Annual Report 2008
A portrait of the Company
Bayerische Motoren Werke G. m. b. H. came into being in 1917, having been founded in 1916 as
Bayerische Flugzeugwerke AG (BFW); it became Bayerische Motoren Werke Aktiengesellschaft
(BMW AG) in 1918.
Today, the BMW Group is one of the ten largest car manufacturers in the world and possesses, with
its BMW, MINI and Rolls-Royce brands, three of the strongest premium brands in the car industry.
The BMW Group also has a strong market position in the motorcycle sector and operates success-
fully in the area of financial services.
The Number ONE strategy, adopted in 2007, has set the BMW Group on course for a successful
future. The business has been given a new strategic direction with the emphasis on profitability and
long-term value growth. The BMW Group’s activities will remain firmly focused on the premium
segments of the international automobile markets.
The mission statement up to the year 2020 is clearly defined: The BMW Group is the world’s leading
provider of premium products and premium services for individual mobility.
Dual binding
The two books slide apart to reveal the index register.
This provides for fast and easy access to individual chapters.
06
BMW Group in figures
08
Report of the Supervisory Board
14
14
16
20
42
45
47
Group Management Report
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Bonds in 2008
Disclosures pursuant to § 289 (4) and § 315 (4) HGB
Financial Analysis
47
49
51
52
55
55
57
58
Group Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on Financial Statements of BMW AG
62
68
Risk Management
Outlook
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and Expenses recognised
in Equity
Notes to the Group Financial Statements
Accounting Principles and Policies
79
Notes to the Income Statement
88
Notes to the Balance Sheet
94
Other Disclosures
115
Segment Information
129
132
Responsibility Statement by the
Company’s Legal Representatives
133
Auditors’ Report
134
134
137
138
140
141
147
Corporate Governance
Members of the Supervisory Board
Members of the Board of Management
Corporate Governance in the BMW Group
Compliance in the BMW Group
Compensation Report
(Sub-section of Management Report)
Declaration of the Board of Management and
of the Supervisory Board pursuant to § 161 AktG
148
148
150
152
154
156
159
160
Other Information
BMW AG Principal Subsidiaries
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Financial Calendar
Contacts
06
BMW Group in figures
Deliveries of automobiles
in thousand units
1,500
1,400
1,300
1,200
1,100
1,000
Revenues
in euro billion
55
50
45
40
35
30
04
05
06
07
08
04
05
06
07
08
1,208.7 1,328.0 1,374.0 1,500.7 1,435.9
44.3
46.7
49.0
56.0
53.2
Profit before financial result
in euro million
Profit before tax
in euro million
4,500
3,750
3,000
2,250
1,500
750
4,500
3,750
3,000
2,250
1,500
750
04
05
06
07
08
04 *
05
06
07
08
3,774
3,793
4,050
4,212
921
3,583
3,287
4,124
3,873
351
* adjusted for new accounting treatment of pension obligations
07
BMW Group in figures
Deliveries to customers
BMW
MINI
Rolls-Royce
2004
2005
2006
2007
2008
Change in %
1,023,583
1,126,768
1,185,088
1,276,793
1,202,239
184,357
200,428
188,077
222,875
232,425
792
796
805
1,010
1,212
Automobile deliveries total
1,208,732
1,327,992
1,373,970
1,500,678
1,435,876
Motorcycles1
92,266
97,474
100,064
102,467
101,685
Vehicle production
BMW
MINI
Rolls-Royce
1,059,978
1,122,308
1,179,317
1,302,774
1,203,482
189,492
200,119
186,674
237,700
235,019
875
692
847
1,029
1,417
Automobile production total
1,250,345
1,323,119
1,366,838
1,541,503
1,439,918
Motorcycles 2
93,836
92,012
103,759
104,396
104,220
– 5.8
4.3
20.0
– 4.3
– 0.8
– 7.6
– 1.1
37.7
– 6.6
– 0.2
Workforce at end of year 3
BMW Group
105,972
105,798
106,575
107,539
100,041
– 7.0
Financial figures
in euro million
Revenues
Capital expenditure
Depreciation and amortisation
Operating cash flow 4
Profit before financial result
Profit before tax
Net profit
44,335
46,656
48,999
56,018
53,197
4,347
2,672
6,157
3,774
3,583 5
2,242 5
3,993
3,025
6,184
3,793
3,287
2,239
4,313
3,272
5,373
4,050
4,124
2,874
4,267
3,683
6,246
4,212
3,873
3,134
4,204
3,670
4,471
921
351
330
– 5.0
– 1.5
– 0.4
– 28.4
– 78.1
– 90.9
– 89.5
1 excluding Husqvarna Motorcycles (13,511 motorcycles)
2 from 2006 including BMW G 650 X assembly by Piaggio S. p. A., excluding Husqvarna Motorcycles (14,232 motorcycles)
3 Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners.
4 reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from operating activities of the
Automobiles segment
5 adjusted for new accounting treatment of pension obligations
08
Joachim Milberg
Chairman of the Supervisory Board
09 Report of the Supervisory Board
Ladies and Gentlemen,
The Supervisory Board oversaw the running of the BMW Group throughout the financial year 2008 on the
basis of detailed written and oral reports provided by the Board of Management and, in joint discussions,
advised the Board of Management on matters of governance. In a total of five meetings, the Supervisory
Board deliberated at length on the current performance and financial position of the BMW Group, risk
management issues (including the level of risk provisions recorded in the Group Financial Statements by
the Board of Management), short and long-term corporate planning and the composition of the Board
of Management. The Supervisory Board made use of regular reports prepared by the Board of Manage-
ment, followed up by talks and discussions, to keep abreast of business developments as well as the
Group’s performance, including variances from budget. The Supervisory Board additionally reviewed and
discussed a number of pertinent topics in more depth on the basis of reports and planning documents
provided by the Board of Management.
Apart from scheduled meetings, the Board of Management also kept the Supervisory Board informed of
the course of business, with particular regard to key performance indicators, personnel figures and other
significant matters. The Chairman of the Supervisory Board was also kept directly informed by the Chairman
of the Board of Management of all major business transactions and projects. The two chairmen ex-
change information regularly throughout the year.
Main focus of the Supervisory Board’s monitoring and advisory activities Over the past year, the
Supervisory Board paid particular attention to the implementation of the BMW Group’s business strategy
and corporate plan as well as its progress in achieving greater competitiveness by rolling out Efficient
Dynamics across the whole product range. Due to the business repercussions of the financial market crisis,
the Supervisory Board both monitored and provided advice to the Board of Management during the
financial year concerning risk management and risk provision.
In the light of declining vehicle residual values on certain markets, the Supervisory Board was kept fully
informed by the Board of Management both regarding the current situation and the future prospects of
the Financial Services segment. The two Boards held in-depth discussions on possible courses of action
in this area.
Furthermore, at the request of the Supervisory Board and in the course of joint discussions, the Board of
Management presented the strategies and measures adopted to optimise the value-added chain.
The Supervisory Board carefully considered the annual budget for the financial year 2009 together with
the Board of Management, including the matter of forecasting sensitivities in the face of current business
conditions. The Supervisory Board also kept itself well informed regarding the financial management of
the BMW Group, including the measures and concepts put forward by the Board of Management to
enhance profitability. The Supervisory Board expressed its support for the measures being taken by the
Board of Management. In this context, the Supervisory Board stressed the necessity of continuing the
dialogue with employee representatives in a fair and constructive manner. After extensive deliberations
on the long-term corporate plan drawn up on the basis of the strategy Number ONE and presented by the
Board of Management, the Supervisory Board granted its formal approval to the plan.
The Supervisory Board firmly believes that the package of measures known as “Efficient Dynamics” – de-
signed to reduce emissions and consumption without compromising the vehicle’s agility or vitality – provides
10
answers to the needs and expectations of customers and thereby represents an important competitive ad-
vantage for the BMW Group. The Supervisory Board thus fully supports the Board of Management in its
endeavours to strengthen the BMW Group’s competitive edge in this area.
One Supervisory Board meeting was held in Steyr, Austria, where engines are developed and manufac-
tured. Using the Steyr plant as an example, the benefits of a production system based on a value-added
approach were demonstrated to the Supervisory Board. The Supervisory Board also took the opportunity
to witness a demonstration of the electrically powered MINI E.
Corporate governance and Declaration of Compliance The Supervisory Board and the Board of Manage-
ment jointly examined whether the corporate governance principles laid down in the previous year had
been applied during the financial year 2008 and also deliberated in detail on further corporate governance
de velopments within the BMW Group to be initiated during the current year. The two Boards issued a joint
Declaration of Compliance with the German Corporate Governance Code (GCGC) pursuant to § 161 AktG
and had it posted to the BMW Group’s website. The recommendations of the Government Commission
on the German Corporate Governance Code contained in the revised code issued on 8 August 2008 will
be complied with in the future with one exception: the Supervisory Board has delegated the task of deter-
mining both remuneration and the remuneration system – including the principal contractual components
and the regular review of the system – to the Personnel Committee. The full Supervisory Board is, how ever,
informed regularly and in great detail of the work of the Personnel Committee. From the point of view of
the Supervisory Board, this division of duties has proved beneficial for its work. All other GCGC recommen-
dations are being complied with. The BMW Group Corporate Governance Code was updated on the basis
of resolutions taken by the Board of Management and the Supervisory Board. The code, setting out the
principles of good corporate governance applied by the BMW Group, is available via the Group’s website.
A detailed report on the amount and structure of the compensation of the Board of Management and the
Supervisory Board can be found in the Corporate Governance Report (pages 141 – 146).
In conjunction with the code recommendations issued on 8 August 2008 and in preparation for the Finan-
cial Reporting Modernisation Act in Germany, the Supervisory Board transferred further duties relating to
financial reporting to the Audit Committee and extended the terms of reference accordingly.
The efficiency of the Supervisory Board’s work – which the GCGC recommends examining on a regular
basis – was also a separate topic of discussion for the full Supervisory Board. The subject was addressed
in the absence of the Board of Management and prepared for by the completion of a questionnaire pre-
viously devised and distributed by the members of the Supervisory Board. The Supervisory Board believes
that this kind of efficiency examination represents an important part of a continuous process of improving
its work, including cooperation with the Board of Management. As part of this improvement process,
one of the measures decided by the Supervisory Board is the scheduling of more time for the exchange of
information and opinions relating to major technological issues.
There was no indication of any conflicts of interest on the part of members of the Supervisory Board and
Board of Management during the past year.
During the financial year 2008, several changes were made to the composition of the Supervisory Board
(see below). No member of the Supervisory Board failed to attend more than half of the Supervisory Board
meetings held during their period of office.
11 Report of the Supervisory Board
Description of Presiding Board activities and committee work In a total of six meetings, the Presiding
Board mainly focussed on preparations for the meetings of the full Supervisory Board (Plenum). The Pre-
siding Board selected additional topics for report and made further suggestions for the coverage of the
Board of Management’s reports to the Plenum. During the financial year 2008, the Presiding Board closely
followed the implementation of the Board of Management’s business strategy approved in 2007, including
the one-year and multi-period business plans. Particular attention was given to the impact of the financial
crisis on these plans. The Board of Management also reported to the Presiding Board on its intention to
take out directors’ and officers’ liability insurance on behalf of management. The Presiding Board also con-
sidered concepts for the compensation of Supervisory Board work in order to formulate a proposal for an
amendment to § 15 of the Articles of Incorporation at the 2008 Annual General Meeting.
The Audit Committee convened three times during the period under report. One further Audit Committee
meeting took place in the form of a telephone conference. One meeting was devoted to preparing for the
Supervisory Board meeting in spring 2008 at which the financial statements were examined. As part of the
process of electing and engaging the external auditor for the financial year 2008, the Audit Committee also
obtained a Declaration of Independence from the external auditors and a fee proposal from the firm of
auditors subsequently elected as Company and Group auditor. After the Annual General Meeting and in
line with a resolution taken by the shareholders, the Audit Committee accordingly appointed KPMG as
auditor for the financial year 2008. The terms of engagement issued by the Audit Committee set out areas
of audit emphasis which also took account of suggestions made by the full Supervisory Board.
In two further meetings and one telephone conference, the Audit Committee considered the Board of
Management’s detailed reports on the latest risk situation, the risk management system, the risk pro-
vision measures proposed by the Board of Management (especially with respect to the Financial Services
segment) and the internal control system in place throughout the Group. The Audit Committee also re-
ceived reports from the Head of Group Internal Audit on the main areas of emphasis for Group Internal
Audit and from the Chairman of the Compliance Committee regarding progress in implementing the
new Compliance Organisation. In order to support its activities in monitoring the financial reporting
process, the Audit Committee engaged the external auditor to review the Group’s Six-Month Interim
Report.
The Personnel Committee held seven meetings during the financial year 2008 and conducted one further
meeting by telephone. One of the main points dealt with at these meetings was the pre-selection by
the Supervisory Board of two candidates for future membership of the Board of Management as well as
preparatory work on decisions for extending the mandates of current members. In accord with the Board
of Management, the Personnel Committee also deliberated on changes to the organisation of the Board
of Management. The Personnel Committee reviewed the parameters, level of compensation and pen-
sion benefits of current Board of Management members. It also considered the appropriateness of
members’ compensation arrangements in the light of their duties, individual performance and the current
financial condition of the BMW Group. Comparative data resulting from a remuneration study for the
automotive sector and other DAX companies were used in the process. In specific cases, the Personnel
Committee also reached decisions with respect to pension benefits for current and former members of
the Board of Management.
The Nomination Committee, set up in 2007 to find suitable candidates for election to the Supervisory
Board and for inclusion in the Supervisory Board’s proposals for election at the Annual General Meeting,
convened in January 2008 to propose candidates for the forthcoming elections at the Annual General
12
Meeting 2008. A further meeting was held in February 2009 to propose candidates for the Annual General
Meeting 2009.
The statutory Mediation Committee (§ 27 (3) of the Law on Worker Participation) was not required to con-
vene during the financial year 2008.
The Chairman reported regularly and in depth at Supervisory Board meetings on the status of Presiding
Board and committee work.
Changes in composition and reorganisation of the Board of Management At its meeting on 13 March
2008, the Supervisory Board, in agreement with the Personnel Committee, appointed Ian Robertson as
member of the Board of Management with immediate effect. Mr. Robertson was appointed to the Board
with responsibility for Sales and Marketing after Stefan Krause left the Board of Management and the
company at his own request.
Ernst Baumann, who had been responsible for Human Resources and had held the post of Industrial
Relations Director since 1999, retired from office on 30 November 2008. The Supervisory Board thanked
Mr. Baumann for his 35 years of successful work for the BMW Group. Following the proposal of the Person-
nel Committee, the Supervisory Board appointed Harald Krüger as member of the Board of Manage-
ment for Human Resources and as Industrial Relations Director with effect from 1 December 2008.
Dr. Michael Ganal, member of the Board of Management, passed away on 4 December 2008 at the age of
54 after a serious illness. Up to that point, Dr. Ganal had held Board responsibility for Finances. Dr. Friedrich
Eichiner, who had initially deputised on a temporary basis in agreement with Dr. Ganal, was officially given
responsibility for Finances on 2 December 2008 as part of a Board reorganisation proposed by the Board
of Management and supported by the Personnel Committee. Dr. Ganal – whose return to work had been
hoped for until the end by the Board of Management, Supervisory Board and employees alike – had con-
sistently worked with great energy, discipline and diligence in the interests of the BMW Group, even during
his illness. The company is exceedingly indebted to him and will always remember him with high esteem.
The Group and Brand Development portfolio of tasks for which Dr. Eichiner was previously responsible
has been reallocated to the various Board members as part of a reorganisation of duties within the Board
of Management.
Changes in the composition of the Supervisory Board, Presiding Board and committees The names of
the members of the Supervisory Board committees appear in the Corporate Governance Report. Several
changes occurred in the composition of the Supervisory Board, Presiding Board and the Supervisory
Board’s committees during the financial year 2008: Maria Schmidt, member of the Works Council for the
Dingolfing site, was officially appointed by the District Court of Munich on 25 March 2008 as member of
the Supervisory Board in the role of employee representative. Prof. Dr. Reinhard Hüttl, Dr. Karl-Ludwig Kley
and Prof. Dr. Renate Köcher were newly elected to the Supervisory Board by the shareholders at the
Annual General Meeting on 8 May 2008. The mandates of Arthur L. Kelly, Heinz-Joachim Neubürger and
Dr. Hans-Dietrich Winkhaus came to an end at the close of the Annual General Meeting on 8 May 2008.
Mr. Konrad Gottinger resigned as member of the Supervisory Board with effect from 15 February 2008.
The Supervisory Board would again like to thank all members leaving office for their dedicated and
13 Report of the Supervisory Board
commendable services performed on behalf of the BMW Group. On 13 March 2008 Stefan Schmid was
elected to the Presiding Board and as a member of the Audit Committee and the Personnel Committee.
On 8 May 2008, after many years of service as member of the Supervisory Board, Prof. Dr. Jürgen Strube
was elected to the Presiding Board, the Personnel Committee, the Nomination Committee and the Audit
Committee. He took over the chair of the Audit Committee with effect from 2 December 2008.
Examination of financial statements and the profit distribution proposal The Company and Group
Financial Statements of Bayerische Motoren Werke Aktiengesellschaft for the year ended 31 December
2008 and the combined Company and Group Management Report were audited by KPMG AG Wirt schafts-
prü fungs gesell schaft, Munich, and given an unqualified audit opinion on 18 February 2008. The Audit
Committee initially examined these documents intensively at its meeting on 27 February 2009, discussing
matters in person with representatives of the external auditor. The Supervisory Board subsequently ex-
amined the relevant drafts of the Board of Management at its meeting on 12 March 2009, after hearing the
committee chairman’s report on the meeting of the Audit Committee. The external auditors were also
present at this meeting to report on the main findings of their audit and to provide additional information as
necessary. Documents relating to the Company and Group Financial Statements and to the combined
Management Report as well as the long-form audit reports of the external auditors were made available to
all members of the Supervisory Board in a timely manner. The Supervisory Board concurred with the
results of the external audit and approved the Company and Group Financial Statements of Bayerische
Motoren Werke Aktiengesellschaft for the financial year 2008 prepared by the Board of Management. The
Company Financial Statements are therefore adopted. The Board of Management’s profit distribution
proposal was reviewed by the Audit Committee and the Supervisory Board. They consider the proposal
appropriate and therefore concur with it. In accordance with the conclusion reached on the Supervisory
Board’s examination, no objections were raised.
During the second half of 2008, the BMW Group had to assert itself in the midst of difficult business con-
ditions brought on by a global crisis on the financial markets. The Supervisory Board wishes to thank the
members of the Board of Management, employees and employee representatives for their joint efforts in
strengthening the competitiveness of the BMW Group.
In the opinion of the Supervisory Board the BMW Group is on the right track with its new strategic focus
and its programme of rolling out Efficient Dynamics across the whole of the product range – a programme
which is having measurable success in reducing both emissions and fuel consumption. The Supervisory
Board is convinced that this programme forms a solid foundation for mastering the challenges presented
during a difficult economic period.
Munich, 12 March 2009
The Supervisory Board
Yours,
Joachim Milberg
Chairman of the Supervisory Board
Group Management Report
14
A Review of the Financial Year
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
14
Group Management Report
A Review of the Financial Year
BMW Group’s performance adversely affected by
economic crisis
The economic climate deteriorated drastically in 2008.
Towards the end of the reporting year, the situation on the
international financial markets reached an unprecedented
pitch. At the same time, the effects of the crisis also spilled
over onto the world’s markets for goods and services.
The rapid pace of the economic downturn and ongoing
uncertainty as to how the economic crisis might proceed
took a heavy toll on the BMW Group’s performance in 2008.
Especially during the second half of the year, consumer
uncertainty resulted in a cutback in spending, affecting
nearly all of the world’s major car markets. In many coun-
tries, car sales volumes plummeted compared to the pre-
vious year. The ongoing weak state of the used car mar-
kets also had a negative impact on the reported figures of
the BMW Group. The situation was further exacerbated
by the significant increase of refinancing costs on the in-
ternational capital markets. The weakness of the US dol-
lar – particularly during the first half of the year – and the fall
in value of the British pound also had a negative impact.
Despite the sharp drop in raw material prices in the second
half of the year, price levels on the commodity markets
remained above-average for the year as a whole. In addi-
tion to the negative impact of external factors, it was also
necessary for the BMW Group in 2008 to recognise the
cost of implementing previously announced measures to
reduce the size of the workforce. Model life cycle factors
also contributed to a reduction in the number of cars sold
by the BMW Group compared to the previous year. In total,
the BMW Group sold 1,435,876 BMW, MINI and Rolls-Royce
cars during the year under report, 4.3 % fewer than in the
previous year.
In its motorcycles business, the BMW Group almost
reached the previous year’s level with 101,685 motorcycles
sold in 2008 (– 0.8 %), thus strengthening its competitive
position in a generally contracting market.
Financial services business was also severely affected by
the knock-on effects of the global economic and financial
crisis. In particular, the tense situation on the international
used car markets and the higher level of bad debts incurred
necessitated the recognition, over the course of the
year, of substantial expenses for risk provision. In addition,
refinancing costs on the international capital markets in-
creased to reflect higher net interest spreads.
Revenue and earnings hard hit by financial crisis
The BMW Group was unable to avoid the effects of global
economic developments in 2008. A slump in revenues in
the final months of the year meant that Group revenues for
2008 fell by 5.0 % to euro 53,197 million. Excluding the ex-
change rate impact, automobile business revenues would
have fallen by 5.4 % and Group revenues would have slipped
by 0.8 %.
The enormous impact of the economic downturn can be
seen most clearly in the change in reported earnings for
the year. In 2008, the BMW Group recognised an additional
risk provision expense for bad debts and residual value
risks amounting to euro 1,968 million. In addition to this,
expenditure in conjunction with previously announced
measures to cut back the size of the workforce reduced
Group earnings by euro 455 million. Under the weight of
these negative factors, the profit before finance result (EBIT)
decreased by 78.1 % to euro 921 million. These substantial
expenses are also reflected in the profit before tax which
dropped by 90.9 % to euro 351 million.
In line with its sales volume performance, automobile busi-
ness revenues in 2008 did not come up to the previous
year’s high level. Revenues generated by the Automobiles
segment fell by 9.4 % to euro 48,782 million. The high level
of risk provision expenses for residual value risks in the auto-
mobiles line of business and expenditure incurred in
conjunction with previously announced measures to cut
back the size of the workforce meant that the profit before
finance result (EBIT) of the Automobiles segment, at euro
690 million, was 80.0 % down on the previous year. The seg-
ment profit before tax for 2008 was euro 318 million
(– 90.2 %).
The Motorcycles segment generated revenues totalling
euro 1,230 million in 2008, similar to the previous year’s level
(+ 0.2 %). In the face of difficult business conditions, the
segment profit before finance result (EBIT) fell by 25.0 % to
euro 60 million and the segment profit before tax came in
at euro 51 million (– 28.2 %).
The total business volume of the Financial Services seg-
ment rose again in 2008. Revenues increased to euro 15,725
million, 12.8 % up on the previous year. Particularly during
the second half of the year, increasingly adverse business
conditions had a massive impact on earnings in this line
of business. The Financial Services segment reported a
loss before tax of euro 292 million (2007: profit before tax of
euro 743 million) primarily as a result of the risk provision
expense recognised for residual value and bad debt risks.
The effective tax rate for the Group, at 6.0 %, was approxi-
mately 13 percentage points lower than in the previous
year. The income tax expense, at euro 21 million, was down
by 97.2 %. The Group net profit for the year declined by
89.5 % to euro 330 million.
15 Group Management Report
BMW Group Revenues by region
in euro million
60,000
52,500
45,000
37,500
30,000
22,500
15,000
7,500
Rest of Europe
North America
Germany
Asia / Oceania
United Kingdom
Other markets
04
05
06
07
08
Rest of Europe
North America
Germany
Asia / Oceania
United Kingdom
Other markets
Total
10,574
10,205
11,961
4,915
5,249
1,431
44,335
12,141
10,957
11,001
5,538
5,125
1,894
46,656
13,226
11,779
10,601
6,200
5,214
1,979
48,999
16,450
12,161
11,918
7,353
5,945
2,191
56,018
15,780
12,461
10,739
7,523
4,913
1,781
53,197
Dividend lower than one year earlier
The Board of Management and the Supervisory Board will
propose to shareholders at the Annual General Meeting
that the unappropriated profit available for distribution in
BMW AG, amounting to euro 197 million, be used to pay a
decreased dividend of euro 0.30 for each share of common
stock (2007: euro 1.06 /– 71.7 %) and a decreased dividend of
euro 0.32 for each share of preferred stock (2007: euro
1.08 /– 70.4 %). The proposed reduction in the dividend for the
financial year 2008 reflects the earnings performance. The
distribution rate for 2008 would be 60.8 % (2007: 22.2 %).
to 7.9 % (2007: 7.6 %) as a result of the lower level of
revenues.
BMW Group sells majority shareholding in Cirquent
With effect from 30 September 2008, the BMW Group sold
72.9 % of its shares in the IT consultancy company Cirquent
(formerly Softlab) to the Japanese company NTT Data.
The BMW Group continues to hold 25.1 % of the shares.
The remaining 2.0 % of shares are held by Cirquent itself.
BMW Group Capital expenditure and operating cash flow
Capital expenditure down on previous year
Capital expenditure, at euro 4,204 million (2007: euro 4,267
million / – 1.5 %), was lower than in the previous year. The
main focus of capital expenditure was on product invest-
ments in conjunction with the production start-ups of new
models such as the BMW 7 Series, the Z4, the X1 and
the MINI Convertible as well as infrastructure investments.
in euro million
7,000
6,000
5,000
4,000
3,000
2,000
1,000
The BMW Group invested euro 2,980 million in property,
plant and equipment and other intangible assets (+ 1.6 %) in
2008. In addition, development expenditure of euro 1,224
million was recognised as assets in accordance with IFRS
(2007: euro 1,333 million / – 8.2 %). The proportion of develop-
ment costs recognised as assets, at 42.7 %, was at a similar
level to the previous year (2007: 42.4 %).
The capital expenditure ratio (i. e. the ratio of capital ex-
penditure to Group revenues) increased slightly in 2008
04
05
06
07
08
Capital
expenditure
Operating
cash flow 1
4,347
3,993
4,313
4,267 4,204
6,157 2 6,184
5,373
6,246 4,471
1 reported in the cash flow statement up to 2006 as cash inflow from operating activities
of Industrial Operations and from 2007 as cash inflow from operating activities of the
Automobiles segment
2 adjusted for new accounting treatment of pension obligations
14
14
16
20
42
45
47
62
68
Group Management Report
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
Internal Management System
Earnings Performance
Financial Position
16
General Economic Environment
Financial crisis reaches the real economy
The world economy suffered a major setback in 2008. In
the period up to summer the primary causes were the high
prices of raw materials and the consequences of the re-
cession on the US property market. In the second half of
the year, however, the downturn worsened due to the
massive impact of the financial crisis. The problem was not
confined to the USA, but caused a crisis of confidence on
financial markets worldwide as well as a massive reduction
in lending volumes. The situation led to major disruptions
in the real economy.
The downturn in the US economy, which had already begun
mid-2007, continued to gather momentum over the course
of 2008. The decline in prices for residential properties and
cutbacks in housing construction investments worsened
during the year and there was still no end in sight by the
end of 2008. The crisis of confidence on the financial mar-
kets triggered by loan defaults on house mortgages went
on to have a far-reaching impact on the real economy.
American consumers in particular, who had generally been
quite willing to consume in recent years, became extremely
reluctant to spend. Companies increased their level of in-
vestment only slightly in 2008. Only foreign trade volumes
profited from the weakness of the US dollar through to the
middle of the year, allowing the US current account deficit
to be reduced further. Although the US economy grew by
1.3 % over the full year, it nevertheless registered a downturn
towards the end of the year.
The euro zone was also unable to avoid the effects of the
financial crisis. Since summer 2008, its performance has
been significantly weaker than in preceding years. Only a
very small increase was registered in the area of private
consumer spending. The main aggravating factors were
sharp price rises during the first half of the year and the pe-
tering out of positive developments on the job markets
during the second half of the year. Companies were ex-
tremely reluctant to invest and export figures fell from sum-
mer onwards in the wake of the global downturn, causing
the euro zone current account balance to drop into the
negative zone. Overall, the euro zone recorded a growth
of only 0.7 % in 2008.
In Germany too, the positive growth rate began to slide
from summer onwards. Exports, which had largely been
responsible for economic growth in recent years, ceased
to be the driving force for the economy when even they
began to drop towards the end of the year. Consumer
spending also remained weak. The positive impetus gen-
erated by the employment market right up to the end
of the year was not enough to relieve consumers of their
sense of uncertainty. It was only because of the robust
performance at the beginning of the year that the German
economy could record a growth rate of 1.3 % for the full
year.
Although the new EU member states were still growing
robustly in 2008, the growth rates registered were signifi-
cantly lower than in the previous year. This applied both
to domestic demand and to exports. The current account
deficits in these countries deteriorated noticeably.
It was originally thought that the Japanese economy
would only be marginally affected by the financial crisis.
As a result of the global downturn and the appreciation
of the yen, however, Japan too felt the knock-on effects
of the financial crisis, with recent export figures even
showing negative trends. Domestic demand also weak-
ened perceptibly. As a result economic output decreased
by 0.7 %.
The emerging economies of Latin America and Eastern
Asia continued to register the fastest growth rates along
with the Eastern European markets. Here too, however,
the negative factors outweighed the positive, resulting in
lower growth rates. While the credit markets in those re-
gions were far less affected than those of the industrial na-
tions, these countries were nevertheless hit by the finan-
cial crisis, particularly due to the outflow of capital and
lower export demand. The growth rate in China slowed
down, albeit still at a high level, and the export surplus
Exchange rates compared to the Euro
(Index: 31 December 2003 = 100)
150
140
130
120
110
100
90
Source: Reuters
British Pound
US Dollar
Japanese Yen
04
05
06
07
08
17 Group Management Report
Oil price trend
Price per barrel of Brent Crude
160
140
120
100
80
60
40
20
Source: Reuters
04
05
06
07
08
Price in US Dollar
Price in Euro
shrank considerably. The rate of growth in India also re-
mained lower than the rates registered in preceding years.
Declining export volumes in particular caused the current
account deficit to widen.
US dollar appreciates against the euro
The value of the US dollar against the euro increased sig-
nificantly during the second half of 2008. Having fallen to
an all-time low of almost US dollar 1.60 to the euro in April,
it went on to reach its highest level in two years at US dol-
lar 1.23 to the euro in November. By the end of the period
under report, it had stabilised at a level of approximately
US dollar 1.40 to the euro. The US dollar’s closing rate was
therefore 4.3 % up on one year earlier.
Similarly, there was a sharp rise in the value of the Japanese
yen compared to the euro. After reaching its lowest level
for the year of almost yen 170 to the euro, by the end of
the year its value was fluctuating between yen 120 and yen
130 to the euro. The Japanese currency rose in value by
around 22 % during the year, strengthening from yen 163 to
the euro at the beginning of the year to yen 127 to the euro
at the end of the year.
By contrast the British pound saw a massive drop in value
in 2008, with an exchange rate of GBP 0.95 to the euro. This
means that it lost approximately 28 % in value over the
course of 2008.
Prices of raw materials highly volatile
The global economic downturn caused demand for raw
materials to fall sharply worldwide during the second half
of the year. The price of crude oil reached its peak at ap-
proximately US dollar 150 per barrel in summer 2008. It
then proceeded to fall to under US dollar 40 by the end of
the year. Although reducing supplies to the market, OPEC
Steel price trend
(Index: January 2004 = 100)
180
170
160
150
140
130
120
110
100
04
05
06
07
08
Source: German Federal Statistical Agency
Precious metals price trend
(Index: 31 December 2003 = 100)
400
350
300
250
200
150
100
Source: Reuters
04
05
06
07
08
Gold
Platinum
Palladium
14
14
16
20
42
45
47
62
68
Group Management Report
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
Internal Management System
Earnings Performance
Financial Position
18
was unable to stop the price of oil falling. Despite these
developments, the average price of a barrel of Brent Crude
over the entire year was around US dollar 97, some 37 %
above the previous year’s average.
maintain the high growth rates seen in previous years and
expanded by only 6 %. In India, the market increased by
only 2 %. While the South Korean market dipped by more
than 2 %, car sales in Japan fell by almost 4 %.
The price of steel also witnessed another sharp rise in
2008, reaching its highest point in summer before starting
to fall. The prices of most precious metals dropped from
the middle of the year onwards, some of them drastically.
Car markets in 2008
The global economic downturn also had a severe impact
on the international car markets in 2008. After a long period
of growth, the number of passenger cars sold worldwide
fell for the first time in years. The three main traditional mar-
kets (the USA, Western Europe and Japan) suffered dra-
matic slumps in some areas, while the growth rates of the
emerging markets, while still at a high level, slowed down.
In the USA, sales figures fell by more than 18 %. The com-
bined effect of high fuel prices and the credit crisis caused
sales of light trucks to drop by approximately 25 %. Only
13.2 million vehicles were sold in total. The market share for
American manufacturers also continued to shrink. With a
market share of only 47.6 %, for the first time, less than half
of passenger cars registered in the USA were manufac-
tured by domestic carmakers.
In Western Europe too the passenger car market experi-
enced sharp volume contraction. The number of new reg-
istrations fell by approximately 8 % to 13.6 million vehicles.
The countries most badly hit were those in which the
property markets had suffered most. The number of new
registrations fell in the United Kingdom by 11 %, in Italy
by 13 % and in Spain by more than a quarter. By contrast,
the reduction of nearly 1 % recorded in France was quite
moderate.
In Germany, almost 3.1 million passenger cars were sold in
2008, 2 % fewer than in the previous year. Consumers re-
mained reluctant to spend in the face of the financial crisis,
the ongoing debate on the taxation of CO2 emissions and
high fuel prices.
After the strong growth rates achieved in the previous year,
Eastern European markets recorded a slight fall in 2008,
with the markets performing differently from one country
to the next. The momentum of the Russian market slowed
down and grew by 16 % in 2008.
The impact of the global downturn in car markets was more
evident in Asia than in the emerging markets of other parts
of the world. The Chinese market was no longer able to
In contrast to the generally weaker performance elsewhere,
car markets in Latin America were again able to maintain
their momentum in 2008. Passenger car sales in Brazil
rose by more than 14 % and sales in Argentina went up by
approximately 9 %. In contrast, the Mexican market con-
tracted by almost 7 %.
Motorcycle markets in 2008
The economic and financial crisis also affected interna-
tional motorcycle markets in 2008, with hardly any markets
achieving the previous year’s sales levels. Worldwide mo-
torcycles sales in the 500 cc plus segment relevant for the
BMW Group were 6.5 % lower than one year earlier.
In Europe, the decline in sales was even greater at 7.2 %.
The German 500 cc plus motorcycle market contracted
by 9.4 %. The markets in Italy and the United Kingdom de-
clined by 9.4 % and 5.7 % respectively. The 12.1 % drop in
sales in Spain was particularly sharp. The only motorcycle
market in the region to see any growth was France which
edged up by 0.2 %.
Many markets outside Europe also failed to match their
prior year performance. In the USA, the largest motorcycle
market worldwide, motorcycle sales were 7.3 % down on
the previous year. In Japan, the short-fall was 5.8 %.
Financial services market in 2008
The worsening economic and financial crisis in 2008 also
presented enormous challenges for the financial services
sector. Financial services providers were forced to recog-
nise huge expenses in the face of a worldwide downturn
in economic growth, much higher financing costs and in-
creased levels of residual value and credit risk.
After credit spreads had narrowed somewhat during the
first half of the year, massive losses incurred by numerous
financial institutions and the collapse of one of America’s
largest investment banks in September triggered wide-
spread disruption on the financial markets. Risk spreads
subsequently rose sharply, reaching a peak in December.
The loss of confidence conveyed by these developments
also made it more difficult to supply financial markets with
sufficient liquidity. In the area of leasing, several automo-
bile financial service providers and fleet operators reacted
by increasing prices sharply, confining their operations
to specific markets or even withdrawing altogether from
the leasing business.
19 Group Management Report
Fluctuations in reference interest rates were extreme in
2008. The American reference rate fell during the year from
4.25 % to a historic low (a range of 0 % to 0.25 %). After ini-
tially raising its reference interest rate by 0.25 percentage
points to 4.25 % in July, the European Central Bank lowered
it in stages during the second half of the year to 2.50 %.
The Bank of England lowered its reference rate from 5.50 %
at the beginning of 2008 to 1.50 % at the beginning of Janu-
ary 2009. Developments were also similar in other industrial
countries and in numerous emerging market states. The
prospect of further reference rate reductions also resulted
in a sharp drop in interest rates for contracts with medium-
term maturities.
The effect of the global economic downturn has also been
reflected in a sharp drop in prices on the international used
vehicle markets. The increasing number of insolvencies,
coupled with the reluctance of consumers and dealers to
spend during a period of ongoing uncertainty, resulted in
a huge drop in demand for used cars during the second
half of 2008.
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
20
Review of Operations
Sales volume down on previous year’s high level
The car sales volume recorded by the BMW Group in 2008
was influenced – particularly during the second half of the
year – by the ongoing financial crisis and the resulting re-
luctance of consumers to spend. In total, the BMW Group
sold 1,435,876 BMW, MINI and Rolls-Royce cars during the
year under report, 4.3 % fewer than in the previous year.
Sales of BMW brand cars in 2008 were also adversely af-
fected by model life cycle factors relating to the BMW
7 Series and the Z4. The number of BMW brand cars sold
in 2008 fell by 5.8 % to 1,202,239 units. The MINI brand
recorded a sales volume of 232,425 units, up 4.3 % on the
previous year, benefiting amongst other things from the
success of the MINI Clubman. The BMW Group sold 1,212
Rolls-Royce cars (+ 20.0 %), enjoying an additional boost
when the Rolls-Royce Phantom Coupé became available
from autumn 2008 onwards.
Lower sales volumes recorded on many markets
The downturn in the global economy resulted in a signifi-
cant reduction in sales volumes in many countries, partic-
ularly in the second half of 2008. In North America, the BMW
Group recorded an 8.8 % drop in retail sales for 2008 with
331,798 units sold. This includes 303,639 units sold in the
USA, lagging 9.7 % behind the previous year’s performance.
In Europe, the impact of the financial crisis was mostly
felt from mid-year onwards. Negative trends in Western
Europe could not be fully offset by positive growth rates
in Eastern Europe, which in some cases, were still quite
strong. In total, the BMW Group sold 864,583 BMW, MINI
BMW Group Deliveries of automobiles by region and market
BMW Group – key automobile markets 2008
as a percentage of sales volume
Other
USA
Spain
France
China
Germany
Italy
United Kingdom
USA
Germany
United Kingdom
Italy
21.1
19.6
10.6
6.3
China
France
Spain
Other
5.3
4.9
4.2
28.0
and Rolls-Royce brand cars in 2008, 3.8 % fewer than one
year earlier. In Germany, the sales volume of 280,915 units
meant that the previous year’s level was matched despite
the exceptionally difficult business climate in 2008 (2007:
280,938 units). By contrast, the number of cars sold in the
United Kingdom dropped sharply to 151,527 units (– 12.8 %).
Sales were also down in Italy and Spain. With 90,470 units
sold in Italy, the sales volume was 15.4 % down on the pre-
vious year. In Spain, the number of cars sold fell by 18.1 %
to 59,658 units. In France, however, the BMW Group regis-
tered strong growth in 2008, with the sales volume up by
8.3 % to 70,516 units. This was also due to the fact that the
in 1,000 units
1,600
1,400
1,200
1,000
800
600
400
200
Rest of Europe
North America
Germany
Asia
United Kingdom
Other markets
Rest of Europe
North America
Germany
Asia
United Kingdom
Other markets
04
299.7
315.9
283.6
106.4
145.3
57.8
05
350.8
329.0
295.9
125.7
156.2
70.4
06
375.0
337.4
285.3
142.2
154.1
80.0
07
443.6
364.0
280.9
159.5
173.8
78.9
08
432.2
331.8
280.9
165.7
151.5
73.8
Total
1,208.7
1,328.0
1,374.0
1,500.7
1,435.9
21 Group Management Report
taxation of vehicles in France is already emissions-based,
thus allowing the BMW Group to profit to a high degree
from its Efficient Dynamics technology.
In Asia, some individual markets developed positively, with
the BMW Group achieving a total sales volume of 165,745
units in this region, 3.9 % up on the previous year. Even
though growth on the Chinese markets (China, Hong Kong
and Taiwan) weakened during the second half of the year,
the sales volume on a full-year basis rose by 23.3 % to 75,481
units. In Japan, by contrast, the number of BMW Group
vehicles sold (48,848 units) was well down (– 19.2 %) on the
previous year.
BMW sales volume influenced by model life cycle
factors
In 2008, the sales volume performance of the BMW brand
was affected by global economic developments and model
life cycle factors. Sales of the BMW 1 Series in 2008 rose
sharply (+ 35.8 %) to 225,095 units, mainly due to the availability
of additional model variants since mid-2007. The perform-
ance of the BMW 3 Series in 2008 was adversely affected
by the life cycle impact of the Sedan and Touring variants.
The revised versions of these two variants did not become
available to customers until autumn 2008. In total, 474,208
units of the BMW 3 Series were handed over to customers
in 2008, a decrease of 14.6 % on a year-on-year basis.
Deliveries of BMW automobiles by model variant
in units
2008
2007
Change
in %
Proportion of
BMW deliveries
2008 in %
BMW 1 Series
Three-door
Five-door
Coupé
Convertible
BMW 3 Series
Sedan
Touring
Coupé
Convertible
BMW 5 Series
Sedan
Touring
BMW 6 Series
Coupé
Convertible
BMW 7 Series
BMW X3
BMW X5
BMW X6
BMW Z4 Series
Coupé
Roadster
49,559
122,666
26,304
26,566
225,095
246,231
93,191
79,248
55,538
30,984
133,525
1,287
7
165,803
310,278
102,399
89,572
52,970
474,208
555,219
156,825
45,462
202,287
8,337
7,962
16,299
181,534
49,311
230,845
9,967
9,659
19,626
60.0
– 8.1
–
–
35.8
– 20.6
– 9.0
–11.5
4.8
–14.6
–13.6
– 7.8
–12.4
–16.4
–17.6
–17.0
38,835
44,421
–12.6
84,440
111,879
– 24.5
116,489
120,617
– 3.4
26,580
–
–
4,035
13,971
18,006
8,361
20,022
28,383
– 51.7
– 30.2
– 36.6
18.7
39.5
16.8
1.4
3.2
7.0
9.7
2.2
1.5
BMW total
1,202,239
1,276,793
– 5.8
100.0
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
22
The BMW 5 Series registered a 12.4 % decrease in sales
volume, with 202,287 units sold in 2008. The BMW 6 Series,
of which 16,299 units were sold, also fell short of its prior
year performance (– 17.0 %).
Both the BMW 7 Series and the BMW Z4 were in the final
stages of their life cycles in 2008. This resulted, as ex-
pected, in lower demand. The BMW 7 Series was handed
over to 38,835 customers in 2008 (– 12.6 %). The new BMW 7
Series has been available since November 2008. The BMW
Z4 recorded a sales volume of 18,006 units in 2008 (– 36.6 %).
The new model was presented in December 2008 and will
be launched on the markets in spring 2009.
The number of BMW X3 sold dropped by 24.5 % to 84,440
units, partly as a result of the BMW Group’s targeted
management of the number of cars sold on the US market.
Sales figures for the BMW X5 did not quite match the pre-
vious year’s performance, with the sales volume down
by 3.4 % to 116,489 units. The BMW X6, which has been avail-
able on the markets since spring 2008 was handed over to
26,580 customers during the period under report.
Proportion of diesel-powered BMW cars remains
at high level
The proportion of diesel-powered BMW brand cars rose
by two percentage points to 43 % in 2008. The diesel propor-
tion for Europe as a whole was 70 %. In Portugal, the diesel
proportion was as high as 96 %. Diesel-powered BMW cars
are also extremely popular in France (92 %), Belgium and
Luxembourg (91 %) and Italy (89 %).
Deliveries of MINI automobiles by model variant
in units
Deliveries of BMW diesel automobiles
in 1,000 units and as a percentage of total volume
700
600
550
500
450
400
350
300
04
05
06
07
08
units
352.5
438.3
472.7
525.9
511.2
as a percentage
of total volume
34
39
40
41
43
Since the end of 2008, diesel BMW brand cars have also
been available in the USA. The BMW Group therefore fore-
casts that the proportion of diesel engines in the BMW
fleet will continue to increase.
Increase in MINI sales volume
The BMW Group sold a total of 232,425 MINI brand vehicles
worldwide in 2008, corresponding to a growth rate of 4.3 %.
Despite difficult business conditions, the MINI brand was
therefore able to set a new sales volume record.
The MINI brand continued to generate a high-value prod-
uct mix in 2008. Overall, 13.5 % of customers opted for the
2008
2007
Change
in %
Proportion of
MINI deliveries
2008 in %
MINI
One
Cooper
Cooper S
MINI Convertible
One
Cooper
Cooper S
MINI Clubman
Cooper
Cooper S
27,154
91,695
43,286
162,135
4,100
11,706
7,402
23,208
31,741
15,341
47,082
25,445
104,432
52,976
182,853
6,257
16,686
12,165
35,108
3,556
1,358
4,914
MINI total
232,425
222,875
6.7
–12.2
–18.3
–11.3
– 34.5
– 29.8
– 39.2
– 33.9
–
–
–
4 .3
69.8
10.0
20.2
100.0
23 Group Management Report
MINI brand cars in 2008 – analysis by model variant
Automobile production of the BMW Group by plant in 2008
as a percentage of total MINI brand sales volume
in 1,000 units
MINI One
Graz 2
Shenyang 1
Goodwood
Rosslyn
Leipzig
Regensburg
MINI Cooper S
Spartanburg
Dingolfing
MINI Cooper
(including Cooper D)
MINI Cooper
MINI Cooper S
(including Cooper D)
58.1
MINI One
28.4
13.5
Regensburg
Dingolfing
Munich
Oxford
274.0
241.3
235.0
202.9
170.7
Leipzig
Rosslyn
Goodwood
Shenyang1
Graz (Magna Steyr) 2
150.0
48.0
1.4
33.7
82.9
Oxford
Munich
Spartanburg
1 Joint venture
2 Contract production
1,439,918 BMW, MINI and Rolls-Royce brand cars were
manufactured by the BMW Group’s worldwide produc-
tion network, a reduction of 6.6 % on a year-on-year basis.
The BMW brand accounted for 1,203,482 units (– 7.6 %).
A total of 235,019 MINI brand cars left the Oxford plant in
England during the year under report, a reduction of 1.1 %.
This was partially due to the fact that production of the
previous MINI Convertible came to an end in August 2008
and production of the new MINI Convertible did not com-
mence until December.
A total of 1,417 Rolls-Royce vehicles were manufactured
in Goodwood, England in 2008, corresponding to a pro-
duction volume increase of 37.7 % over the previous year.
Since summer 2008, the new Rolls-Royce Phantom
Coupé is also being manufactured at the Goodwood
plant.
2008
2007
644
431
137
1,212
757
253
–
1,010
Change
in %
–14.9
70.4
–
20.0
MINI One, more than half for a MINI Cooper (58.1 %) and
28.4 % for a MINI Cooper S. Sales of the MINI Convertible
fell in 2008 due to model life cycle factors. This, however,
was more than offset by the success of the MINI Clubman.
The new MINI Convertible celebrated its world debut at
the Detroit Motor Show in January 2009 and will be availa-
ble to customers from spring onwards.
Rolls-Royce records strong growth
Rolls-Royce Motor Cars recorded strong sales volume
growth (+ 20.0 %), handing over 1,212 Phantom, Phantom
Drophead Coupé and Phantom Coupé vehicles to cus-
tomers in 2008. The Rolls-Royce brand therefore achieved
its fifth successive annual sales volume increase and re-
mains the most successful manufacturer in the super-luxury
segment. Since its market launch in autumn 2008, a total
of 137 units of the Rolls-Royce Phantom Coupé have been
handed over to customers.
Car production volume reduced on
year-on-year basis
The BMW Group reduced production volumes in 2008 in
line with lower demand on the car markets. In total,
Deliveries of Rolls-Royce automobiles by model variant
in units
Rolls-Royce
Phantom (including Phantom Extended Wheelbase)
Drophead Coupé
Coupé
Rolls-Royce total
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
24
Highly adaptable production network
As a result of the reduction in global car sales volumes, the
BMW Group’s production network manufactured fewer
vehicles than originally planned in 2008. Even though a very
large proportion of cars under production are subject to
specific customer orders, production volume has been
adapted even more stringently to market demand. Further-
more, instruments such as flexible working hours and shift
models made it possible to implement reduced produc-
tion schedules to suit each individual plant. The consistent
value-added approach adopted resulted in further process
optimisation during the year. As a result, the targeted
7 % to 8 % annual improvement in cost productivity was
achieved once again.
The BMW Group launched a total of seven new models in
its various plants in 2008, two of which were revised models.
Production of the revised BMW 3 Series Sedan and revised
BMW 3 Series Touring commenced at the BMW Munich
plant in 2008. Working closely with the MINI plant in Oxford,
approximately 500 units of the MINI E were manufactured
in Munich. Since the beginning of 2009, these cars have
been tested in day-to-day use by selected customers in the
USA. The production of the MINI E enabled valuable know-
how in the use of lithium-ion technology to be gained at the
Munich plant.
In September 2008, the chassis and powertrain component
production unit at the Dingolfing plant received the “Best
Plant in Europe” award for the outstanding quality of its
management system. In January 2008, the five-millionth
BMW 5 Series vehicle (now in its fifth generation) rolled
off the production line at the BMW plant in Dingolfing: it
was a 530d Sedan. Production of the new BMW 7 Series
began successfully in autumn. The high number of tech-
nical innovations in this car placed particularly high de-
mands on the various production units involved.
Each of the production units at the Landshut plant played
its part in the successful production start-ups of the various
new and revised models in 2008. The Interior department
saw the commissioning of a new production line with inno-
vative injection moulding machines for the manufacture of
cockpits for the new BMW 7 Series. One of the year’s high-
lights for the Exterior department was the introduction of a
special cleaning plant, for the first time allowing large parts
of the outer body skin area to be cleaned. Thus simplifying
processes and minimising throughput times. Above all,
the new system also greatly reduces energy costs and
avoids wastewater entirely.
The introduction of inorganic sand core technology for
series production underlines the high technological manu-
facturing standards applied in the light alloy foundry. This
production method – using mineral binders which cause
practically no smell or emissions – has vast benefits both
for employees and for the environment. It also increases
yield while simultaneously reducing maintenance costs
and optimising tool utilisation times. By 2010, the entire
foundry at the Landshut plant will have been converted to
the use of inorganic sand core technology.
At the BMW Regensburg plant, the four-millionth vehicle
to be manufactured since the plant was commissioned in
1986 rolled off the production line at the end of May 2008.
Key milestones in 2008 included the production start-up
of the new BMW M3 Convertible and that of the revised
BMW 3 Series Sedan. Work on the extension of the press-
ing plant, which began in 2007, continued according to
schedule in 2008. The BMW Group is investing a total of
euro 90 million on the extension which will be taken into
operations in autumn 2009. From 2009 onwards, the new
BMW Z4 will be manufactured at the Regensburg plant.
The installation of the necessary equipment, involving
capital expenditure in the region of euro 100 million, was
begun in 2008.
Four different BMW models are currently being produced
at the BMW plant in Leipzig: the BMW 3 Series Sedan,
the BMW 1 Series three-door version, the Coupé and the
Convertible. At the end of May 2008 a “topping out” cere-
mony was held at the BMW Leipzig plant for the new
pressing plant which is adjoined to a component produc-
tion unit for doors, front hatches and rear hatches. The
BMW Group is investing approximately euro 100 million in
this extension project which is to be commissioned by the
end of 2009.
With the BMW X6 also now included in its production pro-
gramme, more than 170,000 vehicles were produced for the
first time at the Spartanburg plant in the USA in 2008. Work
began in spring on the large-scale extension of the plant
and is scheduled to take several years. The BMW Group is
investing the equivalent of some euro 510 million in this
project which also includes the construction of a new paint
shop and an additional assembly building. Production of
the BMW Z4 at the Spartanburg plant was discontinued
mid-2008 and its successor will be manufactured at the
BMW plant in Regensburg. In its place, the next generation
of the BMW X3 will be produced in Spartanburg and the
plant will become the main production centre for the
BMW X family.
The first of the revised BMW 3 Series Sedans rolled off the
production line at the BMW plant in Rosslyn, South Africa
in 2008. The proportion of vehicles produced for the export
market at the plant during the reporting year rose further to
stand at 83 %.
At the end of October 2008 a milestone was reached in the
production of engines at the BMW plant in Steyr, Austria:
25 Group Management Report
The first “two-working-day engine” was supplied by the
BMW Steyr plant to the BMW car plant in Dingolfing. The
continuous improvement of production and logistics
processes has now made it possible to reduce the through-
put time from the installation of the first engine compo-
nent to the commencement of assembly at BMW car
plants in Germany to only two days. With this remarkable
throughput time, the BMW Group is setting new stand-
ards for production efficiency in the automotive industry.
In December, the expansion of the BMW development
centre for diesel engines in Steyr was commissioned with
a total investment volume of euro 14 million. The focus is
on increasing capacities in the area of vehicle measurement
technology and function testing. Series production of the
new six- cylinder diesel engine began at the BMW plant
in Steyr in 2008. This diesel engine is a component in the
BMW Group’s Efficient Dynamics package.
Engines for both the BMW and the MINI brands are pro-
duced at the Hams Hall plant in the United Kingdom. In to-
tal, 371,269 engines were manufactured at the plant in 2008.
189,284 of these were produced for BMW brand cars and
181,985 for MINI brand cars. More than 1.5 million engines
have been built at Hams Hall since the plant was commis-
sioned in January 2001.
Activities at the Rolls-Royce Goodwood plant in 2008 were
primarily geared towards preparations for the new model
announced for 2010. The BMW Group is investing a total of
euro 50 million in the expansion of the plant. The work in-
cludes the installation of a second assembly line as well as
the extension of the paint, wood and leather workshops.
Motorcycle sales volume at previous year’s level
The BMW Group sold a total of 101,685 BMW motorcycles
in 2008 and therefore almost achieved the same sales
volume level as in the previous year (– 0.8 %), despite the
overall contraction of the market. The positive perform-
ance by comparison with the competition was helped in
particular by the availability of the R 1200 GS (including
the Adventure version), F 650 GS and F 800 GS enduro
models from spring 2008 onwards.
Divergent sales volume performance on the
markets
In total, 71,889 BMW motorcycles were sold in Europe in
2008, only marginally (– 0.9 %) fewer than one year earlier.
Within the region, however, the individual markets con-
tinued to perform divergently. The BMW Group set itself
apart from these negative market developments in many
countries and increased market shares. This success was
largely due to the ongoing new model initiative. In Ger-
many, which is the largest single market for BMW motor-
cycles, the sales volume dropped sharply to 18,571 units,
a decrease of 13.7 % against the previous year. There was
also a moderate fall in the number of motorcycles sold in
Spain, with the sales volume slipping by 2.2 % to 10,152 units.
Sales of BMW motorcycles in other European countries
were well up on the previous year, in some cases quite con-
siderably. The 8,211 motorcycles handed over to customers
in France corresponded to a 7.9 % sales volume increase.
More motorcycles were also sold in the United Kingdom
(5,618 units / + 7.0 %) and Italy (15,049 units / + 4.3 %) than in 2007.
In the USA, the BMW Group recorded a sales volume of
11,617 units, 3.9 % down on the previous year’s performance.
This was mainly due to the fact that the F 650 GS and the
F 800 GS did not become available on the US market until
the second half of the year (and hence later than in Europe).
The Motorcycles segment’s sales in Japan followed the
general market trend. The BMW Group sold 3,015 motorcy-
cles on this market in 2008, an 8.9 % drop on a year-on-year
BMW motorcycles delivered
in 1,000 units
110
105
100
95
90
85
80
04
05
06
07
08 *
92.3
97.5
100.1
102.5 101.7
* excluding Husqvarna Motorcycles (13,511 motorcycles)
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
26
comparison. The F 800 GS did not become available to
customers until January 2009.
BMW motorcycles in 2008 – analysis by series
as a percentage of sales volume
K Series
F Series
R Series
R Series
F Series
55.5
32.8
K Series
11.7
were manufactured during the period under report (– 0.2 %).
Production at the Berlin plant increased by 6.2 % to 101,964
units, while the number of motorcycles manufactured by
the cooperation partner, Piaggio S. p. A. in Noale, Italy, de-
creased by 73.1 % to 2,256 units.
Numerous models came off the production lines for the
first time at the Berlin plant in 2008 in conjunction with the
segment’s new model initiative, including three K-Series
models (K 1300 S / R / GT), the HP2 Sport and the G 450 X.
Numerous new models launched / presented
The Motorcycles segment expanded its product range
further in 2008, introducing several new models to the
markets. The revised versions of the R 1200 GS and
R 1200 GS Adventure enduro models, the new F 800 GS
and F 650 GS enduros and the high-performance HP2
sports bike all became available to customers in time for
the start of the season in March. The G 450 X, an enduro
designed specifically for sports activities, was launched
in autumn 2008.
Other new models were presented at the world’s largest
motorcycle show, INTERMOT, in October: the K 1300 S
sports bike, the K 1300 R urban bike, K 1300 GT tourer and
the racing version of the S 1000 RR. More new models
were presented to the public for the first time during the
Italian EICMA Motorcycle Fair in November, including
the new F 800 R urban bike and the purist concept study,
the BMW Custom Concept. The K 1300 Series models
have been available since the beginning of February 2009,
the F 800 R from May onwards. The road version of the
S 1000 RR will go on sale at the end of the year.
Motorcycle production volume at previous
year’s level
Motorcycle production volume in 2008 was almost at the
previous year’s level. In total, 104,220 BMW motorcycles
BMW Group – key motorcycle markets 2008
as a percentage of sales volume
Other
Germany
Italy
United Kingdom
France
Spain
USA
Germany
Italy
USA
Spain
18.3
14.8
11.4
10.0
France
United Kingdom
Other
8.1
5.5
31.9
27 Group Management Report
Financial Services segment severely affected by
economic crisis
The worldwide economic and financial crisis affected earn-
ings of the Financial Services segment in 2008 more se-
verely than expected. Above all else, the tense situation on
the international used car markets and the higher level of
bad debts risk necessitated the recognition of substantial
expenses for risk provision. For a current assessment of
risk in the financial services business, reference is made to
the risk report on pages 64 – 65.
The business volume in balance sheet terms at 31 Decem-
ber 2008 amounted to euro 57,587 million and therefore
increased by 12.3 % on a year-on-year basis. 3,031,935 lease
and credit contracts were in place with dealers and retail
customers at 31 December 2008, 15.3 % more than at the end
of the previous reporting period. The increase was due,
amongst other reasons, to the repurchase of a previously
off-balance-sheet port folio of vehicles which had included
a part of the leasing business for Germany. The proportion
of new BMW Group cars leased or financed by the Finan-
cial Services segment in 2008 went up by 3.8 percentage
points to 48.5 %.
Targeted regional expansion continued
The Financial Services segment continued its strategy of
targeted regional expansion in 2008. In October 2008, an
agreement was signed with BMW Brilliance Automotive
Ltd., Shenyang, concerning the establishment of a joint
venture for financial services products in China. In conjunc-
tion with a cooperation agreement with Nordea Finance,
a subsidiary of Scandinavia’s largest bank, Nordea Bank,
financing products have also been available to retail cus-
tomers in Estonia, Latvia and Lithuania since July 2008.
During the first half of the year, the Financial Services seg-
ment received its banking licence for Russia. Retail cus-
tomer financing operations were commenced on this mar-
ket in July 2008.
Study bears out retail customer and dealer
satisfaction
The internationally renowned market research institute,
J. D. Power and Associates, published the results of its
Consumer Financing Satisfaction StudySM 2008 in
December 2008. The BMW Group’s Financial Services
segment took first place in both award categories for
customer satisfaction in the USA.
In the Dealer Financing Satisfaction StudySM 2008 pub-
lished in September 2008, the segment headed all cate-
gories for dealer satisfaction in the USA. These awards
acknowledge the quality of services provided by the BMW
Group to retail customers and dealers in the area of finan-
cial services.
Retail customer business continues to expand
Credit and lease business with retail customers, the seg-
ment’s largest line of business, again grew strongly in 2008.
The value of new contracts signed with retail customers in
2008 amounted to euro 29,341 million, representing a 3.1 %
increase over the previous year. 1,197,871 new contracts
were signed in 2008, 10.3 % more than one year earlier. Well
over half of these contracts related to new vehicles manu-
factured by the BMW Group.
Lease contracts accounted for 34.2 % of new business with
retail customers. This was 4.0 percentage points down
on the previous year and is the result of a targeted shift in
focus towards credit financing. In terms of new contracts,
lease business was 1.4 % lower and credit finance business
was 17.5 % higher than in the previous year.
In the area of used car financing, the number of new con-
tracts rose by 22.2 %. Almost three quarters of these related
to the credit financing of used BMW and MINI brand cars.
At the end of the reporting period, the Financial Services
segment had a portfolio of 2,785,509 contracts with retail
customers, 16.0 % more than one year earlier. The number
of contracts in place with retail customers in Germany
rose by 19.4 %, partly due to the repurchase of a previously
off-balance-sheet port folio of vehicles which had included
a part of the leasing business for Germany. The contract
portfolio in the remaining European markets grew by
13.9 % and in the Asia / Oceania / Africa region by 14.1 %.
The Americas region, with 916,509 contracts, continues
Contract portfolio of BMW Group Financial Services
in 1,000 units
3,000
2,800
2,600
2,400
2,200
2,000
1,800
04
05
06
07
08
1,843
2,087
2,271
2,630 3,032
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
28
Contract portfolio retail customer financing of
BMW Group Financial Services 2008
as a percentage by region
Asia / Oceania / Africa
Germany
America
Rest of Europe
America
Rest of Europe
32.9
27.5
Germany
Asia / Oceania / Africa
26.6
13.0
to constitute the largest proportion of the contract portfo-
lio. Here, the growth rate compared to one year earlier was
15.9 %.
Dealer financing volumes up
The Financial Services segment supports the BMW Group
dealer organisation with a comprehensive range of prod-
ucts. Dealer financing business increased in 2008. At 31 De-
cember 2008, the managed business volume stood at euro
8,887 million, up 6.3 % against the previous year. In total,
246,426 dealer financing contracts were in place at the end
of the reporting period.
Multi-brand financing business up on
previous year
The multi-brand financing line of business was further ex-
panded in 2008. Under the brand name “Alphera”, credit
financing, leasing and other products are marketed to retail
customers via dealerships in 25 markets. In the previous
year, the “up2drive” brand name was successfully intro-
duced for direct business. This sales channel was further
expanded in four markets during the year under report.
