ANNUAL REPORT
2016
A New Era Begins
4
CORPORATE
GOVERNANCE
Page 190 Statement on Corporate Governance (§ 289 a HGB)
(Part of the Combined Management Report)
Information on the Company’s Governing Constitution
Page 190
Page 191 Declaration of the Board of Management and of the
Supervisory Board pursuant to § 161 AktG
Page 192 Members of the Board of Management
Page 193 Members of the Supervisory Board
Page 196 Composition and Work Procedures of the Board of
Management of BMW AG and its Committees
Page 198 Composition and Work Procedures of the
Super visory Board of BMW AG and its Committees
Page 204 Disclosures pursuant to the Act on Equal
Page 205
Gender Participation
Information on Corporate Governance Practices Applied
beyond Mandatory Requirements
Page 207 Compliance in the BMW Group
Page 212 Compensation Report
Page 223 Responsibility Statement by the
Company’s Legal Representatives
Page 224 Auditor’s Report
5
OTHER INFORMATION
Page 226 BMW Group Ten-year Comparison
Page 228 Glossary
Page 230 Index
Page 232 Index of Graphs
Page 233 Financial Calendar
Page 234 Contacts
CONTENTS
1
Page
4 BMW Group in Figures
Page
8 Report of the Supervisory Board
Page 16 Statement of the Chairman of the
Board of Management
2
COMBINED
MANAGEMENT REPORT
Page 22 General Information on the BMW Group
Page 22 Organisational Structure and Business Model
Page 24 Locations
Page 29 Management System
Page 34 Report on Economic Position
Page 34 General and Sector-specific Environment
Page 38 Overall Assessment by Management
Page 39 Financial and Non-financial Performance Indicators
Page 42 Review of Operations
Page 63 Results of Operations, Financial Position and Net Assets
Page 76 Comments on Financial Statements of BMW AG
Page 82 Report on Outlook, Risks and Opportunities
Page 82 Outlook
Page 88 Risks and Opportunities
Page 101 Internal Control System and Risk Management
System Relevant for the Financial Reporting Process
Page 103 Disclosures Relevant for Takeovers
Page 107 BMW Stock and Capital Markets in 2016
3
GROUP FINANCIAL
STATEMENTS
Page 112 Income Statements for Group and Segments
Page 112 Statement of Comprehensive Income for Group
Page 114 Balance Sheets for Group and Segments
Page 116 Cash Flow Statements for Group and Segments
Page 118 Group Statement of Changes in Equity
Page 120 Notes to the Group Financial Statements
Page 120 Accounting Principles and Policies
Page 133 Notes to the Income Statement
Page 139 Notes to the Statement of Comprehensive Income
Page 140 Notes to the Balance Sheet
Page 161 Other Disclosures
Page 175 Segment Information
Page 180 List of Investments at 31 December 2016
Page 4 BMW Group in Figures
Page 8 Report of the Supervisory Board
Page 16 Statement of the Chairman of the Board of Management
1
1
BMW Group
in Figures
Report of the
Supervisory Board
Statement of
the Chairman of
the Board of
Management
4
BMW Group
in Figures
BMW GROUP IN FIGURES
Key non-financial performance indicators
• 01
BMW Group
Workforce at year-end 1
AutoMotive seGMent
Sales volume 2
Fleet emissions in g CO2 / km 3
Motorcycles seGMent
Sales volume 4
2012
2013
2014
2015
2016
Change in %
105,876
110,351
116,324
122,244
124,729
2.0
1,845,186
1,963,798
2,117,965
2,247,485
2,367,603
143
133
130
127
124
5.3
– 2.4
106,358
115,215
123,495
136,963
145,032
5.9
Further non-financial performance figures
• 02
AutoMotive seGMent
Sales volume
BMW 2
MINI
Rolls-Royce
Total 2
Production volume
BMW 5
MINI
Rolls-Royce
Total 5
Motorcycles seGMent
Production volume 6
BMW
FinAnciAl services seGMent
2012
2013
2014
2015
2016
Change in %
1,540,085
1,655,138
1,811,719
1,905,234
2,003,359
301,526
3,575
305,030
3,630
302,183
4,063
338,466
3,785
360,233
4,011
1,845,186
1,963,798
2,117,965
2,247,485
2,367,603
1,547,057
1,699,835
1,838,268
1,933,647
2,002,997
311,490
3,279
303,177
3,354
322,803
4,495
342,008
3,848
352,580
4,179
1,861,826
2,006,366
2,165,566
2,279,503
2,359,756
5.2
6.4
6.0
5.3
3.6
3.1
8.6
3.5
113,811
110,127
133,615
151,004
145,555
– 3.6
New contracts with retail customers
1,341,296
1,471,385
1,509,113
1,655,961
1,811,157
9.4
1 Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners.
2 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2012: 141,165 units, 2013: 198,542 units, 2014: 275,891 units, 2015: 282,000 units, 2016: 316,200 units).
3 EU-28.
4 Excluding Husqvarna, sales volume up to 2013: 59,776 units.
5 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2012: 150,052 units, 2013: 214,920 units, 2014: 287,466 units, 2015: 287,755 units, 2016: 305,726 units).
6 Excluding Husqvarna, production up to 2013: 59,426 units.
5
2012
2013
2014
2015
2016
Change in %
7,803
7,893
8,707
9,224
9,665
4.8
Key financial performance indicators
• 03
BMW Group
Profit before tax in € million
AutoMotive seGMent
Revenues in € million
EBIT margin in % (change in %pts)
RoCE in % (change in %pts)
Motorcycles seGMent
RoCE in % (change in %pts)
70,208
70,630
75,173
85,536
86,424
10.8
73.7
9.4
63.0
9.6
61.7
9.2
72.2
8.9
74.3
1.8
16.4
21.8
31.6
33.0
1.0
– 0.3
2.1
1.4
1.0
FinAnciAl services seGMent
RoE in % (change in %pts)
21.2
20.0
19.4
20.2
21.2
Further financial performance figures
• 04
in € million
2012
2013
2014
2015
2016
Change in %
Capital expenditure
Depreciation and amortisation
Operating cash flow Automotive segment
Revenues
Automotive
Motorcycles
Financial Services
Other Entities
Eliminations
Profit before financial result (EBIT)
Automotive
Motorcycles
Financial Services
Other Entities
Eliminations
Profit before tax
Automotive
Motorcycles
Financial Services
Other Entities
Eliminations
Income taxes
Net profit
5,240
3,541
9,167
76,848
70,208
1,490
19,550
5
6,711
3,741
9,964
76,059
70,630
1,504
19,874
6
6,100
4,170
9,423
80,401
75,173
1,679
20,599
7
5,890
4,659
11,836
92,175
85,536
1,990
23,739
7
5,823
4,806
11,464
94,163
86,424
2,069
25,681
6
– 14,405
– 15,955
– 17,057
– 19,097
– 20,017
8,275
7,599
9
1,558
58
– 949
7,803
7,170
6
1,561
3
– 937
7,978
6,649
79
1,643
44
– 437
7,893
6,561
76
1,619
164
– 527
9,118
7,244
112
1,756
71
– 65
8,707
6,886
107
1,723
154
– 163
9,593
7,836
182
1,981
169
– 575
9,224
7,523
179
1,975
211
– 664
9,386
7,695
187
2,184
– 17
– 663
9,665
7,916
185
2,166
170
– 772
– 2,692
5,111
– 2,564
5,329
– 2,890
5,817
– 2,828
6,396
– 2,755
6,910
– 1.1
3.2
– 3.1
2.2
1.0
4.0
8.2
– 14.3
– 4.8
– 2.2
– 1.8
2.7
10.2
–
– 15.3
4.8
5.2
3.4
9.7
– 19.4
– 16.3
2.6
8.0
Earnings per share in €
7.75 / 7.77
8.08 / 8.10
8.83 / 8.85
9.70 / 9.72
10.45 / 10.47
7.7 / 7.7
6
BMW Group
in Figures
Sales volume of automobiles*
• 05
in 1,000 units
2,247.5
2,367.6
2,118.0
1,845.2
1,963.8
2,500
1,250
0
92.2
94.2
76.8
76.1
80.4
Revenues
• 07
in € billion
100
50
0
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
* Including the joint venture BMW Brilliance Automotive Ltd., Shenyang
(2012: 141,165 units, 2013: 198,542 units, 2014: 275,891 units, 2015: 282,000 units,
2016: 316,200 units).
Profit before financial result
• 06
Profit before tax
• 08
9,118
9,593
9,386
8,275
7,978
in € million
10,000
5,000
0
9,224
9,665
8,707
7,803
7,893
in € million
10,000
5,000
0
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
REPORT OF THE
SUPERVISORY BOARD
STATEMENT OF THE
CHAIRMAN OF THE
BOARD OF MANAGEMENT
1
Report of the
Supervisory Board
Statement of
the Chairman of
the Board of
Management
8
Report of the
Supervisory Board
Norbert Reithofer
Chairman of the Supervisory Board
Dear Shareholders,
9
In 2016, BMW AG celebrated its 100th anniversary. Quite fittingly, the BMW Group finished its
centenary year with record earnings. With its Strategy NUMBER ONE > NEXT, the BMW Group
is moving forward with a sense of purpose into the challenging era of digitalisation and
electrification and fully intends to continue playing an active role in shaping technological
change within the automobile industry.
Main emphases of the Supervisory Board’s monitoring and advisory activities
Throughout the financial year 2016, we performed the duties incumbent on the Supervisory
Board in accordance with the law and the Articles of Association. We continuously monitored
the Board of Management’s governance of the business and provided advice on important
projects and plans.
One of the main areas of emphasis with regard to reporting and our consultations in 2016 was
the enhanced development of the BMW Group’s corporate strategy. We also deliberated at length
on succession planning for the Board of Management. Corporate planning was a further key
area of focus. We discussed the current performance and financial position of the BMW Group
at each of our five Supervisory Board meetings.
We carefully monitored the overall performance of the BMW Group, both at scheduled meetings
and at other times as the situation required. The Board of Management informed us of all key sales
and workforce figures on a regular basis. The Chairman of the Board of Management informed
me personally and in a prompt manner regarding all important transactions and key projects.
Similarly, Dr Karl-Ludwig Kley, the Chairman of the Audit Committee, and Dr Friedrich Eichiner,
member of the Board of Management responsible for Finance, consulted on matters directly,
both at scheduled meetings and as the need arose.
At the beginning of the year, the Board of Management presented us with a summary of new
and revised vehicle models scheduled for market launch in 2016.
The Board of Management reported to us regularly and comprehensively on the BMW Group’s
financial condition, providing information on sales volume developments, market competition
issues relevant for the Automotive and Motorcycles segments, and changes in the size of the
workforce. It also kept us informed of economic developments in the world’s key regions and
the prospects for business in each of them. The Board of Management provided us with regular
updates on new business with retail customers and business volumes in the Financial Services
segment, including explanations of variances against the forecast.
In its regular business status reports, the Board of Management kept us well informed regarding
the progress of important current projects and transactions, which we then deliberated upon in
greater detail. For example, the Board of Management briefed us on the BMW Group’s collabo-
ration with Mobileye and Intel aimed at developing technologies for highly and fully automated
driving. It also provided information on the planned joint venture with other automobile
manufacturers to establish a charging infrastructure for electric vehicles that is compatible with
every brand. Other items reported on included the complete acquisition of the parking space
service provider ParkMobile and the enlargement of the group of shareholders for the HERE
mapping service. The Board of Management also informed us on the impact of an earthquake
in Japan on security of supply for certain components.
10
Report of the
Supervisory Board
We reviewed business developments on various key markets in some depth, particularly those
in China and the USA. The referendum held in the United Kingdom on the country leaving the
European Union prompted us to obtain an assessment from the Board of Management regarding
possible future consequences for the BMW Group.
The Board of Management kept us up-to-date at all times on the further development of the
Group’s corporate strategy. Based on a thorough analysis of the changing environment in
which the BMW Group operates, the Board of Management set out the strategic targets of
Strategy NUMBER ONE > NEXT, which is designed to reconcile the need to ensure operational
excellence, invest in forward-looking areas and maintain profitability at a stable level. After the
various presentations, we discussed individual points of strategy with the Board of Management,
including digitalisation, electric mobility and lightweight construction.
One Supervisory Board meeting was held in Goodwood, England, the headquarters and location
of the Rolls-Royce Motor Cars manufacturing plant. In the course of this meeting we dealt
with several topics, including a Board of Management report on product quality and customer
satisfaction. The Board of Management described various existing and planned emissions
requirements on key markets and presented measures designed to ensure compliance with
those requirements, including the further electrification of the BMW Group’s fleet of vehicles.
Furthermore, the Board of Management explained the strategy and risk management measures
in place for Group financing. While visiting the Rolls-Royce manufacturing plant, we gathered
information on topics such as the implementation of individual customer requirements as a way
of optimising customer orientation.
Corporate strategy and long-term corporate planning were considered in a meeting held over
two days. In the first part of the meeting we discussed the Strategy NUMBER ONE > NEXT in
great detail, including the implementation measures developed by the Board of Management.
The Board of Management elaborated on topics that included the measures adopted for defined
key areas of technology, such as Efficient Dynamics NEXT.
Together with the Board of Management, we also debated at length on the topic of digitalisation
in sales and production and the related requirements. After thorough deliberation, the members
of the Supervisory Board approved the Strategy NUMBER ONE > NEXT.
We also took the opportunity to personally test-drive a variety of series vehicles on a test track,
including the current BMW plug-in hybrid vehicles and other individual models currently
being developed. In addition, selected vehicle models were presented and explained to us. In
this context, the new brand strategy, a key element of Strategy NUMBER ONE > NEXT, was
considered at length.
On the second day of the meeting, we focused on the long-term corporate plan for the years
2017 – 2022. The Board of Management also took the opportunity to point out various risk
scenarios, such as a possible further tightening of emissions regulations. The long-term plan
was approved after exhaustive analysis and consultation. We urged the Board of Management to
maintain close control over fixed costs and profitability in order to secure the necessary levels
of future investment.
The Board of Management reported to us comprehensively on the performance, risk situation
and business strategies of the Financial Services segment. It also provided information on the
current status of regulatory proceedings involving a locally based financial services company.
Towards the end of the year under report, we studied the annual budget for the financial year
2017 presented to us by the Board of Management. We carefully reviewed the opportunities and
risks attached to the budget and discussed them thoroughly with the Board of Management.
11
In both the Personnel Committee and the full Supervisory Board, we examined not only the
structure, but also the amounts of compensation paid to the various members of the Board of
Management. In this context, we reviewed trends in business performance and board compen-
sation over a period of several years. We also gave general consideration to the remuneration
paid to executive managers and employees of BMW AG within Germany over the course of time.
A compensation consultant, independent of both the Board of Management and BMW AG, was
called upon to provide expert advice and assist us in our evaluation of DAX-related compensation
studies. We concluded that the level of compensation paid to board members, including their
pension entitlements, is appropriate and in keeping with other DAX-listed companies. The
Supervisory Board therefore resolved not to propose any changes to the system of Board of
Management compensation in 2016. Further information on the amounts of compensation
paid to the members of the Board of Management is provided in the Compensation Report (see
section “Statement on Corporate Governance”).
Together with the Board of Management, we undertook an in-depth review of the corporate
governance standards currently in place within the BMW Group as well as the rules set out
in the German Corporate Governance Code. The latest Declaration of Compliance, issued in
December 2016, is included in the Annual Report.
We also discussed with the Board of Management the probable impact of technological changes
on future workforce requirements. We were informed about the range of measures implemented
to incorporate Strategy NUMBER ONE > NEXT in the BMW Group’s corporate culture and
brought up to date on activities aimed at attracting young talent. The Board of Management
also provided details of actual and planned additions to the workforce in defined growth areas.
The Board of Management also reported on the latest status of the BMW Group’s diversity concept.
The report presented figures for the percentage of female executives in the BMW Group, in par-
ticular the proportions in the two executive management levels below the Board of Management,
the targets set, and the latest status of these two levels.
We again decided upon a target for the proportion of female members on the Board of Manage-
ment, including a time frame for target attainment. As its target for the period from 1 January 2017
to 31 December 2020, we stipulated that the Board of Management should continue to have at
least one female member. We consider it a key aim to increase the proportion of women on the
Board of Management and fully support the Board’s endeavours to increase the percentage of
women employed at the highest executive management levels within the BMW Group. Moreover,
we developed a diversity concept for the composition of the Board of Management.
The composition targets for the Supervisory Board, which represent the basis for a diversity
concept, were not changed during the financial year 2016. Compliance with the composition
targets set for 31 December 2016 was determined by way of self-assessment.
No conflicts of interest arose on the part of members of either of the two boards during the
year under report. Significant transactions with Supervisory Board members and other related
parties as defined by IAS 24, including close relatives and intermediary entities, are examined
on a quarterly basis.
The Supervisory Board also assessed the efficiency of its own work with the aim of further
improving its internal procedures and the work of its committees. With this point in mind, I
also conducted individual discussions with the members of the Supervisory Board. The matter
was also considered at a meeting of the full Supervisory Board. Additional topics for report were
identified as part of the overall conclusion reached.
12
Report of the
Supervisory Board
Each of the five Supervisory Board meetings during the financial year 2016 was attended on
average by over 90 % of its members, a fact that can be tied in to the analysis of attendance fees
for individual members disclosed in the Compensation Report. During their term of office in
the period under report, none of the members of the Supervisory Board took part in only half or
less than half of the meetings of the Supervisory Board, the Presiding Board or the committees
to which any given member belongs.
Description of Presiding Board activities and committee work
The Supervisory Board has established a Presiding Board and four committees. The chairpersons
of the various committees reported to the Supervisory Board in depth on any committee meetings
held since the previous meeting of the full Supervisory Board. I brought the representatives
of the shareholders up to date regarding the deliberations of the Nomination Committee. A
detailed description of the duties, composition and work procedures of the various committees
is provided in the Corporate Governance Report.
The Presiding Board convened four times during the year under report. Assuming no other
committee was responsible, the Presiding Board prepared the detailed agenda for the meetings of
the full Supervisory Board, including the careful preparation of topics on the basis of written and
oral reports provided by members of the Board of Management and senior heads of department.
We also stipulated further topics for full Supervisory Board meetings and made suggestions for
reports submitted to the Supervisory Board.
The Audit Committee held four meetings and three telephone conference calls during the financial
year 2016. In the course of those conference calls, together with the Board of Management we
deliberated on the Quarterly Financial Reports prior to their publication. Representatives of the
external auditors were present during the telephone conference call held in conjunction with
the Half-year Financial Report.
The Audit Committee Meeting held in spring 2016 focused primarily on preparing for the
Supervisory Board meeting at which the financial statements were to be examined. Before
recommending to the full Supervisory Board that KPMG AG Wirtschaftsprüfungsgesellschaft
be elected as Company and Group auditor at the Annual General Meeting 2016, we obtained a
Declaration of Independence from KPMG AG Wirtschaftsprüfungsgesellschaft. We also consid-
ered the scope and composition of non-audit services, including tax advisory services provided
by KPMG entities to the BMW Group. There were no indications of conflicts of interest, grounds
for exclusion or lack of independence on the part of the auditor.
The fee proposals for the audit of the year-end Company and Group Financial Statements 2016 and
the review of the Half-year Financial Report were deemed appropriate. Subsequent to the Annual
General Meeting 2016, we therefore appointed KPMG AG Wirtschaftsprüfungsgesellschaft for
the relevant engagements and specified audit focus areas.
As in previous years, the Head of Group Controlling reported during the financial year 2016
on the current risk profile of the BMW Group and provided an overview of the changes made
to the risk management system in view of new internal and external requirements.
The Head of Group Financial Reporting informed us about the internal control system (ICS)
underlying financial reporting and explained measures being taken to develop the system further.
No material ICS weaknesses were identified which would jeopardise the system’s effectiveness.
The BMW Group Compliance Committee chairman provided information on the current status of
compliance within the Group as well as changes in the BMW Group Compliance Organisation aimed
at strengthening local compliance management, including the next steps to be taken in this area.
13
The Head of Group Internal Audit reported on internal audit matters, including a description
of the significant internal audit findings and the planned areas of focus on the industrial and
financial services sides of the business.
On repeated occasions, the Audit Committee dealt with the new requirements for financial year-
end audits, particularly the rules applying to non-audit-related services provided by the auditor
and the procedure for changing the external auditor. In accordance with statutory requirements,
we approved a list of non-audit-related services that may be provided by the external auditor.
Furthermore, we performed our statutory duties in connection with the mandatory audit of
over-the-counter trading with derivatives pursuant to § 20 of the Securities Trading Act (WpHG).
An external auditor confirmed the effectiveness of the system that BMW AG currently employs
to ensure compliance with regulatory requirements. Furthermore, in the Audit Committee we
concurred with the decision of the Board of Management to raise the Company’s share capital
in accordance with § 4 (5) of the Articles of Incorporation (Authorised Capital 2014) by € 305,000
and, in conjunction with the Employee Share Programme, to issue a corresponding number
of new non-voting bearer shares of preferred stock, each with a par value of € 1, at favourable
conditions to employees.
The Personnel Committee convened five times during the financial year 2016. One of the
principal duties of this committee is to prepare decisions of the full Supervisory Board relating
to the composition of the Board of Management. In specific cases, we also gave our approval for
members of the Board of Management to accept non-BMW Group mandates.
The Nomination Committee convened twice during the financial year 2016. At these meetings, we
deliberated on succession planning for mandates of the shareholders’ representatives and, taking
account of the composition targets set, made one recommendation for a proposed nomination
of a candidate for election at the Annual General Meeting 2017.
The statutory Mediation Committee was not required to convene during the financial year 2016.
Composition and organisation of the Board of Management
During the period under report, the composition of the Board of Management changed as part
of the process of amicably agreed succession planning.
With effect from 1 October 2016, the Supervisory Board appointed Markus Duesman as member
of the Board of Management. Mr Duesmann has many years of management experience in the
automobile industry and has been with BMW AG since 2007. Most recently, he was head of
powertrain and the related process chain within the development area. Mr Duesmann took over
board responsibility for the Purchasing and Supplier Network from Dr Klaus Draeger, whose
mandate ended on 30 September 2016.
With effect from 1 January 2017, we appointed Dr Nicolas Peter as member of the Board of
Management. Dr Peter joined BMW AG in 1991 and most recently worked as head of the European
sales region. He took over board responsibility for Finances from Dr Friedrich Eichiner, who
retired from the Board of Management with effect from the end of 2016.
We would like to extend our special thanks to Dr Draeger and Dr Eichiner for their many years
of dedicated work in the interests of the BMW Group, both in highly successful years and during
the challenging period of the global financial and economic crisis. We equally wish to thank
them for their personal contribution to the BMW Group’s long-term success.
14
Report of the
Supervisory Board
Composition of the Supervisory Board, the Presiding Board
and Supervisory Board Committees
In 2016, the Annual General Meeting re-elected Simone Menne to the Supervisory Board for
a term of five years. Ulrich Kranz resigned his mandate as executive staff representative with
effect from the end of 2016. As elected substitute member, Ralf Hattler became a member of
the Supervisory Board with effect from 1 January 2017. We thank Mr Kranz for the trusting and
constructive working relationship within the Supervisory Board.
The composition of the Presiding Board and the committees of the Supervisory Board remained
unchanged during the financial year 2016. The Corporate Governance Report contains a summary
of the composition of the Supervisory Board and its committees.
Examination of financial statements and the profit distribution proposal
KPMG AG Wirtschaftsprüfungsgesellschaft conducted a review of the abridged Interim Group
Financial Statements and Interim Group Management Report for the six-month period ended
30 June 2016. The results of the review were presented to the Audit Committee by representatives
of KPMG AG Wirtschaftsprüfungsgesellschaft. No issues were identified that might indicate
that the abridged Interim Group Financial Statements and Interim Group Management Report
had not been prepared, in all material respects, in accordance with the applicable provisions.
The Group and Company Financial Statements of Bayerische Motoren Werke Aktiengesellschaft
for the year ended 31 December 2016 and the Combined Management Report – as author-
ised for issue by the Board of Management on 14 February 2017 – were audited by KPMG AG
Wirtschaftsprüfungsgesellschaft and given an unqualified audit opinion.
KPMG AG Wirtschaftsprüfungsgesellschaft is the external auditor for BMW AG and the
BMW Group. The Auditor’s Report has been signed with effect from the financial year 2016 by
Christian Sailer, as independent auditor (Wirtschaftsprüfer), and with effect from the financial
year 2014 by Andreas Feege, as independent auditor (Wirtschaftsprüfer), responsible for the
performance of the engagement.
The Financial Statements and the Combined Management Report, the long-form audit reports
of the external auditors and the Board of Management’s profit distribution proposal were made
available to all members of the Supervisory Board in a timely manner.
In a first step, the Audit Committee diligently examined and discussed these documents at a
meeting held on 24 February 2017. The Supervisory Board subsequently examined the relevant
drafts of the Board of Management at its meeting on 9 March 2017, after hearing the committee
chairman’s report on the meeting of the Audit Committee. In both meetings, the Board of
Management gave a detailed explanation of the financial reports it had prepared. Representatives
of the external auditors attended both meetings, reported on significant findings and answered
any additional questions raised by the members of the Supervisory Board. They confirmed that
the risk management system established by the Board of Management is capable of identifying
developments at an early stage that might impair the Company’s going-concern status. They
also confirmed that no material weaknesses in the internal control system and risk management
system were found with regard to the financial reporting process. Similarly, they confirmed that
they had not identified any issues in the course of their audit work that were inconsistent with
the contents of the Declaration of Compliance issued jointly by the two boards.
15
Based on thorough examination by the Audit Committee and the full Supervisory Board, we
concurred with the results of the external audit. In accordance with the conclusion reached after
the examination by the Audit Committee and the full Supervisory Board, no objections were
raised. The Group and Company Financial Statements of Bayerische Motoren Werke Aktien-
gesellschaft for the financial year 2016 prepared by the Board of Management were approved at
the Supervisory Board meeting held on 9 March 2017. The separate financial statements have
therefore been adopted.
We also examined the proposal of the Board of Management to use the unappropriated profit to
pay an increased dividend of € 3.50 per share of common stock and € 3.52 per share of non-voting
preferred stock. We consider the proposal appropriate and therefore concur with it.
Expression of appreciation by the Supervisory Board
The Supervisory Board wishes to thank the members of the Board of Management and the entire
staff of the BMW Group worldwide for their efforts and hard work, which contributed to the
overall success of the BMW Group in its centenary year.
Pro-actively shaping change
The Group corporate culture, the spirit of innovation, and the passionate commitment of our
workforce provide a strong foundation for taking on the challenges of the future. Building on
this firm base, the BMW Group will continue to play a formative and leading role in shaping
technological change, with the clear aim of emerging on the winning side.
Munich, 9 March 2017
On behalf of the Supervisory Board
Norbert Reithofer
Chairman of the Supervisory Board
16
Statement of the
Chairman
of the Board of
Management
Harald Krüger
Chairman of the Board of Management
Dear Shareholders,
17
A new era has begun for your company: in this, the first year of our “Next 100”, we are embarking
on a new age of individual mobility. Everything we do is for our customers. For them, we are
creating a new kind of premium mobility geared entirely towards their individual needs, and
which will continue to thrill and excite them moving ahead.
Our Vision Vehicles fascinate people the world over
2016 was our centenary year. And you could see the reports everywhere: “The BMW Group is
not resting on its laurels – it is actively shaping the future.” The response of many people when
they saw our BMW, MINI, Rolls-Royce and BMW Motorrad Vision Vehicles for the first time,
was unequivocally enthusiastic: “The BMW Group’s Vision Vehicles are unlike anything we’ve
seen before.” I experienced this excitement myself in Munich, Beijing and Los Angeles. With
our Vision Vehicles, we are providing a glimpse of mobility beyond 2030, when autonomous
driving, connectivity, electro-mobility and services will be part of everyday life.
