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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, DC 20549-1004




---

Form 10-K

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the year ended December 31, 2003                                                        
|  
|or
|  
|o  |  | 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. 333-89778



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(TRW AUTOMOTIVE HOLDINGS CORP. LOGO)

TRW Automotive Inc.


(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|Delaware                                                           |  | 57-1140153                                 
|(State or other jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer
    Identification Number)

12025 Tech Center Drive

Livonia, Michigan 48150


(734) 266-2600


(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrants Principal
Executive Offices)


Securities registered pursuant to
Section 12(b) of the Act:

None


Securities registered pursuant to
Section 12(g) of the Act:

None


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

Indicate by check
mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by references in Part III of this
Form 10-K or any amendment to this
Form 10-K.     þ

Indicate by check
mark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the
Act.)     Yes o          No þ

None of the
Companys voting stock is held by non-affiliates. As of
March 8, 2004, there were 100 shares of $0.01 par
value common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None


The registrant
meets the condition set forth in General
Instruction I (1)(a) and (b) of Form 10-K and is
therefore filing this Form with the reduced disclosure
format.



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TRW AUTOMOTIVE INC.

INDEX

|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page
|         |  |                                                                                           |  |     
|PART I  
|Item 1.  |  | Business                                                                                  |  |      | 1  | 
|         |  | Joint Ventures                                                                            |  |      | 4  | 
|         |  | Customers                                                                                 |  |      | 4  | 
|         |  | Sales and Marketing                                                                       |  |      | 5  | 
|         |  | Customer Support                                                                          |  |      | 5  | 
|         |  | Intellectual Property                                                                     |  |      | 5  | 
|         |  | Seasonality                                                                               |  |      | 6  | 
|         |  | Research and Development                                                                  |  |      | 6  | 
|         |  | Manufactured Components and
    Raw Materials                                             |  |      | 6  | 
|         |  | Employees                                                                                 |  |      | 7  | 
|         |  | Environmental Matters                                                                     |  |      | 7  | 
|Item 2.  |  | Properties                                                                                |  |      | 7  | 
|Item 3.  |  | Legal Proceedings                                                                         |  |      | 8  | 
|Item 4.  |  | Submission of Matters to a
    Vote of Security Holders*                                  |  |      | 8  | 
|PART II 
|Item 5.  |  | Market for Registrants
    Common Equity and Related Stockholder Matters                 |  |      | 8  | 
|Item 6.  |  | Selected Historical
    Consolidated and Combined Financial Data*                         |  |      | 9  | 
|Item 7.  |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |  |      | 9  | 
|         |  | Basis of Presentation                                                                     |  |      | 9  | 
|         |  | Executive Overview                                                                        |  |      | 10 | 
|         |  | Automotive Environment                                                                    |  |      | 11 | 
|         |  | Acquisitions and
    Divestitures                                                         |  |      | 11 | 
|         |  | Restructuring                                                                             |  |      | 12 | 
|         |  | Asset Impairments Other Than
    Restructuring                                            |  |      | 12 | 
|         |  | Pension Plans                                                                             |  |      | 13 | 
|         |  | Critical Accounting
    Estimates                                                         |  |      | 13 | 
|         |  | Results of Operations on a
    Pro Forma Basis                                            |  |      | 17 | 
|         |  | Total Company
    Results of Operations                                                   |  |      | 18 | 
|         |  | Short Period
    Discussions on a Historical Basis                                        |  |      | 22 | 
|         |  | Segment Results
    of Operations                                                         |  |      | 25 | 
|         |  | Liquidity and Capital
    Resources                                                       |  |      | 29 | 
|         |  | Contractual Obligations and
    Commitments                                               |  |      | 33 | 
|         |  | Off-Balance Sheet
    Arrangements                                                        |  |      | 33 | 
|         |  | Environmental Matters                                                                     |  |      | 35 | 
|         |  | Contingencies                                                                             |  |      | 35 | 
|         |  | Recent Accounting
    Pronouncements                                                      |  |      | 36 | 
|         |  | Forward-Looking
    Statements                                                            |  |      | 38 | 
|         |  | Risk Factors                                                                              |  |      | 39 | 
|Item 7A. |  | Quantitative and Qualitative
    Disclosures About Market Risks                           |  |      | 42 | 

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|         |  |                                                                                          |                                                                                                    |      |     |     | 
|-------- |  | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ---- | --- | --- | 
|         |  |                                                                                          |                                                                                                    | Page
|         |  |                                                                                          |                                                                                                    |     
|Item 8.  |  | Financial Statements and
    Supplementary Data                                          |                                                                                                    |      | 44  |    
|         |  | Independent Auditors
    Report                                                         |                                                                                                    |      | 44  |    
|         |  | Consolidated and Combined
    Statements of Operations                                   |                                                                                                    |      | 46  |    
|         |  | Consolidated and Combined
    Balance Sheets                                             |                                                                                                    |      | 47  |    
|         |  | Consolidated and Combined
    Statements of Cash Flows                                   |                                                                                                    |      | 48  |    
|         |  | Consolidated and Combined
    Statements of Changes in Stockholders Investment          |                                                                                                    |      | 49  |    
|         |  | Notes to Consolidated and
    Combined Financial Statements                              |                                                                                                    |      | 50  |    
|         |  |                                                                                          | Note 1. Description of
    Business and Change in Ownership                                        |      |     | 50  | 
|         |  |                                                                                          | Note 2. Basis of
    Presentation                                                                  |      |     | 52  | 
|         |  |                                                                                          | Note 3. Subsequent Events                                                                          |      |     | 56  | 
|         |  |                                                                                          | Note 4. Summary of
    Significant Accounting Policies                                             |      |     | 57  | 
|         |  |                                                                                          | Note 5. Supplemental Cash
    Flow Information                                                     |      |     | 64  | 
|         |  |                                                                                          | Note 6. Acquisitions and
    Divestitures                                                          |      |     | 64  | 
|         |  |                                                                                          | Note 7. Discontinued
    Operations                                                                |      |     | 64  | 
|         |  |                                                                                          | Note 8. Restructuring                                                                              |      |     | 64  | 
|         |  |                                                                                          | Note 9. Asset Impairments                                                                          |      |     | 65  | 
|         |  |                                                                                          | Note 10. Inventories                                                                               |      |     | 66  | 
|         |  |                                                                                          | Note 11. Property, Plant and
    Equipment                                                         |      |     | 66  | 
|         |  |                                                                                          | Note 12. Goodwill and Other
    Intangible Assets                                                  |      |     | 66  | 
|         |  |                                                                                          | Note 13. Other (Income)
    Expense  Net                                                          |      |     | 67  | 
|         |  |                                                                                          | Note 14. Operating
    Segments                                                                    |      |     | 68  | 
|         |  |                                                                                          | Note 15. Accounts Receivable
    Securitization                                                    |      |     | 71  | 
|         |  |                                                                                          | Note 16. Financial
    Instruments                                                                 |      |     | 72  | 
|         |  |                                                                                          | Note 17. Income Taxes                                                                              |      |     | 74  | 
|         |  |                                                                                          | Note 18. Pension Plans                                                                             |      |     | 76  | 
|         |  |                                                                                          | Note 19. Post-Retirement
    Benefits Other Than Pensions                                          |      |     | 80  | 
|         |  |                                                                                          | Note 20. Debt and Credit
    Agreements                                                            |      |     | 83  | 
|         |  |                                                                                          | Note 21. Lease
    Commitments                                                                     |      |     | 85  | 
|         |  |                                                                                          | Note 22. Capital Stock                                                                             |      |     | 86  | 
|         |  |                                                                                          | Note 23. Stock Options                                                                             |      |     | 86  | 
|         |  |                                                                                          | Note 24. Accumulated Other
    Comprehensive Earnings (Losses)                                     |      |     | 88  | 
|         |  |                                                                                          | Note 25. Related Party Transactions                                                                |      |     | 88  | 
|         |  |                                                                                          | Note 26. Supplemental
    Guarantor Condensed Consolidating and Combining Financial
    Statements |      |     | 89  | 
|         |  |                                                                                          | Note 27. Contingencies                                                                             |      |     | 98  | 
|         |  |                                                                                          | Note 28. Quarterly Financial
    Information (Unaudited)                                           |      |     | 100 | 
|Item 9.  |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure |                                                                                                    |      | 102 |    
|Item 9A. |  | Controls and Procedures                                                                  |                                                                                                    |      | 102 |    
|PART III
|Item 10. |  | Directors and Executive
    Officers of the Registrant*                                  |                                                                                                    |      | 102 |    
|Item 11. |  | Executive Compensation*                                                                  |                                                                                                    |      | 102 |    
|Item 12. |  | Security Ownership of
    Certain Beneficial Owners and Management*                      |                                                                                                    |      | 102 |    
|Item 13. |  | Certain Relationships and
    Related Transactions*                                      |                                                                                                    |      | 102 |    
|Item 14. |  | Principal Accounting Fees
    and Services                                               |                                                                                                    |      | 102 |    
|         |  | Audit Fees                                                                               |                                                                                                    |      | 102 |    

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|                                 |  |                                                                     |  |      |     | 
|-------------------------------- |  | ------------------------------------------------------------------- |  | ---- | --- | 
|                                 |  |                                                                     |  | Page
|                                 |  |                                                                     |  |     
|                                 |  | Audit-Related Fees                                                  |  |      | 102 | 
|                                 |  | Tax Fees                                                            |  |      | 102 | 
|                                 |  | All Other Fees                                                      |  |      | 103 | 
|PART IV                         
|Item 15.                         |  | Exhibits, Financial
    Statement Schedules, and Report on Form 8-K |  |      | 104 | 
|                                 |  | Exhibit-31(a) Certification Pursuant to
    Section 302             |  |      |     | 
|                                 |  | Exhibit-31(b) Certification Pursuant to
    Section 302             |  |      |     | 
|                                 |  | Exhibit-32(a) Certification Pursuant to
    Section 906             |  |      |     | 
|                                 |  | Exhibit-32(b) Certification Pursuant to
    Section 906             |  |      |     | 
|Section 302 Certification of CEO
|Section 302 Certification of CFO
|Section 906 Certification of CEO
|Section 906 Certification of CFO





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| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Item is omitted pursuant to the reduced
    disclosure format, as set forth on the cover page of this filing
    since all of the equity securities of the registrant are owned
    indirectly by TRW Automotive Holdings Corp.

iii



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PART I




Item
1.Business

The Company.TRW
Automotive Inc., a wholly owned indirect subsidiary of TRW
Automotive Holdings Corp., is among the worlds largest and
most diversified suppliers of automotive systems, modules and
components to global vehicle manufacturers, or VMs, and related
aftermarkets. We conduct substantially all of our operations
through our subsidiaries. We believe we have leading market
positions (which we consider to be a number 1, 2 or 3
position) in our primary business lines which encompass the
design, manufacture and sale of active and passive safety
related products. Active safety related products principally
refer to vehicle dynamic controls (primarily braking and
steering), and passive safety related products principally refer
to occupant restraints (primarily air bags and seat belts) and
crash sensors. We are primarily a Tier-1 supplier,
with over 85% of our sales in 2003 made directly to VMs and
approximately 7% sold in the worldwide aftermarket for
VM service and replacement parts and the balance sold
primarily to other parts suppliers for use in their systems. Our
products are primarily used in the manufacture of light
vehicles, consisting of passenger cars and light trucks (which
includes vans and sport-utility vehicles (SUVs)). Our history in
the automotive supply business dates back to the early 1900s
when our predecessor companies began manufacturing valves,
wheels, and electrical components and selling them to the
burgeoning automobile industry.

History and
Ownership.On November 18, 2002,
an entity controlled by affiliates of The Blackstone Group L.P.
(Blackstone), entered into an agreement pursuant to
which it agreed to cause us to purchase the shares of the
subsidiaries of TRW Inc. engaged in the automotive business
from Northrop Grumman Corporation (Northrop
Grumman). This acquisition, which we refer to as the
Acquisition in this Annual Report on Form 10-K
(this report), was consummated on February 28,
2003. Northrop Grumman acquired TRW Inc.s automotive
business in its December 11, 2002 acquisition of
TRW Inc. (now known as Northrop Grumman Space & Mission
Systems Corp.) (TRW), which we refer to as the
Merger in this report.

All references in this report to TRW
Automotive, the Company, we,
our and us mean, unless the context
indicates otherwise, (1) our predecessor, which is the
former TRW Automotive Inc. (which we did not acquire and was
renamed Richmond TAI Corp.) and its subsidiaries and the other
subsidiaries, divisions and affiliates of TRW that together
constituted the automotive business of TRW, for the periods
prior to February 28, 2003, the date the Acquisition was
consummated and (2) the successor and registrant, TRW
Automotive Inc. (formerly named TRW Automotive Acquisition
Corp.) and its subsidiaries, that own and operate the automotive
business of TRW as a result of the Acquisition. In addition,
when the context so requires, we use the term
Predecessor to refer to the historical operations of
our predecessor prior to the Acquisition and
Successor to refer to our historical operations
following the Acquisition and we use the terms we,
our and us to refer to the Predecessor
and the Successor collectively. The historical financial
statements for the periods prior to the Acquisition and
summaries thereof appearing in this report are those of our
predecessor and represent the combined financial statements of
TRWs automotive business. Prior to the Acquisition, our
predecessor operated as a segment of TRW, which was acquired by
Northrop Grumman on December 11, 2002. Our
predecessors 51% interest in the joint venture, TRW Koyo
Steering Systems Company (TKS), was not transferred
to us as part of the Acquisition.

In connection with the Acquisition, we entered
into new senior secured credit facilities, entered into a new
receivables facility and sold $925 million principal amount of
9 3/8% Senior Notes due 2013, $300 million principal amount
of 11% Senior Subordinated Notes due 2013,
200 million
principal amount of 10 1/8% Senior Notes due 2013 and
125 million
principal amount of 11 3/4% Senior Subordinated Notes due
2013 (collectively, the notes). See Notes 15 and 20
to the Consolidated and Combined Financial Statements.

All references in this report to pro
forma results of operations, and other financial data mean
pro forma for the Transactions which means, collectively, the
Acquisition and the related financings described elsewhere in
this report, including the subsequent refinancing of the senior
secured credit facilities on July 22, 2003, without giving
effect to the application of $46 million of cash, that was
used to permanently retire debt in conjunction with that
refinancing.

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As a result of the Acquisition, Automotive
Investors L.L.C., or AIL, an affiliate of Blackstone, held
approximately 78.4%, an affiliate of Northrop Grumman held
approximately 19.6% and our management group held approximately
2.0% of the shares of common stock of TRW Automotive Holdings
Corp. (TRW Automotive Holdings), our indirect
parent. On February 6, 2004, TRW Automotive Holdings
completed an initial public offering of 24,137,931 shares (or
24.4%) of its common stock. After TRW Automotive Holdings
initial public offering, including the use of a portion of the
net proceeds from such initial public offering to repurchase a
portion of the shares held by AIL, AIL holds approximately
56.7%, an affiliate of Northrop Grumman holds approximately
17.2% and our management group holds approximately 1.7% of TRW
Automotive Holdings common stock.

Overview.We have
become a leader in the global automotive parts industry by
capitalizing on the strength of our products, technological
capabilities and systems integration skills. Over the last
decade, we have experienced sales growth in many of our product
lines due to an increasing focus by both governments and
consumers on safety and fuel efficiency. We believe that this
trend is continuing as evidenced by ongoing regulatory
activities, and will enable us to experience growth in the most
recent generation of advanced safety and fuel efficient
products, such as vehicle stability control systems
(VSC), curtain air bags, occupant sensing systems,
electrically assisted power steering systems and tire pressure
monitoring systems. Throughout our long history as a leading
supplier to major VMs, we have focused on products where we have
a technological advantage. We have extensive technical
experience in a broad range of product lines and strong systems
integration skills, which enable us to provide comprehensive,
systems-based solutions for our VM customers.

We have a broad and established global presence,
with a workforce of approximately 60,800 employees and a network
of manufacturing facilities, technical centers, sales offices
and joint ventures located in every major vehicle-producing
region of the world. We have 136 wholly owned manufacturing
facilities and 21 joint-venture facilities in
22 countries. We sell to all the major VMs across the
worlds major vehicle producing regions. Among our largest
customers are Ford Motor Company, DaimlerChrysler AG, Volkswagen
AG, General Motors Corporation and Renault-Nissan BV. Our
geographic breakdown of sales is among the most diverse in the
industry, with approximately 50% of our pro forma sales for 2003
derived from Europe, 41% from North America and 9% from the rest
of the world. No single customer accounted for more than 19% of
such sales, which, we believe, is among the lowest customer
concentration levels of major global Tier-1 suppliers. In
addition, our four largest customers together accounted for
approximately 63% of such sales for the same period. We believe
our diversified business limits our exposure to the risks of any
one geographic economy, product line or major customer.

The following discussion describes each of our
operating segments, as well as the major product groups within
each segment.

Chassis Systems.Our
Chassis Systems segment focuses on the design, manufacture and
sale of product lines relating to steering, foundation brakes,
brake control, modules and suspension. Chassis Systems accounted
for approximately $6.5 billion, or 57.4% of our total pro
forma sales and $265 million, or 38.6%, of our pro forma
segment profit before taxes for the year ended December 31,
2003 and approximately $5.8 billion, or 56.2%, of our total
pro forma sales and $283 million, or 45.3% of our pro forma
segment profit before taxes for the year ended December 31,
2002.

We believe our Chassis Systems segment is well
positioned to capitalize on growth trends toward increasing
active safety systems, particularly in the areas of electric
steering, electronic vehicle stability control and other
advanced braking systems and integrated vehicle control systems.

2



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The following table describes the principal
product lines in order of 2003 sales in our Chassis Systems
segment:

|                  |  |                                                                                                                                                                                                                                                                                                                                                   
|----------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product Line      |  | Description                                                                                                                                                                                                                                                                                                                                       
|                  |  |                                                                                                                                                                                                                                                                                                                                                   
|Steering          |  | Electrically assisted power steering systems
    (column-drive, pinion-drive, rack-drive type), electrically
    powered hydraulic steering systems, hydraulic power and manual
    rack and pinion steering gears, hydraulic steering pumps and
    hoses, fully integral commercial steering systems, commercial
    steering columns and pumps.
|                 
|Foundation Brakes |  | Front and rear disc brake calipers, drum brake
    and drum-in-hat parking brake assemblies, rotors, drums.                                                                                                                                                                                                                                       
|                 
|Brake Control     |  | Two-wheel and four-wheel ABS, electric vehicle
    stability control systems, electro-hydraulic braking systems,
    active cruise control systems, actuation boosters and master
    cylinders, electrically controlled actuation.                                                                                                               
|                 
|Modules           |  | Brake modules, corner modules, pedal box modules,
    strut modules, front cross-member modules, rear axle modules.                                                                                                                                                                                                                               
|                 
|Suspension        |  | Forged steel and aluminum control arms,
    suspension ball joints, rack and pinion linkage assemblies,
    conventional linkages, commercial steering linkages and
    suspension ball joints, active roll control systems.                                                                                                                      

We sell our Chassis Systems products primarily to
VMs and other Tier-1 suppliers. We also sell these products to
VM service organizations and in the independent
aftermarket, through a license in North America, and in the rest
of the world, to independent distributors.

Occupant Safety
Systems.Our Occupant Safety Systems
segment focuses on the design, manufacture and sale of air bags,
seat belts, safety electronics, steering wheels and security
electronic systems. Occupant Safety Systems accounted for
approximately $3.3 billion, or 29.2%, of our total pro
forma sales and $301 million, or 43.9%, of our pro forma
segment profit before taxes for year ended December 31,
2003 and approximately $3.1 billion, or 30.3% of our total
pro forma sales and $212 million, or 33.9%, of our pro
forma segment profit before taxes for year ended
December 31, 2002.

We believe our Occupant Safety Systems segment is
well positioned to capitalize on growth trends toward increasing
passive safety systems, particularly in the areas of side and
curtain air bag systems, occupant sensing systems, active seat
belt pretensioning and retractor systems, and tire pressure
monitoring systems.

The following table describes the principal
product lines in order of 2003 sales in our Occupant Safety
Systems segment:

|                     |  |                                                                                                                                                          
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|Product Line         |  | Description                                                                                                                                              
|                     |  |                                                                                                                                                          
|Air bags             |  | Driver air bag modules, passenger air bag
    modules, side air bag modules, curtain air bag modules,
    single-and dual-stage air bag inflators        
|Seat belts           |  | Retractor and buckle assemblies, pretensioning
    systems, height adjusters, active control retractor systems                                           
|Safety electronics   |  | Front and side crash sensors, vehicle rollover
    sensors, air bag diagnostic modules, weight sensing and vision
    systems for occupant detection     
|Steering wheels      |  | Full range of steering wheels from base designs
    to leather, wood, heated designs, including multifunctional
    switches and integral air bag modules
|Security electronics |  | Remote key less entry systems, advanced theft
    deterrent systems, direct tire pressure monitoring systems                                             

3



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We sell our Occupant Safety Systems products
primarily to VMs and also to other Tier-1 suppliers. We also
sell these products to VM service organizations for service
parts.

Automotive
Components.Our Automotive Components
segment focuses on the design, manufacture and sale of body
controls, engine valves and engineered fasteners and components.
Automotive Components segment accounted for approximately
$1.5 billion, or 13.4%, of our total pro forma sales and
$120 million, or 17.5%, of our pro forma segment profit before
taxes for the year ended December 31, 2003 and
approximately $1.4 billion, or 13.6% of our total pro forma
sales and approximately $130 million, or 20.8%, of our pro
forma segment profit before taxes for the year ended
December 31, 2002.

We believe our Automotive Components segment is
well positioned to capitalize on growth trends toward
multi-valve engines and increasing electronic content per
vehicle. The following table describes in order of 2003 sales
our principal product lines in our Automotive Components segment:

|                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product Line                        |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|Body controls                       |  | Display and heating, ventilating and air
    conditioning electronics, controls and actuators; motors; power
    management controls; man/machine interface controls and
    switches, including a wide array of automotive ergonomic
    applications such as steering column and wheel switches, rotary
    connectors, climate controls, seat controls, window lift
    switches, air bag disable switches; and rain sensors
|Engine valves                       |  | Engine valves, valve train components,
    electro-magnetic valve actuation                                                                                                                                                                                                                                                                                                                                                    
|Engineered fasteners and components |  | Engineered and plastic fasteners and precision
    plastic moldings and assemblies                                                                                                                                                                                                                                                                                                                                             

We sell our Automotive Components products
primarily to VMs and also to other Tier-1 suppliers. We also
sell these products to VM service organizations. In
addition, we sell some engine valve and body control products to
independent distributors for the automotive aftermarket.

Joint Ventures

Joint ventures represent an important part of our
business, both operationally and strategically. We have often
used joint ventures to enter into new geographic markets such as
China, Korea and India, or to acquire new customers or to
develop new technologies such as electro-hydraulic steering
pumps and radar sensors.

In the case of entering new geographic markets,
where we have not previously established substantial local
experience and infrastructure, teaming with a local partner can
reduce capital investment by leveraging pre-existing
infrastructure. In addition, local partners in these markets can
provide knowledge and insight into local customs and practices
and access to local suppliers of raw materials and components.
All of these advantages can reduce the risk, and thereby enhance
the prospects for the success, of an entry into a new geographic
market.

Joint ventures can also be an effective means to
acquire new customers. Joint venture arrangements can allow
partners access to technology they would otherwise have to
develop independently, thereby reducing the time and cost of
development. More importantly, they can provide the opportunity
to create synergies and applications of the technology that
would not otherwise be possible.

Customers

We sell to all the major VM customers across
the worlds entire major vehicle producing regions. Among
our largest customers are Ford Motor Company, DaimlerChrysler
AG, Volkswagen AG, General Motors Corporation and Renault-Nissan
BV. We believe that, among major automotive parts suppliers, the
breadth of our customer mix is among the industry leaders. Our
long-standing relationships with our customers have enabled us
to understand global customer needs and business opportunities.
We believe that we will continue to be able to compete
effectively for our customers business because of the high
quality of our products, our ongoing cost reduction efforts, our
strong global presence and our product and technology
innovations. The

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chart below indicates our ten largest customers
by VM group, the VMs within each group and the percentage
of our pro forma sales for the year ended December 31,
2003, represented by each of these VM groups.


|                |  |                                                          |  |               |      |  
|--------------- |  | -------------------------------------------------------- |  | ------------- | ---- | -
|                |  |                                                          |  | Percentage of
|VM Group        |  | VMs                                                      |  | Sales(1)     
|                |  |                                                          |  |              
|Ford            |  | Ford, Land Rover, Jaguar, Aston-Martin, Volvo,
    Mazda |  |               | 18.4 | %
|DaimlerChrysler |  | Chrysler, Mercedes, Smart, Mitsubishi                    |  |               | 16.3 | %
|Volkswagen      |  | Volkswagen, Audi, Seat, Skoda, Bentley                   |  |               | 15.0 | %
|General Motors  |  | General Motors, Opel, Saab, Isuzu, Subaru                |  |               | 13.2 | %
|Renault-Nissan  |  | Renault, Nissan                                          |  |               | 8.1  | %
|Fiat            |  | Fiat, Lancia, Alfa-Romeo, Ducato                         |  |               | 4.5  | %
|PSA             |  | Peugeot, Citroen                                         |  |               | 3.5  | %
|Toyota          |  | Toyota, NUMMI, Daihatsu                                  |  |               | 3.0  | %
|BMW             |  | BMW                                                      |  |               | 1.9  | %
|Hyundai         |  | Hyundai, KIA                                             |  |               | 1.5  | %
|Honda           |  | Honda                                                    |  |               | 1.4  | %



---



|    |                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our pro forma sales for the year ended
    December 31, 2003 exclude sales of TKS but include sales of
    our former Canadian joint venture, Quality Safety Systems
    (QSS), through June 27, 2003, at which time it
    was sold. Both TKS and QSS sales were primarily to Toyota.

We also sell products to the global aftermarket
as replacement parts for current production and older vehicles.
For the year ended December 31, 2003, our pro forma sales
to the aftermarket represented approximately 7% of our total
sales. We sell these products through both VM service
organizations and independent distribution networks.

Sales and Marketing

We have a sales and marketing organization of
dedicated customer teams that provide a consistent interface
with our key customers. These teams are located in all major
vehicle producing regions to best represent their respective
customers interests within our organization, to promote
customer programs and to coordinate global customer strategies
with the goal of enhancing overall customer service and
satisfaction. Our ability to support our customers globally is
further enhanced by our broad global presence in terms of sales
offices, manufacturing facilities, engineering/ technical
centers and joint ventures.

Our sales and marketing organization and
activities are designed to create overall awareness and
consideration of, and to increase purchases of, our systems,
modules and components. To further this objective, we
participate in international trade shows in Paris, Frankfurt and
Detroit. We also provide on-site technology demonstrations at
our major VM customers on a regular basis.

Customer Support

Our engineering, sales and production facilities
are located in 22 countries. With approximately
500 dedicated sales/ customer development employees, we
provide effective customer solutions, products and service in
any region in which these facilities operate or manufacture.

Intellectual property

We own significant intellectual property,
including a large number of patents, trademarks, copyrights and
trade secrets, and are involved in numerous licensing
arrangements. Although our intellectual property plays an
important role in maintaining our competitive position in a
number of the markets that we serve, no single patent,
copyright, trade secret or license, or group of related patents,
copyrights, trade secrets or licenses, is, in our opinion, of
such value to us that our business would be materially affected
by the expiration or termination thereof. However, we view the
name TRW Automotive and primary mark TRW (which has
been transferred to us as part of the Acquisition) as material
to our business as a whole. Our general policy is to

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apply for patents on an ongoing basis in the
United States, Germany and appropriate other countries to
protect our patentable developments.


Our patent portfolio of nearly 10,000 patents and
pending patent applications reflects our commitment to invest in
technology and covers many aspects of our products and the
processes for making those products. In addition, we have
developed a substantial body of manufacturing know-how that we
believe provides a significant competitive advantage in the
marketplace.

We have entered into several hundred technology
license agreements that either strategically exploit our
intellectual property rights or provide a conduit for us into
third party intellectual property rights useful in our
businesses. In many of these agreements, we license technology
to our suppliers, joint venture companies and other local
manufacturers in support of product production for us and our
customers. In other agreements, we license the technology to
other companies to obtain royalty income.

We own a number of secondary trade names and
marks applicable to certain of our businesses and products that
we view as important to such businesses and products as well.

As part of the Acquisition, we have entered into
intellectual property license agreements with TRW.

Seasonality

Our business is moderately seasonal because our
largest North American customers typically halt operations for
approximately two weeks in July and one week in December.
Additionally, customers in Europe historically shut down vehicle
production during a portion of August and one week in December.
In addition, third quarter automotive production traditionally
is lower as new models enter production. Accordingly, our third
and fourth quarter results may reflect these trends.

Research and Development

We operate a global network of technical centers
worldwide where we employ approximately 4,200 engineers,
researchers, designers, technicians and their supporting
functions. This global network allows us to develop automotive
active and passive technologies while improving existing
products and systems. We utilize sophisticated testing and
computer simulation equipment, including computer-aided
engineering, noise-vibration-harshness, crash sled, math
modeling and vehicle simulations. We have advanced engineering
and research and development programs for next-generation
components and systems in our chassis, occupant safety and
automotive component product areas. We are disciplined in our
approach to research and development, employing various tools to
improve efficiency and reduce cost, such as Six Sigma,
follow-the-sun, a 24-hour a day engineering program
that utilizes our global network, and other e-Engineering
programs, and outsourcing non-core activities.

Company-funded research and development costs
totaled:



| |   |                                                             
| | - | ------------------------------------------------------------
| |  | $137 million for the ten months ended
    December 31, 2003;
|
| |  | $27 million for the two months ended
    February 28, 2003; 
|
| |  | $151 million for the year ended
    December 31, 2002; and  
|
| |  | $131 million for the year ended
    December 31, 2001.      

We believe that continued research and
development activities are critical to maintaining our
leadership position in the industry and will provide us with a
competitive advantage as we seek additional business with new
and existing customers.

Manufactured Components and Raw
Materials

We purchase various manufactured components and
raw materials for use in our manufacturing processes. The
principal components and raw materials we purchase include
castings, electronic parts, molded plastic parts, finished
subcomponents, fabricated metal, aluminum, steel, resins,
leather and wood. All of these components and raw materials are
available from numerous sources. We have recently seen
significant inflationary pressures in the ferrous metals
markets. At this time, we are working with our suppliers and

6



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customers to attempt to mitigate the impact that
this inflation may have on our financial results, but there can
be no assurance that this will not have a material adverse
effect. We have not, in recent years, experienced any
significant shortages of manufactured components or raw
materials and normally do not carry inventories of these items
in excess of those reasonably required to meet our production
and shipping schedule.


Employees

As of December 31, 2003, we had
approximately 60,800 employees (including employees of our
majority owned joint ventures but excluding temporary employees
and employees who are on approved forms of leave), of whom
approximately 22,300 were employed in North America,
approximately 32,000 were employed in Europe, approximately
3,900 were employed in South America and approximately 2,600
were employed in Asia. Approximately 16,000 of our employees are
salaried and approximately 44,800 are hourly. As of
December 31, 2003, approximately 21% of our United States
workforce and approximately 72% of our hourly workforce outside
of the United States were represented by 39 unions. We
consider relations with our employees to be good.

Environmental Matters

Governmental requirements relating to the
discharge of materials into the environment, or otherwise
relating to the protection of the environment, have had, and
will continue to have, an effect on us and our operations. We
have made and continue to make expenditures for projects
relating to the environment, including pollution control devices
for new and existing facilities. We are conducting a number of
environmental investigations and remedial actions at current and
former locations to comply with applicable requirements and,
along with other companies, have been named a potentially
responsible party for certain waste management sites. Each of
these matters is subject to various uncertainties, and some of
these matters may be resolved unfavorably to us.

A reserve estimate for each matter is established
using standard engineering cost estimating techniques on an
undiscounted basis. In the determination of such costs,
consideration is given to the professional judgment of our
environmental engineers, in consultation with outside
environmental specialists, when necessary. At multi-party sites,
the reserve estimate also reflects the expected allocation of
total project costs among the various potentially responsible
parties. At December 31, 2003, we had reserves for
environmental matters of $90 million.

We do not believe that compliance with
environmental protection laws and regulations will have a
material effect upon our capital expenditures, results of
operations or competitive position. Our capital expenditures for
environmental control facilities during 2004 and 2005 are not
expected to be material to us. We believe that any liability
that may result from the resolution of environmental matters for
which sufficient information is available to support cost
estimates will not have a material adverse effect on our
financial position or results of operations. However, we cannot
predict the effect on our financial position of expenditures for
aspects of certain matters for which there is insufficient
information. In addition, we cannot predict the effect of
compliance with environmental laws and regulations with respect
to unknown environmental matters on our financial position or
results of operations or the possible effect of compliance with
environmental requirements imposed in the future. Under the
master purchase agreement entered into in connection with the
Acquisition, Northrop Grumman will indemnify us for 50% of any
environmental liabilities associated with the operation or
ownership of TRWs automotive business on or prior to the
Acquisition (subject to certain exceptions), regardless of
whether the liabilities arise before or after the Acquisition.




Item
2.Properties

Our principal executive offices are located in
Livonia, Michigan. Our operations include numerous
manufacturing, research and development and warehousing
facilities and offices. We own or lease principal facilities
located in 18 states in the United States and in 21 other
countries as follows: Austria, Brazil, Canada, China, the Czech
Republic, France, Germany, Italy, Japan, Malaysia, Mexico,
Poland, Portugal, Singapore, South Africa, South Korea, Spain,
Sweden, Thailand, Turkey, and the United Kingdom. Approximately
57% of our principal facilities are used by the Chassis Systems
segment, 18% by the Occupant Safety Systems segment and 25% by
the Automotive Components segment.

7



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Of the total number of principal facilities
operated by us, approximately 58% of such facilities are owned,
37% are leased, and 5% are held by joint ventures in which we
have a majority interest.



Item 3.Legal
Proceedings

Various claims, lawsuits and administrative
proceedings are pending or threatened against us or our
subsidiaries, covering a wide range of matters that arise in the
ordinary course of our business activities with respect to
commercial, product liability and environmental matters.

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

On May 6, 2002, ArvinMeritor Inc. filed suit
against TRW in the United States District Court for the Eastern
District of Michigan, claiming breach of contract and breach of
warranty in connection with certain tie rod ends that TRW
supplied to ArvinMeritor and the voluntary recall of some of
these tie rod ends. ArvinMeritor subsequently recalled all of
the tie rod ends, and claims that it is entitled to
reimbursement from TRW for the costs associated with both the
products recalled by TRW and those recalled by ArvinMeritor on
its own. ArvinMeritor is seeking $18.3 million in damages
plus legal fees, administrative expenses and interest. We
believe that we have meritorious defenses and intend to defend
vigorously the claims asserted against us, but cannot predict
the outcome of this lawsuit.

While certain of our subsidiaries have been
subject in recent years to asbestos-related claims, we believe
that such claims will not have a material adverse effect on our
financial condition or results of operations. In general, these
claims seek damages for illnesses alleged to have resulted from
exposure to asbestos used in certain components sold by our
subsidiaries. We believe that the majority of the claimants were
assembly workers at the major U.S. automobile
manufacturers. The vast majority of these claims name as
defendants numerous manufacturers and suppliers of a wide
variety of products allegedly containing asbestos. We believe
that, to the extent any of the products sold by our subsidiaries
and at issue in these cases contained asbestos, the asbestos was
encapsulated. Based upon several years of experience with such
claims, we believe that only a small proportion of the claimants
has or will ever develop any asbestos-related impairment.

Neither our settlement costs in connection with
asbestos claims nor our average annual legal fees to defend
these claims have been material in the past. These claims are
strongly disputed by us and it has been our policy to defend
against them aggressively. We have been successful in obtaining
the dismissal of many cases without any payment whatsoever.
Moreover, there is significant insurance coverage with solvent
carriers with respect to these claims. However, while our costs
to defend and settle these claims in the past have not been
material, we cannot assure you that this will remain so in the
future.

We believe that the ultimate resolution of the
foregoing matters will not have a material effect on our
financial condition or results of operations.



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

Omitted pursuant to General Instruction I(2)(c)
to Form 10-K.




PART II






|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

The Company is an indirect wholly owned
subsidiary of TRW Automotive Holdings Corp. and, accordingly,
there is no market for the Companys common stock.

8



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Since our inception, we have paid no dividends on
our common stock. Our senior credit facilities and the
indentures governing the notes generally restrict the payment of
dividends or other distributions by us, subject to specified
exceptions. The exceptions include, among others, the making of
payments or distributions in respect of expenses required for
TRW Automotive Holdings and TRW Automotive Intermediate Holdings
Corp., our direct parent (TRW Automotive Intermediate
Holdings) to maintain their corporate existence, general
corporate overhead expenses, tax liabilities and legal and
accounting fees.






|        |                                                                 
|------- | ----------------------------------------------------------------
|Item 6. | Selected Historical Consolidated and
    Combined Financial Data

Omitted pursuant to General
Instruction I(2)(a) to Form 10-K.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The following discussion and analysis of our
financial condition and results of operations covers periods
prior and subsequent to the Acquisition. Accordingly, the
discussion and analysis of historical operations of the
Predecessor during the periods prior to the consummation of the
Acquisition do not reflect the significant impact that the
Acquisition has had and will have on us. In addition, the
statements in the discussion and analysis regarding industry
outlook, our expectations regarding the performance of our
business and other non-historical statements in the discussion
and analysis are forward-looking statements. These
forward-looking statements are subject to numerous risks and
uncertainties, including, but not limited to, the risks and
uncertainties described in the Forward-Looking
Statements section. Our actual results may differ
materially from those contained in or implied by any
forward-looking statements. You should read the following
discussion together with the sections entitled
Forward-Looking Statements, Risk Factors
and the historical combined financial statements of our
predecessor and our consolidated financial statements included
elsewhere in this report.




Basis of Presentation

The Predecessor did not historically operate as a
stand-alone business, but as part of TRW, which became a
subsidiary of Northrop Grumman on December 11, 2002. We
acquired the shares of the subsidiaries of TRW engaged in the
automotive business upon consummation of the Acquisition.

Due to a change in ownership, and the resultant
application of purchase accounting, the historical financial
statements of the Predecessor and the Successor included in this
report have been prepared on different bases for the periods
presented and are not comparable.

The following provides a description of the basis
of presentation during all periods presented:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Successor
    Represents our consolidated financial position as of
    December 31, 2003 and our consolidated results of
    operations and cash flows for the ten month period ended
    December 31, 2003 following the Acquisition. The financial
    position as of December 31, 2003 and results of operations
    and cash flows for the ten month period ended December 31,
    2003 reflect the application of purchase accounting, described
    below, relating to the Acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Predecessor
    Represents the combined financial position of the automotive
    business of TRW for all periods prior to the Acquisition on
    February 28, 2003. This presentation is on the historical
    basis of accounting without the application of purchase
    accounting related to the Merger in any period presented, due to
    the temporary nature of Northrop Grummans ownership of
    TRWs automotive business. Prior to the Merger on
    December 11, 2002, Northrop Grumman entered into the master
    purchase agreement on November 18, 2002 with affiliates of
    Blackstone to sell TRWs automotive business. The extensive
    representations, warranties and covenants contained in the
    master purchase agreement restricting Northrop Grummans
    conduct prior to the closing of the Acquisition severely limited
    any actions that could have been taken by Northrop Grumman
    during its brief and temporary ownership of TRWs
    automotive business.

The combined financial statements of the
Predecessor for each of the two years in the period ended
December 31, 2002 and the unaudited pro forma information
included in the results of operations for the year ended
December 31, 2002 are based on the historical assets,
liabilities, sales and expenses of the Predecessor for the
periods prior to the Acquisition, including the allocation of a
portion of TRWs general and

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administrative corporate expenses, debt, interest
expense and income taxes for periods prior to March 1,
2003. The unaudited pro forma information for the year ended
December 31, 2003 is based on the historical assets,
liabilities, sales and expenses of the Predecessor for the two
month period ended February 28, 2003 and of the Successor
for the ten month period ended December 31, 2003. The pro
forma adjustments reflect the effect of the Transactions as if
they had occurred on January 1, 2002.


The financial position, results of operations and
cash flows of the Successor exclude, while those of the
Predecessor include, for all periods presented, the assets,
liabilities, results of operations and cash flows of the joint
venture, TKS, which was not transferred to us as part of the
Acquisition.

As a result, the historical and other financial
information of the Predecessor included in this report may not
reflect what our results of operations, financial position and
cash flows would have been had we operated as a separate,
stand-alone company for the periods presented.




Executive Overview

We are among the worlds largest and most
diversified suppliers of automotive systems, modules and
components to global VMs and related aftermarkets. We operate
our business along three operating segments: Chassis Systems,
Occupant Safety Systems and Automotive Components. Our cost of
sales consists of variable and fixed components. Our variable
and fixed costs approximate 80% and 20% of cost of sales,
respectively. Variable costs are proportional to volume and mix
and consist principally of materials and labor to manufacture
our products. Our fixed costs are not significantly influenced
by production volume, in the short term, and consist principally
of administrative salaries, benefits and depreciation and other
facility-related costs.

Our business is moderately seasonal because our
largest North American customers typically halt operations for
approximately two weeks in July and one week in December.
Additionally, customers in Europe historically shut down vehicle
production during a portion of August and one week in December.
Third quarter automotive production traditionally is also lower
as new models enter production. Accordingly, our third and
fourth quarter sales tend to be lower than our first and second
quarter sales.

Contract durations for automotive parts generally
range from one year to the entire life of the vehicle model,
generally three to seven years for cars and four to ten years
for light trucks. Tier-l suppliers generally compete for new VM
business at the beginning of the development of new vehicle
models and upon the redesign of existing vehicle models. New
vehicle model development generally begins at least two to five
years before the marketing of such models to consumers. As a
result, a significant portion of a suppliers annual sales
are generated pursuant to arrangements begun about two to five
years before the revenues related to the arrangements begin to
be realized. The Tier-l sourcing process for vehicle programs,
which varies according to VM, is typically initiated when a VM
seeks requests for quotations from several suppliers at least
three to six years before anticipated vehicle production. Based
on these quotations, VMs, in many cases, then select and work
with a supplier on specific component design and development
projects related to the new vehicle program. At varying points
during this process, VMs may issue nomination
letters, letters of intent or other representations to the
supplier that, based on the suppliers quotation and
subject to a number of conditions established by the VM, the VM
intends to award specific business relating to the vehicle
program to the supplier. By the time the design and development
of the vehicle program is nearly complete, the VM will typically
have evaluated the suppliers performance to date and its
ability to meet the VMs specific production and service
requirements. The VM will then develop a proposed production
timetable, including current vehicle volume and option mix
estimates based on its own assumptions, and then source business
with the supplier pursuant to written contracts, purchase orders
or other firm commitments, provided that the supplier can meet
the VMs designated conditions and remain competitive in
terms of price, quality, technology and delivery. In general,
these contracts, purchase orders and commitments provide that
the VM can terminate for convenience, and in some cases, they
provide that the price will decrease over the proposed
production timetable. Awarded business generally covers the
supply of all or a portion of a VMs production and service
requirements of a particular product program rather than the
supply of a specific quantity of products. Accordingly, in
estimating awarded business over the life of a contract or other
commitment, a supplier must make various assumptions as to the
estimated number of vehicles expected to be produced, the timing
of that production, the mix of options on the vehicles produced
and pricing of the products being supplied. The

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realization of sales based on awarded business is
subject in all cases to a number of important risks and
uncertainties. In addition, the actual production volumes and
option mix of vehicles produced by VMs depend on a number of
factors that are beyond a suppliers control.


Automotive Environment

Our business is greatly affected by the
automotive build rates in North America and Europe. The
automobile industry is characterized by short-term volatility,
but long-term growth of, light vehicle sales and production. New
vehicle demand is driven by macro-economic and other factors
such as interest rates, manufacturer and dealer sales
incentives, fuel prices, consumer confidence and employment and
income growth trends. These factors ultimately determine
longer-term vehicle production and sales rates.

One of the current trends in the automotive
industry is for VMs to shift research and development, design
and testing responsibility to suppliers. VMs have also been
reducing the number of their suppliers, preferring strong
relationships with fewer suppliers. We operate in a difficult
pricing environment and our goal is to mitigate the pricing
pressure imposed by VMs by continuing cost reduction efforts and
restructuring our business. We also have recently seen
significant inflationary pressures in the ferrous metals
markets. We are fully engaged in supply chain management and
utilizing Six Sigma as a leading quality improvement program
throughout our operations and functions.

Acquisitions and Divestitures

In 2001, the Predecessor disposed of five
non-core businesses, one of which was accounted for as
discontinued operations and four of which were not accounted for
as discontinued operations. The business included in
discontinued operations was Lucas Varitys diesel business.
Proceeds from the sale of the discontinued operations was
$29 million and there was a $10 million gain on the
sale, which is included in the net results of discontinued
operations. The most significant of the four businesses divested
that were not accounted for as discontinued operations were
Lucas Varity Indias electrical businesses, and certain
sensor and related components businesses. The revenues of these
businesses were included in sales of the combined statements of
operations and were $69 million for the year ended
December 31, 2001. Proceeds from the sales of these
divested businesses were $17 million and the gain on the
sales of these businesses was $18 million.

On April 8, 2003, we sold our
21.8% equity interest in Toyoda TRW Automotive, Inc.
(Toyoda) to our joint venture partner, Toyoda
Machine Works, Ltd. We had previously accounted for our interest
in Toyoda under the equity method, and classified this
investment in Other assets (long-term) in our
combined and consolidated balance sheets.

On June 27, 2003, we sold our 60%
partnership interest in Quality Safety Systems Company
(QSS), a Canadian seatbelt joint venture, to a
subsidiary of our partner, Tokai Rika Co., Ltd. Through the sale
date, QSSs financial position results of operations and
cash flows were included in our consolidated and combined
financial statements.

On December 29, 2003, we completed the
disposal of a European forge parts facility (Linn),
which provided components internally to other portions of our
businesses. Through the sale date, Linns financial
position results of operations and cash flows were included in
our consolidated and combined financial statements.

Proceeds from the Toyoda, QSS and Linn
divestitures were approximately $57 million, net of cash
retained in the QSS business.

On June 26, 2003, we acquired sole ownership
of the immediate parent of Autocruise, S.A.
(Autocruise) by acquiring for nominal consideration
the equity interest held by our former joint venture partner,
Thales Group. Autocruise, operating a custom-built facility in
Brest, France, designs and manufactures radar-based sensors for
adaptive cruise control systems, principally sold in certain
European markets.

On September 22, 2003, we acquired a 50%
equity interest in EnTire Solutions, LLC, a new joint venture we
entered into with Group Michelin. This joint venture will focus
on the development, marketing, manufacture and sale of advanced
direct tire pressure monitoring systems for passenger cars and
light trucks.

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Restructuring

In 2001, the Predecessor recorded charges of
$213 million related to the closing of two facilities and
various headcount reduction activities including the integration
of the former Chassis, Occupant Safety Systems and Automotive
Electronics segments under one management team. The combination
of these activities in 2001 resulted in a reduction of
approximately 6,000 employees. In 2002, the Predecessor recorded
charges of $59 million for actions that resulted in the
closing of three plants and employee reductions of approximately
950. During the two months ended February 28, 2003, the
Predecessor recorded charges of $3 million for severance
and costs related to the consolidation of certain facilities.
The charges described above include both cash and non-cash
items. For the periods ended December 31, 2001 and 2002,
the cash charges were $189 million and $27 million,
respectively, and the non-cash charges were $24 million and
$32 million, respectively. For the two months ended
February 28, 2003, only cash charges were recorded totaling
$3 million.

In connection with the Acquisition, we assumed
liabilities (subject to certain exceptions) totaling
approximately $51 million for various restructuring
activities, primarily related to involuntary severance
obligations and costs to exit certain activities. For the ten
months ended December 31, 2003, we recorded cash charges of
$29 million for severance and costs related to the
consolidation of certain facilities. Additionally, we recorded a
$37 million reserve through purchase accounting primarily
for severance related to strategic restructurings, plant
closings and involuntary employee termination arrangements
outside of the United States to be paid over the next several
years in accordance with local laws.

While we continuously evaluate whether additional
restructuring opportunities exist to increase our operating
efficiencies, we do not have any current plans that would result
in additional restructuring charges of the magnitude that the
Predecessor incurred in 2001 and 2002.

The following table sets forth a summary of the
activity in the balance sheet accounts related to the
restructuring reserves:

|                                   |  |                       |     |                |  |          |    |            |  |          |     |         |  |   |    |  |  |   |      |   |  |   |     | 
|---------------------------------- |  | --------------------- | --- | -------------- |  | -------- | -- | ---------- |  | -------- | --- | ------- |  | - | -- |  |  | - | ---- | - |  | - | --- | 
|                                   |  |                       |     |                |  |          |    |            |  |         
|                                   |  |                       |     | Provision      |  |          |    |            |  |         
|                                   |  |                       |     |                |  | Purchase |    | Used for   |  |         
|                                   |  | Beginning             |     | Administrative |  | Cost of  |    | Price      |  | Purposes |     | Ending 
|                                   |  | Balance               |     | and Selling    |  | Sales    |    | Allocation |  | Intended |     | Balance
|                                   |  |                       |     |                |  |          |    |            |  |          |     |        
|                                   |  |                      
|                                   |  | (Dollars in millions)
|Ten months ended December 31, 2003 |  | $                     | 51  |                |  | $        | 13 |            |  | $        | 16  |         |  | $ | 37 |  |  | $ | (38  | ) |  | $ | 79  | 
|Two months ended February 28, 2003 |  | $                     | 61  |                |  | $        | 1  |            |  | $        | 2   |         |  | $ |   |  |  | $ | (13  | ) |  | $ | 51  | 
|Year ended December 31, 2002       |  | $                     | 145 |                |  | $        | 17 |            |  | $        | 42  |         |  | $ |   |  |  | $ | (143 | ) |  | $ | 61  | 
|Year ended December 31, 2001       |  | $                     | 63  |                |  | $        | 87 |            |  | $        | 126 |         |  | $ |   |  |  | $ | (131 | ) |  | $ | 145 | 

Of the $79 million restructuring reserve
accrued at December 31, 2003, approximately
$46 million is expected to be paid through 2004, and
approximately $20 million relates to involuntary employee
termination arrangements outside the United States to be paid
over the next several years in accordance with local law.

Asset Impairments Other Than
Restructuring

In 2001, Chassis Systems, Occupant Safety Systems
and Automotive Components segments recorded asset impairment
charges of $28 million, $10 million and
$12 million, respectively. These charges, related primarily
to the write-down of property, plant and equipment, were
recorded as $38 million in cost of sales, $11 million
in other (income) expense-net and $1 million in goodwill
amortization. Of these charges, $49 million was a result of
the reduction of volume, consolidation of production and
outsourcing at certain facilities. In 2002, Occupant Safety
Systems and Automotive Components segments recorded asset
impairment charges of $11 million and $6 million,
respectively. Of these charges, $10 million related to the
write-down of the investment in two affiliates to fair market
value. The remaining $7 million related primarily to the
write-down of property, plant and equipment to fair value. Of
these charges, $9 million was recorded in other income-net,
$7 million in cost of sales and $1 million in
amortization of intangible assets.

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Pension Plans

During the periods presented, substantially all
our employees participated in defined benefit pension plans or
retirement/termination indemnity plans. Net pension income
included in earnings from continuing operations of the
Predecessor for the years ended December 31, 2001 and 2002
and the two months ended February 28, 2003 was
$209 million, $222 million and $23 million,
respectively. Generally, pension income is required to be
retained by the applicable pension plan and is not available for
general corporate use. The net pension income during these
periods is principally due to the overfunded status of the U.K.
defined benefit plan. The fair value of plan assets in excess of
the projected benefit obligation for the U.K. plan was
$1.8 billion, $1.2 billion, $155 million,
$55 million and $280 million at January 1, 2001,
2002, 2003, March 1, 2003 and October 31, 2003,
respectively. The projected benefit obligations in excess of the
fair value of plan assets for the U.S. and other plans was
$174 million, $327 million, $563 million,
$801 million and $826 million on January 1, 2001,
2002, 2003, March 1, 2003, and October 31, 2003,
respectively. For the ten months ended December 31, 2003,
net pension expense of the Successor was $24 million. The
pension expense reflects the application of purchase accounting
related to the Acquisition, including the recognition of all
unamortized gains and losses in the opening balance sheet,
valuing of the assets at fair value as of March 1, 2003 and
changes in actuarial assumptions at March 1, 2003. See
 Critical Accounting Estimates 
Employee Benefit Plans and Note 18 to the financial
statements.

Critical Accounting Estimates

The critical accounting estimates that affect our
financial statements and that use judgments and assumptions are
listed below. In addition, the likelihood that materially
different amounts could be reported under varied conditions and
assumptions is noted.

Product Recalls.We
are at risk for product recall costs. Recall costs are costs
incurred when the customer or we decide to recall a product
through a formal campaign, soliciting the return of specific
products due to a known or suspected safety concern. In
addition, the National Highway Traffic Safety Administration has
the authority, under certain circumstances, to require recalls
to remedy safety concerns. Product recall costs typically
include the cost of the product being replaced, customer cost of
the recall and labor to remove and replace the defective part.

During the Predecessor periods when a decision to
recall a product had been made for which we bore some
responsibility, we recorded the estimated cost to us of the
recall as a charge to net earnings in that period, in accordance
with Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS)
No. 5, Accounting for Contingencies
(SFAS 5). In making estimates relating to
product recalls, judgment was required as to the number of units
to be returned, the total cost of the recall campaign, the
ultimate negotiated sharing of the cost between us and the
customer and, in some cases, the extent to which our supplier
would share in the recall cost. As a result, our actual recall
costs could be significantly different from our estimated costs.

Effective as of the Acquisition date, we
implemented a new methodology for actuarially estimating our
recall obligations that differs from that of our predecessor. We
engaged independent third-party actuaries to run loss histories
for the purpose of establishing loss projections and completed
the valuation work in the fourth quarter of 2003. Under the
actuarial estimation methodology, we accrue for recalls when
revenues are recognized upon the shipment of product. The
adoption of this estimation methodology does not have a material
effect on the reported results of operations or cash flows for
the ten month period ended December 31, 2003 or any
individual quarter within such period. In the future, using an
actuarial based estimation will have the effect of better
matching revenues and expenses as relative to the methodology
employed by our predecessor, we will record higher expenses in a
period of minor or no recalls and lower expenses in a period of
a significant recall since the obligation will have already been
accrued as the revenue was recognized.

Impairment of Long-Lived Assets and
Intangibles.We evaluate long-lived
assets and intangibles subject to amortization for impairment
when events and circumstances indicate that the assets may be
impaired and the undiscounted cash flows to be generated by
those assets are less than their carrying value. If the
undiscounted cash flows are less than the carrying value of the
assets, the assets are written down to their fair value.

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The determination of undiscounted cash flows is
based on the businesses strategic plans and long-range
planning forecasts. The revenue growth rates included in the
plans are based on industry specific data. We use external
vehicle build assumptions published by widely used external
sources and market share data by customer based on known and
targeted awards over a five-year period. The projected profit
margin assumptions included in the plans are based on the
current cost structure and anticipated cost reductions. If
different assumptions were used in these plans, the related
undiscounted cash flows used in measuring impairment could be
different and additional impairment of assets might be required
to be recorded.

We test intangible assets not subject to
amortization, other than goodwill, for impairment on an annual
basis by comparing the estimated fair values to the carrying
values. If the carrying value exceeds the estimated fair value,
the asset is written down to its estimated fair value. Estimated
fair value is based on cash flows, discussed above, discounted
at a risk-adjusted rate of return.

We also evaluate the useful lives of intangible
assets each reporting period.

Goodwill.Effective
January 1, 2002, we adopted SFAS No. 142,
Goodwill and Other Intangible Assets. See
Recent Accounting Pronouncements. In connection with
the Acquisition, we have applied the provisions of
SFAS No. 141, Business Combinations
(SFAS 141) and, after the application of
purchase accounting, we have recorded approximately
$2.5 billion in goodwill.

In accordance with SFAS 142, we no longer
amortize goodwill but perform annual impairment testing at a
reporting unit level. Our reporting units are our three
reportable operating segments. To test goodwill for impairment,
we estimate the fair value of each reporting unit and compare
the estimated fair value to the carrying value. If the carrying
value exceeds the estimated fair value, then a possible
impairment of goodwill exists and requires further evaluation.
Estimated fair values are based on the cash flows projected in
the reporting units strategic plans and long-range
planning forecasts (see Impairment of Long-Lived Assets
and Intangibles), discounted at a risk-adjusted rate of
return.

As the estimated fair values of our reporting
units exceeded their carrying values at each testing date since
adoption, we have recorded no goodwill impairment. While we
believe our estimates of fair value are reasonable based upon
current information and assumptions about future results,
changes in our businesses, the markets for our products, the
economic environment and numerous other factors could
significantly alter our fair value estimates and result in
future impairment of recorded goodwill.

