Auto ANNUAL REPORT 2006 FOREWORD Verband der Automobilindustrie Annual Report 2006 3 a signal effect. A new export record is at our traditional German plants has evidence that its products and technol- permitted us to achieve competitive ogies are competitive on the interna- price levels in many areas. That this tional market. Readiness to accept the is “borrowed competitiveness” can be blending of up to 10 percent of bio-fuels seen from the fact that supplies from to conventional fuels represents a sig- abroad now account for 40 percent of nificant step toward gradually reducing value creation in the German automo- dependence on fossil energy sources. tive industry. We must ask ourselves, however, whether this will be sufficient Firstly: global challenges in the future. For a forward-looking call for a global strategy. strategy, we must aim for a decisive We live in an increasingly global improvement to cost-competitiveness world, with changes occurring ever within Germany itself. more rapidly. Only those who continually achieve peak performance will remain The wage settlement negotiated ahead in the long term. German manu- this spring is an important step towards facturers and parts suppliers faced up seriously overdue goals such as greater to these challenges at an early stage. flexibility and differentiated pay levels. They were at the forefront of system- Of course, a high price had to be paid, atically entering new markets and and the settlement within the metal- enlarging their production basis in working industries is not likely to act as other countries. a stimulus for the creation of new jobs in Germany. The strategy of networking their “No opportunity is ever lost. If you activities with lower-wage locations has In defiance of all economic pres- don’t take it, someone else will!” There been successful, but competitors are sures to the contrary, the German auto- could be no better way of summing up now increasingly adopting it. In Central motive industry continues to employ the competitive situation in the inter- and Eastern Europe – one might almost some 766,000 people and thus acts as national automotive industry. 2006 is say “at our back door” – new, highly a major stability factor. Painful adjust- another year that proves this. profitable and extremely flexible produc- ments to changing situations have tion capacity for more than 1.2 million sometimes been, and still are, necessary The German automotive industry passenger cars has been or is being in order to keep this industrial sector has demonstrated its determination to created, primarily in high-volume auto- competitive as a whole. The automo- seize the available opportunities. As a motive categories. These plants repre- tive industry has nonetheless proved key industry in Germany, it is fully aware sent a challenge to the industry’s ability its ability to create new jobs, even at its of its responsibility not only for national to compete in its traditional locations. German locations, if the circumstances growth and employment, but also for are favourable. For example, the propor- assuring sustainable long-term mobility. This situation gives rise to questions tion of people with academic qualifica- The high level of employment has been to which answers must be found: the tions that the industry employs has maintained. Its decisions in favour of existing cost mix from a combination been increasing for some years, espe- German production locations have had of low-wage locations and production cially in research and development. This 4 Verband der Automobilindustrie IAAFOREWORD is the area in which one in nine of the One example is safety: road acci- successfully: German cars are signifi- automotive industry’s employees works dents have been decreasing for some cantly ahead of other makes in sales of – clear evidence that German manufac- years now, with a lower total in each cars with a diesel particulate filter. They turers and suppliers continue to regard successive year. In terms of active safety, lead the world in the “Clean Diesel” area. a leading position in technology as one in other words accident avoidance, new of their core competencies. assist systems are creating exceptional This is not to imply that the German potential. Networked systems are a major automotive industry intends to rest on Secondly: technical and step forward in achieving the vision of its laurels. High petroleum prices and qualitative leadership “accident-free driving”; electronics have political tensions in the Near East are a safeguard the ability to a key role to play in this respect. constant reminder that there are limits remain competitive to the scope of mobility based on fossil worldwide. Another example is quality: through- fuels. For this reason, the German auto- To be ahead of one’s rivals in know- out the German automotive industry, motive industry has lost no time in sys- how is a decisive precondition for the this has board-of-management status, tematically exploring an “away from oil” success of an industry that has its home with the result that our products have approach with the aim of safeguarding market in a high-wage country such improved their positions again in the sustainable mobility. as Germany. The customer will pay a most recent quality rankings. The long- premium price for premium products term quality they possess, which is one Thirdly: petroleum reserves only if they offer genuine user benefits of the factors that has helped to justify are finite – what we need and added value. Although the Ger- our worldwide image, can for instance is a sustainable strategy for man automotive industry accepts this be seen in the fact that the average age future mobility. high-tech strategy without proviso, it is of passenger cars on German roads is Before the long-term goal of a glo- obliged at the same time to work toward now higher than ever before. bal hydrogen-based economy can be improving overall conditions for the pro- realised, our sector of industry proposes duction of high-volume cars in Germany Last but not least, the environment: to concentrate on a group of promis- as well. Together with premium quality determined efforts by our industry have ing alternative propulsion systems and and competitive costs, technological led to a continuous decrease in aver- fuels. By increasing the efficiency of its leadership is the third element in the age new-car fuel consumption since the gasoline and diesel engines, as well as “three-pronged” approach that our end of the 1970s. In the past 15 years by developing alternative powertrains industry is adopting. alone, a further reduction of one quarter such as hybrid or fuel-cell vehicles or has been achieved. The voluntary com- by using gas and second-generation bio The German automotive industry mitment to reduce fuel consumption and designer fuels, our industry is send- willingly spends considerable sums of has therefore been fulfilled, and as a ing out new signals and determining money on maintaining its leading tech- result total road-vehicle CO2 emissions the direction in which future progress is nological position. More than 16 billion have passed their peak and have been likely to be made. euros are devoted annually to R&D falling for more than five years. At the activities, and with success: more than same time, pollutant emissions have German manufacturers recently 3,600 patents per year make the indus- decreased dramatically since the early announced that they would in future try the world champion in this area. 1990s, in some cases by more than design their vehicles to allow the blend- These are innovations that benefit the 90 percent. We have also tackled the ing of up to 10 percent regenerative fuel customer. question of fine particulate emissions to conventional fuels – a precondition Annual Report 2006 5 for enabling these fuels to secure an industry is well equipped for the future. a European policy on competition to increasing share of the market. Based What it lacks are general conditions be implemented that will strengthen on experience gained in Brazil, com- capable of safeguarding our location in the automotive industry as a whole and panies are now beginning to offer Flex respect of costs and the necessary flexi- prevent conflicts of objective from the Fuel vehicles in Germany as well. These bility. The domestic market is still unsta- outset. are prepared for operation on any pro- ble, despite increasing vehicle replace- portion of bio-fuel up to 100 percent. ment demand and the large number The German automotive industry Plant for the industrial-scale produc- of new, attractive models introduced is ready to accept new challenges. It tion of second-generation bio-fuels by German manufacturers. Consumers is and will remain a key industry that – biomass-to-liquid (BTL) – is being remain uncertain, however. The govern- supplies powerful stimuli for growth, constructed, and vehicle fleets powered ment has on more than one occasion employment, technological development by fuel cells or fuelled by hydrogen are stated that it intends to provide fiscal and the prosperity of other medium- undergoing widespread testing and or financial support for the installation sized companies, and which has show considerable promise. of particulate filters, but no action has increasingly close links with more and yet been taken. The planned increase in more sectors of our economy. Sustainability also calls for traffic German value added tax, scheduled for flows to be organised as efficiently as the start of 2007, represents a risk for possible. The potential lying fallow in this the domestic car market. The German area is obvious from the 12 billion litres automotive industry continues to derive of fuel that are wasted every year in traf- its strength above all from its export fic jams.