Becoming a tech company for premium mobility and premium services
with Strategy nuMBer one > neXt
With its bold, entrepreneurial spirit and ground-breaking innovations, the BMW Group has
always shaped individual mobility – constantly evolving in the process. Through Strategy
NUMBER ONE, we grew from a manufacturer of premium automobiles to a provider of premium
mobility and mobility services. Strategy NUMBER ONE > NEXT maps out the company’s
further evolution towards a tech company for premium mobility and premium services. To
achieve this, we will continue to expand our mobility services: DriveNow, ReachNow, ParkNow
and ChargeNow.
Cooperation for faster technological breakthroughs
Our aspiration to be a technology leader in mobility is firmly anchored in Strategy
NUMBER ONE > NEXT. To achieve this, we need to focus even more on a cooperative spirit.
In the digital age, new players from the IT world are bringing their business model to the
automotive sector – proving once again that individual mobility is an attractive field for
future business.
Our acquisition, together with other German manufacturers, of map service HERE was followed
by another important strategic decision in 2016: the BMW Group is joining forces with Intel
and sensor specialist Mobileye to advance highly-automated and autonomous driving.
Autonomous driving opens up new possibilities for customers
Autonomous driving will be a key technology for the future of mobility, opening up totally new
possibilities for our customers. Above all, people will be able to reclaim the time they previously
spent behind the wheel concentrating on the traffic. With all our products and services, we
offer various forms of mobility that generate individual excitement, creative space, are intuitive
to use and, at the same time, fully integrated into our customers’ lives. As the vehicle becomes
more familiar with its owner, it offers tailored recommendations to make everyday life easier.
18
Statement of the
Chairman
of the Board of
Management
Semi-automated driving with the new BMW 7 Series and BMW 5 Series
The transition to fully-autonomous driving, from around 2030, will see responsibility shift from
driver to machine in five stages. We already have around 8.5 million connected vehicles on the
road today. Our customers are already benefitting from state-of-the-art driver assistance systems
in the BMW 7 Series and the new BMW 5 Series. We are directing all our efforts towards the next
technological leap, which will bring highly-automated driving and further future technologies
to the road with the iNext in 2021.
Campus for highly-automated and autonomous vehicles
We are developing and testing highly-automated and autonomous vehicles at our new Research
and Development Centre for Autonomous Driving near Munich. This was also decided as part
of Strategy NUMBER ONE > NEXT.
Later this year, we will begin testing autonomous driving in city centres with a fleet of 40 com-
puter-operated vehicles. Customer safety will naturally be our top priority.
Firmly on course for sustainable mobility
Alongside digitalisation, emission-free mobility is another huge task for our industry. By 2025,
we expect around 15 to 25 per cent of BMW Group sales to be electrified vehicles. To achieve
this, we continue to expand the share of electrified models across all our brands and series.
Demand will increase with more models and greater range – as shown by the example of our
BMW i3 with its new 94-amp-hour battery. We delivered a total of more than 62,000 BMW i
vehicles and BMW plug-in hybrids to customers in 2016. The BMW i3 is one of the leading electric
vehicles available, while the BMW X5 is the top-selling plug-in hybrid. At our car-sharing service
DriveNow, operated with Sixt SE, BMW i3s already make up 20 per cent of the European fleet.
We see this as a great opportunity to make people, especially young people, excited about
electric driving.
Our goal: to sell 100,000 electrified vehicles in 2017
Between the launch of the BMW i3 in 2013 and 2016, we sold more than 100,000 BMW i models
and BMW plug-in hybrid models. In 2017, we intend to go one better: this year alone, we aim
to deliver a further 100,000 electrified vehicles. Our customers can choose between seven
different models.
The BMW Group is currently the world’s most successful premium provider of plug-in hybrid
vehicles. In 2017, we will release two more models: the BMW 5 Series iPerformance and the
MINI Countryman. These will be followed in 2018 by the BMW i8 Roadster. A year later, we will
launch an all-electric MINI and in 2020, an all-electric BMW X3.
We are creating common platforms and architectures for economical industrialisation of com-
bustion engines with Efficient Dynamics technology and electrification across all brands and
model series.
BMW Group remains the world’s leading premium car company in 2016
In its centenary year 2016, the BMW Group continued its successful business development. For
the sixth consecutive year, sales reached a new all-time high. With a solid increase of 5.3 per cent
over the previous year, sales climbed to more than 2.3 million vehicles. The BMW Group therefore
remains the leading car company in the global premium segment.
19
New all-time highs for BMW, MINI and BMW Motorrad brands
The BMW brand sold more than two million vehicles for the first time in a single year. Demand
for the X models, the BMW 2 Series and the new BMW 7 Series was particularly strong. The MINI
brand also achieved record sales of 360,233 vehicles; as did BMW Motorrad, with 145,032 motor-
cycles and scooters sold.
Rolls-Royce delivered 4,011 vehicles to customers and reported the second-best year in its
113-year history.
The BMW Group continues to benefit from its balanced distribution of sales across the world’s
three major market regions: Europe, Asia and the Americas. We are making targeted investments
in our production network of 31 sites in 14 countries on five continents to enhance performance
and flexibility.
The desirability of our brands and products is reflected in rankings and awards. The BMW Group
was once again the highest-ranked automobile manufacturer in Fortune Magazine’s 2017 “World’s
Most Admired Companies” and is the only German company in the top 50. With the “World
Car Award” and “Best Car” for the BMW 7 Series and “Golden Steering Wheel” for the BMW i3,
the BMW Group earned several of the world’s top honours in 2016.
Targets met for financial year 2016
We achieved our goals for 2016. We succeeded despite increasing uncertainties in the political
and economic environment and strong competition on the global auto markets.
The BMW Group posted record revenues of over 94.1 billion euros in 2016. Profit before tax also
reached a new high of more than 9.6 billion euros.
EBT rose slightly – as forecast – by 4.8 per cent year-on-year. Annual net profit increased by
8.0 per cent to more than 6.9 billion euros. The EBIT margin in the Automotive segment stands
at 8.9 per cent and therefore remains within our target range.
The company is also one of the leading financial services providers in the automotive sector. Our
Financial Services division concluded more than 1.8 million new contracts with retail customers
in 2016. For the first time, the segment Financial Services posted pre-tax earnings of more than
2.1 billion euros and therefore once again made a major contribution to the Group result.
Highly motivated associates are the key to our success
The company employed a total of 124,729 people at the end of 2016. This represents a slight
year-on-year increase of 2.0 per cent. In addition to specialists in alternative drivetrains and
automated driving, we are also recruiting experts for our financial services business and expansion
in mobility services. The BMW Group continues to benefit from its status as a highly attractive
employer, as shown in numerous rankings amongst engineering, IT and business graduates. This
helps us attract the young talent we need to implement digitalisation in all our business segments.
In 2016, we once again invested more than 350 million euros in vocational and professional
training for associates. The BMW Group is also training more than 4,600 young people. This
reflects the company’s sense of responsibility towards future generations.
On behalf of the Board of Management, as well as personally, I would like to thank all our
associates worldwide for their dedication during the financial year 2016. I would also like to
thank our business partners and suppliers, as well as the entire retail organisation. You all play
a direct part in our success!
20
Statement of the
Chairman
of the Board of
Management
2017 model offensive
In the 2017 financial year, we will offer customers more than 20 new BMW, MINI and Rolls-Royce
models. For BMW, a highlight for the current financial year will be the arrival of the most innova-
tive BMW 5 Series of all time. This status has been confirmed by awards such as “Best Connected
Car of the Year”. Our 5 Series customers can choose from options ranging from a plug-in hybrid
variant to the M Performance model. Our current MINI line-up is young and striking, with five
models full of character that appeal to different target groups. The new MINI Countryman is
our second spearhead in the fast-growing premium compact segment. Motorcycle fans can also
look forward to new models this year with 14 market launches from BMW Motorrad.
Dear Shareholders,
We firmly believe that the diverse challenges of tomorrow’s mobility open up new opportunities
for further growth and technological progress which we will pursue in the interest of our
customers. In doing so, we combine fresh thinking, operational excellence and profitability. For
the past seven years, the EBIT margin in the Automotive segment has been within or above our
target range of eight to ten per cent.
In early 2017, the rating agency Moody’s upgraded our long-term credit rating to A1 – giving the
BMW Group the best rating of any European automobile manufacturer and the second-highest
worldwide. This financial stability forms the basis for our investments in the future.
It is only right that our shareholders share in our success. In the 101st year of BMW AG, the
Board of Management and Supervisory Board will therefore propose to the Annual General
Meeting the highest dividend in the history of the company for the financial year 2016, with
a total payout of 2.3 billion euros. Associates of BMW AG in Germany will also share in the
company’s positive performance through our profit-sharing programme.
I would like to thank all of our shareholders and debt investors. You, dear shareholders and
investors, accompany us as we embark upon a new age of mobility. With our strategy, we have
shown you our roadmap for the future and we are consistently implementing the measures
accordingly. Your commitment is a sign of your appreciation and trust. We will do everything
in our power to ensure that BMW AG remains an attractive investment and a reliable and
future-oriented company that justifies your trust.
Harald Krüger
Chairman of the Board of Management
2
Combined
Management
Report
General Information
Economic Position
Outlook, Risks and
Opportunities
BMW Stock and
Capital Markets
COMBINED MANAGEMENT
REPORT
Page 22 General Information on the BMW Group
Page 22 Organisational Structure and Business Model
Page 24 Locations
Page 29 Management System
Page 34 Report on Economic Position
Page 34 General and Sector-specific Environment
Page 38 Overall Assessment by Management
Page 39 Financial and Non- financial Performance Indicators
Page 42 Review of Operations
Page 42 Automotive Segment
Page 48 Motorcycles Segment
Page 49 Financial Services Segment
Page 51 Research and Development
Page 54 Purchasing and Supplier Network
Page 55 Sales and Marketing
Page 57 Workforce
Page 59 Sustainability
Page 63 Results of Operations, Financial Position and Net Assets
Page 76 Comments on Financial Statements of BMW AG
Page 82 Report on Outlook, Risks and Opportunities
Page 82 Outlook
Page 88 Risks and Opportunities
Page 101 Internal Control System and Risk Management
System Relevant for the Financial Reporting Process
Page 103 Disclosures Relevant for Takeovers
Page 107 BMW Stock and Capital Markets in 2016
2
22
General Information
on the BMW Group
Organisational
Structure and
Business Model
GENERAL
INFORMATION
ON THE
BMW GROUP
THE NEXT 100 YEARS –
shaping the future
Distribution network enlarged
Digitalisation and connectedness
consistently increased
www.bmwgroup.com / company
ORGANISATIONAL
STRUCTURE AND
BUSINESS MODEL
This Combined Management Report incorporates the
management reports of Bayerische Motorenwerke
Aktiengesellschaft (BMW AG) and the BMW Group.
General information on the BMW Group
General information on the BMW Group is provided
below. There have been no significant changes com-
pared to the previous year.
Organisational Structure and Business Model
Bayerische Motoren Werke Aktiengesellschaft
(BMW AG), based in Munich, Germany, is the parent
company of the BMW Group. The general purpose
of the Corporation is the development, production
and sale of engines, engine-equipped vehicles, related
accessories and products of the machinery and metal-
working industry as well as the rendering of services
related to the aforementioned items. The BMW Group
is sub-divided into the Automotive, Motorcycles,
Financial Services and Other Entities segments (the
latter primarily comprising holding companies and
Group financing companies). The BMW Group oper-
ates on a global scale and is represented in more than
150 countries worldwide. At the end of the reporting
period, the BMW Group employed a workforce of
124,729 people.
Originally founded in 1916 as Bayerische Flugzeug-
werke AG (BFW), it emerged as Bayerische Motoren
Werke G. m. b. H. in 1917, before finally becoming Bay-
erische Motoren Werke Aktiengesellschaft (BMW AG)
in 1918. The BMW Group comprises BMW AG itself
and all subsidiaries over which BMW AG has either
direct or indirect control. BMW AG is also responsible
for managing the BMW Group as a whole.
Under the motto “THE NEXT 100 YEARS”, the
BMW Group celebrated its centenary in March
2016, showcased by a major centenary event held
in Munich. The four concept vehicles unveiled over
the course of the year for the brands BMW, MINI,
Rolls-Royce and BMW Motorrad provided visionary
insights into the future of individual mobility. At
the same time, the BMW Group also presented its
Strategy NUMBER ONE > NEXT, which builds on
the existing strategy and expands its contents on the
basis of recent developments. At the heart of Strategy
Combined Management Report 23
The MINI brand is a veritable icon in the premium
small car segment, offering unrivalled driving pleasure
in its class. Rolls-Royce has a tradition in the ultra-lux-
ury segment stretching back over more than 100 years.
The Automotive segment’s worldwide distribution net-
work currently consists of around 3,400 BMW, 1,580
MINI and 140 Rolls-Royce dealerships. In Germany,
products and services are sold through BMW Group
branches and by independent authorised dealers.
Sales outside Germany are handled primarily by
subsidiary companies and by independent import
companies in a number of markets. The BMW i deal-
ership and agency network currently covers more
than 1,300 locations.
The motorcycles business is also focused on the
premium segment, with the model range currently
comprising motorcycles for the Sport, Tour, Roadster,
Heritage, Adventure and Urban Mobility segments.
BMW Motorrad also offers a broad range of equip-
ment options designed to enhance rider safety and
comfort. The motorcycles business sales network is
organised similarly to that of the automobile business.
Currently, around 1,180 BMW Motorrad dealerships
operate worldwide.
The BMW Group is also among the leading pro-
viders of financial services in the automobile sector,
operating more than 50 entities and cooperation
arrangements with local financial services providers
and importers worldwide. Credit financing and the
leasing of BMW Group brand cars and motorcycles
to retail customers represent the segment’s main line
of business. It also provides customers with access
to a wide range of insurance and banking products.
Operating under the brand name “Alphabet”, the
BMW Group’s international multi-brand fleet business
provides fleet financing products and comprehensive
management services for corporate car fleets in 19
countries. Within the multi-brand financing line of
business, credit financing, leasing and other services
are marketed to retail customers under the brand
name “Alphera”. Providing support to the dealership
organisation, such as by financing dealership vehicle
inventories, rounds off the segment’s product range.
NUMBER ONE > NEXT is a commitment to consistent
future-oriented activity, focusing on developing prod-
ucts, brands and services for individual mobility in the
premium segment. New technologies, digitalisation
and connectedness as well as social responsibility are
further areas of strategic focus.
The BMW Group is one of the most successful makers
of passenger cars and motorcycles worldwide and
among the largest industrial companies in Germany.
With BMW, MINI and Rolls-Royce, the BMW Group
owns three of the strongest premium brands in the
automotive industry. The vehicles manufactured by
the BMW Group set exceptionally high standards in
terms of aesthetics, dynamics, technology and quality,
and are the culmination of expertise in engineering
and innovation. Its research and innovation network
spans 13 locations in five countries. In addition to its
strong position on international motorcycle markets,
the BMW Group also offers its customers a successful
range of financial services. In recent years, it has also
established itself as a leading provider of premium
services in the field of individual mobility.
see section
Motorcycles
segment
Long-term thinking and responsible action have
long been the cornerstones of the BMW Group’s
success. Ecological and social sustainability along
the entire value-added chain, full responsibility for
its products and a clear commitment to preserving
resources are prime objectives firmly embedded in
the BMW Group’s corporate strategy. The BMW Group
has ranked among the most sustainable companies in
the automotive industry for many years.
see sections
Workforce and
Sustainability
see section
Financial
Services
segment
BMW Group is also working on an integrated digital
concept, Connected Drive, to bring together driver
and vehicle. Through this service, the vehicle becomes
an intelligent companion, digitally integrated and
adapted to the individual needs of each user. The
BMW iNEXT is scheduled to enter the market in 2021,
electrically powered, autonomously driven and fully
connected.
see section
Research and
Development
see sections
Automotive
segment and
Sales and
Marketing
The core BMW brand caters to a broad array of
customer wishes, ranging from fuel-efficient and
innovative models equipped with Efficient Dynam-
ics through to efficient, high-performance BMW M
vehicles, which help bring a touch of the flair of motor-
sport to the roads. At the same time, the BMW Group
continues to push the boundaries of “premium” to
new levels with its BMW i models. Designed to the core
for even greater sustainability, the BMW i embodies
the vehicle of the future – with its electric drivetrain,
intelligent lightweight construction, exceptional
design and newly developed range of mobility services.
24
General Information
on the BMW Group
Organisational
Structure and
Business Model
Locations
BMW Group locations worldwide
• 09
43
Sales subsidiaries and
Financial Services
locations worldwide
31
Production and
assembly plants
13
Research and
development
locations
Headquarters
Canada
usA
Mexico
United Arab
Emirates
Brazil
Argentina 1
South Africa
New Zealand
Russia
India
China
South Korea
Japan
Hong Kong 2
Thailand
Malaysia
Singapore 1
Indonesia 1
Australia
Research and development
network outside Europe
BMW Group Designworks, Newbury
Park, USA
BMW Group Technology Office USA,
Mountain View, USA
BMW Group Engineering and
Emission Test Center,
Oxnard, USA
BMW Group ConnectedDrive Lab
China, Shanghai, and BMW Group
Designworks Studio Shanghai, China
BMW Group Engineering China,
Beijing, China
BMW Group Engineering Japan,
Tokyo, Japan
BMW Group Engineering USA,
Woodcliff Lake, USA
Partner plants
outside Europe
Partner plant, Hosur, India
Partner plant, Jakarta, Indonesia
Partner plant, Cairo, Egypt
Partner plant, Kaliningrad, Russia
Partner plant, Kulim, Malaysia
BMW Technology, Chicago, USA
Sales subsidiaries and
Financial Services
locations worldwide
Production
outside Europe
BMW Group plant Araquari, Brazil
BMW Group plant Chennai, India
BMW Group plant Manaus, Brazil
BMW Group plant Rayong, Thailand
BMW Group plant Rosslyn, South Africa
BMW Group plant Spartanburg, USA
BMW Brilliance Automotive, China
(joint venture – 3 plants)
SGL Automotive Carbon Fibers
(joint operation – 2 plants)
1 Sales locations only.
2 Financial Services only.
Combined Management Report
BMW Group locations in Europe
• 10
25
Sweden
Finland 1
Denmark
Czech
Republic 1
Poland 1
Austria
Slovakia 1
Hungary 1
Romania 1
Bulgaria 1
Greece
Norway
Germany
Netherlands
Great Britain
Ireland
Belgium
France
Switzerland
Spain
Portugal
Italy
Slovenia 1
Malta
Production in Europe
BMW Group plant Berlin
BMW Group plant Dingolfing
BMW Group plant Eisenach
BMW Group plant Landshut
BMW Group plant Leipzig
BMW Group plant Munich
BMW Group plant Regensburg
BMW Group plant Wackersdorf
BMW Group plant Steyr, Austria
BMW Group plant Hams Hall, GB
BMW Group plant Oxford, GB
BMW Group plant Swindon, GB
Rolls-Royce Manufacturing Plant,
Goodwood, GB
Research and development
network in Europe
BMW Group Research and Innovation
Centre (FIZ), Munich, Germany
BMW Group Research and
Technology, Munich, Germany
BMW Car IT, Munich, Germany
BMW Innovation and Technology
Centre, Landshut, Germany
BMW Diesel Competence Centre,
Steyr, Austria
Partner plants
in Europe
Partner plant, Born,
Netherlands
Partner plant, Graz,
Austria
Sales subsidiaries and
Financial Services
locations Europe
26
General Information
on the BMW Group
Organisational
Structure and
Business Model
At the end of the reporting period, the Group’s pro-
duction network comprised a total of 31 locations in 14
countries. The 31 locations comprise 19 BMW Group
manufacturing facilities, five plants belonging to joint
ventures / operations, five partner plants and two con-
tract production plants. The same quality, safety and
sustainability standards are applicable for all plants
throughout the BMW Group production network
worldwide.
The 19 BMW Group plants comprise 13 automobile
and engine plants, two plants for BMW motorcycles,
three sites for the production of components, pressed
parts and tools and one supply centre.
Locations
BMW Group plAnts
Araquari
Berlin
Chennai
Dingolfing
Eisenach
Hams Hall
Landshut
Leipzig
Manaus
Munich
Oxford
Rayong
Regensburg
Rosslyn
Spartanburg
Steyr
Swindon
Wackersdorf
Country
Brazil
Germany
India
Germany
Products
BMW 3 Series, BMW X1, BMW X3, BMW X4
BMW motorcycles, Maxi–Scooter, car brake discs
BMW 1 Series, BMW 3 Series, BMW 5 Series, BMW 7 Series,
BMW X1, BMW X3, BMW X5
BMW 3 Series, BMW 4 Series, BMW 5 Series, BMW 6 Series, BMW 7 Series
M-models: BMW M5, BMW M6
Plug-in-hybrid vehicles: BMW 5 Series, BMW 7 Series
Chassis and drivetrain components
Components for electric mobility
Rolls-Royce bodywork, pressed parts
Germany
Toolmaking, outer body parts for Rolls-Royce, aluminium tanks for BMW Motorrad
United Kingdom
Germany
Germany
Brazil
Germany
United Kingdom
Thailand
Germany
South Africa
USA
Austria
United Kingdom
Germany
Petrol engines for BMW, MINI
BMW i8 Plug-in-hybrid engines
Production of core engine parts
Components and electric drive systems
BMW 1 Series, BMW 2 Series
M-models: BMW M2
Plug-in-hybrid vehicles: BMW 2 Series, BMW i8
Electric vehicles: BMW i3
Motorcycles
BMW 3 Series, BMW 4 Series
M-models: BMW M4
Plug-in-hybrid vehicles: BMW 3 Series
Petrol and diesel engines, high-performance engines for M-models
Production of core engine parts
MINI Hatch, MINI Clubman
BMW 1 Series, BMW 3 Series, BMW 5 Series, BMW 7 Series,
BMW X1, BMW X3, BMW X4, BMW X5, MINI Countryman
Motorcycles
BMW 1 Series, BMW 2 Series, BMW 3 Series, BMW 4 Series,
BMW X1, BMW Z4
M-models: BMW M3, BMW M4
BMW 3 Series
BMW X3, BMW X4, BMW X5, BMW X6
M-models: BMW X5 M, BMW X6 M
Plug-in-hybrid vehicles: BMW X5
Petrol and diesel engines for BMW and MINI,
Production of core engine parts
High performance engines for M-models
Pressed parts and bodywork components
Distribution center for parts and components
Cockpit assembly
Processing of carbon fibre components
Rolls-Royce Phantom, Ghost, Wraith, Dawn
Rolls-Royce Manufacturing Plant Goodwood
United Kingdom
Combined Management Report 27
The plants in Shenyang (China) are operated together
with the joint venture partner, Brilliance China Auto-
motive Holdings Ltd., manufacturing exclusively for
the Chinese market. The Shenyang site comprises
the Dadong and Tiexi automobile plants as well as
an engine plant complete with foundry.
Locations
Joint venture BMW BrilliAnce
AutoMotive HoldinGs ltd.
Dadong (Shenyang)
Tiexi (Shenyang)
Tiexi (Shenyang)
Country
China
China
China
Products
BMW 5 Series Extended-Wheelbase Version
Plug-in-hybrid vehicles: BMW 5 Series Extended-Wheelbase Version
BMW 2 Series, BMW 3 Series (+Extended-Wheelbase Version),
BMW X1 Extended-Wheelbase Version
Plug-in-hybrid vehicles: BMW X1 Extended-Wheelbase Version
Petrol engines, production of core engine parts
SGL Automotive Carbon Fibers (SGL ACF) is a joint
operation of the BMW Group with the SGL Group.
At the Moses Lake site in the US State of Washington,
carbon fibres are produced for subsequent use in the
production of carbon fibre fabrics in Wackersdorf.
Locations
Joint operAtion
sGl AutoMotive cA rBon FiBers
Moses Lake
Wackersdorf
Country
USA
Germany
Products
Carbon fibres
Carbon fibre fabrics
28
General Information
on the BMW Group
Organisational
Structure and
Business Model
The primary function of the four partner plants of
the BMW Group is to serve nearby regional markets.
During the year under report, BMW and MINI vehicles
were also manufactured in Kaliningrad (Russia), Cairo
(Egypt), Jakarta (Indonesia) and Kulim (Malaysia). In
addition, BMW motorcycles were manufactured by the
cooperation partner, TVS Motor Company, in Hosur
(India).
Management System
Locations
PARTNER PlANTS
Hosur
Jakarta
Cairo
Kaliningrad
Kulim
Country
India
Indonesia
Egypt
Russia
Malaysia
Products
Motorcycles
BMW 3 Series, BMW 5 Series, BMW 7 Series, BMW X1, BMW X3, BMW X5
BMW 3 Series, BMW 5 Series, BMW 7 Series, BMW X3, BMW X4, BMW X5, BMW X6
BMW 3 Series, BMW 5 Series, BMW X1, BMW X3, BMW X4, BMW X5, BMW X6
BMW 1 Series, BMW 3 Series, BMW 5 Series, BMW 7 Series,
BMW X1, BMW X3, BMW X4, BMW X5, BMW X6, MINI Countryman
The BMW Group also awards production contracts to
external partners for specific vehicle types. During
the period under report, various MINI models were
produced by Magna Steyr Fahrzeugtechnik in Graz
(Austria) and VDL Nedcar in Born (Netherlands).
Locations
Country
Products
contrAct production
Born
Graz
Netherlands
Austria
MINI Hatch, MINI Convertible, MINI Countryman
MINI Countryman, MINI Paceman
Combined Management Report MANAGEMENT SYSTEM
The business management system applied by the
BMW Group follows a value-based approach, with
a clear focus on achieving profitability, consistent
growth, increasing the value of the business for cap-
ital providers and safeguarding jobs. Achieving the
desired degree of corporate autonomy can only be
ensured in the long term if available capital is prof-
itably employed. The prerequisite for this is that the
amount of profit generated sustainably exceeds the
cost of equity and debt capital.
The BMW Group’s internal management system is
based on a multi-layered structure, with varying
BMW Group – value drivers
• 11
29
degrees of detail, depending on the level of aggre-
gation. Operating performance, for instance, is
managed primarily at segment level. In order to
manage long-term performance and assess strate-
gic issues, additional key performance figures are
taken into account at Group level. In this context,
with effect from the beginning of the 2017 financial
year, the pre-tax return on sales will be used as an
additional indicator of earnings quality throughout
the BMW Group. The contribution made to enter-
prise value during the financial year continues to be
measured in terms of value added. This approach is
translated into operational processes at both Group
and segment level in the form of key financial and
non-financial performance indicators (value drivers).
The link between value added and the relevant value
drivers is shown in a simplified form in the following
diagram.
Value added
–
Return on capital
(roce / roe)
×
Profit
–
Expenses
Revenues
Capital employed
Average weighted
cost of capital rate
Return on sales
Capital turnover
Cost of capital
÷
÷
×
30
General Information
on the BMW Group
Management System
Due to the high level of aggregation involved, it is
impractical to manage the business on the basis of
value added. This key indicator therefore only serves
for reporting purposes. Relevant value drivers which
could have a significant impact on business perfor-
mance and enterprise value are defined for each
controlling level. The financial and non-financial
value drivers are reflected in the key performance
indicators used to manage the business. In the case
of project-related decisions, the system incorporates a
project-oriented control logic focused on value-based
and return-based performance indicators, which
therefore provide a sound basis for decision-making.
Management of operating performance
at segment level
Operating performance at segment level is managed
at its highest level on the basis of return on capital.