Employee Benefit
Plans.Assumptions used in determining
projected benefit obligations and the fair value of plan assets
for our pension plans and other post-retirement benefits are
evaluated periodically by management in consultation with
outside actuaries and outside investment advisors. Changes in
assumptions are based on relevant company data, such as the rate
of increases in compensation levels and the long-term rate of
return on plan assets. Critical assumptions such as the expected
long-term rate of return on plan assets, the discount rate used
to measure our benefit obligations and health care cost
projections are evaluated and updated annually. Based on our
assumptions as of October 31, 2003, as discussed below, a
one fourth percentage point change in these assumptions, holding
all other assumptions constant, would have the following effect
on our U.S. pension costs and obligations on an annual
basis:

|                                  |  |                       |    |          |  |   |   | 
|--------------------------------- |  | --------------------- | -- | -------- |  | - | - | 
|                                  |  |                      
|                                  |  | Costs                
|                                  |  |                      
|                                  |  | Increase              |    | Decrease
|                                  |  |                       |    |         
|                                  |  |                      
|                                  |  | (Dollars in millions)
|Discount rate                     |  | $                     | (1 | )        |  | $ | 1 | 
|Expected long-term rate of return |  | $                     | (2 | )        |  | $ | 2 | 

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|              |  |                       |     |          |  |   |    | 
|------------- |  | --------------------- | --- | -------- |  | - | -- | 
|              |  |                      
|              |  | Obligations          
|              |  |                      
|              |  | Increase              |     | Decrease
|              |  |                       |     |         
|              |  |                      
|              |  | (Dollars in millions)
|Discount rate |  | $                     | (33 | )        |  | $ | 34 | 

|                                 |  |                       |     |          |  |   |    | 
|-------------------------------- |  | --------------------- | --- | -------- |  | - | -- | 
|                                 |  |                      
|                                 |  | Impact on            
|                                 |  | U.S. Retiree         
|                                 |  | Healthcare Costs of  
|                                 |  | a One-Fourth         
|                                 |  | Percentage Change    
|                                 |  | in Discount Rate     
|                                 |  |                      
|                                 |  | Increase              |     | Decrease
|                                 |  |                       |     |         
|                                 |  |                      
|                                 |  | (Dollars in millions)
|U.S. retiree welfare expense     |  | $                     |    |          |  | $ |   | 
|U.S. retiree welfare obligations |  | $                     | (23 | )        |  | $ | 25 | 

|                                 |  |                            |     |                |  |  |      |  
|-------------------------------- |  | -------------------------- | --- | -------------- |  |  | ---- | -
|                                 |  |                           
|                                 |  | Percentage Change on      
|                                 |  | U.S. Retiree Healthcare if
|                                 |  | Healthcare Trend Rates    
|                                 |  |                           
|                                 |  | Decrease by 1%             |     | Increase by 1%
|                                 |  |                            |     |               
|U.S. retiree welfare expense     |  |                            | 9.1 | %              |  |  | 11.0 | %
|U.S. retiree welfare obligations |  |                            | 8.5 | %              |  |  | 10.1 | %

Pensions.We account
for our defined benefit pension plans in accordance with
SFAS No. 87, Employers Accounting for
Pensions (SFAS 87), which requires that
amounts recognized in financial statements be determined on an
actuarial basis. This determination involves the selection of an
expected rate of return on plan assets and a discount rate.
SFAS 87 and the policies we have used, notably the use of a
calculated value of plan assets for pensions (which is further
described below), generally reduced the volatility of pension
income and expense that would have otherwise resulted from
changes in the value of the pension plan assets and pension
liability discount rates. A substantial portion of our pension
benefits relate to our plans in the United States and the United
Kingdom. As discussed in  Pension plans,
the Predecessors results of operations for the periods
presented through February 28, 2003 reflect net pension
income due to the over-funded status of our U.K. plan, net of
pension expense for our U.S. and other plans. For the ten months
ended December 31, 2003, our net pension expense reflects a
combination of a decreased long-term rate of return assumption
on the assets, decreased discount rate and use of fair value of
plan assets as of March 1, 2003 in our purchase accounting,
as opposed to the five-year market related value used
historically.

One key assumption in determining our net pension
(income) expense in accordance with SFAS 87 is the expected
long-term rate of return on plan assets. The expected long-term
annual rate of return on pension assets for 2001, 2002, and 2003
through February 28 were assumed by the Predecessor to be
9.5%, 9.5%, and 9.0%, respectively, in the United States and
8.75% in the United Kingdom. Effective March 1, 2003, we
are assuming long-term annual rates of return on pension assets
of 8.5% in the U.S. and 7.75% in the U.K. The actual returns on
pension assets were a negative 4.3% in 2001, a negative 2.5% in
2002 and a positive 25.9% in 2003 for the U.S. plans and a
negative 8.6% in 2001 and a negative 14.4% in 2002 and a
positive 17% in 2003 for the U.K. plan. Over the last twelve
years through December 31, 2003, our U.S. and U.K. plans
have averaged returns of 8.4% and 8.2%, respectively. We review
our long-term rate of return assumptions annually through
comparison of our historical actual rates of return with our
expectations, consultation with our actuaries regarding the
assumptions used by other large companies and consultation with
our investment managers regarding their expectations for future
returns. While we believe our assumptions of future returns are
reasonable and appropriate, significant differences in our
actual experience or significant changes in our assumptions may
materially affect our pension obligations and our future pension
(income) expense. The expected long-term rate of return on
assets is applied to a calculated market-related value of plan
assets, which recognizes changes in the fair value of plan
assets in a systematic manner over five years. This produces the
expected return on plan assets that is included in pension
(income) expense. In computing the expected return on plan
assets that was included in the pension expense of the Successor
for the ten month period ended December 31, 2003, the
market-related value of assets was set equal to the fair value
of assets; and, in future years, assets gains and losses will be
amortized over five years in determining the market-related
value of assets used to calculate the expected return component
of pension income. The Predecessor used this same methodology to
calculate the expected return.

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Another key assumption in determining our net
pension (income) expense is the determination of the discount
rate to be used to discount plan liabilities. The discount rate
reflects the current rate at which the pension liabilities could
be effectively settled at the end of the year. In estimating
this rate, we look to rates of return on high quality,
fixed-income investments that receive one of the two highest
ratings given by a recognized ratings agency, and we review the
assumption with our actuaries. As of December 31, 2001, the
Predecessor determined its pension discount rates to be 7.25%
for the U.S. plans and 5.75% for the U.K. plan. As of
December 31, 2002, the Predecessor assumed discount rates
of 6.5% and 5.5% for the U.S. plans and the U.K. plan,
respectively. These rates were used for the two-month period
ended February 28, 2003. Beginning March 1, 2003, we
are using discount rates of 6.25% and 5.5% for the
U.S. plans and the U.K. plan respectively. Changes in
discount rates over the past three years have not materially
affected pension income (expense), and the net effect of changes
in the discount rate, as well as the net effect of other changes
in actuarial assumptions and experience, have been deferred
historically as allowed by SFAS 87. As a result of the
Acquisition and the application of purchase accounting, all
unamortized historical changes were immediately recognized in
the opening balance sheet.

We expect to contribute approximately $60 to
$70 million to our U.S. pension plans (subject to
possible legislative changes) and approximately $26 million
to our non-U.S. pension plans in 2004.

Other Post-Retirement
Benefits.We account for our Other
Post-Retirement Benefits (OPEB) in accordance with
SFAS No. 106, Employers Accounting for
Post-Retirement Benefits Other Than Pensions, which
requires that amounts recognized in financial statements be
determined on an actuarial basis. This determination requires
the selection of a discount rate and health care cost trend
rates used to value benefit obligations. The discount rate
reflects the current rate at which the OPEB liabilities could be
effectively settled at the end of the year. In estimating this
rate, we look to rates of return on high quality, fixed-income
investments that receive one of the two highest ratings given by
a recognized ratings agency and we review the assumption with
our actuaries. As of December 31, 2002, the Predecessor
determined its discount rate for OPEB to be 6.5%. The
Predecessor used a discount rate for OPEB of 6.5% for the
two-month period ended February 28, 2003, based on
information available as of December 31, 2002. Beginning
March 1, 2003, we are using a discount rate for OPEB of
6.25%. We develop our estimate of the health care cost trend
rates used to value benefit obligations through review of our
recent health care cost trend experience and through discussions
with our actuary regarding the experience of similar companies.
At December 31, 2001, the Predecessor assumed a
6.4% annual rate of increase in the per capita cost of
covered health care benefits for the U.S. plan
(representing substantially all of the OPEB benefits), which was
assumed to gradually decrease to 5.1% in the year 2009 and
remain at that level thereafter. At December 31, 2002, the
Predecessor assumed a 10.0% annual rate of increase in the
per capita cost of covered health care benefits for the
U.S. plan, which was assumed to decrease gradually to 5.0%
over eight years and remain at that level thereafter. This
assumption was maintained after the Acquisition. We fund our
OPEB obligation on a pay-as-you-go basis and have no plan
assets. We expect to contribute approximately $75 million
on a pay-as-you-go basis to our plans in 2004. Changes in the
assumed discount rate or health care cost trend rate can have a
significant impact on our actuarially determined liability and
related OPEB expense.

On December 8, 2003, President Bush signed
into law the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the MPD Act). The MPD Act
expanded Medicare to include, for the first time, coverage for
prescription drugs. We sponsor retiree welfare programs and
expect that this legislation will eventually reduce our costs
for some of these programs. At this point, our investigation
into a response to the legislation is preliminary, as we await
guidance from various governmental and regulatory agencies
concerning the requirements that must be met to obtain these
cost reductions as well as the manner in which such savings
should be measured.

Because of the various uncertainties related to
our response to this legislation and the appropriate accounting
methodology for this event, we have elected to defer financial
recognition of this legislation until the Financial Accounting
Standards Board issues final accounting guidance. As such,
measures of the accumulated post-retirement benefits obligation
and net periodic post-retirement benefits cost included in these
financial statements do not reflect the effects of the MPD Act.
This deferral election is permitted under FASB Staff Position
FAS 106-1, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003.

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Income Taxes and Tax Valuation
Allowances.We record the estimated
future tax effects of temporary differences between the tax
basis of assets and liabilities and amounts reported in our
balance sheets, as well as operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply for taxable income in
the years in which those temporary differences are expected to
be recovered or settled. We follow specific guidelines in each
tax jurisdiction regarding the recoverability of any tax assets
recorded on the balance sheet and provide necessary valuation
allowances as required. We review our deferred tax assets for
recoverability based on historical taxable income, projected
future taxable income, the expected timing of the reversals of
existing temporary differences and tax planning strategies. If
we continue to operate at a loss in certain jurisdictions or are
unable to generate sufficient future taxable income, or if there
is a material change in the actual effective tax rates or time
period within which the underlying temporary differences become
taxable or deductible, we could be required to increase the
valuation allowances against all or a significant portion of our
deferred tax assets resulting in an increase in our effective
tax rate and an adverse impact on our reported results. On
February 28, 2003, the Acquisition required the Company to
record certain purchase accounting adjustments, which
accordingly required the Company to record certain deferred
taxes. As of December 31, 2003, our gross deferred tax
assets were approximately $1,202 million and our gross
deferred tax liabilities were approximately $864 million.
These amounts were reduced by a valuation allowance of
$223 million for a net deferred tax asset of
$115 million.

Environmental.Governmental regulations relating to the discharge of materials
into the environment, or otherwise relating to the protection of
the environment, have had, and will continue to have, an effect
on our operations. We have made and continue to make
expenditures for projects relating to the environment, including
pollution control devices for new and existing facilities. We
are conducting a number of environmental investigations and
remedial actions at current and former locations to comply with
applicable requirements and along with other companies, have
been named a potentially responsible party for certain waste
management sites.

A reserve estimate for each matter is established
using standard engineering cost estimating techniques on an
undiscounted basis. In the determination of such costs,
consideration is given to the professional judgment of our
environmental engineers, in consultation with outside
environmental specialists, when necessary. At multi-party sites,
the reserve estimate also reflects the expected allocation of
total project costs among the various potentially responsible
parties. Each of the environmental matters is subject to various
uncertainties, and some of these matters may be resolved
unfavorably to us. We believe that any liability, in excess of
amounts accrued in our consolidated and combined financial
statements, that may result from the resolution of these matters
for which sufficient information is available to support cost
estimates, will not have a material adverse affect on our
financial position, results of operations or cash flows.
However, we cannot predict the effect on our financial position,
results of operations or cash flows for aspects of certain
matters for which there is insufficient information. In
addition, we cannot predict the effect of compliance with
environmental laws and regulations with respect to unknown
environmental matters.




Results of Operations on a Pro Forma
Basis

The following unaudited pro forma consolidated
and combined statements of operations for years ended
December 31, 2003 and 2002 include adjustments to reflect
the effect of the Transactions as if they have occurred on
January 1, 2002. These unaudited pro forma consolidated and
combined statements of operations and related notes are provided
for informational purposes only and do not purport to be
indicative of the results which would have actually been
attained had the Transactions occurred on January 1, 2002
or that may be attained in the future.

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| |                                        
| | ---------------------------------------
| | Total Company Results of
    Operations

PRO FORMA CONSOLIDATED AND COMBINED STATEMENTS
OF OPERATIONS

For the Year Ended December 31,
2003


|                                              |  |                       |       |              |  |             |       |           |  |   |      |      |  |   |        |  
|--------------------------------------------- |  | --------------------- | ----- | ------------ |  | ----------- | ----- | --------- |  | - | ---- | ---- |  | - | ------ | -
|                                              |  |                       |       |              |  |            
|                                              |  | Historical            |       |              |  |            
|                                              |  |                       |       |              |  |            
|                                              |  | Successor             |       | Predecessor  |  |             |       |          
|                                              |  |                       |       |              |  |             |       |          
|                                              |  | Ten Months            |       | Two Months   |  |             |       |          
|                                              |  | Ended                 |       | Ended        |  |             |       |          
|                                              |  | December 31,          |       | February 28, |  | Pro Forma   |       |          
|                                              |  | 2003                  |       | 2003         |  | Adjustments |       | Pro Forma
|                                              |  |                       |       |              |  |             |       |          
|                                              |  |                      
|                                              |  | (Dollars in millions)
|Sales                                         |  | $                     | 9,435 |              |  | $           | 1,916 |           |  | $ | (43  | )(a) |  | $ | 11,308 |  
|Cost of sales                                 |  |                       | 8,456 |              |  |             | 1,686 |           |  |   | (100 | )(b) |  |   | 10,042 |  
|                                              |  |                       |       |              |  |             |       |           |  |   |      |      |  |   |        |  
|Gross profit                                  |  |                       | 979   |              |  |             | 230   |           |  |   | 57   |      |  |   | 1,266  |  
|Administrative and selling expenses           |  |                       | 446   |              |  |             | 100   |           |  |   | (2   | )(c) |  |   | 544    |  
|Research and development expenses             |  |                       | 137   |              |  |             | 27    |           |  |   |     |      |  |   | 164    |  
|Purchased in-process research and development |  |                       | 85    |              |  |             |      |           |  |   | (85  | )(d) |  |   |       |  
|Amortization of intangible assets             |  |                       | 27    |              |  |             | 2     |           |  |   | 3    | (e)  |  |   | 32     |  
|Other (income) expense  net                  |  |                       | (56   | )            |  |             | 4     |           |  |   | (1   | )(f) |  |   | (53    | )
|                                              |  |                       |       |              |  |             |       |           |  |   |      |      |  |   |        |  
|Operating income                              |  |                       | 340   |              |  |             | 97    |           |  |   | 142  |      |  |   | 579    |  
|Interest expense                              |  |                       | 260   |              |  |             | 48    |           |  |   | (27  | )(g) |  |   | 281    |  
|Interest income                               |  |                       | (8    | )            |  |             | (1    | )         |  |   | 1    | (g)  |  |   | (8     | )
|Losses on sales of receivables                |  |                       | 25    |              |  |             |      |           |  |   | (17  | )(g) |  |   | 8      |  
|Loss on retirement of debt                    |  |                       | 31    |              |  |             |      |           |  |   | (31  | )(h) |  |   |       |  
|                                              |  |                       |       |              |  |             |       |           |  |   |      |      |  |   |        |  
|(Losses) earnings before income taxes         |  |                       | 32    |              |  |             | 50    |           |  |   | 216  |      |  |   | 298    |  
|Income tax expense                            |  |                       | 98    |              |  |             | 19    |           |  |   | 42   | (i)  |  |   | 159    |  
|                                              |  |                       |       |              |  |             |       |           |  |   |      |      |  |   |        |  
|Net (losses) earnings                         |  | $                     | (66   | )            |  | $           | 31    |           |  | $ | 174  |      |  | $ | 139    |  
|                                              |  |                       |       |              |  |             |       |           |  |   |      |      |  |   |        |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Reflects the elimination of the sales of TKS,
    which was not transferred to us as part of the Acquisition. See
    Note 1 of the Notes to Combined and Consolidated Financial
    Statements.                                                                                                                                                                                                                                       
|   
|(b) |  | Reflects the elimination of $40 million of
    cost of sales of TKS, $12 million in pension and OPEB
    adjustments as a result of purchase accounting, the elimination
    of the effects of a $43 million inventory write-up recorded
    as a result of the Acquisition and $5 million net decrease
    in depreciation and amortization expense resulting from fair
    value adjustments to fixed assets and certain intangibles.
|   
|(c) |  | Reflects the elimination of $1 million
    administrative and selling expense of TKS, the addition of
    $1 million in the annual monitoring fee payable to an
    affiliate of Blackstone and $2 million decrease in
    depreciation and amortization expense resulting from fair value
    adjustments to fixed assets and capitalized software.                                                                                   
|   
|(d) |  | Reflects the elimination of the fair value of
    purchased in-process research and development expensed as a
    result of purchase accounting.                                                                                                                                                                                                                                                                                       
|   
|(e) |  | Reflects the incremental increase in amortization
    resulting from assignment of fair value to certain intangibles.                                                                                                                                                                                                                                                                                                                  
|   
|(f) |  | Reflects elimination of $1 million other
    expense related to TKS.                                                                                                                                                                                                                                                                                                                                                                   
|   
|(g) |  | Reflects adjustments to present pro forma net
    financing costs based upon our new capital structure and the
    initiation of our receivables facility.                                                                                                                                                                                                                                                                             
|   
|(h) |  | Reflects the elimination of the loss on
    retirement of debt in connection with the July 2003 refinancing
    of certain portions of senior credit facilities.                                                                                                                                                                                                                                                                       
|   
|(i) |  | Reflects the tax effect of the above adjustments
    at the applicable tax rates.                                                                                                                                                                                                                                                                                                                                                      

18



---



##### Table of Contents



PRO FORMA COMBINED STATEMENT OF
OPERATIONS

For the Year Ended December 31,
2002


|                                    |  |                       |        |             |  |           |      |      |  |   |        |  
|----------------------------------- |  | --------------------- | ------ | ----------- |  | --------- | ---- | ---- |  | - | ------ | -
|                                    |  |                       |        | Pro Forma   |  |          
|                                    |  | Historical            |        | Adjustments |  | Pro Forma
|                                    |  |                       |        |             |  |          
|                                    |  |                      
|                                    |  | (Dollars in millions)
|Sales                               |  | $                     | 10,630 |             |  | $         | (246 | )(a) |  | $ | 10,384 |  
|Cost of sales                       |  |                       | 9,315  |             |  |           | (267 | )(b) |  |   | 9,048  |  
|                                    |  |                       |        |             |  |           |      |      |  |   |        |  
|Gross profit                        |  |                       | 1,315  |             |  |           | 21   |      |  |   | 1,336  |  
|Administrative and selling expenses |  |                       | 541    |             |  |           | (40  | )(c) |  |   | 501    |  
|Research and development expenses   |  |                       | 151    |             |  |           |     |      |  |   | 151    |  
|Amortization of intangible assets   |  |                       | 15     |             |  |           | 18   | (d)  |  |   | 33     |  
|Other income  net                  |  |                       | (6     | )           |  |           | (8   | )(e) |  |   | (14    | )
|                                    |  |                       |        |             |  |           |      |      |  |   |        |  
|Operating income                    |  |                       | 614    |             |  |           | 51   |      |  |   | 665    |  
|Interest expense                    |  |                       | 316    |             |  |           | (48  | )(f) |  |   | 268    |  
|Interest income                     |  |                       | (7     | )           |  |           | 1    | (g)  |  |   | (6     | )
|Losses on sales of receivables      |  |                       | 7      |             |  |           | (2   | )(f) |  |   | 5      |  
|Gain on retirement of debt          |  |                       | (4     | )           |  |           | 4    | (h)  |  |   |       |  
|                                    |  |                       |        |             |  |           |      |      |  |   |        |  
|Earnings before income taxes        |  |                       | 302    |             |  |           | 96   |      |  |   | 398    |  
|Income tax expense                  |  |                       | 138    |             |  |           | 32   | (i)  |  |   | 170    |  
|                                    |  |                       |        |             |  |           |      |      |  |   |        |  
|Net earnings                        |  | $                     | 164    |             |  | $         | 64   |      |  | $ | 228    |  
|                                    |  |                       |        |             |  |           |      |      |  |   |        |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Reflects the elimination of sales of TKS, which
    was not transferred to us as part of the Acquisition. See
    Note 1 of the Notes to Consolidated and Combined Financial
    Statements.                                                                                                                                                                                                                            
|   
|(b) |  | Reflects the elimination of $228 million of
    cost of sales of TKS, $10 million in pension adjustments as
    a result of purchase accounting and $29 million net
    decrease in depreciation and amortization expense resulting from
    fair value adjustments in fixed assets and certain intangibles.                                                                                                            
|   
|(c) |  | Reflects the elimination of $3 million in
    administrative and selling expenses for TKS, $28 million
    net reduction in historical corporate allocations compared to
    estimated stand-alone costs including the annual monitoring fee
    and a $9 million net decrease in depreciation and
    amortization expense resulting primarily from fair value
    adjustments to fixed assets and certain intangibles.
|   
|(d) |  | Reflects the incremental increase in amortization
    expense resulting from fair value adjustments to certain
    intangibles.                                                                                                                                                                                                                                                                                         
|   
|(e) |  | Reflects the elimination of $8 million of
    other expense related to TKS.                                                                                                                                                                                                                                                                                                                                             
|   
|(f) |  | Reflects adjustments to show pro forma net
    financing costs based upon our new capital structure and the
    initiation of our receivables facility.                                                                                                                                                                                                                                                                 
|   
|(g) |  | Reflects the elimination of $1 million
    interest income related to TKS.                                                                                                                                                                                                                                                                                                                                              
|   
|(h) |  | Reflects the elimination of the gain on the
    repurchase of £5.4 million Lucas Varity senior notes
    in the first quarter of 2002. Gain was reclassified from
    extraordinary items to earnings before income
    taxes under SFAS 145, as of January 1, 2003.                                                                                                                                                
|   
|(i) |  | Reflects the tax effect of the above adjustments
    at applicable tax rates.                                                                                                                                                                                                                                                                                                                                           

The historical and pro forma results of
operations of the Predecessor and the Successor reflect the
impact of various unusual items during the periods discussed.
Earnings (losses) from continuing operations (pretax) for
the pro forma years ended December 31, 2003 and 2002 and
the historical years ended

19



---



##### Table of Contents



December 31, 2002 and 2001 were negatively
impacted by the effects of these unusual items as presented in
the following table:


|                                                                                    |                              |                       |     |              |   |            |     |      |   |   |     |     |   |   |      |      |  
|----------------------------------------------------------------------------------- | ---------------------------- | --------------------- | --- | ------------ | - | ---------- | --- | ---- | - | - | --- | --- | - | - | ---- | ---- | -
|                                                                                    |                              |                       |     |              |   |           
|                                                                                    |                              |                       |     |              |   | Historical
|                                                                                    |                              |                       |     |              |   |           
|                                                                                    |                              |                       |     |             
|                                                                                    |                              | Pro Forma             |     | Predecessor 
|                                                                                    |                              |                       |     |             
|                                                                                    |                              |                       |     |             
|                                                                                    |                              | Years Ended           |     | Years Ended 
|                                                                                    |                              | December 31,          |     | December 31,
|                                                                                    |                              |                       |     |             
|                                                                                    |                              | 2003                  |     | 2002         |   | 2002       |     | 2001
|                                                                                    |                              |                       |     |              |   |            |     |     
|                                                                                    |                              |                      
|                                                                                    |                              | (Dollars in millions)
|Restructuring charges:                                                              |                              |                       |     |              |   |            |     |      |   |   |     |     |   |   |      |     
|                                                                                    | Severance and other (cash)   |                       | $   | (32          | ) |            | $   | (27  | ) |   | $   | (27 | ) |   | $    | (189 | )
|                                                                                    | Asset impairments (non-cash) |                       |     |             |   |            |     | (32  | ) |   |     | (32 | ) |   |      | (24  | )
|                                                                                    |                              |                       |     |              |   |            |     |      |   |   |     |     |   |   |      |     
|Total restructuring charges                                                         |                              |                       | (32 | )            |   |            | (59 | )    |   |   | (59 | )   |   |   | (213 | )   
|Asset impairment charges other than restructuring                                   |                              |                       |    |              |   |            | (17 | )    |   |   | (17 | )   |   |   | (50  | )   
|Pending and threatened litigation and claims                                        |                              |                       |    |              |   |            | (2  | )    |   |   | (2  | )   |   |   | (36  | )   
|Gain on retirement of debt                                                          |                              |                       |    |              |   |            |    |      |   |   | 4   |     |   |   |     |     
|Net gain on the sale of assets                                                      |                              |                       |    |              |   |            | 12  |      |   |   | 12  |     |   |   | 18   |     
|Northrop Grumman/ TRW merger-related transaction
    costs                          |                              |                       | (6  | )            |   |            | (23 | )    |   |   | (23 | )   |   |   |     |     
|Other charges                                                                       |                              |                       | (1  | )            |   |            |    |      |   |   |    |     |   |   |     |     
|                                                                                    |                              |                       |     |              |   |            |     |      |   |   |     |     |   |   |      |     
|Unusual items included in earnings (losses) from
    continuing operations (pretax) |                              |                       | (39 | )            |   |            | (89 | )    |   |   | (85 | )   |   |   | (281 | )   
|                                                                                    |                              |                       |     |              |   |            |     |      |   |   |     |     |   |   |      |     
|Less:                                                                               |                              |                       |     |              |   |            |     |      |   |   |     |     |   |   |      |     
|(Gain) on retirement of debt                                                        |                              |                       |    |              |   |            |    |      |   |   | (4  | )   |   |   |     |     
|Unusual items on amortization of goodwill and
    intangible assets                 |                              |                       |    |              |   |            | 1   |      |   |   | 1   |     |   |   | 1    |     
|                                                                                    |                              |                       |     |              |   |            |     |      |   |   |     |     |   |   |      |     
|Unusual items included in EBITDA                                                    |                              | $                     | (39 | )            |   | $          | (88 | )    |   | $ | (88 | )   |   | $ | (280 | )   
|                                                                                    |                              |                       |     |              |   |            |     |      |   |   |     |     |   |   |      |     

These unusual items are classified in the
statements of operations as follows:

|                                                                                  |  |                       |    |              |  |            |     |      |  |   |     |   |  |   |     |  
|--------------------------------------------------------------------------------- |  | --------------------- | -- | ------------ |  | ---------- | --- | ---- |  | - | --- | - |  | - | --- | -
|                                                                                  |  |                       |    |              |  |           
|                                                                                  |  |                       |    |              |  | Historical
|                                                                                  |  |                       |    |              |  |           
|                                                                                  |  |                       |    |             
|                                                                                  |  | Pro Forma             |    | Predecessor 
|                                                                                  |  |                       |    |             
|                                                                                  |  |                       |    |             
|                                                                                  |  | Years Ended           |    | Years Ended 
|                                                                                  |  | December 31,          |    | December 31,
|                                                                                  |  |                       |    |             
|                                                                                  |  | 2003                  |    | 2002         |  | 2002       |     | 2001
|                                                                                  |  |                       |    |              |  |            |     |     
|                                                                                  |  |                      
|                                                                                  |  | (Dollars in millions)
|Cost of sales                                                                     |  | $                     | 20 |              |  | $          | 61  |      |  | $ | 61  |   |  | $ | 169 |  
|Administrative and selling expenses                                               |  |                       | 18 |              |  |            | 35  |      |  |   | 35  |   |  |   | 87  |  
|Amortization of goodwill and intangible assets                                    |  |                       |   |              |  |            | 1   |      |  |   | 1   |   |  |   | 1   |  
|Other expense (income)  net                                                      |  |                       | 1  |              |  |            | (8  | )    |  |   | (8  | ) |  |   | 24  |  
|Gain on retirement of debt                                                        |  |                       |   |              |  |            |    |      |  |   | 4   |   |  |   |    |  
|                                                                                  |  |                       |    |              |  |            |     |      |  |   |     |   |  |   |     |  
|Reduction in earnings (losses) from continuing
    operations before income taxes |  |                       | 39 |              |  |            | 89  |      |  |   | 85  |   |  |   | 281 |  
|Income tax (expense)                                                              |  |                       | (9 | )            |  |            | (24 | )    |  |   | (22 | ) |  |   | (98 | )
|                                                                                  |  |                       |    |              |  |            |     |      |  |   |     |   |  |   |     |  
|Reduction in earnings (losses) from continuing
    operations                     |  | $                     | 30 |              |  | $          | 65  |      |  | $ | 63  |   |  | $ | 183 |  
|                                                                                  |  |                       |    |              |  |            |     |      |  |   |     |   |  |   |     |  



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Pro forma year ended December 31, 2003
    compared to pro forma year ended December 31,
    2002

Salesfor the year
ended December 31, 2003 of $11.3 billion increased
$924 million from $10.4 billion for the year ended
December 31, 2002. Higher sales resulted primarily from the
favorable impact of foreign currency exchange of
$967 million and the impact of higher volume and product
growth in excess of unfavorable pricing of $17 million
partially offset by the effect of business divestitures
completed in 2003 of $60 million. This higher volume was
achieved despite a lower level of underlying industry production
in both North America and Europe.

20



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##### Table of Contents



Gross Profitfor the
year ended December 31, 2003 of $1,266 million
declined $70 million from $1,336 million for the year
ended December 31, 2002. The decrease resulted from a
decline in net pension and OPEB income of $219 million, and
the net unfavorable impact of negative product mix in excess of
the positive effect of higher volume of $72 million,
partially offset by the favorable impact of foreign currency
exchange of $101 million, cost reduction savings in excess
of inflation and lower pricing of $80 million, and a
decrease in charges for unusual items of $41 million. Gross
profit for 2003 was reduced by unusual items of
$20 million, which were primarily restructuring costs for
severance. Net pension and OPEB expense included in gross profit
for 2003 was approximately $33 million compared to income
of approximately $186 million for 2002. Gross profit for
2002 was reduced by unusual items of $61 million, which
consisted of restructuring expense of $43 million,
principally for asset impairments and severance related charges,
asset impairment charges other than restructuring of
$14 million, and other charges related to employee
compensation arising from the Northrop Grumman acquisition of
TRW of $4 million. Gross profit as a percentage of sales
for 2003 was 11.2% compared to 12.9% for 2002.

Administrative and selling expensesfor the year ended December 31,
2003 of $544 million increased $43 million from
$501 million for the year ended December 31, 2002.
Higher costs resulted primarily from the unfavorable impact of
foreign currency exchange of $31 million, an increase in
net pension and OPEB expense of $5 million, and increases
in inflation, advertising costs, professional fees and other net
costs of $24 million, partially offset by a reduction in
charges for unusual items of $17 million. Net pension and
OPEB expense included in administrative and selling expenses for
the years 2003 and 2002 was approximately $28 million and
$23 million, respectively. Administrative and selling
expenses for 2003 included $18 million of charges for
unusual items, which consisted of approximately $13 million
of restructuring costs, and $5 million for costs associated
with our separation from Northrop Grumman. Administrative and
selling expenses for 2002 included charges for unusual items of
$35 million, which consisted of restructuring expenses
primarily for severance of $16 million, and other charges
of $19 million related to employee compensation arising
from the Northrop Grumman acquisition of TRW. Administrative and
selling expenses as a percentage of sales were 4.8% for 2003 and
for 2002.

Research and development expenseswere $164 million for the year
ended December 31, 2003 compared to $151 million for
the year ended December 31, 2002. Expenses increased
primarily due to the unfavorable impact of foreign currency
exchange of $14 million. Research and development expenses
as a percentage of sales were 1.5% for 2003 and 2002.

Other (income) expense  netfor the year ended December 31,
2003 was income of $53 million compared to income of
$14 million for the year ended December 31, 2002.
Other income for 2003 consisted of non-cash unrealized currency
translation gains on intercompany debt (which we do not expect
to recur on an ongoing basis) of $37 million, earnings of
affiliates of $9 million, net miscellaneous other income of
$8 million and an asset impairment charge of
$1 million. Other income for 2002 consisted of net gain on
sales of assets of $12 million, earnings of affiliates of
$6 million and miscellaneous other income of
$12 million, partially offset by asset impairment charges
of $9 million and foreign currency exchange losses of
$7 million.

Interest expensefor
the year ended December 31, 2003 was $281 million
compared to $268 million for year ended December 31,
2002.

The effective tax ratefor the year ended December 31,
2003 was 53% compared to 43% for the year ended
December 31, 2002. For 2003, the effective rate was higher
than the U.S. statutory rate due primarily to tax losses in
the United States, where tax benefits for net operating losses
are being fully reserved. For 2002, the effective rate was
higher than the U.S. statutory rate due primarily to
operating profits in certain foreign tax jurisdictions with
higher tax rates.

Earnings before interest, taxes, depreciation
and amortization (EBITDA): EBITDA is
defined as earnings (losses) before interest, losses on sales of
receivables, gain (loss) on retirement of debt, taxes,
depreciation and amortization (EBITDA). EBITDA for
the year ended December 31, 2003 was $1,065 million
compared to $1,148 million for the year ended
December 31, 2002. The decrease resulted primarily from a
decline in net pension and OPEB income of $224 million, the
unfavorable impact of negative product mix in excess of the
favorable effect of higher volume of $72 million, and other
net costs of $6 million. These decreases were largely
offset by the favorable impact of foreign currency exchange of
$132 million (which included a $32 million non-cash
unrealized currency translation gain on intercompany debt
positions),

21



---



##### Table of Contents



a decrease in charges for unusual items of
$49 million, and savings from cost reduction activities in
excess of inflation and lower pricing of $38 million. Net
pension and OPEB expense for 2003 was $61 million compared
to income of $163 million for 2002. EBITDA for 2003 was
reduced by unusual items of $39 million, which consisted of
restructuring expenses principally for severance of
$32 million and $6 million for costs associated with
our separation from Northrop Grumman, and other charges of
$1 million. EBITDA for 2002 included unusual items totaling
$88 million, which consisted of restructuring charges for
asset impairments of $32 million, restructuring charges
primarily for severance and other of $26 million, asset
impairment charges other than restructuring of $17 million,
charges related to the acquisition of TRW by Northrop Grumman of
$23 million, litigation charges of $2 million and net
gain on the sale of assets of $12 million.


EBITDA, a measure used by management to measure
performance, is reconciled to net earnings (losses) in the
following table. Our management believes EBITDA is useful to the
investors because it is frequently used by securities analysts,
investors and other interested parties in the evaluation of
companies in our industry. EBITDA is not a recognized term under
GAAP and does not purport to be an alternative to net earnings
(losses) as an indicator of operating performance or to cash
flows from operating activities as a measure of liquidity.
Because not all companies use identical calculations, this
presentation of EBITDA may not be comparable to other similarly
titled measures of other companies. Additionally, EBITDA is not
intended to be a measure of free cash flow for managements
discretionary use, as it does not consider certain cash
requirements such as interest payments, tax payments and debt
service requirements. The amounts shown for EBITDA, as presented
herein, differ from the amounts calculated under the definition
of EBITDA used in our debt instruments. The definition of EBITDA
used in our debt instruments is further adjusted for certain
cash and non-cash charges and is used to determine compliance
with financial covenants and our ability to engage in certain
activities such as incurring additional debt and making certain
payments.

The following table provides a reconciliation of
pro forma net earnings to EBITDA:

|                               |  |              |       |      |  |   |       |  
|------------------------------ |  | ------------ | ----- | ---- |  | - | ----- | -
|                               |  |             
|                               |  | Pro Forma   
|                               |  |             
|                               |  |             
|                               |  | Years Ended 
|                               |  | December 31,
|                               |  |             
|                               |  | 2003         |       | 2002
|                               |  |              |       |     
|                               |  |             
|                               |  | (Dollars in 
|                               |  | millions)   
|Net earnings                   |  | $            | 139   |      |  | $ | 228   |  
|Depreciation and amortization  |  |              | 486   |      |  |   | 483   |  
|Interest expense               |  |              | 281   |      |  |   | 268   |  
|Interest income                |  |              | (8    | )    |  |   | (6    | )
|Losses on sales of receivables |  |              | 8     |      |  |   | 5     |  
|Income tax expense             |  |              | 159   |      |  |   | 170   |  
|                               |  |              |       |      |  |   |       |  
|EBITDA                         |  | $            | 1,065 |      |  | $ | 1,148 |  
|                               |  |              |       |      |  |   |       |  



| |                                                   
| | --------------------------------------------------
| | Short Period Discussions on a Historical
    Basis

As a result of the Acquisition, our historical
results of operations for the ten months ended December 31,
2003 are reported on a different basis under the purchase method
of accounting and thus are not comparable to previous periods of
the Predecessor. Following is a discussion of the results of
operations of the Predecessor for the two months ended
February 28, 2003 and of the Successor for the ten months
ended December 31, 2003 on a historical basis.



| |                                       
| | --------------------------------------
| | Two Months Ended February 28,
    2003

For the two months ended February 28, 2003,
the Predecessor generated sales of $1,916 million, with
cost of sales of $1,686 million, resulting in a gross
profit of $230 million and a gross profit margin of 12.0%.
Administrative and selling expenses were $100 million or
5.2% of sales. Research and development expenses were
$27 million or 1.4% of sales. Amortization of intangible
assets was $2 million, other expense was $4 million
and operating income was $97 million or 5.1% of sales.
Interest expense was $48 million, interest

22



---



##### Table of Contents



income was $1 million and income tax expense
was $19 million. Net earnings were $31 million or 1.6%
of sales.




| |                                       
| | --------------------------------------
| | Ten Months Ended December 31,
    2003

For the ten months ended December 31, 2003,
the Successor generated sales of $9,435 million, with cost
of sales of $8,456 million, resulting in a gross profit of
$979 million and a gross profit margin of 10.4%.
Administrative and selling expenses were $446 million or
4.7% of sales. Research and development expenses were
$137 million or 1.5% of sales. Purchased in-process
research and development expense was $85 million,
amortization of intangible assets was $27 million, other
income was $56 million and operating income was
$340 million or 3.6% of sales. Interest expense was
$260 million, interest income was $8 million, losses
on sales of receivables was $25 million, loss on retirement
of debt was $31 million, and income tax expense was
$98 million. Net losses were $66 million. Included in
cost of sales for the ten months ended December 31, 2003
was a $43 million charge for the reversal of inventory fair
value write-up recorded as of the Acquisition date, relating to
inventory sold during the period. Included in interest expense
was $11 million related to bridge commitment fees and
$5 million of net interest expense on borrowed funds held
in escrow prior to the closing of the Acquisition. Included in
losses on sales of receivables was $18 million of one-time
fees related to the establishment of the receivables facility.



| |                                 
| | --------------------------------
| | Historical 2002 Compared to 2001

Salesfor the year
ended December 31, 2002 of $10.6 billion increased
$539 million from $10.1 billion in the year ended
December 31, 2001. The increase resulted from higher
volume, net of price reductions, of $384 million, and the
positive impact of foreign currency exchange of
$224 million, partially offset by the effect of
divestitures completed in 2001 of $69 million. Higher
volume primarily reflected higher customer vehicle production in
North America and sales growth in the Asia Pacific region.

Gross profitfor the
year ended December 31, 2002 of $1,315 million
increased $213 million from $1,102 million in the year
ended December 31, 2001. The increase was primarily due to
a decrease in unusual items of $108 million, the combined
effect of savings from cost reduction activities and a seat belt
recall in the third quarter of 2001, net of price reductions and
inflation, of $104 million, the net positive impact of
higher sales volume and product mix of $24 million, higher
U.K. pension income of $16 million, and the favorable
effect of foreign currency exchange of $13 million. This
increase was partially offset by a combination of higher costs
due to a product launch in Europe, a temporary increase in costs
following the closing of a facility in Europe and asset
write-offs totaling $32 million, and the impact of
divestitures completed in 2001 of $23 million. Gross profit
in 2002 was reduced by unusual items totaling $61 million,
consisting of restructuring charges of $43 million,
principally for asset impairments and severance related
expenses, asset impairment charges other than restructuring of
$14 million and other charges related to employee
compensation arising from the Northrop Grumman acquisition of
TRW of $4 million. Gross profit in 2001 was reduced by
unusual items totaling $169 million, consisting of
$126 million in restructuring expenses, asset impairment
charges other than restructuring of $38 million and other
charges of $5 million. Gross profit margin for 2002
increased to 12.4% from 10.9% in 2001.

Administrative and selling expensesfor the year ended December 31,
2002 of $541 million decreased $56 million from
$597 million in the year ended December 31, 2001.
Lower expenses resulted primarily from a decrease in unusual
items of $52 million, the effect of divestitures completed
in 2001 of $10 million and net cost reductions of
$6 million, partially offset by the unfavorable effect of
foreign currency exchange of $6 million and higher costs
associated with increased volume of $4 million.
Administrative and selling expenses in 2002 included charges for
unusual items of $35 million, consisting of restructuring
expenses primarily for severance of $16 million and other
charges of $19 million related to employee compensation
arising from the Northrop Grumman acquisition of TRW.
Administrative and selling expenses in 2001 included unusual
items related to restructuring charges of $87 million.
Administrative and selling expenses as a percentage of sales
were 5.1% in 2002 compared to 5.9% in 2001.

Research and development expenseswere $151 million for the year
ended December 31, 2002 and $131 million for the year
ended December 31, 2001. The increase in expenses is
primarily due to additional

23



---



##### Table of Contents



engineering costs on next generation vehicle
control systems and the unfavorable effect of foreign currency
exchange.


Interest expensefor
the year ended December 31, 2002 of $316 million
decreased $57 million from $373 million for the year
ended December 31, 2001. The decrease results from lower
average debt outstanding and lower short-term interest rates in
the United States.

Amortization of intangible assets and goodwillwas $15 million for the year
ended December 31, 2002 compared to $78 million for
the year ended December 31, 2001. The decrease resulted
primarily from the adoption of SFAS 142 on January 1,
2002, in accordance with which goodwill is no longer amortized.

Other (income) expense  netwas income of $6 million and
$2 million for the years ended December 31, 2002 and
2001, respectively. Other income for 2002 consisted of net gain
on sale of assets of $12 million, earnings of affiliates of
$6 million and miscellaneous other income of
$4 million, partially offset by asset impairment charges of
$9 million and foreign currency exchange losses of
$7 million. Other income for 2001 consisted of a net gain
on the sale of assets of $18 million, primarily from the
disposition of electrical products and aftermarket businesses in
India and Turkey, earnings of affiliates of $9 million and
other income of $15 million, partially offset by pending
and threatened litigation expenses of $29 million and asset
impairment charges of $11 million.

The effective tax ratewas 45.9% in both the years ended
December 31, 2002 and 2001.

EBITDAfor the year
ended December 31, 2002 of $1,123 million increased
$277 million from $846 million for the year ended
December 31, 2001. The increase resulted primarily from a
reduction in unusual items of $192 million, the combined
positive impact of a seatbelt recall in 2001 and cost reductions
in excess of lower pricing and inflation of $102 million,
the favorable impact of foreign currency exchange of
$16 million, the net positive impact of higher volume
partially reduced by a shift to lower margin products of
$11 million, and an increase in net pension and OPEB income
of $10 million. The increase was partially reduced by
higher costs related to a product launch in Europe, a temporary
increase in costs following the closure of a facility in Europe
and asset write-offs totaling $32 million, and the
unfavorable impact of divestitures completed in 2001 of
$10 million. EBITDA for 2002 included unusual items
totaling $88 million, consisting of restructuring charges
of $58 million, asset impairment charges other than
restructuring of $17 million, charges related to the
acquisition of TRW by Northrop Grumman of $23 million,
litigation charges of $2 million and gains on asset sales
of $12 million. EBITDA for 2001 included unusual items
aggregating $280 million, consisting of restructuring
charges of $213 million, asset impairment charges other
than restructuring of $49 million, charges for pending and
threatened litigation and claims of $36 million, and gains
on the sale of assets of $18 million. EBITDA included net
pension and OPEB income of $153 million in 2002 and
$143 million in 2001.

Following is a reconciliation of net earnings
(losses) to EBITDA:

|                                             |  |              |       |      |  |   |     |  
|-------------------------------------------- |  | ------------ | ----- | ---- |  | - | --- | -
|                                             |  |             
|                                             |  | Predecessor 
|                                             |  |             
|                                             |  |             
|                                             |  | Years Ended 
|                                             |  | December 31,
|                                             |  |             
|                                             |  | 2002         |       | 2001
|                                             |  |              |       |     
|                                             |  |             
|                                             |  | (Dollars in 
|                                             |  | millions)   
|Net earnings (losses)                        |  | $            | 164   |      |  | $ | (25 | )
|Depreciation and amortization                |  |              | 509   |      |  |   | 548 |  
|Interest expense                             |  |              | 316   |      |  |   | 373 |  
|Interest income                              |  |              | (7    | )    |  |   | (10 | )
|Loss on sale of receivables                  |  |              | 7     |      |  |   | 1   |  
|Loss on retirement of debt                   |  |              | (4    | )    |  |   |    |  
|Income tax expense                           |  |              | 138   |      |  |   | (30 | )
|Discontinued operations, net of income taxes |  |              |      |      |  |   | (11 | )
|                                             |  |              |       |      |  |   |     |  
|EBITDA                                       |  | $            | 1,123 |      |  | $ | 846 |  
|                                             |  |              |       |      |  |   |     |  

24



---



##### Table of Contents





| |                              
| | -----------------------------
| | Segment Results of Operations

The following table reconciles pro forma segment
sales and profit before taxes to pro forma consolidated sales
and profit before taxes for 2003 and 2002. See Note 14 to
the consolidated and combined financial statements for the
reconciliation of historical segment sales and profit before
taxes to historical consolidated amount and a description of
segment profit before taxes for the periods presented.

|                             |                         |                       |        |      |  |   |        |     | 
|---------------------------- | ----------------------- | --------------------- | ------ | ---- |  | - | ------ | --- | 
|                             |                         |                      
|                             |                         | Pro Forma            
|                             |                         |                      
|                             |                         |                      
|                             |                         | Years Ended          
|                             |                         | December 31,         
|                             |                         |                      
|                             |                         | 2003                  |        | 2002
|                             |                         |                       |        |     
|                             |                         |                      
|                             |                         | (Dollars in millions)
|Sales:                       |                         |                       |        |      |  |   |        |    
|Chassis Systems              |                         | $                     | 6,491  |      |  | $ | 5,832  |    
|Occupant Safety Systems      |                         |                       | 3,306  |      |  |   | 3,143  |    
|Automotive Components        |                         |                       | 1,511  |      |  |   | 1,409  |    
|                             |                         |                       |        |      |  |   |        |    
|                             |                         | $                     | 11,308 |      |  | $ | 10,384 |    
|                             |                         |                       |        |      |  |   |        |    
|Profit before taxes:         |                         |                       |        |      |  |   |        |    
|                             | Chassis Systems         |                       | $      | 265  |  |   | $      | 283 | 
|                             | Occupant Safety Systems |                       |        | 301  |  |   |        | 212 | 
|                             | Automotive Components   |                       |        | 120  |  |   |        | 130 | 
|                             |                         |                       |        |      |  |   |        |    
|Segment profit before taxes  |                         |                       | 686    |      |  |   | 625    |    
|Corporate expense and other  |                         |                       | (115   | )    |  |   | (147   | )  
|Financing costs              |                         |                       | (287   | )    |  |   | (269   | )  
|Net employee benefits income |                         |                       | 14     |      |  |   | 189    |    
|                             |                         |                       |        |      |  |   |        |    
|Profit before taxes          |                         | $                     | 298    |      |  | $ | 398    |    
|                             |                         |                       |        |      |  |   |        |    



| |                
| | ---------------
| | Chassis Systems



| |                                         
| | ----------------------------------------
| | For the Year Ended December 31,
    2003

|                                                              |  |                       |       |              |  |             |       |           |  |   |     |   |  |   |       |  
|------------------------------------------------------------- |  | --------------------- | ----- | ------------ |  | ----------- | ----- | --------- |  | - | --- | - |  | - | ----- | -
|                                                              |  |                       |       |              |  |            
|                                                              |  | Historical            |       |              |  |            
|                                                              |  |                       |       |              |  |            
|                                                              |  | Predecessor           |       | Successor    |  |             |       |          
|                                                              |  |                       |       |              |  |             |       |          
|                                                              |  | Ten Months            |       | Two Months   |  |             |       |          
|                                                              |  | Ended                 |       | Ended        |  |             |       |          
|                                                              |  | December 31,          |       | February 28, |  | Pro Forma   |       |          
|                                                              |  | 2003                  |       | 2003         |  | Adjustments |       | Pro Forma
|                                                              |  |                       |       |              |  |             |       |          
|                                                              |  |                      
|                                                              |  | (Dollars in millions)
|Sales                                                         |  | $                     | 5,424 |              |  | $           | 1,110 |           |  | $ | (43 | ) |  | $ | 6,491 |  
|Profit before taxes                                           |  | $                     | 129   |              |  | $           | 46    |           |  | $ | 90  |   |  | $ | 265   |  
|Unusual items  (expense) included in
    profit before taxes |  | $                     | (26   | )            |  | $           | (2    | )         |  | $ |    |   |  | $ | (28   | )



| |                                         
| | ----------------------------------------
| | For the Year Ended December 31,
    2002

|                                                              |  |                       |       |             |  |       |      |   |  |   |       |  
|------------------------------------------------------------- |  | --------------------- | ----- | ----------- |  | ----- | ---- | - |  | - | ----- | -
|                                                              |  | Historical            |       | Pro Forma   |  | Pro  
|                                                              |  | Predecessor           |       | Adjustments |  | Forma
|                                                              |  |                       |       |             |  |      
|                                                              |  |                      
|                                                              |  | (Dollars in millions)
|Sales                                                         |  | $                     | 6,078 |             |  | $     | (246 | ) |  | $ | 5,832 |  
|Profit before taxes                                           |  | $                     | 256   |             |  | $     | 27   |   |  | $ | 283   |  
|Unusual items  (expense) included in
    profit before taxes |  | $                     | (26   | )           |  | $     |     |   |  | $ | (26   | )

25



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| |                                         
| | ----------------------------------------
| | For the Two Years Ended
    December 31,

|                                                              |  |                       |       |      |  |   |       |  
|------------------------------------------------------------- |  | --------------------- | ----- | ---- |  | - | ----- | -
|                                                              |  | 2002                  |       | 2001
|                                                              |  |                       |       |     
|                                                              |  |                      
|                                                              |  | (Dollars in millions)
|Sales                                                         |  | $                     | 6,078 |      |  | $ | 5,617 |  
|Profit before taxes                                           |  | $                     | 256   |      |  | $ | 228   |  
|Unusual items  (expense) included in
    profit before taxes |  | $                     | (26   | )    |  | $ | (110  | )



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Pro Forma Year Ended December 31, 2003
    Compared to Pro Forma Year Ended December 31,
    2002

Salesfor the year
ended December 31, 2003 of $6,491 million increased
$659 million from $5,832 million for the year ended
December 31, 2002. The increase resulted from the favorable
impact of foreign currency exchange of $529 million and
$130 million for the net combined favorable impact of
higher customer volume and new product growth, net of lower
pricing. Higher volume was achieved despite a lower level of
underlying industry volume in both North America and Europe.

Profit before taxesfor the year ended December 31,
2003 of $265 million declined $18 million from
$283 million for the year ended December 31, 2002. The
decrease resulted primarily from the impact of an unfavorable
product mix in excess of the effect of higher volume of
$49 million, an increase in net pension and OPEB expense of
approximately $33 million, and an increase in unusual
charges of $2 million, partially offset by savings from
cost reduction activities in excess of inflation and lower
pricing of $59 million and the favorable impact of foreign
currency exchange of $9 million. Unusual items for 2003
were restructuring expense of $28 million, primarily
severance due to workforce reductions. Unusual items for 2002
included restructuring expense of $20 million, primarily
for severance, and asset impairment charges other than
restructuring of $6 million.



| |                                     
| | ------------------------------------
| | Historical 2002 Compared to
    2001

Salesfor 2002 of
$6,078 million increased $461 million from
$5,617 million in 2001. The increase in 2002 sales resulted
primarily from higher volume, net of price reductions, of
$346 million and the favorable impact of foreign currency
exchange of $114 million. Higher volume was mainly due to
increased vehicle customer production in North America and sales
growth in the Asia Pacific region.

Profit before taxesfor 2002 of $256 million
increased $28 million from $228 million in 2001. The
increase resulted primarily from a decrease of $84 million
in unusual items and the positive impact of higher volume and
product mix of $8 million, partially offset by the negative
impact of lower pricing and inflation in excess of cost
reductions of $27 million, a combination of higher costs
due to a product launch in Europe, temporary cost increases
following the closing of a facility in Europe and asset
write-offs totaling $25 million, and the unfavorable effect
of foreign currency exchange of $5 million. Unusual items
in 2002 included restructuring charges of $20 million,
primarily for severance and asset impairments, and asset
impairment charges other than restructuring of $6 million.
Unusual items in 2001 included several restructuring program
charges aggregating $86 million, asset impairment charges
of $28 million and other charges of $5 million,
partially offset by gains on asset sales of $9 million.



| |                        
| | -----------------------
| | Occupant Safety Systems



| |                                         
| | ----------------------------------------
| | For the Year Ended December 31,
    2003

|                                                              |  |                       |       |              |  |             |     |           |  |   |    |  |  |   |       |  
|------------------------------------------------------------- |  | --------------------- | ----- | ------------ |  | ----------- | --- | --------- |  | - | -- |  |  | - | ----- | -
|                                                              |  |                       |       |              |  |            
|                                                              |  | Historical            |       |              |  |            
|                                                              |  |                       |       |              |  |            
|                                                              |  | Predecessor           |       | Successor    |  |             |     |          
|                                                              |  |                       |       |              |  |             |     |          
|                                                              |  | Ten Months            |       | Two Months   |  |             |     |          
|                                                              |  | Ended                 |       | Ended        |  |             |     |          
|                                                              |  | December 31,          |       | February 28, |  | Pro Forma   |     |          
|                                                              |  | 2003                  |       | 2003         |  | Adjustments |     | Pro Forma
|                                                              |  |                       |       |              |  |             |     |          
|                                                              |  |                      
|                                                              |  | (Dollars in millions)
|Sales                                                         |  | $                     | 2,751 |              |  | $           | 555 |           |  | $ |   |  |  | $ | 3,306 |  
|Profit before taxes                                           |  | $                     | 216   |              |  | $           | 53  |           |  | $ | 32 |  |  | $ | 301   |  
|Unusual items  (expense) included in
    profit before taxes |  | $                     | (1    | )            |  | $           | (1  | )         |  | $ |   |  |  | $ | (2    | )

26



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| |                                         
| | ----------------------------------------
| | For the Year Ended December 31,
    2002

|                                                              |  |                       |       |             |  |           |     |   |  |   |       |  
|------------------------------------------------------------- |  | --------------------- | ----- | ----------- |  | --------- | --- | - |  | - | ----- | -
|                                                              |  | Historical            |       | Pro Forma   |  |          
|                                                              |  | Predecessor           |       | Adjustments |  | Pro Forma
|                                                              |  |                       |       |             |  |          
|                                                              |  |                      
|                                                              |  | (Dollars in millions)
|Sales                                                         |  | $                     | 3,143 |             |  | $         |    |   |  | $ | 3,143 |  
|Profit before taxes                                           |  | $                     | 224   |             |  | $         | (12 | ) |  | $ | 212   |  
|Unusual items  (expense) included in
    profit before taxes |  | $                     | (47   | )           |  | $         |    |   |  | $ | (47   | )



| |                                         
| | ----------------------------------------
| | For the Two Years Ended
    December 31,

|                                                              |  |                       |       |      |  |   |       |  
|------------------------------------------------------------- |  | --------------------- | ----- | ---- |  | - | ----- | -
|                                                              |  | 2002                  |       | 2001
|                                                              |  |                       |       |     
|                                                              |  |                      
|                                                              |  | (Dollars in millions)
|Sales                                                         |  | $                     | 3,143 |      |  | $ | 2,997 |  
|Profit before taxes                                           |  | $                     | 224   |      |  | $ | 110   |  
|Unusual items  (expense) included in
    profit before taxes |  | $                     | (47   | )    |  | $ | (57   | )



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Pro Forma Year Ended December 31, 2003
    Compared to Pro Forma Year Ended December 31,
    2002

Salesfor the year
ended December 31, 2003 of $3,306 million increased
$163 million from $3,143 million for the year ended
December 31, 2002. The increase resulted from the favorable
impact of foreign currency exchange of $298 million that
was partially offset by the unfavorable impact of price
reductions in excess of higher volume totaling $75 million
and the effect of a business divestiture completed in 2003 of
$60 million.