In total, 172,317 new business multi-brand financing con-
tracts were signed in 2008, 38.3 % more than in the previous
year. The largest proportion of new contracts related to the
Americas and Asia / Oceania / Africa regions.
Fleet business continues to grow
The BMW Group’s international brand-neutral fleet busi-
ness operates in the fields of financing, full-service leasing
and fleet management, offering its services under the
brand name “Alphabet”. The contract portfolio for fleet
business continued to grow in 2008 despite difficult mar-
ket conditions. At the end of the reporting period, fifteen
Alphabet fleet management entities were managing a
portfolio of 322,755 contracts worldwide, 15.3 % more than
one year earlier. Alphabet was thus able to strengthen its
market position further.
Sharp volume rise in deposit business
Despite the difficult climate caused by the financial and
economic crisis, the Financial Services segment’s deposit
volume totalled euro 8,209 million at the end of the report-
ing period. This was 43.2 % higher than the level one year
earlier.
The number of securities custodian accounts maintained
at the end of the reporting period totalled 31,681, roughly in
line with the previous year (– 0.4 %).
Credit card business could not be maintained at the pre-
vious year’s level. The managed portfolio comprised
355,606 BMW and MINI credit cards at 31 December 2008,
a decrease of 9.7 %. The BMW Card is included in the
product portfolio in ten countries and the MINI Card in four.
Growth in insurance business
In addition to credit financing and lease business, the Finan-
cial Services segment also operates as an agent for vehi-
cle and mobility-related insurance products in more than
30 markets. In this context, the Financial Services segment
maintains cooperative arrangements with local insurance
companies. The internationalisation of the retail customer
insurance line of business was continued in 2008. The range
of combined insurance and financing products was ex-
panded and adapted to meet a growing demand amongst
customers for one-stop solutions.
The outcome of these measures was that the number of
new business insurance contracts increased by 25.0 %
to 493,672 contracts. During the course of 2008, the port-
folio of insurance contracts exceeded the one million mark
for the first time. 1,146,967 contracts were in place at 31 De-
cember 2008, 21.1 % more than at the end of the previous
year.
Financial and economic crisis influences risk
situation
Credit and lease business was exposed to a higher level of
credit risk in 2008. Compared to the previous year, the bad
debts ratio rose by 13 basis points to 0.59 %.
29 Group Management Report
The interest rate risk is managed within the Financial
Services segment using a risk-return approach. Diversified
value-at-risk *, as measured to quantify the interest rate
risk, increased during the year from euro 37.3 million to
euro 51.0 million.
* Based on a 99 % confidence level and a holding period of 10 days
BMW Group Employees
Automobiles
Motorcycles
Financial Services
Other
thereof consultancy / software
BMW Group
Size of workforce reduced
The BMW Group’s workforce was reduced by 7,498 em-
ployees (– 7.0 %) during the financial year 2008 to stand
at 100,041 employees at 31 December 2008. This is largely
due to the implementation of previously reported meas-
ures to reduce the size of the workforce and the sale
of business units in 2008. The workforce reduction pro-
gramme resulted in a sharp rise in the employee fluctua-
tion ratio at BMW AG.
Despite the overall reduction in personnel, the BMW Group
nevertheless recruited staff on a targeted basis in 2008.
In addition to the recruitment of almost 1,200 new appren-
tices, 226 permanent posts were also filled during the
course of the year at BMW AG. Approximately 74 % of the
BMW Group’s workforce is employed in Germany.
Number of apprenticeships remains high
1,177 young people started their apprenticeships with the
BMW Group at the beginning of the training year 2008. The
number of apprentices recruited has been consistently
BMW Group Apprentices at 31 December
5,500
5,000
4,500
4,000
3,500
3,000
2,500
04
05
06
07
08
4,464
4,464
4,359
4,281 4,102
31.12. 2008
31.12. 2007
92,924
2,917
4,077
123
–
98,548
2,989
4,097
1,905
1,793
100,041
107,539
Change
in %
– 5.7
– 2.4
– 0.5
– 93.5
–
– 7.0
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
30
on a high level for many years. At the same time, due to
their good performance, many apprentices were able to
shorten their training periods, resulting in decreased num-
bers in statistical terms at the year-end. The BMW Group
employed 4,102 apprentices at 31 December 2008, 4.2 %
fewer than one year earlier.
BMW AG’s apprenticeship ratio in Germany (i. e. the ratio of
apprentices to the total workforce) increased slightly in 2008
by 0.2 percentage points to 5.0 %. Starter programmes for
high school leavers and university graduates are also in
place to complement the range of opportunities available to
those about to start their careers with the BMW Group.
Focused basic and further training
As a premium provider, the BMW Group attaches great im-
portance to both the basic and the further training of its
workforce. Further training is always tailored to suit require-
ments and carried out with specific objectives in mind.
The BMW Group continued to invest at a high level during
the financial year 2008. In response to difficult business
conditions, the BMW Group’s further training activities were
focused on selected target groups and specific priority
topics in 2008. As a consequence, total expenditure of euro
154 million was 14.9 % lower than in 2007.
Demand for positions abroad remains strong
The international transfer of know-how and networking at
all levels are crucial factors for businesses such as the
BMW Group. In view of this fact, specialists are, for exam-
ple, specifically sent to various manufacturing sites when
production start-ups commence for new models, thus
ensuring a consistent level of high quality during each start-
up throughout the entire production network. An increas-
ing number of employees are also taking on international
duties within the development and purchasing network.
During the year under report, more than 650 BMW AG
employees worked outside their home country, Germany.
The main targets were North America, the United Kingdom
and China. Furthermore, approximately 175 employees
from non-German BMW Group locations were on assign-
ments in Germany or at international sites away from their
home countries. Employees on longer-term placements
spend an average of two-and-a-half years abroad. This is
a sufficient length of time for them to pass on process and
technical know-how, receive further training while abroad
and, at the same time, gain international experience which
will stand them in good stead during the course of their
subsequent careers.
Employee fluctuation ratio BMW AG1
as a percentage of workforce
7.0
6.0
5.0
4.0
3.0
2.0
1.0
04
05
06
07
08
1.91
2.45
2.68
2.66
5.85 2
1 Number of employees on unlimited employment contracts leaving the company
2 after implementation of previously reported measures to reduce the size of the
workforce
Attractiveness as employer confirmed
The BMW Group continued to be amongst the most at-
tractive employers in 2008. This fact was underscored by
numerous studies and ranking lists. In the study entitled
“Germany’s Most Popular Employers” (Trendence), young
academics from business and engineering fields judged
the BMW Group to be one of the most popular employers
in Germany. Another study, the “Universum Student Survey
2008” (Universum) also came to the same conclusion;
further confirmation of the fact that the BMW Group has an
excellent reputation amongst business and engineering
students.
“Today for Tomorrow” project – taking a proactive
approach to demographic realities
The ageing of society affects the economy as a whole as
well as each individual company. The BMW Group is there-
fore consciously taking up the challenges of demographic
change with an awareness of the opportunities it offers.
The cornerstone for maintaining the ability of the BMW
Group’s workforce to perform with the appropriate set
of skills was laid in the wide-ranging project “Today for
Tomorrow”. The project was divided into five main areas
of action: health management and preventative care, quali-
fications and skills, work environment, individual working-
life time models and communication. During the second
half of 2008, further steps were taken in successfully imple-
menting the results of the project within the organisation.
Amongst a wide range of measures taken, a great deal of
effort was expended in 2008 to adapt production systems
greater consideration is given to the contribution made by
an individual when determining the overall level of remu-
neration. This approach takes better account of the under-
lying principle of performance and reward and is also an
effective way of motivating managers to meet their targets.
In future, annual bonuses will be linked to the post-tax re-
turn on sales, the net profit and the dividend level. Growth
and profitability strategies are therefore now directly linked
to the level of management remuneration at BMW AG.
Internationalisation of personnel activities
The Excellence in Human Resources (EHR) programme in
place since 2002 has consistently improved the efficiency
of the personnel and human resources function within the
BMW Group. An important objective of EHR is to ensure
that employees receive efficient service and competent
advice from members of the human resources department
and a swift response to their enquiries.
Based on the experiences made in Germany, organisational
structures, procedures and supporting IT systems were
adapted for international use and successfully introduced
in the United Kingdom in November 2008. A system is now
in place that offers employees at the Hams Hall, Good-
wood and Oxford sites standardised procedures for con-
tacting the Human Resources department. Routine and
special topics relating to matters such as recruitment and
training have also been standardised and can be handled
centrally, thus improving efficiency whilst maintaining a
high quality of service. The changeover will be completed
in the United Kingdom with roll-out of the new system to
the Bracknell and Hook sites in 2009.
31 Group Management Report
to the ergonomic needs of older employees. A good
example of this is the “Work System 2017” pilot project –
the only project of its kind currently being carried out with-
in the automotive industry. Under this project, the forecast
age structure for 2017 has been “reproduced” for everyday
work purposes in one production section at the Dingolfing
site, thus enabling a targeted evaluation of whether the
measures and instruments employed are practical and
effective. The aim now is to pass on the know-how gained
in the pilot project to other areas of the business, the ulti-
mate goal being more suitable technical and organisational
working conditions for older employees – particularly in
terms of workplaces, working hours and job structures.
A new working time model, known as “Full-time Select”
was also introduced in 2008, giving employees the option
to take additional days off with corresponding reductions
in pay. This working time model was well received by the
workforce, providing additional scope for employees to
structure their own time.
Competitive level of personnel expense
Maintaining a competitive level of personnel expense plays
a major role in the success of the BMW Group, and thus in
the securing of jobs. Personnel expense management is
therefore gaining in importance in an increasingly competi-
tive environment.
The BMW Group does not, however, take the one-sided
approach of simply focusing on reducing costs. The main
emphasis is placed on achieving greater efficiency by
increasing productivity. The high degree of motivation
amongst the workforce on the one hand and the em-
ployee-friendly orientation of the BMW Group on the other
are backed up by performance-based and profit-linked
remuneration arrangements and flexible working time
models. Remuneration, working time rules and other ben-
efits are reviewed and adjusted regularly in close coopera-
tion with employee representatives. In 2008, for example,
the corridor for employees with a BMW time account
was widened to + / – 300 hours. The flexibility thus gained
gives the BMW Group more scope to adapt production to
fluc tuating demand without affecting employees’ pay or
personnel expense.
New structure for management remuneration
The remuneration system for middle and senior manage-
ment was restructured in 2008 in an attempt to embed the
BMW Group’s new strategic direction in the management
remuneration system at BMW AG. Under the new system,
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
32
Further enhancements in environmentally
compatible vehicle design
The BMW Group again set new milestones in improving
the environmental compatibility of its products in 2008.
One example of this is the creation of a comprehensive
product data system containing details of the material
composition of all components used in a vehicle. In May
2008, with the help of this system, the BMW Group became
the first carmaker to present a virtual “material balance
sheet” (for the new BMW 7 Series) conforming to interna-
tional standard ISO 22628.
Furthermore, in a large-scale industrial trial, the BMW
Group was able to demonstrate that, with the aid of post-
shredder technology, BMW Group-manufactured cars
are at least 85 % recyclable and up to 95 % recoverable. Un-
der the post-shredder method (after vehicles have been
dismantled and shredded mechanically), shredder residue
fractions are sorted and sifted into their various constituent
materials such as metals, plastics and minerals, in prepara-
tion for further processing.
Thanks to the extensive preparatory work carried out, the
BMW Group passed the preliminary tests of the relevant
licensing agency in May 2008. The BMW Group therefore
complies with the regulations of the European Directive
2005 / 64 / EG on type approval of motor vehicles with regard
to their reusability, recyclability and recoverability. The use
of recovered materials (recyclates) was also increased in
2008. The proportion of recyclates used in the new BMW
7 Series for instance was increased by approximately 15 %
compared to the preceding model. The use of quality-ap-
proved recyclates reduces costs and preserves resources
while still ensuring compliance with established quality
standards.
Strict management of environmental care activities
The BMW Group applies the “Clean Production” phi-
losophy to its production activities. In line with this forward-
looking commitment to environmental care, the BMW
Group endeavours to achieve systematic and consistent
reductions in the volume of resources used and to lessen
the impact of production activities on the environment.
In order to monitor this, environmentally relevant indicators
are measured automatically and reported on a monthly
basis.
The following key indicators – expressed as amounts per
vehicle produced – are integral components of the group-
wide target system and are managed accordingly:
– energy consumption
– water consumption
– process wastewater
– solvent emissions
– waste for disposal
CO2 emissions per vehicle produced are also recorded
based on the amount of energy consumed and the energy
mix used.
The target for the global production network is to reduce
these key indicators by 30 % between 2006 and 2012. This
entails achieving an average reduction of 5 % p. a. These
targets can, however, vary as a result of model production
start-ups, discontinuations or changed production vol-
umes. The reduction across all key indicators is additionally
examined on the basis of an Environmental Efficiency
Ratio (EER). The EER computation for 2008 showed that
the improvement in resource efficiency remained within
the agreed target corridor.
Energy consumed per vehicle produced
in MWh / vehicle
CO2 emissions per vehicle produced
in t / vehicle
3.10
3.00
2.90
2.80
2.70
2.60
1.05
1.00
0.95
0.90
0.85
0.80
04
05
06
07 *
08
04
05 1
06
07 2
08
2.94
2.94
2.90
2.78
2.80
0.94
0.99
0.94
0.84
0.82
* Basis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich,
Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall,
Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood,
Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang.
1 The increase is attributable to a change in the energy mix.
2 Basis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich,
Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall,
Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood,
Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang.
33 Group Management Report
Fewer resources, lower emissions
Energy savings totalling more than 650,000 MWh achieved
throughout the BMW Group reduced energy costs by
approximately euro 35 million in 2008. The reduction of other
key indicators such as water consumption, process water
and waste for disposal resulted in savings of approximately
euro 1.2 million in the year under report.
The groupwide activities undertaken to reduce energy con-
sumption have been managed since the beginning of 2007
as part of an international energy project. Energy con-
sumption per vehicle produced, at 2.80 MWh, came very
close to the previous year’s level of 2.78 MWh. Considering
the 6.6 % reduction in vehicle production compared to the
previous year, it was only possible to maintain this figure
at roughly the previous year’s level by reducing energy
consumption volumes in absolute terms. Some of the fac-
tors that contributed to the savings were the combined
heat and power plants used in the Landshut and Steyr
plants as well as the conversion of the heating system to
natural gas at the Swindon plant in the United Kingdom. A
wide range of analyses and measures to save even more
energy were carried out in a pilot project at the BMW plant
in Munich in 2008. The know-how gained will now be intro-
duced in stages at further locations throughout the pro-
duction network. At a series of energy awareness seminars,
BMW Group employees in the Berlin, Dingolfing, Leipzig,
Munich and Steyr plants were shown how they can make
an important contribution towards reducing energy con-
sumption at their workplaces.
annual energy consumption of a German city of 170,000 in-
habitants. In financial terms, the resulting savings amounted
to approximately euro 62 million.
Most noticeably, the BMW Group was able to reduce its
electricity consumption in 2008. Due to the higher CO2
emission factor for electricity compared to that for gas,
CO2 emissions per vehicle produced decreased from
0.84 tons of CO2 in 2007 to 0.82 tons in 2008.
Water consumption continued to be exceedingly low. In
2008, water consumption per vehicle produced was ap-
proximately 2.56 m³ (2007: 2.61 m³). In absolute terms, the
BMW Group used 335,000 m³ less water than in the pre-
vious year. Process wastewater per vehicle produced in
2008 remained steady at the previous year’s level of 0.64 m³.
Here too, the absolute amount was reduced by approxi-
mately 68,000 m³.
Waste for disposal (i.e. waste that could not be recycled)
decreased by more than 8 % compared to the previous
year. The figure currently stands at 14.84 kg per vehicle
produced. In addition, improved separation and sorting
methods increased the proportion of recycled waste, there-
by reducing the volume of waste for disposal.
Solvent emissions per vehicle produced fell sharply (by
almost 17 %) to a new low of 1.96 kg in 2008. Improvements
in painting processes at all manufacturing plants were a
major contributing factor for this performance.
The various energy-saving measures emerging from the
international energy project have resulted in total energy
savings of approximately 1.1 million MWh groupwide since
the beginning of 2007. This is roughly equivalent to the
Solvent emissions were also lowered by further reducing
the protective coating used on new cars. Overall, approxi-
mately 82 % of new vehicles were transported in 2008
without the use of surface protection such as wax, adhesive
Water consumption* per vehicle produced
in m3 / vehicle
Process wastewater per vehicle produced
in m3 / vehicle
3.00
2.90
2.80
2.70
2.60
2.50
1.00
0.90
0.80
0.70
0.60
0.50
04
05
06
07
08
04
05
06
07 *
08
3.03
2.60
2.56
2.61
2.56
0.83
0.76
0.67
0.64
0.64
* The indicators for water consumption refer to the production sites of the BMW Group.
The water consumption includes the process water input for the production as well
as the general water consumption e. g. for sanitation facilities.
* Basis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich,
Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall,
Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood,
Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang.
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
34
Waste for disposal* per vehicle produced
in kg / vehicle
17.5
15.0
12.5
10.0
7.5
5.0
Volatile organic compounds (VOC) per vehicle produced
in kg / vehicle
2.75
2.50
2.25
2.00
1.75
1.50
07
08
04
05
06
07 *
08
16.17 14.84
2.26
2.07
2.04
2.36
1.96
* “Waste for disposal per vehicle produced“ became a performance indicator in 2007
* Basis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich,
and has been reported since then.
Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall,
Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood,
Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang.
foil or protective covers. One year earlier the equivalent
percentage stood at 72 %. In line with the BMW Group’s
policy to eliminate the use of surface protection, it was
possible to shut down the last remaining car body con-
servation facilities.
Environmentally friendly transportation solutions
The BMW Group also managed to reduce the negative
environmental impact caused by transporting goods along
the whole chain from purchasing to delivery. The propor-
tion of goods transported by air freight to international
plants was halved in 2008 by further measures to optimise
the supply chain. Accordingly, air freight accounted for only
0.1 % of all goods transported (2007: 0.2 %). The percentage
of goods transported by sea freight rose from 76.8 % in
2007 to 79.1 % in 2008. The equivalent percentage for rail
fell slightly from 6.9 % in 2007 to 6.3 % in 2008, while that for
road was reduced from 16.1 % to 14.5 %.
In all, 50.3 % of all new vehicles left the BMW Group’s plants
by rail, a reduction of 4.5 percentage points against the
previous year. This was partly due to a shift in sales to mar-
kets that cannot be supplied by rail. The use of an addi-
Roadmap of the BMW Group for sustainable mobility
tional harbour in the USA made it possible to reduce the
distances travelled by trucks.
Sustainable mobility as the goal
The BMW Group is aware of its responsibility to protect
the climate and is working with great determination on
solutions that promote sustainable mobility. The strategy
pursued can be subdivided into three phases:
1. The BMW Group is continuously improving the fuel
economy of its vehicles with a combination of highly
efficient engines, optimised energy management, inno-
vative lightweight construction and improved aero-
dynamics.
2. In the medium term, the Group is additionally increasing
fuel economy by a wide range of measures from electri-
fication of the drive train through to hybrid solutions.
3. In the long term, the BMW Group is committed to the
forward-looking use of hydrogen gained from renewable
sources.
Adoption
of the Efficient
Dynamics
strategy.
BMW Group cuts
fuel consumption in
Germany pursuant to
VDA agreement of
1990 by 2005 by almost
30 %.
Introduction of
Efficient Dynamics
measures in nu-
merous BMW and
MINI models.
A fleet of approxi-
mately 500 purely
electrically driven
cars, the MINI E,
put to the test
in everyday traffic
conditions.
First BMW Group
vehicles with
hybrid drive.
Use of regenerative
hydrogen as fuel in
motor traffic.
2000
2005
2006
2007
2008
2009
2010
long-term
BMW Hydrogen 7
is presented to the
public.
About 40 % of the
BMW Group’s new
vehicles in Europe
emitting a maximum
of 140 g CO2 / km.
More than one mil-
lion vehicles equip-
ped with Efficient
Dynamics.
BMW Group is pro-
viding vehicles for
sustainable mobility
in densely populated
areas.
35 Group Management Report
Development of CO2 emissions of BMW Group cars in Europe (EU-15)
(Index: 1995 = 100; Basis: fleet consumption of newly registered cars in Europe (EU-15) measured on the basis of the New European Driving Cycle in accordance
with the ACEA commitment)
105
100
95
90
85
80
75
70
95
96
97
98
99
00
01
02
03
04
05
06
07
08 *
100.0
101.0
102.4
101.0
98.6
96.7 96.7
92.9
92.9
94.8
90.0
88.6
80.0
73.3
* CO2 emissions of newly registered cars in Europe for 2008 stood at 154 grams CO2 per kilometre driven (EU-15) and 156 grams CO2 per kilometre driven (EU-27).
Fleet fuel consumption drastically reduced
The BMW Group has been working intensively for years
to reduce its fleet’s overall fuel consumption. Efficient
Dynamics was adopted as many as eight years ago as an
all-embracing development strategy. Efficient Dynamics
is an innovation package designed to boost fuel economy
and reduce CO2 emissions. It includes highly efficient
petrol and diesel engines, lightweight construction, im-
proved aerodynamics and a sophisticated energy manage-
ment system that includes Auto Start Stop and Brake
Energy Regeneration functions. These innovations are
helping the BMW Group to reduce the fuel consumption
of its new cars by up to 23 % compared to the relevant
predecessor models. Efficient Dynamics is a global strategy
across all models and therefore brings benefits not only
for individual niche models but for the entire fleet.
Since the beginning of 2009, the emissions of 27 BMW
Group models are a maximum of 140 grams of CO2 per kilo-
metre driven. This has resulted in the BMW Group reduc-
ing CO2 emissions of new cars sold in Europe (EU-15) by
almost 27 % between 1995 and 2008. The BMW Group has
therefore met its targets under the ACEA voluntary com-
mitment. In fact, the BMW Group’s voluntary commitment
to reduce the fuel consumption of its EU fleet (EU-15) from
1995 to 2008 by 25 % has already been surpassed by nearly
2 %. CO2 emissions of newly registered cars in Europe
(EU-27) in 2008 stood at 156 grams CO2 per kilometre driven.
The BMW 118d received the international World Green
Car of the Year Award in the USA in 2008. Studies made in
the United Kingdom and the USA highlight the extent to
which Efficient Dynamics reduces fleet fuel consumption
overall. An analysis published by the Clean Green Cars in-
ternet service in the United Kingdom showed that the CO2
emissions of newly registered BMW brand cars sold in the
first half of 2008 were 11.3 % lower than those sold in the
corresponding period one year earlier. The BMW Group
thus made more progress in reducing the CO2 emissions
of its fleet than any other manufacturer. The latest Environ-
mental Defense Report published in the USA in the spring
of 2008 came to a similar conclusion. This independent
study of the fuel consumption of new vehicles sold be-
tween 1990 and 2005 in the USA points out that the BMW
Group reduced fleet CO2 emissions by 12.3 % during the
period studied. During the same period, the number of cars
sold by the BMW Group in the USA quadrupled. Thanks
to this performance, the BMW Group is now undisputed
leader in the rankings for CO2 emissions reduction.
Numerous models fulfil EU5 and EU6 standards
The BMW Group is also market leader when it comes
to introducing vehicles that comply with the future EU5
emissions standard. By spring 2009, the BMW brand
will be selling 49 models that fulfil the EU5 emissions
standard. Moreover, the new BMW 330d with optional
BMW BluePerformance technology is the first vehicle
that already (in model year 2009) complies with the EU6
emissions standard that comes into force from 2014
onwards.
BMW AdvancedDiesel with BluePerformance was intro-
duced in the USA and Canada in 2008. The first diesel
models have been available to customers in North America
since December 2008. The BMW AdvancedDiesel with
BluePerformance comprises a 3.0-litre straight six-cylinder
engine featuring a variable twin turbo and SCR system
(Selective Catalytic Reduction) with urea injection. This in-
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
Driving in the long-term with hydrogen
In the long term, the BMW Group is committed to the use
of renewably produced hydrogen for sustainable automo-
bility and continues to pursue its vision of driving without
causing CO2 emissions. With the BMW Hydrogen 7, the
pioneering use of hydrogen as a source of energy for indi-
vidual mobility is already becoming today’s reality. The
hydrogen-driven vehicle is powered by a twelve-cylinder
engine which generates 191 kW (260 hp). The dual-fuel
design allows either hydrogen or petrol to be used in the
engine’s combustion chambers. The switch from one
operating mode to the other can be made at any time at
the push of a button. The world’s first hydrogen-powered
luxury sedan for day-to-day use has been produced in a
small series of 100 vehicles and made available to a se-
lected group of people from politics, business and other
areas of society for daily use. By the end of 2008, the BMW
Hydrogen 7 had covered more than 3.5 million kilometres
across Europe, the USA and other regions of the world.
The intensive use of the hydrogen sedan in real-life con-
ditions proves that this drive concept is suitable for the
challenges of everyday driving and is a real sustainable
option for the future.
36
novative drive unit sets new standards for fuel consump-
tion and emission reduction. It also complies with the par-
ticularly stringent emission limits valid in California and
other US federal states. BMW AdvancedDiesel is being
offered as a so-called 50-state model (BIN5) throughout
the USA. The introduction of BMW AdvancedDiesel
represents another important aspect of the Efficient
Dynamics strategy designed to reduce fuel consumption
worldwide.
BMW ActiveHybrid – the next step towards
greater fuel economy
The use of hybrid technology is enabling the BMW Group
to realise potential efficiency improvements. The BMW
Group is developing a comprehensive hybrid modular
system in order to provide the optimal solution for each
model – the Best of Hybrid. The BMW Concept 7 Series
ActiveHybrid combines a highly efficient V8 twin turbo
petrol engine and an electric drive based on the “Mild
Hybrid” concept. The electric drive supports the combus-
tion engine in clearly defined driving situations, thus opti-
mising the propulsion unit. A newly developed lithium-ion
battery serves as the energy storage unit.
By contrast, the BMW Concept X6 ActiveHybrid com-
bines an eight-cylinder petrol engine and the electric drive
with the help of an innovative two-mode active gearbox.
Unlike hybrid models that are currently available, BMW
ActiveHybrid technology will deliver efficiency benefits
not only in city traffic, but also out on the open road. Fuel
savings of up to 20 % are possible in comparison to cars
powered by conventional combustion engines. The hybrid
models of the BMW X6 and the BMW 7 Series will be
ready for series production in 2009.
Innovative concepts for tomorrow’s mobility
The BMW Group continues to work on solutions for sus-
tainable mobility. A separate organisational unit (known
as “project i”) has been set up as part of the Number ONE
strategy to develop new mobility concepts, especially for
densely populated areas. The first results of its work – the
MINI E electric vehicle – were presented at the Los Angeles
Auto Show in November 2008. In a pilot project, approxi-
mately 500 all-electric MINI E cars are being tested by
selected private and corporate customers in everyday use
in the US federal states of California, New York and New
Jersey. The MINI E is equipped with a 150 kW (204 hp)
electric motor powered by a lithium-ion battery. The car
is capable of covering distances of up to 250 kilometres
(156 miles). The objective of the pilot project is to gain an
understanding of how individual mobility can be organised
on the basis of an all-electric vehicle. The findings made
and the response of customers will be incorporated into
the further development of electric vehicles.
37 Group Management Report
Research and development expense at
budgeted level
In 2008 the BMW Group scaled down its research and de-
velopment expense intentionally by 8.9 % to euro 2,864 mil-
lion. Detailed disclosures on research and development
expenditures are provided in the notes to the Group Finan-
cial Statements (Note 11
). At 5.4 %, the research and de-
velopment ratio – research and development expenditures
as a percentage of revenues – was 0.2 percentage points
lower than in the previous year. This targeted reduction
was mainly achieved by means of efficiency improvements
to work processes. The rigorous value-added approach
adopted ensures that all research and development activi-
ties create discernible benefits for the customer.
During the year under report, some 9,300 employees worked
within the BMW Group’s innovation network at eleven
locations in five countries.
Driving pleasure without emissions: the MINI E
At the beginning of 2009 the BMW Group became the
world’s first manufacturer of premium automobiles to de-
ploy a fleet of approximately 500 purely electrically driven
vehicles for private daily use. The MINI E is powered by a
150 kW (204 hp) electric motor fed by a rechargeable lithium-
ion battery which transfers its power almost soundlessly
and entirely free of emissions. Specially engineered for
automobile use, the lithium-ion battery can be plugged
into any conventional power outlet and has a range of up
to 250 kilometres. The MINI E exemplifies the BMW Group’s
resolve to reduce energy consumption and emissions
through targeted development and by drawing on its unique
technological expertise in the field of drive systems.
Putting some 500 cars on the road under real daily traffic
conditions will make it possible to gain widely applicable
hands-on experience. These findings will be subsequently
factored into the engineering of series-built vehicles.
The BMW 7 Series as champion of innovation
The launch of the new BMW 7 Series in autumn 2008
saw the debut of numerous technological innovations in a
series vehicle. As well as a completely revised range of
engines, the new models make full use of lightweight con-
struction technology. The BMW 7 Series’ newly developed
chassis ensures optimal driving dynamics and comfort. A
unique combination of innovative driver assistance systems
has been incorporated in the new models. This includes
functions such as Lane Departure Warning, Speed Limit
Display, Lane Change Warning, Head-up-Display, High
Beam Assist, Active Cruise Control with Stop & Go
function, Night Vision (for the first time with Pedestrian
Detection and Warning system), Side View and Back-up
Camera. The new BMW 7 Series also offers maximum
occupant safety thanks to its optimised body structure
and a comprehensive range of passive safety systems
which are electronically controlled and coordinated to
react as intended in all situations.
Driver assistance systems increase comfort
and safety
Numerous innovations in the areas of safety and comfort
were also introduced for the first time in 2008 with the
new BMW 7 Series. Based on an extensive analysis of
accidents, an integrated concept was developed, ranging
from assistance for the driver in normal driving situations
through to automatic emergency calls.
Useful functions of the driver assistance systems men-
tioned above include Active Cruise Control with Stop & Go
capability and Front Collision Warning, Lane Departure
and Lane Change Warning and the Night Vision Pedestrian
Detection and Warning system. These innovations are
successively being integrated into the whole of the BMW
Group’s range of cars.
The Active Cruise Control with Stop & Go function takes
away some of the tasks generally considered less pleasant
by drivers such as when driving in stop and go traffic. Ad-
ditional radar sensors warn the driver of possible collisions.
Within a range of between 30 and 180 km / h, the system
will maintain the speed set by the driver and, if required,
also regulate the distance kept to the car in front. In critical
situations, the driver is made aware of the situation. If the
situation becomes more dangerous an acute warning is
activated, still giving the driver the opportunity to take action.
The Lane Change Warning system monitors the space
behind the vehicle over a range of several lanes. When other
road users approach from behind in the next lane or if
they are already located in the car’s blind spot, the driver is
informed of the situation if the car is travelling at more than
50 km / h. A warning is given when the driver intends to
change lanes and another vehicle is located in the critical
area.
The Lane Departure Warning system keeps a check on lane
markings for a distance of up to 50 metres. The system is
mainly designed for primary routes and motorways. When
the driver unintentionally leaves a lane, a warning of the
critical situation is given before the vehicle crosses the lane
marking. If the lane change is intentional, for example if the
indicator has been activated, no warning is given.
BMW Night Vision improves visibility in the dark for a dis-
tance of up to 300 metres ahead. Any thermal radiation
emitted by the surroundings and objects is converted into
an image by the vehicle’s infrared camera and shown in the
control display. The second generation of the Night Vision
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
presented during the New York International Auto Show,
pays tribute to vehicles and technologies that make a
measurable contribution to the reduction of emissions
symbolising the outstanding environmental awareness
of the relevant manufacturer. The recognition gained by
the BMW 118d can be largely attributed to the Efficient
Dynamics package.
In May 2008 the BMW Group won the “International Engine
of the Year” award for the fourth successive year. The title
was awarded to the 3.0-litre twin-turbo petrol engine, which,
as in the previous year, not only won the overall award, but
also the 2.5 to 3.0-litre engine category. In total, the BMW
Group came first in six of twelve categories, second in a
further six categories and third in one category. The BMW
Group was therefore, yet again, the most successful com-
pany in this engine competition, which is now in its tenth
year.
In September the BMW Group won the ÖkoGlobe 2008
awarded by DEVK, the ACV Automobile Club and the
Center Automotive Research of the University of Gelsen-
kirchen in the category “Enhancement of the Combustion
Engine”. The award was presented for research into the
use of the thermal electric generator, which allows the
energy gained from heat loss in the combustion engine to
be re-used.
In November 2008 the readers of Europe’s largest Sunday
newspaper, “Bild am Sonntag”, chose the BMW 1 Series
Coupé as the best new vehicle in the coupé class in 2008.
The BMW Group was presented with the Golden Steering
Wheel for this achievement.
38
system has been expanded to include a Pedestrian De-
tection system, which identifies persons via camera and
warns the driver of dangerous situations by displaying sym-
bols in the control display. The biggest benefit of BMW
Night Vision comes at night on unlit country roads where
restricted visibility in conjunction with high speeds creates
a higher risk of accident. Persons are identified within a
distance of approximately 100 metres. Depending on the
speed of the car, the driver is warned. The system also
gives a warning when persons approach the road from the
side.
Research into future mobility
Vehicle networking is the basis for future driver assistance
systems. The main focus for the BMW Group, apart from
achieving greater comfort, is on enhancing the driver’s con-
trol over the situation and increasing the safety of all road
users. Within the international forum of the CAR 2 CAR
Communication Consortium, European manufacturers are
working on inter-vehicle communication independent of
vehicle type. For its part, the BMW Group is showing how
the BMW cars and motorcycles in the future will be capable
of communicating with vehicles of other manufacturers.
Cars will be interlinked with each other via wireless LAN
radio contact and able to exchange data with road infra-
structure such as traffic lights and road signs. This will en-
able car drivers to be informed immediately and in good
time of potentially dangerous road traffic situations. The
system can help to avoid accidents or reduce their effects,
particularly in situations such as tail-ends of traffic jams,
road works, accident scenes or slippery road surfaces.
In order to exploit the full potential of Car-to-X communi-
cation systems with blanket coverage, two preconditions
must be met: a joint technological base of operations to
determine interface standards and a uniform radio fre-
quency. A major milestone has been achieved in terms
of standardisation following the recent activation of the
5.9 GHz European frequency band for Car-to-X communi-
cation applications (similar to those already existing in the
USA and in Japan).
Numerous awards for BMW Group’s development
work
The BMW Group’s research and innovation network again
underlined its strength in 2008, receiving numerous awards
for its development work. In March 2008 a panel of inter-
national automotive journalists voted the BMW 118d as
the “World Green Car of the Year”. The award, which was
39 Group Management Report
Creating efficient value-added chains
The BMW Group’s Purchasing and Supplier Network was
driven in 2008 by the desire to achieve sustainable improve-
ments along the valued added chain in the areas of quality,
innovation, compliance with deadlines and cost. The focus
of activities was on reducing production costs whilst im-
proving quality. Despite worsening market conditions during
the second half of the year, the BMW Group was able, to-
gether with its suppliers, to achieve the challenging cost
and quality targets that had been set, both for ongoing se-
ries products and development projects.
High volatility on raw materials markets
The price levels of all major raw materials and supplies
needed for car production rose again sharply during the
first half of 2008 as compared to 2007, creating additional
pressure along the whole of the value-added chain. Costs
rose substantially, particularly for steel and aluminium as
well as for precious metals such as platinum, palladium
and rhodium. Hedges already in place for precious metals
helped to cushion the immediate impact for the BMW
Group. During the second half of the year, the BMW Group
took advantage of falling prices to conclude new contracts
with medium and long-term price hedges for the coming
years.
The BMW Group is responding to the increasing signifi-
cance and complexity of raw materials procurement by
centralising its raw materials management. This will allow
it to react even more swiftly and efficiently to price fluctu-
ations on raw materials markets in the future. Bundling
purchase volumes creates additional synergies in the area
of requirements forecasting, whilst also having a positive
impact on pricing structures.
Natural hedging potential fully used
Purchasing production materials, goods for resale, services
and investment goods in the currencies of the sales mar-
kets in which the BMW Group operates helps to reduce
exchange rate exposures. Careful consideration is given
when selecting suppliers so that the natural hedging
potential is taken full advantage of in the NAFTA region,
China and Japan. Selections are made jointly with the in-
ternational purchasing network.
The course has already been set for a significant increase
in foreign currency purchases for the BMW X3 successor
and successor models of the current BMW 3 Series. By the
same token, favourable cost factors can also be exploited
in the relevant procurement markets.
Regional mix of BMW Group purchase volumes 2008
in %, basis: production material
Asia / Australia
Africa
Central and
Eastern Europe
NAFTA
Rest of Western Europe
Germany
Germany
Rest of Western Europe
NAFTA
45
21
13
Central and Eastern Europe 12
Asia / Australia
Africa
6
3
Exploiting internal and external efficiency
synergies
The BMW Group continued to work closely with its sup-
pliers in 2008. Interdisciplinary teams from development,
purchasing, production and quality management came
together with suppliers to analyse potential opportunities
to reduce costs and improve quality along the entire value-
added chain. In addition to productivity improvements,
the main emphasis was on generating benefits which are
relevant for customers and which can be applied across
all models.
Initiatives were also taken to raise productivity by using
common technologies for component production.
Analyses of existing systems and processes resulted in
significant reductions in the use of space, inventory
volumes and throughput times for products. At the same
time, quality was improved and costs reduced.
Sustainable development and production
processes in the supplier network
The application of high ecological and social standards
and compliance with strict environmental protection
requirements are regarded by the BMW Group as ex-
tremely important criteria for its suppliers. As part of
the process of nominating suppliers, the BMW Group
takes care to ensure that the companies involved ad-
here to internationally recognised standards of sustain-
ability.
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
40
Numerous new models launched
The BMW Group continued to expand its model range in
2008. Numerous new or revised BMW brand models were
launched over the course of the year. The BMW 1 Series
was expanded by the introduction of the Convertible and
Coupé models. The BMW M range of vehicles was also
increased by two new variants (Convertible and Coupé).
The BMW 3 Series Sedan and the BMW 3 Series Touring
each received a model revision. The BMW X6 was sold for
the first time as a Sports Activity Coupé during the year.
The new BMW 7 Series was also launched in 2008.
Two new MINI brand models were presented at the begin-
ning of 2008: the MINI John Cooper Works and the MINI
John Cooper Works Clubman, both of which have been
available to customers since summer.
Rolls-Royce also expanded its model range. Following
the introduction of the Rolls-Royce Phantom Coupé, the
Phantom family now comprises four models.
BMW Museum reopened
After two-and-a-half years of remodelling, the BMW Group
reopened the BMW Museum in mid-June. The museum
building has been extended so that 120 exhibits displayed
in an area of 5,000 m2 give visitors an insight into the history
of the company and an authentic experience of the BMW
brand. The new museum pursues the original museum
philosophy “continuation of the road in a new setting”. Roads
and paths connect the seven independent exhibition areas,
each of which is dedicated to a different theme. The
museum is not only an exhibition hall for unusual cars and
motorcycles from almost 90 years of BMW history; it also
reflects the dynamics and innovative strength of the BMW
brand and of the company as a whole. The newly designed
museum had already welcomed 230,000 visitors by the
end of the year.
BMW Marketing’s main focuses
The main focuses for BMW Marketing in 2008 were the
continuation of the Efficient Dynamics campaign and the
market launch of the new BMW 7 Series.
The second major focus of marketing activities was the
market launch of the new BMW 7 Series. This model is
particularly significant within the BMW brand range of vehi-
cles, not least because of its role as a champion of inno-
vation. As well as aiming to achieve a good position on the
market in a short space of time, marketing activities were
also focused on evoking exceptional emotionality. One
milestone in these communication activities was the un-
veiling of the new BMW 7 Series on the Red Square in Mos-
cow: the biggest hourglass in the world was the setting for
the BMW 7 Series’ first public appearance on the Russian
market – a market crucial to the BMW Group’s activities.
MINI John Cooper Works presented
The new brand MINI John Cooper Works celebrated its
world debut in spring 2008 at the Geneva International
Motor Show. Both the MINI John Cooper Works and the
MINI John Cooper Works Clubman were presented to
the public at this event. In conjunction with the renewed
foundation and repositioning of John Cooper Works, the
brand image was revised and a new logo designed. A range
of communication measures was employed to support
the introduction of products onto the market, including a
campaign aimed at opinion leaders and an international
press event held in summer 2008. The MINI brand an-
nounced an addition to the model range when it presented
the MINI Crossover Concept at the Paris Auto Show.
Rolls-Royce launches the Phantom Coupé
The main emphasis of the marketing activities of Rolls-Royce
Motor Cars in 2008 was the market launch of the fourth
model within the Phantom family: the Phantom Coupé.
The world debut of the Phantom Coupé was celebrated
at the Geneva International Motor Show. The new model
was presented to members of the press in the course of
a journey right across Europe, starting in Goodwood and
ending in the South of France. In addition, several events
were held worldwide with the support of the dealer organi-
sation, giving customers the opportunity to get to know
the Coupé better. The response to the Phantom Coupé
was very positive: two thirds of purchases were first-time
customers for Rolls-Royce Motor Cars.
The Efficient Dynamics package enabled the BMW brand
to assert itself in the premium segment as the market
leader for vehicles with low fuel consumption and CO2 emis-
sions. More than 800,000 BMW brand vehicles equipped
with Efficient Dynamics technology were sold in 2008.
Communicating this technical advantage stood at the fore-
front of BMW’s marketing activities during the year.
Sales organisation restructured
In line with the BMW Group’s new strategic direction, sales
and marketing activities were focused even more sharply
on profitability and greater customer orientation.
During the year under report, a decision was reached to
aggregate the administrative functions of the financial
the introduction of additional BMW ConnectedDrive func-
tions. The BMW Group is therefore the first car manufac-
turer to offer unlimited access to the World Wide Web via
the car’s control display, underlining the pioneering role
played in the area of in-car online services.
Greater customer orientation is especially important for
customer support, which is one of the focal points of the
BMW Group’s strategic efforts. Expanding the range of
services on offer and implementing other measures not
only raised the quality of customer support even further but
also opened up growth opportunities for the BMW Group
and the dealer organisation. Other activities, such as BMW
TeleServices and BMW / MINI Service Inclusive offers,
which had already been able to prove their worth, were
further expanded in 2008.
As well as having attractive products and services, it is a
vital aspect of premium customer care to have well-trained
sales and service staff in the dealer showrooms. Approxi-
mately 34,000 employees attended the BMW Group’s tech-
nical and non-technical training courses in 2008.
41 Group Management Report
services companies and sales companies in selected
markets in order to generate synergies. Parallel to this
reorganisation the BMW Group continued to invest in im-
portant growth markets.
The measures taken also covered dealers worldwide. The
BMW Group expanded the dealer organisation in emerg-
ing markets such as China and India, whereas streamlining
measures were undertaken in the more mature markets.
The number of partners in many European markets there-
fore decreased. The number of customer services points,
however, remained as high as ever, so that customers con-
tinued to receive the same high quality of service to which
they are accustomed.
BMW vehicles are sold via approximately 3,000 dealer show-
rooms worldwide. The MINI sales network comprises ap-
proximately 1,300 showrooms. Marketing activities continue
to emphasise the independence of the different brands.
At the end of 2008, MINI had just over 500 and Rolls-Royce
80 exclusive sales and service locations. Tar geted training
of dealership staff and consistent application of selling
standards ensure that the quality and efficiency of the dealer
showrooms remain high. Training courses were held
around the world in conjunction with the market launch of
the Rolls-Royce Phantom Coupé, giving the dealer organi-
sation the opportunity to prepare for the new model and
strengthen its commitment to the brand.
The BMW Group’s involvement in retail customer business
at its own branches is becoming increasingly targeted on
strategically important cities, resulting in branch consolida-
tion at specific international locations.
The implementation of a European strategy for spare parts
logistics has brought about improvements in service and
efficiency and created the basis for forward-looking, com-
petitive logistics structures in Europe. According to a study
carried out by the US consultancy Carlisle & Company,
the BMW Group’s regional distribution centre in Hanover
was the most productive centre in Europe. In the same
study, the spare parts logistics operations for BMW, MINI
and BMW motorcycles achieved top marks in terms of
availability of parts.
Greater customer focus at all levels
Improving the BMW Group’s customer focus was at
the heart of all sales and marketing activities in 2008. The
same can be said for product design, as demonstrated by
the new iDrive in the latest BMW 7 Series, coupled with
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
42
BMW Stock and Bonds in 2008
Stock markets tumble
The worldwide financial crisis worsened in 2008, climaxing –
at least for the time being – in the provision of government
support to numerous financial institutions and the potential
insolvency of whole countries. The ensuing turmoil also
took its toll on the markets for goods and services, casting
a dark shadow over the world’s major economies, particu-
larly during the second half of the year.
The world’s leading stock markets lost substantially in
value, with volatility at times reaching extremely high levels.
The German stock index, the DAX, was unable to escape
these developments. Compared to the final day of trading
at the end of the previous year, the index lost some 40 % in
value, closing the year 2008 at 4,810.20 points (28 December
2007: 8,067.32 points). Due to one exceptional factor, the
Prime Automobile sector index performed slightly better
than the DAX, closing on the last day of trading 35.3 % down
at 508.42 points (28 December 2007: 785.54 points). The
Dow Jones EURO STOXX 50 ended the year 44.3 % down.
The negative developments on the stock market were also
reflected in the performance of BMW stock. BMW com-
mon stock closed at euro 21.61 on the last day of trading of
2008, 49.0 % below its level a year earlier. Despite this sharp
drop, BMW common stock was – against the background
of an exceedingly difficult year for the stock markets – one
of the best performers amongst European car manufac-
turers in 2008. BMW preferred stock finished 2008 with a
market price of euro 13.86, down 61.8 % on a year earlier.
Authorisation to buy back shares of common
stock extended
At the Annual General Meeting on 8 May 2008, the Board
of Management was authorised to acquire treasury shares
via the stock exchange, up to a maximum of 10 % of the
share capital in place at the date of the resolution and to
withdraw these shares from circulation without any further
resolution by the Annual General Meeting. At the same
time, the authorisation from 15 May 2007 to acquire treasury
shares was rescinded. The authorisation from 8 May 2008
is valid until 6 November 2009. There are no current plans
to exercise the authorisation. The option of a share buy-back
does, however, remain open to BMW AG.
Buy-back of preferred stock for employee
share plan
For over 30 years, BMW AG has encouraged its employees
to participate in the company’s success. Since 1989, this
participation has been in the form of an employee share
programme. As a result, BMW AG acquired a total of
900,000 shares of preferred stock in 2008 via the stock mar-
ket and issued some of the acquired shares to employees.
BMW Group as a successful bond issuer on
international capital markets
Refinancing conditions deteriorated sharply over the course
of 2008 compared to the previous year. Especially in the
second half of the year, the credit markets experienced
significant disruption. However, coordinated measures im-
plemented by central banks and governments worldwide
were able to prevent a meltdown of the financial system.
As part of the process of refinancing business undertaken
by the Financial Services segment, the BMW Group and
relevant Group entities were again active in 2008 as issuers
of bonds, notes and asset backed securities (ABS). As in
previous years, the instruments issued by the BMW Group
were highly sought after, both by institutional and private
investors. Good ratings and continuous provision of infor-
Development of BMW stock compared to stock exchange indices
(Index: 30.12.1998 = 100)
350
300
250
200
150
100
50
99
00
01
02
03
04
05
06
07
08
BMW preferred stock
BMW common stock
Prime Automobile
DAX
43 Group Management Report
mation to the capital markets helped to reinforce the solid
reputation enjoyed by the BMW Group.
During the year, the BMW Group placed two benchmark
bonds with a total issue volume of euro 2.5 billion on Euro-
pean capital markets. In addition, bonds for an aggregate
equivalent amount of some euro 880 million were issued in
Swiss franks, Japanese yen and US dollars and private
placements were made in various currencies for an aggre-
gate amount of approximately euro 4.7 billion.
The BMW Group was also able to demonstrate its ability to
obtain funds via ABS transactions once again, securitising
transactions totalling euro 5.2 billion in 2008. This included
the placement of euro 2.5 billion each on US and European
capital markets via conduit transactions.
The BMW Group proved in 2008 that, despite difficult mar-
ket conditions, it had excellent access to the capital markets
and that the supply of liquidity was ensured at all times.
The underlying strength of the BMW Group as one of the
world’s leading suppliers of premium vehicles is therefore
also reflected in its dealings with the international capital
markets.
Capital markets acknowledge sustainability as
value driver
During 2008, the BMW Group continued its communication
drive on the capital markets with regard to Socially Re-
sponsible Investment (SRI). Road shows held in London
and Paris and an additional event in Zurich helped to pro-
mote and intensify the exchange of ideas with investors
and analysts interested in sustainability.
BMW stock
Common stock
Number of shares in 1,000
Shares bought back at the reporting date
Stock exchange price in euro1
Year-end closing price
High
Low
Preferred stock
Number of shares in 1,000
Shares bought back at the reporting date
Stock exchange price in euro1
Year-end closing price
High
Low
Key data per share in euro
Dividend
Common stock
Preferred stock
Earnings per share of common stock 4
Earnings per share of preferred stock 5
Cash flow 6
Equity
2008
2007
2006
2005
2004
601,995
601,995
601,995
–
–
–
622,228
13,488
622,228
–
21.61
42.73
17.04
52,196
363
13.86
36.51
13.00
42.35
50.73
39.81
43.51
46.47
35.52
37.05
39.97
32.04
33.20
37.44
31.78
52,196
52,196
52,196
52,196
–
–
–
–
36.30
47.52
33.64
43.52
45.91
31.80
33.00
33.98
24.48
24.80
26.20
22.86
2008
2007
2006
2005
2004 2
0.30 3
0.32 3
0.49
0.51
6.84
30.99
1.06
1.08
4.78
4.80
9.70
0.70
0.72
4.38
4.40
8.21
0.64
0.66
3.33
3.35
9.17
0.62
0.64
3.33
3.35
9.13
33.24
29.24
25.17
24.52
1 Xetra closing prices
2 adjusted for new accounting treatment of pension obligations
3 proposed by management
4 annual average weighted amount
5 stock weighted according to dividend entitlements
6 calculated on the basis of operating cash flow: up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from operating activities
of the Automobiles segment
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
44
In 2008, for the fourth time in succession, the BMW Group
was the sector leader in the Dow Jones Sustainability in-
dices and is thus the most sustainable car manufacturer in
the world. The BMW Group is the only enterprise from the
automobile sector to have been represented continuously
in this important group of sustainability indices since their
creation in 1999. In order to be included in the index, the
business, ecological and social performance of some 2,500
enterprises is analysed and the best in each sector chosen
to appear in the relevant Dow Jones Sustainability Index.
The analyses include an assessment of general sustain-
ability criteria as well as of measures implemented in re-
sponse to sector-specific challenges.
In the SAM Group’s corporate sustainability assessment
published at the beginning of 2008, the BMW Group re-
ceived three top awards with the titles Sector Leader, Gold
Class and Sector Mover. Each year the SAM Group as-
sesses more than 1,000 companies from 57 industrial sec-
tors on the basis of company-specific sustainability criteria.
The BMW Group is therefore the leading automotive com-
pany in terms of sustainable business (SAM Sector Leader),
picking up more than 75 % of possible points (SAM Gold
Class) and making the most progress in the sector (SAM
Sector Mover). The BMW Group has also been included –
for eight consecutive years now – in the FTSE4Good indi-
ces, which focus on SRI.
The BMW Group keeps the public informed of its perform-
ance in the field of sustainable business by publishing its
Sustainable Value Report every two years. The report can
be downloaded from the internet at www.bmwgroup.com/
sustainability. A printed version can also be ordered at that
address. In March 2008, the most recent Sustainable Value
Report (for 2007 / 2008) was awarded first prize in the Best
Carbon Disclosure category of the Corporate Responsibility
Reporting Awards 2007 (CRRA). The CRRA 2007 are the
first global independent internet-based reporting awards,
acknowledging the best sustainability reports in nine dif-
ferent categories. The BMW Group won by a huge margin
in the category for the best report on climate protection.
The BMW Group’s next Sustainable Value Report will be
published in 2009.
45 Group Management Report
Disclosures pursuant to § 289 (4) HGB and § 315 (4) HGB and Explanatory Report
Pursuant to Article 4 (1) of the Articles of Incorporation,
BMW AG ’s share capital totalling euro 654,191,358 is sub-
divided into 601,995,196 shares of common stock and
52,196,162 non-voting shares of preferred stock, each with
a par value of euro 1. The shares are issued to bearer. The
rights and duties of shareholders derive from the German
Stock Corporation Act (AktG) in conjunction with the
Company’s Articles of Incorporation, the full text of which
is available at www.bmwgroup.com. The voting power
attached to each share corresponds to its par value. Each
euro 1 of par value of share capital represented in a vote
is entitled to one vote (Article 18 (1) of the Articles of Incor-
poration). The Company’s shares of preferred stock are
non-voting within the meaning of 139 et seqq. AktG, i. e.
they only confer voting rights in exceptional cases stipu-
lated by law such as when the preference amount has not
been paid or has not been fully paid in one year and the
arrears are not paid in the subsequent year. Except for
voting rights, shares of preferred stock confer the same
rights as shares of common stock. Article 24 of the Articles
of Incorporation confers preferential treatment to the non-
voting shares of preferred stock with regard to the ap-
propriation of the Company’s unappropriated profit. Ac-
cordingly, the unappropriated profit is required to be
appropriated in the following order:
(a) subsequent payment of any arrears on dividends on
non-voting preferred shares in the order of accrue-
ment,
(b) payment of an additional dividend of euro 0.02 per euro
1 par value on non-voting preferred shares and
(c) uniform payment of any other dividends on shares
on common and preferred stock, provided the share-
holders do not resolve otherwise at the Annual General
Meeting.
The right of shareholders to have their shares evidenced in
writing is excluded.
Shareholders are only entitled to participate at the Annual
General Meeting and exercise their voting rights if, prior
to the meeting, they have given written notice (in the form
prescribed by § 126 b of the German Civil Code), either in
German or English, of their intention to participate at the
meeting. Shareholders are also required to provide evi-
dence of their entitlement to participate and exercise their
voting rights at the Annual General Meeting. For this pur-
pose, documentary evidence of the shareholding, issued
by the custodian bank (in the written form prescribed by
§ 126 b BGB), in either German or English, is required. Votes
may also be exercised by proxy. The Company may deter-
mine that proxy authorisations may be granted electroni-
cally or by fax, and may stipulate the specific rules for
granting proxy authorisations (see Article 17 of the Articles
of Incorporation). The chairperson may determine a rea-
sonable time limit with respect to the right of shareholders
to raise questions and speak (Article 19 (2) of the Articles
of Incorporation).
When the Company issues shares to employees in con-
junction with its employee share programme, the shares
are subject to a company-imposed vesting period of four
years, during which time the shares may not be sold. The
shares issued in conjunction with the employee share pro-
gramme are shares of non-voting preferred stock which
are transferred solely and directly to employees. Like
all other shareholders, employees exercise their control
rights over these shares on the basis of relevant legal pro-
visions and the Company’s Articles of Incorporation.
Based on the information available to the Company, the
following direct or indirect holdings exceeding 10 % of the
voting rights were held at the balance sheet date:*
Stefan Quandt, Bad Homburg v. d. Höhe, Germany
AQTON SE, Munich, Germany
Stefan Quandt Verwaltungs GmbH, Bad Homburg v. d. Höhe, Germany
Stefan Quandt GmbH & Co. KG für Automobilwerte, Bad Homburg v. d. Höhe, Germany
Johanna Quandt, Bad Homburg v. d. Höhe, Germany
Johanna Quandt GmbH, Bad Homburg v. d. Höhe, Germany
Johanna Quandt GmbH & Co. KG für Automobilwerte, Bad Homburg v. d. Höhe, Germany
Susanne Klatten, Munich, Germany
Susanne Klatten Beteiligungs GmbH, Bad Homburg v. d. Höhe, Germany
Susanne Klatten GmbH, Bad Homburg v. d. Höhe, Germany
Susanne Klatten GmbH & Co. KG für Automobilwerte, Bad Homburg v. d. Höhe, Germany
* based on voluntary balance notifications provided by the listed shareholders at 31 December 2008
Direct share of
voting rights (%)
Indirect share of
voting rights (%)
17.4
17.4
17.4
16.3
16.3
12.6
12.6
12.6
17.4
0.4
16.3
12.6
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
46
The voting power percentages disclosed on the previous
page may have changed subsequent to the stated date
if these changes were not required to be reported to the
Company. Due to the fact that the Company’s shares are
issued to bearer, the Company is generally only aware of
changes in share-holdings if such changes are subject to
mandatory notification rules.
There are no shares with special rights which confer con-
trol rights.
The appointment and removal of members of the Board
of Management are based on the rules contained in § 84 et
seq. AktG in conjunction with § 31 of the German Co-De-
termination Law (MitbestG). In accordance with Article 7
of the Articles of Incorporation, the Board of Management
consists of two or more members. The Supervisory Board
determines the number of the members of the Board
of Management. It is responsible for appointing members
to the Board of Management and for revoking appoint-
ments. It also designates one of the members as the
Chairman of the Board of Management.
Amendments to the Articles of Incorporation must comply
with § 179 et seqq. AktG. All amendments must be resolved
by the shareholders at the Annual General Meeting (§ 119 (1)
no. 5, § 179 (1) AktG). The Supervisory Board is authorised
to approve amendments to the Articles of Incorporation
which only affect its wording (Article 14 no. 3 of the Articles
of Incorporation). Resolutions are passed at the Annual
General Meeting by simple majority of shares unless other-
wise explicitly required by binding provisions of law (§ 20
of the Articles of Incorporation).
In accordance with the resolution passed at the Annual
General Meeting on 8 May 2008, the Board of Management
is authorised, up to 6 November 2009 and subject to the
price limits stipulated in the resolution, to acquire shares of
common and / or non-voting preferred stock via the stock
exchange, up to a maximum of 10 % of the share capital in
place at the date of the resolution. The Board of Manage-
ment is also authorised, without any further resolution by
the Annual General Meeting, to withdraw from circulation
the treasury shares (common and / or non-voting preferred
stock) acquired in accordance with the authorisation de-
scribed above. Furthermore, the Board of Management is
authorised to buy back shares and sell bought-back shares
in situations specified in § 71 AktG, e. g. to avert serious
and imminent damage to the Company or for the purposes
of an employee share scheme. There is no authorised or
conditional capital at the reporting date.
in control or the acquisition of control which could arise, for
example, from a takeover offer:
– An agreement, concluded with an international con-
sortium of banks relating to a syndicated credit line
(which was not being utilised at the balance sheet date),
entitles the lending banks to give extraordinary notice
to terminate the credit line (such that all outstanding
amounts, including interest, would fall due immediately)
if one or more parties jointly acquire direct or indirect
control of BMW AG. The term “control” is defined as the
acquisition of more than 50 % of the share capital of
BMW AG, the right to receive more than 50 % of the divi-
dend or the right to direct the affairs of the Company
or appoint the majority of members of the Supervisory
Board.
– A cooperation agreement concluded with Peugeot SA
relating to the joint development and production of a
new family of small (1 to 1.6 litre) petrol-driven engines
entitles each of the cooperation partners to give extra-
ordinary notification of termination in the event of a com-
petitor acquiring control over the other contractual party
and if any concerns of the other contractual party con-
cerning the impact of the change of control on the co-
operation arrangements are not allayed during the sub-
sequent discussion process.
– BMW AG acts as the guarantor for all of the obligations
arising from the joint venture agreement relating to BMW
Brilliance Automotive Ltd. in China. This agreement
grants an extraordinary right of termination to either joint
venture partner in the event that, either directly or indi-
rectly, more than 25 % of the shares of the other party
are acquired by a third party or the other party is merged
with another legal entity. The termination of the joint
venture agreement may result in the sale of the shares
to the other joint venture partner or in the liquidation of
the joint venture entity.
– Regarding the trading of derivative financial instruments,
framework agreements are in place with financial insti-
tutions and banks (ISDA Master Agreements), each of
which contain extraordinary rights of termination which
trigger the immediate settlement of all current trans-
actions, in the event that the creditworthiness of the re-
spective party is materially weaker following the direct
or indirect acquisition of beneficial ownership of equity
securities having the power to elect a majority of the
Supervisory Board of a contractual party or any other
ownership interest enabling the acquirer to exercise
control of a contractual party or a merger or transfer of
assets.
BMW AG is party to the following significant agreements
which contain special provisions for the event of a change
The BMW Group has not concluded any compensation
agreements with members of the Board of Management
or with employees for situations involving a takeover offer.
47 Group Management Report
Analysis of the Group Financial Statements
Group Internal Management System
In conjunction with the strategy Number ONE, the BMW
Group has also continued to develop its groupwide inter-
nal management system. Processes are now focused even
more sharply on profitability and long-term value growth.
Coherent management of capital employed at all levels
means that the efficient use of capital funds is a prime cri-
terion at project, segment and Group levels. The targets
set for the Automobiles, Motorcycles and Financial Services
segments all stem from this objective. Within the Auto-
mobiles and Motorcycles segments, capital employed is
managed at the level of individual product, process and
infrastructure projects. By contrast, the credit and lease
portfolios of the Financial Services segment are managed
primarily on the basis of a cash flow and risk approach.
Minimum rate of return derived from cost of capital
The cornerstone of the value-added management of the
BMW Group is the entity-specific minimum rate of return,
derived from capital market data and based on the weighted
average cost of capital (WACC) as follows:
Cost of equity capital x fair value of equity capital
Fair value of equity and debt capital
WACC =
+
Cost of debt capital x fair value of debt capital
Fair value of total capital
The cost of equity capital is measured using the Capital
Asset Pricing Model (CAPM). The cost of debt capital is
based partly on the average interest rate paid for long-term
external debt and partly on the interest rate applicable for
pension obligations.
Value management in the context of project control
Strategic priorities set at a functional level are based on
segment-specific strategies and on the project decisions
reached in accordance with those strategies. The close
link between segment-specific strategies and project
objectives ensures that the project development process
remains effective. Once a positive decision has been
Return on Capital Employed
reached for a particular project, it is managed over time
using a value-based approach. Projects are monitored
continuously and resources reallocated according to re-
quirements.
The project decision and related project selection are
important aspects of value-based management for the
BMW Group. Project decisions are taken on the basis of
net present values (NPVs) and rates of return: this involves
computing the present value of cash flows and the inter-
nal project rate of return (or model rate of return in the case
of vehicle projects) expected to be generated by a project
decision and comparing the results with competitive mar-
ket values.
In this way, the amount by which a project will contribute
to the total value of the segment can be measured when
the project decision is taken. Targets and performance are
controlled using project-related target NPVs and individual
cash-flow-related parameters which have an impact on
those values.
The NPV of a project programme is computed by identi-
fying the cash flows of all related projects and discounting
them back to a specific date. This value serves as an im-
portant target for the Automobiles and Motorcycles seg-
ments. The business value of each segment is measured
after adjusting for the fair value of debt capital. The objec-
tive for the Automobiles and Motorcycles segments is to
increase the value of the business continually.
