Group Annual Report BSH BOSCH UND SIEMENS HAUSGERÄTE GMBH

Transcription

1 Group Annual Report 2007 BSH BOSCH UND SIEMENS HAUSGERÄTE GMBH

2 Something special The BSH brands, in all the company s product areas Cookers, Home Laundry, Dishwashers, Dryers, Refrigeration, Freezers, Floor Care or Consumer Products stand for innovative technology, outstanding design, best quality and excellent service. These are brands that people trust, because they offer something special: All over the world, BSH products are making people s lives better. Main Brands Special Brands Regional Brands

3 Group Annual Report 2007

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5 CONTENT 3 5 Foreword The big difference All over the world, from Hong Kong and Singapore to Munich BSH s reputation is assured through the quality of its products. The reasons for this are many. On the road to success Through systematic personnel development, BSH ensures that its employees can work in positions in which they are best able to develop their potential. A system that adds value With the introduction of the BSH production system a global standard has been created that will lead to optimal use of resources along the entire value chain. A matter of common sense With its cutting edge climate protection projects, BSH is setting standards and proving that ecology and economy need not be mutually exclusive Supervisory Board Report Board of Management, Supervisory Board Management Report Development of business Net assets, financial position, and results of operations Significant opportunities and risks for future development Anticipated Trend Group Financial Statements Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Cash Flow Statement of Recognized Income and Expense Consolidated Statement of Changes in Shareholders Equity Notes to the Consolidated Financial Statements Share owner BSH Bosch und Siemens Hausgeräte GmbH Independent Auditors Report Summary of Past Performance

6 4 The figures are conclusive proof of our success Dr. Kurt-Ludwig Gutberlet, President and CEO of BSH.

7 FOREWORD 5 Strong in competition The year 2007, to which this report relates, was an anniversary year for BSH. It is now four decades since Robert Bosch GmbH, Stuttgart, and Siemens AG, Munich merged their respective home appliance divisions and formed BSH Bosch und Siemens Hausgeräte GmbH. In the years since, BSH has systematically developed itself from mere exporter to Europe to one of the world s leading home appliance manufacturers. Growth against the trend In this our anniversary year it is once again apparent that BSH is one of the most competitive companies in the home appliance sector. We have again succeeded not only in winning new market shares in most markets but also in growing profitably, despite having to contend with a difficult operating climate. Rising oil and commodity prices, the rapid devaluation of the US dollar and the worsening of the crisis in real estate have dampened the mood among companies and consumers alike. The markets in Western Europe and North America were impacted in particular. Reduced construction activity in the US has caused the market for white goods there to collapse, but in spite of this, BSH still managed to achieve 18 percent growth. Even in Germany, which is one of our most important markets, the going was tough in 2007, with demand for large home appliances weaker than the economy overall. In spite of this, however, BSH posted higher growth than the competition. In China, where market growth was 14 percent last year, we increased our sales by 32 percent, and in Eastern Europe our growth rate of 22 percent was four times that of the market. Global sales for the group as a whole grew by 6 percent to 8.8 billion euros. In addition to this, earnings rose 18 percent year on year. Figures like these make it impossible to dispute our success. The factors that contributed to our success This success is no accident, of course: it is the result of targeted action on our part. One factor involved has definitely been our consistent policy of investment in our production facilities, and in innovative product lines. In Germany, we have invested heavily in our dishwasher and cookers production plants, and this year has also seen the successful ramp-up of a new generation of washing machines.

8 6 The Board of Management of BSH (from left to right): Prof. Werner Vogt, Dr. Kurt-Ludwig Gutberlet, Dr. Wolfgang Colberg, Jean Dufour

9 FOREWORD 7 In Nanjing, China, we are in the process of massively expanding our appliance park there. In St. Petersburg, Russia, we have opened a new refrigeration factory and have started building a new washing machine factory. In Çerkezköy, Turkey, we have expanded the dishwasher factory, and in the Polish city of Łódz we inaugurated a new development and testing center for dryers. This list is far from exhaustive, and merely offers a sample of our activities during Another important factor in the success of BSH can be described as process excellence. Universal processes allow us, as a global operator, to collaborate across functions, countries and departments efficiently and in a targeted way. In the last few years we have put a great deal of effort into continually optimizing these processes, and in doing so have developed the instruments both to measure the quality of these processes and to constantly improve them. This has created the kind of transparency needed for value-based management of the group. However, the most important success factor for BSH is the global workforce of almost 39,000 employees, who share our vision and give their all for the company on a daily basis. For this we would like to offer them our heartfelt thanks. Strong for the future The year 2007 will not only be remembered as the latest high point in the company s history, but also as the year in which the consequences of climate change, in all their drama, finally entered public consciousness. For years, BSH has been in the vanguard of the development and production of energy-efficient home appliances. There is therefore a strong case for our playing a leading role in promoting them, and we intend to step up our efforts in this area still further. BSH sees one of its future functions as being to make an important contribution to climate protection through appliances that conserve resources. And it has now been shown that commitment of this sort pays off. Even if the challenges BSH has to face in the future are no less daunting, it is in a strong position to stay on its current growth course. We have a strategy, and if we continue to pursue it systematically there is no reason why our success of recent years should not continue. Dr. Kurt-Ludwig Gutberlet Dr. Wolfgang Colberg Jean Dufour Prof. Werner Vogt

10 The big difference All over the world, from Hong Kong and Singapore to Munich BSH s reputation is assured through the quality of its products. The reasons for this are many.

