Supplying the BMW Group Supplierbusiness

IHS AUTOMOTIVE Supplying the BMW Group SupplierBusiness

2015 edition supplierbusiness.com

SUPPLYING THE OEMS BMW Group

Julian Buckley Principal Analyst SAMPLE IHS Automotive | Supplying the BMW Group | 2015 edition

Contents

Overview 6 Modularisation strategy 61 Global market overview 7 Supplier parks 62 Financial data 7 Cluster of reference 63 Financial overview 8 Strategies for manufacturing efficiency 64

Product strategy 9 Purchasing strategy 65 Company history and strategy review 10 Purchasing strategy overview 66 Major model programmes 12 Levels of vertical integration and outsourcing 66 ––1. BMW 3-Series 12 Purchasing organisation 67 ––2. BMW 5-Series 17 Purchasing offices 68 ––3. BMW 1-Series 21 Key purchasing personnel 69 ––4. BMW X1 24 Purchasing budget 69 ––5. Mini 26 ––6. BMW X5 29 Supplier Selection 70 ––7. BMW X3 31 Supply base development 71 ––8. Mini Countryman 33 Major and strategic suppliers 72 ––9. BMW 4-Series 35 Supplier eligibility 78 ––10. BMW 3-Series GT 37 Supplier evaluation criteria 79 Working with the BMW Group 79 Vehicle Platforms 38 Platform strategy 39 Global Sourcing 80 Major platforms 40 Policy and plans 81 ––1. L7 40 ––EMEA 82 ––2. L6 41 ––NAFTA 82 ––3. LU 42 ––APAC 83 ––4. L4 43 ––LATAM 84 ––5. L2 43 Pricing Policy 86 ––6. L3 44 Cost reduction strategies 87 ––7. LI 44 Raw material price management 87 ––8. RR01 45 Payment terms 88 Component sharing 46 Volume planning 47 Quality Management 89 Quality level 90 Production Strategy 49 Quality management systems 90 Production strategy overview 50 Supplier integration into product development 92 Manufacturing network 51 Management of suppliers and sub-suppliers 92 ––Germany 51 Supplier awards 94 ––United States 53 ––China 54 Technology 96 ––United Kingdom 55 Technological positioning 97 ––Austria SAMPLE57 Areas of focus 97 ––South Africa 58 R&D organisation 99 ––CKD assembly sites 59 R&D spending 100 Internal supply network 60 Access to supplier technology 100

IHS™ AUTOMOTIVE Copyright notice and legal disclaimer © 2015 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. IHS and the IHS logo are trademarks of IHS. For more information, please contact IHS at www.ihs.com/CustomerCare.

Approach to alternative fuels, electrification and fuel ––OEM level 118 cells 102 Pursuit of excellence 118 Special vehicle development 102 ––OEM level 118 Outlook 118 Forward Model Programmes 104 ––OEM Level 118 SuRe by region 118 Interviews 107 ––North America 119 Franz Linner, vice-president BMW Supplier Network ––Europe 119 America 108 ––Asia 119 Dr. Jürgen Greiner, Head of Development for SuRe by company size 119 Passenger Car Transmission, ZF Friedrichshafen 110 SWOT Analysis 121 SWOT Analysis - BMW Group 122 Supplier Relations Survey 113 Global footprint 122 Introduction to the SuRe Index 114 Methodology 114 Future Model Programmes by Nameplate 123 Executive summary 114 Performance review – BMW 115 Major Suppliers 131 2014 SuRe survey results 115 BMW 2 SERIES [2013] (GERMANY, EUROPE, L7, F22) 132 ––Top of the ranking: Trust and future potential drive BMW 7-Series (2015) (GERMANY, EUROPE, LG, G11) 134 harmony 115 BMW X6 [2014] (UNITED STATES, NORTH AMERICA, L4, ––Middle of the ranking: OEMs push cost reduction 116 F16) 137 ––Bottom ranking: Cost overrules quality 116 BMW MINI [2013] (UNITED KINGDOM, WEST EUROPE, Profit potential 117 LU, F56) 141 ––OEM level 117 BMW X4 [2014] (UNITED STATES, NORTH AMERICA, L7, Organization 117 F26) 145 ––OEM level 117 BMW i8 [2014] (GERMANY, WEST EUROPE, Li, I12) 147 Trust 118 Figures