Capital employed by BMW Group
in euro million
Group equity
+ Financial liabilities
+ Pension provisions
Capital employed
2008
2007
21,766
2,832
3,717
28,315
20,303
2,247
4,771
27,321
BMW Group
Automobiles
Motorcycles
Earnings for
ROCE purposes
in euro million
Capital
employed
in euro million
2008
2007
2008
2007
639
690
60
4,193
3,450
80
28,315
27,321
14,056
13,953
432
444
Return on
Capital Employed
in %
2008
2007
2.3
4.9
13.9
15.3
24.7
18.0
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
48
Capital employed by Automobiles segment
in euro million
ROCE Automobiles
and Motorcycles
=
Profit before financial result
Capital employed
2008
2007
Capital employed
28,867
less: Non-interest bearing liabilities
14,811
Capital employed
14,056
28,713
14,760
13,953
Return on capital used to measure value on a periodic
basis
General business conditions relevant for periodic planning
have a bearing on how product projects and the product
programme as a whole are managed. It is important that
period-specific targets are also monitored and managed
on a long-term basis. This helps to ensure that the BMW
Group’s earnings performance can develop at a steady
pace. Periodic performance is managed in the context of
defined accounting policies and external financial reporting
requirements. The BMW Group primarily uses profit before
tax and segment-specific rates of return as the key indica-
tor figures by which it assesses operating performance for
a given reporting period.
Instead of the previous return on assets, capital efficiency
within the BMW Group is now measured on the basis of
the return on capital employed (ROCE). This key indicator
takes account of capital employed across all lines of busi-
ness, thus reflecting the overall Group performance. In
line with the method applied at Group level, the return on
capital employed remains the primary performance indica-
tor for the Automobiles and Motorcycles segments. In
the Financial Services segment, the performance indicator
“return on assets” has been replaced by the return on
equity (ROE). The ROE performance indicator is important
for the value-based management of the Financial Services
segment in that it focuses on equity as a resource with
limited availability and on the desire to use capital efficiently.
ROE Financial
Services
=
Profit before tax
Equity capital
Group ROCE is measured by dividing earnings for ROCE
purposes by the average amount of capital employed.
Capital employed is measured for the BMW Group by
reference to liabilities and comprises Group equity, pension
provisions and the financial liabilities of the Automobiles
and Motorcycles segments. The average level of capital
employed for the year is measured as the average capital
employed at the beginning of the year, at quarter-ends and
at the end of the year. In line with the computation of capi-
tal employed, earnings for ROCE purposes is defined as
profit before interest expense incurred in conjunction with
the pension provision and financial liabilities of the Auto-
mobiles and Motorcycles segments (profit before interest
expense and tax).
The ROCE of the Automobiles and Motorcycles seg-
ments is measured as the ratio of the profit before finan-
cial result (the operating profit of the two segments) and
the average amount of capital employed. The latter com-
prises all current and non-current operational assets and
liabilities after adjustment for specified liabilities which
are not subject to interest e. g. trade payables. Based on
the cost of capital as a minimum rate of return and com-
parisons with competitive market values, the target ROCE
for the Automobiles segment has been set at a minimum of
26 %.
ROE is defined as the profit before tax divided by the
average amount of equity capital allocated to the Financial
Services segment. The target is a minimum return on
equity of 18 %.
ROCE Group
Profit before interest expense and tax
=
Capital employed
Long-term creation of value
The overall objective set for earnings is continuous growth;
the minimum rate of return required for each line of busi-
Return on Equity
Profit
before tax
in euro million
Equity
in euro million
Return
on Equity
in %
2008
2007
2008
2007
2008
2007
Financial Services
– 292
743
4,013
4,105
–
18.1
49 Group Management Report
Key performance indicators
in %
Return on Capital Employed
BMW Group
Automobiles
Motorcycles
Return on Equity
Financial Services
* Capital employed calculated on year-end basis
2008
2007
2006 *
2005 *
2.3
4.9
13.9
15.3
24.7
18.0
16.7
21.7
17.7
15.1
23.2
17.8
–
18.1
17.6
16.9
ness is used as the relevant parameter. These periodic tar-
gets are supplementary to project and programme targets.
For each project decision reached, the impact of cash flows
on the NPV and on the model rate of return as well as
the impact on periodic earnings over the long term are
documented. The fact that the performance indicators also
take account of periodic financial reporting requirements
ensures consistency within the target and management
model. This approach enables the BMW Group to analyse
the effect of each project-based decision on business
value (quantified in terms of the NPV of the project pro-
gramme) as well as on earnings and rates of return. Multi-
project planning data gleaned from these procedures al-
lows ongoing comparison between dynamic multi-period
targets and periodic performance.
Earnings Performance
The unfavourable business conditions described else-
where in this report had an adverse impact on the BMW
Group’s earnings performance for the financial year 2008.
Reported earnings were also negatively affected by ex-
Group Income Statement
in euro million
Revenues
Cost of sales
Gross profit
Sales and administrative costs
Research and development costs
Other operating income
Other operating expenses
Profit before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit before tax
Income taxes
Net profit
* restated presentation of financial result
2008
2007 *
53,197
56,018
– 44,323
– 43,832
8,874
12,186
– 5,369
– 2,825
1,428
– 1,187
921
26
685
– 930
– 351
– 570
351
– 21
330
– 5,254
– 2,920
730
– 530
4,212
11
645
– 897
– 98
– 339
3,873
– 739
3,134
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
Internal Management System
47
Earnings Performance
49
51
Financial Position
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
50
penditure to implement previously announced measures
to reduce the workforce, by more pronounced adverse
currency factors and by the ongoing high prices of raw
materials.
The BMW Group recorded a net profit of euro 330 million
(2007: euro 3,134 million) for the financial year 2008. The
post-tax return on sales was 0.6 % (2007: 5.6 %). Earnings per
share of common and preferred stock were euro 0.49 and
euro 0.51 respectively (2007: euro 4.78 and euro 4.80 respec-
tively).
Group revenues fell by 5.0 % compared to the previous year.
Revenues from the sale of BMW, MINI and Rolls-Royce
brand cars decreased by 10.7 %, while revenues from motor-
cycles business remained at the previous year’s level.
Revenues from financial services business grew by 14.9 %
as a result of business volume growth. Revenues gen-
erated by “Other Entities” amounted to euro 146 million. This
largely related to the Cirquent Group which was part of
the BMW Group up to 30 September 2008. The compa-
rable revenues figure for “Other Entities” in 2007 was euro
214 million.
Revenues declined in almost all regions. A drop of 9.9 %
was recorded in Germany and one of 7.6 % for the remain-
der of Europe. Revenues generated in the Americas region
edged up by 2.2 %. For the Africa, Asia and Oceania re-
gions, revenues fell overall by 2.5 %, despite the fact that
revenues generated in China grew by 24.0 %.
Cost of sales increased in absolute terms by 1.1 % on a
year-on-year comparison. Cost of sales in 2008 include the
impact of expenses recognised for additional risk provi-
sions for residual value risks and bad debts totalling euro
1,968 million. Unfavourable exchange rates and higher raw
material prices also contributed to the increase in cost of
sales. As a result of these adverse factors, the gross profit
fell by 27.2 %, giving a gross profit margin of 16.7 % (2007:
21.8 %). The gross profit margin recorded by the Automo-
biles segment was 16.4 % (2007: 19.6 %) and that of the
Motorcycles segment was 25.8 % (2007: 28.1 %).
Sales and administrative costs increased by 2.2 % mainly
due to the fact that most of the expenditure incurred to
reduce the size of the workforce is presented within ad-
ministrative costs (euro 455 million). Sales and administra-
tive costs represented 10.1 % of revenues, 0.7 percentage
points higher than in the previous year.
Research and development costs decreased by 3.3 % to
euro 2,825 million and represented 5.3 % (2007: 5.2 %) of rev-
enues. They include amortisation of capitalised develop-
ment costs amounting to euro 1,185 million (2007: euro 1,109
million). Total research and development costs amounted
to euro 2,864 million (2007: euro 3,144 million). This figure
comprises research costs, development costs not recog-
nised as assets and capitalised development costs. The
research and development expenditure ratio for 2008 was
5.4 % (2007: 5.6 %).
Depreciation and amortisation of property, plant and equip-
ment and intangible assets included in cost of sales, sales
and administrative costs and research and development
costs amounted to euro 3,670 million (2007: euro 3,683 mil-
lion).
The positive net amount from other operating income and
expenses increased by 20.5 % to euro 241 million, mainly
reflecting the higher level of income from the reversal of
provisions. In contrast, gains from the sale of assets (in
particular marketable securities) fell significantly.
The profit before financial result, at euro 921 million, was
euro 3,291 million or 78.1 % below the previous year’s figure.
The financial result deteriorated by euro 231 million. Of this
amount, euro 253 million relates to the line “Other financial
result”. In 2007, this line had included a gain of euro 97 mil-
lion resulting from the settlement of the exchangeable
bond on shares in Rolls-Royce plc, London. Other financial
result also includes losses on other derivative financial in-
struments, in particular on stand-alone interest-rate deriva-
tives. The decrease in the fair values of these financial in-
struments reflected changes in the interest rate structure.
The result from equity accounted investments improved by
euro 15 million, and includes, in addition to the result from
the investment in BMW Brilliance Automotive Ltd., Shen-
yang, the Group’s share of the result of the Cirquent Group.
Net interest result improved by euro 7 million. Within net
interest result, the net expense from the reversal of dis-
counting on pension obligations and the income from the
expected return on pension plan assets increased by euro
11 million.
Taking into account the changes in the financial result
described above, profit before tax fell by 90.9 % compared
to the previous year. The pre-tax return on sales was 0.7 %
(2007: 6.9 %).
51 Group Management Report
Revenues by segment
in euro million
Automobiles
Motorcycles
Financial Services
Other Entities
Eliminations
Group
Profit before tax by segment
in euro million
Automobiles
Motorcycles
Financial Services
Other Entities
Eliminations
Group
2008
2007
48,782
1,230
15,725
191
–12,731
53,197
53,818
1,228
13,940
290
–13,258
56,018
2008
2007
318
51
– 292
295
– 21
351
3,232
71
743
168
– 341
3,873
The Group net profit was euro 2,804 million or 89.5 % below
the figure reported in the previous year. The significantly
lower effective tax rate was due primarily to higher tax reim-
bursements.
The Automobiles segment recorded a 4.3 % decrease in
sales volume and a 9.4 % decrease in revenues. Due to the
adverse factors described above, the segment profit fell by
90.2 % to euro 318 million.
Revenues of the Motorcycles segment edged up by 0.2 %.
Difficult business conditions caused the segment profit to
drop by 28.2 % to euro 51 million.
Revenues generated by the Financial Services segment rose
by 12.8 % to euro 15,725 million as a result of business vol-
ume growth. Higher risk provision expense and refinancing
costs resulted in a segment loss of euro 292 million in 2008.
The segment profit for the Other Entities segment was
euro 295 million (2007: euro 168 million). The increase here
was mainly due to the higher level of income from reversals
of provisions and a gain on the partial sale of the Cirquent
Group.
Financial position
The Group and Segment cash flow statements show the
sources and applications of cash flows for the financial
years 2008 and 2007, classified into cash flows from operat-
ing, investing and financing activities.
Cash flows from operating activities are determined indi-
rectly starting with the Group net profit. By contrast, cash
flows from investing and financing activities are based on
actual payments and receipts. Cash and cash equivalents
in the cash flow statement correspond to the amount
disclosed in the balance sheet.
Operating activities of the BMW Group generated a
positive cash flow of euro 10,872 million in 2008, a de-
crease of euro 1,311 million or 10.8 % compared to the pre-
vious year. Changes in net current assets during 2008
generated a cash inflow of euro 411 million (2007: euro
269 million). The cash outflow for investing activities
amounted to euro 18,652 million and was therefore euro
1,404 million higher than in 2007. Capital expenditure for
intangible assets and property, plant and equipment
resulted in the cash outflow for investing activities de-
creasing by euro 63 million on a year-on-year comparison.
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
Internal Management System
47
Earnings Performance
49
Financial Position
51
Net Assets Position
52
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
52
The cash outflow for net investments in financial services
activities increased by euro 1,288 million compared to the
previous year.
Financing activities in 2008 generated a positive cash
flow of euro 12,904 million (2007: euro 6,168 million). Cash in-
flows from the issue of bonds totalled euro 9,959 million
(2007: euro 6,038 million) while euro 5,080 million (2007: euro
4,152 million) was used to repay bonds. The dividend pay-
ment for the financial year 2008 amounted to euro 694 mil-
lion. The net cash inflow from other financial liabilities and
commercial paper increased by euro 3,912 million.
58.3 % (2007: 70.6 %) of the cash outflow for investing activities
was covered by the cash inflow from operating activities.
The cash flow statement for the Automobiles segment
shows that the cash outflow for operating activities fell
slightly short (euro 81 million) of the cash inflow from in-
vesting activities (2007: surplus of euro 2,147 million). As ex-
pected, the cash flow statement for the Financial Services
segment shows that the cash inflow from operating activi-
ties did not cover the cash outflow for investing activities
due to the high level of capital expenditure on leased prod-
ucts and receivables from sales financing. The short-fall
was 39.4 % (2007: 38.7 %).
After adjustment for the effects of exchange-rate fluctua-
tions and changes in the composition of the BMW Group
amounting to a negative amount of euro 63 million (2007:
negative amount of euro 46 million), the various cash flows
resulted in an increase in cash and cash equivalents of
euro 5,061 million (2007: euro 1,057 million).
Net interest-bearing assets relating to the Automobiles
segment (including inter-segment finance receivables)
amounted to euro 9,046 million at the end of the reporting
period, representing an increase of euro 1,692 million since
31 December 2007. Net interest-bearing assets relating
to the Automobiles segment comprise cash and cash
equivalents (euro 5,073 million), marketable securities (euro
557 million) and inter-segment finance receivables (euro
8,185 million) less the financial liabilities of the Automobiles
segment. Excluding derivative financial instruments, they
amount to euro 4,769 million.
Net Assets Position
The Group balance sheet total increased by euro 12,089 mil-
lion or 13.6 % to euro 101,086 million. Currency effects,
largely attributable to a weaker British pound, held down
the increase in the balance sheet total in 2008. Adjusted for
changes in exchange rates, the balance sheet total would
Change in cash and cash equivalents
in euro million
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
–1,000
– 2,000
– 3,000
– 4,000
– 5,000
Cash and cash
equivalents
31.12. 2007
Cash inflow
from operating
activities
Cash outflow
from investing
activities
Cash inflow
from financing
activities
Currency trans-
lation, changes in
Group composition
Cash and cash
equivalents
31.12. 2008
2,393
+ 10,872
– 18,652
+ 12,904
– 63
7,454
53 Group Management Report
have increased by euro 15,044 million or 17.5 %. The main
factors behind the increase on the assets side were the
increased level of cash and cash equivalents (+ 211.5 %), re-
ceivables from sales financing (+ 11.2 %) and leased products
(+ 14.8 %). On the equity and liabilities side of the balance
sheet, the main increase related to financial liabilities
(+ 37.5 %).
Intangible assets amounted to euro 5,641 million, slightly
below their level one year earlier. Within this line item,
capitalised development costs went up by 0.8 % to euro
5,073 million. Development costs recognised as assets
during the year under report amounted to euro 1,224 million
(– 8.2 %), equivalent to a capitalisation ratio of 42.7 % (2007:
42.4 %). The lower level of additions to capitalised develop-
ment costs in 2008 was due to the smaller number of
projects in the series development phase. Amortisation on
intangible assets amounted to euro 1,185 million (+ 6.9 %).
The carrying amount of property, plant and equipment
increased slightly by 1.7 % to euro 11,292 million. Capital
expenditure increased by euro 2,865 million or 6.7 %, with
the main focus on product investments for production
start-ups and infrastructure improvements. Depreciation
on property, plant and equipment totalled euro 2,375 million
(– 3.9 %). Balances brought forward for subsidiaries being
consolidated for the first time amounted to euro 67 million.
Total capital expenditure as a percentage of revenues was
7.9 % (2007: 7.6 %).
The amount reported for leased products in the balance
sheet rose sharply compared to the end of the previous
year, reflecting a general increase in business volumes as
well as the integration of the – previously off-balance-
sheet – vehicle portfolio of a leasing company which had
included a part of the leasing business for Germany.
Leased products rose by 14.8 % to euro 19,524 million. Ad-
justed for changes in exchange rates, they would have
risen by 14.4 %.
The carrying amount of other investments increased by
54.1 % to euro 322 million, mainly as a result of capital in-
creases at non-consolidated companies.
59 million (– 0.8 %) to euro 7,290 million. Trade receivables
were 13.7 % lower than at 31 December 2007.
Financial assets increased by 6.7 % to euro 5,114 million,
mainly as a result of the higher fair values of derivative finan-
cial instruments.
Liquid funds increased by 86.3 % to euro 8,107 million. Mar-
ketable securities and investment funds decreased as a
result of the transfer of assets to the newly founded BMW
Trust e. V., Munich, in conjunction with the creation of an
external fund for pension obligations.
Cash and cash equivalents rose by euro 5,061 million.
On the equity and liabilities side of the balance sheet,
equity decreased by 6.8 % to euro 20,273 million. The profit
for the year attributable to shareholders of BMW AG in-
creased equity by euro 324 million. Fair value changes rec-
ognised directly in accumulated other equity reduced
equity by euro 1,088 million (2007: euro 61 million). The latter
comprises translation differences, fair value gains and losses
on financial instruments and available-for-sale securities
as well as actuarial gains and losses on pension plans.
Translation differences reduced accumulated other equity
by euro 711 million. The fair values of derivative financial in-
struments decreased by a further euro 601 million. Actu-
arial gains and losses within accumulated other equity
increased by euro 5 million. The fair values of marketable
securities fell marginally by euro 7 million. Deferred taxes
on fair value gains and losses recognised directly in equity
increased equity by euro 226 million in 2008.
Minority interests amounted to euro 8 million. The equity
ratio of the BMW Group fell by 4.3 percentage points to
20.1 %.
The equity ratio for the Automobiles segment was 42.3 %
compared to 41.2 % at the end of the previous year. The
equity ratio for the Financial Services segment fell from
6.9 % to 5.4 %.
Receivables from sales financing were up by 11.2 % to euro
38,063 million due to higher business volumes. Of this
amount, customer and dealer financing accounted for euro
29,470 million (+ 12.6 %) and finance leases accounted for
euro 8,593 million (+ 6.6 %). Inventories decreased by euro
The amount recognised in the balance sheet for pension
provisions went down by 28.4 % to euro 3,314 million. In the
case of pension plans with fund assets, the fair value of
fund assets is offset against the defined benefit obligation.
The reduction in pension obligations resulted primarily
from the transfer of pension obligations to the newly
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
Internal Management System
47
Earnings Performance
49
Financial Position
51
Net Assets Position
52
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
54
Balance sheet structure – Group
in euro billion
Non-current assets
62 %
20 %
41 %
64 %
24 %
38 %
Equity
Non-current provisions and liabilities
Current assets
38 %
39 %
Current provisions and liabilities
36 %
38 %
thereof cash and cash equivalents
7 %
3 %
2008
2007
2007
2008
101
89
89
101
Balance sheet structure – Automobiles segment
in euro billion
Non-current assets
44 %
46 %
41 %
42 %
Equity
Current assets
56 %
54 %
21 %
26 %
Non-current provisions and liabilities
38 %
32 %
Current provisions and liabilities
thereof cash and cash equivalents
10 %
2 %
2008
2007
2007
2008
53
52
52
53
founded BMW Trust e. V. in conjunction with a Contractual
Trust Arrangement (CTA). Obligations also decreased be-
cause of the higher discount factor used.
Other provisions decreased by 11.3 % to euro 4,882 million,
with the reduction mainly due to lower obligations for per-
sonnel-related and other expenses.
less pronounced since it is not affected by depreciation
and amortisation, which are higher than in the previous
year.
Once again, the bulk of the net value added (64.8 %) is ap-
plied to employees. The amount applied to providers of
finance increased to 27.0 % as a result of the higher funding
volume required for the financial services business. The
government / public sector (including deferred tax expense)
accounted for 5.1 %. The proportion of net value added
applied to shareholders, at 1.9 %, was lower than in the pre-
vious year. The remaining proportion of net value added
(1.2 %) will be retained by the BMW Group to finance future
operations. This represents a decrease of 16.1 percentage
points.
55 Group Management Report
Financial liabilities increased by 37.5 % in conjunction with
the refinancing of the Group’s financial services business.
Within financial liabilities, bonds increased by 31.4 % to euro
24,159 million. Liabilities to banks, asset-backed financing
obligations and deposit liabilities were all also up.
Trade payables amounted to euro 2,562 million and were
thus 27.9 % lower than one year earlier.
Other liabilities went up by 2.5 % to euro 6,281 million,
mainly reflecting increases in deferred income relating to
service and repair contracts, deferred income from lease
financing and the valuation of financial instruments.
Compensation Report
The compensation of the Board of Management comprises
fixed and variable components. In addition, benefits are
also payable at the end of members’ mandates, primarily in
the form of pension benefits. Further details, including an
analysis of remuneration by individual, are disclosed in the
Compensation Report which can be found in the “Corpo-
rate Governance” section of the Annual Report on pages
141 – 146. The Compensation Report is a sub-section of the
Group Management Report.
Subsequent Events Report
No events have occurred after the balance sheet date which
have a major impact on the earnings performance, financial
position and net assets of the BMW Group.
Value Added Statement
The value added statement shows the value of work per-
formed less the value of work bought in by the BMW Group
during the financial year. Depreciation and amortisation,
cost of materials and other expenses are treated as bought-
in costs in the value added calculation. The allocation
statement applies value added to each of the participants
involved in the value added process. It should be noted
that the gross value added treats depreciation as a compo-
nent of value added which, in the allocation statement, is
treated as internal financing.
Net value added by the BMW Group in 2008 decreased by
25.7 % to euro 10,469 million. The decrease over the pre-
vious year was largely attributable to the lower level of rev-
enues. The decrease in gross value added, at 10.6 %, was
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
55
55
57
58 Comments on BMW AG
Risk Management
Outlook
Subsequent Events Report
Value Added Statement
Key Performance Figures
47
62
68
56
BMW Group Value added statement
Work performed
Revenues
Financial income
Other income
Total output
Cost of materials
Other expenses
Bought-in costs
Gross value added
Depreciation and amortisation
Net value added
Applied to
Employees
Providers of finance
Government / public sector
Shareholders
Group
Minority interest
Net value added
2008
in euro million
2008
in %
2007
in euro million
2007
in %
Change
in %
53,197
– 410
1,428
54,215
30,648
5,447 *
36,095
18,120
7,651
10,469
6,781
2,823
535
197
127
6
98.1
– 0.7
2.6
100.0
56.5
10.1
66.6
33.4
14.1
19.3
64.8
27.0
5.1
1.9
1.2
–
56,018
–114
730
56,634
31,019
5,355
36,374
20,260
6,164
14,096
7,511
2,270
1,181
694
2,432
8
98.9
– 0.2
1.3
100.0
54.8
9.4
64.2
35.8
10.9
24.9
53.3
16.1
8.4
4.9
17.3
–
10,469
100.0
14,096
100.0
– 4.3
– 0.8
–10.6
– 25.7
– 9.7
24.4
– 54.7
– 71.6
– 94.8
– 25.0
– 25.7
* including expenditure in conjunction with measures to reduce the size of the workforce
BMW Group Value added 2008
in %
Depreciation and amortisation
Cost of materials
Other expenses
Net value added
Net value added
19.3
Depreciation and amortisation
14.1
Cost of materials
56.5
Other expenses
10.1
64.8 %
Employees
27.0 %
Providers of finance
5.1 %
1.9 %
1.2 %
Government / public sector
Shareholders
Group
57 Group Management Report
Key Performance Figures
Gross margin
EBITDA margin
EBIT margin
Pre-tax return on sales
Post-tax return on sales
Pre-tax return on equity
Post-tax return on equity
Equity ratio – Group
Automobiles
Financial Services
Coverage of intangible assets, property, plant and equipment by equity
Return on Capital Employed
Group
Automobiles
Motorcycles
Return on Equity
Financial Services
Cash inflow from operating activities
Cash outflow from investing activities
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
euro million
euro million
Coverage of cash outflow from investing activities by cash inflow from operating activities
%
Net financial assets Automobiles segment
euro million
* adjusted due to changed presentation
2008
2007
16.7
8.6
1.7
0.7
0.6
1.6
1.5
20.1
42.3
5.4
119.7
2.3
4.9
13.9
–
10,872
18,652
58.3
9,046
21.8
14.1
7.5
6.9
5.6
20.2
16.4
24.4
41.2
6.9
129.6
15.3
24.7 *
18.0 *
18.1
12,183 *
17,248
70.6 *
7,354
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
55
55
57
58
Risk Management
Outlook
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG
47
62
68
58
Comments on the Financial Statements of BMW AG
Whereas the Group Financial Statements are drawn up in
accordance with IFRSs issued by the IASB, the financial
statements of BMW AG are drawn up in accordance with
the provisions of the German Commercial Code (HGB).
Where it is permitted and considered sensible, the princi-
ples and policies of IFRSs are also applied in the individual
company financial statements. The pension provision in
the individual company financial statements, for example,
is also determined in accordance with IAS 19 and the full
defined benefit obligation recognised. In numerous other
cases, however, the accounting principles and policies in
the individual company financial statements of BMW AG
differ from those applied in the Group Financial State-
ments. The main differences relate to the recognition of
intangible assets, depreciation and amortisation methods,
the measurement of inventories and provisions as well as
the treatment of financial instruments.
Adverse currency factors relating to the US dollar and
Japanese yen as well as continued intense competition on
the automobile markets had a negative impact on BMW
AG’s earnings.
In conjunction with measures to optimise the structure
of investments within the BMW Group, BMW AG incurred
a loss of the disposal of subsidiaries and a higher profit on
an existing profit and loss transfer agreement. Investments
were reduced as a result of this transaction.
Capital expenditure on intangible assets and property,
plant and equipment amounted to euro 2,064 million (2007:
euro 1,670 million), up 23.6 % compared to the previous
year. The increase was mainly related to high product in-
vestments for the new BMW 7 Series and the new Z4.
Depreciation and amortisation amounted to euro 1,569 mil-
lion.
BMW AG develops, manufactures and sells cars and mo-
torcycles manufactured by itself and foreign subsidiaries.
These vehicles are sold through the Company’s own
branches, independent dealers, subsidiaries and import-
ers. The number of cars manufactured at German and
foreign plants in 2008 decreased by 6.6 % to 1,439,918 units.
At 31 December 2008, BMW AG had 71,596 employees,
4,468 fewer than one year earlier. This is largely due to the
implementation of previously reported measures to re-
duce the size of the workforce. The expenditure incurred
in this context increased administrative costs.
Consumer reluctance to spend in the face of the current
financial crisis as well as model life cycle factors caused a
reduction in the number of cars sold by BMW AG. As a con-
sequence, revenues fell in 2008 by 8.3 %. Sales to foreign
group sales companies accounted for euro 32.5 billion or
approximately 73.3 % of the total revenues of euro 44.3 bil-
lion. In percentage terms, the decrease in cost of sales was
slightly more pronounced than the decrease in revenues.
Gross profit fell by euro 0.4 billion (– 5.6 %) and amounted to
euro 6.5 billion.
In order to secure obligations resulting from pre-retirement
part-time work arrangements and a part of the Company’s
pension obligations, an amount of euro 1,285 million was
transferred to the newly founded BMW Trust e. V., Munich,
in conjunction with a Contractual Trust Arrangement
(CTA).
Equity decreased by euro 310 million to euro 5,338 million.
The existing authorisation to acquire treasury common
stock shares was not exercised during the financial year
2008. Of the preferred stock treasury shares acquired dur-
ing 2008, 363,130 shares were held by the Company at the
end of the reporting period. The equity ratio decreased
from 25.0 % to 22.9 %. Long-term external capital (registered
profit-sharing certificates, pension provisions, the liability
to the BMW Unterstützungsverein e. V. and liabilities due
later than one year) increased by 48.8 % to euro 6,054 mil-
lion. Despite the heightening of the financial crisis during
the second half of 2008, BMW AG had access to the credit
and financial markets at all times and was able to increase
its liquid funds significantly.
59 Group Management Report
BMW AG Balance Sheet at 31 December
in euro million
Assets
Intangible assets
Property, plant and equipment
Investments
Tangible, intangible and investment assets
Inventories
Trade receivables
Receivables from subsidiaries
Other receivables and other assets
Marketable securities
Cash and cash equivalents
Current assets
Prepayments
Total assets
Equity and liabilities
Subscribed capital
Capital reserves
Revenue reserves
Unappropriated profit available for distribution
Equity
Registered profit-sharing certificates
Special untaxed reserves
Pension provisions
Other provisions
Provisions
Liabilities to banks
Trade payables
Liabilities to subsidiaries
Other liabilities
Liabilities
Deferred income
Total equity and liabilities
2008
2007
143
5,404
1,096
6,643
2,586
982
6,098
623
2,360
3,970
109
4,986
4,814
9,909
2,654
1,218
5,937
644
1,763
436
16,619
12,652
54
23,316
55
22,616
654
1,991
2,496
197
5,338
34
13
3,791
6,142
9,933
3,049
1,276
2,311
1,338
7,974
654
1,991
2,309
694
5,648
34
34
3,793
6,292
10,085
394
1,716
2,597
2,094
6,801
24
23,316
14
22,616
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
55
55
57
58
Risk Management
Outlook
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG
47
62
68
60
BMW AG Income Statement
in euro million
Revenues
Cost of sales
Gross profit
Sales costs
Administrative costs
Research and development costs
Other operating income and expenses
Result on investments
Financial result
Profit from ordinary activities
Income taxes
Other taxes
Net profit
Profit carried over from previous year
Transfer to revenue reserves
Unappropriated profit available for distribution
2008
2007
44,313
48,310
– 37,833
– 41,448
6,480
6,862
– 3,085
–1,366
– 2,646
– 641
1,807
–154
395
3
– 14
384
–
– 187
197
– 2,786
– 881
– 2,828
731
255
– 38
1,315
–115
–16
1,184
1
– 491
694
Revenues from the sale of vehicles to car rental companies
are not recognised when there is an obligation to take
back the vehicles. In accordance with the draft financial re-
porting pronouncement “Specific Issues relating to the
Transfer of Beneficial Ownership and Profit Realisation in
accordance with HGB” (IDW ERS HFA 13 revised version
dated 29 November 2006) issued by the German Institute
of Public Accountants (IDW), vehicles remain on the
balance sheet, measured at amortised cost, because, on
the basis of the criteria set out in the pronouncement,
beneficial ownership has not been transferred to the car
rental companies.
61 Group Management Report
KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, has
issued an unqualified audit opinion on the financial state-
ments of BMW AG, of which the balance sheet and the
income statement are presented here. The BMW AG finan-
cial statements for the financial year 2008 will be submitted
to the operator of the electronic version of the German
Federal Gazette and can be obtained via the Company
Register website. These financial statements are available
from BMW AG, 80788 Munich, Germany.
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
62
Risk Management
Risk management in the BMW Group
All business activities involve an element of risk. Some
of those risks can be quite substantial. They may arise in
conjunction with business operations or they may affect
a company as a result of changes in external factors. Other
risks arise as business becomes more inter national. As a
globally operating organisation, the BMW Group is con-
fronted with numerous risks. Price fluctuations on the global
markets for currency, money, capital and commodities as
well as shorter innovation cycles result in ever-increasing
complexity, all of which place great demands on enterprises
with international operations. The downturn that has be-
fallen the world’s economies over the past year has also
affected the risk profile.
The BMW Group’s approach to business has long been
founded on the idea of consciously taking calculated
risks and making full use of the opportunities arising from
them. As part of the risk reporting system, the Board of
Management and the Supervisory Board are regularly in-
formed about risks which could have a significant impact
on business performance. This information is derived from
the BMW Group’s integrated risk management system.
Business decisions are reached after consideration of in-
depth project analyses which show both potential risks
and potential opportunities. In addition, as part of long-term
planning, annual budget and short-term forecasts, the
risks and opportunities attached to specific business
activities are evaluated and used as the basis for setting
targets and implementing appropriate risk-mitigation
measures. The groupwide risk management process
comprises the early identification of risks and opportuni-
ties, their measurement and the use of suitable instru-
ments to manage and monitor risks. The risk manage-
ment system comprises a wide range of organisational
and methodological components that are all finely tuned
to each other. The system’s decentralised structure also
encourages a balanced approach to risks at all organisa-
tional levels.
The Group reporting system provides decision makers with
comprehensive, up-to-date information on performance
against targets and on new developments relating to the
market and competitors. Critical success factors are moni-
tored continuously to ensure that unfavourable develop-
ments are identified at an early stage so that appropriate
counter measures can be implemented and opportunities
exploited.
Standardised rules and procedures, consistently applied
throughout the BMW Group form the basis for an organisa-
tion that is permanently learning. Risk management is a
continuous process since changes in the legal, economic
or regulatory environment or changes within the company
itself could lead to new risks or to known risks being differ-
ently assessed. By regularly sharing experiences with
other companies, the BMW Group ensures that innovative
approaches and ideas flow into the risk management
system and that risk management is subject to continual
improvement. Regular basic and further training as well
as information events are invaluable ways of preparing
people for new or additional requirements with regard to
the processes in which they are involved.
Overall risk management within the BMW Group is man-
aged centrally and reviewed for its appropriateness and
effectiveness by external auditors and by the Group’s inter-
nal audit department. The findings reached serve as the
basis for further improvements.
At present, no risks have been identified which could
threaten the existence of the BMW Group or which could
have a materially adverse impact on the net assets, finan-
cial position or results of operations of the Group. How ever,
risks can never be entirely ruled out.
The areas of risk relevant for the BMW Group are pre-
sented in the following section. Additional comments on
risks in conjunction with financial instruments are provid-
of the consolidated financial statements.
ed in note 39
Risks relating to the general economic
environment
As a globally operating enterprise, the BMW Group is affect-
ed by global economic conditions. This includes changes in
exchange rates as well as developments on the financial
markets. The financial crisis and its impact on the world’s
markets for goods and services had a major effect on re-
ported Group revenues and earnings for 2008. In addition
to the effect of changes in demand and refinancing con-
ditions, fluctuations in exchange rates also had a signifi-
cant impact on Group earnings. This related in particular to
the US dollar (the main single source of risk in the BMW
Group’s currency portfolio), the Japanese yen, the British
pound and the Chinese renminbi. Based on forecasts,
these four currencies account for some 65 % of the foreign
currency exposure of the BMW Group.
The BMW Group manages currency risks both at a strate-
gic and at an operating level. At a strategic level (i. e. in
the medium and long term), the BMW Group endeavours
to manage foreign exchange risks by “natural hedging”, in
63 Group Management Report
other words by increasing the volume of purchases de-
nominated in foreign currency or increasing the volume of
local production. In the short to medium term (i. e. at an
operating level), currency risks are hedged on the financial
markets. Hedging transactions are entered into only with
financial partners of good credit standing. It must be noted,
however, that the financial crisis has resulted in a deterio-
ration of the creditworthiness of many financial institutions
and set in motion a process of consolidation within the
banking sector which has not yet been completed. The
BMW Group takes account of these circumstances by
adjusting counterparty limits as deemed appropriate. The
nature and scope of such measures are set out in guide-
lines applicable throughout the BMW Group. A cash-flow-
at-risk model and scenario analyses are used to measure
exchange rate risks. These instruments are also used as
part of the process of currency management for the purpose
of taking business decisions.
As a general rule, the BMW Group reduces currency risk
by refinancing credit and lease business in the currency
of the relevant market. If funds are raised in a foreign cur-
rency, exchange rate hedges are concluded immediately
afterwards in the corresponding local currency in order
to reduce the risk exposure.
Interest-rate risks are managed within the BMW Group by
raising refinancing funds with matching maturities and
by employing derivative financial instruments. Interest-rate
risks are measured and limited both at country and Group
level on the basis of the value-at-risk concept. The risk-
return ratio is also measured regularly using simulated
computations in conjunction with a present-value-based
interest rate management system. Sensitivity analyses,
which contain stress scenarios and show the potential im-
pact of interest rate changes on earnings, are also used
as tools to manage interest rate risks.
The deposit business operated by the Financial Services
segment, credit lines with various banks and the use of a
wide range of financing instruments ensure that sufficient
liquid funds are available to the Group. Liquidity risk is
continuously monitored at a separate entity level and doc-
umented in a rolling cash flow forecasting system.
Most of the financing and lease business undertaken by
the Financial Services segment is refinanced on the capital
markets. As a result of its good credit standing, reflected
in the long-standing first-class short-term ratings issued
by Moody’s (P-1) and Standard & Poor’s (A-1), the BMW
Group is able to obtain competitive terms and conditions.
Despite all of those factors, the BMW Group was neverthe-
less not able entirely to extricate itself from the difficulties
facing the automobile sector. This is reflected in revised
long-term ratings published by the rating agencies: in
November 2008, Standard & Poor’s lowered its long-term
rating from A+ to A, while Moody’s changed its long-term
rating from A1 to A2. Despite this development, the BMW
Group and the securities issued by its Group entities re-
tained the clas sification “investment grade”. Refinancing
conditions deteriorated markedly as a result of the general
crisis on financial markets during the second half of 2008.
The high level of liquidity reported at the year-end reflects
the BMW Group’s ability to obtain refinancing funds even
in the face of extremely difficult market conditions. Any
continued deterioration in these conditions entails the
risk of further drops in ratings for the entire automobile
sector.
Changes on international raw material markets also have an
impact on the business performance of the BMW Group.
In order to safeguard the supply of production materials
and minimise the cost risk, the commodity markets relevant
for the BMW Group are closely monitored. Changes in
prices of precious metals (such as platinum, palladium
and rhodium), steel and other non-ferrous metals have an
impact on production costs. Hedging strategies are de-
cided on for these metals and other raw materials as
part of the BMW Group’s commodity management proce-
dures.
Changes in the price of crude oil, an important basic mate-
rial in the manufacture of components, have an indirect
impact on production costs. Moreover, the price of crude
oil also directly influences the purchasing behaviour of
drivers when fuel prices change.
An escalation of political tensions, terrorist activities, natural
catastrophes or possible pandemics could have a negative
impact on the economic situation, the international capi-
tal markets and hence the business performance of the
BMW Group.
Sector risks
Fuel prices, whether influenced by market or governmental
tax policies, and increasingly stringent requirements to
reduce vehicle fuel consumption and emissions, present
demanding challenges for the BMW Group’s engine and
product development activities. One manifest result of this
has been the reduction of consumption and emissions
achieved through the BMW Group’s Efficient Dynamics
programme.
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
64
In conjunction with their “trilog debate”, the European
Commission, the European Parliament and the Council of
the European Union reached agreement in December
2008 on the details of a CO2 regulation, which constituted
an important step towards the adoption of a CO2 regulation
for passenger cars. The proposed weight-based CO2
emission standards result in considerably higher efficiency
requirements for the BMW Group than for high-volume
and small-car manufacturers. However, a definitive as-
sessment of the situation is only possible after considering
the legal basis and the manner in which the new regula-
tions are transformed into national law. The proposed
regulations on CO2 emissions and fuel consumption could
influence the business of the Automobiles segment and
thus have a significant impact on Group earnings.
The BMW Group is confronting these challenges by rigor-
ously applying its technological expertise and innovative
strength to reduce the CO2 emissions of its vehicles. The
package of measures known as Efficient Dynamics was
adopted in 2000: a combination of highly efficient engines,
improved aerodynamics, lightweight construction and
energy management reduces the average fuel consump-
tion of the vehicle fleet. In the medium term, the BMW
Group is working on achieving additional fuel economy
with the aid of a wide range of measures from electrifica-
tion of the drive train through to hybrid solutions. The
BMW Group is also endeavouring to make sustainable
mobility possible in densely populated areas. In this con-
text, towards the end of the financial year the BMW Group
presented the MINI E, a purely electrically powered vehicle.
As part of a large-scale field trial, approximately 500 MINI E
vehicles were made available to selected customers,
most of them in the USA, at the beginning of 2009. The
practical experience gained from this trial will be incor-
porated in the further development of electric vehicles. In
the long term, the BMW Group is committed to the use
of hydrogen gained from various renewable sources to
power engines.
centives for all parties involved to contribute to the requi-
site development of efficient drive systems.
Operating risks
Risks arising from business interruption and loss of pro-
duction are insured up to economically reasonable
levels with insurance companies of good credit standing.
The BMW Group’s highly flexible production network
and working time models also help to reduce operating
risks.
Close cooperation between manufacturers and suppliers
is usual in the automotive sector and whilst this provides
economic benefits, it also creates a degree of mutual de-
pendence. Partly reflecting increasing consolidation within
the automotive supply industry, certain suppliers have
become extremely important for the BMW Group. Delivery
delays, cancellations, strikes or poor quality can lead to
production stoppages and thus have a negative impact on
profitability. The currently adverse business climate is also
affecting the supply industry. Revenue contraction in the
automobile sector clearly has an impact on the earnings
performance of suppliers. Simultaneously, as a result of the
turmoil on the capital markets, the banks have only been
willing to provide credit to businesses – including those of
the supply industry – on a more restrictive scale and at
less favourable conditions. The availability of capital is be-
coming increasingly critical for suppliers with high levels of
debt. However, although the number of problem cases
increased in 2008, the BMW Group was not affected by any
defaults. In cooperation with other car manufacturers, the
BMW Group endeavours to maintain close contact with
its suppliers in order to identify troubled suppliers as early
as possible and find appropriate solutions. When selecting
suppliers, both their technical competence and financial
strength are evaluated. Once a supplier has been selected,
a comprehensive Supplier Relationship Management
system – also covering social and ecological aspects –
helps to reduce risk exposure.
The need to reduce consumption and emissions is fully
integrated in the Group’s product innovation process. A
specialist department is studying the interplay of energy
management, aerodynamics, lightweight construction,
performance and CO2 emissions. The BMW Group advo-
cates the use of differentiated CO2 limits for different vehi-
cle classes. These levels should be transparent and meet
customers’ expectations. Achieving real improvements for
the environment requires measures to be applied fairly to
all vehicle classes. The BMW Group therefore welcomes
the current debate on the best way of achieving ecologi-
cal improvements. The solution must provide sufficient in-
Risks relating to the provision of financial services
The BMW Group’s leasing business also entails a volume-
induced increase in the residual value risk on vehicles re-
turned at the end of lease contracts. The volatility of used
car prices on the major sales markets has intensified as a
result of the financial crisis, thus increasing the residual
value risk. Residual values of BMW Group vehicles on used
car markets are continuously monitored over long periods
and future developments forecasted. External market ob-
servations are also used in this context. The overall risk po-
sition is measured by comparing forecasted market values
and contractual values by model and market. The return
65 Group Management Report
ratio for lease vehicles is also computed. The resulting re-
valuation of the portfolio of vehicles exposed to residual
value risks and the losses incurred when selling preowned
cars has an additional negative impact on earnings of the
Financial Services and Automobiles segments. Expected
risks are covered in the balance sheet either by provisions
or by write-downs on the lease vehicles concerned.
The BMW Group strives to mitigate declining residual values
by actively managing the life cycle of current models, opti-
mising reselling processes on international markets and
implementing targeted price and volume measures. Re-
sidual values in the leasing business are reviewed regularly
and adjusted to take account of the latest market condi-
tions and expected future developments.
Operational risks relating to financial services business in-
clude the risk of damage caused by inappropriate or failed
internal procedures and systems, human error or external
factors. The scope of procedures applied in each country
to manage operational risks is set out in a Group manual
which, amongst other things, addresses the requirements
of the Basle II accord. The manual stipulates the rules for
identifying and measuring potential risk scenarios and for
computing key risk indicators on an ongoing basis. It also
sets out the Group’s systematic approach to recording
losses and the nature of any agreed risk-mitigation meas-
ures. Both qualitative and quantitative aspects need to be
taken into account in the decision process. The latter is
backed up by various system-based solutions, all of which
follow the principles of operational risk management,
such as separation of duties, dual control and the docu-
mentation of system changes. In addition, the effectiveness
and efficiency of the internal control system are tested
regularly.
Credit risks affecting the retail customer business (leasing,
financing) on the one hand and the commercial customer
financing business (dealers, fleet customers, importers) on
the other, are continually monitored, assessed and meas-
ured. Risk-mitigating measures are put into place where
necessary. In line with the Group’s own mandatory guide-
lines on risk mitigation and the stringent requirements
imposed by Basle II, the main risk measurement methods
used are customer scoring (retail customer business) and
credit rating (commercial customer business). Close con-
tacts with borrowers, a good understanding of the leased
or financed vehicles involved, prudent measurement of
collateral and the use of local credit audits all help to pre-
vent losses. For risk management purposes, the BMW
Group reverts to normal good banking practices, such as
the use of maximum unsecured risks for each rating cate-
gory. Risk criteria such as arrears and bad debt ratios are
analysed quarterly and used to actively manage the credit
portfolio and improve portfolio quality. Measures imple-
mented during 2008 helped in part to scale back the in-
creased credit risk. The credit decision process comprises
up to three phases. Depending on the credit volume applied
for and the credit risk rating of the party involved, financing
applications for international dealers, importers and fleet
customers are presented to the local, regional or global
credit committees for approval. The dual control and seg-
regation of duties principles apply worldwide and are rig-
orously implemented. In order to minimise risk further, the
BMW Group is continuously making efforts to standardise
its credit-decision processes and the quality of credit ap-
plications and to ensure that uniform and transparent rating
systems are in place worldwide. Allowances are recog-
nised in the balance sheet to cover identified risks.
Within the financial services business, the negative impact
on the credit risk portfolio was reflected in a higher level
of payment arrears and bad debts with retail customers. In
addition, the drastic fall in sales caused by changes in cus-
tomer purchasing behaviour is having an adverse impact
on the financial situation of the dealer network and in-
creases the risk of insolvency within the dealer organisa-
tion. Developments in 2008 necessitated higher risk pro-
visions in the areas of retail customer and dealer financing
business.
Legal risks
The BMW Group is not currently involved in any court or
arbitration proceedings which could have a significant im-
pact on its financial condition.
Compliance with the law is a basic prerequisite for the suc-
cess of the BMW Group. Current law provides the binding
framework for the BMW Group’s various business activities
around the world. The growing international scale of busi-
ness and the huge number of complex legal regulations
increase the risk of laws being broken simply because they
are not known or fully understood. The BMW Group takes
all necessary measures to ensure that its management
bodies, managers and staff act lawfully. It is essential for all
employees to know and to comply with current legal regu-
lations. The extent of those regulations is set out in cor-
porate guidelines and in the BMW Group’s stated set of
core principles. However, wrongdoing by individuals can
never be entirely ruled out. It is the BMW Group’s objective
to keep such risks to a minimum and to systematically un-
cover any cases of corruption, bribery or blackmail. Further
information on compliance in the BMW Group is included
in the Compliance Report on pages 140 – 141.
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
66
Like all enterprises, the BMW Group is exposed to the risk
of warranty claims. Adequate provisions have been recog-
nised in the balance sheet to cover such claims. Part of the
risk, especially where the American market is concerned,
has been insured externally up to economically acceptable
levels. The high quality of BMW Group products, addition-
ally ensured by regular quality audits and ongoing improve-
ment measures, helps to reduce this risk. In comparison
with competitors, this can give rise to benefits and oppor-
tunities for the BMW Group.
Changes in the regulatory environment may impair the
sales volume, revenues and earnings performance of the
BMW Group in individual markets or economic regions.
Further information is given in the section on sector-spe-
cific risks.
Personnel risks
As an attractive employer, the BMW Group has been in a
favourable position for many years in the intense compe-
tition for qualified technical and management staff. A high
level of employee satisfaction helps to minimise the risk
of know-how drift. The BMW Group’s attractiveness as an
employer also helps to ensure that appropriately qualified
staff can be recruited, particularly at a time when new
strategies are being implemented.
An ageing and shrinking population in Germany will have
a lasting impact on the conditions prevailing in the labour,
product, services and financial markets. Demographic
change will give rise to risks and opportunities which will
affect businesses more and more in the coming years.
The BMW Group sees demographic change as one of its
main challenges and is actively involved in planning for
its effect on operations. The focus is on the following areas
of action, aimed at creating and retaining a motivated
workforce in the long term:
(1) the creation of a working environment for the future,
(2) promotion and maintenance of the workforce’s ability
to perform with the appropriate set of skills,
(3) appropriate qualifications,
(4) increasing employees’ awareness of their responsibility
to make personal provisions for their future and
(5) individual employee working life-time models.
Risks relating to pension obligations
The BMW Group’s pension obligations to its employees
resulting from defined benefit plans are measured on the
basis of actuarial reports. In accordance with IAS 19, future
pension payments are discounted by reference to market
yields on high-quality corporate bonds. These yields are
subject to market fluctuation and influence the level of
pension obligations. Furthermore, changes in other factors,
such as longer life expectancies, can also have an impact
on pension obligations. In the United Kingdom, the USA
and a number of other countries, funds intended to cover
the pension entitlements of BMW Group employees are
held in pension funds which are kept separate from corpo-
rate assets and mainly invested in fixed-income securities
(with a high level of creditworthiness), equities, property
and other investment classes. In 2008, a part of the pension
obligations arising in Germany was also transferred to an
external fund, namely to BMW Trust e. V. It is planned that
further pension obligations will be externalised in the
coming years.
Risks affecting pension funds are monitored continuously
and managed from a risk and yield perspective. Regular
asset-liability studies are performed and used to match the
maturities of interest-generating investments with future
pension payments, thereby reducing the interest rate risk
relating to pensions. Investments are broadly spread in
order to reduce risk. In addition, risk limits for investment
activities have been defined for each pension fund and are
monitored continuously.
Risk indicators (e. g. value-at-risk) are regularly computed
in order to identify risks at an early stage and used to de-
velop measures to mitigate risk.
Information and IT risks
In the BMW Group, great importance is attached to the
protection of data, business secrets and innovative devel-
opment to safeguard against unauthorised access, damage
and misuse. The protection of information and data is an
integral component of business processes and systems
are based on international security standards. Staff, process
design and information technology each play a role in the
overall security concept. Groupwide standards, which are
incorporated in the BMW Group’s set of core principles
and documented in detailed working instructions, require
employees to handle all information appropriately and to
ensure that information systems are properly used. Pur-
poseful communication and training measures create a
high degree of security awareness on the part of the em-
ployees involved. Employees receive training from the
Group’s Compliance Organisation to ensure compliance
with legal and regulatory requirements.
The technical data protection procedures used by the
BMW Group include process-specific security measures
67 Group Management Report
as well as standard activities such as virus scanners, fire-
wall systems and access controls at both operating system
and application level. Further measures include internal
testing procedures and the regular backing up of data. A
security network is in place groupwide to ensure compliance
with security specifications. Regular analyses and rigorous
security management ensure high-quality protection. This
includes the activities of the BMW Group’s Security Opera-
tions Centre which is responsible for the security of inter-
nal network communications. The Group’s core process
“Product Development” and the related IT infrastructure
have been audited and certified as conforming to interna-
tional security standard ISO 27001. The protection of BMW
Group-specific know-how also plays an important role in
cooperation arrangements and relationships with partner
companies. The BMW Group protects its intellectual
property by ensuring that the relevant departments have
clear instructions regarding data protection and the use of
information technology. Information pertaining to key areas
of expertise is subject to particularly stringent security
measures.
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
68
Outlook
The economic environment in 2009
The BMW Group forecasts that the global economic down-
turn will continue throughout the whole of 2009. Economic
output in most industrial countries is likely to shrink in the
current year. The dynamism of emerging markets is also
likely to slacken noticeably. An end to the downturn is not
likely to come until confidence in the credit markets is re-
stored and the property markets recover. This, however, is
unlikely to happen before the end of 2009.
The turmoil on the property and credit markets in the USA
will have a massive impact on the real economy in 2009.
The situation cannot be expected to calm down until the
second half of the year at the earliest. Consumer spending
in particular will remain weak in the USA. Both the US
Reserve Bank and the US Government are endeavouring
with all means available to them to prevent the recession
becoming any worse. These measures will, however, not
be able to prevent a drop in economic output on a full year
basis.
Europe will also suffer heavily in 2009 from the consequences
of the economic and financial crisis. The gross domestic
product is likely to shrink in this region too. Exports will
drop further in the wake of the global economic downturn
and consumer spending will falter in the face of uncertainty
as to how the future will unfold. Governments and central
banks in Europe will also apply countermeasures in the
form of fiscal and monetary policies.
The growth rate in Germany in 2009 is also likely to be
negative. Consumer spending will once again fail to gen-
erate any growth, while shrinking exports will also have a
negative impact.
The Japanese economy will also contract in 2009. The
negative trend with exports and the weakness of domestic
demand will continue. Due to its policy of low interest
rates to date, the Japanese Reserve Bank does not have
the option of reducing interest rates further. Manoeuvring
room for fiscal measures is also restricted due to the high
level of national debt.
Growth rates in the emerging markets of Asia, Latin America
and Eastern Europe are also likely to weaken significantly
in 2009. In these regions, the global economic downturn
will primarily have a negative impact on exports.
Euro likely to remain strong
The value of the US dollar against the euro increased sig-
nificantly in the course of 2008. However, lower growth and
lower interest rates plus the very high current account defi-
cit in the USA suggest that the US dollar will depreciate in
value once again. The British pound lost significant ground
against the euro in 2008. In contrast, the Japanese yen
appreciated sharply against the euro over the course of
the year. In 2009, the Japanese yen is forecast to remain
stable.
Risks affecting economic growth
The greatest risk for the global economy continues to
come from the world’s financial crisis and its knock-on
impact on markets for goods and services. If confidence in
the credit markets is restored more slowly than is currently
being predicted, the impact for the global economy would
be even more severe. The global recession will then be
longer and have more serious consequences.
Although energy and raw material prices fell sharply in 2008,
they still remain above long-term average levels. At present,
the global economic downturn is preventing higher prices
on the energy and commodity markets. Nevertheless, the
risk remains of excessive price reactions caused by specu-
lative forces.
Car markets in 2009
The financial crisis will again have a massively adverse
impact on the global automotive economy in 2009. Overall,
the slump in the world’s industrial countries is expected to
be at least as severe as in 2008.
Impetus from the triad of traditional markets (the USA,
Japan and Western Europe) will once again be extremely
weak in 2009. Passenger car sales are again likely to drop
sharply. In Germany, the negative growth rate will probably
be even higher than in 2008.
Lower volumes, in some cases reflecting quite substantial
reductions, are also predicted for the majority of emerging
markets. Even markets such as China and India which
have experienced extreme high growth rates up to now
are likely to see fewer new registrations. In Russia the
reduction could even reach the double-digit range. The
same applies to most markets in Eastern Europe and
Latin America.
Motorcycle markets in 2009
One of the features of the motorcycle business is that
most sales are recorded by the middle of the year. Largely
because of this seasonal pattern, the BMW Group does
not now expect to see a recovery of the motorcycles mar-
kets in 2009. Since the financial crisis and resulting crisis in
69 Group Management Report
confidence is likely to last throughout the entire year, the
performance of motorcycle markets will be severely affected
in 2009. In line with the overall trend, the BMW Group fore-
casts that motorcycle sales in the 500 cc plus segment will
be down in 2009.
Financial services sector in 2009
The business climate in the financial services sector is cur-
rently being overshadowed by a high degree of uncertainty,
which, in turn, is having a negative impact on the refinanc-
ing and liquidity situation and the bad debt risk exposure
of the whole sector. Until confidence in the financial markets
is restored, there can be little hope that refinancing condi-
tions will stabilise.
Based on recent developments, the situation on credit
markets is unlikely to ease quickly. If the economic down-
ward trend continues, the financial services sector too is
likely to have to bear further losses in conjunction with
credit risk. A recovery of the prices on the used car markets
is also not in sight before the end of 2009.
Outlook for the BMW Group in 2009
Towards the end of 2008 the situation on international
financial markets climaxed in an unprecedented fashion.
At the same time, the crisis also spilled over to the real
economy worldwide. The rapid pace of the economic
downturn and uncertainty as to how the economic crisis
will proceed make reliable forecasts extremely difficult,
even for the near future.
The current business environment will also make the year
2009 a challenging one for the BMW Group. By the same
token, the BMW Group has shown on numerous occasions
in the past its ability to adapt successfully to changing con-
ditions. Processes and structures have also been newly
aligned and continually improved at the same time. For
these reasons, the BMW Group has – now more than ever –
the necessary manoeuvring room to position itself appro-
priately during the economic crisis in order to ensure as
good a starting position as possible for the ensuing phase
of economic recovery.
As long as the current situation shows no signs of easing,
the BMW Group will continue to charter its course through
this phase of extreme uncertainty by applying the neces-
sary combination of coordinated tactical measures and a
high degree of flexibility. In this way, the BMW Group is
bracing itself to cope with the market conditions that the
year 2009 brings with it.
The necessary flexibility was shown in early adoption of a
wide range of measures to bring car production volumes
into line with falling worldwide demand. The various meas-
ures implemented – such as flexible deployment of em-
ployees in the production network, the use of employee
time accounts and the option of employees taking sab-
baticals – are decided on in close cooperation with em-
ployee representatives. Production volumes are also being
managed by the use of temporary short-time working
arrangements at specific sites. The BMW Group has also
been able to reduce workforce numbers on a targeted
basis, especially in the production area, by introducing
efficiency improvements, thus enabling personnel ex-
pense to be adapted to changing conditions at an early
stage.
Due to its flexible manufacturing structures, the BMW Group
is second to none in competitive terms. The extreme flexi-
bility of the production network therefore provides a clear
competitive advantage, enabling the BMW Group to adjust
production capacities in line with changing situations on
the various sales markets. The Group’s customer-oriented
sales and production processes enable capacities and
sales processes to be adjusted flexibly and at short notice.
On the sales side, the BMW Group is responding to the
challenges it faces by intensifying its various sales strate-
gies. As part of the process of managing sales volume, this
also includes tailoring volumes to suit demand in individual
sales markets. This strategy allows the BMW Group to
react quickly to changes in demand with due regard to its
strong market position, customer satisfaction and the sta-
bility of the dealer organisation.
The BMW Group took measures to allow for changing busi-
ness conditions at an early stage. For example, the first
signs of problems in 2008 triggered an early adjustment to
risk provisions when the portfolio of lease cars was reas-
sessed. This move took account of the specific risks iden-
tified as well as the impact on the lease portfolio.
In view of the currently adverse climate, the strategy
Number ONE is proving to be an appropriate and forward-
looking entrepreneurial decision for redirecting the BMW
Group. A great deal of preliminary work was carried out
in originally developing this strategy. With business condi-
tions having deteriorated so extremely, this preliminary
work is proving to be a highly useful instrument in man-
aging the business in the short term. The initiatives that
emerged from the strategy Number ONE are now helping
the business to charter its course through the crisis and
Group Management Report
A Review of the Financial Year
14
14
16 General Economic Environment
20
42
45
Internal Management System
Earnings Performance
Financial Position
Review of Operations
BMW Stock and Bonds
Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
Financial Analysis
47
49
51
52 Net Assets Position
Subsequent Events Report
55
Value Added Statement
55
57
Key Performance Figures
58 Comments on BMW AG
Risk Management
Outlook
47
62
68
70
will significantly improve opportunities for the BMW Group
when the situation begins to ease.
Thanks to its broad expertise in the area of innovation, the
BMW Group will retain its ability to satisfy the needs of its
customers with its premium products and services.
In the subsequent phase of economic recovery – which is
generally expected to gather pace during the course of
2010 – the BMW Group will also benefit from the addi-
tional impetus generated by its renewed range of models.
Recently, for example, the new BMW Z4 and the MINI Con-
vertible were presented to the public at the North Ameri-
can International Auto Show in Detroit. At the beginning of
February, the new BMW 7 Series came onto the markets
(in the USA and Asia together with the extended wheelbase
version) and are receiving a positive response from cus-
tomers and the media alike. In 2009, the X range of vehicles
will be extended by the addition of the BMW X1. The BMW
Group will also expand its portfolio with the Progressive
Activity Sedan (PAS), the concept study of which was pre-
sented at the Geneva Motor Show.
After-sales business continues to gain in strategic impor-
tance for the BMW Group. A worldwide initiative is cur-
rently being implemented to tap the full potential of further
profitable growth in the service and spare parts lines of
business.
Despite difficult conditions, the BMW Group has success-
fully managed to increase efficiency and operating per-
formance. Ongoing initiatives to improve efficiency and
productivity on a continuous basis ensure the sustainable
and economic use of resources. On the cost side, these
measures represent another important aspect of the
BMW Group’s new strategic direction. Good progress has
already been made in implementing the profitability pro-
gramme in the areas of fixed and variable costs. This is
being achieved by rigorous exploitation of benefits of scale,
standardisation of processes throughout the business and
targeted management of capital employed.
The BMW Group’s research and development expense
ratio in 2008 was within the announced target range of 5.0 %
to 5.5 % of revenues. Despite its efforts to rationalise re-
search and development activities, the BMW Group will
continue to develop visionary products and technologies –
such as the MINI E – and thus ensure that the combustion
engine is not the only field in which it sets standards. The
BMW Group will also continue to invest in the future in or-
der to extend its competitive advantage. This also includes
the development of innovative mobility concepts in con-
junction with project i. In the current transitional phase, up-
front expenditure in this area provides an important basis
for opening up medium and long-term opportunities.
Rising to the substantial challenges that it faces, the BMW
Group is now intensifying the various measures it has initi-
ated to implement its new strategic direction. The BMW
Group is convinced that these initiatives will yield benefits
for the business in the medium term.
This confidence is based, amongst other things, on a dis-
cernible trend towards smaller-sized and more efficient
drive systems that are nevertheless powerful. The BMW
Group recognised this trend at an early stage. After meas-
uring the impact on its own model programme, these
concepts have now been incorporated in future forecasts.
This trend and the move towards a CO2 emissions-based
tax are seen as the first important steps towards creating
stable legal conditions, thus giving the BMW Group a great
opportunity to increase its technological lead with Efficient
Dynamics.
Automobiles segment
As a result of the massively adverse impact of the economic
crisis, the BMW Group does not expect to achieve the
car sales volume level it recorded in 2008. The prevailing
uncertainties make it difficult to forecast sales volumes
at present. The BMW Group is working on various market
and sales volume performance scenarios and is preparing
the appropriate measures.
From today’s perspective, the BMW Group believes that
these uncertainties will remain throughout 2009 and the
following year. Since economic recovery generally lags
behind, it is not now expected that the targeted return on
sales and EBIT margin for 2010 will be achieved.
Motorcycles segment
The BMW Group will continue the Motorcycles segment’s
new model initiative in 2009 in an attempt to counter the
reduction in consumer spending caused by the financial
crisis. Despite this, motorcycle sales volume is still forecast
to be lower than in 2008.
Financial Services segment
Business conditions for the Financial Services segment will
again be subjected to a high degree of volatility in 2009. The
availability of attractive credit and lease products for cus-
tomers of BMW, MINI and Rolls-Royce brand cars will remain
the basis for sustainable growth in the segment’s business
volume. The same applies in the area of dealer financing.
