November 2007, we purchased certain assets of Brake Pro, Ltd., a Canadian company, including the Brake Pro brand name, which is a highly respected name in
the heavy duty product market. This purchase expanded our presence in the global heavy duty brake market, and the Brake Pro line gives us a product offering for severe duty applications such as waste handling equipment, logging equipment,
construction vehicles and transit applications. During the first quarter of 2008, we began manufacturing Brake Pro branded products.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Prior to October 2007, we used the Raybestos brand name under a licensing agreement. During the month of October 2007, we purchased the Raybestos brand name
from Raybestos Products Company. With the purchase of this brand name, we have acquired one of the premier brand names in the aftermarket industry that we can now use on a variety of products throughout the world. We recently began leveraging the
Raybestos name on a new product line of hub assemblies.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The addition of Haimeng enhances our ability to sell our brake product offering in the Asian and European markets.
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | We recently signed a lease in Mexico for a facility that will be used for brake components.
| | - |  | -------------------------------------------------------------------------------------------

The Haimeng acquisition and our other global efforts, coupled with the comprehensive restructuring plan, position our manufacturing base in low cost
countries throughout the world. Once we have completed our transformation from a domestic manufacturer to a global manufacturer over the next couple of years we will continue to expand our global footprint.



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##### Table of Contents

Restructuring Activity

In 2005, we announced two restructuring plans: (i) a restructuring plan that we announced at the beginning of 2005 as part of the Acquisition, also referred to herein as the acquisition restructuring and
(ii) a restructuring plan that we announced at the end of 2005, also referred to herein as the comprehensive restructuring. We have completed the acquisition restructuring and we are in the third year of the comprehensive restructuring program.
In the second quarter of 2008, we announced the closure of our water pump manufacturing facility in Barcelona, Spain and our brake manufacturing facilities in Dallas, TX, Litchfield, IL and Milton, ON. Barcelona is expected to close by the end of
2008 and Dallas and Milton are expected to close by the end of the first quarter of 2009, with the Litchfield closing coming shortly thereafter. These actions are expected to result in the Company incurring pre-tax charges of approximately $32.5
million of which $17 million was recorded in the second quarter of 2008.

In connection with the comprehensive restructuring, we have
recorded $130 million in restructuring costs to date. We recorded $23 million in 2005, $40 million in 2006, $38 million for 2007, and $29 million during the first six months of 2008. The charges relating to the first six months of 2008 were recorded
in selling, general and administrative expense which consists of employee termination costs and other exit costs. Severance costs are being accounted for in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activitiesand SFAS No. 112, Employers Accounting for Postemployment Benefits  an amendment of FASB Statements No. 5 and 43.We currently estimate that we will incur approximately $22
million more of cash and non-cash restructuring costs in 2008 and 2009, aggregating to $152 million of total cash and non-cash restructuring costs (Refer to Note 10 Restructuring of Operations).

Critical Accounting Policies

The Companys
critical accounting policies are those related to asset impairment, inventories, revenue recognition, sales returns and rebates, estimated costs related to product warranties, pensions, income taxes, contingency reserves and restructuring expenses.
These policies are more fully described in the notes to the consolidated financial statements in the Companys Annual Report on Form 10-K for the year ended December 31, 2007.

The preparation of interim financial statements involves the use of certain estimates that are consistent with those used in the preparation of the
annual financial statements.

Basis of Presentation

The On and Off-highway segment is comprised of the following operations: Filtration, Brake North America and Asia, Commercial Distribution South America, and Chassis. The Company also has two other reportable
segments, which are Commercial Distribution Europe and Brake South America. In the Results of Operations tables below, we have identified in tabular format the revenue by product.



26



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##### Table of Contents

Results of Operations

Three months ended June 30, 2007 compared to the three months ended June 30, 2008

The
following table summarizes the consolidated results for the three months ended June 30, 2007 and the consolidated results for the three months ended June 30, 2008 (Dollars in Millions):