Figure 1: Global light vehicle production, 2009-2018 7 Figure 13: The BMW Efficient Dynamics X5 eDrive Figure 2: The BMW Eisenach plant in 1929 10 should help BMW meet CAFE emissions guidelines in Figure 3: The launch of the 1500 saloon in 1961 marked the United States 30 a turning point for BMW 10 Figure 14: The BMW X3, post 2014 facelift - otherwise Figure 4: BMW headquarters in Munich, Germany 11 known as a Life Cycle Impulse 31 Figure 5: The first 3-Series, introduced in 1975, was the Figure 15: The original Austin Mini Countryman 33 successor to the 2002 12 Figure 16: Mini unveiled the Countryman Park Lane Figure 6: The facelifted F30 3-Series was presented at edition at the 2015 Geneva motor show 33 the 2015 IAA Frankfurt motor show 15 Figure 17: The BMW 428i Gran Coupé in the M Sport Figure 7: A first-generation 5-Series, with the trim package 35 Hofmeister kink visible on rear C-pillar 17 Figure 18: MW introduced the F34 3-Series Gran Figure 8: The new BMW 5-SeriesSAMPLE Edition Sport Touring Turismo in 2013 37 19 Figure 19: LG body structure of the 2016 7-Series, Figure 9: Revised in 2015, this will be the last rear- featuring Carbon Core technology 41 wheel drive 1-Series hatchback 22 Figure 20: Bodyshell of the new five-door Mini Figure 10: The latest BMW X1 is based on a native advancing through the bodyshop at Plant Oxford 42 front-wheel drive platform 24 Figure 21: Cutaway of the LifeDrive architecture which Figure 11: Larger headlight units in the new Mini remain comprises the i3 44 located in fenders, requiring bonnet openings 27 Figure 22: All-aluminium chassis structure for the Figure 12: The Mini JCW - as with all new variants, Rolls-Royce Phantom 45 basic instrumentation has been moved from the round Figure 23: Signing of the contract for the cooperation central feature to a small cluster above the steering between BMW Group and Toyota Motor Corporation 47 wheel 27

Figure 24: At publication, the latest model to enter investment at Spartanburg plant 83 production at Plant Dingolfing was the new 7-Series Figure 36: BMW Brilliance has elected to lease, not sell, saloon 51 the China-only Zinoro 1E EV 84 Figure 25: Conveyor for completed car bodies at the Figure 37: Assembly at the new Araquari plant in Brazil Leipzig plant 52 started with the 3-Series saloon 85 Figure 26: The BMW plant in Spartanburg, South Figure 38: BMW supplier integration process 92 Carolina 53 Figure 39: The new BMW 7-Series 750Li xDrive with Figure 27: Assembly line for the BMW X1 at the Tiexi Display Key fob for remote parking 99 plant 55 Figure 40: Authority Vehicles - BMW X3 xDrive20d as a Figure 28: Production of modular engines at the Hams marked police car, with blue lightbar and decals 103 Hall plant in 2015 56 Figure 41: Unveiled in 2014, the Toyota FT 1 concept Figure 29: Located in park land, there is little room to serves as a reference point for the next BMW Z4 106 expand the Goodwood facility 57 Figure 42: OEM Supplier Relations - Top of the Ranking Figure 30: Rosslyn produced its one millionth 3-Series 116 saloon in March 2015 58 Figure 43: OEM Supplier Relations - Middle of the Figure 31: The first 3-Series saloon produced at the Ranking 116 new facility in Araquari, Brazil was delivered in October Figure 44: OEM Supplier Relations - Bottom of the 2014 59 Ranking 117 Figure 32: Dr. Klaus Dräger, BMW Group 69 Figure 45: OEM Supplier Relations - North America 119 Figure 33: BMW 2014 Global Supplier Network (by Figure 46: OEM Supplier Relations - Europe 119 region) 72 Figure 47: OEM Supplier Relations - Asia 119 Figure 34: Scherm Group electric-powered truck now Figure 48: BMW Global manufacturing facilities 122 delivering parts to Munich Assembly 82 Figure 49: BMW Future Model Programmes by Figure 35: Double celebration - start of X4 production Nameplate 124 in 2014 was followed by announced USD1 billion