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12 10 Products for a better life Paradise Island residential complex in Singapore was fitted exclusively with built-in appliances by Gaggenau, a BSH brand. As head of International Sales at BSH, Dirk Hoffmann travels a lot today in Munich, tomorrow in Hong Kong or Singapore and the day after, perhaps some place off the map in Saudi Arabia. And what Dirk Hoffmann and his colleagues sell in the process is traded in units of impressive magnitude. They call the type of business they do project business, and it represents the high-end segment of the international built-in appliance market not fitting single kitchens with a cooker, refrigerator and dishwasher; but fitting out entire upscale neighborhoods and enormous housing complexes. From the Verve Suites in Kuala Lumpur and the World Trade Center in Dubai to the amazing high-rise Arch in Hong Kong, an increasing number of luxury properties are being fitted entirely with appliances from Bosch, Siemens or Gaggenau. Thinking in terms of processes German engineering and perfect logistics are sought after the world over. However, there s plenty of work for Dirk Hoffmann to do before these factors come into play. For example, when it becomes public that a new site in, say, Malaysia, is to be developed, a certain amount of detective work is required, and all available information channels have to be tapped. Who is the developer? What exactly do they need? As Dirk Hoffmann explains, It s the first project that counts: once we ve shown what we can do, the rest practically takes care of itself. Once you represent a model for success for a developer, they ll usually continue to want to collaborate with you they see you as a reliable partner. BSH has found that the most effective recipe for success in such cases is to make sure that you supply more than just the bare product. Hoffmann sums this up as follows: We have the most success in those markets where we offer a full project management service. By this he means that if you supply the hardware, you get the opportunity to supply the software and then, as well as supplying top quality products, you can impress with your smooth handling of the order. Even the most luxurious kitchen is only as good as the equipment in it. The BSH appliances make the difference. Previous page: Dr. h.c. Dirk Hoffmann in front of the Hong Kong skyline.

13 CORE COMPETENCE 11 Time is money, especially in construction. On day Y, exactly at Z o clock, appliance X must be outside the door of the completed apartment on the 17th floor and ready to install. Dirk Hoffmann knows exactly what his contacts need: If we make sure that there are no delays even perhaps time to spare that s worth its weight in gold to developers. For them, each day saved could mean selling or letting the property a day earlier. So our process management can create considerable added value for them. How this works in practice is explained by the Head of Growth Markets Corporate Sales, Dr. Peter Böhm, using Hong Kong as an example: BSH s site manager is already on the spot eight weeks before completion, observing the progress of this 2000-apartment project. It would be absolutely fatal if we were to deliver the appliances before everything was ready for them to be installed. BSH generally uses certified service partners for installation work, and even trains their employees in advance. The acceptance inspection is then carried out using its own personnel. Nothing is left to chance from the planning through to coordinating the various works to be carried out by the electrical and gas engineers, plumbers and kitchen furniture manufacturers. We think in terms of processes, says Böhm, and it s not just a question of establishing the perfect workflow: it means once we have demonstrated perfect performance and quality, being able to deliver it over and over again in subsequent projects. And that s definitely where our strength lies. The idea is that, for the developer, the decision to use BSH should mean all-round peace-of-mind. Dr. Peter Böhm has global responsibility for growth markets.

14 12 Success breeds success Good performance is rewarded with more orders sometimes in other countries. As the big developers with annual sales figures in the billions tend to be global operators, the effects of a good reference can be felt in other countries, indeed other continents, as well. As Dirk Hoffmann says, If we have established a very good business relationship in a country like Malaysia, and the developer then does a similar project in, say, Dubai, then we can count ourselves in, right from the planning stage. For those responsible at BSH, this opens up broad prospects. According to Hoffmann, BSH has orders on its books for as far ahead as 2011, but he says they still have to plan way beyond that date. Hoffmann and Böhm are talking specifically about projects in the Near East here, but using their expectations of future business as a guide, the company is also keen to position itself elsewhere. And Hoffmann is not only talking about the growth potential of his own division: When we manage to establish awareness not just of the BSH brand but also of our solution competence, then we have a head start in any business we might do as a result in core business areas. The added value of BSH Kuala Lumpur, Dubai, Hong Kong but back in Munich, Rudolf Walfort explains what an ordinary customer, who isn t buying electrical appliances as part of a multimillion-euro luxury villa purchase, stands to gain from all this. For customers like these, what is it that tips the scales in favor of BSH over one of its competitors? What added value do they get when they opt for Bosch, Siemens, Gaggenau or one of the other BSH brands? Walfort, who is responsible for built-in cooking appliances at BSH, can immediately think of a whole series of things that are in fact unique in the market: Slide and Hide, for example, the oven door that is fully set into the appliance a concept that is

