<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

     For the quarterly period ended June 30, 2005

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT of 1934

     For the transition period from ______ to ______

                          COMMISSION FILE NUMBER: 0-452

                            TECUMSEH PRODUCTS COMPANY
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                         <C>
                MICHIGAN                                 38-1093240
        (State of Incorporation)            (IRS Employer Identification Number)
</TABLE>

<TABLE>
<S>                                                      <C>
        100 EAST PATTERSON STREET
           TECUMSEH, MICHIGAN                               49286
(Address of Principal Executive Offices)                 (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (517) 423-8411

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

     Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

     Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
            Class of Stock                          Outstanding at June 30, 2005
            --------------                          ----------------------------
<S>                                                 <C>
Class B Common Stock, $1.00 par value                         5,077,746
Class A Common Stock, $1.00 par value                        13,401,938
</TABLE>


                                                                          Page 1
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                     <C>
Part I.  Financial Information

   Item 1. Financial Statements

           Consolidated Condensed Balance Sheets.....................          3

           Consolidated Condensed Statements of Income...............          4

           Consolidated Condensed Statements of Cash Flows...........          5

           Notes to Consolidated Condensed Financial Statements......          6

   Item 2. Management's Discussion and Analysis of Financial
           Condition and Results of Operations.......................         16

   Item 3. Quantitative and Qualitative Disclosures About
           Market Risk...............................................         22

   Item 4. Controls and Procedures...................................         23

Part II. Other Information...........................................         25

   Item 6. Exhibits and Reports on Form 8-K..........................         25

Signatures...........................................................         26

Certification of CEO Pursuant to Section 302.........................   Exh 31.1

Certification of CFO Pursuant to Section 302.........................   Exh 31.2

Certification of CEO Pursuant to Section 906.........................   Exh 32.1

Certification of CFO Pursuant to Section 906.........................   Exh 32.2
</TABLE>


                                                                          Page 2
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART I. FINANCIAL INFORMATION - ITEM 1
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 JUNE 30,   December 31,
(Dollars in millions, except share data)                           2005         2004
                                                                 --------   ------------
<S>                                                              <C>        <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                     $   75.0     $  227.9
   Accounts receivable, less allowance for doubtful accounts
      of $9.1 in 2005 and $11.0 in 2004                             254.2        220.4
   Inventories                                                      417.9        394.2
   Deferred and recoverable income taxes                             32.8         36.9
   Other current assets                                             101.6         47.8
                                                                 --------     --------
      Total current assets                                          881.5        927.2
Property, plant, and equipment, at cost, net of accumulated
   depreciation of $955.5 in 2005 and $933.1 in 2004                584.9        554.8
Goodwill                                                            133.9        243.5
Other intangibles                                                    59.9         62.4
Deferred income taxes                                                21.0         29.6
Prepaid pension expense                                             178.6        171.9
Other assets                                                         84.7         73.4
                                                                 --------     --------
      Total assets                                               $1,944.5     $2,062.8
                                                                 ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable, trade                                       $  180.8     $  178.1
   Income taxes payable                                               9.7          5.4
   Short-term borrowings                                             93.1         68.8
   Accrued liabilities                                              137.0        169.2
                                                                 --------     --------
      Total current liabilities                                     420.6        421.5

Long-term debt                                                      282.6        317.3
Deferred income taxes                                                 7.0          8.0
Other postretirement benefit liabilities                            210.6        210.7
Product warranty and self-insured risks                              20.0         21.2
Accrual for environmental matters                                    40.6         41.3
Pension liabilities                                                  21.3         24.5
Other non-current liabilities                                        33.7           --
                                                                 --------     --------
      Total liabilities                                           1,036.4      1,044.5
                                                                 --------     --------
Commitments and contingencies
Stockholders' Equity
   Class A common stock, $1 par value; authorized 75,000,000
      shares; issued and outstanding 13,401,938 shares in 2005
      and 2004                                                       13.4         13.4
   Class B common stock, $1 par value; authorized 25,000,000
      shares; issued and outstanding 5,077,746 shares in 2005
      and 2004                                                        5.1          5.1
   Retained earnings                                                895.2      1,041.9
   Accumulated other comprehensive loss                              (5.6)       (42.1)
                                                                 --------     --------
      Total stockholders' equity                                    908.1      1,018.3
                                                                 --------     --------
      Total liabilities and stockholders' equity                 $1,944.5     $2,062.8
                                                                 ========     ========
</TABLE>

  The accompanying notes are an integral part of these Consolidated Condensed
                             Financial Statements.


                                                                          Page 3
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART I. FINANCIAL INFORMATION - ITEM 1
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED    SIX MONTHS ENDED
                                                               JUNE 30             JUNE 30,
                                                         ------------------   ------------------
(Dollars in millions, except per share data)               2005       2004      2005       2004
                                                         --------   -------   --------   -------
<S>                                                      <C>        <C>       <C>        <C>
Net sales                                                $  461.9   $ 484.2   $  926.3   $ 961.2
   Cost of sales and operating expenses                     422.7     421.6      853.5     843.1
   Selling and administrative expenses                       46.5      51.1       94.5      95.8
   Impairments, restructuring charges, and other items      109.8       3.6      109.9       3.6
                                                         --------   -------   --------   -------
Operating income (loss)                                    (117.1)      7.9     (131.6)     18.7
   Interest expense                                          (6.8)     (5.6)     (14.3)    (11.2)
   Interest income and other, net                             1.7       3.8        5.0       8.4
                                                         --------   -------   --------   -------
Income (loss) before taxes                                 (122.2)      6.1     (140.9)     15.9
   Tax provision (benefit)                                    0.3       2.1       (6.1)      5.5
                                                         --------   -------   --------   -------
Net income (loss)                                         ($122.5)  $   4.0    ($134.8)  $  10.4
                                                         ========   =======   ========   =======

   Basic and diluted earnings (loss) per share             ($6.63)  $  0.22     ($7.30)  $  0.56
                                                         ========   =======   ========   =======

Weighted average shares (in thousands)                     18,480    18,480     18,480    18,480
                                                         ========   =======   ========   =======

Cash dividends declared per share                        $   0.32   $  0.32   $   0.64   $  0.64
                                                         ========   =======   ========   =======
</TABLE>

        The accompanying notes are an integral part of these Consolidated
                         Condensed Financial Statements.


                                                                          Page 4
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART I. FINANCIAL INFORMATION - ITEM 1
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                     SIX MONTHS ENDED
                                                          JUNE 30,
                                                     ----------------
(Dollars in millions)                                  2005     2004
                                                     -------   ------
<S>                                                  <C>       <C>
Cash Flows from Operating Activities:
      Cash provided by (used in) operating
         activities                                   ($55.5)  $ 27.9

Cash Flows from Investing Activities:
   Capital expenditures                                (59.4)   (37.7)
                                                     -------   ------
      Cash used in investing activities                (59.4)   (37.7)
                                                     -------   ------

Cash Flows from Financing Activities:
   Dividends paid                                      (11.8)   (11.8)
   Proceeds (Repayments) of borrowings, net             35.8    (29.8)
   Repayments of long-term debt                        (50.0)      --
                                                     -------   ------
      Cash used in financing activities                (26.0)   (41.6)
                                                     -------   ------

Effect of exchange rate changes on cash                (12.0)   (10.1)
                                                     -------   ------

   Decrease in cash and cash equivalents              (152.9)   (61.5)

Cash and Cash Equivalents:
      Beginning of period                              227.9    344.6
                                                     -------   ------
      End of period                                  $  75.0   $283.1
                                                     =======   ======
</TABLE>

        The accompanying notes are an integral part of these Consolidated
                         Condensed Financial Statements.


