Donald C. Runaldue Project Executive ExxonMobilCourageous Leadership During Turbulent TimesModerator

Presentation FlowIntroductionsThe ChallengesOur Jobs at ExxonMobil / Fluor / Emerson Courageous LeadershipExamplesCase StudiesDiscussions

Courageous LeadershipIndustry has faced enormous challenges from the worst economic times since the great depressionSome are just starting to say the tide may be turningWhat have leaders done to position for the longer term and the recovery?

G7 Composite Leading Indicators and Industrial Production Index 3MMA of Year / Year 1(1) Three Month Moving Average Year over YearData source: CLI and IPI from OECDEMI2009My Forecast was wrong in February, and the continued weakness in the Global economies continues. David Farr, Chairman / CEO Emerson Electric Products Group Speech May 20, 2009

My Job at ExxonMobilProject Executive Provide leadership on capital projectsFace the challenges in projectsBut similar challenges todayNeed to work together for all to be successfulNeed qualified motivated teamsMust have an everlasting dogmatic focus on safety

Jim Scotti Senior Vice President & Chief Procurement Officer, Fluor CorporationCourageous Leadership During Turbulent TimesPanelist

TopicsCenter-Led / Global OrganizationSupplier PartnershipsLow-Cost Country SourcingUnderstanding the MarketInvesting in the Future

My Job at FluorManaging a Center-Led / Global OrganizationMaterial ManagementContract ManagementFluor Supply Chain SolutionsLogistics2,000 Resources Globally$13.6 Billion Annual SpendCorporate ProcurementTravelCENTER-LEDPROCUREMENT

My Job at FluorManaging a Center-Led / Global OrganizationHouston, 662Procurement HeadquartersOver 2,000 Procurement Professionals Worldwide

Managing Supplier PartnershipsKeep the larger purpose in mindWork collaboratively for project successListen and consider options that may differ from their own preferences or experienceAsk for only appropriate concessions from partnersAdequately assign risk to partners who can mitigateTrust, but verify

Managing Supplier PartnershipsSuppliers and subcontractors are critical to successful project execution60-70% of typical projects TIC based on materials, equipment, and subcontracted servicesSupplier integration promotes greater efficiencies by allowing each stakeholder to leverage their strengthsWorking with suppliers, instead of treating them as adversaries or risk holders, leads to relationships that work in both good and difficult times

Managing Supplier PartnershipsThe PEpC ProcessCOST INFLUENCETIME (PROJECT LIFECYCLE)EPC becomesPEpCThe ability to influence the cost of a project is greatest at the beginning of a project bringing strategic suppliers in early is essential to success.Strategic Suppliers

Managing Supplier PartnershipsTiger Woods & Steve WilliamsA perfect partnership, in good and bad timesWoods caddy since 1999Also caddied for Raymond Floyd and Greg NormanWoods and Williams are friends, in addition to their professional relationshipTrust, but verify!

Managing Supplier PartnershipsHow Owners Contribute to Success

Appropriate allocation of risk between owners, contractors, and suppliersAppropriate allocation of risk is key to developing and maintaining trust across all execution partnersEach partner should only be expected to accept risks for those aspects they can mitigateAllowing relationships and trust to develop between all partiesUnderstanding that a single project is only one element of a much larger business relationshipContractors and suppliers recognize that successful project execution and client satisfaction are key factors to securing future engagements

Managing Low Cost Country SourcingLCCS provides 15-40% total cost savings versus non-LCCS region competitive biddingLower labor costsLower raw materials costsFluor rates and monitors LCCS suppliers Price differentials against US baselineDelivery times, schedule risk, qualityStrategic supplier agreements developed with suppliers in low cost and emerging marketsProven track records on projects with Fluor, other contractors, and ownersLCCS opportunities exist in several locationsChinaIndiaVietnamNew DelhiShanghai

Managing Market IntelligenceMaterial Market Intelligence Services (MMIS) Monthly Material Market Bulletins for our projects, estimating groups, and clients that contain market specific information and trend analyses for select material and equipment categoriesSupplyDemandPricing

* Cost reductions achieved through increased efficiencies from more experienced personnel, fewer hours and less turnover. Source of Oil Price and % GDP Growth Forecast: Global Insight Apr 17, 2009 the most consistently accurate economic forecasting firm in the world.Bridging Activities Procure = 55% Estimate Construction = 30%Detailed Design = 10%.Major EquipPurchasedPipe Steel FEED = 5%Owner ApprovalOperate PlantLow Cost WindowProject Cash OutflowProjects Commencing in 2009 Q1 Have Potential to Capture the Anticipated Low Cost Window