15 CORE COMPETENCE 13 not just practical, but also won the if product design award; or the liftmatic oven which, because it is wall-mounted, opens up a host of new layout options for the customer. Instead of having a drop-down oven door or pull-out rack, at the press of a button a lift lowers the entire oven floor, together with the suspended baking shelves. Then there are TwistPad controls, not to mention the whole area of sensor technology and automated programming That s just a small selection from my product area, says Walfort, all developed by the company and all product features with USP potential. But I don t really like talking about individual product features. The real added value delivered by BSH is its system competence, and it ll be quite a while before anyone catches up with us in that area. System competence? Rudolf Walfort gives us an example. Take food: more and more people are discovering steam cooking, a particularly vitamin-conserving method. Well, we ve had a series of products for steam cooking in our portfolio for a long time. On the other hand, vitamin-conserving cooking methods are of no use if the vitamins have already been destroyed beforehand! This is why we must concern ourselves with food being stored correctly either deep frozen or at around 0 C. So to us, system competence in this context means that we must look at the whole food chain, from purchase onwards, and bring solutions onto the market across all product areas that are coordinated down to the last detail. This also means constantly having to think about how people s circumstances and thus their needs change. Scenario analysis is what Rudolf Walfort calls this constant peering into the future, this development of visions aimed at offering people the products that can make their lives better, whether they live in Munich, Dubai or Hong Kong. Rudolf Walfort sees the added value of BSH as being primarily its system competence both in relation to the entire supply chain and in the way its various product lines are perfectly coordinated.

16 On the road to success Through systematic personnel development, BSH ensures that its employees can work in positions in which they are best able to develop their potential.

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18 16 Challenges and opportunities The ability to integrate and cooperate is a key requirement of BSH employees. In a company that has always stood out from the competition as regards quality, innovation and cutting edge technology, high levels of technical competence, creativity and commitment in its employees are crucial. Dr. Wolfgang Colberg, Personnel Director at BSH Bosch und Siemens Hausgeräte GmbH, therefore has a clear strategy with regard to the company s employees: We want everyone, and by that I really do mean everyone from assembly line workers to management to make a measurable contribution to company profits, and thus take some responsibility for the company as a whole. It s a question of give and take, because it gives everyone the chance to be part of a successful company. Challenges and opportunities are thus the key words in the search for and development of potential in BSH s 39,000 employees worldwide, as for about a year now, the company s development promotion schemes have been coordinated at a global level on the basis of a universal new competence model. Managers from its own ranks BSH systematically pursues a long-term, value-based growth strategy the key phrase here being long-term, as Dr. Colberg explains: Long-term means that we think in terms of fifteen or twenty years or more. That sort of growth strategy creates quite different opportunities from most. Our employees have extremely attractive jobs with long-term prospects within the company. We re always offering new functions, including in the international domain. We make sure that our employees are successful Dr. Wolfgang Colberg, Personnel Director on the Board of Management of BSH.

19 EMPLOYEES 17 On this basis, Colberg can permit himself to make quite specific and challenging demands of employees. Obviously, we want top people in our company, he says, but it s not enough to just find the best people on the job market and then expect success to follow automatically. We also try to identify ways in which we can help individual employees to do their jobs even better, and to derive more satisfaction from them. This is partly because BSH tries to fill management positions from its own ranks, and these candidates need to be identified at an early stage. Take Monika Gruber, for example: she is currently global Head of Controlling for the Consumer Products Division. Thirteen years ago, after passing her school-leaving exams, she applied to study for a cooperative education degree at BSH. This is a dual course, in which theory phases at the university of cooperative education (BA) alternate with work experience phases at various BSH sites. I wanted financial independence from the start, and I wanted the opportunity of combining theory with practical work within a company, she explains. She was one of the first to spend part of her training abroad, actually writing her dissertation in Australia. In those days, it was still quite a struggle to get a placement abroad but, as she says, Now, all BA students go abroad for at least one semester and I believe this intercultural experience is really important. After completing her studies, she started work as a section head in Controlling, for Consumer Products. Seven years deployment in Spain and Scandinavia followed. In Scandinavia, she started as Head of Business Administration for Norway and later became Head of Controlling for the whole of northern Europe as well, finally returning to Munich in Monika Gruber is in no doubt that her successful career so far is in no small part due to the support she has received from BSH s Human Resources Division along the way: I was able to complete two training courses every year, and they were always practice-based and relevant to the work I was doing at BSH. They also gave me a cross-divisional perspective and broadened my horizons. In all the countries I worked in, I learned the language and got to know people, After seven years abroad, Monika Gruber is back at the Munich headquarters where she is Head of Controlling, Consumer Products.