                                                                          Page 5
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   The consolidated condensed financial statements of Tecumseh Products
     Company and Subsidiaries (the "Company") are unaudited and reflect all
     adjustments (including normal recurring adjustments) which are, in the
     opinion of management, necessary for a fair statement of the financial
     position and operating results for the interim periods. The December 31,
     2004 condensed balance sheet data was derived from audited financial
     statements, but does not include all disclosures required by generally
     accepted accounting principles in the United States ("U.S. GAAP"). The
     consolidated condensed financial statements should be read in conjunction
     with the consolidated financial statements and notes thereto contained in
     the Company's Annual Report for the fiscal year ended December 31, 2004.
     Due to the seasonal nature of the Company's business, the results of
     operations for the interim period are not necessarily indicative of the
     results for the entire fiscal year.

2.   Comprehensive Income

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED   SIX MONTHS ENDED
                                                        JUNE 30,            JUNE 30,
                                                   ------------------   ----------------
     (Dollars in millions)                            2005     2004       2005     2004
     ---------------------                          -------   ------    -------   ------
<S>                                                <C>        <C>       <C>       <C>
     Net income (loss)                              ($122.5)  $  4.0    ($134.8)  $ 10.4
     Other comprehensive income (loss):
        Foreign currency translation adjustments       22.1    (11.1)      15.6    (13.3)
        Gain (Loss) on derivatives                     13.2     (0.1)      17.0     (0.3)
        Unrealized gain on investment holdings           --       --        3.8       --
                                                    -------   ------    -------   ------
     Total comprehensive loss                        ($87.2)   ($7.2)    ($98.4)   ($3.2)
                                                    =======   ======    =======   ======
</TABLE>

3.   Inventories

<TABLE>
<CAPTION>
                             JUNE 30,   DECEMBER 31,
     (Dollars in millions)     2005         2004
     ---------------------   --------   ------------
<S>                          <C>        <C>
     Raw material             $166.4       $169.3
     Work in progress           81.6         82.1
     Finished goods            166.0        130.0
     Supplies                    3.9         12.8
                              ------       ------
     Total inventories        $417.9       $394.2
                              ======       ======
</TABLE>


                                                                          Page 6
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

4.   Business Segments

     The Company has four reportable segments based on the criteria set forth in
     SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
     Information": Compressor Products, Electrical Component Products, Engine &
     Power Train Products, and Pump Products. Revenues and operating income by
     segment for the periods indicated are as follows:

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED    SIX MONTHS ENDED
                                                                   JUNE 30,             JUNE 30,
     BUSINESS SEGMENT DATA                                    ------------------   -----------------
     (Dollars in millions)                                       2005      2004      2005      2004
     ---------------------                                     --------   ------   --------   ------
<S>                                                           <C>         <C>      <C>        <C>
     Net sales:
        Compressor Products                                    $  247.6   $234.1   $  488.6   $446.0
        Electrical Component Products                             102.4    105.2      202.6    212.2
        Engine & Power Train Products                              78.7    104.0      173.6    228.3
        Pump Products                                              32.7     40.6       60.6     74.0
        Other (a)                                                   0.5      0.3        0.9      0.7
                                                               --------   ------   --------   ------
           Total Net Sales                                     $  461.9   $484.2   $  926.3   $961.2
                                                               ========   ======   ========   ======
     Operating income (loss):
        Compressor Products                                    $    7.4   $ 18.8   $   16.0   $ 30.7
        Electrical Component Products                               0.2      4.0       (0.8)     7.4
        Engine & Power Train Products                             (15.5)   (10.7)     (36.4)   (13.6)
        Pump Products                                               4.2      4.8        6.5      8.1
        Other (a)                                                  (1.0)    (0.9)      (1.9)    (1.8)
        Corporate expenses                                         (2.6)    (4.5)      (5.1)    (8.5)
        Impairments, restructuring charges, and other items      (109.8)    (3.6)    (109.9)    (3.6)
                                                               --------   ------   --------   ------
           Total operating income (loss)                         (117.1)     7.9     (131.6)    18.7
        Interest expense                                           (6.8)    (5.6)     (14.3)   (11.2)
        Interest income and other, net                              1.7      3.8        5.0      8.4
                                                               --------   ------   --------   ------
        Income (Loss) before taxes                              ($122.2)  $  6.1    ($140.9)  $ 15.9
                                                               ========   ======   ========   ======
</TABLE>

(a)  "Other" consists of non-reportable business segments, primarily
     Manufacturing Data Systems, Inc.

The Electrical Component Products segment had inter-segment sales of $13.7
million and $18.3 million in the second quarter of 2005 and 2004, respectively,
and $30.3 million and $33.5 million for the first six months of 2005 and 2004,
respectively.


                                                                          Page 7
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

5.   Goodwill and Other Intangible Assets

     At June 30, 2005, goodwill by segment consisted of the following:

<TABLE>
<CAPTION>
                                                    ELECTRICAL     ENGINE &
                                       COMPRESSOR   COMPONENTS   POWER TRAIN   PUMPS    TOTAL
                                       ----------   ----------   -----------   -----   ------
<S>                                    <C>          <C>          <C>           <C>     <C>
     Balance at 1/1/2005                  18.6         216.9         2.9        5.1     243.5
        Impairment                          --        (108.0)         --         --    (108.0)
        Foreign Currency Translation      (1.3)           --        (0.3)        --      (1.6)
                                          ----        ------        ----        ---    ------
                                          17.3         108.9         2.6        5.1     133.9
     Balance at 6/30/2005
</TABLE>

     Second quarter 2005 results include an impairment charge of $108.0 million
     related to the goodwill associated with the 2002 acquisition of FASCO
     (which is included in the Electrical Components segment). As previously
     disclosed, the failure to achieve the business plan, coupled with expected
     future market conditions, has caused the Company to revisit the assumptions
     utilized to determine FASCO's estimated fair value in the impairment
     assessment performed at December 31, 2004. The deterioration of volumes and
     the Company's inability to recover higher commodity and transportation
     costs through price increases has resulted in revised expected cash flows
     for FASCO.

     SFAS 142 requires that the Company estimate the fair value of the reporting
     unit as compared to its recorded book value. If the estimated fair value is
     less than the book value, then an impairment is deemed to have occurred. In
     estimating the fair value of the reporting units, management used
     forecasted discounted cash flows. As required by SFAS 142, the Company
     measured the amount of goodwill impairment by allocating the estimated fair
     value to the tangible and intangible assets within this reporting unit.
     Based on this allocation, it was concluded that $108.0 million of the
     recorded goodwill in the FASCO reporting unit was impaired and needed to be
     expensed as a non-cash charge to continuing operations. Prior to performing
     the SFAS 142 analysis, management assessed long lived assets for impairment
     in accordance with SFAS 144. No SFAS 144 impairment was identified.

