Speech by Prof. Dr.-Ing. Joachim Milberg Chairman of the Board of Management of BMW AG, 82nd Annual General Meeting of BMW AG 16 May 2002

Transcription

1 - Check against delivery - Dear Shareholders, Ladies and Gentlemen, I wish to bid you a very cordial welcome on behalf of the Board of Management to this Annual General Meeting. I welcome the shareholders, the shareholder representatives, the employees of our Company, the representatives of the media, and all other guests with us here today. For the first time the IAS International Accounting Standards applying for the BMW Annual Accounts in the 2001 year of business Let me make one introductory remark before starting my report as such: We have changed our accounting principles this year, for the first time applying the IAS International Accounting Standards for our Annual Accounts in the 2001 year of business. To provide a better comparison of developments, we are also presenting the year 2000 Annual Accounts according to the IAS principles, meaning that our annual Company Bayerische Motoren Werke Aktiengesellschaft comparisons in per cent now relate to IAS figures. Postal Address BMW AG D München Telephone Internet

2 Date Page 2 Ladies and Gentlemen, Consistently implementing the BMW Group's premium brand strategy Consistently implementing the BMW Group's premium brand strategy, we were able in fiscal 2001 to escape the in some cases quite difficult economic conditions in the international markets. In 2001 new records in deliveries, sales and profits Indeed, 2001 was by far the most successful year of business ever in the history of the BMW Group - in terms of deliveries, sales and profits. Success based on: What were the reasons for this significant improvement?

3 Date Page 3 Concentrating on the inherent strengths 2001 was our first full year of business without Rover. It was a year in which we were able to concentrate exclusively on the inherent strengths of the Company, focusing entirely on the development, production and sale of premium products. Outstanding associates Our truly outstanding associates are the key to this strength of the BMW Group. They have built up our very good position in the market. And as one of the most appealing employers, we are able time and again to find and retain the most qualified associates for our Company. Our products characterised by their supreme substance and brand image are a clear sign of our strength. The success of the BMW X5, for example, has contributed significantly to our increase in deliveries and profits. And the results we have achieved with the BMW 3 Series and 5 Series are also particularly convincing. Consistent continuation of our product and market offensive In 2001 we consistently continued our product and market offensive based on our premium brand strategy. MINI made a successful entry into the market and the new BMW 7 Series sets the standard for the future in its class.

4 Date Page 4 Powerful presence in major markets the world over We also benefit from our powerful presence in major markets the world over, which we have continued to develop and expand in recent years particularly in the USA and Asia. Significant milestones achieved Pursuing this strategy, we made the ye ar 2001 a crucial year for the BMW Group: In the year under report we achieved significant milestones in the strategic orientation of our Company. Formula 1: Plan to finish second at the end of the year in the Championship for Constructors. By way of ana logy, the same applies to our involvement in Formula 1: We are very satisfied with the three races we won and the third place we achieved last year in the Constructor's Championship. Indeed, we have already achieved more in Formula 1 than we set out to do two years ago. This year BMW's Formula 1 power unit is once again acknowledged as the most powerful engine in the competition and in the current season we plan to move even further up to the top, finishing second at the end of the year in the Championship for Constructors. Ladies and Gentlemen, Positive development of BMW shares confirms our policy The successful development of the Company in the year 2001 is reflected by the price of our stock. Again, this confirms our corporate policy and shows that we are going the right way.

