TECUMSEH PRODUCTS CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

COMMISSION FILE NUMBER 0-452
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TECUMSEH PRODUCTS COMPANY
(Exact Name of Registrant as Specified in its Charter)

MICHIGAN 38-1093240
(State of Incorporation) (I.R.S. Employer Identification No.)

100 EAST PATTERSON STREET 49286
TECUMSEH, MICHIGAN (Zip Code)
(Address of Principal Executive Offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(517) 423-8411

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Class B Common Stock, $1.00 Par Value
Class A Common Stock, $1.00 Par Value
Class B Common Stock Purchase Rights
Class A Common Stock Purchase Rights

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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

Registrant disclaims the existence of control and, accordingly, believes
that as of March 7, 2002 all of the 5,077,746 shares of its Class B Common
Stock, $1.00 par value, then issued and outstanding, were held by non-affiliates
of Registrant. Certain shareholders, which, as of March 7, 2003, held an
aggregate of 2,279,494 shares of Class B Common Stock might be regarded as
"affiliates" of Registrant as that word is defined in Rule 405 under the
Securities Exchange Act of 1934, as amended. If such persons are "affiliates,"
the aggregate market value as of March 7, 2003 (based on the closing price of
$41.60 per share, as reported on the Nasdaq Stock Market on such date) of
2,798,252 shares then issued and outstanding held by non-affiliates was
approximately $116,407,283.

Numbers of shares outstanding of each of the Registrant's classes of Common
Stock at March 7, 2003:

Class B Common Stock, $1.00 Par Value: 5,077,746

Class A Common Stock, $1.00 Par Value: 13,401,938

Certain information in the definitive proxy statement to be used in
connection with the Registrant's 2003 Annual Meeting of Shareholders has been
incorporated herein by reference in Part III hereof.

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TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

GENERAL

Tecumseh Products Company (the "Company") is a full line, independent
global manufacturer of hermetic compressors for air conditioning and
refrigeration products, gasoline engines and power train components for lawn and
garden applications, and pumps. In addition, as of December 30, 2002, due to the
acquisition of the FASCO Motors Group ("FASCO"), the Company also manufactures
fractional horsepower electric motors and related products for a broad range of
residential and commercial applications. The Company believes it is one of the
largest independent producers of hermetically sealed compressors in the world,
one of the world's leading manufacturers of small gasoline engines and power
train products used in lawn and garden applications, and one of the leading
manufacturers of fractional horsepower motors for the United States market. The
Company also produces a variety of pump products with a wide range of
applications. The Company's products are sold in countries all around the world.

Prior to the acquisition of FASCO, the Company grouped its products into
three principal market segments: Compressor Products, Engine & Power Train
Products and Pump Products. With the addition of FASCO, the Company will form a
new market segment referred to as Electrical Components. This market segment
will include FASCO and certain other operations that were formerly grouped with
Compressor Products.

Compressor Products include a broad range of air conditioning and
refrigeration compressors, as well as refrigeration condensing units. The
Company's compressor products range from fractional horsepower models used in
small refrigerators and dehumidifiers to large compressors used in unitary air
conditioning applications. The Company sells compressors in all four compressor
market segments: (i) household refrigerators and freezers; (ii) room air
conditioners; (iii) commercial and residential unitary central air conditioning
systems; and (iv) commercial refrigeration applications including freezers,
dehumidifiers, water coolers and vending machines. The Company sells compressors
to original equipment manufacturers ("OEMs") and aftermarket distributors.

Engine & Power Train Products consist of (i) two- and four-cycle gasoline
engines for use in a wide variety of lawn and garden applications and other
consumer and light commercial applications and (ii) transmissions, transaxles
and related parts for use principally in lawn and garden tractors and riding
lawn mowers. The Company sells engine and power train products to OEMs and
aftermarket distributors.

Pump Products include (i) small submersible pumps used in a wide variety of
industrial, commercial, and consumer applications and (ii) heavy-duty
centrifugal type pumps used in the construction, mining, agricultural, marine,
and transportation industries. The Company sells pump products to distributors,
mass merchants and OEMs.

Electrical Component Products include AC and DC electric motors, blowers,
gear motors and linear actuators for a broad and diverse set of applications
across many industries. These markets include automotive, appliance and consumer
durables, heating and cooling equipment, computer and office equipment,
industrial machinery, commercial equipment, aerospace and healthcare to name a
few.

In addition to motors, the Company also manufacturers other electrical
components that work in tandem with electric and electronic devices to manage
and regulate their operation and provide connectivity and other motor parts for
sale to external customers. These products include overloads, relays,
thermostats, terminals, laminations and electronic circuit boards. Recently, the
Company began customer testing of an uninterruptible alternative power system
for use in commercial structures, such as cell towers, that require reliable
backup electrical power sources.

FOREIGN OPERATIONS AND SALES

In recent years, international sales and manufacturing have become
increasingly important to the Company's business as a whole. In 2002, sales to
customers outside the United States represented

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approximately 48% of total consolidated net sales. In addition to North American
operations, compressor products are produced in Brazil, France and India, while
engines are produced in Italy and the Czech Republic.

Products sold outside the United States are manufactured at both U.S. and
foreign plants. Tecumseh do Brasil, Ltda. ("Tecumseh do Brasil"), the Company's
Brazilian compressor subsidiary, sells its products principally in Latin
America, North America, Europe and the Middle East. The Brazilian operation
represents a significant portion of the Company's compressor business. In 2002,
total sales generated by Tecumseh do Brasil amounted to 28% of total Compressor
Products segment sales. Brazilian operating income amounted to approximately 67%
of total Compressor Products segment operating income and approximately 59% of
consolidated operating income for the year, exclusive of nonrecurring items.

The Company's European compressor subsidiary, Tecumseh Europe, S.A.
("Tecumseh Europe"), generally sells the compressor products it manufactures in
Europe, the Middle East, Africa, Latin America and Asia. The Company also has
two manufacturing facilities in India that produce air conditioning and
refrigeration compressors primarily for the Indian appliance market.

In the engine business, the Company has two principal markets. The North
American market is primarily served by the Company's U.S. manufacturing
operations. The European market is served by the manufacturing operations of the
Company's Italian engine subsidiary, Tecumseh Europa, S.p.A. ("Tecumseh
Europa"), and to a lesser extent, by U.S. export sales. Tecumseh Europa produces
light-weight engines primarily for lawn and garden applications along with some
utility applications. In addition, the engine business has a manufacturing
facility in the Czech Republic that produces primarily larger engines and engine
components for export to the U.S. market. In the fourth quarter of 2002, the
Company purchased a facility in Curitiba, Brazil. This facility, when
operational in 2003, will also produce engine components and sub-assemblies for
export to the U.S. and European markets.

FASCO's primary market is North America with some sales in Asia.
Manufacturing operations outside the United States are located in Mexico,
Thailand and Australia. Mexican operations are used to supply the North American
market, while the Australian operations supply Asia. The operations in Thailand
supply both of FASCO's markets.

The Company's dependence on sales in foreign countries entails certain
commercial and political risks, including currency fluctuations, unstable
economic or political conditions in some areas and the possibility of U.S.
government embargoes on sales to certain countries. The Company's foreign
manufacturing operations are subject to other risks as well, including
governmental expropriation, governmental regulations which may be
disadvantageous to businesses owned by foreign nationals and instabilities in
the workforce due to changing political and social conditions. These
considerations are especially significant in the context of the Company's
Brazilian operations given the importance of Tecumseh do Brasil's performance to
the Company's total operating results.

INDUSTRY SEGMENT AND GEOGRAPHIC LOCATION INFORMATION

The results of operations and other financial information by industry
segment and geographic location (including the footnotes thereto) for each of
the years ended December 31, 2002, 2001 and 2000 appear under the caption
"Business Segment Data" in Note 6 to the Consolidated Financial Statements which
appear in Part II, Item 8, of this report, "Financial Statements and
Supplementary Data". This information is presented on a basis consistent with
operations over the respective periods and does not include the segment
identified as "Electrical Components", which was created on December 30, 2002 in
conjunction with the acquisition of FASCO. Future reporting periods will include
this segment and prior period information restated to conform to the Company's
new segment configuration. The information contained under the caption "Business
Segment Data", along with the written discussion in the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" under the caption
"Results of Operations" in this report should be read in conjunction with the
business segment information presented in the following sections entitled:
Compressor Products, Engine & Power Train Products and Pump Products. The
section, entitled "FASCO Motors

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Group", provides information regarding those operations which were acquired on
December 30, 2002, and therefore do not affect the results of the Company for
the historical periods presented.

COMPRESSOR PRODUCTS

The Compressor Products segment is the Company's largest business segment.
A compressor is a device that compresses a refrigerant gas. When the gas is
later permitted to expand, it absorbs and transfers heat, producing a cooling
effect, which forms the basis for a wide variety of refrigeration and air
conditioning products. All of the compressors produced by the Company are
hermetically sealed. The Company's current compressor line consists primarily of
reciprocating and rotary designs with a very limited number of scroll models.

PRODUCT LINE

The Company manufactures and sells a variety of traditional, reciprocating
piston compressors suitable for use in all four compressor market segments. This
line of compressors range in size from approximately 12 horsepower models used
in unitary air conditioning applications to small fractional horsepower models
used in refrigerators, dehumidifiers and vending machines.

Rotary compressors ranging from 5,000 to 18,000 BTU/hour are produced by
the Company for room and mobile air conditioning applications. These compressors
generally provide increased operating efficiency, lower equipment space
requirements, and reduced sound levels when compared to reciprocating piston
models.

Scroll compressors generally offer improved energy efficiency and reduced
noise levels compared to traditional reciprocating designs and are generally
preferred by OEMs for certain products, including unitary central air
conditioning systems and certain commercial applications. The Company has a
scroll compressor product line for the unitary air conditioning market that is
sold in very limited quantities.

MANUFACTURING OPERATIONS

Compressor Products manufactured in the Company's U.S. plants accounted for
approximately 41% of 2002 compressor sales. The balance was produced at the
Company's manufacturing facilities in Brazil, France and India. The compressor
operations are substantially vertically integrated, and the Company manufactures
a significant portion of its component needs internally, including electric
motors, metal stampings and glass terminals. Raw materials are purchased from a
variety of non-affiliated suppliers. The Company utilizes multiple sources of
supply and the required raw materials and components are generally available in
sufficient quantities.

SALES AND MARKETING

The Company markets its U.S., Brazilian and Indian built compressors under
the "Tecumseh" brand and French built compressors under the "Tecumseh
Europe-L'Unite Hermetique" brand. The Company sells its compressor products in
North America primarily through its own sales staff. Major OEM customers are
assigned to sales staff on an account basis. Other customers (smaller commercial
OEMs) are served by sales personnel assigned to specified geographic regions,
and sales to aftermarket customers are made through independent sales
representatives. The Company's U.S., Brazilian, French and Indian operations
each have their own sales staff. In certain foreign markets, the Company also
uses local independent sales representatives and distributors.

Substantially all of the Company's sales of compressor products for room
air conditioners and for household refrigerators and freezers are to original
equipment manufacturers. Sales of compressor products for unitary central air
conditioning systems and commercial applications include substantial sales to
both OEM and distributor customers.

The Company has over 1,200 customers for compressor products, the most
significant of which are commercial customers. In 2002, the two largest
customers for compressor products accounted for 7.6% and 5.2%, respectively, of
total segment sales, or 4.5% and 3.0%, respectively, of consolidated net sales.
Loss of

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either of these customers could have a material adverse effect on the results of
operations of the Compressor Products segment and, at least temporarily, on the
Company's business as a whole. Generally, the Company does not enter into
long-term contracts with its customers in this segment. However, the Company
does pursue long-term agreements with selected major customers where a business
relationship has existed for a substantial period of time.

In 2002, approximately 31% of the Compressor Products produced by the
Company in its U.S. plants were exported to foreign countries. The Company
exports to over 60 countries. Over 90% of these exported products were sold in
the Far and Middle East.

COMPETITION

All of the compressor market segments in which the Company operates are
highly competitive. Participants compete on the basis of delivery, efficiency,
noise level, price and reliability. The Company competes not only with other
independent compressor producers but also with manufacturers of end products
that have internal compressor manufacturing operations.

NORTH AMERICAN OPERATIONS

The domestic unitary air conditioning compressor market consists of OEMs
and a significant compressor aftermarket. The Company competes primarily with
two U.S. manufacturers, Copeland Corporation, a subsidiary of Emerson Electric,
Inc., and Bristol Compressors, Inc., a subsidiary of York International
Corporation. Copeland Corporation enjoys a larger share of the domestic unitary
air conditioning compressor business than either Bristol Compressors, Inc. or
the Company.

Over the last several years there has been an industry trend toward the use
of scroll compressors in the high efficiency segment of the unitary air
conditioning market. Copeland Corporation and other compressor manufacturers
have had scroll compressors as part of their product offerings for some time.
Along with its own manufacturing capabilities, Copeland Corporation is also a
member of the Alliance Scroll manufacturing joint venture with two major U.S.
central air conditioning manufacturers, American Standard's Trane air
conditioning division and Lennox International, Inc. Carrier Corporation, a
subsidiary of United Technologies and a major original equipment manufacturer,
has a joint venture to produce scroll compressors with Bristol Compressors, Inc.

As discussed in the product line section, the Company offers only a limited
line of scroll compressor models for sale through the Company's Cool Products
aftermarket division. The Company continues to believe that the scroll
compressor is important to maintaining a position in the unitary air
conditioning and commercial refrigeration markets and it continues to pursue
development of the scroll compressor in a manner that limits risk to the
Company.

In the domestic room air conditioning compressor market, the Company
competes primarily with foreign companies, as a majority of room air
conditioners are now manufactured outside the United States. The Company also
competes to a lesser extent with U.S. manufacturers. Competitors include
Matsushita Electric Industrial Corporation, Rotorex, Inc., Sanyo Electric
Trading Company, L.G. Electronics, Inc., Mitsubishi, Daikin, and others. The
Company has increasingly struggled with price competition from foreign companies
during the last two years. Downward pressure on prices, particularly in the room
air conditioning market, has continued due to world over-capacity and a market
flooded by cheap Asian products both in North America and in Europe.

