Annual Report 2007

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Annual Report 2007 Annual Report 2007 Facts and figures 2007 Contents 02 BMW Group in figures 04 Report of the Supervisory Board 10 Group Management Report 10 A Review of the Financial Year 13 General Economic Environment 17 Review of Operations 41 BMW Stock and Bonds in 2007 44 Disclosures relating to Takeover Regulations and Explanatory Report 47 Financial Analysis 47 – Group Internal Management System 49 – Earnings Performance 51 – Financial Position 52 – Net Assets Position 55 – Subsequent Events Report 55 – Value Added Statement 57 – Key Performance Figures 58 – Comments on Financial Statements of BMW AG 62 Risk Management 68 Outlook 73 Group Financial Statements 73 Group and Sub-group Income Statements 74 Group and Sub-group Balance Sheets 76 Group and Sub-group Cash Flow Statements 78 Group Statement of Changes in Equity 79 Statement of Income and Expenses recognised directly in Equity 80 Notes to the Group Financial Statements 80 – Accounting Principles and Policies 89 – Notes to the Income Statement 96 – Notes to the Balance Sheet 117 – Other Disclosures 131 – Segment Information 135 Responsibility Statement by Company’s Legal Representatives 136 Auditors’ Report 137 Corporate Governance 137 Members of the Supervisory Board 140 Members of the Board of Management 141 Corporate Governance at BMW Group 142 Compensation Report (Sub-section of Management Report) 146 Shareholdings of Members of the Board of Management and the Supervisory Board 147 Declaration of the Board of Management and of the Supervisory Board pursuant to §161 AktG 148 Other Information 148 BMW AG Principal Subsidiaries 150 BMW Group 10-year Comparison 152 BMW Group Locations 154 Glossary 158 Index 160 Contacts 161 Financial Calendar BMW Group in figures Revenues Capital expenditure in euro billion in euro million 55 5,000 50 4,500 45 4,000 40 3,500 35 3,000 30 2,500 03 04 05 06 07 03 04 05 06 07 41.5 44.3 46.7 49.0 56.0 4,245 4,347 3,993 4,313 4,267 Deliveries of automobiles Profit before tax in thousand units in euro million 1,500 4,000 1,400 3,500 1,300 3,000 1,200 2,500 1,100 2,000 1,000 1,500 03 04 05 06 07 03 04* 05 06 07 1,104.9 1,208.7 1,328.0 1,374.0 1,500.7 3,205 3,583 3,287 4,124 3,873 * adjusted for new accounting treatment of pension obligations A portrait of the Company Bayerische Motoren Werke G. m. b. H. came into The Number ONE strategy, adopted in 2007, being in 1917, having been founded in 1916 as has set the BMW Group on course for a successful “Bayerische Flugzeugwerke AG” (BFW); it became future. The business has been given a new strategic Bayerische Motoren Werke Aktiengesellschaft direction with the emphasis on profitability and long- (“BMW AG”) in 1918. term value growth. The BMW Group’s activities Today, the BMW Group is one of the ten largest will remain firmly focused on the premium segments car manufacturers in the world and possesses, with of the international automobile markets. The mission its BMW, MINI and Rolls-Royce brands, three of the statement up to the year 2020 is clearly defined: strongest premium brands in the car industry. The the BMW Group is the world’s leading provider of BMW Group also has a strong market position in the premium products and premium services for indi- motorcycle sector and operates successfully in the vidual mobility. area of financial services. 03 BMW Group in figures 2003 2004 2005 2006 2007 Change in % Vehicle production BMW 944,072 1,059,978 1,122,308 1,179,317 1,302,774 10.5 MINI 174,366 189,492 200,119 186,674 237,700 27.3 Rolls-Royce 502 875 692 847 1,029 21.5 Motorcycles1] 89,745 93,836 92,012 103,759 104,396 0.6 Deliveries to customers BMW 928,151 1,023,583 1,126,768 1,185,088 1,276,793 7.7 MINI 176,465 184,357 200,428 188,077 222,875 18.5 Rolls-Royce 300 792 796 805 1,010 25.5 Motorcycles2] 92,962 92,266 97,474 100,064 102,467 2.4 Workforce at end of year 3] 104,342 105,972 105,798 106,5754] 107,539 0.9 in euro million 2003 2004 2005 2006 2007 Change in % Revenues 41,525 44,335 46,656 48,999 56,018 14.3 Capital expenditure 4,245 4,347 3,993 4,313 4,267 – 1.1 Depreciation and amortisation 2,370 2,672 3,025 3,272 3,683 12.6 Operating cash flow 6] 4,970 6,157 6,184 5,373 6,340 18.0 Profit before tax 3,205 3,5835] 3,287 4,124 3,873 – 6.1 Net profit 1,947 2,2425] 2,239 2,874 3,134 9.0 1] from 2006 including BMW G 650 X assembly by Piaggio S. p. A. 2] excluding C1, sales volume to 2003: 32,859 units 3] Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners. 4] Including acquired entities, the comparable number of employees was 107,345 employees at 31 December 2006. 