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Author:Bill GoldenOwner and Board MemberIntec Mexico, LLC

My personal history:

I have been the president of companies in the USA, Mexico and Europe some of these were private and one was a public company. Sales ranged from $3 - $132 million. All of the companies were in the automotive market.

Relative to Mexican Facilities:

I have been in a Shelter (outsourced services) and a “Stand-Alone”. In fact I started my first Mexican factory with The Offshore Group almost 10 years ago, and then decided it would be a lower cost solution to go to a Stand-Alone. During this time, I built two large factories (Hermosillo and Cuauhtémoc) and certainly experienced all the joys and pains of not only the start ups, but also the operational issues. Both facilities became profitable. However, I determined afterwards that our assumption that the Stand Alone would be lower cost was in reality the opposite.

In 2002 The Intec Group and I founded a new factory with The Offshore Group. The company will produce in excess of $23,000,000 of sales this year. I doubt this growth and performance would have occurred without the assistance of Offshore.

My experience is that the Offshore model not only provided a significantly lower cost solution, but it also recruited and furnished an excellent staff. This allowed us to focus on the real drivers of the business.

Analysis:

The Analysis on the following pages illustrates the Concept, Costs, Distractions and Risks associated with a Stand Alone operation versus an operation within the Offshore Group. The staffing and other assumptions are based on a minimum “Start Up” of a “Stand Alone”. As the “Stand Alone” operation grows in people and complexity, added staffing and costs would be required. The Analysis is also based on my experience in Mexico in both “Stand Alone” and Shelter operations.

Background of the Analysis

The Offshore Group, Inc. www.offshoregroup.com

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Ranking of Costs, Distractions and Risks of a Stand Alone Mexican Facility

These issues are covered by the Offshore Shelter which has proven capability and provides savings through the leveraging of the joint use, expertise and volume.These Costs, Distractions and Risks are ELIMINATED with the Offshore Shelter.

Issue Remarks Cost Distraction RiskFinding low cost Mexican suppliers 8 8 5Qualifying Mexican suppliers 8 8 5Achieving credit with Mexican suppliers 6 6 5Problem resolution w/ Mexican suppliers 8 8 9Travel Hotel rates + arranging training in USA 4 5 5Legal - attorneys Labor, contracts, banking, etc 7 7 8Auditors For Mexican financial statements 5 6 8Banking For payroll and Mexican banking fees 3 6 7Recruitment of staff, Inderct & Direct Labor Stand Alone must advertise or use recruiters at its expense 9 9 7Retention of staff, Indirect & Direct Labor Offshore agreement limits job hopping 7 7 9Busing Daily arrangements and lack of sharing 6 8 3Government Understanding Mexican Law & Regulations/laws. 6 7 8Negotiating Union Contract Requires high level of experience with Mexican Union 8 6 9Managing Union issues Requires high level of experience with Mexican Union 5 8 9Customs USA & Mexico 7 8 10Environmental Offshore provides expertise 4 4 7Medical (Mexican National) Lost Time during production time (Note 1) 7 6 6Collection of IVA 15% Value Add Tax 6 8 7

Higher Training, travel & management costs

For positions that Offshore normally staffs. Stand Alone must train and manage and oversee these functions. 6 9 9

Notes Cost, Distraction and Risk1. Offshore provide Medical appointments with the National Medical -Social Services Rating 1 = Low 10 = High Plus Offshore has Medical facilities on Site

Hardware, skids, office supplies, equipment, certification co's. brokers, contractors, bathroom supplies, vending, scrap, trash, cell phones, rental of equip (copier), etc.

The Offshore Group, Inc. www.offshoregroup.com

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Staff Additions Required for Stand Alone Mexican Facilities

These are positions and functions furnished by the Offshore Shelter which would be required by a Stand Alone Mexican facility to operate in Mexico.These Positions / Costs are ELIMINATED with the Offshore Shelter.

Position Quantity Each Total / Yr. RemarksHuman Resources Manager 1 60,000$ 60,000$ Human Resources Clerk See Remarks 16,500$ 33,000$ 1 per shift per each 50 workersController 1 83,000$ 83,000$ MUST be experiencedFinance AP 1 20,000$ 20,000$ Finance AR 1 20,000$ 20,000$ Includes collection IVAFinance Payroll See Remarks 20,000$ 20,000$ 1 per each 75 peopleFinance GL 1 20,000$ 20,000$ Janitor See Remarks 10,000$ 20,000$ 1 per shift per each 75 peopleCustoms 2 $50 + $30 80,000$ Quantity increases based on part numbers. Min 2 as this is criticalLocal (Mexico) purchasing 2 20,000$ 40,000$ Handles ALL local ordering and vouchingBuilding Maintenance 1 30,000$ 30,000$ Environmental Expert 2,500$ Requires training cost and timeExternal Security 3 10,000$ 30,000$ For plant external security on 3 shifts X 7 daysRetainer for attorney 7,200$

465,700$ External Security provided by OffshoreThis may or may not be required by a Stand Alone Assumes 2 People These can increase based on shifts and number of workers

in each Position

Personnel Cost (fully fringed)

The Offshore Group, Inc. www.offshoregroup.com

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Space, Furniture, Equipment & Supplies Required for Stand Alone Mexican Facilities

These are functional costs furnished by the Offshore Shelter which would be required by a Stand Alone Mexican facility to operate in Mexico.These Costs are ELIMINATED with the Offshore Shelter.