|                                                                   |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|------------------------------------------------------------------ |  | ----------------------------------------- | ---- | - | ----------------------------------------- | - | ---- | ------------ |  | - | ------------- | - |  | ---- | --
|                                                                   |  | ConsolidatedThree MonthsEndedJune 30,2007 |      |   | ConsolidatedThree MonthsEndedJune 30,2008 |   |      | DollarChange |  |   | PercentChange |  
|Net sales                                                          |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|Filtration products                                                |  |                                           | 189  |   |                                           |   | 197  |              |  |   | 8             |   |  | 4    | % 
|Brake North America and Asia products                              |  |                                           | 196  |   |                                           |   | 191  |              |  |   | (5            | ) |  | (3   | )%
|Commercial Distribution South America products                     |  |                                           | 75   |   |                                           |   | 97   |              |  |   | 22            |   |  | 29   | % 
|Chassis products                                                   |  |                                           | 40   |   |                                           |   | 41   |              |  |   | 1             |   |  | 3    | % 
|                                                                   |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|On and Off-Highway segment                                         |  |                                           | 500  |   |                                           |   | 526  |              |  |   | 26            |   |  | 5    | % 
|Commercial Distribution Europe segment                             |  |                                           | 74   |   |                                           |   | 74   |              |  |   |              |   |  | NM   |   
|Brake South America segment                                        |  |                                           | 7    |   |                                           |   | 9    |              |  |   | 2             |   |  | 29   | % 
|Eliminations and other                                             |  |                                           | (7   | ) |                                           |   | (6   | )            |  |   | 1             |   |  | 14   | % 
|                                                                   |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|Total net sales                                                    |  |                                           | 574  |   |                                           |   | 603  |              |  |   | 29            |   |  | 5    | % 
|Cost of sales(1)                                                   |  |                                           | (477 | ) |                                           |   | (503 | )            |  |   | (26           | ) |  | (5   | )%
|                                                                   |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|Gross profit                                                       |  |                                           | 97   |   |                                           |   | 100  |              |  |   | 3             |   |  | 3    | % 
|Gross margin                                                       |  |                                           | 17   | % |                                           |   | 17   | %            |  |   |               |   |  |      |   
|Selling, general and administrative expenses(2)                    |  |                                           | (79  | ) |                                           |   | (98  | )            |  |   | (19           | ) |  | (24  | )%
|Loss on disposition of affiliate                                   |  |                                           |     |   |                                           |   | (1   | )            |  |   | (1            | ) |  | NM   |   
|Selling, general and administrative expenses as a percent of sales |  |                                           | 14   | % |                                           |   | 16   | %            |  |   |               |   |  |      |   
|                                                                   |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|Operating profit (loss)                                            |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|On and Off-Highway segment                                         |  |                                           | 29   |   |                                           |   | 27   |              |  |   | (2            | ) |  | (7   | )%
|Commercial Distribution Europe segment                             |  |                                           | (1   | ) |                                           |   | (12  | )            |  |   | (11           | ) |  | NM   |   
|Brake South America segment                                        |  |                                           | (2   | ) |                                           |   | (6   | )            |  |   | (4            | ) |  | (200 | )%
|Corporate and other                                                |  |                                           | (8   | ) |                                           |   | (8   | )            |  |   |              |   |  | NM   |   
|                                                                   |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|Operating profit                                                   |  |                                           | 18   |   |                                           |   | 1    |              |  |   | (17           | ) |  | (94  | )%
|Operating margin                                                   |  |                                           | 3    | % |                                           |   | 0    | %            |  |   |               |   |  |      |   
|Other income, net                                                  |  |                                           | 2    |   |                                           |   | 1    |              |  |   | (1            | ) |  | (50  | )%
|Interest expense                                                   |  |                                           | (15  | ) |                                           |   | (14  | )            |  |   | 1             |   |  | 7    | % 
|                                                                   |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|Income (loss) before income tax provision                          |  |                                           | 5    |   |                                           |   | (12  | )            |  |   | (17           | ) |  | NM   |   
|Income tax provision                                               |  |                                           | 1    |   |                                           |   | 6    |              |  |   | 5             |   |  | NM   |   
|                                                                   |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   
|Net income (loss)                                                  |  | $                                         | 4    |   |                                           | $ | (18  | )            |  | $ | (22           | ) |  | NM   |   
|                                                                   |  |                                           |      |   |                                           |   |      |              |  |   |               |   |  |      |   



|(1) | We recorded $1 million and less than $1 million of restructuring costs in cost of sales for the second quarter of 2007 and 2008, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(2) | We recorded $8 million and $24 million of restructuring costs in selling, general and administrative expenses for the second quarter of 2007 and 2008, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NM | (Not Meaningful)
|-- | ----------------

Net sales.On and
Off-Highway segmentnet sales increased in the second quarter of 2008 in comparison to the second quarter of 2007 due mainly to the increase in our Commercial Distribution South America productsales. The Commercial Distribution
South America product operations are mainly comprised of our Brazilian operations. Our Brazilian operations sales increased in the second quarter due partially to currency translation gains of $15 million. The remaining increase in sales related to
the Brazilian distribution company, which holds the number three position in aftermarket products in Brazil. The Brazilian distribution company has experienced significant sales growth over the last year due to the favorable market conditions and
gains in market share.



27



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##### Table of Contents

Filtration products salesincreased in the second quarter of 2008 in comparison to the
second quarter of 2007. A contributing factor to the increase in Filtration product sales was the strengthening of the Polish Zloty against the U.S. Dollar. Additionally, we opened a new facility in 2007 in Ukraine, which contributed $2 million to
the increase in sales. Offsetting the increased sales in Ukraine and Poland were decreases in sales to traditional North America aftermarket customers due to soft domestic conditions.

Brake North America and Asia product salesdecreased in the second quarter of 2008 in comparison to the second quarter of 2007. As planned,
certain non profitable original equipment manufacturers (OEM) contracts were not renewed thus reducing sales by $14 million in the U.S. and Canada. Partially offsetting the decrease was a $5 million increase in sales to our retail
customers in the second quarter of 2008.

Chassis product salesincreased by 3% in the second quarter of 2008 in comparison
to the second quarter of 2007 due to an increase in sales to one of our largest customers and the strengthening of the Canadian dollar against the U.S. Dollar.

Commercial Distribution Europe segmentsales for the second quarter of 2008 were consistent with sales in the second quarter of 2007. The segment sales benefited from $7 million in currency translation
gains. The increase in sales can be attributed mainly to the Euro increasing in strength against the U.S. Dollar. Offsetting the currency translation gains were decreased sales in Belgium, Spain and the United Kingdom. During the second quarter of
2008 we sold our Belgium operation and as a result of the transition and unfavorable market conditions sales declined $2 million. Spain and the United Kingdom sales declined due to unfavorable market conditions.

Cost of sales/Gross margin. The gross margin for both the second quarter of 2008 and the second quarter of 2007 was 17%. The comprehensive
restructuring program has led to cost savings but offsetting these savings were higher costs related to freight, steel, and oil-based products.

Selling, general and administrative expenses. Our selling, general and administrative expenses for the second quarter of 2008 increased from the second quarter of 2007 due to the $16 million increase in restructuring costs. A
significant portion of the restructuring costs related to severance costs for the recently announced facility closures.

Operating
profit. Our operating profit decreased in the second quarter of 2008 in comparison to the second quarter of 2007 by $17 million due to the increase in restructuring costs. On and Off-Highway segment operating profit decreased in
the second quarter of 2008 in comparison to the second quarter of 2007 due to the $2 million increase in restructuring costs. The Commercial Distribution Europe segmentoperating profit decreased in the second quarter of 2008 in comparison to
the second quarter of 2007 due to the $9 million increase in restructuring costs, which mainly related to the closure of the water pump manufacturing facility in Barcelona, Spain. TheBrake South America segment operating profit decreased in
the second quarter of 2008 in comparison to the second quarter of 2007 due to a $5 million increase in restructuring relating to the closure of the El Talar, Argentina facility.