Depending on the business model, the segments are
measured on the basis of return on total capital or
equity. Specifically, the return on capital employed
(RoCE) is used for the Automotive and Motorcycles
segments and the return on equity (RoE) for the
see sections
Performance
Indicators and
Outlook
Return on Capital Employed
• 12
Financial Services segment. As an overall reflection
of profitability (return on sales) and capital efficiency
(capital turnover), these key performance indicators
provide a wide range of information into the factors
driving segment performance and changes in the
value of the business.
Automotive segment
The most comprehensive key performance indica-
tor used for the Automotive segment is RoCE. This
indicator provides information on profitability of
capital employed and on operational business. RoCE
is measured on the basis of segment profit before
financial result and the average amount of capital
employed in segment operations. The strategic target
for the Automotive segment’s RoCE is 26 %.
RoCE Automotive =
Profit before
financial result
Average capital
employed
Profit before financial result in € million
Average
capital employed in € million
Return on capital employed in %
Automotive
7,695
7,836
10,361
10,854
2016
2015
2016
2015
2016
74.3
2015
72.2
Capital employed corresponds to the sum of all cur-
rent and non-current operational assets, less liabilities
that do not incur interest (e. g. trade payables and
other provisions).
Managing the business on the basis of key value
drivers makes it easier to identify the reasons for
changes in RoCE and define suitable measures to
drive its development.
Due to its key importance for the Group as a whole,
the Automotive segment is managed on the basis of
additional key performance indicators with varying
degrees of detail, which have a significant impact on
RoCE and hence on segment performance. These
value drivers are sales volume, segment revenues and
the operating return on sales (EBIT margin: profit / loss
before financial result as a percentage of revenues) as
the key performance indicator for segment profitabil-
ity. Average CO2 emissions for the fleet are also taken
into account, due to its impact on ongoing develop-
ment expenses and the significant long-term impact
of regulatory requirements on Group performance.
Fleet emissions corresponds to average CO2 emissions
of new cars sold in the EU-28 countries.
Combined Management Report 31
Motorcycles segment
As with the Automotive segment, operating perfor-
mance for the Motorcycles segment is managed on the
basis of RoCE. Capital employed is measured on the
same basis as in the Automotive segment. The strategic
RoCE target for the Motorcycles segment is 26 %.
roce
Motorcycles
=
Profit before
financial result
Average capital
employed
Return on Capital Employed
• 13
Motorcycles
Profit before financial result in € million
Average
capital employed in € million
Return on capital employed in %
2016
187
2015
182
2016
566
2015
576
2016
33.0
2015
31.6
In view of the increasing strategic importance of the
Motorcycles segment, the EBIT margin will be added
as a key performance indicator with effect from the
beginning of the 2017 financial year. In conjunction
with the non-financial value driver sales volume, this
will enable RoCE development to be understood in
greater detail.
Financial Services segment
As is common practice in the banking sector, the
performance of the Financial Services segment is
measured on the basis of return on equity. RoE is
defined as segment profit before taxes, divided by the
average amount of equity capital attributable to the
Return on Equity
• 14
Financial Services segment. The strategic RoE target
for the Financial Services segment is at least 18 %.
RoE Financial
Services
=
Profit before tax
Average equity capital
Financial Services
2,166
1,975
10,236
9,756
2016
2015
2016
2015
2016
21.2
2015
20.2
Profit before tax in € million
Average equity capital in € million
Return on equity in %
32
General Information
on the BMW Group
Management System
Strategic management at Group level
Strategic management and quantification of the
financial impacts as part of the long-term corporate
planning are performed primarily at Group level. The
most significant performance indicators for these
purposes are Group profit before tax and the size of
the Group’s workforce at the year-end. Group profit
before tax provides a comprehensive measure of the
Group’s overall performance after consolidation
effects and a transparent basis for comparing perfor-
mance, particularly over time. The size of the Group’s
workforce is monitored as an additional non-financial
performance indicator.
Information provided by these two key performance
indicators is reported with the performance indi-
cators, pre-tax return on sales and value added. Value
added, as a highly aggregated performance indicator,
provides an insight into capital efficiency and the
(opportunity) cost of capital required to generate
Group profit. Value added corresponds to the amount
of earnings over and above the cost of capital and gives
an indication of whether the Group is meeting the
minimum requirements for the rate of return expected
by capital providers. A positive value added means
that a company is generating more additional value
than the cost of capital.
Value added
Group
= earnings amount –
cost of capital
= earnings amount –
(cost of capital rate ×
capital employed)
in € million
BMW Group
Earnings amount
Cost of capital
Value added Group
2016
2015
2016
2015
2016
2015
10,000
9,723
6,407
6,040
3,593
3,683
Capital employed comprises the average amount of
Group equity employed during the year as a whole, the
financial liabilities of the Automotive and Motorcycles
segments, and pension provisions. The earnings meas-
ure for these purposes corresponds to Group profit
before tax, adjusted for interest expense incurred in
conjunction with the pension provision and on the
financial liabilities of the Automotive and Motorcycles
segments (earnings before interest expense and taxes).
The cost of capital is the minimum rate of return
expected by capital providers in return for the capital
employed. Since capital employed comprises an equity
capital element (e. g. share capital) and a debt capital
element (e. g. bonds), the overall cost of capital rate is
determined on the basis of the weighted average rates
for equity and debt capital, measured using standard
market procedures. The pre-tax average weighted
cost of capital for the BMW Group in 2016 was 12 %,
unchanged from the previous year.
Combined Management Report 33
Value-based project management
Operational business in the Automotive and Motor-
cycles segments is largely shaped by its life-cycle-
dependent project character. Projects have a sub-
stantial influence on future business performance.
Project decisions are therefore a crucial component
of financial management for the BMW Group.
Project decisions are taken on the basis of calculations
measured in terms of the cash flows each individual
project is expected to generate. Calculations are made
for the full term of a project, incorporating all future
years in which the project is expected to generate cash
flows. Project decisions are taken on the basis of net
present value and internal rate of return calculated
for the project.
The net present value of a project indicates the extent
to which a project will be able to generate a positive
contribution to earnings over and above the cost of
capital. A project with a positive net present value
enhances value added and therefore results in an
increase in the value of the business. The internal
rate of return of the project corresponds to the aver-
age return on capital employed in the project and, in
terms of significance, is equivalent to the multi-year
average RoCE for an individual project. It is therefore
consistent with one of the key performance indicators.
The criteria used for taking decisions as well as the
long-term impact on periodic earnings is document-
ed for all project decisions and incorporated in the
long-term Group forecast. This approach enables an
analysis of the periodic reporting impact of project
decisions on earnings and rates of return over the
term of each project. The overall result is a cohesive
controlling model.
34
Report on
Economic Position
General and Sector-
specific Environment
REPORT
ON ECONOMIC
POSITION
Centenary year sees best Company
performance
Record sales volumes for automobiles
and motorcycles – expectations
exceeded
Record results in operational
segments
€ 9,665 million
+ 4.8 %
Group profit before tax
at record level
GENERAL AND
SECTOR-SPECIFIC
ENVIRONMENT
General economic environment
The global economy grew at a relatively stable pace
in the face of external influences at a rate of 3.1 %
in 2016. Against a background of multiple political
uncertainties, global growth seems relatively robust.
The eurozone continued to record moderate economic
growth, helped among other factors by favourable
conditions on the job market. Although the pace of
the economy in China slowed, the decrease was only
marginal. The USA recorded slight growth in 2016. By
contrast, the emerging economies of Russia and Brazil
contracted again in 2016, despite Russia benefiting
from rising raw materials prices.
Gross domestic product (GDP) in the eurozone grew
by 1.7 % year-on-year. The European Central Bank
(ECB) continued to pursue its expansive monetary
policies. Boosted by strong exports and robust domes-
tic demand, the German economy grew by 1.8 %, its
fastest rate for five years. France (+ 1.2 %) and Italy
(+ 0.9 %) saw growth at similar levels to the previous
year. In both countries, structural reforms designed to
stimulate the economy remain in the implementation
phase.
In the UK, the year 2016 was marked by the Brexit
decision, the economic impact of which is expected to
be felt from 2017 onwards. For the year under report,
a robust GDP growth rate of 2.0 % was recorded. Polit-
ical uncertainty did not have an adverse impact on
household spending. The growth rate also benefited
from falling unemployment. The increase in invest-
ments by companies was significantly lower than in
previous years, while the rise in government spending
was below average. Despite the massive devaluation
of the British pound after the referendum, exports fell
far short of matching the high growth rate recorded
one year earlier.
The new strategic direction adopted for China’s econ-
omy presented significant challenges for the country’s
government. In response to the stock market slump
at the beginning of the year and fears that econom-
ic growth was set to slow down, the government
imposed measures to stimulate the economy. The
6.7 % GDP growth rate in China for the full year was
slightly down on the previous year, though within the
pursued target range.
Combined Management Report The US economy continued to show a solid perfor-
mance, growing year-on-year by 1.6 %. The unem-
ployment rate fell by 0.4 percentage points to 4.9 %.
At the same time, however, domestic spending rose
at a slightly lower rate than one year earlier. Exports
only grew slightly as a result of the strong US dollar.
In view of these developments and in anticipation of
a rising inflation rate, the US Federal Reserve (Fed)
raised its benchmark interest rate in December 2016.
The domestic economy in Japan was held down in
particular by high debt levels and the appreciation
of the yen in 2016. After a two-year downward trend,
household spending increased, albeit at a moderate
rate, while exports remained weak. Ultimately, only
economic stimulus programmes prevented Japan from
stagnating in 2016, with the GDP growth rate finishing
at a modest 0.9 %.
Thanks to its economic reforms, India posted a GDP
growth rate of 7.0 %, achieving growth of at least 7.0 %
for the third year in succession. By contrast, Russia
and Brazil failed once again to pull out of recession.
Although industrial production picked up in Russia,
domestic consumption fell sharply, causing economic
output to fall overall (– 0.6 %). Brazil, however, recorded
its second consecutive year of deep recession (– 3.4 %).
Figures for consumption expenditure (household and
public sector) and business investments dropped to
new lows.
Exchange rates compared to the euro
• 15
Index: December 2011 = 100
35
Currency markets
The British pound weakened significantly in the wake
of the Brexit decision. Compared to its average rate
of 0.78 to the euro during the first half of the year,
it fell sharply during the second half of the year to
0.86 to the euro. The Bank of England reacted to
increasing post-referendum uncertainty by lowering
interest rates, thus contributing to the weakening of
the pound.
The Chinese renminbi lost in value compared to the
previous year, finishing with an average exchange rate
for the year of 7.35 renminbi to the euro.
Despite volatility during the course of the year, the
US dollar remained unchanged compared to the pre-
vious year at an average exchange rate of 1.11 to the
euro in 2016. The Fed shifted only moderately from
its expansionary monetary policies during the year
under report.
The Japanese yen appreciated by approximately 10 %
in 2016, despite the expansion of money supply by
the Bank of Japan. The average exchange rate for the
year was 120.25 yen to the euro.
Currencies in emerging economies reflected a mixed
picture. While the Brazilian real was down by approx-
imately 4 % against the euro, the Russian rouble was
up by approximately 9 % against the euro after a strong
rally.
200
150
100
50
Russian Rouble
Japanese Yen
British Pound
Chinese Renminbi
US Dollar
2012
2013
2014
2015
2016
2017
200
150
100
50
Source: Reuters.
36
Report on
Economic Position
General and Sector-
specific Environment
Oil price trend
• 16
Price per barrel of Brent Crude
120
90
60
30
Price in US Dollar
Price in €
2012
2013
2014
2015
2016
2017
Source: Reuters.
Precious metals price trend
• 17
Index: December 2011 = 100
150
100
50
0
Source: Reuters.
Palladium
Gold
Platinum
2012
2013
2014
2015
2016
2017
120
90
60
30
150
100
50
0
Combined Management Report Raw materials prices
The price of Brent crude oil – the most relevant bench-
mark for Europe – fell at the beginning of the year for a
short time to below the level of 30 US dollars per barrel.
A subsequent volatile upward trend saw the price rise
to a high of 57 US dollars per barrel, bolstered by the
agreement reached by the Organisation of Petroleum
Exporting Countries (OPEC) and Russia to cut back oil
production. Despite these developments, the average
price of Brent crude oil fell to 44 US dollars per barrel,
compared to 52 US dollars per barrel in the previous
year. WTI, the benchmark for crude oil in the USA,
followed a similar trend.
After dropping to new lows at the turn of 2015 / 2016,
precious metals prices stabilised in the course of 2016
at higher levels. The lower prices seen in preced-
ing years have resulted in manufacturers reducing
over- capacities, while at the same time demand has
recovered.
Steel markets saw at times sharp price rises. During
the course of the year, the USA and the EU imposed
anti-dumping duties on Asian steel products, while
the USA did likewise on European steel products.
The situation was further exacerbated by the Chinese
government’s decision to cut working hours in coal-
mines. The price of coal, an important cost factor in
the production of steel, rose accordingly.
Steel price trend
• 18
Index: January 2012 = 100
110
85
60
2012
2013
2014
2015
2016
2017
Source: Working Group for the Iron and Metal Processing Industry.
37
Automobile markets
The positive trend on international automobile mar-
kets seen in the previous year continued in 2016.
Worldwide registrations of passenger cars and light
commercial vehicles grew by 5.9 % to 87.4 million
units. Strong momentum from China (24.1 million
units; + 17.4 %) and Europe (15.2 million units; + 6.6 %)
made significant contributions to growth. By contrast,
the USA recorded only a slight increase (17.6 million
units; + 0.4 %).
Europe’s automobile markets presented a mixed
picture. After a strong performance in the previous
year, the UK saw only comparatively low growth in
the number of new registrations in 2016 (2.7 million
units; + 2.3 %). The French automobile market was in
even better shape than one year earlier, recording a
5.3 % increase to 2.0 million registrations, ahead of
Germany’s growth rate of 4.5 % (3.4 million units).
Italy (1.8 million units; + 16.2 %) and Spain (1.1 million
units; + 10.9 %) both recorded double-digit percentage
increases.
Japan was unable to turn around the previous year’s
negative trend, with the market contracting by a
further 1.6 % to 4.8 million units.
Automobile markets in major emerging economies
continued to suffer from recession in 2016. Russia saw
a 4.7 % drop to 1.2 million units, while registrations
in Brazil slumped by nearly one third (– 32.2 %) to
1.7 million units.
Motorcycle markets
Since the beginning of the financial year 2016, market
analysis has been expanded from the half-litre class
(500 cc) to cover the entire 250 cc plus class. This fol-
lows BMW Motorrad’s entrance with the entry-level
G 310 R model into a new market segment within the
250 cc plus class.
Global motorcycle markets in the 250 cc plus class
were flat year-on-year, mainly reflecting weaker per-
formance in some overseas regions (+ / – 0.0 %). The
European market grew by 12.4 % overall, benefiting
primarily from the significant recovery in Southern
Europe. While the French market grew by an encour-
aging 6.7 %, markets in Germany, Italy and Spain all
recorded double-digit increases, expanding by 13.9 %,
12.8 % and 23.5 % respectively. The US market finished
3.8 % down year-on-year.
OVERALL ASSESSMENT
BY MANAGEMENT
Overall assessment of business performance
The BMW Group can look back on a successful
business performance in 2016, despite increased
competition and growing uncertainties in the inter-
national environment. The overall picture was positive
in terms of results of operations, financial position
and net assets. Overall, management expectations
for the period were therefore met. This assessment
also takes into account events after the end of the
reporting period.
38
Report on
Economic Position
General and Sector-
specific Environment
Overall Assessment
by Management
Financial and Non-
financial Perfor-
mance Indicators
Financial services markets
The global economy grew at a moderate pace in 2016,
with conditions for financial services business gener-
ally tending to be favourable.
Interest levels remained low in the world’s indus-
trialised countries. The US Federal Reserve initially
refrained from tightening its monetary policies, before
finally deciding to raise the benchmark interest rate
by 0.25 % in December.
In March 2016, the European Central Bank (ECB)
resolved to broaden the scope of its expansionary
monetary policies with a comprehensive package of
measures to generate economic growth through more
favourable lending conditions.
In a bid to prevent a severe economic downturn after
the Brexit decision, the Bank of England lowered its
reference interest rate in August and announced addi-
tional expansionary measures, including extending its
bond purchasing programme.
High public-sector spending and expansionary mon-
etary policies adopted by the Chinese central bank
only partially absorbed the slowdown of the Chinese
economy, resulting in a further normalisation of GDP
growth over the course of the year. The Japanese cen-
tral bank broadened the scope of its expansionary
monetary policies in 2016 in order to stimulate the
economy and reverse deflationary tendencies.
Prices in the premium segment of mainland Europe’s
pre-owned car markets rose slightly at the beginning
of 2016, before settling at a similar level to the previous
year in the course of the year. Pre-owned car market
prices in the UK were slightly down year-on-year. Price
levels remained stable on Asian markets. The slight
downward trend continued in North America, despite
a stronger performance during the summer months.
Combined Management Report 39
Automotive segment
Deliveries to customers: solid increase
In 2016, the Automotive segment sold a record number
of vehicles for the sixth year in succession. Dynamic
market conditions, particularly in Europe, influenced
automobile sales volumes more strongly than expect-
ed. Consumer spending in the UK in 2016 remained
stable, despite the Brexit decision. The upward trend
from the previous year in southern European coun-
tries also continued unbroken. Despite growing polit-
ical and economic uncertainties in the international
environment, deliveries to customers increased by a
solid 5.3 % to a total of 2,367,603 1 BMW, MINI and
Rolls Royce brand vehicles (2015: 2,247,485 1 units).
BMW, the Group’s core brand, reported a solid 5.2 %
increase to 2,003,359 1 units (2015: 1,905,234 1 units),
taking it over the two-million-unit threshold for the
first time in a single year. MINI also recorded solid
growth, with deliveries to customers up by 6.4 % to
360,233 units (2015: 338,466 units). Rolls-Royce Motor
Cars sold 4,011 units (2015: 3,785 units; + 6.0 %).
In the Annual Report 2015, the outlook for the full year
2016 had foreseen a slight increase in sales volume.
The generally positive sentiment among consumers,
especially in Europe, but also in Asia, helped the
BMW Group to exceed its original forecast.
1 Including the
joint venture
BMW Brilliance
Automotive Ltd.,
Shenyang
(2016: 316,200
units, 2015:
282,000 units).
2 EU-28.
Fleet carbon dioxide (CO2) emissions 2:
slight decrease
The fleet-wide deployment of Efficient Dynamics
technologies – including drivetrain electrification –
contributes to the efficient reduction of carbon dioxide
emissions. CO2 emissions produced by the vehicle
fleet sold in Europe (EU-28) decreased slightly to
124 grams CO2 / km (2015: 127 grams CO2 / km; – 2.4 %)
in the year under report.
As foreseen in the outlook for the full year 2016, fleet
carbon emissions fell slightly and were therefore in
line with forecast.
FINANCIAL AND NON-
FINANCIAL PERFORMANCE
INDICATORS
The following section provides information on the key
financial and non-financial performance indicators
used as the basis for managing the BMW Group and
its segments. As part of the analysis of operations and
the financial condition of the BMW Group, forecasts
made the previous year for the financial year 2016 are
compared with actual outcomes in 2016.
BMW Group
Profit before tax: slight increase
During the financial year 2016, the BMW Group
continued to invest in innovative technologies and
its production network to ensure future sustainabil-
ity. The Group nevertheless remained on course in
terms of earnings. With a Group profit before tax of
€ 9,665 million (2015: € 9,224 million; + 4.8 %), earn-
ings reached a new high, despite the continuation
of intensive competition on the world’s automobile
markets. In addition to an excellent sales volume
performance, Group earnings also benefited from
an improved financial result.
As foreseen in the outlook for the financial year 2016,
the Group’s profit before tax was slightly higher than
one year earlier and therefore in line with expectations.
Workforce at year-end: slight increase
As at 31 December 2016, the BMW Group employed
a workforce of 124,729 (2015: 122,244; + 2.0 %) world-
wide. The slight company-wide increase was due to
the need for additional qualified staff for the develop-
ment of electric mobility and other technology fields
and the growth of the financial services business.
The systematic expansion of mobility services also
contributed to the increase in the workforce size.
As foreseen in the outlook for the financial year
2016, there was a slight increase in the size of the
BMW Group’s workforce, in line with expectations.
40
Report on
Economic Position
Financial and Non-
financial Perfor-
mance Indicators
Revenues: slight increase
Automotive segment revenues edged up by 1.0 %
to a new record figure of € 86,424 million (2015:
€ 85,536 million), with currency exchange effects
holding down the scale of the increase. The forecast
of a slight rise in Automotive segment revenues made
in the Annual Report 2015 therefore was confirmed.
EBIT margin in target range of between 8 and 10 %
The EBIT margin in the Automotive segment (profit
before financial result divided by revenues) came
in at 8.9 % (2015: 9.2 %; – 0.3 percentage points). As
foreseen for the financial year 2016, the EBIT mar-
gin from automobile business was within the target
range of between 8 and 10 % and therefore in line
with expectations.
Return on capital employed (RoCE): slight increase
The return on capital employed (RoCE) amounted to
74.3 % (2015: 72.2 %; + 2.1 percentage points). Amongst
other factors, transactions with other segments and
the expansion of business with service and Connected
Drive contracts made positive contributions to RoCE
for the Automotive segment.
The outlook for RoCE, which was already raised in
the Quarterly Report to 30 June 2016 from a mod-
erate decrease to a slight decrease, was once more
exceeded. In the Annual Report 2015, a moderate
decrease in RoCE was foreseen. The rate achieved by
the Automotive segment in 2016 was therefore once
again well above the minimum target of 26 %.
Motorcycles segment
Deliveries to customers: solid increase
In a highly favourable market environment, most nota-
bly in Europe, BMW Motorrad reported a solid 5.9 %
increase, with 145,032 units sold (2015: 136,963 units).
These figures benefited from unexpectedly good sales
figures for Europe and Latin America.
The forecast increase, upgraded in the Quarterly
Report to 30 June 2016 from slight to solid, was
therefore realised. In the Annual Report 2015, only
a slight increase in deliveries to customers had been
foreseen for the Motorcycles segment.
Return on capital employed: slight increase
The Motorcycles segment generated a return on capital
employed (RoCE) of 33.0 % in the year under report
(2015: 31.6 %; + 1.4 percentage points), slightly above
the previous year, mainly reflecting effective working
capital management and the improvement in earnings.
The reported figures also benefited from the trend
towards high-value models and the new brand strategy
initiated in 2014.
The forecast RoCE, which had already been changed
from a slight decrease to “at the previous year’s level”
in the Quarterly Report to 30 June 2016, was therefore
once again exceeded. In the Annual Report 2015, a
slight decrease in RoCE had been foreseen.
Combined Management Report Financial Services segment
Return on equity: slight increase
Growth in business volumes and an improved risk
profile in the Financial Services segment had a posi-
tive impact on segment return on equity (RoE) in 2016.
At 21.2 %, the RoE was slightly higher than expected
(2015: 20.2 %; + 1.0 percentage point).
In the Annual Report 2015, RoE was forecast to be
at the previous year’s level. As expected, it remained
ahead of the long-term target of 18 %.
The following overall picture arises for the key per-
formance indicators used by the BMW Group and its
segments:
41
Comparison of 2016 forecasts with actual outcomes 2016
• 19
BMW Group
Profit before tax
Workforce at year-end
AutoMotive seGMent
Sales volume 1
Fleet emissions 2
Revenues
EBIT margin
Return on capital employed
Motorcycles seGMent
Sales volume
Return on capital employed
Forecast for 2016
in 2015 Annual Report
Forecast revision
during the year
Actual outcome
in 2016
slight increase
slight increase
slight increase
slight decrease
slight increase
target range
between 8 and 10
moderate decrease
Q2: slight decrease
€ million
9,665 (+ 4.8 %)
124,729 (+ 2.0 %)
units
2,367,603 (+ 5.3%)
g CO2 / km
€ million
124 (– 2.4 %)
86,424 (+ 1.0 %)
%
%
8.9 (– 0.3 %pts)
74.3 (+2.1 %pts)
slight increase
Q2: solid increase
units
145,032 (+ 5.9%)
slight decrease
Q2: in line with last
year’s level
%
%
33.0 (+ 1.4 %pts)
21.2 (+ 1.0 %pts)
FinAnciAl services seGMent
Return on equity
in line with last year’s level
1 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2016: 316,200 units).
2 EU-28.
42
Report on
Economic Position
Review of Operations
Automotive segment
REVIEW OF OPERATIONS
Automotive segment
Solid growth in deliveries to customers
The BMW Group sold 2,367,603* BMW, MINI and
Rolls-Royce brand vehicles worldwide in 2016, thereby
setting a new record for the sixth year in succession
(2015: 2,247,485* units; + 5.3 %). The BMW brand
recorded a solid 5.2 % increase to 2,003,359* units,
thereby exceeding the two-million threshold for
the first time (2015: 1,905,234* units). MINI also
achieved a solid 6.4 % increase to 360,233 units (2015:
338,466 units). Rolls-Royce Motor Cars delivered
4,011 luxury automobiles to customers during the
year under report (2015: 3,785 units; + 6.0 %). A new
all-time high was therefore not only recorded at Group
level, but also for the BMW and MINI brands.
Dynamic growth in Europe and Asia, challenges on
the US market
Within a generally favourable market environment,
the BMW Group surpassed the one-million mark for
sales of BMW, MINI and Rolls-Royce brand vehicles in
Europe for the second year in succession in 2016 with
1,092,155 units sold (2015: 1,000,427 units; + 9.2 %).
Sales figures for Germany were up 4.5 % year-on-year
to 298,928 units (2015: 286,098 units). Despite the
Brexit decision, automobile business in Great Britain
also developed positively during the year under report,
with sales rising to a total of 252,205 units (2015:
230,982 units; + 9.2 %). Sales volume growth was again
recorded in Asia. Overall, sales of the Group’s three
brands in the region totalled 747,291* units (2015:
685,792* units; + 9.0 %), including 516,785* units sold
in China, 11.4 % more than one year earlier (2015:
464,086* units). Total sales of BMW, MINI and Rolls-
Royce brand vehicles on the American continent were
down year-on-year within a highly competitive market
environment, falling by 7.2 % to 460,398 units (2015:
495,897 units). Sales in the USA fell by 9.7 % to 366,493
units (2015: 405,715 units).
BMW Group – key automobile markets 2016
• 20
as a percentage of sales volume
Other 29.1
Japan 3.2
Italy 3.5
France 3.6
Great Britain 10.7
21.8 China
15.5 USA
12.6 Germany
BMW Group sales volume of vehicles by region and market
• 21
in 1,000 units
Europe
thereof Germany
thereof Great Britain
Americas
thereof USA
Asia*
thereof China*
Other markets
Total*
2016
2015
2014
2013
2012
1,092.2
1,000.4
298.9
252.2
460.4
366.5
747.3
516.8
67.7
286.1
231.0
495.9
405.7
685.8
464.1
65.4
914.6
272.3
205.1
482.3
397.0
658.4
456.7
62.7
859.5
259.2
189.1
463.8
376.6
578.7
391.7
61.8
865.4
287.4
174.5
425.3
348.5
493.4
327.3
61.1
2,367.6
2,247.5
2,118.0
1,963.8
1,845.2
* Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2016: 316,200 units, 2015: 282,000 units, 2014: 275,891 units, 2013: 198,542 units, 2012: 141,165 units).
Combined Management Report BMW* brand exceeds the two-million threshold,
again taking a top position in the premium
segment
The BMW brand exceeded the two-million threshold
for the first time in 2016, selling 2,003,359 units.