20 18 Head of Personnel Development, Andrea Werner: Our universal competence model provides a common framework for personnel development at BSH. so I have built up my own, personal international network. This network that Monika Gruber has built up, the source of which is basically BSH s International Executive Pool, contains a member of junior management from no fewer than four countries China, the US, Turkey and Russia. They meet twice a year to discuss problems and hammer out issues. Gruber simply says: BSH was offering a great opportunity here, so I took it. People who really fit in Monika Gruber s career at BSH over the last 13 years has been due both to her own ability and to the company s targeted development promotion measures. That is not to say that fate, committed line managers and her own initiative didn t also have a lot to do with it. These days, in a company constantly facing the challenges of global competition, finelytuned instruments are needed for placing the right people in the right positions. As Dr. Colberg says: It is important to us to find people who really fit in here. For this we needed a universal competence model that defined exactly what we require of people at BSH. Having such a model creates clarity and consistency. Also, because it reflects our corporate culture, it helps employees identify with the company. At BSH, it is Personnel Development (PE) that is responsible for developing and implementing this universal competence model and the instruments it applies. Head of Personnel Development, Andrea Werner, adopted a practice-based approach. Within four or five months her team, working in conjunction with top managers from throughout BSH, had identified the necessary criteria and, from them, developed the universal 12-competence model. It was approved in July 2007, and has since been implemented in BSH s Orientation Centers (OCs), which are similar to its better-known Assessment Centers, which are used for personnel selection. However, unlike them, according to Andrea Werner the sole purpose of the OCs is to determine where in the company employees should

21 EMPLOYEES 19 The continuing professional development of its personnel is of central importance to BSH. work, and thus help them decide what direction they would like their development at BSH to take. The list of competences is divided into four main areas strategy and management skills, methods and problem-solving skills, leadership and social skills and personnelrelated skills. In each of the four groups there are also three subskills, all of which have been specifically derived from daily routine at BSH. For example, says Andrea Werner, it is essential that our people are capable of integrating and cooperating. We have so many interfaces that in the search for solutions we have to work with different people and functions everywhere. If you can t do that, then you ll find it hard to get on at BSH. Other key qualifications are, for example, performance motivation and commitment or and to Dr. Colberg this is particularly important process competence. Colberg: We ve been working for years on ensuring that our employees thinking is processoriented, and that they don t all isolate themselves in their own little ivory towers. Intercultural competence, too, is absolutely essential in a global enterprise like BSH. An upward spiral The next challenge will be to apply the various parts of the program they have worked out over the past year to actual personnel work in the field, and this will include integrating it into a suitable talent management IT system. If we want to promote global careers, we must make sure that all personnel development measures worldwide are linked, says Andrea Werner, and it s our new competence model that will provide the basis for this. Dr. Colberg is convinced they re on the right track with this initiative: We make sure that our employees are successful, and that they have fun being successful. In this way, we create an upward spiral in which success breeds success. So it s a case of onwards and upwards, both for the employees and for BSH.

22 A system that adds value The introduction of the BSH production system sets a global standard for the optimal use of resources along the entire value chain.

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24 22 Standards for greater efficiency Following a pilot phase in Traunreut, the BSH production system will be rolled out at all sites worldwide. The world of engineers is one of facts, figures, mathematical formulae and logical interrelationships engineers are only interested in what can be measured and calculated. You know, says mechanical engineer Simon Mayer, manager of BSH s factory in Traunreut, I m a numbers person. I look at the numbers, and then I make decisions. One decision was an easy one for Simon Mayer, as he explains: Here at Traunreut, we wanted to be one of the first to introduce BSH s new production system, as we see it as offering a fantastic opportunity, not only to deliver more quality, more flexibility and more value, but to be able to measure and quantify these factors as well. 100 percent in 2009 Great expectations. But what exactly is this production system? Put briefly, it is a holistic approach, the aim of which is only to produce what the customer wants, and to do so as quickly and cost-efficiently a possible. This is why it s becoming increasingly important to implement universal standards throughout the group. In a globalized market, the effects of factors such as shorter innovation cycles, a constantly increasing number of variants and ever more stringent quality requirements at the same time as falling market prices are being increasingly felt. Global operators such as BSH do not have time to rest on their laurels; they must rise to these challenges before it is too late, not just by applying best practice in production, but by being prepared to try out new concepts as well. Three years ago we started looking into the idea more closely, remembers Simon Mayer. There had already been forerunners in Nauen and Giengen. Then, in early 2006 the decision was finally taken to roll out a universal production system throughout the group worldwide, and we at the Traunreut factory asked to be used for the pilot. After that, everything happened very quickly, and the changeover process has been under way since mid Now, at the end of 2007, we have gone over to the new production system in about 30 to 40 percent Each individual step in the production process is examined down to the last detail and then optimized. Previous page: Katrin Fehr and Werner Schmid in the cooker plant at Traunreut.

25 PRODUCTION SYSTEM 23 of the factory i.e. the whole of our newly designed cooker assembly unit has gone over to it, and our cooktop assembly unit is due to be converted during This means we re right on schedule for Traunreut to be 100 percent based on the new system from By then, all other BSH factories will have started rolling out the new system. Taking people with you Simon Mayer may be a numbers person, but it was not long before he realized that most of the challenges he faced with the introduction of the BSH production system were not technical in nature, but psychological. As he reports, there was obviously a certain amount of prejudice to overcome, with people muttering things like: Now what have they thought up to make our lives more difficult? Although it was important to dispel these prejudices and fears right from the start, it was also important to take them seriously. We mustn t forget, Mayer says, that with the new system, the way people work together has completely changed. We have to make sure that each individual has a full understanding of the whole production process. But as a result, each individual must also be prepared to question whether their particular step in the work process is actually useful and that s not an easy thing to do. So for Simon Mayer it was particularly important to take his people with him. Every employee at the plant, from manager to assembly worker, had to be helped to come to the We saw the opportunities it offered, so we wanted to be in on it from the start Simon Mayer, manager of the cooker factory in Traunreut.