Profit before taxesfor the year ended December 31,
2003 of $301 million increased $89 million from
$212 million for the year ended December 31, 2002. The
increase reflected a reduction in unusual charges of
$45 million, the favorable impact of foreign currency
exchange of $35 million and savings from cost reduction
activities in excess of inflation and pricing givebacks of
$23 million, partially offset by the net combined
unfavorable impact of negative product mix and higher volume of
$11 million. Unusual items in 2003 consisted of
restructuring expense of $2 million, primarily for
severance. Unusual items in 2002 totaled $47 million, which
consisted primarily of restructuring expense for asset
impairments of $21 million, restructuring expenses
primarily for severance of $13 million, and asset
impairment charges other than restructuring of $12 million.



| |                                     
| | ------------------------------------
| | Historical 2002 Compared to
    2001

Salesfor 2002 of
$3,143 million increased $146 million from
$2,997 million in 2001. Increased sales resulted from the
favorable impact of foreign currency exchange of
$74 million and the positive impact of higher volume, net
of lower pricing, of $72 million.

Profit before taxesfor 2002 of $224 million
increased $114 million compared to $110 million in
2001. The increase primarily reflected the net combined effect
of a seat belt recall in 2001 and cost reductions in excess of
lower pricing and inflation of $93 million, the net
positive impact of higher volume and product mix of
$9 million, the favorable effect of foreign currency
exchange of $9 million and a decrease in unusual items of
$10 million, partially offset by asset write-offs totaling
$6 million. Unusual items in 2002 totaled $47 million,
consisting primarily of restructuring charges for asset
impairments of $21 million, restructuring charges primarily
for severance of $13 million, and asset impairment charges
other than restructuring of $12 million. Unusual items in
2001 included several restructuring program charges aggregating
$47 million and asset impairment charges of
$10 million.

27



---



##### Table of Contents





| |                      
| | ---------------------
| | Automotive Components



| |                                         
| | ----------------------------------------
| | For the Year Ended December 31,
    2003

|                                                              |  |                       |       |              |  |             |     |           |  |   |   |  |  |   |       |  
|------------------------------------------------------------- |  | --------------------- | ----- | ------------ |  | ----------- | --- | --------- |  | - | - |  |  | - | ----- | -
|                                                              |  |                       |       |              |  |            
|                                                              |  | Historical            |       |              |  |            
|                                                              |  |                       |       |              |  |            
|                                                              |  | Predecessor           |       | Successor    |  |             |     |          
|                                                              |  |                       |       |              |  |             |     |          
|                                                              |  | Ten Months            |       | Two Months   |  |             |     |          
|                                                              |  | Ended                 |       | Ended        |  |             |     |          
|                                                              |  | December 31,          |       | February 28, |  | Pro Forma   |     |          
|                                                              |  | 2003                  |       | 2003         |  | Adjustments |     | Pro Forma
|                                                              |  |                       |       |              |  |             |     |          
|                                                              |  |                      
|                                                              |  | (Dollars in millions)
|Sales                                                         |  | $                     | 1,260 |              |  | $           | 251 |           |  | $ |  |  |  | $ | 1,511 |  
|Profit before taxes                                           |  | $                     | 90    |              |  | $           | 26  |           |  | $ | 4 |  |  | $ | 120   |  
|Unusual items  (expense) included in
    profit before taxes |  | $                     | (2    | )            |  | $           |    |           |  | $ |  |  |  | $ | (2    | )



| |                                         
| | ----------------------------------------
| | For the Year Ended December 31,
    2002

|                                                           |  |                       |       |             |  |           |     |   |  |   |       | 
|---------------------------------------------------------- |  | --------------------- | ----- | ----------- |  | --------- | --- | - |  | - | ----- | 
|                                                           |  | Historical            |       | Pro Forma   |  |          
|                                                           |  | Predecessor           |       | Adjustments |  | Pro Forma
|                                                           |  |                       |       |             |  |          
|                                                           |  |                      
|                                                           |  | (Dollars in millions)
|Sales                                                      |  | $                     | 1,409 |             |  | $         |    |   |  | $ | 1,409 | 
|Profit before taxes                                        |  | $                     | 148   |             |  | $         | (18 | ) |  | $ | 130   | 
|Unusual items  income included in
    profit before taxes |  | $                     | 2     |             |  | $         |    |   |  | $ | 2     | 



| |                                         
| | ----------------------------------------
| | For the Two Years Ended
    December 31,

|                                                                     |  |             |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | ----------- | ----- | ---- |  | - | ----- | -
|                                                                     |  | 2002        |       | 2001
|                                                                     |  |             |       |     
|                                                                     |  |            
|                                                                     |  | (Dollars in
|                                                                     |  | millions)  
|Sales                                                                |  | $           | 1,409 |      |  | $ | 1,477 |  
|Profit before taxes                                                  |  | $           | 148   |      |  | $ | 40    |  
|Unusual items  income
    (expense) included in profit before taxes |  | $           | 2     |      |  | $ | (84   | )



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Pro Forma Year Ended December 31, 2003
    Compared to Pro Forma Year Ended December 31,
    2002

Salesfor the year
ended December 31, 2003 of $1,511 million increased
$102 million from $1,409 million for the year ended
December 31, 2002. The increase resulted primarily from the
favorable impact of foreign currency exchange of
$140 million, which was partially offset by lower volume
and price reductions of $38 million.

Profit before taxesfor the year ended December 31,
2003 of $120 million decreased $10 million from
$130 million for the year ended December 31, 2002. The
decrease resulted from the combined unfavorable impact of lower
volume and adverse product mix of $12 million, an increase
in net pension and OPEB expense of $5 million, and an
increase in unusual charges of $4 million, partially offset
by the favorable impact of foreign currency exchange of
$11 million. Unusual items for 2003 of $2 million were
primarily restructuring expenses. Unusual items for 2002
included restructuring charges of $4 million, primarily for
severance, and asset impairment charges of $6 million,
which were more than offset by gains on asset sales of
$7 million and other income of $5 million.



| |                                     
| | ------------------------------------
| | Historical 2002 Compared to
    2001

Salesfor 2002 of
$1,409 million declined $68 million compared to
$1,477 million in 2001. The decline in sales resulted from
the effect of divestitures completed in 2001 of
$69 million, and the combination of lower volume and price
reductions totaling $35 million, partially offset by the
favorable effect of foreign currency exchange of
$36 million.

Profit before taxesfor 2002 of $148 million
increased $108 million compared to $40 million in
2001. The increase was primarily due to lower unusual items of
$86 million, cost reductions in excess of lower pricing and
inflation of $35 million, and the favorable impact of
foreign currency exchange of $4 million, partially offset by

28



---



##### Table of Contents



the effect of divestitures completed in 2001 of
$10 million and negative impact of lower volume of
$5 million. Unusual items in 2002 included restructuring
charges of $4 million, primarily for severance, and asset
impairment charges of $6 million, offset by gains on asset
sales of $7 million and other income of $5 million.


Liquidity and Capital Resources



| |                     
| | --------------------
| | Debt and Commitments

Historically, prior to the Acquisition, the
principal source of liquidity for the Predecessor was cash flow
generated from operations, and principal liquidity requirements
were for working capital and capital expenditures. In the United
States, the Predecessor historically participated in a
consolidated cash management system operated by TRW. Under this
arrangement, the Predecessors short-term financing was
obtained from TRW rather than from external sources. Following
the Acquisition, we have been operating using our own
consolidated cash management system.

Our primary source of liquidity continues to be
cash flow generated from operations. We also have availability
under our revolving credit facility and receivables facility,
subject to certain conditions, described below. See
 Off-balance Sheet Arrangements. Our
primary liquidity requirements are expected to be for debt
service, working capital, capital expenditures and research and
development.

We are significantly leveraged. In connection
with the Acquisition, TRW Automotive Intermediate Holdings
Corp., our direct parent (TRW Automotive Intermediate
Holdings), issued the Northrop Grumman subordinated note
(the Seller Note) to an affiliate of Northrop
Grumman. TRW Automotive Inc. issued the senior notes and the
senior subordinated notes, entered into senior credit
facilities, consisting of a revolving credit facility and term
loan facilities, and initiated a trade accounts receivable
securitization program, or the receivables facility. As of
December 31, 2003, we had outstanding $3,426 million
in aggregate indebtedness, with an additional $456 million
of borrowing capacity available under our revolving credit
facility, after giving effect to $44 million in outstanding
letters of credit, which reduced the amount available. As of
December 31, 2003, approximately $212 million of our
total reported accounts receivable balance, was considered
eligible for borrowings under our receivables facility, of which
approximately $162 million would have been available for
funding, and we had no advance outstanding under our receivables
facility. See  Off-balance Sheet
Arrangements. In addition, we had a cash and cash
equivalents balance of $828 million as of December 31,
2003. Our liquidity requirements will be significant, primarily
due to debt service requirements and costs incurred in
connection with our receivables facility.

The Seller Note will mature on the fifteenth
anniversary of the issue date, or the twelfth anniversary if, on
or at any date after the fifth anniversary of the closing date
of the Acquisition, the debt rating on our lowest rated
securities is investment grade. The Northrop Grumman
subordinated note bears interest at 8% per year initially,
payable in kind at the option of TRW Automotive Intermediate
Holdings until maturity, with an increase to 10% per year
from the first date on or after the fifth anniversary of the
closing date of the Acquisition that the debt rating on our
lowest rated securities is investment grade. We have valued the
note based on the 15 year life and 8% pay-in-kind interest
and determined that the fair value of this note at March 1,
2003 was $348 million using a 12% discount rate.
Notwithstanding TRW Automotive Intermediate Holdings
option to make cash interest payments, our indentures governing
the notes prohibit the payment of dividends by TRW Automotive
Inc. to TRW Automotive Intermediate Holdings for the purpose of
making any payments in respect of, or otherwise servicing the
obligations represented by, the Seller Note. If TRW Automotive
Intermediate Holdings declares and pays a dividend (other than a
stock dividend and subject to certain other exceptions) to its
stockholders, then commencing on the payment date for such
dividend, interest on the Seller Note will thereafter be payable
in cash, in quarterly installments.

The senior credit facilities we entered into in
connection with the Acquisition consisted of a secured revolving
credit facility and various senior secured term loan facilities.
The revolving credit facility, through a syndication of lenders,
provides for borrowings of up to $500 million including the
availability of letters of credit, and is available in
U.S. dollars, euros, pounds sterling and other currencies.
The revolving credit facility matures on February 28, 2009.
The term loan facilities consisted of a $410 million term
loan A facility maturing on February 28, 2009 and term
loan B facilities maturing on February 28, 2011
consisting of a $1,030 million dollar-denominated facility
and a
65 million
euro-denominated facility. We subsequently refinanced
$200 million of the borrowings under our term loan A
facility and all of the borrowings under our

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term loan B facilities with the proceeds of
new term loan C facilities (denominated in the amounts of
$1.15 billion and
95 million),
together with approximately $46 million of available cash
on hand, on July 22, 2003 in order to reduce our interest
expense. On January 9, 2004, we refinanced all of the
borrowings under our existing term loan facilities with the
proceeds of new term loan facilities, together with
approximately $213 million of available cash on hand, in
order to further reduce our interest expense. The new term loan
facilities consist of a $350 million term loan A-1
facility that matures on February 28, 2009 and term
loan D facilities that mature on February 28, 2011
consisting of an $800 million dollar-denominated facility
and
93 million
euro-denominated facility. Our revolving credit facility remains
unchanged.


The senior credit facilities are unconditionally
guaranteed on a senior secured basis, in each case, by us,
substantially all our existing and future wholly owned domestic
subsidiaries and by TRW Automotive Finance (Luxembourg),
S.à.r.l. (TRW Automotive Luxembourg). In
addition, all obligations under the senior credit facilities,
and the guarantees of those obligations, are secured by
substantially all the assets of TRW Automotive Holdings, our
assets, and the assets of each U.S. guarantor, subject to
certain exceptions. The obligations of the foreign subsidiary
borrowers under the senior credit facilities, and foreign
guarantees of such obligations are, subject to certain
exceptions and only to the extent permitted by applicable legal
and contractual provisions and to the extent that it does not
result in adverse tax consequences, secured by substantially all
of the assets of the foreign subsidiary borrowers and foreign
subsidiary guarantors.

Borrowings under the senior credit facilities
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) JPMorgan Chase Banks prime rate
and (2) the federal funds rate plus  1/2 of 1% or
(b) a LIBOR or a eurocurrency rate determined by reference
to the costs of funds for deposits in the currency of such
borrowing for the interest period relevant to such borrowing
adjusted for certain additional costs. At December 31,
2003, the margin for borrowings under the revolving credit
facility and the old term loan A facility was 2.50% with
respect to base rate borrowings and 3.50% with respect to
eurocurrency borrowings. At December 31, 2003, the
applicable margin for borrowings under the old term loan C
facilities was 2.00% with respect to base rate borrowings and
3.00% with respect to eurocurrency borrowings. At
December 31, 2003, on a pro forma basis after giving effect
to the refinancing of our senior credit facilities in January
2004 and our ratings upgrade we received in connection with our
initial public offering, the applicable margin under the new
term loan A-1 facility would have been 0.75% with respect
to base rate borrowings and 1.75% with respect to eurocurrency
borrowings and the applicable margins for borrowings under the
new term loan D facilities would have been 1.25% with
respect to base rate borrowings and 2.25% with respect to
eurocurrency borrowings. The applicable margin for the
borrowings under the term loan A-1 facility may be reduced
or increased based on our attaining certain leverage ratios. The
applicable margin for the borrowings under the term
loan D-1 facilities may be reduced or increased based on
our attaining certain leverage ratios or certain ratings for our
senior secured debt. The applicable margin for the borrowings
under the term loan D-2 facilities may be increased but
will not be decreased.

In addition to paying interest on outstanding
principal under the senior credit facilities, we are required to
pay a commitment fee to the lenders under the revolving credit
facility in respect of the unutilized commitments thereunder
currently at a rate equal to 0.5% per annum (which may be
reduced or increased under certain circumstances). We also pay
customary letter of credit fees.

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The term loans amortize each year generally in
equal quarterly amounts (or in the case of the period after
December 31, 2009 with respect to term loan D
facilities, in quarterly amounts until the maturity date) in the
following approximate aggregate principal amounts (in millions)
for each year set forth below:

|                          |  |          |     |             |  |             |     |  |  |   |    | 
|------------------------- |  | -------- | --- | ----------- |  | ----------- | --- |  |  | - | -- | 
|                          |  |          |     | Term        |  | Term       
|                          |  |          |     | Loan D-1    |  | Loan D-2   
|                          |  | Term     |     | Dollar      |  | Euro       
|                          |  | Loan A-1 |     | Denominated |  | Denominated
|Years Ending December 31, |  | Facility |     | Facility    |  | Facility   
|                          |  |          |     |             |  |            
|2004                      |  | $        |    |             |  | $           | 6   |  |  |  | 1  | 
|2005                      |  |          |    |             |  |             | 8   |  |  |   | 1  | 
|2006                      |  |          |    |             |  |             | 8   |  |  |   | 1  | 
|2007                      |  |          | 141 |             |  |             | 8   |  |  |   | 1  | 
|2008                      |  |          | 166 |             |  |             | 8   |  |  |   | 1  | 
|2009                      |  |          | 43  |             |  |             | 8   |  |  |   | 1  | 
|Thereafter                |  |          |    |             |  |             | 754 |  |  |   | 87 | 
|                          |  |          |     |             |  |             |     |  |  |   |    | 
|Total                     |  | $        | 350 |             |  | $           | 800 |  |  |  | 93 | 
|                          |  |          |     |             |  |             |     |  |  |   |    | 

Our senior notes consist of $925 million
principal amount of 9 3/8% Senior Notes due 2013 and
200 million
principal amount of 10 1/8% Senior Notes due 2013. Our
senior subordinated notes consist of $300 million principal
amount of 11% Senior Subordinated Notes due 2013 and
125 million
principal amount of 11 3/4% Senior Subordinated Notes
due 2013. Interest is payable semi-annually on February 15
and August 15, with the first payment having been made on
August 15, 2003. Our senior notes are unconditionally
guaranteed on a senior unsecured basis and our senior
subordinated notes are unconditionally guaranteed on a senior
subordinated unsecured basis, in each case, by substantially all
of our existing and future wholly owned domestic subsidiaries
and by TRW Automotive Luxembourg, our restricted Luxembourg
subsidiary. TRW Automotive Holdings transferred approximately
$317 million of the net proceeds from its initial public
offering to us to enable us to repay a portion of our senior
subordinated notes and senior notes.

The senior credit facilities, senior notes and
senior subordinated notes contain a number of covenants that,
among other things, restrict, subject to certain exceptions, the
ability of our subsidiaries to sell assets, incur additional
indebtedness or issue preferred stock, repay other indebtedness
(including, in the case of the senior credit facilities, the
senior notes and senior subordinated notes, as well as the
Seller Note), pay dividends and distributions or repurchase
capital stock, create liens on assets, make investments, loans
or advances, make certain acquisitions, engage in mergers or
consolidations, enter into sale and leaseback transactions,
engage in certain transactions with affiliates, amend certain
material agreements governing our indebtedness (including, in
the case of the senior credit facilities, the senior notes,
senior subordinated notes and the receivables facility, as well
as the Seller Note), 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 and require certain prepayments
from excess cash flows, as defined, and in connection with
certain asset sales and the incurrence of debt not permitted
under the senior credit facilities.

The senior credit facilities and the indentures
governing the notes generally restrict the payment of dividends
or other distributions by us, subject to specified exceptions.
The exceptions include, among others, the making of payments or
distributions in respect of expenses required for TRW Automotive
Holdings and TRW Automotive Intermediate Holdings to maintain
their corporate existence, general corporate overhead expenses,
tax liabilities and legal and accounting fees. Since we are a
holding company without any independent operations, we do not
have significant cash obligations, and are able to meet our
limited cash obligations under the exceptions to our debt
covenants.

We are subject to increased OPEB cash costs due
to, among other factors, rising health care costs. Under the
master purchase agreement relating to the Acquisition, Northrop
Grumman was obligated to indemnify us for certain cash OPEB
payments. However, following the occurrence of our initial
public offering, such payments with respect to the OPEB
indemnity will instead be paid to the stockholders as of the
closing of the Acquisition who remain stockholders as of the
date of such payment in proportion to their beneficial ownership
of our voting securities as of such date of payment. In
addition, we expect to have substantially

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increased pension funding obligations in the
future. See  Pension plans,
 Critical accounting estimates 
Pensions and  Critical accounting
estimates  Other post-retirement benefits.


Pricing pressure from customers has been a
characteristic of the automotive parts industry in recent years.
Virtually all VMs have policies of seeking price reductions each
year. We have taken steps to reduce costs and resist price
reductions: however, price reductions have impacted our sales
and profit margins. If we are not able to offset continued price
reductions through improved operating efficiencies and reduced
expenditures, those price reductions may have a material adverse
effect on our results of operations.

In addition to pricing concerns, we continue to
be approached by our customers for changes in terms and
conditions in our contracts concerning warranty and recall
participation and payment terms on product shipped. We believe
that the likely resolution of these proposed modifications will
not have a material adverse effect on our financial condition,
results of operations or cash flow.

We believe that funds generated from operations
and planned borrowing capacity will be adequate to fund debt
service requirements, capital expenditures, working capital
requirements and company-sponsored research and development
programs. Our ability to continue to fund these items and
continue to reduce debt may be affected by general economic,
financial, competitive, legislative and regulatory factors, and
the cost of warranty and recall and litigation claims, among
other things.

We believe that our current financial position
and financing plans will provide flexibility in worldwide
financing activities and permit us to respond to changing
conditions in credit markets. We cannot assure you, however,
that our business will generate sufficient cash flow from
operations or that future borrowings will be available to us
under our revolving credit facility or receivables facility in
an amount sufficient to enable us to pay our indebtedness or to
fund our other liquidity needs.



| |           
| | ----------
| | Cash Flows

Cash provided by operating activities for the two
months ended February 28, 2003 and the ten months ended
December 31, 2003 combined was $773 million as
compared to $526 million for year ended December 31,
2002. The $247 million increase was due primarily to lower
net working capital requirements in 2003, due to certain
obligations being satisfied in December 2002 prior to the Merger.

Cash used in investing activities increased from
$414 million in 2002 to approximately $3.8 billion in
2003, principally due to the use of funds used to consummate the
Acquisition. Capital expenditures in 2003 were $416 million
compared to $427 million in the comparable prior year.

Cash provided by financing activities was
$3.9 billion for 2003 compared to $5 million for the
same period in 2002. The increase was due to new borrowings, net
of issue costs, used to finance the Acquisition, as well as net
amounts received from TRW to settle intercompany accounts.



| |                     
| | --------------------
| | Capital Expenditures

Through February 2004, we have spent
approximately $40 million in capital expenditures,
primarily in connection with the continuation of new product
launches started in 2003, upgrading existing products,
additional new product launches in 2004 and providing for
incremental capacity, infrastructure and equipment at our
facilities to support our manufacturing and cost reduction
efforts. We expect to spend approximately $390 million in
such capital expenditures during the remainder of 2004.

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Contractual Obligations and
Commitments

The following table reflects our contractual
obligations as of December 31, 2003:

|                                      |       |                        |       |           |  |           |     |           |  |         |     |     |  |   |     |     |  |   |       |       | 
|------------------------------------- | ----- | ---------------------- | ----- | --------- |  | --------- | --- | --------- |  | ------- | --- | --- |  | - | --- | --- |  | - | ----- | ----- | 
|                                      |       |                       
|                                      |       | Payments Due by Period
|                                      |       |                       
|                                      |       |                        |       | Less Than |  |           |     | More Than
|                                      |       | Total                  |       | 1 Year    |  | 1-3 Years |     | 3-5 Years |  | 5 Years
|                                      |       |                        |       |           |  |           |     |           |  |        
|                                      |       |                       
|                                      |       | (Dollars in millions) 
|Long-term debt obligations            |       | $                      | 3,331 |           |  | $         | 21  |           |  | $       | 30  |     |  | $ | 212 |     |  | $ | 3,068 |      
|Capital lease obligations             |       |                        | 19    |           |  |           | 3   |           |  |         | 6   |     |  |   | 3   |     |  |   | 7     |      
|Operating lease obligations           |       |                        | 220   |           |  |           | 56  |           |  |         | 70  |     |  |   | 50  |     |  |   | 44    |      
|Unconditional purchase obligations(1) |       |                        |      |           |  |           |    |           |  |         |    |     |  |   |    |     |  |   |      |      
|Other long-term liabilities(2)        |       |                        | 2,397 |           |  |           | 338 |           |  |         | 484 |     |  |   | 459 |     |  |   | 1,116 |      
|                                      |       |                        |       |           |  |           |     |           |  |         |     |     |  |   |     |     |  |   |       |      
|                                      | Total |                        | $     | 5,967     |  |           | $   | 418       |  |         | $   | 590 |  |   | $   | 724 |  |   | $     | 4,235 | 
|                                      |       |                        |       |           |  |           |     |           |  |         |     |     |  |   |     |     |  |   |       |      



---



|    |                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | There were no unconditional purchase obligations
    other than those related to inventory, services, tooling and
    property, plant and equipment purchased in the ordinary course
    of business.
|   
|(2) | Other long-term liabilities include OPEB and
    pension liabilities that were actuarially determined.                                                                                               

In addition to our contractual obligations and
commitments set forth in the table above, we have contingent
obligations in the form of severance and bonus payments for our
executive officers. Each of Messrs. Plant, Lunn, Bialosky,
Cantie and Lake are parties to an employment agreement with us
or certain of our wholly owned subsidiaries. The employment
agreements of Messrs. Plant and Lunn extend for an
indefinite term, subject to termination by either party pursuant
to the terms of the agreement, and the employment agreements of
Messrs. Bialosky, Cantie and Lake extend for a three year
term followed by automatic additional one-year terms unless
notice of termination is given by either party prior to the
expiration of the term. Each of these employment agreements
provides for a bonus opportunity equal to a specified percentage
of the executives base salary (200% for Mr. Plant,
130% for Mr. Lunn and 90% for the other officers) based
upon the achievement of certain financial targets established by
our Board of Directors. In addition, we have contingent
severance payment obligations under these employment agreements
in certain events. Our contingent severance payment obligations
in the event of termination without cause (other than due to
death and disability) for these executives aggregate
approximately $15 million (excluding continued welfare
benefit coverage, certain perquisites, supplemental retirement
benefits and any change in control related payments).

Off-Balance Sheet Arrangements

We do not have guarantees related to
unconsolidated entities, which have, or are reasonably likely to
have, a material current or future effect on our financial
position, results of operations or cash flows.

In connection with the Acquisition, we entered
into a receivables facility, which provided up to
$600 million in funding from commercial paper conduits
sponsored by several of the lenders under our senior credit
facilities, based on availability of eligible receivables and
other customary factors. On January 8, 2004, we completed
an amendment to the receivables facility, which reduced the
amount of maximum committed funding from $600 million to
$400 million.

At the closing of the Acquisition, certain of our
subsidiaries (the sellers) signed a receivables
purchase agreement and began selling trade accounts receivables
(the receivables) originated by them in the United
States through the receivables facility. Receivables are sold to
TRW Automotive Receivables LLC (the transferor) at a
discount. The transferor is a bankruptcy-remote special purpose
limited liability company that is our wholly owned consolidated
subsidiary. The transferors purchase of receivables is
financed through a transfer agreement with TRW Automotive Global
Receivables LLC (the borrower). Under the terms of
the transfer agreement, the borrower purchases all receivables
sold to the transferor. The borrower is a bankruptcy-remote
qualifying special purpose limited liability company that is
wholly owned by the transferor and is not consolidated when
certain requirements are met as further described below.

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Generally, multi-seller commercial paper conduits
supported by committed liquidity facilities are available to
provide cash funding for the borrowers purchase of
receivables through secured loans/tranches to the extent desired
and permitted under the receivables loan agreement. A note is
issued by the borrower to the transferor for the difference
between the purchase price for the receivables purchased and
cash available to be borrowed through the facility. The sellers
of the receivables act as servicing agents per the servicing
agreement and continue to service the transferred receivables
for which they receive a monthly servicing fee at a rate of
1% per annum of the average daily outstanding balance of
receivables. The usage fee under the facility is 1.50% of
outstanding borrowings. In addition, we are required to pay a
fee of 0.50% on the unused portion of the receivables facility.
These rates are per annum and payments of these fees are made to
the lenders on the monthly settlement date.

Availability of funding under the receivables
facility depends primarily upon the outstanding trade accounts
receivable balance for the week as of Friday of the previous
week. This balance is reported no later than the third business
day of the subsequent week to the lenders. Availability is
determined by reducing the receivables balance by outstanding
borrowings under the program, the historical rate of collection
on those receivables and other characteristics of those
receivables that affect their eligibility (such as bankruptcy or
downgrading below investment grade of the obligor, delinquency
and excessive concentration). Based on the terms of this
facility and on the criteria described above, as of
December 31, 2003, approximately $212 million of our
accounts receivable balance was considered eligible for
borrowings under the program, of which approximately
$162 million would have been available for funding. We had
no outstanding borrowings under this facility as of
December 31, 2003.

This facility can be treated as a general
financing agreement or as an off-balance sheet financing
arrangement. Whether the funding and related receivables are
shown as liabilities and assets, respectively, on our
consolidated balance sheet, or, conversely, are removed from the
consolidated balance sheet depends on the level of the
multi-seller conduits loans to the borrower. When such
level is at least 10% of the fair value of all of the
borrowers assets (consisting principally of receivables
sold by the sellers), the securitization transactions are
accounted for as a sale of the receivables under the provisions
of SFAS 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities,
and are removed from the consolidated balance sheet. The
proceeds received are included in cash flows from operating
activities in the statements of cash flows. Costs associated
with the receivables facility are recorded as losses on sale of
receivables in our consolidated statement of operations. The
book value of our retained interest in the receivables
approximates fair market value due to the current nature of the
receivables.

However, at such time as the fair value of the
multi-seller commercial paper conduits loans are less than
10% of the fair value of all of the borrowers assets, we
are required to consolidate the borrower, resulting in the
funding and related receivables being shown as liabilities and
assets, respectively, on our consolidated balance sheet and the
costs associated with the receivables facility being recorded as
interest expense. As there were no borrowings outstanding under
the receivables facility on December 31, 2003, the fair
value of the multi-seller conduits loans was less than 10%
of the fair value of all of the borrowers assets and,
therefore, the financial position and results of operations of
the borrower were included in our consolidated financial
statements as of December 31, 2003.

In addition to the receivables facility described
above, which was entered into in connection with the
Acquisition, in December 2003 and January 2004, certain of our
European subsidiaries entered into receivables financing
arrangements in France and Germany for terms of two years and
twelve months, respectively. Total availability under these
receivables financing arrangements is an aggregate of
approximately
145 million.
We expect to enter into an additional receivables financing
arrangement in the United Kingdom in the second quarter of 2004
with a term of two years and an availability of approximately
£40 million. The receivables financing arrangement in
France does not involve a special purpose vehicle, but rather is
a factoring arrangement in which customers send bills of
exchange directly to the bank. The receivables financing
arrangements in Germany and the United Kingdom involve a German
or a U.K. special purpose vehicle, as the case may be, that is
our subsidiary purchasing trade receivables from subsidiaries in
their country of origin and selling the trade receivables it
purchases to a bank in their country of origin. These financing
arrangements provide or will provide, as the case may be,
efficient short-term financing to meet our liquidity needs.

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Environmental Matters

A reserve estimate for each environmental matter
is established using standard engineering cost estimating
techniques on an undiscounted basis. In the determination of
such costs, consideration is given to the professional judgment
of our environmental engineers, in consultation with outside
environmental specialists, when necessary.

At multi-party sites, the reserve estimate also
reflects the expected allocation of total project costs among
the various potentially responsible parties. At
December 31, 2003, we had reserves for environmental
matters of $90 million.

We do not believe that compliance with
environmental protection laws and regulations will have a
material effect upon our capital expenditures, results of
operations or competitive position. Our capital expenditures for
environmental control facilities during 2004 and 2005 are not
expected to be material to us. We believe that any liability
that may result from the resolution of environmental matters for
which sufficient information is available to support cost
estimates will not have a material adverse effect on our
financial position or results of operations. However, we cannot
predict the effect on our financial position of expenditures for
aspects of certain matters for which there is insufficient
information. In addition, we cannot predict the effect of
compliance with environmental laws and regulations with respect
to unknown environmental matters on our financial position or
results of operations or the possible effect of compliance with
environmental requirements imposed in the future. In connection
with the Acquisition, Northrop Grumman has agreed to indemnify
us for 50% of any environmental liabilities associated with the
operation or ownership of TRWs automotive business
existing at or prior to the Acquisition, subject to certain
exceptions.




Contingencies

Various claims, lawsuits and administrative
proceedings are pending or threatened against our subsidiaries,
covering a wide range of matters that arise in the ordinary
course of our business activities with respect to commercial,
product liability and environmental matters.

In October 2000, Kelsey-Hayes Company (formerly
known as Fruehauf Corporation) was served with a grand jury
subpoena relating to a criminal investigation being conducted by
the U.S. Attorney for the Southern District of Illinois.
The U.S. Attorney has informed us that the investigation
relates to possible wrongdoing by Kelsey-Hayes Company and
others involving certain loans made by Kelsey- Hayes
Companys then parent corporation to Fruehauf Trailer
Corporation, the handling of the trailing liabilities of
Fruehauf Corporation and actions in connection with the 1996
bankruptcy of Fruehauf Trailer Corporation.

Kelsey-Hayes Company became a wholly owned
subsidiary of TRW upon TRWs acquisition of Lucas Varity in
1999 and became our wholly-owned subsidiary in connection with
the Acquisition. We have cooperated with the investigation and
are unable to predict the outcome of the investigation at this
time.

On May 6, 2002, ArvinMeritor Inc. filed suit
against TRW in the United States District Court for the Eastern
District of Michigan, claiming breach of contract and breach of
warranty in connection with certain tie rod ends that TRW
supplied to ArvinMeritor and the voluntary recall of some of
these tie rod ends. ArvinMeritor subsequently recalled all of
the tie rod ends, and claims that it is entitled to
reimbursement from TRW for the costs associated with both the
products recalled by TRW and those recalled by ArvinMeritor on
its own. ArvinMeritor is seeking $18.3 million in damages
plus legal fees, administrative expenses and interest. We
believe that we have meritorious defenses and intend to defend
vigorously the claims asserted against us, but cannot predict
the outcome of this lawsuit.

While certain of our subsidiaries have been
subject in recent years to asbestos-related claims, we believe
that such claims will not have a material adverse effect on our
financial condition or results of operations. In general, these
claims seek damages for illnesses alleged to have resulted from
exposure to asbestos used in certain components sold by our
subsidiaries. We believe that the majority of the claimants were
assembly workers at the major U.S. automobile
manufacturers. The vast majority of these claims name as
defendants numerous manufacturers and suppliers of a wide
variety of products allegedly containing asbestos. We believe
that, to the extent any of the products sold by our subsidiaries
and at issue in these cases contained asbestos, the asbestos was
encapsulated. Based upon several years of experience with such
claims, we believe that only a small proportion of the claimants
has or will ever develop any asbestos-related impairment.

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Neither our settlement costs in connection with
asbestos claims nor our average annual legal fees to defend
these claims have been material in the past. These claims are
strongly disputed by us and it has been our policy to defend
against them aggressively. We have been successful in obtaining
the dismissal of many cases without any payment whatsoever.
Moreover, there is significant insurance coverage with solvent
carriers with respect to these claims.

However, while our costs to defend and settle
these claims in the past have not been material, we cannot
assure you that this will remain so in the future.

We believe that the ultimate resolution of the
foregoing matters will not have a material effect on our
financial condition or results of operations.




Recent Accounting Pronouncements

The FASB recently issued the following accounting
pronouncements applicable to the Company:



| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | SFAS No. 132, Revised,
    Employers Disclosures about Pensions and Other
    Postretirement Benefits (SFAS 132
    Revised);                                                         
|
| |  | FASB Staff Position No. FAS 106-1,
    Accounting and Disclosure Requirements Related to the
    Medicare Prescription Drug, Improvement and Modernization
    Act of 2003 (FSP 106-1);
|
| |  | SFAS No. 142, Goodwill and
    Intangible Assets (SFAS 142);                                                                                                                           
|
| |  | SFAS No. 143, Accounting for
    Asset Retirement Obligations (SFAS 143);                                                                                                              
|
| |  | SFAS No. 145, Rescission of FASB
    Statements No. 4, 44 and 64, Amendment of FASB Statement
    No. 13, and Technical Corrections
    (SFAS 145);                                    
|
| |  | SFAS No. 146, Accounting for
    Costs Associated with Exit or Disposal Activities
    (SFAS 146);                                                                                     
|
| |  | SFAS No. 149, Amendment of
    Statement 133 on Derivative Instruments and Hedging
    Activities (SFAS 149);                                                                          
|
| |  | SFAS 150, Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity (SFAS 150);                                                         
|
| |  | FASB Interpretation No. 45,
    Guarantors Accounting and Disclosure Requirements
    for Guarantees, Including Indirect Guarantees of
    Indebtedness of Others (FIN 45); and       
|
| |  | FASB Interpretation No. 46R,
    Consolidation of Variable Interest Entities
    (FIN 46R).                                                                                            

In December 2003, the FASB issued
SFAS No. 132 Revised. This revision does not change
the measurement or recognition provisions of pension and other
postretirement benefit plans. It includes all of the disclosures
required by the prior SFAS 132 and adds additional
disclosures including information about the assets, obligations,
and cash flows. It also requires disclosure of net periodic
benefit cost recognized by cost component for interim periods.
SFAS No. 132 Revised was effective December 31,
2003 and the additional disclosures are included in Note 18
and Note 19.

In January 2004, the FASB issued FSP 106-1, which
permits a sponsor of a postretirement health care plan that
provides a prescription drug benefit to make a one-time election
to defer accounting for the effects of the Medicare Prescription
Drug, Improvement and Modernization Act of 2003. Regardless
of whether a sponsor elects that deferral, the FSP requires
certain disclosures in financial statements for fiscal years
ending after December 7, 2003 pending further consideration
of the underlying accounting issues. The Company has elected to
defer financial recognition of this legislation and has included
the required disclosures in Note 19.

SFAS 142 sets forth the accounting for
goodwill and intangible assets after the completion of a
business acquisition and for goodwill and intangible assets
already recorded. Effective January 1, 2002, goodwill is no
longer amortized but is subject to impairment analysis annually
or if an event occurs or circumstances indicate the carrying
amount may be impaired. Goodwill impairment testing is performed
at the reporting unit level (defined as an operating segment, as
that term is used in SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information
(SFAS 131) or one level below the operating
segment, depending on whether certain criteria are met). The
carrying value of assets, including goodwill, and liabilities
are assigned

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to each reporting unit. The fair value of each
reporting unit is then determined and compared to the carrying
value. If carrying value exceeds fair value, then a possible
impairment of goodwill exists and requires further evaluation.


The Predecessor adopted SFAS 142 on
January 1, 2002 and ceased amortizing goodwill. In
accordance with the provisions of SFAS 142, the Predecessor
tested goodwill for impairment as of January 1, 2002 and no
impairment was indicated. The Predecessor also reclassified the
value of workforce of approximately $15 million from
intangible assets to goodwill. In addition, the Predecessor
reassessed the useful lives and residual values of all acquired
intangible assets and made no adjustments.

The following table reflects the reconciliation
of reported net earnings (losses) to adjusted net earnings for
the exclusion of goodwill amortization:

|                                            |  |                                         |     |              |  |              |    |      |  |   |     |  |  |   |     |  
|------------------------------------------- |  | --------------------------------------- | --- | ------------ |  | ------------ | -- | ---- |  | - | --- |  |  | - | --- | -
|                                            |  |                                         |     |             
|                                            |  |                                         |     | Predecessor 
|                                            |  | Successor                               |     |             
|                                            |  |                                         |     | Two          |  |             
|                                            |  | Ten Months                              |     | Months       |  | Years Ended 
|                                            |  | Ended                                   |     | Ended        |  | December 31,
|                                            |  | December 31,                            |     | February 28, |  |             
|                                            |  | 2003                                    |     | 2003         |  | 2002         |    | 2001
|                                            |  |                                         |     |              |  |              |    |     
|                                            |  |                                        
|                                            |  | (In millions, except per share amounts)
|Reported net earnings (losses)              |  | $                                       | (66 | )            |  | $            | 31 |      |  | $ | 164 |  |  | $ | (25 | )
|Add back: goodwill amortization, net of tax |  |                                         |    |              |  |              |   |      |  |   |    |  |  |   | 53  |  
|                                            |  |                                         |     |              |  |              |    |      |  |   |     |  |  |   |     |  
|Adjusted net earnings (losses)              |  | $                                       | (66 | )            |  | $            | 31 |      |  | $ | 164 |  |  | $ | 28  |  
|                                            |  |                                         |     |              |  |              |    |      |  |   |     |  |  |   |     |  

SFAS 143 requires the fair value of a
liability for asset retirement obligations to be recorded in the
period in which it is incurred. The statement applies to a
companys legal or contractual obligation associated with
the retirement of a tangible long-lived asset that resulted from
the acquisition, construction or development or through the
normal operation of a long-lived asset. The statement was
effective as of January 1, 2003. The Predecessor adopted
SFAS 143 on January 1, 2003 and the adoption did not
have a material impact on the combined financial statements.

In April 2002, the FASB issued SFAS 145,
which requires gains and losses on extinguishments of debt to be
reclassified as income or loss from continuing operations rather
than as extraordinary items as previously required by
SFAS 4, Reporting Gains and Losses from
Extinguishment of Debt. SFAS 145 also amends
SFAS 13 requiring certain modifications to capital leases
to be treated as sale-leaseback transactions and to subleases
when the original lessee remains a secondary obligor, or
guarantor. The Predecessor adopted the provisions of
SFAS 145 related to the rescission of SFAS 4 on
January 1, 2003. In the first quarter of 2002, the
Predecessor completed an unsolicited repurchase of
£5.4 million (approximately $8 million) of the
10.875% debentures issued by a subsidiary due 2020. The
repurchase resulted in an extraordinary gain of $4 million
before taxes and $2 million after taxes. The extraordinary
gain recorded for the extinguishment of debt in the first
quarter of 2002 has been reclassified into net earnings in the
accompanying financial statements. The remaining provisions of
SFAS 145 were effective for transactions and reporting
subsequent to May 15, 2002 and were adopted by the
Predecessor as of that date. The adoption of these provisions
did not have a material impact on the Predecessors
financial position, results of operations or cash flows.

In June 2002, the FASB issued SFAS 146,
which requires that a liability for costs associated with exit
or disposal activities be recognized when the liability is
incurred rather than when an entity commits to an exit plan.
SFAS 146 also provides that the liability be initially
measured at fair value. The Predecessor adopted SFAS 146 on
January 1, 2003 and the adoption did not have a material
impact on the combined financial statements.

In November 2002, the FASB issued FIN 45,
which expands the existing disclosure requirements for most
guarantees, including loan guarantees such as standby letters of
credit. It also clarifies that at the time a company issues a
guarantee, the company must recognize an initial liability for
the fair value of the obligations it assumes under that
guarantee and must disclose that information in its interim and
annual financial statements. The initial recognition and initial
measurement provisions of FIN 45 apply on a prospective
basis to guarantees issued or modified after December 31,
2002. The disclosure requirements are effective for financial
statements of interim or annual periods ending after
December 15, 2002. The adoption of these

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provisions did not have a material impact on the
Predecessors financial position, results of operations or
cash flows.


In December 2003, the FASB issued FIN 46R to
address certain implementation issues and to make technical
corrections to the original interpretation issued January 2003.
FIN 46R establishes conditions under which an entity must
be consolidated based upon variable interests rather than voting
interests. Variable interests are ownership interests or
contractual relationships that enable the holder to share in the
financial risks and rewards resulting from the activities of a
Variable Interest Entity (VIE). A VIE can be a corporation,
partnership, trust, or any other legal structure used for
business purposes. An entity is considered a VIE under
FIN 46R if it does not have an equity investment sufficient
for it to finance its activities without assistance from
variable interests, if its equity investors do not have voting
rights, or if the voting rights of equity investors are not
proportionate to their economic rights. FIN 46R requires us
to consolidate VIEs for which we are the primary beneficiary and
to disclose certain information about significant variable
interests we hold. The primary beneficiary of a VIE is the
entity that receives the majority of the entitys expected
losses, residual returns, or both. FIN 46R is effective
March 31, 2004 for VIEs except special purpose entities for
which the effective date is December 31, 2003. We believe
we do not have special purpose entities within the scope of
FIN 46R, but we continue to evaluate our cost and equity
method investments to determine whether these entities are VIEs
pursuant to the revised interpretation; however, we do not
expect the adoption of FIN 46R to have a material effect on
our financial position, results of operations or cash flows.

In April 2003, the FASB issued SFAS 149,
which requires contracts with comparable characteristics to be
accounted for similarly, and is effective for contracts entered
into or modified after June 30, 2003, as well as for
hedging relationships designated after that date. We adopted
SFAS 149 as of the beginning of the fiscal quarter ending
September 26, 2003, and the adoption of this standard did
not have a material impact on our reported financial position of
results of operations.

In May 2003, the FASB issued SFAS 150, which
clarifies the accounting for certain financial instruments with
characteristics of both liabilities and equity and requires that
those instruments be classified as liabilities in statements of
financial position. Previously, many of those financial
instruments were classified as equity. SFAS 150 is
effective for financial instruments entered into or modified
after May 31, 2003 and other provisions are effective at
the beginning of the first interim period beginning after
June 15, 2003. In October 2003, the FASB deferred
indefinitely the statements provisions related to
redeemable minority interests. The adoption of SFAS 150 had
no impact on the Successors financial position.




Forward-Looking Statements

This report includes forward-looking
statements. Forward-looking statements include statements
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
information. 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 can be no assurance that
managements expectations, beliefs and projections will be
achieved.

There are a number of risks, uncertainties and
other important factors 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 which could cause our actual results to differ
materially from those suggested by our forward-looking
statements are set forth below under Risk Factors herein and in
TRW Automotive Holdings final prospectus dated as of
February 2, 2004 (the Prospectus) filed with
the Securities and Exchange Commission (the SEC)
pursuant to Rule 424(b)(4) and include:



| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | our substantial leverage;                                                               
|
| |  | limitations on flexibility in operating our
    business imposed by our debt agreements;

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| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increases in interest rates;                                                                                                                    
|
| |  | our dependence on our largest customers;                                                                                                        
|
| |  | the possibility that our owners interests
    will conflict with ours;                                                                         
|
| |  | the highly competitive automotive parts industry;                                                                                               
|
| |  | the cyclicality of automotive production and
    sales;                                                                                         
|
| |  | pricing pressures from our customers;                                                                                                           
|
| |  | risks associated with our
    non-U.S. operations;                                                                                              
|
| |  | risks related to our ability to operate on a
    stand-alone basis, separate from our former parent, TRW;                                       
|
| |  | fluctuations in currency exchange rates;                                                                                                        
|
| |  | product liability and customer warranty and
    recall claims;                                                                                  
|
| |  | changes to environmental and automotive safety
    regulations;                                                                                 
|
| |  | increasing costs for purchased components and raw
    materials;                                                                                
|
| |  | non-performance by, or insolvency of, our
    suppliers;                                                                                        
|
| |  | work stoppages;                                                                                                                                 
|
| |  | changes in our relationships with our employees
    and the unions that represent them;                                                         
|
| |  | our ability to attract and retain skilled
    employees, particularly engineers and other employees with
    electronics and software expertise;
|
| |  | economic, regulatory and political conditions
    domestically and internationally; and                                                         
|
| |  | other risks and uncertainties set forth under
    Risk Factors below and in the Prospectus.                                                   

All forward-looking statements attributable to us
or persons acting on our behalf apply only as of the date of
this report and are expressly qualified in their entirety by the
cautionary statements included in this report and in the
Prospectus. We undertake no obligation to update or revise
forward-looking statements, which may be made to reflect events,
or circumstances that arise after the date made or to reflect
the occurrence of unanticipated events.




Risk Factors



| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Our available cash and access to additional
    capital may be limited by our substantial
    leverage.

We are highly leveraged. This leverage may limit
our ability to obtain additional financing for working capital,
capital expenditures, product development, debt service
requirements, acquisitions and general corporate or other
purposes and limit our ability to adjust to changing market
conditions and place us at a competitive disadvantage compared
to our competitors that have less debt. In addition, a
substantial portion of our cash flows from operations must be
dedicated to the payment of principal and interest on our
indebtedness and is not available for other purposes, including
our operations, capital expenditures and future business
opportunities. Certain of our borrowings, including borrowings
under our senior credit facilities, are at variable rates of
interest, exposing us to the risk of increased interest rates.
We may be more vulnerable than a less leveraged company to a
downturn in general economic conditions or in our business, or
we may be unable to carry out capital spending that is important
to our growth.



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | The cyclicality of automotive production
    and sales could adversely affect our business.

Almost all of our business is directly related to
automotive sales and automotive vehicle production by our VM
customers. Automotive production and sales are highly cyclical
and depend on general economic conditions and other factors,
including consumer spending and preferences. In addition,
automotive production and sales can be affected by labor
relations issues, regulatory requirements, trade agreements and
other factors. The volume of automotive production in North
America, Europe and the rest of the world has fluctuated,
sometimes significantly, from year to year, and such
fluctuations give rise to fluctuations in the

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demand for our products. Any significant economic
decline that results in a reduction in automotive production and
sales by our VM customers could have a material adverse effect
on our results of operations.




| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | Increasing costs for manufactured
    components and raw materials may adversely affect our
    profitability.

We use a broad range of manufactured components
and raw materials in our products, including ferrous and
non-ferrous castings, electronic and electro-mechanical
components, finished sub-components, molded plastic and rubber
parts, pyrotechnic assemblies and chemicals, fabricated metal
parts, aluminum, steel, resins, leather and wood. It is
generally difficult to pass increased prices for manufactured
components and raw materials through to our customers in the
form of price increases. Therefore, a significant increase in
the price of these items could materially increase our operating
costs and materially and adversely affect our profit margins. We
have recently seen significant inflationary pressures in the
ferrous metals markets. At this time, we are working with our
suppliers and customers to attempt to mitigate the impact that
this inflation may have on our financial results, but there can
be no assurances that this will not have a material adverse
effect.



| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Continued pricing pressures on automotive
    suppliers may adversely affect our business.

Pricing pressure from customers has been a
characteristic of the automotive parts industry in recent years.
Virtually all VMs have policies of seeking price reductions each
year. We have taken steps to reduce costs and resist price
reductions; however, price reductions have impacted our sales
and profit margins. If we are not able to offset continued price
reductions through improved operating efficiencies and reduced
expenditures, those price reductions may have a material adverse
effect on our results of operations.



| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Our business would be materially and
    adversely affected if we lost any of our largest
    customers.

For the year ended December 31, 2003,
approximately 18.4% of our pro forma sales were to Ford Motor
Company and its subsidiaries, approximately 16.3% of our pro
forma sales were to DaimlerChrysler AG and its subsidiaries,
approximately 15% of our pro forma sales were to Volkswagen AG
and its subsidiaries and approximately 13.2% of our pro forma
sales were to General Motors Corporation and its subsidiaries.
Although business with any given customer is typically split
among numerous contracts, the loss of, or significant reduction
in purchases by, one or more of those major customers could
materially and adversely affect our business, results of
operations and financial condition.



| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | We may incur material losses and costs as a
    result of product liability and warranty and recall claims that
    may be brought against us.

We may be exposed to product liability and
warranty claims in the event that our products actually or
allegedly fail to perform as expected or the use of our products
results, or is alleged to result, in bodily injury and/or
property damage. Accordingly, we could experience material
warranty or product liability losses in the future and incur
significant costs to defend these claims.

In addition, if any of our products are, or are
alleged to be, defective, we may be required to participate in a
recall of that product if the defect or the alleged defect
relates to motor vehicle safety. Automotive suppliers like us
are becoming more integrally involved in the vehicle design
process and are assuming more of the vehicle system design
responsibility. As a result, VMs are increasingly looking to
their suppliers for contribution when faced with product
liability, warranty and recall claims. Depending on the terms
under which we supply products, a VM may hold us responsible for
some or all of the repair or replacement costs of these products
under new vehicle warranties, when the product supplied did not
perform as represented. Our costs associated with recalls or
providing product warranties could be material. Product
liability, warranty and recall costs may have a material adverse
effect on our financial condition.



| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | Our pension and other post-retirement
    benefits expense and underfunding levels of our pension plans
    could materially increase.

Substantially all our employees participate in
defined benefit pension plans or retirement/termination
indemnity plans. As a result of declines in pension asset
values, different actuarial assumptions and the application of
purchase accounting, our pension expenses have increased.
Continued declines in interest rates or the market values of the
securities held by the plans, or certain other changes, could
materially increase the

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underfunded status of our plans and affect the
level and timing of required contributions in 2004 and beyond. A
material increase in the underfunded status of the plans could
significantly increase our pension expenses and reduce our
profitability.


In addition, we fund our OPEB obligations on a
pay-as-you-go basis and have no plan assets. Increases in the
cost of health care in excess of our assumptions could increase
our actuarially determined liability and related OPEB expense
and cash funding. See  Pension Plans,
 Critical Accounting Estimates 
Employee Benefit Plans, and  Critical
Accounting Estimates  Pensions for a further
discussion of pension and OPEB matters.



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | We may be unable to continue to compete
    successfully in the highly competitive automotive parts
    industry.

The automotive parts industry is highly
competitive. Our competitors include independent suppliers of
parts, as well as suppliers formed by spin-offs from our
existing VM customers, who are becoming more aggressive in
attempting to sell parts to other VMs. Depending on the
particular product, the number of our competitors varies
significantly. We may not be able to continue to compete
favorably and increased competition in our markets may have a
material adverse effect on our business.



| |                                                                           
| | --------------------------------------------------------------------------
| | We are subject to other risks associated
    with our non-U.S. operations.

We have significant manufacturing operations
outside the United States, including joint ventures and other
alliances. During times of a strengthening United States dollar,
our reported international sales and earnings may be reduced
because the local currency may translate into fewer United
States dollars. There are other risks inherent in international
operations, including: exchange controls and currency
restrictions; currency fluctuations and devaluations; changes in
local economic conditions; changes in laws and regulations;
exposure to possible expropriation or other government actions;
and unsettled political conditions and possible terrorist
attacks against American interests. These and other factors may
have a material adverse effect on our international operations
or on our business, results of operations and financial
condition.



| |                                                                          
| | -------------------------------------------------------------------------
| | Non-performance by our suppliers may
    adversely affect our operations.

Because we purchase from suppliers various types
of equipment, raw materials and component parts, we may be
materially and adversely affected by the failure of those
suppliers to perform as expected. This non-performance may
consist of delivery delays or failures caused by production
issues or delivery of non-conforming products. The risk of
non-performance may also result from the insolvency or
bankruptcy of one or more of our suppliers. Recent inflationary
pressures in the ferrous metals markets may increase the number
of insolvencies affecting our suppliers. Our efforts to protect
against and to minimize these risks may not always be effective.



| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Work stoppages or other labor issues at our
    customers facilities or at our facilities could adversely
    affect our operations.

Work stoppages occur relatively frequently in the
automotive industry. If any of our customers experience a
material work stoppage, that customer may halt or limit the
purchase of our products. This could cause us to shut down
production facilities relating to those products, which could
have a material adverse effect on our business, results of
operations and financial condition.

As of December 31, 2003, approximately 21%
of our United States workforce and approximately 72% of our
hourly workforce outside of the United States were represented
by 39 unions. It is likely that a significant portion of our
workforce will remain unionized for the foreseeable future. It
is also possible that the portion of our workforce that is
unionized may increase in the future. Recently, the United Auto
Workers union approached us seeking to establish a
partnership and distributed handbills at several
United States facilities inviting employees to organizational
meetings. In the United States, four of our union agreements,
covering approximately 600 employees and representing
approximately 9% of our hourly workforce in the United States,
expire in the next two years. We will engage in labor
negotiations with respect to 76 of our 146
non-U.S. locations during the next two years. Most of our
non-U.S. locations that are covered by labor agreements
have agreements that are required to be re-negotiated every two
years, with the balance being

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covered by three-year agreements or four-year
agreements. While historically negotiations at our
non-U.S. locations have rarely resulted in work stoppages,
we cannot assure you that we will be able to negotiate
acceptable contracts with these unions or that our failure to do
so will not result in work stoppages. A work stoppage at one or
more of our plants may have a material adverse effect on our
business.




| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have recorded a significant amount of
    goodwill and other identifiable intangible assets, and we may
    never realize the full value of our intangible
    assets.

In connection with the Acquisition, we have
recorded a significant amount of goodwill and other identifiable
intangible assets, including customer relationships, trademarks
and developed technologies. Goodwill and other net identifiable
intangible assets were approximately $3.3 billion as of
December 31, 2003, or 34% of our total assets. Goodwill,
which represents the excess of cost over the fair value of the
net assets of the businesses acquired, was approximately
$2.5 billion as of December 31, 2003, or 25% of our
total assets. Goodwill and net identifiable intangible assets
are recorded at fair value on the date of acquisition and, in
accordance with Financial Accounting Standards Board Statement
of Financial Accounting Standards No. 142 Goodwill
and Other Intangible Assets (SFAS 142),
will be reviewed at least annually for impairment. Impairment
may result from, among other things, deterioration in our
performance, adverse market conditions, adverse changes in
applicable laws or regulations, including changes that restrict
the activities of or affect the products sold by our business,
and a variety of other factors. The amount of any quantified
impairment must be expensed immediately as a charge to results
of operations. Depending on future circumstances, it is possible
that we may never realize the full value of our intangible
assets. Any future determination of impairment of a significant
portion of goodwill or other identifiable intangible assets
would have an adverse effect on our financial condition and
results of operations.




Item 7A.     Quantitative
and Qualitative Disclosures About Market Risks

We are subject to inherent risks attributed to
operating in a global economy. Our practice is to utilize
derivative financial instruments to manage foreign currency
exchange rate risks. Historically, the Predecessor managed cash
flow transactional foreign currency exchange risk pursuant to
TRWs written corporate policy. Forward contracts and, to a
lesser extent, options are utilized to protect our cash flow
from adverse movements in exchange rates. Forward contracts and
options are only used to hedge transaction exposures and are
accounted for according to SFAS No. 133
Accounting for Derivative Instruments and Hedging
Activities. Risk associated with translation exposures are
not hedged. Transactional currency exposures are reviewed
monthly and any natural offsets are considered prior to entering
into a derivative financial instrument. Following the
Acquisition, we are operating in accordance with written polices
regarding the use of derivative financial instruments that are
similar to those historically maintained by TRW, but we are
continuing to evaluate these policies.

