Phil Lilja- GCC Richard Hackney- RSM

1. National Accounts - Walk the Talk Phil Lilja- GCC Richard Hackney- RSM

2. Why Sell Controls to National Accounts? • The “enigma” that can differentiate • save you from the reverse auction? • Double the job margin when you include contracting • Reduce warranty costs through monitoring • Lead to a long-term subscription including service contracting • but….

3. Barriers to National Account Control Work • Customer awareness • is Trane in this business? • Need better product solutions • Poor inter-office communications • No sharing of rewards • what does my office get when McMart comes to town? • No standard cost model • (I don’t think?) job made money!

4. Today’s Agenda • Land of Opportunity • National Account control business $$ • WIIFM? • selling new or adding controls to existing accounts • what’s good about being the job site office? • Promotional plans for GNA controls • Control products to fit GNA customers

5. Today’s Agenda • Contracting: • using the standard financial model • defining the standard process • Getting your piece of the action • Gross margin based model • Sharing the reward pool • incentives for both selling and being the job site office

6. Today’s Agenda • Contract roles: who does what? • scope share for those involved • Tools for leveraging success • in place, and on the way • Your thoughts, reactions and suggestions

7. Are We In The Business? • Some success in the early 1990s • T100 with BMN • global control capabilities in BMN • Lowe’s, Best Buy, theatre chains • Tracker GNA customer base has quietly grown substantially since mid 1990s • Pilot, Abercrombie &Fitch, CompUSA • But GNA controls mostly “set aside” the past 8-10 years

8. Are We In The Business? • New focus on GNA controls • GCC dedication • Trane vision focus on customers definitely includes national accounts • New and upgrade opportunities for T100/Summit customers • Tracer Summit Enterprise Management package brings back BMN features, and more • back on our feet!

9. Chain Store Age Magazine Ad 2002

10. Land of OpportunityTop 100 U.S. Retailer HQs

11. Top 100 U.S. Retailers$1,173,057,562,00 Shoe stores 0.8% Hard lines stores 9.5% Mail-order 1.5% Apparel stores 3.7% Discount stores 12.8% Electronic retailers 3.5% Supercenters 9.0% Sears, Penneys 3.4% Warehouse wholesale clubs 6.2% Military exchanges 0.8% Home centers 6.8% International 4.6% Convenience stores 1.9% Supermarkets 21.4% Department stores 6.0% Drug stores 8.1% Source: Chain Store Age Magazine August 2002

12. “Easy” targets • Retailers one large category • multiple, consistent designs • Restaurants • another big list! • Focused offers for their business • http://www.chainstoreage.com/research_desk/ industry_data/top100co/top100_companies.htm

13. Basic Thermostat Customers Big Box Customers Novar Prevalent Tracker Customers Target Market Basic Thermostat Customers Big Box Customers Novar Fading Retail National Account Market Existing Market Target Market Building/system size and complexity

14. Target Market Analysis • Primary market: 2003-2004 • retail new construction • current Trane unitary customers • Secondary market • retail retrofit -same customers • leverage operational consistency • Additional segmentation- growth • drug and specialty stores

15. Target Market Analysis Novar dominant with “Big Box” retailers with product and service influence fading as customers demand interfaces to RTU controls (2004) and their margins erode Many smaller-store retailers use only programmable thermostats Large opportunity to move thermostat customers up to Tracker-level control

16. Trane Control Product & CapabilitiesMeet Market Opportunities New Tracker meets control needs of typical unitary RTU retail space Tracker installation simplicity minimal & repeatable wiring commissioning by “less expert” techs NAEs sell RTUs today... Tracker as an “accessory” a step forward as we work on our inter-territory processes

17. GNA Sales- NAEs Customers You need this... I want that... Who can I sell this package to? I need that... I can sell more RTUs to the same GNA customer with Tracker I can save money... I see the added value of Tracker I can sell Tracker with RTUs There are Trane controls for RTUs Oh, Trane does controls Awareness Two Targets for Messages Sale Opportunity Motivation Acceptance