71 Group Management Report
If the situation on used car markets does not stabilise in
2009, further losses on the sale of vehicles coming out of
leases cannot be ruled out. Given the current economic
situation, it seems unlikely that the bad debts risk for the
retail customer and dealer financing lines of business will
diminish in the short term.
As part of the strategy Number ONE, the further develop-
ment of the various lines of business will be reviewed in the
light of changed external parameters. As well as focusing
on service quality and process efficiency, greater impor-
tance will be attached to achieving a well-balanced earnings
and risk profile for the segment’s various lines of business.
Profitability targets for 2012 remain in place
Against the background of the business conditions de-
scribed above, it is not possible to provide any further quan-
titative earnings forecasts over and beyond those that are
necessarily made in conjunction with the preparation of
the Group Financial Statements and that are described in
the notes to the Group Financial Statements and in the
Group Management Report.
Since economic recovery will lag behind, the original fore-
cast for the financial year 2009 and the target for 2010 are
not attainable. The profitability targets for 2012 set in con-
junction with the strategy Number ONE nevertheless
remain in place. The BMW Group will continue to steer
its new strategic course by stepping up cost-cutting and
efficiency improvement measures and still intends to
achieve a return on capital employed (ROCE) in the Auto-
mobiles segment in excess of 26 % and a return on sales
of between 8 % and 10 %.
With its strategy Number ONE and the rigorous value-
added approach adopted, the BMW Group is laying the
foundation for achieving its ambitious targets in the
future.
72
Group Financial Statements
BMW Group
Income Statement for Group and Segments
in euro million
Revenues
Cost of sales
Gross profit
Sales and administrative costs
Research and development costs
Other operating income
Other operating expenses
Profit before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit before tax
Income taxes
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
Earnings per share of common stock in euro
Earnings per share of preferred stock in euro
* adjusted for changed presentation of financial result
Note
Group
2008
2007 *
Automobiles
Motorcycles
Financial Services
Other Entities
Eliminations
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
8
9
10
11
12
12
13
14
14
15
16
17
17
53,197
56,018
– 44,323
– 43,832
8,874
12,186
– 5,369
– 2,825
1,428
– 1,187
921
26
685
– 930
– 351
– 570
– 5,254
– 2,920
730
– 530
4,212
11
645
– 897
– 98
– 339
351
3,873
318
3,232
51
71
– 292
743
295
168
– 21
– 341
– 21
330
6
324
0.49
0.51
– 739
3,134
8
3,126
4.78
4.80
48,782
53,818
– 40,791
– 43,290
7,991
10,528
– 4,572
– 2,714
559
– 574
690
25
766
–1,036
–127
– 372
– 4,417
– 2,805
552
– 408
3,450
11
710
– 870
– 69
– 218
– 92
226
6
220
– 511
2,721
8
2,713
1,230
– 913
317
–147
–111
3
– 2
60
–
1
– 10
–
– 9
– 14
37
–
37
1,228
– 883
345
–152
–115
2
–
80
–
–
– 9
–
– 9
–11
60
–
60
15,725
13,940
–15,332
–12,595
393
1,345
– 583
– 606
–
31
– 57
– 216
–
2
– 8
– 70
– 76
131
–161
–
–161
–
25
– 47
717
–
2
– 2
26
26
– 269
474
–
474
191
–145
46
– 57
–
891
– 607
273
1
2,102
–154
22
–16
279
–
279
290
– 229
61
– 76
–
209
–145
49
–
1,768
– 58
119
– 5
163
–
163
–12,731
–13,258
12,858
13,165
127
– 93
–10
–
– 56
53
114
– 3
–
– 58
70
– 84
–
–
– 2,186
–1,835
–
–135
3
– 257
– 30
– 51
–
– 51
57
– 284
–
– 284
–1,927
–1,591
2,051
1,575
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
73 Group Financial Statements
in euro million
Revenues
Cost of sales
Gross profit
Sales and administrative costs
Research and development costs
Other operating income
Other operating expenses
Profit before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit before tax
Income taxes
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
Earnings per share of common stock in euro
Earnings per share of preferred stock in euro
* adjusted for changed presentation of financial result
Note
Group
2008
2007 *
Automobiles
Motorcycles
Financial Services
Other Entities
Eliminations
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
48,782
53,818
– 40,791
– 43,290
7,991
10,528
– 4,572
– 2,714
559
– 574
690
25
766
–1,036
–127
– 372
– 4,417
– 2,805
552
– 408
3,450
11
710
– 870
– 69
– 218
1,230
– 913
317
–147
–111
3
– 2
60
–
1
– 10
–
– 9
1,228
– 883
345
–152
–115
2
–
80
–
–
– 9
–
– 9
15,725
13,940
–15,332
–12,595
393
1,345
– 583
– 606
–
31
– 57
– 216
–
2
– 8
– 70
– 76
–
25
– 47
717
–
2
– 2
26
26
191
–145
46
– 57
–
891
– 607
273
1
2,102
290
– 229
61
– 76
–
209
–145
49
–
1,768
–12,731
–13,258
12,858
13,165
127
– 93
–10
–
– 56
53
114
– 3
–
– 58
70
– 84
–
–
– 2,186
–1,835
–1,927
–1,591
2,051
1,575
–154
22
– 58
119
–
–135
3
– 257
351
3,873
318
3,232
51
71
– 292
743
295
168
– 21
– 341
– 92
226
6
220
– 511
2,721
8
2,713
– 14
37
–
37
–11
60
–
60
131
–161
–
–161
– 269
474
–
474
–16
279
–
279
– 5
163
–
163
– 30
– 51
–
– 51
57
– 284
–
– 284
8
9
10
11
12
12
13
14
14
15
16
17
17
53,197
56,018
– 44,323
– 43,832
8,874
12,186
– 5,369
– 2,825
1,428
– 1,187
921
26
685
– 930
– 351
– 570
– 21
330
6
324
0.49
0.51
– 5,254
– 2,920
730
– 530
4,212
11
645
– 897
– 98
– 339
– 739
3,134
8
3,126
4.78
4.80
74
BMW Group
Balance Sheet for Group and Segments at 31 December
Assets
in euro million
Intangible assets
Property, plant and equipment
Leased products
Investments accounted for using the equity method
Other investments
Receivables from sales financing
Financial assets
Deferred tax
Other assets
Non-current assets
Inventories
Trade receivables
Receivables from sales financing
Financial assets
Current tax
Other assets
Cash and cash equivalents
Current assets
Total assets
Equity and liabilities
in euro million
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Treasury shares
Minority interest
Equity
Pension provisions
Other provisions
Deferred tax
Financial liabilities
Other liabilities
Non-current provisions and liabilities
Other provisions
Current tax
Financial liabilities
Trade payables
Other liabilities
Current provisions and liabilities
Total equity and liabilities
Note
Group
2008
2007
Automobiles
Motorcycles
Financial Services
Other Entities
Eliminations
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
20
21
22
23
23
24
25
26
27
28
29
24
25
26
27
30
5,641
11,292
19,524
111
322
22,192
1,808
866
660
5,670
11,108
17,013
63
209
20,248
1,173
720
415
62,416
56,619
7,290
2,305
7,349
2,672
15,871
13,996
3,306
602
1,842
7,454
3,622
237
2,109
2,393
38,670
32,378
2,693
6,121
5,348
5,319
– 7,744
–11,254
22,192
20,248
23,248
24,147
244
259
41,453
22,590
19,911
– 3,334
– 3,152
123
25
–
25
424
485
1,961
47,825
9
122
839
39
3,034
2,053
120
25
–
23
349
385
392
9
80
442
8
2,879
789
15,871
13,996
64
–
–
29
–
1,381
160
14,055
21,037
–
4
–
1,481
205
152
19
–
–
–
762
219
11,015
17,486
13
35
–
1,026
49
–
–
–
–
– 1
–
–
–
–
– 235
–1,125
– 30
– 894
–17,500
–11,396
– 29,938
– 26,726
-415
– 580
–
–
–
–
–1
–
–
–
–
21,967
18,203
23,127
21,415
– 36,745
– 35,918
21,109
19,937
– 36,329
– 35,337
328
355
101,086
88,997
53,183
52,414
69,792
59,656
44,164
38,901
– 66,683
– 62,644
Note
Group
2008
2007
Automobiles
Motorcycles
Financial Services
Other Entities
Eliminations
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
654
1,911
20,419
– 2,709
–10
8
654
1,911
20,789
–1,621
–
11
20,273
21,744
22,481
21,583
–
–
3,752
4,139
4,883
8,499
–10,843
–12,477
3,314
2,757
2,757
30,497
2,201
41,526
2,125
633
4,627
2,676
2,714
21,428
2,024
33,469
2,826
808
29,887
22,493
2,562
4,080
3,551
4,106
39,287
33,784
28
252
3,096
10,030
14,128
27,534
311
105
364
22,519
38,506
31
258
2,725
7,663
12,020
22,697
178
115
612
21,109
32,820
317
30
18
654
2
12
–
–
–
–
– 2,290
– 2,087
18,018
13,063
– 236
–13
586
418
–16,751
–12,723
18,969
14,149
– 19,277
–14,823
2
60
9
27
63
18
– 4
–
– 414
–
– 26
–
– 598
–10
7,746
20,312
5,947
16,253
– 36,145
– 34,710
– 36,563
– 35,344
15,207
10,806
12,495
10,198
31
32
33
34
35
36
33
34
35
37
36
101,086
88,997
53,183
52,414
69,792
59,656
44,164
38,901
– 66,683
– 62,644
5,403
11,074
268
82
–
238
1,346
2,144
7,005
2,070
–
1,401
358
14,028
5,073
29,935
5,333
10,870
254
63
–
92
1,010
404
7,036
2,438
–
2,734
180
14,630
1,249
28,267
13,861
10,986
2,847
2,412
1,931
2,685
3,986
1,795
468
2,599
2,029
9,950
16,841
3,831
2,354
2,062
715
2,024
2,612
630
2,087
2,769
11,747
19,845
51
193
65
194
–
–
–
–
–
–
–
277
109
–
–
–
–
–
386
630
122
63
2
–
252
439
21
–
–
160
10
191
630
–
–
–
–
–
–
–
292
119
–
–
–
–
–
411
670
111
62
2
–
285
460
35
–
–
162
13
210
670
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
Receivables from sales financing
15,871
13,996
Assets
in euro million
Intangible assets
Property, plant and equipment
Leased products
Investments accounted for using the equity method
Other investments
Receivables from sales financing
Financial assets
Deferred tax
Other assets
Non-current assets
Inventories
Trade receivables
Financial assets
Current tax
Other assets
Cash and cash equivalents
Current assets
Total assets
Equity and liabilities
in euro million
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Treasury shares
Minority interest
Equity
Pension provisions
Other provisions
Deferred tax
Financial liabilities
Other liabilities
Other provisions
Current tax
Financial liabilities
Trade payables
Other liabilities
Non-current provisions and liabilities
Current provisions and liabilities
Total equity and liabilities
20
21
22
23
23
24
25
26
27
28
29
24
25
26
27
30
31
32
33
34
35
36
33
34
35
37
36
38,670
32,378
5,641
11,292
19,524
111
322
22,192
1,808
866
660
7,290
2,305
3,306
602
1,842
7,454
654
1,911
20,419
– 2,709
–10
8
3,314
2,757
2,757
30,497
2,201
41,526
2,125
633
2,562
4,080
5,670
11,108
17,013
63
209
20,248
1,173
720
415
7,349
2,672
3,622
237
2,109
2,393
654
1,911
20,789
–1,621
–
11
4,627
2,676
2,714
21,428
2,024
33,469
2,826
808
3,551
4,106
29,887
22,493
39,287
33,784
75 Group Financial Statements
Note
Group
2008
2007
Automobiles
Motorcycles
Financial Services
Other Entities
Eliminations
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
5,403
11,074
268
82
5,333
10,870
254
63
2,693
6,121
–
238
1,346
2,144
–
92
1,010
404
51
193
65
194
–
–
–
–
–
–
–
–
–
–
–
–
–
–
62,416
56,619
23,248
24,147
244
259
7,005
2,070
–
1,401
358
14,028
5,073
29,935
7,036
2,438
–
2,734
180
14,630
1,249
28,267
101,086
88,997
53,183
52,414
277
109
–
–
–
–
–
386
630
292
119
–
–
–
–
–
411
670
123
25
120
25
22,590
19,911
–
25
–
23
22,192
20,248
424
485
1,961
47,825
9
122
349
385
392
41,453
9
80
15,871
13,996
839
39
3,034
2,053
442
8
2,879
789
64
–
–
29
152
19
–
–
–
–
–
–
– 3,334
– 3,152
–
–
5,348
5,319
– 7,744
–11,254
–
1,381
160
14,055
21,037
–
4
–
1,481
205
–
762
219
11,015
17,486
13
35
–
1,026
49
–
– 235
–1,125
–
– 30
– 894
–17,500
–11,396
– 29,938
– 26,726
– 1
–
–
–1
–
–
-415
– 580
–
–
21,109
19,937
– 36,329
– 35,337
328
355
–
–
21,967
18,203
23,127
21,415
– 36,745
– 35,918
69,792
59,656
44,164
38,901
– 66,683
– 62,644
Note
Group
2008
2007
Automobiles
Motorcycles
Financial Services
Other Entities
Eliminations
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
20,273
21,744
22,481
21,583
–
–
3,752
4,139
4,883
8,499
–10,843
–12,477
2,847
2,412
1,931
2,685
3,986
3,831
2,354
2,062
715
2,024
13,861
10,986
1,795
468
2,599
2,029
9,950
16,841
2,612
630
2,087
2,769
11,747
19,845
101,086
88,997
53,183
52,414
122
63
2
–
252
439
21
–
–
160
10
191
630
111
62
2
–
285
460
35
–
–
162
13
210
670
28
252
3,096
10,030
14,128
27,534
311
105
31
258
2,725
7,663
12,020
22,697
178
115
317
30
18
654
2
12
–
–
–
–
– 2,290
– 2,087
18,018
13,063
– 236
–13
586
418
–16,751
–12,723
18,969
14,149
– 19,277
–14,823
2
60
27
63
15,207
10,806
12,495
10,198
364
22,519
38,506
612
21,109
32,820
9
7,746
20,312
18
5,947
16,253
– 4
–
– 414
–
– 26
–
– 598
–10
– 36,145
– 34,710
– 36,563
– 35,344
69,792
59,656
44,164
38,901
– 66,683
– 62,644
76
BMW Group
Cash Flow Statement for Group and Segments
in euro million
Net profit / loss
Reconciliation of net profit / loss to cash inflow from operating activities
Current tax
Other interest and similar income / expenses
Depreciation of leased products
Depreciation and amortisation of tangible, intangible and investment assets
Change in provisions
Change in deferred taxes
Other non-cash income and expense items
Gain / loss on disposal of non-current assets and marketable securities
Result from equity accounted investments
Changes in current assets and current liabilities
Change in inventories
Change in receivables
Change in liabilities
Income taxes paid
Interest received
Note
Group
2008
2007 1
Automobiles
Financial Services
2008
2007 1
2008
2007 1
330
3,134
226
2,721
–161
474
Net profit / loss
75
–169
6,763
3,676
– 332
– 51
424
– 21
– 26
37
859
– 485
– 448
240
1,002
– 62
4,698
3,689
221
– 256
111
–181
–11
– 700
398
571
– 817
386
Cash inflow from operating activities
40
10,872
12,183
5,110
Cash inflow from operating activities
Investment in intangible assets and property, plant and equipment
– 4,204
– 4,267
– 4,114
– 4,103
– 31
–110
Investment in intangible assets and property, plant and equipment
Reconciliation of net profit / loss to cash inflow from operating activities
Current tax
Other interest and similar income / expenses
Depreciation of leased products
Depreciation and amortisation of tangible, intangible and investment assets
Change in provisions
Change in deferred taxes
Other non-cash income and expense items
Gain / loss on disposal of non-current assets and marketable securities
Result from equity accounted investments
Changes in current assets and current liabilities
Change in inventories
Change in receivables
Change in liabilities
Income taxes paid
Interest received
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investments
Proceeds from the disposal of investments
1
– 2
4,324
24
–109
358
– 78
1
–
3
– 528
738
– 98
– 2
2
–
–
–
9
379
–113
6
3,567
– 515
– 213
94
– 22
– 25
9
597
571
– 281
191
4,471
177
– 319
2
– 353
333
–
–
– 5,317
5,039
– 4,552
–10
– 694
–127
–
–
2,786
2,858
– 868
3,945
1,043
–155
4
3,568
236
– 459
98
–180
–11
– 663
371
85
– 589
177
6,246
270
–147
16
–
–
– 2,698
2,568
– 4,099
–
– 458
– 147
–
–
–1,389
– 333
845
–1,482
– 294
5
6,591
26
62
192
163
1
–
1
–1,177
268
– 74
–
5,603
–
–
–
– 75
260
–
–
–
1,129
–1,412
3,768
6,405
–
9,890
– 359
– 14,811
–12,902
Investment in leased products
354
5,507
4,563
Disposals of leased products
– 61,630
– 54,573
Additions to receivables from sales financing
56,562
49,813
Payments received on receivables from sales financing
Investment in marketable securities
Proceeds from marketable securities
–
–
– 2
1,127
–1,160
6,233
2,140
Repurchase of treasury shares
Payment of dividend for the previous year
Interest paid
Proceeds from the issue of bonds
Repayment of bonds
Internal financing
Change in other financial liabilities
–
Change in commercial paper
8,340
Cash inflow / outflow from financing activities
177
– 142
2
272
– 44
16
– 15,164
–13,261
5,840
4,917
– 61,630
– 54,573
56,562
– 5,392
5,299
49,813
– 2,698
2,577
40
–18,652
–17,248
–14,218
–13,198
Cash outflow from investing activities
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investments
Proceeds from the disposal of investments
Investment in leased products
Disposals of leased products
Additions to receivables from sales financing
Payments received on receivables from sales financing
Investment in marketable securities
Proceeds from marketable securities
Cash outflow from investing activities
Repurchase of treasury shares
Payment of dividend for the previous year
Interest paid
Proceeds from the issue of bonds
Repayment of bonds
Internal financing
Change in other financial liabilities
Change in commercial paper
–10
– 694
– 312
9,959
–
– 458
– 389
6,038
– 5,080
– 4,152
–
9,050
– 9
12,904
–
3,603
1,526
6,168
Cash inflow / outflow from financing activities
40
Effect of exchange rate and changes in composition of Group on cash and cash equivalents
40
– 63
– 46
– 40
– 15
–11
– 20
Effect of exchange rate and changes in composition of Group on cash and cash equivalents
Change in cash and cash equivalents
5,061
1,057
3,824
650
1,264
232
Change in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
40
2,393
7,454
1,336
2,393
1,249
5,073
599
1,249
789
2,053
557
789
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
1 adjusted for changed presentation of interest
2 Interest relating to financial services business is generally classified as revenues / cost of sales.
77 Group Financial Statements
Note
Group
2008
2007 1
Automobiles
Financial Services
2008
2007 1
2008
2007 1
330
3,134
226
2,721
–161
474
Net profit / loss
379
–113
6
3,567
– 515
– 213
94
– 22
– 25
9
597
571
– 281
191
4,471
1,043
–155
4
3,568
236
– 459
98
–180
–11
– 663
371
85
– 589
177
6,246
– 294
5
6,591
26
62
192
163
1
–
1
–1,177
268
– 74
–
5,603
1
– 2
4,324
24
–109
358
– 78
1
–
3
– 528
738
– 98
– 2
Reconciliation of net profit / loss to cash inflow from operating activities
Current tax
Other interest and similar income / expenses
Depreciation of leased products
Depreciation and amortisation of tangible, intangible and investment assets
Change in provisions
Change in deferred taxes
Other non-cash income and expense items
Gain / loss on disposal of non-current assets and marketable securities
Result from equity accounted investments
Changes in current assets and current liabilities
Change in inventories
Change in receivables
Change in liabilities
Income taxes paid
Interest received
5,110
Cash inflow from operating activities
Investment in intangible assets and property, plant and equipment
– 4,204
– 4,267
– 4,114
– 4,103
– 31
–110
Investment in intangible assets and property, plant and equipment
177
– 319
2
– 353
333
–
–
– 5,317
5,039
– 4,552
–10
– 694
–127
–
–
2,786
2,858
– 868
3,945
270
–147
16
–
–
–
2
–
–
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investments
Proceeds from the disposal of investments
– 359
– 14,811
–12,902
Investment in leased products
354
5,507
4,563
Disposals of leased products
–
–
– 2,698
2,568
– 4,099
–
– 458
– 147
–
–
–1,389
– 333
845
–1,482
– 61,630
– 54,573
Additions to receivables from sales financing
56,562
49,813
Payments received on receivables from sales financing
– 75
260
–
9
Investment in marketable securities
Proceeds from marketable securities
–14,218
–13,198
Cash outflow from investing activities
–
–
–
1,129
–1,412
3,768
6,405
–
9,890
–
–
– 2
1,127
–1,160
6,233
2,140
Repurchase of treasury shares
Payment of dividend for the previous year
Interest paid
Proceeds from the issue of bonds
Repayment of bonds
Internal financing
Change in other financial liabilities
–
Change in commercial paper
8,340
Cash inflow / outflow from financing activities
Effect of exchange rate and changes in composition of Group on cash and cash equivalents
40
– 63
– 46
– 40
– 15
–11
– 20
Effect of exchange rate and changes in composition of Group on cash and cash equivalents
Change in cash and cash equivalents
5,061
1,057
3,824
650
1,264
232
Change in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
40
2,393
7,454
1,336
2,393
1,249
5,073
599
1,249
789
2,053
557
789
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
1 adjusted for changed presentation of interest
2 Interest relating to financial services business is generally classified as revenues / cost of sales.
Cash inflow from operating activities
40
10,872
12,183
in euro million
Net profit / loss
Current tax
Reconciliation of net profit / loss to cash inflow from operating activities
Other interest and similar income / expenses
Depreciation of leased products
Depreciation and amortisation of tangible, intangible and investment assets
Change in provisions
Change in deferred taxes
Other non-cash income and expense items
Gain / loss on disposal of non-current assets and marketable securities
Result from equity accounted investments
Changes in current assets and current liabilities
Change in inventories
Change in receivables
Change in liabilities
Income taxes paid
Interest received
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investments
Proceeds from the disposal of investments
Investment in leased products
Disposals of leased products
Additions to receivables from sales financing
Payments received on receivables from sales financing
Investment in marketable securities
Proceeds from marketable securities
Cash outflow from investing activities
Repurchase of treasury shares
Payment of dividend for the previous year
Interest paid
Proceeds from the issue of bonds
Repayment of bonds
Internal financing
Change in other financial liabilities
Change in commercial paper
Cash inflow / outflow from financing activities
40
75
–169
6,763
3,676
– 332
– 51
424
– 21
– 26
37
859
– 485
– 448
240
177
– 142
2
–10
– 694
– 312
9,959
–
9,050
– 9
12,904
1,002
– 62
4,698
3,689
221
– 256
111
–181
–11
– 700
398
571
– 817
386
272
– 44
16
–
– 458
– 389
6,038
–
3,603
1,526
6,168
– 15,164
–13,261
5,840
4,917
– 61,630
– 54,573
56,562
– 5,392
5,299
49,813
– 2,698
2,577
40
–18,652
–17,248
– 5,080
– 4,152
78
BMW Group
Statement of Income and Expenses recognised in Equity
in euro million
2008
2007
Fair value gains and losses on available-for-sale investments recognised directly in equity
– 7
–183
Fair value gains and losses on financial instruments used for hedging purposes
recognised directly in equity
Exchange differences arising on the translation of foreign subsidiaries
Actuarial gains and losses on defined benefit pension and similar obligations
Deferred tax on gains and losses recognised directly in equity
Gains and losses recognised directly in equity
Profit after tax attributable to shareholders of BMW AG
Aggregate amount of net profit for period and gains and losses recognised
in equity
– 617
– 806
116
226
–1,088
373
– 422
559
– 388
– 61
324
3,126
– 764
3,065
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
79 Group Financial Statements
BMW Group
Notes to the Group Financial Statements
Accounting Principles and Policies
1
Basis of preparation
The consolidated financial statements of Bayerische
Motoren Werke Aktiengesellschaft (“BMW Group Financial
Statements” or “Group Financial Statements”) at 31 De-
cember 2008 have been drawn up in accordance with
International Financial Reporting Standards (IFRSs) as en-
dorsed by the EU. The designation “IFRSs” also includes
all valid International Accounting Standards (IASs). All Inter-
pretations of the International Financial Reporting Inter-
pretations Committee (IFRIC) mandatory for the financial
year 2008 are also applied.
The changes relate to the following:
– supplementation of the Group Income Statement with
segment income statements for the Automobiles,
Motorcycles, Financial Services and Other Entities seg-
ments,
– supplementation of the Group Balance Sheet with seg-
ment balance sheets for the Automobiles, Motorcycles,
Financial Services and Other Entities segments and
– supplementation of the Group Cash Flow Statement
with segment cash flow statements for the Automobiles
and Financial Services segments.
The Group Financial Statements comply with § 315 a of
the German Commercial Code (HGB). This provision, in
conjunction with the Regulation (EC) No. 1606 / 2002 of the
European Parliament and Council of 19 July 2002, relating
to the application of International Financial Reporting
Standards, provides the legal basis for preparing consoli-
dated financial statements in accordance with interna-
tional standards in Germany and applies to financial years
beginning on or after 1 January 2005.
The BMW Group and segment income statements are
presented using the cost of sales method. The Group and
segment balance sheets correspond to the classification
provisions contained in IAS 1 (Presentation of Financial
Statements).
In order to improve clarity, various items are aggregated in
the income statement and balance sheet. These items are
disclosed and analysed separately in the Notes.
In order to support the sale of its products, the BMW Group
provides various financial services – mainly credit and
lease financing – to retail customers and to dealers. The in-
clusion of the financial services activities of the Group has
a significant impact on the Group Financial Statements.
To coincide with the first-time application of IFRS 8
(Operating Segments) at 31 December 2008, the previous
practise of providing additional information on the BMW
Group’s Industrial Operations and Financial Operations has
been discontinued and replaced by the uniform presenta-
tion of segment information. In addition to the mandatory
segment information disclosures required by IFRS 8, addi-
tional detailed segment information is provided on a volun-
tary basis in order to provide a better insight into the earn-
ings, financial and net assets position of the BMW Group.
Inter-segment transactions – relating primarily to internal
sales of products, the provision of funds and the related in-
terest – are eliminated in the “Eliminations” column. Fur-
ther information regarding the allocation of activities of the
BMW Group to segments and a description of the seg-
ments is provided in the explanatory notes to segment in-
formation on pages 129 – 131. The differences between
the new and old method of presentation and a reconcilia-
tion of significant performance indicators can be found
on the BMW Group’s website at www.bmwgroup.com/ir.
In conjunction with the refinancing of financial services
business, a significant volume of receivables arising from
retail customer and dealer financing is sold. Similarly,
rights and obligations relating to leases are sold. The sale
of receivables is a well established instrument used by
industrial companies. These transactions are usually in
the form of asset-backed financing transactions involving
the sale of a portfolio of receivables to a trust which, in turn,
issues marketable securities to refinance the purchase
price. The BMW Group continues to “service” the receiv-
ables and receives an appropriate fee for these services.
In accordance with IAS 27 (Consolidated and Separate
Financial Statements) and the interpretation contained in
SIC-12 (Consolidation – Special Purpose Entities) such
assets remain in the Group Financial Statements although
they have been legally sold. Gains and losses relating to
the sale of such assets are not recognised until the assets
are removed from the Group balance sheet on transfer of
the related significant risks and rewards. The balance
sheet value of the assets sold at 31 December 2008 totalled
euro 8.7 billion (31 December 2007: euro 6.3 billion).
In addition to credit financing and lease contracts, the
Financial Services segment also brokers insurance busi-
ness via cooperation arrangements entered into with
80
local insurance companies. These activities are not mate-
rial to the BMW Group as a whole.
The Group currency is the euro. All amounts are disclosed
in millions of euros (euro million) unless stated otherwise.
All consolidated subsidiaries have the same year-end as
BMW AG.
The Group Financial Statements, drawn up in accordance
with § 315 a HGB, and the Management Report for the
financial year 2008 will be submitted to the operator of the
electronic version of the German Federal Gazette and can
be obtained via the Company Register website. Printed
copies will also be made available on request. In addition
the Group Financial Statements and the Group Manage-
ment Report can be downloaded from the BMW Group
website at www.bmwgroup.com/ir.
The Board of Management authorised the Group Financial
Statements for issue on 18 February 2009.
2
Consolidated companies
The BMW Group Financial Statements include, besides
BMW AG, all material subsidiaries, 7 special purpose secu-
rities funds and 24 special purpose trusts (almost all used
for asset-backed financing transactions).
The number of subsidiaries, special purpose securities
funds and other special purpose trusts included in the
Group Financial Statements changed in 2008 as follows:
Included at 31.12. 2007
Included for the first time in 2008
No longer included in 2008
Included at 31.12. 2008
Germany
Foreign
Total
49
–
18
31
155
9
11
153
204
9
29
184
54 subsidiaries (2007: 65), either dormant or generating a
negligible volume of business, are not included. These
subsidiaries were not consolidated because the resulting
impact on the Group Financial Statements would not
influence the economic decisions of users taken on the
basis of the financial statements. Non-inclusion of operat-
ing subsidiaries reduces total Group revenues by 1.1 %
(2007: 1.2 %).
The joint venture BMW Brilliance Automotive Ltd., Shen-
yang, and the participation in Cirquent GmbH, Munich,
are accounted for using the equity method. 14 (2007: 16)
participations are not consolidated using the equity method
on the grounds of immateriality. They are included in the
balance sheet in the line “Other investments”, measured
at cost less, where applicable, accumulated impairment
losses.
version of the German Federal Gazette. This list, along with
the “List of Third Party Companies which are not of Minor
Importance for the Group”, will also be posted on the BMW
Group website at www.bmwgroup.com/ir.
BMW Roma S. r. l., Rome, BMW de Argentina S. A., Buenos
Aires, and BMW of Manhattan, Inc., Wilmington, Del., are
consolidated in the BMW Group Financial Statements for
the first time. In addition, SimeLease (Malaysia) Sdn Bhd,
Kuala Lumpur, and that entity’s subsidiary, SimeCredit
(Malaysia) Sdn Bhd, Kuala Lumpur – acquired by BMW
Holding B. V., The Hague, on 13 April 2007 following receipt
of approval from the relevant local authorities – were also
consolidated for the first time. The names of these entities
were changed to BMW Lease (Malaysia) Sdn Bhd, Kuala
Lumpur, and BMW Credit (Malaysia) Sdn Bhd, Kuala
Lumpur, immediately after acquisition.
A separate “List of Group Investments” pursuant to § 313 (4)
HGB will be submitted to the operator of the electronic
The purchase consideration for the two companies – all
settled with cash and cash equivalents – was euro 23 million.
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
81 Group Financial Statements
Transaction costs were not incurred. The transaction in-
volved the acquisition of all issued share capital and voting
rights. Based on the purchase price allocation, the follow-
ing carrying amounts and fair values were attributed to the
assets and liabilities of the acquired companies at the ac-
quisition date:
in euro million
Assets
Receivables from sales financing
Other assets
Liabilities
Provisions
Financial liabilities
Other liabilities
Net assets acquired
Acquisition cost
Goodwill
Carrying amount /
Fair value
179
3
4
141
28
9
23
14
The excess of cost over the fair value of recognised net
assets amounted to euro 14 million. This relates primarily
to potential synergy benefits that can be realised by ex-
panding lease and financing business. The full amount is
attributable to the Financial Services segment. This good-
will is tested annually for impairment.
BMW Lease (Malaysia) Sdn Bhd, Kuala Lumpur, and its
subsidiary, BMW Credit (Malaysia) Sdn Bhd, Kuala
Lumpur, recorded a net profit of euro 3 million in 2008. Net
revenues of the two entities in 2008 amounted to euro
18 million.
The companies entory AG, Ettlingen, axentiv AG, Darm-
stadt, Nexolab GmbH, Munich, and F. A. S.T. Gesellschaft
für angewandte Softwaretechnologie mbH, Munich, all
ceased to be consolidated companies in 2008 following
their merger with Cirquent GmbH, Munich. As a result of
the sale of 72.9 % of Cirquent GmbH, Munich, with effect
from 30 September 2008, that entity and its subsidiaries
ceased to be consolidated companies on that date. Aveling
Barford Manufacturing (Pty) Ltd., Cape Town, entory S. A.
Luxembourg, Luxembourg, Midland Gears Ltd., Bracknell,
Lingford Australia Pty Ltd., Sydney, and BMW Vertriebs
GmbH, Munich – the latter due to its merger with BMW
Leasing GmbH, Munich – also ceased to be consolidated
companies.
The BMW Group reporting entity also changed by com-
parison to the previous year as a result of the first-time
consolidation of four special purpose trusts and the decon-
solidation of four special purpose trusts and ten special
purpose securities funds.
The changes are not material, because the resulting im-
pact on the Group Financial Statements would not in-
fluence the economic decisions of users taken on the
basis of the financial statements.
3
Business disposals
72.9 % of the shares of Cirquent GmbH, Munich, were
sold with effect from 30 September 2008. Due to the fact
that this entity is no longer controlled in accordance
with the criteria stipulated in IAS 27, Cirquent GmbH,
Munich, and its subsidiaries arcensis GmbH, Stuttgart,
Silverstroke AG, Ettlingen, Cirquent Ges. m. b. H., Vienna,
Cirquent AG, Zurich, and Cirquent Ltd., Birmingham,
ceased to be consolidated companies. A put option
exists for the remaining 25.1 % of the shares of Cirquent
GmbH, Munich, which can be exercised through to
2012.
The remaining interest in Cirquent GmbH, Munich, is
included in the Group Financial Statements as an invest-
ment accounted for using the equity method.
Income and expenses recorded by Cirquent GmbH, Munich,
and by its subsidiaries during the first nine months of 2008
are included in the Group Financial Statements for the year
ended 31 December 2008.
82
4
Consolidation principles
The equity of subsidiaries is consolidated in accordance
with IFRS 3 (Business Combinations). IFRS 3 requires that
all business combinations are accounted for using the
purchase method, whereby identifiable assets and liabili-
ties acquired are measured initially at their fair value. The
excess of the Group’s interest in the net fair value of the
identifiable assets and liabilities acquired over cost is
recognised as goodwill and is subjected to a regular review
for possible impairment. Goodwill of euro 91 million which
arose prior to 1 January 1995 is netted against reserves.
The companies BMW Roma S. r. l., Rome, and BMW de
Argentina S. A., Buenos Aires, were consoli dated for the
first time with effect from 1 January 2008. The equivalent
date for BMW Lease (Malaysia) Sdn Bhd, Kuala Lumpur,
and BMW Credit (Malaysia) Sdn Bhd, Kuala Lumpur, was
1 April 2008, and that for BMW of Manhattan, Inc., Wilming-
ton, Del., was 1 October 2008.
5 Foreign currency translation
The financial statements of consolidated companies which
are drawn up in a foreign currency are translated using
the functional currency concept (IAS 21: The Effects of
Changes in Foreign Exchange Rates) and the modified
closing rate method. The functional currency of a sub-
sidiary is determined as a general rule on the basis of the
primary economic environment in which it operates and
corresponds therefore to the relevant local currency. In-
come and expenses of foreign subsidiaries are translated
in the Group Financial Statements at the average ex-
change rate for the year, and assets and liabilities are trans-
lated at the closing rate. Exchange differences arising from
the translation of shareholders’ equity are offset directly
US Dollar
British Pound
Chinese Renminbi
Japanese Yen
Australian Dollar
Receivables, liabilities, provisions, income and expenses
and profits between consolidated companies (intragroup
profits) are eliminated on consolidation.
Under the equity method, investments are measured at
the BMW Group’s share of equity taking account of fair
value adjustments on acquisition, based on the Group’s
shareholding. Any difference between the cost of invest-
ment and the Group’s share of equity is accounted for in
accordance with the purchase method. Investments in
other companies are accounted for as a general rule using
the equity method when significant influence can be exer-
cised (IAS 28 Investments in Associates). This is normally
the case when voting rights of between 20 % and 50 % are
held (associated companies).
against accumulated other equity. Exchange differences
arising from the use of different exchange rates to translate
the income statement are also offset directly against accu-
mulated other equity.
Foreign currency receivables and payables in the single
entity accounts of BMW AG and subsidiaries are recorded,
at the date of the transaction, at cost. Exchange gains and
losses computed at the end of the reporting period are
recognised as income or expense.
The exchange rates of those currencies which have a
material impact on the Group Financial Statements were
as follows:
Closing rate
Average rate
31.12. 2008
31.12. 2007
2008
2007
1.40
0.95
9.54
126.74
2.03
1.46
0.73
10.70
163.77
1.67
1.47
0.80
10.23
152.29
1.74
1.37
0.68
10.42
161.28
1.64
6
Accounting principles
The financial statements of BMW AG and of its subsidiar-
ies in Germany and elsewhere have been prepared for
consolidation purposes using uniform accounting policies
in accordance with IAS 27.
Revenues from the sale of products are recognised when
the risks and rewards of ownership of the goods are trans-
ferred to the customer, the sales price is agreed or deter-
minable and receipt of payment can be assumed. Rev-
enues are stated net of discounts, allowances, settlement
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
83 Group Financial Statements
discount and rebates. In the case of long-term construc-
tion work, revenues are generally recognised in accord-
ance with IAS 18 (Revenue) and IAS 11 (Construction Con-
tracts) on the basis of the stage of completion of work
performed using the “percentage of completion” method.
Revenues also include lease rentals and interest income
from financial services.
If the sale of products includes a determinable amount for
subsequent services (multiple-component contracts), the
related revenues are deferred and recognised as income
over the period of the contract. Amounts are normally rec-
ognised as income by reference to the expected pattern of
related expenditure.
Profits arising on the sale of vehicles for which a BMW Group
company retains a repurchase commitment (buy-back
contracts) are not recognised until such profits have been
realised. The vehicles are included in inventories and stated
at cost.
Cost of sales comprises the cost of products sold and the
acquisition cost of purchased goods sold. It includes all
directly attributable material and production costs and pro-
duction overheads, including depreciation/amortisation
of property, plant and equipment and intangible assets re-
lating to production and write-downs on inventories. Cost
of sales also includes freight and insurance costs relating
to deliveries to dealers and agency fees on direct sales.
Expenses which are directly attributable to financial services
business and interest expense from refinancing the entire
financial services business, including the expense of risk
provisions and write-downs, are reported in cost of sales.
Research costs and development costs which are
not capitalised are recognised as an expense when in-
curred.
In accordance with IAS 20 (Accounting for Government
Grants and Disclosure of Government Assistance), public
sector grants are not recognised until there is reasonable
assurance that the conditions attaching to them have been
complied with and the grants will be received. They are
recognised as income over the periods necessary to match
them with the related costs which they are intended to
compensate.
Basic earnings per share are computed in accordance
with IAS 33 (Earnings per Share). Undiluted earnings per
share are calculated for common and preferred stock by
dividing the net profit after minority interests, as attributa-
ble to each category of stock, by the average number of
outstanding shares. The net profit is accordingly allocated
to the different categories of stock. The portion of the
Group net profit for the year which is not being distributed
is allocated to each category of stock based on the number
of outstanding shares. Profits available for distribution are
determined directly on the basis of the dividend resolutions
passed for common and preferred stock. Diluted earnings
per share would have to be disclosed separately.
Purchased and internally-generated intangible assets are
recognised as assets in accordance with IAS 38 (Intangible
Assets), where it is probable that the use of the asset will
generate future economic benefits and where the costs of
the asset can be determined reliably. Such assets are
measured at acquisition and/or manufacturing cost and, to
the extent that they have a finite useful life, amortised on a
straight-line basis over their estimated useful lives. With
the exception of capitalised development costs, intangible
assets are generally amortised over their estimated useful
lives of between three and five years. Intangible assets
with finite useful lives are assessed regularly for recovera-
bility and their carrying amounts are reduced to the recov-
erable amount in the event of impairment.
Development costs for vehicle and engine projects are
capitalised at manufacturing cost, to the extent that costs
can be allocated reliably and both technical feasibility and
successful marketing are assured. It must also be prob-
able that the development expenditure will generate future
economic benefits. Capitalised development costs com-
prise all expenditure that can be attributed directly to the
development process, including development-related over-
heads. Capitalised development costs are amortised on
a systematic basis, following the commencement of pro-
duction, over the estimated product life which is generally
seven years.
All items of property, plant and equipment are considered
to have finite useful lives. They are recognised at acquisi-
tion or manufacturing cost less scheduled depreciation
based on the estimated useful lives of the assets. Depre-
ciation on property, plant and equipment reflects the pat-
tern of their usage and is generally computed using the
straight-line method. Components of items of property,
plant and equipment with different useful lives are depre-
ciated separately.
84
Systematic depreciation is based on the following useful lives, applied throughout the BMW Group:
in years
Factory and office buildings, distribution facilities and residential buildings
Plant and machinery
Other equipment, factory and office equipment
For machinery used in multiple-shift operations, depre-
ciation rates are increased to account for the additional
utilisation.
The cost of internally constructed plant and equipment
comprises all costs which are directly attributable to the
manufacturing process and an appropriate portion of
production-related overheads. This includes production-
related depreciation and an appropriate proportion of
administrative and social costs.
Financing costs are not included in acquisition or manu-
facturing cost.
Non-current assets also include assets relating to leases.
The BMW Group uses property, plant and equipment
as lessee and also leases out assets, mainly vehicles pro-
duced by the Group, as lessor. IAS 17 (Leases) contains
rules for determining, on the basis of risks and rewards,
the economic owner of the assets. In the case of finance
leases the assets are attributed to the lessee and in the
case of operating leases the assets are attributed to the
lessor.
In accordance with IAS 17, assets leased under finance
leases are measured at their fair value at the inception of
the lease or at the present value of the lease payments,
if lower. The assets are depreciated using the straight-line
method over their estimated useful lives or over the lease
period, if shorter. The obligations for future lease instalments
are recognised as financial liabilities.
Where Group products are recognised by BMW Group
leasing companies as leased assets under operating leases,
they are measured at manufacturing cost. All other leased
products are measured at acquisition cost. All leased
products are depreciated using the straight-line method
over the period of the lease to the lower of their imputed
residual value or estimated fair value. Residual value pro-
visions are treated as write-downs and offset against
leased products on the assets side of the balance sheet.
8 to 50
5 to 10
3 to 10
The recoverability of the carrying amount of intangible as-
sets (including capitalised development costs and good-
will) and property, plant and equipment is tested regularly
for impairment in accordance with IAS 36 (Impairment of
Assets) on the basis of cash generating units. This relates
primarily to capitalised development costs and property,
plant and equipment connected with vehicle projects.
If there is no indication of impairment during the year, an
annual impairment test is carried out at the year-end. An
impairment loss is recognised when the recoverable
amount (defined as the higher of the asset’s net selling
price and its value in use) is lower than the carrying
amount. The value in use is determined on the basis of a
present value computation. If the reason for the previously
recognised impairment loss no longer exists, the impair-
ment loss is reversed up to the level of its rolled-forward
depreciated or amortised cost.
Investments accounted for using the equity method are
measured at the Group’s share of equity taking account
of fair value adjustments on acquisition unless the invest-
ment is impaired.
Investments in non-consolidated subsidiaries reported in
other investments are measured at cost or, if lower, at their
fair value.
Participations are measured at their quoted market price
or fair value. When, in individual cases, these values are not
available or cannot be determined reliably, participations
are measured at cost.
Non-current marketable securities are measured according
to the category of financial asset to which they are classi-
fied. No held-for-trading financial assets are included under
this heading.
Financial assets are accounted for on the basis of the
settlement date. On initial recognition, they are measured
at acquisition cost, including transaction costs.
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
85 Group Financial Statements
Subsequent to initial recognition, available-for-sale and
held-for-trading financial assets are measured at fair value.
When market prices are not available, the fair value of
available-for-sale financial assets is measured using appro-
priate valuation techniques e.g. discounted cash flow
analysis based on market information available at the end
of the reporting period.
Available-for-sale assets include financial assets, securities
and investment fund shares. This category includes all
non-derivative financial assets which are not classified as
“loans and receivables” or “held-to-maturity investments”
or as items measured “at fair value through profit and loss”.
Loans and receivables which are not held for trading, held-
to-maturity financial investments and all financial assets
for which published price quotations in an active market
are not available and whose fair value cannot be determined
reliably, are measured, to the extent that they have a fixed
term, at amortised cost, using the effective interest method.
When the financial assets do not have a fixed term, they
are measured at acquisition cost.
In accordance with IAS 39 (Financial Instruments: Recog-
nition and Measurement), assessments are made regularly
as to whether there is any objective evidence that a finan-
cial asset or group of assets may be impaired. Impairment
losses identified after carrying out an impairment test are
recognised as an expense. Gains and losses on available-
for-sale financial assets are recognised directly in equity
until the financial asset is disposed of or is determined to
be impaired, at which time the cumulative loss previously
recognised in equity is included in net profit or loss for the
period.
With the exception of derivative financial instruments, all
receivables and other current assets relate to loans
and receivables which are not held for trading and they are
measured at amortised cost. Receivables with maturities
of over one year which bear no or a lower-than-market in-
terest rate are discounted. Appropriate impairment losses
are recognised to take account of all identifiable risks.
Receivables from sales financing comprise receivables from
retail customer, dealer and lease financing.
Impairment losses on receivables relating to the financial
services business are recognised using a uniform method-
ology that is applied throughout the Group and meets the
requirements of IAS 39. This methodology results in the
recognition of impairment losses on individual assets and
groups of assets. If there is objective evidence of impair-
ment, the BMW Group recognises impairment losses on
the basis of individual assets. Within the customer retail
business, the existence of overdue balances or the inci-
dence of similar events in the past are examples of such
objective evidence. In the event of overdue receivables,
impairment losses are always recognised individually based
on the length of period of the arrears. In the case of dealer
financing receivables, the allocation of the dealer to a cor-
responding rating category is also deemed to represent
objective evidence of impairment. If there is no objective
evidence of impairment, impairment losses are recognised
on financial assets using a portfolio approach based on
similar groups of assets. Company-specific loss proba-
bilities and loss ratios, derived from historical data, are
used to measure impairment losses on similar groups of
assets.
The recognition of impairment losses on receivables relat-
ing to industrial business is also, as far as possible, based
on the same process applied to financial services business.
Impairment losses (write-downs and allowances) on re-
ceivables are always recorded on separate accounts and
are not written off until the corresponding receivables are
derecognised.
Items are presented as financial assets to the extent that
they relate to financing transactions.
Derivative financial instruments are only used within the
BMW Group for hedging purposes in order to reduce the
currency, interest rate and market price risks from operating
activities and related financing requirements. All derivative
financial instruments (such as interest, currency and com-
bined interest/currency swaps as well as forward currency
contracts) are measured in accordance with IAS 39 at their
fair value, irrespective of their purpose or the intention for
which they are held. The fair values of derivative financial
instruments are measured using market information and
recognised valuation techniques. In those cases where
hedge accounting is applied, changes in fair value are rec-
ognised either in income or directly in equity under accu-
mulated other equity, depending on whether the transac-
tions are classified as fair value hedges or cash flow hedges.
In the case of fair value hedges, the results of the fair value
measurement of the derivative financial instruments and
86
the related hedged items are recognised in the income
statement. In the case of fair value changes in cash flow
hedges which are used to mitigate the future cash flow
risk on a recognised asset or liability or on forecast transac-
tions, unrealised gains and losses on the hedging instru-
ment are recognised initially directly in accumulated other
equity. Any such gains or losses are recognised subse-
quently in the income statement when the hedged item
(usually external revenue) is recognised in the income
statement. The portion of the gains or losses from fair value
measurement not relating to the hedged item is recog-
nised immediately in the income statement. If, contrary to
the normal case within the BMW Group, hedge account-
ing cannot be applied, the gains or losses from the fair
value measurement of derivative financial instruments are
recognised immediately in the income statement.
In accordance with IAS 12 (Income Taxes), deferred taxes
are recognised on all temporary differences between the
tax and accounting bases of assets and liabilities and on
consolidation procedures. Deferred tax assets also in-
clude claims to future tax reductions which arise from the
expected usage of existing tax losses available for carry-
forward (where future usage is probable). Deferred taxes
are computed using enacted or planned tax rates which
are expected to apply in the relevant national jurisdictions
when the amounts are recovered.
Inventories of raw materials, supplies and goods for
resale are stated at the lower of average acquisition cost
and net realisable value.
Work in progress and finished goods are stated at the
lower of average manufacturing cost and net realisable
value. Manufacturing cost comprises all costs which are
directly attributable to the manufacturing process and
an appropriate proportion of production-related over-
heads. This includes production-related depreciation
and an appropriate proportion of administrative and social
costs.
Financing costs are not included in acquisition or manu-
facturing cost.
Provisions for pensions and similar obligations are recog-
nised using the projected unit credit method in accord-
ance with IAS 19 (Employee Benefits). Under this method,
not only obligations relating to known vested benefits at
the reporting date are recognised, but also the effect of
future increases in pensions and salaries. This involves
taking account of various input factors which are evaluated
on a prudent basis. The provision is derived from an in-
dependent actuarial valuation which takes into account all
relevant biometric factors.
Actuarial gains and losses are recognised, net of deferred
tax, directly in equity.
The expense related to the reversal of the discounting of
pension obligations and the income from the expected
return on pension plan assets are reported separately as
part of the financial result. All other costs relating to alloca-
tions to pension provisions are allocated to costs by func-
tion in the income statement.
Other provisions are recognised when the BMW Group
has an obligation to a third party, an outflow of resources
is probable and a reliable estimate can be made of the
amount of the obligation. Measurement is computed on
the basis of fully attributable costs. Non-current provi-
sions with a remaining period of more than one year are
discounted to the present value of the expenditures ex-
pected to settle the obligation at the end of the reporting
period.
Financial liabilities are measured on first-time recognition
at cost, which is equivalent to the fair value of the con-
sideration given. Transaction costs are included in this
initial measurement. Subsequent to initial recognition, lia-
bilities are, with the exception of derivative financial instru-
ments, measured at amortised cost. The BMW Group
has no liabilities which are held for trading. Liabilities from
finance leases are stated at the present value of the future
lease payments and disclosed under other financial lia-
bilities.
The preparation of the Group Financial Statements in ac-
cordance with IFRSs requires management to make cer-
tain assumptions and estimates that affect the reported
amounts of assets and liabilities, revenues and expenses
and contingent liabilities. The assumptions and estimates
relate principally to the groupwide determination of eco-
nomic useful lives, the recognition and measurement of
provisions and the recoverability of future tax benefits. All
assumptions and estimates are based on factors known
at the end of the reporting period. They are determined
on the basis of the most likely outcome of future business
developments. This includes the situation in the auto-
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
87 Group Financial Statements
motive sector and the general business environment.
Estimates and underlying assumptions are checked regu-
larly. Actual amounts could differ from those assumptions
and estimates if business conditions develop differently
to the Group’s expectations at the end of the reporting
period. Where new information comes to light, differences
are reflected in the income statement and assumptions
changed accordingly.
7
New financial reporting rules
(a) Financial reporting rules applied for the first time in
the financial year 2008
The following Standards and Revised Standards were ap-
plied for the first time in the financial year 2008:
On 13 October 2008 the IASB published amendments to
IAS 39 Financial Instruments: Recognition and Measure-
ment and IFRS 7 Financial Instruments: Disclosures
(Reclassification of Financial Assets) permitting the re-
classification of certain financial instruments. Due to
the necessity to be able to apply these amendments
with immediate effect in the light of the deterioration of
the financial market crisis during the third quarter 2008,
the IASB’s usual due process was suspended. The re-
classification amendments can be applied retrospec-
tively from 1 July 2008. On 27 November 2008, the IASB
published an update of these amendments (Reclassi-
fication of Financial Assets – Effective Date and Transi-
tion) in order to clarify the effective dates of the amend-
ments.
Reclassifications of the kind referred to in the amendments
are not made by the BMW Group.
IFRS 8 (Operating Segments) was applied by the BMW
Group for the first time in the financial year 2008, resulting
in changes in the preparation and presentation of seg-
ment information.
(b) New financial reporting rules issued in 2008
The IASB revised the following Standards in 2008:
– Amendments to IAS 39 Financial Instruments: Recogni-
tion and Measurement and IFRS 7 Financial Instru-
ments: Disclosures (Reclassification of Financial Assets
and Reclassification of Financial Assets: Effective Date
and Transition)
– Amendments to IFRS 1 First-time Adoption of Interna-
tional Financial Reporting Standards and IAS 27 Con-
solidated and Separate Financial Statements (Cost of
an Investment in a Subsidiary, Jointly Controlled Entity
or Associate)
– IFRS 1 First-time Adoption of International Financial
Reporting Standards (revised version)
– Amendment to IFRS 2 (Vesting Conditions and Cancel-
lations)
– Amendments to IAS 32 Financial Instruments: Presen-
tation and IAS 1 Presentation of Financial Statements
(Puttable Financial Instruments and Obligations Arising
on Liquidation)
– Amendment to IAS 39 Financial Instruments: Recogni-
tion and Measurement (Eligible Hedged Items).
The Amendments to IAS 39 Financial Instruments: Recog-
nition and Measurement and IFRS 7 Financial Instruments:
Disclosures (Reclassification of Financial Assets and Re-
classification of Financial Assets: Effective Date and Tran-
sition) are mandatory from 1 July 2008.
The following Interpretations were also applied early for
the first time:
The amended IFRS 1 (revised version) replaces the current
IFRS 1 and must be applied by entities drawing up IFRS
financial statements after 1 July 2009.
– IFRIC 11 (IFRS 2 Group and Treasury Share Trans-
actions)
– IFRIC 12 (Service Concession Arrangements), not
yet endorsed by the EU
– IFRIC 14 (IAS 19 The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their
Interaction)
Interpretations applied for the first time in 2008 did not
have a significant impact on the BMW Group.
The amendments to IAS 39 Financial Instruments: Rec-
ognition and Measurement (Eligible Hedged Items) are
mandatory for the first time for financial years beginning on
or after 1 July 2009. The revised IAS 39 is required to be
applied retrospectively.
All other amendments referred to above are mandatory for
the first time for financial years commencing on or after
1 January 2009.
88
BMW Group
Notes to the Group Financial Statements
Notes to the Income Statement
The IASB also published a revised version of IFRS 3
(Business Combinations) and IAS 27 (Consolidated and
Separate Financial Statements) in 2008. The new rules
come into effect for financial years beginning on or after
1 July 2009.
The IASB has also published a collection of amendments
to various IFRSs (“Improvements to IFRSs”). This in-
cludes amendments to various existing IFRSs. The total
of 35 amendments to 20 IFRSs are presented in two parts:
Part I contains amendments that involve accounting
changes for presentation, recognition or measurement
purposes (24 improvements). Part II contains 11 amend-
ments involving terminology or editorial changes with
minimal effect on accounting. Unless otherwise specified,
the amendments are effective for financial years begin-
ning on or after 1 January 2009.
These new financial reporting rules are not expected to
have a significant impact on the BMW Group.
In addition, the following Interpretations were also issued:
– IFRIC 15 (Agreements for the Construction of Real
Estate). This Interpretation is mandatory for the first time
for financial years beginning on or after 1 January 2009.
– IFRIC 16 (Hedges of a Net Investment in a Foreign Oper-
ation). This Interpretation is mandatory for financial years
commencing on or after 1 October 2008, whereby exist-
ing hedging relationships that do not meet the criteria
contained in IFRIC 16 may be wound up prospectively.
– IFRIC 17 (Distributions of Non-cash Assets to Owners).
This Interpretation is mandatory for the first time for
reporting periods in financial years beginning on or after
1 July 2009.
These new financial reporting rules are not expected to
have a significant impact on the BMW Group. This also
applies to financial reporting rules issued in earlier periods
and for which application in 2008 is encouraged but not
mandatory.
8
Revenues
Revenues by activity comprise the following:
in euro million
Sales of products and related goods
Income from lease instalments
Sale of products previously leased to customers
Interest income on loan financing
Other income
Revenues
2008
2007
38,652
43,297
5,544
4,997
2,943
1,061
5,069
4,185
2,457
1,010
53,197
56,018
An analysis of revenues by operating segment and geographical region is shown in the segment information on pages
129 – 131.
9
Cost of sales
Cost of sales comprises:
in euro million
Manufacturing costs
Warranty expenditure
Cost of sales directly attributable to financial services
Interest expense relating to financial services business
Expense for risk provisions and write-downs for financial services business
Other cost of sales
Cost of sales
2008
2007
26,727
29,536
990
9,634
2,666
1,697
2,609
1,309
8,450
2,045
529
1,963
44,323
43,832
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
89 Group Financial Statements
Cost of sales include euro 13,997 million (2007: euro: 11,024
million) relating to the financial services business.
Manufacturing costs include impairment losses on intan-
gible assets and property, plant and equipment of euro
3 million (2007: euro 17 million). Cost of manufacturing is
reduced by public-sector subsidies in the form of reduced
taxes on assets and reduced consumption-based taxes
amounting to euro 23 million (2007: euro 16 million).
10
Sales and administrative costs
Sales costs amounted to euro 4,047 million (2007: euro
4,284 million) and comprise mainly marketing, advertising
and sales personnel costs.
Administrative costs amounted to euro 1,322 million (2007:
euro 970 million) and comprise expenses for administra-
tion not attributable to development, production or sales
functions. This includes most of the expenditure incurred
to reduce the size of the workforce.
11
Research and development costs
Research and development costs of euro 2,825 million (2007:
euro 2,920 million) comprise all research costs and devel-
opment costs not recognised as assets as well as amorti-
sation of capitalised development costs of euro 1,185 million
(2007: euro 1,109 million).
Total research and development expenditure comprising
research costs, development costs not recognised as
assets and capitalised development costs were as follows:
in euro million
Research and development costs
Amortisation
New expenditure for capitalised development costs
Total research and development expenditures
12
Other operating income and expenses
in euro million
Exchange gains
Income from the reversal of provisions
Income from the reversal of write-downs
Gains on the disposal of assets
Sundry operating income
Other operating income
Exchange losses
Expense for additions to provisions
Expenses for impairment losses
Sundry operating expenses
Other operating expenses
Other operating income and expenses
2008
2007
2,825
–1,185
1,224
2,864
2,920
–1,109
1,333
3,144
2008
2007
827
278
8
50
265
1,428
748
113
52
274
1,187
241
204
90
38
229
169
730
231
64
25
210
530
200
Other operating income includes public-sector grants of euro 32 million (2007: euro 36 million).
90
13
Result from equity accounted investments
The profit from equity accounted investments of euro
26 million (2007: euro 11 million) includes the result of the
joint venture BMW Brilliance Automotive Ltd., Shenyang
and the result for the final three months of the financial
year 2008 relating to the remaining investment in Cirquent
GmbH, Munich.
14
Net interest result
in euro million
Expected return on plan assets
Other interest and similar income*
thereof from subsidiaries euro 10 million (2007: euro 12 million)
Interest and similar income
Expense from reversing the discounting of pension obligations
Expense from reversing the discounting of other long-term provisions
Write-downs on marketable securities
Other interest and similar expenses*
thereof to subsidiaries euro 1 million (2007: euro 1 million)
Interest and similar expenses
Net interest result
2008
2007
360
325
685
– 550
– 96
– 123
– 161
358
287
645
– 537
– 86
– 49
– 225
– 930
– 897
– 245
– 252
* Interest income and expenses relating to stand-alone derivatives are netted within the net interest result. Interest income includes net interest income of euro 102 million (2007:
euro 70 million) relating to stand-alone derivatives.
15
Other financial result
in euro million
Income from investments
thereof from subsidiaries euro 4 million (2007: euro 1 million)
Expense of assuming losses under profit and loss transfer agreements
thereof from subsidiaries – euro 1 million (2007: –)
Impairment losses on investments in subsidiaries
Result on investments
Losses and gains relating to financial instruments
Sundry other financial result
2008
2007
4
–1
– 6
– 3
– 348
– 348
3
–
– 6
– 3
– 95
– 95
Other financial result
– 351
– 98
Other financial result includes losses on other derivative
financial instruments, in particular on stand-alone interest
rate derivatives. The decrease in the fair values of these
financial instruments reflected the change in the interest
rate structure.
16
Income taxes
Taxes on income comprise the following:
in euro million
Current tax expense
Deferred tax expense
Income taxes
2008
2007
75
– 54
21
1,002
– 263
739
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
91 Group Financial Statements
Deferred taxes are recognised on temporary differences
between the carrying amount of assets and liabilities for
IFRS purposes and their tax bases. Deferred taxes are
computed using enacted or planned tax rates which are
expected to apply in the relevant national jurisdictions
when the amounts are recovered. A uniform corporation
tax rate of 15.0 % applies in Germany from 1 January 2008.
After taking account of the average multiplier rate (Hebe-
satz) of 410.0 % for municipal trade tax and the solidarity
charge of 5.5 %, the overall tax rate for BMW companies in
Germany is 30.2 % (2007: 38.9 %). This reduced rate was
already applied in the financial year 2007 to measure de-
ferred tax assets and liabilities. The non-deductibility of
in euro million
Intangible assets
Property, plant and equipment
Leased products
Investments
Other current assets
Tax loss carryforwards
Provisions
Liabilities
Consolidations
Valuation allowance
Netting
Deferred taxes
municipal trade tax for corporation tax purposes with effect
from the beginning of the financial year 2008 has been
taken into account. The tax rates for companies outside
Germany range from 12.5 % (2007: 12.5 %) to 46.9 % (2007:
40.7 %). A valuation allowance is recognised on deferred
tax assets when recoverability is uncertain. In determining
the level of the valuation allowance, all positive and nega-
tive factors concerning the likely existence of sufficient
taxable profit in the future are considered. These estimates
can change depending on the actual course of events.
An analysis of deferred tax assets and liabilities by position
at 31 December is shown below:
Deferred tax assets
Deferred tax liabilities
2008
2007
2008
2007
1
43
573
3
1,796
1,438
1,197
2,945
1,736
9,732
1
43
558
2
1,110
1,072
1,145
3,084
1,661
8,676
– 513
– 8,353
866
– 671
– 7,285
720
1,541
454
4,137
5
3,196
–
75
1,296
406
11,110
–
– 8,353
2,757
1,528
428
3,205
1
3,767
–
51
690
329
9,999
–
– 7,285
2,714
“Netting” relates to the offset of deferred tax assets and
liabilities within individual separate entities or tax groups.
Deferred tax assets on tax losses available for carryforward
and on capital losses increased on a net basis. Tax losses
available for carryforward, which for the most part can be
carried forward without restriction, totalled euro 3.8 billion
at the end of the reporting period (2007: euro 1.8 billion). A
valuation allowance of euro 30 million (2007: euro 43 million)
was recognised in 2008 on deferred tax assets relating to
tax losses available for carryforward. Capital losses in the
United Kingdom decreased to euro 1.7 billion in 2008 (2007:
euro 2.2 billion) due to exchange rate factors. As in pre-
vious years, these tax losses – amounting to euro 483 mil-
lion at the end of the reporting period (2007: euro 628 mil-
lion) – were fully written down since they can only be
utilised against future capital gains. Capital losses are not
connected to on-going business operations.
