Quality Management using Key Performance Indicators at MTU Aero Engines

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1 Quality Management using Key Performance Indicators at MTU Aero Engines Egon Behle, CEO, MTU Aero Engines IAQG General Assembly, 16 October 2009

2 MTU and its business model OEM business MRO business Commercial engine business Military engine business Commercial MRO Risk- and revenue-sharing partner in programs of all major OEMs Focus on low-pressure turbines and high-pressure compressors Approx. 30% of the active engine fleet flies with MTU components on board Capability to develop and manufacture complete propulsion systems R&D is frequently financed by the customer MTU has significant stakes in the major European military programs Largest independent provider of commercial engine MRO (Maintenance, Repair and Overhaul) services Stakes in engines with high growth rates (V2500, CFM56, CF34) Strong presence in Asia GP7000 EJ200 * ) FY m (42%) 497 m (18%) m (40%) Revenues* 2,724.3 m Revenues* 331 m EBIT * 7537 Headcount * 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 2

30% of the active engine fleet flies with MTU components on board Capability to develop and manufacture complete propulsion systems R&D is frequently financed by the customer MTU has significant

3 The players in the engine market The major market players in the engine business Overview of the engine industry OEMs Engine sub-system (module) providers Engine component suppliers Increasing Partnership Players specialize in specific engine modules and technologies Oligopolistic market structures High market entry barriers: High technological expertise required Substantial up-front investments required (R&D, royalty payments) Long-term agreements In part captive spare parts market Acceptance and certification requirements and approval by authorities 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 3

entry barriers: High technological expertise required Substantial up-front investments required (R&D, royalty payments) Long-term agreements In part captive

4 The market cycles (status September 2009) History Forecast (4.7% p.a. growth) Passenger traffic forecast Passenger traffic World revenue passenger Kilometers (bn) Aircraft deliveries Aircraft firm orders Number of civil transport jet aircraft (Airliners, Freighters & RJs) Source: MTU/ASM September 2009, Airclaims CASE Remark: Western-manufactured jet powered commercial transport aircraft are considered (Airliners, Freighters & RJs; turboprops, business jets, military and general aviation excluded) 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 4

5 To shape our future, the MTU strategy is targeting profitable growth in all business segments ~ 6 Bn. Sales 2018 EBIT > 12% Strategic target Customers / Partners Products Branding Shareholders Employees Locations Strategic target fields First-class technology Successful programs Competence enhancement in market niches Growth via acquisitions Competitive cost structure Strategic pillars Quality, Reliability, Speed, Productivity and Intercultural Expertise Strategic basement 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 5

First-class technology Successful programs Competence enhancement in market niches Growth via acquisitions Competitive cost structure

6 Quality, a management task Mindset of organization MTU Board follows up KPIs Focus on selected KPIs Monitor development of trends Quality audits and initiatives Quality needs to be produced by every individual at any time. 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 6

and initiatives Quality needs to be produced by every individual at any

7 Quality, a selling argument CIP as an ongoing process throughout the complete organization Improve price/ performance ratio Dedicated projects to improve KPIs examples: strong improvement of TAT and OTD in MTU s MRO locations to become benchmark to win new contracts on the basis of best quality 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 7

improvement of TAT and OTD in MTU s MRO locations to become benchmark to win new contracts

8 MTU's Integrated Management System (IMS) Safety is a prime concern in aviation. The smallest of mistakes may have catastrophic consequences. Therefore MTU insists on the finest quality of its products and services. Quality and safety are the first priority in whatever we do. MTU's Integrated Management System (IMS) Quality Occupational health & safety Environmental protection A world-class, efficient Integrated Management System (quality, occupational health & safety, environmental protection) that ensures that principles, objectives and standards are put in place at all of the company's locations. 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 8

MTU's Integrated Management System (IMS) Quality Occupational health & safety Environmental protection A world-class, efficient Integrated Management System (quality,

9 The key quality data / indicators have been continuously improved Customer complaints (components) Scrap costs Statistical process control (SPC) EFQM result Spec compliance Process maturity levels First pass yield (components/engines) Rework costs DPM RPM Passed reviews (design / production readiness) Compliance with development milestones First pass yield (Design) Supplier performance Number of component mods Production quality Process quality Development quality October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 9

reviews (design / production readiness) Compliance with development milestones First pass yield (Design) Supplier performance Number of

10 MTU's system allows the key performance indicator information to be viewed from different perspectives Organization Product / program Process GP 7000 Management perspective Center perspective Team perspective Engine Module Detail part Business processes Main processes Part processes A complete and consistent database for the generation of key indicators for different perspectives 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 10

Module Detail part Business processes Main processes Part processes A complete and consistent database for the

11 Cost optimization and quality do not have to contradict each other Aviation safety is the first priority in whatever we do! Highest priority on customer needs Strong focus on on-time and on-quality delivery Implementation of best-practice processes in production and quality management Intense oversight and training of our suppliers Continuous improvements through people, processes and tools Highly qualified and trained personnel Participation in national and international initiatives and working groups to develop internationally accepted standards 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 11

management Intense oversight and training of our suppliers Continuous improvements through people, processes and tools Highly qualified and trained

12 Thank you very much for your attention! "Good is not good enough where better is expected." (Thomas Fuller English historian) 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 12

13 weiteres Material 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 13

14 We use key performance indicators (KPIs) to continuously improve our operational performance 1 The company's objectives are broken down into the operational units' objectives Company Center 5 The organization's productive efficiency is improved, the objectives are adjusted 4 Our Continuous Improvement Program (CIP) supports sustained process optimization Team Employee 2 The relevant key performance indicators are consistently reported 3 In the event of deviations, corrective actions and failure analyses are initiated without delay 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 14

Improvement Program (CIP) supports sustained process optimization Team Employee 2 The relevant key performance indicators are consistently reported 3

15 External consultants help with the optimization of selected KPIs Example: Project for the reduction of turnaround time (TAT) in parts manufacturing Result: TAT reduction by 26% achieved (average out of 54 components) -26% 16 October 2009 IAQG General Assembly MTU Aero Engines Egon Behle 15

manufacturing Result: TAT reduction by 26% achieved (average out of 54

Quarterly Financial Report January 1 to September 30, 2010. MTU Aero Engines Holding AG, Munich

Quarterly Financial Report January 1 to September 30, 2010 MTU Aero Engines Holding AG, Munich Contents 3 Key Facts and Figures for the Group Interim Group Management Report 6 MTU Share 7 General Economic