18. Feature- Benefit Messages • Centralized facility control • Energy management with payback • Much more for same $ (or little more) • Lighting control • More information • Remote troubleshooting • Trusted manufacturer-business partner

19. Key Tactics 2003 • Tracker GNA sales kit • Sales brochure - leave behind • Customer PowerPoint presentation • GNA sales kit at GNA sales meeting • Financial calculator (to find 15%) • Co-market Trane equipment/service • Trade shows • SPECS, EEI

20. Summary - GNA Controls Marketing • Opportunity for 2003 • new Tracker product • simple message to targeted customers • many mid-size RTU customers • NAEs know RTUs • Tracker an easy add • current cross-territory distribution works best with delivered product

21. National Account Controls Product Update • Tracer Summit • Enterprise Management option • shared database for multiple users • Tracker V11- available now • Tracker V12- mid 2003

22. Tracer Summit Enterprise Management Options Tracer Summit shared database server Client Workstation 1 Client Workstation 2 Client Workstation 3 Modem TCP/IP to server TCP/IP BACnet/IP to BCUs Dial-up connection Building Control Unit Tracker EMTK Tracer 100

23. Summit GNA Features • Global scheduling • Site scanning • Alarm forwarding to pagers/phones • Database server for multiple operators • “One for all” views and changes • shared database- “good housekeeping” • Legacy support • T100 • Tracker V1-6

24. Tracker V11 and V12 • V11 now available for GNA sales • KW/KWH metering and energy reports • trend logs • 15 points x 64 events • V12 mid 2003 • IP communications • no phone line or modem call $$ • All-site alarm log

25. Tracker V12 National Account Headquarters Network access and firewall negotiation required Global Alarming Site Status Site Management Modem Regional/District Service Tracker PC WS Global Service Technician Tracker PC WS Internal Network Direct Connect RS-232 Ethernet/IP Service Technician Tracker PC WS Global Operator Tracker PC WS Global Operator Tracker PC WS

26. Continuing GNA Product Updates for 2003-04 • Central enterprise management server to link all customer sites • Tracker and Tracer Summit • central (single) web page server • global scheduling for Tracker • legacy support via web browser • T100 and Tracker V1-6 (EMTK) • competitive system gateways

27. 3-25 Ton Rooftops Product Updates • Adding thermal expansion valves • Face split coils • Hot gas re-heat • Implementing Reliatel in the Voyager product April 2003

28. “Delivered” Jobs Typically unitary Retail/Restaurant “Cookie-cutter” Simple Tracker or Tracer Summit Selling office Subcontracts installation and commissioning Job site office Warranty as needed Applied Jobs Applied equipment On-site expertise Variable design (More) complex Typically Tracer Summit Jobsite office project management contracting commissioning training GNA Project Range

29. What can assist the growth of ICS in GNA? • Standard financial model and policies for the (controls) contracting business. • Standard for Incentive Pay for controls contracting. • MOPP 34C Task Force, extension of work started by the MOPP-WOR-1 Task Force and in coordination with MOPP 34B (buy/sell, variation)

30. Standard Financial Model(aka Consistent Bookkeeping) • Critical for inter-territory contracting • Ability to compare actual costs to original estimate for both: • selling/contracting office • jobsite office • Eliminate mistrust resulting in inter-office “issues” • Ability to seek and find trends • labor efficiencies • process improvements

31. Standard Financial Model • Single, standard financial model used across all offices for: • estimating • job costing • financial reporting • Includes standardizing allocation of all overhead & operating expenses • Includes standardization of costing & reporting sales incentives • effective ratios seen and understood

32. Standardized Cost #1 Burdened Labor Rates • Burdened Labor defined and introduced to Company-owned offices 2001 • Required implementation January 2002 • Now February 2003... • used in your office? • Burdened Labor Rate (BLR) calculation spreadsheet available

33. Labor Rates • Company-wide defined burdened labor rates a standard for every office • known for each company office • used for every GNA project • Estimating • Job costing • Financial reporting