We are exposed to credit loss in the event of
nonperformance by the other party to the derivative financial
instruments. We limit this exposure by entering into agreements
directly with a number of major financial institutions that meet
our credit standards and that are expected to satisfy fully
their obligations under the contracts. We view derivative
financial instruments as a risk management tool and do not use
them for speculative or trading purposes.

Based on our exposure to foreign currency
exchange rate risk relating to derivative foreign currency
instruments outstanding at December 31, 2003, a 10% uniform
strengthening in the value of the U.S. dollar relative to
the currencies in which those derivative foreign currency
instruments are denominated would result in an increase in fair
value of approximately $30 million.

At December 31, 2003, approximately 47% of
our total debt was at variable interest rates. We were required
under the then existing senior credit facilities to maintain
appropriate interest protection and other hedging arrangements
if needed so that at least 50% of our consolidated indebtedness
would effectively bear interest at a fixed rate for a period of
three years. Based on our interest rate exposure on variable
rate borrowings outstanding at December 31, 2003, a
one-percentage-point increase in the average interest rate would
increase future interest expense by approximately
$16 million per year. As a result of the refinancing on
January 9, 2004, we are no longer required under the senior
secured credit facilities to maintain such interest protection
and hedging arrangements.

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At December 31, 2003 approximately 23% of
our total debt was in foreign currencies. Based on our foreign
currency exposure on foreign currency denominated borrowings
outstanding at December 31, 2003, a 10% increase in foreign
currency rates would increase future interest expense by
approximately $6.2 million per year.

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

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Item 8.     Financial
Statements and Supplementary Data




REPORT OF ERNST & YOUNG
LLP, INDEPENDENT AUDITOR

Stockholder and Directors

TRW Automotive Inc. (Successor)


We have audited the accompanying consolidated
balance sheet of TRW Automotive Inc. as of December 31,
2003, and the related consolidated statements of operations,
cash flows and changes in stockholders investment for the
ten months ended December 31, 2003. Our audit also included
the financial statement schedule listed in the Index at
Item 15(a)(2). These financial statements and schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audit.

We conducted our audit in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of TRW Automotive Inc. at
December 31, 2003 and the consolidated results of its
operations and its cash flows for the ten months ended
December 31, 2003, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.



| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP

Troy, Michigan

February 16, 2004


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REPORT OF ERNST & YOUNG
LLP, INDEPENDENT AUDITORS

Stockholder and Directors

TRW Automotive Inc. (Predecessor)


We have audited the accompanying combined balance
sheet of TRW Automotive Inc. as of December 31, 2002, and
the related combined statements of operations, cash flows and
changes in stockholders investment for each of the two
years in the period ended December 31, 2002 and the two
month period ended February 28, 2003. Our audits also
included the financial statement schedule listed in the Index at
Item 15(a)(2). These financial statements and schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the combined
financial position of TRW Automotive Inc. at December 31,
2002, and the combined results of its operations and its cash
flows for each of the two years in the period ended
December 31, 2002 and the two month period ended
February 28, 2003, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.

As discussed in Note 4 to the combined
financial statements, the Company changed its method of
accounting for goodwill resulting from its adoption of Statement
of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets, effective January 1,
2002.



| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP

Troy, Michigan

October 29, 2003, except for Note 3


as to which the date is January 9, 2004


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TRW AUTOMOTIVE INC.



CONSOLIDATED AND COMBINED STATEMENTS OF
OPERATIONS


|                                                                     |  |                                         |       |              |  |              |       |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------- |  | --------------------------------------- | ----- | ------------ |  | ------------ | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                     |  |                                         |       |             
|                                                                     |  | Successor                               |       | Predecessor 
|                                                                     |  |                                         |       |             
|                                                                     |  |                                         |       |              |  |             
|                                                                     |  | Ten Months                              |       | Two Months   |  | Years Ended 
|                                                                     |  | Ended                                   |       | Ended        |  | December 31,
|                                                                     |  | December 31,                            |       | February 28, |  |             
|                                                                     |  | 2003                                    |       | 2003         |  | 2002         |       | 2001
|                                                                     |  |                                         |       |              |  |              |       |     
|                                                                     |  |                                        
|                                                                     |  | (In millions, except per share amounts)
|Sales                                                                |  | $                                       | 9,435 |              |  | $            | 1,916 |      |  | $ | 10,630 |   |  | $ | 10,091 |  
|Cost of sales                                                        |  |                                         | 8,456 |              |  |              | 1,686 |      |  |   | 9,315  |   |  |   | 8,989  |  
|                                                                     |  |                                         |       |              |  |              |       |      |  |   |        |   |  |   |        |  
|Gross profit                                                         |  |                                         | 979   |              |  |              | 230   |      |  |   | 1,315  |   |  |   | 1,102  |  
|Administrative and selling expenses                                  |  |                                         | 446   |              |  |              | 100   |      |  |   | 541    |   |  |   | 597    |  
|Research and development expenses                                    |  |                                         | 137   |              |  |              | 27    |      |  |   | 151    |   |  |   | 131    |  
|Purchased in-process research and development                        |  |                                         | 85    |              |  |              |      |      |  |   |       |   |  |   |       |  
|Amortization of intangible assets (including
    goodwill in 2001)   |  |                                         | 27    |              |  |              | 2     |      |  |   | 15     |   |  |   | 78     |  
|Other (income) expense  net                                         |  |                                         | (56   | )            |  |              | 4     |      |  |   | (6     | ) |  |   | (2     | )
|                                                                     |  |                                         |       |              |  |              |       |      |  |   |        |   |  |   |        |  
|Operating income                                                     |  |                                         | 340   |              |  |              | 97    |      |  |   | 614    |   |  |   | 298    |  
|Interest expense                                                     |  |                                         | 260   |              |  |              | 48    |      |  |   | 316    |   |  |   | 373    |  
|Interest income                                                      |  |                                         | (8    | )            |  |              | (1    | )    |  |   | (7     | ) |  |   | (10    | )
|Loss (gain) on retirement of debt                                    |  |                                         | 31    |              |  |              |      |      |  |   | (4     | ) |  |   |       |  
|Losses on sales of receivables                                       |  |                                         | 25    |              |  |              |      |      |  |   | 7      |   |  |   | 1      |  
|                                                                     |  |                                         |       |              |  |              |       |      |  |   |        |   |  |   |        |  
|(Losses) earnings from continuing operations
    before income taxes |  |                                         | 32    |              |  |              | 50    |      |  |   | 302    |   |  |   | (66    | )
|Income tax expense (benefit)                                         |  |                                         | 98    |              |  |              | 19    |      |  |   | 138    |   |  |   | (30    | )
|                                                                     |  |                                         |       |              |  |              |       |      |  |   |        |   |  |   |        |  
|(Losses) earnings from continuing operations                         |  |                                         | (66   | )            |  |              | 31    |      |  |   | 164    |   |  |   | (36    | )
|Discontinued operations (net of taxes)                               |  |                                         |      |              |  |              |      |      |  |   |       |   |  |   | 11     |  
|                                                                     |  |                                         |       |              |  |              |       |      |  |   |        |   |  |   |        |  
|Net (losses) earnings                                                |  | $                                       | (66   | )            |  | $            | 31    |      |  | $ | 164    |   |  | $ | (25    | )
|                                                                     |  |                                         |       |              |  |              |       |      |  |   |        |   |  |   |        |  

See accompanying notes to consolidated and
combined financial statements

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TRW AUTOMOTIVE INC.



CONSOLIDATED AND COMBINED BALANCE
SHEETS


|                                                                 |                                                                                            |                                                |       |             |     |   |        |       |       | 
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ---------------------------------------------- | ----- | ----------- | --- | - | ------ | ----- | ----- | 
|                                                                 |                                                                                            |                                               
|                                                                 |                                                                                            | As of December 31,                            
|                                                                 |                                                                                            |                                               
|                                                                 |                                                                                            | Successor                                      |       | Predecessor
|                                                                 |                                                                                            |                                                |       |            
|                                                                 |                                                                                            | 2003                                           |       | 2002       
|                                                                 |                                                                                            |                                                |       |            
|                                                                 |                                                                                            |                                               
|                                                                 |                                                                                            | (Dollars in millions,                         
|                                                                 |                                                                                            | except per share                              
|                                                                 |                                                                                            | information)                                  
|ASSETS                                                          
|Current assets:                                                  |                                                                                            |                                                |       |             |     |   |        |      
|                                                                 | Cash and cash equivalents                                                                  |                                                | $     | 828         |     |   | $      | 188   |      
|                                                                 | Marketable securities                                                                      |                                                |       | 16          |     |   |        | 26    |      
|                                                                 | Accounts receivable, net of allowances of
    $45 million and $53 million in 2003 and 2002 |                                                |       | 1,643       |     |   |        | 1,348 |      
|                                                                 | Inventories                                                                                |                                                |       | 635         |     |   |        | 608   |      
|                                                                 | Prepaid expenses                                                                           |                                                |       | 73          |     |   |        | 49    |      
|                                                                 | Deferred income taxes                                                                      |                                                |       | 120         |     |   |        | 144   |      
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|Total current assets                                             |                                                                                            |                                                | 3,315 |             |     |   | 2,363  |      
|Property, plant and equipment                                    |                                                                                            |                                                | 2,877 |             |     |   | 6,281  |      
|                                                                 |                                                                                            | Less accumulated depreciation and amortization |       |             | 378 |   |        |       | 3,723 | 
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|Total property, plant and equipment 
    net                    |                                                                                            |                                                | 2,499 |             |     |   | 2,558  |      
|Intangible assets:                                               |                                                                                            |                                                |       |             |     |   |        |      
|                                                                 | Goodwill                                                                                   |                                                |       | 2,503       |     |   |        | 2,646 |      
|                                                                 | Other intangible assets                                                                    |                                                |       | 856         |     |   |        | 356   |      
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|                                                                 |                                                                                            |                                                | 3,359 |             |     |   | 3,002  |      
|                                                                 |                                                                                            | Less accumulated amortization                  |       |             | 37  |   |        |       | 424   | 
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|Total intangible assets  net                                    |                                                                                            |                                                | 3,322 |             |     |   | 2,578  |      
|Prepaid pension cost                                             |                                                                                            |                                                | 120   |             |     |   | 3,048  |      
|Deferred income taxes                                            |                                                                                            |                                                | 142   |             |     |   |       |      
|Other assets                                                     |                                                                                            |                                                | 522   |             |     |   | 401    |      
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|                                                                 |                                                                                            | $                                              | 9,920 |             |     | $ | 10,948 |      
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|                                                                
|LIABILITIES, MINORITY INTERESTS AND
    STOCKHOLDERS INVESTMENT
|Current liabilities:                                             |                                                                                            |                                                |       |             |     |   |        |      
|                                                                 | Short-term debt                                                                            |                                                | $     | 76          |     |   | $      | 327   |      
|                                                                 | Current portion of long-term debt                                                          |                                                |       | 24          |     |   |        | 17    |      
|                                                                 | Trade accounts payable                                                                     |                                                |       | 1,626       |     |   |        | 1,407 |      
|                                                                 | Accrued compensation                                                                       |                                                |       | 338         |     |   |        | 227   |      
|                                                                 | Income taxes                                                                               |                                                |       | 187         |     |   |        | 150   |      
|                                                                 | Other current liabilities                                                                  |                                                |       | 875         |     |   |        | 627   |      
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|Total current liabilities                                        |                                                                                            |                                                | 3,126 |             |     |   | 2,755  |      
|Debt allocated from TRW                                          |                                                                                            |                                                |      |             |     |   | 3,279  |      
|Long-term debt                                                   |                                                                                            |                                                | 3,326 |             |     |   | 302    |      
|Post-retirement benefits other than pensions                     |                                                                                            |                                                | 935   |             |     |   | 751    |      
|Pension benefits                                                 |                                                                                            |                                                | 838   |             |     |   | 427    |      
|Deferred income taxes                                            |                                                                                            |                                                | 147   |             |     |   | 731    |      
|Long-term liabilities                                            |                                                                                            |                                                | 300   |             |     |   | 231    |      
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|Total liabilities                                                |                                                                                            |                                                | 8,672 |             |     |   | 8,476  |      
|Minority interests                                               |                                                                                            |                                                | 50    |             |     |   | 81     |      
|Stockholders investment:                                        |                                                                                            |                                                |       |             |     |   |        |      
|                                                                 | Parent company investment                                                                  |                                                |       |            |     |   |        | 2,738 |      
|                                                                 | Capital stock                                                                              |                                                |       |            |     |   |        |      |      
|                                                                 | Paid-in-capital                                                                            |                                                |       | 1,304       |     |   |        |      |      
|                                                                 | Accumulated deficit                                                                        |                                                |       | (66         | )   |   |        |      |      
|                                                                 | Accumulated other comprehensive losses                                                     |                                                |       | (40         | )   |   |        | (347  | )    
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|Total stockholders investment                                   |                                                                                            |                                                | 1,198 |             |     |   | 2,391  |      
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      
|                                                                 |                                                                                            | $                                              | 9,920 |             |     | $ | 10,948 |      
|                                                                 |                                                                                            |                                                |       |             |     |   |        |      

See accompanying notes to consolidated and
combined financial statements.

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TRW AUTOMOTIVE INC.



CONSOLIDATED AND COMBINED STATEMENTS OF CASH
FLOWS


|                                                                                                           |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |      |      |  
|---------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------------ | ------ | ------------ | ---- | ---- | --- | - | ---- | ---- | ---- | - | ---- | ---- | ---- | -
|                                                                                                           |                                                                      |                                                         |        |             
|                                                                                                           |                                                                      | Successor                                               |        | Predecessor 
|                                                                                                           |                                                                      |                                                         |        |             
|                                                                                                           |                                                                      |                                                         |        |              |        |             
|                                                                                                           |                                                                      | Ten Months                                              |        | Two Months   |        | Years Ended 
|                                                                                                           |                                                                      | Ended                                                   |        | Ended        |        | December 31,
|                                                                                                           |                                                                      | December 31,                                            |        | February 28, |        |             
|                                                                                                           |                                                                      | 2003                                                    |        | 2003         |        | 2002         |      | 2001
|                                                                                                           |                                                                      |                                                         |        |              |        |              |      |     
|                                                                                                           |                                                                      |                                                        
|                                                                                                           |                                                                      | (Dollars in millions)                                  
|Operating activities                                                                                       |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|Net (losses) earnings                                                                                      |                                                                      | $                                                       | (66    | )            |        | $            | 31   |      |     | $ | 164  |      |      | $ | (25  | )   
|Adjustments to reconcile net (losses) earnings to
    net cash provided by (used in) operating activities: |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|                                                                                                           | Depreciation and amortization                                        |                                                         |        | 407          |        |              |      | 84   |     |   |      | 509  |      |   |      | 548  |     
|                                                                                                           | Amortization of deferred financing fees                              |                                                         |        | 9            |        |              |      |     |     |   |      | 2    |      |   |      | 2    |     
|                                                                                                           | Pension and other post-retirement benefits, net
    of contributions |                                                         |        | (11          | )      |              |      | (28  | )   |   |      | (236 | )    |   |      | (219 | )   
|                                                                                                           | Purchased in-process research and development                        |                                                         |        | 85           |        |              |      |     |     |   |      |     |      |   |      |     |     
|                                                                                                           | Net gain on sale of assets                                           |                                                         |        |             |        |              |      |     |     |   |      | (12  | )    |   |      | (18  | )   
|                                                                                                           | Loss (gain) on retirement of debt                                    |                                                         |        | 31           |        |              |      |     |     |   |      | (4   | )    |   |      |     |     
|                                                                                                           | Asset impairment charges                                             |                                                         |        |             |        |              |      | 1    |     |   |      | 48   |      |   |      | 50   |     
|                                                                                                           | Pending and threatened litigation                                    |                                                         |        |             |        |              |      |     |     |   |      | 2    |      |   |      | 29   |     
|                                                                                                           | Deferred income taxes                                                |                                                         |        | 7            |        |              |      | (3   | )   |   |      | 105  |      |   |      | 19   |     
|                                                                                                           | Discontinued operations                                              |                                                         |        |             |        |              |      |     |     |   |      |     |      |   |      | (11  | )   
|                                                                                                           | Other  net                                                          |                                                         |        | 14           |        |              |      | 5    |     |   |      | 30   |      |   |      | 4    |     
|Changes in assets and liabilities, net of effects
    of businesses acquired or divested:                  |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|                                                                                                           | Accounts receivable, net                                             |                                                         |        | 134          |        |              |      | (284 | )   |   |      | 78   |      |   |      | 7    |     
|                                                                                                           | Securitization of accounts receivable                                |                                                         |        |             |        |              |      |     |     |   |      | (327 | )    |   |      | 327  |     
|                                                                                                           | Inventories                                                          |                                                         |        | 48           |        |              |      | 2    |     |   |      | (26  | )    |   |      | 103  |     
|                                                                                                           | Trade accounts payable                                               |                                                         |        | 40           |        |              |      | 64   |     |   |      | 69   |      |   |      | (40  | )   
|                                                                                                           | Prepaid expenses and other assets                                    |                                                         |        | 45           |        |              |      | 17   |     |   |      | 194  |      |   |      | 146  |     
|                                                                                                           | Other liabilities                                                    |                                                         |        | 126          |        |              |      | 39   |     |   |      | (101 | )    |   |      | (114 | )   
|                                                                                                           | Other  net                                                          |                                                         |        | (23          | )      |              |      | (1   | )   |   |      | 31   |      |   |      | 20   |     
|                                                                                                           |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|                                                                                                           |                                                                      | Net cash provided by (used in) operating
    activities |        |              | 846    |              |      |      | (73 | ) |      |      | 526  |   |      |      | 828  |  
|Investing activities                                                                                       |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|Capital expenditures including other intangibles                                                           |                                                                      |                                                         | (350   | )            |        |              | (66  | )    |     |   | (427 | )    |      |   | (475 | )   
|Acquisitions, net of cash acquired                                                                         |                                                                      |                                                         | (3,354 | )            |        |              |     |      |     |   |     |      |      |   |     |     
|Acquisition transaction fees                                                                               |                                                                      |                                                         | (56    | )            |        |              |     |      |     |   |     |      |      |   |     |     
|Net proceeds from divestitures                                                                             |                                                                      |                                                         | 57     |              |        |              |     |      |     |   | 22   |      |      |   | 46   |     
|Other  net                                                                                                |                                                                      |                                                         | 7      |              |        |              | (2   | )    |     |   | (9   | )    |      |   | 20   |     
|                                                                                                           |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|                                                                                                           |                                                                      | Net cash used in investing activities                   |        |              | (3,696 | )            |      |      | (68 | ) |      |      | (414 | ) |      |      | (409 | )
|Financing activities                                                                                       |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|Increase (decrease) in short-term debt                                                                     |                                                                      |                                                         | 32     |              |        |              | (321 | )    |     |   | 121  |      |      |   | (36  | )   
|Proceeds from debt in excess of 90 days                                                                    |                                                                      |                                                         | 1,290  |              |        |              |     |      |     |   | 17   |      |      |   | 10   |     
|Principal payments on debt in excess of
    90 days                                                        |                                                                      |                                                         | (1,342 | )            |        |              | (18  | )    |     |   | (81  | )    |      |   | (47  | )   
|Proceeds from issuance of long-term debt                                                                   |                                                                      |                                                         | 3,087  |              |        |              |     |      |     |   |     |      |      |   |     |     
|Debt issue costs                                                                                           |                                                                      |                                                         | (114   | )            |        |              |     |      |     |   |     |      |      |   |     |     
|Equity contributions                                                                                       |                                                                      |                                                         | 698    |              |        |              |     |      |     |   |     |      |      |   |     |     
|Net transfers from (to) parent company                                                                     |                                                                      |                                                         |       |              |        |              | 503  |      |     |   | (78  | )    |      |   | (386 | )   
|Other  net                                                                                                |                                                                      |                                                         | 1      |              |        |              | 78   |      |     |   | 26   |      |      |   | (5   | )   
|                                                                                                           |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|                                                                                                           |                                                                      | Net cash provided by (used in) financing
    activities |        |              | 3,652  |              |      |      | 242 |   |      |      | 5    |   |      |      | (464 | )
|Effect of exchange rate changes on cash                                                                    |                                                                      |                                                         | 26     |              |        |              | (13  | )    |     |   | (47  | )    |      |   | 12   |     
|                                                                                                           |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|Increase in cash and cash equivalents                                                                      |                                                                      |                                                         | 828    |              |        |              | 88   |      |     |   | 70   |      |      |   | (33  | )   
|Cash and cash equivalents at beginning of period                                                           |                                                                      |                                                         |       |              |        |              | 188  |      |     |   | 118  |      |      |   | 151  |     
|                                                                                                           |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|Cash and cash equivalents at end of period                                                                 |                                                                      | $                                                       | 828    |              |        | $            | 276  |      |     | $ | 188  |      |      | $ | 118  |     
|                                                                                                           |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|Supplemental cash flow
    information                                                                     |                                                                      |                                                         |        |              |        |              |      |      |     |   |      |      |      |   |      |     
|Interest paid, net of amount capitalized                                                                   |                                                                      | $                                                       | 182    |              |        | $            | 45   |      |     | $ | 326  |      |      | $ | 368  |     
|Income tax paid (refund)  net                                                                             |                                                                      | $                                                       | 93     |              |        | $            | 10   |      |     | $ | (129 | )    |      | $ | 61   |     

See accompanying notes to consolidated and
combined financial statements.

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##### Table of Contents



TRW AUTOMOTIVE INC.



CONSOLIDATED AND COMBINED STATEMENTS OF
CHANGES


IN STOCKHOLDERS INVESTMENT


|                                                         |  |                       |       |                   |  |               |      |   |  |   |       |  
|-------------------------------------------------------- |  | --------------------- | ----- | ----------------- |  | ------------- | ---- | - |  | - | ----- | -
|                                                         |  |                      
|                                                         |  | Predecessor          
|                                                         |  |                      
|                                                         |  |                       |       | Accumulated       |  |              
|                                                         |  | Parent                |       | Other             |  | Total        
|                                                         |  | Company               |       | Comprehensive     |  | Stockholders
|                                                         |  | Investment            |       | Earnings (Losses) |  | Investment   
|                                                         |  |                       |       |                   |  |              
|                                                         |  |                      
|                                                         |  | (Dollars in millions)
|Balance at December 31, 2000                             |  | $                     | 2,015 |                   |  | $             | (299 | ) |  | $ | 1,716 |  
|Net losses  2001                                        |  |                       | (25   | )                 |  |               |     |   |  |   | (25   | )
|Foreign exchange losses, net of tax of
    $14 million   |  |                       |      |                   |  |               | (76  | ) |  |   | (76   | )
|Minimum pension liability, net of tax of
    $25 million |  |                       |      |                   |  |               | (47  | ) |  |   | (47   | )
|Deferred cash flow hedges, net of tax                    |  |                       |      |                   |  |               | 1    |   |  |   | 1     |  
|                                                         |  |                       |       |                   |  |               |      |   |  |   |       |  
|Total comprehensive losses                               |  |                       |       |                   |  |               |      |   |  |   | (147  | )
|Net transfers from parent company                        |  |                       | (65   | )                 |  |               |     |   |  |   | (65   | )
|                                                         |  |                       |       |                   |  |               |      |   |  |   |       |  
|Balance at December 31, 2001                             |  | $                     | 1,925 |                   |  | $             | (421 | ) |  | $ | 1,504 |  
|Net earnings  2002                                      |  |                       | 164   |                   |  |               |     |   |  |   | 164   |  
|Foreign exchange losses, net of tax of
    $110 million  |  |                       |      |                   |  |               | 178  |   |  |   | 178   |  
|Minimum pension liability, net of tax of
    $55 million |  |                       |      |                   |  |               | (104 | ) |  |   | (104  | )
|Unrealized gains on securities, net of tax               |  |                       |      |                   |  |               | 1    |   |  |   | 1     |  
|Deferred cash flow hedges, net of tax                    |  |                       |      |                   |  |               | (1   | ) |  |   | (1    | )
|                                                         |  |                       |       |                   |  |               |      |   |  |   |       |  
|Total comprehensive losses                               |  |                       |       |                   |  |               |      |   |  |   | 238   |  
|Net transfers from parent company                        |  |                       | 649   |                   |  |               |     |   |  |   | 649   |  
|                                                         |  |                       |       |                   |  |               |      |   |  |   |       |  
|Balance at December 31, 2002                             |  | $                     | 2,738 |                   |  | $             | (347 | ) |  | $ | 2,391 |  
|Net earnings  two months ended
    February 28, 2003    |  |                       | 31    |                   |  |               |     |   |  |   | 31    |  
|Foreign exchange loss, net of tax of
    $16 million     |  |                       |      |                   |  |               | (58  | ) |  |   | (58   | )
|                                                         |  |                       |       |                   |  |               |      |   |  |   |       |  
|Total comprehensive losses                               |  |                       |       |                   |  |               |      |   |  |   | (27   | )
|Net transfers from parent company                        |  |                       | 290   |                   |  |               |     |   |  |   | 290   |  
|                                                         |  |                       |       |                   |  |               |      |   |  |   |       |  
|Balance at February 28, 2003                             |  | $                     | 3,059 |                   |  | $             | (405 | ) |  | $ | 2,654 |  
|                                                         |  |                       |       |                   |  |               |      |   |  |   |       |  

|                                                                                    |  |                       |       |             |  |               |     |       |  |   |     |   |  |   |       |  
|----------------------------------------------------------------------------------- |  | --------------------- | ----- | ----------- |  | ------------- | --- | ----- |  | - | --- | - |  | - | ----- | -
|                                                                                    |  |                      
|                                                                                    |  | Successor            
|                                                                                    |  |                      
|                                                                                    |  |                       |       | Accumulated |  |              
|                                                                                    |  |                       |       | Other       |  |              
|                                                                                    |  | Paid-in               |       | Accumulated |  | Comprehensive |     |      
|                                                                                    |  | Capital               |       | Deficit     |  | Losses        |     | Total
|                                                                                    |  |                       |       |             |  |               |     |      
|                                                                                    |  |                      
|                                                                                    |  | (Dollars in millions)
|Balance at March 1, 2003                                                            |  | $                     |      |             |  | $             |    |       |  | $ |    |   |  | $ |      |  
|Net losses  ten months ended
    December 31, 2003                                 |  |                       |       |             |  |               | (66 | )     |  |   |     |   |  |   | (66   | )
|Foreign exchange loss, net of current and
    deferred tax liability of $71 million |  |                       |       |             |  |               |     |       |  |   | (34 | ) |  |   | (34   | )
|Deferred cash flow hedges, net of tax                                               |  |                       |       |             |  |               |     |       |  |   | (6  | ) |  |   | (6    | )
|                                                                                    |  |                       |       |             |  |               |     |       |  |   |     |   |  |   |       |  
|Total comprehensive losses                                                          |  |                       |       |             |  |               |     |       |  |   |     |   |  |   | (106  | )
|Equity contributions                                                                |  |                       | 1,304 |             |  |               |     |       |  |   |     |   |  |   | 1,304 |  
|                                                                                    |  |                       |       |             |  |               |     |       |  |   |     |   |  |   |       |  
|Balance at December 31, 2003                                                        |  | $                     | 1,304 |             |  | $             | (66 | )     |  | $ | (40 | ) |  | $ | 1,198 |  
|                                                                                    |  |                       |       |             |  |               |     |       |  |   |     |   |  |   |       |  

See accompanying notes to consolidated and
combined financial statements.

49



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##### Table of Contents



TRW AUTOMOTIVE INC.



NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS







|   |                                                    
|-- | ---------------------------------------------------
|1. | Description of Business and Change in
    Ownership



| |                        
| | -----------------------
| | Description of Business

TRW Automotive Inc. (also referred to herein as
the Company or the Successor), is among
the worlds largest and most diversified suppliers of
automotive systems, modules and components to global automotive
vehicle manufacturers (VMs) and related
aftermarkets. The Company conducts substantially all of its
operations through subsidiaries. These operations primarily
encompass the design, manufacture and sale of active and passive
safety related products. Active safety related products
principally refer to vehicle dynamic controls (primarily braking
and steering), and passive safety related products principally
refer to occupant restraints (primarily air bags and seat belts)
and crash sensors. The Company is primarily a Tier-1
supplier (a supplier which sells directly to VMs), with over 85%
of its sales in 2003 made directly to VMs.



| |                    
| | -------------------
| | Change in Ownership

The former TRW Automotive Inc. (which we did not
acquire and was renamed Richmond TAI Corp.)
(Automotive or the Predecessor) was
incorporated in Delaware on June 3, 2002 as a wholly owned
subsidiary of TRW Inc. (TRW) in contemplation of the
spin-off announced by the TRW Board of Directors in March 2002.
Automotive, together with TRWs other subsidiaries engaged
in the automotive business, comprised TRWs automotive
business. Historically, TRW automotive business resulted from
the combination of the legacy TRW automotive business with the
legacy Lucas Varity plc (Lucas Varity) automotive
business.

Prior to the consummation of the planned
spin-off, TRW entered into an Agreement and Plan of Merger with
Northrop Grumman Corporation (Northrop), dated
June 30, 2002, whereby Northrop would acquire all of the
outstanding common stock of TRW, including TRWs automotive
business, in exchange for Northrop shares. The acquisition of
TRW by Northrop was completed on December 11, 2002 (the
Merger).

Additionally, on November 18, 2002, an
entity controlled by affiliates of The Blackstone Group, L.P.
(Blackstone), entered into a Master Purchase
Agreement, as amended, pursuant to which TRW Automotive Holdings
Corp. (TRW Automotive Holdings), the Companys
indirect parent, would cause the Company to purchase the shares
of the subsidiaries of TRW engaged in automotive business from
Northrop (the Acquisition). The Predecessors
51% interest in the joint venture, TRW Koyo Steering Systems
Company (TKS) was not transferred to the Company as
part of the Acquisition.

The Acquisition was completed on
February 28, 2003 for a purchase price of
$4,443 million (excluding assumed debt of
$210 million), subject to certain closing and post-closing
adjustments. Upon completion of the Acquisition, a subsidiary of
Northrop retained a 19.6% interest in the Company.

TRW Automotive Holdings was capitalized by cash
equity contributions totaling $698 million (further
described below) and contributed the $698 million in cash
plus newly issued shares of its common stock having an implied
value of $170 million to TRW Automotive Intermediate
Holdings Corp. (Intermediate), which is the direct
parent of the Company. Intermediate issued a $600 million
face amount subordinated 8% pay-in-kind note due 2018 (the
Seller Note) to an affiliate of Northrop to acquire
the stock of certain TRW automotive subsidiaries. The Seller
Note had an estimated fair value of $348 million (excluding
related deferred tax) as of the Acquisition date. Intermediate
contributed such stock together with cash equity contributions
of $698 million and the $170 million of TRW Automotive
Holdings common stock to the Company for 100% of the
Companys stock. Intermediate has no independent operations
or investments other than its investment in the Company.
Intermediate will be dependent on the cash flows of the Company
to repay the Seller Note upon maturity.

In connection with the Acquisition, the Company
issued senior notes (the Senior Notes) and senior
subordinated notes (the Senior Subordinated Notes)
in a private offering, entered into new revolving credit

50



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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

and term loan facilities (the Senior
Secured Credit Facilities) and initiated a trade accounts
receivable securitization program (the Receivables
Facility).

Funding for the cash portion of the purchase
price of the Acquisition included $1,577 million in
proceeds from the Senior Notes and Senior Subordinated Notes,
$1,510 million in borrowings under the Senior Secured
Credit Facilities, and a cash equity contribution primarily from
affiliates of Blackstone, in exchange for shares of TRW
Automotive Holdings common stock. Employees of the Company
and certain of its subsidiaries also made cash equity
contributions in exchange for shares of TRW Automotive Holdings.
In connection with the Acquisition, the Company incurred
approximately $56 million in costs, which have been
capitalized and included as part of the purchase price (included
in Goodwill).

In addition, the Company assumed certain debt
instruments existing at the Acquisition including
10.875% debentures previously issued by Lucas Industries
Limited due 2020 at face amount of $149 million and certain
other borrowings, including accrued interest, totaling
approximately $60 million. Northrop retained all other
indebtedness outstanding at the Acquisition, including debt
allocated from TRW.

The Senior Notes consist of $925 million,
9 3/8% Senior Notes and
200 million,
10 1/8% Senior Notes, both due February 15, 2013.
The Senior Subordinated Notes consist of $300 million,
11% Senior Subordinated Notes and
125 million,
11 3/4% Senior Subordinated Notes, both due
February 15, 2013. Interest is payable semi-annually on
February 15 and August 15 and the first payment was
made on August 15, 2003. The Senior Notes are
unconditionally guaranteed on a senior unsecured basis and the
Senior Subordinated Notes are unconditionally guaranteed on a
senior subordinated unsecured basis, in each case, by
substantially all existing and future wholly owned domestic
subsidiaries and by TRW Automotive Finance Luxembourg,
S.à.r.l. (TRW Luxembourg), a restricted
Luxembourg subsidiary.

The Senior Secured Credit Facilities consist of a
secured revolving credit facility and various senior secured
term loan facilities. The six-year revolving credit facility,
through a syndication of lenders, provides for borrowings up to
$500 million including the availability of letters of
credit, a portion of which is available in various foreign
currencies. Initial borrowings under senior secured term loan
facilities consisted of a six-year tranche A term loan
issued in a face amount of $410 million and eight-year
tranche B term loans issued in face amounts of
$1,030 million and approximately
65 million.
See Note 20 for further description of the Senior Notes,
Senior Subordinated Notes and Senior Secured Credit Facilities
and refinancing activities in 2003 subsequent to the Acquisition
date. For financing activities subsequent to December 31,
2003, see Note 3.

The Receivables Facility provided up to
$600 million in funding. On February 28, 2003,
subsidiaries of the Company signed a Receivables Purchase
Agreement and began selling trade accounts receivables
originated by them and certain of their subsidiaries as sellers
in the United States to the Receivables Facility. See
Note 15 for further description of the Receivables Facility
and Note 3 for amendments subsequent to December 31,
2003.

The following unaudited pro forma financial data
summarizes the results of operations for the years ended
December 31, 2003 and December 31, 2002 as if the
Acquisition had occurred as of January 1, 2002. Pro forma
adjustments include the removal of the results of operations of
TKS, elimination of a $43 million inventory write-up
recorded as a result of the Acquisition, elimination of
$85 million in purchased in-process research and
development expense, adjustments to depreciation and
amortization to reflect fair value of property, plant and
equipment and identified intangible assets (with finite lives),
the elimination of the amortization of unrecognized pension and
other post retirement benefit losses, adjustments to corporate
allocations to reflect estimated stand-alone costs, adjustments
to interest expense to reflect the Companys new capital
structure, adjustments to losses on sales of receivables
relating to the initiation costs of the Receivables Facility and
certain corresponding adjustments to income tax expense. These
pro forma amounts

51



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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

are not necessarily indicative of the results
that would have been attained if the Acquisition had occurred at
January 1, 2002 or that may be attained in the future.

|                 |  |                      |        |      |  |   |        | 
|---------------- |  | -------------------- | ------ | ---- |  | - | ------ | 
|                 |  |                     
|                 |  | Years Ended         
|                 |  | December 31,        
|                 |  |                     
|                 |  | 2003                 |        | 2002
|                 |  |                      |        |     
|                 |  |                     
|                 |  | (In millions, except
|                 |  | per share amounts)  
|Sales            |  | $                    | 11,308 |      |  | $ | 10,384 | 
|Operating income |  |                      | 579    |      |  |   | 665    | 
|Net earnings     |  |                      | 139    |      |  |   | 228    | 






|   |                      
|-- | ---------------------
|2. | Basis of Presentation

The following provides a description of the basis
of presentation during all periods presented:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Successor
    Represents the consolidated financial position of the Company as
    of December 31, 2003 and consolidated results of operations
    and cash flows for the ten months ended December 31, 2003
    following the Acquisition. The financial position as of
    December 31, 2003 and results of operations and cash flows
    for the ten months ended December 31, 2003 reflect purchase
    accounting for the Acquisition (as described more fully below).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | Predecessor
    Represents the combined financial position of the automotive
    business of TRW for all periods prior to the Acquisition on
    February 28, 2003. This presentation reflects the
    historical basis of accounting without any application of
    purchase accounting for the Merger in any period presented, due
    to the temporary nature of Northrops ownership of
    TRWs automotive business. Prior to the Merger on
    December 11, 2002, Northrop entered into the Master
    Purchase Agreement on November 18, 2002 with affiliates of
    Blackstone to sell TRWs automotive business as discussed
    in Note 1. The extensive representations, warranties and
    restrictions on Northrops conduct prior to the closing of
    the Acquisition in the Master Purchase Agreement severely
    limited any actions that could have been taken by Northrop
    during its brief and temporary ownership of TRWs
    automotive business.

The Predecessors 51% interest in the joint
venture, TKS was not transferred to the Successor as part of the
Acquisition.

The combined statements of operations include
expenses recorded by the Predecessor or directly charged to the
Predecessor by TRW for periods prior to the Merger and by
Northrop for periods prior to the Acquisition. In addition, the
combined statements of operations include an allocation of
general and administrative corporate expenses from TRW and
Northrop to reflect the services provided to the Predecessor or
benefits received by the Predecessor. These services primarily
consisted of general corporate management and governance,
finance and accounting, treasury and risk management, human
resources and benefits administration, legal, management
information services and other shared support services. The
Northrop allocation was $8 million for the two months ended
February 28, 2003. TRWs allocation was
$81 million for each of the years 2002 and 2001. The
allocations are reported in administrative and selling expenses
in the combined statements of operations. These allocations were
computed using TRWs and Northrops internal
allocation methodology, which was based upon an established
percentage of costs applied to the cost of operations (sales
less earnings (losses) before taxes from continuing operations).
Given that TRW and Northrop provided such support services for
the benefit of their entire organizations, it would have been
impractical to allocate such expenses in a more direct manner.
Accordingly, management believes that this was a reasonable
method for allocating such expenses. However, as the scale of
operations and nature of the business of TRW and Northrop
differed from that of the Predecessor, these allocations are not
necessarily representative of the operating expenses that would
have been incurred had the Predecessor operated on a stand-alone
basis. For each of the years ended December 31, 2002 and
2001 and the two months ended

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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

February 28, 2003, management estimates that
stand-alone general and administrative expenses would have been
approximately $48 million (unaudited), $48 million
(unaudited) and $8 million (unaudited), respectively.

Debt, other than debt allocated from TRW and
Northrop, reported on the Predecessors combined balance
sheet represents the historical third party obligations of the
automotive legal entities. Debt allocated from TRW and Northrop
is included on the Predecessors combined balance sheet.
This allocation reflects TRWs and Northrops
historical practice of incurring most of its indebtedness,
including debt incurred to finance the acquisition of the Lucas
Varity automotive business, at the parent company level.

Interest expense from the specific third party
debt obligations attributed to the Predecessors operations
is included in the combined statements of operations. In
addition, an estimate of the remaining interest expense of TRW
and Northrop, attributable to the debt allocated to the
Predecessor, is also included in the Predecessors combined
statements of operations. The allocation of debt and interest is
based on the ratio of the Predecessors net assets to
TRWs and Northrops net assets plus non-automotive
debt. Management believes that this is a reasonable method of
allocating debt and interest to the Predecessor. This allocation
is not, however, indicative of the total amount of debt and
interest that would have been incurred by the Predecessor as a
stand-alone entity.

The Predecessor, primarily for the United States
operations, participated in TRWs and Northrops
centralized cash management system. Under this system, cash
receipts were transferred to TRW and Northrop to fund cash
disbursements and other general corporate obligations. As such,
the amount of cash and cash equivalents on the
Predecessors combined balance sheet does not represent the
amount required or generated by the Predecessor. The balance of
cash and cash equivalents on the Predecessors combined
balance sheet primarily relates to cash and cash equivalents at
foreign operations that did not participate in TRWs and
Northrops cash management program.

TRW and Northrop accounted for and paid all
material United States income taxes. The Predecessors
taxable income (loss) related to its United States operations
and foreign operations subject to a United States
check-the-box election to be taxed in the United
States was included in TRWs consolidated income tax
returns and relating to the two months ended February 28,
2003, shall be included in Northrops consolidated income
tax returns for the year ended December 31, 2003. The
combined statements of operations include an allocation to the
Predecessor of TRW and Northrops United States income
taxes (credits) in amounts generally equivalent to the
provisions that would have resulted had the Predecessor filed
separate income tax returns for the years presented. The
Predecessor has also been allocated United States deferred
income taxes based on the estimated differences between the book
and tax basis of its assets and liabilities.

Most of the Companys foreign operations
account for and pay foreign income taxes related to their
operations. For those operations that have not separately
accounted for and paid income taxes related to their operations,
the combined statements of operations include an allocation of
TRWs and Northrops foreign income taxes in amounts
generally equivalent to the provisions which would have resulted
had those foreign operations filed separate income tax returns
for the years presented. These operations have also been
allocated foreign deferred income taxes based on the estimated
differences between the book and tax basis of their assets and
liabilities.

In the opinion of management, all adjustments
necessary for a fair presentation of financial position, results
of operations and cash flows have been presented. The financial
information included may not necessarily reflect the results of
operations, financial position, changes in stockholders
investment in the future or what they would have been if the
Predecessor had been a separate, stand-alone company for the
periods presented.

The consolidated financial statements of the
Successor as of and for the ten months ended December 31,
2003 reflect the Acquisition under the purchase method of
accounting, in accordance with the Financial

53



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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS)
No. 141, Business Combinations
(SFAS 141).

The primary reasons for Blackstones
acquisition of TRWs automotive business, and the primary
factors that contributed to a purchase price that resulted in
recognition of goodwill, include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Blackstones belief that the Company is the
    only supplier that combines a broad customer base and geographic
    diversity with leading positions in both key active safety
    technologies and key passive safety technologies;
    Blackstones belief that there are significant
    opportunities to enhance automotive safety through new
    technology that uses information from active safety systems to
    optimize the performance of passive safety systems, and the
    Companys leading positions in both active and passive
    safety technologies which will allow the Company to benefit from
    this convergence;
|
| |  | The Companys geographically diverse global
    manufacturing base which offers an advantage over many of its
    competitors, including allowing the Company to leverage sales to
    a customer in one location, or for one product, into sales to
    that customer in other locations and for other products while
    limiting exposure to the risks of any one geographic economy,
    product line or major customer; and                                                                                                                                                                                                            
|
| |  | The proven capabilities of the Companys
    assembled, experienced management team to execute the
    Companys strategy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Other considerations affecting the value of
goodwill include:



| |   |                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The potential for improved earnings gained from
    operating as a stand-alone automotive company with focused
    management effort;                                                                                                         
|
| |  | The potential for more efficient resource
    management when operated as a stand-alone automotive company;                                                                                                                                   
|
| |  | The ability of the assembled workforce to develop
    future innovative technologies, as has been done in the past;                                                                                                                           
|
| |  | The ability of the assembled workforce to drive
    significant annual cost reductions to maximize
    profitability; and                                                                                                                     
|
| |  | The application of purchase accounting,
    particularly for such items as pension, OPEB and deferred tax
    liabilities for which significant reserve balances were recorded
    with no corresponding significant short-term cash outflows.

54



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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The following table summarizes the estimated fair
values of the assets acquired and liabilities assumed at the
date of Acquisition:

|                                                               |                                   |           |       |       | 
|-------------------------------------------------------------- | --------------------------------- | --------- | ----- | ----- | 
|                                                               |                                   | At       
|                                                               |                                   | March 1, 
|                                                               |                                   | 2003     
|                                                               |                                   |          
|                                                               |                                   | (Dollars 
|                                                               |                                   | in       
|                                                               |                                   | millions)
|Cash and cash equivalents                                      |                                   | $         | 276   |      
|Accounts receivable                                            |                                   |           | 1,634 |      
|Inventories                                                    |                                   |           | 650   |      
|Deferred income taxes                                          |                                   |           | 391   |      
|Other current assets                                           |                                   |           | 65    |      
|Property, plant and equipment                                  |                                   |           | 2,363 |      
|Intangible assets not subject to
    amortization  trademarks |                                   |           | 292   |      
|Intangible assets subject to amortization:                     |                                   |           |       |      
|                                                               | Developed technology (8 years)    |           |       | 79    | 
|                                                               | Customer relationships (20 years) |           |       | 451   | 
|Other long-term assets                                         |                                   |           | 564   |      
|Purchased in-process research and development                  |                                   |           | 85    |      
|Deferred income taxes                                          |                                   |           | 120   |      
|Goodwill                                                       |                                   |           | 2,500 |      
|                                                               |                                   |           |       |      
|                                                               | Total assets acquired             |           |       | 9,470 | 
|                                                               |                                   |           |       |      
|Accounts payable and other current liabilities                 |                                   |           | 2,616 |      
|Long-term debt assumed                                         |                                   |           | 210   |      
|Deferred income taxes                                          |                                   |           | 385   |      
|Post-retirement benefits other than pensions                   |                                   |           | 946   |      
|Other long-term liabilities                                    |                                   |           | 1,034 |      
|                                                               |                                   |           |       |      
|                                                               | Total liabilities assumed         |           |       | 5,191 | 
|                                                               |                                   |           |       |      
|                                                               | Net assets acquired               |           | $     | 4,279 | 
|                                                               |                                   |           |       |      

Net assets acquired as presented above includes
the effect of the discount to fair value of the Seller Note as
of the Acquisition date (see Note 1). Cash and cash
equivalents, accounts receivable, other current assets, and
accounts payable and other current liabilities were stated at
historical carrying values, given the short-term nature of these
assets and liabilities. The Companys projected pension,
post-retirement and post-employment benefit obligations and
assets have been reflected in the allocation of purchase price
at the projected benefit obligation less plan assets at fair
market value, based on computations of independent actuaries
engaged by the Company. Deferred income taxes have been provided
in the consolidated balance sheet based on the Companys
estimates of the tax versus book basis of the assets acquired
and liabilities assumed, as adjusted to estimated fair values.
Valuation allowances have been established against those assets
for which realization is not likely, namely in the U.S., as
losses are currently being generated in that tax jurisdiction.
Property, plant and equipment have been recorded at fair value
based on a valuation prepared by independent appraisers, and
inventory and debt outstanding as of the effective date of the
Acquisition based on managements judgments and estimates.
The Company also recorded a $37 million reserve, primarily
for severance related to strategic restructurings, plant
closings and involuntary employee termination arrangements
outside the U.S. to be paid over the next several years in
accordance with local law.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The Company engaged independent appraisers to
provide fair values of intangible assets acquired; including
purchased in-process research and development, trademarks,
developed technology and customer relationships.

The Company has recorded a one-time charge for
purchased in-process research and development (Purchased
IPR&D) expenses of $85 million. The value of
Purchased IPR&D was comprised of 21 ongoing development
projects, which ranged from 5% to 95% complete at the
Acquisition date. Purchased IPR&D was derived by assigning
values to those projects identified by management as having
economic value, but that had not yet reached technological
feasibility and had no alternative future use. These products
had not been released to the market as of the date of the
Acquisition, but the features and functionality of the products
had been defined.

Developed technology and trademarks were valued
based on the relief of royalty approach. This method allocates
value based on what the Company would be willing to pay as a
royalty to a third-party owner of the technology or trademark in
order to exploit the economic benefits. The technologies that
have been valued under this approach are innovative and
technological advancements within the safety business. A total
value of $79 million has been allocated to developed
technologies and will be amortized over 8 years.

The trademarks have been valued at
$292 million and assigned an indefinite life. The Company
holds a number of trademarks covering its products including
TRW, Lucas, and
Kelsey-Hayes. These trademarks represent the
goodwill and reputation that the Company has built up through
the years by selling high-quality products to its customers. A
number of third parties have entered into license agreements
with the Company pursuant to which they pay royalty fees in
exchange for the right to apply its trademarks to their products.

Customer relationships were valued using an
excess earnings approach after considering a fair return on
fixed assets, working capital, trademarks, technology, and
assembled workforce. A value of $451 million has been
assigned to customer relationships and will be amortized on a
straight-line basis over 20 years.

Management believes that the carrying values of
all other assets acquired and liabilities assumed approximate
their fair values.

The resulting goodwill after all identifiable
intangible assets have been valued was approximately
$2.5 billion, of which approximately $1.1 billion was
tax deductible. Goodwill and trademarks will be subject to
annual impairment tests in accordance with
SFAS No. 142, Goodwill and Other Intangible
Assets (SFAS 142).

The consolidated statement of operations for the
ten months ended December 31, 2003 includes
$43 million in cost of sales representing the write-off of
the inventory adjustment recorded in purchase accounting
relating to the sale of inventory on hand as of the Acquisition
date that was sold during this period, depreciation adjustments
correlating to the fair value adjustments to property, plant and
equipment, amortization of identified intangible assets and fair
value adjustments to assumed debt obligations, among other
changes resulting from the application of purchase accounting.






|   |                  
|-- | -----------------
|3. | Subsequent Events

On January 8, 2004, the Company completed an
amendment to the Receivables Facility, which reduced the amount
of maximum committed funding thereunder from $600 million
to $400 million. In January 2004, certain of the
Companys European subsidiaries entered into receivables
financing arrangements in Germany for a term of one year. Total
availability under these receivables financing arrangements is
approximately
75 million.

On January 9, 2004, the Company refinanced
all of the borrowings under its existing term loan facilities
with the proceeds of new term loan facilities, together with
approximately $213 million of available cash on

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

hand. Deferred debt issuance costs associated
with the existing term loan facilities of $11 were expensed in
the first quarter of 2004. The new term loan facilities consist
of tranche A-1 term loan issued in a face amount of
$350 million maturing February 2009 and tranche D term
loans issued in face amounts of $800 million and
approximately
93 million
maturing February 2011.

In January, 2004 the Company entered into a
series of interest rate swap agreements with a total notional
value of $500 million to effectively change a fixed rate
debt obligation into a floating rate obligation. The total
notional amount of these agreements is equal to the face value
of the designated debt instrument. The swap agreements are
expected to settle in February 2013, the maturity date of the
corresponding debt instrument.

TRW Automotive Holdings completed an initial
public offering of 24,137,931 shares of common stock
registered on Form S-1, registration statement
number 333-110513, as amended, which became effective on
February 2, 2004. Net proceeds from the offering, after
deducting underwriting discounts and estimated offering
expenses, were approximately $636 million. TRW Automotive
Holdings used approximately $319 million of the net
proceeds from the proposed offering to repurchase
12,068,965 shares of common stock held by an affiliate of
Blackstone and transferred approximately $317 million of
such proceeds to the Company to repay a portion of each of the
dollar and euro Senior Notes and Senior Subordinated Notes in
each case, including the payment of a related redemption premium
thereon, as follows:



| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $117 million of such proceeds were used to
    repay 35% of the $300,000,000 aggregate principal amount of
    11% Senior Subordinated Notes due 2013;
|
| |  | $61 million were used to repay 35% of the
    125,000,000
    aggregate principal amount of 11 3/4% Senior
    Subordinated Notes due 2013;          
|
| |  | $109 million were used to repay 11% of the
    $925,000,000 aggregate principal amount of
    9 3/8% Senior Notes due 2013; and                       
|
| |  | $30 million were used to repay 11% of the
    200,000,000
    aggregate principal amount of 10 1/8% Senior Notes due
    2013.                       

The related redemption premiums totaling
$30 million and deferred debt costs totaling
$7 million were expensed in the first quarter of 2004.

Additionally, during the month of January 2004,
we completed the disposal of our North American Independent
Aftermarket business, which had annual sales of approximately
$55 million in 2003, as well as a sale and subsequent
leaseback transaction involving certain real estate holdings in
the United Kingdom.






|   |                                               
|-- | ----------------------------------------------
|4. | Summary of Significant Accounting
    Policies

The Company has generally adopted the accounting
policies of the Predecessor. The accounting policies described
below are the accounting policies of the Predecessor and
Successor unless specifically stated.

Principles of
consolidation.The combined financial
statements of the Predecessor represent the automotive business
of TRW. The consolidated financial statements of the Successor
represent the accounts of the Company. The combined and
consolidated financial statements include wholly owned and
majority-owned subsidiaries. Investments in 20% to 50% owned
affiliates are accounted for under the equity method and
presented in other assets in the consolidated and combined
balance sheets. Equity in earnings (losses) from these
investments are presented in other (income) expense, net in the
consolidated and combined statements of operations.

Intercompany accounts are eliminated.

Reclassifications.Certain prior period amounts were reclassified to conform to the
current year presentation of the Successor.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

Use of estimates.The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP)
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities (including
fair value adjustments made to date in accounting for the
Acquisition  see Note 2), disclosures of
contingent assets and liabilities and reported amounts in the
consolidated and combined statements of operations. Actual
results could materially differ from those estimates.

Foreign currency.The financial statements of foreign subsidiaries are translated
to U.S. dollars at end-of-period exchange rates for assets
and liabilities and a weighted average exchange rate for each
period for revenues and expenses. Translation adjustments for
those subsidiaries whose local currency is their functional
currency are recorded as a component of accumulated other
comprehensive earnings (losses) in stockholders
investment. Transaction gains and losses arising from
fluctuations in currency exchange rates on transactions
denominated in currencies other than the functional currency are
recognized in earnings as incurred, except for those
transactions which hedge purchase commitments and for those
intercompany balances which are designated as long-term
investments.

Revenue recognition.Sales are recognized in accordance with accounting principles
generally accepted in the United States, including the
Securities and Exchange Commissions Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial
Statements, which requires that sales be recognized when
there is evidence of a sales agreement, the delivery of goods
has occurred, the sales price is fixed or determinable and
collection of related billings is reasonably assured. Sales are
recorded upon shipment of product to customers and transfer of
title under standard commercial terms (typically F.O.B. shipping
point). In those limited instances where other terms are
negotiated and agreed, revenue is recorded when title is
transferred to the customer.

Cash and cash
equivalents.Cash and cash equivalents
include all highly liquid investments purchased with maturity
dates of three months or less.

Accounts receivable.Receivables are stated at amounts estimated by management to be
the net realizable value. The allowance is based on specific
identification. Accounts receivable are charged off when it
becomes apparent based upon age or customer circumstances that
such amounts will not be collected. Collateral is not typically
required.

Accounts receivable securitization.The Receivables Facility of the
Successor (which is further described in Note 15) can
be treated as a general financing agreement or as an off-balance
sheet financing arrangement. Whether the funding and related
receivables are shown as liabilities and assets, respectively,
on the Companys consolidated balance sheet, or conversely,
are removed from the consolidated balance sheet, depends on the
level of the multi-seller conduits loans to the Borrower.
When such level is at least 10% of the fair value of all the
Borrowers assets (consisting principally of receivables
sold by the sellers), the securitization transactions are
accounted for as a sale of the receivables under the provisions
of SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities (SFAS 140) and are removed
from the balance sheet. Costs associated with the off-balance
sheet Receivables Facility are recorded as losses on sales of
receivables in the Companys consolidated statement of
operations. The book value of the Companys retained
interest in the receivables approximates fair market value due
to the current nature of the receivables. However, at such time
as the fair value of the multi-seller commercial paper
conduits loans are less than 10% of the fair value of all
of the Borrowers assets, the Company is required to
consolidate the Borrower, resulting in the funding and related
receivables being shown as liabilities and assets, respectively,
on the Companys consolidated balance sheet and the costs
associated with the receivables facility being recorded as
interest expense.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The Predecessor participated in an accounts
receivable securitization arrangement established by TRW with a
financial institution and several financial conduits in 2001 and
2002. The TRW securitization arrangement was terminated in
December 2002.

Inventories.Inventories are stated at the lower of cost or market.
Inventories valued using the last-in, first-out
(LIFO) method were $28 and $47 million at
December 31, 2003 and 2002, respectively. Inventories not
valued by the LIFO method were principally on the
first  in, first  out (FIFO) method.
Had the cost of all inventories been determined by the FIFO
method, inventories as of December 31, 2002 would have been
greater by $11 million. The LIFO reserve at
December 31, 2003 was immaterial.

Depreciation.Depreciation is computed over the assets estimated useful
lives, using straight-line method for the majority of
depreciable assets, including capital leases. The remaining
assets are depreciated using accelerated methods. The estimated
useful lives of buildings, machinery and equipment, and
computers and other office equipment are between 30 to
40 years, eight to 12 years and three to five years,
respectively. Amortization of assets held under capital leases
is included in depreciation expense. Depreciation expense was
$370 million for the ten months ended December 31,
2003, $79 million for the two months ended
February 28, 2003 and, $479 million and
$455 million for the years ended December 31, 2002 and
2001, respectively.

Product tooling.Product tooling is special purpose tooling that is limited to
the manufacture of a specific part or parts of the same basic
design. Product tooling includes dies, patterns, molds and jigs.
Customer owned tooling for which reimbursement was contractually
guaranteed by the customer or for which the Company had a
non-cancelable right to use the tooling is classified in other
assets on the consolidated and combined balance sheet. When
approved for billing to the customer, such charges are
reclassified into accounts receivable. Tooling owned by the
Predecessor and Successor is capitalized as property, plant and
equipment, and amortized as cost of sales over its estimated
economic life, not exceeding five years.