     Other intangible assets consisted of the following:

<TABLE>
<CAPTION>
                                                       GROSS
                                                      CARRYING    ACCUMULATED           AMORTIZABLE
                                                       AMOUNT    AMORTIZATION    NET        LIFE
                                                      --------   ------------   -----   -----------
<S>                                                   <C>        <C>            <C>     <C>
     Intangible assets subject to amortization:
        Two year non-compete agreement                  $15.0        $15.0      $  --       2 years
        Customer relationships and contracts             39.3          6.6       32.7    6-15 years
        Technology                                       15.4          5.5        9.9    3-10 years
        Trade-name and trademarks                         0.9          0.5        0.4     3-8 years
                                                        -----        -----      -----
           Total                                         70.6         27.6       43.0
     Intangible assets not subject to amortization:
        Trade name                                       16.9           --       16.9
                                                        -----        -----      -----
     Total intangible assets                            $87.5        $27.6      $59.9
</TABLE>


                                                                          Page 8
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

     The estimated amortization expense over the next five years is $5.0 million
     for 2005 and approximately $4.2 million annually for 2006 through 2009.
     Amortization expense for the three months ended June 30 was $1.3 million
     and $3.1 million for 2005 and 2004, respectively. Amortization expense for
     year to date ended June 30 was $2.6 million and $6.2 million for 2005 and
     2004, respectively.

6.   Pension and Other Postretirement Benefit Plans

     Components of net periodic benefit (income) cost are as follows:

<TABLE>
<CAPTION>
                                            PENSION BENEFITS      OTHER BENEFITS
                                           ------------------   ------------------
                                           THREE MONTHS ENDED   THREE MONTHS ENDED
                                                JUNE 30,             JUNE 30,
                                           ------------------   ------------------
                                              2005     2004         2005    2004
                                             ------   ------       -----   -----
<S>                                          <C>      <C>       <C>        <C>
     Service Cost                            $  2.3   $  2.2       $ 1.3   $ 1.1
     Interest Cost                              5.4      5.4         2.8     2.8
     Expected return on plan assets           (10.5)   (10.5)         --      --
     Amortization of prior service costs        0.1      0.3        (0.3)   (0.3)
     Amortization of net (gain) loss           (0.6)    (1.1)       (0.8)   (1.0)
                                             ------   ------       -----   -----
     Net periodic benefit (income) cost       ($3.3)   ($3.7)      $ 3.0   $ 2.6
</TABLE>

<TABLE>
<CAPTION>
                                           PENSION BENEFITS    OTHER BENEFITS
                                           ----------------   ----------------
                                           SIX MONTHS ENDED   SIX MONTHS ENDED
                                               JUNE 30,           JUNE 30,
                                           ----------------   ----------------
                                            2005      2004      2005     2004
                                           -------   ------   -------   ------
<S>                                        <C>       <C>      <C>       <C>
     Service Cost                          $  4.6    $  4.4    $ 2.6    $ 2.2
     Interest Cost                           10.8      10.8      5.6      5.6
     Expected return on plan assets         (21.0)    (21.0)      --       --
     Amortization of prior service costs      0.2       0.6     (0.6)    (0.6)
     Amortization of net (gain) loss         (1.2)     (2.2)    (1.6)    (2.0)
                                           ------    ------    -----    -----
     Net periodic benefit (income) cost     ($6.6)    ($7.4)   $ 6.0    $ 5.2
</TABLE>

     During the second quarter of 2005, the Company announced some changes to
     certain of its retiree medical benefits. Included among these changes were
     plans to phase in retiree contributions and raise plan deductibles (both as
     of January 1, 2006). The Company also implemented plans to eliminate
     Post-65 prescription drug benefits starting January 1, 2008 and discontinue
     all retiree medical benefits for anyone hired after January 1, 2006.

     As a result of these actions, the Company performed a re-measurement of its
     liability at June 30, 2005 factoring in applicable plan changes, as well as
     a reduction in the discount rate used in the calculation from 5.85% to
     5.5%. The amortization of the benefit related to these changes will be $1.4
     million for 2005 and will be recognized in the second half of the year.


                                                                          Page 9
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

     The Company previously disclosed in its financial statements for the year
     ended December 2004, that it expected to contribute $0.1 million to one of
     its pension plans in 2005. As of June 30, 2005, no contributions have been
     made. The Company presently anticipates contributing a total of $0.1
     million to fund this pension plan in 2005.

7.   Impairments, Restructuring Charges, and Other Items

     Second quarter 2005 results include an impairment charge of $108.0 million
     related to the goodwill associated with the 2002 acquisition of FASCO
     (which is included in the Electrical Components segment). As previously
     disclosed, the failure to achieve the business plan, coupled with expected
     future market conditions, has caused the Company to revisit the assumptions
     utilized to determine FASCO's estimated fair value in the impairment
     assessment performed at December 31, 2004. The deterioration of volumes and
     the Company's inability to recover higher commodity and transportation
     costs through price increases has resulted in revised expected cash flows
     for FASCO. Based on the revised estimates of cash flow, FASCO's fair value
     has deteriorated from the previous assessment and, as a result, a goodwill
     impairment of $108.0 million was recognized.

     The Company also recognized restructuring costs of $1.8 million in the
     second quarter of 2005. These costs included $0.2 million of facility
     consolidation costs in the North American Compressor business and a $0.5
     million additional impairment charge related to the St. Clair, Missouri
     Electrical Components facility, both ongoing programs nearing or at
     completion. The remaining $1.1 million of restructuring costs relate to the
     first step in the Company's efforts to reduce its excess capacity in the
     European Engine & Power Train operations. Included in the Company's plans
     for this operation is a workforce reduction of 100 personnel, which is
     expected to be completed this year at a cost of $2.5 million.

     Second quarter 2004 results include restructuring and impairment charges
     totaling $3.6 million related to facility consolidation actions affecting
     several of the Company's facilities in its North American Compressor and
     Electrical Components businesses.

8.   Guarantees and Warranties

     A portion of accounts receivable at the Company's Brazilian subsidiary are
     sold with recourse. Brazilian receivables sold at June 30, 2005 and
     December 31, 2004 were $30.7 million and $101.0 million, respectively. The
     Company estimates the fair value of the contingent liability related to
     these receivables to be $1.7 million, which is included in operating income
     and allowance for doubtful accounts.


                                                                         Page 10
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

     A provision for estimated future warranty costs and estimated returns for
     credit relating to warranty are recorded when products are sold and revenue
     recognized. A reconciliation of the changes in the Company's product
     warranty liability follows:

<TABLE>
<CAPTION>
                                                 Six Months Ended
     (Dollars in millions)                         June 30, 2005
                                                 ----------------
<S>                                                   <C>
     Balance at January 1, 2005                       $ 38.1
        Accruals for warranties                          5.3
        Settlements made (in cash or in kind)          (12.1)
        Effect of foreign currency translation          (0.4)
                                                      ------
     Balance at June 30, 2005                         $ 30.9
</TABLE>

9.   Debt

     At June 30, 2005, the Company was not in compliance with all of its
     financial covenants under both the Senior Guaranteed Notes and the
     Revolving Credit Facility and was provided waivers through August 8, 2005.