5 Date Page 5 Seen over the year, BMW stock was one out of only four investments in the German DAX 30 index with a higher price at the end of the year than at the beginning. BMW stock better than the CDAX automotive index and a lot better than the DAX index At a price of Euro 39.55, BMW stock closed the year on 28 December per cent above our stock price at the end of the year which was better than the CDAX automotive index and a lot better than the overall DAX rating. This confirms once again that BMW stock is and remains a first-class investment. Ladies and Gentlemen, Automobiles segment with new record deliveries All segments of the BMW Group contributed to our success in Let us first take a look at the

6 Date Page 6 automobiles segment, which achieved new record deliveries. 906,000 BMW and MINI automobiles worldwide Delivering approximately 906,000 BMWs and MINIs to customers the world over, we continued to grow significantly in the year under report - that is by more than 10 per cent - despite general stagnation in the world market as a whole. In the course of 2001 we successfully introduced a whole range of new BMW models: the new 3 Series compact, the M3 convertible, the upgraded 3 Series, the X5 4.6 is and, in Europe, the new 7 Series. In all, worldwide deliveries of BMW cars exceeded 880,000 units - which alone is a new record for the brand.

7 Date Page 7 The development of deliveries last year proves that the BMW brand is stronger than ever before. MINI introduced successfully into the market as an independent brand Introducing MINI, the BMW Group was furthermore able in 2001 to successfully launch a new, completely independent brand into the market. MINI has already achieved a strong position as a premium brand in the small car segment MINI has been welcomed very positively by the markets, with customer deliveries in 2001 amounting to almost 25,000 units. We have therefore more than fulfilled our expectations. This figure proves that MINI has already achieved a strong position as a premium brand in the small car segment. Ladies and Gentlemen, Prizes and awards by international automotive media confirm the success of our products The success of our BMW products is also confirmed by numerous prizes and awards we have received from leading international media in the automotive industry.

8 Date Page 8 Automotive Engineering International: BMW 7 Series "Best Engineered Vehicle for 2002" Only recently, for example, Automotive Engineering International, the US car journal, voted the new BMW 7 Series the "Best Engineered Vehicle for 2002". What Car: BMW 5 Series, 3 Series, X5 and M3 "Car of the Year" What Car, the British automobile magazine, has given four BMW products the title "Car of the Year" this year alone: the BMW 5 Series, the BMW 3 Series, the BMW X5, and the BMW M3. auto motor und sport reader's choice: BMW 5 Series, X5 and MINI "Best Cars 2002" In the reader's choice of auto motor und sport, Germany's No 1 automobile magazine, the BMW 5 Series, the BMW X5 and the MINI were all chosen as the best cars overall in their class in BMW brand at the top of the market in terms of several outstanding Apart from these specific awards and titles relating to individual models, the readers of auto motor und sport

9 Date Page 9 image criteria gave us really good news this year also as a Company, ranking the BMW brand at the top of the market in terms of several outstanding image criteria. MINI already won its segment title in the 2001 auto motor und sport reader's choice, at a time when the car had not even been introduced into the market: From the start it was chosen as the best import car in the mini cars segment. And this year MINI has won the title in both categories at the same time, leaving behind the competition both in the overall rating and in the import car category. Auto Zeitung: BMW 7 Series, X5 and MINI Cooper winners of the "Auto Trophy" The most recent titles won by our products go back only a few days: Last week, for example, the BMW 7 Series, the BMW X5 and the MINI Cooper all won the Auto Trophy in their respective categories. Production continuing at full swing: more than automobiles in 2001 The production of BMW and MINI cars, Ladies and Gentlemen, continued at full swing throughout 2001: Building more than 946,000 units, we once again exceeded the previous year's record figure in production.

10 Date Page 10 Major factors: Ongoing improvement of the production systems in terms of efficiency as well as the flexibility of the worldwide production network; performance and commitment of the associates This was made possible by the ongoing improvement of our production systems in terms of efficiency as well as the flexibility of our worldwide production network. Other major factors are the ongoing expansion of our capacities and the performance and commitment of our associates. This performance is borne out, for example, by numerous additional shifts worked last year in agreement with our employees' representatives. Positive development in the major international regions and markets Major regions and markets also contributed to the positive development of BMW and MINI deliveries in 2001: Deliveries by the BMW Group to customers developed positively in nearly all European markets. The USA once again played an outstanding role in