Goodwill and other intangible
assets.Effective January 1,
2002, goodwill is no longer amortized but is subject to
impairment analysis annually or if an event occurs or
circumstances indicate the carrying amount may be impaired.
Goodwill impairment testing is performed at the reporting unit
level. The fair value of each reporting unit is determined and
compared to the carrying value. If the carrying value exceeds
the fair value, than a possible goodwill impairment exists and
further evaluation is required.

Prior to January 1, 2002, goodwill acquired
after 1970 was amortized by the straight-line method over
40 years. Goodwill acquired prior to 1971,
$47 million, was not being amortized.

The following table reflects the reconciliation
of reported earnings (losses) from continuing operations to
adjusted net earnings for the exclusion of goodwill amortization.

|                                                          |  |                                         |     |              |  |              |    |      |  |   |     |  |  |   |     |  
|--------------------------------------------------------- |  | --------------------------------------- | --- | ------------ |  | ------------ | -- | ---- |  | - | --- |  |  | - | --- | -
|                                                          |  |                                         |     |             
|                                                          |  | Successor                               |     | Predecessor 
|                                                          |  |                                         |     |             
|                                                          |  |                                         |     |              |  |             
|                                                          |  | Ten Months                              |     | Two Months   |  | Years Ended 
|                                                          |  | Ended                                   |     | Ended        |  | December 31,
|                                                          |  | December 31,                            |     | February 28, |  |             
|                                                          |  | 2003                                    |     | 2003         |  | 2002         |    | 2001
|                                                          |  |                                         |     |              |  |              |    |     
|                                                          |  |                                        
|                                                          |  | (In millions, except per share amounts)
|Reported earnings (losses) from continuing
    operations |  | $                                       | (66 | )            |  | $            | 31 |      |  | $ | 164 |  |  | $ | (36 | )
|Add back: goodwill amortization, net of tax               |  |                                         |    |              |  |              |   |      |  |   |    |  |  |   | 53  |  
|                                                          |  |                                         |     |              |  |              |    |      |  |   |     |  |  |   |     |  
|Adjusted net earnings from continuing operations          |  |                                         | (66 | )            |  |              | 31 |      |  |   | 164 |  |  |   | 17  |  
|Discontinued operations (net of taxes)                    |  |                                         |    |              |  |              |   |      |  |   |    |  |  |   | 11  |  
|                                                          |  |                                         |     |              |  |              |    |      |  |   |     |  |  |   |     |  
|Adjusted net (losses) earnings                            |  | $                                       | (66 | )            |  | $            | 31 |      |  | $ | 164 |  |  | $ | 28  |  
|                                                          |  |                                         |     |              |  |              |    |      |  |   |     |  |  |   |     |  

Other intangible assets of the Predecessor
include capitalized internal-use software, patents and licenses
and other identifiable intangible assets acquired through
acquisitions. Capitalized internal-use software of the

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

Predecessor are amortized over periods not to
exceed 10 years. Other identifiable intangible assets of
the Predecessor are amortized primarily over five to
17 years.

See Note 12 for other intangible assets of
the Successor and related lives.

Asset impairment.Asset impairment losses are recorded on long-lived assets and
intangible assets, subject to amortization, when events and
circumstances indicate that the assets may be impaired and the
undiscounted net cash flows estimated to be generated by those
assets are less than their carrying amounts. If estimated future
undiscounted cash flows are not sufficient to recover the
carrying value of the assets, the assets are adjusted to their
fair values. Fair value is determined using appraisals or
discounted cash flow calculations. Intangible assets not subject
to amortization are tested for impairment annually by comparing
the fair value to the carrying value. If the carrying value
exceeds the fair value, the asset is adjusted to fair value.

Environmental costs.Costs related to environmental assessments and remediation
efforts at operating facilities, previously owned or operated
facilities, and Superfund or other waste site locations are
accrued when it is probable that a liability has been incurred
and the amount of that liability can be reasonably estimated.
Estimated costs are recorded at undiscounted amounts, based on
experience and assessments, and are regularly evaluated. The
liabilities are recorded in other current liabilities and
long-term liabilities in the consolidated and combined balance
sheets.

Debt issuance costs.The costs related to the issuance of long-term debt are deferred
and amortized over the life of each debt issue. Deferred amounts
associated with debt extinguished prior to maturity are
expensed. See Note 3 and Note 20.

Warranties and
Recall.Product warranty liabilities
are recorded based upon management estimates including such
factors as the written agreement with the customer, the length
of the warranty period, the historical performance of the
product and likely changes in performance of newer products and
the mix and volume of products sold. The liability is reviewed
on a regular basis and adjusted to reflect actual experience.

The following table presents the movement in the
product warranty liability for the year ended December 31,
2002 and the two months ended February 28, 2003 and the ten
months ended December 31, 2003:

|                                   |  |                       |    |          |  |          |    |             |  |         |     |   |  |   |     |   |  |   |    | 
|---------------------------------- |  | --------------------- | -- | -------- |  | -------- | -- | ----------- |  | ------- | --- | - |  | - | --- | - |  | - | -- | 
|                                   |  |                       |    |          |  |          |    | Change in   |  |        
|                                   |  |                       |    | Current  |  | Used for |    | Estimates   |  |        
|                                   |  | Beginning             |    | Period   |  | Purposes |    | and         |  | Ending 
|                                   |  | Balance               |    | Accruals |  | Intended |    | Translation |  | Balance
|                                   |  |                       |    |          |  |          |    |             |  |        
|                                   |  |                      
|                                   |  | (Dollars in millions)
|Ten months ended December 31, 2003 |  | $                     | 46 |          |  | $        | 49 |             |  | $       | (22 | ) |  | $ | 1   |   |  | $ | 74 | 
|Two months ended February 28, 2003 |  | $                     | 43 |          |  |          | 8  |             |  |         | (5  | ) |  |   |    |   |  | $ | 46 | 
|Year ended December 31, 2002       |  | $                     | 61 |          |  |          | 49 |             |  |         | (45 | ) |  |   | (22 | ) |  | $ | 43 | 

Apart from product warranties, the Predecessor
also incurred recall costs when they or the customer decided to
recall a product through a formal campaign soliciting the return
of specific products due to a known or suspected safety concern.
Product recall costs typically include the cost of the product
being replaced, customer cost of the recall and labor to remove
and replace the defective part. Under the accounting policy for
recalls of the Predecessor, when a decision to recall a product
was made for which the Predecessor had borne some
responsibility, the Predecessor recorded the estimated cost of
the recall as a charge to net earnings in that period, in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 5, Accounting for
Contingencies (SFAS 5). In making
estimates relating to product recalls, judgment is required as
to the number of units to be returned, the total cost of the
recall campaign, the ultimate negotiated sharing of the cost
between the Predecessor and the customer and, in some cases, the
extent to which its supplier will share in the recall cost. As a
result, the Predecessors actual recall costs could be
significantly different from its estimated costs.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

Effective as of the Acquisition Date, the Company
implemented a new methodology for actuarially estimating its
recall obligations that differs from that of the Predecessor.
The Company engaged independent third-party actuaries to run
loss histories for the purpose of establishing loss projections
and completed the valuation work in the fourth quarter of 2003.
Under the actuarial estimation methodology, the Company accrues
for recalls when revenues are recognized upon the shipment of
product. The adoption of this estimation methodology does not
have a material effect on reported results of operations or cash
flows for the ten months ended December 31, 2003 or any
individual quarterly period within such ten-month period.

Research and
development.Research and development
programs include research and development for commercial
products that are expensed as incurred.

Shipping and
handling.Shipping costs include
payments to third-party shippers to move the product to the
customer. Handling costs include costs from the point the
product was removed from finished goods inventory to when
provided to the shipper. Shipping and handling costs are
expensed as incurred as cost of sales.

Pre-production
costs.Pre-production engineering and
research and development costs for which the customer does not
contractually guarantee reimbursement, are expensed as incurred.

Income taxes.Income
tax expense in the consolidated and combined statements of
operations is calculated in accordance with
SFAS No. 109, Accounting for Income Taxes
(SFAS 109) which requires the recognition of
deferred income taxes using the liability method. Income tax
expense in the Predecessors statement of operations was
calculated on a separate tax return basis as if the Predecessor
had operated as a stand-alone entity. The Predecessors
operations through February 28, 2003 will be included in
the consolidated income tax returns filed by Northrop for the
U.S. portion.

Financial
instruments.The Predecessor adopted
SFAS 133, Accounting for Derivative Instruments and
Hedging Activities, as amended, on January 1, 2001.
SFAS 133 requires companies to recognize all derivative
instruments as either assets or liabilities at fair value. The
transition adjustment recorded as a result of the adoption did
not have a material impact on the Predecessors financial
position, results of operations or cash flows.

Under SFAS 133, the gain or loss on
derivative instruments that have been designated and qualify as
hedges of the exposure to changes in the fair value of an asset
or a liability, as well as the offsetting gain or loss on the
hedged item, are recognized in net earnings (losses) during the
period of the change in fair values. For derivative instruments
that have been designated and qualify as hedges of the exposure
to variability in expected future cash flows, the gain or loss
on the derivative is initially reported as a component of other
comprehensive earnings (losses) and reclassified to the
consolidated and combined statement of operations when the
hedged transaction affects net earnings. Any gain or loss on the
derivative in excess of the cumulative change in the present
value of future cash flows of the hedged item is recognized in
net earnings (losses) during the period of change. For
derivative instruments that are a hedge of a net investment in a
foreign currency, the gain or loss is reported in other
comprehensive earnings (losses) as part of foreign currency
exchange loss. Derivatives not designated as hedges are adjusted
to fair value through net earnings (losses).

Stock-based
compensation.Stock options under
employee compensation plans are accounted for using the
recognition and measurement principles of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees, (APB 25) and related
interpretations. Pursuant to APB 25, no stock-based
employee compensation expense is reflected in net earnings
(losses) if options granted have exercise prices greater than or
equal to the market value of the underlying common stock on the
date of grant. See Note 23.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The following table illustrates the effect on net
earnings (losses) as if the fair value recognition provisions of
SFAS 123, Accounting for Stock-Based
Compensation, had been applied to stock-based employee
compensation:

|                                                                                                  |  |                                         |     |              |  |              |    |      |  |   |     |   |  |   |     |  
|------------------------------------------------------------------------------------------------- |  | --------------------------------------- | --- | ------------ |  | ------------ | -- | ---- |  | - | --- | - |  | - | --- | -
|                                                                                                  |  |                                         |     |             
|                                                                                                  |  | Successor                               |     | Predecessor 
|                                                                                                  |  |                                         |     |             
|                                                                                                  |  | Ten Months                              |     | Two Months   |  |             
|                                                                                                  |  | Ended                                   |     | Ended        |  | Years Ended 
|                                                                                                  |  | December 31,                            |     | February 28, |  | December 31,
|                                                                                                  |  |                                         |     |              |  |             
|                                                                                                  |  | 2003                                    |     | 2003         |  | 2002         |    | 2001
|                                                                                                  |  |                                         |     |              |  |              |    |     
|                                                                                                  |  |                                        
|                                                                                                  |  | (In millions, except per share amounts)
|Net earnings (losses), as reported                                                                |  | $                                       | (66 | )            |  | $            | 31 |      |  | $ | 164 |   |  | $ | (25 | )
|Add: Stock-based compensation as reported                                                         |  |                                         |    |              |  |              |   |      |  |   |    |   |  |   |    |  
|Deduct: Stock-based compensation under
    SFAS 123 fair value method, net of related tax effects |  |                                         | (9  | )            |  |              |   |      |  |   | (9  | ) |  |   | (6  | )
|                                                                                                  |  |                                         |     |              |  |              |    |      |  |   |     |   |  |   |     |  
|Adjusted net earnings (losses), fair value method                                                 |  | $                                       | (75 | )            |  | $            | 31 |      |  | $ | 155 |   |  | $ | (31 | )
|                                                                                                  |  |                                         |     |              |  |              |    |      |  |   |     |   |  |   |     |  

Recent accounting
pronouncements.In December 2003, the
Financial Accounting Standards Board (FASB) issued
SFAS No. 132 Revised, Employers
Disclosures about Pensions and Other Postretirement
Benefits (SFAS 132 Revised). This
revision does not change the measurement or recognition of
pension and other postretirement benefit plans. It includes all
of the disclosures required by the prior SFAS 132 and adds
additional disclosures including information about the assets,
obligations, and cash flows. It also requires disclosure of net
periodic benefit cost recognized by cost component for interim
periods. SFAS No. 132 Revised is effective
December 31, 2003 and the additional disclosures are
included in Note 18 and Note 19.

In January 2004, the FASB issued FASB Staff
Position No. FAS 106-1, Accounting and
Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (FSP
106-1). FSP 106-1, permits a sponsor of a postretirement
health care plan that provides a prescription drug benefit to
make a one-time election to defer accounting for the effects of
the Medicare Prescription Drug, Improvement and
Modernization Act of 2003. Regardless of whether a sponsor
elects that deferral, the FSP requires certain disclosures in
financial statements of fiscal years ending after
December 7, 2003 pending further consideration of the
underlying accounting issues. The Company has elected to defer
financial recognition of this legislation and has included the
required disclosures in Note 19.

In June 2001, the FASB issued
SFAS No. 143, Accounting for Asset Retirement
Obligations (SFAS 143). SFAS 143
requires the fair value of a liability for asset retirement
obligations to be recorded in the period in which it is
incurred. The statement applies to a companys legal or
contractual obligation associated with the retirement of a
tangible long-lived asset that resulted from the acquisition,
construction or development or through the normal operation of a
long-lived asset. The statement was effective for the
Predecessor beginning January 1, 2003 and its adoption did
not have material effect on the Predecessors financial
position, results of operations or cash flows.

In April 2002, the FASB issued
SFAS No. 145, Recession of FASB Statement
No. 4, 44 and 64, Amendment of FASB Statement No. 13
and Technical Corrections (SFAS 145).
SFAS 145 requires gains and losses on extinguishments of
debt to be reclassified as income or loss from continuing
operations rather than as extraordinary items as previously
required by SFAS No. 4, Reporting Gains and
Losses from Extinguishment of Debt. SFAS 145 also
amends SFAS No. 13 Accounting for Leases
(SFAS 13) requiring certain modifications to
capital leases to be treated as sale-leaseback transactions and
to subleases when the original lessee remains a secondary
obligor, or guarantor. The provisions of SFAS 145 related
to the rescission of SFAS 4 were effective for the
Predecessor on January 1, 2003. The extraordinary gain
recorded for the extinguishment of debt in the first quarter of
2002 was reclassified into earnings (losses) from continuing
operations on January 1, 2003. The remaining provisions of
SFAS 145 were effective for transactions and reporting
subsequent to May 15, 2002 and were adopted by the Company
as of that date. The

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

adoption of these provisions did not have a
material impact on the Predecessors financial position,
results of operations or cash flows.

In June 2002, the FASB issued
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (SFAS 146).
SFAS 146 requires that a liability for costs associated
with exit or disposal activities be recognized when the
liability is incurred rather than when an entity commits to an
exit plan. SFAS 146 also provides that the liability be
initially measured at fair value. The statement was effective
for the Predecessor beginning January 1, 2003 and its
adoption did not have a material impact on its financial
position, results of operations or cash flows.

In November 2002, the FASB issued FASB
Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN 45), which
expands the existing disclosure requirements for most
guarantees, including loan guarantees such as standby letters of
credit. It also clarifies that at the time a company issues a
guarantee, the company must recognize an initial liability for
the fair value of the obligations it assumes under that
guarantee and must disclose that information in its interim and
annual financial statements. The initial recognition and initial
measurement provisions apply on a prospective basis to
guarantees issued or modified after December 31, 2002. The
disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15,
2002. The adoption of FIN 45 did not have a material impact
on the Predecessors financial position, results of
operation or cash flows.

In December 2003, the FASB issued FIN 46R to
address certain implementation issues and to make technical
corrections to the original interpretation issued January 2003.
FIN 46R establishes conditions under which an entity must
be consolidated based upon variable interests rather than voting
interests. Variable interests are ownership interests or
contractual relationships that enable the holder to share in the
financial risks and rewards resulting from the activities of a
Variable Interest Entity (VIE). A VIE can be a
corporation, partnership, trust, or any other legal structure
used for business purposes. An entity is considered a VIE under
FIN 46R if it does not have an equity investment sufficient
for it to finance its activities without assistance from
variable interests, if its equity investors do not have voting
rights, or if the voting rights of equity investors are not
proportionate to their economic rights. FIN 46R requires
the Company to consolidate VIEs for which it is the primary
beneficiary and to disclose certain information about
significant variable interests it holds. The primary beneficiary
of a VIE is the entity that receives the majority of the
entitys expected losses, residual returns, or both.
FIN 46R is effective March 31, 2004 for VIEs except
special purpose entities, for which the effective date is
December 31, 2003. The Company does not have special
purposes entities within the scope of FIN 46R. The Company
continues to evaluate our cost and equity method investments to
determine whether these entities are VIEs pursuant to the
revised interpretation; however, the Company does not expect the
adoption of FIN 46R to have a material effect on its
financial position, results of operations or cash flows.

In April 2003, the FASB issued SFAS 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities (SFAS 149), which
requires contracts with comparable characteristics to be
accounted for similarly, and is effective for contracts entered
into or modified after June 30, 2003, as well as for
hedging relationships designated after that date. The Company
adopted SFAS 149 as of the beginning of the fiscal quarter
ending September 26, 2003, and the adoption of this
standard did not have a material impact on its reported
financial position of results of operations.

In May 2003, the FASB issued SFAS 150, which
clarifies the accounting for certain financial instruments with
characteristics of both liabilities and equity and requires that
those instruments be classified as liabilities in statements of
financial position. Previously, many of those financial
instruments were classified as equity. SFAS 150 is
effective for financial instruments entered into or modified
after May 31, 2003 and other provisions are effective at
the beginning of the first interim period beginning after
June 15, 2003. In

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

October 2003, the FASB deferred indefinitely the
statements provisions related to redeemable minority
interests. The adoption of SFAS 150 had no impact on the
Successors financial position.






|   |                                   
|-- | ----------------------------------
|5. | Supplemental Cash Flow Information

A portion of the Acquisition purchase price was
financed with non-cash consideration. As described in
Note 1, Intermediate issued the Seller Note to an
affiliate of Northrop to acquire the stock of certain TRW
automotive subsidiaries. Intermediate contributed these acquired
subsidiaries, with a deemed fair value of $348 million
(excluding related deferred tax), to the Company. Intermediate
also contributed the $170 million of TRW Automotive
Holdings common stock to the Company. The Company
transferred these shares of TRW Automotive Holdings common
stock to a subsidiary of Northrop as part of the purchase price.
In addition, the purchase price included a preliminary
post-closing adjustment estimate recorded by the Company as
short-term debt.






|   |                              
|-- | -----------------------------
|6. | Acquisitions and Divestitures

On April 8, 2003, the Company sold its 21.8%
equity interest in TOYODA TRW Automotive Inc.
(Toyoda) to its joint venture partner, Toyoda
Machine Works, Ltd. The Company had previously accounted for its
interest in Toyoda under the equity method, and classified this
investment in Other assets (long-term) in its
consolidated and combined balance sheets. On June 27, 2003,
the Company sold its 60%, partnership interest in Quality Safety
Systems Company (QSS), a Canadian seatbelt joint
venture, to a subsidiary of its partner, Tokai Rika Co., Ltd.
Through the sale date, QSSs financial position and results
of operations were included in the Companys consolidated
and combined financial statements. On December 29, 2003,
the Company completed the disposal of a European forge parts
facility (Linn), which provided components
internally to other portions of the Companys business.
Through the sale date, Linns financial position and
results of operations were included in the Companys
consolidated and combined financial statements. Proceeds from
the Toyoda, QSS and Linn divestitures were approximately
$57 million, net of cash retained in the QSS business.

On June 26, 2003, the Company acquired sole
ownership of the immediate parent of Autocruise, S.A.
(Autocruise) by acquiring for nominal consideration
the equity interest held by its former joint venture partner,
Thales Group. Autocruise, operating a custom-built facility in
Brest, France, designs and manufactures radar-based adaptive
cruise control systems, principally sold in certain European
markets.

On September 22, 2003, the Company acquired
a 50% interest in EnTire Solutions, LLC, a joint venture with
Group Michelin. This joint venture will focus on the
development, marketing, manufacture and sale of advanced direct
tire pressure monitoring systems for passenger cars and light
trucks.






|   |                        
|-- | -----------------------
|7. | Discontinued Operations

In 2000, the Company disposed of a substantial
portion of the Lucas Diesel Systems business. In 2001, the
Company completed the disposition of the remaining Lucas Diesel
Systems business. The combined financial statements reflect as
discontinued operations for 2001 the businesses operating
results. The tax expense included in discontinued operations on
the Combined Statements of Operations for 2001 was
$4 million. Net proceeds totaled $29 million in 2001.
Sales of the discontinued operations were $20 million in
2001. Interest has not been allocated to discontinued
operations. In 2001, the Company recorded a $10 million
gain on the sale of discontinued operations, which is included
in the net results of discontinued operations.






|   |              
|-- | -------------
|8. | Restructuring

In 2001, Chassis Systems, Occupant Safety Systems
and Automotive Components recorded charges of $86 million,
$47 million and $80 million, respectively, related to
the closing of two facilities and various

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

headcount reduction activities including the
integration of the former Chassis, Occupant Safety Systems and
Automotive Electronic segments under one management team. The
combination of these activities in 2001 resulted in a reduction
of approximately 6,000 employees. In 2002, Chassis Systems,
Occupant Safety Systems and Automotive Components recorded
charges of $20 million, $35 million and
$4 million, respectively, for actions that resulted in the
closing of three plants and employee reductions of approximately
950. During the two months ended February 28, 2003, Chassis
Systems and Occupant Safety Systems recorded charges of
$2 million and $1 million, respectively, for severance
and costs related to the consolidation of certain facilities.
The charges described above include both cash and non-cash
items. For the periods ended December 31, 2001 and 2002,
the cash charges were $189 million and $27 million,
respectively, and the non-cash charges were $24 million and
$32 million, respectively. For the two months ended
February 28, 2003, only cash charges were recorded totaling
$3 million.

In connection with the Acquisition, the Company
assumed liabilities (subject to certain exceptions) totaling
approximately $51 million for various restructuring
activities, primarily related to involuntary severance
obligations and costs to exit certain activities. For the ten
months ended December 31, 2003, Chassis Systems, Occupant
Safety Systems and Automotive Components recorded cash charges
of $26 million, $1 million and $2 million,
respectively, for severance and costs related to the
consolidation of certain facilities. Additionally, we recorded a
$37 million reserve in purchase accounting primarily for
severance related to strategic restructurings, plant closings
and involuntary employee termination arrangements outside of the
United States to be paid over the next several years in
accordance with local laws.

The following table illustrates the movement of
the restructuring reserves:

|                                   |  |                       |     |                |  |          |    |            |  |          |     |         |  |   |    |  |  |   |      |   |  |   |     | 
|---------------------------------- |  | --------------------- | --- | -------------- |  | -------- | -- | ---------- |  | -------- | --- | ------- |  | - | -- |  |  | - | ---- | - |  | - | --- | 
|                                   |  |                       |     |                |  |          |    |            |  |         
|                                   |  |                       |     | Provision      |  |          |    |            |  |         
|                                   |  |                       |     |                |  | Purchase |    | Used for   |  |         
|                                   |  | Beginning             |     | Administrative |  | Cost of  |    | Price      |  | Purposes |     | Ending 
|                                   |  | Balance               |     | and Selling    |  | Sales    |    | Allocation |  | Intended |     | Balance
|                                   |  |                       |     |                |  |          |    |            |  |          |     |        
|                                   |  |                      
|                                   |  | (Dollars in millions)
|Ten months ended December 31, 2003 |  | $                     | 51  |                |  | $        | 13 |            |  | $        | 16  |         |  | $ | 37 |  |  | $ | (38  | ) |  | $ | 79  | 
|Two months ended February 28, 2003 |  | $                     | 61  |                |  |          | 1  |            |  |          | 2   |         |  |   |   |  |  |   | (13  | ) |  | $ | 51  | 
|Year ended December 31, 2002       |  | $                     | 145 |                |  |          | 17 |            |  |          | 42  |         |  |   |   |  |  |   | (143 | ) |  | $ | 61  | 
|Year ended December 31, 2001       |  | $                     | 63  |                |  |          | 87 |            |  |          | 126 |         |  |   |   |  |  |   | (131 | ) |  | $ | 145 | 

Of the $79 million restructuring reserve
accrued at December 31, 2003, approximately
$46 million is expected to be paid through 2004, and
approximately $20 million relates to involuntary employee
termination arrangements outside the United States to be paid
over the next several years in accordance with local law.






|   |                  
|-- | -----------------
|9. | Asset Impairments

In 2002, Occupant Safety Systems and Automotive
Components segments recorded asset impairment charges of
$11 million and $6 million, respectively. Of these
charges, $10 million related to the write-down of the
investment in two affiliates to fair market value. The remaining
$7 million related primarily to the write-down of property,
plant and equipment to fair value. Of these charges,
$9 million is recorded in other income-net, $7 million
in cost of sales and $1 million in amortization of
intangible assets.

In 2001, Chassis Systems, Occupant Safety Systems
and Automotive Components segments recorded asset impairment
charges totaling $28 million, $10 million and
$12 million, respectively. These charges, primarily related
to the write-down of property, plant and equipment, were
recorded as $38 million in cost of sales, $11 million
in other income-net and $1 million in amortization of
intangible assets. Of these charges,

65



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

$49 million was a result of the reduction of
volume, consolidation of production and outsourcing at certain
facilities.






|    |            
|--- | -----------
|10. | Inventories

|                                      |  |                       |     |             |  |   |     | 
|------------------------------------- |  | --------------------- | --- | ----------- |  | - | --- | 
|                                      |  | Successor             |     | Predecessor
|                                      |  |                       |     |            
|                                      |  |                      
|                                      |  | As of December 31,   
|                                      |  |                      
|                                      |  | 2003                  |     | 2002       
|                                      |  |                       |     |            
|                                      |  |                      
|                                      |  | (Dollars in millions)
|Finished products and work in process |  | $                     | 385 |             |  | $ | 368 | 
|Raw materials and supplies            |  |                       | 250 |             |  |   | 240 | 
|                                      |  |                       |     |             |  |   |     | 
|                                      |  | $                     | 635 |             |  | $ | 608 | 
|                                      |  |                       |     |             |  |   |     | 






|    |                              
|--- | -----------------------------
|11. | Property, Plant and Equipment

|                                              |                         |                       |       |             |   |   |        |        |  
|--------------------------------------------- | ----------------------- | --------------------- | ----- | ----------- | - | - | ------ | ------ | -
|                                              |                         | Successor             |       | Predecessor
|                                              |                         |                       |       |            
|                                              |                         |                      
|                                              |                         | As of December 31,   
|                                              |                         |                      
|                                              |                         | 2003                  |       | 2002       
|                                              |                         |                       |       |            
|                                              |                         |                      
|                                              |                         | (Dollars in millions)
|Property, plant and equipment                 |                         |                       |       |             |   |   |        |       
|                                              | Land and improvements   |                       | $     | 261         |   |   | $      | 84     |  
|                                              | Buildings               |                       |       | 561         |   |   |        | 1,221  |  
|                                              | Machinery and equipment |                       |       | 2,055       |   |   |        | 4,976  |  
|                                              |                         |                       |       |             |   |   |        |       
|                                              |                         |                       | 2,877 |             |   |   | 6,281  |       
|Accumulated depreciation                      |                         |                       |       |             |   |   |        |       
|                                              | Land and improvements   |                       |       | (2          | ) |   |        | (1     | )
|                                              | Buildings               |                       |       | (59         | ) |   |        | (560   | )
|                                              | Machinery and equipment |                       |       | (317        | ) |   |        | (3,162 | )
|                                              |                         |                       |       |             |   |   |        |       
|                                              |                         |                       | (378  | )           |   |   | (3,723 | )     
|                                              |                         |                       |       |             |   |   |        |       
|Total property, plant and equipment 
    net |                         | $                     | 2,499 |             |   | $ | 2,558  |       
|                                              |                         |                       |       |             |   |   |        |       






|    |                                     
|--- | ------------------------------------
|12. | Goodwill and Other Intangible Assets



| |         
| | --------
| | Goodwill

In connection with the Acquisition, the goodwill
of the Successor as of December 31, 2003, is as follows:

|                                        |                            |                       |       |          |  |            |     |       |  |   |     |   |  |   |       |   | 
|--------------------------------------- | -------------------------- | --------------------- | ----- | -------- |  | ---------- | --- | ----- |  | - | --- | - |  | - | ----- | - | 
|                                        |                            |                       |       | Occupant |  |            |     |      
|                                        |                            | Chassis               |       | Safety   |  | Automotive |     |      
|                                        |                            | Systems               |       | Systems  |  | Components |     |      
|                                        |                            | Segment               |       | Segment  |  | Segment    |     | Total
|                                        |                            |                       |       |          |  |            |     |      
|                                        |                            |                      
|                                        |                            | (Dollars in millions)
|Goodwill acquired February 28,
    2003 |                            | $                     | 1,000 |          |  | $          | 970 |       |  | $ | 530 |   |  | $ | 2,500 |  
|                                        | Purchase price adjustments |                       |       | 1        |  |            |     | 1     |  |   |     | 1 |  |   |       | 3 | 
|                                        |                            |                       |       |          |  |            |     |       |  |   |     |   |  |   |       |  
|Balance as of December 31, 2003         |                            | $                     | 1,001 |          |  | $          | 971 |       |  | $ | 531 |   |  | $ | 2,503 |  
|                                        |                            |                       |       |          |  |            |     |       |  |   |     |   |  |   |       |  

As of December 31, 2002, the carrying amount
of the Predecessors goodwill was $2,411 million, net
of accumulated amortization of $235 million.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)



| |                  
| | -----------------
| | Intangible Assets

The following table reflects intangible assets of
the Successor as of December 31, 2003, and related
amortization information:

|                                                  |                        |                                                                                                               |    |              |  |              |   |     |   |  |  |            |  | 
|------------------------------------------------- | ---------------------- | ------------------------------------------------------------------------------------------------------------- | -- | ------------ |  | ------------ | - | --- | - |  |  | ---------- |  | 
|                                                  |                        |                                                                                                               |    |              |  | Weighted    
|                                                  |                        | Gross                                                                                                         |    |              |  | Average     
|                                                  |                        | Carrying                                                                                                      |    | Accumulated  |  | Amortization
|                                                  |                        | Amount                                                                                                        |    | Amortization |  | Period      
|                                                  |                        |                                                                                                               |    |              |  |             
|                                                  |                        |                                                                                                              
|                                                  |                        | (Dollars in millions)                                                                                        
|Intangible assets subject to
    amortization     |                        |                                                                                                               |    |              |  |              |   |     |   |  |  |           
|                                                  | Capitalized software   |                                                                                                               | $  | 34           |  |              | $ | (10 | ) |  |  | 2.6 years  | 
|                                                  | Customer relationships |                                                                                                               |    | 451          |  |              |   | (19 | ) |  |  | 20.0 years | 
|                                                  | Developed technology   |                                                                                                               |    | 79           |  |              |   | (8  | ) |  |  | 8.0 years  | 
|                                                  |                        |                                                                                                               |    |              |  |              |   |     |   |  |  |           
|                                                  | Total                  |                                                                                                               | $  | 564          |  |              | $ | (37 | ) |  |  | 17.2 years | 
|                                                  |                        |                                                                                                               |    |              |  |              |   |     |   |  |  |           
|Intangible assets not subject to
    amortization |                        |                                                                                                               |    |              |  |              |   |     |   |  |  |           
|                                                  | Trademarks             |                                                                                                               |    | 292          |  |              |   |     |   |  |  |            | 
|                                                  |                        |                                                                                                               |    |              |  |              |   |     |   |  |  |           
|                                                  | Total                  |                                                                                                               | $  | 856          |  |              |   |     |   |  |  |            | 
|                                                  |                        |                                                                                                               |    |              |  |              |   |     |   |  |  |           
|Aggregate Amortization Expense                    |                        |                                                                                                               |    |              |  |              |   |     |   |  |  |           
|For the ten months ended December 31, 2003        |                        | $                                                                                                             | 37 |              |  |              |   |     |   |  |  |           
|                                                  |                        | Amortization of capitalized software is included
    in cost of sales and administrative and selling expenses |    |              |  |              |   |     |   |  |  |            |  | 
|Estimated Amortization Expense                    |                        |                                                                                                               |    |              |  |              |   |     |   |  |  |           
|For the year ended December 31, 2004              |                        | $                                                                                                             | 46 |              |  |              |   |     |   |  |  |           
|For the year ended December 31, 2005              |                        |                                                                                                               | 41 |              |  |              |   |     |   |  |  |           
|For the year ended December 31, 2006              |                        |                                                                                                               | 35 |              |  |              |   |     |   |  |  |           
|For the year ended December 31, 2007              |                        |                                                                                                               | 33 |              |  |              |   |     |   |  |  |           
|For the year ended December 31, 2008              |                        |                                                                                                               | 33 |              |  |              |   |     |   |  |  |           

As of December 31, 2002, the carrying amount
of the Predecessors capitalized software and patents,
licenses and other intangibles was $118 million and
$49 million, net of $67 million and $123 million
accumulated amortization, respectively.






|    |                                 
|--- | --------------------------------
|13. | Other (Income) Expense 
    Net

|                                  |  |                       |     |              |  |              |    |      |  |   |     |   |  |   |     |  
|--------------------------------- |  | --------------------- | --- | ------------ |  | ------------ | -- | ---- |  | - | --- | - |  | - | --- | -
|                                  |  |                       |     |             
|                                  |  | Successor             |     | Predecessor 
|                                  |  |                       |     |             
|                                  |  |                       |     |              |  |             
|                                  |  | Ten Months            |     | Two Months   |  | Years Ended 
|                                  |  | Ended                 |     | Ended        |  | December 31,
|                                  |  | December 31,          |     | February 28, |  |             
|                                  |  | 2003                  |     | 2003         |  | 2002         |    | 2001
|                                  |  |                       |     |              |  |              |    |     
|                                  |  |                      
|                                  |  | (Dollars in millions)
|Minority interest                 |  | $                     | 11  |              |  | $            | 4  |      |  | $ | 21  |   |  | $ | 20  |  
|Net gain on sales of assets       |  |                       |    |              |  |              |   |      |  |   | (12 | ) |  |   | (18 | )
|Asset impairments                 |  |                       |    |              |  |              | 1  |      |  |   | 9   |   |  |   | 11  |  
|Pending and threatened litigation |  |                       |    |              |  |              |   |      |  |   |    |   |  |   | 29  |  
|Earnings of affiliates            |  |                       | (8  | )            |  |              | (1 | )    |  |   | (6  | ) |  |   | (9  | )
|Foreign currency exchange         |  |                       | (41 | )            |  |              | 4  |      |  |   | 7   |   |  |   | 1   |  
|Miscellaneous other income        |  |                       | (18 | )            |  |              | (4 | )    |  |   | (25 | ) |  |   | (36 | )
|                                  |  |                       |     |              |  |              |    |      |  |   |     |   |  |   |     |  
|                                  |  | $                     | (56 | )            |  | $            | 4  |      |  | $ | (6  | ) |  | $ | (2  | )
|                                  |  |                       |     |              |  |              |    |      |  |   |     |   |  |   |     |  

67



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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)





|    |                   
|--- | ------------------
|14. | Operating Segments

The Company is a U.S.-based international
business providing advanced technology products and services for
the automotive markets. The Company reports in three operating
segments: Chassis Systems, Occupant Safety Systems and
Automotive Components. The reporting of the automotive business
as three segments is consistent with the manner in which the
Company is managed and by which resources are allocated by the
chief operating decision maker.

The principal customers for the Companys
automotive products are the North and South American, European
and Asian vehicle manufacturers.

The Company designs, manufactures and sells a
broad range of steering, suspension and braking products, seat
belts, airbags, steering wheels, safety electronics, engine
valves, engineered fastening body control systems and other
components and systems for passenger cars, light trucks and
commercial vehicles. A description of the products and services
provided by each of the operating segments follows.



| |                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Chassis
    Systems Active safety
    systems and other systems and components in the area of
    foundation brakes, ABS and other brake control (including
    electronic vehicle stability control) and steering gears and
    systems;
|
| | Occupant Safety
    Systems Passive safety
    systems and components in the areas of air bags, seat belts and
    crash sensors and other safety and security electronics; and                                                          
|
| | Automotive
    Components Engine valves,
    engineered fasteners and plastic components and body controls.                                                                                                                              

The accounting policies of the operating segments
were the same as those described in the Summary of
Significant Accounting Policies note to consolidated and
combined financial statements (Note 4). The Company
evaluated operating performance based on segment profit before
taxes and segment assets.

The following income and expense items are not
included in segment profit before taxes:



| |   |                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Corporate expense and other, which primarily
    represents costs associated with corporate staff and related
    expenses, including certain litigation. Corporate expense
    includes an allocation of TRW and Northrops cost to
    reflect the services provided to the Predecessor or benefits
    received by the Predecessor.
|
| |  | Financing cost, which represents debt-related
    interest, including interest allocated from TRW and Northrop and
    losses on the sales of receivables.                                                                                                                                                                            
|
| |  | Net employee benefits income, which includes
    pension income related to retirees and terminated vested
    individuals acquired as part of the Lucas Varity acquisition,
    net of interest related to other post-retirement employee
    benefits.                                                                               
|
| |  | Amortization of goodwill.                                                                                                                                                                                                                                                                                                             

Segment assets are shown net of segment current
operating liabilities other than taxes. In addition, segment
assets exclude prepaid pension cost for corporate and divested
operations, goodwill, unrealized gains or losses on securities
of affiliate investments accounted for using the cost method,
deferred income tax assets and corporate assets.

68



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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

Financial data for the operating segments for the
ten months ended December 31, 2003, the two months ended
February 28, 2003, and for each of the years ended
December 31, 2002, and 2001 are as follows:

|                                                                             |  |                       |       |          |  |            |       |       |  |   |       |   |  |   |        |  
|---------------------------------------------------------------------------- |  | --------------------- | ----- | -------- |  | ---------- | ----- | ----- |  | - | ----- | - |  | - | ------ | -
|                                                                             |  |                       |       | Occupant |  |            |       |      
|                                                                             |  | Chassis               |       | Safety   |  | Automotive |       |      
|                                                                             |  | Systems               |       | Systems  |  | Components |       | Total
|                                                                             |  |                       |       |          |  |            |       |      
|                                                                             |  |                      
|                                                                             |  | (Dollars in millions)
|Ten Months ended December 31,
    2003                                       |  |                       |       |          |  |            |       |       |  |   |       |   |  |   |        |  
|Sales to external customers                                                  |  | $                     | 5,424 |          |  | $          | 2,751 |       |  | $ | 1,260 |   |  | $ | 9,435  |  
|Intersegment sales                                                           |  |                       | 1     |          |  |            | 8     |       |  |   | 39    |   |  |   | 48     |  
|Segment profit before taxes                                                  |  |                       | 129   |          |  |            | 216   |       |  |   | 90    |   |  |   | 435    |  
|Unusual items  included in segment
    profit before taxes                  |  |                       | (26   | )        |  |            | (1    | )     |  |   | (2    | ) |  |   | (29    | )
|Segment assets                                                               |  |                       | 1,391 |          |  |            | 786   |       |  |   | 780   |   |  |   | 2,957  |  
|Depreciation and amortization                                                |  |                       | 201   |          |  |            | 129   |       |  |   | 77    |   |  |   | 407    |  
|Capital expenditures including other intangibles                             |  |                       | 206   |          |  |            | 65    |       |  |   | 76    |   |  |   | 347    |  
|Two Months ended February 28,
    2003                                       |  |                       |       |          |  |            |       |       |  |   |       |   |  |   |        |  
|Sales to external customers                                                  |  | $                     | 1,110 |          |  | $          | 555   |       |  | $ | 251   |   |  | $ | 1,916  |  
|Intersegment sales                                                           |  |                       |      |          |  |            | 1     |       |  |   | 7     |   |  |   | 8      |  
|Segment profit before taxes                                                  |  |                       | 46    |          |  |            | 53    |       |  |   | 26    |   |  |   | 125    |  
|Unusual items  included in segment
    profit before taxes                  |  |                       | (2    | )        |  |            | (1    | )     |  |   |      |   |  |   | (3     | )
|Depreciation and amortization                                                |  |                       | 47    |          |  |            | 22    |       |  |   | 10    |   |  |   | 79     |  
|Capital expenditures including other intangibles                             |  |                       | 30    |          |  |            | 27    |       |  |   | 9     |   |  |   | 66     |  
|Year ended December 31, 2002                                                 |  |                       |       |          |  |            |       |       |  |   |       |   |  |   |        |  
|Sales to external customers                                                  |  | $                     | 6,078 |          |  | $          | 3,143 |       |  | $ | 1,409 |   |  | $ | 10,630 |  
|Intersegment sales                                                           |  |                       | 2     |          |  |            | 4     |       |  |   | 42    |   |  |   | 48     |  
|Segment profit before taxes                                                  |  |                       | 256   |          |  |            | 224   |       |  |   | 148   |   |  |   | 628    |  
|Unusual items  income (expense)
    included in segment profit before taxes |  |                       | (26   | )        |  |            | (47   | )     |  |   | 2     |   |  |   | (71    | )
|Segment assets                                                               |  |                       | 1,993 |          |  |            | 625   |       |  |   | 595   |   |  |   | 3,213  |  
|Depreciation and amortization                                                |  |                       | 261   |          |  |            | 154   |       |  |   | 66    |   |  |   | 481    |  
|Capital expenditures including other intangibles                             |  |                       | 269   |          |  |            | 95    |       |  |   | 57    |   |  |   | 421    |  
|Year ended December 31, 2001                                                 |  |                       |       |          |  |            |       |       |  |   |       |   |  |   |        |  
|Sales to external customers                                                  |  | $                     | 5,617 |          |  | $          | 2,997 |       |  | $ | 1,477 |   |  | $ | 10,091 |  
|Intersegment sales                                                           |  |                       | 23    |          |  |            | 3     |       |  |   | 34    |   |  |   | 60     |  
|Segment profit before taxes                                                  |  |                       | 228   |          |  |            | 110   |       |  |   | 40    |   |  |   | 378    |  
|Unusual items  included in segment
    profit before taxes                  |  |                       | (110  | )        |  |            | (57   | )     |  |   | (84   | ) |  |   | (251   | )
|Segment assets                                                               |  |                       | 1,876 |          |  |            | 682   |       |  |   | 534   |   |  |   | 3,092  |  
|Depreciation and amortization                                                |  |                       | 234   |          |  |            | 150   |       |  |   | 70    |   |  |   | 454    |  
|Capital expenditures including other intangibles                             |  |                       | 280   |          |  |            | 120   |       |  |   | 60    |   |  |   | 460    |  

The Company accounts for intersegment sales or
transfers at current market prices.

69



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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

Sales to the Companys four largest
customers (including sales within the vehicle
manufacturers group) are as follows:

|                                   |  |                       |       |                 |  |             |       |            |  |             |       |  |  |   |       |  |  |  |    |  
|---------------------------------- |  | --------------------- | ----- | --------------- |  | ----------- | ----- | ---------- |  | ----------- | ----- |  |  | - | ----- |  |  |  | -- | -
|                                   |  |                       |       |                 |  | General     |       |            |  | Aggregate  
|                                   |  | Ford Motor            |       | DaimlerChrysler |  | Motors      |       | Volkswagen |  | Percent of 
|                                   |  | Company               |       | AG              |  | Corporation |       | AG         |  | Total Sales
|                                   |  |                       |       |                 |  |             |       |            |  |            
|                                   |  |                      
|                                   |  | (Dollars in millions)
|Ten months ended December 31, 2003 |  | $                     | 1,736 |                 |  | $           | 1,538 |            |  | $           | 1,252 |  |  | $ | 1,446 |  |  |  | 63 | %
|Two months ended February 28, 2003 |  |                       | 347   |                 |  |             | 312   |            |  |             | 247   |  |  |   | 252   |  |  |  | 60 | %
|Year ended December 31, 2002       |  |                       | 2,123 |                 |  |             | 1,939 |            |  |             | 1,487 |  |  |   | 1,397 |  |  |  | 65 | %
|Year ended December 31, 2001       |  |                       | 1,865 |                 |  |             | 1,678 |            |  |             | 1,325 |  |  |   | 1,335 |  |  |  | 61 | %

Reconciliations of the items reported for the
operating segments to the applicable amounts reported in the
combined financial statements as of and for the ten months ended
December 31, 2003, the two months ended February 28,
2003 and for each of the years ended December 31, 2002 and
2001 are as follows:

|                                                                     |  |                       |      |              |  |              |     |      |  |   |      |   |  |   |      |  
|-------------------------------------------------------------------- |  | --------------------- | ---- | ------------ |  | ------------ | --- | ---- |  | - | ---- | - |  | - | ---- | -
|                                                                     |  | Successor             |      | Predecessor  |  |              |     |     
|                                                                     |  |                       |      |              |  |             
|                                                                     |  | Ten Months            |      | Two Months   |  | Years Ended 
|                                                                     |  | Ended                 |      | Ended        |  | December 31,
|                                                                     |  | December 31,          |      | February 28, |  |             
|                                                                     |  | 2003                  |      | 2003         |  | 2002         |     | 2001
|                                                                     |  |                       |      |              |  |              |     |     
|                                                                     |  |                      
|                                                                     |  | (Dollars in millions)
|Segment profit before taxes                                          |  | $                     | 435  |              |  | $            | 125 |      |  | $ | 628  |   |  | $ | 378  |  
|Corporate expense and other                                          |  |                       | (75  | )            |  |              | (44 | )    |  |   | (186 | ) |  |   | (183 | )
|Financing cost                                                       |  |                       | (314 | )            |  |              | (47 | )    |  |   | (319 | ) |  |   | (369 | )
|Net employee benefits income (expense)                               |  |                       | (14  | )            |  |              | 16  |      |  |   | 179  |   |  |   | 171  |  
|Goodwill amortization                                                |  |                       |     |              |  |              |    |      |  |   |     |   |  |   | (63  | )
|                                                                     |  |                       |      |              |  |              |     |      |  |   |      |   |  |   |      |  
|Earnings (losses) from continuing operations
    before income taxes |  | $                     | 32   |              |  | $            | 50  |      |  | $ | 302  |   |  | $ | (66  | )
|                                                                     |  |                       |      |              |  |              |     |      |  |   |      |   |  |   |      |  

|                                      |  |                       |       |             |  |   |        | 
|------------------------------------- |  | --------------------- | ----- | ----------- |  | - | ------ | 
|                                      |  | Successor             |       | Predecessor
|                                      |  |                       |       |            
|                                      |  |                      
|                                      |  | At December 31,      
|                                      |  |                      
|                                      |  | 2003                  |       | 2002       
|                                      |  |                       |       |            
|                                      |  |                      
|                                      |  | (Dollars in millions)
|Segment assets                        |  | $                     | 2,957 |             |  | $ | 3,213  | 
|Segment current operating liabilities |  |                       | 2,721 |             |  |   | 2,190  | 
|Current deferred income taxes         |  |                       | 120   |             |  |   | 144    | 
|Prepaid pension cost                  |  |                       | 143   |             |  |   | 2,593  | 
|Goodwill                              |  |                       | 2,503 |             |  |   | 2,411  | 
|All other                             |  |                       | 1,476 |             |  |   | 397    | 
|                                      |  |                       |       |             |  |   |        | 
|Total assets                          |  | $                     | 9,920 |             |  | $ | 10,948 | 
|                                      |  |                       |       |             |  |   |        | 

70



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

Information concerning principal geographic areas
is as follows:

|                                   |  |                       |       |         |  |         |       |           |  |       |     |  |  |   |       |  |  |   |        | 
|---------------------------------- |  | --------------------- | ----- | ------- |  | ------- | ----- | --------- |  | ----- | --- |  |  | - | ----- |  |  | - | ------ | 
|                                   |  | United                |       |         |  | United  |       |           |  |      
|                                   |  | States                |       | Germany |  | Kingdom |       | All Other |  | Total
|                                   |  |                       |       |         |  |         |       |           |  |      
|                                   |  |                      
|                                   |  | (Dollars in millions)
|Sales to external customers        |  |                       |       |         |  |         |       |           |  |       |     |  |  |   |       |  |  |   |        | 
|Ten months ended December 31, 2003 |  | $                     | 3,382 |         |  | $       | 1,646 |           |  | $     | 603 |  |  | $ | 3,804 |  |  | $ | 9,435  | 
|Two months ended February 28, 2003 |  |                       | 743   |         |  |         | 334   |           |  |       | 115 |  |  |   | 724   |  |  |   | 1,916  | 
|Year ended December 31, 2002       |  |                       | 4,454 |         |  |         | 1,666 |           |  |       | 604 |  |  |   | 3,906 |  |  |   | 10,630 | 
|Year ended December 31, 2001       |  |                       | 4,344 |         |  |         | 1,723 |           |  |       | 729 |  |  |   | 3,295 |  |  |   | 10,091 | 
|Property, plant and equipment-net  |  |                       |       |         |  |         |       |           |  |       |     |  |  |   |       |  |  |   |        | 
|At December 31, 2003               |  | $                     | 729   |         |  | $       | 536   |           |  | $     | 273 |  |  | $ | 961   |  |  | $ | 2,499  | 
|At December 31, 2002               |  |                       | 858   |         |  |         | 524   |           |  |       | 285 |  |  |   | 891   |  |  |   | 2,558  | 
|At December 31, 2001               |  |                       | 998   |         |  |         | 413   |           |  |       | 303 |  |  |   | 861   |  |  |   | 2,575  | 

Sales are attributable to geographic areas based
on the location of the assets generating the sales. Inter-area
sales are not significant to the total sales of any geographic
area.






|    |                                   
|--- | ----------------------------------
|15. | Accounts Receivable Securitization

At December 31, 2003, the Receivables
Facility provided up to $600 million in funding. On
January 8, 2004, the Company completed an amendment to the
Receivables Facility, which reduced the amount of committed
funding thereunder from $600 million to $400 million
and caused certain of its subsidiaries to enter into new
receivables financing programs in Europe. See Note 3. On
February 28, 2003, certain subsidiaries of the Company
(the Sellers) signed a Receivables Purchase
Agreement and began selling trade accounts receivable (the
Receivables) originated by them and certain of their
subsidiaries as sellers in the United States through the
Receivables Facility. Receivables are sold to TRW Automotive
Receivables LLC (the Transferor) at a discount. The
Transferor is a bankruptcy remote special purpose limited
liability company that is a wholly owned subsidiary of the
Company. The Transferors purchase of Receivables is
financed through a transfer agreement with TRW Automotive Global
Receivables LLC (Borrower). Under the terms of the
Transfer Agreement, the Borrower purchases all Receivables sold
to the Transferor. The Borrower is a bankruptcy remote
qualifying special purpose limited liability company that is
wholly owned by the Transferor and is not consolidated when
certain requirements are met as further described in Note 4.

Generally, multi-seller commercial paper conduits
supported by committed liquidity facilities are available to
provide cash funding for the Borrowers purchase of
Receivables through secured loans/tranches to the extent desired
and permitted under the receivables loan agreement. A note is
issued for the difference between Receivables purchased and cash
borrowed through the facility. The Sellers act as servicing
agents per the servicing agreement and continue to service the
transferred receivables for which they receive a monthly
servicing fee at a rate of 1% per annum. The usage fee
under the Receivables Facility is 1.50%. In addition, the
Company is required to pay a fee of 0.50% on the unused portion
of the Receivables Facility. These rates are per annum and
payments of these fees are made to the Lenders monthly.

Availability of funding under the Receivables
Facility depends primarily upon the outstanding trade accounts
receivable balance for the week as of Friday of the previous
week. This balance is reported no later than the third business
day of the subsequent week to the lenders. Availability is
determined by reducing the receivables balance by outstanding
borrowings under the program, the historical rate of collection
on those receivables and other characteristics of those
receivables that affect their eligibility (such as bankruptcy or
downgrading below investment grade of the obligor, delinquency
and excessive concentration). Based on the terms of this
facility and the criteria described above, approximately
$212 million of the Companys total reported accounts
receivable balance interest in securitized receivables balance
as of December 31, 2003 was

71



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

considered eligible for borrowings under this
facility, of which approximately $162 million would have
been available for funding. At the date of initial funding, the
Company securitized $150 million in receivables. In
addition, during the ten months ended December 31, 2003,
the Company securitized $70 million in receivables. As
these amounts were collected from customers and no amounts were
securitized at December 31, 2003, the fair value of the
multi-seller conduits loans was less than 10% of the fair
value of the borrowers assets and, therefore, the
financial statements of the borrower were included in our
consolidated financial statements as of December 31, 2003.

Prior to the Merger, TRW had a $350 million
accounts receivable securitization agreement, later reduced to
$325 million, with a financial institution and several
financial conduits. TRW established a wholly-owned,
fully-consolidated, bankruptcy-remote, special purpose
subsidiary, TRW Receivables Inc., which is included in the
combined historical financial statements of the Predecessor, for
the purpose of purchasing accounts receivable of TRW and the
Predecessor, including receivables purchased by TRW from certain
of its and the Predecessors subsidiaries, and selling an
undivided interest in the receivables to the financial conduits.
The agreement provided that collection of receivables were to be
reinvested in new accounts receivable. In accordance with the
agreement, TRW serviced and collected the receivables on behalf
of the financial conduits. The conduits and the special purpose
subsidiary had no recourse to other assets of the Predecessor or
of TRW for failure of debtors to pay when due. Net cash flows
paid to special purpose subsidiary for the year ended
December 31, 2002 were $327 million. This accounts
receivable securitization program was terminated in December
2002.

The company does not own any variable interests
in the multi-seller conduits, as that term is defined in
FIN 46R, Consolidation of Variable Interest
Entities.






|    |                      
|--- | ---------------------
|16. | Financial Instruments

|                                                           |  |                       |       |             |  |          |       |       |  |   |     |  |  |   |     | 
|---------------------------------------------------------- |  | --------------------- | ----- | ----------- |  | -------- | ----- | ----- |  | - | --- |  |  | - | --- | 
|                                                           |  |                       |       |            
|                                                           |  | Successor             |       | Predecessor
|                                                           |  |                       |       |            
|                                                           |  |                      
|                                                           |  | As of December 31,   
|                                                           |  |                      
|                                                           |  |                       |       |            
|                                                           |  | 2003                  |       | 2002       
|                                                           |  |                       |       |            
|                                                           |  | Carrying              |       | Fair        |  | Carrying |       | Fair 
|                                                           |  | Value                 |       | Value       |  | Value    |       | Value
|                                                           |  |                       |       |             |  |          |       |      
|                                                           |  |                      
|                                                           |  | (Dollars in millions)
|Cash and cash equivalents                                  |  |                       | $ 828 |             |  |          | $ 828 |       |  | $ | 188 |  |  | $ | 188 | 
|Marketable Securities                                      |  |                       | 16    |             |  |          | 16    |       |  |   | 26  |  |  |   | 26  | 
|Short-term debt                                            |  |                       | 76    |             |  |          | 76    |       |  |   | 327 |  |  |   | 327 | 
|Floating rate long-term debt                               |  |                       | 1,480 |             |  |          | 1,480 |       |  |   | 3   |  |  |   | 3   | 
|Fixed rate long-term debt                                  |  |                       | 1,869 |             |  |          | 2,141 |       |  |   | 316 |  |  |   | 234 | 
|Foreign currency forward contracts 
    (liability) asset |  |                       | (8    | )           |  |          | (8    | )     |  |   | 6   |  |  |   | 6   | 

The fair value of long-term debt was determined
from quoted market prices for publicly traded debt and was
estimated using a discounted cash flow analysis based on the
Companys then-current borrowing rates for similar types of
borrowing arrangements for long-term debt without a quoted
market price. The fair value of foreign currency forward
contracts were estimated using a discounted cash flow analysis
based on quoted market prices of offsetting contracts.

Foreign currency forward
contracts.The Company manufactures
and sells its products in countries throughout the world. As a
result, it is exposed to fluctuations in foreign currency
exchange rates. The Company enters into forward contracts and,
to a lesser extent, purchases currency options to hedge portions
of its foreign currency denominated forecasted revenues,
purchases and the subsequent cash flows after maximizing natural
offsets within the consolidated group. The critical terms of the
hedges are the same as the underlying forecasted transactions,
and the hedges are considered to be effective to offset the
changes in fair value of cash flows from the hedged
transactions. Gains or losses on these instruments, which mature
at

72



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

various dates through December 2005, are
generally recorded in other comprehensive earnings (losses)
until the underlying transaction is recognized in net earnings.
The earnings impact is reported either in sales, cost of sales,
or other income-net, to match the underlying transaction.

The amount of gains and losses reclassified into
net earnings in 2003 as a result of the discontinuance of cash
flow hedges was immaterial.

In addition, the Company enters into certain
foreign currency forward contracts that are not treated as
hedges under SFAS 133 to hedge recognized foreign currency
transactions. Gains and losses on these contracts are recorded
in net earnings and are substantially offset by the effect of
the revaluation of the underlying foreign currency denominated
transaction.

The Predecessor placed foreign exchange contracts
either through TRW, or directly with a number of major financial
institutions to minimize credit risk. No collateral was held in
relation to the contracts, and the Company anticipated that
these financial institutions would satisfy their obligations
under the contracts.