Interest expense. Interest expense in the second quarter of 2008 decreased marginally in comparison to the same period last year. Interest
expense was slightly lower due to lower variable short term interest rates.

Income tax provision. The income tax provision
was $6 million and $1 million for the second quarter of 2008 and 2007, respectively. While the tax provision increased by $5 million, the income before tax decreased by $17 million in 2008. During the second quarter of 2008, a higher tax valuation
allowance was recorded due to losses in Spain and Belgium. Additionally, the tax provision increased due to certain international restructuring activities. The effective tax rate on ordinary income, which excludes the valuation entity losses and
restructuring activities, was similar for both 2008 and 2007.

Net income (loss).Net income decreased by $22 million in the
second quarter of 2008 in comparison to the second quarter of 2007 due mainly to the increase in restructuring costs.



28



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##### Table of Contents

Results of Operations

Six months ended June 30, 2007 compared to the six months ended June 30, 2008

The
following table summarizes the consolidated results for the six months ended June 30, 2007 and the consolidated results for the six months ended June 30, 2008 (Dollars in Millions):



|                                                                   |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|------------------------------------------------------------------ |  | --------------------------------------- | ----- | - | --------------------------------------- | - | ----- | ------------ |  | - | ------------- | - |  | ---- | --
|                                                                   |  | ConsolidatedSix MonthsEndedJune 30,2007 |       |   | ConsolidatedSix MonthsEndedJune 30,2008 |   |       | DollarChange |  |   | PercentChange |  
|Net sales                                                          |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|Filtration products                                                |  |                                         | 367   |   |                                         |   | 380   |              |  |   | 13            |   |  | 4    | % 
|Brake North America and Asia products                              |  |                                         | 353   |   |                                         |   | 340   |              |  |   | (13           | ) |  | (4   | )%
|Commercial Distribution South America products                     |  |                                         | 136   |   |                                         |   | 184   |              |  |   | 48            |   |  | 35   | % 
|Chassis products                                                   |  |                                         | 76    |   |                                         |   | 78    |              |  |   | 2             |   |  | 3    | % 
|                                                                   |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|On and Off-Highway segment                                         |  |                                         | 932   |   |                                         |   | 982   |              |  |   | 50            |   |  | 5    | % 
|Commercial Distribution Europe segment                             |  |                                         | 143   |   |                                         |   | 146   |              |  |   | 3             |   |  | 2    | % 
|Brake South America segment                                        |  |                                         | 14    |   |                                         |   | 16    |              |  |   | 2             |   |  | 14   | % 
|Eliminations and other                                             |  |                                         | (13   | ) |                                         |   | (12   | )            |  |   | 1             |   |  | 8    | % 
|                                                                   |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|Total net sales                                                    |  |                                         | 1,076 |   |                                         |   | 1,132 |              |  |   | 56            |   |  | 5    | % 
|Cost of sales(1)                                                   |  |                                         | (885  | ) |                                         |   | (937  | )            |  |   | (52           | ) |  | (6   | )%
|                                                                   |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|Gross profit                                                       |  |                                         | 191   |   |                                         |   | 195   |              |  |   | 4             |   |  | 2    | % 
|Gross margin                                                       |  |                                         | 18    | % |                                         |   | 17    | %            |  |   |               |   |  |      |   
|Selling, general and administrative expenses(2)                    |  |                                         | (162  | ) |                                         |   | (175  | )            |  |   | (13           | ) |  | (8   | )%
|Loss on disposition of affiliate                                   |  |                                         |      |   |                                         |   | (1    | )            |  |   | (1            | ) |  | NM   |   
|Selling, general and administrative expenses as a percent of sales |  |                                         | 15    | % |                                         |   | 15    | %            |  |   |               |   |  |      |   
|                                                                   |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|Operating profit (loss)                                            |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|On and Off-Highway segment                                         |  |                                         | 53    |   |                                         |   | 54    |              |  |   | 1             |   |  | 2    | % 
|Commercial Distribution Europe segment                             |  |                                         | (3    | ) |                                         |   | (13   | )            |  |   | (10           | ) |  | NM   |   
|Brake South America segment                                        |  |                                         | (3    | ) |                                         |   | (7    | )            |  |   | (4            | ) |  | (133 | )%
|Corporate and other                                                |  |                                         | (18   | ) |                                         |   | (15   | )            |  |   | 3             |   |  | 17   | % 
|                                                                   |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|Operating profit                                                   |  |                                         | 29    |   |                                         |   | 19    |              |  |   | (10           | ) |  | (34  | )%
|Operating margin                                                   |  |                                         | 3     | % |                                         |   | 2     | %            |  |   |               |   |  |      |   
|Other income, net                                                  |  |                                         | 3     |   |                                         |   | 1     |              |  |   | (2            | ) |  | (67  | )%
|Interest expense                                                   |  |                                         | (30   | ) |                                         |   | (28   | )            |  |   | 2             |   |  | 7    | % 
|                                                                   |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|Income (loss) before income tax provision                          |  |                                         | 2     |   |                                         |   | (8    | )            |  |   | (10           | ) |  | NM   |   
|Income tax provision                                               |  |                                         | 1     |   |                                         |   | 7     |              |  |   | 6             |   |  | NM   |   
|                                                                   |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   
|Net income (loss)                                                  |  | $                                       | 1     |   |                                         | $ | (15   | )            |  | $ | (16           | ) |  | NM   |   
|                                                                   |  |                                         |       |   |                                         |   |       |              |  |   |               |   |  |      |   



|(1) | We recorded $1 million and less than $1 million of restructuring costs in cost of sales for the six months ended 2007 and 2008, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(2) | We recorded $16 million and $29 million of restructuring costs in selling, general and administrative expenses for the six months ended 2007 and 2008, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NM | (Not Meaningful)
|-- | ----------------

Net sales.On and
Off-Highway segmentnet sales increased in the first six months of 2008 in comparison to the first six months of 2007 due mainly to the increase in our Commercial Distribution South America productsales. The Commercial
Distribution South America product operations are mainly comprised of our Brazilian operations. Our Brazilian operations sales increased in the first six months due partially to currency translation gains of $30 million. The Brazilian distribution
company sales increased due to favorable market conditions in their domestic aftermarket. The Brazilian distribution company has experienced significant growth over the last year due to the favorable market conditions and gains in market share.



