September 11, 2003

Wartsila to close Mulhouse plant
Last month Wartsila announced that it would start servicing and selling large Volvo Penta engines for commercial shipping applications. Now the other shoe has dropped. Wartsila is to discontinue the production of the Wartsila 200 and 220SG engines in Mulhouse, France.

The move is part of a plan aimed at significantly improving the company's profit generating ability. The Group's targeted operating margin of 7-8% is to be reached by the end of 2005. Wartsila is looking to ship power and service for future growth.Though Wartsila has secured significant power plant orders in recent weeks, demand in this market "is clearly lower than the capacity available in the Group" and "capacity will be adapted and the number of employees reduced accordingly." Wartsila will refocus its Power Plant business offering fewer products in order to adapt to the market conditions and the high volatility in demand.

Wartsila says that "in its present form the high-speed engine business has not met expectations. Wartsila is therefore planning to discontinue the production of the Wartsila 200 and 220SG engines in Mulhouse, France. The manufacturing of special products will continue in Surgeres.

Wartsila France will be stepped up as a service company and will continue to provide service for the customers of the high-speed engines as before.

The business analysis will continue and is expected to lead to further capacity reductions. Dependent on the final scope and timing of the plan, a provision of EUR 75-150 million will be made in the fourth quarter of 2003. It will burden the Power Divisions' result for 2003. As announced at the end of July Wartsila's operational profitability excluding the restucturing provision will be at previous year's level.

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