26 24 For Stefan Lauwitz, one of the greatest advantages of the new system is its transparency. clear and logical conclusion that a production system of this sort brings benefits for everyone and, in the final analysis, is actually much better than all the other options. Stefan Lauwitz, Head of Corporate Production Technology at headquarters, who is coordinating the rollout of the system from the group s headquarters in Munich, adds that a production system of this sort is also a matter for the bosses, saying: The whole changeover, and the new thinking that goes with it, must be seen to be being experienced by everyone. First and foremost, it s essential that management takes the trouble to know and understand these processes, because only what I understand myself can I put into practice and communicate to others. Working in a value-creating way First of all, workshops for around one hundred managers were held at Traunreut. Over the course of a day-and-a-half, they learned what the changes to the production sequence mean, how they are to be implemented, what the production system is supposed to achieve and, not least, about the new philosophy behind it all. Cooker production was the first to be radically changed, with five principles, namely producing according to demand, solid product start and discontinuation, challenging and fostering employees, avoiding errors and avoiding waste being applied. Standing right where it s all happening, on the production line itself, Katrin Fehr, who is responsible for time management, explains what has changed: The work done at each workstation can be divided into two kinds valuecreating and non-value-creating. Our aim was to create conditions that ensured that the proportion of value-creating work was as large as possible. For example, two steps forward and two steps back, or turning round to pick up another screwdriver, are clearly not valuecreating. By analyzing problems such as these at every single workstation they were able to optimize workflows, which are now defined down to the last action and for each station. Katrin Fehr says that for the workers in assembly this was a really big change at first: People had the feeling they were losing some of their personal freedom at their workstations. However, they soon noticed that there were plenty of advantages to the new way of doing things. The new workflows

27 PRODUCTION SYSTEM 25 Gearing the production lines to the requirements of the people who work on them minimizes the proportion of non-valuecreating work. increase productivity and actually make work easier. But assembly is not the only factor in the equation. The BSH production system affects the whole value chain, from the purchase of raw materials and components, through storage and logistics and production in the factories to the actual delivery of appliances. When they analyzed this value chain, Simon Mayer and his co-workers noticed that, at 30 to 50 minutes, the processing times for materials in the factory accounted for a very small section of the chain in terms of time. However, it took ten days for the product made from these materials to be finished and to leave the factory. According to Mayer, this was attributable to the length of the storage phases between the individual production phases. We immediately changed the technical setup to make the various production areas more closely linked. By doing this we were able to make massive reductions in the size of the buffer stocks, and now it s more value that s created in the workstream, instead of more handling. We can do it Stefan Lauwitz distils the production system concept down to one essential point, saying: No matter what we do, the first thing is to create transparency. Then we can see where value is being created and where resources are still being wasted and that s something we can systematically improve. And by creating transparency and universal standards, we re also making it possible for the immense knowledge and experience that exist within our organization worldwide to be shared and made accessible to everyone. Transparency is all well and good, but what about the numbers, Simon Meyer do they add up? In response to this question, Simon Mayer leans back and looks relaxed: We ve made really good progress there already, he says. Our sales department is now able to influence production from the fifth working day. That s a considerable improvement. We re achieving enormous reductions in warehouse stocks as a result. And then there s the target we ve set ourselves, here in Traunreut, of saving several million euros through the production system and I think we can do it, too.

28 A matter of common sense With its cutting edge climate protection projects, BSH is setting standards and proving that ecology and economy need not be mutually exclusive.

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30 28 Pioneering work in climate protection Production of energyefficient refrigerators at BSH s plant at Hortolândia in Brazil. Few thought it would work putting brand new, energy efficient refrigerators into shacks in shanty towns but it is working, and achieving threefold benefit social, ecological and economic into the bargain. The idea is as simple as it is effective. At any rate, this BSH model is receiving the highest praise from non-governmental organizations because it combines in exemplary fashion the three pillars of sustainability. BSH s Refrigerator Exchange initiative, on which it has collaborated with local energy providers in the favelas in various Brazilian cities, is one of many projects that bear witness to the company s consistent commitment to climate protection. It is the result of many years research and experience, as it is not only since the recent debate on climate change that BSH has been one of the leading companies in the sector in developing energy-efficient and resource-sparing appliances. The year 2007 will thus go down in memory not least as the year in which the Nobel Peace Prize was awarded to Al Gore and the Intergovernmental Panel on Climate Change; but it was also the year in which mankind truly became aware, for the first time, of the dramatic global consequences of climate change. BSH has landmark years of its own to remember, however: back in the nineties, for example, Bosch unveiled one of the first fully CFC- and FC-free refrigerators a pioneering contribution toward combating climate change. We can justifiably say that since the seventies, we have shown a good deal of the pioneering and entrepreneurial spirit when it comes to energy efficiency and sparing resources, says Dr. Herbert Mrotzek, Head of the Corporate Environmental Protection and Health and Safety department, which BSH set up as early as Its stated mission is to continually improve climate protection through innovative solutions. Dr. Herbert Mrotzek, Head of Corporate Environmental Protection and Health and Safety. Previous page: Márcio Vazquez in front of old refrigerators awaiting recycling.