The BMW 1 Series fell just short of its previous year’s
performance with a sales volume of 176,032 units in
the year under report (2015: 182,158 units; – 3.4 %). By
contrast, at 196,183 units, sales of the BMW 2 Series
were nearly a quarter higher (2015: 157,144 units;
+ 24.8 %). Sales figures for the BMW 3 Series fell year-
on-year to 411,844 units (2015: 444,338; – 7.3 %). Near-
ing the end of its life cycle, sales of the BMW 5 Series
at 331,410 units narrowly missed the previous year’s
high figure (2015: 347,096 units; – 4.5 %). Worldwide
Sales volume of BMW vehicles by model variant*
• 22
43
sales of the new BMW 7 Series were over two thirds up
on the previous year (61,514 units; 2015: 36,364 units;
+ 69.2 %).
The BMW X family remained extremely popular in
2016, with sales rising by more than one fifth world-
wide to 644,992 units (2015: 527,319 units; + 22.3 %).
Sales volume growth of the BMW X1 was particularly
pronounced with a jump of 83.6 % to 220,378 units
(2015: 120,011 units). The BMW X3 also saw a sig-
nificant year-on-year rise in deliveries to customers
(157,017 units; 2015: 137,810 units; + 13.9 %). At
166,219 units, sales of the BMW X5 were only slight-
ly lower than one year earlier (2015: 168,143 units;
– 1.1 %).
in units
BMW 1 Series
BMW 2 Series
BMW 3 Series
BMW 4 Series
BMW 5 Series
BMW 6 Series
BMW 7 Series
BMW X1
BMW X3
BMW X4
BMW X5
BMW X6
BMW Z4
BMW i
BMW total
* Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2016: 316,200 units, 2015: 282,000 units).
2016
2015
Change in %
Proportion of
BMW sales volume
2016 in %
176,032
196,183
411,844
133,272
331,410
13,400
61,514
220,378
157,017
58,055
166,219
43,323
5,432
29,280
182,158
157,144
444,338
152,390
347,096
20,962
36,364
120,011
137,810
55,050
168,143
46,305
7,950
29,513
2,003,359
1,905,234
– 3.4
24.8
– 7.3
– 12.5
– 4.5
– 36.1
69.2
83.6
13.9
5.5
– 1.1
– 6.4
– 31.7
– 0.8
5.2
8.8
9.8
20.5
6.6
16.5
0.7
3.1
11.0
7.8
2.9
8.3
2.2
0.3
1.5
100.0
44
Report on
Economic Position
Review of Operations
Automotive segment
MINI sets new sales volume record
The MINI brand also set a new sales volume record
in 2016 with a total of 360,233 units sold (2015:
338,466 units; + 6.4 %). Positive contributions to this per-
formance came from the new Convertible (29,758 units;
Sales volume of MINI vehicles by model variant
• 23
2015: 14,145 units) and the new Clubman (63,509 units;
2015: 8,003 units). With 198,373 units sold, the MINI
Hatch 3- and 5-door models fell short of the previous
year’s high level (2015: 221,982 units; – 10.6 %).
in units
2016
2015
Change in %
Proportion of
MINI sales volume
2016 in %
MINI Hatch (3- and 5-door)
MINI Convertible / Coupé / Roadster
MINI Clubman
MINI Countryman / Paceman
MINI total
198,373
221,982
30,050
63,509
68,301
20,004
8,003
88,477
360,233
338,466
– 10.6
50.2
–
– 22.8
6.4
55.1
8.3
17.6
19.0
100.0
Strong performance by Rolls-Royce
Rolls-Royce Motor Cars enjoyed the second-best year
in its history, with 4,011 luxury automobiles delivered
to customers (2015: 3,785 units; + 6.0 %). This perfor-
mance includes an all-time quarterly high contribution
of 1,386 units in the fourth quarter (2015: 1,181 units;
+ 17.4 %). A high proportion of these sales related to
the new Rolls-Royce Dawn, of which 1,283 units were
sold worldwide after its mid-year launch.
Sales volume of Rolls-Royce vehicles
by model variant
• 24
in units
2016
2015
Change in %
Phantom (incl. Coupé,
Drophead Coupé,
Extended Wheelbase)
Ghost
Wraith / Dawn
Rolls-Royce total
389
1,175
2,447
4,011
488
1,609
1,688
3,785
– 20.3
– 27.0
45.0
6.0
High capacity utilisation throughout
production network
In 2016, buoyant customer demand and various new
model start-ups resulted in high capacity utilisation
throughout the BMW Group production network. At
the same time, rapid progress was made in expanding
the Group’s international manufacturing locations.
The production network currently comprises 31 loca-
tions in 14 countries worldwide.
* Including the
joint venture
BMW Brilliance
Automotive Ltd.,
Shenyang
(2016: 305,833
units, 2015:
287,755 units).
New production records were set in 2016, with a
total of 2,359,756* BMW, MINI and Rolls-Royce
brand vehicles manufactured (2015: 2,279,503* units;
+ 3.5 %), comprising 2,002,997* BMW (2015: 1,933,647*
units; + 3.6 %), 352,580 MINI (2015: 342,008 units;
+ 3.1 %) and 4,179 Rolls-Royce brand vehicles (2015:
3,848 units; + 8.6 %).
Combined Management Report Vehicle production of the BMW Group by plant
• 25
45
in units
Spartanburg
Regensburg
Dingolfing
Leipzig
Munich
Oxford
Tiexi 1
Dadong 1
Rosslyn
Rayong
Araquari
Chennai
Goodwood
Born (VDL Nedcar) 2
Graz (Magna Steyr) 2
Partner plants (Jakarta, Cairo, Kaliningrad, Kulim)
BMW Group
1 Joint Venture BMW Brilliance Automotive Ltd., Shenyang.
2 Contract production.
Flexibility, quality and efficiency are key characteris-
tics of the Group’s production system. Its great ability
to adapt enables the BMW Group to respond rapidly
to changing market situations and fluctuations in
regional sales volumes by adapting production plans.
Digitalisation, standardised modules and intelligent
composite construction methods demonstrate the
high performance of the Group’s production net-
work. At the same time, the production system offers
customers an impressive level of individualisation,
allowing changes in order specifications up to six days
prior to delivery. The production expertise within
the BMW Group thus gives it a crucial competitive
advantage that contributes to the profitability and
sustainable success of the Company.
2016
2015
Change in %
Proportion of
production in %
411,171
346,291
339,769
246,550
216,769
210,971
161,901
143,825
63,117
17,844
15,408
8,568
4,179
87,609
53,528
32,256
400,904
304,509
360,804
233,656
221,998
201,206
144,988
142,767
71,353
8,928
9,936
7,716
3,848
57,019
82,655
27,216
2,359,756
2,279,503
2.6
13.7
– 5.8
5.5
– 2.4
4.9
11.7
0.7
– 11.5
99.9
55.1
11.0
8.6
53.6
– 35.2
18.5
3.5
17.4
14.7
14.4
10.4
9.2
8.9
6.9
6.1
2.7
0.7
0.6
0.4
0.2
3.7
2.3
1.4
100.0
Strong production base in Germany
The German plants play a leading role within the
Group’s international network. For the sixth year
in succession, the BMW Group produced over one
million vehicles at its German plants in Munich,
Dingolfing, Regensburg and Leipzig.
In November 2016, the BMW Group began manufactur-
ing the seventh generation of the BMW 5 Series at its
Dingolfing assembly plant, which underwent numerous
conversion and building measures to prepare for the
new model. Dingolfing therefore remains the centre of
competence for producing the top BMW model series.
Extensive expansion work is also progressing at the
main plant in Munich. By mid-2017, a state-of-the-art
painting line will be completed that meets the very
highest standards in efficiency and economical use of
resources. The new building is part of an extensive
investment project that also includes the enlargement
of the body-making section and vehicle assembly as
well as parts of the logistics system.
Four engine production plants worldwide
In 2016, the joint venture BBA opened a new engine
plant in Shenyang (China) to produce the latest gen-
eration of BMW TwinPower Turbo 3- and 4-cylinder
petrol engines. The new light metal foundry, which
was opened at the same time, is designed for sus-
tainable production. Both the engine plant and the
light metal foundry meet state-of-the-art production
standards and supply the BMW Brilliance manufac-
turing plants in Dadong and Tiexi. The BMW Group
now manufactures engines at a total of four locations:
Munich (Germany), Hams Hall (UK), Steyr (Austria)
and Shenyang (China).
The BMW Group’s largest engine plant, located in
Steyr, produces 3-, 4- and 6-cylinder diesel engines as
well as 3-, 4- and 6-cylinder petrol engines. Engines
made in Steyr are installed in more than half of
all BMW vehicles and in over one third of all MINI
vehicles. In September 2016, the development centre
for diesel engines, which adjoins the manufacturing
plant, took the first new, state-of-the-art engine testing
facilities into service. The Steyr plant established a
new production record of 1,261,449 engines in 2016.
The BMW Group develops and manufactures battery
cell modules, high-voltage storage systems and electric
motors at a total of five locations. The most important
electric drivetrain technologies and components are
developed at the prototype construction facility in
Munich and produced at the Dingolfing and Landshut
plants. The Dingolfing plant manufactures battery
cell modules and installs them in high-voltage storage
systems for the BMW i3, the BMW i8 and the Group’s
plug-in hybrid models. The electric motors and range
extenders for the BMW i models are made at the
Landshut plant. The Spartanburg plant in the USA
produces and installs high-voltage storage systems
for the BMW X5 iPerformance. The BBA joint venture
plant in Shenyang is currently building a new centre
for high-voltage storage systems.
46
Report on
Economic Position
Review of Operations
Automotive segment
In 2016, the BMW Group plant in Regensburg cele-
brated its 30th anniversary. The highly flexible plant
manufactures eight different models on one line.
During the reporting period, production volume was
boosted to over 346,000 units, approximately 14 % up
on the previous year.
The BMW Group plant in Leipzig produced over 29,000
BMW i model vehicles during the period under report.
The BMW i3 is one of the three best-selling electric
vehicles worldwide. In addition to the Munich plant,
Leipzig is now the second BMW Group site to utilise
electric trucks, powered exclusively by electricity gen-
erated via renewable sources, to transport its materials
on public roads. In 2016, a total of 246,550 vehicles
rolled off production lines in Leipzig, the highest
figure to date for the plant.
Since its opening, some 160 engineers have been
engaged in research at the Lightweight and Engineer-
ing Center in Landshut, designing innovative hi-tech
materials and composite concepts for the vehicles of
the future. The think tank, built near the production
facilities, concentrates lightweight construction know-
how at the Landshut plant.
The Wackersdorf Innovation Park is the logistical hub
for materials management and just-in-sequence deliv-
ery to BMW Group assembly plants in ten different
countries. For the first time, a fleet of ten self-driving
Smart Transport robots is being used in Wackersdorf
to transport components within the logistics centre.
These self-driving transport robots are capable of driv-
ing freely within the logistics centre and transporting
loads of up to 500 kilograms.
SGL Automotive Carbon Fibers (SGL ACF), the joint
operation between the BMW Group and the SGL
Group, is also based in Wackersdorf. In Moses Lake
(USA), SGL ACF operates a carbon fibre production
plant that is powered by hydroelectricity and supplies
carbon fibres to the SGL ACF plant in Wackersdorf,
where they are processed into textile cores.
During the year under report, the BMW Group plant
in Eisenach commissioned a state-of-the-art servo
tryout press. Eisenach is one of three BMW Group
plants worldwide specialised in making pressing
tools. Moreover, some 250 employees at the plant
manufacture the majority of the outer body parts from
sheet metal, aluminium and stainless steel for the
Rolls-Royce plant in Goodwood (UK) as well as parts
for BMW motorcycle production in Berlin.
Combined Management Report 47
The manufacturing sites in Chennai (India) and Ray-
ong (Thailand) complete the BMW Group’s interna-
tional production network. In 2016, the plant in India
produced the 50,000th BMW for the local market. The
BMW plant in Thailand is the only facility within the
production network that manufactures not only BMW
and MINI automobiles, but also BMW motorcycles.
During the period under report, a total of 32,256 auto-
mobiles were produced at the Group’s various partner
plants, which mainly serve their regional markets.
Internationalisation of BMW production network
progresses
By expanding its international production network,
the BMW Group follows global market developments
with the aim of ensuring a balanced distribution of
added value.
In North America, expansion work has been con-
tinued at the BMW plant in Spartanburg (USA). In
2016, the plant set a new annual record, turning out
over 411,000 units. In terms of production volume,
the Spartanburg plant is therefore the largest in the
BMW Group’s network.
In San Luis Potosí (Mexico), preparations for construct-
ing the new plant are running on schedule and a local
training centre has already been opened at the site. The
plant is due to commence operations in 2019.
In Europe, the British production cluster comprising
the MINI assembly facility in Oxford, the pressing
plant in Swindon and the engine manufacturing plant
in Hams Hall is a key element in the BMW Group’s
production network. In order to secure greater capac-
ity for forecast growth, the MINI 3-door model, the
MINI Convertible and the MINI Countryman are also
being produced for the BMW Group at the automotive
manufacturer VDL NedCar in Born, the Netherlands.
Important work was carried out to convert and expand
the Rolls-Royce manufacturing plant in Goodwood
(UK) during the period under report. For future mod-
els, the BMW Group is investing in a new production
system on one line at the plant. The new Technology
and Logistics Centre in Bognor Regis, near Goodwood,
was opened in January 2016.
In Rosslyn (South Africa), preparations are already
underway for producing the next generation of the
BMW X3. In May 2016, work began on the body-mak-
ing facility, which is being enlarged by 50 %.
In Shenyang (China), the BBA plants in Dadong and
Tiexi produced over 305,000 units, setting a new record
in the process. Comprehensive expansion work at the
Dadong plant has been continued. The extension will
improve the flexibility of the plant and prepare it for
the manufacture of future models.
48
Report on
Economic Position
Review of Operations
Motorcycles
segment
Financial Services
segment
Motorcycles segment
BMW Group sales volume of motorcycles*
• 26
145.0
137.0
123.5
115.2
106.4
in 1,000 units
150
75
0
2012
2013
2014
2015
2016
* Excluding Husqvarna, sales volume up to 5 March 2013: 59,776 units.
BMW Group – key motorcycle markets 2016
• 27
as a percentage of sales volume
Other 43.2
Great Britain 5.8
17.2 Germany
9.5 USA
9.2 France
8.5 Italy
6.6 Spain
Solid sales volume growth for BMW Motorrad
The Motorcycles segment profited from a favourable
market environment during the period under report,
particularly in Europe and Latin America, thereby
achieving a record sales volume performance for the
sixth year in succession. Deliveries of BMW motor-
cycles to customers worldwide rose by a solid 5.9 %
to 145,032 units (2015: 136,963 units).
Dynamic growth in Europe
Sales of motorcycles in Europe grew by 7.5 % to
87,983 units (2015: 81,834 units) year-on-year. These
figures include 24,894 units sold in Germany (2015:
23,823 units; + 4.5 %), 12,300 units in Italy (2015:
11,150 units; + 10.3 %) and 13,350 units in France (2015:
12,550 units; + 6.4 %). Market conditions in the USA
remained very difficult. The number of motorcycles
sold dropped significantly to 13,730 units (2015:
16,501 units; – 16.8 %).
Internationalisation continues
Production of the G 310 R commenced at the
Group’s cooperation partner TVS Motor Company
in India during the year under report. Operations
at the Group’s partner plant in Thailand were also
ramped up. Following the takeover of production in
Manaus (Brazil) in October 2016, for the first time,
BMW Motorrad now operates its own manufacturing
facilities at a location outside Europe.
Motorcycle production slightly down on
previous year
A total of 145,555 motorcycles rolled off production
lines during the year under report (2015: 151,004 units;
– 3.6 %). The slight drop was largely attributable to the
higher number of new model production start-ups in
the second half of 2016 compared to one year earlier.
Started in 2015, expansion work on the BMW Group
plant in Berlin continued during the year under report.
In addition to measures to increase production capac-
ity, a state-of the-art logistics centre is being built near
the Berlin plant and scheduled to begin operations
from the end of 2017.
Combined Management Report 49
Financial Services segment
Financial services business continues to grow
As in the previous year, the Financial Services segment
continued to perform well in 2016, despite the volatile
market environment. In balance sheet terms, business
volume grew by 11.0 % to € 123,394 million (2015:
€ 111,191 million). The contract portfolio under man-
agement at 31 December 2016 comprised 5,114,906
contracts and therefore grew 8.4 % year-on-year (2015:
4,718,970 contracts).
Contract portfolio of
Financial Services segment
• 28
in 1,000 units
6,000
3,000
0
4,130
4,360
3,846
5,115
4,719
2012
2013
2014
2015
2016
Growth in new business volumes
Credit financing and leasing business with retail
customers remain a major factor for the success of
the Financial Services segment. During the period
from January to December 2016, 1,811,157 new cred-
it financing and leasing contracts were concluded
with customers, 9.4 % up on the previous year (2015:
1,655,961 contracts). This increase reflected a signif-
icant 11.1 % rise in credit financing and a solid 6.2 %
rise in leasing contracts. Overall, leasing accounted
for 34.2 % of new business (2015: 35.3 %), with credit
financing at 65.8 % (2015: 64.7 %).
Almost every second new BMW Group vehicle (49.6 %)
was leased or financed by the Financial Services seg-
ment in the financial year 2016, 3.3 percentage points
more than one year earlier (2015: 46.3 %).*
In the BMW and MINI pre-owned vehicle financing
and leasing lines of business, the number of new con-
tracts signed by the segment increased significantly
in 2016 (+ 10.5 %) to 361,928 contracts (2015: 327,391
contracts).
The total volume of new credit and leasing contracts
concluded with retail customers during the twelve-
month period under report grew by 9.3 % year-on-year
to € 55,327 million (2015: € 50,606 million).
* The calculation
only includes
auto mobile
markets, in which
the Financial
Services segment
is represented by
a consolidated
entity.
BMW Group new vehicles financed or
leased by Financial Services segment*
• 29
in %
50
25
0
40.4
44.0
41.7
49.6
46.3
Leasing 19.7
21.5
20.9
22.1
22.3
Financing 20.7
22.5
20.8
24.2
27.3
2012
2013
2014
2015
2016
* Until 2015 excluding Rolls-Royce.
Decrease in multi-brand financing
Multi-brand financing saw a moderate decrease
(– 5.9 %) in the number of new contracts signed in
2016, which fell to 153,297 (2015: 162,870 contracts).
At 31 December 2016, the total portfolio comprised
466,436 contracts, in line with the previous year (2015:
470,150 contracts; – 0.8 %).
* EU Bank compris-
es BMW Bank
GmbH, its branch-
es in Italy, Spain
and Portugal, and
its subsidiary in
France.
Dealer financing up year-on-year
The total volume of dealer financing increased in 2016,
growing by 6.7 % to € 18,307 million at the end of the
reporting period (2015: € 17,156 million).
Deposit business volume at previous year’s level
Customer deposits provide an important source of
refinancing for the Financial Services segment. The
volume of deposits at the end of the reporting period
stood at € 13,512 million, in line with the previous
year’s level (2015: € 13,509 million; + / – 0.0 %).
Growth in insurance business
Demand for insurance products remained high in
2016, with the number of new insurance contracts
signed rising by 4.6 % to 1,262,973 (2015: 1,207,196
contracts). At 31 December 2016, the contract port-
folio comprised 3,411,872 contracts (2015: 3,200,742
contracts; + 6.6 %).
50
Report on
Economic Position
Review of Operations
Financial Services
segment
Research and
Development
The increase in credit financing and leasing business
with retail customers is reflected in the overall contract
portfolio. A total of 4,703,417 contracts were in place
with retail customers at 31 December 2016 (2015:
4,326,631 contracts; + 8.7 %). By region, Asia / Pacific
continued to enjoy significant growth, recording an
18.0 % increase in the contract portfolio, mainly driv-
en by greater demand in China. The Europe / Middle
East / Africa region (+ 8.6 %), the Americas region
(+ 7.1 %) and the EU Bank* region (+ 5.3 %) also record-
ed year-on-year growth.
Contract portfolio retail customer financing
of Financial Services segment 2016
• 30
in % per region
Asia / Pacific 17.7
Europe /
Middle East /
Africa 24.8
29.9 Americas
27.6 EU Bank*
* EU Bank comprises BMW Bank GmbH, its branches in Italy, Spain and Portugal, and its
subsidiary in France.
Fleet business expanded
The BMW Group is one of Europe’s foremost leasing
and full-service providers. The Financial Services
segment’s fleet management line of business offers
leasing and financing arrangements as well as other
fleet-related services to commercial customers under
the brand name “Alphabet”. The number of new con-
tracts signed rose by 7.0 % during the financial year
2016. At 31 December 2016, the segment was thus
managing a portfolio of 644,420 fleet contracts (2015:
602,303 contracts).
Combined Management Report 51
Risk profile improved
Despite ongoing political and economic uncertain-
ties, including the UK’s decision to leave the EU, the
stable trend in the global economy during the year
under report contributed to an improvement in the
risk situation of the Financial Services segment’s total
portfolio. The risk profile for the segment’s credit
financing portfolio also improved slightly. The credit
loss ratio on the total credit portfolio for the twelve-
month period decreased to 0.32 %, slightly down on
the previous year’s level (2015: 0.37 %).
Development of credit loss ratio
• 31
in %
0.5
0.48
0.46
0.50
0.37
0.32
0.25
0
2012
2013
2014
2015
2016
see
note 7
Average sales proceeds per vehicle, generated from
remarketing pre-owned BMW and MINI brand vehi-
cles, reflected the marginally less favourable situation
on international pre-owned markets, and were there-
fore slightly down on the previous year. Residual value
losses on such vehicles rose moderately year-on-year,
mainly due to greater competition in North America.
Further information on the risk profile is provided in
the section “Risks and Opportunities”.
Research and Development
www.bmwgroup.com / innovation
Research and development are of central importance
for the BMW Group as a premium manufacturer. As
part of the Efficient Dynamics strategy, continual
efforts are undertaken to improve energy efficiency
and reduce emissions across the full range of auto-
mobiles and motorcycles. In line with its Connected
Drive strategy, the BMW Group is engaged in work on
the connectedness of driver, vehicle and the outside
world. The Group seeks to take a leading position in
the field of autonomous driving. At 31 December 2016,
a total of 13,103 people at 13 locations in five coun-
tries worldwide were employed in the BMW Group’s
research and innovation network.
Research and development expenditure totalled
€ 5,164 million during the year under report, in
line with the previous twelve-month period (2015:
€ 5,169 million; – 0.0 %). At 5.5 %, the research and
development expenditure ratio was also practically
identical to that of the preceding year (2015: 5.6 %).
The ratio of capitalised development costs to total
research and development expenditure for the period
(capitalisation ratio) was 40.5 % (2015: 39.9 %). Amor-
tisation of capitalised development costs totalled
€ 1,222 million (2015: € 1,166 million; + 4.8 %). Further
information on research and development expendi-
ture is provided in the “Report on Economic Position
(Results of Operations)” and in
note 7 to the Group
Financial Statements.
Given the pace of technological change, collaboration
in the field of research and development is customary
in the automotive industry. The BMW Group also
enters into collaboration arrangements with selected
partners. The aim of these research and development
activities, which may also include cross-sector cooper-
ation, is to help find innovative solutions for individual
mobility. The focus is on future-oriented technologies
such as digitalisation and alternative drive systems.
52
Report on
Economic Position
Review of Operations
Research and
Development
Expertise in drivetrain technology
The BMW Group is consistently extending its portfolio
of electrically powered vehicles. At the end of 2016,
it included the BMW i3 all-electric, battery-powered
vehicle, six plug-in hybrid vehicles for the global
market, and an additional plug-in hybrid exclusively
developed for the Chinese market.
In 2016, an additional version of the BMW i3 was
launched, featuring significantly greater battery
capacity. The vehicle is also available with or without
a range extender. During the reporting year, plans
were laid for both the first all-electric MINI and for
an electrically powered BMW X3. In 2017, the new
BMW 5 Series and the MINI Countryman are both due
to be launched as plug-in hybrid versions. A roadster
version of the BMW i8 has also been announced for
2018.
With its C-evolution, BMW Motorrad presented in
2016 the second edition of an all-electric “Maxi Scoot-
er” with greatly improved range and higher top speed.
For the medium and long term, the BMW Group is also
developing a fuel cell electric vehicle (FCEV). The fuel
cell electric drive system, which converts hydrogen to
electricity and steam, combines locally emission-free,
electrically powered driving with the dynamic flair
typical of the BMW brand, capability for covering long
distances, and short refuelling times. Battery and fuel
cell technology can be combined in one vehicle.
At the same time, the BMW Group continues to work
on enhancing its existing range of highly efficient
combustion engines. 2016 saw the launch of the new
BMW 7 Series, featuring a newly developed inline
6-cylinder diesel engine that combines high perfor-
mance with low fuel consumption. The BMW 1 and 2
Series M Performance models were presented with a
new, powerful inline 6-cylinder petrol engine in 2016.
Driver assistance systems, highly and fully
automated driving
The new BMW 5 Series offers drivers extensive sup-
port with a variety of assistance systems. It is fitted
with a stereo camera as standard, which monitors
the vehicle’s environment together with optionally
available radar and ultrasound sensors. New features
in the BMW 5 Series include an avoidance assistant,
a crossing-traffic warning, a lane-change assistant
and a lane control assistant with active side collision
protection, which monitors the driving lanes and
developments next to the vehicle and actively supports
the driver in the event of imminent collision with a
corrective steering intervention.
With extended functions built into the optionally avail-
able Active Cruise Control (ACC) and the steering and
lane control assistant, the BMW 5 Series represents
a further step towards automated driving, including
recognition of speed limits, which the optional Speed
Limit Assist shows the driver. The assistance system
supports the driver in keeping a correct distance at
speeds up to 210 km / h as well as at accelerating and
braking. These features offer drivers a significant ben-
efit in terms of convenience, particularly at low speeds
and in slow-moving traffic. The optional Remote
Parking feature of the BMW 5 Series Sedan enables
drivers to manoeuvre the vehicle into the tightest of
parking spaces using a remote-control car key.
At the same time, the BMW Group is conducting
research into highly automated systems that do not
need to be permanently monitored by the driver and
fully automated systems that no longer require the
driver to monitor them at all. At the end of 2016,
some 600 BMW Group employees were engaged in
the development of highly automated driving tech-
nologies. Beginning in 2017, the BMW Group plans
to concentrate its expertise in the field of vehicle
connectivity and automated driving at one location.
Combined Management Report 53
Numerous awards for innovations
The BMW Group won over 50 national and interna-
tional awards during the year under report. Among
other honours, the BMW 7 Series was named World
Luxury Car at the renowned World Car Awards.
At the “International Engine of the Year Award”, the
most prestigious engine competition worldwide, the
drivetrain of the BMW i8 was winner in the 1.4- to
1.8-litre category. At the Automotive Innovations
Award, jointly awarded by the Center of Automotive
Management and the auditing and consulting firm
PricewaterhouseCoopers, BMW drivetrains were
adjudged to be the most innovative conventional
systems across all models.
The BMW i3 won the “Golden Steering Wheel” award
in the “Alternative drives” category. In 2016, the
BMW Group won numerous design awards, includ-
ing the International Forum Design Awards for its
Rolls-Royce Dawn, MINI Clubman, MINI Convertible,
BMW M2, BMW X1 and BMW 7 Series.
BMW Connected digital platform presented
With BMW Connected, the BMW Group presented
a comprehensive digital concept that facilitates
individual mobility. Based on a flexible platform,
BMW Connected seamlessly combines the vehicle
with the digital life of the user through user devices
such as smartphones. The functions of existing BMW
ConnectedDrive apps will be integrated in BMW
Connected. The security and anonymisation of data
have the highest priority for the BMW Group, both
internally and for its customers.