29



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##### Table of Contents

Filtration products salesincreased in the first six months of 2008 in comparison to the
first six months of 2007. A contributing factor to the increase in Filtration product sales was the strengthening of the Polish Zloty against the U.S. Dollar. Additionally, we opened a new facility in 2007 in Ukraine, which contributed $4 million to
the increase in sales. Offsetting the increased sales in Ukraine and Poland were decreases in sales to traditional North America aftermarket customers due to soft domestic conditions.

Brake North America and Asia product salesdecreased in the first six months of 2008 in comparison to the first six months of 2007. Our
Canadian operations decreased by approximately $17 million during the first six months of 2008, which was due to a decrease in sales related to OEM contracts. As planned, certain non profitable OEM contracts have not been renewed thus reducing sales
by $26 million. Partially offsetting the decrease was a $4 million increase in original equipment service (OES) product sales and a $7 million increase in sales to our retail customers.

Chassis product sales increased by 3% in the first six months of 2008 in comparison to the first six months of the prior year due to the
strengthening of the Canadian dollar against the U.S. Dollar.

Commercial Distribution Europe segmentsales increased in the
first six months of 2008 in comparison to the first six months of 2007 due to $13 million in currency translation gains. The increase can be attributed mainly to the Euro increasing in strength against the U.S. Dollar. Offsetting the currency
translation gains were decreased sales in Belgium, Spain and the United Kingdom. During the second quarter of 2008 we sold our Belgium operation and as a result of the transition and unfavorable market conditions sales declined $2 million. Spain and
the United Kingdom sales declined due to unfavorable market conditions.

Cost of sales/Gross margin. The gross margin for the
first six months of 2008 decreased to 17% from 18% in the first six months of 2007. The comprehensive restructuring program has led to improved gross margins. However, more than offsetting these improvements were higher costs related to freight,
steel, and oil-based products.

Selling, general and administrative expenses. Our selling, general and administrative
expenses for the first six months of 2008 increased from the first six months of 2007. During the first six months of 2008, restructuring increased by $13 million due to the recent restructuring activities at our Brake North America facilities, our
Spain facilities and our Argentina facility.

Operating profit. Our operating profit decreased in the first six months
of 2008 in comparison to the first six months of 2007 due to the increase in restructuring costs. On and Off-Highway segment operating profit was the same for the first six months of 2008 and 2007. The increases in restructuring costs in
first six months of 2008 were offset by the increased operating profit in our Commercial Distribution South America products due to the increase in sales. The Commercial Distribution Europe segmentoperating profit decreased in the first six
months of 2008 in comparison to 2007 due to the increase in restructuring costs related mainly to the Spain facilities. TheBrake South America segment operating profit decreased in the first six months of 2008 in comparison to the first six
months of 2007 due to the restructuring costs related to the closure of the Argentina facility. Corporate and other operating profit increased by $3 million in the first six months of 2008 as compared to the first six months of 2007 due to
the decrease in general administrative compensation costs, professional fees and health care costs.

Interest expense.
Interest expense in the first six months of 2008 decreased marginally in comparison to the same period last year. Interest expense was slightly lower due to lower variable short term interest rates.

Income tax provision.The income tax provision for the first six months of 2008 increased by $6 million in comparison to the first six
months of 2007. The tax provision increased in the first six months of 2008 even though the income before tax decreased by $10 million. During the first six months of 2008 a higher tax valuation allowance was recorded due to losses in Spain and
Belgium. Additionally, the tax provision increased due to certain international restructuring activities. The effective tax rate on ordinary income, which excludes the valuation entity losses and restructuring activities, was similar for both 2008
and 2007.

Net income (loss).Net income decreased by $16 million in the first six months of 2008 in comparison to the first
six months of 2007 due mainly to the increase in restructuring costs.



30



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##### Table of Contents

Liquidity and Capital Resources

The Companys primary source of liquidity is cash flow from operations. We also have availability under our revolving credit facility and receivables facility, subject to certain requirements. Our primary
liquidity requirements are expected to be for debt servicing, working capital, restructuring obligations and capital spending. Our liquidity requirements are significant, primarily due to debt service requirements and restructuring.

As of June 30, 2008, we had $597 million in aggregate indebtedness, with an additional $104 million of borrowing capacity available under our
revolving credit facility, after giving effect to $21 million in outstanding letters of credit, which reduced the amount available. We had no amounts outstanding under our trade accounts receivable securitization program (the Receivables
Facility) as of June 30, 2008 and December 31, 2007. The Receivables Facility provides for a maximum capacity of $100 million subject to certain adjustments. In addition, we had cash and cash equivalents of $59 million and $63
million as of December 31, 2007 and June 30, 2008, respectively.

We spent $14 and $12 million on capital expenditures during the
first six months of 2007 and 2008, respectively. Based on the current level of operations, the Company believes that cash flow from operations and available cash, together with available borrowings under its revolving credit facility and Receivables
Facility, will be adequate to meet liquidity needs and restructuring plans and to fund planned capital expenditures.