20092010201120122013Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Full% GDP World-2.7-3.1-3.0-1.40.71.52.22.73.13.53.74.04.44.24.14.14.1Oil Price $/Barrel4344454853555456576063676973767885Cost Change Due To Market% Engineering*000-5-5-5-500+5+5+5+5+5+5+5+10% Procurement-5-5-5-5-15-15-10-10-500+5+5+10+10+10+10% Construction*0-5-5-5-10-10-10-10-500+5+5+5+10+10+10

Investing in the FutureFluor Endowment to Clemson UniversityFluor Endowed Chair of Supply Chain & Logistics$2 million investmentAnnounced September 11, 2007First class began August 20, 200840+ students from Fluor and other companies in the industry

Investing in the FutureFluor Endowment to Clemson UniversityFluor Endowed Chair of Supply Chain & Logistics

Fully online; no campus visits requiredGraduates obtain a Masters Degree in Engineering with a Concentration in Supply Chain from a fully accredited US UniversityContinued support and input from owners, contractors, and suppliers is required

Melissa Herkt President & COO PlantWeb Solutions Group Emerson Process ManagementCourageous Leadership During Turbulent TimesPanelist

My Job at EmersonEmerson At-a-Glance 2008$24.8 Billion in salesDiversified global manufacturer and technology providerApproximately 141,000 employees worldwideHeadquarters in St. Louis, Mo.NYSE: EMR Manufacturing and/or sales presence in more than 150 countries255 manufacturing locations, 165 outside the U.S.No. 94 on 2009 FORTUNE 500 list of Americas largest corporationsFounded in 1890*

Summary: Who We AreEMERSON a successful and stable partnerEmerson Process Management a world leader in automationPlantWeb Solutions Group (PSG) combining control and safety systems operations management, and services into integrated digital plant solutionsPSG DivisionsProcess Systems and Solutions Power & Water Solutions Asset Optimization

RosemountMicro MotionTop-WorxRosemount AnalyticalDanielMobreyRoxarFisherBaumannBettisEl-O-MaticShaferMeasurementValves & Regulators DeltaV Ovation DeltaV SIS Syncade Smart Wireless SureService

AMS Suite Services and TechnologiesMechanical EquipmentElectrical SystemsProcess EquipmentInstruments & Valves

PressureTemperatureLevelFlowpHConductivityGas CompositionFlow Computers

Control ValvesRegulatorsValve ActuatorsValve InstrumentsMeasurementValves & Regulators Process Automation Safety Systems Operations Management Remote Automation Wireless Solutions Industry Solutions Asset Management Software Services and Technologies Mechanical Equipment Electrical Systems Process Equipment Instruments & ValvesPSG Operations Group Material Supply Chain Labor Supply Chain Global Project Management Office Product Support Quality Educational Services IT

Integrated Material and Labor Supply Chain

PSG Material Supply Chain Networkintra-hub networkintra-hub networkintra-hub networkAble to reach 98% of customers in 24 hrsDistributes worldwide via intra-hub networkMain Distribution Center is close to suppliers

COST INFLUENCET I M EThe ability to influence the cost of a project is greatest at the beginning of a project driving early strategic supplier integration is essential to success.Supplier Integration: The PEpC ProcessEPC becomesPEpCPEpC Lays the Foundation

Evolution of Project Delivery MethodologiesTraditional PEpC MACTraditional Packaged tendering processPEpC Procure, Engineer, procure, ConstructMAC Main Automation Contractor (a.k.a. MICC Main Instrument & Controls Contractor)

Strategic Partner Selection CriteriaTechnology leaders, not followersBroad scope of supply with > 80% of required disciplineSignificant experience, capabilities & referencesProject delivery excellenceStrong global and local presenceComprehensive lifecycle support

Do Partnerships / Alliances Deliver?Industry research shows quantifiable improvements through Partnerships / Alliances during project delivery and in operationsProven in practice case study presented at 2008 CII Annual ConferenceConstruction Industry Institute RS102-1, Nov 1996

MAC / MICC Benefits & ResultsComplete responsibility for all automationEliminates redundant and overlapping communication chainsSingle organization with globally consistent project management Mitigates traditional I&C problemsReduces the risk of scope expansions, schedule extensions, and cost overrunsProven through real world experience

30% Savings IllustrationTypical MAC / MICC Savings Example

While underlying economics and resulting orders remain very weak , Emerson continues to reposition global assets to achieve best cost structure Emersons long-term strategies align with global megatrendsDeveloping world - infrastructure, urbanizationResource scarcity - energy capacity, renewableEnvironment - energy efficiency, emissionsConnectivity - datacenter and information networks