In the domestic markets for water coolers, dehumidifiers, vending machines,
refrigerated display cases and other commercial refrigeration products, the
Company competes primarily with compressor manufacturers from the Far East,
Europe and South America, and to a lesser extent, the United States. Competitors
include Matsushita Electric Industrial Corporation, Danfoss, Inc., Embraco,
S.A., Copeland Corporation and others.

The household refrigerator and freezer market is vertically integrated with
many white good producers manufacturing a substantial portion of their
compressor needs. The Company's competitors include AB

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Electrolux, Matsushita Electric Industrial Corporation, Embraco, S.A., Danfoss,
Inc., and others. The Company has an extensive product line in this market which
includes both reciprocating piston and rotary type compressors with a reputation
for reliable field performance.

In light of the domestic competition and world over-capacity situation, the
Company has continued to take actions begun in late 1999 to consolidate North
American compressor manufacturing capacity. The objective is to reduce the cost
structure of the Company's domestically produced compressor models and improve
the quality performance, thereby offering a more competitively priced product to
our customers. In the first quarter of 2002, the Company recorded a charge of
$4.5 million in connection with the relocation of rotary compressor lines from
the U.S. to Brazil. The charge represents primarily the write down of certain
unusable equipment.

EUROPEAN OPERATIONS

Tecumseh Europe sells the major portion of its manufactured compressors in
Western Europe, and competes in those markets primarily with several large
European manufacturers, some of which are captive suppliers, and to a lesser but
increasing extent, with manufacturers from the Far East and Brazil. Competitors
include AB Electrolux, Embraco, S.A., Danfoss, Inc. and others. Tecumseh Europe
produces compressors primarily for the commercial refrigeration market.

BRAZILIAN OPERATIONS

Tecumseh do Brasil competes directly with Embraco, S.A. in Brazil and with
Embraco and several other foreign manufacturers in Latin America. Historically,
Tecumseh do Brasil has sold the major portion of its manufactured compressors in
Latin America, North America, Europe and the Middle East. Significant
devaluations of the Brazilian Real in 1999 and 2002 have set the stage for
Tecumseh do Brasil to better compete in foreign markets, resulting in
approximately 66%, 64% and 61% of its production being exported in 2002, 2001
and 2000, respectively.

INDIAN OPERATIONS

Tecumseh Products India, Ltd. has two compressor manufacturing facilities
in India that sell to regional markets. Major competitors include the Indian
manufacturers Kirloskar Copeland Ltd., Carrier Aircon Ltd., Godrej, Videocon,
BPL and others. Tecumseh Products India, Ltd. produces compressors for the air
conditioning and refrigerator and freezer markets. In 2002, approximately 31% of
its sales were made to a single customer, and the loss of this customer would
have a significant impact on the results of operations of this facility, and to
a lesser extent, on the consolidated results of the Company as a whole.

RESEARCH

Ongoing research and development is another method in which the Company
strives to meet its competition. The ability to successfully bring new products
to market in a timely manner has rapidly become a critical factor in competing
in the compressor products business as a result of, among other things, the
imposition of energy efficiency standards and environmental regulations
including those related to refrigerant requirements. These factors are discussed
below.

REGULATORY REQUIREMENTS

Chlorofluorocarbon compounds ("CFCs"), the primary refrigerants used in
household refrigerators and freezers and in commercial refrigeration equipment,
have been identified as one of the leading factors causing depletion of the
earth's ozone layer. Under a 1992 international agreement, production of CFCs in
developed countries was phased out January 1, 1996. The Company began producing
compressors using alternative refrigerants (approved by the U.S. government) for
the commercial refrigeration market in late 1992 and for the refrigerator and
freezer market during 1994. The Company believes that its rapid development of
products using non-CFC refrigerant technology has improved its competitive
position in these markets.

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Hydrochlorofluorocarbon compounds ("HCFCs") are used as a refrigerant in
air conditioning systems. Under a 1992 international agreement, HCFCs will be
banned from new equipment beginning in 2010. Some European countries began HCFC
phase-outs as early as 1998, and some have fully eliminated the use of HCFCs as
early as 2002. Within the last several years, the Company has approved and
released a number of compressor models utilizing U.S. government approved
hydrofluorocarbons, ("HFC") refrigerants, which are considered more
environmentally safe than the preceding refrigeration compounds. HFCs are also
currently under global scrutiny and subject to possible future restrictions.

In the last few years, there has been an even greater political and
consumer movement, particularly from northern European countries, toward the use
of hydrocarbons ("HCs") as alternative refrigerants, moving further away from
the use of chlorine (which depletes the ozone layer of our atmosphere) and the
use of fluorine (which contributes to the "green-house" effect). Both Tecumseh
do Brasil and Tecumseh Europe have compressor products available for sale that
utilize hydrocarbon refrigerants. Hydrocarbons are flammable compounds and have
not been approved by the U.S. government for air conditioning or household
refrigerator and freezer applications. It is not presently possible to estimate
the level of expenditures that will be required to meet future industry
requirements or the effect on the Company's competitive position.

The U.S. National Appliance Energy Conservation Act of 1987 (the "NAECA")
requires specified energy efficiency ratings on room air conditioners and
household refrigerator/freezers. Proposed energy efficiency requirements for
unitary air conditioners were published in the U.S. in January 2001 to be
effective in the year 2006. The European manufacturing community has issued
energy efficiency directives that specify the acceptable level of energy
consumption for refrigerators and freezers. These efficiency ratings apply to
the overall performance of the specific appliance, of which the compressor is
one component. The Company has ongoing projects aimed at improving the
efficiency levels of its compressor products and plans to have products
available to meet known energy efficiency requirements as determined by our
customers. Some of the Company's compressor products already meet or exceed the
new energy efficiency standards. It is not presently possible to estimate the
level of expenditures that will be required to meet the new standards or the
effect on the Company's competitive position.

ENGINE & POWER TRAIN PRODUCTS

Small gasoline engines account for a majority of the net sales of the
Company's Engine & Power Train Products segment. These are used in a broad
variety of consumer products, including lawn mowers (both riding and walk-behind
types), snow throwers, small lawn and garden tractors, small power devices used
in outdoor chore products, generators, pumps and certain self-propelled
vehicles. The Company manufactures gasoline engines, both two- and four-cycle
types, with aluminum die cast bodies ranging in size from 2 through 22
horsepower and with cast iron bodies ranging in size from 12 through 18
horsepower. The Company's power train products include transmissions, transaxles
and related parts used principally in lawn and garden tractors and riding lawn
mowers.

MANUFACTURING OPERATIONS

The Company manufactures engines and related components in its five plants
in the United States, one plant in Italy and one plant in the Czech Republic. In
the fourth quarter of 2002 the Company purchased a vacant facility in Curitiba,
Brazil for the manufacture of engine and power train components and sub-
assemblies. This plant is expected to be operational in the first half of 2003.
All of the Company's power train products are currently manufactured in one
facility in the United States. Operations of the Company in this segment are
partially vertically integrated as the Company produces most of its plastic
parts and carburetors, as well as a substantial portion of the aluminum
die-castings used in its engines and power train products.

Significant declines in unit volumes since 1999 have left the Engine &
Power Train operations with over-capacity. During the fourth quarter of 2002 and
2001 the Company recognized nonrecurring charges of $4.1 million and $6.1
million, respectively related primarily to the transfer of certain engine and
component part production from domestic facilities to the Company's facilities
in the Czech Republic.

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SALES AND MARKETING

The Company markets its Engine & Power Train Products worldwide under the
"Tecumseh" and "Peerless" brands. A substantial portion of the Company's engines
are incorporated into lawn and garden and other consumer products under brand
labels owned by OEMs and sold through "do it yourself" home centers, mass
merchandisers, department stores and lawn and garden specialty retailers.

The majority of the Company's Engine & Power Train Products are sold
directly to OEMs. The Company also sells engines and parts to its authorized
dealers and distributors, who service its engines both in the United States and
abroad. Marketing of Engine & Power Train Products is handled by the Company's
own sales staff and by local sales representatives in certain foreign countries.
North America and Europe are the principal markets for lawn and garden products.

Sales in this segment can be significantly affected by environmental
factors affecting the respective selling seasons for the various types of
equipment. For example, snow thrower sales, and therefore the demand for the
Company's applicable engine, show a strong correlation with the amount of
snowfall received. Similarly, the frequency of weather-related and other
interruptions to power supplies or the perceived threat of interruptions, affect
the demand for generators. Factors such as these are largely unpredictable, yet
greatly influence the year-to-year demand for engine products.

In 2002, the three largest (direct ship) customers for Engine & Power Train
Products accounted for 20.9%, 19.4% and 13.6%, respectively, of segment sales,
or 6.7%, 6.2% and 4.4%, respectively, of consolidated net sales. Some of the
engines provided to these customers are incorporated into end consumer products
that are sold by Sears. Total sales to Sears and Sears affiliated suppliers in
2002 and 2001 amounted to 16.8% and 23.5%, respectively, of segment sales, or
5.4% and 8.1%, respectively, of consolidated net sales. The year over year
reduction in the percentage of sales to Sears and Sears affiliated suppliers is
due to a substantial decline in participation in their walk behind lawn mower
segment. Loss of any of this segment's three largest customers, and/or the loss
of Sears as a retail distributor, would have a material adverse effect on the
results of operations of this segment and, at least temporarily, on the Company
and its business as a whole.

COMPETITION

The Company believes it is the largest consolidated producer of engines and
transmissions for the outdoor power equipment industry. However, it remains the
second largest producer of small gasoline engines for lawn and garden
applications in the world. The largest such producer, with a broader product
range, is Briggs & Stratton Corporation. Other producers of small gasoline
engines include Kohler Corporation, Toro Company and Honda Corporation, among
others.

Competition in the Company's engine business is based principally on price,
service, product performance and features and brand recognition. As mass
merchandisers have captured a larger portion of the sales of lawn and garden
products in the United States, price competition and the ability to offer
customized styling and feature choices have become even more important. The
Company believes that it competes effectively on these bases.

ENVIRONMENTAL STANDARDS

The U.S. Environmental Protection Agency ("EPA") has in place regulations
for the engines produced by the company. The Company produces competitively
priced engines that comply with current EPA and California Air Resources Board
("CARB") Standards. Phase-in of the rules for various engine models is in
progress and will continue through the 2008 model year. It is not possible at
this time to determine the related costs of compliance, nor the impact on the
competitive position of the Company. The State of California enforces the CARB
Tier II Emission Standards. A broad range of the Company's engines has been
certified to comply with these emissions standards.

The European Community has implemented noise standards for some categories
of engine powered equipment. These standards take effect in two stages: Stage I
began January 3, 2002 and Stage II is scheduled to take affect January 3, 2006.
They regulate the sound level of the complete product delivered to the end user.

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The Company currently supplies engines to and works with equipment manufacturers
to assure that their products comply with these standards. The European
community has also adopted exhaust emission regulations that will affect the
engines sold into the European community. These regulations will be implemented
in stages with the initial stage taking affect in August 2004. These regulations
are similar to the U.S. EPA regulations and as a result will not impact the
competitive position of the Company.

PUMP PRODUCTS

The Company manufactures and sells submersible pumps, centrifugal pumps and
related products through its two subsidiaries, Little Giant Pump Company
("Little Giant") and MP Pumps, Inc. ("MP Pumps"). Little Giant pumps are used in
a broad range of commercial, industrial, and consumer products, including (1)
heating, (2) ventilating and cooling, (3) parts washers, (4) machine tools, (5)
evaporative coolers, (6) sump pumps, (7) statuary fountains, (8) water gardening
and (9) waste management. Little Giant's products are sold worldwide to OEMs,
distributors and mass retailers. Sales and marketing is executed through Little
Giant's own sales management and through manufacturers' representatives under
the "Little Giant" and "Interon" brand names.

The pump industry is highly fragmented, with many relatively small
producers competing for sales. Little Giant has been particularly successful in
competing in the pump industry by targeting specific market niches where
opportunities exist and then designing and marketing corresponding products. In
the last three years, the "Little Giant" brand name has become more associated
with consumer products due to the success of the subsidiary's water-gardening
product line. However, the focus of this pump manufacturer has long been in the
commercial and industrial market channels of the pump industry, and Little Giant
is pursuing these markets through the development of complete pump systems
utilizing larger pump models.

MP Pumps manufactures and sells a variety of centrifugal pumps ranging in
capacity from 15 to 1,500 gallons per minute, that are used in the agricultural,
marine and transportation industries, and in a variety of commercial and
industrial applications and end products. MP Pumps sells both to OEMs, which
incorporate its pumps into their end products, and through an extensive network
of market segmented distributors located throughout the United States. The
distributors within the network both engineer and sell pump products to end
users and small OEMs. A limited number of pumps are also sold to departments and
agencies of the U.S. government. MP Pumps markets both custom and standard
catalog product through its own sales staff. Pumps sold through distribution
channels are branded under the "MP" and "Flomax" registered trade names. Some
pumps are privately labeled for specific customer use.

FASCO MOTORS GROUP

On December 30, 2002 the Company acquired the stock of the companies that
comprise the FASCO Motors Group from Invensys plc for approximately $411
million. Headquartered in Eaton Rapids, Michigan, FASCO is a leading
manufacturer in the U.S. fractional horsepower ("FHP") motors industry. This
industry is large and diverse with an estimated size of $10.4 billion. The
market is generally stable as many different manufacturers use FHP motors as
components of their applications. The pervasiveness of motors has been due, in
part, to rising disposable income, spending on appliance "necessities" for
remodeling and new construction, increased heating efficiency standards,
increased use of power options in vehicles, growth in applications for motors in
healthcare, leisure, exercise and home maintenance products, a wide variety of
industrial applications, decreases in motor size and improvements in motor
efficiency.