     Subsequent to the end of the second quarter, the Company renegotiated the
     terms of its lending agreements with the holders of the Senior Guaranteed
     Notes. The amendment to this agreement adds additional restrictive
     covenants and relaxes certain others. The amendment also requires the
     Company to provide collateral including all North American personal
     property and select real property. Under the agreement, the Company may pay
     dividends up to current levels beginning with the third quarter 2005. After
     the third quarter, however, dividend payments are only permitted to the
     extent the Company meets certain financial targets and remains in
     compliance with all other terms. This restriction will end if the Company
     remains in compliance with this requirement through December 31, 2006. As
     of August 8, 2005 the interest rate applicable to this borrowing will
     increase to 6.60%, payable on the same schedule as the existing notes.
     There is no change to the maturity schedule.

     In conjunction with the amendment to the Senior Guaranteed Notes indicated
     above, the Company also renegotiated the terms of its $100 million
     five-year revolving credit facility. Similar to the arrangement applicable
     to the Senior Guaranteed Notes, certain covenants have been relaxed and
     others added. The Company's debt under the amended credit agreement will
     participate in the collateral established under the Senior Guaranteed
     Notes. The amended credit facility has an applicable Eurodollar rate
     margin, letter of credit fee rate and facility fee rate based on a sliding
     scale related to the Company's debt to EBITDA ratio. The Eurodollar rate
     margin and letter of credit fee rate will initially be set at 210 basis
     points and the facility fee rate will be set initially at 40.0 basis points
     on August 8, 2005. As of June 30, 2005, the Company had borrowed $15
     million under the revolving credit facility at an average interest rate of
     4.35%.

     The holders of the Company's industrial revenue bonds will share in the
     collateral established through these amendments.


                                                                         Page 11
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

10.  Environmental Matters

     The Company has been named by the U.S. Environmental Protection Agency
     ("EPA") as a potentially responsible party ("PRP") in connection with the
     Sheboygan River and Harbor Superfund Site in Wisconsin. In May 2000, the
     EPA issued a Record of Decision ("ROD") selecting the remedy for the Site.
     The Company is one of several named PRP's in the proposed cleanup action.
     The EPA has estimated the cost of cleanup at $40.9 million. Additionally,
     the Wisconsin Department of Natural Resources ("WDNR"), as a Natural
     Resource Trustee, is investigating what additional requirements, if any,
     the state may have beyond those specified under the ROD.

     The EPA has indicated its intent to address the site in two phases, with
     the Company's Sheboygan Falls plant site and the upper river constituting
     the first phase ("Phase I") and the middle and lower river and harbor being
     the second phase ("Phase II"). In March 2003, the Company entered into a
     Consent Decree with the EPA concerning the performance of remedial design
     and remedial action for Phase I. The Consent Decree has also been approved
     by the U.S. Department of Justice, but it has yet to become a final
     judgment pending approval by the pertinent federal district court.
     Negotiation of a Consent Decree regarding Phase II has yet to commence.

     On March 25, 2003, with the cooperation of the EPA, the Company and
     Pollution Risk Services, LLC ("PRS") entered into a Liability Transfer and
     Assumption Agreement (the "Liability Transfer Agreement"). Under the terms
     of the Liability Transfer Agreement, PRS assumed all of the Company's
     responsibilities, obligations and liabilities for remediation of the entire
     Site and the associated costs, except for certain specifically enumerated
     liabilities. Also, as required by the Liability Transfer Agreement, the
     Company purchased Remediation Cost Cap insurance, with a 30 year term, in
     the amount of $100.0 million and Environmental Site Liability insurance in
     the amount of $20.0 million. The Company believes such insurance coverage
     will provide sufficient assurance for completion of the responsibilities,
     obligations and liabilities assumed by PRS under the Liability Transfer
     Agreement. On October 10, 2003, in conjunction with the Liability Transfer
     Agreement, the Company completed the transfer of title to the Sheboygan
     Falls, Wisconsin property to PRS.

     The total cost of the Liability Transfer Agreement to the Company,
     including the cost of the insurance policies, was $39.2 million. The
     Company recognized a charge of $13.6 million ($8.7 million net of tax) in
     the first quarter of 2003. The charge consisted of the difference between
     the cost of the Liability Transfer Agreement and amounts previously accrued
     for the cleanup. The Company continues to maintain an additional reserve of
     $0.5 million to reflect its potential environmental liability arising from
     operations at the Site, including potential residual liabilities not
     assumed by PRS pursuant to the Liability Transfer Agreement.

     It is the intent of the Company, PRS and the EPA to negotiate provisions
     that would add PRS as a PRP by amendment to the Consent Decree, which
     requires the approval of the U.S. Department of Justice. Until such
     approval is received, U.S. GAAP requires that the Company continue to
     record the full amount of the estimated remediation liability of $39.7
     million and a corresponding asset of $39.2 million included in Other Assets
     in the balance sheet. While the Company believes the arrangements with PRS
     are sufficient to satisfy substantially all of the Company's environmental
     responsibilities with respect to the Site, these arrangements do not
     constitute a legal discharge or release of the Company's liabilities with
     respect to the Site. The actual cost of this obligation will be governed by
     numerous factors, including, without limitation, the requirements of the
     WDNR, and may be greater or lower than the amount accrued.


                                                                         Page 12
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

     The Company, in cooperation with the WDNR, also conducted an investigation
     of soil and groundwater contamination at the Company's Grafton, Wisconsin
     plant. It was determined that contamination from petroleum and degreasing
     products used at the plant were contributing to an off-site groundwater
     plume. The Company began remediation of soils in 2001 on the east side of
     the facility. Additional remediation of soils began in the fall of 2002 in
     two other areas on the plant site. At June 30, 2005, the Company had
     accrued $2.3 million for the total estimated cost associated with the
     investigation and remediation of the on-site contamination. Investigation
     efforts related to the potential off-site groundwater contamination have to
     date been limited in their nature and scope. The extent, timing and cost of
     off-site remediation requirements, if any, are not presently determinable.

     The Company and TRC Companies and TRC Environmental Corporation
     (collectively, "TRC") entered into a Consent Order with the Wisconsin
     Department of Natural Resources (the "WDNR") on December 29, 2004 relating
     to the Hayton Area Remediation Project ("HARP") downstream from the
     Company's New Holstein, Wisconsin facility. The Consent Order provides a
     framework for the completion of the remediation and regulatory closure at
     HARP.

     Concurrent to entering into the Consent Order, the Company and two of its
     subsidiaries and TRC entered into an Exit Strategy Agreement (the
     "Agreement"), whereby the Company transferred to TRC substantially all of
     its obligations to complete the HARP remediation pursuant to the Consent
     Order and in accordance with applicable environmental laws and regulations.
     As required by the Agreement, the Company purchased a Pollution Legal
     Liability Select Cleanup Cost Cap Policy (the "Policy"). The Company
     believes that the Policy provides additional assurance that the
     responsibilities, obligations, and liabilities transferred and assigned by
     the Company and assumed by TRC under the Agreement will be completed.
     Although the arrangements with TRC and the WDNR do not constitute a legal
     discharge or release of the Company's liabilities, the Company believes
     that the specific work substitution provisions of the Consent Order and the
     broad coverage terms of the Policy, collectively, are sufficient to satisfy
     substantially all of the Company's environmental obligations with respect
     to the HARP remediation.