Net cash provided
by or used in operating activities

Net cash (used in) or provided by or used in operating activities for the six months ended
June 30, 2007 and 2008 was a $25 million use of cash and an $11 million source of cash, respectively. There were significant changes in the following operating activities:



|                                                                             |  |                             |     |   |                             |   |     |  
|---------------------------------------------------------------------------- |  | --------------------------- | --- | - | --------------------------- | - | --- | -
|                                                                             |  | Six MonthsEndedJune 30,2007 |     |   | Six MonthsEndedJune 30,2008 |  
|Summary of significant changes in operating activities:                      |  |                             |     |   |                             |   |     |  
|Net (loss) income                                                            |  | $                           | 1   |   |                             | $ | (15 | )
|Change in accounts receivable                                                |  |                             | (75 | ) |                             |   | (74 | )
|Change in inventories                                                        |  |                             | (32 | ) |                             |   | 19  |  
|Change in other operating assets                                             |  |                             | 16  |   |                             |   | (28 | )
|Change in other operating liabilities                                        |  |                             | 30  |   |                             |   | 95  |  
|Change in other                                                              |  |                             | 30  |   |                             |   |    |  
|                                                                             |  |                             |     |   |                             |   |     |  
|Subtotal                                                                     |  |                             | (30 | ) |                             |   | (3  | )
|Other less significant changes in operating activities                       |  |                             | 5   |   |                             |   | 14  |  
|                                                                             |  |                             |     |   |                             |   |     |  
|Net cash provided by (used in) operating activities from cash flow statement |  | $                           | (25 | ) |                             | $ | 11  |  

Trade accounts receivable  The change in accounts receivable was a higher use of cash during
the first six months of 2008 as compared to the first six months of 2007 partially due to higher sales during the first six months of 2008.

Inventories  The change in inventories was a source of cash in the first six months of 2008 as opposed to a use of cash in the first six months of 2007. During the first six months of 2007, inventory increased by $32 million from
December 31, 2006 due in part to the transition of the restructuring program. We built up inventory levels as we closed plants and transitioned production to other low cost sources. During the first six months of 2008, we focused on reducing
inventory levels and did not build up inventory levels in facilities affected by restructuring.



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##### Table of Contents

Other operating assets  The change in other operating assets was a use of cash in the first six
months of 2008 compared to a source of cash in the first six months of 2007. Other operating assets was a source of cash in the prior year primarily due to a payment received on a non-trade receivable.

Other operating liabilities  The change in other operating liabilities was a higher source of cash in the first six months of 2008 as compared to
the first six months of 2007. The increase is primarily due to the increase in accounts payable and other current liabilities since December 31, 2007.

Net cash used in investing activities

Net cash used in investing activities was $8 million for both
the six months ended June 30, 2007 and 2008. We received $6 million of proceeds from sales of assets in the first six months of 2007, as compared to $1 million in 2008. The proceeds received in the first six months of 2007 mainly related to the
sale of assets as part of the comprehensive restructuring plan. In addition, we spent $14 million and $12 million on capital expenditures during the six months ended June 30, 2007 and June 30, 2008, respectively. Further, during the first
six months of 2008 we received proceeds of $6 million from the sales of affiliates and we invested $3 million in an affiliate. Included within the proceeds from affiliates on our cash flow statement was $3 million for the sale of Quinton Hazell
Belgium and $3 million for the collection on a note relating to the March 31, 2005 sale of our former subsidiary Beck Arnley.

Net
cash provided by or used in financing activities

For the six months ended June 30, 2007, net cash provided by financing activities
was $10 million. For the six months ended June 30, 2008, there were no cash flows provided by or used in financing activities.

Senior credit facilities.Our senior credit facilities consist of a revolving credit facility and a term loan facility. Our revolving credit facility provides for loans in a total principal amount of up to $125 million and matures in
2010. Our term loan facility provides for up to $350 million in loans of which $297 million was outstanding at June 30, 2008. The term loan matures in 2011. Proceeds from the term loan were used to fund the Acquisition.

On November 30, 2004, in connection with the Acquisition, Affinia established financing arrangements with third-party lenders (the
lenders) that provide senior credit facilities consisting of a revolving credit facility and a term loan facility that are unconditionally guaranteed by the parent, and certain domestic subsidiaries of Affinia (collectively, the
Guarantors). The repayment of these facilities is secured by substantially all the assets of the Guarantors, including, but not limited to, a pledge of their capital stock and 65 percent of the capital stock of non-U.S. subsidiaries
owned directly by the Guarantors. The revolving credit facility, which expires on November 30, 2010, provides for borrowings of up to $125 million through a syndicate of lenders. The revolving credit facility also includes borrowing capacity
available for letters of credit. As of June 30, 2008, the Company had $21 million in outstanding letters of credit, none of which had been drawn against. There were no other amounts outstanding under the revolving credit facility at
June 30, 2008. The term loan facility provided for a $350 million term loan with a maturity of seven years, of which $297 million was outstanding at June 30, 2008. On December 12, 2005, in connection with the comprehensive
restructuring, certain provisions applicable to the senior credit facilities were amended.

The senior credit facilities, as amended, bear
interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the lenders prime rate and (2) the federal funds rate plus one-half of 1% or
(b) LIBOR rate determined by reference to the costs of funds for deposits in U.S. dollars for the interest period relevant to such borrowing adjusted for certain additional costs. The applicable margin for borrowings under the term loan
facility is 2.00% with respect to base rate borrowings and 3.00% with respect to LIBOR borrowings. The applicable margin for borrowings under the revolving credit facility and the term loan facility may be reduced subject to our attaining certain
leverage ratios or increased based on certain credit ratings as determined by Moodys and Standard & Poors.

In
addition to paying interest on the outstanding principal under the senior credit facilities, we are required to pay a commitment fee, which was less than $1 million in the first six months of 2008, to the lenders under the revolving credit facility
in respect of the unutilized commitments at a rate equal to 0.50% per annum. We also paid customary letter of credit fees.