The following table represents the movement of
amounts reported in other comprehensive earnings (losses) from
deferred cash flow hedges, net of tax for the ten months ended
December 31, 2003 and the year ended December 31, 2002.

|                                                                            |  |                       |    |             |  |   |    |  
|--------------------------------------------------------------------------- |  | --------------------- | -- | ----------- |  | - | -- | -
|                                                                            |  | Successor             |    | Predecessor
|                                                                            |  |                       |    |            
|                                                                            |  | 2003                  |    | 2002       
|                                                                            |  |                       |    |            
|                                                                            |  |                      
|                                                                            |  | (Dollars in millions)
|Balance at beginning of period                                              |  | $                     |   |             |  | $ | 1  |  
|Net change in derivative fair value and other
    movements during the year |  |                       | (4 | )           |  |   |   |  
|Net amounts reclassified to statement of
    operations during the year     |  |                       | (2 | )           |  |   | (1 | )
|                                                                            |  |                       |    |             |  |   |    |  
|Other comprehensive losses                                                  |  | $                     | (6 | )           |  | $ |   |  
|                                                                            |  |                       |    |             |  |   |    |  

73



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)





|    |             
|--- | ------------
|17. | Income Taxes

Under the liability method, deferred tax assets
and liabilities are determined on differences between financial
reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws.

|                                                                                                                                     |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |      |    |  
|------------------------------------------------------------------------------------------------------------------------------------ | -------------------- | --------------------- | --- | ------------ | -- | ------------ | -- | ---- | -- | - | ---- | ---- | --- | - | ---- | ---- | -- | -
|                                                                                                                                     |                      |                       |     |             
|                                                                                                                                     |                      | Successor             |     | Predecessor 
|                                                                                                                                     |                      |                       |     |             
|                                                                                                                                     |                      |                       |     |              |    |             
|                                                                                                                                     |                      | Ten Months            |     | Two Months   |    | Years Ended 
|                                                                                                                                     |                      | Ended                 |     | Ended        |    | December 31,
|                                                                                                                                     |                      | December 31,          |     | February 28, |    |             
|                                                                                                                                     |                      | 2003                  |     | 2003         |    | 2002         |    | 2001
|                                                                                                                                     |                      |                       |     |              |    |              |    |     
|                                                                                                                                     |                      |                      
|                                                                                                                                     |                      | (Dollars in millions)
|The components of earnings (losses) before
    income taxes are as follows:                                                          |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|U.S.                                                                                                                                 |                      | $                     | (57 | )            |    | $            | (1 | )    |    | $ | (120 | )    |     | $ | (447 | )   
|Non-U.S.                                                                                                                             |                      |                       | 89  |              |    |              | 51 |      |    |   | 422  |      |     |   | 381  |     
|                                                                                                                                     |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|                                                                                                                                     |                      | $                     | 32  |              |    | $            | 50 |      |    | $ | 302  |      |     | $ | (66  | )   
|                                                                                                                                     |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|Significant components of the provision for
    income taxes are as follows:                                                         |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|Current                                                                                                                              |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|                                                                                                                                     | U.S. Federal         |                       | $   | 5            |    |              | $  | 1    |    |   | $    | (214 | )   |   | $    | (118 | ) 
|                                                                                                                                     | Non U.S.             |                       |     | 98           |    |              |    | 19   |    |   |      | 81   |     |   |      | 56   |   
|                                                                                                                                     | U.S. state and local |                       |     | 2            |    |              |    | 5    |    |   |      | 1    |     |   |      | (7   | ) 
|                                                                                                                                     |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|                                                                                                                                     |                      |                       | 105 |              |    |              | 25 |      |    |   | (132 | )    |     |   | (69  | )   
|Deferred                                                                                                                             |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|                                                                                                                                     |                      | U.S. federal          |     |              |   |              |    |      | (3 | ) |      |      | 259 |   |      |      | 17 |  
|                                                                                                                                     |                      | Non-U.S.              |     |              | (7 | )            |    |      | (3 | ) |      |      | 10  |   |      |      | 23 |  
|                                                                                                                                     |                      | U.S. state and local  |     |              |   |              |    |      |   |   |      |      | 1   |   |      |      | (1 | )
|                                                                                                                                     |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|                                                                                                                                     |                      |                       | (7  | )            |    |              | (6 | )    |    |   | 270  |      |     |   | 39   |     
|                                                                                                                                     |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|                                                                                                                                     |                      | $                     | 98  |              |    | $            | 19 |      |    | $ | 138  |      |     | $ | (30  | )   
|                                                                                                                                     |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|The reconciliation of income taxes calculated
    at the U.S. Federal statutory income tax rate of 35% to income
    tax expense is: |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|Income taxes at U.S. statutory rate                                                                                                  |                      | $                     | 11  |              |    | $            | 18 |      |    | $ | 105  |      |     | $ | (24  | )   
|U.S. state and local income taxes net of
    U.S. federal tax benefit                                                                |                      |                       | 2   |              |    |              | 3  |      |    |   |     |      |     |   | (5   | )   
|Non-U.S. tax rate variances net of foreign
    tax credits                                                                           |                      |                       | 37  |              |    |              |   |      |    |   | 32   |      |     |   | 35   |     
|Non-U.S. government grants                                                                                                           |                      |                       | (18 | )            |    |              | (3 | )    |    |   | (11  | )    |     |   | (9   | )   
|Valuation allowance                                                                                                                  |                      |                       | 35  |              |    |              |   |      |    |   |     |      |     |   |     |     
|Purchased IPR&D                                                                                                                      |                      |                       | 29  |              |    |              |   |      |    |   |     |      |     |   |     |     
|Prior years adjustments                                                                                                             |                      |                       |    |              |    |              |   |      |    |   | (6   | )    |     |   |     |     
|Foreign tax refund                                                                                                                   |                      |                       |    |              |    |              |   |      |    |   |     |      |     |   | (13  | )   
|Reversal of purchase accounting reserves for
    non-deductible expenses                                                             |                      |                       |    |              |    |              |   |      |    |   |     |      |     |   | (19  | )   
|Non deductible expenses                                                                                                              |                      |                       | 5   |              |    |              |   |      |    |   | 4    |      |     |   | 2    |     
|Other                                                                                                                                |                      |                       | (3  | )            |    |              | 1  |      |    |   | 14   |      |     |   | 3    |     
|                                                                                                                                     |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     
|                                                                                                                                     |                      | $                     | 98  |              |    | $            | 19 |      |    | $ | 138  |      |     | $ | (30  | )   
|                                                                                                                                     |                      |                       |     |              |    |              |    |      |    |   |      |      |     |   |      |     

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

On February 28, 2003, the Acquisition
required the Company to record certain purchase accounting
adjustments, which accordingly required the Company to record
certain deferred taxes. Included in purchase accounting
adjustments is a write-off of purchased in-process research and
development. In accordance with Emerging Issues Task Force
(EITF) Issue No. 96-7, Accounting for
Deferred Taxes on In-Process Research and Development Activities
Acquired in a Purchase Business Combination, no tax
benefit was recorded on the write-off of purchased in-process
research and development. For the ten months ended
December 31, 2003, the Company recorded income tax expense
of $98 million on pretax net earnings, excluding the charge
for purchased in-process research and development.

|                                                                              |                                                               |                                |   |             |       |   |   |        |        |  
|----------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------ | - | ----------- | ----- | - | - | ------ | ------ | -
|                                                                              |                                                               | Successor                      |   | Predecessor
|                                                                              |                                                               |                                |   |            
|                                                                              |                                                               |                               
|                                                                              |                                                               | December 31                   
|                                                                              |                                                               |                               
|The components of deferred income tax assets and liabilities are shown below: |                                                               | 2003                           |   | 2002       
|                                                                              |                                                               |                                |   |            
|                                                                              |                                                               |                               
|                                                                              |                                                               | (Dollars in millions)         
|Deferred tax assets                                                           |                                                               |                                |   |             |       |   |   |       
|                                                                              | Pensions and post-retirement benefits other than
    pensions |                                | $ | 639         |       |   | $ | 622    |       
|                                                                              | State and local taxes                                         |                                |   |            |       |   |   | 8      |       
|                                                                              | Inventory                                                     |                                |   | 29          |       |   |   | 22     |       
|                                                                              | Reserves and accruals                                         |                                |   | 204         |       |   |   | 139    |       
|                                                                              | Net operating loss and credit carry forwards                  |                                |   | 321         |       |   |   | 57     |       
|                                                                              | Other                                                         |                                |   | 9           |       |   |   | 123    |       
|                                                                              |                                                               |                                |   |             |       |   |   |       
|                                                                              |                                                               | Total deferred tax assets      |   |             | 1,202 |   |   |        | 971    |  
|                                                                              | Valuation allowance for deferred tax assets                   |                                |   | (223        | )     |   |   | (57    | )     
|                                                                              |                                                               |                                |   |             |       |   |   |       
|                                                                              |                                                               | Net deferred tax assets        |   |             | 979   |   |   |        | 914    |  
|Deferred tax liabilities                                                      |                                                               |                                |   |             |       |   |   |       
|                                                                              | Pensions and post-retirement benefits other than
    pensions |                                |   | (135        | )     |   |   | (1,308 | )     
|                                                                              | Fixed assets and intangibles                                  |                                |   | (336        | )     |   |   | (146   | )     
|                                                                              | Undistributed earnings of foreign subsidiaries                |                                |   | (189        | )     |   |   |       |       
|                                                                              | Foreign currency exchange                                     |                                |   | (55         | )     |   |   | (14    | )     
|                                                                              | Other                                                         |                                |   | (149        | )     |   |   | (33    | )     
|                                                                              |                                                               |                                |   |             |       |   |   |       
|                                                                              |                                                               | Total deferred tax liabilities |   |             | (864  | ) |   |        | (1,501 | )
|                                                                              |                                                               |                                |   |             |       |   |   |       
|                                                                              | Net deferred taxes                                            |                                |   | 115         |       |   |   | (587   | )     
|                                                                              |                                                               |                                |   |             |       |   |   |       

At December 31, 2003 and 2002, the Company
had deferred tax assets of approximately $321 million and
$57 million, respectively, from net operating loss and
credit carryforwards. The deferred tax asset at
December 31, 2003 includes the tax benefits from a
$14 million net operating loss in the United States, which
expires in 2023 with a full valuation allowance. At
December 31, 2003 and 2002, the Company also had deferred
tax assets of approximately $307 and $57 million,
respectively, for additional foreign net operating loss and
credits carryforwards, approximately $264 million of which
can be carried forward indefinitely with the remainder expiring
between 2004 and 2018.

As of March 1, 2003 deferred tax assets of
$224 million for net operating loss carryforwards were
acquired with the purchase of the automotive business. A
valuation allowance was recorded on $183 million of these
purchased deferred tax assets and, to the extent such benefits
are ever realized, such benefits will be recorded as a reduction
of goodwill.

The provision includes the estimated U.S. federal
income tax effects of earnings of subsidiaries expected to be
distributed to the Company. Deferred income taxes have not been
provided on $158 million of

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

undistributed earnings of certain foreign
subsidiaries as such amounts are considered to be permanently
reinvested. It is not practical to estimate the additional
income taxes and applicable withholding tax that would be
payable on the remittance of such undistributed earnings.

SFAS 109, Accounting for Income
Taxes requires that deferred tax assets be reduced by a
valuation allowance, if based on available evidence, it is more
likely than not that some portion or all of the recorded tax
assets will not be realized in the future periods. The factors
considered by management in its determination of the probability
of the realization of the deferred tax assets include: net
operating loss carryback availability, historical taxable
income, projected future taxable income, the expected timing of
the reversals of existing temporary differences and tax planning
strategies. As a result of the Acquisition, management believes
it is more likely than not that the U.S. deferred tax asset
may not be realized in the future. Accordingly, the Company
recorded a full valuation allowance against the US deferred tax
asset. In addition, the Company also evaluated the potential
realization of deferred tax benefits for foreign locations on a
jurisdiction by jurisdiction basis. Where the Company determined
that the probability of realizing the tax asset was not likely,
a valuation allowance was established against such deferred tax
asset.






|    |              
|--- | -------------
|18. | Pension Plans

During the two months ended February 28,
2003 and each of the two years ended December 31, 2002, and
2001, substantially all Company-designated employees
participated in TRWs defined benefit plans or retirement/
termination indemnity plans and following the Acquisition
substantially all employees of the Company and its subsidiaries
participate in the Companys defined benefit plans or
retirement/termination indemnity plans. The financial statements
reflect the pension assets and liabilities related to the active
and retired Company-designated employees in the Companys
plans or in TRWs plans based upon a measurement date of
October 31, 2003 for the Successor and December 31,
2002 for the Predecessor.

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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The following table provides a reconciliation of
the changes in the plans benefit obligations and fair
value of assets over the ten months ended December 31, 2003
and the year ended December 31, 2002, and a statement of
the funded status as of December 31, 2003 and 2002:

|                                                  |                                                                                                  |                       |       |             |   |      |       |          |   |   |      |     |   |   |       |       |  
|------------------------------------------------- | ------------------------------------------------------------------------------------------------ | --------------------- | ----- | ----------- | - | ---- | ----- | -------- | - | - | ---- | --- | - | - | ----- | ----- | -
|                                                  |                                                                                                  |                       |       |            
|                                                  |                                                                                                  | Successor             |       | Predecessor
|                                                  |                                                                                                  |                       |       |            
|                                                  |                                                                                                  |                       |       |            
|                                                  |                                                                                                  | 2003                  |       | 2002       
|                                                  |                                                                                                  |                       |       |            
|                                                  |                                                                                                  | U.S.                  |       | Non-U.S.    |   | U.S. |       | Non-U.S.
|                                                  |                                                                                                  |                       |       |             |   |      |       |         
|                                                  |                                                                                                  |                      
|                                                  |                                                                                                  | (Dollars in millions)
|Change in benefit obligations:                    |                                                                                                  |                       |       |             |   |      |       |          |   |   |      |     |   |   |       |      
|Benefit obligations at beginning of period        |                                                                                                  | $                     | 1,094 |             |   | $    | 4,178 |          |   | $ | 823  |     |   | $ | 3,554 |      
|                                                  | Service cost                                                                                     |                       |       | 27          |   |      |       | 39       |   |   |      | 25  |   |   |       | 54    |  
|                                                  | Interest cost                                                                                    |                       |       | 55          |   |      |       | 197      |   |   |      | 60  |   |   |       | 226   |  
|                                                  | Amendments                                                                                       |                       |       |            |   |      |       | 3        |   |   |      |    |   |   |       |      |  
|                                                  | Actuarial (gains) losses                                                                         |                       |       | (16         | ) |      |       | 256      |   |   |      | 90  |   |   |       | 369   |  
|                                                  | Foreign currency exchange rate changes                                                           |                       |       |            |   |      |       | 603      |   |   |      |    |   |   |       | 353   |  
|                                                  | Special termination benefits                                                                     |                       |       |            |   |      |       |         |   |   |      | 9   |   |   |       |      |  
|                                                  | Curtailment                                                                                      |                       |       |            |   |      |       |         |   |   |      | 1   |   |   |       |      |  
|                                                  | Divestiture                                                                                      |                       |       |            |   |      |       | (10      | ) |   |      |    |   |   |       |      |  
|                                                  | Stand-alone allocation adjustment                                                                |                       |       |            |   |      |       |         |   |   |      | (6  | ) |   |       |      |  
|                                                  | Benefits paid                                                                                    |                       |       | (46         | ) |      |       | (190     | ) |   |      | (86 | ) |   |       | (255  | )
|                                                  |                                                                                                  |                       |       |             |   |      |       |          |   |   |      |     |   |   |       |      
|Benefit obligations at the measurement date       |                                                                                                  |                       | 1,114 |             |   |      | 5,076 |          |   |   | 916  |     |   |   | 4,301 |      
|                                                  |                                                                                                  |                       |       |             |   |      |       |          |   |   |      |     |   |   |       |      
|Change in plan assets:                            |                                                                                                  |                       |       |             |   |      |       |          |   |   |      |     |   |   |       |      
|Fair value of plan assets at beginning of period  |                                                                                                  |                       | 605   |             |   |      | 3,898 |          |   |   | 736  |     |   |   | 4,512 |      
|                                                  | Actual return on plan assets                                                                     |                       |       | 121         |   |      |       | 657      |   |   |      | (36 | ) |   |       | (648  | )
|                                                  | Foreign currency exchange rate changes                                                           |                       |       |            |   |      |       | 575      |   |   |      |    |   |   |       | 420   |  
|                                                  | Stand-alone allocation adjustment                                                                |                       |       |            |   |      |       |         |   |   |      | 40  |   |   |       | 96    |  
|                                                  | Divestiture                                                                                      |                       |       |            |   |      |       | (6       | ) |   |      |    |   |   |       |      |  
|                                                  | Company contributions                                                                            |                       |       | 4           |   |      |       | 19       |   |   |      | 5   |   |   |       | 20    |  
|                                                  | Plan participant contributions                                                                   |                       |       |            |   |      |       | 6        |   |   |      |    |   |   |       | 5     |  
|                                                  | Benefits paid                                                                                    |                       |       | (46         | ) |      |       | (190     | ) |   |      | (86 | ) |   |       | (255  | )
|                                                  |                                                                                                  |                       |       |             |   |      |       |          |   |   |      |     |   |   |       |      
|Fair value of plan assets at the measurement date |                                                                                                  |                       | 684   |             |   |      | 4,959 |          |   |   | 659  |     |   |   | 4,150 |      
|                                                  |                                                                                                  |                       |       |             |   |      |       |          |   |   |      |     |   |   |       |      
|Funded status of the plan                         |                                                                                                  |                       | (430  | )           |   |      | (117  | )        |   |   | (257 | )   |   |   | (151  | )    
|                                                  | Company contributions and benefit payments made
    between measurement date and disclosure date |                       |       |            |   |      |       | 6        |   |   |      |    |   |   |       |      |  
|                                                  | Unrecognized actuarial (gain) loss                                                               |                       |       | (97         | ) |      |       | (169     | ) |   |      | 308 |   |   |       | 2,945 |  
|                                                  | Unrecognized prior service cost                                                                  |                       |       |            |   |      |       | 3        |   |   |      |    |   |   |       | 13    |  
|                                                  | Unrecognized net transition asset                                                                |                       |       |            |   |      |       |         |   |   |      |    |   |   |       | (4    | )
|                                                  |                                                                                                  |                       |       |             |   |      |       |          |   |   |      |     |   |   |       |      
|Total recognized                                  |                                                                                                  | $                     | (527  | )           |   | $    | (277  | )        |   | $ | 51   |     |   | $ | 2,803 |      
|                                                  |                                                                                                  |                       |       |             |   |      |       |          |   |   |      |     |   |   |       |      

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The following table provides the amounts
recognized in the Consolidated and Combined Balance Sheets as of
December 31, 2003 and 2002:

|                                     |  |                       |      |             |  |      |      |          |  |   |      |   |  |   |       |  
|------------------------------------ |  | --------------------- | ---- | ----------- |  | ---- | ---- | -------- |  | - | ---- | - |  | - | ----- | -
|                                     |  |                       |      |            
|                                     |  | Successor             |      | Predecessor
|                                     |  |                       |      |            
|                                     |  |                       |      |            
|                                     |  | 2003                  |      | 2002       
|                                     |  |                       |      |            
|                                     |  | U.S.                  |      | Non-U.S.    |  | U.S. |      | Non-U.S.
|                                     |  |                       |      |             |  |      |      |         
|                                     |  |                      
|                                     |  | (Dollars in millions)
|Prepaid benefit cost                 |  | $                     | 2    |             |  | $    | 118  |          |  | $ | 20   |   |  | $ | 3,028 |  
|Accrued benefit liability            |  |                       | (529 | )           |  |      | (397 | )        |  |   | (24  | ) |  |   | (228  | )
|Additional minimum liability         |  |                       |     |             |  |      |     |          |  |   | (160 | ) |  |   | (45   | )
|Intangible asset and other           |  |                       |     |             |  |      | 2    |          |  |   | 1    |   |  |   | 4     |  
|Accumulated other comprehensive loss |  |                       |     |             |  |      |     |          |  |   | 214  |   |  |   | 44    |  
|                                     |  |                       |      |             |  |      |      |          |  |   |      |   |  |   |       |  
|Total recognized                     |  | $                     | (527 | )           |  | $    | (277 | )        |  | $ | 51   |   |  | $ | 2,803 |  
|                                     |  |                       |      |             |  |      |      |          |  |   |      |   |  |   |       |  

The total accumulated benefit obligation of all
plans as of the October 31, 2003 measurement date is
$5,866 million ($1,018 million for U.S. plans and
$4,848 million for non-U.S. plans). The total
accumulated benefit obligation of all plans as of
December 31, 2002 was $4,933 million
($823 million for U.S. plans and $4,110 million for
non-U.S. plans).

Information for pension plans with an accumulated
benefits obligation in excess of plan assets is as follows:

|                                |  |                          |       |             |  |      |     |          |  |   |     |  |  |   |     | 
|------------------------------- |  | ------------------------ | ----- | ----------- |  | ---- | --- | -------- |  | - | --- |  |  | - | --- | 
|                                |  |                          |       |            
|                                |  | Successor                |       | Predecessor
|                                |  |                          |       |            
|                                |  |                         
|                                |  | Years Ended December 31,
|                                |  |                         
|                                |  |                          |       |            
|                                |  | 2003                     |       | 2002       
|                                |  |                          |       |            
|                                |  | U.S.                     |       | Non-U.S.    |  | U.S. |     | Non-U.S.
|                                |  |                          |       |             |  |      |     |         
|                                |  |                         
|                                |  | (Dollars in millions)   
|Projected benefits obligation   |  | $                        | 1,064 |             |  | $    | 567 |          |  | $ | 868 |  |  | $ | 446 | 
|Accumulated benefits obligation |  | $                        | 969   |             |  | $    | 515 |          |  | $ | 775 |  |  | $ | 407 | 
|Fair value of assets            |  | $                        | 624   |             |  | $    | 170 |          |  | $ | 604 |  |  | $ | 139 | 

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The following table provides the components of
net pension (income) cost from continuing operations for the
plans for the ten months ended December 31, 2003, the two
months ended February 28, 2003, and for the years ended
December 31, 2002 and 2001:

|                                               |  |                       |     |                   |  |                          |      |           |  |      |     |           |  |      |     |           |  |   |     |   |  |   |      |   |  |   |     |   |  |   |      |  
|---------------------------------------------- |  | --------------------- | --- | ----------------- |  | ------------------------ | ---- | --------- |  | ---- | --- | --------- |  | ---- | --- | --------- |  | - | --- | - |  | - | ---- | - |  | - | --- | - |  | - | ---- | -
|                                               |  |                       |     |                  
|                                               |  | Successor             |     | Predecessor      
|                                               |  |                       |     |                  
|                                               |  |                       |     |                   |  |                         
|                                               |  |                       |     |                   |  | Years Ended December 31,
|                                               |  | Ten Months            |     | Two Months        |  |                         
|                                               |  | Ended                 |     | Ended             |  |                          |      |          
|                                               |  | December 31, 2003     |     | February 28, 2003 |  | 2002                     |      | 2001     
|                                               |  |                       |     |                   |  |                          |      |          
|                                               |  | U.S.                  |     | Non- U.S.         |  | U.S.                     |      | Non- U.S. |  | U.S. |     | Non- U.S. |  | U.S. |     | Non- U.S.
|                                               |  |                       |     |                   |  |                          |      |           |  |      |     |           |  |      |     |          
|                                               |  |                      
|                                               |  | (Dollars in millions)
|Defined benefit plans                          |  |                       |     |                   |  |                          |      |           |  |      |     |           |  |      |     |           |  |   |     |   |  |   |      |   |  |   |     |   |  |   |      |  
|Service cost                                   |  | $                     | 27  |                   |  | $                        | 39   |           |  | $    | 5   |           |  | $    | 7   |           |  | $ | 25  |   |  | $ | 54   |   |  | $ | 26  |   |  | $ | 37   |  
|Interest cost on projected benefit obligations |  |                       | 55  |                   |  |                          | 197  |           |  |      | 10  |           |  |      | 37  |           |  |   | 60  |   |  |   | 226  |   |  |   | 59  |   |  |   | 207  |  
|Expected return on plan assets                 |  |                       | (41 | )                 |  |                          | (253 | )         |  |      | (13 | )         |  |      | (80 | )         |  |   | (81 | ) |  |   | (521 | ) |  |   | (80 | ) |  |   | (461 | )
|Miscellaneous expense (income)                 |  |                       |    |                   |  |                          |     |           |  |      |    |           |  |      |    |           |  |   | 5   |   |  |   |     |   |  |   | (1  | ) |  |   |     |  
|Amortization of recognized loss                |  |                       |    |                   |  |                          |     |           |  |      | 1   |           |  |      | 10  |           |  |   |    |   |  |   | 6    |   |  |   | (2  | ) |  |   |     |  
|Amortization of prior service cost             |  |                       |    |                   |  |                          |     |           |  |      |    |           |  |      |    |           |  |   | 2   |   |  |   | 3    |   |  |   | 4   |   |  |   | 3    |  
|Amortization of transition asset               |  |                       |    |                   |  |                          |     |           |  |      |    |           |  |      |    |           |  |   |    |   |  |   | (1   | ) |  |   |    |   |  |   | (1   | )
|                                               |  |                       |     |                   |  |                          |      |           |  |      |     |           |  |      |     |           |  |   |     |   |  |   |      |   |  |   |     |   |  |   |      |  
|Defined benefit plans                          |  |                       | 41  |                   |  |                          | (17  | )         |  |      | 3   |           |  |      | (26 | )         |  |   | 11  |   |  |   | (233 | ) |  |   | 6   |   |  |   | (215 | )
|Defined contribution plans                     |  |                       | 14  |                   |  |                          | 11   |           |  |      | 3   |           |  |      | 1   |           |  |   | 1   |   |  |   | 1    |   |  |   | 1   |   |  |   | 1    |  
|Employee stock ownership and savings plan      |  |                       |    |                   |  |                          |     |           |  |      |    |           |  |      |    |           |  |   | 15  |   |  |   |     |   |  |   | 15  |   |  |   |     |  
|                                               |  |                       |     |                   |  |                          |      |           |  |      |     |           |  |      |     |           |  |   |     |   |  |   |      |   |  |   |     |   |  |   |      |  
|Total pension (income) cost                    |  | $                     | 55  |                   |  | $                        | (6   | )         |  | $    | 6   |           |  | $    | (25 | )         |  | $ | 27  |   |  | $ | (232 | ) |  | $ | 22  |   |  | $ | (214 | )
|                                               |  |                       |     |                   |  |                          |      |           |  |      |     |           |  |      |     |           |  |   |     |   |  |   |      |   |  |   |     |   |  |   |      |  

The assumptions used in the measurement of the
benefit obligations for the active and retired
Company-designated employees are shown in the following table:

|                                         |  |                  |       |                   |  |      |              |           |  |  |       |  |  |  |              | 
|---------------------------------------- |  | ---------------- | ----- | ----------------- |  | ---- | ------------ | --------- |  |  | ----- |  |  |  | ------------ | 
|                                         |  |                  |       |                  
|                                         |  | Successor        |       | Predecessor      
|                                         |  |                  |       |                  
|                                         |  |                  |       |                  
|                                         |  | October 31, 2003 |       | December 31, 2002
|                                         |  |                  |       |                  
|                                         |  | U.S.             |       | Non- U.S.         |  | U.S. |              | Non- U.S.
|                                         |  |                  |       |                   |  |      |              |          
|Discount rate                            |  |                  | 6.25% |                   |  |      | 2.50 - 8.50% |           |  |  | 6.50% |  |  |  | 3.00 - 6.50% | 
|Expected long-term return on plan assets |  |                  | 8.50% |                   |  |      | 3.00 - 9.00% |           |  |  | 9.00% |  |  |  | 4.00 - 8.75% | 
|Rate of increase in compensation levels  |  |                  | 4.00% |                   |  |      | 1.50 - 8.00% |           |  |  | 4.00% |  |  |  | 2.00 - 4.00% | 

The assumptions used to determine net periodic
benefit cost are shown in the following table:

|                                         |  |                   |       |                   |  |                          |              |          |  |      |       |          |  |      |              |          |  |  |              |  |  |  |              |  |  |  |              |  |  |  |              | 
|---------------------------------------- |  | ----------------- | ----- | ----------------- |  | ------------------------ | ------------ | -------- |  | ---- | ----- | -------- |  | ---- | ------------ | -------- |  |  | ------------ |  |  |  | ------------ |  |  |  | ------------ |  |  |  | ------------ | 
|                                         |  |                   |       |                  
|                                         |  | Successor         |       | Predecessor      
|                                         |  |                   |       |                  
|                                         |  |                   |       |                   |  |                         
|                                         |  |                   |       |                   |  | Years Ended December 31,
|                                         |  |                   |       |                   |  |                         
|                                         |  | Ten Months Ended  |       | Two Months Ended  |  |                          |              |         
|                                         |  | December 31, 2003 |       | February 28, 2003 |  | 2002                     |              | 2001    
|                                         |  |                   |       |                   |  |                          |              |         
|                                         |  | U.S.              |       | Non-U.S.          |  | U.S.                     |              | Non-U.S. |  | U.S. |       | Non-U.S. |  | U.S. |              | Non-U.S.
|                                         |  |                   |       |                   |  |                          |              |          |  |      |       |          |  |      |              |         
|Discount rate                            |  |                   | 6.25% |                   |  |                          | 3.00 - 6.50% |          |  |      | 6.50% |          |  |      | 3.00 - 6.50% |          |  |  | 7.25%        |  |  |  | 3.00 - 6.50% |  |  |  | 7.50%        |  |  |  | 3.00 - 7.00% | 
|Expected long-term return on plan assets |  |                   | 8.50% |                   |  |                          | 4.00 - 8.00% |          |  |      | 9.00% |          |  |      | 4.00 - 8.75% |          |  |  | 9.50%        |  |  |  | 4.00 - 8.75% |  |  |  | 9.50%        |  |  |  | 4.00 - 8.75% | 
|Rate of compensation increase            |  |                   | 4.00% |                   |  |                          | 2.00 - 4.00% |          |  |      | 4.00% |          |  |      | 2.00 - 4.00% |          |  |  | 3.50 - 5.00% |  |  |  | 2.00 - 4.00% |  |  |  | 3.50 - 5.00% |  |  |  | 2.00 - 4.50% | 

To develop the expected long-term rate of return
on assets assumption, the Company considered the historical
returns and the future expectations for returns for each asset
class, as well as the target asset allocation of the pension
portfolio. This resulted in the selection of the 8.50% long-term
rate of return on asset assumptions for the U.S. plans.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

Plan Assets.The
Companys U.S. pension plan weighted-average asset
allocations at December 31, 2003 by asset category are as
follows. The December 31, 2002 percent reflects the
assets of the total Predecessor Master Trust.

|                  |       |                 |     |             |  |  |     |      | 
|----------------- | ----- | --------------- | --- | ----------- |  |  | --- | ---- | 
|                  |       | Successor       |     | Predecessor
|                  |       |                 |     |            
|                  |       |                
|                  |       | At December 31,
|                  |       |                
|                  |       | 2003            |     | 2002       
|                  |       |                 |     |            
|Asset Category    |       |                 |     |             |  |  |     |     
|Equity securities |       |                 | 70% |             |  |  | 62% |     
|Debt securities   |       |                 | 28% |             |  |  | 26% |     
|Real estate       |       |                 | 0%  |             |  |  | 10% |     
|Other             |       |                 | 2%  |             |  |  | 2%  |     
|                  |       |                 |     |             |  |  |     |     
|                  | Total |                 |     | 100%        |  |  |     | 100% | 
|                  |       |                 |     |             |  |  |     |     

The asset allocation policy of the U.S. plan
is as follows:

|                  |  |         |     |        |  |         |     |  |  |  |     | 
|----------------- |  | ------- | --- | ------ |  | ------- | --- |  |  |  | --- | 
|                  |  | Minimum |     | Target |  | Maximum
|                  |  |         |     |        |  |        
|Asset Class       |  |         |     |        |  |         |     |  |  |  |     | 
|U.S. Equity       |  |         | 45% |        |  |         | 50% |  |  |  | 55% | 
|Non-U.S. Equity   |  |         | 16% |        |  |         | 20% |  |  |  | 24% | 
|U.S. Fixed Income |  |         | 25% |        |  |         | 30% |  |  |  | 35% | 

The goals and investment objectives of the asset
strategy are to ensure that there is an adequate level of assets
to meet benefit obligations to participants and retirees over
the life of the plans and maintain liquidity in the plans
assets sufficient to cover current benefit obligations. Risk is
managed by investing in a broad range of asset classes and
within those asset classes, a broad range of individual
securities.

Contributions.The
Company expects to contribute approximately
$60 - $70 million to U.S. pension plans
(subject to possible legislative changes) and approximately
$26 million to non-U.S. pension plans in 2004.

The Company also sponsors qualified defined
contribution pension plans covering employees at certain
operations and an unfunded non-qualified defined contribution
plan for a select group of highly compensated employees. These
plans allow participants to defer compensation, and generally
provide employer matching contributions.






|    |                                                 
|--- | ------------------------------------------------
|19. | Post-Retirement Benefits Other Than
    Pensions

The Successor assumed sponsorship of all welfare
benefit plans previously maintained by TRW for TRW Automotive
participants.

During the Predecessor periods, TRW provided
health care and life insurance benefits for a majority of
Company-designated retired employees in the United States and
Canada. The health care plans provide for cost sharing, in the
form of retiree contributions, deductibles and coinsurance,
between TRW and its retirees. Approximately 70% of the active
plan participants in the Companys post-retirement health
care plans are subject to provisions which limit the
Companys contribution toward the plans cost.
Approximately 80% of inactive plan participants are covered by
benefits with no inflationary cap, accounting for a substantial
majority of existing post-retirement health care benefit
liabilities. Life insurance benefits are generally
noncontributory. The Companys policy is to fund
post  retirement health care and life insurance
benefits as those benefits become payable. Retirees in certain
other countries are provided similar benefits by plans sponsored
by their governments.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The following table provides a reconciliation of
the changes in the plans benefit obligations and fair
value of assets over the ten month period ended
December 31, 2003 and the one-year period ended
December 31, 2002, and a statement of the funded status as
of December 31, 2002 and 2003 for the active and retired
Company-designated employees based upon a measurement date of
October 31, 2003 for the Successor and December 31,
2002 for the Predecessor:

|                                                 |                                                                                                  |                       |        |             |   |   |      |     |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------------ | --------------------- | ------ | ----------- | - | - | ---- | --- | -
|                                                 |                                                                                                  | Successor             |        | Predecessor
|                                                 |                                                                                                  |                       |        |            
|                                                 |                                                                                                  | 2003                  |        | 2002       
|                                                 |                                                                                                  |                       |        |            
|                                                 |                                                                                                  |                      
|                                                 |                                                                                                  | (Dollars in millions)
|Benefits obligations at beginning of period      |                                                                                                  | $                     | 991    |             |   | $ | 850  |    
|                                                 | Service cost                                                                                     |                       |        | 8           |   |   |      | 10  |  
|                                                 | Interest cost                                                                                    |                       |        | 50          |   |   |      | 59  |  
|                                                 | Actuarial loss                                                                                   |                       |        | 27          |   |   |      | 114 |  
|                                                 | Foreign currency exchange rate changes                                                           |                       |        | 19          |   |   |      | 3   |  
|                                                 | Plan participant contributions                                                                   |                       |        | 3           |   |   |      | 4   |  
|                                                 | Benefits paid                                                                                    |                       |        | (47         | ) |   |      | (62 | )
|                                                 |                                                                                                  |                       |        |             |   |   |      |    
|Benefit obligations at the measurement date      |                                                                                                  |                       | 1,051  |             |   |   | 978  |    
|                                                 |                                                                                                  |                       |        |             |   |   |      |    
|Fair value of plan assets at beginning of period |                                                                                                  |                       |       |             |   |   |     |    
|                                                 | Company contributions                                                                            |                       |        | 44          |   |   |      | 58  |  
|                                                 | Plan participant contributions                                                                   |                       |        | 3           |   |   |      | 4   |  
|                                                 | Benefits paid                                                                                    |                       |        | (47         | ) |   |      | (62 | )
|                                                 |                                                                                                  |                       |        |             |   |   |      |    
|Fair value of plan assets at measurement date    |                                                                                                  |                       |       |             |   |   |     |    
|                                                 |                                                                                                  |                       |        |             |   |   |      |    
|Funded status of the plan                        |                                                                                                  |                       | (1,051 | )           |   |   | (978 | )  
|                                                 | Company contributions and benefit payments made
    between measurement date and disclosure date |                       |        | 11          |   |   |      |    |  
|                                                 | Unrecognized actuarial loss                                                                      |                       |        | 27          |   |   |      | 172 |  
|                                                 | Unrecognized prior service cost                                                                  |                       |        |            |   |   |      | (3  | )
|                                                 |                                                                                                  |                       |        |             |   |   |      |    
|Total accrued benefit cost recognized            |                                                                                                  | $                     | (1,013 | )           |   | $ | (809 | )  
|                                                 |                                                                                                  |                       |        |             |   |   |      |    

The following table provides the components of
net post-retirement benefit cost for the plans for the ten
months ended December 31, 2003, the two months ended
February 28, 2003, and the years ended December 31,
2002 and 2001:

|                                  |  |                       |    |              |  |              |    |      |  |   |    |  |  |   |    | 
|--------------------------------- |  | --------------------- | -- | ------------ |  | ------------ | -- | ---- |  | - | -- |  |  | - | -- | 
|                                  |  | Successor             |    | Predecessor  |  |              |    |     
|                                  |  |                       |    |              |  |             
|                                  |  | Ten Months            |    | Two Months   |  | Years Ended 
|                                  |  | Ended                 |    | Ended        |  | December 31,
|                                  |  | December 31,          |    | February 28, |  |             
|                                  |  | 2003                  |    | 2003         |  | 2002         |    | 2001
|                                  |  |                       |    |              |  |              |    |     
|                                  |  |                       |    |             
|                                  |  | (Dollars in millions) |    |             
|Service cost                      |  | $                     | 8  |              |  | $            | 2  |      |  | $ | 10 |  |  | $ | 10 | 
|Interest cost                     |  |                       | 50 |              |  |              | 10 |      |  |   | 59 |  |  |   | 56 | 
|Amortization of recognized income |  |                       |   |              |  |              | 1  |      |  |   |   |  |  |   |   | 
|                                  |  |                       |    |              |  |              |    |      |  |   |    |  |  |   |    | 
|Net post-retirement benefit cost  |  | $                     | 58 |              |  | $            | 13 |      |  | $ | 69 |  |  | $ | 66 | 
|                                  |  |                       |    |              |  |              |    |      |  |   |    |  |  |   |    | 

The assumptions used in the measurement of the
benefit obligations are shown in the following table:

|              |  |             |              |              |  |  |              | 
|------------- |  | ----------- | ------------ | ------------ |  |  | ------------ | 
|              |  | Successor   |              | Predecessor 
|              |  |             |              |             
|              |  | October 31, |              | December 31,
|              |  | 2003        |              | 2002        
|              |  |             |              |             
|Discount rate |  |             | 5.50 - 6.25% |              |  |  | 5.50 - 6.50% | 

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The assumptions used to determine net periodic
benefit costs are shown in the following table:

|              |  |              |              |              |  |                          |              |      |  |  |              |  |  |  |              | 
|------------- |  | ------------ | ------------ | ------------ |  | ------------------------ | ------------ | ---- |  |  | ------------ |  |  |  | ------------ | 
|              |  |              |              |             
|              |  | Successor    |              | Predecessor 
|              |  |              |              |             
|              |  | Ten Months   |              | Two Months   |  |                         
|              |  | Ended        |              | Ended        |  | Years Ended December 31,
|              |  | December 31, |              | February 28, |  |                         
|              |  | 2003         |              | 2003         |  | 2002                     |              | 2001
|              |  |              |              |              |  |                          |              |     
|Discount rate |  |              | 5.50 - 6.50% |              |  |                          | 5.50 - 6.50% |      |  |  | 5.75 - 7.25% |  |  |  | 5.75 - 7.50% | 

The assumed healthcare cost trend rates are shown
in the following table:

|                                       |  |             |              |              |  |  |              |  
|-------------------------------------- |  | ----------- | ------------ | ------------ |  |  | ------------ | -
|                                       |  | Successor   |              | Predecessor 
|                                       |  |             |              |             
|                                       |  | October 31, |              | December 31,
|                                       |  | 2003        |              | 2002        
|                                       |  |             |              |             
|Initial rate at end of year            |  |             | 8.00 - 10.00 | %            |  |  | 5.25 - 10.00 | %
|Ultimate rate                          |  |             | 2.25 - 5.00  | %            |  |  | 2.25 - 5.25  | %
|Year in which ultimate rate is reached |  |             | 2010         |              |  |  | 2010         |  

The Company expects to contribute approximately
$75 million on a pay-as-you-go basis in 2004.

A one-percentage-point change in the assumed
health care cost trend rate would have had the following effects:

|                                                            |  |                       |    |          |  |   |     |  
|----------------------------------------------------------- |  | --------------------- | -- | -------- |  | - | --- | -
|                                                            |  |                      
|                                                            |  | One Percentage       
|                                                            |  | Point                
|                                                            |  |                      
|                                                            |  | Increase              |    | Decrease
|                                                            |  |                       |    |         
|                                                            |  |                      
|                                                            |  | (Dollars in millions)
|Effect on total of service and interest cost
    components |  | $                     | 2  |          |  | $ | (2  | )
|Effect on post-retirement benefit obligations               |  | $                     | 20 |          |  | $ | (21 | )

On December 8, 2003, President Bush signed
into law the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the MPD Act). The MPD Act
expanded Medicare to include, for the first time, coverage for
prescription drugs. The Company sponsors retiree welfare
programs and the Company expects that this legislation will
eventually reduce the Companys costs for some of these
programs. At this point, the Companys investigation into
its response to the legislation is preliminary, as we await
guidance from various governmental and regulatory agencies
concerning the requirements that must be met to obtain these
cost reductions as well as the manner in which such savings
should be measured.

Because of the various uncertainties related to
the Companys response to this legislation and the
appropriate accounting for this event, the Company has elected
to defer financial recognition of this legislation until the
Financial Accounting Standards Board issues final accounting
guidance. As such, measures of the accumulated post-retirement
benefits obligation and net periodic post-retirement benefits
cost included in these financial statements do not reflect the
effects of the MPD Act. When issued, that final guidance could
require the Company to change previously reported information.
This deferral election is permitted under FASB Staff Position
FAS 106-1, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)





|    |                           
|--- | --------------------------
|20. | Debt and Credit Agreements

Total outstanding debt of the Company at
December 31, 2003 and the Predecessor at December 31,
2002 consisted of the following:

|                                                         |  |                       |       |                   |  |   |       | 
|-------------------------------------------------------- |  | --------------------- | ----- | ----------------- |  | - | ----- | 
|                                                         |  | Successor             |       | Predecessor      
|                                                         |  |                       |       |                  
|                                                         |  | December 31, 2003     |       | December 31, 2002
|                                                         |  |                       |       |                  
|                                                         |  |                      
|                                                         |  | (Dollars in millions)
|Short-term debt                                          |  | $                     | 76    |                   |  | $ | 327   | 
|                                                         |  |                       |       |                   |  |   |       | 
|Long-term debt                                           |  |                       |       |                   |  |   |       | 
|Senior Notes                                             |  | $                     | 1,178 |                   |  | $ |      | 
|Senior Subordinated Notes                                |  |                       | 458   |                   |  |   |      | 
|Term Loan A facility                                     |  |                       | 210   |                   |  |   |      | 
|Term Loan C facility                                     |  |                       | 1,270 |                   |  |   |      | 
|Revolving credit facility                                |  |                       |      |                   |  |   |      | 
|7.25% Series A Revenue Bonds due 2004                    |  |                       | 6     |                   |  |   | 6     | 
|10.875% Lucas Industries Limited debentures due
    2020 |  |                       | 189   |                   |  |   | 265   | 
|Capitalized leases                                       |  |                       | 19    |                   |  |   | 32    | 
|Other borrowings                                         |  |                       | 20    |                   |  |   | 16    | 
|                                                         |  |                       |       |                   |  |   |       | 
|Total long-term debt                                     |  |                       | 3,350 |                   |  |   | 319   | 
|Less current portion                                     |  |                       | 24    |                   |  |   | 17    | 
|                                                         |  |                       |       |                   |  |   |       | 
|                                                         |  |                       | 3,326 |                   |  |   | 302   | 
|Debt allocated from TRW                                  |  |                       |      |                   |  |   | 3,279 | 
|                                                         |  |                       |       |                   |  |   |       | 
|Total long-term debt                                     |  | $                     | 3,326 |                   |  | $ | 3,581 | 
|                                                         |  |                       |       |                   |  |   |       | 

In connection with the Acquisition, the Company
issued Senior Notes and Senior Subordinated Notes in a private
offering and entered into new Senior Secured Credit Facilities.
In addition, the Company assumed certain debt instruments
existing at the Acquisition including 10.875% debentures
previously issued by Lucas Industries Limited (formerly known as
Lucas Industries plc) due 2020 at face amount of
$149 million and a fair value at Acquisition of
$167 million, and certain other borrowings, including
accrued interest, totaling approximately $60 million.

The Senior Notes consist of $925 million,
9 3/8% Senior Notes and
200 million,
10 1/8% Senior Notes, both due February 15, 2013.
The Senior Subordinated Notes consist of $300 million,
11% Senior Subordinated Notes and
125 million,
11 3/4% Senior Subordinated Notes, both due
February 15, 2013. Interest is payable semi-annually on
February 15 and August 15. The Senior Notes are
unconditionally guaranteed on a senior unsecured basis and the
Senior Subordinated Notes are guaranteed on a senior
subordinated unsecured basis, in each case by substantially all
existing and future wholly owned domestic subsidiaries and by
TRW Automotive Finance (Luxembourg), S.à.r.l. (TRW
Luxembourg), a restricted Luxembourg subsidiary.

In connection with the private offering of the
Senior Notes and Senior Subordinated Notes, the Company agreed
to consummate exchange offers to exchange these notes for notes
registered under the Securities Act of 1933. Accordingly, the
Company filed a registration statement on Form S-4 with the
SEC. The registration statement, as amended, was declared
effective by the SEC on November 5, 2003 and the Company
commenced the exchange offers on such date. The exchange offers
expired at midnight on December 4, 2003.

The Senior Secured Credit Facilities consist of a
secured revolving credit facility and various senior secured
term loan facilities. The revolving credit facility, through a
syndication of lenders, provides for

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

borrowings up to $500 million including the
availability of letters of credit, a portion of which is
available in various foreign currencies and bears interest at a
rate equal to an applicable margin plus, at the Companys
option, either (a) a base rate determined by reference to
the higher of 1) the prime rate or 2) the federal funds
rate plus 0.5% or (b) LIBOR or a eurocurrency rate
determined by reference to the costs of funds for deposits in
the currency of such borrowing for the interest period relevant
to such borrowing, each as adjusted for an applicable margin
ranging from 1 1/4% to 4 1/4% depending on the type of
borrowing and the leverage ratio of the Company, as defined in
the agreement. Interest is generally due quarterly in arrears,
and is also due upon the expiration of any particular loan. The
Company is required to pay a commitment fee in respect of the
undrawn portion of the revolving commitments at a rate equal to
0.5% per annum (which may be reduced or increased under certain
circumstances), and customary letter of credit fees. As of
December 31, 2003, the Company had approximately
$44 million in outstanding letters of credit, none of which
had been drawn against.

The term loans generally bear interest at the
same rates as the revolving credit facility. The Senior Secured
Credit Facilities are unconditionally guaranteed on a senior
secured basis by the Company and, subject to certain exceptions,
each existing and future domestic subsidiary of the Company
(other than the Companys receivables subsidiaries),
including Intermediate, and guaranteed by TRW Luxembourg. In
addition, all obligations under the Senior Secured Credit
Facilities and the guarantees of those obligations are secured
by substantially all the assets of TRW Automotive Holdings, the
Company and each U.S. guarantor, subject to certain
exceptions. The obligations of the foreign subsidiary borrowers
under the Senior Secured Credit Facilities, and foreign
guarantees of such obligations are subject to certain exceptions
and only to the extent permitted by applicable legal and
contractual provisions and to the extent that it does not result
in adverse tax consequences, secured by substantially all of the
assets of the foreign subsidiary borrowers and foreign
subsidiary guarantors.

The tranche A term loan was issued in the
face amount of $410 million while tranche B term loans
were issued in a face amounts of $1,030 million and
approximately
65 million.

On July 22, 2003, the Company refinanced
$200 million of the borrowings under its tranche A
term loan facility and all of the borrowings under its
tranche B term loan facilities with approximately
$1,150 million and
95 million
in the form of new tranche C term loan facilities under its
Senior Secured Credit Facility. At December 31, 2003, the
term loan A bears interest at 4.69% and the term C loans
bear interest at 4.13% and 5.11% per annum, respectively.
The net proceeds from these borrowings, together with
approximately $46.2 million of available cash on hand, were
used to refinance all of the outstanding tranche B loans
and $200 million of the tranche A term loan previously
borrowed under this facility.

The term loans amortize each year generally in
equal quarterly amounts (or in the case of the period after
December 31, 2009 with respect to tranche C term loan
facilities, in quarterly amounts until the maturity date) in the
following approximate principal amounts (in millions) for each
year set forth below:

|                          |  |             |     |             |  |             |       |  |  |   |    | 
|------------------------- |  | ----------- | --- | ----------- |  | ----------- | ----- |  |  | - | -- | 
|                          |  |             |     | Term Loan C |  | Term Loan C
|                          |  |             |     | Dollar      |  | Euro       
|                          |  | Term Loan A |     | Denominated |  | Denominated
|Years Ending December 31, |  | Facility    |     | Facility    |  | Facility   
|                          |  |             |     |             |  |            
|2004                      |  | $           |    |             |  | $           | 9     |  |  |  | 1  | 
|2005                      |  |             |    |             |  |             | 11    |  |  |   | 1  | 
|2006                      |  |             |    |             |  |             | 11    |  |  |   | 1  | 
|2007                      |  |             | 84  |             |  |             | 12    |  |  |   | 1  | 
|2008                      |  |             | 100 |             |  |             | 12    |  |  |   | 1  | 
|2009                      |  |             | 26  |             |  |             | 12    |  |  |   | 1  | 
|Thereafter                |  |             |    |             |  |             | 1,083 |  |  |   | 89 | 
|                          |  |             |     |             |  |             |       |  |  |   |    | 
|Total                     |  | $           | 210 |             |  | $           | 1,150 |  |  |  | 95 | 
|                          |  |             |     |             |  |             |       |  |  |   |    | 

84



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The Senior Secured Credit Facilities and Senior
Notes and Senior Subordinated Notes contain a number of
covenants that, among other things, restrict, subject to certain
exceptions, the ability of the Company and its subsidiaries, to
sell assets, incur additional indebtedness or issue preferred
stock, repay other indebtedness (including the Senior Notes and
Senior Subordinated Notes), pay certain dividends and
distributions or repurchase capital stock, create liens on
assets, make investments, loans or advances, make certain
acquisitions, engage in mergers or consolidations, enter into
sale and leaseback transactions, engage in certain transactions
with affiliates, amend certain material agreements governing the
Companys indebtedness, including the Senior Notes and
Senior Subordinated Notes and the Receivables Facility, and
change the business conducted by the Company and its
subsidiaries. In addition, the Senior Secured Credit Facilities
contain the following financial covenants: a maximum total
leverage ratio, a minimum interest coverage ratio, and a maximum
capital expenditures limitation and require certain prepayments
from excess cash flows, as defined and in connection with
certain asset sales and the incurrence of debt not permitted
under the Senior Secured Credit Facilities. As of
December 31, 2003, the Company was in compliance with all
of its financial covenants.

The Company has borrowings under uncommitted
credit agreements in many of the countries in which it operates.
These borrowings are primarily in the local foreign currency of
the country or region where the Companys operations are
located. The borrowings are from various domestic and
international banks at quoted market interest rates. Under the
Master Purchase Agreement, as amended, the Company was required
to use its reasonable best efforts to cause itself or its
affiliates to be substituted for TRW in automotive related
guarantees provided by TRW and Northrop prior to
February 28, 2003 and to indemnify and hold TRW and
Northrop harmless from and against any losses resulting from any
payment following February 28, 2003 by TRW and Northrop or
any of their subsidiaries under such guarantee. The
weighted-average interest rate on short-term borrowings
outstanding at December 31, 2003 and 2002 was 2.2% and
4.9%, respectively.

Capital lease arrangements were provided by
several financial institutions, primarily in the United Kingdom
and Germany, at rates ranging from 4.3% to 10% and expire at
various dates through 2015. Other borrowings bear interest at
rates ranging from 2.5% to 8.0% and mature at various dates
through 2015.

The weighted average interest rate on the
Companys debt at December 31, 2003 was 7.6%. The
weighted-average interest rate on debt allocated from TRW and
Northrop at December 31, 2002 and 2001 was 8.6% and 8.3%,
respectively. Interest expense allocated from TRW and Northrop
was $281 million and $323 million for the years ended
December 31, 2002 and 2001, respectively and
$48 million for the two months ended February 28, 2003.

The maturities of long-term debt outstanding as
of December 31, 2003 were: 2004-$24 million;
2005-$18 million; 2006-$18 million;
2007-$100 million; and $3,572 million thereafter.

See Note 3 for debt refinancing and
repayment activity subsequent to December 31, 2003.

Compensating balance arrangements and fees were
not material.






|    |                  
|--- | -----------------
|21. | Lease Commitments

The Company leases certain offices, manufacturing
and research buildings, machinery, automobiles and computer and
other equipment. Such leases, some of which are noncancelable
and in many cases include renewals, are set to expire at various
dates. The Company pays most maintenance, insurance and tax
expenses relating to leased assets. Rental expense for operating
leases was $77 million for the ten months ended
December 31, 2003, $16 million for the two months for
February 28, 2003, $86 million for year ended
December 31, 2002 and $82 million for year ended
December 31, 2001.

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

At December 31, 2003, the future minimum
lease payments for noncancelable operating leases totaled
$220 million and are due as follows: 2004-$56 million;
2005-$39 million; 2006-$31 million;
2007-$27 million; 2008-$23 million and
$44 million thereafter.






|    |              
|--- | -------------
|22. | Capital Stock

The Company was incorporated in Delaware on
November 27, 2002 with a capitalization of 100 shares of
$0.01 par value common stock authorized and one hundred
shares of common stock outstanding, all of which are held by TRW
Automotive Intermediate Holdings.






|    |              
|--- | -------------
|23. | Stock Options

Effective as of the closing of the Acquisition,
TRW Automotive Holdings established the TRW Automotive Holdings
Corp. 2003 Stock Incentive Plan, which permits the grant of
non-qualified stock options, incentive stock options, stock
appreciation rights, restricted stock and other stock-based
awards to the employees, directors, consultants of TRW
Automotive Holdings or its affiliates.

As of December 31, 2003, TRW Automotive
Holdings had 10,276,950 shares of TRW Automotive Holdings
common stock reserved for issuance under the plan, including
outstanding options to purchase approximately
9,644,400 shares of common stock granted to certain
employees of the Company or its affiliates. These options have a
10 year life and generally vest 20% per year over
5 years.

During the Predecessor periods, TRW and Northrop
granted nonqualified stock options to certain employees to
purchase common stock at the market price on the date of grant.
Stock options granted to employees were exercisable to the
extent of one-third of the optioned shares for each full year of
employment following the date of grant and were set to expire
10 years after the date of grant.

The Company applies the recognition and
measurement principles of Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued
to Employees (APB 25), and related
interpretations in accounting for those plans. No stock-based
employee compensation expense has been reflected in net earnings
(losses), as all options granted under those plans had an
exercise price equal to or greater than the market value of the
underlying stock on the date of grant.

A summary of stock options held by employees of
the Successor and Predecessor follows:

|                                       |  |           |       |             |  |           |       |           |  |  |       |  |  |   |       | 
|-------------------------------------- |  | --------- | ----- | ----------- |  | --------- | ----- | --------- |  |  | ----- |  |  | - | ----- | 
|                                       |  |           |       |            
|                                       |  | Successor |       | Predecessor
|                                       |  |           |       |            
|                                       |  |           |       |            
|                                       |  | 2003      |       | 2001       
|                                       |  |           |       |            
|                                       |  |           |       | Weighted-   |  |           |       | Weighted-
|                                       |  |           |       | Average     |  |           |       | Average  
|                                       |  | Thousands |       | Exercise    |  | Thousands |       | Exercise 
|                                       |  | of Shares |       | Price       |  | of Shares |       | Price    
|                                       |  |           |       |             |  |           |       |          
|Outstanding at beginning of period     |  |           |      |             |  | $         |      |           |  |  | 3,195 |  |  | $ | 51.18 | 
|Granted                                |  |           | 9,982 |             |  |           | 16.00 |           |  |  | 93    |  |  |   | 37.83 | 
|Exercised                              |  |           |      |             |  |           |      |           |  |  | 87    |  |  |   | 23.36 | 
|Canceled, expired or terminated        |  |           | 338   |             |  |           | 16.00 |           |  |  | 43    |  |  |   | 56.03 | 
|                                       |  |           |       |             |  |           |       |           |  |  |       |  |  |   |       | 
|Outstanding at end of year             |  |           | 9,644 |             |  |           | 16.00 |           |  |  | 3,158 |  |  |   | 51.49 | 
|                                       |  |           |       |             |  |           |       |           |  |  |       |  |  |   |       | 
|Exercisable                            |  |           | 450   |             |  |           | 16.00 |           |  |  | 1,946 |  |  |   | 50.34 | 
|Weighted-average grant date fair value |  |           |       |             |  |           | 10.41 |           |  |  |       |  |  |   | 9.70  | 

The weighted average fair value of options having
exercise prices equal to fair value on the date of grant was
$10.41. The weighted average fair value of options with exercise
prices exceeding fair value on the date of grant was $10.41 with
a weighted average exercise price of $21.59.