     In addition to the above-mentioned environmental matters, the Company is
     also currently participating with the EPA and various state agencies at
     certain other sites to determine the nature and extent of any remedial
     action that may be necessary with regard to such other sites. At June 30,
     2005 and December 31, 2004, the Company had accrued $42.6 million and $43.3
     million, respectively, for environmental remediation, including $39.7
     million relating to the Sheboygan River and Harbor Superfund Site.
     Additionally, as of June 30, 2005 and December 31, 2004, the Company had
     recorded a corresponding asset of $39.2 million relating to the Sheboygan
     River and Harbor Superfund Site in connection with its agreement with PRS.
     As these matters continue toward final resolution, amounts in excess of
     those already provided may be necessary to discharge the Company from its
     obligations for these sites. Such amounts, depending on their amount and
     timing, could be material to reported net income in the particular quarter
     or period that they are recorded. In addition, the ultimate resolution of
     these matters, either individually or in the aggregate, could be material
     to the consolidated financial statements.

11.  Income Taxes

     The Company's effective income tax rate was (0.2%) for the second quarter
     and a benefit of 4.4% for the first half of 2005, as compared with an
     effective tax rate of 35.0% for both corresponding periods in 2004. The
     difference in the Company's tax benefit rate for the second quarter and the


                                                                         Page 13
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

     first half of fiscal 2005 as compared with the corresponding periods of
     fiscal 2004 is primarily due to non-deductibility of the goodwill
     impairment recognized in the second quarter of 2005.

     In addition, the Company has identified and is evaluating the use of
     certain tax planning strategies, including the use of U.S. trading
     companies and royalty arrangements with its affiliates, in order to ensure
     that the benefit of tax carryovers and credits are realized. These
     strategies should result in U.S. income taxes otherwise payable being
     offset by the Company's utilization of their U.S. net operating loss
     carryovers and foreign tax credits. At the present time, management
     believes it is more likely than not that the net U.S. deferred tax asset
     will be realized; however, there can be no assurance that such tax planning
     strategies will ultimately generate amounts sufficient to ensure the
     utilization of all the U.S. deferred tax assets. If projected amounts of
     deferred tax assets to be realized from these tax strategies become less
     likely than not to be realized, a valuation allowance would be required
     with a resulting non-cash charge to earnings for some or all of the U.S.
     deferred tax assets.

12.  Commitments and Contingencies

     The Company is also the subject of, or a party to, a number of other
     pending or threatened legal actions involving a variety of matters,
     including class actions and asbestos-related claims, incidental to its
     business.

     One such lawsuit filed against the Company and other defendants alleges
     that the horsepower labels on the products the plaintiffs purchased were
     inaccurate. The plaintiffs seek certification of a class of all persons in
     the United States who, beginning January 1, 1995 through the present,
     purchased a lawnmower containing a two stroke or four stroke gas
     combustible engine up to 20 horsepower that was manufactured by defendants.
     The complaint seeks an injunction, compensatory and punitive damages, and
     attorneys' fees. No orders have been entered in the case, and there has
     been limited discovery. The Company intends to vigorously defend this case.

     Although the ultimate outcome of these matters cannot be predicted with
     certainty, and some may be disposed of unfavorably to the Company,
     management does not believe that the disposition will have a material
     adverse effect on the consolidated financial position or results of
     operations of the Company.

13.  New Accounting Standards

     On December 15, 2004 the FASB issued Statement No. 153 (SFAS 153),
     Exchanges of Nonmonetary Assets - Accounting Principles Board Opinion No.
     29, Accounting for Nonmonetary Transactions (APB 29). SFAS 153 is based on
     the principle that nonmonetary asset exchanges should be recorded and
     measured at the fair value of the assets exchanged, with certain
     exceptions. This standard requires exchanges of productive assets to be
     accounted for at fair value, rather than at carryover basis, unless (1)
     neither the asset received nor the asset surrendered has a fair value that
     is determinable within reasonable limits or (2) the transactions lack
     commercial substance (as defined). In addition, the Board decided to retain
     the guidance in APB 29 for assessing whether the fair value of a
     nonmonetary asset is determinable within reasonable limits. The new
     standard is the result of the convergence project between the FASB and the
     International Accounting Standards Board (IASB) and is effective for
     nonmonetary asset exchanges occurring in fiscal periods beginning after
     June 15, 2005. The Company has not yet completed its analysis of the
     effects of this pronouncement, but it does not believe the effects will be
     material.


                                                                         Page 14
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 1
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

     On November 24, 2004, the FASB issued Statement No. 151, Inventory Costs,
     an amendment of ARB No. 43, Chapter 4 (FAS 151). The standard adopts the
     IASB view related to inventories that abnormal amounts of idle capacity and
     spoilage costs should be excluded from the cost of inventory and expensed
     when incurred. Additionally, the Board made the decision to clarify the
     meaning of the term 'normal capacity'. The provisions of FAS 151 are
     applicable to inventory costs incurred during fiscal years beginning after
     June 15, 2005. The Company does have operations with idle capacity;
     however, while the Company has not yet calculated the effects of this
     pronouncement, it does not believe the effects will be material.


                                                                         Page 15
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 2
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Consolidated net sales in the second quarter of 2005 decreased to $461.9 million
from $484.2 million in 2004. Consolidated net sales for the first half of 2005
amounted to $926.3 million compared to $961.2 million in the first half of 2004.
Excluding an increase in sales of $18.3 million for the quarter and $36.3
million year to date resulting from the effect of changes in foreign currency
exchange rates, sales decreased $40.6 million versus the same quarter in the
prior year and $71.2 million year to date. This is primarily due to lower
volumes in the Engine & Power Train segment in both North America and Europe.
Sales declines were also experienced in the Electrical Components and Pump
segments.

Consolidated results for the second quarter of 2005 amounted to net loss of
$122.5 million or $6.63 per share compared to net income of $4.0 million or
$0.22 per share in the second quarter of 2004. Reported results for the second
quarter 2005 included a goodwill impairment charge related to the Electrical
Components business of $108.0 million ($5.84 per share) and restructuring and
asset impairment charges of $1.8 million ($1.6 million net of tax or $0.09 per
share) related to a new action in the Engine & Power Train business ($1.1
million) and the continuation of previously announced actions in both the
Compressor ($0.2 million) and Electrical Components ($0.5 million) segments.
Reported results for the second quarter 2004 included restructuring and asset
impairment charges of $3.6 million ($2.3 million net of tax or $0.13 per share)
involving the Compressor and Electrical Components businesses.

Consolidated net loss for the six months ended June 30, 2005 amounted to $134.8
million or $7.30 per share compared to net income of $10.4 million $0.56 per
share for the same period in 2004. Excluding the impairment and restructuring
charges, operating results were lower than the prior year second quarter across
all business segments, with the most substantial declines in the Compressor and
Engine & Power Train segments.

Compressor Products

Second quarter 2005 sales in the Company's compressor business increased to
$247.6 million from $234.1 million in the second quarter of 2004. Compressor
business sales in the first six months of 2005 increased to $488.6 million from
$446.0 million in the first six months of 2004. The increase for both the
quarter and year to date from the prior year was mainly attributable to the
effect of foreign currency translation that increased sales by $17.1 million and
$33.4 million, respectively. Volume increases of compressor products that are
primarily manufactured by the Company in its Brazilian and Indian facilities and
sold into the original equipment markets for residential refrigerators and
freezers and volume increases in compressor products for commercial applications
were largely offset by declines in sales of compressors utilized in room air
conditioners.