The senior
credit facilities contain a number of covenants that, among other things and subject to certain exceptions, restrict our ability, and the ability of our subsidiaries, to sell assets, incur additional indebtedness or issue preferred stock, repay
other indebtedness (including our senior subordinated notes), pay certain dividends and distributions or repurchase our capital stock, create liens on assets, make investments, loans or advances, make certain acquisitions, engage in mergers or
consolidations, enter into sale



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and leaseback transactions, engage in certain transactions with affiliates, amend certain material agreements governing our indebtedness (including our
senior subordinated notes), and change the business conducted by us and our subsidiaries. In addition, the senior credit facilities contain the following financial covenants: a maximum total leverage ratio; a minimum interest coverage ratio; and a
maximum capital expenditures limitation. As of June 30, 2008, we were in compliance with all of these covenants.

Our covenant
compliance levels and ratios for the quarter ended June 30, 2008 are as follows:



|                                               |  |                                                         |  |             
|---------------------------------------------- |  | ------------------------------------------------------- |  | ------------
|                                               |  | CovenantComplianceLevel for theQuarterEndedJune 30,2008 |  | ActualRatios
|Minimum Adjusted EBITDA to cash interest ratio |  | 2.25x                                                   |  | 2.94x       
|Maximum net debt to Adjusted EBITDA ratio      |  | 4.00x                                                   |  | 3.71x       

Adjusted EBITDA is used to determine our compliance with many of the covenants contained in our
senior credit facilities. Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments permitted by our lenders in calculating covenant compliance under our senior credit facility.

We believe that the inclusion of debt covenant related adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional
information to investors to demonstrate compliance with our financing covenants.

The breach of covenants in our senior credit facilities
that are tied to ratios based on Adjusted EBITDA could result in a default under those facilities and the lenders could elect to declare all amounts borrowed due and payable. Any such acceleration would also result in a default under our indenture
and trade accounts receivable securitization program. However, EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP (Accounting Principles Generally Accepted in the United States) and do not purport to be alternatives to net income as
a measure of operating performance. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for managements discretionary use, as they do not consider certain cash requirements such as interest payments, tax
payments and debt service requirements.

The following table reconciles net income to EBITDA and Adjusted EBITDA (Dollars in
Millions):



|                              |  |                               |    |                               |   |     |                             |  |                             |    |  |   |     |  
|----------------------------- |  | ----------------------------- | -- | ----------------------------- | - | --- | --------------------------- |  | --------------------------- | -- |  | - | --- | -
|                              |  | Three MonthsEndedJune 30,2007 |    | Three MonthsEndedJune 30,2008 |   |     | Six MonthsEndedJune 30,2007 |  | Six MonthsEndedJune 30,2008 |   
|Net (loss) income             |  | $                             | 4  |                               | $ | (18 | )                           |  | $                           | 1  |  | $ | (15 | )
|Interest expense              |  |                               | 15 |                               |   | 14  |                             |  |                             | 30 |  |   | 28  |  
|Depreciation and amortization |  |                               | 7  |                               |   | 8   |                             |  |                             | 16 |  |   | 17  |  
|Income tax provision          |  |                               | 1  |                               |   | 6   |                             |  |                             | 1  |  |   | 7   |  
|                              |  |                               |    |                               |   |     |                             |  |                             |    |  |   |     |  
|EBITDA                        |  |                               | 27 |                               |   | 10  |                             |  |                             | 48 |  |   | 37  |  
|Restructuring charges(a)      |  |                               | 9  |                               |   | 25  |                             |  |                             | 17 |  |   | 29  |  
|Other adjustments(b)          |  |                               | 1  |                               |   | 2   |                             |  |                             | 1  |  |   | 4   |  
|                              |  |                               |    |                               |   |     |                             |  |                             |    |  |   |     |  
|Adjusted EBITDA               |  | $                             | 37 |                               | $ | 37  |                             |  | $                           | 66 |  | $ | 70  |  
|                              |  |                               |    |                               |   |     |                             |  |                             |    |  |   |     |  



|(a) | In accordance with the terms of our senior credit facilities, EBITDA has been adjusted to exclude costs associated with restructuring, which are principally related to severance,
asset write-downs and related exit costs. In 2005, we commenced our comprehensive restructuring plan that will mainly occur between 2006 and 2008.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Certain costs are allowed to be added back to EBITDA in accordance with the terms of our senior credit facilities.
|--- | ------------------------------------------------------------------------------------------------------------------

Indenture.The indenture governing the senior subordinated notes limits Affinias (and most or all of our subsidiaries) ability to
incur additional indebtedness, pay dividends on or make other distributions or repurchase our capital stock, make certain investments, enter into certain types of transactions with affiliates, use assets as security in other transactions and sell
certain assets or merge with or into other companies. Subject to certain exceptions, Affinia and its restricted subsidiaries are permitted to incur additional indebtedness, including secured indebtedness, under the terms of the senior subordinated
notes.

The indenture also uses EBITDA adjusted as permitted under the indenture to determine compliance with various covenants under the
indenture.



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Receivables facility. Our off-balance sheet receivables facility provides up to $100 million in
funding based on availability of eligible receivables and satisfaction of other customary conditions. Under the receivables facility, receivables are sold by certain subsidiaries of our Company to a wholly-owned bankruptcy remote finance subsidiary
of the Company, which transfers an undivided interest in the purchased receivables to a commercial paper conduit or its bank sponsor in exchange for cash.

