DoD PACKAGING PILOT PROGRAM Status Update

1. DoD PACKAGING PILOT PROGRAMStatus Update Packaging Pilot IPT 23 August 2000

2. Background • OSD directs pilot implementation • GEAE Evendale, Lynn / GEES Strother, Ontario, Cincinnati • Honeywell Phoenix / Tempe/Tucson • Formal OSD Pilot Program Consulting Group Oversight • Oversight, Metrics, Lessons Learned & Reporting • Pilot Program executed by Block Change modifications • All existing contracts and orders at participating facilities • Prime contractors enable GE/AS to utilize commercial packaging arrangements on all subcontracts • Rapid Improvement Team Deployment • Guideline Development and Scorecard

3. GEAE and Honeywell Metrics • Quantitative metrics show positive trends • Cost Reductions/Savings are occurring • Cycle Time is being reduced • No warranty returns due to packaging problems • Insufficient data to date for statistical inferences • Innovations are being implemented • Anecdotal information positive

4. Proposed Pilot Program Expansion • Current Pilot is “engine” focused • Minimal data to date • Provides little insight into other commodities • Data gathered to date insufficient to support any macro policy decisions • Proposed Pilot Expansion • Broaden Pilot to include other Sectors within the two contractors’ business base • Use other Sectors • Use existing two commercial POCs as liaison • Apply Packaging Scorecard and Metrics review process • Utilize existing packaging IPT for technical coordination • Identify and implement expansion during 2nd & 3rd quarter FY00 • Gather objective data to support policy development

5. Proposed Honeywell Sites • Aerospace Electronic Systems • Boyne City, Michigan • Aircraft Instruments • Implementation: 1 May 2000 • Engine Systems and Accessories • Rocky Mount, NC • Hydromechanical Controls • Implementation: 1 May 2000

6. Expansion Candidates(Initial Candidate List) AM General Corp South Bend, IN B.F. Goodrich Landing Gear Cleveland, OH Bell Helicopter Textron Ft. Worth, TX Boeing Aircraft and Missile Philadelphia, PA Boeing Aircraft and Missile Wichita, KS L-3 Communications East Camden, NJ Lockheed Martin Astronautics Denver, CO Lockheed Martin Vought Systems Dallas, TX Northrop Grumman St. Augustine, FL Raytheon Missile Systems Tucson, AZ Raytheon Systems Ft. Wayne, IN Rockwell Collins Cedar Rapids, IA Sikorsky Aircraft Stratford, CT Sundstrand San Diego, CA

7. Additional Expansion Candidates *Second Candidate List* Electronics and Communications • Lockheed Martin/Denver CO Sent Pkg to Bill Manning • Raytheon/Lexington MA Sent Pkg to Bob Elden Interested Conference Call • Boeing Solid State Electronics/Kent WA Contacted Meredith Murphy • Northrop Grumman/Rolling Meadows IL Contacted Donna Livesay • GTE Unknown • DynCorp Unknown • Rockwell Collins/Cedar Rapids IA Not Contacted General Aerospace • Sikorsky/Stratford CT Unknown • United Tech/Pratt Whitney/Hartford CT Sent Pkg to Paul Robert and DCM. Wants to Pilot.

8. Additional Expansion Candidates *Second Candidate List* -cont’d DoD Overall Vehicles • GeneralDynamics/LimaArmyTank/Muskegon MI Unknown • Carlyle Group Unknown • Borg-Warner(Spring Drummer)Automotive/Chicago IL Sent Pkg to K. Dutkiewicz • RENCO/AM General Corp/South Bend IN Contacted DCM • Stewart & Stevenson/Sealy TX Left Msg with DCM • Oshkosh Truck/Oshkosh WI Left Msg with DCM DoD Ships • Gen Dynamics/Electric Boat/Groton CT Unknown • Newport News Shipbuilding/Newport News VA Unknown • Litton Industries/Marine/Charlottesville VA Unknown • Lockheed Martin/Naval Electronics/Syracuse NY Contacted DCM. No Interest by DCM.

9. 7000 140 6000 120 5000 100 Hours 4000 80 3000 60 2000 40 1000 20 Volume 0 0 1998 Jul-99 Jul-00 Jan-99 Mar-99 Jan-00 Mar-00 Feb-99 Apr-99 May-99 Jun-99 Feb-00 Apr-00 May-00 Jun-00 Sep-99 Oct-99 Dec-99 Aug-99 Nov-99 Avg cycle 2500 2000 1500 100 0 500 0 1998 1999 2000 1998 cum 1999 cum 2000 cum GE Aircraft Engines QMI Cycle Reduction Quality Lot ) (MMT’s PSS Implementation Implementation Number of Reports of Discrepancy ( RoD’s ) since implementation (5/3/99) -- 8 1998 Benchmark Wrong Quantity in a unit pack -- 5 Discrepant Label -- 3 Warranty Returns -- 0 Zero Container Failures Packaging Innovations Packaging Material Costs Dollars (000) • Five reports submitted • Blades in bags Note: 8% increase in fiberboard 1st qtr 2000 • No metal caps • Source packaging • Fiberboard container edge crush test criteria • Foam in Place reduction • Increased Automation • Rationalized fiberboard across GEAE sites • Developing a Foam in Place Replacement-- Plastics Reduction

10. Military Packaging Pilot Status 12 Mo.YTD. Number of Pieces Shipped 415K K Number of Warranty Returns 2 0 Percentage of Warranty Returns 0% 0% Currently monitoring warranty to detect any packaging related discrepancies Innovation report in process for Implemented Items

