Letter to employees at Pratt and Whitney

Date:

AUgust 13, 2009

To:

All Connecticut Employees

From:

David P.. Hess, President

As we have communicated, and as you may have seen in recent news reports, we recently announced that the Cheshire Engine Center and the Connecticut Airfoil Repair Operations (CARO) are being evaluated with the union to see if we can together identify ways to make both operations economically viable over the long-term. We hope that the joint consideration will lead to a solution to save the approximately 1,000 hourly and salaried jobs that are at risk out of the almost 11,000 people Pratt & Whitney is privileged to employ in the state.

While no final decisions will be made until after the "meet and confer" process with the union is completed - a process that is expected to take approximately 45 days - we appreciate how' unsettling news like this can be for those employees who could be impacted. Although the facts that led us to begin the evaluation process aren't comforting, in times like these it's important for everyone to understand our commitment to Connecticut, the business realities confronting us and to stay informed.

First, Pratt & Whitney shares UTC's pride in our longstanding role as a leading Connecticut employer with a demonstrated commitment to the state. Even ifthis action is required, Pratt & Whitney will maintain a significant presence here and UTC will continue to be the largest private employer in Connecticut, with more than 26,000 employees. Rather than retreat from the state, UTC has actually increased its presence by headquartering its newest business UTC Fire and Security - here. Since 2003 UTC's total employment in the state has grown by 3.5 percent or about 935 additional jobs. Though we've had to make some difficult adjustments to compensate for the challenging aerospace environment, Pratt & Whitney's commitment to Connecticut is equally strong.

1

So, what are the circumstances that have brought us to this point and what have we done about it?

Unfortunately, the global economic downturn hit the aerospace market and specifically the jet engine business particularly hard. Commercial airlines are expected to lose more than $9 billion this year; passenger and cargo traffic is significantly down this year over last; and aircraft retirements have increased 22 percent from last year. These conditions and changing customer demands already have caused us to: Reduce our global MRO workforce by 12 percent over the last 18 months; and Announce the closing of MRO facilities in San Diego and Indianapolis.

In Connecticut, we project that Cheshire will suffer a volume drop next year because of market conditions, with the majority of the reduction in workload from our domestic customers. Volume in CARO has been falling since 2007. And while we forecast some recovery as the economy eventually recovers, we expect much of the volume erosion to be sustained as a number of significant customers have elected to move work elsewhere or in some cases bring the work in-house to do themselves.

Realizing the impact of these forces, we have for quite some time taken steps to improve the financial and operational performance of the two facilities. This includes: making significant capital investments to improve our processes, capacity and flow; reducing the salaried overhead structure; instituting merit deferrals and temporary salary reductions; and adopting highly competitive pricing.

Despite these and other efforts, including everyone's skilled and hard work, both operations' financial and operational performance still lag significantly behind others in the Pratt & Whitney network. For example, already today Cheshire's costs run 40 percent higher than those at our Columbus, Ga. , facility. The projected loss of volume would unavoidably drive these uncompetitive shop costs up even higher, making these businesses very difficult to maintain here if we can't find ways with the union to improve them.

The evaluation process has begun and four full days of meetings have been held with the union, with additional ones this week. The past two meetings have been spent sharing with the union the financial, operational and market data analyses and the projections that led us to conclude that the evaluations are necessary.

Out of respect for the confidentiality of the process and the need to protect proprietary information for competitive purposes, much of the data cannot be shared publicly. We have informed the union the company would realize very significant cost savings if these two facilities were closed. These cost savings would significantly offset the projected drop in our commercial customer base and allow Pratt & Whitney to remain cost competitive. Through our process of working cooperatively with the union, we are hopeful that we can significantly narrow this sizable gap and identify viable alternatives that serve the interests of our employees, the union, our customers and our shareholders. In order to provide the union with maximum flexibility, these meetings provide them with the opportunity to review the information necessary to craft and offer proposals about how best to achieve needed cost savings. We stand ready to give any proposals they might offer the full consideration they are due.

We appreciate that these business realities are difficult to comprehend, especially when Cheshire's volume has been strong in both 2008 and in 2009. Unfortunately, the hard fact is that the past is not indicative of the future - a future we must prepare for today. Without the steady state cost savings,

the decline in our domestic customer base coupled with these facilities' uncompetitive cost structures

foreshadow significant erosion in their financial performance in 2010 with likely losses..

Contributing to their challenges is that our commercial customer base for the foreseeable future is

largely in Asia, and when the industry recovers the greatest growth opportunities will be there.

We have also told the union that if our efforts with them to find alternatives to keep the work in Connecticut are unsuccessful, we estimate that Cheshire's operations could close as early as 2011, and CARO's operations could cease as early as the middle of next year. Of course, ensuring that our work for our military customers can be efficiently and safely maintained with absolutely no compromise to our national security or the well足 being ofthe men and women in our armed forces who depend on our engines' performance will be a critical factor in our final determination. Again, it is important to stress that no decisions have been made and all of the details are subject to the outcome of the evaluation process.

AppreCiating what is at stake, please be assured that no evaluation of closing or relocating any Pratt & Whitney operation is ever undertaken lightly. In addition to our customers and the overall health of our company, the impact of any decision on our employees weighs heavily in any decision. In fact, and in keeping with our commitment, in Connecticut our company assigns extra value to options that would keep the work here. However, what is critical is that we prudently take the necessary actions to ensure the long-term viability and growth of Pratt & Whitney and, as such, are genuinely engaged with the union in a serious process to explore ways in which Cheshire and CARO might be a part of that future.

Regrettably, there will continue to be uncertainty for some of our people until the evaluation process is complete and we can provide definite answers about the path forward and whether it will impact our Cheshire and CARO facilities.

In these uncertain times, your work and commitment to our customers is deeply appreCiated. Please do your best to avoid distractions and stay focused on working safely. In the meantime, be assured that we will continue to keep you informed and should you have any questions, please contact your supervisor or local HR manager.

Thank you.

3