86



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

The exercise price and weighted average remaining
contractual life of options outstanding at December 31,
2003 follows:

|                  |  |            |       |          |  |                |       |  |  |  |            | 
|----------------- |  | ---------- | ----- | -------- |  | -------------- | ----- |  |  |  | ---------- | 
|                  |  |            |       |          |  | Weighted      
|                  |  | Thousands  |       | Exercise |  | Average       
|                  |  | of Options |       | Price    |  | Remaining Life
|                  |  |            |       |          |  |               
|Total outstanding |  |            | 4,141 |          |  | $              | 10.00 |  |  |  | 9.20 years | 
|                  |  |            | 682   |          |  |                | 13.00 |  |  |  | 9.93 years | 
|                  |  |            | 545   |          |  |                | 16.25 |  |  |  | 9.93 years | 
|                  |  |            | 3,312 |          |  |                | 20.00 |  |  |  | 9.20 years | 
|                  |  |            | 964   |          |  |                | 30.00 |  |  |  | 9.31 years | 
|                  |  |            |       |          |  |                |       |  |  |  |            | 
|                  |  |            | 9,644 |          |  |                |       |  |  |  |            | 
|                  |  |            |       |          |  |                |       |  |  |  |            | 
|Exercisable       |  |            | 225   |          |  |                | 10.00 |  |  |  | 9.17 years | 
|                  |  |            | 180   |          |  |                | 20.00 |  |  |  | 9.17 years | 
|                  |  |            | 45    |          |  |                | 30.00 |  |  |  | 9.17 years | 
|                  |  |            |       |          |  |                |       |  |  |  |            | 
|                  |  |            | 450   |          |  |                |       |  |  |  |            | 
|                  |  |            |       |          |  |                |       |  |  |  |            | 

During 2002, options were granted to employees of
the Predecessor for an aggregate of approximately
444,000 shares of TRW stock at a weighted-average exercise
price of $37.00 per share and weighted average fair value
of $9.21 per share. During 2002, options for approximately
1,135,000 shares were exercised, canceled or terminated
through December 11, 2002.

In connection with the Merger on
December 11, 2002, employees of the Predecessor holding
options to purchase TRW stock became fully vested in such
options and were given the opportunity to either exercise their
options (cash-out) or convert them into Northrop stock options
in such a manner that their aggregate intrinsic value
immediately before and after the exchange were the same. At
December 11, 2002, options for approximately
300,000 shares were paid out in cash while options for the
remaining approximately 2,167,000 shares were converted to
options for Northrop shares using a conversion rate of .5357
Northrop shares per TRW share, consistent with the tender offer
rate associated with the Merger.

Had the compensation cost for the stock options
granted in 2003, 2002 and 2001 been determined based on the fair
value at the grant date, consistent with the fair value method
of SFAS 123, Accounting for Stock-Based
Compensation, the Successors net losses would have
been effected by additional costs of $9 million, for the
ten months ended December 31, 2003 and the
Predecessors net earnings (losses) would have been
effected by additional costs of $9 million for the year
ended December 31, 2002, including the impact of
accelerated recognition of compensation cost due to the change
of control, and $6 million for the year ended
December 31, 2001.

Fair value was estimated at the date of grant
using the Black-Scholes option pricing model using the following
weighted-average assumptions for 2003, 2002 and 2001,
respectively: risk-free interest rate of approximately 4.2%,
4.5%, and 4.71%; dividend yield of 0.00%, 3.00%, and 2.85%;
expected volatility of approximately 40%, 28%, and 28%; and an
expected option life of ten years for 2003 and six years for
2002 and 2001.

87



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)





|    |                                                      
|--- | -----------------------------------------------------
|24. | Accumulated Other Comprehensive Earnings
    (Losses)

The components of accumulated other comprehensive
earnings (losses) at December 31, 2003 and 2002 are as
follows:

|                                                                                                                                  |  |                       |     |             |  |   |      |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | --- | ----------- |  | - | ---- | -
|                                                                                                                                  |  | Successor             |     | Predecessor
|                                                                                                                                  |  |                       |     |            
|                                                                                                                                  |  |                      
|                                                                                                                                  |  | December 31,         
|                                                                                                                                  |  |                      
|                                                                                                                                  |  | 2003                  |     | 2002       
|                                                                                                                                  |  |                       |     |            
|                                                                                                                                  |  |                      
|                                                                                                                                  |  | (Dollars in millions)
|Foreign currency exchange loss (net of current
    and deferred tax liability of $71 million in 2003 and
    $14 million in 2002) |  | $                     | (34 | )           |  | $ | (178 | )
|Unrealized gain on cash flow hedges (net of tax)                                                                                  |  |                       | (6  | )           |  |   |     |  
|Minimum pension liability adjustments (net of tax
    of $89 million in 2002)                                                     |  |                       |    |             |  |   | (169 | )
|                                                                                                                                  |  |                       |     |             |  |   |      |  
|                                                                                                                                  |  | $                     | (40 | )           |  | $ | (347 | )
|                                                                                                                                  |  |                       |     |             |  |   |      |  



|    |                           
|--- | --------------------------
|25. | Related Party Transactions

As part of the Acquisition, the Company executed
a Transaction and Monitoring Fee Agreement with Blackstone
whereby Blackstone agreed to provide the Company monitoring,
advisory and consulting services, including advice regarding
(i) structure, terms and negotiation of debt and equity
offerings; (ii) relationships with the Companys and
its subsidiaries lenders and bankers; (iii) corporate
strategy; (iv) acquisitions or disposals and (v) other
financial advisory services as more fully described in the
agreement. Pursuant to this agreement, the Company paid
Blackstone a transaction fee of $49 million at the time of
the Acquisition. The Company has agreed to pay an annual
monitoring fee of $5 million for these services,
approximately $4 million of which is included in the
unaudited consolidated statement of operations for the ten
months ended December 31, 2003.

The combined statements of operations include
$81 million of administrative and selling expenses in each
of the years ended December 31, 2002 and 2001 and
$281 million and $323 million of interest expense
allocated from TRW for the years ended December 31, 2002
and 2001, respectively. The combined statements of operations
for the two months ended February 28, 2003 also include
$8 million of administrative and selling expenses and
$48 million of interest expense allocated from Northrop
(see Note 2).

In connection with the Master Purchase Agreement,
Northrop Grumman has agreed to indemnify the Company from
certain liabilities, including:



| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any losses or damages arising from the inaccuracy
    or breach of any representation or warranty of Northrop Grumman,
    TRW or the former TRW Automotive Inc. contained in the master
    purchase agreement or any of the related ancillary agreements;                  
|
| |  | 50% of any environmental liabilities (subject to
    certain exceptions) associated with the operation or ownership
    of TRWs automotive business on or prior to the
    Acquisition, regardless of whether the liabilities arise before
    or after the Acquisition; and
|
| |  | specified tax losses or liabilities, including,
    among others, those associated with TRWs automotive
    business relating to specified tax amounts due on or prior to
    the Acquisition.                                                                              

As of December 31, 2003, the Company has
recorded certain receivables from Northrop related to these
indemnities.

88



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)





|    |                                                                                      
|--- | -------------------------------------------------------------------------------------
|26. | Supplemental Guarantor Condensed Consolidating
    and Combining Financial Statements

In connection with the Acquisition, the Company
(presented as Parent in the following tables) issued Senior
Notes and Senior Subordinated Notes as further described above.
The Senior Notes are fully, unconditionally and jointly and
severally guaranteed on an unsecured senior basis and the Senior
Subordinated Notes are fully, unconditionally and jointly
severally guaranteed on an unsecured senior subordinated basis,
in each case, by substantially all existing and future wholly
owned restricted domestic subsidiaries of the Company and by TRW
Luxembourg (collectively, the Guarantors). All other
subsidiaries of TRW Automotive, whether direct or indirect, do
not guarantee the Senior Notes and Senior Subordinated Notes
(Non-Guarantors). At this time, all existing wholly
owned domestic subsidiaries of TRW Automotive are restricted
domestic subsidiaries. The Guarantors also unconditionally
guarantee the Companys borrowings under the Senior Secured
Credit Facilities on a senior secured basis.

The following unaudited condensed consolidating
and combining financial statements present the results of
operations, financial position and cash flows of (1) the
Parent, (2) the Guarantors, (3) the Non-Guarantors and
(4) eliminations to arrive at the information for the
Company on a combined basis. Separate financial statements and
other disclosures concerning the Guarantors are not presented
because management does not believe that such information is
material to investors.

89



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                                           |  |                                                        |      |            |  |                |       |              |  |              |       |   |  |   |      |   |  |   |       |  
|---------------------------------------------------------- |  | ------------------------------------------------------ | ---- | ---------- |  | -------------- | ----- | ------------ |  | ------------ | ----- | - |  | - | ---- | - |  | - | ----- | -
|                                                           |  |                                                       
|                                                           |  | For the Ten Months Ended December 31, 2003 (Successor)
|                                                           |  |                                                       
|                                                           |  | Parent                                                 |      | Guarantors |  | Non-Guarantors |       | Eliminations |  | Consolidated
|                                                           |  |                                                        |      |            |  |                |       |              |  |             
|                                                           |  |                                                       
|                                                           |  | (Dollars in millions)                                 
|Sales                                                      |  | $                                                      |     |            |  | $              | 3,319 |              |  | $            | 6,503 |   |  | $ | (387 | ) |  | $ | 9,435 |  
|Cost of Sales                                              |  |                                                        |     |            |  |                | 3,068 |              |  |              | 5,785 |   |  |   | (397 | ) |  |   | 8,456 |  
|                                                           |  |                                                        |      |            |  |                |       |              |  |              |       |   |  |   |      |   |  |   |       |  
|Gross profit                                               |  |                                                        |     |            |  |                | 251   |              |  |              | 718   |   |  |   | 10   |   |  |   | 979   |  
|Administrative and selling expenses                        |  |                                                        |     |            |  |                | 200   |              |  |              | 246   |   |  |   |     |   |  |   | 446   |  
|Research and development expenses                          |  |                                                        |     |            |  |                | 47    |              |  |              | 90    |   |  |   |     |   |  |   | 137   |  
|Purchased in-process research and development
    expenses |  |                                                        |     |            |  |                | 26    |              |  |              | 59    |   |  |   |     |   |  |   | 85    |  
|Amortization of intangible assets                          |  |                                                        | 19   |            |  |                | 7     |              |  |              | 1     |   |  |   |     |   |  |   | 27    |  
|Other (income) expense  net                               |  |                                                        | (43  | )          |  |                | (123  | )            |  |              | 101   |   |  |   | 9    |   |  |   | (56   | )
|Intercompany charges  net                                 |  |                                                        | (10  | )          |  |                | (20   | )            |  |              | 30    |   |  |   |     |   |  |   |      |  
|                                                           |  |                                                        |      |            |  |                |       |              |  |              |       |   |  |   |      |   |  |   |       |  
|Operating income                                           |  |                                                        | 34   |            |  |                | 114   |              |  |              | 191   |   |  |   | 1    |   |  |   | 340   |  
|Interest expense                                           |  |                                                        | 225  |            |  |                | 35    |              |  |              |      |   |  |   |     |   |  |   | 260   |  
|Interest income                                            |  |                                                        | (1   | )          |  |                |      |              |  |              | (7    | ) |  |   |     |   |  |   | (8    | )
|Loss on retirement of debt                                 |  |                                                        | 31   |            |  |                |      |              |  |              |      |   |  |   |     |   |  |   | 31    |  
|Losses (gains) on sales of receivables                     |  |                                                        |     |            |  |                | 32    |              |  |              | (7    | ) |  |   |     |   |  |   | 25    |  
|Intercompany interest  net                                |  |                                                        | (83  | )          |  |                | 30    |              |  |              | 53    |   |  |   |     |   |  |   |      |  
|                                                           |  |                                                        |      |            |  |                |       |              |  |              |       |   |  |   |      |   |  |   |       |  
|(Losses) earnings from operations before income
    taxes  |  |                                                        | (138 | )          |  |                | 17    |              |  |              | 152   |   |  |   | 1    |   |  |   | 32    |  
|Income tax expense                                         |  |                                                        |     |            |  |                | 7     |              |  |              | 91    |   |  |   |     |   |  |   | 98    |  
|Equity in net (earnings) losses of
    subsidiaries        |  |                                                        | (72  | )          |  |                | (17   | )            |  |              |      |   |  |   | 89   |   |  |   |      |  
|                                                           |  |                                                        |      |            |  |                |       |              |  |              |       |   |  |   |      |   |  |   |       |  
|Net (losses) earnings                                      |  | $                                                      | (66  | )          |  | $              | 27    |              |  | $            | 61    |   |  | $ | (88  | ) |  | $ | (66   | )
|                                                           |  |                                                        |      |            |  |                |       |              |  |              |       |   |  |   |      |   |  |   |       |  

90



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                                          |  |                                                          |     |            |  |                |     |              |  |          |       |   |  |   |     |   |  |   |       |  
|--------------------------------------------------------- |  | -------------------------------------------------------- | --- | ---------- |  | -------------- | --- | ------------ |  | -------- | ----- | - |  | - | --- | - |  | - | ----- | -
|                                                          |  |                                                         
|                                                          |  | For the Two Months Ended February 28, 2003 (Predecessor)
|                                                          |  |                                                         
|                                                          |  | Parent                                                   |     | Guarantors |  | Non-Guarantors |     | Eliminations |  | Combined
|                                                          |  |                                                          |     |            |  |                |     |              |  |         
|                                                          |  |                                                         
|                                                          |  | (Dollars in millions)                                   
|Sales                                                     |  | $                                                        |    |            |  | $              | 710 |              |  | $        | 1,286 |   |  | $ | (80 | ) |  | $ | 1,916 |  
|Cost of Sales                                             |  |                                                          |    |            |  |                | 645 |              |  |          | 1,123 |   |  |   | (82 | ) |  |   | 1,686 |  
|                                                          |  |                                                          |     |            |  |                |     |              |  |          |       |   |  |   |     |   |  |   |       |  
|Gross profit                                              |  |                                                          |    |            |  |                | 65  |              |  |          | 163   |   |  |   | 2   |   |  |   | 230   |  
|Administrative and selling expenses                       |  |                                                          |    |            |  |                | 50  |              |  |          | 50    |   |  |   |    |   |  |   | 100   |  
|Research and development expenses                         |  |                                                          |    |            |  |                | 6   |              |  |          | 21    |   |  |   |    |   |  |   | 27    |  
|Amortization of intangible assets                         |  |                                                          |    |            |  |                | 2   |              |  |          |      |   |  |   |    |   |  |   | 2     |  
|Other (income) expense  net                              |  |                                                          |    |            |  |                | (18 | )            |  |          | 20    |   |  |   | 2   |   |  |   | 4     |  
|Intercompany charges  net                                |  |                                                          |    |            |  |                | 5   |              |  |          | (5    | ) |  |   |    |   |  |   |      |  
|                                                          |  |                                                          |     |            |  |                |     |              |  |          |       |   |  |   |     |   |  |   |       |  
|Operating income                                          |  |                                                          |    |            |  |                | 20  |              |  |          | 77    |   |  |   |    |   |  |   | 97    |  
|Interest expense                                          |  |                                                          | 42  |            |  |                |    |              |  |          | 6     |   |  |   |    |   |  |   | 48    |  
|Interest income                                           |  |                                                          |    |            |  |                |    |              |  |          | (1    | ) |  |   |    |   |  |   | (1    | )
|Intercompany interest  net                               |  |                                                          | 3   |            |  |                | (6  | )            |  |          | 3     |   |  |   |    |   |  |   |       |  
|                                                          |  |                                                          |     |            |  |                |     |              |  |          |       |   |  |   |     |   |  |   |       |  
|(Losses) earnings from operations before income
    taxes |  |                                                          | (45 | )          |  |                | 26  |              |  |          | 69    |   |  |   |    |   |  |   | 50    |  
|Income tax (benefit) expense                              |  |                                                          | (19 | )          |  |                | 7   |              |  |          | 31    |   |  |   |    |   |  |   | 19    |  
|Equity in net (earnings) losses of
    subsidiaries       |  |                                                          | (57 | )          |  |                | (8  | )            |  |          |      |   |  |   | 65  |   |  |   |      |  
|                                                          |  |                                                          |     |            |  |                |     |              |  |          |       |   |  |   |     |   |  |   |       |  
|Net Losses (earnings)                                     |  | $                                                        | 31  |            |  | $              | 27  |              |  | $        | 38    |   |  | $ | (65 | ) |  |   | 31    |  
|                                                          |  |                                                          |     |            |  |                |     |              |  |          |       |   |  |   |     |   |  |   |       |  

|                                                          |  |                                                             |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|--------------------------------------------------------- |  | ----------------------------------------------------------- | ---- | ---------- |  | -------------- | ----- | ------------ |  | -------- | ----- | - |  | - | ---- | - |  | - | ------ | -
|                                                          |  |                                                            
|                                                          |  | For the Twelve Months Ended December 31, 2002 (Predecessor)
|                                                          |  |                                                            
|                                                          |  | Parent                                                      |      | Guarantors |  | Non-Guarantors |       | Eliminations |  | Combined
|                                                          |  |                                                             |      |            |  |                |       |              |  |         
|                                                          |  |                                                            
|                                                          |  | (Dollars in millions)                                      
|Sales                                                     |  | $                                                           |     |            |  | $              | 4,331 |              |  | $        | 6,852 |   |  | $ | (553 | ) |  | $ | 10,630 |  
|Cost of sales                                             |  |                                                             |     |            |  |                | 3,919 |              |  |          | 5,963 |   |  |   | (567 | ) |  |   | 9,315  |  
|                                                          |  |                                                             |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|Gross profit                                              |  |                                                             |     |            |  |                | 412   |              |  |          | 889   |   |  |   | 14   |   |  |   | 1,315  |  
|Administrative and selling expenses                       |  |                                                             |     |            |  |                | 292   |              |  |          | 276   |   |  |   | (27  | ) |  |   | 541    |  
|Research and development expenses                         |  |                                                             |     |            |  |                | 44    |              |  |          | 107   |   |  |   |     |   |  |   | 151    |  
|Amortization of intangible assets                         |  |                                                             |     |            |  |                | 12    |              |  |          | 3     |   |  |   |     |   |  |   | 15     |  
|Other (income) expense  net                              |  |                                                             | (9   | )          |  |                | (111  | )            |  |          | 100   |   |  |   | 14   |   |  |   | (6     | )
|Intercompany charges  net                                |  |                                                             |     |            |  |                | 4     |              |  |          | (31   | ) |  |   | 27   |   |  |   |       |  
|                                                          |  |                                                             |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|Operating income                                          |  |                                                             | 9    |            |  |                | 171   |              |  |          | 434   |   |  |   |     |   |  |   | 614    |  
|Interest expense                                          |  |                                                             | 281  |            |  |                | 1     |              |  |          | 34    |   |  |   |     |   |  |   | 316    |  
|Interest income                                           |  |                                                             |     |            |  |                |      |              |  |          | (7    | ) |  |   |     |   |  |   | (7     | )
|Gain on retirement of debt                                |  |                                                             |     |            |  |                | (2    | )            |  |          | (2    | ) |  |   |     |   |  |   | (4     | )
|Losses on sales of receivables                            |  |                                                             |     |            |  |                |      |              |  |          | 7     |   |  |   |     |   |  |   | 7      |  
|Intercompany interest  net                               |  |                                                             | 250  |            |  |                | (82   | )            |  |          | (168  | ) |  |   |     |   |  |   |       |  
|                                                          |  |                                                             |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|(Losses) earnings from operations before income
    taxes |  |                                                             | (522 | )          |  |                | 254   |              |  |          | 570   |   |  |   |     |   |  |   | 302    |  
|Income tax (benefit) expense                              |  |                                                             | (166 | )          |  |                | 104   |              |  |          | 200   |   |  |   |     |   |  |   | 138    |  
|Equity in net (earnings) losses of
    subsidiaries       |  |                                                             | (521 | )          |  |                | (11   | )            |  |          |      |   |  |   | 532  |   |  |   |       |  
|                                                          |  |                                                             |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|Net earnings (losses)                                     |  | $                                                           | 165  |            |  | $              | 161   |              |  | $        | 370   |   |  | $ | (532 | ) |  | $ | 164    |  
|                                                          |  |                                                             |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                                                     |  |                                               |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|-------------------------------------------------------------------- |  | --------------------------------------------- | ---- | ---------- |  | -------------- | ----- | ------------ |  | -------- | ----- | - |  | - | ---- | - |  | - | ------ | -
|                                                                     |  |                                              
|                                                                     |  | For the Twelve Months Ended December 31, 2001
|                                                                     |  |                                              
|                                                                     |  | Parent                                        |      | Guarantors |  | Non-Guarantors |       | Eliminations |  | Combined
|                                                                     |  |                                               |      |            |  |                |       |              |  |         
|                                                                     |  |                                              
|                                                                     |  | (Dollars in millions)                        
|Sales                                                                |  | $                                             |     |            |  | $              | 4,205 |              |  | $        | 6,377 |   |  | $ | (491 | ) |  | $ | 10,091 |  
|Cost of sales                                                        |  |                                               |     |            |  |                | 4,046 |              |  |          | 5,448 |   |  |   | (505 | ) |  |   | 8,989  |  
|                                                                     |  |                                               |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|Gross profit                                                         |  |                                               |     |            |  |                | 159   |              |  |          | 929   |   |  |   | 14   |   |  |   | 1,102  |  
|Administrative and selling expenses                                  |  |                                               |     |            |  |                | 250   |              |  |          | 347   |   |  |   |     |   |  |   | 597    |  
|Research and development expenses                                    |  |                                               |     |            |  |                | 49    |              |  |          | 82    |   |  |   |     |   |  |   | 131    |  
|Amortization of intangible assets                                    |  |                                               |     |            |  |                | 53    |              |  |          | 25    |   |  |   |     |   |  |   | 78     |  
|Other (income) expense  net                                         |  |                                               | (5   | )          |  |                | (132  | )            |  |          | 122   |   |  |   | 13   |   |  |   | (2     | )
|Intercompany charges  net                                           |  |                                               |     |            |  |                | 1     |              |  |          | (1    | ) |  |   |     |   |  |   |       |  
|                                                                     |  |                                               |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|Operating income                                                     |  |                                               | 5    |            |  |                | (62   | )            |  |          | 354   |   |  |   | 1    |   |  |   | 298    |  
|Interest expense                                                     |  |                                               | 332  |            |  |                | 1     |              |  |          | 39    |   |  |   | 1    |   |  |   | 373    |  
|Interest income                                                      |  |                                               |     |            |  |                |      |              |  |          | (10   | ) |  |   |     |   |  |   | (10    | )
|Gain on retirement of debt                                           |  |                                               |     |            |  |                |      |              |  |          |      |   |  |   |     |   |  |   |       |  
|Losses on sales of receivables                                       |  |                                               |     |            |  |                |      |              |  |          | 1     |   |  |   |     |   |  |   | 1      |  
|Intercompany interest  net                                          |  |                                               | 304  |            |  |                | (80   | )            |  |          | (223  | ) |  |   | (1   | ) |  |   |       |  
|                                                                     |  |                                               |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|Earnings (losses) from continuing operations
    before income taxes |  |                                               | (631 | )          |  |                | 17    |              |  |          | 547   |   |  |   | 1    |   |  |   | (66    | )
|Income tax (benefit) expense                                         |  |                                               | (221 | )          |  |                | (8    | )            |  |          | 199   |   |  |   |     |   |  |   | (30    | )
|Equity in net (earnings) losses of
    subsidiaries                  |  |                                               | (385 | )          |  |                | (29   | )            |  |          |      |   |  |   | 414  |   |  |   |       |  
|                                                                     |  |                                               |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|Earnings (losses) from continuing operations
    before income taxes |  |                                               | (25  | )          |  |                | 54    |              |  |          | 348   |   |  |   | (413 | ) |  |   | (36    | )
|Discontinued operations (net of taxes)                               |  |                                               |     |            |  |                |      |              |  |          | 11    |   |  |   |     |   |  |   | 11     |  
|                                                                     |  |                                               |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  
|Net earnings (losses)                                                |  | $                                             | (25  | )          |  | $              | 54    |              |  | $        | 359   |   |  | $ | (413 | ) |  | $ | (25    | )
|                                                                     |  |                                               |      |            |  |                |       |              |  |          |       |   |  |   |      |   |  |   |        |  

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                                                 |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |       | 
|---------------------------------------------------------------- | ------------------------------------------- | ----------------------------- | ----- | ---------- | - | -------------- | ----- | ------------ | - | ------------ | ----- | ----- |  | - | ------ | - |  | - | ----- | ----- | 
|                                                                 |                                             |                              
|                                                                 |                                             | December 31, 2003 (Successor)
|                                                                 |                                             |                              
|                                                                 |                                             | Parent                        |       | Guarantors |   | Non-Guarantors |       | Eliminations |   | Consolidated
|                                                                 |                                             |                               |       |            |   |                |       |              |   |             
|                                                                 |                                             |                              
|                                                                 |                                             | (Dollars in millions)        
|Assets                                                           |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|Current assets                                                   |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|                                                                 | Cash and cash equivalents                   |                               | $     | 401        |   |                | $     | 7            |   |              | $     | 420   |  |   | $      |  |  |   | $     | 828   | 
|                                                                 | Marketable securities                       |                               |       |           |   |                |       |             |   |              |       | 16    |  |   |        |  |  |   |       | 16    | 
|                                                                 | Accounts receivable                         |                               |       |           |   |                |       | 20           |   |              |       | 1,623 |  |   |        |  |  |   |       | 1,643 | 
|                                                                 | Inventories                                 |                               |       |           |   |                |       | 180          |   |              |       | 455   |  |   |        |  |  |   |       | 635   | 
|                                                                 | Prepaid expenses                            |                               |       | 8          |   |                |       | 6            |   |              |       | 59    |  |   |        |  |  |   |       | 73    | 
|                                                                 | Deferred income taxes                       |                               |       |           |   |                |       | 67           |   |              |       | 53    |  |   |        |  |  |   |       | 120   | 
|                                                                 |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|Total current assets                                             |                                             |                               | 409   |            |   |                | 280   |              |   |              | 2,626 |       |  |   |       |   |  |   | 3,315 |      
|Investments in consolidated subsidiaries                         |                                             |                               | 2,087 |            |   |                | 341   |              |   |              |      |       |  |   | (2,428 | ) |  |   |      |      
|Property, plant and equipment  net                              |                                             |                               |      |            |   |                | 710   |              |   |              | 1,789 |       |  |   |       |   |  |   | 2,499 |      
|Goodwill and other intangible assets 
    net                   |                                             |                               | 1,021 |            |   |                | 2,044 |              |   |              | 257   |       |  |   |       |   |  |   | 3,322 |      
|Prepaid pension cost                                             |                                             |                               |      |            |   |                | 2     |              |   |              | 118   |       |  |   |       |   |  |   | 120   |      
|Deferred income taxes                                            |                                             |                               | (245  | )          |   |                | 385   |              |   |              | 2     |       |  |   |       |   |  |   | 142   |      
|Other assets                                                     |                                             |                               | 64    |            |   |                | 179   |              |   |              | 279   |       |  |   |       |   |  |   | 522   |      
|                                                                 |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|                                                                 |                                             | $                             | 3,336 |            |   | $              | 3,941 |              |   | $            | 5,071 |       |  | $ | (2,428 | ) |  | $ | 9,920 |      
|                                                                 |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|Liabilities, minority interests and
    stockholders investment |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|Current liabilities                                              |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|                                                                 | Short-term debt                             |                               | $     | 41         |   |                | $     |             |   |              | $     | 35    |  |   | $      |  |  |   | $     | 76    | 
|                                                                 | Current portion of long-term debt           |                               |       | 9          |   |                |       | 6            |   |              |       | 9     |  |   |        |  |  |   |       | 24    | 
|                                                                 | Trade accounts payable                      |                               |       |           |   |                |       | 452          |   |              |       | 1,174 |  |   |        |  |  |   |       | 1,626 | 
|                                                                 | Other current liabilities                   |                               |       | 81         |   |                |       | 563          |   |              |       | 756   |  |   |        |  |  |   |       | 1,400 | 
|                                                                 |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|Total current liabilities                                        |                                             |                               | 131   |            |   |                | 1,021 |              |   |              | 1,974 |       |  |   |       |   |  |   | 3,126 |      
|                                                                 | Long-term debt                              |                               |       | 3,107      |   |                |       | 1            |   |              |       | 218   |  |   |        |  |  |   |       | 3,326 | 
|                                                                 | Post-retirement benefits other than pension |                               |       |           |   |                |       | 804          |   |              |       | 131   |  |   |        |  |  |   |       | 935   | 
|                                                                 | Deferred income taxes                       |                               |       |           |   |                |       |             |   |              |       | 147   |  |   |        |  |  |   |       | 147   | 
|                                                                 | Long-term liabilities                       |                               |       |           |   |                |       | 737          |   |              |       | 401   |  |   |        |  |  |   |       | 1,138 | 
|                                                                 | Intercompany accounts  net                 |                               |       | (1,100     | ) |                |       | (1,101       | ) |              |       | 2,201 |  |   |        |  |  |   |       |      | 
|                                                                 |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|Total liabilities                                                |                                             |                               | 2,138 |            |   |                | 1,462 |              |   |              | 5,072 |       |  |   |       |   |  |   | 8,672 |      
|Minority interests                                               |                                             |                               |      |            |   |                |      |              |   |              | 50    |       |  |   |       |   |  |   | 50    |      
|Total stockholders investment                                   |                                             |                               | 1,198 |            |   |                | 2,479 |              |   |              | (51   | )     |  |   | (2,428 | ) |  |   | 1,198 |      
|                                                                 |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      
|                                                                 |                                             | $                             | 3,336 |            |   | $              | 3,941 |              |   | $            | 5,071 |       |  | $ | (2,428 | ) |  | $ | 9,920 |      
|                                                                 |                                             |                               |       |            |   |                |       |              |   |              |       |       |  |   |        |   |  |   |       |      

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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                                                 |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |       | 
|---------------------------------------------------------------- | ---------------------------------------------- | ------------------------------- | ----- | ---------- |  | -------------- | ----- | ------------ |  | -------- | ----- | ----- | - | - | ------ | ------ | - | - | ------ | ----- | 
|                                                                 |                                                |                                
|                                                                 |                                                | December 31, 2002 (Predecessor)
|                                                                 |                                                |                                
|                                                                 |                                                | Parent                          |       | Guarantors |  | Non-Guarantors |       | Eliminations |  | Combined
|                                                                 |                                                |                                 |       |            |  |                |       |              |  |         
|                                                                 |                                                |                                
|                                                                 |                                                | (Dollars in millions)          
|Assets                                                           |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|Current assets                                                   |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|                                                                 | Cash and cash equivalents                      |                                 | $     |           |  |                | $     | 6            |  |          | $     | 182   |   |   | $      |       |   |   | $      | 188   | 
|                                                                 | Marketable securities                          |                                 |       |           |  |                |       |             |  |          |       | 26    |   |   |        |       |   |   |        | 26    | 
|                                                                 | Accounts receivable                            |                                 |       |           |  |                |       | 340          |  |          |       | 1,008 |   |   |        |       |   |   |        | 1,348 | 
|                                                                 | Inventories                                    |                                 |       |           |  |                |       | 177          |  |          |       | 431   |   |   |        |       |   |   |        | 608   | 
|                                                                 | Prepaid expenses                               |                                 |       |           |  |                |       | 8            |  |          |       | 41    |   |   |        |       |   |   |        | 49    | 
|                                                                 | Deferred income taxes                          |                                 |       |           |  |                |       | 191          |  |          |       | (47   | ) |   |        |       |   |   |        | 144   | 
|                                                                 |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|Total current assets                                             |                                                |                                 |      |            |  |                | 722   |              |  |          | 1,641 |       |   |   |       |        |   |   | 2,363  |      
|                                                                 | Investments in consolidated subsidiaries       |                                 |       | 6,439      |  |                |       | 507          |  |          |       |      |   |   |        | (6,946 | ) |   |        |      | 
|                                                                 | Property, plant and equipment  net            |                                 |       |           |  |                |       | 798          |  |          |       | 1,760 |   |   |        |       |   |   |        | 2,558 | 
|                                                                 | Goodwill and other intangible assets 
    net |                                 |       |           |  |                |       | 2,095        |  |          |       | 483   |   |   |        |       |   |   |        | 2,578 | 
|                                                                 | Prepaid pension cost                           |                                 |       |           |  |                |       | 20           |  |          |       | 3,028 |   |   |        |       |   |   |        | 3,048 | 
|                                                                 | Other assets                                   |                                 |       |           |  |                |       | 153          |  |          |       | 248   |   |   |        |       |   |   |        | 401   | 
|                                                                 |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|                                                                 |                                                | $                               | 6,439 |            |  | $              | 4,295 |              |  | $        | 7,160 |       |   | $ | (6,946 | )      |   | $ | 10,948 |      
|                                                                 |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|Liabilities, minority interests and
    stockholders investment |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|Current liabilities                                              |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|                                                                 | Short-term debt                                |                                 | $     |           |  |                | $     |             |  |          | $     | 327   |   |   | $      |       |   |   | $      | 327   | 
|                                                                 | Current portion of long-term debt              |                                 |       |           |  |                |       |             |  |          |       | 17    |   |   |        |       |   |   |        | 17    | 
|                                                                 | Trade accounts payable                         |                                 |       |           |  |                |       | 426          |  |          |       | 981   |   |   |        |       |   |   |        | 1,407 | 
|                                                                 | Other current liabilities                      |                                 |       | 136        |  |                |       | 386          |  |          |       | 482   |   |   |        |       |   |   |        | 1,004 | 
|                                                                 |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|Total current liabilities                                        |                                                |                                 | 136   |            |  |                | 812   |              |  |          | 1,807 |       |   |   |       |        |   |   | 2,755  |      
|Debt allocated from TRW                                          |                                                |                                 | 3,279 |            |  |                |      |              |  |          |      |       |   |   |       |        |   |   | 3,279  |      
|Long-term debt                                                   |                                                |                                 |      |            |  |                | 7     |              |  |          | 295   |       |   |   |       |        |   |   | 302    |      
|Post-retirement benefits other than pension                      |                                                |                                 |      |            |  |                | 664   |              |  |          | 87    |       |   |   |       |        |   |   | 751    |      
|Deferred income taxes                                            |                                                |                                 |      |            |  |                | 35    |              |  |          | 696   |       |   |   |       |        |   |   | 731    |      
|Long-term liabilities                                            |                                                |                                 |      |            |  |                | 379   |              |  |          | 279   |       |   |   |       |        |   |   | 658    |      
|Intercompany accounts  net                                      |                                                |                                 | 633   |            |  |                | (862  | )            |  |          | 229   |       |   |   |       |        |   |   |       |      
|                                                                 |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|Total liabilities                                                |                                                |                                 | 4,048 |            |  |                | 1,035 |              |  |          | 3,393 |       |   |   |       |        |   |   | 8,476  |      
|Minority interests                                               |                                                |                                 |      |            |  |                |      |              |  |          | 81    |       |   |   |       |        |   |   | 81     |      
|Total stockholders investment                                   |                                                |                                 | 2,391 |            |  |                | 3,260 |              |  |          | 3,686 |       |   |   | (6,946 | )      |   |   | 2,391  |      
|                                                                 |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      
|                                                                 |                                                | $                               | 6,439 |            |  | $              | 4,295 |              |  | $        | 7,160 |       |   | $ | (6,946 | )      |   | $ | 10,948 |      
|                                                                 |                                                |                                 |       |            |  |                |       |              |  |          |       |       |   |   |        |        |   |   |        |      

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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                                        |                                                         |                                            |        |            |   |                |      |              |   |          |      |      |   |   |   |   |  |   |        |        |  
|------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------ | ------ | ---------- | - | -------------- | ---- | ------------ | - | -------- | ---- | ---- | - | - | - | - |  | - | ------ | ------ | -
|                                                        |                                                         |                                           
|                                                        |                                                         | For the Ten Months Ended December 31, 2003
|                                                        |                                                         |                                           
|                                                        |                                                         | Parent                                     |        | Guarantors |   | Non-Guarantors |      | Eliminations |   | Combined
|                                                        |                                                         |                                            |        |            |   |                |      |              |   |         
|                                                        |                                                         |                                           
|                                                        |                                                         | (Dollars in millions)                     
|Net cash provided by (used in) operating
    activities |                                                         | $                                          | (112   | )          |   | $              | 420  |              |   | $        | 538  |      |   | $ |  |   |  | $ | 846    |       
|Cash flow from investing activities                     |                                                         |                                            |        |            |   |                |      |              |   |          |      |      |   |   |   |   |  |   |        |       
|Capital expenditures including intangibles              |                                                         |                                            |       |            |   |                | (86  | )            |   |          | (264 | )    |   |   |  |   |  |   | (350   | )     
|Net proceeds from divestitures                          |                                                         |                                            |       |            |   |                | 16   |              |   |          | 41   |      |   |   |  |   |  |   | 57     |       
|Acquisitions, net of cash acquired                      |                                                         |                                            | (3,357 | )          |   |                |     |              |   |          | 3    |      |   |   |  |   |  |   | (3,354 | )     
|Acquisition transaction fees                            |                                                         |                                            | (56    | )          |   |                |     |              |   |          |     |      |   |   |  |   |  |   | (56    | )     
|Other  net                                             |                                                         |                                            |       |            |   |                | 2    |              |   |          | 5    |      |   |   |  |   |  |   | 7      |       
|                                                        |                                                         |                                            |        |            |   |                |      |              |   |          |      |      |   |   |   |   |  |   |        |       
|                                                        | Net cash used in investing activities                   |                                            |        | (3,413     | ) |                |      | (68          | ) |          |      | (215 | ) |   |   |  |  |   |        | (3,696 | )
|Cash flow from financing activities                     |                                                         |                                            |        |            |   |                |      |              |   |          |      |      |   |   |   |   |  |   |        |       
|(Decrease) Increase in short-term debt                  |                                                         |                                            |       |            |   |                |     |              |   |          | 32   |      |   |   |  |   |  |   | 32     |       
|Proceeds from issuance of long-term debt                |                                                         |                                            | 3,085  |            |   |                |     |              |   |          | 2    |      |   |   |  |   |  |   | 3,087  |       
|Proceeds from debt in excess of 90 days                 |                                                         |                                            | 1,290  |            |   |                |     |              |   |          |     |      |   |   |  |   |  |   | 1,290  |       
|Principal payments on debt in excess of
    90 days     |                                                         |                                            | (1,336 | )          |   |                |     |              |   |          | (6   | )    |   |   |  |   |  |   | (1,342 | )     
|Change in intercompany accounts                         |                                                         |                                            | 302    |            |   |                | (345 | )            |   |          | 43   |      |   |   |  |   |  |   |       |       
|Debt issue costs                                        |                                                         |                                            | (114   | )          |   |                |     |              |   |          |     |      |   |   |  |   |  |   | (114   | )     
|Equity contribution from parent company                 |                                                         |                                            | 698    |            |   |                |     |              |   |          |     |      |   |   |  |   |  |   | 698    |       
|Other  net                                             |                                                         |                                            | 1      |            |   |                |     |              |   |          |     |      |   |   |  |   |  |   | 1      |       
|                                                        |                                                         |                                            |        |            |   |                |      |              |   |          |      |      |   |   |   |   |  |   |        |       
|                                                        | Net cash provided by (used in) financing
    activities |                                            |        | 3,926      |   |                |      | (345         | ) |          |      | 71   |   |   |   |  |  |   |        | 3,652  |  
|Effect of exchange rate changes on cash                 |                                                         |                                            |       |            |   |                |     |              |   |          | 26   |      |   |   |  |   |  |   | 26     |       
|                                                        |                                                         |                                            |        |            |   |                |      |              |   |          |      |      |   |   |   |   |  |   |        |       
|(Decrease) increase in cash and cash equivalents        |                                                         |                                            | 401    |            |   |                | 7    |              |   |          | 420  |      |   |   |  |   |  |   | 828    |       
|Cash and cash equivalents at beginning of period        |                                                         |                                            |       |            |   |                |     |              |   |          |     |      |   |   |  |   |  |   |       |       
|                                                        |                                                         |                                            |        |            |   |                |      |              |   |          |      |      |   |   |   |   |  |   |        |       
|                                                        | Cash and cash equivalents at end of period              |                                            | $      | 401        |   |                | $    | 7            |   |          | $    | 420  |   |   | $ |  |  |   | $      | 828    |  
|                                                        |                                                         |                                            |        |            |   |                |      |              |   |          |      |      |   |   |   |   |  |   |        |       

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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                                        |                                                         |                                                          |      |            |  |                |     |              |   |          |      |     |   |   |   |   |  |   |      |     |  
|------------------------------------------------------- | ------------------------------------------------------- | -------------------------------------------------------- | ---- | ---------- |  | -------------- | --- | ------------ | - | -------- | ---- | --- | - | - | - | - |  | - | ---- | --- | -
|                                                        |                                                         |                                                         
|                                                        |                                                         | For the Two Months Ended February 28, 2003 (Predecessor)
|                                                        |                                                         |                                                         
|                                                        |                                                         | Parent                                                   |      | Guarantors |  | Non-Guarantors |     | Eliminations |   | Combined
|                                                        |                                                         |                                                          |      |            |  |                |     |              |   |         
|                                                        |                                                         |                                                         
|                                                        |                                                         | (Dollars in millions)                                   
|Net cash provided by (used in) operating
    activities |                                                         | $                                                        | (39  | )          |  | $              | 36  |              |   | $        | (70  | )   |   | $ |  |   |  | $ | (73  | )  
|Cash flow from investing activities                     |                                                         |                                                          |      |            |  |                |     |              |   |          |      |     |   |   |   |   |  |   |      |    
|Capital expenditures including intangibles              |                                                         |                                                          |     |            |  |                | (20 | )            |   |          | (46  | )   |   |   |  |   |  |   | (66  | )  
|Other  net                                             |                                                         |                                                          |     |            |  |                | (2  | )            |   |          |     |     |   |   |  |   |  |   | (2   | )  
|                                                        |                                                         |                                                          |      |            |  |                |     |              |   |          |      |     |   |   |   |   |  |   |      |    
|                                                        | Net cash used in investing activities                   |                                                          |      |           |  |                |     | (22          | ) |          |      | (46 | ) |   |   |  |  |   |      | (68 | )
|Cash flow from financing activities                     |                                                         |                                                          |      |            |  |                |     |              |   |          |      |     |   |   |   |   |  |   |      |    
|Increase in short-term debt                             |                                                         |                                                          |     |            |  |                |    |              |   |          | (321 | )   |   |   |  |   |  |   | (321 | )  
|Principal payments on debt in excess of
    90 days     |                                                         |                                                          |     |            |  |                |    |              |   |          | (18  | )   |   |   |  |   |  |   | (18  | )  
|Change in intercompany accounts                         |                                                         |                                                          | (420 | )          |  |                | (8  | )            |   |          | 428  |     |   |   |  |   |  |   |     |    
|Net transfers (to) from parent company                  |                                                         |                                                          | 503  |            |  |                |    |              |   |          |     |     |   |   |  |   |  |   | 503  |    
|Other  net                                             |                                                         |                                                          |     |            |  |                |    |              |   |          | 78   |     |   |   |  |   |  |   | 78   |    
|                                                        |                                                         |                                                          |      |            |  |                |     |              |   |          |      |     |   |   |   |   |  |   |      |    
|                                                        | Net cash provided by (used in) financing
    activities |                                                          |      | 83         |  |                |     | (8           | ) |          |      | 167 |   |   |   |  |  |   |      | 242 |  
|Effect of exchange rate changes on cash                 |                                                         |                                                          |     |            |  |                |    |              |   |          | (13  | )   |   |   |  |   |  |   | (13  | )  
|                                                        |                                                         |                                                          |      |            |  |                |     |              |   |          |      |     |   |   |   |   |  |   |      |    
|Increase in cash and cash equivalents                   |                                                         |                                                          | 44   |            |  |                | 6   |              |   |          | 38   |     |   |   |  |   |  |   | 88   |    
|Cash and cash equivalents at beginning of period        |                                                         |                                                          |     |            |  |                | 6   |              |   |          | 182  |     |   |   |  |   |  |   | 188  |    
|                                                        |                                                         |                                                          |      |            |  |                |     |              |   |          |      |     |   |   |   |   |  |   |      |    
|                                                        | Cash and cash equivalents at end of period              |                                                          | $    | 44         |  |                | $   | 12           |   |          | $    | 220 |   |   | $ |  |  |   | $    | 276 |  
|                                                        |                                                         |                                                          |      |            |  |                |     |              |   |          |      |     |   |   |   |   |  |   |      |    

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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |      |   |   |   |   |  |   |      |      |  
|------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------ | ---- | ---------- |  | -------------- | ---- | ------------ | - | -------- | ---- | ---- | - | - | - | - |  | - | ---- | ---- | -
|                                                        |                                                         |                                     
|                                                        |                                                         | For the Year Ended December 31, 2002
|                                                        |                                                         |                                     
|                                                        |                                                         | Parent                               |      | Guarantors |  | Non-Guarantors |      | Eliminations |   | Combined
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |         
|                                                        |                                                         |                                     
|                                                        |                                                         | (Dollars in millions)               
|Net cash provided by (used in) operating
    activities |                                                         | $                                    | (356 | )          |  | $              | (14  | )            |   | $        | 896  |      |   | $ |  |   |  | $ | 526  |     
|Cash flow from investing activities                     |                                                         |                                      |      |            |  |                |      |              |   |          |      |      |   |   |   |   |  |   |      |     
|Capital expenditures including intangibles              |                                                         |                                      |     |            |  |                | (111 | )            |   |          | (316 | )    |   |   |  |   |  |   | (427 | )   
|Net proceeds from divestitures and sale of assets       |                                                         |                                      |     |            |  |                |     |              |   |          | 22   |      |   |   |  |   |  |   | 22   |     
|Other  net                                             |                                                         |                                      |     |            |  |                | 1    |              |   |          | (10  | )    |   |   |  |   |  |   | (9   | )   
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |      |   |   |   |   |  |   |      |     
|                                                        | Net cash used in investing activities                   |                                      |      |           |  |                |      | (110         | ) |          |      | (304 | ) |   |   |  |  |   |      | (414 | )
|Cash flow from financing activities                     |                                                         |                                      |      |            |  |                |      |              |   |          |      |      |   |   |   |   |  |   |      |     
|(Decrease) Increase in short-term debt                  |                                                         |                                      |     |            |  |                |     |              |   |          | 121  |      |   |   |  |   |  |   | 121  |     
|Proceeds from debt in excess of 90 days                 |                                                         |                                      |     |            |  |                |     |              |   |          | 17   |      |   |   |   |   |  |   | 17   |     
|Principal payments on debt in excess of
    90 days     |                                                         |                                      |     |            |  |                |     |              |   |          | (81  | )    |   |   |  |   |  |   | (81  | )   
|Change in intercompany accounts                         |                                                         |                                      | 434  |            |  |                | 128  |              |   |          | (562 | )    |   |   |  |   |  |   |     |     
|Net transfers (to) from parent company                  |                                                         |                                      | (78  | )          |  |                |     |              |   |          |     |      |   |   |  |   |  |   | (78  | )   
|Other  net                                             |                                                         |                                      |     |            |  |                |     |              |   |          | 26   |      |   |   |  |   |  |   | 26   |     
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |      |   |   |   |   |  |   |      |     
|                                                        | Net cash provided by (used in) financing
    activities |                                      |      | 356        |  |                |      | 128          |   |          |      | (479 | ) |   |   |  |  |   |      | 5    |  
|Effect of exchange rate changes on cash                 |                                                         |                                      |     |            |  |                |     |              |   |          | (47  | )    |   |   |  |   |  |   | (47  | )   
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |      |   |   |   |   |  |   |      |     
|(Decrease) increase in cash and cash equivalents        |                                                         |                                      |     |            |  |                | 4    |              |   |          | 66   |      |   |   |  |   |  |   | 70   |     
|Cash and cash equivalents at beginning of period        |                                                         |                                      |     |            |  |                | 2    |              |   |          | 116  |      |   |   |  |   |  |   | 118  |     
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |      |   |   |   |   |  |   |      |     
|                                                        | Cash and cash equivalents at end of period              |                                      | $    |           |  |                | $    | 6            |   |          | $    | 182  |   |   | $ |  |  |   | $    | 188  |  
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |      |   |   |   |   |  |   |      |     

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##### Table of Contents



TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |     |   |   |   |   |  |   |      |      |  
|------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------ | ---- | ---------- |  | -------------- | ---- | ------------ | - | -------- | ---- | --- | - | - | - | - |  | - | ---- | ---- | -
|                                                        |                                                         |                                     
|                                                        |                                                         | For the Year Ended December 31, 2001
|                                                        |                                                         |                                     
|                                                        |                                                         | Parent                               |      | Guarantors |  | Non-Guarantors |      | Eliminations |   | Combined
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |         
|                                                        |                                                         |                                     
|                                                        |                                                         | (Dollars in millions)               
|Net cash provided by (used in) operating
    activities |                                                         | $                                    | (397 | )          |  | $              | 890  |              |   | $        | 335  |     |   | $ |  |   |  | $ | 828  |     
|Cash flow from investing activities                     |                                                         |                                      |      |            |  |                |      |              |   |          |      |     |   |   |   |   |  |   |      |     
|Capital expenditures including intangibles              |                                                         |                                      |     |            |  |                | (126 | )            |   |          | (349 | )   |   |   |  |   |  |   | (475 | )   
|Net proceeds from divestitures and sale of assets       |                                                         |                                      |     |            |  |                | 12   |              |   |          | 34   |     |   |   |  |   |  |   | 46   |     
|Other  net                                             |                                                         |                                      |     |            |  |                | 9    |              |   |          | 11   |     |   |   |  |   |  |   | 20   |     
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |     |   |   |   |   |  |   |      |     
|Net cash used in investing activities                   |                                                         |                                      |     |            |  |                | (105 | )            |   |          | (304 | )   |   |   |  |   |  |   | (409 | )   
|Cash flow from financing activities                     |                                                         |                                      |      |            |  |                |      |              |   |          |      |     |   |   |   |   |  |   |      |     
|(Decrease) Increase in short-term debt                  |                                                         |                                      |     |            |  |                |     |              |   |          | (36  | )   |   |   |  |   |  |   | (36  | )   
|Proceeds from debt in excess of 90 days                 |                                                         |                                      |     |            |  |                |     |              |   |          | 10   |     |   |   |   |   |  |   | 10   |     
|Principal payments on debt in excess of
    90 days     |                                                         |                                      |     |            |  |                |     |              |   |          | (47  | )   |   |   |  |   |  |   | (47  | )   
|Change in intercompany accounts                         |                                                         |                                      | 187  |            |  |                | (789 | )            |   |          | 602  |     |   |   |  |   |  |   |     |     
|Net transfers (to) from parent company                  |                                                         |                                      | 210  |            |  |                |     |              |   |          | (596 | )   |   |   |  |   |  |   | (386 | )   
|Other  net                                             |                                                         |                                      |     |            |  |                |     |              |   |          | (5   | )   |   |   |  |   |  |   | (5   | )   
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |     |   |   |   |   |  |   |      |     
|                                                        | Net cash provided by (used in) financing
    activities |                                      |      | 397        |  |                |      | (789         | ) |          |      | (72 | ) |   |   |  |  |   |      | (464 | )
|Effect of exchange rate changes on cash                 |                                                         |                                      |     |            |  |                |     |              |   |          | 12   |     |   |   |  |   |  |   | 12   |     
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |     |   |   |   |   |  |   |      |     
|(Decrease) increase in cash and cash equivalents        |                                                         |                                      |     |            |  |                | (4   | )            |   |          | (29  | )   |   |   |  |   |  |   | (33  | )   
|Cash and cash equivalents at beginning of period        |                                                         |                                      |     |            |  |                | 6    |              |   |          | 145  |     |   |   |  |   |  |   | 151  |     
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |     |   |   |   |   |  |   |      |     
|                                                        | Cash and cash equivalents at end of period              |                                      | $    |           |  |                | $    | 2            |   |          | $    | 116 |   |   | $ |  |  |   | $    | 118  |  
|                                                        |                                                         |                                      |      |            |  |                |      |              |   |          |      |     |   |   |   |   |  |   |      |     






|    |              
|--- | -------------
|27. | Contingencies

Various claims, lawsuits and administrative
proceedings are pending or threatened against the Company or its
subsidiaries, covering a wide range of matters that arise in the
ordinary course of its business activities with respect to
commercial, product liability and environmental matters. In
addition, the Company and its subsidiaries are conducting a
number of environmental investigations and remedial actions at
current and former locations of certain of the Companys
subsidiaries. Along with other companies, certain subsidiaries
of the Company have been named potentially responsible parties
for certain waste management sites. Each of these matters is
subject to various uncertainties, and some of these matters may
be resolved unfavorably with respect to the Company or the
relevant subsidiary. A reserve estimate for each environmental
matter is established using standard engineering cost estimating
techniques on an undiscounted basis. In the determination of
such costs, consideration is given to the professional judgment
of Company environmental engineers, in consultation with outside
environmental specialists, when necessary. At multi-party sites,
the reserve estimate also reflects the expected allocation of
total project costs among the various potentially responsible
parties. At December 31, 2003, the Company had reserves for
environmental matters of $90 million. The Company believes
any liability that may result from the resolution of
environmental matters for which sufficient information is
available to support these cost estimates will not have a
material adverse effect on the

98



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

Companys financial position or results of
operations. However, the Company cannot predict the effect on
the Companys financial position of expenditures for
aspects of certain matters for which there is insufficient
information. In addition, the Company cannot predict the effect
of compliance with environmental laws and regulations with
respect to unknown environmental matters on the Companys
financial position or results of operations or the possible
effect of compliance with environmental requirements imposed in
the future.

Further, product liability claims may be asserted
in the future for events not currently known by management.
Although the ultimate liability from these potential claims
cannot be ascertained at December 31, 2003, management does
not anticipate that any related liability, after consideration
of insurance recovery, would have a material adverse effect on
the Companys financial position.

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

On May 6, 2002, ArvinMeritor Inc. filed suit
against TRW in the United States District Court for the Eastern
District of Michigan, claiming breach of contract and breach of
warranty in connection with certain tie rod ends that TRW
supplied to ArvinMeritor and the recall of some of these tie rod
ends. ArvinMeritor subsequently recalled all of the tie rod
ends, and claims that it is entitled to reimbursement from TRW
for the costs associated with both the products recalled by TRW
and those recalled by ArvinMeritor on its own. ArvinMeritor is
seeking $18.3 million in damages plus legal fees,
administrative expenses and interest. Management believes that
the Company has meritorious defenses and intends to defend
vigorously the claims asserted against the Company, but cannot
predict the outcome of this lawsuit.

While certain of the Companys subsidiaries
have been subject in recent years to asbestos-related claims,
management believes that such claims will not have a material
adverse effect on the Companys financial condition or
results of operations. In general, these claims seek damages for
illnesses alleged to have resulted from exposure to asbestos
used in certain components sold by the Companys
subsidiaries. Management believes that the majority of the
claimants were assembly workers at the major
U.S. automobile manufacturers.

The vast majority of these claims name as
defendants numerous manufacturers and suppliers of a wide
variety of products allegedly containing asbestos. Management
believes that, to the extent any of the products sold by these
subsidiaries and at issue in these cases contained asbestos, the
asbestos was encapsulated. Based upon several years of
experience with such claims, management believes that only a
small proportion of the claimants has or will ever develop any
asbestos-related impairment.

Neither settlement costs in connection with
asbestos claims nor average annual legal fees to defend these
claims have been material in the past. These claims are strongly
disputed by the Company and its subsidiaries and it has been the
policy to defend against them aggressively. Many of these cases
have been dismissed without any payment whatsoever. Moreover,
there is significant insurance coverage with solvent carriers
with respect to these claims. However, while costs to defend and
settle these claims in the past have not been material, there
can be no assurances that this will remain so in the future.

Management believes that the ultimate resolution
of the foregoing matters will not have a material adverse effect
on the Companys financial condition or results of
operations.