Tables

Table 1: BMW Group Top 10 best-selling global models Table 10: BMW 4-Series global sales (by Sales Brand, (by Sales Parent, Global Nameplate) 2004-2009-2014- Sales Nameplate) with segment competitors 2010- 2019 12 2020 36 Table 2: BMW 3-Series global sales (by Sales Brand, Table 11: BMW 3-Series GT global sales (by Sales Sales Nameplate) with segment competitors 2010- Brand, Sales Nameplate) with segment competitors 2020 16 2010-2020 37 Table 3: BMW 5-Series global sales (by Sales Brand, Table 12: BMW Group Top 10 most used platforms (by Sales Nameplate) with segment competitors 2010- Sales Parent) 2004-2009-2014-2019 40 2020 20 Table 13: BMW Global Production (by Country) 2005– Table 4: BMW 1er and 2er and Mini sales (by Sales 2020 48 Parent, Sales Brand) 2010-2020 23 Table 25: BMW Group Global Top 10 production plants Table 5: BMW X1 global salesSAMPLE (by Sales Brand, Sales with annual output (by Sales Parent and Country) Nameplate) with segment competitors 2010-2020 25 2004-2009-2014-2019 50 Table 6: Mini global sales (by Sales Brand, Sales Table 14: Magna part deliveries to the BMW Group Nameplate) with segment competitors 2010-2020 28 - by plant (2014-’10 specific vehicles covered in Who Table 7: BMW X5 global sales (by Sales Brand, Sales Supplies Whom from IHS SupplierBusiness) 73 Nameplate) with segment competitors 2010-2020 30 Table 15: ZF part deliveries to the BMW Group - by Table 8: BMW X3 global sales (by Sales Brand, Sales plant (2014-’10 specific vehicles covered in Who Nameplate) with segment competitors 2010-2020 32 Supplies Whom from IHS SupplierBusiness) 76 Table 9: Mini Countryman global sales (by Sales Brand, Table 16: BMW Group Vehicle production (by region) Sales Nameplate) with segment competitors 2010- 2010-2020 81 2020 34 Table 17: Automotive sales of SuRe Index survey repondents 120

Table 18: SWOT Analysis - BMW Group 122 Table 22: BMW MINI [2013] (UNITED KINGDOM, WEST Table 19: BMW 2 SERIES [2013] (GERMANY, EUROPE, L7, EUROPE, LU, F56) 141 F22) 132 Table 23: BMW X4 [2014] (UNITED STATES, NORTH Table 20: BMW 7-Series (2015) (GERMANY, EUROPE, LG, AMERICA, L7, F26) 145 G11) 134 Table 24: BMW i8 [2014] (GERMANY, WEST EUROPE, Li, Table 21: BMW X6 [2014] (UNITED STATES, NORTH I12) 147 AMERICA, L4, F16) 137

