International business benchmark for success

Coburg (July 2, 2004). “In view of the ongoing globalization of many industrial segments, the national development of a company is no longer the benchmark for success,” said Michael Stoschek, President and CEO of the Brose Group, when he presented the financial statement for 2003 to the company shareholders and advisory board.

In the previous year, Brose’s business worldwide grew by 7% to €1.9 billion. The companies outside Germany achieved the greatest growth, generating a turnover increase of 20% to €850 million, accounting for 44% of the total turnover. In the coming year, the foreign business of the Brose Group will, for the first time ever, exceed that of the business generated inside Germany.

As the majority of vehicles produced in Germany are destined to be exported (71%), Brose is becoming much less dependent upon the weak domestic economy.

Growth defies branch trend
Despite the decline in production figures in the automotive industry worldwide and continued pricing pressure on products, the business trend with systems for vehicle doors and seats was better than elsewhere in this branch. Business generated with door systems and seat adjusters for the VW Touareg and Porsche Cayenne SUVs played a major role in this trend.

While the sales generated by seat adjusters rose by 13% to €310 million and the business in door systems by 11% to €585 million, the window regulator business achieved €736 million, only slightly exceeding its previous year level(+1%). Turnover with closure systems dropped by 4% to €220 million.

Decline in result
Warranty expenses, negative exchange rate developments, and advance outlays for new production sites have had an unfavorable impact on the result and annual surplus so that these could not keep pace with the growth in turnover.

Investments in the future
Investments and growth in 2003 however could still be financed from the company’s own funds. Due to the traditionally low level of dividends paid out to the company shareholders, the company’s equity constituted some two-thirds of the total capital, providing the basis for the corporate group’s continuous stable expansion.

In 2003, Brose invested some €128 million in building up new production sites in Germany, the Czech Republic, the USA and Canada. It also invested in new manufacturing equipment and in expanding its information technology capabilities.

Three plants began operations in Saarwellingen, Ghent/Belgium and Chicago/USA, increasing the number of production sites worldwide to 24. In the previous ten years alone, 18 new plants were set up in Europe and overseas.

High level of expenditure on research and development
The Brose Group is resolutely pursuing its goal of distinguishing itself from the competition as the technological leader. There are 850 engineers and technicians engaged worldwide in the development of new products and processes. Some €130 million is spent annually on research and development. This sum represents 7% of the turnover which is very high compared to the norm in this business segment.

Internationalization continues
Given the planned expansion of business in China, the shareholder meeting decided to set up a third Chinese production site in Changchun. About €17 million are to be invested in manufacturing and information technology as well as in land and buildings. The plant is scheduled to go operational in early 2006.

By setting up this plant, Brose will have further intensified its activities in Asia. In addition to the sales and engineering offices the company already has in Japan and Korea, Brose will also open a purchasing office in Shanghai.

Worldwide demand for qualified specialist staff
In the previous business year, Brose took on 573 new employees worldwide. This increase in headcount mainly took place outside Germany in anticipation of the new plants and the processing of new customer projects.

At the end of the year, there were 7,500 employees at 30 locations in Europe, North and South America, South Africa and Asia. Today, 38 % of the employees work outside Germany.

In 2003, there were 175 young persons doing an apprenticeship at Brose. While 145 of them were in the process of learning a technical or commercial profession, there were 30 students doing degrees in either mechanical or electrical engineering or joint degrees in economics and engineering at a university of cooperative education.

Restrained optimism for 2004

Brose anticipates stimulus for growth in the current business year to come from the production starts of new products at the plants in Rastatt, Saarwellingen, Ghent and Bratislava as well as at the North American production sites of Chicago and Tuscaloosa.

In view of the weak demand for individual vehicle models, lower product prices and fluctuations in the exchange rates, Brose only expects a 3% increase in turnover for 2004.

The shareholders and advisory board of the Brose Group have approved investments totaling €145 million for 2004. These are to be made primarily in new manufacturing technology, in setting up new locations and expanding information technology capabilities worldwide. €80 million is to be invested in Germany, €15 million in other European countries and €50 million in overseas.

Press contact:
Christian Treinies
Phone: +49 9561 21 2332
Fax: +49 9561 21 1704
E-mail: christian.treinies@brose.net