11. Military Packaging Pilot Status 12 Mo.YTD. Number of Pieces Shipped 415K K Number of Warranty Returns 2 0 Percentage of Warranty Returns 0% 0% Currently monitoring warranty to detect any packaging related discrepancies Innovation report in process for Implemented Items

12. Military Packaging Pilot Status 12 Mo.YTD. Number of Pieces Shipped 415K K Number of Warranty Returns 2 0 Percentage of Warranty Returns 0% 0% Reduction Currently monitoring warranty to detect any packaging related discrepancies Innovation report in process for Implemented Items

13. Thoughts About the Pilot Program • Contractor Comments: “Process, material and equipment groups are all participating.” “How can we make this authority permanent?” “Shipping folks are taking immediate action and are empowered.” “Has acted as a catalyst for areas other than packaging.” “New ideas are pushing the envelope.” “The packaging suppliers have been challenged.” “There may not be enough time in the Pilot to prove the concept.” “The Pilot ROI may not be sufficient to justify participation.” “Warranty requirements are a concern.” • DCMC Comments: “Working very well.” “More rapid and open communication; routine meetings are now the norm.”

14. Pilot Contractor as a SubcontractorFlow Up of Commercial Packaging Practices Existing subcontracts. Where [pilot contractor] is a subcontractor and the subcontract specifies packaging in accordance with a version of Mil-Std-2073 or any standard other than the contractor’s commercial packaging practices, DCMA shall notify the prime contractor that [pilot contractor] is participating in a Pilot Program and is authorized to package items using its standard commercial packaging methods. The DoD buying activity shall modify the prime contract, if necessary, to allow [pilot contractor] to use its commercial packaging practices in performance of its subcontract

15. 1999 Jan - Mar Apr - Jun Jul - Sep Oct - Dec Pilot Program Kickoff 9/10 Pilot Program Charter 10/29 IPT Meetings 10/7 11/5 8/23 3/21-22 12/8 12/10 11/19 11/15 SPI Executive Approval 12/14 2/14 OSD Process 12/21 3/17 IPT Metrics Development 3/5 1/11 ACO Contract MOD 4/21 3/9 Rapid Improvement Team Implementation 4/21 Final Implementation Plan Approved 4/30 Pilot Prg Execution Plan 5/3 Contractor Site Visits Contractor Transition Execution 5/25 5/26 7/30 3/17 2/8 5/7 8/6 1/7 4/7 6/2 PPCG Briefing 9/1 12/1 4/27 2/14 6/21 12/10 9/17 9/21 12/14 Frontline Forum Research Briefing DUSD(L) & ADUSD(AR) SPI Executive Briefing SPI Executive Briefing 3/27 6/15 12/13 SPI Executive Briefing SPI Executive Briefing SPI Executive Briefing SPI Executive Briefing SPI Executive Briefing Packaging Pilot Schedule 1998 2000 TASK Sep - Dec Jan - Mar Apr - Jun Jul - Sep Oct - Dec 6/25 Briefings SPI Executive Briefing 8/23/00

16. PLAN FOR REPORTING AND EVALUATING RESULTS 11/15 Jul Jul Aug Aug Sep Sep Oct Oct Nov Nov Dec Dec 5/3 10/1 9/1 12/1 6/1 12/8 3/1 8/1 8/1 4/7 1/7 6/2 12/8 8/23 3/21-22 6/25 12/13 1/11 3/27 6/15 SPI EC SPI EC ARSSG SPI EC SPI EC 1999 2000 Action May Jun Jan Feb Mar Apr May Jun Pilot Launches Internal Reports PPCG Briefing IPT Meeting Other Briefings 9/1 12/1 9/21 12/14 9/17 SPI EC SPI EC SPI EC 8/23/00

17. Balanced Scorecard Commercial Packaging Pilot Program KEY PERFORMANCE FACTORS New Process Operating Cost Minimization of Plastics Pak Cycle Time Cost of Packaging Innovation Quality Protection (By end of program) Reduct-ion in overall Pak costs of 10% over current baseline to package military items No increase in cost of O&M due to innovation for program code item No increase in quantity of plastic materials over 3 years No decrease in marine degradable materials over 3 years Reduce Pak cycle time by 10% Tested innovations within 1 year reported to IPT that can be transferred 10% increase per year Clear input of end user RQMB, lower hassle of Introducing Innovation, increase in items offered by DoD Pac specialist No more than 1% (project code items) returns under warranty Zero Safety Problems Zero impact on readiness Goals (in priority order) Dollars Track O&M costs trend for program code items Vendor efforts to reduce plastics & increase degradables Time # of innovations submitted to DoD Log when submitted (briefing) Survey of Vendor Personnel # of package failure results in part damage/failure Survey of end-user satisfaction Performance Measures Calculate the difference be-tween baseline military packag-ing costs and pilot program military packag-ing costs. Report periodically as required Surveys-sample incrementally to baseline & look for trends Report of survey Trends out of depots/Users on DD1225/364s Visit every 6 months for observations & discussions Vendors report on actions taken Baseline Log in/Log Out of current Mil Pak vs innovation Sampling done along with cost baseline Review Log at IPT meetings Survey prior to IPT meeting Supply Discrepancies Reports Warranty Cards (DCMC, DLA, AMS) Interview, Questionnaire or observation with immediate reporting Performance Drivers F IPT Sub Team F Local Vendor Site F ICPs Roll up to IPT F Frank Sechrist R Local Vendor Site F Local Vendor Site F Local Vendor Site F IPT Sub Team F Local DCMC Rep will log R Industry Rep will review Action Officer