Compressor business operating income for the second quarter of 2005 amounted to
$7.4 million compared to $18.8 million in the second quarter of 2004. Operating
income for the six months ended June 30, 2005 amounted to $16.0 million compared
to $30.7 million for the first six months of 2004. The decrease in operating
income for the second quarter and year to date versus the comparable 2004
periods reflects the effects of a weaker U.S. Dollar and an unfavorable mix of
sales. During the second quarter, the U.S. Dollar was on average 17% weaker
versus the Brazilian Real and 4% weaker versus the Euro.


                                                                         Page 16
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 2
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Electrical Component Products

Electrical Components business sales were $102.4 million in the second quarter
of 2005 compared to $105.2 million in the second quarter of 2004. The $2.8
million reduction in sales was primarily attributable to volume declines in the
automotive seat actuator, small engine starter and mobile HVAC businesses. First
half 2005 sales amounted to $202.6 million compared to $212.2 million in the
first half of 2004. In addition to the volume declines from the second quarter
mentioned above, the Company experienced volume declines in residential and
commercial aftermarket, blowers and gear motors during the first quarter to
bring the year to date decline in comparative sales to $9.6 million.

Electrical Components operating income for the second quarter of 2005 amounted
to $0.2 million compared to $4.0 million in the second quarter of 2004. Segment
operating loss for the first half of the year was $0.8 million compared to
operating income of $7.4 million for the same period in 2004. The decline in
operating income in both the quarter and year to date largely resulted from
lower sales volumes, higher commodity costs in excess of pricing recoveries, and
unanticipated operational inefficiencies related to the closure of the St. Clair
facility, partially offset by lower amortization of intangible assets.

Engine & Power Train Products

Engine & Power Train business sales amounted to $78.7 million in the second
quarter of 2005 compared to $104.0 million in the second quarter of 2004. Sales
in the first half of 2005 were $173.6 million compared to $228.3 million in the
first half of 2004. The decline in sales for the second quarter and year to date
was primarily the result of the loss of business on walk behind rotary lawn
applications with a single customer during the first quarter and other
reductions in walk behind volume. Additionally, volumes were lower in the
transaxle business and in other engine lines utilized on various utility
products.

Engine & Power Train business operating loss in the second quarter of 2005
amounted to $15.5 million compared to a loss of $10.7 million in the second
quarter of 2004. For the first half of 2005, the business incurred an operating
loss of $36.4 million compared to an operating loss of $13.6 million in 2004.
The decline in quarter and year to date results reflects losses in volume and
increases in commodity, transportation and tooling costs. Additionally, during
the first quarter, the Company experienced increased warranty response and
expediting costs related to a quality issue at a transmission business customer.
Continued reductions in profitability in Europe also contributed to the increase
in the quarter and year to date loss.

Engine & Power Train losses were substantially due to the significant costs
associated with excess capacities in the U.S. and Europe. The excess capacity
situation was exacerbated by the shift of production to the Company's Brazilian
manufacturing facility resulting in duplicate capacities. While the favorable
impact of the normal seasonal snow thrower-related business should improve
results in the second half of the year compared to the first half, substantial
cost reductions and volume improvements will be necessary for sustained
improvement. The Company intends to complete these cost reductions throughout
2005. As previously disclosed, the Company has engaged AlixPartners to assist in
the acceleration of these cost reduction efforts. AlixPartners' involvement
commenced as of July 31, 2005.


                                                                         Page 17
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 2
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Pump Products

Pump business sales in the second quarter of 2005 amounted to $32.7 million
compared to $40.6 million in same period in 2004. First half sales amounted to
$60.6 million in 2005 compared to $74.0 million the previous year. The 18.1%
reduction in year to date sales was primarily attributable to the loss of water
gardening business at one mass market retailer.

Operating income amounted to $4.2 million in the second quarter of 2005 compared
to $4.8 million in the same period in 2004. Operating income in the first half
of 2005 was $6.5 million compared to $8.1 million in 2004. The decrease in
operating income was primarily attributable to the reductions in sales volumes
offset by reductions in engineering and selling and administration costs.

Interest Expense

Interest expense amounted to $6.8 million in the second quarter of 2005 compared
to $5.6 million in the second quarter of 2004. Interest expense amounted to
$14.3 million in the first half of 2005 compared to $11.2 million in the same
period of 2004. The increase was primarily related to higher average interest
rates applicable to the Company's variable rate borrowings in a number of its
foreign locations in addition to reflecting the impact of the loss of benefit
previously provided by interest rate swaps exchanging fixed rates for variable.

Interest Income and Other, Net

Interest income and other, net amounted to $1.7 million in the second quarter of
2005 compared to $3.8 million in the second quarter of 2004. Interest income and
other, net amounted to $5.0 million in the first half of 2005 compared to $8.4
million in the same period of 2004. This decrease resulted primarily from lower
average deposits in Brazil and the United States.

Taxes on Income

The Company's effective income tax rate was (0.2%) for the second quarter and a
benefit of 4.4% for the first half of 2005, as compared with an effective tax
rate of 35.0% for both corresponding periods in 2004. The difference in the
Company's tax benefit rate for the second quarter and the first half of fiscal
2005 as compared with the corresponding periods of fiscal 2004 is primarily due
to non-deductibility of the goodwill impairment recognized in the second quarter
of 2005. The effective tax rate in future periods may vary from the 35% used in
prior years based upon changes in the mix of profitability between the
jurisdictions where benefits on losses are not provided versus other
jurisdictions where provisions and benefits were recognized. In addition, the
Company has identified and is evaluating the use of certain tax planning
strategies, including the use of U.S. trading companies and royalty arrangements
with its affiliates, in order to ensure that the benefit of tax carryovers and
credits are realized. These strategies should result in U.S. income taxes
otherwise payable being offset by the Company's utilization of their U.S. net
operating loss carryovers and foreign tax credits. At the present time,
management believes it is more likely than not that the net U.S. deferred tax
asset will be realized; however, there can be no assurance that such tax
planning strategies will ultimately generate amounts sufficient to ensure the
utilization of all the U.S. deferred tax assets. If projected amounts of
deferred tax assets to be realized from


                                                                         Page 18
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 2
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

these tax strategies become less likely than not to be realized, a valuation
allowance would be required with a resulting non-cash charge to earnings for
some or all of the U.S. deferred tax assets.

Outlook

Information in this "Outlook" section should be read in conjunction with the
cautionary language and discussion of risks included below.

The outlook for the remainder of the year is subject to the same variables that
have negatively impacted the Company's year to date results. Commodity costs,
key currency rates, particularly the Brazilian Real, and weather will remain key
factors to any rebound in the second half of the year. Recent indicators provide
some encouragement that the effect of these factors may moderate. While weather
in North and South America has not been conducive to either OEM or aftermarket
sales during the first half of the year, the recent heat wave in the U.S. should
help aftermarket operations in the Compressor and Electrical Components
businesses over the rest of the summer. In addition, there has been some
improvement in steel prices, although slight in comparison to the increases
experienced over the last 18 months. Additionally, the Company has been
aggressively executing cost cutting actions. Global headcounts have been reduced
by 1,600 since March 31, 2005, and the Company has changed retiree and
healthcare benefits in the U.S. with an expected annual benefit of $4.0 million.
The Company has engaged AlixPartners to assist in the completion of the Engine &
Power Train Group restructuring, where substantial cost reductions, associated
with the elimination of duplicate capacities, are expected to benefit future
periods. Accordingly, the Company expects second half results to be better than
those of the first half of the year, but to lag comparable 2004 results.

