Federal Mogul Valves, the motor industry development program and component manufacture in South Africa.
Federal Mogul Valves manufacture automotive components for customers in both the domestic and export markets. For the components that are exported, they receive a government funded export subsidy. This subsidy is progressively being reduced each year and will, at this point in time, be discontinued in 2007. While Federal Mogul Valves' ability to export these components is not totally dependent on this export subsidy, the subsidy is certainly contributing to the profits that they are achieving. If they simply continue with their present strategy they will experience reduced margins as the export subsidy is reduced and eventually removed completely. If however they alter their strategic approach to the business to take into consideration the changes that they are faced with, they can introduce changes that will compensate for the reduction in profits that they will experience when the export subsidy is removed.