5] adjusted for new accounting treatment of pension obligations 6] In its financial statements for 2005, the BMW Group brought the cash flow computation into line with standards normally applied on the financial markets. Since then, the BMW Group discloses the figures for the cash flow from operating activities (operating cash flow), corresponding to the cash flow from Industrial Operations reported in the cash flow statement. 04 Report of the Supervisory Board Joachim Milberg Chairman of the Supervisory Board 05 Ladies and Gentlemen, The Supervisory Board monitored the business affairs and governance of the BMW Group continuously during the financial year 2007 and supported the Board of Management throughout in an advisory capacity. Main focus of the work of the In a total of five meetings, the Supervisory Board deliberated at length on the performance and financial Supervisory Board position of the BMW Group, corporate planning, the composition of the Board of Management and risk management issues. The Supervisory Board made use of regular business status reports to keep abreast of business performance, including the degree to which stated objectives have been achieved. It also selected a number of topics for more in-depth review and discussion based on reports and planning documents pro- vided by the Board of Management. Two of the main areas of focus of the Supervisory Board in 2007 were currency management and the Board of Management’s decisions concerning the future strategic direction of the BMW Group. The Board of Management also kept the Supervisory Board informed of key performance indicators, personnel developments and other significant matters, both at scheduled meetings and at other times as the need arose. The Chairman of the Supervisory Board was also kept informed regularly and directly by the Chairman of the Board of Management of all major business transactions and projects. The growing need to reduce CO2 emissions in the transport sector, the challenges that this poses for the BMW Group as a premium car maker and the technical measures introduced by the Board of Management to reduce emissions and fuel consumption were reported on in detail by the Board of Management and discussed within the Supervisory Board. In the opinion of the Supervisory Board, the package of measures known as EfficientDynamics – designed to improve fuel economy whilst simultaneously emphasising agile and dynamic vehicle concepts – represents a clear competitive advantage for the BMW Group. For this reason, the Supervisory Board fully supports the Board of Management’s strategy to extend the BMW Group’s lead in this area. In this context, the Board of Management also reported to the Supervisory Board on one particular ground-breaking project which is looking, amongst other things, at new ways of achieving greater individual mobility in the world’s megacities. One meeting of the Supervisory Board was held at the Oxford plant, enabling the Supervisory Board to see at first hand the expansion measures undertaken at the plant. It was also given an insight into the integration of the new generation of MINI models into existing manufacturing structures and the benefits of the flexible working time model devised for the plant. After detailed consideration of the BMW Group’s long-term business plan, the Supervisory Board concurred with the Board of Management’s conclusion that the plan is feasible and formally gave its approval to the plan. 06 Report of the Supervisory Board As part of a special review of value-added and currency management within the BMW Group, the Board of Management provided the Supervisory Board with an overview of current and planned currency measures as well as natural hedging activities and explained the various alternatives available to the BMW Group. On the basis of this information, joint discussions were held on the future strategy in this area. The Supervisory Board meeting in September 2007 primarily involved a discussion of the Board of Manage- ment’s detailed report on the BMW Group’s strategy process. At the same meeting, the Supervisory Board also deliberated on and made its decisions regarding the composition of the Board of Management. The Supervisory Board was appreciative of the Board of Management’s in-depth review of the current busi- ness model and its thorough analysis of the options open to the BMW Group to achieve continued long-term growth.
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