The Company will continue to focus its efforts on improving the profitability
and competitiveness of its worldwide operations. It is likely that additional
production relocation and consolidation initiatives will take place during 2005
that could have an effect on the consolidated financial position and future
results of operations of the Company.

LIQUIDITY, CAPITAL RESOURCES AND RISKS

Historically, the Company's primary source of cash has been net cash provided by
operations. Operating activities in the first half of 2005, however, used cash
of $55.5 million compared to providing $27.9 million of cash in 2004. The
decline in 2005 resulted primarily from the loss from operations and additional
investment in accounts receivable and inventory. Working capital of $460.9
million at June 30, 2005 was down from $505.7 million at the end of 2004
primarily due to the use of cash to prepay $50 million of the Company's
Guaranteed Senior Notes, pay dividends and fund capital expenditures related to
new product expansion in Brazil and India.

The negative results experienced over the last nine months and recognition of
the goodwill impairment charge also required that the Company seek amendments to
its debt covenants in both the Note Purchase Agreement with the holders of its
Senior Guaranteed Notes and the credit agreement for its Revolving Credit
Facility, under which JPMorgan Chase Bank, N.A. acts as agent for a group of
lenders. The amendments were signed on August 5, 2005. New terms of the
agreements provide for security interests in certain of the Company's assets and
specific covenants related to EBITDA and capital expenditures through December
2006. In addition, the terms of the agreement permit resumption of dividends,
presuming continued compliance with these temporary covenants and subject to
minimum levels of EBITDA, beginning


                                                                         Page 19
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 2
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

with the fourth quarter of 2005 through the first quarter of 2007. Interest
costs will be higher under each of the amended agreements.

In conjunction with the actions noted above, working capital requirements and
planned capital investments for the remainder of 2005 are expected to be
financed primarily through internally generated funds; however, short-term
borrowings and various financial instruments are utilized from time to time to
hedge currency risk and finance foreign working capital requirements. The
Company maintains a $100 million revolving credit facility that is available for
general corporate purposes, of which $15.0 million was drawn and outstanding and
$18.1 million was utilized for letters of credit at June 30, 2005. The Company
may also utilize long-term financing arrangements in connection with state
investment incentive programs.

Environmental Matters

The Company is subject to various federal, state and local laws relating to the
protection of the environment, and is actively involved in various stages of
investigation or remediation for sites where contamination has been alleged.
(See Note 9 to the financial statements.) Liabilities, relating to probable
remediation activities, are recorded when the costs of such activities can be
reasonably estimated based on the facts and circumstances currently known.
Difficulties exist estimating the future timing and ultimate costs to be
incurred due to uncertainties regarding the status of laws, regulations, levels
of required remediation, changes in remediation technology and information
available.

At June 30, 2005 and December 31, 2004, the Company had accrued $42.6 million
and $43.3 million, respectively, for environmental remediation. As these matters
continue toward final resolution, amounts in excess of those already provided
may be necessary to discharge the Company from its obligations for these sites.
Such amounts, depending on their amount and timing, could be material to
reported net income in the particular quarter or period in which they are
recorded. In addition, the ultimate resolution of these matters, either
individually or in the aggregate, could be material to the consolidated
financial statements.

CAUTIONARY STATEMENTS RELATING TO FORWARD-LOOKING STATEMENTS

This discussion contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act that are subject to the safe harbor
provisions created by that Act. In addition, forward-looking statements may be
made orally in the future by or on behalf of the Company. Forward-looking
statements can be identified by the use of terms such as "expects," "should,"
"may," "believes," "anticipates," "will," and other future tense and
forward-looking terminology, or by the fact that they appear under the caption
"Outlook."

Readers are cautioned that actual results may differ materially from those
projected as a result of certain risks and uncertainties, including, but not
limited to, i) changes in business conditions and the economy in general in both
foreign and domestic markets; ii) the effect of terrorist activity and armed
conflict; iii) weather conditions affecting demand for air conditioners, lawn
and garden products, portable power generators and snow throwers; iv) the
success of the Company's ongoing effort to bring costs in line with projected
production levels and product mix; v) financial market changes, including
fluctuations in interest rates and foreign currency exchange rates; vi) economic
trend factors such as housing starts; vii) emerging governmental regulations;
viii) availability and cost of materials, particularly


                                                                         Page 20
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 2
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

commodities, including steel, copper and aluminum, whose cost can be subject to
significant variation; ix) actions of competitors; x) the ultimate cost of
resolving environmental and legal matters; xi) the Company's ability to
profitably develop, manufacture and sell both new and existing products; xii)
the extent of any business disruption that may result from the restructuring and
realignment of the Company's manufacturing operations or system implementations,
the ultimate cost of those initiatives and the amount of savings actually
realized; xiii) potential political and economic adversities that could
adversely affect anticipated sales and production in Brazil; xiv) potential
political and economic adversities that could adversely affect anticipated sales
and production in India, including potential military conflict with neighboring
countries; xv) the Company's ability to reduce a substantial amount of costs in
the Engine & Power Train group associated with excess capacity, and xvi) the
ongoing financial health of major customers. These forward-looking statements
are made only as of the date hereof, and the Company undertakes no obligation to
update or revise the forward-looking statements, whether as a result of new
information, future events or otherwise.


                                                                         Page 21
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 3
           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to risk during the normal course of business from credit
risk associated with accounts receivable and from changes in interest rates,
commodity prices and foreign currency exchange rates. The exposure to these
risks is managed through a combination of normal operating and financing
activities which include the use of derivative financial instruments in the form
of foreign currency forward exchange contracts and commodity forward purchasing
contracts. Fluctuations in commodity prices and foreign currency exchange rates
can be volatile, and the Company's risk management activities do not totally
eliminate these risks. Consequently, these fluctuations can have a significant
effect on results. A discussion of the Company's policies and procedures
regarding the management of market risk and the use of derivative financial
instruments was provided in its Annual Report on Form 10-K in Item 7A and in
Notes 1 and 12 of the Notes to Consolidated Financial Statements. The Company
does not utilize financial instruments for trading or other speculative
purposes. There have been no changes in these policies or procedures during the
second quarter of 2005.

The Company utilizes foreign currency forward exchange contracts to hedge
foreign currency receivables, payables and other known transactional exposures
for periods consistent with the expected cash flows of the underlying
transactions. The contracts generally mature within one year and are designed to
limit exposure to exchange rate fluctuations because gains and losses on the
hedged transactions offset gains and losses on the contracts. At June 30, 2005
and December 31, 2004, the Company held foreign currency forward exchange
contracts and foreign currency call options with total notional values in the
amount of $168.0 million and $53.4 million, respectively.

The Company uses commodity forward purchasing contracts to help control the cost
of traded commodities, primarily copper and aluminum, used as raw material in
the production of motors, electrical components and engines. Local management is
allowed to contract commodity forwards for a limited percentage of projected raw
material requirements up to one year in advance. The total values of commodity
forwards outstanding at June 30, 2005 and December 31, 2004 were $23.9 million
and $23.7 million, respectively.