11 Date Page 11 the 2001 year of business. Asia remained a significant growth region for the BMW Group also in Broad international orientation acting as a factor crucial to success The broad international orientation of the Company is therefore a crucial factor contributing significantly to the success of the BMW Group. Selling more than 70 per cent of our volume outside Germany, we hold a unique position versus the competition and are thus living out the true spirit of globalisation in the genuine sense of the word. Motorcycles segment reports new record deliveries worldwide more than 95,300 units, ninth record year in a row Accounting for more than 95,300 units sold, the BMW Motorcycles segment continued its story of success in sales last year, exceeding the sales figure one year before by over 17 per cent. This makes 2001 the ninth record year in a row in BMW motorcycle sales. Throughout 2001, BMW motorcycles grew by a greater margin than the world motorcycle market as a whole. We succeeded in strengthening our position as Europe's leading manufacturer of motorcycles.

12 Date Page 12 Financial Services segment maintaining the previous year's level - Business volume Euro 20.6 billion, 1.2 million financing agreements Accounting for a business volume of Euro 20.6 billion, the financial services segment maintained the same level in 2001 as in the previous year. This means that we were able through our new business to set off the discontinuation of Rover Cars and Land Rover financing. In all, Financial Services concluded 1.2 million financing agreements in the year under review. As in the previous year, therefore, one out of every three new BMWs sold was financed by BMW Financial Services.

13 Date Page 13 BMW Group: New record in terms of sales As I have already mentioned, the successful development of BMW Group business in 2001 also generated new records in terms of sales. Sales of Euro 38.5 billion (up by 3.3 per cent) BMW Group sales were up in 2001 to a new record of almost Euro 38.5 billion, 3.3 per cent more than in the

14 Date Page 14 previous year. Leaving out Rover Cars and Land Rover sales included in the overall sales figure up to 9 May and, respectively, 30 June of the previous year, Group sales increased by an even more substantial 14 per cent. Sales in the BMW Automobiles segment were up in the previous year to Euro 33.5 billion, exceeding the year 2000 figure by 13.1 per cent. Sales in the BMW Motorcycles segment in the year 2001 exceeded the figure of Euro 1 billion for the first time, the new record figure of almost Euro 1.1 billion showing an increase by 14.1 per cent. This means that we have almost doubled sales in the motorcycles segment in just five years - certainly an outstanding achievement. Sales in the Financial Services segment in 2001 amounted to approximately Euro 7.5 billion, a decline by 12.4 per cent. Highest-ever return on sales: 8.4 per cent The BMW Group's return on sales increased significantly in 2001, amounting to 8.4 per cent and thus reaching the highest level ever since we started publishing this data for the BMW Group worldwide in 1989.

15 Date Page 15 Capital expenditure of Euro 3.5 billion (up by 26.4 per cent) In 2001 capital expenditure by the BMW Group amounted to more than Euro 3.5 billion, 26.4 per cent more than in the year The share of overall capital expenditure in Group sales amounted to 9.1 per cent, versus 7.5 per cent in the previous year. As in previous years, we once again financed our capital expenditure in 2001 completely from the Group's cash flow, which amounted Group-wide to Euro 4.2 billion in Significant increase in capital expenditure reflects implementation of the ongoing product and market offensive This significant increase in capital expenditure again reflects the implementation of our ongoing product and market offensive. Making this capital expenditure, we have initiated a wide range of activities in preparation of new models, in securing our leadership in technology and innovation, and in expanding our production capacities and presence in the markets. Expansion of our production network is the prerequisite for an ongoing increase in sales and deliveries Particularly the expansion of our production network is the prerequisite for an ongoing increase in sales and deliveries we plan to achieve in the years to come. Almost 5,000 new jobs in 2001 worldwide Reflecting our success in business, we have a growing need for new employees. Accordingly, we created