PRODUCT LINE

FASCO manufacturers AC motors, DC motors, blowers, gearmotors and linear
actuators. Its products are used in a wide variety of applications in markets
that include automotive, appliance and consumer durables, heating and cooling
equipment, computer and office equipment, industrial machinery, commercial
equipment, aerospace and healthcare to name a few. Tecumseh believes that FASCO
has products to serve approximately 23% of the market, with its primary focus on
high value-added products and services.

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MANUFACTURING

At the time of purchase, FASCO operated 13 manufacturing locations, 2 of
which were in the process of being closed and were not purchased by Tecumseh
from Invensys. The remaining 11 locations, most of which are owned, are located
as follows: 6 in the United States, 2 in Mexico and 1 each in Canada, Thailand
and Australia. FASCO's facilities are to a large extent vertically integrated,
however, some component parts are purchased from outside suppliers. FASCO
utilizes multiple sources of supply and the required raw materials, including
copper wire, steel, aluminum, zinc and components are generally available in
sufficient quantities.

SALES AND MARKETING

FASCO markets its products principally under the "FASCO" brand. The FASCO
brand name is well-known and nearly a century old. FASCO sells its products
primarily through its own direct sales force supplemented by third party sales
representatives in certain markets. Approximately, 90% of FASCO's sales are to
OEM customers. Sales professionals are assigned to accounts based upon type of
account and geographic region.

FASCO has over 2,500 customers for its products, the largest of which are
in the automotive sector. Historically, the top three customers have accounted
for less the 20% of revenues, with the largest customer accounting for
approximately 10% of revenues. Loss of the largest customer could have a
material adverse affect on the results of FASCO. In addition, certain of FASCO's
customers are competitors of Tecumseh's other business segments. Individually,
none of these customers exceed 1% of FASCO's total sales. Generally, FASCO does
not have long-term contracts with its customers, with the exception of select
major customers.

COMPETITION

All of the application markets in which FASCO competes are highly
competitive. Different competitors are present within each of the application
markets. Key competitors in the automotive market segment include Daewoo, Bosch
and Johnson Electric. Key competitors in residential and commercial market
segments include General Electric, Emerson and A.O. Smith. In the linear
actuator and gearmotor market segments, key competitors include Merkle-Koff,
Bison and Hubbell. Participants compete on various levels, including motor
design and application, customer service and price. Motor design and application
is critical because OEMs are constantly improving their product lines, which
often require new motor specifications. In general, end-use markets today are
looking for smaller, more efficient, faster, cooler-operating and lighter
motors. In addition to competing with other independent motor manufactures,
FASCO also competes to a lesser extent with manufacturers of end products that
have internal motor manufacturing operations.

BACKLOG AND SEASONAL VARIATIONS

Most of the Company's production is against short-term purchase orders, and
backlog is not significant.

Both Compressor Products and Engine & Power Train Products are subject to
some seasonal variation. Generally, the Company's sales and operating profit are
stronger in the first two quarters of the year than in the last two quarters.

PATENTS, LICENSES AND TRADEMARKS

The Company owns a substantial number of patents, licenses and trademarks
and deems them to be important to certain lines of its business; however, the
success of the Company's overall business is not considered primarily dependent
on them. In the conduct of its business, the Company owns and uses a variety of
registered trademarks, the most familiar of which is the trademark consisting of
the word "Tecumseh" in combination with a Native American Indian head symbol.

RESEARCH AND DEVELOPMENT

The Company must continually develop new and improved products in order to
compete effectively and to meet evolving regulatory standards in all of its
major lines of business. The Company spent approximately

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$30.8, $27.6 and $28.1 million during 2002, 2001, and 2000, respectively, on
research activities relating to the development of new products and the
development of improvements to existing products. None of this research was
customer sponsored.

EMPLOYEES

On December 31, 2002, the Company employed approximately 22,000 persons,
55% of whom were employed in foreign locations. Of this total approximately,
5,200 employees were added on December 30, 2002 with the acquisition of FASCO.
Approximately 2,000 of the U.S. employees were represented by labor unions, with
no more than approximately 1,300 persons represented by the same union contract.
The majority of foreign location personnel are represented by national trade
unions. The number of the Company's employees is subject to some seasonal
variation. Excluding the employees added at year end as a result of the FASCO
acquisition, the maximum number of persons employed was approximately 17,200 and
the minimum was 16,800. Overall, the Company believes it generally has a good
relationship with its employees.

AVAILABLE INFORMATION

We make available, free of charge, on our Internet website
(http://www.tecumseh.com) our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of
1934 as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange Commission.

EXECUTIVE OFFICERS OF THE REGISTRANT

Kenneth G. Herrick retired as Chairman of the Board of Directors effective
February 26, 2003. He was given the honorary designation of Chairman Emeritus by
the Board. Todd W. Herrick has succeeded Kenneth G. Herrick as Chairman.

The following are the executive officers of the Company.

- ---------------

(1) Last five years of business experience -- President and Chief Executive
Officer, Tecumseh Products Company 1986 to 2003. (Employed with Tecumseh
Products Company since 1972.)

(2) Last five years of business experience -- Corporate Controller, Tecumseh
Products Company 1999 to 2001. Corporate Controller, RTI International
Metals, Inc. (formerly RMI Titanium Company) 1986 to 1999. (Employed with
Tecumseh Products Company since 1999.)

(3) Last five years of business experience -- Assistant Director of Corporate
Human Resources, Tecumseh Products Company 1990 to 2001. (Employed with
Tecumseh Products Company since 1990.)

ITEM 2. PROPERTIES

The Company's headquarters are located in Tecumseh, Michigan, approximately
50 miles southwest of Detroit. At December 31, 2002 the Company had 43 principal
properties worldwide occupying approximately 11.0 million square feet with the
majority, approximately 9.6 million square feet, devoted to manufacturing.
Seventeen facilities with approximately 5.2 million square feet were located in
nine countries outside the

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United States. The following table shows the approximate amount of space devoted
to each of the Company's three principal business segments and FASCO.

Five domestic facilities, including land, building and certain machinery
and equipment were financed and leased through industrial revenue bonds. All
owned and leased properties are suitable, well maintained and equipped for the
purposes for which they are used. The Company considers that its facilities are
suitable and adequate for the operations involved.

ITEM 3. LEGAL PROCEEDINGS

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. The Company believes that
the EPA's remedy, as specified in the ROD, goes well beyond what is
environmentally protective and cost-effective for the site and largely ignores
the results of the multi-million dollar remedial investigation and feasibility
study that the Company performed under EPA oversight. 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 plant site and upper river constituting the first phase and the middle and
lower river and harbor being the second phase. The Company anticipates entering
into a Consent Decree concerning the performance of remedial design and remedial
action for the plant site, the upper river and the flood plain soils, deferring
for an unspecified period any action regarding Phase II. As part of these
negotiations the Company has agreed to pay an additional $2.1 million in past
response costs to the EPA.

At December 31, 2002 and December 31, 2001, the Company had accrued $29.2
and $28.7 million, respectively, for estimated costs associated with the cleanup
of this site. The actual cost will be governed by numerous factors including the
requirements of the WDNR, and may be greater or lower than the amount accrued.
These factors include the results of further investigations, the details of the
remedial actions required by the EPA (in consultation with the WDNR), changes in
remedial technologies, the extent of any natural resource damages, and the
outcome of any related litigation. Other PRPs may contribute to the costs of any
final remediation, and/or natural resource damage claims, regarding the middle
and lower river and harbor portions of the Site.

The Company, in cooperation with the WDNR, 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 are 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. While the Company has provided for estimated investigation and on-site
remediation costs, the extent and timing of future off-site remediation
requirements, if any, are not presently determinable.

The WDNR requested that the Company join it in a cooperative effort to
investigate and clean up PCB contamination in the watershed of the south branch
of the Manitowoc River, downstream of the Company's New Holstein, Wisconsin
facility. Despite the fact that the WDNR's investigation does not establish the

11

parties responsible for the PCB contamination, the WDNR has indicated that it
believes the Company is a source and that it expects the Company to participate
in the cleanup. The Company has participated in the first phase of a cooperative
cleanup, consisting of joint funding of the removal of soils and sediments in
the source area near its facility. The next phase of the cooperative effort is
scheduled to occur in 2003 involving a stream segment downstream of the source
area. The Company has provided for these costs. Although participation in a
cooperative remedial effort after 2003 for the balance of the watershed is under
consideration, it is not possible to reasonably estimate the cost of any such
participation at this time.

In addition to the above-mentioned sites, 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 December 31, 2002 and 2001, the Company had
accrued $36.3 million and $36.1 million, respectively, for environmental
remediation, including the amounts noted above relating to the Sheboygan River
and Harbor Superfund Site. 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 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.

Various lawsuits and claims, including those involving ordinary routine
litigation incidental to its business, to which the Company is a party, are
pending, or have been asserted, against the Company. Although the outcome of
these matters cannot be predicted with certainty, and some of them may be
disposed of unfavorably to the Company, management has no reason to believe that
their disposition will have a materially adverse effect on the consolidated
financial position or results of operations of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter of 2002 to a vote of
security holders through the solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's Class A and Class B common stock trades on the Nasdaq Stock
Market under the symbols TECUA and TECUB, respectively. Total shareholders of
record as of March 7, 2003 were approximately 513 for Class A common stock and
506 for Class B common stock. There were no equity securities sold by the
Company during the period covered by this report. The Company has no equity
securities authorized for issuance under compensation plans.

MARKET PRICE AND DIVIDEND INFORMATION

RANGE OF COMMON STOCK PRICES AND DIVIDENDS FOR 2002

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RANGE OF COMMON STOCK PRICES AND DIVIDENDS FOR 2001

ITEM 6. SELECTED FINANCIAL DATA

The following is a summary of certain financial information of the Company.

13

Nonrecurring items:

2002 net income included $10.3 million ($6.6 million net of tax or $0.36
per share) in nonrecurring charges. Of this amount, the Engine & Power Train
business had a charge of $5.8 million ($3.7 million net of tax or $0.20 per
share) which included $4.1 million for costs, mostly write-downs of fixed
assets, associated with the relocation of engine component manufacturing, and
the discontinuation of production activities at its Grafton, Wisconsin facility
and $1.7 million for additional environmental clean up costs, primarily
additional past response costs levied by the EPA for its Sheboygan, Wisconsin
facility. Additionally, the Compressor business had a charge of $4.5 million
($2.8 million net of tax or $0.15 per share) for costs related to the relocation
of additional rotary compressor lines from the U.S. to Brazil, primarily the
write-off of certain unusable equipment.

2001 net income included $29.3 million ($18.9 million net of tax) related
to the cost of an early retirement incentive program and an asset impairment
charge of $6.1 million ($3.9 million net of tax) for unusable equipment due to
the transfer of certain engine and component part production from domestic
facilities to the Company's facilities in the Czech Republic.

During 2000 the Company recorded a $33.5 million charge ($23.3 million net
of tax) related to the realignment of its North American and Indian compressor
manufacturing operations.

The 1999 results included credit of $14.1 million ($9.0 million net of tax)
comprised of a $4.6 million gain on the curtailment of employee benefit plans at
a closed plant, a $4.0 million gain on an insurance settlement, and an $8.6
million gain from currency hedging at the Company's Brazilian subsidiary. These
gains were partially offset by charges for plant closing and environmental costs
totaling $3.1 million.

During 1998, the Company recorded a $45 million charge ($28.8 million net
of tax) for asset impairment.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CAUTIONARY STATEMENTS RELATING TO FORWARD LOOKING STATEMENTS

The following report should be read in connection with the information
contained in the Consolidated Financial Statements and Notes to Consolidated
Financial Statements.

This discussion contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act and 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 and snow throwers; iv) the extent to which the decline in
demand for lawn and garden and utility engines will continue, and 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 of materials; ix) actions of competitors; x) the ultimate cost of
resolving environmental 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, the ultimate cost of those
initiatives and the amount of savings actually realized; xiii) the integration
of FASCO into the Company and the issuance of debt in connection with the FASCO
acquisition; and xiv) potential political and economic adversities that could
adversely affect anticipated sales and production in Brazil. These
forward-looking statements are made only as of the date hereof, and the Company
undertakes no

14

obligation to update or revise the forward-looking statements, whether as a
result of new information, future events or otherwise.

OVERVIEW

Tecumseh Products Company is a full line, independent global manufacturer
of hermetic compressors for air conditioning and refrigeration products,
gasoline engines and power train components for lawn and garden applications,
and pumps. In addition, as of December 30, 2002, due to the acquisition of
FASCO, the Company also manufactures fractional horsepower electric motors and
related products for a broad range of residential and commercial applications.
The Company's products are sold in countries all around the world.

The 2002 statement of income does not include any of FASCO's operations,
nor does the discussion and analysis of results of operations set forth below.
For the reporting periods presented products are grouped into three principal
industry segments: Compressor Products, Engine & Power Train Products, and Pump
Products. In future periods the Company will be including the results of FASCO
and certain other operations in a new Electrical Components segment.

Consolidated net income for 2002 amounted to $51.0 million or $2.76 per
share, compared to $42.8 million or $2.30 per share in the same period of 2001.
Included in the full year 2002 reported results were several one-time items,
such as nonrecurring charges of $10.3 million ($6.6 million net of tax or $0.36
per share), and the cumulative effect of a change in accounting for goodwill
($3.1 million net of tax or $0.17 per share) related to the adoption of
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets". On a pro forma basis (excluding these one-time items), full
year results would have been $60.7 million or $3.28 per share.

Full year 2001 results also included several one-time items, such as
nonrecurring charges of $35.4 million ($22.8 million net of tax or $1.23 per
share), a $5.2 million ($0.28 per share) tax credit resulting from a refund of
prior years' federal income taxes, and $2.0 million net of tax ($0.11 per share)
for interest income associated with the tax credit. For comparative purposes,
pro forma results for the 2001 full year (excluding these one-time items) would
have been $58.4 million or $3.14 per share.

The improvement in pro forma results for the full year was attributable to
better results from the Compressor and Pumps Groups, mostly offset by a
substantial decline in profitability at the Engine & Power Train Group.