The Company is subject to interest rate risk, primarily associated with its
borrowings. The Company's $250 million Senior Guaranteed Notes are fixed-rate
debt. The Company's remaining borrowings, which consist of bank borrowings by
its foreign subsidiaries and Industrial Development Revenue Bonds, are
variable-rate debt. Currently, 67% of the Company's total debt is fixed-rate.
While changes in interest rates impact the fair value of this debt, there is no
impact to earnings and cash flow because the Company intends to hold these
obligations to maturity unless refinancing conditions are favorable.
Alternatively, while changes in interest rates do not affect the fair value of
the Company's variable-interest rate debt, they do affect future earnings and
cash flows. A 1% increase in interest rates would increase interest expense for
the year by approximately $1.3 million.


                                                                         Page 22
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 4
                             CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the reports that the Company
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to the Company's management, including its President and Chief Executive Officer
and Vice President, Treasurer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.

As of the end of the fiscal quarter covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's Disclosure Committee and management, including the President and Chief
Executive Officer and the Company's Vice President, Treasurer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based
upon such evaluation, the Company's President and Chief Executive Officer along
with the Company's Vice President, Treasurer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures which were
identified as not effective as of December 31, 2004 because of the material
weakness discussed below, have not yet been fully corrected and are, therefore,
not effective as of June 30, 2005. In light of the material weakness, the
Company performed additional analysis and other post-closing procedures to
ensure our consolidated financial statements were prepared in accordance with
generally accepted accounting principles. Accordingly, management believes that
the financial statements included in this report fairly state in all material
respects our financial condition, results of operations and cash flows for the
periods presented.

As outlined in management's annual report as of December 31, 2004, the Company
did not maintain effective controls over the segregation of duties over certain
system access controls as well as security over user access rights to certain
financial application systems which could affect accounts receivable and
revenue, inventory and cost of goods sold, and accounts payable and other
financial statement accounts at a number of its locations. Specifically, the
control deficiencies demonstrated an inadequate design of access security
policies and segregation of duties requirements as well as a lack of independent
monitoring of user access to financial application programs and data.
Individually, these deficiencies were evaluated as representing a more than
remote likelihood that a misstatement that is more than inconsequential, but
less than material, could occur. However, when aggregated, these deficiencies
could result in a misstatement to the financial statement accounts, resulting in
a material misstatement to the consolidated financial statements that would not
be prevented or detected.

The Company has implemented additional controls to remediate this material
weakness. These controls include, but are not limited to, additional levels of
reviews of transactions, additional reviews of changes to financial applications
and data by those with access to both, and reassignment of responsibilities to
provide for better segregation of duties. While specific efforts have been
undertaken to address the segregation of duties and system access issues within
each of the affected locations, the Company has not completed its process to
verify the adequacy of the measures taken and ensure these steps had completely
addressed the previously identified concerns.

The Company has also made progress with respect to its implementation of a
common, global ERP system, which represents the long-term solution to these
deficiencies as well as a significant improvement to the overall internal
control structure of the company. The system implementation includes improved
controls over access to financial application programs and data, independent


                                                                         Page 23
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                     PART 1. FINANCIAL INFORMATION - ITEM 4
                             CONTROLS AND PROCEDURES

monitoring of users having unrestricted access to financial application programs
and data, and provides for improved segregation of duties. The first business
went live March 1, 2005 and the Company's remaining locations are expected to go
live during 2006 and 2007.

Changes In Internal Control Over Financial Reporting

As noted above, the Company is in the process of implementing a new global ERP
system. Location implementations began in the first quarter of 2005 and the
Company's remaining locations are expected to go live during 2006 and 2007.
During this time period, there will be significant changes in internal controls
over financial reporting at the operations affected. The Company believes it has
designed adequate controls into the new system and will begin testing their
application at each location after their respective go-live dates.

There have been no changes in the Company's internal controls over financial
reporting that occurred during the quarter that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.

Limitations On The Effectiveness Of Controls And Procedures

Management of the Company, including the chief executive officer and chief
financial officer, does not expect that the Company's disclosure controls and
procedures or internal control over financial reporting will detect or prevent
all error and all fraud. A control system, no matter how well designed and
implemented, can provide only reasonable, not absolute, assurance that the
control system's objective will be met. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that all control issues within a company are detected.

In addition, projection of any evaluation of the effectiveness of internal
control over financial reporting to future periods is subject to the risk that
controls may become inadequate because of changes in condition, or that the
degree of compliance with policies and procedures included in such controls may
deteriorate.


                                                                         Page 24
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
                           PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

<TABLE>
<CAPTION>
(a)   Exhibit
       Number   Description
      -------   -----------
<S>   <C>       <C>
         4.1    Amendment No. 2 date August 5, 2005 to Note Purchase Agreement
                dated March 5, 2003 by and among Tecumseh Products Company and
                certain Purchasers listed therein

         4.2    Credit Agreement dated as of December 21, 2004 among Tecumseh
                Products Company, the lenders named therein, and JPMorgan Chase
                Bank, N.A., as agent

         4.3    First Amendment dated August 5, 2005 to Credit Agreement dated
                as of December 21, 2004 among Tecumseh Products Company, the
                lenders named therein, and JPMorgan Chase Bank, N.A., as agent

        31.1    Certification of the President and Chief Executive Officer
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

        31.2    Certification of the Chief Financial Officer pursuant to Section
                302 of the Sarbanes-Oxley Act of 2002.

        32.1    Certification of the President and Chief Executive Officer
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

        32.2    Certification of the Chief Financial Officer pursuant to Section
                906 of the Sarbanes-Oxley Act of 2002.
</TABLE>


                                                                         Page 25
<PAGE>
                   TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES

                                   SIGNATURE

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

                                        TECUMSEH PRODUCTS COMPANY
                                               (Registrant)


Dated: August 8, 2005                   BY: /s/ JAMES S. NICHOLSON
                                            ------------------------------------
                                            James S. Nicholson
                                            Vice President, Treasurer and
                                            Chief Financial Officer (on behalf
                                            of the Registrant and as principal
                                            financial officer)


                                                                         Page 26
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
 Number   Description
 ------   -----------
<S>       <C>
   4.1    Amendment No. 2 date August 5, 2005 to Note Purchase Agreement dated
          March 5, 2003 by and among Tecumseh Products Company and certain
          Purchasers listed therein

   4.2    Credit Agreement dated as of December 21, 2004 among Tecumseh Products
          Company, the lenders named therein, and JPMorgan Chase Bank, N.A., as
          agent

   4.3    First Amendment dated August 5, 2005 to Credit Agreement dated as of
          December 21, 2004 among Tecumseh Products Company, the lenders named
          therein, and JPMorgan Chase Bank, N.A., as agent

  31.1    Certification of the President and Chief Executive Officer pursuant to
          Section 302 of the Sarbanes-Oxley Act of 2002.

  31.2    Certification of the Chief Financial Officer pursuant to Section 302
          of the Sarbanes-Oxley Act of 2002.

  32.1    Certification of the President and Chief Executive Officer pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002.

  32.2    Certification of the Chief Financial Officer pursuant to Section 906
          of the Sarbanes-Oxley Act of 2002.
</TABLE>