Digital connectivity has also become a key topic for
the Group’s motorcycles. With its optionally avail-
able “Intelligent Emergency Call”, BMW Motorrad
has announced that eCall for urgent help in case of
emergency or accidents will also be added as a feature
of its motorcycles as from 2017.
Next generation of the AirTouch virtual
touchscreen
The BMW Group made further progress in the field
of interaction between the driver and the vehicle
during the year under report. Following up on BMW
Gesture Control, which is already available for the
new BMW 5 and 7 Series, in 2016 the Group pre-
sented its enhanced AirTouch system, which enables
drivers to use simple gestures with an open hand to
activate command fields on a large panorama screen
on the dashboard. At the beginning of 2017, the BMW
HoloActive Touch system was presented to the public
for the first time. The innovative interface between
driver and vehicle is similar to a virtual touchscreen,
which is operated using finger gestures on a screen
that appears to float freely in space.
Extreme lightweight construction in the BMW HP4
BMW Motorrad demonstrated with the exclusive BMW
HP4 RACE experimental motorcycle how extreme
lightweight construction can be realised based on
carbon fibre technology. Among other features, this
motorcycle, which is fit for racing, is equipped with a
highly innovative frame structure made of pure carbon
as well as carbon wheel-rims.
Regional mix of BMW Group
purchase volumes 2016
• 32
in %, basis: production material
Asia / Australia 5.7
Rest of Western
Europe 15.4
NAFTA 17.2
1.3 Africa
39.8 Germany
20.6 Eastern Europe
54
Report on
Economic Position
Review of Operations
Purchasing and
Supplier Network
Sales and Marketing
Purchasing and Supplier Network
Charting a course in a volatile environment
Despite the increasingly volatile environment, the Pur-
chasing and Supplier Network ensures that the Group
is capable of flexibly responding to fluctuations in
demand when purchasing production materials, raw
materials, capital goods and services. The main focus
is on high quality standards, innovation, a flexible
and reliable supply structure and competitive costs.
Connecting procurement markets
Continually rising vehicle sales and production vol-
umes outside Europe are also changing the regional
distribution of purchasing volumes, for example due to
the expansion of production capacities in the Group’s
plant in Spartanburg, USA, or the construction of
the BMW Group plant in San Luis Potosí, Mexico,
which is scheduled to begin production in 2019. The
BMW Group remains committed to its strategy of
maintaining a regionally balanced growth in sales
volume, production and purchasing volumes. This
strategy also makes an important contribution to
natural hedging against currency risks.
Investments ensure expertise in productivity
and technology
A further important area is the production of key
components for BMW Group vehicles. Investments in
state-of-the-art manufacturing facilities and efficient
structures ensure the competitiveness of in-house
component production.
During the period under report, the new Lightweight
and Engineering Center was opened in Landshut,
the Group’s most important components plant. In
future, research will be conducted at the centre on
new materials, composite material concepts and
production processes for future vehicle generations,
encompassing a wide range of technologies.
Combined Management Report 55
BMW i becoming further established
Under the brand name BMW i, the BMW Group offers
a range of electric mobility solutions that include not
only the vehicles, but also services such as journey
planning using different modes of transport and
charging of electric vehicles. Over 100,000 electric
and electrified vehicles have been sold to customers
since the BMW i brand was launched. BMW i vehicles
are meanwhile available in 52 countries worldwide.
Since first going on sale in 2013, the BMW i3 has
established itself as the front runner in its segment.
Over 80 % of BMW i3 buyers are first-time customers
for the BMW Group. Since summer 2016, the BMW i3
has been optionally available with a battery that pro-
vides 50 % more capacity and a range of around 300
kilometres in the European driving cycle.
The BMW i8 plug-in hybrid sports car continues to
be the best-selling vehicle in its class since its market
launch in 2014. The eDrive technology of the BMW i8
is also integrated in the new BMW iPerformance mod-
els of the 2, 3 and 7 Series as well as in the X5.
The global dealership and agency network for BMW i
currently covers over 1,300 locations. In addition,
BMW i models are offered via new channels, such
as the Customer Interaction Center. Moreover, the
Mobile Sales Advisor is now established as a core
element of the sales model in six markets. The BMW i
online store gives customers in the Netherlands, Bel-
gium, Luxembourg, Austria and Italy the opportunity
to order their BMW i3 via the Internet.
Under the name 360° ELECTRIC, BMW i provides a
comprehensive range of products and services for both
all-electric vehicles and plug-in hybrids worldwide.
A new generation of the BMW i wallbox has been
launched for quick, easy charging at home. It can
now charge vehicles at up to three times the previous
speed. While on the road, drivers can now use the
BMW i service ChargeNow with over 65,000 charging
points in 29 different countries.
Sales and Marketing
www.bmwgroup.com / brands
The BMW Group’s sales and distribution network
comprises some 3,400 BMW, 1,580 MINI and 140
Rolls-Royce dealerships worldwide. Products and
services are sold by independent authorised dealer-
ships, BMW Group branches and subsidiaries, as well
as independent importers in certain markets. The
dealership and agency network for BMW i currently
covers over 1,300 locations.
100th anniversary of BMW
In March 2016, the company celebrated its 100th anni-
versary with the slogan THE NEXT 100 YEARS. The
anniversary year kicked off with a major centenary
event in Munich for employees and the general public.
The four vision vehicles of BMW, MINI, Rolls-Royce
and BMW Motorrad, presented over the course of the
year, provided the international public with a visionary
glimpse into the future of individual mobility.
The BMW VISION NEXT 100 demonstrates how
driving pleasure could look in the future. The MINI
VISION NEXT 100 offers an individualised, continu-
ally available form of urban mobility. The Rolls-Royce
VISION NEXT 100 provides an insight into the future
world of highly customised automotive luxury. Future
motorcycling pleasure with the BMW Motorrad
VISION NEXT 100 promises unlimited freedom.
Digitalisation continued
In 2016, the BMW Group continued to digitalise its
processes in both sales and marketing. The aim is to
make customer contact possible at an earlier stage
and provide individualised offers for vehicle sales and
services. Moreover, online sales help to attract new
customer groups. For example, at the end of 2015 a
nationwide online pilot project began across the UK.
Over the course of the year under report, the sale
of new vehicles via the Internet established itself as
a further sales channel to supplement on-location
dealership sales. This method enables customers to
purchase any BMW model online. The service covers
all aspects of the purchase, including selecting the
right model, fully customised vehicle configuration,
financing and payment. It is even possible to trade in
a used vehicle online. If required, customers can also
receive personal advice from a vehicle specialist (BMW
Product Genius) or take up direct contact with a dealer.
56
Report on
Economic Position
Review of Operations
Sales and Marketing
Workforce
Premium services for individual mobility
The BMW Group has been developing its range of
mobility services under the brand NOW since 2011.
In Europe, the USA and China, the BMW Group now
offers its customers individually tailored solutions
for urban mobility. The range includes car sharing,
on-demand mobility such as DriveNow and Reach-
Now as well as parking and charging solutions such
as ParkNow and ChargeNow.
The DriveNow premium car-sharing service, a joint
venture between BMW AG and Sixt SE, now has over
750,000 customers in seven countries and is repre-
sented in eleven European cities. Around 20 % of
DriveNow vehicles in Europe are electrically powered
and the number is scheduled to grow. With Alphacity,
the BMW Group also provides car-sharing services
for companies.
In April 2016, the BMW Group launched ReachNow
in Seattle (USA), a further development of car sharing.
The ReachNow fleet in Seattle and Portland now com-
prises 800 BMW and MINI brand vehicles. Electrically
powered BMW i3 vehicles make up 20 % of the fleet. In
addition to Seattle and Portland, in November 2016
Brooklyn / New York became the third US city to
launch ReachNow. Currently, membership amounts
to more than 32,000 in the three cities. In Decem-
ber 2016, ReachNow began offering Ride in Seattle,
its new mobility service, which enables members to
order a vehicle optionally with a driver. In residential
areas, Fleet Solutions offers the exclusive use of a fleet
of premium vehicles that are permanently available
on location. The ReachNow Reserve service makes it
possible to book a specific vehicle for longer periods
of between two and five days and have it delivered
at the time and place of the customer’s choice. Via
ReachNow Share, MINI owners will be able in the
future to rent out their vehicle when they do not need
it themselves.
ParkNow is a comprehensive parking solution for Web,
app and navigation systems. When parking on the
street, payment is made cash-free via smartphone.
When parking in multi-storey car parks, ParkNow
provides support in finding, reserving, booking and
paying for parking spaces. ParkNow was launched in
Germany, Austria and France during the year under
report.
With ChargeNow, the BMW Group provides easy
access to a constantly growing network of public
charging stations that currently includes over 65,000
charging points in 29 countries. Customers can locate
the BMW i partner charging stations directly via the
navigation system integrated in the vehicle, via the
ChargeNow app or via the website. ChargeNow inte-
grates the charging stations of various operators to
form one large, expanding network.
BMW continues electrification strategy with
iPerformance
In early 2016, BMW presented the first iPerformance
model, the plug-in version of the 3 Series. With emis-
sions of only 44 g CO2 / km and an electric range of
up to 40 km, the iPerformance Sedan combines the
driving dynamics of the 3 Series with the advantages
of an electric drive system. A plug-in hybrid version
of the current 7 Series was launched in July. With
only 45 g CO2 / km, the efficient, powerful 4-cylinder
engine sets new standards in the luxury segment. The
BMW 2 Series Active Tourer is also available as an
iPerformance model. With its 3-cylinder combustion
engine and 100 kW / 136 hp of power output and a
65 kW / 88 hp electric motor, it emits 46 g CO2 / km.
The revised model of the BMW 3 Series Gran Turismo
has been available since July 2016. The new modular
engines and Connected Drive range of services com-
bine the sporting flair typical of BMW with superb
efficiency and a high level of connectedness. The
BMW 1 Series and the 2 Series Convertible and Coupé
models have also been available as M Performance
versions since July 2016. In the course of the year, both
the BMW X1 and the BMW 1 Series were launched
in China. Since autumn 2016, the BMW M2 Coupé
has been on sale in the compact high-performance
sports car segment.
The first official information on the seventh generation
of the new BMW 5 Series was published in mid-Octo-
ber 2016. The new 5 Series Sedan had its worldwide
debut in Detroit in January 2017 and has been on sale
since mid-February 2017. The success story of the
BMW 5 Series in the sporty business class is being
continued with this dynamic, efficient, innovative
vehicle.
Combined Management Report As the first concrete steps in implementing the Strat-
egy NUMBER ONE > NEXT, numerous new concepts
and innovations have been presented to the public,
such as the BMW i8 Spyder, which celebrated its world
premiere at the Consumer Electronics Show (CES) in
Las Vegas, followed by the M Performance model of
the BMW 7 Series at the Geneva International Motor
Show. The China version of the BMW X1 was present-
ed at the show in Beijing and the BMW Concept X2
at the Paris Motor Show (Mondial de l’Automobile).
MINI launches new convertible
The new MINI Convertible has been on the market
since March 2016. The new model was launched fea-
turing five different versions of the new generation
of engines with MINI TwinPower Turbo technology.
The sports version, the MINI John Cooper Works
Convertible, became available in May. The new MINI
Convertible keeps up the tradition of highly dynamic
driving pleasure and continues to offer its owners the
typical MINI go-kart feeling.
Rolls-Royce Dawn launched
The new Rolls-Royce Dawn has been available since
mid-2016. The Dawn was first presented to the media
in March 2016 amid high acclaim. The luxury con-
vertible boasts a special in-house designed roof that
reduces interior noise levels to a minimum. During
the year under report and to celebrate the end of the
vehicle’s life cycle, a special edition of 50 Rolls-Royce
Phantoms was built – the Phantom Zenith Collection.
57
Workforce
www.bmwgroup.com / careers
Slight increase in workforce
At 31 December 2016, the BMW Group employed a
workforce of 124,729 worldwide, 2.0 % more than one
year earlier (2015: 122,244 employees). The increase
was primarily due to the expansion of the internation-
al production network and financial services business.
Moreover, skilled workers and IT specialists were
increasingly recruited for future-oriented areas, such
as software architecture and development, artificial
intelligence and autonomous driving.
BMW Group employees
• 33
Automotive
Motorcycles
Financial Services
Other
BMW Group
31. 12. 2016
31. 12. 2015
Change in %
112,869
111,410
3,351
8,394
115
3,021
7,697
116
124,729
122,244
1.3
10.9
9.1
– 0.9
2.0
Dual vocational training expanded worldwide
The BMW Group increased its international appren-
ticeship activities during the year under report, due
amongst others to the higher number of apprentices
employed at plants, for example in the USA and
Thailand. The number of new entrants at German
sites remained constant at 1,200 apprentices. At the
end of the reporting period, 4,613 young people were
engaged in vocational training and other training pro-
grammes designed to promote young talent within
the BMW Group (2015: 4,700).
BMW Group apprentices at 31 December
• 34
5,000
4,266
4,445
4,595
4,700
4,613
2,500
0
2012
2013
2014
2015
2016
58
Report on
Economic Position
Review of Operations
Workforce
Sustainability
High level of investment to bolster
employee skill sets
At € 352 million, expenditure on basic and further
training remained unchanged at a high level. By
improving the skill sets of its workforce for example
in electric mobility, hydrogen and fuel cell technology,
lightweight construction and robot technology, the
BMW Group is creating a solid foundation for future
activities.
Highly attractive employer
The BMW Group retained its status as one of world’s
most attractive employers in 2016. In the latest
“World’s Most Attractive Employers” rankings pub-
lished by the agency Universum, the BMW Group was
once again named best German employer across all
sectors and the most attractive automotive company
in the world.
The BMW Group came top in Trendence’s “Young
Professional Barometer Germany” for the fifth year
in succession. It also improved its position again in
the Trendence “Graduate Barometer Germany – IT
Edition” for highly sought-after IT specialists, taking
second place in 2016. In Universum’s “Young Profes-
sionals Study Germany”, the BMW Group took top
spot in both the “Engineering” and “Business” cate-
gories and came third in the “IT” category, confirming
the excellent results of the previous year. Overall, the
BMW Group finished as the best-placed company in
the study.
BMW supplementary benefit plan
and centenary bonus
Demographic and economic conditions relevant for
the provision of pension benefits are changing at an
increasingly rapid pace. In 2016, the BMW Group there-
fore enhanced the Company pension plan to make it
more sustainable and viable for the future. To mark the
occasion of its centenary, nearly all employees of the
BMW Group were awarded a one-time centenary bonus.
BMW AG employees received the bonus mainly in the
form of a starting contribution to the new BMW sup-
plementary benefit plan, which serves as an additional
component in the Company pension plan.
Diversity as a competitive factor
Diversity represents a key factor in ensuring the
BMW Group’s continued competitiveness going forward,
focusing on the three aspects of gender, cultural back-
ground, and age / experience. The aim is to ensure equal
opportunities for all employees. A variety of measures
were implemented in 2016 to promote and benefit from
diversity in the workforce.
The proportion of women in the workforce, management
functions and young talent programmes continued to
increase during the year under report. The percentage of
women in the total BMW Group workforce rose to 18.7 %
(BMW AG: 15.8 %), above the internal target range of 15 to
17 %. The proportion of women in management positions
rose to 15.3 % for the BMW Group as a whole and 13.3 %
for BMW AG. Female representation in programmes for
young employees and interns in the year under report
was approximately 44 % for trainee programmes and 29 %
for student training programmes.
Proportion of female employees in manage-
ment functions at BMW AG / BMW Group*
• 35
BMW Group 12.1
BMW AG 10.0
13.0
13.5
10.6
11.3
15.3
13.3
14.3
12.5
in %
16
8
0
2012
2013
2014
2015
2016
* Reporting on the proportion of women in management was changed in 2016 and is now
based on the criterion “management function” rather than individual employee
classification. Prior year figures have been adjusted accordingly.
Combined Management Report At the same time, the workforce in Germany is becoming
more international. Employees from over 100 countries
work together successfully at the Munich site alone.
Moreover, a balanced age structure in the workforce
encourages an exchange between generations and plays
a role in reducing the loss of know-how when employees
retire.
Employee attrition rate at BMW AG*
• 36
as a percentage of workforce
7.0
3.5
0
3.87
3.47
2.70
2.08
1.41
2012
2013
2014
2015
2016
* Number of employees on unlimited employment contracts leaving the Company.
59
Sustainability
www.bmwgroup.com / responsibility
Economic success, the responsible use of resources
and the assumption of social responsibilities form the
basis for long-term growth within the BMW Group.
The Group secures the future of its business model
through sustainable activity. In promoting sustaina-
bility, the BMW Group concentrates on three areas:
— the development of products and services for
sustainable individual mobility (for example
electric mobility and services such as DriveNow
and ReachNow)
— the efficient use of resources along the entire
value chain
— responsibility towards employees and society in
general
Through its sustainability policy, the BMW Group is
supporting the achievement of the UN’s Sustainable
Development Goals (SDG), which were adopted in
September 2015.
Further information on the subject of sustainability
within the BMW Group and related topics is provided
in the Sustainable Value Report 2016, published online
at
www.bmwgroup.com. The Sustainable Value Report is
drawn up in accordance with the Guidelines of the
Global Reporting Initiative (GRI G4), the most wide-
ly used set of guidelines for sustainability reporting
worldwide. The Sustainable Value Report corresponds
to the “comprehensive” option, in which all relevant
information and indicators of the aspects identified
as essential are reported on. It will be published at
the same time as the Annual Report 2016.
60
Report on
Economic Position
Review of Operations
Sustainability
Social dialogue and materiality analysis as a basis
for sustainability management
The BMW Group is in continual dialogue with a large
number of stakeholders, both in Germany and abroad.
Dialogue helps the Company to recognise global trends
at an early stage, achieve sustainability objectives
more effectively and strengthen social commitment.
In the course of this dialogue, the BMW Group gains
a clear picture of how current trends are changing the
business environment and what role the BMW Group
can play. For example, stakeholder dialogue events
on the topic of urban mobility were held in Seattle,
Boston, Madrid, Tokyo and Barcelona during the
period under report.
In order to identify important sustainability topics at
an early stage, the BMW Group also conducts mate-
riality analyses on a regular basis. Moreover, social
challenges are continually monitored and analysed
in order to gauge their significance, from the point
of view of both external and internal stakeholders.
The materiality analysis is used to create a materi-
ality matrix, which is used as a basis to check the
strategic direction of sustainability management. The
materiality matrix is described in greater detail in the
Sustainable Value Report 2016.
Materiality matrix
• 37
Absolutely
crucial
High
materiality
Vehicle efficiency and CO2 emissions
Energy use and GHG emissions
of operations and supply chain
Air emissions of vehicles
Occupational health and safety
Environmental and social standards
in the supply chain / sustainable sourcing
Human rights
Prevention of corruption and
anticompetitive behaviour
Alternative drivetrain technologies
Product safety
Connected and autonomous driving
Mobility concepts
and services
Data protection
Attractive workplace, talent attraction and retention
Diversity and equal opportunity
Customer satisfaction
Employee development and training
Socio-economic impacts in society
Design for recycling and resource efficiency
Air emissions of operations
and supply chain
Water consumption
Waste and water pollution
s
r
e
d
l
o
h
e
k
a
t
s
e
h
t
r
o
f
e
c
n
a
t
r
o
p
m
I
Medium
materiality
Low
materiality
Use of urban space
Responsible marketing and product communication
Responsible financial services
Employee-management relations
Efficient use of materials in operations
and supply chain
Political involvement
Importance for the BMW Group
Absolutely
crucial
Involvement with local communities
Biodiversity
Corporate volunteering
Donations and philanthropy
Corporate Citizenship
Less
important
Less
important
Combined Management Report
Top rankings in sustainability ratings
The BMW Group again achieved top rankings in
prestigious ratings on the topic of sustainability in
2016, thus maintaining its leading position as a sus-
tainable automotive manufacturer. In the 2016 rating
for the Dow Jones Sustainability Indices (DJSI), the
BMW Group again headed the Automobiles sector
and is therefore the only carmaker to have been listed
consecutively since the inception of the index.
In the Carbon Disclosure Project (CDP), the Group
achieved the best evaluation for its efforts in the field
of climate protection. The BMW Group is therefore
one of only two companies worldwide to have reached
the highest category seven times in a row. Moreover,
the BMW Group was again included in the British
FTSE4Good Index in 2016.
Fleet carbon dioxide emissions reduced
The development of sustainable products and services
is an integral part of the BMW Group’s business model.
The fleet-wide deployment of Efficient Dynamics tech-
nologies is helping to continually reduce CO2 emission
levels. The electrification of the fleet continued to
progress in 2016. Due to the expansion of the mod-
el range, annual sales of electrified BMW vehicles
increased strongly, surpassing the 62,000-unit mark
in the course of 2016. These measures form the basis
for complying with the legally stipulated CO2 and fuel
consumption limits going forward. Between 1995 and
2016, the average CO2 emissions of the three brands
sold by the BMW Group in Europe fell by 41.0 %.
In 2016, the BMW Group’s fleet of new vehicles sold
in Europe (EU-28) consumed an average of 4.6 litres of
diesel and 5.6 litres of petrol per 100 km respectively.
CO2 emissions averaged 124 grams per km.
61
Clean production
Integrated sustainability management in production
processes ensures the efficient use of resources. Since
2006, the consumption of resources and emissions per
vehicle produced has been reduced by an average of
50.0 %. The individual figures are as follows:
in %
Energy consumption
Water consumption
Process wastewater
Non-recyclable waste
Solvent emissions
CO2 emissions
2016
– 35.4 %
– 31.0 %
– 48.8 %
– 81.5 %
– 54.6 %
– 48.6 %
In 2016, at 2.21 MWh per vehicle produced, the
amount of energy consumed rose slightly compared
with the previous year (2015: 2.19 MWh; + 0.9 %). The
higher figure is due amongst others to the start-up of
the new engine plant in Shenyang, China. In addition,
the construction of a new, more efficient painting line
in Munich made it necessary to run two painting lines
in parallel for a certain period.
Despite the slight increase in the average amount
of energy consumed per vehicle, the use of highly
efficient, ecologically sustainable combined heat and
power plants and electricity generated from renewable
sources at production sites enabled the Company to
reduce production-related CO2 emissions per vehicle
by a further 5.3 % year-on-year to 0.54 tonnes during
the period under report (2015: 0.57 tonnes).
Despite record temperatures and long, hot periods at
some assembly plants in 2016, at 2.25 m³ per vehicle
produced, water consumption was in line with the
previous year (2015: 2.24 m³; + 0.4 %). At 0.42 m³, the
volume of process wastewater generated per vehicle
produced fell by 6.7 % (2015: 0.45 m³). The volume of
non-recyclable production waste was further reduced
to 3.51 kg per vehicle produced during the year under
report (2015: 4.00 kg; – 12.3 %). Solvent emissions were
cut by 6.6 % to 1.14 kg per vehicle produced during
2016 (2015: 1.22 kg).
Social engagement
In 2016, the BMW Group contributed a total of
€ 87.8 million for social engagement (2015: € 39.1 mil-
lion), including € 70.4 million for donations (2015:
€ 17.1 million). The significant increase in the Com-
pany’s centenary year was mainly due to a donation
to a BMW foundation.
62
Report on
Economic Position
Review of Operations
Sustainability
Results of Opera-
tions, Financial Posi-
tion and Net Assets
Although energy and water consumption per vehicle
produced rose slightly, both the use of resources and
the production-related emissions fell by an average of
4.9 % in 2016. However, the slight increase in energy
and water consumption per vehicle produced gave rise
to additional costs totalling € 2.8 million. The reduction
in resource consumption and production-related emis-
sions per vehicle produced since 2006 corresponds to
a cost saving of € 155.3 million.
Sustainability along the value chain
Sustainability criteria also play a key role when select-
ing and assessing suppliers as well as in the field of
transport logistics. The BMW Group has therefore
integrated a comprehensive sustainability manage-
ment strategy in its purchasing processes. The positive
business performance in recent years has also caused a
significant rise in the Group’s transportation require-
ments worldwide. The principle adhered to by the
BMW Group that “production follows the market” is
an effective method of significantly reducing the need
for transportation, therefore keeping CO2 emissions
as low as possible.
Sustainability in human resources policies
In 2016, the BMW Group continued to consolidate
its position as one of the most attractive employers
worldwide. Its leading role in terms of sustainability
is a key reason for the high degree of employee loyalty
within the BMW Group and one of the reasons for
the low staff attrition rate, enabling the BMW Group
to maintain a low level of personnel recruitment
expenditure. Further information on the attrition rate
is provided in the section “Workforce”.
A key reason for the BMW Group’s long-term suc-
cess and an example for the high level of employee
identification with it are the personal engagement
and the ideas brought forward by staff members,
demonstrated by the € 25.1 million saved in 2016 in
conjunction with the idea management programme
CREATE.
Combined Management Report 63
RESULTS OF OPERATIONS,
FINANCIAL POSITION AND
NET ASSETS
Results of operations
Once again, the BMW Group achieved year-on-year
growth in revenues, sales volume and profit before
tax in the financial year 2016. The number of BMW,
BMW Group Income Statement
• 38
in € million
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
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
MINI and Rolls-Royce brand cars sold rose by a solid
5.3 % to 2,367,603* units.
2016
2015
Change in %
94,163
– 75,442
18,721
92,175
– 74,043
18,132
– 9,158
– 8,633
670
– 847
9,386
441
196
– 489
131
279
9,665
914
– 820
9,593
518
185
– 618
– 454
– 369
9,224
– 2,755
6,910
– 2,828
6,396
2.2
– 1.9
3.2
– 6.1
– 26.7
– 3.3
– 2.2
– 14.9
5.9
20.9
–
–
4.8
2.6
8.0
Profit before tax for the financial year 2016 was slightly
up year-on-year. At 10.3 %, the pre-tax return on sales
was similar to one year earlier (2015: 10.0 %).
BMW Group revenues increased slightly by 2.2 % year-
on-year to reach € 94,163 million (2015: € 92,175 mil-
lion). The primary drivers of this performance were
the higher volume of BMW, MINI and Rolls-Royce
brand vehicles sold and the growth in size of the
Financial Services segment’s contract portfolio.
Continued fierce competition and negative currency
factors held down the scale of revenue growth. The
negative currency impact on revenues was mainly
attributable to changes in the average exchange rates
of the British pound, Chinese renminbi and South
African rand against the euro. Group revenues by
region were as follows:
BMW Group revenues by region
• 39
in %
2016
2015
Europe (including Germany)
Asia (including China)
Americas (including USA)
Other regions
Group
47.1
28.8
20.7
3.4
45.6
27.6
23.3
3.5
100.0
100.0
*Includes the joint venture BMW Brilliance Automotive, Shenyang Ltd. (2016:
316,200 units, 2015: 282,000 units).
64
BMW Group cost of sales
• 40
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
in € million
Manufacturing costs
Cost of sales relating to financial services business
thereof interest expense relating to financial services business
Research and development expenses
thereof amortisation of capitalised development costs
Warranty expenses
Service contracts, telematics and roadside assistance
Other cost of sales
Cost of sales
The Group’s cost of sales was slightly higher than in the
previous year, due to sales volume and portfolio factors.
Cost of sales relating to financial services business rose
by € 1,274 million to € 20,723 million, reflecting the
increased portfolio size. Research and development
expenses were at a similar level to the previous year
in absolute terms and, with an expense ratio of 4.6 %,
also in relative terms. Total research and development
expenditure – comprising research costs, non-capital-
ised development costs and capitalised development
costs (excluding systematic amortisation thereon),
amounted to € 5,164 million in the year under report
(2015: € 5,169 million). As a result of the continuous
expansion and revision of the BMW Group’s various
model series, research and development expenditure
remains at a generally constant level. These factors
resulted in a research and development expenditure
ratio of 5.5 % (2015: 5.6 %) and a capitalisation ratio of
40.5 % (2015: 39.9 %).