Deferred tax assets were recognised in 2008 for entities
which recorded tax losses in either 2008 or 2007. These
deferred tax assets exceed deferred tax liabilities by
euro 185 million (2007: euro 325 million). Deferred tax
assets are recognised on the basis of management’s
assessment of whether it is probable that the relevant
entities will generate sufficient taxable profits against
which deductible temporary differences can be offset.
Deferred taxes recognised directly in equity amounted to
euro 303 million (2007: euro 116 million). The increase of
euro 187 million relates to deferred taxes on gains and losses
arising on items recognised directly in equity, namely on
marketable securities (negative amount of euro 11 million),
on derivative financial instruments (positive amount of
euro 231 million) and on actuarial gains and losses relating
to defined benefit pension plans (negative amount of euro
33 million). The change also includes a euro 39 million re-
duction in deferred taxes arising from the translation of for-
eign subsidiaries’ financial statements.
Deferred taxes are not recognised on retained profits of
euro 15,641 million (2007: euro 13,925 million) of foreign sub-
sidiaries, as it is intended to invest these profits to maintain
and expand the business volume of the relevant companies.
A computation was not made of the potential impact of
income taxes on the grounds of disproportionate expense.
92
The tax returns of BMW Group companies are checked
regularly by German and foreign tax authorities. Taking
account of a variety of factors – including existing inter-
pretations, commentaries and legal decisions taken relat-
ing to the various tax jurisdictions and the BMW Group’s
past experience – adequate provision has, as far as
identifiable, been made for potential future tax obliga-
tions.
The actual tax expense for the financial year 2008 of euro
21 million (2007: euro 739 million) is euro 85 million (2007:
euro 767 million) lower than the expected tax expense of
euro 106 million (2007: euro 1,506 million) which would theo-
retically arise if the tax rate of 30.2 % (2007: 38.9 %), appli-
cable for German companies, was applied across the
Group. The difference between the expected and actual
tax expense is attributable to the following:
in euro million
Expected tax expense
Variances due to different tax rates
Tax reductions (–) / tax increases (+) as a result of non-taxable income and non-deductible expenses
Tax expense (+) / benefits (–) for prior periods
Other variances
Actual tax expense
2008
2007
106
1,506
24
– 49
– 60
–
21
– 731
4
– 4
– 36
739
The effects of the sale of Cirquent GmbH, Munich, are in-
cluded in the line relating to non-taxable income. Rulings
made by the European Court of Justice with regard to Ger-
man tax legislation have had a positive impact on the tax
expense of German entities. The impact in 2008 is included
on the line “Tax expenses / benefits for prior periods”. The
line “Variances due to different tax rates” includes a tax
expense of euro 18 million relating to the revaluation of de-
ferred tax assets and liabilities as a result of changed tax
rates (2007: tax income of euro 491 million).
The effect of the reduction in tax expense as a result of the
utilisation of tax losses for which deferred tax assets had
not previously been recognised amounted to euro 4 million
(2007: euro 12 million). Moreover, the tax expense was re-
duced by euro 9 million (2007: euro 2 million) as a result of
deferred taxes on previously unrecognised temporary
differences. The tax expense for the valuation allowance
on deferred tax assets relating to tax losses available for
carryforward and temporary differences amounted to euro
21 million (2007: euro 4 million). Tax income from the re-
versal of previously recognised allowances amounted to
euro 21 million (2007: euro 67 million). Overall, the net tax
income from new or reversing temporary differences
totalled euro 63 million (2007: tax expense of euro 293 mil-
lion).
17
Earnings per share
Net profit for the year after minority interest
euro million
324.3
3,125.9
2008
2007
Profit attributable to common stock
Profit attributable to preferred stock
Average number of common stock shares in circulation
Average number of preferred stock shares in circulation
Earnings per share of common stock
Earnings per share of preferred stock
Dividend per share of common stock
Dividend per share of preferred stock
euro million
euro million
297.9
26.4
2,878.4
247.5
number
601,995,196
number
51,296,162
601,995,196
51,535,857
euro
euro
euro
euro
0.49
0.51
0.30
0.32
4.78
4.80
1.06
1.08
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
93 Group Financial Statements
Earnings per share of preferred stock are computed on the
basis of the number of preferred stock shares entitled to
receive a dividend in each of the relevant financial years.
Diluted earnings per share were not applicable in either the
current or prior year.
18
Other disclosures relating to the income statement
The income statement includes personnel costs as follows:
in euro million
Personnel costs
Wages and salaries
Social security, retirement and welfare costs
thereof retirement costs: euro 811 million (2007: euro 761 million)
2008
2007
5,991
1,245
6,268
1,243
7,236
7,511
Personnel costs include euro 455 million of expenditure incurred to reduce the size of the workforce. The average number
of employees during the year was:
Employees
Apprentices and students gaining work experience
Average number of employees
2008
2007
95,699
6,034
101,733
97,922
6,480
104,402
For information regarding the number of employees at the
year-end, reference is made to pages 29 – 31 in the Group
Management Report.
The fee expense recognised in the financial year 2008 for
the auditors of the Group Financial Statements, KPMG AG
Wirtschaftsprüfungsgesellschaft and its affiliated entities,
pursuant to § 314 (1) no. 9 HGB amounted to euro 7 million
(2007: euro 5 million) and consists of the following:
in euro million
Year-end audits
Audit-related services
Tax advisory services
2008 1
2007 2
3
1
3
7
2
–
3
5
1 Fee expense for KPMG Europe LLP
2 Fee expense for KPMG Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft
The item “Year-end audits” includes fees for the audit of
annual financial statements of BMW AG, the audit of the
Group Financial Statements and the audit of the annual
financial statements of subsidiaries in Germany, the United
Kingdom, Switzerland and Spain.
94
BMW Group
Notes to the Group Financial Statements
Notes to the Balance Sheet
19
Analysis of changes in Group tangible, intangible and investment assets 2008
Acquisition and manufacturing cost
1.1. 2008 1
Translation
differences
Additions
Reclassi-
fications
Disposals
31.12. 2008
1.1. 2008 1
Translation
differences
Depreciation and amortisation
Current year
Disposals
31.12. 2008
Carrying amount
31.12. 2008
31.12. 2007
in euro million
Development costs
Other intangible assets
Intangible assets
Land, titles to land, buildings, including buildings on
third party land
Plant and machinery
Other facilities, factory and office equipment
8,479
1,020
9,499
6,623
20,430
2,062
Advance payments made and construction in progress
1,019
Property, plant and equipment
30,134
–
–11
–11
–127
– 330
– 22
5
– 474
1,224
115
1,339
255
1,535
179
896
2,865
–
13
13
266
471
32
– 782
–13
848
175
1,023
142
440
182
17
781
8,855
962
9,817
6,875
21,666
2,069
1,121
31,731
Leased products
20,860
– 22
12,376
–
7,807
25,407
3,847
28
3,975
1,967
5,883
19,524
17,013
Investments accounted for using the equity method
63
–
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
261
8
21
290
–1
–
– 5
– 6
1 including gross balances brought forward for entities consolidated for the first time in the financial year
2 including impairment losses of euro 3 million
3 including assets under construction of euro 727 million
48
158
–
7
165
–
–
–
–
–
–
43
–
–
43
111
375
8
23
406
Analysis of changes in Group tangible, intangible and investment assets 2007
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
Acquisition and manufacturing cost
1.1. 2007 1
Translation
differences
Additions
Reclassi-
fications
Disposals
31.12. 2007
1.1. 2007 1
Translation
differences
Depreciation and amortisation
Current year
Disposals
31.12. 2007
Carrying amount
31.12. 2007
31.12. 2006
in euro million
Development costs
Other intangible assets
Intangible assets
Land, titles to land, buildings, including buildings on
third party land
Plant and machinery
Other facilities, factory and office equipment
7,684
813
8,497
6,425
19,640
2,055
Advance payments made and construction in progress
740
Property, plant and equipment
28,860
–
–11
– 11
–118
– 315
– 44
– 23
– 500
1,333
250
1,583
248
1,444
184
808
2,684
–
–
–
231
264
6
– 501
–
538
43
581
220
618
147
5
990
8,479
1,009
9,488
6,566
20,415
2,054
1,019
30,054
Leased products
17,628
–1,219
11,038
–
6,587
20,860
3,289
– 247
2,475
1,670
3,847
17,013
13,642
Investments accounted for using the equity method
82
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
272
195
14
481
–
–1
–
–1
– 2
18
54
–
8
62
–
–
–
–
–
37
64
187
–
251
63
261
8
21
290
1 including the gross balances brought forward of companies consolidated for the first time during the financial year
2 including impairment losses of euro 12 million
3 including impairment losses of euro 5 million
3,445
378
3,823
2,626
14,783
1,549
1
18,959
–
76
5
–
81
2,874
310
3,184
2,529
13,525
1,515
1
17,570
22
70
5
–
75
– 2
– 2
– 4
– 58
– 214
–18
–
– 290
–
–
–
–
–
–
– 4
– 4
– 48
– 200
– 43
–
– 291
–
–
–
–
–
1,185
110
1,295
202
2,002
171
–
2,375 2
–
6
–
–
6
1,109
103
1,212 2
201
2,057
213
–
2,471 3
–
6
–
–
6
846
92
938
52
423
130
–
605
–
3
–
–
3
538
36
574
61
602
141
–
804
22
–
–
–
–
3,782
394
4,176
2,718
16,148
1,572
1
20,439
–
79
5
–
84
3,445
373
3,818
2,621
14,780
1,544
1
18,946
–
76
5
–
81
11,292
11,108
5,073
568
5,641
4,157
5,518
497
1,120 3
111
296
3
23
322
5,034
636
5,670
3,945
5,635
510
1,018
63
185
3
21
209
5,034
636
5,670
3,945
5,635
510
1,018
63
185
3
21
209
4,810
502
5,312
3,896
6,115
535
739
60
197
190
14
401
11,108
11,285
95 Group Financial Statements
Acquisition and manufacturing cost
1.1. 2008 1
Translation
differences
Additions
Disposals
31.12. 2008
Reclassi-
fications
Depreciation and amortisation
1.1. 2008 1
Translation
differences
Current year
Disposals
31.12. 2008
3,445
378
3,823
2,626
14,783
1,549
1
18,959
– 2
– 2
– 4
– 58
– 214
–18
–
– 290
1,185
110
1,295
202
2,002
171
–
2,375 2
846
92
938
52
423
130
–
605
3,782
394
4,176
2,718
16,148
1,572
1
20,439
Carrying amount
31.12. 2008
31.12. 2007
5,073
568
5,641
4,157
5,518
497
1,120 3
5,034
636
5,670
3,945
5,635
510
1,018
11,292
11,108
Leased products
20,860
– 22
12,376
–
7,807
25,407
3,847
28
3,975
1,967
5,883
19,524
17,013
–
76
5
–
81
–
–
–
–
–
–
6
–
–
6
–
3
–
–
3
–
79
5
–
84
Acquisition and manufacturing cost
1.1. 2007 1
Translation
differences
Additions
Disposals
31.12. 2007
Reclassi-
fications
Depreciation and amortisation
1.1. 2007 1
Translation
differences
Current year
Disposals
31.12. 2007
2,874
310
3,184
2,529
13,525
1,515
1
17,570
–
– 4
– 4
– 48
– 200
– 43
–
– 291
1,109
103
1,212 2
201
2,057
213
–
2,471 3
538
36
574
61
602
141
–
804
3,445
373
3,818
2,621
14,780
1,544
1
18,946
111
296
3
23
322
63
185
3
21
209
Carrying amount
31.12. 2007
31.12. 2006
5,034
636
5,670
3,945
5,635
510
1,018
4,810
502
5,312
3,896
6,115
535
739
11,108
11,285
Leased products
17,628
–1,219
11,038
–
6,587
20,860
3,289
– 247
2,475
1,670
3,847
17,013
13,642
22
70
5
–
75
–
–
–
–
–
–
6
–
–
6
22
–
–
–
–
–
76
5
–
81
63
185
3
21
209
60
197
190
14
401
in euro million
Development costs
Other intangible assets
Intangible assets
Land, titles to land, buildings, including buildings on
third party land
Plant and machinery
Other facilities, factory and office equipment
Advance payments made and construction in progress
1,019
Property, plant and equipment
8,479
1,020
9,499
6,623
20,430
2,062
30,134
–
–11
–11
–127
– 330
– 22
5
– 474
Investments accounted for using the equity method
63
–
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
261
8
21
290
–1
–
– 5
– 6
1 including gross balances brought forward for entities consolidated for the first time in the financial year
2 including impairment losses of euro 3 million
3 including assets under construction of euro 727 million
in euro million
Development costs
Other intangible assets
Intangible assets
Land, titles to land, buildings, including buildings on
third party land
Plant and machinery
Other facilities, factory and office equipment
Advance payments made and construction in progress
740
Property, plant and equipment
7,684
813
8,497
6,425
19,640
2,055
28,860
Investments accounted for using the equity method
82
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
272
195
14
481
–
–11
– 11
–118
– 315
– 44
– 23
– 500
–
–1
–
–1
– 2
1,224
115
1,339
255
1,535
179
896
2,865
48
158
–
7
165
1,333
250
1,583
248
1,444
184
808
2,684
18
54
–
8
62
–
13
13
266
471
32
– 782
–13
–
–
–
–
–
–
–
–
231
264
6
– 501
–
–
–
–
–
–
848
175
1,023
142
440
182
17
781
–
43
–
–
43
538
43
581
220
618
147
5
990
37
64
187
–
251
8,855
962
9,817
6,875
21,666
2,069
1,121
31,731
111
375
8
23
406
8,479
1,009
9,488
6,566
20,415
2,054
1,019
30,054
63
261
8
21
290
1 including the gross balances brought forward of companies consolidated for the first time during the financial year
2 including impairment losses of euro 12 million
3 including impairment losses of euro 5 million
96
20
Intangible assets
Intangible assets mainly comprise capitalised development
costs on vehicle and engine projects as well as subsidies
for tool costs, licences, purchased development projects
and software. Amortisation on intangible assets is pre-
sented in cost of sales, administrative costs, research and
development costs and other operating expenses.
In addition, intangible assets include a brand-name right
amounting to euro 37 million (2007: euro 49 million) and
goodwill amounting to euro 111 million (2007: euro 163 mil-
lion) with indefinite useful lives. The latter comprises
goodwill arising on the acquisition of DEKRA SüdLeasing
Services GmbH, Stuttgart, and its subsidiaries and on the
acquisition of SimeLease (Malaysia) Sdn Bhd, Kuala Lumpur,
and its subsidiary SimeCredit (Malaysia) Sdn Bhd, Kuala
Lumpur. This item is not presented separately in the Group
balance sheet since the amount is not significant in rela-
tion to either the balance sheet total or intangible assets.
As in the previous year there were no reversals of impair-
ment losses on intangible assets.
Changes in intangible assets during the year are shown in
the analysis of changes in Group tangible, intangible and
investment assets on pages 94 – 95.
21
Property, plant and equipment
A break-down of the different classes of property, plant and
equipment disclosed in the balance sheet and changes
during the year are shown in the analysis of changes in
Group tangible, intangible and investment assets on pages
94 – 95.
Property, plant and equipment include a total of euro 68 mil-
lion (2007: euro 102 million) relating to operational buildings
used by BMW AG as well as leased plant, machinery and
other equipment used primarily at the Oxford and Hams
Hall production plants. Due to the nature of the lease ar-
rangements (finance leases), economic ownership of these
assets is attributable to the BMW Group. The leases for
buildings, with a carrying amount of euro 50 million (2007:
euro 60 million) run for periods up to 2028 at the latest.
Some of the leases contain extension and purchase op-
tions. The leases for plant and machinery and other equip-
ment at the Oxford plant, with a carrying amount of euro
6 million (2007: euro 19 million) at 31 December, run for
periods up to 2011 at the latest. For each of the leases,
there is a recurring option to extend the leases by one
year. A purchase option was not agreed. The lease for
plant and machinery and other facilities, factory and office
equipment at the Hams Hall production plant, with a
carrying amount of euro 10 million (2007: euro 17 million)
runs until 2018 and may be extended for one year periods
thereafter. A purchase option was not agreed.
Disposals of land, titles to land and buildings, including
buildings on third party land relate primarily to a number of
properties which were sold and are being leased back.
Minimum lease payments of the relevant leases are as
follows:
in euro million
31.12. 2008
31.12. 2007
Total of future minimum lease payments
due within one year
due between one and five years
due later than five years
Interest portion of the future minimum lease payments
due within one year
due between one and five years
due later than five years
Present value of future minimum lease payments
due within one year
due between one and five years
due later than five years
67
202
157
426
9
27
49
85
58
175
108
341
85
318
201
604
16
48
73
137
69
270
128
467
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
97 Group Financial Statements
22
Leased products
The BMW Group, as lessor, leases out assets (predomi-
nantly own products) as part of its financial services busi-
ness. Minimum lease payments of euro 8,515 million (2007:
euro 7.419 million) from non-cancellable operating leases
fall due as follows:
in euro million
within one year
between one and five years
later than five years
Leased products
31.12. 2008
31.12. 2007
4,589
3,925
1
8,515
3,902
3,516
1
7,419
Contingent rents of euro 30 million (2007: euro 10 million),
based principally on the distance driven, were recognised
in income. The agreements have, in part, extension and
purchase options as well as price escalation clauses.
Changes in leased products during the year are shown in
the analysis of changes in Group tangible, intangible and
investment assets on pages 94 – 95.
23
Investments accounted for using the equity
method and other investments
Investments accounted for using the equity method
comprise the Group’s interests in the joint venture BMW
Brilliance Automotive Ltd., Shenyang, and, for the first
time in 2008, the investment in Cirquent GmbH, Munich.
The disclosures relating to the income statement include
the income and expenses of Cirquent GmbH, Munich,
since the deconsolidation of the Cirquent Group. The ag-
gregated interests of the Group are as follows:
in euro million
31.12. 2008
31.12. 2007
Disclosures relating to the income statement
Income
Expenses
Disclosures relating to the balance sheet
Non-current assets
Current assets
Equity
Non-current liabilities
Current liabilities
627
603
139
234
126
31
216
627
615
106
259
80
41
244
Other investments relate primarily to investments in non-
consolidated subsidiaries, participations and non-current
marketable securities.
consolidation of BMW Lease (Malaysia) Sdn Bhd, Kuala
Lumpur, BMW Roma S. r. l., Rome, and BMW de Argentina
S. A., Buenos Aires.
Additions to investments in non-consolidated subsidiaries
relate to the foundation of BMW Bank OOO, Moscow,
and an equity capital increase at the level of Husqvarna
Motorcycles S. r. l., Cassinetta di Biandronno.
Items reported as disposals of investments in non-con-
solidated subsidiaries result primarily from the first-time
Impairment losses on investments in subsidiaries relate to
BMW Philippines Corp., Manila.
A break-down of the different classes of other investments
disclosed in the balance sheet and changes during the
year are shown in the analysis of changes in Group tangible,
intangible and investment assets on pages 94 – 95.
98
24
Receivables from sales financing
Receivables from sales financing, totalling euro 38,063 mil-
lion (2007: euro 34,244 million), comprise euro 29,470 mil-
lion (2007: euro 26,181 million) for credit financing for retail
customers and dealers and euro 8,593 million (2007: euro
8,063 million) for finance leases. Finance leases are
analysed as follows:
in euro million
31.12. 2008
31.12. 2007
Gross investment in finance leases
due within one year
due between one and five years
due later than five years
Present value of future minimum lease payments
due within one year
due between one and five years
due later than five years
3,315
6,357
29
9,701
2,932
5,634
27
8,593
3,215
6,013
1
9,229
2,886
5,176
1
8,063
Unrealised interest income
1,108
1,166
Contingent rents recognised as income (generally relating
to the distance driven) amounted to euro 5 million (2007:
euro 12 million). Write-downs on finance leases amounting
to euro 52 million (2007: euro 52 million) were measured and
recognised on the basis of specific credit risks.
Allowance for impairment and credit risk
in euro million
Gross carrying amount
Allowance for impairment
Net carrying amount
Receivables from sales financing include euro 22,192 mil-
lion (2007: euro 20,248 million) with a remaining term of
more than one year.
31.12. 2008
31.12. 2007
39,116
1,053
38,063
35,036
792
34,244
Allowances for impairment on receivables from sales financing developed as following during the year under report:
2008
in euro million
Balance at 1 January *
Allocated / reversed
Utilised
Exchange rate impact and other changes
Balance at 31 December
2007
in euro million
Balance at 1 January *
Allocated / reversed
Utilised
Exchange rate impact and other changes
Balance at 31 December
* including entities consolidated for the first time during the financial year
Allowance for impairment recognised on a
group basis
specific item basis
672
543
– 262
–15
938
125
10
–14
– 6
115
Allowance for impairment recognised on a
group basis
specific item basis
590
277
–184
–16
667
149
– 3
–17
– 4
125
Total
797
553
– 276
– 21
1,053
Total
739
274
– 201
– 20
792
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
99 Group Financial Statements
At the end of the reporting period, impairment allowances
of euro 115 million (2007: euro 125 million) were recognised
on a group basis on gross receivables from sales financing
totalling euro 17,274 million (2007: euro 18,979 million). Im-
pairment allowances of euro 938 million (2007: euro 667 mil-
lion) were recognised at 31 December 2008 on a specific
item basis on gross receivables from sales financing total-
ling euro 7,755 million (2007: euro 5,493 million).
Receivables from sales financing which were not overdue
at the end of the reporting period amounted to euro 14,087
million (2007: euro 10,564 million). No impairment losses
were recognised for these balances.
The estimated fair value of collateral received for receiva-
bles on which impairment losses were recognised totalled
euro 14,570 million (2007: euro 14,617 million) at the end of
the reporting period. This collateral related primarily to
vehicles. The carrying amount of assets held as collateral
and taken back as a result of payment default amounted to
euro 44 million (2007: euro 36 million).
As in the previous year, there were no receivables from
sales financing at the end of the reporting period which
have been renegotiated and which were otherwise over-
due or otherwise required recognition of an impairment
loss.
25
Financial assets
Financial assets comprise:
in euro million
Interest and currency derivatives
Marketable securities and investment funds
Loans to third parties
Credit card receivables
Other
Financial assets
thereof non-current
thereof current
31.12. 2008
31.12. 2007
3,449
653
13
253
746
5,114
1,808
3,306
1,980
1,959
28
260
568
4,795
1,173
3,622
The change in the line item “Interest and currency deriva-
tives” relates primarily to changed exchange rate parities
and the changed interest rate structure.
to the newly founded BMW Trust e. V., Munich, in con-
junction with the creation of an external fund for pension
obligations.
The decrease in marketable securities and investment
funds was primarily attributable to the transfer of securities
Marketable securities and investment funds relate to avail-
able-for-sale financial assets and comprise:
in euro million
Stocks
Investment funds
Fixed income securities
Sundry marketable securities
Marketable securities and investment funds
31.12. 2008
31.12. 2007
32
–
620
1
653
452
415
1,082
10
1,959
100
The contracted maturities of debt securities are as follows:
in euro million
Fixed income securities
due within three months
due later than three months
Sundry marketable securities
due within three months
due later than three months
Debt securities
31.12. 2008
31.12. 2007
–
620
1
–
621
–
1,082
1
9
1,092
Obligations resulting from pre-retirement part-time work
arrangements were previously secured by investment
funds maintained with the Deutsche Treuinvest Stiftung,
Frankfurt am Main. In 2008, these investment funds were
transferred to the newly founded BMW Trust e. V., Munich,
in conjunction with a Contractual Trust Arrangement (CTA).
The value of the investment funds that exceeds the obli-
gations for pre-retirement part-time work arrangements
(settlement arrears) amounting to euro 35 million is reported
under other financial assets.
Allowance for impairment and credit risk
Receivables relating to the credit card business comprise the following:
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
in euro million
Gross carrying amount
Allowance for impairment
Net carrying amount
Allowances for impairment losses on receivables relating to credit card business developed as following:
2008
in euro million
Balance at 1 January
Allocated / reversed
Utilised
Exchange rate impact and other changes
Balance at 31 December
2007
in euro million
Balance at 1 January
Allocated / reversed
Utilised
Exchange rate impact and other changes
Balance at 31 December
Allowance for impairment recognised on a
group basis
specific item basis
1
28
–15
1
15
6
– 5
–1
–
–
Allowance for impairment recognised on a
group basis
specific item basis
1
–
–
–
1
4
12
– 9
–1
6
31.12. 2008
31.12. 2007
268
15
253
267
7
260
Total
7
23
– 16
1
15
Total
5
12
– 9
–1
7
101 Group Financial Statements
26
Income tax assets
Income tax assets can be analysed as follows:
31 December 2008
in euro million
Deferred tax
Current tax
Income tax assets
31 December 2007
in euro million
Deferred tax
Current tax
Income tax assets
27
Other assets
Other assets comprise:
in euro million
Other taxes
Receivables from subsidiaries
Receivables from other companies in which an investment is held
Prepayments
Collateral receivables
Sundry other assets
Other assets
thereof non-current
thereof current
Maturity
within one year
Maturity
later than one year
–
498
498
866
104
970
Maturity
within one year
Maturity
later than one year
–
118
118
720
119
839
Total
866
602
1,468
Total
720
237
957
31.12. 2008
31.12. 2007
373
425
103
848
291
462
554
641
104
729
135
361
2,502
2,524
660
1,842
415
2,109
Receivables from subsidiaries include trade receivables
of euro 139 million (2007: euro 96 million) and financial re-
ceivables of euro 286 million (2007: euro 545 million). They
include euro 43 million (2007: euro 25 million) with a remain-
ing term of more than one year.
Prepayments of euro 848 million (2007: euro 729 million)
relate mainly to prepaid interest, development costs not
eligible for capitalisation as non-current assets, insurance
premiums and rent. Prepayments of euro 483 million (2007:
euro 494 million) have a maturity of less than one year.
Receivables from other companies in which an investment
is held are, as in the previous year, all due within one year.
Collateral receivables comprise mainly customary collateral
arising on the sale of receivables.
102
28
Inventories
Inventories comprise the following:
in euro million
31.12. 2008
31.12. 2007
Raw materials and supplies
Work in progress, unbilled contracts
Finished goods and goods for resale
Inventories
596
803
5,891
7,290
632
871
5,846
7,349
At 31 December 2008, inventories measured at their net
realisable value amounted to euro 426 million (2007: euro
473 million) and are included in total inventories of euro
7,290 million (2007: euro 7,349 million). Write-downs to net
realisable value amounting to euro 47 million (2007: euro
40 million) were recognised in 2008.
29
Trade receivables
Trade receivables amounting in total to euro 2,305 million
(2007: euro 2,672 million) include euro 40 million due later
than one year (2007: euro 3 million).
Allowance for impairment and credit risk
in euro million
Gross carrying amount
Allowance for impairment
Net carrying amount
31.12. 2008
31.12. 2007
2,373
68
2,305
2,717
45
2,672
Allowances on trade receivables developed as following during the year under report:
2008
in euro million
Balance at 1 January
Allocated / reversed
Utilised
Exchange rate impact and other changes
Balance at 31 December
2007
in euro million
Balance at 1 January
Allocated / reversed
Utilised
Exchange rate impact and other changes
Balance at 31 December
Allowance for impairment recognised on a
group basis
specific item basis
38
32
– 8
–
62
7
2
– 2
–1
6
Allowance for impairment recognised on a
group basis
specific item basis
68
–11
–18
–1
38
9
2
– 4
–
7
Total
45
34
–10
–1
68
Total
77
– 9
– 22
–1
45
As in the previous year, there were no trade receivables
at the end of the reporting period which have been rene-
gotiated and which were otherwise overdue or otherwise
required recognition of an impairment loss.
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
103 Group Financial Statements
Some trade receivables were overdue for which an impairment loss was not recognised. Overdue balances are analysed
into the following time windows:
in euro million
1 – 30 days overdue
31 – 60 days overdue
61 – 90 days overdue
91 – 120 days overdue
More than 120 days overdue
31.12. 2008
31.12. 2007
301
81
3
6
43
434
327
63
24
14
46
474
Receivables that are overdue by between 1 and 30 days
do not normally result in bad debt losses since the overdue
nature of the receivables is primarily attributable to the
timing of receipts around the month-end. In the case of
trade receivables, collateral is generally held in the form of
vehicles documents and bank guarantees so that the risk
of bad debt loss is extremely low.
30
Cash and cash equivalents
Cash and cash equivalents of euro 7,454 million (2007: euro
2,393 million) comprise cash on hand and at bank, all with
a maturity of under three months.
31
Equity
Equity of the BMW Group developed during the year under report as follows:
in euro million
Subscribed
capital
Capital
reserves
Revenue
reserves
Accumulated other equity
Treasury
shares
Minority
interest
Total
Trans-
lation dif-
ferences
Securities Derivative
financial
instru-
ments
Pension
obliga-
tions
31 December 2006
654
1,911
18,121
– 837
214
178
–1,115
–
4
19,130
Dividends paid
Translation differences
Financial instruments
Actuarial gains and losses
on pension obligations
Deferred tax on transactions
recognised directly in equity
Net profit 2007
31 December 2007
Repurchase of treasury shares
Dividends paid
Translation differences
Financial instruments
Actuarial gains and losses
on pension obligations
Deferred tax on transactions
recognised directly in equity
Net profit 2008
Other changes
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,126
– 458
–
– 422
–
–
–
7
–
–183
366
–
31
–
–
–
–
–
4
–
–
528
–113
– 279
–
–
–
–
–
–
–
–
–
–1
–
–
–
8
– 458
– 385
183
528
– 388
3,134
654
1,911
20,789
–1,259
35
438
– 835
–
11
21,744
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 694
–
–
–
–
324
–
–
–
– 806
–
–
–
–
–
–
–
–
–
–
–16
– 7
– 601
–
–
–11
224
–
–
–
–
–
–
111
–
5
13
–
–
–10
–
–
–
–
–
–
–
–
–
–1
–
–
–
6
– 8
–10
– 694
– 712
– 608
5
226
330
– 8
31 December 2008
654
1,911
20,419
– 2,065
17
45
– 706
–10
8
20,273
104
Number of shares issued
At 31 December 2008, common stock issued by BMW AG
was divided into 601,995,196 shares with a par-value of
one euro. Preferred stock issued by BMW AG was divided
into 52,196,162 shares with a par-value of one euro, also
unchanged from the previous year. Unlike the common
stock, no voting rights are attached to the preferred stock.
All of the Company’s stock is issued to bearer. Preferred
stock bears an additional dividend of euro 0.02 per share.
During the financial year 2008, BMW AG acquired 900,000
treasury shares of preferred stock at an average price of
euro 28.54 per share. 536,870 of these shares were issued
to employees at a reduced price of euro 13.77 per share
in conjunction with an employee share scheme. These
shares are entitled to receive dividends for the financial
year 2009. The remaining 363,130 shares of preferred stock
were held by BMW AG as treasury shares at 31 December
2008. As a result of the buy-back of shares of preferred
stock and their subsequent issue, the preferred stock por-
tion of share capital remained unchanged at euro 52 million.
The effect of applying IFRS 2 (Share-Based Payments)
to the employee share scheme was not material for the
Group.
At the Annual General Meeting of BMW AG on 8 May 2008,
the shareholders again authorised the Board of Manage-
ment to acquire treasury shares via the stock exchange,
up to a maximum of 10 % of the share capital in place at the
date of the resolution and to withdraw those shares from
circulation without any further resolution by the Annual
General Meeting. At the same time, the authorisation from
15 May 2007 to acquire treasury shares was rescinded. The
authorisation from 8 May 2008 is valid until 6 November
2009. The authorisation was not exercised in 2008. It has
not yet been decided whether or the extent to which the
authorisation will be used in the future.
Capital reserves
Capital reserves include premiums arising from the issue
of shares and were unchanged at euro 1,911 million.
Revenues reserves
Revenue reserves comprise the post-acquisition and non-
distributed earnings of consolidated companies. In addi-
tion, revenue reserves include both positive and negative
goodwill arising on the consolidation of Group companies
prior to 31 December 1994.
Revenue reserves decreased marginally to euro 20,419 mil-
lion during the year under report. They were increased in
2008 by the amount of the net profit attributable to share-
holders of BMW AG amounting to euro 324 million and
were reduced by the payment of the dividend for 2007
amounting to euro 694 million.
The unappropriated profit of BMW AG of euro 197 million
for 2008 will be proposed to the Annual General Meeting
for distribution. The proposed distribution must be au-
thorised by the shareholders at the Annual General Meeting
of BMW AG. It is therefore not recognised as a liability in
the Group Financial Statements.
Accumulated other equity
Accumulated other equity consists of all amounts rec-
ognised directly in equity resulting from the translation
of the financial statements of foreign subsidiaries, the
effects of recognising changes in the fair value of de-
rivative financial instruments and marketable securities
directly in equity, actuarial gains and losses relating to
defined benefit pension plans and similar obligations and
deferred taxes.
Minority interest
Equity attributable to minority interests amounted to euro
8 million (2007: euro 11 million). This includes a minority
interest of euro 6 million (2007: euro 8 million) in the results
for the year.
Capital management disclosures
The BMW Group’s objectives when managing capital are
to safeguard the Group’s ability to continue as a going
concern in the long-term and to provide an adequate return
to shareholders.
The BMW Group manages the capital structure and
makes adjustments to it in the light of changes in eco-
nomic conditions and the risk profile of the underlying
assets.
In order to manage its capital structure, the BMW Group
uses various instruments including the amount of divi-
dends paid to shareholders and share buy-backs.
The BMW Group manages the structure of debt capital
on the basis of a target debt ratio. An important aspect of
the selection of financial instruments is the objective to
achieve matching maturities for the Group’s financing
requirements. In order to reduce non-systematic risk, the
BMW Group uses a variety of financial instruments avail-
able on the world’s capital markets to achieve optimal di-
versification.
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
105 Group Financial Statements
The capital structure at the end of the reporting period was as follows:
in euro million
31.12. 2008
31.12. 2007
Equity attributable to shareholders of BMW AG
Proportion of total capital
Non-current financial liabilities
Current financial liabilities
Total financial liabilities
Proportion of total capital
Total capital
20,275
25.1 %
30,497
29,887
60,384
74.9 %
80,659
21,733
33.1 %
21,428
22,493
43,921
66.9 %
65,654
Equity attributable to shareholders of BMW AG decreased
during the financial year by 6.7 %, mainly as a result of high-
er translation differences on various items within equity.
The decrease in percentage terms (equity attributable to
shareholders of BMW AG as a percentage of total capital)
was due to the higher funding requirements for financial
services business.
The BMW Group is officially rated by the rating agencies
Standard & Poor’s and Moody’s. The long-term ratings
for the BMW Group published by Standard & Poor’s and
Moody’s in September 2005 remain valid. In November
2008 Moody’s issued an A2 rating (with negative outlook)
and Standard & Poor’s issued an A rating (with stable out-
look) for the BMW Group. On 18 February 2009 Moody’s
revised the rating to “under review for possible downgrade”.
As a result of its good credit standing, reflected in the long-
standing first-class short-term ratings issued by Moody’s
(P-1) and Standard & Poor’s (A-1), the BMW Group is also
able to obtain competitive re financing terms and conditions
in the short term.
Non-current financial liabilities
Current financial liabilities
Outlook
* rating under review for possible downgrade
Moody’s
Standard & Poor’s
A2
P-1
under review *
A
A-1
stable
32
Pension provisions
Pension provisions are recognised as a result of commit-
ments to pay future vested pension benefits and current
pensions to present and former employees of the BMW
Group and their dependants. Depending on the legal, eco-
nomic and tax circumstances prevailing in each country,
various pension plans are used, based generally on the
length of service, final salary and remuneration structure
of the employees involved. Due to similarity of nature,
the obligations of BMW Group companies in the U. S. and
of BMW (South Africa) (Pty) Ltd., Pretoria, for post-em-
ployment medical care are also disclosed as pension pro-
visions. The provision for these pension-like obligations
amounts to euro 66 million (2007: euro 55 million) and is
measured, similar to pension obligations, in accordance
with IAS 19. In the case of post-employment medical care,
it is assumed that the costs will increase on a long-term
basis by 6 % p.a. (unchanged from the previous year). The
expense for medical care costs in the financial year 2008
was euro 7 million (2007: euro 6 million).
Post-employment benefit plans are classified as either de-
fined contribution or defined benefit plans. Under defined
contribution plans, an enterprise pays fixed contributions
into a separate entity or fund and does not assume any
other obligations. The total pension expense for all defined
contribution plans of the BMW Group amounted to euro
412 million (2007: euro 442 million). This includes employer
contributions paid to state pension insurance schemes
amounting to euro 376 million (2007: euro 406 million).
Under defined benefit plans, the enterprise is required to
pay the benefits granted to present and past employees.
Defined benefit plans may be funded or unfunded, the lat-
ter sometimes covered by accounting provisions. Most of
the pension commitments of the BMW Group in Germany
relate to BMW AG. In 2008 BMW AG and a number of Ger-
man subsidiaries transferred some of their pension obli-
gations to the newly founded BMW Trust e. V., Munich, in
conjunction with a Contractual Trust Arrangement (CTA).
In addition, the existing deferred remuneration retirement
106
scheme, into which employees can make contributions
in the form of salary conversion, was transferred in full
to BMW Trust e.V., Munich. Obligations not covered by
assets held by the fund are covered by pension provisions.
The main other countries with funded plans were the
United Kingdom, the USA, Switzerland, the Netherlands,
Belgium and Japan.
Pension obligations are computed on an actuarial basis at
the level of the defined benefit obligation. This computa-
tion requires the use of estimates. The main assumptions,
in addition to life expectancy, depend on the economic
situation in each particular country. The following weighted
average values are used in the United Kingdom and in the
other countries:
31 December
in %
Discount rate
Salary level trend
Pension level trend
Germany
2008
2007
United Kingdom
2008
2007
Other
2008
2007
6.00
3.25
2.25
5.50
3.25
1.75
6.01
4.01
3.11
5.53
4.39
3.38
5.44
3.58
1.86
5.78
3.36
1.90
The salary level trend refers to the expected rate of salary
increase which is estimated annually depending on in-
flation and career development of employees within the
Group.
In the case of externally funded plans, the defined benefit
obligation is offset against plan assets measured at their
fair value. Where the plan assets exceed the pension obli-
gations and the enterprise has a right of reimbursement or
a right to reduce future contributions, the surplus amount
is recognised in accordance with IAS 19 as an asset under
sundry other assets. In the case of externally funded plans,
a liability is recognised under pension provisions where
the benefit obligation exceeds fund assets.
Actuarial gains or losses may result from increases or de-
creases in either the present value of the defined benefit
obligation or in the fair value of the plan assets. Causes of
actuarial gains or losses include the effect of changes in
the measurement parameters, changes in estimates caused
by the actual development of risks impacting on pension
obligations and differences between the actual and ex-
pected return on plan assets. Past service cost arises where
a BMW Group company introduces a defined benefit plan
or changes the benefits payable under an existing plan.
Based on the measurement principles contained in IAS 19,
the following funding status applies to the Group’s pen-
sion plans:
in euro million
2008
2007
2008
2007
2008
2007
2008
2007
Germany
United Kingdom
Other
Total
Present value of pension benefits covered by accounting provisions
31
3,849
–
–
Present value of funded pension benefits
3,817
–
4,403
6,327
Defined benefit obligations
Fair value of plan assets
Net obligation
Income (+) expense (–) from past service cost
not yet recognised
Amount not recognised as an asset because of
the limit in IAS 19.58
3,848
3,849
4,403
6,327
1,155
–
4,059
5,686
2,693
3,849
344
641
–
–
–
–
–
1
–
6
131
406
537
277
260
4
9
119
162
3,968
336
8,626
6,663
455
8,788
10,631
343
5,491
6,029
112
3,297
4,602
– 2
4
– 2
17
10
23
Balance sheet amounts at 31 December
2,693
3,849
345
647
273
127
3,311
4,623
thereof pension provision
thereof pension assets (–)
2,693
3,849
345
651
–
–
–
– 4
276
– 3
127
3,314
4,627
–
– 3
– 4
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
107 Group Financial Statements
Pension provisions relating to pension plans in other coun-
tries amounted to euro 276 million (2007: euro 127 million).
This includes euro 145 million (2007: euro 8 million) relating
to externally funded plans.
The change in the defined benefit obligations was attribut-
able mainly to changes in the discount rates used in the
actuarial computation. In addition, exchange rate changes,
in particular the depreciation of the British pound, had a
substantial impact on the measurement of the defined
benefit obligations and fund assets.
The changes in the pension provision and pension as-
sets (reimbursement claims or right to reduce future
contributions to the funds) as disclosed in the balance
sheet can be derived as follows:
in euro million
2008
2007
2008
2007
2008
2007
2008
2007
Germany
United Kingdom
Other
Total
Balance sheet amounts at 1 January
3,849
4,414
647
439
127
164
4,623
5,017
Deconsolidation effects
Expense from pension obligations
– 4
293
–
239
4
76
–
52
–
30
–
28
–
–
399
319
Pension payments or transfers to external funds
–1,471
– 80
– 98
– 47
–14
– 67
–1,583
–194
Actuarial gains (–) and losses (+)
on defined benefit obligations
– 271
– 776
– 647
Actuarial gains (–) and losses (+) on plan assets
278
–
486
211
42
Employee contributions to the deferred
remuneration retirement scheme
Translation differences and other changes
20
–1
52
–
–
–
–123
– 50
–1
104
–
27
8
2
– 919
– 557
868
44
–
20
52
– 8
– 97
– 58
Balance sheet amounts at 31 December
2,693
3,849
345
647
273
127
3,311
4,623
thereof pension provision
thereof pension assets (–)
2,693
3,849
345
651
–
–
–
– 4
276
– 3
127
3,314
4,627
–
– 3
– 4
The defined benefit plans of the BMW Group give rise to
an expense from pension obligations in the financial year
2008 of euro 399 million (2007: euro 319 million), comprising
the following components:
in euro million
2008
2007
2008
2007
2008
2007
2008
2007
Germany
United Kingdom
Other
Total
Current service cost
Expense from reversing the discounting of pension obligations
Past service cost
Expected return on plan assets (–)
Expense from pension obligations
117
209
150
192
–1
–103
59
316
4
64
323
–
31
25
–1
29
22
–
207
550
243
537
2
–103
– 32
293
–
– 303
– 335
– 25
– 23
– 360
– 358
239
76
52
30
28
399
319
The expense from reversing the discounting of pension
obligations and the income from the expected return on
plan assets are reported as part of the financial result. All
other components of pension expense are included in the
relevant income statement under costs by function.
Depending on the risk structure of the pension obligations
involved, pension plan assets are invested in various in-
vestment classes, the most predominant one being bonds.
Other equity instruments, property and alternative invest-
ments (e. g. infrastructure funds) are also considered.
The expected rate of return is derived on the basis of the
specific investment strategy applied to each individual
pension fund. This is determined on the basis of the rates
of return from the individual investment classes taking
account of costs and unplanned risks. This approach re-
sulted in the following expected rates of return on plan
assets (disclosed on the basis of weighted averages).
108
in %
Germany
2008
2007
United Kingdom
2008
2007
Other
2008
2007
Expected rate of return on plan assets
5.43
–
5.93
5.75
6.99
7.25
Compared to the expected return of euro 360 million (2007:
euro 358 million), fund assets actually decreased in the
financial year 2008 by euro 508 million (2007: increase in
fund assets of euro 314 million). This gave rise to actuarial
losses on fund assets of euro 868 million (2007: euro 44 mil-
lion). The actuarial losses on fund assets compare with
actuarial gains of euro 919 million (2007: euro 557 million) on
benefit obligations. This offsetting effect was attributable
primarily to the fact that the pension funds’ investment
strategy is based on the structure of the related benefit
obligations.
The level of the pension obligations differs depending on
the pension system applicable in each country. Since the
state pension system in the United Kingdom only pro-
vides a basic fixed amount benefit, retirement benefits are
largely organised in the form of company pensions on
the one hand and arrangements financed by the individual
on the other. The pension benefits in the United Kingdom
therefore contain contributions made by the employee.
The net obligation from pension plans in Germany, the
United Kingdom and other countries changed as follows:
Germany
in euro million
Defined benefit obligation
Plan assets
Net obligation
2008
2007
2008
2007
2008
2007
1 January
Deconsolidation effects
Expense from pension obligations
Payments to external funds
Employee contributions (deferred remuneration
retirement scheme)
Payments on account and pension payments
Actuarial gains (–) and losses (+)
Translation differences and other changes
3,849
4,414
– 4
325
–
–
239
–
49
52
– 99
– 80
– 271
– 776
–1
–
–
–
– 32
–1,375
– 29
3
278
–
–
–
–
–
–
–
–
–
3,849
4,414
– 4
293
–1,375
–
239
–
20
52
– 96
– 80
7
– 776
–1
–
31 December
3,848
3,849
–1,155
–
2,693
3,849
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
United Kingdom
in euro million
1 January
Deconsolidation effects
Expense from pension obligations
Payments to external funds
Employee contributions
Pension payments
Actuarial gains (–) and losses (+)
Defined benefit obligation
Plan assets
Net obligation
2008
2007
2008
2007
2008
2007
6,327
6,568
– 5,686
– 6,134
641
434
– 24
379
–
13
–
387
–
15
– 285
– 293
– 647
211
28
–
– 303
– 335
– 98
–13
285
486
– 47
–15
293
42
510
4
76
–
52
– 98
– 47
–
–
– 161
– 118
344
–
–
253
– 51
641
Translation differences and other changes
– 1,360
– 561
1,242
31 December
4,403
6,327
– 4,059
– 5,686
109 Group Financial Statements
Other
in euro million
1 January
Effects of first-time consolidation
Deconsolidation effects
Expense from pension obligations
Payments to external funds
Employee contributions
Pension payments
Actuarial gains (–) and losses (+)
Translation differences and other changes
31 December
Defined benefit obligation
Plan assets
Net obligation
2008
2007
2008
2007
2008
2007
455
450
– 343
– 298
112
152
1
–1
55
–
1
–
–
51
–
1
–17
–16
–1
44
537
8
– 39
455
–
–
– 25
– 8
–1
11
104
–15
–
–
– 23
– 57
–1
6
2
28
– 277
– 343
1
–1
30
– 8
–
– 6
103
29
260
–
–
28
– 57
–
–10
10
–11
112
Plan assets in Germany, the United Kingdom and other countries comprised the following:
Components of plan assets
in euro million
2008
2007
2008
2007
2008
2007
2008
2007
Germany
United Kingdom
Other countries
Total
Equity instruments
Debt securities
Real estate
Other
31 December
379
641
–
135
–
–
–
–
642
1,266
2,620
3,135
278
519
487
798
1,155
–
4,059
5,686
151
101
7
18
277
205
111
6
21
343
1,172
1,471
3,362
3,246
285
672
493
819
5,491
6,029
For the first time, benefit obligations in Germany are being
financed partly by pension provisions and partly by fund
assets. In both Germany and the United Kingdom, a sub-
stantial portion of plan assets is invested in debt securities
in order to minimise the effect of capital market fluctua-
tions. Other investment classes, such as stocks, serve to
generate higher rates of return. This is necessary to cover
risks (such as longer life expectancies) not taken into ac-
count in the actuarial assumptions applied.
The present value of the defined benefit obligations and
the fair values of fund assets – as well as the experience-
based (actuarial) adjustments made for those two items –
have developed as follows over the last four years:
in euro million
2008
2007
2006
2005
Defined benefit obligation
Fair value of plan assets
Net obligation
Actuarial gains (–) and losses (+) on defined benefit obligations
Actuarial gains (–) and losses (+) on plan assets
8,788
5,491
3,297
– 919
868
10,631
6,029
4,602
– 557
44
11,430
6,432
4,998
– 400
–117
11,237
6,017
5,220
1,131
– 424
Experience adjustments on defined benefit obligations
are not disclosed since the amounts involved are immate-
rial. Actuarial gains on plan assets are primarily attributable
to experience adjustments.
110
33
Other provisions
Other provisions comprise the following items:
in euro million
31.12. 2008
31.12. 2007
Obligations for personnel and social expenses
Obligations for ongoing operational expenses
Other obligations
Other provisions
Provisions for obligations for personnel and social expens-
es comprise mainly performance-related remuneration
components, early retirement part-time working arrange-
ments and employee long-service awards.
Provisions for obligations for on-going operational expens-
es comprise primarily warranty obligations.
Total
1,241
2,790
851
4,882
thereof
due within
one year
603
1,081
441
2,125
Total
1,559
2,818
1,125
5,502
thereof
due within
one year
1,062
1,129
635
2,826
Provisions for other obligations cover numerous specific
risks and obligations of uncertain amount.
Other provisions changed during the year as follows:
in euro million
At
Translation
1.1. 2008 1 differences
Additions
Reversal of
discounting
Utilised 2 Reversed
At
31.12. 2008
Obligations for personnel and social expenses
Obligations for ongoing operational expenses
Other obligations
1,562
2,836
1,129
5,527
– 7
– 51
– 28
– 86
659
1,173
414
2,246
14
74
8
– 950
–1,197
– 213
96
– 2,360
– 37
– 45
– 459
– 541
1,241
2,790
851
4,882
1 actuarial gains (-) and losses (+) on plan assets
2 including entities deconsolidated during the financial year
Of the amount shown as reversed, euro 263 million are included in costs by function in the income statement.
34
Income tax liabilities
31 December 2008
in euro million
Deferred tax
Current tax
Income tax liabilities
31 December 2007
in euro million
Deferred tax
Current tax
Income tax liabilities
Maturity
within one year
Maturity
later than one year
–
265
265
2,757
368
3,125
Maturity
within one year
Maturity
later than one year
–
378
378
2,714
430
3,144
Total
2,757
633
3,390
Total
2,714
808
3,522
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
111 Group Financial Statements
Current tax liabilities of euro 633 million (2007: euro 808 mil-
lion) comprise euro 97 million (2007: euro 161 million) for
taxes payable and euro 536 million (2007: euro 647 million)
for tax provisions. In 2008, tax provisions of euro 141 million
were reversed (2007: euro 8 million).
35
Financial liabilities
Financial liabilities include all liabilities of the BMW Group at the relevant reporting dates relating to financing activities and
comprise the following:
31 December 2008
in euro million
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Interest and currency derivatives
Other
Financial liabilities
31 December 2007
in euro million
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Interest and currency derivatives
Other
Financial liabilities
Maturity
within
one year
Maturity
between one
and five years
Maturity
later than
five years
6,685
6,365
6,402
5,471
3,439
762
763
11,787
3,879
1,785
–
5,263
796
207
5,687
900
22
–
–
63
108
Total
24,159
11,144
8,209
5,471
8,702
1,621
1,078
29,887
23,717
6,780
60,384
Maturity
within
one year
Maturity
between one
and five years
Maturity
later than
five years
5,230
4,548
5,030
5,445
1,638
105
497
8,945
1,450
702
–
4,708
472
273
22,493
16,550
4,208
503
–
–
–
39
128
4,878
Total
18,383
6,501
5,732
5,445
6,346
616
898
43,921
Issue volume
in relevant currency
(ISO-Code)
Weighted
average maturity
period (in years)
Weighted
average effective
interest rate (in %)
112
Bonds comprise:
Issuer
BMW Finance N. V., The Hague
BMW (UK) Capital plc, Bracknell
BMW US Capital, LLC, Wilmington, Del.
Interest
variable
variable
variable
variable
fixed
fixed
fixed
fixed
fixed
fixed
variable
variable
variable
variable
variable
fixed
fixed
fixed
variable
variable
variable
variable
variable
fixed
fixed
fixed
fixed
fixed
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
JPY 16,500 million
SKK 768 million
EUR 2,698 million
USD 111 million
JPY 98,700 million
EUR 7,740 million
USD 1,250 million
GBP 400 million
SEK 1,300 million
CZK 735 million
JPY 67,100 million
EUR 200 million
GBP 12 million
CZK 1,080 million
SEK 690 million
EUR 267 million
GBP 300 million
JPY 39,000 million
JPY 10,000 million
USD 261 million
EUR 100 million
CAD 100 million
MXN 405 million
JPY 2,200 million
EUR 4,250 million
USD 1,212 million
MXN 1,725 million
CHF 1,150 million
Rolls-Royce Motor Cars Ltd., Bracknell
variable
GBP 46 million
Other
* unlimited
variable
variable
variable
variable
fixed
fixed
fixed
JPY 22,200 million
EUR 660 million
SEK 800 million
USD 320 million
JPY 111,700 million
CHF 500 million
SEK 400 million
1.6
3.0
2.6
2.5
4.3
6.6
4.4
6.0
1.3
1.0
3.3
1.5
1.0
3.0
1.5
1.0
5.2
3.5
2.0
3.4
3.0
3.0
5.0
3.0
7.1
8.1
4.4
4.4
– *
2.6
1.9
2.0
4.1
10.7
4.5
1.5
1.2
4.5
5.1
2.7
1.2
5.0
4.9
5.2
4.6
4.4
0.8
2.9
2.8
3.4
2.4
5.1
6.4
1.6
1.0
1.8
2.9
2.3
8.7
1.1
4.4
5.3
7.8
2.9
3.0
1.2
4.3
4.4
2.8
2.0
2.3
2.5
113 Group Financial Statements
The following details apply to the commercial paper:
Issuer
Issue volume
in relevant currency
(ISO-Code)
Weighted
average maturity
period (in days)
Weighted
average nominal
interest rate (in %)
BMW AG, Munich
BMW Finance N. V., The Hague
BMW (UK) Capital plc, Bracknell
BMW US Capital, LLC, Wilmington, Del.
EUR 760 million
EUR 1,895 million
GBP 275 million
USD 3,580 million
24.8
40.2
30.7
25.0
36
Other liabilities
Other liabilities comprise the following items:
31 December 2008
in euro million
Other taxes
Social security
Advance payments from customers
Deposits received
Payables to subsidiaries
Payables to other companies in which an investment is held
Deferred income
Other
Other liabilities
31 December 2007
in euro million
Other taxes
Social security
Advance payments from customers
Deposits received
Payables to subsidiaries
Payables to other companies in which an investment is held
Deferred income
Other
Other liabilities
Deferred income comprises the following items:
Maturity
within
one year
Maturity
between one
and five years
Maturity
later than
five years
335
30
327
88
44
28
1,262
1,966
4,080
–
8
19
177
1
–
1,675
29
1,909
–
6
–
–
–
–
244
42
292
Maturity
within
one year
Maturity
between one
and five years
Maturity
later than
five years
537
46
367
56
75
–
1,002
2,023
4,106
–
–
15
90
–
–
1,651
36
1,792
–
–
–
–
–
–
191
41
232
5.1
4.7
5.2
2.4
Total
335
44
346
265
45
28
3,181
2,037
6,281
Total
537
46
382
146
75
–
2,844
2,100
6,130
in euro million
31.12. 2008
31.12. 2007
Deferred income from lease financing
Deferred income relating to service contracts
Grants
Other deferred income
Deferred income
Total
1,068
1,615
303
195
3,181
thereof
due within
one year
654
485
56
67
1,262
Total
977
1,433
358
76
2,844
thereof
due within
one year
580
317
49
56
1,002
114
Deferred income relating to service contracts relates to
service and repair work to be provided under commitments
given at the time of the sale of a vehicle (multi-component
arrangements). Grants comprise primarily public funds to
promote regional structures; this has been invested in the
construction of the production plant in Leipzig. In accord-
ance with IAS 20, they are recognised as income over
the useful lives of the assets to which they relate. Other
deferred income includes primarily the effects of the initial
measurement of financial instruments.
37
Trade payables
31 December 2008
in euro million
Maturity
within
one year
Maturity
between one
and five years
Maturity
later than
five years
Total
Trade payables
2,525
37
–
2,562
31 December 2007
in euro million
Maturity
within
one year
Maturity
between one
and five years
Maturity
later than
five years
Total
Trade payables
3,516
35
–
3,551
The total amount of financial liabilities, other liabilities and trade payables with a maturity later than five years amounts
euro 7,072 million (2007: euro 5,110 million).
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
115 Group Financial Statements
BMW Group
Notes to the Group Financial Statements
Other Disclosures
38 Contingent liabilities and other financial commitments
Contingent liabilities
No provisions were recognised for the following contingent liabilities (stated at their nominal amount), since an outflow of
resources is not considered to be probable:
in euro million
Guarantees
Performance guarantees
Bills of exchange
Other
Contingent liabilities
31.12. 2008
31.12. 2007
83
8
–
60
151
132
13
2
78
225
Contingent liabilities relate primarily to non-group entities.
Guarantees include an amount of euro 5 million (2007: –) in
respect of non-consolidated subsidiaries.
Several liability applies in the case of investments in gen-
eral partnerships.
The usual commercial guarantees have been given in
relation to the sale of Rover Cars and Land Rover activities.
Other financial obligations
In addition to liabilities, provisions and contingent liabilities,
the BMW Group also has other financial commitments,
primarily under lease contracts for land, buildings, plant
and machinery, tools, office and other facilities. The leases
run for periods of one to 94 years and in some cases con-
tain extension and / or purchase options. In 2008 an amount
of euro 230 million (2007: euro 169 million) was recognised
as expense in conjunction with other financial commit-
ments.
The total of future minimum lease payments under non-
cancellable leases can be analysed by maturity as follows:
in euro million
31.12. 2008
31.12. 2007
Nominal total of future minimum lease payments
due within one year
due between one and five years
due later than five years
Other financial obligations
222
619
695
1,536
212
575
683
1,470
The above amounts include euro 7 million (2007: euro 3 mil-
lion) in respect of non-consolidated subsidiaries and euro
1 million (2007: euro 7 million) for back-to-back operating
leases.
Purchase commitments for property, plant and equipment
amount to euro 1,891 million (2007: euro 1,925 million).
Sundry other financial commitments amount to euro 158 mil-
lion (2007: euro 161 million).
116
39 Financial instruments
The carrying amounts and fair values of financial instruments are allocated below to IAS 39 categories, cash funds, cash
flow hedges and fair value hedges:
31 December 2008
in euro million
Cash funds
Loans
and receivables
Held-to-maturity
investments
Other liabilities
Available-
for-sale
Fair value-
option
Held for
trading
Cash flow
hedges
Fair value
hedges
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Fair value
Carrying
amount
Carrying
amount
Carrying
amount *
Carrying
amount *
Carrying
amount *
Carrying
amount *
Carrying
amount *
Assets
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Marketable securities and investment funds
Loans to third parties
Credit card receivables
Other financial assets
Cash and cash equivalents
Trade receivables
Other assets
Receivables from subsidiaries
Receivables from companies in which an investment is held
Collateral receivables
Other
Liabilities
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Derivative instruments
Other financial liabilities
Trade payables
Other liabilities
Liabilities to subsidiaries
Other
* Carrying amount corresponds to fair value.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,454
7,454
–
–
–
291
–
–
–
–
–
–
–
–
–
–
–
–
–
–
291
–
–
–
–
–
–
–
–
–
–
–
–
–
37,839
38,063
–
–
13
253
711
–
–
–
13
253
711
–
2,305
2,305
425
103
–
186
–
–
–
–
–
–
–
–
–
–
425
103
–
186
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24,280
11,120
8,263
5,473
8,615
–
1,097
2,562
45
1,931
–
–
–
–
–
–
–
–
–
–
–
–
–
24,159
11,144
8,209
5,471
8,702
–
1,078
2,562
45
1,931
322
–
–
653
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
836
817
1,796
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
610
637
374
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
117 Group Financial Statements
31 December 2008
in euro million
Cash funds
Loans
and receivables
Held-to-maturity
investments
Other liabilities
Available-
for-sale
Fair value-
option
Held for
trading
Cash flow
hedges
Fair value
hedges
Fair value
Fair value
Carrying
amount
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Carrying
amount *
Carrying
amount *
Carrying
amount *
Carrying
amount *
Carrying
amount *
Receivables from subsidiaries
Receivables from companies in which an investment is held
291
–
291
–
Marketable securities and investment funds
Assets
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Loans to third parties
Credit card receivables
Other financial assets
Cash and cash equivalents
Trade receivables
Other assets
Collateral receivables
Other
Liabilities
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Derivative instruments
Other financial liabilities
Trade payables
Other liabilities
Liabilities to subsidiaries
Other
* Carrying amount corresponds to fair value.
7,454
7,454
2,305
2,305
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37,839
38,063
–
–
13
253
711
–
425
103
–
186
–
–
–
–
–
–
–
–
–
–
–
–
13
253
711
–
425
103
–
186
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24,280
11,120
8,263
5,473
8,615
–
1,097
2,562
45
1,931
–
–
–
–
–
–
–
–
–
–
–
–
–
24,159
11,144
8,209
5,471
8,702
–
1,078
2,562
45
1,931
322
–
–
653
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
836
817
1,796
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
610
637
374
–
–
–
–
–
–
–
–
–
–
–
–
118
31 December 2007
in euro million
Cash funds
Loans
and receivables
Held-to-maturity
investments
Other liabilities
Available-
for-sale
Fair value-
option
Held for
trading
Cash flow
hedges
Fair value
hedges
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Fair value
Carrying
amount
Carrying
amount
Carrying
amount *
Carrying
amount *
Carrying
amount *
Carrying
amount *
Carrying
amount *
Assets
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Marketable securities and investment funds
Loans to third parties
Credit card receivables
Other financial assets
Cash and cash equivalents
Trade receivables
Other assets
Receivables from subsidiaries
Receivables from companies in which an investment is held
Collateral receivables
Other
Liabilities
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Derivative instruments
Other financial liabilities
Trade payables
Other liabilities
Liabilities to subsidiaries
Other
* Carrying amount corresponds to fair value.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,393
2,393
–
–
–
135
1
–
–
–
–
–
–
–
–
–
–
–
–
–
135
1
–
–
–
–
–
–
–
–
–
–
–
–
33,490
34,244
–
–
27
260
568
–
–
–
28
260
568
–
2,672
2,672
641
104
–
78
–
–
–
–
–
–
–
–
–
–
641
104
–
78
–
–
–
–
–
–
–
–
–
–
–
–
–
52
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
51
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,485
5,702
5,446
5,882
–
910
3,551
75
2,081
–
–
–
–
–
–
–
–
–
–
–
–
–
6,501
5,732
5,445
6,346
–
898
3,551
75
2,081
18,808
18,383
209
–
1,904
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
195
802
983
–
–
–
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180
423
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
119 Group Financial Statements
31 December 2007
in euro million
Cash funds
Loans
and receivables
Held-to-maturity
investments
Other liabilities
Available-
for-sale
Fair value-
option
Held for
trading
Cash flow
hedges
Fair value
hedges
Fair value
Fair value
Carrying
amount
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Carrying
amount *
Carrying
amount *
Carrying
amount *
Carrying
amount *
Carrying
amount *
Receivables from subsidiaries
Receivables from companies in which an investment is held
135
1
135
1
Marketable securities and investment funds
Assets
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Loans to third parties
Credit card receivables
Other financial assets
Cash and cash equivalents
Trade receivables
Other assets
Collateral receivables
Other
Liabilities
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Derivative instruments
Other financial liabilities
Trade payables
Other liabilities
Liabilities to subsidiaries
Other
* Carrying amount corresponds to fair value.