31 ENVIRONMENT AND SOCIETY 29 Saving energy in day-to-day operations As over 90 percent of the environmental damage caused by large home appliances occurs during normal use, this is where BSH can make the greatest contribution to ecological equilibrium, i.e. in the environmentally friendly design of its products. This includes reducing the amounts appliances consume because, as Dr. Mrotzek explains: Older appliances often consume more than twice as much electricity and water as new ones. It was this fact that provided the inspiration for the Refrigerator Exchange initiative in the favelas of Brazil: Brazil s economy is growing, and the resulting increased demand for energy is causing considerable problems. Energy providers there are therefore required by the state to invest 0.5 percent of their revenues in efficiency programs. According to Márcio Vazquez, who was responsible for getting the project off the ground, the favelas probably contain the oldest appliance stock in the world. In these deprived settlements, some of which have as many as 300,000 inhabitants, refrigerators that either totally lack insulation or are at best badly insulated, have been the norm. And because many favela residents are not officially registered as living there, they tap illegally into the grid, which is another problem Brazil s energy providers have to contend with. As Márcio Vazquez explains: The benefit is twofold: providing poor households with free refrigerators automatically increases the official percentage of people with electricity, and at the same time we are reducing energy consumption by installing more efficient appliances. An incredible 45,000 have been replaced in the course of one year, and BSH is organizing the whole process delivering, collecting and recycling. That way, we ensure that the old refrigerators don t continue to be used, says Vazquez. Following the success of this pilot project, BSH is engaged in intensive talks with the Brazilian government, which is currently working on a major program of investment aimed at building on the benefits described above. Energy champions in all BSH companies The network of international associations, universities, energy providers and industry partners that BSH has built up over the years is proof of the incalculable value of its many years experience working to protect the environment. We keep a close eye on technical and social developments in all areas and are constantly looking to see where we can forge useful collaborations, to make sure that new technologies are used for the benefit of all, is how development engineer Horst Werkmann from Electronics, Drives and Systems (EDS), one of BSH s innovation centers, describes his department s aims. Márcio Vazquez (photo, top of page): BSH coordinates the whole process of replacing old refrigerators in the favelas, including the recycling.

32 30 For example, it is one of the dreams of this BSH think tank to design a washing machine or dishwasher that only springs into life when a wind turbine is running, or there is sun to supply solar power collectors with energy an intelligent network, in fact. It is important not to rest on our laurels, and instead to keep looking far into the future, is the way Werkmann sees it. This is why, at BSH, they have actually started to bring together all the resource-conservation activities currently under way within the company into a single project. The importance being attached to this project is evidenced by the high caliber of the steering team that has been put together for it it includes two members of BSH s Board of Management, for example. The company s strengths are to be pooled in five modules, starting in Product Development, Marketing and Corporate Communications and continuing with work in groups and policy committees, so that the individual projects can be coordinated and their impact made even greater. Jean Dufour, Member of the Board of Management, says, quite simply, that Energy excellence must become a BSH-wide movement. An important step in the right direction is the appointment of socalled Energy Champions in all BSH subsidiaries, whose job, as local experts, will be to champion environmental concerns all over the world and link up the individual country-specific structures involved. According to Dr. Mrotzek: This will allow us to put the diverse experience and special expertise in the field of energy efficiency that exists in the various countries at the disposal of the whole company. We were always leaders in this field, he says, and in future we want to be the benchmark for the sector. Horst Werkmann (with Kira Marquardt) from the BSH think tank, EDS looking far into the future. Progress in quantum leaps While we must look to the future, it should be acknowledged that what has been achieved to date is still enormous the water consumption of washing machines reduced by up to 67 percent since 1990, and the electricity consumption of refrigerators cut up to 79 percent, to name just two statistics. What has been achieved is really impressive, but is there not still some real room for improvement? Dr. Christian Zimmermann from BSH s product area Cooling is optimistic.