34. Costing Where Costs Occur • Rates used for where work is performed: for example • engineering work/rates by selling/contracting office • technician work/rates by job site office • Labor rates are known, and used in estimate for each GNA project

35. Applying Burdened Labor Rates on a GNA project Calculated Burdened Labor Rates Job Estimation Job Costing Known and used for each involved office Accurate estimates- reviewed by job site office Financial Reporting Improved job tracking Compensation Better metrics Fairly between offices

36. The Benefits of a Corporate Standard • Local conditions and efficiencies will cause variation in office labor costs • these are expected and known • This facilitates comparisons for you, and for the Company overall • Facilitates comparisons to industry • Facilitates inter-territorial work • CRITICAL for GNA success

37. #2- Consistent Estimating using Trane Estimator • Standard “assemblies” for common control labor tasks • Quantify the type and costs of resources • Estimate subcontract with jobsite office • Identified team players for every job • use BLRs for each office involved

38. What Should You Do? • Review your estimating process and assure it is well performed • Assure that you are using the standard burdened labor rates • Always compare actual costs to original estimates • review standards regularly • Transition to use of the Trane Estimator if not already using it

39. Job costing • Trend Analysis • Revise standards • Signed GNA agreement $$$ $$$ • Informed of pending project(s) • Feedback • Validation • Acceptance • Turnover to customer GNA Controls Job Cycle GNA Selling/ Contracting Office • Job Estimate • Use Estimator • Use BLR • Quoting • Booking • Scheduling • Installation • Contracting Jobsite Office

40. Contract RolesWho does what? • GNA owner can direct which Trane authorized entity shall execute a controls project • per GNA business relationship plan (BRP) • Do what’s best for the customer, local office execution is usually best • NAE at selling office has pricing authority for all projects regardless of location, if they are taking the contract • Jobsite office paid for work performed at standard burdened labor rates plus • Jobsite office receives % of GM associated with local contract work (@ 70% of total)

41. Contract RolesWho does what? • Selling/contracting office must inform jobsite office: • of any upcoming projects in territory • before calling on local representative of GNA • of any work performed planned in territory by contracting office or others • Every office needs an appointed GNA job coordinator • coordination, communications and support • receives commission per jobsite support sales credit (MOPP)

42. Contract RolesWho does what? • Contracting office must include $ for • warranty execution for jobsite office • standard warranty allowance $ transferred to jobsite office • Warranty $ based on local rates • Jobsite office • provides local training • on site warranty, paid through warranty allowance provided

43. Standards for Incentive Pay • Selling resources will engage in influencing customers if they feel they will be fairly compensated, when the project is outside of their territory. • Standards for execution and financial models are key to deliver standards for Incentive Pay.

44. #3- Sharing CommissionsRecommendations of WOR-1 Task Force • Contracting commissions based on % of the gross margin on a project • split within office: typically 55%/45% • validation process is required on the estimate prior to project execution • basis of expected commissions • Commissions will be paid on the delivered gross margin of the job • but not less than 70% of the validated estimate gross margin

45. Commissions on Controls Contracting • Costs using the Trane Estimator • Use standard burdened labor rates • 3 bids on outsource material and subs • Minimum commissions shall be paid at: • 50% job billed • at 70% of Validated Estimate GM • Total commission shall be reconciled and paid at 100% job completion • not including warranty period

46. Resources • Global Controls & Contracting • Dane Taival (651) 407-3829 • Ben Riechers (651) 407-3871 • Phil Lilja (651) 407-4069 • CSO Finance • Randy Berg (608) 787-4004 • Amy Hansen (608) 787-3100 • Dave Ofsdahl (608) 787-4764

47. Tools • Customer relationship Manager (CRM) • Estimator • Burdened labor rate spreadsheet • MOPP-WOR-1 • MOPP-34 • GraphICS

48. Summary • Many opportunities for NEW control business through national accounts • Trane is serious about getting it • new products, developments continue • promotional plans underway • Rewards must be shared between selling and job site offices • standard financial model and policies • One Trane will win national account control business for all of us