2,393
2,393
2,672
2,672
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33,490
34,244
–
–
27
260
568
–
641
104
–
78
–
–
–
–
–
–
–
–
–
–
–
–
28
260
568
–
641
104
–
78
–
–
–
–
–
–
–
–
–
–
–
–
–
52
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
51
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,808
18,383
6,485
5,702
5,446
5,882
–
910
3,551
75
2,081
6,501
5,732
5,445
6,346
–
898
3,551
75
2,081
209
–
–
1,904
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
195
802
983
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
423
–
–
–
–
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
120
Fair value measurement of financial instruments
The fair values shown are computed using market informa-
tion available at the end of the reporting period on the
basis of prices quoted by the counterparties or using ap-
propriate measurement methods, e. g. discounted cash
flow models. In the latter case, amounts were discounted
at 31 December 2008 on the basis of the following interest
rates:
ISO-Code
in %
Interest rate for six months
Interest rate for one year
Interest rate for five years
Interest rate for ten years
EUR
USD
GBP
JPY
2.1
2.0
3.3
3.8
1.8
2.0
2.1
2.5
3.0
3.1
3.2
3.5
1.0
1.1
0.9
1.2
These interest rates were adjusted, where necessary, to
take account of the credit quality and risk of the underlying
financial instrument.
possible – unlike in the past – that different models (e. g.
the par-method) could result in different fair values.
As a result of the impact of the financial market crisis, some
of the interest rates used to measure the fair value of de-
rivatives are based on wider-than-normal credit and liquidity
spreads. It is therefore possible that the calculated fair
values cannot be traded at present on the markets.
Currency hedging contracts used to hedge cash flows
are measured on the basis of the zero-coupon method.
As a result of the financial crisis and current climate, it is
in euro million
Held for trading
Closing out existing positions could have an impact on
profit or loss. The contracts involved have, however, been
entered into for hedging purposes, and it is therefore in-
tended to hold them until maturity.
Gains and losses on financial instruments
The following table shows the net gains and losses arising
for each of the categories of financial instrument defined
by IAS 39:
2008
2007
Gains / losses from the use of derivative instruments
– 208
– 39
Available-for-sale
Gains / losses on sale and fair value gains / losses on available-for-sale securities;
including equity investments carried at cost
Income from investments
Accumulated other equity
Balance at 1 January
Total change during the year
of which recognised in the income statement during the period under report
Balance at 31 December
Loans and receivables
Impairment losses / reversals of impairment losses
Other income / expenses
Other liabilities
Income / expenses
–195
4
35
–18
20
17
– 610
– 41
49
3
214
–179
–168
35
– 277
–12
–109
168
Gains / losses from the use of derivatives relate primarily to
fair value gains or losses arising on stand-alone derivatives.
Write-downs of euro 123 million (2007: euro 49 million) on
available-for-sale securities, for which fair value changes
were previously recognised directly in equity, were recog-
nised as expenses in 2008. Reversals of write-downs on
current marketable securities of euro 5 million were recog-
nised directly in equity (2007: euro 2 million).
The disclosure of interest income resulting from the un-
winding of interest on future expected receipts would nor-
mally only be relevant for the BMW Group where assets
have been discounted as part of the process of determin-
ing impairment losses. However, as a result of the assump-
tion that most of the income that is subsequently recovered
is received within one year and the fact that the impact is
not material, the BMW Group does not discount assets for
the purposes of determining impairment losses.
121 Group Financial Statements
Cash flow hedges
The effect of cash flow hedges on accumulated other equity was as follows:
in euro million
Balance at 1 January
Total changes during the year
of which recognised in the income statement during the period under report
Balance at 31 December
2008
2007
438
– 393
– 627
45
178
260
– 260
438
During the period under report, an expense of euro 32 mil-
lion (2007: euro 4 million) was recognised in the income
statement to reflect the ineffective portion of cash flow
hedges due to over-hedging.
to hedge interest rate risks attached to future transactions.
It is expected that euro 27 million of net losses, recognised
in equity at the end of the reporting period, will be recog-
nised in the income statement in 2009.
At 31 December 2008, the BMW Group held derivative in-
struments with terms of up to 48 months (2007: 41 months)
to hedge currency risks attached to future transactions.
It is expected that euro 258 million of net gains, recognised
in equity at the end of the reporting period, will be recog-
nised in the income statement in 2009.
At 31 December 2008, the BMW Group held derivative in-
struments with terms of up to 96 months (2007: 108 months)
Cash flow hedges are used to hedge cash flows arising in
conjunction with the supply of vehicles to subsidiaries.
Fair value hedges
The following table shows gains and losses on hedging
instruments and hedged items which are deemed to be
part of a fair value hedge relationship:
in euro million
31.12. 2008
31.12. 2007
Gains / losses on hedging instruments designated as part of a fair value hedge relationship
Gains / loss from hedged items
386
– 405
– 19
272
– 271
1
The difference between the gains / losses on hedging
instruments and the result recognised on hedged items
represents the ineffective portion of fair value hedges.
Fair value hedges are mainly used to hedge bonds and
other financial liabilities.
information on the credit-standing of the counterparty ob-
tained or historical data based on the existing business re-
lationship (i. e. payment patterns to date) reviewed in order
to minimise the credit risk, all depending on the nature and
amount of the exposure that the BMW Group is proposing
to enter into.
Credit risk
Notwithstanding the existence of collateral accepted, the
carrying amounts of financial assets generally take account
of the maximum credit risk arising from the possibility that
the counterparties will not be able to fulfill their contractual
obligations. The maximum credit risk for irrevocable credit
commitments relating to the credit card business amounts
to euro 1,570 million (2007: euro 2,082 million). The equivalent
figure for dealer financing is euro 12,490 million (2007: euro
12,043 million).
In the case of performance relationships underlying non-
derivative financial instruments, collateral will be required,
Within the financial services business, the financed items
(e. g. vehicles, equipment and property) in the retail cus-
tomer and dealer lines of business serve as first-ranking
collateral with a recoverable value. Security is also put up
by customers in the form of collateral asset pledges, asset
assignment and first-ranking mortgages, supplemented
where appropriate by warranties and guarantees. If an item
previously accepted as collateral is acquired, it undergoes
a multi-stage process of repossession and disposal in
accordance with the legal situation prevailing in the relevant
market. The assets involved are generally vehicles which
can be converted into cash at any time via the dealer organ-
isation.
122
Impairment losses are recorded as soon as credit risks are
identified on individual financial assets, using a method-
ology specifically designed by the BMW Group. More de-
tailed information regarding this methodology is provided
in the section on accounting policies.
The use of comprehensive rating and scoring techniques
and credit monitoring procedures ensures the recoverabil-
ity of the value of receivables from sales financing which
are neither overdue nor impaired.
The credit risk relating to derivative financial instruments
is minimised by the fact that the Group only enters into
such contracts with parties of first-class credit standing.
The general credit risk on derivative financial instruments
utilised by the BMW Group is therefore not considered to
be significant. A concentration of credit risk with particular
borrowers or groups of borrowers has not been identified.
In the context of the current climate for financing, it must
be reckoned with that assessments of individual counter
parties’ creditworthiness may need to be amended.
Further disclosures relating to credit risk, in particular im-
pairment losses recognised, are provided in the notes to
the relevant category of receivables on pages 98, 100 and
102.
Liquidity risk
The following table shows the maturity structure of con-
tractual cash flows (undiscounted) for financial liabilities:
31 December 2008
in euro million
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Interest and currency derivative instruments
Trade payables
Other financial liabilities
31 December 2007
in euro million
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Interest and currency derivative instruments
Trade payables
Other financial liabilities
Maturity
within
one year
Maturity
between one
and five years
Maturity
later than
five years
–7,755
– 6,434
– 6,639
– 5,504
– 3,670
349
– 2,525
–766
– 32,944
–13,690
– 4,236
–1,866
–
– 5,405
383
– 37
– 218
– 25,069
Maturity
within
one year
Maturity
between one
and five years
– 5,947
– 4,736
– 5,193
– 5,474
–1,854
63
– 3,516
– 497
– 27,154
–10,627
–1,630
– 774
–
– 5,043
234
– 35
– 273
–18,148
– 5,900
– 945
– 26
–
–
–106
–
–145
– 7,122
Maturity
later than
five years
– 4,920
– 551
–
–
–
132
–
–128
– 5,467
Total
– 27,345
–11,615
– 8,531
– 5,504
– 9,075
626
– 2,562
–1,129
– 65,135
Total
– 21,494
– 6,917
– 5,967
– 5,474
– 6,897
429
– 3,551
– 898
– 50,769
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
123 Group Financial Statements
The cash flows shown comprise principal repayments and
the related interest. The amounts disclosed for interest
rate and currency derivatives include all cash flows relating
to derivatives that have a negative fair value at the balance
sheet date as well as all cash flows relating to derivatives
that have a positive fair value at the balance sheet date but
which are part of a hedging relationship with a financial
liability.
Solvency is assured at all times by managing and monitor-
ing the liquidity situation on the basis of a rolling cash flow
forecast. The resulting funding requirements are secured
by a variety of instruments placed on the world’s financial
markets. The objective is to minimise risk by matching
maturities for the Group’s financing requirements within
the framework of the target debt ratio. The long-term ratings
published by Standard & Poor’s (A) and Moody’s (A2)
enable the BMW Group to obtain financing on competitive
terms and conditions. Against the background of the
current financial market and economic crisis and the re-
sulting impact on the automobile sector, Moody’s revised
the rating on 18 February 2009 to “under review for pos-
sible downgrade”. The BMW Group will continue to be
able to raise sufficient funds to refinance its business
even after taking account of forthcoming rating adjust-
ments.
Short-term liquidity is managed primarily by issuing
money market instruments (commercial paper). As a result
of its good credit standing, reflected in the first-class
short-term ratings issued by Moody’s (P-1) and Standard
& Poor’s (A-1), the BMW Group is also able to obtain com-
petitive terms and conditions in this area.
Also reducing liquidity risk, additional secured and un-
secured lines of credit are in place with first-class interna-
tional banks. Intragroup cash flow fluctuations are evened
out by the use of daily cash pooling arrangements.
Market risks
The principal market risks to which the BMW Group is ex-
posed are currency risk and interest rate risk.
Protection against such risks is provided at first instance
through natural hedging which arises when the values of
non-derivative financial instruments have matching matu-
rities and amounts (netting). Derivative financial instru-
ments are used to reduce the risk remaining after netting.
Financial instruments are only used to hedge underlying
positions or forecast transactions.
The scope of permitted transactions, responsibilities,
financial reporting procedures and control mechanisms
used for financial instruments are set out in detailed inter-
nal guidelines. This includes, above all, a clear separation
of duties between trading and processing. Currency and
interest rate risks are managed at a corporate level.
Further disclosures relating to risk management are pro-
vided in the Group Management Report.
Currency risk
As an enterprise with worldwide operations, business is
conducted in a variety of currencies, from which currency
risks arise. Since a significant portion of Group revenues
are generated outside the euro currency region and the
procurement of production material and funding is also or-
ganised on a worldwide basis, the currency risk is an ex-
tremely important factor for Group earnings.
At 31 December 2008, derivative financial instruments were
in place to hedge exchange rate risks, in particular for the
currencies US dollar, British pound, Canadian dollar and
Japanese yen. The hedging contracts comprise mainly
option and forward currency contracts.
A description of how these risks are managed is provided
in the Group Management Report on page 62. The BMW
Group measures currency risks using a cash-flow-at-risk
model.
The starting point for analysing currency risk with this
model is the identification of forecast foreign currency
transactions or “exposures”. At the end of the reporting
period, exposures for the coming year were as follows:
in euro million
Euro / US Dollar
Euro / British Pound
Euro / Japanese Yen
31.12. 2008
31.12. 2007
3,631
2,291
835
6,140
3,484
1,263
124
In the next stage, these exposures are compared to all
hedges that are in place. The net cash flow surplus repre-
sents an uncovered risk position. The cash-flow-at-risk
approach involves allocating the impact of potential ex-
change rate fluctuations to operating cash flows on the
basis of probability distributions. Volatilities and correla-
tions serve as input factors to assess the relevant proba-
bility distributions.
The potential negative impact on earnings for the current
period is computed on the basis of current market prices
and exposures to a confidence level of 95 % for each cur-
rency. Aggregation of these results creates a risk reduction
effect due to correlations between the various portfolios.
The following table shows the potential negative impact
for the BMW Group – measured on the basis of the cash-
flow-at-risk approach – attributable at the balance sheet
date to unfavourable changes in exchange rates for the three
principal currencies.
in euro million
Euro / US Dollar
Euro / British Pound
Euro / Japanese Yen
31.12. 2008
31.12. 2007
39
56
54
33
14
56
The BMW Group’s currency risk relates primarily to the three
currencies shown.
Interest rate risk
The BMW Group’s financial management system involves
the use of standard financial instruments such as short-
term deposits, investments in variable and fixed-income
securities as well as securities funds. The BMW Group is
therefore also exposed to risks resulting from changes in
interest rates.
These risks arise when funds with differing fixed-rate peri-
ods or differing terms are borrowed and invested. All items
subject to, or bearing, interest are exposed to interest rate
risk. Interest rate risks can affect either side of the balance
sheet.
The fair values of the Group’s interest rate portfolios for the
three principal currencies were as follows at the end of the
reporting period:
in euro million
Euro
US Dollar
British Pound
31.12. 2008
31.12. 2007
6,241
5,646
1,860
6,930
6,012
2,278
Interest rate risks can be managed by the use of interest
rate derivatives. The interest rate contracts used for hedg-
ing purposes comprise mainly swaps which are accounted
for on the basis of whether they are designated as a fair
value hedge or as a cash flow hedge. A description of how
interest rate risk is managed is provided in the Group Man-
agement Report on page 63.
As stated there, the BMW Group applies a value-at-risk
approach for internal reporting purposes and to manage
interest rate risks. This is based on a state-of-the-art
historical simulation, in which the potential future fair
value losses of the interest rate portfolios are compared
across the Group with expected amounts measured on
the basis of a holding period of three months and a con-
fidence level of 99 %. Aggregation of these results creates
a risk reduction effect due to correlations between the
various portfolios.
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
125 Group Financial Statements
In the following table the potential volume of fair value
fluctuations – measured on the basis of the value-at-risk
approach – are compared with the expected value for the
interest rate relevant positions of the BMW Group for the
three principal currencies:
in euro million
Euro
US Dollar
British Pound
31.12. 2008
31.12. 2007
52
119
7
76
109
10
Other risks
The BMW Group is exposed to raw material price risks. A
description of how these risks are managed is provided
in the Group Management Report on pages 62 – 63. De-
rivative financial instruments are used on a relatively small
scale to reduce these risks, primarily for the purchase of
precious metals. The risk from these derivatives was not
material to the Group in 2008 and 2007 and remains small
at the present time. For this reason, a sensitivity analysis
for these derivatives is not provided.
A further exposure relates to the residual value risk on
vehicles returned to the Group at the end of finance lease
contracts. The risks from financial instruments used
in this context were not material to the Group in the past
and at the end of the reporting period. A description of
how these risks are managed is provided in the Group
Management Report on pages 62 – 63. Information re-
garding the residual value risk from operating leases is
provided in the section on accounting policies.
40
Explanatory notes to the cash flow statements
The cash flow statements show how the cash and cash
equivalents of the BMW Group and of the Automobiles
and Financial Services segments have changed in the
course of the year as a result of cash inflows and cash out-
flows. In accordance with IAS 7 (Cash Flow Statements),
cash flows are classified into cash flows from operating,
investing and financing activities. The Group and segment
cash flow statements are presented on pages 76 – 77.
Cash and cash equivalents included in the cash flow state-
ment comprise cash in hand, cheques, and cash at bank,
to the extent that they are available within three months
from the end of the reporting period and are subject to an
insignificant risk of changes in value. The negative impact
of changes in cash and cash equivalents due to the effect
of exchange rate fluctuations in 2008 was euro 44 million
(2007: euro 47 million).
The cash flows from investing and financing activities are
based on actual payments and receipts. The cash flow
from operating activities is computed using the indirect
method, starting from the net profit of the Group. Under
this method, changes in assets and liabilities relating to
operating activities are adjusted for currency translation
effects and changes in the composition of the Group. The
changes in balance sheet positions shown in the cash
flow statement do not therefore agree directly with the
amounts shown in the Group and segment balance sheets.
If the BMW Group acts as the lessor in a finance lease, the
relevant cash flows are reported in the cash flow statement
as part of the cash flow from investing activities. If the
BMW Group acts as the lessee in a finance lease, the
cash flows are reported as part of the cash flows from
operating and investing activities.
If the BMW Group acts as the lessor in an operating
lease, cash flows are reported as part of the cash flow
from investing activities. In the final case, where the
BMW Group acts as the lessee in an operating lease,
cash flows are reported as part of the cash flow from
operating activities.
In 2008, some of the shares of Cirquent GmbH, Munich,
were sold to NTT Data Corporation, Tokyo. The cash
inflow for the purchase consideration, amounting to euro
153 million, was not reported on a separate line within in-
vesting activities on the grounds of materiality. The sale of
Cirquent GmbH, Munich, resulted in an outflow of cash
funds amounting to euro 21 million. The amounts of assets
and liabilities of Cirquent GmbH, Munich, summarised by
major category pursuant to IAS 7.40 (d), are not disclosed
on the grounds of materiality.
Cash outflows for taxes on income and cash inflows for
interest are classified as cash flows from operating activi-
ties in accordance with IAS 7.31 and IAS 7.35. Cash out-
flows for interest are presented on a separate line within
cash flows from financing activities.
Cash flows from dividends received amounted to euro 4 mil-
lion (2007: euro 3 million).
126
41 Related party relationships
In accordance with IAS 24 (Related Party Disclosures),
related individuals or entities which have the ability to con-
trol the BMW Group or which are controlled by the BMW
Group, must be disclosed unless such parties are not al-
ready included in the consolidated financial statements as
consolidated companies. Control is defined as ownership
of more than one half of the voting power of BMW AG or
the power to direct, by statute or agreement, the financial
and operating policies of the management of the Group.
In addition, the disclosure requirements of IAS 24 also
cover transactions with participations, joint ventures and
with parties which have the ability to exercise significant
influence over the financial and operating policies of the
BMW Group. This also includes close relatives and inter-
mediaries. Significant influence over the financial and
operating policies of the BMW Group can arise when a
party holds 20 % or more of the shares of BMW AG or is a
member of the Board of Management or Supervisory
Board of BMW AG.
For the financial year 2008, the disclosure requirements
contained in IAS 24 only affect the BMW Group with re-
gard to business relationships with non-consolidated sub-
sidiaries, joint ventures and participations as well as with
members of the Board of Management and Supervisory
Board of BMW AG.
The BMW Group maintains normal business relationships
with non-consolidated subsidiaries. Transactions with
these entities are small in scale, arise in the normal course
of business and are conducted on the basis of arm’s length
principles.
Transactions of BMW Group companies with the joint ven-
ture, BMW Brilliance Automotive Ltd., Shenyang, all arise
in the normal course of business and are conducted on
the basis of arm’s length principles. Group companies
sold goods and services to BMW Brilliance Automotive
Ltd., Shenyang, during 2008 for an amount of euro 406 mil-
lion (2007: euro 293 million). At 31 December 2008, receiva-
bles of Group companies from BMW Brilliance Automotive
Ltd., Shenyang, amounted to euro 102 million (2007: euro
103 million). As in the previous year there were no payables
from Group companies to BMW Brilliance Automotive Ltd.,
Shenyang, at the end of the reporting period.
Business transactions of the BMW Group with participa-
tions all arise in the normal course of business and are
conducted on the basis of arm’s length principles. With
the exception of Cirquent GmbH, Munich, business rela-
tionships with such entities are on a small scale. Group
companies did not provide any services to Cirquent GmbH,
Munich, during the fourth quarter 2008. During the final
three months of 2008 Group entities purchased services
and goods from Cirquent GmbH, Munich, for euro 45 mil-
lion. At 31 December 2008, receivables of Group compa-
nies from Cirquent GmbH, Munich, totalled euro 1 million.
Payables of Group companies to Cirquent GmbH, Munich,
amounted to euro 28 million.
Stefan Quandt is a shareholder and Deputy Chairman
of the Supervisory Board of BMW AG. He is also sole
shareholder and Chairman of the Supervisory Board of
DELTON AG, Bad Homburg v. d. H., which, via its sub-
sidiaries, performed logistics services for the BMW Group
during the financial year 2008. In addition, companies of
the DELTON Group purchased vehicles from the BMW
Group. These service and sales contracts are not material
for the BMW Group, arise in the course of ordinary activi-
ties and are made, without exception, on the basis of arm’s
length principles.
Susanne Klatten is a shareholder and member of the Su-
pervisory Board of BMW AG, and also a shareholder and
Deputy Chairman of the Supervisory Board of Altana AG,
Wesel, which purchased vehicles from the BMW Group
during the financial year 2008. These sale contracts are
not material for the BMW Group, arise in the course of
ordinary activities and are made, without exception, on the
basis of arm’s length principles.
With the exception of these related party transactions,
BMW Group companies did not enter into any significant
contracts with members of the Board of Management or
Supervisory Board of BMW AG. The same applies to close
members of the families of those persons.
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
127 Group Financial Statements
42
43
Declaration with respect to the Corporate
Governance Code
The Board of Management and the Supervisory Board
of Bayerische Motoren Werke Aktiengesellschaft have
issued the Declaration of Compliance pursuant to § 161
of the German Stock Corporation Act. The Declaration
of Compliance is reproduced on page 147 and is also
available to shareholders on the BMW Group website at
www.bmwgroup.com/ir.
Shareholdings of members of the Board of
Management and Supervisory Board
The members of the Supervisory Board of BMW AG hold
in total 27.70 % of the issued common and preferred
stock shares, of which 16.12 % relates to Stefan Quandt,
Bad Homburg v. d. H. and 11.58 % to Susanne Klatten,
Munich. The shareholdings of the members of the Board
of Management of BMW AG is, in total, less than 1 % of
the issued stock shares.
44
Compensation of members of the Board of Management and Supervisory Board
The compensation of current members of the Board of Management and Supervisory Board amounted to euro 13.3 mil-
lion (2007: euro 18.7 million) and comprised the following:
in euro million
Short-term employment benefits
Post-employment benefits
Compensation
2008
2007
12.5
0.8
13.3
18.0
0.7
18.7
The remuneration of the members of the Board of Manage-
ment for the financial year 2008 amounted to euro 10.9 mil-
lion (2007: euro 15.2 million). This comprised fixed compo-
nents of euro 3.1 million (2007: euro 2.7 million) and variable
components of euro 7.8 million (2007: euro 12.5 million).
Further details about the remuneration of current mem-
bers of the Board of Management and the Supervisory
Board can be found in the Compensation Report on
pages 141 – 146. The Compensation Report is part of the
Group Management Report.
In addition, an amount of euro 0.8 million (2007: euro 0.7 mil-
lion) has been granted to current members of the Board
of Management after the end of their employment relation-
ship. This relates to the expense for allocations to pension
provisions.
The compensation of the members of the Supervisory
Board for the financial year 2008 amounted to euro 1.6 mil-
lion (2007: euro 2.8 million), comprising only fixed compo-
nents (2007: euro 0.1 million for fixed components and euro
2.7 million for variable components).
The compensation system for members of the Board of
Management and the Supervisory Board does not include
any stock options, value appreciation rights comparable to
stock options or any other stock-based compensation
components.
The remuneration of former members of the Board of
Management and their surviving dependants amounted
to euro 3.1 million (2007: euro 4.3 million).
Pension obligations to former members of the Board of
Management and their surviving dependants are fully cov-
ered by pension provisions amounting to euro 44.3 million
(2007: euro 38.3 million), computed in accordance with IAS 19.
Members of the Board of Management and the Super visory
Board holding a credit card issued by BMW Bank GmbH,
Munich, during the financial year 2008 had a credit line of
up to euro 7,500 (2007: euro 25,565). The amounts arising
from credit card usage were all within the agreed limits.
The names of the members of the Supervisory Board and of
the Board of Management are disclosed on pages 134 – 137.
128
45 Application of § 264 (3) and § 264 b HGB
A number of companies and incorporated partnerships (as
defined by § 264 a HGB) which are affiliated, consolidated
entities of BMW AG and for which the consolidated financial
statements of BMW AG represent exempting consolidated
financial statements, apply the exemptions available in
§ 264 (3) and § 264 b HGB with regard to the drawing up of a
management report. The exemptions have been applied
by:
– Bavaria Wirtschaftsagentur GmbH, Munich
– BMW Fahrzeugtechnik GmbH, Eisenach
– BMW Fuhrparkmanagement Beteiligungs GmbH,
Stuttgart
– BMW Hams Hall Motoren GmbH, Munich
– BMW Ingenieur-Zentrum GmbH + Co., Dingolfing
– BMW M GmbH Gesellschaft für individuelle Automobile,
Munich
– BMW Vertriebs GmbH & Co. oHG, Dingolfing
– Rolls-Royce Motor Cars GmbH, Munich
In addition, the following entities apply the exemption avail-
able in § 264 (3) and § 264 b HGB with regard to publication:
– Bavaria Wirtschaftsagentur GmbH, Munich
– BMW Fuhrparkmanagement Beteiligungs GmbH,
Stuttgart
– BMW Hams Hall Motoren GmbH, Munich
– BMW Ingenieur-Zentrum GmbH + Co., Dingolfing
– BMW INTEC Beteiligungs GmbH, Munich
– BMW Vertriebs GmbH & Co. oHG, Dingolfing
– Rolls-Royce Motor Cars GmbH, Munich
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
129 Group Financial Statements
BMW Group
Notes to the Group Financial Statements
Segment Information
46 Explanatory notes to segment information
Information on reportable segments
For the purposes of presenting segment information, the
activities of the BMW Group are divided into operating
segments in accordance with the rules contained in IFRS 8
(Operating Segments). Operating segments are identified
on the same basis that is used internally to manage and
report on performance and takes account of the organisa-
tional structure of the BMW Group based on the various
products and services of the reportable segments.
The activities of the BMW Group are broken down into the
operating segments Automobiles, Motorcycles, Financial
Services and Other Entities.
The Automobiles segment develops, manufactures, as-
sembles and sells cars and off-road vehicles, under the
brands BMW, MINI and Rolls-Royce as well as spare parts
and accessories. BMW and MINI brand products are sold in
Germany through branches of BMW AG and by independent,
authorised dealers. Sales outside Germany are handled
primarily by subsidiary companies and, in a number of mar-
kets, by independent import companies. Rolls-Royce brand
vehicles are sold in the USA via a subsidiary company and
elsewhere by independent, authorised dealers.
The Motorcycles segment develops, manufactures, as-
sembles and sells BMW brand motorcycles as well as
spare parts and accessories.
Eliminations comprise the effects of eliminating business
relationships between the operating segments.
Internal management and reporting
Segment information is prepared in conformity with the
accounting policies adopted for preparing and presenting
the Group Financial Statements. There were no changes
in accounting policies compared to previous periods.
Inter-segment receivables and payables, provisions, in-
come, expenses and profits are eliminated in the column
“Eliminations”. Inter-segment sales take place at arm’s
length prices.
The role of “chief operating decision maker” with re-
spect to resource allocation and performance assess-
ment of reportable segments is embodied in the full
Board of Management. In order to assist the decision-
taking process, various measures of segment result and
of segment assets have been set for the different operat-
ing segments.
The Automobiles and Motorcycles segments are man-
aged on the basis of the profit before financial result. Capi-
tal employed is the corresponding measure of segment
assets used to determine how to allocate resources. Capi-
tal employed comprises all current and non-current opera-
tional assets of the segment, adjusted for liabilities used
operationally which are not subject to interest.
The Financial Services segment focuses primarily on car
leasing, fleet business, retail customer and dealer financing,
customer deposit business and insurance activities.
The performance of the Financial Services segment is
measured on the basis of profit or loss before tax. Net
assets, defined as all assets less all liabilities, are used as
the basis for assessing the allocation of resources.
Holding and Group financing companies are included in
the Other Entities segment. This segment also includes
the operating companies (BMW Services Ltd., Bracknell,
and BMW (UK) Investments Ltd., Bracknell) which are
not allocated to one of the other segments. It also includes
the income and expenses recorded by the Cirquent Group
in the first nine months of 2008.
The performance of the Other Entities segment is assessed
on the basis of profit or loss before tax. The corresponding
measure of segment assets used to manage the Other
Entities segment is total assets less tax-related assets and
investments.
130
Segment information by operating segment is as follows:
Segment information by operating segment
in euro million
External revenues
Inter-segment revenues
Total revenues
Segment result
Segment assets
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
* including impairment losses of euro 3 million (2007: euro 17 million)
Interest and similar income of the Financial Services seg-
ment totalling euro 2 million (2007: euro 2 million) are in-
cluded in segment result. Interest and similar expenses of
the Financial Services segment amounted to euro 8 mil-
lion (2007: euro 2 million). The Other Entities segment
result includes interest and similar income amounting to
euro 2,102 million (2007: euro 1,768 million) and interest and
similar expenses amounting to euro 1,927 million (2007:
euro 1,591 million).
Automobiles
Motorcycles
Financial
Services
Other Entities
Group
Reconciliation to
Group figures
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
13,952
1,773
15,725
– 292
3,752
14,842
6,339
12,146
1,794
13,940
743
4,139
13,012
4,124
146
45
191
295
4
13
214
76
290
168
9
11
38,548
33,419
–
–
53,197
56,018
–12,731
–13,258
–12,731
–13,258
– 402
43,996
– 568
35,891
– 2,788
– 2,223
– 2,344
–1,629
–
–
53,197
56,018
351
3,873
101,086
88,997
16,580
15,305
7,645
6,158
37,877
10,905
48,782
690
14,367
4,467
3,567
42,435
11,383
53,818
3,450
15,108
4,462
3,566
1,222
1,223
8
5
1,230
1,228
60
423
55
70 *
80
440
45
86 *
the Other Entities segment profit is the result from equity
accounted investments amounting to euro 1 million in 2008.
In the previous year, the Other Entities segment did not
record any profit / loss from equity accounted investments.
Segment assets of the Other Entities segment at 31 De-
cember 2008 included investments accounted for using
the equity method amounting to euro 29 million (2007: –).
The information disclosed for capital expenditure and
depreciation and amortisation relates to property, plant and
equipment, intangible assets and leased products.
The profit of the “Other Entities” segment was influenced
above all by the partial sale of the Cirquent Group and the
reversal of a provision no longer required. Also included in
Segment figures can be reconciled to the corresponding
Group figures as follows:
in euro million
Reconciliation of segment result
Total for reportable segments
Financial result of Automobiles segment and Motorcycles segment
Elimination of inter-segment items
Group profit before tax
Reconciliation of segment assets
Total for reportable segments
Non-operating assets – Other Entities segment
Operating liabilities – Financial Services segment
Interest-bearing assets – Automobiles segment
Liabilities of Automobiles and Motorcycles segments subject to interest
Elimination of inter-segment items
Total Group assets
Reconciliation of capital on non-current assets
Total for reportable segments
Elimination of inter-segment items
Total Group capital expenditure on non-current assets
Reconciliation of depreciation and amortisation on non-current assets
Total for reportable segments
Elimination of inter-segment items
Total Group depreciation and amortisation on non-current assets
2008
2007
753
– 381
– 21
351
57,090
5,616
66,040
24,849
14,174
– 66,683
101,086
19,368
– 2,788
16,580
9,989
– 2,344
7,645
4,441
– 227
– 341
3,873
53,106
5,482
55,517
23,899
13,637
– 62,644
88,997
17,528
– 2,223
15,305
7,787
–1,629
6,158
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
Segment information by operating segment
in euro million
External revenues
Inter-segment revenues
Total revenues
Segment result
Segment assets
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
* including impairment losses of euro 3 million (2007: euro 17 million)
37,877
10,905
48,782
690
14,367
4,467
3,567
42,435
11,383
53,818
3,450
15,108
4,462
3,566
1,222
1,223
8
5
1,230
1,228
60
423
55
70 *
80
440
45
86 *
131 Group Financial Statements
Automobiles
Motorcycles
Financial
Services
Other Entities
Reconciliation to
Group figures
Group
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
13,952
1,773
15,725
– 292
3,752
14,842
6,339
12,146
1,794
13,940
743
4,139
13,012
4,124
146
45
191
295
214
76
290
168
38,548
33,419
4
13
9
11
–
–
53,197
56,018
–12,731
–13,258
–12,731
–13,258
– 402
43,996
– 568
35,891
– 2,788
– 2,223
– 2,344
–1,629
–
–
53,197
56,018
351
3,873
101,086
88,997
16,580
15,305
7,645
6,158
In the case of segment information by geographical region,
external sales are based on the location of the customer’s
registered office. Revenues with major customers were
not material overall. The information disclosed for non-
current assets relates to property, plant and equipment,
intangible assets and leased products. The reconciling
item disclosed for non-current assets relates to leased
products.
Information by region
in euro million
Germany
USA
United Kingdom
Rest of Europe
Africa / Asia / Oceania
Rest of America
Eliminations
Group
External
revenues
2008
2007
10,739
11,918
11,349
11,110
4,913
5,945
15,780
16,450
8,471
8,691
1,945
1,904
Non-current
assets
2008
2007
21,916
18,111
11,081
11,549
1,739
2,302
3,337
3,101
549
498
1,169
1,382
–
–
– 3,334
– 3,152
53,197
56,018
36,457
33,791
IFRS 8 was applied early with effect from 1 January 2008. The comparative figures for 2007 have been adjusted accordingly.
Munich, 18 February 2009
Bayerische Motoren Werke
Aktiengesellschaft
The Board of Management
132
Responsibility Statement by the Company’s Legal Representatives
Statement pursuant to § 37y No. 1 of the Securities
Trading Act (WpHG) in conjunction with § 297 (2)
sentence 3 and § 315 (1) sentence 6 of the German
Commercial Code (HGB)
“To the best of our knowledge, and in accordance with the
applicable reporting principles, the consolidated financial
statements give a true and fair view of the assets, liabilities,
financial position and profit of the Group, and the Group
Management Report includes a fair review of the develop-
ment and performance of the business and the position of
the Group, together with a description of the principal op-
portunities and risks associated with the expected develop-
ment of the Group.”
Munich, 18 February 2009
Bayerische Motoren Werke
Aktiengesellschaft
The Board of Management
72
72
74
76
78
79
Group Financial Statements
Income Statements
Balance Sheets
Cash Flow Statements
Statement of Income and
Expenses recognised
in Equity
Notes
79
Accounting Principles
and Policies
Notes to the Income
Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information
88
94
115
129
133 Group Financial Statements
BMW Group
Auditors’ Report
We have audited the consolidated financial statements
prepared by Bayerische Motoren Werke Aktien gesell-
schaft, comprising the income statement, the balance
sheet, statements of changes in equity, cash flow state-
ment and the notes to the consolidated financial state-
ments and its report on the position of the Company
and the Group for the business year from 1 January to
31 December 2008. The preparation of the consolidated
finan cial statements and Group Management Report in
accordance with IFRS, as adopted by the EU, and the
additional requirements of German commercial law
pur suant to § 315a (1) HGB are the responsibility of the
parent company’s management. Our responsibility is to
express an opinion on the consolidated financial state-
ments and on the Group Management Report based
on our audit.
We conducted our audit of the consolidated financial
statements in accordance with § 317 HGB and German
generally accepted standards for the audit of financial
statements promulgated by the Institut der Wirtschafts-
prüfer (IDW). Those standards require that we plan and
perform the audit such that material misstatements
materially affecting the presentation of the net assets,
financial position and results of operations in the con-
solidated financial statements in accordance with the ap-
plicable financial reporting framework and in the Group
Management Report are detected with reasonable assur-
ance. Knowledge of the business activities and the eco-
nomic and legal environment of the Group and expecta-
tions as to possible misstatements are taken into account
in the determination of audit procedures. The effective-
ness of the accounting-related internal control system
and the evidence supporting the disclosures in the con-
solidated financial statements and in the Group Manage-
ment Report are examined primarily on a test basis within
the framework of the audit. The audit also includes as-
sessing the annual financial statements of those entities
included in consolidation, the determination of entities
to be included in consolidation, the accounting and con-
solidation principles used and significant estimates made
by management, as well as evaluating the overall presen-
tation of the consolidated financial statements and Group
Management Report. We believe that our audit provides
a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the con-
solidated financial statements comply with IFRSs, as
adopted by the EU, the additional requirements of German
commercial law pursuant to § 315a (1) HGB and give a true
and fair view of the net assets, financial position and results
of operations of the Group. The Group Management Report
is consistent with the consolidated financial statements
and as a whole provides a suitable view of the Group’s po-
sition and suitably presents the opportunities and risks of
future development.
Munich, 27 February 2009
KPMG AG
Wirtschaftsprüfungsgesellschaft
(formerly KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft)
Dr. Schindler
Wirtschaftsprüfer
Pastor
Wirtschaftsprüfer
134
Corporate Governance
Members of the Supervisory Board
Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h.
Joachim Milberg
Chairman
Former Chairman of the Board of
Management of BMW AG
Chairman of the Presiding Board, Personnel Committee
and Nomination Committee; member of Audit Committee
and the Mediation Committee
Mandates
Bertelsmann AG
FESTO AG
SAP AG
ZF Friedrichshafen AG (since 15. 04. 2008)
Deere & Company
Manfred Schoch*
Deputy Chairman
Chairman of the General Works Council
Industrial Engineer
Member of the Presiding Board, Personnel Committee,
Audit Committee and Mediation Committee
Stefan Quandt
Deputy Chairman
Industrial Engineer
Member of the Presiding Board, Personnel Committee,
Audit Committee, Nomination Committee and Mediation
Committee
Mandates
DELTON AG (Chairman)
DataCard Corp.
Stefan Schmid *
Deputy Chairman
Chairman of the Works Council, Dingolfing
Member of the Presiding Board, Personnel Committee,
Audit Committee and Mediation Committee
* Employee representative
Membership of other statutory supervisory boards
Membership of equivalent national or foreign boards of business enterprises
134
134
137
138
140
141
147
Corporate Governance
Members of the Supervisory Board
Members of the Board of
Management
Corporate Governance in the
BMW Group
Compliance in the BMW Group
Compensation Report
Declaration of the Board of
Management and of the Supervisory
Board pursuant to § 161 AktG
Konrad Gottinger*
(until 15. 02. 2008)
Deputy Chairman
Member of the Works Council, Dingolfing
Member of the Presiding Board, Personnel Committee,
Audit Committee and Mediation Committee
Prof. Dr. Jürgen Strube
Deputy Chairman
Chairman of the Supervisory Board of BASF SE
Chairman of the Audit Committee;
member of the Presiding Board, Personnel Committee
and Mediation Committee
Mandates
Allianz Deutschland AG
BASF SE (Chairman)
Bertelsmann AG (Deputy Chairman)
Commerzbank AG (until 15. 05. 2008)
Fuchs Petrolub AG (Chairman)
Hapag-Lloyd AG
Linde AG (until 03. 06. 2008)
Dr. Hans-Dietrich Winkhaus
(until 08. 05. 2008)
Deputy Chairman
Former Chairman of the Board of
Henkel AG & Co. KGaA
Member of the Presiding Board, Personnel Committee,
Audit Committee and Nomination Committee
Mandates
Deutsche Lufthansa AG (until 29. 04. 2008)
ERGO Versicherungsgruppe AG (until 05. 05. 2008)
Henkel AG & Co. KGaA (until 14. 04. 2008)
135 Corporate Governance
Ulrich Eckelmann*
Head of the Industry, Technology and
Environment section
IG Metall Executive Board
Mandates
VOITH AG (since 11. 03. 2008)
Bertin Eichler*
Executive Member of the
Executive Board of IG Metall
Mandates
ThyssenKrupp AG (Deputy Chairman)
BGAG Beteiligungsgesellschaft der
Gewerkschaften GmbH (Chairman)
Franz Haniel
Engineer, MBA
Mandates
DELTON AG (Deputy Chairman)
Franz Haniel & Cie. GmbH (Chairman)
Heraeus Holding GmbH
Metro AG (Chairman)
secunet Security Networks AG
Giesecke & Devrient GmbH
Prof. Dr. rer. nat. Dr. h. c. Reinhard Hüttl
(since 08. 05. 2008)
Chairman of the Executive Board of
Helmholtz-Zentrum Potsdam Deutsches
GeoForschungsZentrum – GFZ
University professor
Arthur L. Kelly
(until 08. 05. 2008)
Managing Partner of
KEL Enterprises L. P.
Mandates
BASF SE (until 14. 01. 2008)
DataCard Corp. (until 30. 06. 2008)
Deere & Company
Northern Trust Corp.
Robert Bosch Corp.
Snap-on Inc.
Susanne Klatten
BSc., MBA
Honorary Senator of the
Technical University of Munich
Mandates
ALTANA AG (Deputy Chairman)
UnternehmerTUM GmbH (Chairman)
Dr. jur. Karl-Ludwig Kley
(since 08. 05. 2008)
Chairman of the Executive Management of
Merck KGaA
Mandates
Bertelsmann AG
WestLB AG (until 31. 12. 2008)
Prof. Dr. rer. pol. Renate Köcher
(since 08. 05. 2008)
Director of Institut für Demoskopie Allensbach
Gesellschaft zum Studium der öffentlichen
Meinung mbH
Mandates
Allianz SE
BASF SE (until 14. 01. 2008)
Infineon Technologies AG
MAN AG
Willibald Löw*
Chairman of the Works Council, Landshut
Prof. Dr. rer. nat. Drs. h. c. mult. Hubert Markl
Former President of Max-Planck-Gesellschaft
zur Förderung der Wissenschaften e. V.
Professor of Biology (retired)
Mandates
Münchener Rückversicherungs-Gesellschaft AG
Georg von Holtzbrinck GmbH
Sanofi-Aventis S. A. (until 14. 05. 2008)
136
Wolfgang Mayrhuber
Chairman of the Board of Management of
Deutsche Lufthansa AG
Mandates
Eurowings Luftverkehrs AG (until 31. 12. 2008)
Fraport AG
LSG Lufthansa Service Holding AG (until 30. 09. 2008)
Lufthansa Cargo AG (until 30. 09. 2008)
Lufthansa Technik AG
Münchener Rückversicherungs-Gesellschaft AG
HEICO Corp.
SWISS International Air Lines AG
Heinz-Joachim Neubürger
(until 08. 05. 2008)
Senior Advisor of Kohlberg Kravis Roberts & Co.
Managing Director of Kohlberg Kravis Roberts &
Co. Ltd.
Export Merchant, MBA
Mandates
Allianz Versicherungs-AG (until 24. 04. 2008)
ProSiebenSat.1 Media AG (until 05. 09. 2008)
Werner Neugebauer*
Regional Executive Officer of IG Metall Bavaria
Mandates
ZF Sachs AG (since 11. 09. 2008)
Franz Oberländer*
Member of the Works Council, Munich
Anton Ruf *
Director Product Line L7
Maria Schmidt*
(since 25. 03. 2008)
Member of the Works Council, Dingolfing
Werner Zierer*
Chairman of the Works Council, Regensburg
134
134
137
138
140
141
147
Corporate Governance
Members of the Supervisory Board
Members of the Board of
Management
Corporate Governance in the
BMW Group
Compliance in the BMW Group
Compensation Report
Declaration of the Board of
Management and of the Supervisory
Board pursuant to § 161 AktG
* Employee representative
Membership of other statutory supervisory boards
Membership of equivalent national or foreign boards of business enterprises
137 Corporate Governance
Members of the Board of Management
Dr.-Ing. Norbert Reithofer
Chairman
Frank-Peter Arndt
Production
Mandates
BMW Motoren GmbH (Chairman)
BMW (South Africa) (Pty) Ltd. (Chairman)
Leipziger Messe GmbH
Dr. Michael Ganal
(† 04. 12. 2008)
Finance (until 02. 12. 2008)
Stefan Krause
(until 13. 03. 2008)
Sales and Marketing
Mandates
Allianz Deutschland AG (until 25. 04. 2008)
Ernst Baumann
(until 30. 11. 2008)
Harald Krüger
(since 01. 12. 2008)
Human Resources, Industrial Relations Director
Human Resources, Industrial Relations Director
Mandates
Krones AG
Mandates
BMW Brilliance Automotive Ltd.
Dr.-Ing. Herbert Diess
Purchasing and Supplier Network
Dr.-Ing. Klaus Draeger
Development
Ian Robertson
(since 13. 03. 2008)
Sales and Marketing
Mandates
Rolls-Royce Motor Cars Limited (Chairman)
Dr. Friedrich Eichiner
Corporate and Brand Development (until 02. 12. 2008)
Finance (since 02. 12. 2008)
Mandates
Allianz Deutschland AG (since 25. 04. 2008)
BMW Brilliance Automotive Ltd. (Deputy Chairman)
BMW (US) Holding Corp.
General Counsel:
Dr. Dieter Löchelt
Membership of other statutory supervisory boards
Membership of equivalent national or foreign boards of business enterprises
138
Corporate Governance in the BMW Group
Corporate governance – in other words ensuring that ac-
tions are taken in accordance with the principles of re-
sponsible management in order to increase the value of
the business on a sustainable basis – is an all-embracing
issue for the BMW Group which affects all areas of the
enterprise. The corporate culture within the BMW Group
is founded on transparent reporting and internal commu-
nication, a policy of corporate governance aimed at the in-
terests of stakeholders, a fair and open approach towards
employees and between Board of Management and Super-
visory Board and compliance with the law.
Information on the Company’s governing
constitution
Bayerische Motoren Werke Aktiengesellschaft (BMW AG)
is a stock corporation (Aktiengesellschaft) based on the
German Stock Corporation Act (Aktiengesetz). It has three
representative bodies, namely Annual General Meeting,
Supervisory Board and Board of Management. The duties
and authorities of those bodies derive from the Stock Cor-
poration Act and the Articles of Incorporation of BMW AG,
the full text of which is published on the BMW Group’s
website. Shareholders – the owners of the business –
exercise their rights at the Annual General Meeting. The
Annual General Meeting decides in particular on the utili-
sation of unappropriated profit, the ratification of the acts
of the members of the Board of Management and of the
Supervisory Board, the appointment of the external auditor,
changes to the Articles of Incorporation, specified capital
measures and – in accordance with legislation applicable
to BMW AG relating to co-determination by employees –
on the composition of one half of the Supervisory Board.
The Board of Management manages the enterprise under
its own responsibility. Within this framework, it is monitored
and advised by the Supervisory Board. The Supervisory
Board appoints the members of the Board of Management
and can, at any time, revoke an appointment if there is an
important reason. The Board of Management keeps the
Supervisory Board informed of all significant matters regu-
larly, without delay and comprehensively, following the
principles of conscientious and faithful accountability and
in accordance with prevailing law and reporting duties allo-
cated to it by the Supervisory Board. The Board of Manage-
ment requires the approval of the Supervisory Board for
certain major transactions. The Supervisory Board is not,
however, authorised to undertake management meas-
ures itself.
by the Annual General Meeting) and ten em ployee re-
presentatives (elected by employees). The close inter ac-
tion between Board of Management and Super visory
Board in the interests of the enterprise as described above
is also known as a “two-tier board structure”. The com-
position of the Board of Management and the Supervisory
Board and of sub-committees set up by the Supervisory
Board is disclosed on pages 134 to 137 of the Annual
Report.
Core principles
Within the BMW Group, the Board of Management, the
Supervisory Board and employees base their actions on
twelve core principles which create the cornerstone of
the success of the BMW Group:
Customer focus
The success of our company is determined by our cus-
tomers. They are at the heart of everything we do. The
results of all our activities must be valued in terms of the
benefits they will generate for our customers.
Peak performance
We aim to be the best – a challenge to which all of us must
rise. Each and every employee must be prepared to deliver
peak performance. We strive to be among the elite, but
without being arrogant. For us, it is the company and our
products that count – nothing else.
Responsibility
Every BMW Group employee has the personal responsi-
bility to ensure the company’s success. In team work,
every employee must assume personal responsibility. We
are fully aware that as we work to achieve our corporate tar-
gets, we have responsibility to each other – in the interests
of the company.
Effectiveness
For our company, the only results that count are those with
a lasting effect. In evaluating leadership, we must consider
the effect of performance on improving results.
Adaptability
To ensure our long-term success, we must adapt to new
challenges with speed and flexibility. We see change as an
opportunity – and in order to capitalise on it, we need to be
adaptable.
In accordance with the regulations contained in the
German Co-determination Act, BMW AG’s Supervisory
Board comprises ten shareholder representatives (elected
Dissent (frankness)
As we strive to find the best solution, our employees are
encouraged to express opposing opinions, if they wish.
134
134
137
138
140
141
147
Corporate Governance
Members of the Supervisory Board
Members of the Board of
Management
Corporate Governance in the
BMW Group
Compliance in the BMW Group
Compensation Report
Declaration of the Board of
Management and of the Supervisory
Board pursuant to § 161 AktG
139 Corporate Governance
However, the solutions we agree upon will then be imple-
mented without exception by everybody involved.
Respect, trust, fairness
We trust each other with respect. Leadership is based on
mutual trust. Trust is rooted in fairness and reliability.
Employees
People make companies. Our employees are the strongest
factor in our success – which means our personnel deci-
sions will be among the most important we ever make.
Leading by example
Every manager must lead by example.
Sustainability
In our view, sustainability refers to our business success
which is the basis for the fulfillment of our ecological and
social responsibility.
Society
Social responsibility is an integral part of our corporate
self-image.
Independence
We are securing the corporate independence of the
BMW Group through sustained profitable growth.
Declaration of Compliance and the BMW Group
Corporate Governance Code
Management and Supervisory Boards of companies listed
in Germany are required by law (§ 161 German Stock Cor-
poration Act) to report once a year whether the officially
published and relevant recommendations issued by the
“German Government Corporate Governance Code Com-
mission”, as valid at the date of the declaration, have been,
and are being, complied with. Companies affected are
also required to state which of the recommendations of
the Code have not been or are not being applied.
The Board of Management and Supervisory Board of
BMW AG believe that the recommendations and sugges-
tions contained in the German Corporate Governance Code
(GCGC) contribute to an enhancement of the financial
markets in Germany, in particular for international investors.
At the joint meeting held in December 2008, the Board of
Management and Supervisory Board of BMW AG issued
the current year’s declaration of compliance with the new
version of the GCGC valid from 8 August 2008 and posted
to the BMW Group’s website. The full text of the declaration
is also provided on page 147 of the Annual Report. BMW AG
continues to comply with the recommendations of the
GCGC with only one exception: The Supervisory Board
has delegated the task of determining the remuneration
and remuneration system (including the principal con-
tractual components and the regular review of the system)
to the Personnel Committee. The full Supervisory Board
is, however, informed regularly and in great detail of the
work of the Personnel Committee. From the perspective
of the Supervisory Board, this division of duties has proved
its worth and increases the efficiency of the Supervisory
Board’s work. All other recommendations are being com-
plied with. In addition, the Board of Management and
the Supervisory Board have, in past years, developed the
BMW Group’s own Corporate Governance Code based
on the GCGC in order to provide shareholders and other
stakeholders with a comprehensive and stand-alone
document covering the corporate governance practices
applied by the BMW Group. The BMW Group’s Corporate
Governance Code has been revised in conjunction with
the new version of the GCGC. A copy of it can be ob-
tained, along with other shareholder information, from the
BMW Group website.
A coordinator responsible for all corporate governance
issues reports directly and on a regular basis to the Board
of Management and the Supervisory Board.
Reportable securities transactions (“Directors’
Dealings”)
Members of the Board of Management and the Super-
visory Board and related persons of those members, are
required, pursuant to § 15 a of the German Securities
Trading Act, to give notice of any of their transactions with
BMW stock or related financial instruments, when the
total sum of such transactions exceeds an amount of euro
5,000 during the calendar year. BMW AG gives notice of
any transaction reported to it on its website at the address
www.bmwgroup.com/ir and in its Annual Document pur-
suant to § 10 (1) of the German Securities Prospectus Act.
Shareholdings of members of the Board of
Management and the Supervisory Board
The members of the Supervisory Board of BMW AG hold
in total 27.70 % of the Company’s issued common and pre-
ferred stock shares of the Company, of which 16.12 % re-
lates to Stefan Quandt, Bad Homburg v. d. H. and 11.58 %
to Susanne Klatten, Munich. The shareholding of the
members of the Board of Management is, in total, less
than 1 % of the issued stock shares.
140
Compliance in the BMW Group
Responsible and lawful conduct provides the basis for the
success of the BMW Group. This approach is integral to
the Group’s corporate culture and it is the reason why cus-
tomers, shareholders, business partners and the general
public place their trust in the BMW Group. The Board of
Management and the employees of the BMW Group are
obliged to act responsibly and in compliance with the law.
This principle has been embedded in the Group’s internal
guidelines for many years now. All departments can avail
themselves of assistance from designated experts from
the relevant Legal and Patents, Group Internal Audit and
Group Security departments to ensure that legal provisions
are complied with.
In order to ensure better protection against compliance-
related and reputational risks, the Board of Management
created a Compliance Committee in 2007 which is man-
dated to establish a worldwide Compliance Organisation
throughout the BMW Group.
The BMW Group Compliance Committee comprises the
heads of the following departments: Legal and Patents,
Corporate Communication and Governmental Affairs, Group
Internal Audit, Group Financial Reporting, Organisation /
In-house Consulting and Group Human Resources. It
manages and monitors activities necessary to avoid non-
compliance with the law (Legal Compliance). These ac-
tivities include training, information and communication
measures, following up potential cases of non-compliance
and implementing compliance requirements. The Com-
pliance Committee reports regularly to the Board of
Management on all compliance-related issues, including
the progress made in setting up the Compliance Organi-
sation, details of investigations performed, identified
cases of non-compliance, sanctions imposed and correc-
tive / preventative measures implemented. The BMW
Group Compliance Committee operates through the
newly established Compliance Committee Office which
is in organisation terms to the Chairman of the Board of
Management.
The Board of Management keeps the Audit Committee
(i. e. a part of the Supervisory Board) informed on the up-
to-date status of compliance activities within the BMW
Group – both on a regular basis and on a case-by-case
basis where necessary. The Compliance Organisation was
implemented at BMW AG and a number of German sub-
sidiaries in 2008 and will be rolled out internationally in 2009.
A whole new landscape of principles, guidelines and in-
structions was also put in place in 2008. To some extent,
these internal rules stipulate processes that reflect current
legislation and thus supplement the Group’s compliance
activities.
The Compliance Organisation comprises the whole set
of measures taken to ensure that the BMW Group, its
representative bodies, its managers and its staff act lawfully.
The various elements of the Compliance Organisation are
shown in the diagram below and are valid throughout the
BMW Group. To the extent that additional compliance re-
quirements apply to individual countries or for specific lines
of business, this is covered by local compliance measures.
The BMW Group Legal Compliance Code (“LCC”) forms
the centre of the Compliance Organisation. This document
explains the significance of legal compliance and provides
an overview of the various legal areas that are relevant for
the BMW Group. The LCC is available for download to
employees in German and English. Translations into seven
other languages will be available from 2009 onwards.
Managers in particular bear a high degree of responsibility
and must set a good example in the process of avoiding
incidences of non-compliance. All managers are required
to inform the staff working for them of the content and
significance of the LCC and to draw attention to legal
risks. Managers must, at regular intervals and on their
Compliance Committee
BMW AG Board of Management
Annual Status Report
Compliance
Committee
Identification and
monitoring
Code of
conduct
Reporting
Compliance
Committee Office
Communi-
cation
Compliance
contact
Training
Implementation with
appropriate personnel
134
134
137
138
140
141
147
Corporate Governance
Members of the Supervisory Board
Members of the Board of
Management
Corporate Governance in the
BMW Group
Compliance in the BMW Group
Compensation Report
Declaration of the Board of
Management and of the Supervisory
Board pursuant to § 161 AktG
141 Corporate Governance
own initiative, check compliance with the law and commu-
nicate regularly with staff on this issue. Any indications
of non-compliance with the law must be rigorously investi-
gated.
As part of the first implementation phase, more than 4,500
managers received training in essential compliance matters
in 2008. This training is obligatory for all managers working
for the BMW Group and is available in the form of web-
based training sessions in either German or English. Suc-
cessful participation in the relevant training sessions is
documented in a certificate. This basic training is also sup-
plemented by training sessions for specific target groups
covering specific compliance issues.
In order to avoid legal risks, all members of staff are ex-
pected to discuss matters with their managers and with
the relevant departments within the BMW Group, in par-
ticular the Legal Department, the Group Internal Audit
Department and the Group Security Department. As a fur-
ther point of contact (telephone or e-mail), the BMW Group
Compliance Contact was set up in 2008 for employees
and non-employees with questions regarding compliance.
This also applies if weaknesses or circumstances have
been identified which could result in non-compliance with
the law. Information can also be provided anonymously if
so desired.
Compliance-related queries and all matters to which atten-
tion has been drawn are documented and followed up by
the Compliance Committee Office, where necessary with
the assistance of Group Internal Audit, Group Security
and legal advisory departments. A reporting system is cur-
rently being established for the Compliance Organisation
which will enable compliance-relevant issues to be reported
to the Compliance Committee on a regular basis, and –
where necessary – on an ad hoc basis. This includes re-
porting on the status and the progress made in setting up
the Compliance Organisation, identified legal risks and
incidences of non-compliance as well as corrective / pre-
ventative measures implemented.
Compliance with, and the implementation of, the LCC is
reviewed regularly by the Group Internal Audit and Group
Security departments. For this purpose, the Group Internal
Audit Department also performs on-site audits and inter-
views employees.
In order to avoid this situation, the BMW Group’s employ-
ees are – via various internal channels – kept fully informed
of the tools and measures used by the Compliance Organi-
sation. The central channel of communication is the Com-
pliance website within the BMW Group Intranet where
employees can find compliance-related information and
also have access to training materials, in both German and
English. Employees can use the website to access fre-
quently asked questions (and related answers) on compli-
ance-related issues.
In the interest of investor protection and in order to ensure
that the BMW Group complies with regulations relating to
potential insider information, the Board of Management
appointed – as early as 1994 – an Ad-hoc Committee which
is made up from representatives of various specialist de-
partments and whose members examine the relevance of
issues for ad-hoc disclosure purposes. All persons work-
ing on behalf of the enterprise and with access to insider
information in accordance with existing rules have been,
and continue to be, included in an appropriate list – which
is regularly updated – and informed of the duties arising
from insider rules.
Compensation Report
The BMW Group supports the endeavours of the German
Corporate Governance Code (GCGC) to increase trans-
parency in the disclosure of the components of compen-
sation. The following section therefore describes the
principles relating to the compensation of the Board of
Management and the stipulations set out in the statutes
relating to the compensation of the Supervisory Board. As
well as discussing the structure of remuneration, the com-
ponents of compensation are also disclosed in absolute
figures. In accordance with the recommendations of the
GCGC, the compensation of each member of the Board of
Management and the Supervisory Board is disclosed by
name and analysed into components.
1. Compensation of the Board of Management,
Responsibilities
In order to increase the efficiency of the Supervisory Board’s
work in personnel-related matters, the task of determining
the remuneration of the Board of Management has been
delegated to the Personnel Committee. The Supervisory
Board is informed regularly and in detail of the work of the
Personnel Committee.
It is essential that employees are aware of, and comply with
applicable legal regulations. The BMW Group does not tol-
erate violations of law by its employees. Culpable violations
of law may result in employment-contract sanctions and
personal liability consequences for the employee involved.
Overall objectives
The compensation model used for the Board of Manage-
ment should be attractive in the context of the competitive
environment for highly qualified executives. The objective
of the variable component of compensation is to create
142
an incentive for exceptional individual performance, linked
to the performance of the BMW Group. The structure of
the compensation of the Board of Management should
also contain parallels to the compensation system applied
to employees and senior management.
Components of compensation
The compensation of the Board of Management comprises
fixed and variable components. In addition, benefits are
also payable at the end of members’ mandates, primarily in
the form of pension benefits. For the purposes of deter-
mining the overall compensation of the Board of Manage-
ment, the Personnel Committee, having considered the
overall position and forecasts of the BMW Group, decides
on an overall remuneration framework, which will include a
high variable proportion.
The Personnel Committee reviews the compensation
system at regular intervals, with regard to the structure
and amount of the remuneration of the Board of Manage-
ment. Fixed remuneration comprises a base remunera-
tion amount, which is paid as monthly salary, and other
remuneration elements. Other remuneration elements
comprise mainly the use of company cars as well as the
payment of insurance premiums, contributions towards
relocation costs and security systems.
The measures used to determine the variable component
of compensation are the BMW Group’s net profit and the
dividend level for the relevant year, the return on sales and
the individual performance of the Board of Management
members as evaluated by the Personnel Committee of the
Supervisory Board. Upper limits are in place for all Board
of Management members.
The compensation system does not include any stock
options, value appreciation rights comparable to stock op-
tions, other share-based compensation components or
other long-term incentives. No compensation agreements
were concluded with members of the Board of Manage-
ment for situations involving a takeover offer. Similarly, they
did not receive any payments or benefits from third parties
in 2008 on account of their activities as the members of the
Board of Management.
Pension agreements are in place for the event of the ter-
mination of a mandate. Pensions are paid to former
members of the Board of Management who have either
reached the age of 65, or, if their mandate had terminated
earlier and had not been extended, to members who have
either reached the age of 60, or who are unable to work
due to ill-health or accident, or who have entered into early
retirement in accordance with a special arrangement. The
amount of the pension comprises, unchanged from the
previous year, a basic monthly amount of euro 10,000 or
euro 15,000 (Chairman of the Board of Management) plus a
fixed amount. The fixed amount is made up of approximate-
ly euro 75 for each year of service in the company before
becoming a member of the Board of Management plus
between euro 153 and euro 600, for each full year of service
on the board (up to a maximum of 15 years). Pension pay-
ments are adjusted by analogy to the rules applicable for
the adjustment of civil servants’ pensions: the pensions
of members of the Board of Management are adjusted
accordingly when the civil servants remuneration level B6
(excluding allowances) is increased by more than 5 %.
If a mandate is ended early before the member of the Board
of Management reaches the age of 60, a transitional pay-
ment amounting to two-thirds of the pension theoretically
earned up to the date when a full pension can be drawn,
may become payable if, after a minimum of three years of
service as a member of the Board of Management, this is
considered appropriate on the basis of an objective evalu-
ation of all circumstances. Arrangements are in place con-
cerning the offsetting of other income against pensions
and transitional payments.
No performance-based or compensatory payments have
been agreed for the event of the termination of members’
mandates.
The amounts disclosed below as the annual pension pro-
vision allocation for each member corresponds to the
pension service cost.
Members of the Board of Management holding a credit card
issued by BMW Bank GmbH, Munich, during the financial
year 2008 had a credit line of up to euro 7,500 (2007: euro
25,565). The amounts arising from credit card usage were
all within the agreed limits.
