ABC-NACO Technology Advantage Helps Sales During Down Market; Sale of Non-Core Assets Will Strengthen Balance Sheet.

Business Editors

DOWNERS GROVE, Ill.--(BUSINESS WIRE)--Dec. 21, 2000

ABC-NACO stated that its major customers are being severely impacted by increased fuel costs, higher interest rates and a slowing economy. Major North American freight car builders have closed plants and shut down production lines as the year-end demand for new freight cars softened dramatically. As a result, ABC-NACO said significant orders for its Rail Products segment were cut back, cancelled or pushed into the first and second quarters of next year. The Company stressed that in spite of these conditions the Rail Products segment continues to use its product and process technology advantages to improve its market position. It also stated that the economic slowdown has not affected the Rail Services and Systems and Flow and Specialty Products segments of ABC-NACO's business, which are less cyclical and have a higher component of repair, maintenance and replacement work. These segments continue to show double-digit growth as customers seek to lower their cost through supply chain efficiencies and long-term service agreements. In addition, the Company's European and Asian operations and the sale of its advanced technology products have not been affected by the domestic cutbacks.

ABC-NACO expects to receive significant orders for its advanced suspension system technology that are indicators of future growth even if the North American economy remains soft. Of special note are several orders of major importance to its European expansion strategy that should be announced within weeks. These orders are based on over eighteen months of testing in several countries and will specify ABC-NACO's Axle Motion suspension, which is designed to carry higher payloads at lower track forces. This is a key performance factor with major railways throughout Europe as they seek to increase freight shipments by rail.

ABC-NACO Chairman and Chief Executive Officer, Joseph A. Seher, stated "We certainly did not expect the dramatic drop in domestic Rail Products orders at the end of this year. Historically, the last quarter of the year has been our lowest volume quarter due to holidays, plant closings for maintenance and a desire by customers to reduce inventories. It also appears that economic softness is playing a much larger role than the government and leading economists previously forecasted for this period.

Seher continued "These unexpected economic developments present new challenges to our Company and to the commitments we have made to our shareholders. There are some forecasts from rail industry marketing analysts that indicate the potential for a order rate of more than 45,000 new rail cars next year. However, we believe it is prudent, at this time, to take a conservative approach and to continue to find additional ways to reduce cost. The implementation of the Advanced Precision Technology program, coupled with other productivity improvements and plant consolidations has allowed the Company to reduce over 1,500 employees in the past year. We are continuing to take additional actions necessary to reach our profit goals for next year.

Seher concluded, "We have taken the bold and necessary actions to meet the difficult challenges of an uncertain market. Our accelerated effort to dispose of non-core assets will allow us to restructure our balance sheet. This week, we completed an agreement for the sale of one of those assets. The sale is expected to close before the end of the year and is the first of several planned dispositions. Now we must move beyond this final quarter of 2000 so we can maximize the restructuring and productivity improvements that we have worked so hard to achieve."

Outlook

The combination of new car order cutbacks, along with the reduced demand for loose wheels and curtailed spending for maintenance programs by the railroads, will have a short-term, negative impact on the Company.

As a result, the fourth quarter will now reflect a loss that is approximately 40% higher than the third quarter net loss, before the restructuring charge, of $7.1 million. Revenue for the fourth quarter is now projected to be almost 10% lower than the third quarter. The previously announced annualized savings of $40 million from the Advanced Precision Technology program, which will be fully realized in 2001, were expected to partially offset losses in the fourth quarter. It now appears that the lower order rate and intense price competition will offset this savings impact.

While the reduced order level for the fourth quarter may cause the first quarter of 2001 to step off somewhat slower than originally planned, the Company anticipates exceeding market expectations for next year.

ABC-NACO is one of the world's leading suppliers of technologically advanced products to the railroad and flow control industries through its three business groups: Rail Products, Rail Services and Systems, and Flow and Specialty Products. With four technology centers around the world, ABC-NACO holds pre-eminent market positions in the design, engineering, and manufacture of high-performance freight rail car, locomotive and passenger rail suspension and coupler systems, wheels and mounted wheel sets. The Company also supplies railroad and transit infrastructure products and services, technology-driven specialty track products, as well as highly engineered valve bodies and components for industrial flow control systems worldwide. It has 32 offices and facilities in the United States, Canada, Mexico, Scotland, Portugal, and China.

Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts, may be deemed to be forward-looking statements that are subject to change based on various factors which may be beyond the control of ABC-NACO Inc. Accordingly, actual results could differ materially from those expressed or implied in any such forward-looking statement. Factors that could affect actual results are described more fully in the Company's Annual Report on 10-K for the transition period ended December 31, 1999, under the caption "Cautionary Statement Concerning Forward Looking Statements," and other risks described from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.