R&D at Atlas Copco CMT.A process based upon many needs.

Sverker Hartwig

VP Technique AC AB

Atlas CopcoCommitted to Customer Values and Needs

A quick update on “The Atlas Copco Group, May2007”

Atlas Copco is a Leading Industrial Provider

Construction

Others

31%

22%

14%

5%

ManufacturingProcess

Mining

Services

18%

10%

Sales per customer category total all business areas

Global Reach Spans More Than 150 Markets

CompressorTechnique

50%

Industrial Technique

13%

Construction and Mining Technique

37%NorthAmerica22%

Europe40%

Africa/MiddleEast

9%

22%

7%

Asia/Australia

SouthAmerica

Atlas Copco sold the majority of Rental Service in 2006.

Revenues per business area Revenues per geographic area

Atlas Copco 2006 Results

2002-2004 pro forma, excluding divested businesses

0

10 000

20 000

30 000

40 000

50 000

2002 2003 2004 2005 20060

5

10

15

20

25

Revenues, MSEK Operating margin, %

MSEK %

Now lets focus on Business Area AC CMTConstruction and Mining Technique

2006 Results

NorthAmerica27%

Europe31%

Africa/MiddleEast

14%

19%

9%

Asia/Australia

SouthAmerica

Construction and Mining Technique

0

5 000

10 000

15 000

20 000

2002 2003 2004 2005 20060

5

10

15

20

Revenues, MSEK Operating margin, %

MSEK %

This is the market!But is by far not all mining.

9

Rough summary Ugr. and surfacem3/annum global

Total excavation 10.000.000.000

Of which blasted 9.600.000.000

Of which crushed 7.300.000.000

9.600.000.000- 7.300.000.000 = 2.300.000.000

(direct used as is or waste)

Of crushed, milled for mining 1.400.000.000

(7300.000.000-1400.000.000 = 5.900.000.000 Aggregate)

Of milled, concentrated 1.200.000.000

Application - TunnellingTunnelling/Construction*ar/y/y/yy

ar

rokmkmkmmkmkm

m

Benching

St. Gotthard railway tunnelProject 1999 - 2010

Application – Underground miningUnderground Mining*615 Mton / yeareq. 16% of total mined ore

Europe 160 Mt/yAfrica 160 Mt/yS America 105 Mt/yt/y

rldel, platinum, diamonds

ndst/yt/yt/yt/yt/yt/y/y

Underground Rock Drilling Loaders and Mine TrucksConstruction and Mining Technique

Some of many ”Standard” rigs UGRSimba 157 Simba 1257 Simba 1254 Simba M4 C Simba L6 C Simba M7 C

A modular system is a must but not easy

URE Underground Rigs assembly

Surface Drilling Equipment Applications

ROC D, F and L modular sys SE

Rotary and Deep HoleConstruction and Mining Technique

Rock Drilling ToolsConstruction and Mining Technique

Exploration and Ground EngineeringConstruction and Mining Technique

Construction ToolsConstruction and Mining Technique

OK that´s what we haveto deal with,What about R&D

Product development drivers,

Customer needsCustomer needs

ProductivityTotal cost ( And initial)RepeatabilityPrecisionHole qualityAutomationAvailabilityServiceability

Internal needsInternal needs

Product costStandardisationComponent countModularisationLead TimeTied capital

Market trendsMarket trends

4General trends4Noise and emission4Other environmental demands ( Oil spill)4Industrial design

Other driversOther drivers

4Legislation4Competition4Ideas and innovations4Emerging technologies

R&D work is ruled by a lot of processes.Do we have to many?

Process description

PRE STUDY

PROJECT: Main

PROJECT:Follow up & close

Feasibility

studyPre study

Design andsource parts for prototype

1 2

3 4 85 976

11 12

Assemble prototypes

Functionaltests

Fieldtests

Follow up and sourceparts for preseries prod.

Assemble pre series

Follow up:

Large Project

10

Assembleand deliverfirst serial product

Follow up and sourceparts forserial prod.

- Production (PSM)- Field (FSM)- Proactive QA follow up

G

G3

Closeproject

G0 G1 G2

G3 G5 G7 G8

G9

G4 G6

M5M3M2M1 M4

1 = Project phases

G1 = Gates

M1 = MilestonesLEG

END

M1 Start prototype assembly

M2 Start test period

M3 End test period

M4 Verify design status

M5 Deliver first serial product

Project Manual

G2 Start project

G1 Start pre study

G3 Order parts for prototypes

G7

G8

G0 Start feasibility study

G9 Approve outcome and close project

G6 Approve for Market release

Order parts for pre series productionMarket release decision

Release for functional tests

Release for field testsG5

G4

Discontinuation decisionOrder parts for serial production

As a supplier, mining knowledge is a must, but we need more, The Rocket Boomer L3 contains the following

Tot. ca 17 700 articles for assembly

Ex:1 Cabin including air condition

6 wheels

2 compressors

15 hydraulic pumps

9 hydraulic motors

52 hydraulic cylinders

33 computer CPUs

3 computer screens

ca 2200m hydraulic hoses

Product development at CMTResources

R&D some 500 engineers– Control system design, – Rock drill design, RD– Laboratory and support, RR– Hydraulic, Electric,Pneumatic………….

Fully equipped laboratories for functional and performance testing in Örebro, Kalmar, Essen, Garland

Test mines/ sites in Garland Texas, Nacka, Stockholm and in Kvarntorp, Örebro

Field test sites all over the world

And now all these hackers, RCS - a common automation platform

But these guys will change our world( MWD drilling an example)

Since I can not tell you all our secrets, I can tell you what you need apart from money.

My best advice for R&D anytime anywhere!

Rule 1Working hand in hand with customers. Making friends, trying to understand and trying to solve their problems, that's what really makes people think and invent!

Rule 2Make it clear to the organization

We want your ideas

We will reward your for good ideas

We will make your good ideas come true( but no candies for nothing)

Rule 3

Apply a patent policy to:

-Create an inventive climate

-Safeguard your R&D investments

-Promote inventors

( and to avoid making infringements)

Rule 4Don’t make market manager of your best sales guy, don’t

make your best innovator engineering manager, but make sure these guys are rewarded equally or better!

Consider alternative career paths, for people who wants to remain in creative sales, technical innovations……. loving it and doing a good job-Expert career

-Line career

-Project management career

Rule 5What ever your immediate needs! However desperate your situation is. Never surrender to short sighted “skip long term ”

In every way you have, make the organization feel and notice, that long term is dealt with, an as high or higher priority!

Ask for deadlines, follow up, get involved!

Roll out your program today

Sweden has a lot of ”survival”opportunities

Mineral deposits

The global two leading equipment suppliers and thena number of smaller.

The shining mining companies and contractors of the world

A lot of money

If we cannot make a fortune of that we have a problem.

I think we have, even if the business as of todayhides it.

Our problems

We lack good people, Is Sweden to small?

Maybe we need a Baltic university cluster or even justone Baltic university

We put to much effort into processes and to little oncontent

In spite of what we say, we work to short sighted

Skip quaterly and get back in some good oldSwedish innovativeness that once created Swedens industry

We are committed to your superior productivity throughinteraction and innovation.