16 Date Page 16 almost 5,000 new jobs in 2001 in Development, Production and Sales, almost 4,000 thereof in Germany alone. Global workforce of the BMW Group at the end of 2001 approximately 97,300 associates The global workforce of the BMW Group at the end of 2001 was approximately 97,300 associates. Taking the demerging of Powertrain Limited in Bracknell, a supplier plant, and the sale of British Motor Heritage into account, this would equal a workforce of approximately 92,000 associates in the year 2000, meaning that effectively our workforce grew by 5.4 per cent in the course of the year under report. Result of ordinary business activities: Euro 3.2 billion before taxes (up by 26,4 percent) Our record sales, Ladies and Gentlemen, provide the foundation for the best result ever achieved by the BMW Group: In 2001 the result of our ordinary business activities increased to the new record level of Euro 3.2 billion before taxes. This means a significant improvement of profits up by almost 60 per cent over the previous year when measured according to the IAS principle. This is all the more remarkable and positive considering the significant expenditure on our ongoing product and market offensive I have already mentioned. Looking now at our individual segments, we find numerous factors contributing to this result:

17 Date Page 17 In the BMW automobiles segment the result of our ordinary business activities is up over the previous year by 2.2 per cent to a new record level of almost Euro 2.8 billion. Growing by 78.8 per cent to Euro 59 million, the result of our ordinary business in the BMW motorcycles segment also shows an extremely positive development. In the financial services segment, the result of our ordinary business activities is up by 11.1 per cent to Euro 390 million, again a new record figure Group equity increased by 14.2 per cent to Euro 10.8 billion Group equity increased by 14.2 per cent in the year under review to Euro 10.8 billion, thus boosting the Group's equity ratio by 1.9 percentage points to 21 per cent. This brings us back to the figure we achieved under the German HGB commercial code in 1998, which subsequently dropped in 1999, after formation of the provision for restructuring Rover, to 10.5 per cent. Annual surplus of Euro 1.86 billion Our tax ratio is 42.4 per cent following 40.5 per cent in the previous year. This gives the BMW Group an annual surplus of Euro 1.86 billion, up more than 54 per cent over the year 2000.

18 Date Page 18 Result per share: Euro 2.78 per common share Euro 2.80 per preferred share Dividend per share: Euro 0.52 per common share Euro 0.54 per preferred share The result per share is Euro 2.78 on our common stock and Euro 2.80 on preferred stock. For comparison, last year's figures were Euro 1.80 and 1.82, respectively. The Board of Management and the Supervisory Board, in the light of these figures, advise the Annual General Meeting to use the balance sheet profit of BMW AG amounting to Euro 350 million for payment of a dividend up by 13 per cent to Euro 0.52 per common share and, respectively, up by 12.5 per cent for payment of a dividend of Euro 0.54 per preferred share, each with a nominal value of Euro 1.-, on the stock capital entitled to dividends. Thank you: Shareholders At this point, Ladies and Gentlemen, I would like to thank you, our shareholders, very much indeed on behalf of the entire Board of Management. Representatives of our shareholders and employees on the Supervisory Board I thank you for the trust and good faith you give our Company. And I thank the representatives of our shareholders and employees on the Supervisory Board for our good cooperation in the year under report. The record figures we are able to present today are the result of the good cooperation of all parties involved and the outcome of the objectives and philosophy we have

19 Date Page 19 worked out for the Company together. Associates I wish to include all associates of the BMW Group in my words of thanks. Without them and their personal contribution, this result would not have been possible. It is our associates, therefore, who prove time and again what kind of performance our Company is capable of. Partners in sales as well as all their employees within our worldwide dealer organisation Last but certainly not least, the records we achieved in 2001 were made possible by the great personal commitment and hard work of our partners in sales as well as all their employees within our worldwide dealer organisation. So I express my sincere gratitude to them, too. This, Ladies and Gentlemen, concludes our review of fiscal Expectations for the year 2002 What, now, are our expectations for the year 2002?