33 ENVIRONMENT AND SOCIETY 31 Obviously, progress is not linear, he says, it comes in stages, and time and again, new technologies can result in quantum leaps. He also stresses how important it is to persevere, and continues: With every new product we develop, energy efficiency is always part of the specifications, and when we set up a new production platform, we anticipate a jump to the next energy efficiency class, or even to the one after that and worldwide, too, even if that new energy class is still nowhere to be seen in the existing standards. This produces a strong leverage effect, which is often also the result of collaborating with components suppliers. As Dr. Zimmermann says: We not only optimize internally, for example in the layout of our appliances, but also work very closely with our suppliers on the development of components. This considerably increases the effectiveness of our own efforts. The developers concern themselves with the whole life cycle of a new appliance, from its environmentally friendly production and energy-efficient use to the ecological requirements for its recycling. Only if you avoid using critical substances right from the start can you be sure of avoiding polluting the environment when you recycle a refrigerator, for example. As Dr. Zimmermann puts it: To produce appliances that are environmentally compatible throughout their life cycle is our clearly stated aim. Dr. Christian Zimmermann from the product area Cooling. An investment that pays for itself This philosophy obviously comes at a price. But even if it does result in slightly higher production costs, the investment is certainly worth it for the customer. Constantly making customers aware of this fact, however, is not the job of the developers, but of the experts in Marketing. Their advertising campaigns leave customers in no doubt as to the economic benefits of energy-saving technology, especially in times of rising energy prices. Customers are also reminded that they are making an important contribution to the ecological equilibrium of the planet without having to sacrifice the slightest bit of convenience or comfort. Energy efficiency is quite clearly a matter of common sense, and it is also becoming a worldwide trend. The last word goes to Dr. Zimmermann: Because of our cutting edge technology, it is with our name that this trend is largely associated, and of that we are very proud. Outstandig ecological and social engagement and performance: the Brazilian team lead by Ivana Ribeiro

34 32 Supervisory Board Report During the year under review, the Board of Management reported regularly to the Supervisory Board on the performance of the company and on its major decisions, both orally and in writing. The 2006 financial statement, the development of business during fiscal 2006 and in the year 2007, and the Business Plan 2008, including HR and financial planning, were explained to the Supervisory Board by the Board of Management at the two regular Supervisory Board meetings held during the year. The Board of Management reported to the Supervisory Board on the company s economic development and the competitive situation in the relevant markets, particularly in Europe, Turkey, Russia, the USA, South America, and China, as well as the progress in implementing the corporate growth program and its further development. The Supervisory Board provided comprehensive advice on these topics. Rudi Lamprecht, Chairman of the Supervisory Board. The Supervisory Board also discussed the Board of Management s report on the situation in the product areas, in particular the Refrigeration, Laundry and Dishwashers areas, and the investment projects in China and Russia. The Supervisory Board also addressed topics including the development of material and market prices, as well as personnel and selling costs, the internationalization of purchasing, asset management and business risks stemming from the situation in the financial markets, exchange rate developments and the rise in energy costs. The Supervisory Board sought details from the Board of Management about the Group s Risk Management System, and offered advice on the establishment of a Compliance Management System. The Supervisory Board s discussions also encompassed technical, sales-related and political issues around the energy efficiency of home appliances and further cuts in energy consumption, research and development topics, including the introduction of new ranges of appliances, projects associated with the Protos plant oil stove, competitor analysis and mergers and acquisitions in the home appliance sector. In addition to its official sessions during the course of the year, regular discussions also took place between the Board of Management and the Chairman of the Supervisory Board and his deputies. The financial statement of BSH Bosch und Siemens Hausgeräte GmbH and the consolidated financial statement as of December 31, 2007, and the management report for BSH Bosch und Siemens Hausgeräte GmbH and the Group management report have been audited by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Munich, and have been given their unqualified approval. The reports prepared by the auditors were presented to all members of the Supervisory Board. The Supervisory Board thoroughly examined the documents concerned, which were also discussed in full at the Supervisory Board s meeting to approve the balance sheet, which was held in the presence of the auditors.

35 SUPERVISORY BOARD REPORT 33 The Supervisory Board raises no objections and concurs with the findings of the audit. It approves the financial statement of BSH Bosch und Siemens Hausgeräte GmbH and the consolidated financial statement, and recommends that the shareholders adopt the financial statement and the consolidated financial statement and approve the Board of Management s proposal about the use of net income. Dr. Peter Moritz stepped down from the Supervisory Board with effect from May 8, 2007, followed by Mr. Volker Pruschke on August 31, We have thanked them both for their valuable contributions. They were succeeded as members of the Supervisory Board by Mr. Dominik Asam and Mr. Thomas Horst Bauer, on May 8, 2007 and October 8, 2007 respectively. Dr. Jürgen Radomski left the Supervisory Board at the conclusion of its meeting on December 7, Dr. Radomski had been a member of the Supervisory Board of BSH Bosch und Siemens Hausgeräte GmbH since 1995, serving as the body s Chairman or Vice-Chairman for over six years. During this period he played a key role in shaping the development of the company. The Supervisory Board has expressed its thanks to Dr. Radomski for his great contribution to the company s current position. Mr. Karl-Heinz Seibert was elected to succeed him on the Supervisory Board with effect from December 7, The Supervisory Board would like to thank the Board of Management and the company s employees for their successful endeavors over the past year. Munich, April 30, 2008 For the Supervisory Board Rudi Lamprecht Chairman of the Supervisory Board

36 34 Board of Management Dr. sc. pol. Kurt-Ludwig Gutberlet Chairman Chief Executive Officer, Corporate Strategy, Corporate Communications, Law and Industrial Policy, Internal Audit, Consumer Products, Customer Service Dr. sc. pol. Wolfgang Colberg Chief Financial Officer, Finance and M&A, Business Administration, Corporate Development and Controlling, Labour Relations Director, Human Resources, Information Technology, Purchasing, Tax, Customs, Insurance Jean Dufour Chief Sales and Marketing Officer, Corporate Sales, Brand Management, Logistics Prof. E. h. Werner Vogt Chief Operating Officer, Chief Technology Officer, Product Area Dishwashers, Product Area Cookers, Product Area Cooling, Product Area Laundry, Electronic Systems and Drives, Corporate Technology

