DieQua Announces Price Increase

Due to the unfortunate increase in raw material, logistics, and exchange rate costs, Diequa will be instituting a price increase in January 2007. While we understand that pricing pressures are everywhere and on everyone, it's a necessary move to maintain the high quality of products and services you have come to expect.

It is often reported that the emergence of China as a manufacturing competitor is having a major effect on the worldwide demand for raw materials, especially steel. This demand is driving up the costs of this material, which has a direct influence on the costs of gears, housings, shafts, and bearings, all critical components in gearboxes and speed reducers.

It is also obvious that, with oil prices increasing, the cost of fuel is on the rise. Along with additional importation inspection and administrative costs, shipping expenses have increased dramatically this year. This has a direct impact on the costs to procure and receive goods.

Another element in the cost of goods is the exchange rate between the Dollar and the Euro. With a significant number of enclosed drives sold in the United States originating from European sources, the negative exchange rate differential has a direct relationship on the costs of parts, sub assemblies, and finished goods. The additional costs will be realized, not only by Diequa, but by many of the manufacturers of competing products.

To combat the increases resulting from the exchange rate, Diequa is ramping up our manufacturing and assembly capabilities to take advantage of the more stable costs associated with using local labor and component suppliers. As we transition into more of a manufacturing company, our goal is to provide better value and increased customer service by increasing our control over the production of our product range.

12/2006

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