20 Date Page 20 Economy picking up again in many parts of the world At the beginning of the year the world economy reached and passed the bottom of its slump. Now there are many indicators showing that the economy is picking up again in many parts of the world. In the USA, for example, economic recovery is already clearly noticeable - and we also see signs of a general upswing on this side of the Atlantic, giving us every reason to expect such an economic recovery to actually materialise in the course of the year. In Asia, finally, a number of markets will develop dynamically. But the fact still remains that this forecast is based on the mere interpretation of positive indicators - no more and no less.

21 Date Page 21 International automotive industry currently characterised more by the individual performance of specific manufacturers than by a general, all-round development within the industry as a whole This is one of the reasons why the international automotive industry is currently characterised more by the individual performance of specific manufacturers and not so much by a general, all-round development within the industry as a whole. A further point is that we are still looking at different markets in the automotive industry, where there is a clear distinction between the volume and the premium segments. Moderate development of deliveries in volume segments In the volume segments deliveries are expected to grow only moderately in the course of Above-average development of deliveries in premium segments The premium segments, on the other hand, where the BMW Group is at home, will follow different principles and standards: Demand for premium cars will continue to grow above -average the world over. BMW Group will maintain its growth strategy also in the year 2002 Given this situation, the BMW Group will maintain its growth strategy also in the year Our results in fiscal 2001 will provide the benchmark for the current year of business. The first quarter of the current year of business was already very successful in this respect:

22 Date Page 22 As of March, more than 260,400 BMW and MINI cars delivered In the first three months of 2002 the BMW Group delivered more than 260,400 cars, up by more than 17 per cent over the first quarter As of March, more than 23,200 BMW motorcycles delivered The BMW motorcycles segment also reported positive growth in the first quarter of 2002, with motorcycle deliveries increasing in the first three months of the year by 20.8 per cent to more than 23,200 units compared with the same period last year. Financial services with the most successful first quarter ever BMW Financial Services have just reported the most successful first quarter ever since we started operating this line of business. Sales in this segment amounted to Euro 2.1 billion in the first three months of this year, exceeding the previous

23 Date Page 23 year's figure for the same period by 17.6 per cent. Overall BMW Group sales: Euro 10.8 billion (up by 14 per cent) The overall sales volume of the BMW Group in the first quarter 2002 was approximately Euro 10.8 billion, an increase by 14 per cent compared with the same period last year. Result of ordinary business activities: Euro 1.0 billion (+ 5.9 per cent after adjustment) The result of the BMW Group's ordinary business activities amounted over Euro 1 billion in the first quarter Taking special effects from the sale of real estate no longer required in the first three months of 2001 into acount, this equals an increase in profits in the first quarter 2002 by 5.9 per cent. Over 98,000 associates worldwide As of 31 March 2002, the BMW Group employed a total workforce of over 98,000 associates worldwide, 3 per cent over the corresponding figure in the first quarter of last year. Positive development of deliveries in the second quarter The positive development of BMW Group deliveries is continuing in the second quarter of the year:

24 Date Page 24 More than 355,000 automobiles worldwide (more than 19 per cent) As of April we have delivered more than 355,000 BMW and MINI cars to customers the world over, an increase over the previous year's figure by more than 19 per cent. The good first four months confirm our expectations that we will succeed in 2002 in continuing the positive development of business in the previous year. BMW Group is confident that deliveries, sales and profits will increase even further Assuming there will be no unexpected deterioration of economic conditions, the BMW Group is confident that deliveries, sales and profits will increase even further. Chance in 2002 to deliver more than one million BMW and MINI cars to customers For the first time we have the chance in 2002 to deliver more than one million BMW and MINI cars to customers the world over.