2016
2015
Change in %
43,175
20,723
1,638
4,294
1,222
2,165
2,018
3,067
43,685
19,449
1,495
4,271
1,166
1,891
1,771
2,976
75,442
74,043
– 1.2
6.6
9.6
0.5
4.8
14.5
13.9
3.1
1.9
Warranty expenses include the accrued expense for
vehicle recall actions, the cost of which is expected to
exceed amounts previously recognised. Accordingly,
a further amount of € 678 million was allocated to the
warranty provision for various issues, including airbags
supplied by the Takata group of companies, the ISOFIX
attachment system used for child car seats, and costs
relating to the provision of the network service for
telematics (2G). Expenses relating to telematics and
roadside assistance have increased, primarily due to
the greater volume of service contracts and Connected
Drive products.
Gross profit came in slightly higher (+ 3.2 %) at
€ 18,721 million, reflecting sales volume growth in the
Automotive segment and increased business volumes
in the Financial Services segment. The gross profit
margin was 19.9 % (2015: 19.7 %).
Combined Management Report 65
The result on investments for the year under report
includes impairment losses on other investments
totalling € 192 million (2015: € 25 million).
Profit before tax increased to € 9,665 million (2015:
€ 9,224 million), helped by a number of factors, includ-
ing higher volumes and the improved financial result.
Income tax expense amounted to € 2,755 million (2015:
€ 2,828 million), corresponding to an effective tax rate
of 28.5 % (2015: 30.7 %). The lower income tax expense
was partly attributable to transfer pricing and the
revaluation of tax-related items.
The post-tax return on sales was 7.3 % (2015: 6.9 %).
Sales and administrative expenses rose by € 525 million
year-on-year to € 9,158 million, resulting in an expense
ratio of 9.7 % (2015: 9.4 %). The increase was due to a
number of factors, including the larger workforce and
higher expenses for IT projects.
Depreciation and amortisation on property, plant
and equipment and intangible assets recorded in cost
of sales and in selling and administrative expenses
totalled € 4,806 million (2015: € 4,659 million). The slight
increase compared to the previous year was mainly
attributable to investments and capitalised develop-
ment costs recorded in previous accounting periods.
The net amount of other operating income and
expenses deteriorated from a net positive amount
of € 94 million to a negative amount of € 177 million,
mainly due to lower gains on the disposal of assets and
higher expenses for provisions. A donation to a BMW
foundation also increased other operating expenses.
Profit before financial result (EBIT) amounted
to € 9,386 million in the year under report (2015:
€ 9,593 million), slightly down on the previous year,
with the positive effect of greater volumes offset by
higher expenses and lower other operating income.
The financial result was a net positive amount of
€ 279 million, an improvement of € 648 million com-
pared to the previous year, mainly thanks to net gains
on commodity derivatives on the one hand and lower
losses on currency derivatives on the other. Interest
and similar expenses improved by € 129 million to
a net negative amount of € 489 million year-on-year,
mainly reflecting lower interest expense on pension
obligations and lower other refinancing costs. The
result from equity accounted investments includes the
Group’s share of the results of the joint ventures BMW
Brilliance Automotive Ltd. and the two DriveNow enti-
ties, DriveNow GmbH & Co. KG and DriveNow Ver-
waltungs GmbH. The figure also includes the Group’s
share of the result of the associated company THERE
Holding B. V. Compared to the previous year, the result
from equity accounted investments fell by € 77 mil-
lion to € 441 million. This deterioration was primarily
attributable to the inclusion of THERE Holding B. V.,
with a negative impact of € 56 million, largely reflecting
scheduled depreciation and amortisation on purchase
price allocations on the one hand and transaction costs
on the other. At € 507 million, the contribution made
by BMW Brilliance Automotive Ltd. was slightly down
on the previous year (2015: € 522 million), partly due
to currency factors, including the fact that costs were
incurred for model revisions of vehicles already adapt-
ed for the local market (BMW X1 and BMW 5 Series) as
well as for the localisation of further products.
66
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
Results of operations by segment
Revenues by segment
• 41
in € million
Automotive
Motorcycles
Financial Services
Other Entities
Eliminations
Group
2016
2015
Change in %
Currency adjusted
change* in %
86,424
2,069
25,681
6
– 20,017
94,163
85,536
1,990
23,739
7
– 19,097
92,175
1.0
4.0
8.2
– 14.3
– 4.8
2.2
3.1
5.6
9.9
– 14.3
–
4.3
*The adjustment for exchange rate factors is calculated by applying the relevant current exchange rates to the prior year’s figures.
Profit / loss before tax by segment
• 42
2016
2015
Change in %
7,916
185
2,166
170
– 772
7,523
179
1,975
211
– 664
9,665
9,224
5.2
3.4
9.7
– 19.4
– 16.3
4.8
Due to the various factors described above, at
€ 7,695 million (2015: € 7,836 million), profit before
financial result was slightly down on the previous
year. The EBIT margin came in at 8.9 % (2015: 9.2 %).
The main factors for the decrease were tougher com-
petition and increased costs, partially countered by
the positive impact of sales volume growth.
Overall, the Automotive segment reported a solid
increase in pre-tax profit. This outcome was largely
due to the improved financial result, which benefited
from net gains on commodity derivatives, reduced
refinancing costs and lower interest expense on pen-
sion obligations.
in € million
Automotive
Motorcycles
Financial Services
Other Entities
Eliminations
Group
Automotive segment
Automotive segment revenues grew slightly on the
back of higher sales volumes, with currency factors
holding revenue growth down. The gross profit mar-
gin increased slightly to 17.9 % year-on-year (2015:
17.7 %).
At € 7,604 million, selling and administrative expens-
es were € 385 million higher than the previous year.
Administrative expenses increased due to a number
of factors, including the larger workforce, a new
allocation of expenses relating to internal activities,
and higher expenses for IT projects. Overall, as a
percentage of revenues, the expense ratio was 8.8 %
(2015: 8.4 %).
The net negative amount of other operating income
and expenses deteriorated by € 70 million to € 152 mil-
lion, mainly due to lower gains on the disposal of
assets and higher expenses for provisions. A donation
to a BMW foundation also increased other operating
expenses.
Combined Management Report Motorcycles segment
Motorcycles segment revenues increased slightly
compared to the previous year. The gross profit
margin dropped from 22.5 % to 20.8 %, mainly due
to higher expenses incurred in conjunction with the
implementation of the segment’s new strategy and the
expansion of its model range. The increased workforce
size is reflected in higher selling and administrative
expenses. As a result of income from the reversal of
write-downs, the Motorcycles segment recorded a
slightly higher profit before tax than one year earlier.
Financial Services segment
The Financial Services segment revenues showed
a solid growth on the back of a dynamic operating
performance, clearly reflected in the upward trend
of its contract portfolio.
Selling and administrative expenses in the segment
went up by € 130 million to € 1,294 million, mainly
due to the increased size of the workforce and greater
expense for new IT projects.
Higher business volumes and a slightly improved
credit risk situation contributed to the solid increase
in the Financial Services segment’s profit before tax.
Other Entities segment / Eliminations
Profit before tax in the Other Entities segment was sig-
nificantly lower than one year earlier. The net positive
result from other operating income and expenses fell
from € 192 million to € 7 million year-on-year, mainly
due to lower income from the reversal of provisions
in 2016. The decrease was cushioned by the improve-
ment in the net interest result, which was due to lower
refinancing costs.
Inter-segment eliminations reduced Group profit
before tax, partly reflecting higher eliminations trig-
gered by the growth in new leasing business and the
ensuing increase in leased products.
67
Financial position
The consolidated cash flow statements for the Group
and the Automotive and Financial Services segments
show the sources and applications of cash flows for
the financial years 2016 and 2015, classified into cash
flows from operating, investing and financing activities.
Cash and cash equivalents in the cash flow statements
correspond to the amounts disclosed in the balance
sheet.
Cash flows from operating activities are determined
indirectly, starting with Group and segment net profit.
By contrast, cash flows from investing and financing
activities are based on actual payments and receipts.
BMW Group financial position
• 43
in € million
2016
2015
Change
Cash inflow from operating
activities
Cash outflow from invest-
ing activities
Cash inflow from financing
activities
Effects of exchange rate
and composition of Group
Change in cash and cash
equivalents
3,173
960
2,213
– 5,863
– 7,603
1,740
4,393
5,004
– 611
55
73
– 18
1,758
– 1,566
3,324
The increase in cash flows from the Group’s operating
activities was primarily attributable to the higher net
profit for the year (€ 514 million), higher depreciation
and amortisation (€ 312 million), provisions (€ 587 mil-
lion) and the change in other operating assets and
liabilities (€ 679 million).
The decrease in cash outflows from the Group’s
investing activities primarily reflects lower net
investments in marketable securities and investment
funds in connection with the Group’s liquidity reserve
(€ 1,369 million). The net outflow for these items
comprises investments in marketable securities and
investment funds on the one hand, and proceeds from
the sale of marketable securities and investment funds
on the other.
68
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
The Group’s financing activities resulted in inflows
and outflows in conjunction with bonds amounting
to € 967 million and € 1,466 million respectively.
The cash outflow from investing activities exceeded the
cash inflow from operating activities by € 2,690 million
in the financial year 2016. A similar constellation arose
in the previous year, when the shortfall amounted to
€ 6,643 million.
BMW Group Change in cash and cash equivalents
• 44
After adjustment for the effects of exchange rate
fluctuations and changes in the composition of the
BMW Group totalling a positive amount of € 55 million
(2015: € 73 million), the various cash flows resulted in
an increase in cash and cash equivalents of € 1,758 mil-
lion (2015: decrease of € 1,566 million).
in € million
12,000
8,000
4,000
0
+ 3,173
6,122
– 5,863
+ 4,393
+ 55
7,880
Cash and
cash
equivalents
31. 12. 2015
Cash inflow
from
operating
activities
Cash outflow
from
investing
activities
Cash inflow
from
financing
activities
Currency
translation,
changes in
Group composition
Cash and
cash
equivalents
31. 12. 2016
12,000
8,000
4,000
0
Free cash flow for the Automotive segment was as
follows:
in € million
2016
2015
Change
Cash inflow from operating activities
Cash outflow from investing activities
Net investment in marketable securities and investment funds
Free cash flow Automotive segment
11,464
– 5,432
– 240
5,792
11,836
– 7,524
1,092
5,404
– 372
2,092
– 1,332
388
Combined Management Report Cash outflows from operating activities in the Finan-
cial Services segment are driven primarily by cash
flows relating to leased products and receivables from
sales financing and totalled € 9,844 million (2015:
€ 10,351 million). The cash outflow from investing
activities totalled € 102 million (2015: € 140 million).
Cash inflows from financing activities went up by
€ 1,573 million to € 11,601 million, mainly influenced
by the change in other financial liabilities.
Net financial assets of the Automotive segment com-
prise the following:
in € million
2016
2015
Change
Cash and cash equivalents
4,794
3,952
842
Marketable securities and
investment funds
Intragroup net financial
assets
Financial assets
Less: external financial
liabilities*
Net financial assets
Automotive segment
4,147
4,326
– 179
12,077
21,018
11,278
19,556
799
1,462
– 1,498
– 2,645
1,147
19,520
16,911
2,609
* Excluding derivative financial instruments.
69
Refinancing
A broadly based range of instruments transacted on
international money and capital markets is used to
refinance worldwide operations. Close to all of the
funds raised are used to finance the BMW Group’s
Financial Services business.
The overall objective of Group financing is to ensure
the solvency of the BMW Group at all times. Achieving
this objective is tackled in three strategic areas:
1. The ability to act at all times by assuring perma-
nent access to strategically important capital mar-
kets
2. Autonomy through the diversification of refi-
nancing instruments and investors
3. Focus on value by optimising financing costs
Financing measures undertaken centrally ensure
access to liquidity for the Group’s operating subsidiar-
ies at market-based, consistent conditions. Funds are
acquired with a view to achieving a desired structure
for the composition of liabilities, comprising a finely
tuned mix of financing instruments. The use of longer-
term financing instruments to finance the Group’s
financial services business and the maintenance of
a sufficiently high liquidity reserve serves to avoid
the liquidity risk intrinsic to any large portfolio of
contracts. This prudent approach to financing also
bolsters BMW AG’s ratings. Further information is
provided in the section “Liquidity risks” within the
“Report on Outlook, Risks and Opportunities”.
Apart from issuing commercial paper on the money
market, the BMW Group’s financing companies also
issue bearer bonds. In addition, retail customer and
dealer financing receivables on the one hand and leas-
ing rights and obligations on the other are securitised
in the form of asset-backed securities (ABS) financing
arrangements. Financing instruments employed by
the Group’s in-house banks in Germany and the USA
(e. g. customer deposits) are also used as a supplemen-
tary source of financing. Loans are also taken out with
international banks.
70
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
Thanks to its excellent ratings and the high level
of acceptance it receives on capital markets, the
BMW Group was again able to refinance operations
on debt capital markets during the financial year 2016.
In addition to the issue of bonds and loan notes and
private placements, commercial paper was also issued.
Additional funds were raised via new securitised
instruments and the prolongation of existing instru-
ments. As in previous years, all issues were highly
sought after by private and institutional investors alike.
BMW Group financial liabilities
• 45
in € million
Derivate instruments 3,331
Commercial paper 3,852
Liabilities
from customer
deposits (banking)
13,512
Liabilities to banks
14,892
Other 1,249
Bonds
44,421
Asset-backed
financing
transactions
16,474
BMW Group financial liabilities
• 46
in € million
50,000
42,326 44,144
25,000
11,261
0
Maturity (years)
within
1
between
1–5
later
than 5
In the course of 2016, the BMW Group issued four euro
benchmark bonds on the European capital market
with a total issue volume of € 2.75 billion. For the first
time, it also issued bonds on the US capital market
with a total issue volume of US Dollar 6.25 billion.
Bonds were also issued in British pounds, Chinese
renminbi, Canadian and Australian dollars and Nor-
wegian krone for a total amount € 1.9 billion. Private
placements totalling € 4.3 billion were also issued.
Twelve public ABS transactions were executed in 2016,
including three in the USA, two each in Germany,
South Africa and China, and one each in Canada,
South Korea and France, with a total volume equiv-
alent to € 7.3 billion. Further funds were also raised
via new ABS conduit transactions in Japan and the
USA totalling € 1.4 billion. Other existing transactions
remained in place in various countries, including
Germany, Switzerland, the UK, South Korea, South
Africa and Australia.
* Measured at ex-
change rates at
31.12.2016.
The following table provides an overview of amounts*
utilised at 31 December 2016 in connection with the
BMW Group’s money and capital market programmes:
Programme
in € billion
Programme
framework
Amount
utilised
Euro Medium Term Notes
Australian Medium Term Notes
Commercial Paper
50.0
1.7
13.8
34.4
0.3
3.9
At 31 December 2016, liquid funds stood at a solid
level of € 13.2 billion. The BMW Group also has access
to a syndicated credit line of € 6 billion, with a term
up to October 2018. This credit line, provided by a
consortium of 38 international banks, was not being
utilised at the end of the reporting period.
Further information with respect to financial liabili-
ties is provided in
notes 29, 33 and 37 to the Group
Financial Statements.
see
notes 29, 33
and 37
Combined Management Report Net assets
BMW Group condensed balance sheet at 31 December
• 47
71
Group
2016
2015
Change in %
Currency adjusted
change in %
Proportion of
balance sheet
total in %
8,157
17,960
37,789
2,546
560
78,260
9,770
4,265
11,841
2,825
6,682
7,880
7,372
17,759
34,965
2,233
428
70,043
8,843
4,326
11,071
2,751
6,261
6,122
188,535
172,174
47,363
4,587
10,918
3,869
97,731
8,512
15,555
42,764
3,000
9,630
3,557
91,683
7,773
13,767
188,535
172,174
10.6
1.1
8.1
14.0
30.8
11.7
10.5
– 1.4
7.0
2.7
6.7
28.7
9.5
10.8
52.9
13.4
8.8
6.6
9.5
13.0
9.5
11.4
1.1
7.3
14.0
30.5
12.3
9.9
– 3.2
7.0
5.4
6.2
27.6
9.5
13.6
60.9
13.0
3.9
5.5
10.5
12.1
4.3
9.5
20.0
1.4
0.3
41.5
5.2
2.3
6.3
1.5
3.5
4.2
100.0
25.1
2.4
5.8
2.1
51.8
4.5
8.3
9.5
100.0
Inventories went up by a solid 7.0 % compared to the
end of 2015, with most of the increase relating to fin-
ished goods, reflecting general business growth and
stocking up in the various markets.
Cash and cash equivalents went up by € 1,758 million,
thus ensuring a solid level of liquid funds at 31 Decem-
ber 2016.
in € million
Assets
Intangible assets
Property, plant and equipment
Leased products
Investments accounted for using the equity method
Other investments
Receivables from sales financing
Financial assets
Deferred and current tax
Inventories
Trade receivables
Other assets
Cash and cash equivalents
Total assets
equity A nd liABilities
Equity
Pension provisions
Other provisions
Deferred and current tax
Financial liabilities
Trade payables
Other liabilities
Total equity and liabilities
The balance sheet total of the BMW Group increased
by a solid 9.5 % compared to 31 December 2015. The
changes in individual balance sheet items caused by
currency factors relate primarily to changes in the
exchange rates of the US dollar, British pound, South
African rand and Chinese renminbi against the euro.
The growth in business reported by the Financial Ser-
vices segment is reflected in the significant increase
in receivables from sales financing and a solid rise in
the volume of leased products. A total of 1,811,157 new
contracts were concluded with retail customers (leasing
and credit financing) in 2016, 9.4 % more than one year
earlier. The credit financing contract portfolio grew
by 9.5 % to 3,022,904 contracts, with growth reported
primarily in China and the USA. The lease contract
portfolio increased by 7.3 % to stand at 1,680,513 con-
tracts at 31 December 2016.
72
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
Balance sheet structure – Group
• 48
Total equity and liabilities in € billion
200
133
66
0
189
189
172
172
25 %
25 % Equity
Non-current assets 65 %
64 %
39 %
37 % Non-current provisions and liabilities
Current assets 35 %
36 %
36 %
38 % Current provisions and liabilities
thereof cash and cash equivalents 4 %
4 %
2016
2015
2016
2015
Balance sheet structure – Automotive segment
• 49
Total equity and liabilities in € billion
100
66
33
0
89
83
89
83
Non-current assets 48 %
48 %
41 %
19 %
40 % Equity
17 % Non-current provisions and liabilities
Current assets 52 %
52 %
40 %
43 % Current provisions and liabilities
thereof cash and cash equivalents 5 %
5 %
2016
2015
2016
2015
200
133
66
0
100
66
33
0
Combined Management Report 73
The sharp rise in other liabilities reflects the increased
scale of service contracts and Connected Drive prod-
ucts, advance payments received from leasing custom-
ers, and the expected higher level of payments due to
dealerships and importers for bonuses, rebates and
other price deductions.
The increase in trade payables mainly reflects higher
production volumes.
Overall, the results of operations, financial position
and net assets position of the BMW Group continued
to develop positively during the year under report.
Group equity rose by € 4,599 million to € 47,363 million.
Equity increased year-on-year as a result of the net prof-
it attributable to shareholders of BMW AG amounting
to € 6,863 million and fair value gains on derivative
financial instruments amounting to € 2,008 million.
Decreases in equity arose in particular in connection
with the dividend payment of € 2,102 million and
the negative impact of remeasurements of the net
defined benefit liability for pension plans amounting to
€ 1,858 million, the latter due mainly to lower discount
rates applied in Germany and the UK.
The Group equity ratio at the end of the reporting
period was 25.1 % (31 December 2015: 24.8 %). The
equity ratio for the Automotive segment was 41.3 %
(31 December 2015: 40.1 %) and that for the Financial
Services segment stood at 8.0 % (31 December 2015:
8.2 %).
Pension provisions increased significantly compared
to the end of the financial year 2015, mainly due to the
lower discount factors applied in Germany and the UK.
Other provisions also increased significantly compared
to 31 December 2015, mostly reflecting the higher level
of warranty provisions for vehicle recall actions, the
cost of which is expected to exceed amounts previously
recognised. Accordingly, a further amount of € 678 mil-
lion was allocated to the warranty provision for various
issues, including airbags supplied by the Takata group
of companies, the ISOFIX attachment system used for
child car seats, and costs relating to the provision of
the network service for telematics (2G).
The year-on-year increase in financial liabilities was
primarily attributable to the issue of bonds and higher
liabilities to banks, in both cases securing favourable
refinancing conditions on a long-term basis. In addition,
new ABS transactions were concluded including the
USA and Germany. Lower commercial paper volumes
and the more favourable development of derivatives
kept the increase in financial liabilities down.
74
Report on
Economic Position
Results of Opera-
tions, Financial Posi-
tion and Net Assets
Value added statement
The value added statement shows the value of work
performed, less the value of work bought in by the
BMW Group during the financial year. Depreciation
and amortisation, cost of materials, and other expens-
es are treated as bought-in costs in the net value added
calculation. The allocation statement applies value
added to each of the participants involved in the value
added process. The bulk of the net value added is
applied to employees. The remaining portion will be
retained in the Group to finance future operations. It
should be noted that the gross value added amount
treats depreciation as a component of value added
which, in the allocation statement, is treated as inter-
nal financing.
Net valued added by the BMW Group in the financial
year 2016 remained at a high level.
BMW Group value added statement
• 50
Work perForMed
Revenues
Financial income
Other income
Total output
Cost of materials*
Other expenses
Bought-in costs
Gross value added
Depreciation and amortisation of total tangible,
intangible and investment assets
Net value added
Applied to
Employees
Providers of finance
Government / public sector
Shareholders
Group
Minority interest
Net value added
2016
in € million
2016
in %
2015
in € million
94,163
875
670
98.4
0.9
0.7
92,175
200
914
Change in %
2015
in %
98.8
0.2
1.0
95,708
100.0
93,289
100.0
2.6
50,279
13,502
63,781
31,927
8,304
23,623
11,535
1,965
3,213
2,300
4,563
47
52.5
14.1
66.6
33.4
8.7
24.7
48.8
8.3
13.7
9.7
19.3
0.2
51,145
11,398
62,543
30,746
8,222
22,524
10,870
1,918
3,340
2,102
4,267
27
54.8
12.2
67.0
33.0
8.8
24.2
48.3
8.5
14.8
9.3
19.0
0.1
23,623
100.0
22,524
100.0
2.0
3.8
4.9
6.1
2.5
– 3.8
9.4
6.9
74.1
4.9
* Cost of materials comprises all primary material costs incurred for vehicle production plus ancillary material costs (such as customs duties, insurance premiums and freight).
Combined Management Report
75
BMW Group value added 2016
• 51
in %
Depreciation and
amortisation 8.7
14.1 Other expenses
Cost of materials 52.5
48.8 % Employees
24.7 Net value added
8.3 % Providers of finance
13.7 % Government / public sector
9.7 % Shareholders
19.3 % Group
0.2 % Minority interest
Business environment and review of operations
The general and sector-specific environment in
which BMW AG operates is the same as that for the
BMW Group and is described in the “Report on Eco-
nomic Position” section of the Combined Management
Report.
BMW AG develops, manufactures and sells cars and
motorcycles as well as spare parts and accessories
manufactured in-house, by foreign subsidiaries and
by external suppliers, and performs services related to
these products. Sales activities are carried out primarily
through branches, subsidiaries, independent dealer-
ships and importers. In 2016, BMW AG increased auto-
mobile sales volume by 80,359 units to 2,355,726 units.
This figure includes 305,726 units relating to series sets
supplied to the joint venture BMW Brilliance Automo-
tive Ltd., Shenyang, an increase of 17,971 units over
the previous year. At 31 December 2016, BMW AG
employed a workforce of 85,754 people, 894 more than
one year earlier.
76
Report on
Economic Position
Comments on
Financial Statements
of BMW AG
COMMENTS ON FINANCIAL
STATEMENTS OF BMW AG
Bayerische Motoren Werke Aktiengesellschaft
(BMW AG), based in Munich, Germany, is the parent
company of the BMW Group. The comments on the
BMW Group and Automotive segment provided in
earlier sections are also relevant for BMW AG, unless
presented differently in the following section. The
Financial Statements of BMW AG are drawn up in
accordance with the provisions of the German Com-
mercial Code (HGB) and the relevant supplementary
provisions contained in the German Stock Corpora-
tion Act (AktG).
The key financial and non-financial performance
indicators relevant for BMW AG are largely identical
and synchronous with those of the Automotive seg-
ment of the BMW Group and are described in detail
in the “Report on Economic Position” section of the
Combined Management Report.
Differences between the accounting policies used
in the BMW AG financial statements (prepared in
accordance with HGB) and the BMW Group Finan-
cial Statements (prepared in accordance with IFRS)
arise primarily in connection with the capitalisation
of intangible assets, the creation of valuation units,
the recognition and measurement of financial instru-
ments and provisions and the recognition of deferred
tax assets. Differences also arise in the presentation
of assets and liabilities in the balance sheet and of
income and expense items in the income statement.
The German Accounting Directive Implementation Act
(BilRUG) was applied for the first time with effect from
the beginning of the 2016 financial year. Comparative
figures have not been restated where this gave rise to
changes in the presentation of items in the balance
sheet or income statement. Further information
regarding the impact of BilRUG and the comparabil-
ity of individual income statement line items for the
financial year 2016 with those of the previous year
is provided in the notes to the Financial Statements
of BMW AG.
Combined Management Report Results of operations
BMW AG Income Statement
• 52
in € million
Revenues
Cost of sales
Gross profit
Selling expenses
Administrative expenses
Research and development expenses
Other operating income and expenses
Result on investments
Financial result
Income taxes
Profit after income tax
Other taxes
Net profit
Transfer to revenue reserves
Unappropriated profit available for distribution
77
2016*
2015
75,350
– 60,946
14,404
– 3,635
– 2,504
– 4,504
– 137
1,015
– 35
– 1,308
3,296
– 19
3,277
– 977
2,300
72,384
– 57,764
14,620
– 3,427
– 2,610
– 4,758
184
1,606
– 1,043
– 1,782
2,790
– 49
2,741
– 639
2,102
* German Accounting Directive Implementation Act (BilRUG) applied with effect from the beginning of the financial year 2016. Comparative figures for 2015 have not been adjusted.
The result on investments was down on the previous
year due to lower profit transfers from Group com-
panies. By contrast, the financial result improved by
€ 1,008 million, mainly due to the higher gains arising
on the fair value measurement of designated plan
assets and lower interest expenses for pensions. In
the latter case, the improvement was attributable to
a change in legislation concerning the methodology
required to be applied to determine the discount factor
for pension provisions.
The expense for income taxes relates primarily to
current tax for the financial year 2016.
After deducting the expense for taxes, the Company
reports a net profit of € 3,277 million, compared to
€ 2,741 million in the previous year.
78
Report on
Economic Position
Comments on
Financial Statements
of BMW AG
As a consequence of the first-time application of the
Financial Reporting Implementation Act (BilRUG) in
2016, the previous year’s figures are only comparable
to a limited extent with those of the financial year
under report. In particular, the amounts reported for
revenues, cost of sales, expenses by function, other
operating income and expenses are affected by the
new, extended definition of “revenues” and the nec-
essary reclassification of expenses related to revenues.
Revenues increased by 4.1 % year-on-year, mainly
reflecting higher sales volumes of the BMW X1 and
BMW 7 Series. In geographical terms, most of the
increase related to Asia and Europe. Sales to Group
entities accounted for € 56,412 million or 74.9 % of
total revenues of € 75,350 million.