Consolidated net sales for the full year ended December 31, 2002 amounted
to $1,343.8 million, a decrease of 3.9%, compared to sales of $1,398.9 million
for the comparable period in 2001. Excluding the effects of foreign currency
translation on sales, the lower 2002 sales were primarily attributable to the
Engine & Power Train Group.

RESULTS OF OPERATIONS

COMPRESSOR PRODUCTS

2002 vs. 2001

Sales for the year ended December 31, 2002 amounted to $790.9 million
compared to $804.6 million in 2001. Excluding the $8.5 million reduction in
sales resulting from currency translation, full year sales declined less than
1%. Increases in sales of compressors used in household refrigeration and
commercial applications nearly offset losses of share in the unitary and room
air conditioning markets. Sales of compressors manufactured in North America
were down 19.3% as productive capacities for the residential refrigeration and
room air conditioning markets were moved to Brazil and India where favorable
cost structures enable the Company to more effectively compete. Correspondingly,
sales of compressors manufactured in Brazil and India increased 35.4% over prior
year levels.

Compressor Group operating income, exclusive of non-recurring charges, for
the years ended December 31, 2002 and 2001 amounted to $77.5 million and $54.3
million, respectively. The improvement in operating margins was attributable to
greater coverage of fixed costs, the positive effects of restructuring

15

actions implemented over the last 18 months, and the favorable effects from
devaluation of the Brazilian Real. This improvement in operating margins was
partially offset by declining margins on high-volume, commodity-type compressors
and accelerated spending on new products. The Company's Brazilian operations
contributed approximately 67% of the compressor business's operating profit in
2002, compared to 77% in 2001. While Brazilian operation profits improved year
over year, the decline in the overall percentage was a result of improved
profitability in North America where prior restructuring actions reduced fixed
costs. Indian operations were also profitable for the full year 2002 compared to
a loss in 2001.

2001 vs. 2000

Annual Compressor Group sales declined approximately 13% to $804.6 million
in 2001 compared to $919.8 million in 2000. While sales declines generally
occurred throughout the Company's global operations reflective of the slower
worldwide economy, the majority of the decline was attributable to the
continuing sea-change in the North American room air conditioning market.
U.S.-based manufacturers of room air conditioners continued to shift the
manufacture of completed units to Asia where inexpensive locally produced
compressors were readily available. As a result, the Company lost market share
in the room air conditioning market which continued to erode the volume of North
American-based production. Brazilian sales also declined by approximately 14%
reflecting weakness in the local economy and the effects of currency
translations.

Compressor Group operating income, exclusive of nonrecurring items, was
$54.3 million in 2001 compared to $66.5 million in 2000. Operating margins were
adversely impacted by a number of factors including lower overall selling
prices, reduced fixed cost coverage as a result of lower production volumes and
manufacturing inefficiencies. The Company's Brazilian operations continued to be
a significant component of worldwide compressor operations. Operating margins in
2001 were consistent with 2000 margins, therefore, increasing the Brazilian
operations overall portion of Compressor Group operating profit from 66% in 2000
to 77% in 2001. The Indian operations significantly reduced their operating
losses from 2000 levels when margins were adversely impacted by a lengthy work
stoppage and start-up costs associated with a new manufacturing plant.

ENGINE & POWER TRAIN PRODUCTS

2002 vs. 2001

Engine & Power Train sales and operating income declined for the third
consecutive year. Sales for the year ended December 31, 2002 amounted to $432.3
million compared to $480.9 million in 2001. Operating income, exclusive of
nonrecurring items, for the year ended December 31, 2002 was $1.4 million
compared to $20.0 million in 2001. For the full year 2002, domestic engine unit
volume decreased 8% over the prior year, including a 36% decline in engines for
snow throwers. 2001 was a record year for snow thrower engine sales as a result
of low inventories at retail at the beginning of that season. However, low
snowfall in the winter of 2002 left above average inventories at retail at the
end of the 2002 season and as a result, sales of engines for snow throwers was
below average for the calendar year as fewer were required for the winter of
2003. Declines in volume, less profitable mix and declining contribution margins
were responsible for the substantial deterioration in full year profitability.

2001 vs. 2000

The Engine & Power Train Group's sales and operating income declined for
the second straight year with 2001 results significantly below those for 2000.
Sales declined from $612.8 million in 2000 to $480.9 million in 2001 reflecting
a significant reduction in both engine and transmission sales in the lawn and
garden segment, as well as various utility applications, such as portable power
generators. While sales of engines used for snow throwers was one of the best
seasons in the group's history, they were not enough to offset the demand in
other applications. While the sales declines were reflective of the overall
economic condition, some portion of the decline was attributable to the
Company's declining participation in the walk behind mower segment.

16

As a result of the approximate 22% decline in sales, operating income of
$20.0 million in 2001 was dramatically lower than the $46.8 million posted in
2000. These amounts were exclusive of a nonrecurring charge recorded in the
fourth quarter of 2001 of $6.1 million ($3.9 million net of tax) related
primarily to the transfer of certain engine and component part production from
domestic facilities to the Company's newly acquired facilities in the Czech
Republic.

PUMP PRODUCTS

2002 vs. 2001

Pump business sales for the year ended December 31, 2002 increased 6.3% to
$120.6 million compared to $113.4 million in 2001. Full year operating income
amounted to $14.8 million in 2002 compared to $11.6 million in 2001.
Improvements in sales were primarily in pumps used in consumer applications,
such as water gardening where the overall market continued to grow, and
condensate pumps used in HVAC applications where the Company has gained share in
that market.

2001 vs. 2000

Pump Products sales in 2001 amounted to $113.4 million compared to $117.3
million in 2000, a slight decrease of 3%. Operating income in 2001 was $11.6
million compared to $14.7 million in 2000. Decreased retail sales activity in
the water gardening market, resulting from a soft economy combined with slight
decreases in sales for industrial and commercial applications, were primary
reasons for the decline in sales and profits in 2001.

During the third quarter of 2000, the Pump segment entered the residential
wastewater collection, transfer and disposal market by acquiring the assets of
Interon Corporation. This market, while currently in its infancy, is expected to
grow rapidly as it provides an economical alternative to conventional gravity
wastewater disposal systems. The acquisition of Interon assets has not had a
material impact on reported results of operations, financial position or cash
flows.

NONRECURRING ITEMS

Full year 2002 results were adversely impacted by $10.3 million ($6.6
million net of tax or $0.36 per share) in nonrecurring charges. During the
fourth quarter, a charge of $5.8 million ($3.7 million net of tax or $0.20 per
share) was recorded in the Engine & Power Train business. Included in the charge
was $4.1 million for costs, mostly write-downs of fixed assets, associated with
the relocation of engine component manufacturing, and the discontinuation of
production activities at its Grafton, Wisconsin facility. Also included in the
charge was $1.7 million for additional environmental clean up costs, primarily
additional past response costs levied by the EPA for its Sheboygan, Wisconsin
facility. During the first quarter, a charge of $4.5 million ($2.8 million net
of tax or $0.15 per share) was recorded in the Compressor business. This charge
was for costs, primarily the write-off of certain unusable equipment, related to
the relocation of additional rotary compressor lines from the U.S. to Brazil.

The 2001 results were adversely impacted by $35.4 million ($22.8 million
net of tax, or $1.23 per share) in nonrecurring items. During the third quarter
of 2001, the Company offered an early retirement incentive plan to eligible
Corporate, North American Compressor Group and Engine & Power Train Group
employees. Two hundred fifty (250) employees, representing approximately 78% of
those eligible, or approximately 20% of the total salaried workforce in the
eligible groups, elected early retirement. The cost of providing the pension and
healthcare benefits associated with this plan amounted to $29.3 million ($18.9
million net of tax, or $1.02 per share) and was recorded as a nonrecurring
charge in the third quarter. Ongoing cost savings from this action were
estimated to be in a range of $10 to $12 million annually.

During the fourth quarter of 2001, the Company recorded a charge of $6.1
million ($3.9 million net of tax, or $.21 per share) in the Engine & Power Train
business related primarily to the transfer of certain engine and component part
production from domestic facilities to the Company's facilities in the Czech
Republic.

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In early 2000, the Company recorded $33.5 million in nonrecurring charges
($23.3 million net of tax, or $1.21 per share) related to the restructuring and
realignment of its domestic and international compressor manufacturing
operations. These amounts included approximately $15.5 million ($12.0 million
net of tax) in severance pay and future benefit costs relating to the announced
realignment and manpower reductions in the Company's North American and Indian
manufacturing operations, $3.2 million ($2.0 million net of tax) in plant
closing and exit costs, and $14.8 million ($9.3 million net of tax) in asset
impairment charges for idled, unusable and/or underutilized equipment.

INTEREST INCOME AND INCOME TAX

Interest income and other, net amounted to $15.1 million, $20.3 million,
and $27.9 million in 2002, 2001 and 2000, respectively. The decline was the
result of declining average interest rates over the period. On a comparable
basis, the Company's effective tax rates were 35.4%, 35.6% and 38.7% for the
years ended December 31, 2002, 2001 and 2000, respectively. The 2001 effective
tax rate excludes the effects of a $5.2 million refund of prior years' U.S.
federal income taxes and a $1.3 million charge from the resolution of an income
tax issue in Italy. The higher effective tax rate in 2000 was due primarily to
the inability to recognize a tax benefit on Indian operating losses.

ACQUISITIONS

On December 30, 2002, the Company acquired the FASCO Motors Group from
Invensys Plc for cash of $396.6 million and the assumption of approximately
$14.5 million in debt. FASCO is a leading manufacturer in the U.S. of fractional
horsepower motors. FASCO manufactures AC motors, DC motors, blowers, gear motors
and linear actuators, all of which are used in a wide variety of applications
within the HVAC, automotive, healthcare and appliance industries. The addition
of FASCO will allow the Company to reach new customers and markets and enables
the Company to deliver higher valued-added products and complete customer
solutions in all of its business segments.

The acquisition was financed with proceeds from $325 million in new bank
borrowings and internal cash flows. Of the $325 million in new borrowings, $250
million was from a six-month bridge loan and $75 million was from a new
three-year $125 million revolving credit facility. As the bridge loan was
replaced on March 5, 2003 with permanent long-term financing, it has been
presented as long-term debt in the December 31, 2002 balance sheet.

The purchase price allocation has been prepared on a preliminary basis, and
reasonable changes are expected as additional information becomes available. The
following is a summary of the estimated values of the assets acquired and
liabilities assumed as of the date of the acquisition:

The Company also expended $4.0 million in April 2002 for the acquisition of
Manufacturing Data Systems, Inc., a supplier of Internet-enabled,
open-architecture software motion control applications that increase
manufacturing flexibility and enable agile manufacturing for the Computer
Numerical Control (CNC) and General Motion Control (GMC)markets.

18

In May 2001, the Company acquired an engine manufacturing facility in the
Czech Republic for $14.9 million. This transaction was accounted for as an asset
purchase. The results of operations for this facility since the acquisition are
included in the Company's statement of consolidated income.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary source of cash has been net cash
provided by operations, however, as noted above, to partially finance the
acquisition of FASCO, the Company borrowed $325 million on December 30, 2002.
For the year ended 2002, operating activities generated cash flows of $131.5
million, compared to $173.0 million in 2001. This decrease resulted primarily
from higher working capital requirements offset by higher operating results.

Capital expenditures for 2002 amounted to $73.9 million compared to $65.4
million in 2001. Approximately $41.3 million was spent on capacity enhancements,
new product capabilities and routine upgrades in the Brazilian, French and
Indian compressor facilities. Approximately $5.3 million was spent primarily on
facility improvement and upgrades in the North American Compressor Operations.
Engine operations capital expenditures were approximately $23 million, $17.8
million of which were spent on facilities, capacity expansion and new product
capabilities in Brazil and the Czech Republic.

Net cash provided by financing activities amounted to $353.8 million in
2002 compared to a net cash use of $37.0 million in 2001. Proceeds from
borrowings net of debt repayments in 2002 amounted to $377.5 million compared to
$4.9 million in 2001. The Company paid dividends of $23.7 million and $23.8
million in 2002 and 2001, respectively. During 2001, the Company repurchased
8,500 shares of Class A stock at a cost of $0.4 million and 392,400 shares of
Class B stock at a cost of $17.7 million. There were no stock repurchases during
2002.

The Company continued to preserve its strong liquid financial position by
maintaining a cash and cash equivalent balance of $333.1 million at December 31,
2002, compared to $317.6 million at the end of 2001. Working capital was $503.7
million at December 31, 2002 compared to $605.7 million at December 31, 2001.
The ratio of current assets to current liabilities was 2.1 in 2002 and 3.4 in
2001.

RESTRUCTURING ACTIONS

As discussed under "Nonrecurring Items", the Company has undertaken several
restructuring actions during 2000 through 2002 to improve the overall
competitiveness of the Company. These actions were intended to lower the
Company's overall operating costs and to eliminate non-productive capacity.

During the first quarter of 2002 the Company recorded a charge of $4.5
million ($2.8 million net of tax or $0.15 per share) in the Compressor business
related to the relocation of additional rotary compressor lines from the Tupelo,
Mississippi plant to Brazil. The charge was primarily for the write-off of
certain equipment that is not useable in Brazil.

During the fourth quarter of 2002 the Company recorded a charge of $4.1
million ($2.6 million net of tax or $0.14 per share) in the Engine & Power Train
business. The charge related to the relocation of certain component part
manufacturing operations from several facilities in the United States to the
Czech Republic and the discontinuation of production activities at its Grafton,
Wisconsin facility. The charge was primarily for the write-down of excess fixed
assets and relocation costs.

During the third quarter of 2001 the Company offered an early retirement
incentive plan to eligible Corporate, North American Compressor Group and Engine
& Power Train Group employees. Two hundred fifty (250) employees, representing
approximately 78% of those eligible, or approximately 20% of the total salaried
workforce in the eligible groups, elected early retirement. The cost of
providing the pension and healthcare benefits associated with this plan amounted
to $29.3 million ($18.9 million net of tax) and was recorded as a nonrecurring
charge in the third quarter. Ongoing cost savings from this action are estimated
to be in a range of $10 to $12 million annually.