25 Date Page 25 Ladies and Gentlemen, Continuing our product and market offensive in 2002 In the year 2002 we will be continuing the BMW Group's product and market offensive. BMW 7 Series: Introduction in all international markets Our new BMW 7 Series will play an important role in this context. Following its introduction in major European markets in November 2001, the new 7 Series has entered further markets since the beginning of the year - for example the USA, Canada, Great Britain and Japan. And by the end of the year the 7 Series will be available in all our markets the world over. Expansion of the 7 Series model line-up At the same time we are continuing to broaden the line - up of the new 7 Series: Following the introduction of the long-wheelbase version in March, we will be presenting

26 Date Page 26 the diesel engine versions in fall New 7 Series will convincingly continue the success of its predecessor Deliveries in the first six months exceeding sales of the predecessor by 17 per cent Sales figures incidently show that the new 7 Series will be convincingly continuing the worldwide success of its predecessor. In the first six months since the launch of the 7 Series, we already delivered more than 17,000 units to customers the world over. This means that right now we have sold 17 per cent more new 7 Series than in the same introductory period of the former model. Successor to the BMW Z3 being launched in autumn 2002 MINI brand introduced in all international markets Apart from further versions of the 7 Series, BMW will also be presenting the successor to the Z3 this autumn. This new model will first be launched in the US market and will then come to Europe in spring Under the motto "MINI goes global", the MINI brand will be introduced in the overseas markets in the course of At the end of the year MINI will therefore be available in more than 50 countries the world over, thus making a major contribution to the ongoing growth of the BMW Group.

27 Date Page 27 Expansion of the model range with MINI Cooper S The launch of the MINI Cooper S is now broadening our model range even further: Our new top-of-the-range MINI has been available in some markets since March and will be entering the European markets in summer A further important point is that we signed a contract with Toyota just a few days ago for the supply of diesel engines for the MINI. But I will come back to that point later on. Significant increase in production due to great demand Initially our MINI plant in Oxford was laid out for an annual production capacity of approximately 100,000 units. Now, following the start of the third production shift in November 2001, we are in a position to significantly increase this figure. In fact, we are now looking at an increase in production by per cent

28 Date Page 28 - and naturally we will be selling all of these cars. This expansion of our capacity reflects the great demand for MINI. Rolls-Royce: Full responsibility for the brand will be concluded in the new Rolls - Royce saloon entering the market in early 2003 Apart from the introduction of new BMW and MINI models, we will also be concluding our preparations in 2002 for assuming full respons ibility for the Rolls -Royce brand, after which the new Rolls-Royce saloon will be entering the market in early Summer 2002: Completion of Rolls- Royce's own sales and distribution network The new Head Office and Manufacturing Plant in Goodwood in the south of England have been largely completed in the meantime, and by summer we will be finalising the establishment of Rolls -Royce's own worldwide sales and distribution network.

29 Date Page 29 Start of pilot production in Goodwood/England Pilot production is also scheduled to start in Goodwood by the middle of the year. And we have indeed already received our first orders from customers. New Company with about 350 associates will start business operations on 1 January 2003 Employing approximately 350 associates, the new Company will be taking up its business operations on 1 January We are very happy that Tony Gott will be in charge of our Rolls-Royce motor car operations. Like our cars, BMW motorcycles are also well prepared for the year New motorcycles 2002: F 650 CS and R 1150 GS Adventure The new models we are introducing for the 2002 motorcycle season are the F 650 CS and the R 1150 GS Adventure.

30 Date Page 30 Ladies and Gentlemen, Consistent continuation of our product and market offensive The BMW Group will be consistently continuing its product and market offensive, further boosting both deliveries and sales in the six years to come.

31 Date Page 31 To be specific: Increase in deliveries by approximately one-third We will be increasing the number of deliveries by approximately one -third