Quantity of Yearly Depreciated Heat/ AC, Elec.Position or Function Staff Space Cost Furniture Equip.* Yrly Cost Cell Phone Office Supplies & Tel cost

HR Manager 1 1,875$ 1,500$ 1800 1,530$ 1,800$ 600$ 450$ HR Clerk (each) 3 750$ 500$ 1300 522$ 1,200$ 500$ Interview & Test Area 0 3,000$ 750$ 500 758$ 300$ 75$ Time clock 650 11$ 400$ 25$ HR Record Storage 300$ 1,000$ Controller 1 1,875$ 1,500$ 2100 1,535$ 1,800$ 1,000$ 450$ Finance AP 1 1,000$ 750$ 1300 772$ 600$ 320$ Finance AR 1 1,000$ 750$ 1300 772$ 600$ 320$ Finance Payroll 1 1,000$ 750$ 1300 772$ 600$ 320$ Finance GL 1 1,000$ 750$ 1300 772$ 600$ 320$ Finance Record Storage 0 1,000$ 1,000$ 0 1,000$ 30$ Customs 2 2,250$ 2,000$ 3000 2,050$ 2,500$ 2,000$ 1,000$ Local (Mexico) purchasing 2 2,250$ 2,000$ 3000 2,050$ 2,000$ 800$ Copiers & Printers 2500 500$ 2,400$ 60$

Expensed annually 17,300$ 13,043$ 6,100$ 12,300$ 4,670$ 53,413$

Capital 17,300$ 13,250$ 20,050$ 13,043$ 6,100$ 12,300$ 4,670$ 86,713$

Notes:1 Space Cost = the space required for staff that a Stand Alone must incur without Offshore.2 Furniture & Equipment Cost = the furniture and equipment that a Stand Alone must incur without Offshore

(Equip. includes: Computer, cables, software, telephone and in some cases a printer.)3 Cell Phone, Office Supplies, Heat / AC, electrical and Telephone costs are those costs that a Stand Alone

must incur without Offshore.

Purchase Cost Yearly

The Offshore Group, Inc. www.offshoregroup.com

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Summary

These are costs absorbed by the Offshore Shelter which would be required by a Stand Alone Mexican facility to operate in Mexico.These Costs are ELIMINATED with the Offshore Shelter.

Cost Item Annual Cost CommentsStaff 465,700$ See Slide 3Space 17,300$ See Slide 4Furniture 13,250$ See Slide 4Equipment 20,050$ See Slide 4Cell Phones 6,100$ See Slide 4Office Supplies 12,300$ See Slide 4Heat AC, Elec. & Tel. 4,670$ See Slide 4Travel expense 6,500$ See Slide 2 to establish Company + Train'g of added staff + ManagingLegal Fees 12,000$ Beyond retainerAudit Fees 20,000$ Annual Statements for MexicoFinding low cost Mexican suppliers 50,000$ Higher costs and lack of volumeQualifying Mexican suppliers 5,500$ See Slide 2 Achieving credit with Mexican suppliers 2,000$ See Slide 2 Problem resolution w / Mexican suppliers 7,000$ See Slide 2 Potentially VERY HIGHTravel (Higher rates for hotels) 2,000$ See Slide 2 Recruitment of staff, Inderct & Direct Labor 15,000$ Includes IDL and DLRetention of staff, Indirect & Direct Labor 12,000$ Lost productionBusing 3,600$ Higher cost due to lack of sharing & volumeGovernment 10,000$ Assumes costs to establish company & potential finesUnion Contract 26,000$ Assumes higher costs than OffshoreCustoms 24,000$ RISK is VERY HIGH - amount is min reserve per yearMedical (Mexican National) 14,000$ Lost production due to doctor visitsCollection of IVA 12,000$ Lost collection amount

Higher training, travel & management costs 15,000$ For positions that Offshore normally staffs. Stand Alone must train and manage and oversee these functions.

775,970$

The Offshore Group, Inc. www.offshoregroup.com

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Summary

•The Costs, Distractions and Risks in a Stand Alone Mexican Facility are substantial.•

•The Costs shown illustrate the added costs beyond the production costs.

•The Distractions will add costs to the cost equation as the plant management will be required to focus on these elements and thus de-focus on the plants production, quality and development.

•The Risks can be severe and unanticipated.

•The Offshore Shelter Eliminates these Costs, Distractions and Risks by leveraging its expertise, volume and experience.

•RESULT: Working within the shelter allows the Factory to focus on its production mission.

The Offshore Group, Inc. www.offshoregroup.com