SAMPLE

Platform strategy The BMW Group launched ‘Strategy Number ONE’ in 2007. When the switch-over is completed, all vehicles within the While this outlines the mission statement through 2020, 1er and 2er ranges and possibly up to five core Mini models which is to see the BMW Group as ‘the leading provider will be based on variants of the same UKL1 platform (where of premium products and premium services for individual Mini models are now listed under the LM product line). mobility’, the plan has two further targets: to be profitable The transverse-mounted, front-engine and front-wheel and to enhance long-term value in times of change. These drive architecture should remedy the lack of interior space tenets are applied to various areas of company activity, across the existing 1-Series (if the new front-wheel drive covering structural, cultural and technological areas, X1 crossover SUV is an indication), while platform sharing supported by four pillars: Growth, Shaping the Future; should open up a variety of part-sharing synergies. The Profitability; and Access to Technologies and Customers. most fundamental of these, aside from the platform itself, Each of these goals can be identified within the future will be across the powertrain, which in all models will use group platform strategy. selections from the new range of modular engines and related transmissions. The majority of global OEMs are currently rolling out strategies designed to consolidate a greater number of As this happens, a programme of platform consolidation vehicle ranges onto fewer unique platform structures. is also taking place across the major rear-wheel drive BMW, though, has not had to launch its own ground-up model ranges. Where the current 5-Series uses a platform rationalization programme, largely due to the historically shared with 6- and 7-Series, the next-generation model, small number of unique models produced by the OEM and due for introduction in mid-2016, will be moved over to the decision to share existing platforms as the company the LK product line. This will become the volume RWD has continued to expand its vehicle portfolio. As recently architecture, further supporting production of the next 3er as 2000, BMW was producing eight model ranges on five and 4er ranges, plus the X3 and X4 compact SUVs. To build platform types and even some of these architectures shared volumes under the next LG product range, the X5 and X6 basic design characteristics. SUVs will join the 6er and 7er ranges, the latter expected to be extended further with the introduction of an all-new That is not to say that no missteps have been made. With X7 SUV in 2018. The LG line-up will further include the the launch of the original 1-Series in 2004, BMW elected Rolls-Royce Ghost, Wraith and the new Dawn, a two-door to introduce the new model range within the L2 product four-seat super luxury cabriolet unveiled at the 2015 IAA line, where the core vehicles were the 3-Series saloon and Frankfurt motor show. its derivatives. Motivated by savings through consolidation and the desire to preserve the rear-wheel drive brand In speaking about BMW platforms, it is important to note heritage, the resulting hatchback was compromised in that there is a distinct difference in meaning between areas key to the segment, such as interior space. Combined ‘architecture’ and ‘platform’. Where these reports generally with a comparatively high price, the premium hatchback use the two descriptives interchangeably, BMW specifically never challenged the dominant volume segment entries, states that an architecture is an over-arching structure including the Volkswagen Golf and Ford Focus. with construction principles which can be shared over two brands and a wide variety of models, whereas a platform is Moving forward, BMW and Mini are on course to correct a specific derivative of this structure. Examining this more this error. In 2014, the same year Mini introduced its third- closely, an architecture defines key aspects, such as the generation hatchback, BMW launched the 2-Series Active positioning of the front axle, A-pillar, while supporting a Tourer. This model represented two firsts for the carmaker: variety of wheelbase lengths and drivetrains. At the same the first compact MPV and SAMPLEmore significantly, the first front- time, this structure remains flexible in terms of overall wheel drive model. While the existing 1-Series (following a vehicle length and height. Ultimately, this means vehicles mid-life facelift in 2014) remains rear-wheel drive, this will such as the Mini models, BMW 2er Active Tourer and BMW be the last generation to use this powertrain and it will X1 all currently share the basic architecture, while using switch to the front-wheel drive powertrain in 2017 – with different platforms. full production across all variants achieved in 2019.