Cost of sales increased by 5.5 % to € 60,946 million,
mostly due to the higher cost of materials. As a result,
gross profit decreased by € 216 million to € 14,404 mil-
lion.
Selling and administrative expenses increased overall
year-on-year, partly reflecting the cost of the larger
workforce and IT projects.
Research and development expenses related mainly
to new vehicle models (including relevant expenses
relating to the start-up of the new BMW 5 Series),
the development of drive systems and work on other
innovations. Compared to the previous year, research
and development expenses decreased by 5.3 %.
The net amount of other operating income and expens-
es deteriorated by € 321 million to a negative amount
of € 137 million, whereby the year-on-year decrease
mainly reflected the reclassification of income from
other services to the line item “Revenues” in conjunc-
tion with the first-time application of BilRUG. Higher
income from the reversal of provisions and the lower
expense for allocations to provisions, in particular
for commodity and currency contract risks, worked
in the opposite direction.
Combined Management Report Financial and net assets position
BMW AG Balance Sheet at 31 December
• 53
in € 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
Surplus of pension and similar plan assets over liabilities
Total assets
equity A nd liABilities
Subscribed capital
Capital reserves
Revenue reserves
Unappropriated profit available for distribution
Equity
Registered profit-sharing certificates
Pension provisions
Other provisions
Provisions
Liabilities to banks
Trade payables
Liabilities to subsidiaries
Other liabilities
Liabilities
Deferred income
Total equity and liabilities
79
2016*
2015
310
11,163
3,238
14,711
4,260
667
6,001
2,525
3,846
2,676
353
11,016
3,250
14,619
4,267
628
6,229
1,820
3,911
2,478
19,975
19,333
430
1,183
303
722
36,299
34,977
657
2,127
9,038
2,300
657
2,107
8,061
2,102
14,122
12,927
30
93
7,606
7,699
995
5,030
5,951
406
30
82
7,617
7,699
1,343
4,500
6,690
239
12,382
12,772
2,066
36,299
1,549
34,977
* German Accounting Directive Implementation Act (BilRUG) applied with effect from the beginning of the financial year 2016. Comparative figures for 2015 have not been adjusted.
80
Report on
Economic Position
Comments on
Financial Statements
of BMW AG
Capital expenditure on intangible assets and prop-
erty, plant and equipment in the year under report
totalled € 2,346 million (2015: € 2,748 million), down
by 14.6 % compared to the previous year. Depreciation
and amortisation amounted to € 2,233 million (2015:
€ 2,072 million).
At € 3,238 million, the carrying amount of investments
was similar to one year earlier (2015: € 3,250 mil-
lion). Further shares in SGL Carbon SE, Wiesbaden,
were purchased during the financial year 2016. An
impairment loss of € 64 million (2015: € 13 million)
was recognised in the year under report, reflecting
the decreased fair value in the investment in SGL
Carbon SE at 31 December 2016.
At € 4,260 million, inventories were practically identical
to the end of the previous year (2015: € 4,267 million).
Receivables from subsidiaries, most of which relate
to intragroup financing receivables, decreased slightly
by € 228 million to € 6,001 million.
The increase in other receivables and other assets
to € 2,525 million (2015: € 1,820 million) was mainly
attributable to higher receivables from companies with
which an investment relationship exists. Tax receiv-
ables and genuine repurchase (repo) transactions in
place at the end of the reporting period also increased
year-on-year.
Liquidity within the BMW Group is managed centrally
by BMW AG on the basis of a group-wide liquidity
concept, which revolves around the strategy of con-
centrating a significant part of the Group’s liquidity
at the level of BMW AG. An important instrument
used to achieve this aim is the cash pool headed by
BMW AG. The liquidity position reported by BMW AG
therefore reflects the global activities of BMW AG and
other Group companies.
Cash and cash equivalents went up by € 198 million
to € 2,676 million. At the same time, intragroup refi-
nancing volumes at the level of BMW AG were reduced.
Equity rose by € 1,195 million to € 14,122 million, tak-
ing the equity ratio from 37.0 % to 38.9 %.
In order to secure obligations resulting from pre-re-
tirement part-time work arrangements and pension
obligations, investments in fund assets totalling
€ 490 million were transferred to BMW Trust e. V.,
Munich, in conjunction with a Contractual Trust
Arrangement (CTA). Fund assets are offset against the
related guaranteed obligations. The resulting surplus
of assets over liabilities is reported in the BMW AG
balance sheet on the line “Surplus of pension and
similar plan assets over liabilities”.
Under the motto “THE NEXT 100 YEARS”, almost all
of the workforce received a special bonus in conjunc-
tion with the BMW AG’s centenary anniversary. For
the most part, the bonus was paid in the form of a
starting contribution to a new defined contribution
component of the BMW pension plan. In future, 10 %
of the annual profit share payable by BMW AG will
be paid into the plan, for which a minimum rate of
return is guaranteed.
Pension provisions, net of designated plan assets,
increased from € 82 million to € 93 million.
Other provisions were at a similar level to the previous
year and comprise mainly obligations for person-
nel-related expenses, warranties, selling activities,
litigation and liability risks as well as risks relating
to commodity and currency contracts.
Liabilities to banks decreased as a result of the repay-
ment of project-related loans.
Deferred income went up by € 517 million to
€ 2,066 million and comprised mainly amounts relat-
ing to services still to be performed for service and
maintenance contracts.
Combined Management Report 81
Risks and opportunities
BMW AG’s performance is highly dependent on the
same set of risks and opportunities that affect the
BMW Group and which are described in detail in the
“Report on Outlook, Risks and Opportunities” section
of the Combined Management Report. As a general
rule, BMW AG participates in the risks entered into by
Group entities on the basis of the relevant shareholding
percentage.
BMW AG is integrated in the group-wide risk man-
agement system and internal control system of the
BMW Group. Further information is provided in the
“Internal Control System and Risk Management System
Relevant for the Financial Reporting Process” section
of the Combined Management Report.
Outlook
Due to its dominant role in the Group and its close ties
with Group entities, expectations for BMW AG with
respect to the Company’s financial and non-financial
performance indicators correspond largely to the
BMW Group’s outlook for the Automotive segment,
which is described in detail in the “Report on Outlook,
Risks and Opportunities” section of the Combined
Management Report.
KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, has
issued an unqualified audit opinion on the financial
statements of BMW AG, of which the balance sheet and
the income statement are presented here. The BMW AG
financial statements for the financial year 2016 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.
82
Report on Outlook,
Risks and
Opportunities
Outlook
REPORT ON OUT-
LOOK, RISKS AND
OPPORTUNITIES
Positive Company performance
expected to continue in 2017
Automobile and motorcycle sales
expected to reach new record levels
Outlook foresees increase in
revenues and profit
World economy expected to grow
despite risks
OUTLOOK
The report on outlook, risks and opportunities describes
the expected development of the BMW Group, includ-
ing the associated material risks and opportunities,
from a Group management perspective. In line with
the Group’s internal management system, the out-
look covers a period of one year. However, risks and
opportunities are managed on the basis of a two-year
assessment. The report on risks and opportunities
therefore covers a period of two years.
The report on outlook, risks and opportunities
contains forward-looking assertions based on the
BMW Group’s expectations and assessments, which
are subject to uncertainty. As a result, actual outcomes
can deviate, for example on account of political and
economic developments – either positively or nega-
tively – from the expectations described below. Further
information can be found in the section “Risks and
Opportunities”.
Assumptions used in the outlook
The following outlook relates to a forecast period
of one year and is based on the composition of the
BMW Group during that period. The outlook takes
account of all information known up to the date on
which the financial statements were prepared for issue
and which could have an effect on the overall perfor-
mance of the Group. The expectations contained in
the outlook are based on the BMW Group’s forecasts
for 2017 and reflect its most recent status. The basis
for the preparation of and the principal assumptions
used in the forecasts – which consider the consensus
opinions of leading organisations, such as economic
research institutes and banks – are set out below. The
BMW Group’s forecast is based on these assumptions.
The continuous forecasting process ensures that the
BMW Group is ready to take advantage of oppor-
tunities as they arise and to react appropriately to
unexpected risks. The principal risks and opportuni-
ties are described in detail in the section “Risks and
Opportunities”. The risks and opportunities discussed
in that section are relevant for all of the BMW Group’s
performance indicators and could result in variances
between the outlook and actual outcomes.
Combined Management Report 83
Despite uncertainty regarding the country’s future
political and economic course, GDP in the USA is
expected to grow faster in 2017 than in the preced-
ing year (+ 2.3 %). The US Federal Reserve is likely to
continue its policy of moderate interest rate rises in
2017. After decreasing in 2016, industrial production is
predicted to grow significantly in 2017, with a positive
impact on GDP growth.
According to forecasts, Japan can expect a GDP growth
rate of 1.0 % in 2017, with rising exports potentially
providing renewed economic momentum. An expect-
ed increase in domestic consumer spending could also
help revive the Japanese economy.
The Indian economy is forecast to expand by 7.4 %
in 2017, boosted by the gradual implementation of
business-friendly structural reforms. After a number
of years of deep recession, Russia (+ 1.2 %) and Brazil
(+ 0.6 %) could return to growth in 2017, helped by
rising raw materials prices.
Economic outlook
Despite greater political uncertainty, the global
economy is forecast to grow by around 3.4 % in 2017,
slightly faster than in the preceding year. A number of
factors make uncertainty likely to persist with regard
to future economic and political developments. These
include the negotiations between the UK and the EU
following the Brexit vote and the future course of the
new US administration. Moreover, the existing risks to
financial stability due to high sovereign debt levels in
Europe and Japan, more restrictive monetary policies
in the USA and high levels of corporate debt in China
have not diminished compared to the previous year.
Further information on political and global economic
risks can be found in the section “Risks and Oppor-
tunities”.
Economic growth in the eurozone is forecast to slow
down slightly to 1.5 % in 2017. Germany, Europe’s
largest economy, is expected to grow at a similar rate
(+ 1.5 %). In macroeconomic terms, the prospects of the
other eurozone countries are also expected to develop
positively. GDP growth rates in France (+ 1.3 %) and
Italy (+ 0.8 %) in 2017 are expected to be similar to the
preceding year. The Spanish economy is forecast to
grow by 2.4 % and therefore faster than the eurozone
average. Greece also is expected to achieve growth
of 1.7 %.
It is currently assumed that the UK government will
give notice of its intention to leave the EU during the
first half of 2017, thus triggering the start of official
negotiations. Uncertainty regarding the future rela-
tionship is currently influencing both investment
and consumer spending levels in the UK. As a result
of the current situation, it is expected that the UK
economy will see a distinct loss of momentum, with
a significantly lower year-on-year growth rate of 1.2 %.
In China, economic growth is again predicted to
weaken slightly in the current year, resulting in a
growth rate of around 6.4 %. Reducing over-capaci-
ties in various industrial sectors and the controlled
reduction of high debt levels will present the Chinese
government with significant challenges in 2017. The
risk of a significant economic downturn in China
therefore cannot be ruled out.
84
Report on Outlook,
Risks and
Opportunities
Outlook
Currency markets
Currencies of particular importance for the interna-
tional operations of the BMW Group are the Chinese
renminbi, the US dollar, the British pound and the
Japanese yen. These major currencies could be subject
to a significant degree of fluctuation again in 2017.
Given that the Chinese renminbi is likely to continue
to move in the same direction as the US dollar in the
short term, it is likely to appreciate slightly against the
euro in 2017. If, however, the Chinese central bank
decides to intervene in the currency markets, it could
result in a relatively narrow fluctuation range.
A more restrictive monetary policy in the USA would
boost the value of the US dollar against the euro.
Continued economic recovery in the eurozone, com-
bined with rising inflation, could prompt the ECB to
implement a gradual reduction in government bond
purchases. In that case, the loss in value of the euro
against the US dollar would be less pronounced.
The uncertain political situation in the UK following
the Brexit vote could lead to capital exports and
encourage the Bank of England to retain its expan-
sionary monetary policy. If the UK economy slows
down at a more pronounced rate than expected in
2017, the Bank of England could adopt additional
measures to increase the money supply. As a result,
the British pound could either stabilise at its current
level or continue to lose value in the short term.
The central bank in Japan could continue to pursue its
highly expansionary monetary policy for the foresee-
able future. This policy could result in the yen hardly
changing in value against the euro or even losing in
value, given that monetary policy in the eurozone is
currently not expected to be expanded.
As US monetary policies continue to normalise, the
currencies of numerous emerging economies are
likely to remain under pressure in the short term.
Countries that export raw materials and have current
account and fiscal deficits, such as South Africa or
Brazil, are most likely to be affected. Any increase in
raw materials prices would generally have a positive
impact on these economies.
Automobile markets
Overall, the world’s automobile markets are forecast
to grow by around 1.8 % to an estimated 89.0 mil-
lion units in 2017. The US market is expected to
grow by 0.3 % to 17.6 million units. The forecast for
China points to an increase of around 5.7 % to some
25.5 million units. The country’s interior provinces
are expected to contribute significantly to growth as
they catch up.
Despite the region’s continued economic revival,
automobile markets in Europe are not expected to
grow significantly. The trend in Germany is expected
to remain flat (3.4 million). Registrations in France are
forecast to fall slightly (– 1.7 %) to around 1.95 million
units. After its strong performance in 2016, the Italian
automobile market is expected to grow at a modest
0.7 % to around 1.86 million units.
The automobile market in Japan is likely to contract
further in 2017. Registrations are forecast to be in the
region of 4.7 million units and hence 1.6 % down on
the previous year.
After dropping back in 2016, the automobile markets
in the world’s major emerging economies are expected
to recover in 2017, with registrations predicted to grow
by 4.1 % to 1.3 million units in Russia and by 3.0 % to
1.7 million units in Brazil.
Motorcycle markets
The world’s motorcycle markets in the 250 cc plus class
are forecast to grow slightly in 2017. In Europe, the
positive trend is set to continue in the major markets
of Germany, France, Italy and Spain. The BMW Group
expects the US market to remain at the previous year’s
level during the current financial year.
Combined Management Report 85
Outlook for the BMW Group
BMW Group
Profit before tax: slight increase expected
Competition on international automobile markets
is set to remain intense during the current year. The
situation is likely to be exacerbated by political and
macroeconomic uncertainties in Europe as well as the
unforeseeable consequences of the Brexit decision in
the UK. Moreover, the strategy of the new US admin-
istration regarding economic policy remains unclear.
Further information is provided in the sections on
political and economic risks in the section “Risks and
Opportunities”.
Nevertheless, the BMW Group intends to continue its
growth course in 2017. New vehicles such as the new
BMW 5 Series and the new MINI Countryman and
new motorcycles such as the two R NineT models as
well as services are expected to make a contribution
to earnings growth. Investments in future-oriented
projects, including vehicle electrification, digitalisa-
tion and the expansion of the production network,
will, however, counteract the general upward trend.
Overall, Group profit before tax is expected to increase
slightly year-on-year (2016: € 9,665 million).
Workforce size at year-end: slight increase expected
Based on current forecasts, the BMW Group’s work-
force is again expected to grow slightly in 2017 (2016:
124,729 employees). The main factors driving the
expected increase will be projects aimed at securing
the Group’s future, growth of automobile and motor-
cycles business and the expansion of financial and
mobility services.
Financial Services markets
The pace of global economic growth is expected to pick
up slightly in 2017. With the exception of the USA,
central banks in industrialised countries are likely to
maintain their expansionary course.
The Fed is expected to continue raising interest rates in
the course of 2017. The expansionary monetary poli-
cies of the ECB are likely to be continued in 2017, with
a slightly reduced volume of monthly bond purchases.
The UK economy is expected to come under more
pressure as a consequence of the Brexit vote. The Bank
of England has already announced its intention to
take appropriate measures as necessary.
Growth in China is set to cool further in 2017, with
the Chinese central bank expected to implement a raft
of measures to accompany the transformation process
for the domestic economy.
Japan’s central bank may have few tools left to stimu-
late the country’s economy and rate of inflation. Public
sector spending is therefore expected to increase as a
means to kick-start growth.
Expected consequences for the BMW Group
Future developments on international automobile
markets also have a direct impact on the BMW Group.
Whereas competition is likely to intensify in con-
tracting markets, new opportunities appear in
growth regions. Sales volumes in some countries
are likely to be significantly affected by challenges
in the competitive environment. Europe’s markets
are not expected to maintain the pace of growth
seen in 2016. Demand in the Americas region is
likely to remain flat. Asia is expected to continue
its upward trend.
Due to its global business model, the BMW Group
is well placed at all times to exploit opportunities,
including those arising at short notice. Coordination
between the Group’s sales and production networks
also helps cushion the impact of unforeseeable
developments in the various regions. Investments
in markets important for the future are also a basis
for further growth, while simultaneously expanding
the global presence of the BMW Group. Thanks to
its three strong brands – BMW, MINI and Rolls-
Royce – the BMW Group is expected to remain on
course for success during the current year.
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Report on Outlook,
Risks and
Opportunities
Outlook
Automotive segment
Deliveries to customers: slight increase expected
The BMW Group expects a further year-on-year
increase in sales of BMW, MINI and Rolls-Royce brand
vehicles and aims to achieve again in 2017 a leading
position in the global premium segment. Balanced
growth in major sales regions will help to even out
volatilities in individual markets. Assuming economic
conditions do not deteriorate, deliveries to custom-
ers are forecast to rise slightly to a new high (2016:
2,367,6031 units) in 2017.
Important contributions to continued growth will
come in particular from new models. The all-new
BMW 5 Series Sedan has been available since mid-Feb-
ruary 2017. The BMW 5 Series iPerformance and M
Performance models followed in March. The BMW
5 Series iPerformance model as a plug-in hybrid
is now available worldwide. The model revisions
of the BMW 4 Series and the BMW M4 Coupé and
Convertible were also launched in March. The new
BMW 5 Series Touring is scheduled for launch in mid-
June. The second generation of its highly successful
MINI Countryman model was introduced in February.
Towards the middle of year, a John Cooper Works and
a plug-in hybrid will be added to the MINI Country-
man range. Further new models are planned for the
second half of 2017.
1 Includes the
joint venture
BMW Brilliance
Automotive,
Shenyang Ltd.
(2016: 316,200
units).
2 EU-28.
Fleet carbon dioxide emissions 2:
slight decrease expected
The BMW Group is continuing its efforts to reduce
fuel consumption and carbon dioxide emissions.
According to forecasts, carbon dioxide emissions
for the vehicle fleet will decrease slightly during the
outlook period, thus continuing the trend seen in
previous years (2016: 124 grams CO2 / km).
Revenues: slight increase expected
Automotive segment revenues are expected to rise
slightly in line with sales volume. The Company
expects that segment revenues will increase slightly
in 2017 (2016: € 86,424 million).
EBIT margin in target range between 8 and 10 %
expected
An EBIT margin within a range of 8 to 10 % (2016:
8.9 %) remains the target for the Automotive segment.
Return on capital employed:
slight decrease expected
Segment RoCE is forecast to decrease slightly (2016:
74.3 %). However, the long-term target RoCE of at
least 26 % for the Automotive segment will be easily
surpassed.
Motorcycles segment
Deliveries to customers:
significant increase expected
The BMW Group expects the upward trend in the
Motorcycles segment to continue. New models, includ-
ing the R NineT Pure, the R NineT Racer, the K 1600 B
and the G 310 GS were unveiled at international trade
fairs held in autumn 2016. Together with updated
versions of the R 1200 GS, the S 1000 R, the S 1000 RR,
the K 1600 GT and the luxury GTL, the new models
will expand the product portfolio significantly and
appeal to new customer groups. Overall, deliveries of
BMW motorcycles to customers are forecast to increase
significantly year-on-year (2016: 145,032 units).
EBIT margin in target range between 8 and 10 %
expected
With effect from the beginning of the financial
year 2017, the EBIT margin will also serve as a key
performance indicator for the Motorcycles segment.
Accordingly, segment performance will also be man-
aged based on the operating return on sales (EBIT
margin) in future. Further information can be found
in the description of the Group management system in
the section “General Information on the BMW Group”.
In this context, a target range of 8 to 10 % has also been
set for the Motorcycles segment. The EBIT margin for
the Motorcycles segment is expected to lie within this
range in 2017 (2016: 9.0 %).
Return on capital employed expected at previous
year’s level
Segment RoCE in 2017 is forecast to be in line with
the previous year (2016: 33.0 %). The long-term target
RoCE of 26 % for the Motorcycles segment will there-
fore be surpassed.
Combined Management Report Financial Services segment
Return on equity: slight decrease expected
According to forecasts, the Financial Services segment
is likely to continue performing well in 2017. However,
it is expected that regulatory requirements for equity
capital will be tightened and the risk situation will
normalise in the forecast period. The segment RoE is
therefore expected to decrease slightly year-on-year
(2016: 21.2 %). The target of at least 18 % is neverthe-
less likely to be exceeded again.
Overall assessment by Group management
Business is expected to develop positively in the
financial year 2017. The introduction of numerous
new automobile and motorcycle models as well as the
expansion of individual mobility-related services give
reason to expect that profitable growth will contin-
ue in the current year. Despite the many challenges
described above, Group profit before tax is forecast to
grow slightly. Based on the forecast of a slight increase
Key performance indicators
• 54
BMW Group
Profit before tax
Workforce at year-end
AutoMotive seGMent
Sales volume 1
Fleet emissions 2
Revenues
EBIT margin
Return on capital employed
Motorcycles seGMent
Sales volume
EBIT margin
Return on capital employed
87
in deliveries to customers, Automotive segment rev-
enues are also expected to increase slightly in 2017.
At the same time, a slight decrease in fleet carbon
dioxide emissions is expected. The Group’s targets are
to be met with a slight rise in the workforce size. The
Automotive segment’s EBIT margin in 2017 is set to
remain within the target range of between 8 and 10 %,
while its RoCE is forecast to decrease slightly. A slight
fall is also forecast for the RoE in the Financial Services
segment. Both performance indicators will be above
their long-term targets of 26 % (RoCE) and 18 % (RoE)
respectively. Deliveries to customers in the Motor-
cycles segment are forecast to rise significantly, with
an EBIT margin within the target range of between 8
and 10 % and RoCE at the previous year’s level.
Depending on the political and economic situation
and the outcomes of the risks and opportunities
described below, actual business performance could,
however, differ from current expectations.
2016
2017 Outlook
9,665
124,729
slight increase
slight increase
2,367,603
124
86,424
8.9
74.3
slight increase
slight decrease
slight increase
between 8 and 10
slight decrease
145,032
significant increase
9.0
33.0
between 8 and 10
in line with last year’s level
€ million
units
g CO2 / km
€ million
%
%
units
%
%
FinAnciAl services seGMent
Return on equity
1 Including the joint venture BMW Brilliance Automotive Ltd., Shenyang (2016: 316,200 units).
2 EU-28.
%
21.2
slight decrease
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Report on Outlook,
Risks and
Opportunities
Risks and
Opportunities
RISKS AND
OPPORTUNITIES
As a worldwide-leading manufacturer of premium cars
and motorcycles and provider of premium financing
and mobility services, the BMW Group is exposed
to numerous uncertainties and changes. Making full
use of the opportunities arising out of change is a
fundamental aspect of the Group’s corporate success.
In order to achieve growth, drive profitability, boost
efficiency and maintain sustainable levels of business
going forward, the BMW Group consciously takes
certain risks.
Management of opportunities and risks is a funda-
mental prerequisite for the Group’s ability to react
appropriately to changes in political, legal, technical
or economic conditions. All identified opportunities
and risks are addressed in the Outlook Report, if
likely to materialise. The following sections focus
on potential future developments or events, which
could result in a positive deviation (opportunities)
or a negative deviation (risk) from the BMW Group’s
outlook. As a general rule, the earnings impact of
risks and opportunities is assessed separately, i. e.
without off-setting.
Risk management in the BMW Group
• 55
Opportunities and risks are assessed as a general rule
over a medium-term period of two years. As part of
the risk management process, all potential risks of
loss (individual and accumulated risks) that represent
a threat to the company are monitored and managed.
As a matter of principle, any risks capable of posing a
threat to the going-concern status of the BMW Group
are avoided. If there is no specific reference to a seg-
ment, opportunities and risks relate to the Automotive
segment. The scope of entities covered by the report
on risks and opportunities corresponds to the scope
of consolidated entities included in the BMW Group
Financial Statements.
Risk management system
The objective of the risk management system, and one
of the key functions of risk reporting, is to identify,
record and actively manage any internal or external
risks that could pose a threat to the attainment of
the Group’s corporate targets. The risk management
system covers all significant risks to the Group and
any which could pose a threat to its going-concern
status. In terms of structure, the responsibility for
risk reporting lies with each individual employee
and manager in their specific roles – and not with
a centralised unit. Every employee and manager is
required to report any risks identified via the relevant
reporting channels. This requirement is set out in
guidelines that apply throughout the Group.
Group-wide
risk management
Identification
Analysis and
Measurement
Effectiveness
Usefulness
Compliance
Committee
Reporting /
Monitoring
Completeness
Risk
Management
Steering
Committee
Controlling
Supervisory
Board
Board of
Management
Measures
Group
Audit
Internal Control System
Combined Management Report 89
Risk management process
The risk management process applies throughout the
Group and comprises the early identification and
assessment of risks, comprehensive analysis and risk
measurement, the coordinated use of suitable man-
agement tools and also the monitoring and evaluation
of any measures taken.
Risks reported from within the network are firstly
presented for review to the Risk Management
Steering Committee, chaired by Group Controlling.
After review, the risks are reported to the Board
of Management and the Supervisory Board. Risks
which are significant or which threaten the Group’s
going-concern status are classified according to their
potential to impact the Group’s results of operations,
financial position and net assets. The level of risk is
then quantified in each case according to its proba-
bility of occurrence and the respective risk mitigation
measures.
The risk management system is regularly examined by
the Internal Audit. By sharing experiences with other
companies on an ongoing basis, the BMW Group
endeavours to incorporate new insights in the
risk management system, thus ensuring continual
improvement. Regular training and further develop-
ment programmes as well as information events at
the BMW Group, particularly within the risk man-
agement network, are invaluable ways of preparing
those involved in the process for new or additional
challenges.
In addition to comprehensive risk management, man-
aging the business on a sustainable basis also consti-
tutes one of the Group’s core corporate principles.
Any risks or opportunities relating to sustainability
issues are examined and discussed by the Sustain-
ability Committee. Resulting strategic options and
measures for the BMW Group are put forward to
the Sustainability Board, which includes the entire
Board of Management. Risk aspects discussed are
integrated within the Group-wide risk network. The
overall composition of the Risk Management Steering
Committee and the Sustainability Committee ensures
that risk and sustainability management are closely
coordinated.
The Group risk management system comprises
a decentralised network covering all parts of the
business and is steered by a centralised risk manage-
ment function. Each of the BMW Group’s divisions
is represented within the risk management network
by so-called Network Representatives. The network is
embedded within the formal organisational structure.
This promotes its visibility and underlines the impor-
tance of risk management within the BMW Group. The
duties, responsibilities and tasks of the centralised risk
management unit and the Network Representatives
are clearly described, documented and understood.
Group risk management is geared towards meeting
the following three criteria: effectiveness, usefulness
and completeness.
In view of the dynamic growth of business of the
BMW Group and the increasingly volatile environ-
ment in which it operates, one of the key areas con-
sidered in developing the risk management system
has been the ability to assess the overall risk situation
of the BMW Group. A risk-bearing capacity model has
been developed for the BMW Group, based on the
established controlling models used in the Financial
Services segment as in the banking sector to ensure
risk-bearing capacity. Using a limit control system
to manage significant financial risks on a month-by-
month basis, measures are in place to ensure that
the asset cover, in the form of equity and forecast
Group earnings for the next twelve months, always
exceeds the prevailing risk situation and the risk level
associated with the business strategy currently being
pursued. These controls facilitate the early identifica-
tion of developments which could pose a threat to the
BMW Group’s going-concern status. The results of the
calculations of risk bearing capacity are incorporated
in the assessment of the overall risk situation. The
processes and methodologies used to report risks are
regularly reviewed. During the financial year 2016,
the risk catalogue introduced three years earlier was
tested for effectiveness and revised as appropriate.