32 Date Page 32 approximately one -third Growth in sales of more than Euro 50 billion And, as a result, our sales volume will grow to a new dimension of more than Euro 50 billion Objective: Most successful premium manufacturer in the automobile industry Twenty new models and three new engine series Our objective, quite simply, is to be the most successful premium manufacturer in the entire automobile industry. With this in mind, we plan to introduce 20 new models and three new engine series within the next six years. With X3, 1 Series and 6 Series the BMW brand is growing around its core We will be broadening the BMW brand with the X3 in the Sports Activity Vehicles segment and with the 1 Series entering at the lower end of the market. Launching the 6 Series, in turn, we will be continuing our tradition of large coupés in a highly exclusive segment - and there will also be a convertible version of the 6 Series. The BMW brand is therefore growing around its core. Thanks to our organisational efficiency, we are able to quickly define new products and vehicle concepts while at the same time quickly implementing and completing the process of series development. Seeking to ensure individual mobility with CleanEnergy Project. and innovative use of electronics in the car and drive system Over and above our product and market offensive, we are focusing increasingly on a number of overriding activities seeking to ensure individual mobility, such as our CleanEnergy Project. And at the same time we are

33 Date Page 33 concentrating to an increasing extent on the innovative use of electronics in the car and drive system, serving to expand our top position in line with the requirements and market challenges of the future. Approximately Euro 10 billion for the development of new products Capital expenditure of approximately Euro 16 billion on new technologies, sales and distribution structures In all, we will be spending approximately Euro 10 billion in the next six years on the development of new products. In the same period we also plan to make capital expenditure to the tune of approximately Euro 16 billion. Like in the past, we will be financing this investment securely out of our cash flow. Expansion of the BMW Group's production network This capital expenditure will go not only into new technologies and our sales structures, but also into the ongoing enlargement and development of our production network, preparing the BMW Group for the new dimension we now seek to achieve.

34 Date Page 34 The new BMW Leipzig plant The most important decision we took in this context in the year of business under report was the choice of the Leipzig/Halle region as the location of our new car production plant. Building this plant, we are enlarging our worldwide production network, creating capacities for our product and market offensive in the years to come. Up to Euro 1.3 billion initial expenditure for the new plant Our initial expenditure in Leipzig will be up to Euro 1.3 billion. And we will be making further investments with each new product decision. The BMW Group's future Leipzig plant stands for many of the factors so typical of our success - for example our networks, the agility of the BMW Group, and the close,

35 Date Page 35 cooperative interaction of management and associates. Being close to the BMW Group's car production plants in Bavaria, Leipzig can be rapidly integrated into production network Being close to the BMW Group's car production plants in Bavaria, Leipzig can be rapidly integrated into our production network. This enables us to calculate the entire ramp-up process with perfect precision and to quickly start up production. The integration of our suppliers is an essential, closely related factor in this context: At the Leipzig Plant we are able to capitalise on our proven supplier organisations and systems in the south and central parts of Germany. Looking at business and operational factors, we were guided in our decision in favour of the Leipzig/Halle region not only by the cost of acquiring and developing the real estate, but also by questions such as productivity and, accordingly, wage costs and working hours. BMW's Formula for Work ensures a high standard of flexibility Precisely this is why we developed "BMW's Formula for Work" for this purpose together with the representatives of our employees. This special concept gives us a high standard of flexibility in using our production facilities and takes us a crucial step into the future.

36 Date Page 36 Ability to use production facilities between 60 and 140 hours a week Thanks to BMW's Formula for Work we are able to use our production facilities between 60 and 140 hours a week. And this, in turn, means an increase in the use of our installed capacities by up to 40 per cent - an enormous improvement of production and productivity. Governmental appropriation helps to alleviate the cost disadvantages Governmental appropriation also helps to alleviate the cost disadvantages still prevailing in this region. Confident that the support we are applying for will be approved I am happy to note that the EU Commission has in principle acknowledged our claim to governmental support, initiating a formal assessment process focusing on the level of support. This does not come unexpected - indeed, it is the usual approach with all major projects in Europe claiming such assistance. And we are confident that the support and assistance we are applying for will be approved following the probe by the EU Commission. Approximately 10,000 new jobs Medium-term capacity of approximately 650 units/day In the medium term approximately 10,000 new jobs will be created at our new location in Leipzig, approximately 5,500 at the plant s site itself and the remaining jobs in the immediate vicinity. Again in the medium term, we will be reaching a production capacity of 650 units a day.