37 Supervisory Board BOARDS 35 Rudi Lamprecht, Munich Chairman of the Supervisory Board Member of the Managing Board of Siemens AG (until Dec. 31, 2007) Advisor to the Managing Board of Siemens AG (since Jan. 1, 2008) Elmar Freund, Bad Neustadt Vice-Chairman Chairman of the Group Works Committee Wolfgang Chur, Stuttgart Vice-Chairman Member of the Board of Management of Robert Bosch GmbH Dominik Asam, Munich (since May 8, 2007) Head of the Board of Management of Siemens Financial Services GmbH Thomas Bauer, Stuttgart (since Oct. 8, 2007) Director, Sales and Marketing Coordination Consumer Goods and Industrial Technology; Marketing Communications and Brand Management of Robert Bosch GmbH Ellen Bonna-Knöpp, Giengen Chairperson of the Works Committee of the Giengen plant Artur Fischer, Rosenheim Senior Authorized Representative of the IG Metall trade union, Rosenheim Administrative Office Peter Kern, Frankfurt Union Secretary to the Executive Committee of the IG Metall trade union Gerhard Kümmel, Stuttgart Member of the Board of Management of Robert Bosch GmbH Volker Pruschke, Stuttgart (until Aug. 31, 2007) Director, Sales and Marketing Coordination Consumer Goods and Industrial Technology; Marketing Communications and Brand Management of Robert Bosch GmbH Dr. rer. pol. h.c., Dr. techn. h.c. Jürgen Radomski, Munich (until Dec. 7, 2007) Member of the Managing Board of Siemens AG Gotthard Romberg, Stuttgart Formerly Member of the Board of Management of Robert Bosch GmbH Wolfgang Rückert, Traunreut Vice-Chairman of the Works Committee Traunreut plant Dieter Schweisfurth, Hamburg Head of Sales, Bosch Northern Region BSH Bosch und Siemens Hausgeräte GmbH Karl-Heinz Seibert, Munich (since Dec. 7, 2007) Head of Mergers, Acquisitions and Postclosing Management, Siemens AG Franz Veh, Dillingen Chairman of the Works Committee, Dillingen plant Lothar Wiedeberg, Berlin Vice-Chairman of the Works Committee, Berlin plant Prof. Dr.-Ing., Dr.-Ing. E.h. Klaus Wucherer, Erlangen Member of the Managing Board of Siemens AG (until Dec. 31, 2007) Advisor to the Managing Board of Siemens AG (since Jan. 1, 2008) Dr. rer. pol. Peter Moritz, Munich (until May 8, 2007) Member of the Board of Management, Siemens Financial Services GmbH

38 36 Management Report A. Development of business Development of the sector and of the economy as a whole A host of factors acted as a drag on the global economy in Rising crude oil and commodity prices, the more rapid decline in the US dollar, and the worsening US property crisis all depressed business and consumer sentiment. Nevertheless, at 3.9 percent, economic growth in 2007 was only slightly less than the strong rate of expansion recorded in 2006 (4.1 percent). The main boost came once again from investment activity, although consumer spending also continued to make a noticeable contribution to growth. At regional level, economic trends again varied considerably. In the USA, the property crisis had a particularly noticeable impact. Growth in 2007 was therefore significantly lower than in previous years at 2.2 percent, with the main decline in construction activity. The American economy was buoyed only by the weakness of the US dollar, which resulted in an upturn in US exports. As in previous years, the emerging economies experienced an extremely favorable economic trend. Latin America continued to benefit from very high commodity prices, which boosted investment activity and to an increasing extent consumer spending as well. At 5.3 percent, economic growth was roughly on a par with the previous year (+5.1 percent). South America s most important economy, Brazil, saw growth accelerate to 5.4 percent despite the continued appreciation of its currency. Among the emerging economies, those in Asia continued to achieve the strongest rate of growth, expanding by 8.9 percent. The best performers in 2007 were once again China (+11.5 percent) and India (+9.2 percent). Europe picked up where it left off in 2006 by continuing to deliver a very encouraging performance. The continent as a whole achieved a growth of 3.4 percent in 2007 (2006: +3.5 percent) with Central and Eastern Europe an above-average rate of growth (6.5 percent). Thanks primarily to the strength of the global economy, the fast pace of expansion in Western Europe was largely unchanged at 2.8 percent (2006: +2.9 percent). Neither persistently high crude oil prices, the surge in the euro, nor the sharp increase in value-added tax in Germany had a significantly adverse effect on the economic environment. Alongside exports, investment activity proved to be a further factor underpinning Western Europe s economic upturn. At 2.5 percent, growth in Germany was slightly less than the strong rate of expansion recorded in 2006 (2.9 percent). This figure is better than originally expected given the 3.0 percentage point increase in value-added tax and the sharp rise in energy prices.