19

The fourth quarter 2001 charge of $6.1 million ($3.9 million net of tax, or
$.21 per share) in the Engine & Power Train business related primarily to the
transfer of certain engine and component part production from domestic
facilities to the Company's facilities in the Czech Republic.

In the first quarter of 2000, the Company recorded $33.5 million in
nonrecurring charges ($23.3 million net of tax) related to the restructuring and
realignment of its compressor manufacturing operations, both domestically and
internationally. The charges consisted primarily of plant closing costs
including employee termination liabilities, plant decommissioning expenses, the
write-off, removal, and storage of obsolete equipment, a workforce reduction
charge at the Indian compressor operations, and an asset impairment charge.
Included in the $33.5 million charge were cash items of approximately $15.8
million that will be paid from Company funds, and $2.9 million that will be paid
from pension plan assets. The balance of $14.8 million was comprised of non-cash
items, principally the write down or impairment of long-lived assets.

PROJECTED CASH REQUIREMENTS

Capital expenditures for 2003 are projected to be slightly above 2002
levels, however, this includes projected capital expenditures for FASCO, which
was not part of the consolidated Company during 2002. Approximately two thirds
(2/3) of the budgeted capital spending is planned for foreign operations to
expand product offerings. Additional spending may be required for acquisitions
or investments in joint ventures or partnering arrangements should such
opportunities be pursued.

Working capital requirements, planned capital investment, capacity
consolidation, and restructuring costs for 2003 are expected to be financed
primarily through internally available funds, supplemented, if necessary, by
borrowings and other sources of external financing.

LONG-TERM LIQUIDITY

The Company anticipates that it will be able to continue to fund its
long-term liquidity requirements, including capital expenditures and working
capital needs, from internally generated funds, supplemented by borrowings and
other financing arrangements as required. The Company maintains a $125 million
revolving credit facility, which is available for general corporate purposes. At
December 31, 2002 the Company had borrowed $75 million against this line on a
short-term basis to fund the acquisition of FASCO. The Company completed a
private placement of $300 million of long-term senior notes with an average
maturity of 6 years and a final maturity of 8 years on March 5, 2003. Proceeds
from the new notes were used to repay the $250 million in bridge financing and
to repay a portion of the amount borrowed against the revolving credit facility.

Other available financing sources include long-term financing arrangements
in connection with state sponsored investment incentive programs, short-term
borrowing and various other forms of financial instruments to finance foreign
working capital requirements and hedge exposure to foreign currency exchange
risks.

The Company regularly considers various strategic business opportunities
including acquisitions. Tecumseh evaluates such potential acquisitions on the
basis of their ability to enhance the Company's existing products, operations,
or capabilities, as well as provide access to new products, markets and
customers. Although no assurances can be given that any acquisition will be
consummated, the Company may finance such acquisitions through a number of
sources including internally available cash resources, new debt financing, the
issuance of equity securities or any combination of the above.

INTERNATIONAL OPERATIONS

As of December 31, 2002, and excluding amounts related to FASCO,
approximately 44% of the Company's consolidated net sales and 37% of the
Company's total assets were outside of North America, primarily in Brazil,
France, Italy, India and the Czech Republic. Including FASCO, 29% of the
Company's total assets were outside North America, with additional non-North
American locations including Australia and Thailand. Management believes that
international operations have been, and will continue to be, a significant
benefit to overall Company performance. However, the Company's international
operations are

20

subject to a number of risks inherent with operating abroad, including, but not
limited to, world economic conditions, political instability and currency rate
fluctuations. There can be no assurance that these risks will not have a
material adverse impact on the Company's foreign or consolidated net sales, or
on its results of operations or financial condition. For further information,
see Item 7A, "Quantitative and Qualitative Disclosure About Market Risk" below.

IMPACT OF FOREIGN CURRENCIES

Changes in the value of foreign currencies in relation to the U.S. dollar
can affect both reported results and the competitiveness of goods produced for
export in countries like Brazil. While the Company does hedge some of its
short-term forecasted transactions denominated in foreign currencies, the
effects of these contracts were not significant in 2002 or 2001. Alternatively,
the Company does not generally hedge its net investment in its foreign
subsidiaries. During 2002, the U.S. dollar weakened against most currencies
where the Company has operations, with the exception of the Brazilian Real which
devalued 53% against the U.S dollar during the year. As a result, the Company's
investments in its foreign net assets declined in U.S. dollar value by $26.1
million. Under applicable accounting standards, translation adjustments relating
to the Company's investments in foreign affiliates are reflected in other
comprehensive income (part of stockholders' equity) in the period in which they
arise.

ENVIRONMENTAL

As discussed under "Business -- Engine & Power Train
Products -- Environmental Standards", the Company's engines are subject to
increasingly stringent emission and noise standards. In addition, as discussed
under "Business -- Compressor Products -- Regulatory Requirements", the Company
is subject to evolving and sometimes conflicting environmental regulations and
regulatory requirements governing the types of refrigerants used in
refrigeration and air conditioning products.

It is not presently possible to estimate the level of expenditures which
will be required to meet any future industry or governmental regulatory
requirements, or the effect on the Company's competitive position.

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 Item 3 "Legal Proceedings" and Note 8 to the Consolidated 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 December 31, 2002 and 2001 the Company had accrued $36.3 million and
$36.1 million, respectively for environmental remediation, including $29.2 and
$28.7 million, respectively relating to the Sheboygan River and Harbor Superfund
Site. 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
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. For further information on environmental matters, see Item
3, "Legal Proceedings".

NEW ACCOUNTING STANDARDS

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets". Under SFAS
No. 142 goodwill is no longer amortized, but is subject to impairment testing on
at least an annual basis. As of December 31, 2001, the net book value of the
Company's goodwill was $45.1 million. However, as required by the Statement, the
Company tested for impairment at the date of adoption and found that the
goodwill associated with the Engine & Power Train European operations had been
impaired. Accordingly, goodwill amounting to $4.8 million ($3.1 million net of
tax) was written-off and recognized as a cumulative effect from an accounting
change. The net book value of

21

the Company's goodwill at December 31, 2002, was $270.3 million, and included
$223.2 million of goodwill recorded in connection with the FASCO acquisition.
Amortization of goodwill amounted to approximately $1.5 million for the twelve
months ended December 31, 2001.

On January 1, 2002, the Company also adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-lived Assets". This statement, which
superseded SFAS No. 121, addresses accounting and financial reporting for the
impairment or disposal of long-lived assets. There was no material effect on the
results of operations or financial position as a result of adopting this
standard. The nonrecurring items recorded in the first and fourth quarters were
determined in accordance with the provisions of SFAS No. 144.

In June 2002 the Financial Accounting Standards Board ("FASB") issued SFAS
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". The
standard nullifies EITF Issue 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit". In particular, the new standard
applies to involuntary work force reductions and the costs to consolidate
facilities. The statement mostly addresses when such costs can be accrued and
generally delays recognition versus current practice by providing that
liabilities must be actually incurred and not just planned. The standard is
effective for actions occurring after December 31, 2002. To the extent that the
Company takes such actions in 2003, SFAS No. 146 will be applied.

The FASB also issued other standards during 2002, including SFAS No. 148,
"Accounting for Stock-based Compensation -- Transition and Disclosure an
amendment to SFAS No. 123". The Company does not employ the type of stock-based
compensation covered by SFAS No. 148 and does not believe that it or any of
these other standards will have an effect on the Company.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements requires that management make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and revenues and expenses
during the period. Management bases its estimates on historical experience and
other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about carrying values of
assets and liabilities that are not readily apparent from other sources.
Management continually evaluates the information used to make these estimates as
our business and the economic environment change. The use of estimates is
pervasive throughout the Company's financial statements, but the accounting
policies and estimates Management considers most critical are as follows:

Impairment of Long-Lived Assets

It is the Company's policy to review our long-lived assets for possible
impairment whenever events and circumstances indicate that the carrying value of
an asset may not be recoverable. The Company recognizes losses relating to the
impairment of long-lived assets when the future undiscounted cash flows are less
than the asset's carrying value. Assumptions and estimates used in the
evaluation of impairment, including current and future economic trends, the
effects of new technologies and foreign currency movements are subject to a high
degree of judgment and complexity. Changes in the assumptions and estimates may
affect the carrying value of long-lived assets and could result in additional
impairment charges in future periods.

Goodwill and Intangibles

Purchase accounting requires accounting estimates and judgments to allocate
the purchase price to the fair market value of the assets and liabilities
purchased. On December 30, 2002 the Company acquired FASCO for $396.6 million,
recognizing $223.2 million in goodwill and $55 million in intangibles with lives
ranging from 2 years to indefinite lives. These values are based upon
preliminary estimates of the fair market values of the tangible and intangible
assets and liabilities of FASCO at the date of acquisition. These estimates will
be adjusted upon completion of professional asset appraisals.

In addition, the Company has additional amounts of goodwill and intangible
assets recorded from previous acquisitions. These assets, and those recorded in
conjunction with the FASCO acquisition, are

22

subject to periodic evaluation for impairment when circumstances warrant, or at
least once per year. With respect to goodwill, impairment is tested in
accordance with SFAS No. 142, "Goodwill and Other Intangibles" by comparison of
the carrying value of the reporting unit to its fair value. As there is not a
quoted price for the Company's reporting units, fair value is estimated based
upon a present value technique of estimated future cash flows. Assumptions in
estimating future cash flows are subject to a high degree of judgment and
complexity. Changes in the assumptions and estimates may affect the carrying
value of goodwill and could result in additional impairment charges in future
periods. Intangible assets other than goodwill are also subject to periodic
evaluation for impairment and are equally sensitive to changes in the underlying
assumptions and estimates.

Accrued and Contingent Liabilities

The Company has established reserves for environmental and legal
contingencies in accordance with SFAS No. 5. A significant amount of judgment
and use of estimates is required to quantify the Company's ultimate exposure in
these matters. The valuation of reserves for contingencies is reviewed on a
quarterly basis at the operating and corporate levels to assure that the Company
is properly reserved. Reserve balances are adjusted to account for changes in
circumstances for ongoing issues and the establishment of additional reserves
for emerging issues. While management believes that the current level of
reserves is adequate, changes in the future could impact these determinations.
For additional information on environmental liabilities, see Note 8 to the
Financial Statements.

Employee Related Benefits

Accounting for pensions and other postretirement benefits involves several
assumptions relating to expected rates of return on plan assets, determination
of discount rates for remeasuring plan obligations, determination of inflation
rates regarding compensation levels and health care cost projections. The
Company develops its demographics and utilizes the work of actuaries to assist
with the measurement of employee related obligations. The assumptions used vary
from year-to-year, which will affect future results of operations. Any
differences among these assumptions and the Company's actual return on assets,
financial market-based discount rates, and the level of cost sharing provisions
will also impact future results of operations.

OUTLOOK

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

The Company does not expect 2003 worldwide market conditions in its
Compressor and Engine Businesses to be much improved over 2002. Conditions in
these markets will continue to suffer from over-capacity and deflationary
pricing. However, actions to improve profitability in these segments, as well as
the addition of FASCO should improve overall Company earnings in 2003, excluding
any restructuring charges, if cost reduction efforts are sustained.

Full year 2003 results in the Compressor segment are expected to continue
to improve, as they did in 2002, as a result of past actions to consolidate
operations in the U.S. and move production to low-cost locations like India and
Brazil. In addition, the Group will be looking at ways to revitalize U.S.
operations by reversing the negative growth pattern demonstrated over the past
several years. Until this can be accomplished, the Group's reliance on Brazilian
operations for growth and profitability will represent a significant
concentration of risk. Profits from the Brazilian and Indian compressor
operations are expected to grow in 2003 as a result of their additional
productive capacities.

Results in the Engine Group are expected to deteriorate before they
improve. The restructuring actions recognized in the fourth quarter only
represent an initial step in correcting the overall cost structure of the Group
and further actions are expected in 2003 as the new engine component operations
in Brazil commence and further restructuring actions are defined and
implemented. While improvements are not materializing as quickly as desired, the
slower approach has the benefit of not compromising the supply of quality
product to our customers.

23

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market 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.

Credit Risk -- Financial instruments which potentially subject the Company
to concentrations of credit risk are primarily cash investments and accounts
receivable. The Company places its cash investments in bank deposits and
investment grade, short-term debt instruments (predominately commercial paper)
with reputable credit-worthy counterparties and, by policy, limits the amount of
credit exposure to any one counterparty.

The Company uses contemporary credit review procedures to approve customer
credit. Customer accounts are actively monitored and collection efforts are
pursued within normal industry practice. Management believes that concentrations
of credit risk with respect to receivables are somewhat limited due to the large
number of customers in the Company's customer base and their dispersion across
different industries and geographic areas. However, in the Engine & Power Train
Group, the manufacture of small gasoline engine-powered lawn and garden
equipment is dominated, to a large extent, by three manufacturers. The Company
sells to all three of these manufacturers and, as a result, a significant
portion of the Group's open accounts receivable at any time is comprised of
amounts due from these three manufacturers.

A portion of export accounts receivable of the Company's Brazilian
subsidiary is sold at a discount. Discounted receivable balances in the
Brazilian subsidiary at December 31, 2002 and 2001 were $41.2 and $15.5 million,
respectively, and the discount rate was 4.9% in 2002 and 4.8% in 2001. The
Company maintains an allowance for losses based upon the expected collectability
of all accounts receivable, including receivables sold.

Interest Rate Risk -- The Company is subject to minimal interest rate risk
in relation to variable rate, long-term Industrial Development Revenue Bonds and
to short-term variable rate borrowings used by our foreign subsidiaries to
manage their working capital needs. The Company's interim financing of the FASCO
acquisition was subject to variable interest rates, however, these borrowings
were refinanced on March 5, 2003 with fixed rate debt. The Company is also
subject to interest rate risk relating to interest earned on its short-term
funds invested.