Compensation of the Board of Management for the
financial year 2008 (total)
The total remuneration of the current members of the Board
of Management of BMW AG for the financial year 2008
amounted to euro 10.9 million (2007: euro 15.2 million). This
comprises fixed components (including other remunera-
tion) of euro 3.1 million (2007: euro 2.7 million) and variable
components of euro 7.8 million (2007: euro 12.5 million).
in euro million
2008
2007
Amount
Proportion
in %
Amount
Proportion
in %
Fixed remuneration
Variable remuneration
3.1
7.8
28.4
71.6
2.7
12.5 *
17.8
82.2
Total remuneration
10.9
100.0
15.2
100.0
* calculated on the basis of an agreed upper limit.
134
134
137
138
140
141
147
Corporate Governance
Members of the Supervisory Board
Members of the Board of
Management
Corporate Governance in the
BMW Group
Compliance in the BMW Group
Compensation Report
Declaration of the Board of
Management and of the Supervisory
Board pursuant to § 161 AktG
143 Corporate Governance
The fixed remuneration of board members remained un-
changed for the financial year 2008. The increase in the
total amount of fixed remuneration for all members was
primarily due to the fact that the Board of Management
comprised eight members for practically the whole of the
financial year 2008, whereas this had only been the case
during the fourth quarter of the financial year 2007.
In addition, an expense of euro 0.8 million (2007: euro 0.7 mil-
lion) was recognised for current members of the Board of
Management for post-employment benefits. This relates
to the expense for allocations to pension provisions (service
cost).
The amount paid to former members of the Board of
Management and their dependants was euro 3.1 million
(2007: euro 4.3 million). Pension obligations to former
members of the Board of Management and their depend-
ants are fully covered by pension provisions amounting
to euro 44.3 million (2007: euro 38.3 million), computed in
accordance with IAS 19.
Compensation of the individual members of the Board of Management for the financial year 2008 (2007)
Fixed compensation
Salary
Other
compensation
Variable
compensation
Compensation
Total
Allocation for
year to pension
provision
in euro
Norbert Reithofer
Frank-Peter Arndt
Ernst Baumann1
Herbert Diess
Klaus Draeger
Friedrich Eichiner
Michael Ganal2
Stefan Krause 3
Harald Krüger 4
Ian Robertson 5
Total
600,000
(600,000)
300,000
(300,000)
330,000
(360,000)
300,000
(75,000)
300,000
(300,000)
300,000
(75,000)
333,871
(360,000)
72,581
(360,000)
25,000
(–)
240,323
(–)
2,801,775
(2,430,000)
16,271
(15,222)
19,708
(98,199)
17,725
(15,737)
29,762
(9,662)
26,276
(55,900)
23,516
(11,068)
61,464
(14,220)
3,697
(16,222)
2,777
(–)
102,938
(–)
304,134
Total
616,271
(615,222)
319,708
(398,199)
347,725
(375,737)
329,762
(84,662)
326,276
(355,900)
323,516
(86,068)
395,335
(374,220)
76,278
(376,222)
27,777
(–)
343,261
(–)
1,650,000
(3,139,200)
825,000
(1,569,600)
882,292
(1,818,300)
825,000
(392,400)
825,000
(1,569,600)
825,000
(392,400)
892,641
(1,818,300)
360,000
(1,818,300)
68,750
(–)
660,887
(–)
2,266,271
(3,754,422)
1,144,708
(1,967,799)
1,230,017
(2,194,037)
1,154,762
(477,062)
1,151,276
(1,925,500)
1,148,516
(478,468)
1,287,976
(2,192,520)
436,278
(2,194,522)
96,527
(–)
1,004,148
(–)
124,912
(161,124)
69,327
(84,851)
86,079
(95,394)
89,930
(28,909)
70,871
(85,602)
81,547
(25,157)
102,093
(122,013)
56,423
(72,557)
4,616
(–)
133,533
(–)
819,331
(675,607)
3,105,909
7,814,570
10,920,479
(236,230)
(2,666,230)
(12,518,100)
(15,184,330)
1 Member of the Board of Management until 30 November 2008
2 Member of the Board of Management until 4 December 2008
3 Member of the Board of Management until 13 March 2008
4 Member of the Board of Management from 1 December 2008
5 Member of the Board of Management from 13 March 2008
2. Compensation of the Supervisory Board
Responsibilities, regulation pursuant to the Articles
of Incorporation
The compensation of the Supervisory Board is deter-
mined by shareholders’ resolution at the Annual General
Meeting. The compensation regulation valid for the finan-
cial year 2008 is the result of the shareholders’ resolutions
taken at the Annual General Meeting on 8 May 2008 and
§ 15 of the Articles of Incorporation of BMW AG. The Arti-
cles of Incorporation of BMW AG can be accessed via the
Internet.
Components of compensation
In line with the recommendations of the German Corpo-
rate Governance Code (section 5.4.6 paragraph 2 GCGC),
the members of the Supervisory Board receive fixed as
well as performance-related compensation.
Each member of the Supervisory Board receives, in addi-
tion to the reimbursement of expenses, a fixed amount
of euro 55,000 (payable at the end of the year) as well as a
profit-oriented compensation of euro 220 for each full euro
0.01 by which the earnings per share (EPS) of common
144
stock reported in the Group Financial Statements for the
relevant financial year (compensation year) exceeds a mini-
mum amount of euro 2.30 (payable after the Annual General
Meeting held in the following year). An upper limit of euro
110,000 is in place for the performance-related compensa-
tion. Since the minimum EPS was not achieved in 2008,
no performance-related compensation is payable for the
financial year 2008.
The German Corporate Governance Code also recom-
mends that the exercising of chair and deputy chair posi-
tions in the Supervisory Board as well the chair and mem-
bership of committees should also be considered when
determining the level of compensation (section 5.4.6 para-
graph 1 GCGC).
Accordingly, the Articles of Incorporation of BMW AG stip-
ulate that the Chairman of the Supervisory Board shall re-
ceive three times the amount and each Deputy Chairman
shall receive twice the amount of the remuneration of a
Supervisory Board member. Provided the relevant commit-
tee convened for meetings on at least three days during
the financial year, each chairman of the Supervisory Board’s
committees receives twice the amount and each member
of a committee receives one and a half times the amount
of the remuneration of a Supervisory Board member. If a
member of the Supervisory Board exercises more than one
of the functions referred to above, the compensation is
measured only on the basis of the function which is remu-
nerated with the highest amount, thus avoiding amounts
accumulating when more than one function is exercised.
In addition, each member of the Supervisory Board re-
ceives an attendance fee of euro 2,000 for each full meeting
of the Supervisory Board (Plenum) which the member
has attended (payable at the end of the financial year).
Attendance at more than one meeting on the same day is
not remunerated separately.
The Company also reimburses to each member of the
Supervisory Board any value added tax arising on their
remuneration. The amounts disclosed below are net
amounts.
Compensation of the Supervisory Board for the financial
year 2008 (total)
In accordance with § 15 of the Articles of Incorporation, the
compensation of the Supervisory Board for activities
during the financial year 2008 amounted to euro 1.6 million
(2007: euro 2.8 million). This includes fixed compensation of
euro 1.6 million (2007: euro 0.1 million). No variable compen-
sation is payable for 2008 (2007: euro 2.7 million) since the
conditions stipulated in the Articles of Incorporation (mini-
mum EPS of euro 2.30) were not met.
in euro million
2008
2007
Amount
Proportion
in %
Amount
Proportion
in %
Fixed compensation
1.6
100.0
Variable compensation
–
–
0.1
2.7 *
3.6
96.4
Total compensation
1.6
100.0
2.8
100.0
* calculated on the basis of an agreed upper limit.
134
134
137
138
140
141
147
Corporate Governance
Members of the Supervisory Board
Members of the Board of
Management
Corporate Governance in the
BMW Group
Compliance in the BMW Group
Compensation Report
Declaration of the Board of
Management and of the Supervisory
Board pursuant to § 161 AktG
145 Corporate Governance
Compensation of the individual members of the Supervisory Board for the financial year 2008 (2007)1
in euro
Fixed compensation
Attendance fee
Variable
compensation
Joachim Milberg (Chairman)
Manfred Schoch (Deputy Chairman)
Stefan Quandt (Deputy Chairman)
Konrad Gottinger (Deputy Chairman) 2
Stefan Schmid (Deputy Chairman) 3
Jürgen Strube (Deputy Chairman) 4
Hans-Dietrich Winkhaus (Deputy Chairman) 5
Ulrich Eckelmann
Bertin Eichler
Franz Haniel
Reinhard Hüttl 6
Arthur L. Kelly 7
Susanne Klatten
Karl-Ludwig Kley 8
Renate Köcher 9
Willibald Löw
Hubert Markl
Wolfgang Mayrhuber
Heinz-Joachim Neubürger 10
Werner Neugebauer
Franz Oberländer
Anton Ruf
Maria Schmidt 11
Werner Zierer
Total
165,000
(18,000)
110,000
(12,000)
110,000
(12,000)
13,825
(12,000)
99,180
(5,967)
90,765
(6,000)
38,770
(12,000)
55,000
(6,000)
55,000
(6,000)
55,000
(6,000)
35,765
(–)
19,385
(6,000)
55,000
(6,000)
35,765
(–)
35,765
(–)
55,000
(6,000)
55,000
(6,000)
55,000
(6,000)
19,385
(6,000)
55,000
(6,000)
55,000
(6,000)
55,000
(6,000)
42,377
(–)
55,000
(6,000)
1,420,982
(155,967)
10,000
(–)
10,000
(–)
10,000
(–)
(–)
(–)
10,000
(–)
10,000
(–)
2,000
(–)
10,000
(–)
8,000
(–)
8,000
(–)
8,000
(–)
2,000
(–)
8,000
(–)
4,000
(–)
8,000
(–)
10,000
(–)
8,000
(–)
10,000
(–)
2,000
(–)
8,000
(–)
10,000
(–)
10,000
(–)
8,000
(–)
10,000
(–)
184,000
(–)
(310,680)
(–)
(207,120)
(–)
(207,120)
(–)
(207,120)
(–)
(102,993)
(–)
(103,560)
(–)
(207,120)
(–)
(103,560)
(–)
(103,560)
(–)
(103,560)
(–)
(–)
(–)
(103,560)
(–)
(103,560)
(–)
(–)
(–)
(–)
(–)
(103,560)
(–)
(103,560)
(–)
(103,560)
(–)
(103,560)
(–)
(103,560)
(–)
(103,560)
(–)
(103,560)
(–)
(–)
(–)
(103,560)
(–)
(–)
(2,691,993)
1 Fixed and variable compensation are calculated on a time-apportioned basis, i.e. based on the actual period of office during the financial year.
2 Member of the Supervisory Board until 15 February 2008
3 Deputy Chairman of the Supervisory Board from 13 March 2008
4 Deputy Chairman of the Supervisory Board from 8 May 2008
5 Member of the Supervisory Board until 8 May 2008
6 Member of the Supervisory Board from 8 May 2008
7 Member of the Supervisory Board until 8 May 2008
8 Member of the Supervisory Board from 8 May 2008
9 Member of the Supervisory Board from 8 May 2008
10 Member of the Supervisory Board until 8 May 2008
11 Member of the Supervisory Board from 25 March 2008
Total
175,000
(328,680)
120,000
(219,120)
120,000
(219,120)
13,825
(219,120)
109,180
(108,960)
100,765
(109,560)
40,770
(219,120)
65,000
(109,560)
63,000
(109,560)
63,000
(109,560)
43,765
(–)
21,385
(109,560)
63,000
(109,560)
39,765
(–)
43,765
(–)
65,000
(109,560)
63,000
(109,560)
65,000
(109,560)
21,385
(109,560)
63,000
(109,560)
65,000
(109,560)
65,000
(109,560)
50,377
(–)
65,000
(109,560)
1,604,982
(2,847,960)
146
Members of the Supervisory Board holding a credit card
issued by BMW Bank GmbH, Munich, during the financial
year 2008 had a credit line of up to euro 7,500 (2007: euro
25,565). The amounts arising from credit card usage were
all within the agreed limits.
None of the members of the Supervisory Board performed
advisory, agency or other services for the BMW Group in
a personal capacity in 2008. In consequence, no additional
compensation was paid. It is BMW Group’s policy and
practice, not to enter into contractual relationships with
members of the Supervisory Board requiring them to pro-
vide personal services, in particular advisory and agency
services, in return for compensation (cf. Section 4.4 of the
BMW Group Corporate Governance Code).
In addition to the BMW Group Corporate Governance Code,
the Legal Compliance Code and the Articles of Incorpora-
tion, further information on the BMW Group’s business (in-
cluding financial publications) is available on the Group’s
website at www.bmwgroup.com/ir.
134
134
137
138
140
141
147
Corporate Governance
Members of the Supervisory Board
Members of the Board of
Management
Corporate Governance in the
BMW Group
Compliance in the BMW Group
Compensation Report
Declaration of the Board of
Management and of the Supervisory
Board pursuant to § 161 AktG
147 Corporate Governance
Declaration of the Board of Management and of the Supervisory Board
of Bayerische Motoren Werke Aktiengesellschaft with respect to the
recommendations of the “Government Commission of the German Corporate
Governance Code” pursuant to § 161 German Stock Corporation Act
I. Declaration of compliance
The Board of Management and Supervisory Board of
Bayerische Motoren Werke Aktiengesellschaft (“BMW AG”)
declare the following with respect to the recommendations
of the “Government Commission on the German Corpo-
rate Governance Code”:
1. During the period since filing the most recent declaration
on 4 December 2007, BMW AG has complied with all rec-
ommendations published on 20 July 2007 in the official
section of the electronic Federal Gazette (Code version
dated 14 June 2007), except for the divergence from sec-
tion 4.2.2 paragraph 1 GCGC already declared on 4 Decem-
ber 2007, namely that the discussion and regular review of
the structure of the compensation system of the Board
of Management is performed by the Personnel Commit-
tee and not, additionally, by the full Super visory Board.
2. BMW AG will comply with all recommendations published
on 8 August 2008 in the official section of the electronic
Federal Gazette (Code version dated 6 June 2008) except
for only one divergence, namely that the Super visory
Board has delegated the task of taking resolutions re-
garding the Management Board remu neration system,
including the principal contractual com ponents and the
regular review of that system, to the Personnel Commit-
tee (section 4.2.2 paragraph 1 GCGC).
II. Explanatory notes
The task of determining the Management Board compen-
sation system, including the principal contractual compo-
nents and the regular review of that system has been dele-
gated to the Personnel Committee in order to increase
the efficiency of the Supervisory Board’s work in personnel-
related matters. The Supervisory Board is informed regu-
larly and in detail of the work of the Personnel Committee.
Munich, December 2008
Bayerische Motoren Werke
Aktiengesellschaft
Supervisory Board
Board of Management
148
Other Information
BMW AG
Principal Subsidiaries
Principal subsidiaries of BMW AG
at 31 December 2008
Domestic1
BMW INTEC Beteiligungs GmbH, Munich 3
BMW Bank GmbH, Munich 3
BMW Finanz Verwaltungs GmbH, Munich
BMW Ingenieur-Zentrum GmbH + Co., Dingolfing
BMW Maschinenfabrik Spandau GmbH, Berlin
BMW Leasing GmbH, Munich 3
BMW Hams Hall Motoren GmbH, Munich 4
BMW Fahrzeugtechnik GmbH, Eisenach 3
BMW M GmbH Gesellschaft für individuelle Automobile, Munich 3
Equity
in euro million
Net result
in euro million
Capital investment
in %
3,769
268
247
47
42
16
15
11
5
–
–
117
– 4
1
–
–
–
–
100
100
100
100
100
100
100
100
100
1 In the case of German subsidiaries, based on financial statements drawn up in accordance with HGB.
2 In the case of foreign subsidiaries, based on financial statements drawn up in accordance with uniform IFRSs accounting policies.
Equity and net result are translated at the closing rate.
3 profit and loss transfer agreement with BMW AG
4 profit and loss transfer agreement with a subsidiary of BMW AG
5 below euro 500,000
Other Information
BMW AG Principal Subsidiaries
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Index of graphs
Financial Calendar
148
148
150
152
154
156
158
159
160 Contacts
149 Other Information
Principal subsidiaries of BMW AG
at 31 December 2008
Foreign 2
BMW Österreich Holding GmbH, Steyr
BMW Motoren GmbH, Steyr
BMW China Automotive Trading Ltd., Beijing
BMW Russland Trading OOO, Moscow
BMW Austria Gesellschaft m. b. H., Salzburg
BMW Holding B. V., The Hague
BMW Italia S. p. A., Milan
BMW (Schweiz) AG, Dielsdorf
BMW Australia Finance Ltd., Melbourne, Victoria
BMW (South Africa) (Pty) Ltd., Pretoria
BMW Finance N. V., The Hague
BMW Overseas Enterprises N. V., Willemstad
BMW Japan Corp., Tokyo
BMW Japan Finance Corp., Tokyo
BMW Belgium Luxembourg S. A. / N. V., Bornem
BMW France S. A., Montigny le Bretonneux
BMW Canada Inc., Whitby
BMW Australia Ltd., Melbourne, Victoria
BMW Portugal Lda., Lisbon
BMW Hellas Trade of Cars SA, Athens
BMW Korea Co., Ltd., Seoul
BMW Automotive (Ireland) Ltd., Dublin
BMW Sverige AB, Stockholm
BMW New Zealand Ltd., Auckland
BMW Nederland B. V., The Hague
BMW (UK) Holdings Ltd., Bracknell
BMW (UK) Ltd., Bracknell
BMW (UK) Manufacturing Ltd., Bracknell
BMW Financial Services (GB) Ltd., Hook
BMW (UK) Capital plc, Bracknell
BMW Malta Ltd., St. Julians
BMW Malta Finance Ltd., St. Julians
BMW Coordination Center V. o. F., Bornem
BMW España Finance S. L., Madrid
BMW Ibérica S. A., Madrid
BMW de Mexico, S. A. de C. V., Mexico City
BMW (US) Holding Corp., Wilmington, Del.
BMW Manufacturing, LLC, Wilmington, Del.
BMW Financial Services NA, LLC, Wilmington, Del.
BMW of North America, LLC, Wilmington, Del.
BMW US Capital, LLC, Wilmington, Del.
Equity
in euro million
Net result
in euro million
Capital investment
in %
1,950
740
136
127
63
3,688
414
381
370
342
341
64
297
347
213
175
153
118
53
46
25
24
24
22
19
1,084
868
805
168
105
972
833
592
360
262
– 3
1,206
690
577
242
233
394
144
130
3
10
906
58
45
21
45
– 64
2
7
26
22
61
– 91
26
15
14
9
9
– 9
5
7
–10
– 21
90
– 89
–18
107
58
– 2
21
32
–14
5
135
–106
– 60
20
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
150
BMW Group Ten-year Comparison
Deliveries to customers
Automobiles 3
Motorcycles 4
Production
Automobiles 3
Motorcycles 5
Financial Services
Contract portfolio
Business volume (based on balance sheet carrying amounts)
Income Statement
Revenues
Gross profit margin Group
Profit before financial result
Profit before tax
Return on sales (earnings before tax / revenues)
Income taxes
Effective tax rate
Net profit / – loss for the year
Balance Sheet
Non-current assets
Current assets
Equity
Equity ratio Group
Non-current provisions and liabilities
Current provisions and liabilities
Balance sheet total
Cash Flow Statement
Cash and cash equivalents at balance sheet date
Operating cash flow7
Capital expenditure
Capital expenditure ratio (capital expenditure / revenues)
Personnel
Workforce at the end of year 8
Personnel cost per employee
Dividend
Dividend total
Dividend per share of common stock / preferred stock
2008
IASs / IFRSs
2007
IASs / IFRSs
2006
2005
2004
2003
2002
2001
2000
IASs / IFRSs
IASs / IFRSs
IASs / IFRSs,
IASs / IFRSs
IASs / IFRSs,
IASs / IFRSs
IASs / IFRSs
2000
HGB
1999
HGB
adjusted 1
adjusted 2
units
units
1,435,876
1,500,678
101,685
102,467
1,373,970
1,327,992
1,208,732
1,104,916
1,057,344
905,657
1,011,874
1,011,874
1,180,429
100,064
97,474
92,266
92,962
92,599
84,713
74,614
74,614
65,168
units
units
1,439,918
1,541,503
104,220
104,396
1,366,838
1,323,119
1,250,345
1,118,940
1,090,258
946,730
1,026,775
1,026,775
1,147,420
103,759
92,012
93,836
89,745
93,010
90,478
74,397
74,397
69,157
contracts
3,031,935
2,629,949
euro million
57,587
51,257
2,270,528
2,087,368
1,843,399
1,623,425
1,443,236
1,297,702
1,317,150
970,747
1,010,839
44,010
40,428
32,556
28,647
26,505
25,306
24,958
17,578
16,859
euro million
53,197
56,018
48,999
46,656
44,335
41,525
42,411
38,463
37,226
35,356
34,402
%
euro million
euro million
%
euro million
%
euro million
euro million
euro million
euro million
%
euro million
euro million
16.7
921
351
0.7
21
6.0
330
62,416
38,670
20,273
20.1
41,526
39,287
euro million
101,086
euro million
euro million
euro million
%
7,454
4,471
4,204
7.9
21.8
4,212
3,873
6.9
739
19.1
3,134
56,619
32,378
21,744
24.4
33,469
33,784
88,997
2,393
6,246
4,267
7.6
23.1
4,050
4,124
8.4
1,250
30.3
2,874
50,514
28,543
19,130
24.2
31,372
28,555
79,057
1,336
5,373
4,313
8.8
22.9
3,793
3,287
7.0
1,048
31.9
2,239
47,556
27,010
16,973
22.8
29,509
28,084
74,566
1,621
6,184
3,993
8.6
23.2
3,774
3,583
8.1
1,341
37.4
2,242
40,822
26,812
16,534
24.4
26,517
24,583
67,634
2,128
6,157
4,347
9.8
22.7
3,353
3,205
7.7
1,258
39.3
1,947
36,921
24,554
16,150
26.3
22,090
23,235
61,475
1,659
4,970
4,245
10.2
22.8
3,505
3,297
7.8
1,277
38.7
2,020
34,667
20,844
13,871
25.0
20,028
21,612
55,511
2,333
4,553
4,042
9.5
25.3
3,356
3,242
8.4
1,376
42.4
1,866
31,282
19,977
10,770
21.0
19,223
21,266
51,259
2,437
4,304
3,516
9.1
22.8
2,065
2,032
5.5
823
40.5
1,209
30,079
19,261
9,432
19.1
17,386
22,522
49,340
2,927
3,966
2,781
7.5
18.1
1,578
1,663
4.7
637
38.3
1,026
20,056
15,819
4,896
13.6
13,457
17,522
35,875
2,879
–
2,138
6.0
16.4
931
1,111
3.2
448
40.3
– 2,487 6
19,857
17,650
3,932
10.5
14,785
18,790
37,507
2,055
–
2,155
6.3
euro
100,041
75,612
107,539
76,704
106,575
76,621
105,798
75,238
105,972
73,241
104,342
73,499
101,395
69,560
97,275
66,711
93,624
63,548
93,624
62,307
114,952
55,710
euro million
197
694
euro
0.30 / 0.32
1.06 / 1.08
458
419 9
419
392
351
350
310
310
269
0.70 / 0.72
0.64 / 0.66
0.62 / 0.64
0.58 / 0.60
0.52 / 0.54
0.52 / 0.54
0.46 / 0.48
0.46 / 0.48
0.40 / 0.42
1 adjusted for new accounting treatment of pension obligations
2 reclassified after harmonisation of internal and external reporting systems
3 including Rover Cars up to 9 May 2000 and Land Rover up to 30 June 2000
4 excluding C1, sales volume to 2003: 32,859 units, excluding Husqvarna Motorcycles (13,511 motorcycles)
5 up to 1999 including BMW F 650 assembly by Aprilia S. p. A., from 2006 including BMW G 650 X assembly by Piaggio S. p. A. / excluding C1 production by Bertone, production
volume C1 up to 2002: 33,489 units, excluding Husqvarna Motorcycles (14,232 motorcycles)
6 The net profit before exceptional items amounted to euro 663 million.
7 Figures (available since 2000) are reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from
operating activities of the Automobiles segment.
8 Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners.
9 adjustment to dividend due to buy-back of treasury shares
Other Information
BMW AG Principal Subsidiaries
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Index of graphs
Financial Calendar
148
148
150
152
154
156
158
159
160 Contacts
151 Other Information
2008
2007
IASs / IFRSs
IASs / IFRSs
2006
IASs / IFRSs
2005
IASs / IFRSs
2004
IASs / IFRSs,
adjusted 1
2003
IASs / IFRSs
2002
IASs / IFRSs,
adjusted 2
2001
IASs / IFRSs
2000
IASs / IFRSs
2000
HGB
1999
HGB
units
units
1,435,876
1,500,678
101,685
102,467
1,373,970
1,327,992
1,208,732
1,104,916
1,057,344
905,657
1,011,874
1,011,874
1,180,429
100,064
97,474
92,266
92,962
92,599
84,713
74,614
74,614
65,168
units
units
1,439,918
1,541,503
104,220
104,396
1,366,838
1,323,119
1,250,345
1,118,940
1,090,258
946,730
1,026,775
1,026,775
1,147,420
103,759
92,012
93,836
89,745
93,010
90,478
74,397
74,397
69,157
Business volume (based on balance sheet carrying amounts)
contracts
3,031,935
2,629,949
euro million
57,587
51,257
2,270,528
2,087,368
1,843,399
1,623,425
1,443,236
1,297,702
1,317,150
970,747
1,010,839
44,010
40,428
32,556
28,647
26,505
25,306
24,958
17,578
16,859
euro million
53,197
56,018
48,999
46,656
44,335
41,525
42,411
38,463
37,226
35,356
34,402
%
%
%
euro million
euro million
euro million
euro million
euro million
euro million
euro million
%
euro million
euro million
16.7
921
351
0.7
21
6.0
330
62,416
38,670
20,273
20.1
41,526
39,287
euro million
101,086
euro million
euro million
euro million
%
7,454
4,471
4,204
7.9
21.8
4,212
3,873
6.9
739
19.1
3,134
56,619
32,378
21,744
24.4
33,469
33,784
88,997
2,393
6,246
4,267
7.6
23.1
4,050
4,124
8.4
1,250
30.3
2,874
50,514
28,543
19,130
24.2
31,372
28,555
79,057
1,336
5,373
4,313
8.8
22.9
3,793
3,287
7.0
1,048
31.9
2,239
47,556
27,010
16,973
22.8
29,509
28,084
74,566
1,621
6,184
3,993
8.6
23.2
3,774
3,583
8.1
1,341
37.4
2,242
40,822
26,812
16,534
24.4
26,517
24,583
67,634
2,128
6,157
4,347
9.8
22.7
3,353
3,205
7.7
1,258
39.3
1,947
36,921
24,554
16,150
26.3
22,090
23,235
61,475
1,659
4,970
4,245
10.2
22.8
3,505
3,297
7.8
1,277
38.7
2,020
34,667
20,844
13,871
25.0
20,028
21,612
55,511
2,333
4,553
4,042
9.5
25.3
3,356
3,242
8.4
1,376
42.4
1,866
31,282
19,977
10,770
21.0
19,223
21,266
51,259
2,437
4,304
3,516
9.1
22.8
2,065
2,032
5.5
823
40.5
1,209
30,079
19,261
9,432
19.1
17,386
22,522
49,340
2,927
3,966
2,781
7.5
18.1
1,578
1,663
4.7
637
38.3
1,026
20,056
15,819
4,896
13.6
13,457
17,522
35,875
2,879
–
2,138
6.0
16.4
931
1,111
3.2
448
40.3
– 2,487 6
19,857
17,650
3,932
10.5
14,785
18,790
37,507
2,055
–
2,155
6.3
euro
100,041
75,612
107,539
76,704
106,575
76,621
105,798
75,238
105,972
73,241
104,342
73,499
101,395
69,560
97,275
66,711
93,624
63,548
93,624
62,307
114,952
55,710
euro million
197
694
euro
0.30 / 0.32
1.06 / 1.08
458
419 9
419
392
351
350
310
310
269
0.70 / 0.72
0.64 / 0.66
0.62 / 0.64
0.58 / 0.60
0.52 / 0.54
0.52 / 0.54
0.46 / 0.48
0.46 / 0.48
0.40 / 0.42
Deliveries to customers
Automobiles 3
Motorcycles 4
Production
Automobiles 3
Motorcycles 5
Financial Services
Contract portfolio
Income Statement
Revenues
Gross profit margin Group
Profit before financial result
Profit before tax
Income taxes
Effective tax rate
Net profit / – loss for the year
Balance Sheet
Non-current assets
Current assets
Equity
Equity ratio Group
Return on sales (earnings before tax / revenues)
Non-current provisions and liabilities
Current provisions and liabilities
Balance sheet total
Cash Flow Statement
Cash and cash equivalents at balance sheet date
Operating cash flow7
Capital expenditure
Capital expenditure ratio (capital expenditure / revenues)
Personnel
Workforce at the end of year 8
Personnel cost per employee
Dividend
Dividend total
Dividend per share of common stock / preferred stock
1 adjusted for new accounting treatment of pension obligations
2 reclassified after harmonisation of internal and external reporting systems
3 including Rover Cars up to 9 May 2000 and Land Rover up to 30 June 2000
4 excluding C1, sales volume to 2003: 32,859 units, excluding Husqvarna Motorcycles (13,511 motorcycles)
5 up to 1999 including BMW F 650 assembly by Aprilia S. p. A., from 2006 including BMW G 650 X assembly by Piaggio S. p. A. / excluding C1 production by Bertone, production
volume C1 up to 2002: 33,489 units, excluding Husqvarna Motorcycles (14,232 motorcycles)
6 The net profit before exceptional items amounted to euro 663 million.
7 Figures (available since 2000) are reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from
8 Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners.
operating activities of the Automobiles segment.
9 adjustment to dividend due to buy-back of treasury shares
152
BMW Group
Locations
— S
— S
— R
— P
— R
— R
— R
— S
— S
— S
— S
— A
— P
— S
— P
— R
— S
— S
— S
— R
— S
— A
— S
— S
— A
— S
— A
— A
— S
— S
— S
— S
— S
— S
— S
— A
— P
— P
— S
— P
— S
— P
— R
— P
— P
— P
— S
— C
— R
— P
— P
— R
— S
— S
— S
— S
— H
— S
— P
— S
— S
— S
— S
— S
— S
— S
— P
— P
— P
— P
— S
— S
— S
— S
— S
Other Information
BMW AG Principal Subsidiaries
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Index of graphs
Financial Calendar
148
148
150
152
154
156
158
159
160 Contacts
The BMW Group is present in the world markets with
24 production and assembly plants, 41 sales subsidiaries
and a research and development network.
— H Headquarters
— R Research and Development
BMW Group Research and Innovation Centre
(FIZ), Munich
BMW Group Forschung und Technik, Munich
BMW Group Car IT, Munich
BMW Innovations- und Technologiezentrum für
Leichtbau, Landshut
BMW Entwicklungszentrum für Dieselmotoren,
Steyr, Austria
BMW Group Designworks, Newbury Park, USA
BMW Group Technology Office, Palo Alto, USA
BMW Group Engineering and Emission Test Center,
Oxnard, USA
BMW Group Technology Office, Tokyo, Japan
BMW Group Entwicklungsbüro, Beijing, China
BMW Group Entwicklung USA, Woodcliff Lake, USA
— S
— S
— S
— S
— R
— R
— P
— P
— R
— R
— R
— R
— R
— R
— S
— S
— S
— S
— A
— A
— S
— S
— P
— P
— S
— S
— S
— S
153 Other Information
— P
— P
— R
— R
— S
— S
— S
— S
— S
— R
— S
— R
— S
— S
— S
— S
— S
— S
— S
— S
— P
— P
— P
— P
— P
— P
— P
— P
— S
— S
— S
— S
— S
— S
— A
— A
— S
— S
— A
— A
— S
— A
— S
— A
— A
— A
— S
— S
— S
— S
— S
— S
— S
— S
— S
— S
— A
— A
— P
— P
— S
— S
— P
— S
— P
— P
— S
— P
— S
— S
— P
— R
— R
— P
— P
— R
— P
— S
— P
— P
— C
— S
— C
— P
— P
— P
— P
— P
— R
— R
— S
— S
— S
— R
— P
— H
— H
— S
— S
— S
— S
— S
— S
— S
— S
— P
— P
— S
— S
— S
— S
— S
— S
— S
— S
— S
— S
— S
— S
— S
— S
— S
— P Production
— C Contract production
— S Sales subsidiary markets
Berlin plant
Dingolfing plant
Eisenach plant
Goodwood plant, GB (headquarters of
Rolls-Royce Motor Cars Limited)
Hams Hall plant, GB
Landshut plant
Leipzig plant
Munich plant
Oxford plant, GB
Regensburg plant
Rosslyn plant, South Africa
BMW Brilliance Automotive Ltd., Shenyang,
China (joint venture with Brilliance China
Automotive Holdings)
Spartanburg plant, USA
Steyr plant, Austria
Swindon plant, GB
Wackersdorf plant
Husqvarna Motorcycles S. r. l., Cassinetta di
Biandronno, Italy
Magna Steyr Fahrzeugtechnik, Austria
— A Assembly plants
CKD production Cairo, Egypt
CKD production Chennai, India
CKD production Jakarta, Indonesia
CKD production Kaliningrad, Russia
CKD production Kulim, Malaysia
CKD production Rayong, Thailand
South Africa
South Korea
Spain
Sweden
Switzerland
Thailand
USA
Argentina
Australia
Austria
Belgium
Brazil
Bulgaria
China
Canada
Czech Republic
Denmark
Finland
France
Germany
Great Britain
Greece
Hungary
India
Indonesia
Ireland
Italy
Japan
Malaysia
Malta
Mexico
Netherlands
New Zealand
Norway
Philippines
Poland
Portugal
Romania
Russia
Slovakia
Slovenia
154
Glossary
ACEA
Abbreviation for “Association des Constructeurs Européens
d’Automobiles” (European Automobile Manufacturers
Association).
Effectiveness
The degree to which offsetting changes in fair value or cash
flows attributable to a hedged risk are achieved by the
hedging instrument.
Common stock
Stock with voting rights (cf. preferred stock).
Cost of materials
Comprises all expenditure to purchase raw materials and
supplies.
DAX
Abbreviation for “Deutscher Aktienindex”, the German
Stock Index. The index is based on the weighted market
prices of the 30 largest German stock corporations (by
stock market capitalisation).
Deferred taxes
Accounting for deferred taxes is a method of allocating tax
expense to the appropriate accounting period.
Derivatives
Financial products, whose measurement is derived princi-
pally from market price, market price fluctuations and ex-
pected market price changes of the underlying instrument
(e. g. indices, stocks or bonds).
DJSI World
Abbreviation for “Dow Jones Sustainability Index World”.
A family of indexes created by Dow Jones and the Swiss
investment agency SAM Sustainability Group for com-
panies with strategies based on a sustainability concept.
The BMW Group has been one of the leading companies
in the DJSI since 1999.
EBIT
Abbreviation for “Earnings Before Interest and Taxes”. The
profit before income taxes, minority interest and financial
result.
EBITDA
Abbreviation for “Earnings Before Interest, Taxes, Depre-
ciation and Amortisation”. The profit before income taxes,
minority interest, financial result and depreciation / amor-
tisation.
Efficient Dynamics
The aim of Efficient Dynamics is to reduce consumption
and emissions whilst simultaneously increasing dynamics
and performance. This involves a holistic approach to
achieving optimum automobile potential, ranging from
efficient engine technologies, lightweight construction
and comprehensive energy and heat management inside
the vehicle.
Equity ratio
The proportion of equity (= subscribed capital, reserves,
accumulated other equity and minority interest) to the
balance sheet total.
Free cash flow
Free cash flow corresponds to the cash inflow from operat-
ing activities of the Automobiles segment less the cash
outflow for investing activities of the Automobiles segment.
Gross margin
Gross profit as a percentage of revenues.
IASs
International Accounting Standards.
IFRSs
International Financial Reporting Standards, intended to
ensure global comparability of financial reporting and con-
sistent presentation of financial statements. The IFRSs are
issued by the International Accounting Standards Board
and include the International Accounting Standards (IASs),
which are still valid.
ISO 14001
An internationally recognised standard for environmental
management systems.
Operating cash flow
Cash inflow from the Automobiles segment.
Preferred stock
Stock which receives a higher dividend than common
stock, but without voting rights.
Other Information
BMW AG Principal Subsidiaries
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Index of graphs
Financial Calendar
148
148
150
152
154
156
158
159
160 Contacts
Supplier relationship management
Supplier relationship management (SRM) uses focused
procurement strategies to organise networked supplier
relationships, optimise processes for supplier qualification
and selection, ensure the application of uniform standards
throughout the Group and create efficient sourcing and
procurement processes along the whole value added
chain.
Sustainability
Sustainability, or sustainable development, gives equal
consideration to ecological, social and economic develop-
ment. In 1987 the United Nations “World Commission on
Environment and Development” defined sustainable de-
velopment as development that meets the needs of the
present without compromising the ability of future genera-
tions to meet their own needs. The economic relevance
of corporate sustainability to the BMW Group is evident in
three areas: resources, reputation and risk.
155 Other Information
Production network
The BMW Group production network consists worldwide
of 17 plants, six assembly plants and one contract produc-
tion plant. Within this network, the plants supply one an-
other with systems and components and are all character-
ised by a high level of productivity, agility and flexibility.
Rating
Standardised evaluation of a company’s credit standing
which is widely accepted on the global capital markets.
Ratings are published by independent rating agencies,
e. g. Standard & Poor’s or Moody’s, based on their analysis
of a company.
Return on sales
Pre-tax:
Post-tax: Profit as a percentage of revenues.
Profit before tax as a percentage of revenues.
Risk management
An integral component of all business processes. Follow-
ing enactment of the Law on Control and Transparency
within Businesses (KonTraG), all companies listed on a
stock exchange in Germany are required to set up a risk
management system. The purpose of this system is to
identify risks at an early stage which could have a signifi-
cant adverse effect on the assets, liabilities, financial posi-
tion and results of operations, and which could endanger
the continued existence of the company. This applies in
particular to transactions involving risk, errors in accounting
or financial reporting and violations of legal requirements.
The Board of Management is required to set up an appro-
priate system, to document that system and monitor it reg-
ularly with the aid of the internal audit department.
Subscribed capital
The share capital of a company is computed by multiplying
the nominal value of the shares by the number of shares.
Subsidiaries
Subsidiaries are those enterprises which, either directly
or indirectly, are under the uniform control of the manage-
ment of BMW AG or in which BMW AG, either directly or
indirectly
– holds the majority of the voting rights
– has the right to appoint or remove the majority of the
members of the Board of Management or equivalent
governing body, and in which BMW AG is at the same
time (directly or indirectly) a shareholder
– has control (directly or indirectly) over another enterprise
on the basis of a control agreement or a provision in the
statutes of that enterprise.
156
Index
58
A
Accounting principles
Annual General Meeting
143 – 144, 159
Application of § 264 (3) and § 264b of the German
Commercial Code (HGB)
29 – 30, 93
Apprentices
128
11 – 12, 15, 42, 45 – 46, 104, 138,
B
Balance sheet structure
Board of Management
126 – 127, 131 – 132, 136 – 143, 147, 155
Bonds
54
42 – 43, 52, 55, 66, 77, 107, 121, 154
09 – 13, 15, 42, 46, 55, 62, 80, 104,
15, 24, 52 – 53, 130, 151
52 – 54, 77, 80, 125
07, 15, 43, 47, 51 – 52, 63, 79, 85 – 86, 116 – 117,
07, 15, 51 – 52, 76, 79, 125, 133, 151
18, 32 – 33, 35 – 36, 40, 64, 70, 161
55, 127, 141 – 146
10 – 11, 32, 39, 65 – 67, 127, 138 – 141, 146 – 147
53, 80 – 82, 104, 126
82, 133
10, 12, 55, 127, 134, 138 – 139, 141,
C
Capital expenditure
Cash and cash equivalents
Cash flow
119 – 121, 123 – 125, 133, 151, 154 – 155
Cash flow statement
CO2 emissions
Compensation Report
Compliance
Consolidated companies
Consolidation principles
Contingent liabilities
Corporate Governance
143 – 144, 146 – 147
Cost of materials
Cost of sales
Current assets
130 – 131, 151
Current provisions and liabilities
Current taxes
55 – 56, 154
86, 115
49 – 50, 58, 60, 73, 77, 79, 83, 88 – 89, 96
51, 54, 59, 75, 77, 84 – 85, 91, 97, 101,
74, 90, 76 – 77, 101, 110 – 111
54, 75, 151
11, 42, 154
28, 40 – 41, 65, 69, 121
D
DAX
Dealer organisation
Declaration to Corporate Governance Code
Deferred taxes
Development
60, 63 – 64, 66 – 67, 70 – 71, 73, 83 – 84, 89, 95 – 96, 101, 106,
132 – 133, 137, 152, 155
Dividend
151, 155
Dow Jones Sustainability Index World
53, 77, 86, 91 – 92, 104, 154
12, 15, 25, 30, 35 – 39, 42, 46 – 47, 49 – 50, 53,
15, 31, 43, 45 – 46, 52, 77, 83, 92 – 93, 104, 125, 142,
44, 154
147
Other Information
BMW AG Principal Subsidiaries
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Index of graphs
Financial Calendar
148
148
150
152
154
156
158
159
160 Contacts
07, 12 – 13, 24, 29 – 31, 33, 37, 41 – 42, 45 – 46,
43, 50, 73, 83, 92 – 93, 143
09, 13, 21, 25, 34 – 36, 38, 40, 63 – 64,
E
Earnings per share
Efficient Dynamics
70, 154
Employees
55 – 56, 58, 65 – 66, 69, 93, 104 – 106, 138 – 142, 151
Equity
43, 46 – 50, 53 – 54, 57 – 59, 73, 75, 77 – 78, 80 – 82,
84 – 86, 90 – 91, 95, 97, 103 – 105, 107, 109, 120 – 121, 130, 133,
148 – 149, 151, 154
Exchange rates
Explanatory notes to the cash flow statements
16, 50, 52 – 53, 62, 82, 124
125
53, 57, 75, 84 – 85, 99, 100, 117, 119, 121 – 122
46, 50, 52 – 53, 55, 58, 62 – 63, 78,
47 – 48, 52 – 53, 55, 75, 77, 81, 84, 86, 105,
F
Financial assets
Financial instruments
85 – 87, 90 – 91, 103 – 104, 114, 116, 120 – 125, 139
Financial liabilities
111, 114, 117, 119, 121 – 122
Financial result
151, 154
Financial Services
63, 65, 70, 73, 75, 77, 79, 81, 125, 129 – 130, 149, 151
Fleet consumption
35
Foreign currency translation
82
06 – 07, 48 – 50, 60, 73, 86, 90, 107, 129 – 130,
09, 11, 14, 27 – 29, 42, 47 – 49, 51, 53, 57,
G
Group tangible, intangible and investment assets
96 – 97
94,
110
101
49, 60 – 61, 72, 79, 82, 85 – 88, 93, 97, 107,
49, 60, 73, 77, 86, 90 – 91, 151, 154
I
Income statement
110, 120 – 121, 133, 151
Income tax assets
Income taxes
Income tax liabilities
Intangible assets
91, 95 – 96, 130 – 131
Internal financing
Inventories
Investments
77 – 78, 80, 82, 84 – 85, 90 – 91, 95, 97, 107, 115, 117, 119 – 120, 124,
129 – 130
Investments accounted for using the equity method and
other investments
15 – 16, 49 – 50, 52 – 53, 58 – 60, 66, 73, 75,
15, 50 – 51, 53, 57 – 59, 75, 77, 83 – 84, 89,
53, 59, 75, 77, 83, 86, 102
97
55
K
Key data per share
43
L
Lease business
Leased products
Locations
27 – 28, 63
52 – 53, 75, 77, 84, 91, 95, 97, 130 – 131
30, 32 – 34, 37, 41, 152
157 Other Information
M
Mandates of members of the Board of Management
Mandates of members of the Supervisory Board
Marketable securities
97, 99 – 100, 104, 117, 119 – 120
Motorcycles
68, 70, 73, 75, 79, 97, 129 – 131, 151, 153
137
134 – 136
50, 52 – 53, 59, 77, 79, 84, 90 – 91, 95,
07, 14, 18, 25 – 26, 29, 38, 40 – 41, 47 – 51, 57 – 58,
07, 14, 31, 49 – 51, 60, 73, 77 – 78, 81, 83, 85, 92,
N
Net profit
103 – 104, 125, 142, 151
New financial reporting rules
Non-current assets
Non-current provisions and liabilities
87 – 88
54, 75, 77, 84, 97, 101, 130 – 131, 151
54, 75, 151
49 – 50, 73, 89
14, 20 – 23, 25 – 26, 51, 66, 69 – 70, 151
79, 87 – 88, 129 – 131
127
15, 42 – 43, 45 – 46, 50, 58, 73, 83, 92 – 93, 104, 127,
S
Sales and administrative costs
Sales volume
Segment information
Shareholdings of members of the Board of Management
and the Supervisory Board
Stock
138 – 139, 142, 144, 147, 151, 154 – 155
Subscribed capital
Subsidiaries
101, 104 – 105, 113, 115, 117, 119, 121, 126, 140, 148 – 149, 152, 155
Supervisory Board
138 – 147
Suppliers
Sustainability
53, 58 – 59, 78, 80 – 82, 84, 90 – 91, 93, 95 – 97,
08 – 13, 15, 46, 62, 126 – 127, 134,
39, 43 – 44, 139, 154 – 155
59, 75, 154 – 155
39, 43, 64
93
T
Tangible, intangible and investment assets
96 – 97, 130 – 131
Trade payables
Trade receivables
48, 55, 59, 75, 114, 117, 119, 122
53, 59, 75, 101 – 103, 117, 119
59, 77, 94,
49 – 50, 73, 90
O
Other disclosures relating to the income statement
Other financial result
Other investments
Other operating expenses
Other operating income
Other provisions
Outlook
53, 75, 80, 84, 95, 97, 117, 119
49, 73, 89, 96
49 – 50, 60, 73, 89
54, 59, 75, 86, 110
68 – 71, 105
47 – 48, 53, 58 – 59, 75, 86, 105 – 107, 109,
89, 93
59, 101
148 – 149
P
Pension provisions
127, 143
Personnel costs
Prepayments
Principal subsidiaries
Production
69, 83 – 84, 86, 89, 96, 114, 123, 151 – 153, 155, 161
Production network
Profit before financial result
Profit before tax
Property, plant and equipment
77, 83 – 84, 89, 91, 95 – 96, 115, 130 – 131
39 – 40, 63
Purchases
23 – 24, 30, 32 – 33, 64, 69, 155
06 – 07, 48 – 50, 73, 129, 151
06 – 07, 14, 48 – 51, 73, 130, 151, 154 – 155
15, 50 – 51, 53, 57 – 59, 75,
07, 10, 15, 23 – 26, 30 – 34, 36, 39, 46, 53, 63 – 64,
52 – 53, 75, 77, 81, 85, 98,
42, 63, 105, 123, 155
R
Rating
Receivables from sales financing
99, 117, 119, 122
Related party relationships
126
Report of the Supervisory Board
Research
Research and development costs
89 – 90, 96
Result from equity accounted investments
Return on sales
Revenue reserves
Risk management
59, 75, 104
09, 11, 62, 65, 123, 155
09, 11, 13
31, 50, 57, 70 – 71, 142, 151, 155
49 – 50, 60, 73, 77,
50, 130
27, 37 – 38, 49 – 50, 60, 70, 73, 83, 89, 96, 152, 155
W
Workforce
07, 14, 29 – 31, 50, 56, 58, 66, 69, 89, 93, 151
This version of the Annual Report is a translation
from the German version. Only the original German
version is binding.
158
Index of graphs
17
15
16
06
06
Finances
Profit before financial result
Profit before tax
Revenues
06
BMW Group Capital expenditure and
operating cash flow
BMW Group Revenues by region
15
Exchange rates compared to the Euro
Oil price trend
Precious metals price trend
Steel price trend
Contract portfolio of BMW Group Financial Services
2008
Contract portfolio retail customer financing of
BMW Group Financial Services 2008
Regional mix of BMW Group purchase
volumes 2008
Change in cash and cash equivalents
Balance sheet structure – Automobiles segment
Balance sheet structure Group
BMW Group Value added 2008
54
55
28
39
52
27
17
17
54
20
Production and sales volume
06
Deliveries of automobiles
BMW Group Deliveries of automobiles by region
and market
BMW Group – key automobile markets 2008
Deliveries of BMW diesel automobiles
22
Automobile production of the BMW Group by
plant in 2008
MINI brand cars in 2008 – analysis by model variant
BMW motorcycles delivered
BMW Group – key motorcycle markets 2008
BMW motorcycles in 2008 – analysis by series
20
26
26
23
25
23
Workforce
BMW Group Apprentices at 31 December
Employee fluctuation ratio BMW AG
30
Compliance Committee
140
29
32
Environment
CO2 emissions per automobile produced
32
Energy consumed per automobile produced
Process wastewater per automobile produced
Water consumption per automobile produced
Roadmap of the BMW Group for sustainable mobility
Volatile organic compounds (VOC) per automobile
produced
Waste for removal per automobile produced
Development of CO2 emissions of BMW Group cars in
Europe (EU-15)
33
33
34
34
35
34
Stock
Development of BMW stock compared to stock
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Number ONE
Future
Growth
Customers
Profitability
The challenge of the future
03
Future
Growth
Customers
Profitability
The time has come not only to define mobility in the 21st century, but to realise it. Only the
best ideas and concepts will succeed: concepts which align our own needs with those of
our customers and with the challenges society faces – and in doing so create a new state
of balance that will benefit us all.
The challenge of the future
04
Norbert Reithofer
Chairman of the Board of Management
The challenge of the future
Preface
Norbert Reithofer
Chairman of the Board of Management
05
Ladies and Gentlemen,
2008 has not been an easy year for any of us – and that applies equally to the BMW
Group. Who would have thought, at the start of the year, that we would see so much
turmoil in the international finance markets within a matter of months? That within
a few short weeks a whole series of reputable banking institutions would vanish from
the market? Or that entire countries would find themselves in financial difficulties?
During the course of the year, developments in the financial markets began to affect
the real economy. More than that, they shook the very framework and the mechanisms
of the global economic and financial system. Within the space of weeks, much valu-
able trust was lost. Consumers are naturally concerned – and their lack of confidence
is reflected in sales of automobiles.
Although most markets saw a major drop in sales from the previous year, the BMW
Group brands BMW, MINI and Rolls-Royce performed comparatively well under the
circumstances. Our company’s global automotive sales were 4.3 % lower than the
previous year, but despite this decrease we were still able to achieve the second-best
sales figures in our company’s history. In fact, MINI was one of the few automotive
brands that reported growth in 2008. Our motorcycle business also performed well
and almost matched the previous year’s high level, with sales of 101,685 BMW motor-
cycles.
Nevertheless, the situation remains challenging and there is currently no improvement
in sight. The BMW Group will be confronted by economic developments no less
06
than other automobile manufacturers. Consumers’ reluctance to buy new vehicles;
the poor state of the pre-owned vehicle market and the resulting residual value
problems; and, not least, much higher refinancing costs – are all factors which have
affected our business and had a negative impact on earnings. However, although
we revised our forecasts for 2008, we were still able to close the year with positive
earnings.
At the same time, we also achieved a great deal during 2008: We made great strides
in implementing Strategy Number ONE, which gives us a significant competitive
edge and provides a clearly formulated vision. We took decisive action early on –
which has proved to be the right course in the current challenging circumstances.
You will find many examples of this in our annual report. Strategy Number ONE is our
compass out of this crisis and we will be stronger than before. And we will follow this
strategic path consistently.
We have continued to invest in Efficient Dynamics and other technologies – and thus
in our future. That future can be seen in the many new models which we introduced
in 2008.
We presented a new version of the BMW brand’s flagship 7 Series. From the positive
response it received in the media and particularly among our customers, it looks like
we truly hit the mark. We were also able to offer our customers exciting new products
in other segments: including the BMW 1 Series Convertible; revised models of the
BMW 3 Series Sedan and Touring; the BMW X6 and the BMW M3; through to the
Rolls-Royce Phantom Coupé.
The challenge of the future
Preface
Norbert Reithofer
Chairman of the Board of Management
07
We also remain the world’s most sustainable automotive company. For the fourth
consecutive year we headed the Dow Jones Sustainability Index for our industry.
At the BMW Group, sustainability is deeply anchored within the company. This can be
seen most clearly in our products. For instance, by the end of 2008 we could already
boast claim to 27 models with emissions of less than 140 grams of CO2 per kilometre.
Many of our vehicles are already “best-in-class” when it comes to fuel economy.
Our Clean Production philosophy makes sustainability an integral part of vehicle
production. Our aim is for the BMW Group to use resources more efficiently than
any other company in the industry. Because we know that companies who practice
corporate sustainability shape their own future. And we want our future to be a
successful one!
We have substantially increased productivity in manufacturing our vehicles. In the
process we also cooperated with the BMW Group Works Council in the reduction of
our workforce. We took important steps in this direction at an early stage, and – what
is particularly important to me – by mutual agreement with employee representatives.
Rest assured that the Board of Management and I do not take such decisions lightly,
and that we are well aware of what it means for the people concerned. But today,
more than ever, we can see that this was an important and necessary step towards
securing the future of our plants and of the company as a whole.
We were also able to make substantial cost reductions and leverage potential effi-
ciencies in other key areas. And so, we start 2009 with a whole range of competitive
advantages, exciting products and sound liquidity. One thing is clear: This will be a
08
challenging year for our entire industry. It will be a year of transition in which every auto-
mobile manufacturer will be put to the test.
But it should also be clear that, despite all the challenges it faces, the BMW Group is
still a company that delivers a strong operating performance. The foundation of that
strength lies in the passion and dedication of all our employees. And so I would like to
take this opportunity to express my sincerest gratitude to all our employees for their
commitment over the past year. I know that we will continue to work extremely hard
this year and to use every means available to emerge as a winner from the crisis in our
industry. There is no denying that the crisis has filtered into people’s minds, but we
at the BMW Group like to think differently: We will look to the future, and that will assure
our position as a leader in our industry.
Yours
Norbert Reithofer
Chairman of the Board of Management
Everything we do, we do with con-
viction. We firmly believe that the
future of mobility demands a new
equilibrium.
A balance between individual de-
mands and ecological necessities;
between familiar approaches and
new ideas; between success and
responsibility.
All of our future decisions will be
measured against these standards –
that is how we will create the mobility
of tomorrow.
The challenge of the future
The challenge of the future
An age is dawning in which
sustainability will shape
our values.
In which a paradigm shift
will redefine the future of
individual mobility.
Our goals are clear. And
we will consistently realise
them.
Strategy Number ONE
MINI E
Target
Shaping future mobility
project i
Focussing on solutions
Challenges: Megacities
More than 3,000 dealers worldwide
Innovative service products
Target
20% increase from after-sales business
by 2014
Service that spans a vehicle’s lifetime
Potential: over 14 million BMW Group vehicles on the road
Active safety systems
Integrated safety: so that accidents don’t have to happen
Driver assistance systems
Passive safety systems
Wastewater-free production
Waste prevention
Target
– 30% resource consumption per vehicle produced
by 2012
CO2 reduction
Clean Production
Energy efficiency
The challenge of the future
Re-evaluating past ideas.
One thing is certain:
Premium will always be
premium. And yet still
reinvent itself.
The challenge of the future
This is how we create
vehicles that redefine the
premium concept.
Based on technological
innovation – and the
efficient and responsible
use of resources.
Redefining premium
Visionary thinking
Focussing on individuals
Making efficiency key
Going our own way
Promoting creativity
Act responsibly
Recognise mobility needs
Rethink mobility
Living sustainability
Demonstrate leadership
Master future challenges
Create fascination
Safeguard profitability
Keep thinking
The challenge of the future
Our vision: to be the leading
supplier of premium
products and premium
services for individual
mobility.
The challenge of the future
Contents
23
Preface
Norbert Reithofer
Introduction
The challenge of the future
04
09
Topic
Future
one
project i – reinventing urban mobility
Topic
two
Growth
Service that spans a vehicle’s lifetime
Topic
three
Customers
Integrated safety
Topic
four
Profitability
Clean Production
Topic
five
New products
Topic
six
The year 2008
24
32
46
56
68
80
24
Topic
one
Ensuring individual mobility in the major cities of tomorrow requires setting
totally new solutions in motion today. It means developing not only fuel-saving
drive technologies, but also new vehicles and mobility services. It means
being prepared to question everything, even our own way of thinking.
Welcome to project i.
Reinventing
urban mobility.
project i.
The challenge of the future
Topic
one
Future
project i
25
Autumn 2007
Strategy Number ONE adopted
Example: Bangkok. Traffic researchers have found that
drivers in Thailand’s capital city now travel at no more than
15 kilometres an hour during rush hour. Traffic jams are so
common in this city of seven million that its traffic police
recently had to be trained in basic obstetrics – because
more and more women were giving birth in their cars.
On the streets of Mexico City, on the other hand, one of
30 megacities around the world with more than ten million
inhabitants, today’s 4.2 million vehicles create their own
microclimate. 99 percent of the carbon monoxide and
80 percent of the nitrogen oxides in the city’s air come from
the exhausts of cars, buses and motorcycles. The roads
are just as congested in Los Angeles. This city currently
has the world’s highest density of cars. The average com-
mute to and from work takes two hours – which means
commuters spend about three weeks out of every year
stuck in traffic.
In major conurbations the original concept of mobility –
easily getting from A to B within a certain amount of time –
is rapidly becoming a dream. At the same time more and
more people are flooding into the mega-metro polises. Over
280 million city dwellers already live in mega-cities. And
people keep on coming. The influx is growing. Space is
getting scarcer. There is less and less room to move
around.
26
December 2007
Launch of
project i
But what is the point of individual mobility if you are moving
no faster than a well-trained jogger? Or, to put it another
way: What kind of future urban mobility would enable people
to reach their destination reliably and without hassle once
again? Which vehicles would be needed, with which cli-
mate-neutral drive technologies – and how could we find
new ways of integrating them with other means of trans-
port? How many wheels should the ideal urban mobility
concept have? And which factors that nobody has even
thought of should planning take into account?
All these questions have been the subject of a radically
open discussion taking place in a plain factory building at
the heart of the BMW plant in Munich that began in spring
2008. From the outside one would never guess that a
revolution is being planned right here. A grey-painted stair-
way leads through a restricted access area to a buzzing
open-plan office. The walls are covered with city maps,
charts, flow diagrams and hand-drawn sketches. Tele-
phones ring non-stop; engineers dash from one desk to
another. Standing right next to the doorway is a prototype
of a BMW electric bicycle with a sign reading “E-Parking
Only” hanging over it.
March 2008
Megacity analysis
completed
All this brings to mind the excitement of the days when
start-ups were springing up all over the place; and, at first
glance, the project does indeed appear to have a lot in
common with a start-up. Set up as a largely autonomous
company within the company, project i is probably the
most far-reaching future project launched as part of the
Group’s corporate strategy Number ONE. Its mission is
nothing less than to completely rethink mobility for people
who live in the world’s metropolitan areas – and that in-
cludes everything from vehicle concepts to production
structures through to branding and service strategies. The
“i” in the project name ambitiously stands for intelligent,
innovative and international. “We have tremendous free-
dom,” says Inga Jürgens (40), a graduate in management
information systems who joined project i from the BMW
Group’s strategy department. “Not just for the sake of
it,” she adds, “but because we strongly believe that the
premium mobility of the future cannot be developed from
the concepts of the past.”
The challenge of the future
Topic
one
Future
project i
27
Challenge: London
City centre toll: 8 pounds / day
Inhabitants: 7.5 million
Inhabitants per square kilometre: 4,800
Vehicles in the toll zone: 130,000 / day
April 2008
First prototype of the
MINI E
Inga Jürgens
Head of Planning
and Control
project i
Munich
28
Challenge: Los Angeles
Average commute: 60 minutes
Inhabitants LA metropolitan area: 13 million
Percentage of commuter traffic comprised by cars: 90 %
Inhabitants per square kilometre: 3,330
November 2008
MINI E debuts at
Los Angeles Motorshow
Kolling has spent the past few months fleshing out the
details of a climate-neutral vehicle of this kind together
with partners from the BMW Group’s global design net-
work. The first full-sized models are already parked in the
project i team’s office. “We are thinking about launching
a whole range of models in the first half of the next decade,”
confides Kolling. “Some with two wheels, some with four.
Obviously, a densely-built city like Barcelona needs com-
pletely different vehicles than the greater Los Angeles area
with its eight-lane highways and extensive network of
sprawling suburbs.”
The prototypes are still under wraps and can only be
accessed by team members. But out on the roads electric
mobility in its current form is already a reality.
July 2008
Announcement
of field trial
in the USA 2009
For the 30-strong core team nothing is off-limits – apart
from conventional thinking, that is. They welcome ideas
that would be tossed out as impractical anywhere else
and relish questions that challenge conventional wisdom.
They discuss unexpected approaches that open up new
possibilities. According to Jürgens, the biggest surprise
has been “how remarkably open the BMW Group has been
about taking risks. Not to mention the unusual way we are
allowed to work – and the speed with which our unconven-
tional ideas are turned into solutions for the future.”
Because, unlike a regular start-up, the project i team has
access to the combined know-how, resources and cutting-
edge technologies of a global company. And so it can also
deliver highly sophisticated answers to some extremely
complex challenges within a very short space of time. In
less than eight months project leader Ulrich Kranz’s team
developed a comprehensive vision of future mobility that
is as remarkable as it is persuasive. The team conducted
interviews with mobility researchers, urban planners and
architects from around the world. They also negotiated with
battery manufacturers and energy providers, because any
city vehicle of the future would be sure to incorporate at
least an electric motor. “Not only is an electric-powered
vehicle climate-neutral to drive,” explains Joachim Kolling
(44), the project i team’s design head, “when you drive right
into the city centre, it also produces zero emissions. And,
in the future, that will be increasingly necessary to enter
mega-cities at all.”
The challenge of the future
Topic
one
Future
project i
29
Challenge: Mexico City
square kilometre: 5,800
Average age of vehicles: 15 years
Inhabitants in the metropolitan area: 20 million
Inhabitants per
Annual growth in inhabitants: up to 1 million Minibus traffic: 55 %
CO2 emissions from road traffic: 99 %
Dr. Joachim Kolling
Head of Design and
Creative Processes
project i
Munich
30
Challenge: New York
Inhabitants per square kilometre: 9,600
Inhabitants: 8.1 million
Inhabitants NY metropolitan area: 21.2 million
Parking costs per day: 20 – 40 US-$
Spring 2009
Delivery of
500 MINI E test vehicles
Just last December test drivers were out on the roads all
over Bavaria in a remodelled version of the MINI Cooper,
testing its performance in winter conditions. The MINI E,
as it is known, was developed exclusively as a test vehicle.