Affinia as the receivables collection agent, services, administers and collects the receivables under the receivables purchase agreement for which it receives a monthly servicing fee at a rate of 1.00% per annum
of the average daily outstanding balance of receivables. The receivables facility fees include a usage fee paid by the finance subsidiary, that varies based upon the Companys leverage ratio as calculated under the senior credit facilities.
Funded amounts under the receivables facility bear interest at a rate equal to the conduits pooled commercial paper rate plus the usage fee. At June 30, 2008, the usage fee margin for the receivables facility was 1.25% per annum of
the amount funded. In addition, the finance subsidiary is required to pay a fee on the unused portion of the receivables facility that varies based upon the same ratio. At June 30, 2008, the fee was 0.50% per annum of the unused portion of
the receivables facility.

Availability of funding under the receivables facility depends primarily upon the outstanding trade accounts
receivable balance from time to time. Aggregate availability is determined by using a formula that reduces the gross receivables balance by factors that take into account historical default and dilution rates, obligor concentrations, average days
outstanding and the costs of the facility. As of June 30, 2008, $267 million of our accounts receivable balance was considered eligible for financing under the program, of which approximately $82 million was available for funding. At
June 30, 2008, we had no amount outstanding under this facility.

The receivables facility contains conditions, representations,
warranties and covenants similar to those in the senior credit facilities. It also contains amortization events similar to the events of default under the senior credit facilities, plus amortization events relating to the quality and performance of
the trade receivables. If an amortization event occurs, all of the cash flow from the receivables sold to the finance subsidiary will be allocated to the receivables facility until it is paid in full.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We are exposed to various market risks, such as currency exchange and interest rate fluctuation. Where necessary to minimize such risks we may enter into derivative transactions, however we do not enter into derivatives or other financial
instruments for trading or speculative purposes.

Currency risk

We conduct business in North America, Europe, South America, Asia, Australia and Africa. Although we manage our businesses in such a way as to reduce a portion of the risks associated with operating internationally,
changes in currency exchange rates may adversely impact our results of operations and financial position.

The results of operations and
financial position of each of our operations are measured in their respective local (functional) currency. Business transactions denominated in currencies other than an operations functional currency produce foreign exchange gains and losses,
as a result of the re-measurement process, as described in SFAS No. 52, Foreign Currency Translation. To the extent that our business activities create monetary assets or liabilities denominated in a non-local currency,
changes in an entitys functional currency exchange rate versus each currency in which an entity transacts business have a varying impact on an entitys results of operations and financial position, as reported in functional currency
terms. Therefore, for entities that transact business in multiple currencies, we seek to minimize the net amount of revenue or expense denominated in non-local currencies. However, in the normal course of conducting international business, some
amount of non-local currency exposure will exist. Therefore, management monitors these exposures and may engage in business activities or execute financial hedge transactions intended to mitigate the potential financial impact due to changes in the
respective exchange rates.

The Companys consolidated results of operations and financial position, as reported in U.S. dollars, are
also affected by changes in currency exchange rates. The results of operations of non-U.S. dollar functional entities are translated into U.S. dollars for consolidated reporting purposes each period at the average currency exchange rate experienced
during the period. To the extent that the U.S. dollar may appreciate or depreciate over time, the contribution of non-U.S. dollar denominated results of operations to the Companys U.S. dollar reported consolidated earnings will vary
accordingly. Therefore, changes in the various local currency exchange rates, as applied to the revenue and expenses of our non-U.S. dollar operations may have a significant impact on the Companys sales and, to a lesser extent, consolidated
net income trends. In addition, a significant portion of the Companys consolidated financial position is maintained at foreign locations and is denominated in functional currencies other than the U.S. dollar. The non-U.S. dollar denominated
monetary assets and liabilities are translated into U.S. dollars at each respective currencys exchange rate then in effect at the end of each reporting period. The financial impact of the translation process is reflected within the other
comprehensive income component of shareholders equity. Accordingly, the amounts shown in our consolidated shareholders equity account will fluctuate depending upon the cumulative appreciation or depreciation of the U.S. dollar versus
each of the respective functional currencies in which the Company conducts business. Management seeks to mitigate the potential financial



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impact upon the Companys consolidated results of operations due to exchange rate changes by engaging in business activities or may execute financial
derivative transactions intended to mitigate specific transactional underlying currency exposures. We do not engage in activities solely intended to counteract the impact that changes in currency exchange rates may have upon the Companys U.S.
dollar reported statement of financial condition.

To date, our foreign currency exchange rate risk management efforts have primarily
focused upon operationally managing the amount of net non-functional currency monetary assets or liabilities subject to the re-measurement process. In addition, we periodically execute short-term currency exchange rate forward contracts that are
intended to mitigate the earnings impact related to the re-valuation of specific monetary assets or liabilities denominated in a currency other than a particular entitys functional currency. At June 30, 2008, we had currency exchange rate
derivatives with a notional value of $173 million and a net liability value of $1 million.

Interest rate risk

At June 30, 2008, the Companys financial position included $297 million of variable rate debt outstanding. Therefore, a hypothetical immediate
1% increase of the average interest rate on this debt would increase the future annual interest expense related to these debt obligations by $3.0 million.

Under the provisions of the senior credit facilities with its banks, the Company is required to pay a fixed rate of interest on at least 40% of its debt, consisting of the aggregate obligations under the senior credit
facility, our senior subordinated notes and any additional senior subordinated notes that might be issued in the future. At June 30, 2008, approximately 75% of the Companys total debt obligations were fixed or effectively fixed-rate in
nature.

In April 2006, the Company entered into pay-fixed interest rate swaps having a combined notional value of $150 million to
effectively fix the rate of interest on a portion of our variable interest rate senior credit facility until April 30, 2008. In September 2007, the Company executed pay-fixed interest rate swaps having a notional amount of $150 million
beginning upon the termination of the existing interest rate swaps and expiring on April 30, 2010. The effect of these transactions is to reduce the net annual interest expense impact of a hypothetical immediate 1% increase of the average
interest rate on the Companys $297 million variable rate debt outstanding from $3.0 million to $1.5 million.