Commodity Price Risk -- 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 compressor motors and
components and engines. Company policy allows local management to contract
commodity forwards for a limited percentage of projected raw material
requirements up to one year in advance. Commodity contracts at most of the
Company's divisions and subsidiaries are essentially purchase contracts designed
to fix the price of the commodities during the operating cycle. The Company's
practice has been to accept delivery of the commodities and consume them in
manufacturing activities. At December 31, 2002 and 2001, the Company held a
total notional value of $14.6 and $25.8 million, respectively, in commodity
forward purchasing contracts. The majority of these contracts were not recorded
on the balance sheet as they did not require an initial cash outlay and do not
represent a liability until delivery of the commodities is accepted. However,
commodity contracts at the Company's French compressor subsidiary are
essentially derivative financial instruments designed to hedge the fluctuation
in commodity pricing and, as such, are subject to the provisions of SFAS No.
133.

Foreign Currency Exchange Risk -- The Company is subject to foreign
currency exchange exposure for operations whose assets and liabilities are
denominated in currencies other than U.S. dollars. On a normal basis, the
Company does not attempt to hedge the foreign currency translation fluctuations
in the net investments in its foreign subsidiaries. The Company does, from time
to time, enter into short-term forward exchange contracts to sell or purchase
foreign currencies at specified rates based on estimated foreign currency cash
flows. Company policy allows local management to hedge known receivables or
payables and forecasted cash flows up to a year in advance. It is the policy of
the Company not to purchase financial and/or derivative instruments for
speculative purposes. At December 31, 2002 and 2001, the Company held foreign
currency forward contracts with a total notional value of $4.9 and $15.0
million, respectively.

24

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.

25

MANAGEMENT'S REPORT

To the Shareholders of
Tecumseh Products Company

Management is responsible for the integrity and objectivity of the
financial statements and other information presented in this annual report. The
statements were prepared in accordance with generally accepted accounting
principles and, where necessary, include certain amounts based on management's
best estimate and judgment to reflect the expected effects of events and
transactions that have not been completed. All financial information in the
annual report is consistent with the financial statements.

Management has established and maintains a system of internal accounting
controls to provide reasonable assurance that assets are safeguarded and
transactions are executed in accordance with management's authorization. These
controls are documented by written policies and procedures that are communicated
to employees with significant roles in the financial reporting process. This
system is continually reviewed, evaluated, and modified to reflect current
conditions.

The Audit Committee of the Board of Directors, composed of outside
Directors, assists the Board of Directors in overseeing and monitoring
management's and the independent public accountants' participation in the
financial reporting process. The Audit Committee meets regularly with
management, the internal auditors, and the independent public accountants. Both
the independent public accountants and the internal auditors have unrestricted
access to the Audit Committee with and without management's representative
present, to discuss the results of their examinations and their opinions on the
adequacy of internal accounting controls and quality of financial reporting.

The independent public accountants are engaged to express an opinion on the
Company's financial statements. Their opinion is based on procedures which they
believe to be sufficient to provide reasonable assurance that the financial
statements contain no material errors.

Todd W. Herrick
Chairman of the Board of Directors,
President and Chief Executive Officer

David W. Kay
Vice President, Treasurer and
Chief Financial Officer

26

INDEPENDENT ACCOUNTANT'S REPORT

To the Shareholders and Board of Directors of Tecumseh Products Company

We have audited the accompanying consolidated balance sheets of Tecumseh
Products Company and Subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tecumseh
Products Company and Subsidiaries at December 31, 2002 and 2001 and the
consolidated results of operations and cash flows for each of the three years in
the period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
(SFAS) No. 142, "Goodwill and Other Intangible Assets", and SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets", effective
January 1, 2002.

Ciulla, Smith & Dale, LLP
Certified Public Accountants

January 31, 2003
Southfield, Michigan

27

TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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

28

TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

29

TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

30

TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

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

31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)

NOTE 1. ACCOUNTING POLICIES

Business Description -- Tecumseh Products Company (the "Company") is a full
line, independent global manufacturer of hermetic compressors for residential
and commercial refrigerators, freezers, water coolers, dehumidifiers, window air
conditioning units and residential and commercial central system air
conditioners and heat pumps; gasoline engines and power trains for lawn mowers,
lawn and garden tractors, garden tillers, string trimmers, snow throwers,
industrial and agricultural applications and recreational vehicles; and
centrifugal pumps, sump pumps and small submersible pumps for industrial,
commercial marine and agricultural applications.

On December 30, 2002, the Company acquired FASCO, a leading manufacturer of
electric motors and components, including AC and DC motors, blowers, gear motors
and linear actuators, for a wide variety of industrial and consumer applications
across a broad range of industries.

Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its subsidiaries. The Company's
investments in unconsolidated affiliates are generally accounted for on the
equity basis. All significant intercompany transactions and balances have been
eliminated.

Foreign Currency Translation -- All of the Company's foreign subsidiaries
use the local currency of the country of operation as the functional currency.
Assets and liabilities are translated into U.S. dollars at year-end exchange
rates while revenues and expenses are translated at average monthly exchange
rates. The resulting translation adjustments are recorded in other comprehensive
income or loss, a component of stockholders' equity. Realized foreign currency
transaction gains and losses are included in current income and amounted to a
net gain of $5.2 million in 2002. Amounts realized in 2001 and 2000 were not
significant.

Cash Equivalents -- Cash equivalents consist of commercial paper and other
short-term investments that are readily convertible into cash.

Inventories -- Inventories are valued at the lower of cost or market,
generally on the first-in, first-out basis.

Property, Plant and Equipment -- Expenditures for additions, major renewals
and betterments are capitalized and expenditures for maintenance and repairs are
charged to expense as incurred. For financial statement purposes, depreciation
is determined using the straight-line method at rates based upon the estimated
useful lives of the assets. Depreciation expense was $64.9, $70.5, and $69.3
million in 2002, 2001 and 2000, respectively.

On January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets". This statement, which supersedes
SFAS No. 121, addresses accounting and financial reporting for the impairment or
disposal of long-lived assets. The nonrecurring items in 2002 include $7.2
million for the impairment of unusable assets determined in accordance with the
provisions of SFAS No. 144.

Goodwill and Intangible Assets -- Effective January 1, 2002, the Company
adopted SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS No.
142, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized, but are subject to impairment testing on at least an annual
basis. Other intangible assets continue to be amortized over their estimated
useful lives. Accumulated amortization of goodwill and intangibles was $29.9 and
$25.1 million at December 31, 2002 and 2001, respectively. The Company tested
goodwill for impairment at the date of adoption and found that goodwill
associated with the Engine & Power Train European operations had been impaired.
Accordingly, goodwill amounting to $4.8 million ($3.1 million net of tax) was
written-off and recognized as a cumulative effect from an accounting change. At
December 31, 2002 the Company's goodwill associated with its three reportable
business segments was $39.9 million for Compressor Products, $2.1 million for
Engine & Power Train Products, and $5.1 million for Pump Products. As more fully
explained in Note 13, The Company acquired FASCO on December 30, 2002. This
acquisition was accounted for as a purchase following the accounting standards
established under

32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SFAS No. 141, "Business Combinations", and No. 142, "Goodwill and Other
Intangible Assets". Goodwill associated with the FASCO purchase was
preliminarily estimated to be $223.2 million. The final value of goodwill
recorded at December 31, 2002 is subject to adjustment as third party valuations
are completed. The Company recognized goodwill amortization of $1.5 and $1.7
million in 2002 and 2001, respectively. Net earnings for the years ended
December 31, 2001 and 2000, excluding goodwill amortization, would have been
$43.8 million and $67.2 million, respectively. The Company's accounting policy
for goodwill prior to January 1, 2002 was to amortize goodwill over its
estimated useful life, principally over a forty-year period.

Intangible assets associated with the FASCO purchase were preliminarily
estimated to be $55 million consisting of $35 million in intangible assets
subject to amortization and $20 million in intangibles with indefinite useful
lives. The final value of intangible assets associated with the FASCO purchase
is subject to adjustment as third party valuations are completed. Intangible
assets are included with Other assets on the Consolidated Balance Sheet.

Revenue Recognition -- Revenues from the sale of the Company's products are
recognized upon passage of title to the customer, which, in most cases,
coincides with shipment of the products.

Derivative Financial Instruments -- Derivative financial instruments are
occasionally utilized by the Company to manage risk exposure to movements in
foreign exchange rates. The Company, from time to time, enters into forward
exchange contracts to obtain foreign currencies at specified rates based on
expected future cash flows for each currency. The premium or discount on the
contracts is amortized over the life of the contract. Changes in the value of
derivative financial instruments are measured at the balance sheet date and
recognized in current earnings or other comprehensive income depending on
whether the derivative is designated as part of a hedge transaction and, if it
is, the type of transaction. The Company does not hold derivative financial
instruments for trading purposes. See Note 10 for discussion of adoption of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities".

Product Warranty -- Provision is made for the estimated cost of maintaining
product warranties at the time the product is sold.

Self-Insured Risks -- Provision is made for the estimated costs of known
and anticipated claims under the deductible portions of the Company's health,
liability and workers' compensation insurance programs. In addition, provision
is made for the estimated cost of post-employment benefits.

Environmental Expenditures -- Expenditures for environmental safekeeping
are expensed or capitalized as appropriate. Costs associated with remediation
activities are expensed. Liabilities relating to probable remedial activities
are recorded when the costs of such activities can be reasonably estimated and
are not discounted or reduced for possible recoveries from insurance carriers.

Earnings Per Share -- Basic and diluted earnings per share are equivalent.
Earnings per share are computed based on the weighted average number of common
shares outstanding for the periods reported. The weighted average number of
common shares used in the computations was 18,479,684 in 2002, 18,607,249 in
2001, and 19,218,065 in 2000.

Research, Development and Testing Expenses -- Company sponsored research,
development and testing expenses related to present and future products are
expensed as incurred and were $30.8, $27.6, and $28.1 million in 2002, 2001 and
2000, respectively.

Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts during the reporting period and
at the date of the financial statements. Significant estimates include accruals
for product warranty, self-insured risks, pension and postretirement benefit
obligations and environmental matters, as well as the evaluation of goodwill and
long-lived asset impairment. Actual results could differ materially from those
estimates.

33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2. COMPREHENSIVE INCOME

Accumulated other comprehensive income or loss is shown in the Consolidated
Statements of Stockholders' Equity and includes the following:

NOTE 3. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The Company has defined benefit retirement plans that cover substantially
all domestic employees. Plans covering salaried employees generally provide
pension benefits that are based on average earnings and years of credited
service. Plans covering hourly employees generally provide pension benefits of
stated amounts for each year of service. The Company sponsors a retiree health
care benefit plan, including retiree life insurance, for eligible salaried
employees and their eligible dependents. At certain divisions, the Company also
sponsors retiree health care benefit plans for hourly retirees and their
eligible dependents. The retiree health care plans, which are unfunded, provide
for coordination of benefits with Medicare and any other insurance plan covering
a participating retiree or dependent, and have lifetime maximum benefit
restrictions. Some of the retiree health care plans are contributory, with some
retiree contributions adjusted annually. The Company has reserved the right to
interpret, change or eliminate these health care benefit plans.

The Company uses September 30 as the measurement date (the date upon which
plan assets and obligations are measured) to facilitate the preparation and
reporting of pension and postretirement plan data. Information regarding the
funded status and net periodic benefit costs are reconciled to or stated as of
the fiscal year end of December 31.

34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables provide a reconciliation of the changes in the plans'
benefit obligations, fair value of assets and funded status for 2002 and 2001:

The following table provides the funded status of the plans for 2002 and
2001:

35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables provide the components of net periodic benefit
(income) cost for 2002, 2001 and 2000:

Assumptions used in measuring the benefit obligations were:

For measurement purposes an 8.38% annual rate of increase in the cost of
covered health care benefits was assumed for 2002. The rate was assumed to
decrease each year to a rate of 5.25% for 2008 and remain at that rate
thereafter.

In 2001, the Company offered an early retirement incentive plan to eligible
employees which resulted in the recognition of a curtailment loss of $29.3
million. The accumulated other postretirement benefit obligation was increased
by $11.3 million and additional pension expense of $18.0 million was recorded.

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage point change in
assumed health care cost trend rates would have the following effects:

The Company's foreign subsidiaries provide for defined benefits that are
generally based on earnings at retirement date and years of credited service.
The combined expense for these unfunded plans was $2.6, $3.0 and $2.9 million in
2002, 2001, and 2000, respectively. The net liability recorded in the
consolidated balance sheet was $17.7 and $14.6 million for 2002 and 2001,
respectively. Tecumseh Europe, S.A. has a minimum pension liability of $1.1
million $(0.7 million net of tax effects) which is recognized in accumulated
other comprehensive income.

The Company has defined contribution retirement plans that cover
substantially all domestic employees. The combined expense for these plans was
$2.5, $2.9 and $3.9 million in 2002, 2001 and 2000, respectively.

36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4. INCOME TAXES

Consolidated income before taxes consists of the following:

Provision for income taxes consists of the following:

A reconciliation between the actual income tax expense provided and the
income tax expense computed by applying the statutory federal income tax rate of
35% to income before tax is as follows:

37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of the Company's deferred tax assets and liabilities
as of December 31 were as follows:

The Company's share of accumulated unremitted earnings of foreign
subsidiaries at December 31, 2002 and 2001 was $264.4 and $245.7 million,
respectively.

At December 31, 2002, the Company had net operating loss carryforwards
attributable to foreign operations for income tax purposes of $1.1 million which
expire from 2003 to 2007 if not offset against future taxable income.

NOTE 5. INVENTORIES

The components of inventories at December 31, were:

NOTE 6. BUSINESS SEGMENT DATA

In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", the Company has identified three reportable
operating segments. Operating segments are defined as components of an
enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker(s) in deciding how to
allocate resources and in assessing performance.

The Company's three reportable operating segments are defined as follows:

Compressor Products -- Manufacturing and marketing of a full line of
hermetic compressors for residential and commercial air conditioning and
refrigeration products.