impact bars and seat braces minimize cabin deformation delivered by Borealis and the completed module is delivered in the event of side impact. A shock absorber is positioned ready for paint application. The Daplen fender used on the between the bumper bracket and cladding to further absorb X5 is 50% lighter than an equivalent steel component. impacts. Additionally, the bonnet has a pyrotechnic trigger mechanism to raise the closure if a pedestrian impact is Total combined output on the L4 architecture across the predicted by a bumper-mounted photosensor. X5 and X6 reached in excess of 187,000 units over 2014 and totals are forecast to exceed 200,000 units over 2015 Variants based on the Mini hatchback will make up the and ’16. In 2018 both of these models will be switched majority of initial output on the LU architecture, with over to platforms based on the LG architecture. This will forecast output expected to reach almost 225,000 units help to build volumes on a chassis type supporting the over 2016. In the same year, production on a related platform comparatively low-volume 6- and 7-Series, plus Rolls-Royce version will see output of the new, front-wheel drive X1 models. In addition, a version of the LG will be used across CUV break 200,000 units. Total vehicle volumes using the production of the X7, a new seven-seat premium SUV related LU will see total output reach 646,000 units over 2016. As to the 7-Series saloon. With volumes of about 35,000upa, the 1-Series is rolled out through 2019, this total is forecast this model will join the other X-Series ranges in production to reach 943,000 units, a figure which should see the LU at the plant in Spartanburg, South Carolina. challenging for the title of most-used architecture across the BMW Group. (Vehicles on the L4 and L6 architectures will be switched over to the LG. For more information, please refer to the L6 4. L4 - (inc. BMW X5, X6) write-up earlier in this section.) The L4 is a primarily steel unibody architecture used across 5. L2 - (inc. 1-Series, 3-Series, X1, Z4; production of the full-size (Europe) and mid-size (North Zinoro 1E) America) X5 and X6 SUV models. BMW classifies these vehicles under the L4 Product Line and within the MKL Introduced in 2004, the L2 architecture served as the Plus upper medium luxury class segment. The L4 uses a basis for platforms used across the previous-generation longitudinally-mounted, front-engine layout. All versions E81 1-Series and E90 3-Series ranges. BMW classifies of these SUV models have been fitted as standard with the these vehicles under the L2 Product Line, with respective xDrive four-wheel drive system, but the third-generation segments being the UKL2 Plus compact premium class and model of the X5 is also available with optional sDrive rear- the KKL Plus upper medium luxury class. The architecture wheel drive. was also used for the Z4 replacement of the earlier Z3 roadster and the X1 crossover. This first generation of the The latest version of the X5 was unveiled in 2013. This was CUV has since been adapted to use a pure EV powertrain, essentially a carryover of the platform introduced in 2006, now produced in China by the BMW Brilliance JV and but with a substantial series of upgrades and improvements. marketed as the Zinoro 1E. These included a greater percentage of hot-formed steel parts across the floorpan. The forming process makes the The L2 architecture used a longitudinally-mounted front- material more malleable, which means a single stamping engine and rear-wheel drive powertrain, although it was can replace a series of welded individual parts. In addition to capable of supporting the xDrive four-wheel drive system. eliminating steps in the production process, these changes The basic structure featured a steel unibody architecture can reduce total vehicle weight, as did the aluminium hood with some aluminium elements (both pressed and cast) and magnesium cross brace supporting the IP. The 2014 MY across the chassis structure and suspension to reduce X5 was an average 80kg lighterSAMPLE than the previous model. total vehicle weight and achieve a 50:50 front: rear weight distribution. Total output across all model ranges reached Further lightweighting was achieved by forming the front 729,000 units in 2007 and numbers remained above fender assemblies from Daplen EF341AE, a polypropylene- 600,000 units through 2011, but these dropped as models based thermoplastic olefin compound developed by Borealis, were switched over to replacement platforms. Plastic Omnium Auto Exterior and the BMW Group. The component has a low thermal expansion rate and a Class The L7 has now almost totally replaced the L2 and the older A surface finish. Incorporated features include headlight architecture is expected to be phased out of production by reinforcements, wheel housing, cleaning systems, airbag 2016. sensors and cooling devices. The mould designs were