As of June 30,
2008, the aggregate fair value of the interest rate swaps was a liability of $4 million. The potential loss in fair value of these swaps arising from a hypothetical immediate decrease in interest rates of 50 basis points is approximately $1.3
million.



|Item 4. | Controls and Procedures
|------- | -----------------------

As of the end of the
period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures pursuant to Rule 15a-5(c) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in alerting
them on a timely basis to information required to be included in our submissions and filings with the SEC. Management has concluded that as of June 30, 2008, the design and operation of our disclosure controls and procedures provided reasonable
assurance that the disclosure controls are effective to accomplish their objectives.

During the second quarter of 2008, there were no
changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.



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PART II

OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

On April 20, 2006,
Heritage Equity Group (Heritage) and Beck Arnley Worldparts Corporation (Beck Arnley) filed suit against Affinia in the Rutherford County Chancery Court for the State of Tennessee. The suit arose out of Affinias sale of
Beck Arnley to Heritage and damages allegedly that arose from a tax election which Affinia was required to make under the Purchase Agreement with Dana. On June 28, 2007, as part of a settlement agreement, Beck Arnley dismissed its suit in
Tennessee and agreed to pay the original loan and royalty on a modified basis. However, immediately after signing the settlement agreement, Beck Arnley refused to make payment and Affinia was forced to sue for default on the loan in Delaware. That
suit, filed in October 2007 has been dismissed. The parties entered into a settlement agreement as of March 2008. The settlement agreement increased the amount of the loan, which is due from Beck Arnley, from $3 million to $3.4 million and
provided for interest to accrue annually initially at a rate of 10%. During the second quarter of 2008, Uni-Select Inc. purchased Beck Arnley. As part of that purchase, the full outstanding amount of the loan was paid to Affinia.

On December 12, 2007, Visteon Corporation filed suit in state court in Wayne County, Michigan against Affinia and various Wix legal entities
for contribution to a claim that Visteon Corporation settled with Ford Motor Company related to the recall of allegedly defective air filters sold by Wix. Affinia believes that it has a number of legal and factual defenses available to it and
intends to vigorously defend itself in this matter. The suit claimed $10 million in damages; however, given the unclear nature of Visteons settlement with Ford over several matters that lead to this damage claim, the possible exposure is not
reasonably estimable at this time.

On March 31, 2008 a class action lawsuit was filed by S&E Quick Lube Distributors, Inc. of
Utah against several auto parts manufacturers for allegedly conspiring to fix prices for replacement oil, air, fuel and transmission filters. Several auto parts companies are named as defendants, including Champion Laboratories, Inc., Purolator
Filters NA LLC, Honeywell International Inc, Wix Filtration Products, Cummins Filtration Inc., Donaldson Company, Baldwin Filters Inc., Bosch USA., Mann + Hummel USA Inc., Arvinmeritor Inc. and United Components Inc. The lawsuit was filed in US
District Court for the District of Connecticut and seeks damages and injunctive relief on behalf of a nationwide class of direct purchasers of filters. Since this initial complaint was filed, over 30 tag-along suits have been filed in
various jurisdictions. As a result, the case has been sent to the Joint Panel for Multidistrict Litigation and will be consolidated in one court. Affinia believes that Wix did not have significant sales in this particular market so we expect any
potential exposure to be immaterial.



|Item 1A. | Risk Factors
|-------- | ------------

In addition to the other information
set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business,
financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition and/or operating results.



|Item 5. | Other Information
|------- | -----------------

On August 12, 2008, the Board of Directors
of the Company appointed Joseph E. Parzick as a director of the Company.

On August 12, 2008, the Board of Directors of the Company approved a special
one-time performance bonus opportunity to further motivate certain employees of the Company, including the named executive officers, who are currently eligible to earn an annual cash bonus in respect of fiscal 2008. The Companys annual cash
bonuses are earned based on the Compensation Committees determination that certain EBITDA and working capital performance criteria for the Companys fiscal year have been satisfied to achieve corporate EBITDA targets. The Company is
establishing a special one-time performance bonus opportunity to further motivate those select employees to achieve the 2008 corporate EBITDA targets.

The
performance criteria for the 2008 special bonus opportunity require satisfaction of both specified Company EBITDA targets, and also specified EBITDA targets relating to the employees business unit. Any such special bonuses, if earned, would be
payable in the form of restricted stock unit awards to be granted in fiscal 2009 under the 2005 Stock Incentive Plan. The number of units to be awarded would be determined based on a portion of the eligible employees earned fiscal 2008 annual
cash bonus attributable to the achievement of the EBITDA targets applicable to such fiscal 2008 annual cash bonus.

The restricted stock unit awards would
be subject to such additional vesting and other conditions as the Compensation Committee may determine appropriate. The 2005 Stock Incentive Plan Restricted Stock Unit Agreement includes a cliff vesting condition, which requires the employees
continued service with the Company through December 31, 2011. The above description is qualified in its entirety by reference to a copy of the 2005 Stock Incentive Plan Restricted Stock Unit Agreement attached to this quarterly report as
Exhibit 10.1 and which is incorporated herein by reference.



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|Item 6. | Exhibits
|------- | --------



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



|       |  |                                                                           
|------ |  | --------------------------------------------------------------------------
|(10.1) |  | 2005 Stock Incentive Plan Restricted Stock Unit Agreement                 
|       | 
|(31)   |  | Certifications of Executive Officers pursuant to Rule 13a-14(a)           
|       | 
|(32)   |  | Certifications of Executive Officers pursuant to 18 U.S.C. Section 1350(b)



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SIGNATURES

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



AFFINIA GROUP INTERMEDIATE HOLDINGS INC.By:

/s/ Terry R. McCormackTerry R. McCormackChief Executive Officer, President, and Director(Principal Executive Officer)By:

/s/ Thomas H. MaddenThomas H. MaddenSenior Vice President and Chief Financial Officer(Principal Financial Officer)


Date: August 13, 2008



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