38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Engine & Power Train Products -- Manufacturing and marketing of gasoline
engines and power train components for lawn and garden and utility applications.

Pump Products -- Manufacturing and marketing centrifugal, sump and small
submersible pumps for industrial, commercial, marine and agricultural
applications.

FASCO was acquired on December 30, 2002. Accordingly, none of FASCO's
operating results are included in the Company's operating segment disclosures.
FASCO's assets are disclosed on a separate line in the assets segment
information as this acquisition will be the basis for forming a fourth
reportable segment, "Electrical Components", in 2003.

The accounting policies of the reportable segments are the same as those
described in Note 1 of Notes to the Consolidated Financial Statements.

External customer sales by geographic area are based upon the destination
of products sold. The Company has no single customer that accounts for 10% or
more of consolidated net sales. Long-lived assets by geographic area are based
upon the physical location of the assets.

39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INDUSTRY SEGMENT INFORMATION

40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GEOGRAPHIC SEGMENT INFORMATION

NOTE 7. DEBT

On December 30, 2002, the Company acquired FASCO. The acquisition was
financed with proceeds from $325 million in new bank borrowings and internal
cash flows. Of $325 million in new borrowings, $250 million was from a six-month
bridge loan and $75 million was from a new $125 million revolving credit

41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

facility. As the bridge loan was replaced with long-term Senior Notes on March
5, 2003, it has been presented as long-term debt in the December 31, 2002
balance sheet. These Notes have an effective interest rate of 4.66% over their
average 6 year life. Under the revolving credit facility, the Company may select
among various interest rate arrangements. The facility has a three-year term,
which may be extended annually with the consent of the participating banks.

Scheduled maturities of long-term debt for each of the five years
subsequent to December 31, 2002 are as follows:

2003........................................................ $ 2.0
2004........................................................ 36.0
2005........................................................ 0.8
2006........................................................ 0.9
2007 and thereafter......................................... 260.5
------
$300.2
======

Interest paid was $4.4 million in 2002, $3.3 million in 2001, and $3.4
million in 2000.

NOTE 8. 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. The Company believes that
the EPA's remedy, as specified in the ROD, goes well beyond what is
environmentally protective and cost-effective for the site and largely ignores
the results of the multi-million dollar remedial investigation and feasibility
study that the Company performed under EPA oversight. 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 plant site and upper river constituting the first phase and the middle and
lower river and harbor being the second phase. The Company anticipates entering
into a Consent Decree concerning the performance of remedial design and remedial
action for the plant site, the upper river and the flood plain soils, deferring
for an unspecified period any action regarding Phase II. As part of these
negotiations the Company has agreed to pay an additional $2.1 million in past
response costs to the EPA.

At December 31, 2002 and December 31, 2001, the Company had accrued $29.2
and $28.7 million, respectively, for estimated costs associated with the cleanup
of this site. The actual cost will be governed by numerous factors including the
requirements of the WDNR, and may be greater or lower than the amount accrued.
These factors include the results of further investigations, the details of the
remedial actions required by the EPA (in consultation with the WDNR), changes in
remedial technologies, the extent of any natural resource damages, and the
outcome of any related litigation. Other PRPs may contribute to the costs of any
final remediation, and/or natural resource damage claims, regarding the middle
and lower river and harbor portions of the Site.

The Company, in cooperation with the WDNR, 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 are 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. While the Company has provided for estimated

42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

investigation and on-site remediation costs, the extent and timing of future
off-site remediation requirements, if any, are not presently determinable.

The WDNR requested that the Company join it in a cooperative effort to
investigate and clean up PCB contamination in the watershed of the south branch
of the Manitowoc River, downstream of the Company's New Holstein, Wisconsin
facility. Despite the fact that the WDNR's investigation does not establish the
parties responsible for the PCB contamination, the WDNR has indicated that it
believes the Company is a source and that it expects the Company to participate
in the cleanup. The Company has participated in the first phase of a cooperative
cleanup, consisting of joint funding of the removal of soils and sediments in
the source area near its facility. The next phase of the cooperative effort is
scheduled to occur in 2003 involving a stream segment downstream of the source
area. The Company has provided for these costs. Although participation in a
cooperative remedial effort after 2003 for the balance of the watershed is under
consideration, it is not possible to reasonably estimate the cost of any such
participation at this time.

In addition to the above mentioned sites, 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 which may be necessary
with regard to such other sites. At December 31, 2002 and 2001, the Company had
accrued $36.3 million and $36.1 million, respectively, for environmental
remediation, including the amounts noted above relating to the Sheboygan River
and Harbor Superfund Site. 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 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.

NOTE 9. COMMITMENTS AND CONTINGENCIES

Various lawsuits and claims, including those involving ordinary routine
litigation incidental to its business, to which the Company is a party, are
pending, or have been asserted, against the Company. Although the outcome of
these matters cannot be predicted with certainty, and some of them may be
disposed of unfavorably to the Company, management has no reason to believe that
their disposition will have a materially adverse effect on the consolidated
financial position or results of operations of the Company.

NOTE 10. FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and the estimated fair
values of financial instruments at December 31, 2002 and 2001:

The carrying amount of cash equivalents approximates fair value due to
their liquidity and short-term maturities. The carrying value of the Company's
debt approximates fair value due to the variable interest rate on the majority
of the debt. The fair values of foreign currency and commodity contracts reflect
the differences between the contract prices and the forward prices available on
the balance sheet date.

The Company does not utilize financial instruments for trading or other
speculative purposes. The Company generally does not hedge the net investment in
its subsidiaries. All derivative financial instruments

43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

held at December 31, 2002 will mature within 6 months. All such instruments held
at December 31, 2001 matured in 2002.

Effective July 1, 2000, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The adoption of SFAS No. 133
resulted in an insignificant impact on reported earnings and an unrealized loss
of $1.6 million net of tax, classified in accumulated other comprehensive
income. By December 31, 2000, the Company had reclassified $1.3 million of this
loss to earnings leaving a balance of $.3 million in other comprehensive income
for its outstanding foreign currency cash flow hedge contracts. During 2001, the
remaining $0.3 million was reclassified to earnings.

The Company's derivative financial instruments consist of foreign currency
forward exchange contracts. These contracts are recognized on the balance sheet
at their fair value, which is the estimated amount at which they could be
settled based on forward market exchange rates. The Company's foreign
subsidiaries use forward exchange contracts to hedge foreign currency
receivables, payables, and other known and forecasted transactional exposures
for periods consistent with the expected cash flow of the underlying
transactions. The contracts generally mature within one year and are designed to
limit exposure to exchange rate fluctuations. On the date a forward exchange
contract is entered into, it is designated as a foreign currency cash flow
hedge. Subsequent changes in the fair value of the contract that is highly
effective and qualifies as a foreign currency cash flow hedge are recorded in
other comprehensive income. The Company's European subsidiaries had contracts
for the sale of $0.2 million and $13.0 million at December 31, 2002 and 2001,
respectively. The European subsidiaries had contracts for the purchase of $4.7
million and $2.0 million at December 31, 2002 and 2001, respectively.

The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk management objective and
strategy for undertaking various hedge transactions. This process includes
linking all derivatives that are designated as foreign currency hedges to
specific forecasted transactions. The Company formally assesses, both at the
hedge's inception and on an ongoing basis, whether the derivatives that are used
in hedging transactions are highly effective in offsetting changes in cash flows
of hedged items. When it is determined that a derivative is not highly effective
as a hedge or that it has ceased to be a highly effective hedge, the Company
discontinues hedge accounting prospectively, as discussed below.

The Company discontinues hedge accounting prospectively when the derivative
is (1) determined to be no longer effective in offsetting the fair value of the
cash flows of a hedged item; (2) sold, terminated, or exercised; (3)
undesignated as a hedge instrument, because it is unlikely that a forecasted
transaction will occur. When hedge accounting is discontinued, the derivative
will be carried at its fair value on the balance sheet, with changes in its fair
value recognized in current period earnings. Any related gains or losses that
were accumulated in other comprehensive income will be recognized immediately in
cost of sales.

The Company uses commodity forward purchasing contracts to help control the
cost of commodities (copper and aluminum) used in the production of compressor
motors and components and engines. Company policy allows local managers to
contract commodity forwards for a limited percentage of raw material
requirements up to one year in advance. These contracts are not recorded in the
balance sheet as they do not require an initial cash outlay and do not represent
a liability until delivery of the commodity. Commodity forwards outstanding at
December 31, 2002 and 2001 were $14.6 and $25.8 million, respectively.

A portion of export accounts receivable at the Company's Brazilian
subsidiary are sold at a discount. Discounted Brazilian receivable balances at
December 31, 2002 and 2001 were $41.2 and $15.5 million, respectively, and the
discount rate was 4.9% in 2002 and 4.8% in 2001.

NOTE 11. STOCKHOLDERS' EQUITY

The shares of Class A common stock and Class B common stock are
substantially identical except as to voting rights. Class A common stock has no
voting rights except the right to i) vote on any amendments that

44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

could adversely affect the Class A Protection Provision in the articles of
incorporation and ii) vote in other limited circumstances, primarily involving
mergers and acquisitions, as required by law.

A Shareholders' Rights Plan is in effect for each class of stock. These
plans protect shareholders against unsolicited attempts to acquire control of
the Company that do not offer an adequate price to all shareholders. The rights
are not currently exercisable, but would become exercisable at an exercise price
of $180 per share, subject to adjustment, if certain events occurred relating to
a person or group acquiring or attempting to acquire 10% or more of the
outstanding shares of Class B common stock. The rights have no voting or
dividend privileges and are attached to, and do not trade separately from, the
Class A and Class B common stock. The rights expire on August 25, 2009. As of
December 31, 2002, 13,401,938 shares of Class A common stock and 5,077,746
shares of Class B common stock were reserved for future exercise under the
plans.

NOTE 12. NONRECURRING ITEMS

2002

Full year 2002 results were adversely impacted by $10.3 million ($6.6
million net of tax or $0.36 per share) in nonrecurring charges. During the
fourth quarter, a charge of $5.8 million ($3.7 million net of tax or $0.20 per
share) was recorded in the Engine & Power Train business. Included in the charge
is $4.1 million for costs, mostly write-downs of fixed assets, associated with
the relocation of engine component manufacturing, and the discontinuation of
production activities at its Grafton, Wisconsin facility. Also included in the
charge is $1.7 million for additional environmental clean up costs, primarily
additional past response costs levied by the EPA for its Sheboygan, Wisconsin
facility. During the first quarter, a charge of $4.5 million ($2.8 million net
of tax or $0.15 per share) was recorded in the Compressor business. This charge
was for costs, primarily the write-off of certain unusable equipment, related to
the relocation of additional rotary compressor lines from the U.S. to Brazil.

2001

The 2001 results were adversely impacted by $35.4 million ($22.8 million
net of tax, or $1.23 per share) in nonrecurring items. During the third quarter
of 2001, the Company offered an early retirement incentive plan to eligible
Corporate, North American Compressor Group and Engine & Power Train Group
employees. Two hundred fifty (250) employees, representing approximately 78% of
those eligible, or approximately 20% of the total salaried workforce in the
eligible groups, elected early retirement. The cost of providing the pension and
healthcare benefits associated with this plan amounted to $29.3 million ($18.9
million net of tax) and has been recorded as a nonrecurring charge in the third
quarter. Ongoing cost savings from this action were estimated to be in a range
of $10 to $12 million annually.

During the fourth quarter of 2001, the charge of $6.1 million ($3.9 million
net of tax, or $.21 per share) in the Engine & Power Train business related
primarily to the transfer of certain engine and component part production from
domestic facilities to the Company's facilities in the Czech Republic.

2000

In 2000, the Company recorded $33.5 million in nonrecurring charges ($23.3
million net of tax) related to the restructuring and realignment of its domestic
and international compressor manufacturing operations. Included in this charge
was $15.5 million in severance pay and other employee related costs, $3.2
million in plant closing and exit costs, and $14.8 million in asset impairment
charges for idled, unusable and/or underutilized equipment. As of December 31,
2002 this program was substantially complete.

The $15.5 million charge for severance pay and other employee related costs
involves the termination of approximately 895 employees due to the closing of
the compressor manufacturing plant in Somerset, Kentucky and 600 employees in
India caused by the transfer of production to a new facility. At December 31,
2002, this program was substantially complete.

45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The plant closing and exit costs relate to the facility in Somerset,
Kentucky which was permanently closed. Production has been transferred to other
facilities.

The asset impairment charge represents write-downs to net realizable value
of equipment dedicated to the production of a discontinued compressor model and
equipment no longer needed in the restructured manufacturing operations.

NOTE 13. BUSINESS ACQUISITIONS

On December 30, 2002, the Company acquired the FASCO Motors Group from
Invensys Plc for cash of $396.6 million and the assumption of approximately
$14.5 million in debt. FASCO is a leading manufacturer in the U.S. of fractional
horsepower motors. FASCO manufactures AC motors, DC motors, blowers, gear motors
and linear actuators, all of which are used in a wide variety of applications
within the HVAC, automotive, healthcare and appliance industries. The addition
of FASCO will allow the Company to reach new customers and markets and enables
the Company to deliver higher valued-added products and complete customer
solutions in all of its business segments.

The acquisition was financed with proceeds from $325 million in new bank
borrowings and internal cash flows. Of $325 million in new borrowings, $250
million was from a six-month bridge loan and $75 million was from a new
three-year $125 million revolving credit facility. As the bridge loan is
expected to be replaced with permanent long-term financing, it has been
presented as long-term debt in the December 31, 2002 balance sheet.