37 Date Page 37 So what are the next steps? Last week we celebrated the groundbreaking ceremony for our new plant in Leipzig. Start production in the second half of 2004 The new plant is scheduled to start production in the second half of Production of BMW 3 Series customer cars in spring 2005 Production of BMW 3 Series customer cars will then begin in spring 2005.

38 Date Page 38 Ladies and Gentlemen, BMW Group maintains lean structures and efficient processes Despite this substantial capital expenditure on the construction of new plants and the expansion of existing facilities, we are maintaining the lean structures and efficient processes so typical of the BMW Group. Integration of external partners in our production and development processes In this context we are focusing increasingly on cooperative networks with external partners we wish to integrate into our production and development processes. Cooperations and networks to multiply our own resources This will allow us to increase our own resources and spread out the risks involved in our business. Cooperating with performance-oriented and flexible partners, we are becoming even more agile in the efficient implementation of our programmes and Examples: activities, while keeping our capital expenditure most efficient. Partnership with Magna Steyr in the development and production of the BMW X3 A good example is our close cooperation with Magna Steyr in the Austrian city of Graz agreed on 30 October 2001: In this case we are looking at genuine partnership not only in production, but also in development of the new BMW X3 Sports Activity Vehicle. Choosing Magna Steyr, BMW has found a partner with many years of experience in the implementation of four-

39 Date Page 39 wheel-drive vehicle projects. The BMW X3 will be built in Graz for the world markets. Production will be flexible, tailored to demand. Series production will be starting in the course of Cooperation with Toyota in the supply of diesel engines for MINI A further example of such cooperation is our joint venture with Toyota on diesel engines for MINI resolved just six days ago. Here we are looking at 1.4-litre diesel engines to be built and supplied by Toyota. Accordingly, we will be launching diesel-powered MINIs into the market in the course of the year Ladies and Gentlemen, Dr. Helmut Panke follows Joachim Milberg as new chairman of the board of management of BMW AG As of today, Dr Helmut Panke is my successor. Dr Panke has been a Member of the Board of Management since 1996 and in this period we have jointly mastered many discussions and decisions. Dr Panke thus stands for continuity in our objectives. He will continue the successful course of the BMW Group consistently and with clear focus. I am happy that he is

40 Date Page 40 my successor. So please give Dr Panke the confidence and good faith you have given me during my term in office. Stefan Krause new Member of the BMW Board of Management responsible for financial affairs A new Member of the BMW Board of Management is Mr Stefan Krause. As the successor to Dr Panke he is responsible for financial affairs. This shows once again that the BMW Group is able to recruit experts for important positions from its own ranks. This is a clear sign of the strength of our company. Ladies and Gentlemen, Within our Company the focus has never been just on sales, deliveries of cars, and profits. Rather, the focus has always been on people, on the human factor. Associates and our shareholders crucial to our success Our associates and our shareholders are a decisive factors crucial to the success of the BMW Group. My thanks therefore go to the associates and shareholders. I thank you for the successful years we have spent together - in particular, I thank you for your loyalty, your commitment and your constructive support also in difficult times. Excellent cooperation of the Board of Management, the Supervisory Board and Another equally outstanding factor crucial to the success to the BMW Group is the excellent cooperation of the Board of Management, the Supervisory Board and

41 Date Page 41 the Works Council of the Board of Management, the Supervisory Board and the Works Council. So let me come back to what I said at the beginning and let me thank the Supervisory Board and the Works Council very much indeed for this interaction. This cooperation was based consistently on a spirit of mutual trust and respect. Indeed, such an open spirit is an important foundation for our management culture. My special thanks therefore also go to my colleagues on the Board of Management and the entire top management team. I would like to thank them for what we have achieved together as a team and, in particular, for how we have achieved this together. BMW Group can look positively into the future I believe that the BMW Group can look positively into the future. The Company rests on the shoulders of an excellent team. Ladies and Gentlemen, thank you very much for everything.