99



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

In addition, under the employment agreements the
Company and certain of its subsidiaries have entered into with
the Companys executive officers in connection with the
Acquisition, the Company has contingent obligations in the form
of severance and bonus payments for the Companys executive
officers. Each of Messrs. Plant, Lunn, Bialosky, Cantie and
Lake are parties to an employment agreement with the Company or
certain wholly owned subsidiaries of the Company. The employment
agreements of Messrs. Plant and Lunn extend for an
indefinite term, subject to termination by either party pursuant
to the terms of the agreement, and the employment agreements of
Messrs. Bialosky, Cantie and Lake extend for a three-year
term followed by automatic additional one-year terms unless
notice of termination by either party prior to the expiration of
the term. Each of these employment agreements provides for a
bonus opportunity equal to a specified percentage of the
executives base salary (200% for Mr. Plant, 130% for
Mr. Lunn and 90% for the other officers) based upon the
achievement of certain financial targets established by the
Companys board of directors. In addition, the Company and
certain of its subsidiaries have contingent severance payment
obligations under these employment agreements in certain events
specified therein. Such contingent severance payment obligations
in the event of termination without cause (other than due to
death and disability) for these executives aggregate
approximately $15 million (excluding continued welfare
benefit coverage, certain perquisites, supplemental retirement
benefits and any change in control related payments).






|    |                                                
|--- | -----------------------------------------------
|28. | Quarterly Financial Information
    (Unaudited)

|                                            |  |                           |     |              |  |              |       |   |  |   |       |  
|------------------------------------------- |  | ------------------------- | --- | ------------ |  | ------------ | ----- | - |  | - | ----- | -
|                                            |  |                          
|                                            |  | First                    
|                                            |  |                          
|                                            |  |                           |     |             
|                                            |  | Successor                 |     | Predecessor 
|                                            |  |                           |     |             
|                                            |  | One Month                 |     | Two Months   |  | Three Months
|                                            |  | Ended                     |     | Ended        |  | Ended       
|                                            |  | March 27,                 |     | February 28, |  | March 28,   
|                                            |  | 2003                      |     | 2003         |  | 2002        
|                                            |  | (A)                       |     | (B)          |  | (C)         
|                                            |  |                           |     |              |  |             
|                                            |  |                          
|                                            |  | (Dollars in millions,    
|                                            |  | except per share amounts)
|Sales                                       |  | $                         | 940 |              |  | $            | 1,916 |   |  | $ | 2,570 |  
|Gross profit                                |  |                           | 77  |              |  |              | 230   |   |  |   | 321   |  
|(Losses) earnings before income taxes       |  |                           | (26 | )            |  |              | 50    |   |  |   | 73    |  
|Net (losses) earnings                       |  |                           | (43 | )            |  |              | 31    |   |  |   | 47    |  
|Unusual items (expense) before income taxes |  |                           | (1  | )            |  |              | (9    | ) |  |   | (2    | )

|                                          |  |                                                 |       |               |  |               |       |               |  |   |       |   |  |   |       |  
|----------------------------------------- |  | ----------------------------------------------- | ----- | ------------- |  | ------------- | ----- | ------------- |  | - | ----- | - |  | - | ----- | -
|                                          |  |                                                 |       |               |  |              
|                                          |  |                                                 |       | Third        
|                                          |  | Second                                          |       |              
|                                          |  |                                                 |       | Successor     |  | Predecessor  
|                                          |  | Successor                                       |       | Predecessor   |  |               |       |              
|                                          |  |                                                 |       |               |  | Three Months  |       | Three Months 
|                                          |  | Three Months                                    |       | Three Months  |  | Ended         |       | Ended        
|                                          |  | Ended                                           |       | Ended         |  | September 26, |       | September 27,
|                                          |  | June 27, 2003                                   |       | June 28, 2002 |  | 2003          |       | 2002         
|                                          |  | (D)                                             |       | (E)           |  | (F)           |       | (G)          
|                                          |  |                                                 |       |               |  |               |       |              
|                                          |  |                                                
|                                          |  | (Dollars in millions, except per share amounts)
|Sales                                     |  | $                                               | 2,977 |               |  | $             | 2,841 |               |  | $ | 2,536 |   |  | $ | 2,545 |  
|Gross profit                              |  |                                                 | 352   |               |  |               | 392   |               |  |   | 242   |   |  |   | 297   |  
|Earnings (losses) before income taxes     |  |                                                 | 23    |               |  |               | 138   |               |  |   | (32   | ) |  |   | 93    |  
|Net (losses) earnings                     |  |                                                 | (10   | )             |  |               | 93    |               |  |   | (23   | ) |  |   | 57    |  
|Unusual items expense before income taxes |  |                                                 | (2    | )             |  |               | (2    | )             |  |   | (44   | ) |  |   | (8    | )

100



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TRW AUTOMOTIVE INC.


NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS  (Continued)

|                                          |  |                                  |       |              |  |   |       |  
|----------------------------------------- |  | -------------------------------- | ----- | ------------ |  | - | ----- | -
|                                          |  |                                 
|                                          |  | Fourth                          
|                                          |  |                                 
|                                          |  | Successor                        |       | Predecessor 
|                                          |  |                                  |       |             
|                                          |  | Three Months                     |       | Three Months
|                                          |  | Ended                            |       | Ended       
|                                          |  | December 31,                     |       | December 31,
|                                          |  | 2003                             |       | 2002        
|                                          |  | (H)                              |       | (I)         
|                                          |  |                                  |       |             
|                                          |  |                                 
|                                          |  | (Dollars in millions, except per
|                                          |  | share amounts)                  
|                                          |  |                                 
|Sales                                     |  | $                                | 2,982 |              |  | $ | 2,674 |  
|Gross profit                              |  |                                  | 308   |              |  |   | 305   |  
|Earnings (losses) before income taxes     |  |                                  | 67    |              |  |   | (2    | )
|Net earnings (losses)                     |  |                                  | 10    |              |  |   | (33   | )
|Unusual items expense before income taxes |  |                                  | (14   | )            |  |   | (73   | )



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Earnings (losses) before income taxes include a
    $1 million charge ($1 million after tax) for
    restructuring actions.                                                                                                                                                                                                                                           
|   
|(B) |  | Earnings (losses) before income taxes includes a
    $3 million charge ($2 million after tax) for
    restructuring actions and a $6 million charge
    ($4 million after tax) for merger-related transaction costs.                                                                                                                                                  
|   
|(C) |  | Earnings (losses) before income taxes includes a
    $3 million charge ($2 million after tax) related to
    asset impairments, a $3 million charge ($2 million
    after tax) for restructuring actions and a $4 million gain
    ($2 million after tax) on retirement of debt.                                                                                      
|   
|(D) |  | Earnings (losses) before income taxes includes a
    $2 million charge ($2 million after tax), primarily
    related to restructuring actions.                                                                                                                                                                                                                        
|   
|(E) |  | Earnings (losses) before income taxes includes a
    $6 million charge ($3 million after tax) for
    restructuring actions, a $5 million gain ($3 million
    after tax) related to asset sales and a $1 million charge
    for impaired assets.                                                                                                                     
|   
|(F) |  | Earnings (losses) before income taxes includes a
    $13 million charge ($8 million after tax) related to
    restructuring actions and, a $31 million charge
    ($31 million after tax) for loss on retirement of debt.                                                                                                                                             
|   
|(G) |  | Earnings (losses) before income taxes includes a
    $7 million net charge ($9 million after tax) for
    restructuring actions, a $6 million charge ($5 million
    after tax) for impaired assets, a $7 million gain
    ($5 million after tax) related to asset sales and a
    $2 million charge ($1 million after tax) for pending
    and threatened litigation.
|   
|(H) |  | Earnings (losses) before income taxes include a
    $14 million charge ($12 million after tax) related to
    restructuring and other charges.                                                                                                                                                                                                                        
|   
|(I) |  | Earnings (losses) before income taxes includes a
    $43 million charge ($32 million after tax) related to
    restructuring charges, a $23 million charge
    ($15 million after tax) for special compensation
    arrangements related to Northrops acquisition of TRW and a
    $7 million charge ($4 million after tax) related to
    asset impairments         

101



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With
    Accountants On Accounting and Financial Disclosure

None






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Our Chief Executive Officer and Chief Financial
Officer, based on their evaluation of the effectiveness of the
Companys disclosure controls and procedures as of
December 31, 2003, have concluded that the Companys
disclosure controls and procedures are adequate and effective in
alerting them on a timely basis to material information relating
to the Company required to be included in the Companys
reports filed under the Securities Exchange Act of 1934.

There were no significant changes in the
Companys internal controls or in other factors that could
significantly affect the Companys internal controls over
financial reporting subsequent to the date of their evaluation.




PART III






|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

Omitted pursuant to General
Instructions I(2)(c) to Form 10-K.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Omitted pursuant to General
Instructions I(2)(c) to Form 10-K.






|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management

Omitted pursuant to General
Instructions I(2)(c) to Form 10-K.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

Omitted pursuant to General
Instructions I(2)(c) to Form 10-K.






|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accounting Fees and
    Services

Audit Fees

The aggregate fees for 2003 audit services
provided to TRW Automotive Holdings and its subsidiaries,
including the Company, by Ernst & Young LLP were
approximately $7.083 million. Such fees related to its
audit of our 2003 financial statements, review of the financial
statements included in our quarterly reports on Form 10-Q
for 2003, reviews of registration statements, issuance of
comfort letter and consents and consultations.

Audit-Related Fees

Audit-related services provided to TRW Automotive
Holdings and its subsidiaries, including the Company, by
Ernst & Young LLP for 2003 amounted to
$1.719 million, consisting primarily of internal control
reviews, audits of carve-out financial statements for operations
intended for divestiture, due diligence associated with initial
public offering and accounting consultations.

Tax Fees

Fees for tax-related compliance and tax planning
services provided to TRW Automotive Holdings and its
subsidiaries, including the Company, by Ernst & Young
LLP during 2003 were $5.32 million.

102



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##### Table of Contents



All Other Fees

Fees for all other services provided to TRW
Automotive Holdings and its subsidiaries, including the Company,
by Ernst & Young LLP in 2003 was $52,000.

In total, fees of $14.174 million were
provided to TRW Automotive Holdings and its subsidiaries,
including the Company, by Ernst & Young LLP in 2003,
approximately 62% of which were audit or audit-related.

The Audit Committee has considered the nature of
the above-listed services provided by Ernst & Young LLP
and determined that they are compatible with their provision of
independent audit services. The Audit Committee has discussed
these services with Ernst & Young LLP and management to
determine that they are permitted under the Code of Professional
Conduct of the American Institute of Certified Public
Accountants and the auditor independence requirements of the
U.S. Securities and Exchange Commission.

We have implemented procedures to ensure full
compliance with the provisions of the Sarbanes-Oxley Act of
2002, including restrictions on the services which may be
provided by Ernst & Young LLP. The Audit Committee
believes that these restrictions would have had no significant
effect on the nature and scope of services provided by
Ernst & Young LLP in 2003 nor on our ability to procure
accounting, tax or other professional services as required.

The Audit Committee has also adopted procedures
for pre-approving all audit and non-audit services provided by
Ernst & Young LLP. These procedures include reviewing
all requested audit and permitted non-audit services and a
budget for such services. The budget includes a description of,
and a budgeted amount for, particular categories of non-audit
services that are recurring in nature and otherwise anticipated
at the time the budget is submitted. Further Audit Committee
approval is required to exceed the budget amount for a
particular category of non-audit services by more than 10% or
$20,000 and to engage the independent auditor for any non-audit
services not included in the budget. For both types of
pre-approval, the Audit Committee considers whether such
services are consistent with the SECs rules on auditor
independence. The Audit Committee also considers whether the
independent auditor is best positioned to provide the most
effective and efficient service, for reasons such as its
familiarity with our business, people, culture, accounting
systems, risk profile, and whether the services enhance our
ability to manage or control risks and improve audit quality.
The Audit Committee may delegate pre-approval authority to one
or more members of the Audit Committee. The Audit Committee
periodically monitors the services rendered and actual fees paid
to the independent auditors to ensure that such services are
within the parameters approved by the Audit Committee.

103



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PART IV






|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K

|   |  |    |  |                                                                                                                                                                                                                                                         |  |          |     | 
|-- |  | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | --- | 
|   |  |    |  |                                                                                                                                                                                                                                                         |  | Page No.
|   |  |    |  |                                                                                                                                                                                                                                                         |  |         
|a) |  | 1) |  | Financial Statements                                                                                                                                                                                                                                    |  |          | 44  | 
|   |  |    |  | Reports of Ernst & Young LLP,
    independent auditors                                                                                                                                                                                                  |  |          | 44  | 
|   |  |    |  | Consolidated and Combined Statements of
    Operations for the Ten Months ended December 31, 2003
    (Successor), the Two Months ended February 28, 2003
    and the Years ended December 31, 2002 and 2001 (Predecessor)                              |  |          | 46  | 
|   |  |    |  | Consolidated and Combined Balance Sheets as of
    December 31, 2003 (Successor) and December 31, 2002
    (Predecessor)                                                                                                                                |  |          | 47  | 
|   |  |    |  | Consolidated and Combined Statements of Cash
    Flows for the Ten Months ended December 31, 2003
    (Successor), the Two Months ended February 28, 2003
    and the Years ended December 31, 2002 and 2001 (Predecessor)                              |  |          | 48  | 
|   |  |    |  | Consolidated and Combined Statements of Changes
    in Stockholders Investment for the Ten Months ended
    December 31, 2003 (Successor), the Two Months ended
    February 28, 2003 and the Years ended December 31,
    2002 and 2001 (Predecessor) |  |          | 49  | 
|   |  |    |  | Notes to Consolidated and Combined Financial
    Statements                                                                                                                                                                                             |  |          | 50  | 
|   |  | 2) |  | Financial Statement Schedules                                                                                                                                                                                                                          |  |          | 104 | 
|   |  |    |  | SCHEDULE II
    Valuation and Qualifying Accounts for the Ten Months
    ended
    December 31, 2003 and years ended December 31, 2002 and
    December 31, 2001                                                                                        |  |          |     | 

|                                       |                                        |                       |   |            |  |            |   |            |   |            |   |      |      |  |   |     |      |  |   |     | 
|-------------------------------------- | -------------------------------------- | --------------------- | - | ---------- |  | ---------- | - | ---------- | - | ---------- | - | ---- | ---- |  | - | --- | ---- |  | - | --- | 
|                                       |                                        |                       |   |            |  |            |   |           
|                                       |                                        |                       |   | Additions  |  |            |   |           
|                                       |                                        |                       |   |            |  |            |   |           
|                                       |                                        |                       |   |            |  | Charged    |   |            |   |           
|                                       |                                        | Balance at            |   | Charged to |  | (Credited) |   |            |   | Balance at
|                                       |                                        | Beginning             |   | Costs and  |  | to Other   |   |            |   | End of    
|Description                            |                                        | of Period             |   | Expenses   |  | Accounts   |   | Deductions |   | Period    
|                                       |                                        |                       |   |            |  |            |   |            |   |           
|                                       |                                        |                      
|                                       |                                        | (Dollars in millions)
|Ten Months ended December 31,
    2003 |                                        |                       |   |            |  |            |   |            |   |            |   |      |      |  |   |     |      |  |   |    
|                                       | Allowance for doubtful accounts        |                       | $ | 56         |  |            | $ | 3          |   |            | $ |     |      |  | $ | (14 | )(a) |  | $ | 45  | 
|                                       | Deferred tax asset valuation allowance |                       |   | 315        |  |            |   | 34         |   |            |   | (123 | )(b) |  |   | (3  | )(c) |  |   | 223 | 
|Year ended December 31, 2002           |                                        |                       |   |            |  |            |   |            |   |            |   |      |      |  |   |     |      |  |   |    
|                                       | Allowance for doubtful accounts        |                       | $ | 41         |  |            | $ | 16         |   |            | $ |     |      |  | $ | (4  | )(a) |  | $ | 53  | 
|                                       | Deferred tax asset valuation allowance |                       |   | 75         |  |            |   | (18        | ) |            |   |     |      |  |   |    |      |  |   | 57  | 
|Year ended December 31, 2001           |                                        |                       |   |            |  |            |   |            |   |            |   |      |      |  |   |     |      |  |   |    
|                                       | Allowance for doubtful accounts        |                       | $ | 41         |  |            | $ | 10         |   |            | $ |     |      |  | $ | (10 | )(a) |  | $ | 41  | 
|                                       | Deferred tax asset valuation allowance |                       |   | 103        |  |            |   | (28        | ) |            |   |     |      |  |   |    |      |  |   | 75  | 

| |  |    |  |                                                                                                                                                                                                                                      |  |  |  | 
| |  | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | 
| |  |    |  | a) Uncollectible
    accounts charged off, net of recoveries.                                                                                                                                                                        |  |  |  | 
| |  |    |  | b) Accumulated other comprehensive losses
    for foreign currency translation relating to undistributed
    foreign earnings and reclassifications amongst deferred tax
    accounts.                                               |  |  |  | 
| |  |    |  | c) Goodwill for utilization of net operating
    losses.                                                                                                                                                                             |  |  |  | 
| |  |    |  | The other schedules have been omitted because
    they are not applicable or are not required or the information
    to be set forth therein is included in the Consolidated and
    Combined Financial Statements or notes thereto. |  |  |  | 
| |  | 3) |  | Exhibits (including those incorporated by
    reference)                                                                                                                                                                             |  |  |  | 

104



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|        |   |              |  |                                                                                                                                                                                                                                                                                                                                                    
|------- | - | ------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |             
|Number  |   | Exhibit Name
|        |   |             
|        | 2 | .1*          |  | The Master Purchase Agreement, dated as of
    November 18, 2002, between BCP Acquisition Company L.L.C.
    and Northrop Grumman Corporation                                                                                                                                                                                                      
|        | 2 | .2*          |  | Amendment No. 1, dated December 20,
    2002, to the Master Purchase Agreement, dated as of
    November 18, 2002, among BCP Acquisition Company L.L.C.,
    Northrop Grumman Corporation, TRW Inc. and TRW Automotive Inc.                                                                                                                        
|        | 2 | .3*          |  | Amendment No. 2, dated February 28,
    2003, to the Master Purchase Agreement, dated as of
    November 18, 2002, among BCP Acquisition Company L.L.C.,
    Northrop Grumman Corporation, Northrop Grumman Space &
    Mission Systems Corp. and TRW Automotive Inc.                                                                              
|        | 3 | .1*          |  | Amended and Restated Certificate of Incorporation
    of TRW Automotive Inc., as amended                                                                                                                                                                                                                                                           
|        | 3 | .2*          |  | Amended and Restated By-Laws of TRW Automotive
    Inc.                                                                                                                                                                                                                                                                                            
|        | 4 | .2*          |  | Dollar Senior Notes Indenture dated as of
    February 18, 2003 between TRW Automotive Acquisition Corp.
    and The Bank of New York, as Trustee                                                                                                                                                                                                  
|        | 4 | .3*          |  | Dollar Senior Notes Supplemental Indenture dated
    as of February 28, 2003 among the New Guarantors (as
    defined therein), TRW Automotive Acquisition Corp. and The Bank
    of New York, as Trustee                                                                                                                                          
|        | 4 | .4*          |  | Dollar Senior Subordinated Notes Indenture
    dated as of February 18, 2003 between TRW Automotive
    Acquisition Corp. and The Bank of New York, as Trustee                                                                                                                                                                                     
|        | 4 | .5*          |  | Dollar Senior Subordinated Notes Supplemental
    Indenture dated as of February 28, 2003 among the New
    Guarantors (as defined therein), TRW Automotive Acquisition
    Corp. and The Bank of New York, as Trustee                                                                                                                             
|        | 4 | .6*          |  | Euro Senior Notes Indenture dated as of
    February 18, 2003 between TRW Automotive Acquisition Corp.
    and The Bank of New York, as Trustee                                                                                                                                                                                                    
|        | 4 | .7*          |  | Euro Senior Notes Supplemental Indenture dated as
    of February 28, 2003 among the New Guarantors (as defined
    therein), TRW Automotive Acquisition Corp. and The Bank of
    New York, as Trustee                                                                                                                                            
|        | 4 | .8*          |  | Euro Senior Subordinated Notes Indenture
    dated as of February 18, 2003 between TRW Automotive
    Acquisition Corp. and The Bank of New York, as Trustee                                                                                                                                                                                       
|        | 4 | .9*          |  | Euro Senior Subordinated Notes Supplemental
    Indenture dated as of February 28, 2003 among the New
    Guarantors (as defined therein), TRW Automotive Acquisition
    Corp. and The Bank of New York, as Trustee                                                                                                                               
|        | 4 | .10*         |  | 9 3/8% $925,000,000 Senior Notes Due
    2013 Exchange and Registration Rights Agreement dated as of
    February 18, 2003 between TRW Automotive Acquisition Corp.
    and J.P. Morgan Securities Inc. for itself and on behalf of
    the Dollar Initial Purchasers (as defined therein)                                                         
|        | 4 | .11*         |  | Joinder to the 9 3/8% $925,000,000 Senior
    Notes Due 2013 Exchange and Registration Rights Agreement
    dated as of February 28, 2003 among TRW Automotive
    Acquisition Corp., the Guarantors (as defined therein) and
    J.P. Morgan Securities Inc. for itself and on behalf of the
    Dollar Initial Purchasers (as defined therein)   
|        | 4 | .12*         |  | 10 1/8% 200,000,000
    Senior Notes Due 2013 Exchange and Registration Rights
    Agreement dated as of February 18, 2003 between TRW
    Automotive Acquisition Corp. and J.P. Morgan Securities
    Ltd. for itself and on behalf of the Euro Initial Purchasers (as
    defined therein)                                                      
|        | 4 | .13*         |  | Joinder to the
    10 1/8% 200,000,000
    Senior Notes Due 2013 Exchange and Registration Rights
    Agreement dated as of February 28, 2003 among TRW
    Automotive Acquisition Corp., the Guarantors (as defined
    therein) and J.P. Morgan Securities Ltd. for itself and on
    behalf of the Euro Initial Purchasers (as defined therein)
|        | 4 | .14*         |  | 11% $300,000,000 Senior Subordinated
    Notes Due 2013 Exchange and Registration Rights Agreement
    dated as of February 18, 2003 between TRW Automotive
    Acquisition Corp. and J.P. Morgan Securities Inc. for
    itself and on behalf of the Dollar Initial Purchasers (as
    defined therein)                                           

105



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|        |    |              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |             
|Number  |    | Exhibit Name
|        |    |             
|        | 4  | .15*         |  | Joinder to the 11% $300,000,000 Senior
    Subordinated Notes Due 2013 Exchange and Registration
    Rights Agreement dated as of February 28, 2003 among TRW
    Automotive Acquisition Corp., the Guarantors (as defined
    therein) and J.P. Morgan Securities Inc. for itself and on
    behalf of the Dollar Initial Purchasers (as defined therein)                                                                                                                                                                                                                                   
|        | 4  | .16*         |  | 11 3/4% 125,000,000
    Senior Subordinated Notes Due 2013 Exchange and
    Registration Rights Agreement dated as of February 18, 2003
    between TRW Automotive Acquisition Corp. and J.P. Morgan
    Securities Ltd. for itself and on behalf of the Euro Initial
    Purchasers (as defined therein)                                                                                                                                                                                                                                                                                   
|        | 4  | .17*         |  | Joinder to the
    11 3/4% 125,000,000
    Senior Subordinated Notes Due 2013 Exchange and
    Registration Rights Agreement dated as of February 28, 2003
    among TRW Automotive Acquisition Corp., the Guarantors (as
    defined therein) and J.P. Morgan Securities Ltd. for itself
    and on behalf of the Euro Initial Purchasers (as defined therein)                                                                                                                                                                                                                             
|        | 4  | .18****      |  | 8% $600,000,000 Pay-in-kind Note dated as of
    February 28, 2003 due February 28, 2018 issued by TRW
    Automotive Intermediate Holdings Corp. to TRW Automotive Safety
    Systems Inc.                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 4  | .19*****     |  | Euro Senior Notes Second Supplemental Indenture
    dated as of December 4, 2003 among the Guarantors (as
    defined therein), TRW Automotive Inc. (formerly known as TRW
    Automotive Acquisition Corp.) and The Bank of New York, as
    Trustee                                                                                                                                                                                                                                                                                                                                        
|        | 4  | .20*****     |  | Euro Senior Subordinated Notes Second
    Supplemental Indenture dated as of December 4, 2003 among
    the Guarantors (as defined therein), TRW Automotive Inc.
    (formerly known as TRW Automotive Acquisition Corp.) and The
    Bank of New York, as Trustee                                                                                                                                                                                                                                                                                                                           
|        | 10 | .1*****      |  | Second Amended and Restatement Credit Agreement
    dated as of January 9, 2004, among TRW Automotive Holdings
    Corp., TRW Automotive Intermediate Holdings Corp., TRW
    Automotive Inc. (formerly know as TRW Automotive Acquisition
    Corp.), the Foreign Subsidiary Borrowers party thereto, the
    Lenders party thereto from time to time, JP Morgan Chase Bank as
    Administrative Agent, Credit Suisse First Boston, Lehman
    Commercial Paper Inc., and Deutsche Bank Securities Inc., as
    Co-Syndication Agents, and Bank of America, N.A. as
    Documentation Agent
|        | 10 | .2*          |  | U.S. Guarantee and Collateral Agreement,
    dated and effective as of February 28, 2003, among TRW
    Automotive Holdings Corp., TRW Automotive Intermediate Holdings
    Corp., TRW Automotive Acquisition Corp., each other subsidiary
    of TRW Automotive Holdings Corp. party thereto, TRW Automotive
    Finance (Luxembourg) S.à.r.l. and JP Morgan Chase Bank, as
    Collateral Agent                                                                                                                                                                                            
|        | 10 | .3*          |  | Finco Guarantee Agreement, dated as of
    February 28, 2003, between TRW Automotive Finance
    (Luxembourg) S.à.r.l. and JP Morgan Chase Bank, as
    Collateral Agent                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .4*          |  | First-Tier Subsidiary Pledge Agreement, dated and
    effective as of February 28, 2003, among TRW Automotive
    Acquisition Corp., each subsidiary of TRW Automotive Acquisition
    Corp. party thereto and JP Morgan Chase Bank, as Collateral Agent                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .5*          |  | Receivables Purchase Agreement, dated as of
    February 28, 2003, among Kelsey-Hayes Company, TRW
    Automotive U.S. LLC, TRW Vehicle Safety Systems Inc. and
    Lake Center Industries Transportation, Inc., as sellers,
    TRW Automotive U.S. LLC, as seller agent and TRW Automotive
    Receivables LLC, as buyer                                                                                                                                                                                                                                                                   
|        | 10 | .6*          |  | Transfer Agreement, dated as of February 28,
    2003, between TRW Automotive Receivables LLC and TRW Automotive
    Global Receivables LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10 | .7*          |  | Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the conduit lenders and committed lenders
    party thereto, Credit Suisse First Boston, Hudson Castle Group
    Inc., Deutsche Bank AG London and JPMorgan Chase Bank, as
    funding agents, and JPMorgan Chase Bank as administrative agent                                                                                                                                                                                                                  

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|        |    |              |  |                                                                                                                                                                                                                                                                                                             
|------- | -- | ------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |             
|Number  |    | Exhibit Name
|        |    |             
|        | 10 | .8*          |  | Servicing Agreement, dated as of
    February 28, 2003, among TRW Automotive Global Receivables
    LLC, TRW Automotive U.S. LLC, as collection agent, the
    Persons identified on Schedule I thereto, as sub-collection
    agents, and JPMorgan Chase Bank, as administrative agent                     
|        | 10 | .9*          |  | Performance Guaranty, dated as of
    February 28, 2003, among TRW Automotive Acquisition Corp.,
    the Persons identified on Schedule IV thereto, as performance
    guarantors, TRW Automotive Receivables LLC, TRW Automotive
    Global Receivables LLC, and JPMorgan Chase as administrative
    agent
|        | 10 | .10**        |  | Trust deed constituting £100,000,000 10%
    Bonds Due 2020, dated January 10, 1999, between Lucas
    Industries plc and The Law Debenture Trust Corporation p.l.c.                                                                                                                                        
|        | 10 | .11*         |  | Intellectual Property License Agreement, dated as
    of February 28, 2003, between TRW Automotive Acquisition
    Corp. and Northrop Grumman Space and Missions Corp.                                                                                                                                      
|        | 10 | .12*         |  | Intellectual Property License Agreement, dated as
    of February 28, 2003, between Northrop Grumman Space and
    Missions Corp. and TRW Automotive Acquisition Corp.                                                                                                                                      
|        | 10 | .13*         |  | Transition Services Agreement, dated as of
    February 28, 2003, between TRW Inc. and TRW Automotive
    Acquisition Corp.                                                                                                                                                                                 
|        | 10 | .14*         |  | Employee Matters Agreement, dated as of
    February 28, 2003, between TRW Inc. and TRW Automotive
    Acquisition Corp.                                                                                                                                                                                    
|        | 10 | .15*         |  | Insurance Allocation Agreement, dated as of
    February 28, 2003, between TRW Inc. and TRW Automotive
    Acquisition Corp.                                                                                                                                                                                
|        | 10 | .16********  |  | Second Amended and Restated Stockholders
    Agreement, dated as of January 28, 2004, between TRW
    Automotive Holdings Corp., Automotive Investors L.L.C. and
    Northrop Grumman Corporation                                                                                                           
|        | 10 | .17*         |  | Transaction and Monitoring Fee Agreement, dated
    as of February 28, 2003, between TRW Automotive Acquisition
    Corp. and Blackstone Management Partners IV L.L.C.                                                                                                                                      
|        | 10 | .18*         |  | Employee Stockholders Agreement, dated as of
    February 28, 2003, by and among TRW Automotive Holdings
    Corp. and the other parties named therein                                                                                                                                                      
|        | 10 | .19*         |  | Consent, dated as of April 4, 2003, between
    TRW Automotive Holdings Corp. and Automotive Investors L.L.C.                                                                                                                                                                                               
|        | 10 | .20******    |  | Amended and Restated TRW Automotive Holdings
    Corp. 2003 Stock Incentive Plan                                                                                                                                                                                                                            
|        | 10 | .21*         |  | Form of General Non-Qualified Stock Option
    Agreement                                                                                                                                                                                                                                                    
|        | 10 | .22*         |  | Employment Agreement, dated as of
    February 6, 2003 between TRW Automotive Acquisition Corp.,
    TRW Limited and John C. Plant                                                                                                                                                                          
|        | 10 | .23*         |  | Employment Agreement, dated as of
    February 28, 2003 by and between TRW Automotive Acquisition
    Corp., TRW Limited and Steven Lunn                                                                                                                                                                    
|        | 10 | .24*         |  | Employment Agreement, dated as of
    February 27, 2003 by and between TRW Limited and Peter J.
    Lake                                                                                                                                                                                                    
|        | 10 | .25*         |  | Employment Agreement, dated as of
    February 13, 2003 by and between TRW Automotive Acquisition
    Corp. and Joseph S. Cantie                                                                                                                                                                            
|        | 10 | .26*         |  | Employment Agreement dated as of
    February 13, 2003 by and between TRW Automotive Acquisition
    Corp. and David L. Bialosky                                                                                                                                                                            
|        | 10 | .27*         |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and John C. Plant                                                                                                                                                                                                
|        | 10 | .28**        |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and Steven Lunn                                                                                                                                                                                                  
|        | 10 | .29**        |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and Peter J. Lake                                                                                                                                                                                                
|        | 10 | .30**        |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and Joseph S. Cantie                                                                                                                                                                                             

107



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|        |    |              |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | -- | ------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |             
|Number  |    | Exhibit Name
|        |    |             
|        | 10 | .31**        |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and David L. Bialosky                                                                                                                                                                                                                                                                                                        
|        | 10 | .32*         |  | Amended and Restated TRW Automotive Supplemental
    Retirement Income Plan, dated February 27, 2003                                                                                                                                                                                                                                                                                                                    
|        | 10 | .33*         |  | Letter Agreement, dated May 27, 2003,
    between John C. Plant and TRW Automotive Inc.                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .34**        |  | Lucas Funded Executive Pension Scheme No. 4                                                                                                                                                                                                                                                                                                                                                                             
|        | 10 | .35**        |  | TRW Automotive Benefits Equalization Plan                                                                                                                                                                                                                                                                                                                                                                               
|        | 10 | .36**        |  | TRW Automotive Deferred Compensation Plan                                                                                                                                                                                                                                                                                                                                                                               
|        | 10 | .37**        |  | Amendment No. 1, dated as of April 30,
    2003, to the Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the existing conduit lenders, the new conduit
    lenders, existing committed lenders, new committed lenders,
    existing funding agents and new funding agents party thereto,
    and JPMorgan Chase Bank as administrative agent
|        | 10 | .38**        |  | Amendment No. 2, dated as of May 19,
    2003, to the Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the conduit lenders, the committed lenders and
    the funding agents party thereto and JPMorgan Chase Bank, as
    administrative agent                                                                                             
|        | 10 | .39***       |  | Amendment No. 3, dated as of
    September 26, 2003, to the Receivables Loan Agreement,
    dated as of February 27, 2003, among TRW Automotive Global
    Receivables LLC, as borrower, the conduit lenders, the committed
    lenders and the funding agents party thereto and JPMorgan Chase
    Bank, as administrative agent                                                                                       
|        | 10 | .40*****     |  | Amendment No. 4, dated as of January 8,
    2004, to the Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the conduit lenders, the committed lenders and
    the funding agents party thereto and JPMorgan Chase Bank, as
    administrative agent                                                                                          
|        | 10 | .41*****     |  | Amendment No. 5, dated as of January 8,
    2004, to the Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the conduit lenders, the committed lenders and
    the funding agents party thereto and JPMorgan Chase Bank, as
    administrative agent                                                                                          
|        | 10 | .42******    |  | Form of Share Repurchase Agreement between TRW
    Automotive Holdings Corp. and Automotive Investors L.L.C.                                                                                                                                                                                                                                                                                                            
|        | 31 | (a)          |  | Certification Pursuant to Rule 13a-14(a)
    under the Securities Exchange Act of 1934, as adopted pursuant
    to §302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                               
|        | 31 | (b)          |  | Certification Pursuant to Rule 13a-14(a)
    under the Securities Exchange Act of 1934, as adopted pursuant
    to §302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                               
|        | 32 | (a)          |  | Certification Pursuant to 18 U.S.C.
    §1350, As Adopted Pursuant to §906 of the
    Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                        
|        | 32 | (b)          |  | Certification Pursuant to 18 U.S.C.
    §1350, As Adopted Pursuant to §906 of the
    Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                        



---



| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Incorporated by reference to the Registration
    Statement on Form S-4 of TRW Automotive Inc., (File
    No. 333-106702) filed on July 1, 2003.



| |    |                                                                                                                                                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ** | Incorporated by reference to Amendment No. 1
    to the Registration Statement on Form S-4 of TRW Automotive
    Inc., (File No. 333-106702) filed on September 12,
    2003.



| |     |                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | *** | Incorporated by reference to Amendment No. 2
    to the Registration Statement on Form S-4 of TRW Automotive
    Inc., (File No. 333-106702) filed on October 30, 2003.



| |      |                                                                                                                                                                
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | **** | Incorporated by reference to the Registration
    Statement on Form S-1 of TRW Automotive Holdings Corp.,
    (File No. 333-110513) filed on November 14, 2003.

108



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##### Table of Contents





| |       |                                                                                                                                                                                      
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ***** | Incorporated by reference to Amendment No. 2
    to the Registration Statement on Form S-1 of TRW Automotive
    Holdings Corp., (File No. 333-110513) filed on
    January 15, 2004.



| |        |                                                                                                                                                                                      
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ****** | Incorporated by reference to Amendment No. 5
    to the Registration Statement on Form S-1 of TRW Automotive
    Holdings Corp., (File No. 333-110513) filed on
    January 26, 2004.



| |         |                                                                                                                                                                                      
| | ------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ******* | Incorporated by reference to Amendment No. 6
    to the Registration Statement on Form S-1 of TRW Automotive
    Holdings Corp., (File No. 333-110513) filed on
    January 27, 2004.



|         |                                                                                                                                                                                      
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|******** | Incorporated by reference to Amendment No. 7
    to the Registration Statement on Form S-1 of TRW Automotive
    Holdings Corp., (File No. 333-110513) filed on
    January 29, 2004.

(b) Reports on Form 8-K

During the last quarter of the period covered,
the following reports on Form 8-K were filed:

November 7, 2003, Form 8-K reporting
under ITEM 12. Results of Operations and Financial
Condition disclosing the filing of financial information
for the third quarter of fiscal 2003 ended September 26,
2003.

109



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##### Table of Contents



SIGNATURES

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



| |                    
| | -------------------
| | TRW AUTOMOTIVE INC.
| | (Registrant)       



| |     |                     
| | --- | --------------------
| | By: | /s/ JOSEPH S. CANTIE

| |                                               
| | ----------------------------------------------
| |                                               
| | Joseph S. Cantie                              
| | Vice President and Chief Financial
    Officer
| | (Principal Financial Officer)                 

Date: March 29, 2004

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed on
March 29, 2004 by the following persons on behalf of the
registrant and in the capacities indicated.

|                                         |  |                                                                                       |  | 
|---------------------------------------- |  | ------------------------------------------------------------------------------------- |  | 
|                                         |  |                                                                                      
|Signature                                |  | Title                                                                                
|                                         |  |                                                                                      
|                                        
|/s/ JOHN C. PLANTJohn C. Plant           |  | President, Chief Executive Officer and
    Director
    (Principal Executive Officer)
|                                        
|/s/ JOSEPH S. CANTIEJoseph S. Cantie     |  | Vice President and Chief Financial Officer
    (Principal Financial Officer)         
|                                        
|/s/ TAMMY S. MITCHELLTammy S. Mitchell   |  | Controller
    (Principal Financial Officer)                                         
|                                        
|/s/ ROBERT L. FRIEDMANRobert L. Friedman |  | Director                                                                             
|                                        
|/s/ NEIL P. SIMPKINSNeil P. Simpkins     |  | Director                                                                             
|                                        
|/s/ JOSHUA H. ASTROFJoshua H. Astrof     |  | Director                                                                             
|                                        
|/s/ J. MICHAEL LOSHJ. Michael Losh       |  | Director                                                                             
|                                        
|/s/ MICHAEL J. ONEILLMichael J. ONeill |  | Director                                                                             
|                                        
|/s/ PAUL H. ONEILLPaul H. ONeill       |  | Director                                                                             

110



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10-K EXHIBIT INDEX

|        |   |             |  |                                                                                                                                                                                                                                                                                                                                                    
|------- | - | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |            
|Number  |   | Description
|        |   |            
|        | 2 | .1*         |  | The Master Purchase Agreement, dated as of
    November 18, 2002, between BCP Acquisition Company L.L.C.
    and Northrop Grumman Corporation                                                                                                                                                                                                      
|        | 2 | .2*         |  | Amendment No. 1, dated December 20,
    2002, to the Master Purchase Agreement, dated as of
    November 18, 2002, among BCP Acquisition Company L.L.C.,
    Northrop Grumman Corporation, TRW Inc. and TRW Automotive Inc.                                                                                                                        
|        | 2 | .3*         |  | Amendment No. 2, dated February 28,
    2003, to the Master Purchase Agreement, dated as of
    November 18, 2002, among BCP Acquisition Company L.L.C.,
    Northrop Grumman Corporation, Northrop Grumman Space &
    Mission Systems Corp. and TRW Automotive Inc.                                                                              
|        | 3 | .1*         |  | Amended and Restated Certificate of Incorporation
    of TRW Automotive Inc., as amended                                                                                                                                                                                                                                                           
|        | 3 | .2*         |  | Amended and Restated By-Laws of TRW Automotive
    Inc.                                                                                                                                                                                                                                                                                            
|        | 4 | .2*         |  | Dollar Senior Notes Indenture dated as of
    February 18, 2003 between TRW Automotive Acquisition Corp.
    and The Bank of New York, as Trustee                                                                                                                                                                                                  
|        | 4 | .3*         |  | Dollar Senior Notes Supplemental Indenture dated
    as of February 28, 2003 among the New Guarantors (as
    defined therein), TRW Automotive Acquisition Corp. and The Bank
    of New York, as Trustee                                                                                                                                          
|        | 4 | .4*         |  | Dollar Senior Subordinated Notes Indenture
    dated as of February 18, 2003 between TRW Automotive
    Acquisition Corp. and The Bank of New York, as Trustee                                                                                                                                                                                     
|        | 4 | .5*         |  | Dollar Senior Subordinated Notes Supplemental
    Indenture dated as of February 28, 2003 among the New
    Guarantors (as defined therein), TRW Automotive Acquisition
    Corp. and The Bank of New York, as Trustee                                                                                                                             
|        | 4 | .6*         |  | Euro Senior Notes Indenture dated as of
    February 18, 2003 between TRW Automotive Acquisition Corp.
    and The Bank of New York, as Trustee                                                                                                                                                                                                    
|        | 4 | .7*         |  | Euro Senior Notes Supplemental Indenture dated as
    of February 28, 2003 among the New Guarantors (as defined
    therein), TRW Automotive Acquisition Corp. and The Bank of
    New York, as Trustee                                                                                                                                            
|        | 4 | .8*         |  | Euro Senior Subordinated Notes Indenture
    dated as of February 18, 2003 between TRW Automotive
    Acquisition Corp. and The Bank of New York, as Trustee                                                                                                                                                                                       
|        | 4 | .9*         |  | Euro Senior Subordinated Notes Supplemental
    Indenture dated as of February 28, 2003 among the New
    Guarantors (as defined therein), TRW Automotive Acquisition
    Corp. and The Bank of New York, as Trustee                                                                                                                               
|        | 4 | .10*        |  | 9 3/8% $925,000,000 Senior Notes Due
    2013 Exchange and Registration Rights Agreement dated as of
    February 18, 2003 between TRW Automotive Acquisition Corp.
    and J.P. Morgan Securities Inc. for itself and on behalf of
    the Dollar Initial Purchasers (as defined therein)                                                         
|        | 4 | .11*        |  | Joinder to the 9 3/8% $925,000,000 Senior
    Notes Due 2013 Exchange and Registration Rights Agreement
    dated as of February 28, 2003 among TRW Automotive
    Acquisition Corp., the Guarantors (as defined therein) and
    J.P. Morgan Securities Inc. for itself and on behalf of the
    Dollar Initial Purchasers (as defined therein)   
|        | 4 | .12*        |  | 10 1/8% 200,000,000
    Senior Notes Due 2013 Exchange and Registration Rights
    Agreement dated as of February 18, 2003 between TRW
    Automotive Acquisition Corp. and J.P. Morgan Securities
    Ltd. for itself and on behalf of the Euro Initial Purchasers (as
    defined therein)                                                      
|        | 4 | .13*        |  | Joinder to the
    10 1/8% 200,000,000
    Senior Notes Due 2013 Exchange and Registration Rights
    Agreement dated as of February 28, 2003 among TRW
    Automotive Acquisition Corp., the Guarantors (as defined
    therein) and J.P. Morgan Securities Ltd. for itself and on
    behalf of the Euro Initial Purchasers (as defined therein)
|        | 4 | .14*        |  | 11% $300,000,000 Senior Subordinated
    Notes Due 2013 Exchange and Registration Rights Agreement
    dated as of February 18, 2003 between TRW Automotive
    Acquisition Corp. and J.P. Morgan Securities Inc. for
    itself and on behalf of the Dollar Initial Purchasers (as
    defined therein)                                           



---



##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 4  | .15*        |  | Joinder to the 11% $300,000,000 Senior
    Subordinated Notes Due 2013 Exchange and Registration
    Rights Agreement dated as of February 28, 2003 among TRW
    Automotive Acquisition Corp., the Guarantors (as defined
    therein) and J.P. Morgan Securities Inc. for itself and on
    behalf of the Dollar Initial Purchasers (as defined therein)                                                                                                                                                                                                                                   
|        | 4  | .16*        |  | 11 3/4% 125,000,000
    Senior Subordinated Notes Due 2013 Exchange and
    Registration Rights Agreement dated as of February 18, 2003
    between TRW Automotive Acquisition Corp. and J.P. Morgan
    Securities Ltd. for itself and on behalf of the Euro Initial
    Purchasers (as defined therein)                                                                                                                                                                                                                                                                                   
|        | 4  | .17*        |  | Joinder to the
    11 3/4% 125,000,000
    Senior Subordinated Notes Due 2013 Exchange and
    Registration Rights Agreement dated as of February 28, 2003
    among TRW Automotive Acquisition Corp., the Guarantors (as
    defined therein) and J.P. Morgan Securities Ltd. for itself
    and on behalf of the Euro Initial Purchasers (as defined therein)                                                                                                                                                                                                                             
|        | 4  | .18****     |  | 8% $600,000,000 Pay-in-kind Note dated as of
    February 28, 2003 due February 28, 2018 issued by TRW
    Automotive Intermediate Holdings Corp. to TRW Automotive Safety
    Systems Inc.                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 4  | .19*****    |  | Euro Senior Notes Second Supplemental Indenture
    dated as of December 4, 2003 among the Guarantors (as
    defined therein), TRW Automotive Inc. (formerly known as TRW
    Automotive Acquisition Corp.) and The Bank of New York, as
    Trustee                                                                                                                                                                                                                                                                                                                                        
|        | 4  | .20*****    |  | Euro Senior Subordinated Notes Second
    Supplemental Indenture dated as of December 4, 2003 among
    the Guarantors (as defined therein), TRW Automotive Inc.
    (formerly known as TRW Automotive Acquisition Corp.) and The
    Bank of New York, as Trustee                                                                                                                                                                                                                                                                                                                           
|        | 10 | .1*****     |  | Second Amended and Restatement Credit Agreement
    dated as of January 9, 2004, among TRW Automotive Holdings
    Corp., TRW Automotive Intermediate Holdings Corp., TRW
    Automotive Inc. (formerly know as TRW Automotive Acquisition
    Corp.), the Foreign Subsidiary Borrowers party thereto, the
    Lenders party thereto from time to time, JP Morgan Chase Bank as
    Administrative Agent, Credit Suisse First Boston, Lehman
    Commercial Paper Inc., and Deutsche Bank Securities Inc., as
    Co-Syndication Agents, and Bank of America, N.A. as
    Documentation Agent
|        | 10 | .2*         |  | U.S. Guarantee and Collateral Agreement,
    dated and effective as of February 28, 2003, among TRW
    Automotive Holdings Corp., TRW Automotive Intermediate Holdings
    Corp., TRW Automotive Acquisition Corp., each other subsidiary
    of TRW Automotive Holdings Corp. party thereto, TRW Automotive
    Finance (Luxembourg) S.à.r.l. and JP Morgan Chase Bank, as
    Collateral Agent                                                                                                                                                                                            
|        | 10 | .3*         |  | Finco Guarantee Agreement, dated as of
    February 28, 2003, between TRW Automotive Finance
    (Luxembourg) S.à.r.l. and JP Morgan Chase Bank, as
    Collateral Agent                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .4*         |  | First-Tier Subsidiary Pledge Agreement, dated and
    effective as of February 28, 2003, among TRW Automotive
    Acquisition Corp., each subsidiary of TRW Automotive Acquisition
    Corp. party thereto and JP Morgan Chase Bank, as Collateral Agent                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .5*         |  | Receivables Purchase Agreement, dated as of
    February 28, 2003, among Kelsey-Hayes Company, TRW
    Automotive U.S. LLC, TRW Vehicle Safety Systems Inc. and
    Lake Center Industries Transportation, Inc., as sellers,
    TRW Automotive U.S. LLC, as seller agent and TRW Automotive
    Receivables LLC, as buyer                                                                                                                                                                                                                                                                   
|        | 10 | .6*         |  | Transfer Agreement, dated as of February 28,
    2003, between TRW Automotive Receivables LLC and TRW Automotive
    Global Receivables LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10 | .7*         |  | Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the conduit lenders and committed lenders
    party thereto, Credit Suisse First Boston, Hudson Castle Group
    Inc., Deutsche Bank AG London and JPMorgan Chase Bank, as
    funding agents, and JPMorgan Chase Bank as administrative agent                                                                                                                                                                                                                  
|        | 10 | .8*         |  | Servicing Agreement, dated as of
    February 28, 2003, among TRW Automotive Global Receivables
    LLC, TRW Automotive U.S. LLC, as collection agent, the
    Persons identified on Schedule I thereto, as sub-collection
    agents, and JPMorgan Chase Bank, as administrative agent                                                                                                                                                                                                                                                                                                      



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                             
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .9*         |  | Performance Guaranty, dated as of
    February 28, 2003, among TRW Automotive Acquisition Corp.,
    the Persons identified on Schedule IV thereto, as performance
    guarantors, TRW Automotive Receivables LLC, TRW Automotive
    Global Receivables LLC, and JPMorgan Chase as administrative
    agent
|        | 10 | .10**       |  | Trust deed constituting £100,000,000 10%
    Bonds Due 2020, dated January 10, 1999, between Lucas
    Industries plc and The Law Debenture Trust Corporation p.l.c.                                                                                                                                        
|        | 10 | .11*        |  | Intellectual Property License Agreement, dated as
    of February 28, 2003, between TRW Automotive Acquisition
    Corp. and Northrop Grumman Space and Missions Corp.                                                                                                                                      
|        | 10 | .12*        |  | Intellectual Property License Agreement, dated as
    of February 28, 2003, between Northrop Grumman Space and
    Missions Corp. and TRW Automotive Acquisition Corp.                                                                                                                                      
|        | 10 | .13*        |  | Transition Services Agreement, dated as of
    February 28, 2003, between TRW Inc. and TRW Automotive
    Acquisition Corp.                                                                                                                                                                                 
|        | 10 | .14*        |  | Employee Matters Agreement, dated as of
    February 28, 2003, between TRW Inc. and TRW Automotive
    Acquisition Corp.                                                                                                                                                                                    
|        | 10 | .15*        |  | Insurance Allocation Agreement, dated as of
    February 28, 2003, between TRW Inc. and TRW Automotive
    Acquisition Corp.                                                                                                                                                                                
|        | 10 | .16******** |  | Second Amended and Restated Stockholders
    Agreement, dated as of January 28, 2004, between TRW
    Automotive Holdings Corp., Automotive Investors L.L.C. and
    Northrop Grumman Corporation                                                                                                           
|        | 10 | .17*        |  | Transaction and Monitoring Fee Agreement, dated
    as of February 28, 2003, between TRW Automotive Acquisition
    Corp. and Blackstone Management Partners IV L.L.C.                                                                                                                                      
|        | 10 | .18*        |  | Employee Stockholders Agreement, dated as of
    February 28, 2003, by and among TRW Automotive Holdings
    Corp. and the other parties named therein                                                                                                                                                      
|        | 10 | .19*        |  | Consent, dated as of April 4, 2003, between
    TRW Automotive Holdings Corp. and Automotive Investors L.L.C.                                                                                                                                                                                               
|        | 10 | .20******   |  | Amended and Restated TRW Automotive Holdings
    Corp. 2003 Stock Incentive Plan                                                                                                                                                                                                                            
|        | 10 | .21*        |  | Form of General Non-Qualified Stock Option
    Agreement                                                                                                                                                                                                                                                    
|        | 10 | .22*        |  | Employment Agreement, dated as of
    February 6, 2003 between TRW Automotive Acquisition Corp.,
    TRW Limited and John C. Plant                                                                                                                                                                          
|        | 10 | .23*        |  | Employment Agreement, dated as of
    February 28, 2003 by and between TRW Automotive Acquisition
    Corp., TRW Limited and Steven Lunn                                                                                                                                                                    
|        | 10 | .24*        |  | Employment Agreement, dated as of
    February 27, 2003 by and between TRW Limited and Peter J.
    Lake                                                                                                                                                                                                    
|        | 10 | .25*        |  | Employment Agreement, dated as of
    February 13, 2003 by and between TRW Automotive Acquisition
    Corp. and Joseph S. Cantie                                                                                                                                                                            
|        | 10 | .26*        |  | Employment Agreement dated as of
    February 13, 2003 by and between TRW Automotive Acquisition
    Corp. and David L. Bialosky                                                                                                                                                                            
|        | 10 | .27*        |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and John C. Plant                                                                                                                                                                                                
|        | 10 | .28**       |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and Steven Lunn                                                                                                                                                                                                  
|        | 10 | .29**       |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and Peter J. Lake                                                                                                                                                                                                
|        | 10 | .30**       |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and Joseph S. Cantie                                                                                                                                                                                             
|        | 10 | .31**       |  | Retention Agreement, dated August 9, 2002,
    by and between Northrop Grumman Corporation and David L. Bialosky                                                                                                                                                                                            
|        | 10 | .32*        |  | Amended and Restated TRW Automotive Supplemental
    Retirement Income Plan, dated February 27, 2003                                                                                                                                                                                                        
|        | 10 | .33*        |  | Letter Agreement, dated May 27, 2003,
    between John C. Plant and TRW Automotive Inc.                                                                                                                                                                                                                     
|        | 10 | .34**       |  | Lucas Funded Executive Pension Scheme No. 4                                                                                                                                                                                                                                                                 



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .35**       |  | TRW Automotive Benefits Equalization Plan                                                                                                                                                                                                                                                                                                                                                                               
|        | 10 | .36**       |  | TRW Automotive Deferred Compensation Plan                                                                                                                                                                                                                                                                                                                                                                               
|        | 10 | .37**       |  | Amendment No. 1, dated as of April 30,
    2003, to the Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the existing conduit lenders, the new conduit
    lenders, existing committed lenders, new committed lenders,
    existing funding agents and new funding agents party thereto,
    and JPMorgan Chase Bank as administrative agent
|        | 10 | .38**       |  | Amendment No. 2, dated as of May 19,
    2003, to the Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the conduit lenders, the committed lenders and
    the funding agents party thereto and JPMorgan Chase Bank, as
    administrative agent                                                                                             
|        | 10 | .39***      |  | Amendment No. 3, dated as of
    September 26, 2003, to the Receivables Loan Agreement,
    dated as of February 27, 2003, among TRW Automotive Global
    Receivables LLC, as borrower, the conduit lenders, the committed
    lenders and the funding agents party thereto and JPMorgan Chase
    Bank, as administrative agent                                                                                       
|        | 10 | .40*****    |  | Amendment No. 4, dated as of January 8,
    2004, to the Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the conduit lenders, the committed lenders and
    the funding agents party thereto and JPMorgan Chase Bank, as
    administrative agent                                                                                          
|        | 10 | .41*****    |  | Amendment No. 5, dated as of January 8,
    2004, to the Receivables Loan Agreement, dated as of
    February 27, 2003, among TRW Automotive Global Receivables
    LLC, as borrower, the conduit lenders, the committed lenders and
    the funding agents party thereto and JPMorgan Chase Bank, as
    administrative agent                                                                                          
|        | 10 | .42******   |  | Form of Share Repurchase Agreement between TRW
    Automotive Holdings Corp. and Automotive Investors L.L.C.                                                                                                                                                                                                                                                                                                            
|        | 31 | (a)         |  | Certification Pursuant to Rule 13a-14(a)
    under the Securities Exchange Act of 1934, as adopted pursuant
    to §302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                               
|        | 31 | (b)         |  | Certification Pursuant to Rule 13a-14(a)
    under the Securities Exchange Act of 1934, as adopted pursuant
    to §302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                               
|        | 32 | (a)         |  | Certification Pursuant to 18 U.S.C.
    §1350, As Adopted Pursuant to §906 of the
    Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                        
|        | 32 | (b)         |  | Certification Pursuant to 18 U.S.C.
    §1350, As Adopted Pursuant to §906 of the
    Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                        



---



| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Incorporated by reference to the Registration
    Statement on Form S-4 of TRW Automotive Inc., (File
    No. 333-106702) filed on July 1, 2003.



| |    |                                                                                                                                                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ** | Incorporated by reference to Amendment No. 1
    to the Registration Statement on Form S-4 of TRW Automotive
    Inc., (File No. 333-106702) filed on September 12,
    2003.



| |     |                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | *** | Incorporated by reference to Amendment No. 2
    to the Registration Statement on Form S-4 of TRW Automotive
    Inc., (File No. 333-106702) filed on October 30, 2003.



| |      |                                                                                                                                                                
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | **** | Incorporated by reference to the Registration
    Statement on Form S-1 of TRW Automotive Holdings Corp.,
    (File No. 333-110513) filed on November 14, 2003.



| |       |                                                                                                                                                                                      
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ***** | Incorporated by reference to Amendment No. 2
    to the Registration Statement on Form S-1 of TRW Automotive
    Holdings Corp., (File No. 333-110513) filed on
    January 15, 2004.



| |        |                                                                                                                                                                                      
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ****** | Incorporated by reference to Amendment No. 5
    to the Registration Statement on Form S-1 of TRW Automotive
    Holdings Corp., (File No. 333-110513) filed on
    January 26, 2004.



| |         |                                                                                                                                                                                      
| | ------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ******* | Incorporated by reference to Amendment No. 6
    to the Registration Statement on Form S-1 of TRW Automotive
    Holdings Corp., (File No. 333-110513) filed on
    January 27, 2004.



|         |                                                                                                                                                                                      
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|******** | Incorporated by reference to Amendment No. 7
    to the Registration Statement on Form S-1 of TRW Automotive
    Holdings Corp., (File No. 333-110513) filed on
    January 29, 2004.