The purchase price allocation has been prepared on a preliminary basis, and
reasonable changes are expected as additional information becomes available. The
following is a summary of the estimated values of the assets acquired and
liabilities assumed as of the date of the acquisition:

Current assets.............................................. $110.4
Property, plant and equipment............................... 158.2
Intangible assets........................................... 55.0
Goodwill.................................................... 223.2
------
Total assets acquired.................................. $546.8
======
Current liabilities......................................... $ 92.2
Other liabilities........................................... 53.7
Long-term debt.............................................. 0.6
------
Total liabilities assumed.............................. $146.5
======

FASCO will be the basis for forming a fourth reportable segment, Electrical
Components, in 2003. The goodwill of $223.2 will be included in that segment.
None of the goodwill from the FASCO acquisition is deductible for tax purposes.
The $55 million of intangible assets consists of $15 million for a two-year non-
compete agreement, $20 million for trade names and trademarks with an estimated
ten year life, and $20 million for various trade names and trademarks with
indefinite lives.

The final value of goodwill and the intangible assets are subject to
adjustment as third party valuations are completed.

46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following unaudited pro forma financial information presents the
results of operations as though the acquisition had been completed at the
beginning of the respective periods.

47

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The information pertaining to directors under the caption "Election of
Directors" in the Company's definitive Proxy Statement relating to its 2003
Annual Meeting of Shareholders is incorporated herein by reference. Information
regarding executive officers required by Item 401 of Regulation S-K is furnished
in Part I of this report. The information required to be reported pursuant to
Item 405 of Regulation S-K will be set forth under the caption "Appendix
A -- Share Ownership -- Section 16(a) Beneficial Ownership Reporting Compliance"
in the Company's definitive Proxy Statement relating to its 2003 Annual Meeting
of Shareholders and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information under the captions "Appendix B -- Executive Compensation,"
"Compensation Committee Interlocks and Insider Participation" and "Election of
Directors -- Director Compensation" in the Company's definitive Proxy Statement
relating to its 2003 Annual Meeting of Shareholders is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information under the caption "Appendix A -- Share Ownership" in the
Company's definitive Proxy Statement relating to its 2003 Annual Meeting of
Shareholders is incorporated herein by reference. No information is required to
be reported pursuant to Item 2019d) of Regulation S-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information under the caption "Compensation Committee Interlocks and
Insider Participation" in the Company's definitive Proxy Statement relating to
its 2003 Annual Meeting of Shareholders is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company's principal executive officer and principal financial officer,
after evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a
date within 90 days before the filing date of this report, have concluded that,
as of such date the Company's disclosure controls and procedures were adequate
and effective to ensure that material information relating to the Company and
its consolidated subsidiaries would be made known to them by others within those
entities.

(b) Changes in Internal Controls

There were no significant changes in the Company's internal controls or in
other factors that could significantly affect those internal controls subsequent
to the date of the evaluation, nor were there any significant deficiencies or
material weaknesses in our internal controls. As a result, no corrective actions
were required or undertaken.

48

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) and (2) Financial Statements

See "Financial Statements"

(3) See Index to Exhibits (Item 15(c), below)

(b) Report on Form 8-K filed in the fourth quarter of 2002

On October 2, 2002, the Company filed a report on Form 8-K reporting under
Item 7, "Financial Statements and Exhibits," the issuance of a press release
regarding third quarter 2002 earnings.

On October 10, 2002, the Company filed a report on Form 8-K reporting under
Item 5, "Other Events," the issuance of a press release regarding its engine
product recall.

On November 27, 2002, the Company filed a report on Form 8-K reporting
under Item 7, "Financial Statements and Exhibits," the issuance of a press
release regarding its Agreement to purchase FASCO Motors from Invensys.

On December 30, 2002, the Company filed a report on Form 8-K reporting
under Item 7, "Financial Statements and Exhibits," the issuance of a press
release regarding its Acquisition of FASCO Motors from Invensys.

(c) Exhibits

- ---------------

* Filed herewith

(d) Financial Statement Schedules

None.

51

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

Date: March 13, 2003 By /s/ TODD W. HERRICK
--------------------------------------
Todd W. Herrick
Chairman of the Board of Directors,
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

52

CERTIFICATION

I, Todd W. Herrick, certify that:

1. I have reviewed this annual report on Form 10-K of Tecumseh
Products Company;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
annual report;

4. The Registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;

b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the
Audit Committee of Registrant's Board of Directors (or persons performing
the equivalent function);

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's ability
to record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's internal
controls; and

6. The Registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

/s/ TODD W. HERRICK
--------------------------------------
Todd W. Herrick
President and Chief Executive Officer

Dated: March 13, 2003

CERTIFICATION

I, David W. Kay, certify that:

1. I have reviewed this annual report on Form 10-K of Tecumseh
Products Company;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
annual report;

4. The Registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;

b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the
Audit Committee of Registrant's Board of Directors (or persons performing
the equivalent function);

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's ability
to record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's internal
controls; and

6. The Registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

/s/ DAVID W. KAY
--------------------------------------
David W. Kay
Vice President, Treasurer and Chief
Financial Officer

Dated: March 13, 2003

INDEX TO EXHIBITS

Exhibit
Number Description
- ------ -----------
3.1 Restated Articles of Incorporation of Tecumseh Products
Company (incorporated by reference to Exhibit (3) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1991, as filed with the Securities and Exchange
Commission, File No. 0-452)

3.2 Certificate of Amendment to the Restated Articles of
Incorporation of Tecumseh Products Company (incorporated by
reference to Exhibit B-5 of the registrant's Form 8 Amendment
No. 1 dated April 22, 1992 to Form 10 Registration Statement
dated April 24, 1965, as filed with the Securities and
Exchange Commission, File No. 0-452)

3.3 Certificate of Amendment to the Restated Articles of
Incorporation of Tecumseh Products Company (incorporated by
reference to Exhibit (4)(c) of the registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994, as
filed with the Securities and Exchange Commission, File No.
0-452)

3.4* Amended and Restated Bylaws of Tecumseh Products Company as
amended through February 26, 2003

4.1 Note Purchase Agreement dated March 5, 2003 by and among
Tecumseh Products Company and certain Purchasers listed
therein (incorporated by reference to Exhibit 4.1 of the
registrant's Current Report on Form 8-K as filed March 7, 2003
with the Securities and Exchange Commission, File No. 0-452)

4.2 Guaranty Agreement dated March 5, 2003 is made by certain
subsidiaries of Tecumseh Products Company in favor of the
Purchasers of the Notes (incorporated by reference to Exhibit
4.2 of the registrant's Current Report on Form 8-K as filed
March 7, 2003 with the Securities and Exchange Commission,
File No. 0-452)

4.3 Form of Note (incorporated by reference to Exhibit 4.3 of the
registrant's Current Report on Form 8-K as filed March 7, 2003
with the Securities and Exchange Commission, File No. 0-452)

10.1 Amended and Restated Class B Rights Agreement (incorporated by
reference to Exhibit 4 to Form 8 Amendment No. 1 dated April
22, 1992 to Form 8-A registering Common Stock Purchase Rights
dated January 23, 1991, as filed with the Securities and
Exchange Commission, File No. 0-452)

10.2 Amendment No. 1 to Amended and Restated Class B Rights
Agreement (incorporated by reference to Exhibit 4 to Form 8
Amendment No. 2 dated October 2, 1992 to Form 8-A registering
Common Stock Purchase Rights dated January 23, 1991, as filed
with the Securities and Exchange Commission, File No. 0-452)

Exhibit
Number Description
- ------ -----------
10.3 Amendment No. 2 to Amended and Restated Class B Rights
Agreement (incorporated by reference to Exhibit 4 to Form
8-A/A Amendment No. 3 dated June 22, 1993 to Form 8-A
registering Common Stock Purchase Rights dated January 23,
1991, as filed with the Securities and Exchange Commission,
File No. 0-452)

10.4 Third Amendment to Amended and Restated Class B Rights
Agreement (incorporated by reference to Exhibit 4.2 of the
registrant's Current Report on Form 8-K as filed August 26,
1999 with the Securities and Exchange Commission, File No.
0-452)

10.5 Fourth Amendment to Amended and Restated Class B Rights
Agreement, dated as of August 22, 2001, between Tecumseh
Products Company and State Street Bank and Trust Company,
N.A., as successor Class B Rights Agent (incorporated by
reference to Exhibit 4.4 to Form 8-A/A Amendment No. 5 dated
September 19, 2001 to Form 8-A registering Common Stock
Purchase Rights dated January 23, 1991, as filed with the
Securities and Exchange Commission, File No. 0-452)

10.6* Fifth Amendment to Class B Rights Agreement, dated as of July
15, 2002, between Tecumseh products Company, State Street Bank
and Trust Company, N.A. as the existing agent, and Equiserve
Trust Company, N.A. as successor Class B Rights Agent

10.7 Class A Rights Agreement (incorporated by reference to Exhibit
4 to Form 8-A registering Class A Common Stock Purchase Rights
dated April 22, 1992, as filed with the Securities and
Exchange Commission, File No. 0-452)

10.8 Amendment No. 1 to Class A Rights Agreement (incorporated by
reference to Exhibit 4 to Form 8 Amendment No. 1 dated October
2, 1992 to Form 8-A registering Class A Common Stock Purchase
Rights dated April 22, 1992, as filed with the Securities and
Exchange Commission, File No. 0-452)

10.9 Amendment No. 2 to Class A Rights Agreement (incorporated by
reference to Exhibit 4 to Form 8-A/A Amendment No. 2 dated
June 22, 1993 to Form 8-A registering Class A Common Stock
Purchase Rights dated April 22, 1992, as filed with the
Securities and Exchange Commission, File No. 0-452)

10.10 Third Amendment to Class A Rights Agreement (incorporated by
reference to Exhibit 4.1 of the registrant's Current Report on
Form 8-K as filed August 26, 1999 with the Securities and
Exchange Commission, File No. 0-452)

10.11 Fourth Amendment to Class A Rights Agreement dated as of
August 22, 2001, between Tecumseh products Company and State
Street Bank and Trust Company, N.A., as successor Class A
Rights Agent (incorporated by reference

Exhibit
Number Description
- ------ -----------
to Exhibit 4.4 to Form 8-A/A Amendment No. 4 dated September
19, 2001 to Form 8-A registering Class A Common Stock Purchase
Rights dated April 22, 1992, as filed with the Securities and
Exchange Commission, File No. 0-452)

10.12* Fifth Amendment to Class A Rights Agreement, dated as of July
15, 2002, between Tecumseh products Company, State Street Bank
and Trust Company, N.A. as the existing agent, and Equiserve
Trust Company, N.A. as successor Class A Rights Agent

10.13 Description of Death Benefit Plan (management contract or
compensatory plan or arrangement) (incorporated by reference
to Exhibit (10)(f) to registrant's Annual Report on Form 10-K
for the year ended December 31, 1992, as filed with the
Securities and Exchange Commission, File No. 0-452)

10.14 Management Incentive Plan, as amended through November 22,
1995 (management contract or compensatory plan or arrangement)
(incorporated by reference to Exhibit (10)(h) to registrant's
Annual Report on Form 10-K for the year ended December 31,
1995, as filed with the Securities and Exchange Commission,
File No. 0-452)

10.15 Third Amendment to Management Incentive Plan, adopted January
22, 1997 (management contract or compensatory plan or
arrangement) (incorporated by reference to Exhibit (10)(i) to
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, as filed with the Securities and Exchange
Commission, File No. 0-452)

10.16 Fourth Amendment to Management Incentive Plan effective
January 1, 2000 (management contract or compensatory plan or
arrangement) (incorporated by reference to Exhibit 10.12 to
registrant's Annual Report on Form 10-K for the year ended
December 31, 1999, as filed with the Securities and Exchange
Commission, File No. 0-452)

10.17 Fifth Amendment to Management Incentive Plan effective
November 22, 2000 (management contract or compensatory plan or
arrangement) (incorporated by reference to Exhibit 10.12 to
registrant's Annual Report on Form 10-K for the year ended
December 31, 2000, as filed with the Securities and Exchange
Commission, File No. 0-452)

10.18 Amended and Restated Supplemental Executive Retirement Plan
effective June 27, 2001 (management contract or compensatory
plan or arrangement) (incorporated by reference to Exhibit
10.16 to registrant's Annual Report on Form 10-K for the year
ended December 31, 2001, as filed with the Securities and
Exchange Commission, File No. 0-452)

10.19 First Amendment to the Supplemental Executive Retirement Plan
adopted September 26, 2001 (management contract or
compensatory plan or

Exhibit
Number Description
- ------ -----------
arrangement) (incorporated by reference to Exhibit 10.17 to
registrant's Annual Report on Form 10-K for the year ended
December 31, 2001, as filed with the Securities and Exchange
Commission, File No. 0-452)

10.20 Outside Directors' Voluntary Deferred Compensation Plan
adopted November 25, 1998 (management contract or compensatory
plan or arrangement) (incorporated by reference to Exhibit
(10)(k) to registrant's Annual Report on Form 10-K for the
year ended December 31, 1998, as filed with the Securities and
Exchange Commission, File No. 0-452)

10.21* First Amendment to Outside Directors' Voluntary Deferred
Compensation Plan adopted August 28, 2002 (management contract
or compensatory plan or arrangement)

10.22 Amended and Restated Voluntary Deferred Compensation Plan
effective November 28, 2001 (management contract or
compensatory plan or arrangement) (incorporated by reference
to Exhibit 10.19 to registrant's Annual Report on Form 10-K
for the year ended December 31, 2001, as filed with the
Securities and Exchange Commission, File No. 0-452)

10.23* First Amendment to Amended and Restated Voluntary Deferred
Compensation Plan adopted September 25, 2002 (management
contract or compensatory plan or arrangement)

10.24 Description of Voluntary Early Retirement Program effective
July 2, 2001 (management contract or compensatory plan or
arrangement) (incorporated by reference to Exhibit 10.20 to
registrant's Annual Report on Form 10-K for the year ended
December 31, 2001, as filed with the Securities and Exchange
Commission, File No. 0-452)

10.25* Director Retention Phantom Stock Plan as amended and restated
November 27, 2002 (management contract or compensatory plan or
arrangement)

21* Subsidiaries to the Company

24* Power of Attorney

99.1* Certification of Chairman and Chief Executive Officer pursuant
to 18 U.S.C. Section 1350

99.2* Certification of Vice President and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350

- --------------------
* Filed herewith