Courage to Invest & Make the Right Choices Excerpts from D.N. Farr speech to Electrical Products Group, May 20, 2009

Courage in the Face of AdversityThe Wall Street JournalWednesday, July 22, 2009

$728 million Emersons investment in Engineering & Development during 20088,500 number of Engineering & Development personnel worldwide38%... increase in new products as percent of Emerson sales between 1995 and 2008 655 new patents earned in 2008 by Emerson employees globally Emerson is Committed to Identifying and Meeting New Customer Needs*In USD

NP as % of Sales2008$8.8B2013F$12-14B 200820133%9%14%21% 30% 35% 36%40%Record New Product Sales of Nearly $9B in 2008$BillionsNew Product Sales for EmersonNew Product And Technology Investments Continue To Pay Off

Building Technology and Engineering Capacity in Best Cost RegionsHigh CostBest Cost6,0007,2007,7008,5005,5005,000Number of engineers51%49%70%30%64%36%59%41%57%43%53%47%Strong Investment for Emerging Market Sales Penetration

ConclusionCourageous Leadership: Questions to PonderHas your companys behavior with contractors / suppliers changed since the crisis began?Do you value relationships, trust, and reliability more now? How are you investing for the recovery and the future?Are you exhibiting courageous leadership in your job and in your company? What does that look like?Do you really understand the market?Are your additional demands paired with more reward opportunity for your contractors / suppliers?Do you think the crisis has lowered the cost for everything?

Questions & Answers

**********For certain offices, a number of its Procurement resources are located on project sites domestically or are expats. In Calgary, 14 of the procurement professional are expats. In the Aliso Viejo office, 23 are expats and 13 are on project sites domestically. The Houston office has 78 expats and 165 on domestic project sites. The Richland office has 39 expats. In Greenville, 168 of the procurement professionals are on project sites domestically.*****Driven by aggressive cost reduction targets, Fluor has focused on emerging markets globally to provide our clients with total cost savings of 15 to 40% above the savings that can be generated by competitively sourcing from suppliers in the U.S. and Western Europe. These savings are achieved through lower labor costs, reduced costs on manufacturing equipment, raw material supply, etc. Weve found that the use of LCCS can also drive a more flexible and efficient supply chain for companies that operate on a global basis.

When developing SRAs, Fluor scanned the globe in search of high-quality, low-cost suppliers which led us to low-cost countries such as China, Korea, Malaysia and India. Today, approximately 25 percent of our SRA holders are headquartered outside North America; and these agreements have thus far delivered high-quality, low-cost products on time to projects around the world.

Along with great cost advantages and opportunities, LCCS comes with some risk. Fluor considers the balance of risks vs. benefits in each and every country we do business, and we are particularly thorough when evaluating the balance of tradeoffs when engaging in LCCS. Some risks to consider with LCCS include: long lead and delivery times, delivery reliability, unforeseen add-on costs such as taxes and import/export charges, unknown supplier performance, lack of quality guarantees, and differences in local laws and regulations that may or may not protect a company to the same degree as when engaging in business in the U.S. or Europe.

Fluors market intelligence is our greatest differentiator when it comes to LCCS. Many, if not all of the above risks can be managed simply by knowing the conditions of the market you are entering, and then creating risk mitigation strategies prior to engaging the suppliers within that market. Strategies should be flexible enough to change based on continuous monitoring and supplier input.

Additional risk mitigation through SQS, Inspections, and Quality Control will be key to realizing full savings potential.

*********Notes to PresenterThere are 2 versions of this chart. The one WITHOUT the brand names for SENIOR MANAGEMENT audiences who dont know our brands and to whom we need to quickly overview the scope of our capabilities. The chart WITH the brand names is for TECHNICAL audiences who need to know that these strong brands are part of the Emerson portfolio.Its important for customers to understand how our organization fits together. Later in the presentation we are going to talk about how this organization works with customers to deliver the product and/or solution his is looking for.

**Notes to PresenterThere are 2 versions of this chart. The one WITHOUT the brand names for SENIOR MANAGEMENT audiences who dont know our brands and to whom we need to quickly overview the scope of our capabilities. The chart WITH the brand names is for TECHNICAL audiences who need to know that these strong brands are part of the Emerson portfolio.

Its important for customers to understand how our organization fits together. Later in the presentation we are going to talk about how this organization works with customers to deliver these products and services to so that the customer achieves maximum business benefit.

Boxes in yellow represent areas of strategic focus and the extension of the Supply Chain visibility into project operations.*Later on, you will see that the bulk of our largest supplier are located in Asia thus SDC as our largest distribution center***************