It was built at the MINI plant in Oxford and fitted with an
electric drive in Munich. It features a 204-hp electric motor,
a top speed of 152 km / h and has a high-performance
lithium-ion battery where the rear seat would be. The energy
storage unit allows the car to drive a distance of up to
250 kilometres (156 miles). It recharges within 2.5 hours and
runs perfectly when put to the test in snow at minus 12 de-
grees Celsius. Anyone who spotted the zero-emission car
driving around Bavaria would hardly have noticed anything
different from the regular MINI. In fact, the only visible dif-
ference is that there is no exhaust pipe – and, of course, no
engine noise either.
Once road trials have been completed, around 500 of these
100-percent emission-free MINI cars will be delivered to
customers in New York, Los Angeles and Berlin for testing.
This makes the BMW Group the first manufacturer world-
wide to put a vehicle with lithium-ion technology on the
roads in large numbers. The excitement the test vehicles
generated in the market surprised even the enthusiastic
project i members. Several thousand Americans applied
to drive a MINI E despite the relatively high lease rate of
850 dollars a month.
The MINI E is an extremely valuable “trial balloon on four
wheels” for the project i team. “We hope this project will
provide us with important insight as to how customers use
an electric car,” explains Jürgens. “And, of course, tell us
what we need to improve.”
For this purpose MINI E drivers will be monitored by market
researchers during the twelve-month field trial and regu-
larly surveyed about their driving experience. Also in Berlin,
where more MINI E cars will take to the roads in the spring
as part of a cooperative venture with the energy provider
Vattenfall Europe, researchers from the universities of
Chemnitz and Berlin will provide the pilot project with scien-
tific support. The goal here is also to find out more about
electric car drivers’ habits. The MINI E will also help re-
searchers explore electric cars’ potential for energy storage.
Many energy providers experience major difficulties with
fluctuations in the availability of energy from regenerative
sources depending on the weather: For instance, if it
is windy at night, the CO2-free energy produced is rarely
needed at that time. On the other hand, wind power is
The challenge of the future
Topic
one
Future
project i
31
Challenge: Shanghai
Inhabitants per square kilometre: 12,946
Inhabitants in the urban area: 9.7 million
Inhabitants by 2015: 13.25 million
Spring 2010
Evaluation of
MINI E field trial
not always available at peak times. But if, in the future,
you could hook up a large number of electric cars to
battery-charging stations for recharging at night, the fleet
of E- vehicles would work as a kind of gigantic, networked
battery. Electric vehicles would store the green energy as
soon as it was generated – helping to solve one of the
central problems of regenerative power generation and
meeting the challenges of urban mobility at the same time.
For now, those remain visions of the future. “But we are
making such tremendous progress on completely new
concepts for vehicles with electric drives within such a short
space of time,” Kolling points out, “that we don’t even
know what else is possible yet!” A lot of questions still need
to be answered – but that is precisely what project i is all
about.
But what does such a vehicle need to be able to do?
What could it potentially do without? What does mobility
mean for people in megacities? These are the questions
project i market researchers put to dozens of traffic plan-
ners, architects, environmentalists and creative types from
all over the world at the very outset of the project. They
travelled round the globe twice to interview people in Lon-
don and Paris, Los Angeles, Mexico City and Shanghai.
“Many of them,” Kolling recalls, “were totally surprised how
openly we listened to what they had to say. And they are
now very keen to see what kind of solutions we will be able
to offer them.”
However, the key question is one the project team has
asked itself again and again, in every phase of the project.
And it is still heard every day in the office at the heart of
the BMW plant in Munich. The question is: “Which of our
customers’ problems does this solve?”
Every aspect of project i developments is measured against
this pivotal question. “Need-Offer-Fit” is what designer
Kolling calls this approach. It simply means that every prod-
uct and the services that go with it have to be developed
in ongoing dialogue with future users. This approach sub-
stantially improves its chances of success. “We want this
discussion to be as long and as intensive as possible,” says
Kolling, “because our future customers’ needs are chang-
ing just as dramatically as the cities themselves: We will
keep on adjusting and improving our vehicle concepts right
up until production starts.”
The first project i vehicles will roll off the assembly line be-
fore the middle of the next decade. Until then, there is
plenty of time for all those questions. And plenty of scope
for unconventional answers: answers which are sure to
get – and keep – tomorrow’s urbanites on the move.
32
Topic
two
There are more than 14 million BMW Group vehicles on the roads today – which
means there are more than 14 million potential service customers. For this reason
the company is launching a global initiative which will systematically exploit the
huge sales potential of the service and parts business – and at the same time reach
out to entirely new customer groups.
Customer
service
Growth
driver
The challenge of the future
Topic
two
Growth
Customer service
33
Closing the driver’s door behind you for the first time; starting the
engine; slipping it into gear. For a BMW Group customer, driving
away in a new car is always a very special moment. It is also the
beginning of a relationship between customer and manufacturer
that often lasts for years. There are more than 14 million BMW
Group vehicles on the roads today – that means there are 14 million
potential service customers out there, all looking for the best
available long-term care.
Quality of service is one of the main criteria customers take into
account when buying a new vehicle. According to industry re-
ports, one in three automotive customers would be prepared to
switch providers to experience a more innovative approach to
service. From the BMW Group’s point of view, after-sales service
not only means satisfied customers, but also translates directly
into sales and profitability, since parts, accessories and services
have such tremendous growth potential. To make better use of
this potential, the BMW Group has launched a global initiative to
expand its after-sales offering.
34
Percentage of automotive customers who would switch to a more innovative service provider
30 %
Projected growth in the automotive parts and
service business over the next five years
20 %
The aim is to provide BMW Group customers with a comprehen-
sive range of services throughout the entire life of their vehicle –
improving customer loyalty and winning new customers in the
process. That is why one of the steps currently being taken is to
set up highly modernised “Dealer Metro Distribution Centres” in
43 major cities around the world, where dealers in that region will
be able to access the 10,000 to 15,000 most essential BMW and
MINI parts within a few hours. They offer customers fast and com-
prehensive service – including owners of older vehicles, many
of whom currently use independent garages they believe to be
cheaper.
The challenge of the future
Topic
two
Growth
Customer service
35
Percentage of after-sales customers who would be prepared to switch service providers
40 %
Some people are loyal to one brand of car their whole life. Meet some of our long-time BMW and MINI drivers with their vehicles in everyday situations on the following pages.
At the same time, the range of products offered – as well as the
positioning and advertising of the parts and services business –
will be systematically expanded. The goal is to generate at least
20 percent more sales over the next five years. In this way, the
BMW Group will also strengthen the profitability and stability of
its extensive dealer network: For the 3,000-plus BMW Group
dealerships worldwide, the service and parts business represents
a reliable source of revenue which is immune to economic fluc-
tuations. Customers, on the other hand, benefit from receiving the
best possible on-site service – from that first special moment to
the end of their vehicle’s lifetime.
36
BMW 3 Series Touring
Vehicle
Purchased
2008
Total distance travelled
Longest route
BMW Welt Munich–Walldorf
1,750 km
The challenge of the future
Topic
two
Growth
Customer service
37
Percentage of automotive customers who already
changed their brand of car because of poor service
15 %
Dr. Lutz Bergau Aviation doctor
Dr. Maren Rehfeld-Bergau Paediatrician Alaska fan
BMW drivers since
First BMW
BMW 2002
Alaska fan
1977
38
Jan Hendrik Schönfeld
MINI driver since
First MINI
MINI Cooper
Real estate agent
2001
The challenge of the future
Topic
two
Growth
Customer service
39
MINI Cooper S Convertible
Vehicle
Purchased
Total distance travelled
Longest route
2007
Hanover–Milan–Hanover
43,000 km
40
Vehicle
Purchased
2008
Total distance travelled
Longest route
BMW 3 Series
9,000 km
Muelheim–Tuscany–Muelheim
The challenge of the future
Topic
two
Growth
Customer service
41
Percentage of sales generated by after-sales business in the German automotive industry
50 %
Ghias Al-Tinawi
BMW driver since
First BMW
BMW 316
Internist
1983
42
Alice Fiedler
MINI driver since
First MINI
Marketing
2001
MINI Cooper
The challenge of the future
Topic
two
Growth
Customer service
43
MINI Cooper S
Vehicle
Pina
Passenger
Purchased
2007
Total distance travelled
Longest route
22,000 km
Frankfurt–Meran–Frankfurt
44
BMW X5
Vehicle
Purchased
2008
Total distance travelled
Longest route
12,000 km
Bremen–Gibraltar
Percentage of sales generated by after-sales business in the German automotive industry
23 %
The challenge of the future
Topic
two
Growth
Customer service
45
Thomas Greppmair
BMW driver since
First BMW of 14
Overall distance travelled
BMW 316
1977
Currency trader
1 million kilometres
46
Topic
three
Intelligent brakes. Adaptive headlights. Systems that can see in the dark. Vehicles
that can detect a collision before it happens: Active safety systems in BMW Group
vehicles open up a whole new dimension in automotive safety.
A new concept
of safety. Smart
prevention.
Saving lives.
Active and
passive safety.
The challenge of the future
Topic
three
Access to technologies and customers
Safety
47
a
b
Image a
b
Klaus Kompaß
After the crash
Head of vehicle safety at the BMW Group.
The new BMW 7 Series after a side impact at more than 56 km / h.
14 million passenger cars in Germany
46
million passenger cars in Germany
1970
2007
48
Image a
b
Preparations
Proper seating
A dummy is lifted into the vehicle by a crane. The dummy weighs more than 80 kilograms.
The dummy’s exact seating position is crucial to readings. A dummy can record 10,000 measurements per second.
201 billion kilometres driven by cars in Germany
1970
692
billion kilometres driven by cars in Germany
a
b
2007
692
The challenge of the future
Topic
three
Access to technologies and customers
Safety
49
2007
Off to a spectacular start. The shriek of a siren warns of
an imminent impact. Almost immediately the building is
rocked by an ominous thud, and then – silence. The vehi-
cle’s tail-end has been severely crushed by the impact –
under glaring spotlights, with high-speed cameras cap-
turing every thousandth of a second of the crash.
Just another day at the largest of the BMW Group’s three
crash test facilities. The elongated cement-encased
building on the grounds of the Research and Innovation
Centre (FIZ) in Munich is sort of like an ultramodern scrap-
ping plant – only for research purposes. Every day the
technicians here send brand new automobiles fitted with
dozens of test sensors hurtling into a concrete block. Or
they have them rammed by a high-speed barrier. Or else
they find some other way to deliberately deform them.
And they do it all in the name of maximum and precision
safety.
Before an automobile can be sold worldwide it has to pass
at least 30 different crash tests. Then there are additional
tests to make sure it meets the BMW Group’s own high
safety standards. The company has been researching the
causes of accidents and the most effective ways of dealing
with them for more than 30 years. Developers have en-
dowed the Group’s vehicles with energy-absorbing defor-
mation zones, reinforced passenger compartments, re-
straint systems, airbags and many other “passive safety
systems” which save lives and protect drivers from injury
on a daily basis. The side head airbag alone, which the
BMW Group was the first automobile manufacturer world-
wide to offer as a standard feature back in 1997, has drasti-
cally reduced the number and severity of head injuries in
the event of a side impact. The combined effectiveness
of these and other safety technologies is reflected in acci-
dent statistics: Although the total number of kilometres
driven on German roads more than tripled between 1970
and 2007, the number of road casualties fell by around
77 percent over the same period. Ironically, that has be-
come something of a problem.
It has now become virtually impossible to make drivers
and their passengers any safer – even with the most so-
phisticated passive safety systems. “Of course we could
add even more airbags to our vehicles or make the body
even more rigid,” says Klaus Kompaß, head of vehicle
safety at the BMW Group, “but these days we have pretty
much exhausted the potential of passive systems.” That
is why for some time now Kompaß and his colleagues
have been focussing their attention more on active safety,
where the primary goal is not to mitigate accidents and
their consequences but to avoid them altogether. This
requires developers to take a much broader view – and to
look beyond the vehicle to the surroundings in which it is
driving.
50
Image a
b
c / d
Lights on
On your marks
Test in progress
One-and-a-half times brighter than the desert at noon – 14 high-speed cameras need plenty of light.
Measuring acceleration over a 130-metre track (longer than a football pitch).
Heading straight for the “tree” at 56 km / h – the standards for passive safety are extremely high.
b
a
c
The challenge of the future
Topic
three
Access to technologies and customers
Safety
51
11.7 minutes average rescue time
21.2 minutes average rescue time
outside of town
outside of town
with BMW ConnectedDrive
without BMW ConnectedDrive
d
52
91 percent of all road fatalities fall into one of four categories. For all four types of
accidents the BMW Group already has effective driver assistance systems on the
market or in development.
Accident type 1:
41percent = driving
accidents.
Standard features:
– lane departure warning
– high beam assistant
– adaptive cornering lights
– active steering
In research or development phase:
– curve info
In this they are assisted by engineers from the BMW
Group’s accident research team who analyse real-life acci-
dents and reconstruct the entire course of events using
computer models. For this purpose they evaluate their
own accident data as well as data from the German Federal
Statistical Office, the German In-Depth Accident Study
project GIDAS and the renowned William Lehman Injury
Research Center in Miami in the United States which
works closely with BMW safety experts. By meticulously
sifting through all the data, accident researchers discover
more about what happens on the roads and how dan-
gerous situations arise. For instance, they established that
in 41 percent of all fatal road accidents the driver loses
control of the vehicle on a straight road. This is followed in
second place by accidents in longitudinal traffic – that is,
collisions with oncoming traffic or vehicles ahead. Colli-
sions while turning or crossing traffic account for 18 percent
of all road fatalities, and those involving pedestrians cross-
ing the road make up 10 percent.
The details are even more revealing: 30 percent of acci-
dents in longitudinal traffic are rear-end collisions, often as
a result of lack of concentration, driving too closely or a
combination of both. We know today that in 42 percent of
collisions at intersections the driver responsible for causing
the accident made no attempt to brake before the impact
and 60 percent did not attempt a steering manoeuvre. Ac-
cording to official German statistics only about two percent
of accidents can be traced to technical defects – and those
are largely the result of poor vehicle maintenance. That
means accidents are nearly always due to drivers failing
to see things, driving inappropriately or misjudging the
situation.
These are shocking figures. But they reveal to engineers
like Klaus Kompaß where the remaining potential for pre-
vention lies. According to the BMW safety chief, “The
person driving the car is the decisive factor. Humans have
definite strengths when it comes to driving, and there
are lots of things they do better than any technology. But
there are also areas where technology is superior to human
beings and where we can use it to help the driver either
avoid accidents – or at least mitigate the consequences.”
Sophisticated driver assistance systems installed in BMW
Group vehicles today already monitor the driver’s sur-
roundings and provide the information needed to make
fast and responsible decisions. The active cruise control
system and the lane departure warning help the driver
manoeuvre safely. Intervention systems such as integral
active steering and the Dynamic Drive active stabiliser
system steady the car in dangerous situations and help
drivers perform their intended manoeuvres in the best way
possible. Intelligent navigation systems and the speed-
limit display supply the driver with relevant data on traffic
conditions and the maximum speed allowed.
The challenge of the future
Topic
three
Access to technologies and customers
Safety
53
a
b
Image a
b
Always on track
Safety begins in normal driving
with lane departure warning.
Intelligent suspension control functions help avoid accidents.
Accident type 2:
22 percent = accidents in
longitudinal traffic.
Standard features:
– lane change warning
– lane departure warning
– adaptive brake assistant
– Night Vision
– high beam assistant
– ACC
– 2-phase brake light
– brake assistant
– ABS, DSC, ASC
In research or development phase:
– signal warning driver of motorists
heading in the wrong direction
on highways
But none of these systems will ever take the steering wheel
out of the driver’s hands. “Drivers will always have to make
the final call,” says Kompaß. “We can only enable them
to make the best possible decision.” Many safety systems
within the vehicle are efficiently networked for that pur-
pose: A camera in the rear view mirror of the new BMW
7 Series provides data needed to display the applicable
speed limit as well as for the lane departure warning and
the high beam assistant. The 7 Series’ integrated chassis
management also interfaces with the transmission shift
characteristics, power-steering assist, integral active
steering, accelerator pedal response and dynamic damp-
ing control as well as the DSC and Dynamic Drive re-
sponse. Highly complex applications such as these, which
encompass the entire vehicle architecture, require quite
different development capabilities – and these cannot be
fully realised by external suppliers. “Our development
work gives the BMW Group access to future technologies
in-house and also from our suppliers,” explains Kompaß.
That work is also economically advantageous. Innovations
such as active steering, lane departure warning, Dynamic
Drive and adaptive cornering lights have all been patented.
The fact that more and more people are opting for safety
features shows that customers increasingly consider road
safety a crucial part of their driving experience.
“What is typical about the BMW Group,” adds Kompaß, “is
our integrated approach to the topic. We analyse the en-
tire process chain – from accident prevention through to
what happens after the impact. That is how we ensure
maximum safety.”
For instance, BMW Group engineers know, from their
study of accidents, that more than half of all fatal pedestrian
accidents take place at dusk or during the night – in other
words, in poor visibility. And although only around 20 per-
cent of all driving is done at night, about 40 percent of
all road fatalities occur in the dark. In response to this chal-
lenge BMW safety experts developed a uniquely intelligent
infrared system to warn the driver of pedestrians or ani-
mals on the road in the dark. “Night Vision,” as the technol-
ogy is called, uses an infrared camera to transmit moving
video images of the surroundings. The difference in tem-
perature allows its sensor to detect people and animals up
to 300 metres away, even in complete darkness beyond
the range of the headlights. If Night Vision identifies a per-
son or animal moving along the roadside, the image is
shown on the control display; if there is any immediate dan-
ger the driver is also given a warning signal.
54
a
Image a
b
c
b
Looking around the corner with Side View.
Preventive safety for pedestrians and cyclists
The new BMW Night Vision detects pedestrians.
Research for the future
The crossroads assistant uses vehicle-to-vehicle communications.
Accident type 3:
18 percent = crossing
accidents.
Standard features:
– Side View
– bending light
– ABS, brake assistant
In research or development phase:
– cross traffic assistant
– traffic light info
BMW developers are always looking ahead in their own
work, too. That is how they find answers today to challenges
which won’t fully emerge until farther down the road. One
such example is the expected increase in the number of
crossing accidents. Studies confirm that accidents that
occur when turning or crossing traffic are often caused
by obstructed visibility – for instance, when a driver is un-
able to see approaching cross traffic due to parked cars.
That is why BMW developers are already working on the
ultimate in assistance systems: vehicle-to-vehicle commu-
nication. Intelligent communication between vehicles
could, for instance, allow a car to alert traffic behind it to
patches of black ice. A vehicle approaching an intersection
could warn cross traffic of its approach, even though it
might still be concealed by a building. “Vehicle-to-vehicle
communication is still a long way off; and then, it would
only work if all brands could communicate with each other,”
explains Kompaß. “At the end of the day a system like this
can only be effective if as many vehicles as possible have
communications systems of this kind.” Nonetheless, last
summer the EU reserved standardised radio frequencies
for all member countries for Car2Car communications. A
research project sponsored by the German federal govern-
ment will soon explore the potential for this type of com-
munications between vehicles made by different manu-
facturers: The BMW Group has had concepts ready for
technical implementation for a long time.
The challenge of the future
Topic
three
Access to technologies and customers
Safety
55
c
Accident type 4:
10 percent = accidents involving
pedestrians.
Standard features:
– pedestrian detection
– Night Vision
– ABS, brake assistant
In research or development phase:
– active emergency braking
Of course, even the most visionary safety systems will
never be able to prevent all accidents. That is why the
BMW Group’s integrated safety concept includes not only
normal driving situations, but also the phase before, during
and after a collision. Just milliseconds before a crash,
the impact warning apparatus positions the brake pads and
primes the braking system. Then as soon as the driver
touches the brake, the brake action is optimised according
to the distance and relative speed data provided by the
ACC. Even before the impact occurs, an electric motor reels
in the seat belt to tighten it. After the crash the warning
lights automatically switch on to warn other road users. At
the same time the vehicle control system activates the in-
terior lights and unlocks the central locking to allow rescue
services to get in. In parallel the BMW ConnectedDrive
communications network automatically alerts the local
emergency dispatch centre and provides essential informa-
tion about the accident within seconds.
This unique system was jointly developed with traumatol-
ogists from the William Lehman Injury Research Center
at the University of Miami. At the core of the system is an
intelligent algorithm that calculates the likelihood of sus-
taining severe injuries using accident and vehicle data. It
is based on biomechanical accident analyses conducted
by doctors at the Lehman Center to establish connections
between different types of accidents and the probability
of serious or life-threatening injuries. The instant one of
the 600,000 vehicles fitted with the emergency call system
is involved in an accident the system calculates the risk
of injury to the passengers from parameters such as type,
severity and direction of the impact and relays the data to
the dispatch centre, along with the vehicle’s exact GPS
position. At the same time the extended emergency call
system establishes a phone connection that allows the
BMW Call Centre and the emergency services to make
contact with the driver. This is the only system of its kind in
the world.
In this way the BMW emergency call system has ensured
a fast response to more than 30,000 incidents. Just recently
Klaus Kompaß read a report about a BMW driver who had
crashed his vehicle through the guardrail on a remote
US highway and rolled over. “The man was lying severely
injured off the side of the highway where he couldn’t be
seen,” explains Kompaß. “Under normal circumstances it
could have been hours or even days before anyone found
him there.” But the car’s BMW ConnectedDrive system
alerted the dispatch centre and an ambulance was rushed
directly to the scene of the accident. The man survived.
Before all these safety features become standard equip-
ment they undergo extensive and rigorous testing at the
BMW Group’s crash facilities. All this involves a tremen-
dous amount of time, effort, and also money. But it gives
the BMW Group access to future technologies which will
directly benefit the Group’s customers. And even though
it is heartbreaking to see all those new vehicles knocked
out of shape at the crash facility, every crash under test con-
ditions helps prevent real injuries on the roads.
56
Topic
four
The BMW Group is systematically improving resource efficiency throughout
its global production network: year after year, plant by plant. From 2006 to
2012 water, energy, CO2 emissions, waste and solvent emissions will all be
reduced by no less than 30 percent – with tangible benefits for the environ-
ment as well as for the company’s earnings.
Reduce costs.
Save resources.
Clean Production.
The challenge of the future
Topic
four
Profitability
Clean Production
57
Target: minus 30 % until 2012
Continually improve the environmental performance
5 % per annum starting in 2006
More performance. Less consumption. Since the BMW Group became the first auto-
mobile manufacturer to appoint an environmental officer back in the early seventies, it has
continually improved its environmental performance. Its progress has also been reflected
in its ranking in the Dow Jones Sustainability Index World: The BMW Group is the only
automobile manufacturer to have been highly rated in this definitive global sustainability
index from the very start. In fact, over the past four years the company has consistently
ranked number one in its sector. This makes the BMW Group the world’s most sustainable
automobile manufacturer. The innovations implemented as part of the Efficient Dynamics
programme combine lower CO2 emissions with optimised driving dynamics throughout
the model range. The BMW Group has also established a systematic approach across its
entire worldwide production network which controls resource consumption and emissions
just as rigorously as, say, the use of financial resources. From the start of the project in
2006 through to 2012, this will reduce energy and water consumption, solvent and carbon
dioxide emissions as well as waste and wastewater by an impressive 30 percent.
58
What is particularly attractive about this approach is that the key to continuous improvement
lies within the production network itself. Because each plant constantly scrutinises the
efficiency of its production processes, there are always certain locations which lead the
way with their ideas, technologies and processes. Thanks to the ongoing exchange of
information and experience the plants systematically benefit from what others have already
achieved.
For instance, American production engineers in the body shop at the Spartanburg plant
developed an adhesive that works without the previously necessary 120-degree Celsius
heat drying process. Hence Spartanburg was able to avoid not only investing in a body
shop dryer but also made huge energy savings in its manufacturing operations. Following
the example of Regensburg, the plants in Leipzig, Munich and Rosslyn in South Africa
are now switching to this resource and cost-saving technology. One-time investment costs:
around 400,000 euros. Savings: 1.5 million euros in energy costs and around 8,150 tons
fewer CO2 emissions per year.
Moreover, at the Landshut plant’s light-metal foundry production experts have been re-
placing the previously used synthetic resin binders with odourless, low-emission mineral
binders since late 2006. The new mineral binder will be used in the manufacture of new
products in the future. This will reduce the percentage of organic components in the
exhaust air by an impressive 98 percent. The whole foundry is slated to switch to this in-
organic binder system by 2010.
“It is often possible to make extensive improvements just by completely rethinking estab-
lished processes,” says Herbert Höltschl, the BMW Group’s corporate officer for sustain-
ability and environmental protection and one of the originators of the project. “Sometimes
you even have to invest less to save more: We profit from doing less.”
The challenge of the future
Topic
four
Profitability
Clean Production
59
The automotive industry’s body pressing plants traditionally use tensile oil to make sheet
metal easier to process. This procedure inevitably releases tiny oil particles into the air,
making elaborate filtering necessary. However, production planners at the Leipzig plant
found a way to dispense with tensile oils altogether by using better tools and press panels.
This not only cut investments in ventilation systems by more than half, it also reduced
running expenses for ventilation and heating by no less than 70 percent.
To identify potential efficiencies of this kind in the early stages, and avoid often costly
modifications later on, the BMW Group’s environmental officers are consulted on all in-
vestment decisions near the outset. Plant managers have also made a binding commitment
to reduce resource consumption by an average of five percent per year. A global bench-
marking system allows all plant managers to see how well they are managing resources
at any time compared with other BMW Group sites. Most importantly, they can call upon
the experience and expertise of the best-performing location to help optimise their own
plant. In this way the BMW Group’s production network practically has its own built-in
Savings from lower resource consumption over the previous year
more than euro 36 million in 2008
“turbocharger” to drive improvements and constantly provide fresh momentum – thus
pre-empting predictable but inevitable price increases for resources and emissions.
Once you have a turbocharger like that up and running, there is no turning it off. And even
though the project’s goal of “minus 30 percent” is initially for a six-year period, its ambitions
stretch much further. “As a company we have set ourselves the goal of one day building
emission-free vehicles,” says Höltschl, “so of course we are also thinking about how we
can build those same vehicles emission-free.”
From that point of view, things are off to an ambitious start with a five percent optimisation
per year. But that is also just the beginning.
60
Image a
b
c
d
Turbines installed on the grounds of the BMW plant in Spartanburg use methane gas to produce electricity and hot water.
A pipeline more than 15 km long supplies the BMW plant in Spartanburg with methane gas.
The power supply centre constantly monitors whether all systems are generating energy properly.
Waste materials at the Palmetto landfill decompose to produce the methane gas needed to generate energy.
a
b
Example 01
Topic: Energy and CO2
Location: Spartanburg, USA
Energy provided by methane gas: 63 %
CO2 emissions: 59,000 tons less per year
The challenge of the future
Topic
four
Profitability
Clean Production
61
c
d
Reduction in the BMW Group’s energy consumption
more than 650,000 MWh in 2008
Energy for next to nothing in Spartanburg in the U.S. That is, as long as you have the
smart technology to take advantage of it. Since 2003 the BMW plant in Spartanburg has
been using methane gas from a nearby landfill to supply its paint shop with power. Today
the plant uses methane to meet around 63 percent of its energy requirements, cutting CO2
emissions by an amount equal to the energy needed to heat and cool about 15,000 American
households over a year. The BMW Group’s European plants are just as resourceful, albeit
using a completely different technology: So-called heat wheels built into the ventilation
systems recover heat from the exhaust air. This free energy source meets up to 70 percent
of heat energy requirements. At the Research and Innovation Centre (FIZ) in Munich surface
groundwater is used to cool buildings in a way that conserves resources. Thanks to clever
innovations like these, today’s energy consumption is 18 percent lower than ten years ago
at 2.80 MWh per vehicle produced.
62
Image a
b
c
Up until a few months ago equipment used to protect the surface of new vehicles stood here.
The vehicles are delivered to their new owners worldwide in closed freight cars.
Today more than half of all the BMW Group’s new vehicles leave the plant by rail.
a
Example 02
Topic: Surface protection
Plant: Regensburg, Germany
Solvent emissions: 70 tons less in 2008
The challenge of the future
Topic
four
Profitability
Clean Production
63
b
c
Reduction in solvent emissions used in the BMW Group
more than 800 tons in 2008
Paint is as much a part of car building as sheet steel and engines. Many paints contain
solvents that pose health and environmental concerns. That is why the BMW Group uses
water-based paints with low solvent content or completely solvent-free powder-based
paint technology at all company sites. The company has now largely done away with the
common methods of surface protection used to protect new cars from the elements during
transport, such as wax, protective films and covers. After a BMW Group study showed
that new vehicles could be transported in closed freight cars or cleaned after transport
without compromising quality, the last remaining surface protection systems to use wax
were switched off in 2008. In this way the plants in Regensburg, Dingolfing, Munich and
Rosslyn in South Africa not only use five grams less solvent per vehicle, but also cut
material, energy and labour costs. In 2008 alone solvent emissions were reduced by more
than 800 tons company-wide. Overall the BMW Group reduced its solvent emissions by
almost half between 1999 and 2008, to less than two kilograms per vehicle.
64
Image a
b
c
d
a
Certain body seams have to be sealed off using PVC before painting. In the past up to 70 masking plugs –
plastic parts used only once – protected the body from getting an unwanted coat of PVC.
Superfine nozzles apply the PVC in such a precise, fine coating that only a single masking plug is needed.
Every single part is perfectly packed – and the same packaging can be used over and over again.
13,5 million reusable containers are in circulation between the BMW Group and its suppliers.
b
Example 03
Topic: PVC waste
Plant: Munich, Germany
PVC waste: minus 80 %
Waste for disposal: 100 tons less in 2008
The challenge of the future
Topic
four
Profitability
Clean Production
65
c
d
Reduction in the total volume of waste produced in the BMW Group
more than 60,000 tons in 2008
Reduce. Reuse. Recycle. When it comes to waste, the BMW Group follows a consistent,
three-phase strategy. Waste is avoided or reused as a resource wherever possible. Only
what cannot be reused without compromising quality is ultimately recycled. Finally, if
recycling is not an option, it is then disposed of as waste. The proportion of “waste for dis-
posal” fell from more than 16 kg per vehicle to 14.8 kg per vehicle between 2007 and 2008
alone. In the Munich plant’s paint shop, for instance, the pre-treatment process for bodies
awaiting painting has been optimised to eliminate 80 % of the PVC waste from the under-
body coating process. But even residual waste can perform a useful function: As fuel for
heat and power plants it helps conserve fossil energy resources.
66
Image a
b
c
a
As drilling emulsion, cooling fluid for milling and lathing, for washing and rinsing – water is indispensable for machining cylinder
heads, crankcases, crankshafts and connecting rods.
The BMW engine plant in Steyr, Austria builds around 60 percent of all BMW engines.
Using a completely new combination of different membrane technologies all of the plant’s process wastewater is processed and
fed back into production.
b
Example 04
Topic: Water and wastewater
Plant: Steyr, Austria
Wastewater: zero litres
Savings: up to 30 million litres per year
The challenge of the future
Topic
four
Profitability
Clean Production
67
c
Reduction in the water consumption of the BMW Group
more than 335,000 m3
in 2008
Wastewater as an inexhaustible source of water. Wherever possible the BMW Group
taps into the most sustainable source of water there is: its own wastewater. For instance,
the BMW engine plant in Steyr, Austria has a closed water cycle for mechanical production
that uses a series of filters to purify drain water until it becomes fresh water again. Since
the outlet to the local sewer system was closed off in late 2006, the plant has only drawn
fresh water to compensate evaporation losses. It means the plant uses up to 30 million litres
less water annually – about the same amount a small town of about 750 people uses.
Across the BMW Group the quantity of process wastewater per vehicle has fallen by more
than a quarter since 2004.
68
Topic
five
The BMW Group’s three brands, BMW, MINI and Rolls-Royce, are among
the automotive industry’s strongest premium brands. A wide range of new
models released in 2008 once again illustrates the innovative power and
performance of the BMW Group.
Setting milestones.
Creating fascination.
New products
in 2008.
The challenge of the future
Topic
five
New products
69
BMW
1 Series Convertible
The BMW 1 Series Convertible combines the pleasure of open-top driving with unbeatable fuel efficiency.
To take an example: The 118d Convertible has an average fuel consumption of 4.9 litres per 100 kilometres
in the EU Test Cycle and CO2 emissions of 129 grams per kilometre.
70
BMW
M3 Convertible
The BMW M3 Convertible combines outstanding driving dynamics with aesthetic looks to offer a unique
driving experience – in a car that is ideally suited to everyday driving. This fourth generation of the M3 Convertible
made its world debut at the Geneva Motor Show in March 2008.
The challenge of the future
Topic
five
New products
71
BMW
3 Series Touring
The BMW 3 Series is the epitome of sportiness in its class and has occupied the top slot
as the world’s bestselling premium vehicle for years. The BMW 3 Series is set to increase its
lead with revised versions of the Sedan and Touring.
72
BMW
7 Series
Redefining the benchmark: The fifth generation of the BMW 7 Series luxury sedan shows how to combine
driving pleasure with spacious opulence. The new BMW 7 Series is the product of stylish design and
exceptional engineering in drive train, chassis, safety, driver assistance systems and comfort functions.
The challenge of the future
Topic
five
New products
73
BMW
7 Series
Redefining the benchmark: The fifth generation of the BMW 7 Series luxury sedan shows how to combine
driving pleasure with spacious opulence. The new BMW 7 Series is the product of stylish design and
exceptional engineering in drive train, chassis, safety, driver assistance systems and comfort functions.
74
BMW
X6
The BMW X6, the world’s first Sports Activity Coupé, draws its fascination from characteristics
and abilities no other vehicle offers in a format of this kind. Its design unites the sporty
elegance of a large BMW Coupé with the strength and presence of the BMW X models.
The challenge of the future
Topic
five
New products
75
BMW
X6
The BMW X6, the world’s first Sports Activity Coupé, draws its fascination from characteristics
and abilities no other vehicle offers in a format of this kind. Its design unites the sporty
elegance of a large BMW Coupé with the strength and presence of the BMW X models.
76
BMW
F 800 R
K 1300 S
The new F 800 R is the first BMW in the
high-volume segment for medium-category
roadsters. It boasts a sporty, dynamic design
and an overall concept consistently geared
towards riding pleasure.
The new K 1300 S is currently the fastest, most powerful
BMW series-production motorcycle available. It com-
bines top performance with outstanding allround charac-
teristics and active safety features such as BMW Integral
ABS, Anti-Slip Control (ASC) and ESA II Electronic Sus-
pension Adjustment as standard.
The challenge of the future
Topic
five
New products
77
MINI
John Cooper Works
A big name backed by a long tradition, excellent performance data and an
unforgettable driving experience: The MINI John Cooper Works is sporty to
the extreme and takes the passion for motor sports beyond the racetrack.
78
Rolls-Royce
Phantom Coupé
The Rolls-Royce Phantom Coupé is the fourth and most recent addition
to the Rolls-Royce Motor Cars product range. A particularly light and
extremely rigid aluminium chassis guarantees optimum safety, while the
tried-and-tested 6.5-litre V12 engine supplies its high-performance drive train.
The challenge of the future
Topic
five
New products
79
Rolls-Royce
Phantom Coupé
The Rolls-Royce Phantom Coupé is the fourth and most recent addition
to the Rolls-Royce Motor Cars product range. A particularly light and
extremely rigid aluminium chassis guarantees optimum safety, while the
tried-and-tested 6.5-litre V12 engine supplies its high-performance drive train.
80
Topic
six
In review.
The pulsation of
the BMW Group.
The year 2008.
The challenge of the future
Topic
six
The year 2008
81
Five is a charm – five million BMW 5 Series
On January 29,
over five generations
2008 the five-millionth BMW 5 Series rolls off
the assembly line at the Dingolfing plant: a
carbon black metallic 530d Sedan. It all started
back in 1972, when the very first generation of
the BMW 5 Series made its debut at the Inter-
national Motor Show in Frankfurt. The early
vehicles were initially built at the company’s
first plant in Munich, before production moved
to the newly opened BMW plant in Dingolfing
in the autumn of 1973. New generations came
along in 1981, 1988 and 1995, and in 2003 the
current generation was born.
Top German Design
Award for the BMW
Group
The BMW
Group receives the Federal
Republic of Germany’s
Design Award for its G 650
Xcountry. The one- cylinder
motorcycle earned a gold
award for its sporty and
lightweight design. The
Design Award of the Federal
Republic of Germany has
been pre sented by the Ger-
man Design Council on
behalf of the Federal Ministry
of Economics every year
since 1969.
BMW 118d voted “World
Green Car of the Year”
The BMW 118d is named
“World Green Car of the Year”
at the opening of the New York
International Auto Show 2008.
The title, which is awarded by a
jury of 47 automotive journalists
from 24 countries, recognises
vehicles and technologies that
are specially designed to
reduce emissions, and reflect
their manufacturers’ exceptional
environmental awareness.
JAN
29, 2008
FEB
08, 2008
MAR
20, 2008
82
Premiere of 16th BMW
Art Car by Olafur
The 16th
Eliasson
BMW Art Car premieres
at the Pinakothek der
Moderne in Munich, mak-
ing artist Olafur Eliasson’s
exhibit the newest addi-
tion to the long-standing
BMW Art Car Collection.
Eliasson’s work, titled
“Your mobile expecta-
tions – BMW H2R project”
replaced the outer shell
of the hydrogen-powered
H2R prototype with an
equally complex and
fragile skin made of two
reflective layers of super-
imposed metal. These
form a mesh over the
chassis which is then cov-
ered with multiple layers
of ice.
One-two finish for BMW F1
Sauber Team in Canada
The BMW Sauber Formula 1 team
scores the first win in its short
career at the Canadian Grand Prix.
In the one-two victory in Montreal,
Robert Kubica finishes ahead of
teammate Nick Heidfeld. Kubica
takes the lead in the drivers’ cham-
pionship, with the BMW Sauber F1
team in second place in the con-
structors’ championship. The sea-
son ended with the team placed
third in the constructors’ cham-
pionship; Robert Kubica came in
fourth and Nick Heidfeld finished
sixth in the drivers’ competition.
To mark the 30th anniver-
BMW M1 Hommage at the Concorso
d’Eleganza
sary of the BMW M1 super sports car, the
BMW Group unveils a design study that pays
tribute to this legendary model at the Concorso
d’Eleganza Villa d’Este 2008. The BMW M1
was a superlative car, and a highly emotive
vehicle that was uncompromisingly primed for
the race track. This development originated
from the BMW Turbo, a concept car which
boasted a host of technical innovations in ad-
dition to its groundbreaking functional design.
APR
25, 2008
MAY
27, 2008
JUNE
08, 2008
The challenge of the future
Topic
six
The year 2008
83
BMW Museum reopens after remodel-
The BMW Museum reopens in June
ling
after two and a half years of construction. The
completely redesigned 5,000-square-metre
exhibition area houses 120 exhibits for visitors
to explore. The rotunda located next door to
the BMW Group headquarters remains the
museum’s hallmark. A single-storey building
directly adjacent to the “Bowl”, as the building
has been known since it opened in 1973, adds
further exhibition space.
The new museum is true to the original con-
cept of bringing the road inside the building.
“Roads” and ramps connect seven separate
exhibition “houses”, each focussing on a
specific theme. The museum is designed not
only to showcase exceptional automobiles and
motorcycles from past decades, but also to
reflect the dynamism and innovative power of
the BMW brand and the company. Between
the museum’s reopening and the end of the
year the BMW Group welcomed no less than
230,000 visitors.
19, 2008
84
“Let’s MINI 2008” – more
than 3,000 MINI fans in
On the
Hildesheim
first weekend in July more
than 3,000 MINI fans flock
to Hildesheim Airport to
experience the MINI brand.
One of the event’s high-
lights was a rather unequal
race that pitted the Classic
Mini, driven by rally legend
Rauno Aaltonen, against the
MINI John Cooper Works
CHALLENGE.
State Opera for All in Berlin
What began in Munich in 1996 with
the Bavarian State Opera is now
taking Berlin by storm: In 2007, the
“Staatsoper Unter den Linden” opera
house and the BMW branch in Berlin
created a groundbreaking cultural
format to allow the general public to
enjoy free open-air opera and con-
certs under the motto “State Opera
for All”. This year a live broadcast
of Ludwig van Beethoven’s opera
“Fidelio” and his ninth symphony
conducted by Daniel Barenboim
opens the new season to an appre-
ciative audience of 45,000.
BMW Group still number
one for sustainability
The SAM Group publishes
its latest evaluation for the
Dow Jones Sustainability
Indexes (DJSI). For the fourth
consecutive year the BMW
Group leads its sector, and,
as such, is the world’s most
sustainable automobile
manufacturer. The BMW
Group is the only company
in its industry to have been
listed in this important collec-
tion of corporate sustainabil-
ity indexes every year since
they were established in 1999.
The SAM Group analyses
the economic, environmental
and social performance of
approximately 2,500 compa-
nies and selects the best in
each sector for the Dow
Jones Sustainability Indexes.
General sustainability criteria
are considered as well as
industry-specific challenges.
JULY
04, 2008
AUG
30, 2008
SEPT
04, 2008
The challenge of the future
Topic
six
The year 2008
85
Paris: BMW Group unveils three
The BMW Group
concept cars
presents no fewer than three concept
vehicles at the Paris Motor Show: the
BMW Concept X1, the BMW Con-
cept 7 Series ActiveHybrid and the
MINI Crossover Concept. The BMW
Concept X1 combines the function-
ality of a Sports Activity Vehicle and
the advantages of the premium com-
pact class in a vehicle that is both
modern and innovative. The BMW
Concept 7 Series ActiveHybrid is a
further step in the implementation of
Efficient Dynamics. This vehicle com-
bines a highly-efficient V8 cylinder
petrol engine with an electric drive in
this mild-hybrid concept. The MINI
Crossover Concept brings an entirely
new vehicle concept to the MINI
model range, offering more space and
versatility as well as a four-wheel drive.
MINI E – the BMW Group’s
first electric car for a cus-
The BMW Group
tomer
introduces a fully electric-
powered vehicle, the MINI E.
Already in 2009, 500 MINI E
cars will be driving on the
roads in everyday traffic situa-
tions. Anyone living in the
metropolitan areas of Califor-
nia or New York interested in
driving a MINI E was able to
apply online. Feedback from
the field trial will be incorpo-
rated in series development
projects at a later stage.
By
The BMW Group’s
140-gram fleet
the end of 2008 the BMW
Group’s product range
includes 27 models that
produce 140 grams of
CO2 per kilometre or less.
This corresponds to a
fuel consumption of less
than 5.1 litres diesel or
5.8 litres petrol over 100 kilo-
metres. The BMW Group
will continue to work
tirelessly to develop inno-
vative drive solutions in
the future.
You will find an overview
about the product range
on the next pages.
OCT
04, 2008
NOV
18, 2008
DEC
31, 2008
86
BMW 520d Sedan
BMW 520d Touring
BMW 320d Sedan
Fuel consumption
5.1 l
Fuel consumption
5.3 l
Fuel consumption
CO2 emissions
136 g
CO2 emissions
140 g
CO2 emissions
4.8 l
128 g
BMW 318d Touring
BMW 123d 5-door
BMW 123d 3-door
Fuel consumption
4.8 l
Fuel consumption
5.2 l
Fuel consumption
CO2 emissions
125 g
CO2 emissions
138 g
CO2 emissions
5.2 l
138 g
BMW 120d Coupé
BMW 118d 5-door
BMW 118d 3-door
Fuel consumption
4.8 l
Fuel consumption
4.5 l
Fuel consumption
CO2 emissions
128 g
CO2 emissions
119 g
CO2 emissions
4.5 l
119 g
MINI Cooper
MINI Cooper D
MINI One Clubman
Fuel consumption
5.4 l
Fuel consumption
3.9 l
Fuel consumption
CO2 emissions
129 g
CO2 emissions
104 g
CO2 emissions
5.4 l
130 g
Consumption and emission data
The 140-gram fleet
for the BMW Group
87
BMW 320d Touring
BMW 320d Coupé
BMW 320d Convertible
BMW 318d Sedan
Fuel consumption
4.9 l
Fuel consumption
4.8 l
Fuel consumption
5.3 l
Fuel consumption
CO2 emissions
130 g
CO2 emissions
128 g
CO2 emissions
140 g
CO2 emissions
4.7 l
123 g
BMW 123d Coupé
BMW 120d 5-door
BMW 120d 3-door
BMW 120d Convertible
Fuel consumption
5.2 l
Fuel consumption
4.8 l
Fuel consumption
4.8 l
Fuel consumption
CO2 emissions
138 g
CO2 emissions
128 g
CO2 emissions
128 g
CO2 emissions
BMW 118d Convertible
BMW 116d 5-door
BMW 116d 3-door
MINI One
Fuel consumption
4.9 l
Fuel consumption
4.4 l
Fuel consumption
4.4 l
Fuel consumption
CO2 emissions
129 g
CO2 emissions
118 g
CO2 emissions
118 g
CO2 emissions
5.1 l
134 g
5.3 l
128 g
MINI Cooper D Clubman
MINI Cooper Clubman
MINI Cooper Convertible
Fuel consumption
4.1 l
Fuel consumption
5.5 l
Fuel consumption
CO2 emissions
109 g
CO2 emissions
132 g
CO2 emissions
5.7 l
137 g
Consumption data in litres / 100 km in the EU test cycle, CO2 emissions in g / km
88
Model
Urban
(l / 100 km)
Extraurban
(l / 100 km)
Combined
(l / 100 km)
CO2 emis-
sions [g / km]
Model
Urban
(l / 100 km)
Extraurban
(l / 100 km)
Combined
(l / 100 km)
CO2 emis-
sions [g / km]
BMW
116i 3-door 6
118i 3-door 6
120i 3-door 6
130i 3-door
116d 3-door1
118d 3-door 4, 7
120d 3-door 4, 7
123d 3-door 4
116i 5-door 6
118i 5-door 6
120i 5-door 6
130i 5-door
116d 5-door1
118d 5-door 4, 7
120d 5-door 4, 7
123d 5-door 4
125i Coupé
135i Coupé
120d Coupé 4, 7
123d Coupé 4
118i Convertible 6
120i Convertible 6
125i Convertible
135i Convertible
118d Convertible 4, 7
120d Convertible 4, 7
123d Convertible 4
316i Sedan
318i Sedan 6
320i Sedan 6
325i Sedan
7.5 (8.3)
7.9 (8.2)
8.7 (8.4)
12.2 (12.3)
5.3
5.4 (7.0)
6.1 (7.3)
6.5 (7.3)
7.5 (8.3)
7.9 (8.2)
8.7 (8.4)
12.2 (12.3)
5.3
5.4 (7.0)
6.1 (7.3)
6.5 (7.3)
11.4 (11.4)
13.0 (13.2)
6.1 (7.3)
6.5 (7.3)
8.5 (8.9)
8.9 (9.1)
11.7 (11.6)
13.3 (13.5)
5.8 (7.3)
6.4 (7.6)
6.7 (7.6)
7.7 (8.5)
7.9 (8.5)
8.4 (8.9)
9.8 (9.7)
325i xDrive Sedan
10.9 (10.8)
9.9 (9.9)
11.0 (11.0)
13.2 (13.1)
14.1 (13.8)
5.7 (7.3)
6.0 (7.3)
6.7 (7.9)
7.6 (8.1)
7.3 (8.0)
8.3 (8.8)
9.1
330i Sedan
330i xDrive Sedan
335i Sedan
335i xDrive Sedan
318d Sedan 4, 7
320d Sedan 4, 7
320d xDrive Sedan
325d Sedan
330d Sedan 4
330d xDrive Sedan4
335d Sedan2
M3 Sedan 3
316i Touring1
318i Touring6
4.8 (5.3)
4.7 (5.0)
5.1 (5.1)
6.0 (6.0)
3.9
4.0 (4.6)
4.1 (4.5)
4.4 (4.6)
4.8 (5.3)
4.7 (5.0)
5.1 (5.1)
6.0 (6.0)
3.9
4.0 (4.6)
4.1 (4.5)
4.4 (4.6)
5.9 (5.9)
7.0 (6.9)
4.1 (4.5)
4.4 (4.6)
5.0 (5.6)
5.2 (5.5)
6.0 (6.1)
7.1 (7.0)
4.4 (4.9)
4.3 (4.7)
4.6 (4.9)
4.9 (5.2)
4.8 (5.2)
4.8 (5.1)
5.5 (5.6)
6.1 (6.2)
5.6 (5.6)
6.2 (6.2)
6.7 (6.9)
7.1 (7.3)
4.1 (4.6)
4.1 (4.6)
4.6 (4.8)
4.6 (5.1)
4.8 (5.2)
5.5 (5.7)
5.3
5.8 (6.4)
139 (152)
5.9 (6.2)
140 (148)
BMW
320i Touring6
325i Touring
6.4 (6.3)
152 (150)
325i xDrive Touring
8.3 (8.3)
197 (198)
330i Touring
4.4
118
330i xDrive Touring
4.5 (5.5)
119 (146)
335i Touring
4.8 (5.5)
128 (146)
335i xDrive Touring
5.2 (5.6)
138 (148)
318d Touring4, 7
320d Touring4, 7
5.8 (6.4)
139 (152)
320d xDrive Touring
5.9 (6.2)
140 (148)
6.4 (6.3)
152 (150)
325d Touring
330d Touring4
8.3 (8.3)
197 (198)
330d xDrive Touring4
4.4
118
335d Touring2
4.5 (5.5)
119 (146)
4.8 (5.5)
128 (146)
5.2 (5.6)
138 (148)
316i Coupé1
320i Coupé6
325i Coupé
8.5 (9.1)
9.9 (9.8)
11.0 (10.9)
10.0 (10.1)
11.1 (11.1)
13.4 (13.2)
14.2 (13.9)
5.8 (7.5)
6.1 (7.5)
6.9 (8.0)
7.8 (8.2)
7.5 (8.1)
8.4 (8.9)
9.2
7.7
8.7 (8.9)
9.8 (9.7)
7.9 (7.9)
190 (190)
325i xDrive Coupé
10.9 (10.8)
9.2 (9.2)
220 (221)
330i Coupé
4.8 (5.5)
128 (146)
330i xDrive Coupé
5.2 (5.6)
138 (148)
335i Coupé
335i xDrive Coupé
6.3 (6.8)
149 (161)
320d Coupé 4, 7
6.6 (6.8)
158 (163)
320d xDrive Coupé
8.1 (8.1)
195 (195)
9.4 (9.4)
224 (225)
325d Coupé
330d Coupé 4
4.9 (5.8)
129 (152)
330d xDrive Coupé 4
5.1 (5.8)
134 (152)
5.4 (5.9)
144 (154)
335d Coupé2
M3 Coupé3
9.9 (9.9)
11.0 (11.0)
13.2 (12.5)
14.1 (13.8)
6.0 (7.4)
6.7 (7.9)
7.6 (8.1)
7.3 (8.0)
8.3 (8.8)
9.1
4.9 (5.3)
5.6 (5.7)
6.2 (6.3)
5.7 (5.8)
6.3 (6.3)
6.9 (7.0)
7.2 (7.4)
4.2 (4.8)
4.2 (4.8)
4.8 (4.9)
4.8 (5.2)
5.0 (5.3)
5.6 (5.8)
5.4
4.9
4.9 (5.1)
5.5 (5.6)
6.1 (6.2)
5.6 (5.6)
6.2 (6.2)
6.7 (6.7)
7.1 (7.3)
4.1 (4.7)
4.6 (4.8)
4.6 (5.1)
4.8 (5.2)
5.5 (5.7)
5.3
6.2 (6.7)
148 (160)
7.2 (7.2)
173 (173)
8.0 (8.0)
193 (191)
7.3 (7.4)
175 (178)
8.1 (8.1)
194 (194)
9.3 (9.3)
222 (223)
9.8 (9.8)
235 (235)
4.8 (5.8)
125 (150)
4.9 (5.8)
130 (150)
5.6 (6.0)
146 (159)
5.9 (6.3)
155 (165)
5.9 (6.3)
155 (165)
6.6 (6.9)
174 (181)
6.8
5.9
178
142
6.3 (6.5)
151 (156)
7.1 (7.1)
170 (170)
7.9 (7.9)
189 (189)
7.2 (7.2)
173 (173)
8.0 (8.0)
193 (193)
9.1 (8.8)
218 (210)
9.7 (9.7)
232 (232)
4.8 (5.7)
128 (149)
5.4 (5.9)
143 (156)
5.7 (6.2)
153 (164)
5.7 (6.2)
152 (164)
6.5 (6.8)
171 (178)
6.7
177
17.9 (17.0)
9.2 (9.0)
12.4 (11.9)
295 (285)
5.9 (6.4)
142 (154)
320i Convertible 6
5.9 (6.4)
142 (152)
6.1 (6.5)
146 (156)
7.1 (7.1)
170 (170)
325i Convertible
330i Convertible
335i Convertible
7.9 (7.9)
189 (189)
320d Convertible 4, 7
7.2 (7.2)
173 (173)
325d Convertible
8.0 (8.0)
193 (193)
330d Convertible 4
9.0 (9.4)
10.4 (10.6)
10.5 (10.6)
13.6 (12.8)
6.9 (7.7)
8.0 (8.3)
7.7 (8.2)
5.2 (5.4)
5.9 (6.1)
6.0 (6.1)
7.1 (7.0)
4.3 (5.0)
5.0 (5.3)
5.2 (5.4)
6.6 (6.9)
157 (165)
7.6 (7.8)
181 (187)
7.7 (7.8)
185 (187)
9.5 (9.1)
226 (217)
5.3 (6.0)
140 (157)
6.1 (6.4)
162 (170)
6.1 (6.4)
162 (170)
9.1 (9.2)
218 (221)
M3 Convertible 3
18.7 (17.3)
9.6 (9.4)
12.9 (12.3)
309 (293)
9.7 (9.7)
232 (232)
4.7 (5.6)
123 (148)
4.8 (5.6)
128 (148)
5.4 (5.9)
143 (156)
520i Sedan
523i Sedan
525i Sedan
5.7 (6.2)
153 (164)
525i xDrive Sedan
5.7 (6.2)
152 (164)
530i Sedan
6.5 (6.8)
171 (178)
530i xDrive Sedan
6.7
177
17.9 (17.0)
9.2 (9.0)
12.4 (11.9)
295 (285)
7.9
5.1
6.1
146
540i Sedan
550i Sedan
520d Sedan 5
525d Sedan
8.0 (8.6)
4.9 (5.3)
6.0 (6.5)
144 (156)
525d xDrive Sedan
9.2 (9.4)
10.1 (10.3)
10.3 (10.4)
11.3 (11.2)
10.9 (10.8)
11.5 (11.6)
5.4 (5.4)
5.7 (5.9)
5.7 (5.8)
6.2 (6.3)
5.8 (5.6)
6.2 (6.0)
6.7 (6.9)
162 (164)
7.3 (7.5)
174 (178)
7.4 (7.5)
176 (178)
8.1 (8.1)
193 (193)
7.7 (7.5)
182 (178)
8.2 (8.1)
194 (193)
15.8 (14.4)
7.4 (6.9)
10.5 (9.7)
250 (232)
16.6 (15.5)
7.6 (7.2)
10.9 (10.3)
260 (246)
6.5 (7.5)
8.2 (8.5)
8.8 (9.1)
4.3 (4.6)
5.0 (5.3)
5.4 (5.6)
5.1 (5.6)
136 (149)
6.2 (6.5)
165 (172)
6.7 (6.9)
179 (183)
Vehicle fleet
Consumption and emission data for the BMW Group
89
Model
BMW
Urban
(l / 100 km)
Extraurban
(l / 100 km)
Combined
(l / 100 km)
CO2 emis-
sions [g / km]
Model
Urban
(l / 100 km)
Extraurban
(l / 100 km)
Combined
(l / 100 km)
CO2 emis-
sions [g / km]
BMW
530d Sedan
530d xDrive Sedan
535d Sedan 2
M5 Sedan 3
520i Touring
523i Touring
525i Touring
525i xDriveTouring
530i Touring
530i xDrive Touring
550i Touring
520d Touring 5
525d Touring
525d xDrive Touring
530d Touring
530d xDrive Touring
535d Touring 2
M5 Touring 3
630i Coupé
650i Coupé
635d Coupé 2
630i Convertible
650i Convertible
635d Convertible 2
M6 Coupé3
M6 Convertible 3
740i 2, 4
740Li 2, 4
750i 2, 4
750Li 2, 4
730d 2, 4
730Ld 2, 4
X3 xDrive20i 1
X3 xDrive25i
X3 xDrive30i
X3 xDrive20d 4
X3 xDrive30d
X3 xDrive35d 2
X5 xDrive30si 2
X5 xDrive48i 2
X5 xDrive30d 2
X5 xDrive35d 2
X6 xDrive35i 2, 4
X6 xDrive50i 2, 4
X6 xDrive30d2
8.6 (9.1)
9.2 (9.6)
5.1 (5.2)
5.5 (5.5)
9.0
21.7
5.4
10.2
9.4 (9.5)
10.6 (10.6)
10.8 (10.7)
11.8 (11.7)
11.1 (11.0)
12.0 (12.1)
5.6 (5.5)
6.0 (6.0)
5.9 (6.0)
6.4 (6.5)
6.0 (5.8)
6.4 (6.3)
6.7 (7.7)
8.4 (8.6)
9.1 (9.2)
8.8 (9.3)
9.6 (9.9)
9.2
21.7
4.5 (4.7)
5.2 (5.4)
5.6 (5.7)
5.3 (5.3)
5.8 (5.6)
5.6
10.5
6.4 (6.6)
170 (176)
X6 xDrive35d 2
10.5
7.1
8.3
220
6.9 (7.0)
183 (186)
6.7
14.4
178
344
6.9 (7.0)
166 (167)
7.7 (7.7)
183 (184)
7.7 (7.7)
183 (184)
Z4 sDrive23i 4
Z4 sDrive30i 4
Z4 sDrive35i 4
MINI
MINI One
8.4 (8.4)
201 (201)
MINI Cooper
7.9 (7.7)
187 (184)
8.5 (8.4)
203 (201)
MINI Cooper D
MINI Cooper S
12.4 (11.8)
12.4 (11.9)
13.5 (12.6)
6.2 (6.1)
6.2 (6.2)
7.0 (6.9)
8.5 (8.2)
199 (192)
8.5 (8.3)
199 (195)
9.4 (9.0)
219 (210)
6.8 (9.0)
6.9 (9.1)
4.7 (6.5)
7.9 (9.7)
4.4 (5.0)
4.5 (5.0)
3.5 (4.2)
5.2 (5.3)
5.6
5.3 (6.5)
128 (155)
5.4 (6.5)
129 (156)
3.9 (5.0)
104 (134)
6.2 (6.9)
149 (165)
6.9
165
17.0 (16.1)
7.8 (7.5)
11.2 (10.7)
267 (254)
MINI John Cooper Works1
9.2
5.3 (5.8)
140 (154)
6.4 (6.6)
171 (176)
MINI Cooper Convertible
7.4 (9.3)
6.9 (7.0)
184 (187)
MINI Cooper S Convertible 8.1 (9.9)
4.7 (5.2)
5.4 (5.4)
5.7 (6.7)
137 (161)
6.4 (7.1)
153 (170)
6.6 (6.8)
176 (180)
MINI John Cooper Works
7.2 (7.2)
192 (192)
Convertible1
9.3
5.8
7.1
169
6.9
14.6
182
348
MINI One Clubman
MINI Cooper Clubman
6.9 (9.1)
7.1 (9.2)
11.2 (11.0)
6.0 (5.8)
7.9 (7.7)
188 (184)
MINI Cooper D Clubman
4.9 (6.6)
17.8 (15.9)
8.1 (7.4)
11.7 (10.5)
279 (249)
MINI Cooper S Clubman
8.0 (9.8)
9.2
5.6
6.9
183
MINI John Cooper Works
4.5 (5.1)
4.5 (5.1)
3.6 (4.2)
5.3 (5.4)
5.4 (6.6)
130 (158)
5.5 (6.6)
132 (159)
4.1 (5.1)
109 (136)
6.3 (7.0)
150 (168)
11.8 (11.6)
6.3 (6.0)
8.3 (8.1)
198 (192)
Clubman1
9.3
5.7
7.0
167
19.2 (16.5)
8.8 (7.7)
12.6 (10.9)
299 (258)
9.6
21.4
22.0
13.8
14.0
16.4
16.4
9.5
9.6
12.6
12.8 (13.1)
13.4 (13.3)
8.2 (8.3)
9.7 (9.9)
9.7
13.8
17.0
10.4
10.5
14.9
17.7
10.4
5.8
10.2
10.6
7.6
7.7
8.5
8.5
5.9
6.0
6.9
7.3 (7.4)
7.3 (7.6)
5.5 (5.8)
6.0 (6.4)
6.7
8.3
9.3
7.0
7.1
8.9
9.9
7.0
7.2
14.3
14.7
9.9
10.0
11.4
11.4
7.2
7.3
190
342
352
232
235
266
266
192
194
9.0
215
9.3 (9.5)
224 (228)
9.5 (9.7)
229 (233)
6.5 (6.7)
172 (178)
7.4 (7.7)
196 (206)
7.8
208
10.3
12.1
8.2
8.3
11.1
12.8
8.2
247
289
217
220
259
299
217
Rolls-Royce
Rolls-Royce Phantom2
23.2
11.3
15.7
377
Rolls-Royce Phantom
extended Wheelbase2
23.3
11.4
15.8
380
Rolls-Royce Phantom
Drophead Coupé2
23.2
Rolls-Royce Phantom Coupé2
23.2
11.3
11.3
15.7
15.7
377
377
Figures in brackets only valid for automatic transmissions.
1 only available with manual transmission
2 only available with automatic transmission
3 only available with SMG Drivelogic, 7-gear M transmission
4 EU5 comes as standard
5 EU5 comes as standard for left-hand drive vehicles
6 also available as EU5 in selected markets from April 2009
7 Consumption figures for automatic transmission on right-hand drive vehicles vary.
Further information and constantly updated data for the vehicles is available on the
Internet at www.bmw.com, www.mini.com and www.rolls-roycemotorcars.com.
as of March 2009
Values measured in accordance with the New European Drive Cycle (EU Directive: 80 / 1268 / EEC in the relevant
applicable version). Valid for vehicles with a European country specification.
90
The manufacture of, and the paper used for, the BMW Group’s Annual Report 2008, have been certified in accordance
with the criteria of the Forest Stewardship Council (FSC). The FSC prescribes stringent standards for forest manage-
ment, thus helping to avoid uncontrolled deforestation, human rights infringements and damage to the environment.
Since products bearing the FSC label are handled by various enterprises along the processing and trading chain, the
FSC chain of custody certification rules are also applied to enterprises which process paper e. g. printing companies.
The CO2 emissions generated through the production of paper
for this report, as well as through print and production, were
neutralized by the BMW Group. To this end, the corresponding
amount of emission allowances was erased, with the transaction
identification DE75016 on 3 March 2009.