Identified risks are aggregated into risk categories on
the basis of the risk catalogue. Improved reporting
channels ensure effective systematic risk control and
earlier reporting of risks. Transparency of external
reporting has also been increased, including the
introduction of an additional sub-category “Market
development” to the category “Sales and marketing”,
which enables a distinction to be made between mar-
ket risks typical for the sector and operational risks
relating to the BMW Group’s specific sales network
structure.
Risk management for the Group as a whole falls under
the remit of the Risk Management Steering Commit-
tee, the Compliance Committee, the Internal Control
System and the Group Internal Audit.
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Risks and
Opportunities
Risks and
Opportunities
Risk management procedures in place in the Financial
Services segment also address regulatory issues and
requirements, such as Basel III. Internal methods used
to identify, measure, manage and monitor risks within
the Financial Services segment comply with national
and international standards. The adopted risk strategy,
in combination with a set of strategic principles and
guidelines, serves as the basis for risk management
within the Financial Services segment. At the heart
of the risk management process is a clear division
between front- and back-office activities and a compre-
hensive internal control system. The main instrument
of risk management within the Financial Services
segment is ensuring that the Group’s risk-bearing
capacity is not exceeded. All risks (defined as unex-
pected losses) must be covered at all times in line
with risk appetite by an asset cushion in the form
of equity capital. Unexpected losses are measured
according to various value-at-risk models, which are
validated at regular intervals. Risks are aggregated
after taking account of correlation effects. In addition
to assessing the Group’s ability to bear risk under nor-
mal circumstances, stress scenarios are also taken into
consideration. The segment’s risk-bearing capacity is
monitored regularly with the aid of an integrated limit
system that also differentiates between the various
risk categories.
Risk measurement
In order to determine which risks can be considered
significant in relation to results of operations, financial
position and net assets and to performance indica-
tors of the BMW Group, risks are classified as high,
medium or low. The impact of risks is measured and
reported net of risk mitigation measures (net basis).
When a risk materialises, the overall impact on the
results of operations, financial position and net assets
is measured for the two-year assessment period and
allocated according to the following categories:
Class
Low
Medium
High
Earnings impact
> €0 – 500 million
> €500 – 2,000 million
> €2,000 million
In the following sections, the term “earnings impact”
is used consistently to cover the overall impact on the
results of operations, financial position and net assets.
The significance of risks for the BMW Group is deter-
mined on the basis of risk level. The measurement of
risk level takes account of both earnings impact (net
of appropriate countermeasures) and the likelihood
of occurrence. The risk level is approximated in the
case of risks measured on the basis of “value at risk”
and “cash flow at risk” models. These approximations
flow into the assessment of the significance of the
risks, resulting in increased comparability between
risk categories compared to the previous year.
Overall, the following criteria apply for the purposes
of classifying the risk level:
Class
Low
Medium
High
Risk amount
> €0 – 50 million
> €50 – 400 million
> €400 million
Opportunity management system and
opportunity identification
New opportunities regularly present themselves in
the dynamic business environment in which the
BMW Group operates. Macroeconomic trends and
sector-specific and general business environment,
including external regulations, suppliers, customers
and competitors, are monitored on a continual basis.
Identifying opportunities is an integral part of the
process of developing strategies and drawing up
forecasts for the BMW Group. The Group’s product
and service portfolio is continually reviewed on the
strength of these analyses and new product projects,
for example, presented to the Board of Management
for consideration.
The continuous optimisation of important business
processes and strict cost controls are essential to
ensuring profitability and a high return on capital
employed. Probable measures to increase profitability
are incorporated in the outlook. One example is the
implementation of modular-based production and
common architectures, which enable a greater com-
monality between different models and product lines.
This strategy contributes to improved profitability by
reducing development costs and other investment on
the series development of new vehicles. This supports
economies of scale in production costs and increases
production flexibility. Moreover, a more competitive
cost basis opens up opportunities to engage in new
market segments.
The implementation of identified opportunities is
undertaken on a decentralised basis within the rel-
evant functions. The significance of opportunities
for the BMW Group is classified in the categories
“significant” and “insignificant”.
Combined Management Report Risks and opportunities
The following table provides an overview of all risks
and opportunities and illustrates their significance
for the BMW Group.
Risks and opportunities which could, from today’s
perspective, have a significant impact on the results
of operations, financial position and net assets of the
BMW Group are described in the following sections.
91
Overall, neither at the balance sheet date nor at the
date on which the Group Financial Statements were
prepared were any risks identified that could pose a
threat to the going-concern status of the BMW Group.
risks A nd opportunities
Macroeconomic risks and opportunities
Strategic and sector risks and opportunities
Changes in legislation and regulatory requirements
Market developments
Risks and opportunities relating to operations
Production and technology
Purchasing
Sales and marketing
Information, data protection and IT
Financial risks and opportunities
Foreign currencies
Raw materials
Liquidity
Pension obligations
Risks and opportunities relating to the provision of financial services
Credit risk
Residual value
Interest rate changes
Operational risks
Legal risks
Risk level
Change compared
to prior year*
Opportunities
Change compared
to prior year
High
Stable
Insignificant
Stable
Medium
High
High
Medium
Low
High
Medium
Low
Low
Medium
Medium
Medium
Low
Low
Medium
Stable
Stable
Stable
Stable
Stable
Insignificant
Insignificant
Insignificant
Insignificant
Insignificant
Increased
Insignificant
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Significant
Significant
–
Significant
Significant
Significant
Significant
–
–
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
–
Stable
Stable
Stable
Stable
–
–
* Prior-year classifications have been amended in line with the revision of the risk catalogue described in the section “Risk Management System” and the measurement of risk amount described in the section
“Risk measurement”.
Macroeconomic risks and opportunities
Economic conditions influence business performance
and hence the results of operations, financial posi-
tion and net assets of the BMW Group. Unforeseen
disruptions in global economic ties can have highly
unpredictable effects. Macroeconomic risks can lead
to reduced purchasing power in the countries and
regions involved and lead to reduced demand for the
products and services offered by the BMW Group.
If macroeconomic risks were to materialise, they
could – due to sales volume fluctuations – have a
high earnings impact over the two-year assessment
period. Overall, the risk level attached to macroeco-
nomic risks is classified as high. Macroeconomic risks
are evaluated on the basis of historical data and by
means of a cash-flow-at-risk approach, supplemented
by scenario analyses.
Given the political events that have occurred during
the financial year under report, future global economic
developments are currently subject to a high degree
of uncertainty, in particular with respect to potential
barriers that could affect global trade. The outcome
of the elections in the USA in November 2016, the
planned exit of the UK from the EU and possible
election wins for anti-globalisation parties in the EU
in the coming years could result in higher tariff and
non-tariff barriers to trade.
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Report on Outlook,
Risks and
Opportunities
Risks and
Opportunities
The possible introduction of trade barriers by the new
US administration could have an adverse impact on the
BMW Group’s operations in the form of less favourable
conditions for importing vehicles. Moreover, counter-
measures by the USA’s trading partners could slow
down global economic growth and consequently have
an adverse impact on the export of vehicles produced
in the USA. The BMW Group’s production strategy
involves local production both in the USA and in other
important trading regions. The strategy of regional
production reduces the existing risk of trade barriers.
Nevertheless, any increase in trade barriers would
have an adverse impact on the BMW Group.
The Brexit plan could have a long-term adverse
impact on the BMW Group, particularly as a result of
increased trade barriers in relation to the European
single market. In the short and medium term, too,
uncertainty regarding the outcome of the negotiations
with the EU could lead to reduced customer spending
and trigger further unfavourable currency effects.
Unresolved structural problems in the eurozone, a
potential increase in anti-globalisation political sen-
timent and a possible renewed economic downturn
could potentially hold down growth prospects for the
BMW Group. European integration with a unified
economic and currency area remains an important
pillar of economic stability in Europe.
The transition of the Chinese economy from an invest-
ment-driven to a consumer-driven market is likely to
entail slower growth rates and greater instability on
financial markets. If the Chinese economy were to
grow at a significantly slower pace than expected, the
consequence could be not only a decline in automo-
bile sales, but also, potentially, lower demand for raw
materials, which would have a negative impact above
all on emerging economies such as Brazil or Russia.
Any renewed drop in raw material prices could result
in lower demand from these countries. The threat of
turmoil on the Chinese property, stock and banking
markets and an overly rapid hike in interest rates by
the US Federal Reserve pose considerable risks for
global financial market stability.
Furthermore, increasing political unrest, military
conflicts, terrorist activities, natural disasters or
pandemics could have a lasting negative impact on
the global economy and international capital markets.
The BMW Group counters macroeconomic risks pri-
marily by internationalising its sales and production
structures, in order to minimise the extent to which
earnings depend on risks in individual countries and
regions. Flexible sales and production processes across
the BMW Group increase the ability to react quickly
to regional economic developments.
Should the global economy develop significantly
better than reflected in the outlook, macroeco-
nomic opportunities could arise with a potentially
favourable impact on the revenues and earnings of
the BMW Group. Stronger Chinese growth, econo-
my-boosting structural reforms within the eurozone,
growth stimulus through infrastructure investment
in the USA or more robust consumer spending by
US households despite rising financing costs, could
result in significantly stronger sales volume growth,
reduced competitive pressures and improved pricing.
Macroeconomic opportunities that could generate a
sustainable impact on earnings are currently classified
by the BMW Group as insignificant.
Strategic and sector risks and opportunities
Changes in legislation and regulatory requirements
Abrupt introduction of tightened new laws and regu-
lations represents a significant risk for the automobile
industry, particularly in relation to emissions, safety
and consumer protection, as well as taxes on vehicle
purchases and use. Country- and sector-specific trade
barriers can also change at short notice. Unfavourable
developments in any of these areas can necessitate
significantly higher levels of investment and ongoing
expenses or influence customer behaviour. Risks from
changes in legislation and regulatory requirements
could have a low impact on earnings over the two-year
assessment period. The risk level attached to these
risks is classified as medium.
The BMW Group sees a clear move towards increasing-
ly stringent vehicle emissions regulations, particularly
for conventional drive systems, not only in the devel-
oped markets of Europe and North America, but also
in emerging markets such as China. The introduction
of new measurement procedures to represent stand-
ard driving cycles, combined with significantly lower
emissions thresholds, represents a major challenge for
the automotive sector. The BMW Group counters this
risk with its Efficient Dynamics concept and continues
to play a pioneering role within the premium segment
in reducing both fuel consumption and emissions.
Electric drive systems are being built into a growing
number of models, namely in BMW i vehicles since
2013 and – following the introduction of the X5 in
2015 – in models using plug-in-hybrid technologies,
thus contributing to the BMW Group’s effort to comply
with statutory carbon emissions requirements.
Combined Management Report Further risks can result from the tightening of existing
import and export regulations. These lead primarily to
additional expenses, but can also restrict the import
and export of vehicles or parts. Increased taxes on
high-value consumer goods have also been proposed
in a number of regions. Taxes of this kind in major
markets of the BMW Group, such as China, could have
a negative impact on regional demand and margins
on BMW Group vehicles in the automobile segments
concerned.
Setting the regulatory framework for innovative mobil-
ity solutions and providing state-funded incentives
are important prerequisites for developing mobility
services and introducing product innovations, such
as autonomous driving. If the necessary public meas-
ures are implemented globally at a faster pace than
expected, opportunities will arise for the BMW Group
to expand new business segments more quickly.
Alternative mobility services, such as DriveNow,
ChargeNow and ParkNow, could benefit from sup-
portive regulatory measures, for example through
systematic application in German cities of car-sharing
legislation that comes into force in September 2017.
Access restrictions for inefficient vehicles with lower
environmental standards could provide a competitive
advantage and hence an opportunity for BMW Group
vehicles equipped with Efficient Dynamics technol-
ogies and for BMW i and iPerformance vehicles with
alternative drive systems. The market acceptance and
sales volumes of product innovations that are either
planned for the future or have recently been launched
could turn out to be greater than predicted in the
outlook. Good examples of such opportunities are
implementation of the 360° ELECTRIC portfolio in the
field of electric mobility, achieving growth in the field
of mobility services, and collaborating with Toyota on
developing a hydrogen fuel cell system.
The BMW Group’s earnings could also be positively
affected in the short to medium term by changes in
trading policies. A possible reduction in tariff barriers,
import restrictions or direct excise duties could lower
the cost of materials for the BMW Group, also enabling
products and services to be offered to customers at
lower prices. Further opportunities from changes in
legislation and regulatory requirements compared
to the outlook for the earnings performance of the
BMW Group are classified as insignificant.
93
Market development
In addition to the potential impact of macroeconomic
factors and sector-specific political framework condi-
tions, it is also extremely difficult to predict the impact
of increasingly fierce competition among established
manufacturers and the emergence of new competitors.
Unforeseen consumer preferences and changes in how
brands are perceived can give rise to opportunities
and risks. If market risks were to materialise, they
could have a high earnings impact over the two-year
assessment period. The risk level is classified as high.
Fierce competition, particularly in Western Europe,
the USA and China, is a potential reason for lower
demand and for fluctuations in the regional distri-
bution and composition of demand for vehicles and
mobility services. Greater competition could potential-
ly put pressure on selling prices and margins. Changes
in customer behaviour can also be brought about by
changes in public opinion, values, environmental
issues and fuel or energy prices. Selling price and
margin risks are measured using a scenario approach,
based on a bottom-up survey of the key sales markets
and an analysis of historical data. The BMW Group’s
flexible selling and production processes enable risks
to be reduced and opportunities in market and prod-
uct segments to be taken.
Local restrictions affecting product usage in specific
sectors may limit BMW Group sales volumes in indi-
vidual markets. In some urban areas, for instance,
local measures have been or are being introduced
which impose entry restrictions, road use charges
or, in some situations, highly restrictive registration
rules. These restrictions may affect local demand for
the BMW Group vehicles affected and hence have
negative repercussions on sales volume and margins.
The BMW Group’s endeavours to counter this risk
include offering locally emission-free vehicles (such
as the BMW i3), which benefit from state subsidies
and exemption rules.
New opportunities are continuously being sought to
create even greater added value for customers than
currently expected, and thereby realise significant
opportunities with respect to sales volumes and pric-
ing. Further development of the product and mobility
portfolio and expansion in growth regions are seen
as the most important growth opportunities for the
BMW Group in the medium to long term. Continued
growth depends above all on the ability to develop
innovative products and bring them to market. The
range of services on offer was further expanded in
2016, including the establishment of new mobility ser-
vices by ReachNow in North America and the expan-
sion of the DriveNow offering introduced in additional
European cities. Furthermore, vehicle- related services
were brought onto the market. The new BMW 5 and
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Report on Outlook,
Risks and
Opportunities
Risks and
Opportunities
7 Series models, for instance, include the optional
Driving Assistant Plus which, as a future-oriented
product innovation, offers the comfort of partially
autonomous driving. The BMW Group does not expect
these opportunities to have a material earnings impact
over the two-year assessment period compared to the
assumptions made in the outlook.
BMW Group also recognises appropriate accounting
provisions for statutory and non-statutory warranty
obligations. Such provisions reduce the risk to earn-
ings, as they are already included in the outlook.
Further information on risks in conjunction with
provisions for statutory and non-statutory warranty
obligations is provided in
note 31 to the Group
Financial Statements.
see
note 31
Risks and opportunities relating to operations
Risks and opportunities relating to
production and technology
Risks relating to production and technology often
manifest themselves in the form of potential sources
of production interruptions or additional expenses
necessary to comply with quality standards under
changed environmental conditions. If risks from the
production and technology category were to materi-
alise, they could have a high earnings impact over the
two-year assessment period. The risk level attached
to production and technology is classified as high.
Production stoppages and downtimes, in particular
due to fire, but also to machinery and tooling-related
breakdowns, IT disruptions, power failures, transpor-
tation and logistical disruptions, pose risks, against
which the BMW Group has put suitable measures
in place. Production structures and processes are
designed from the outset with a view to minimising
any potential damage and the probability of occur-
rence. The broad array of measures taken include
technical fire protection solutions, land development
measures including contingencies against flooding
when facilities are expanded or new buildings added,
the interchangeability of production facilities, pre-
ventative maintenance, the ability to manage spare
parts across sites, and predictive planning of trans-
portation alternatives. The risk level is also reduced by
deploying flexible working hour models and working
time accounts, but also as appropriate through split
arrangements or by building engine types at addition-
al sites. This makes it possible to recover quickly any
backlog arising from production interruptions. More-
over, risks arising from interruptions and production
downtime due to fire are also appropriately insured
with insurance companies of good credit standing.
In order to attain the outstanding level of quality
expected of the BMW Group’s products and corre-
spondingly high external ratings (e. g. for product
safety) and reduce statutory and non-statutory
warranty obligations, it may be necessary to incur a
higher level of expenditure than originally forecast.
In addition, availability of products may be limited,
particularly at the start of production of new vehicles.
These risks are mitigated through regular audits and
the continual improvement of the quality management
system, which ensures a high standard of quality. The
The BMW Group sees opportunities relating to produc-
tion and technology primarily in the competitive edge
accruing from mastering new and complex technolo-
gies. Opportunities could arise as a result of product-
or process-related technological innovations, as well
as from organisational changes designed to improve
efficiency and increase competitiveness. In the field of
lightweight construction, for example, carbon is being
utilised in high volumes for the first time in the auto-
mobile industry for the production of the BMW i3. In
2015, the BMW Group then introduced carbon for the
BMW 7 Series. This has generated competitive bene-
fits in the form of lower fuel consumption and better
driving dynamics through reduced vehicle weight.
Given the long lead times involved in developing new
products and processes, additional opportunities are
expected to have insignificant impact on earnings
during the forecast period.
Risks and opportunities relating to purchasing
Purchasing risks relate primarily to supply risks
caused by the failure of a supplier to deliver as well
as risks associated with the quality of bought-in parts.
Production problems incurred by suppliers could have
adverse consequences for the BMW Group, ranging
from increased expenditure through to production
interruptions and a corresponding reduction in sales
volume. The increasingly complex nature of the
supplier network, especially at the level of lower tier
suppliers, whose operations can only be indirectly
influenced by the BMW Group, is a further potential
cause of downtimes at supplier locations. Purchas-
ing risks, if materialised, could have a high earnings
impact over the two-year assessment period. The
risk level attached to purchasing risks is classified
as medium.
Close cooperation between carmakers and automotive
suppliers in the development and production of vehi-
cles and the provision of services generates economic
benefits, but also raises levels of dependency. Potential
reasons for the failure of individual suppliers could
include non-compliance with sustainability or quality
standards, lack of financial strength on the part of a
supplier, the occurrence of natural hazards, IT-related
risks, fires or insufficient supply of raw materials.
As part of the supplier pre-selection process, the
BMW Group is careful to ensure compliance with the
sustainability standards stipulated for the supplier
Combined Management Report 95
Risks and opportunities relating to
sales and marketing
The BMW Group employs a global sales network,
primarily comprising independent dealers, branches,
subsidiaries and importers to sell its products and
services. Any threat to the continued activities of
parts of the sales network would entail risks for the
BMW Group. If sales and marketing risks were to
materialise, they are likely to have low earnings impact
over the two-year assessment period. The risk level
is classified as low.
New opportunities for the BMW Group’s brands are
opening up in particular as a result of developments
in the field of digital communication and connectivity.
Additional opportunities could also arise if new sales
channels contribute to greater brand reach to addi-
tional customer groups than currently envisaged in
the forecast. Digital communication and connectivity
enables consumers to be reached on a more targeted
and individualised basis, thus strengthening long-term
relationships and brand loyalty. The outcome is often
a more intense product and brand experience for cus-
tomers, which could lead to higher sales volume and
have a positive impact on revenues and earnings. The
BMW Group invests in advanced marketing concepts
in order to intensify customer relationships. In 2016,
for example, customers in the United Kingdom were
able to access an online sales platform, enabling them
to select, finance and buy their vehicle online. The
BMW Group’s brands are also present on numerous
platforms, such as Facebook, YouTube and Twitter.
The BMW Group estimates the earnings impact as
insignificant over the two-year assessment period as
compared to the assumptions made in the outlook.
network, including the requirement to comply with
internationally recognised human rights and appli-
cable labour and social standards. The principal tool
for ensuring compliance with the BMW Group Sus-
tainability Standard is a three-stage risk management
system for sustainability. In addition, the technical
and financial capabilities of suppliers – especially
those supplying for modular-based production – are
monitored. Supplier sites are assessed for exposure
to natural hazards, such as floods or earthquakes, in
order to identify supply risks at an early stage and
implement appropriate safeguards. Fire risks at series
suppliers are evaluated by means of questionnaires
and selective site inspections. In order to minimise
supply risks, the BMW Group works hard to reduce
the input of raw materials or to use alternative raw
materials as a substitute.
The BMW Group pays particular attention to the qual-
ity of the parts built into its vehicles. In order to attain
a very high level of quality, it may become necessary
to invest in new technological concepts or discontinue
planned innovations, with the consequence that the
cost of materials could exceed levels accounted for in
the outlook. By monitoring and developing global sup-
plier markets, the BMW Group continuously strives
to increase its competitiveness by working together
with the world’s best product and service providers.
Within the Purchasing and Supplier Network
opportunities emerge above all in the area of global
sourcing through increased efficiency and the use
of innovations developed by suppliers, which can
lead to a broader range of products. Introduction
of new and innovative production technologies and
location-specific cost factors, in particular through
local supplier structures in close proximity to new
and existing BMW Group production plants, can lead
to lower cost of materials for the BMW Group. The
integration of previously unidentified innovations
from the supplier market into the product range is
a further source of opportunities. The BMW Group
offers innovative suppliers numerous possibilities for
creating specific contractual arrangements which are
attractive for those developing innovative solutions.
At regular intervals, the BMW Group honours its
most inventive suppliers with the Supplier Innova-
tion Award. The BMW Group does not expect these
opportunities to have a significant earnings impact
over the two-year assessment period as compared to
the assumptions made in the outlook.
requirements and in-house rules. The BMW Group
protects its intellectual property as well as customer
and employee data in cooperations and business
partnerships by stipulating clear instructions with
regard to data protection and the use of information
technology. Information pertaining to key areas of
expertise as well as sensitive personal data are subject
to particularly strict security measures. Technical data
protection incorporates industry-wide standards and
best practices. Responsibility for data and information
protection lies for each Group entity with the Board
of Management or relevant management team.
The use of information technology in new products
and services, production or communication with
customers opens up new opportunities. Under the
slogan Industry 4.0, new approaches to production are
being tested which could generate significant improve-
ments in process and energy efficiency. The range
of services and apps on offer to customers via BMW
ConnectedDrive is constantly being expanded and
updated. The purchase together with other companies
of the firm HERE lays the foundation for the next
generation of mobility and location-based services.
For the automobile sector, it serves as the basis for
new customer-oriented functions, such as innovative
assistance systems through to fully automated driving.
The BMW Group expects these opportunities to have
an insignificant earnings impact over the two-year
assessment period compared to the assumptions made
in the outlook.
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Risks and
Opportunities
Information, data protection and IT
The advance of digitalisation across all areas of the
business raises the need for increasingly stringent
requirements for the confidentiality, integrity and
availability of electronically processed data and in
information technology (IT) in general. The increased
threat of cybercrime has changed the risk exposure
of the BMW Group. In addition to intellectual prop-
erty theft, BMW Group must protect itself against
attacks on data integrity and availability. At the same
time, regulations covering the handling of personal
data are also becoming more stringent, for example
with the adoption of the EU General Data Protection
Regulation by the European Parliament in April 2016.
If information, data protection and IT risks were to
materialise, they could have a high earnings impact
over the two-year assessment period. Risk levels
attached to these risks are classified as high.
In addition to IT attacks and direct physical inter-
vention, lack of knowledge or misconduct on the
part of employees may also represent a danger to the
confidentiality, integrity and availability of data and
systems. Direct consequences of information, data
protection and IT risks include expenses required
for rapid data, information and systems recovery.
Negative impacts on operational performance due
to the non-availability of products and services or
disruptions in spare-part or vehicle production could
also be possible. A further indirect result could be
reputational damage.
Great importance is attached to protecting the
confidentiality, integrity and availability of business
information and employee and customer data, for
instance against unauthorised access and misuse. Data
security based on the International Standard ISO / IEC
27001 is an integral component of all business pro-
cesses. As part of risk management procedures, data
protection, information and IT risks are systematically
documented, allocated appropriate measures by the
departments responsible and regularly monitored in
terms of threat level and risk mitigation. Regular anal-
yses and controls and rigorous security management
ensure an appropriate level of security. Despite regular
testing and preventative security measures, it is impos-
sible to eliminate risks completely in this area. All
employees are required to treat carefully information
such as confidential business, customer and employee
data, to use securely information systems and handle
risks with transparency. Group-wide requirements
are documented in a comprehensive set of principles,
guidelines and instructions, such as, for example, the
Binding Corporate Rules for handling of employee
data. Regular communication and information activ-
ities create a high degree of security and risk aware-
ness among employees involved. Employees receive
training to ensure compliance with the applicable
Combined Management Report 97
liquidity risks
The major part of the Financial Services segment’s
credit financing and lease business is refinanced on
capital markets. Liquidity risks may be reflected in
rising refinancing costs. They may also manifest them-
selves in restricted access to funds as a consequence of
the general market situation or the failure of individual
banks. If liquidity risks were to materialise, they would
be likely to have a low earnings impact over the two-
year assessment period. The risk of incurring liquidity
risk, including the risk of the BMW Group’s rating
being downgraded and any ensuing deterioration in
financing conditions, is classified as low.
Based on the experience of the financial crisis, a
minimum liquidity concept has been developed and
is rigorously adhered to. Use of the “matched funding
principle” to finance the Financial Services segment’s
operations eliminates liquidity risks to a large extent.
Solvency is assured at all times throughout the
BMW Group by maintaining a liquidity reserve and
by the broad diversification of refinancing sources.
Regular measurement and monitoring ensure that
cash inflows and outflows from transactions in
varying maturity cycles and currencies offset each
other. The relevant procedures are incorporated in the
BMW Group’s target liquidity concept. The liquidity
position is monitored continuously and managed
by means of a cash flow requirement and sourcing
forecast system in place throughout the Group. A
diversified refinancing strategy reduces dependency
on any specific type of instrument. Moreover, the
BMW Group’s solid financial and earnings position
results in the high creditworthiness ratings issued by
internationally recognised rating agencies.
A description of the methods applied for risk measure-
ment and hedging in conjunction with currency and
commodity risks is provided in
note 37 to the Group
Financial Statements. If the relevant recognition crite-
ria are fulfilled, derivatives used by the BMW Group
as hedges are accounted for as hedging relationships.
Further information on risks in conjunction with
financial instruments is provided in
note 37 to the
Group Financial Statements.
see
note 37
see
note 37
Financial risks and risks relating to
the use of financial instruments
Currency risks and opportunities
As an internationally operating enterprise, the
BMW Group conducts business in a variety of
currencies, thus giving rise to currency risks and
opportunities. A substantial portion of Group revenue
generation, purchasing and funding occur outside
the eurozone (particularly in China and the USA).
Cash-flow-at-risk models and scenario analyses are
used to measure currency risks and opportunities. If
currency risks were to materialise, they could have a
high earnings impact over the two-year assessment
period. The risk level attached to currency risks is
medium. Significant opportunities can arise if curren-
cy developments are favourable for the BMW Group.
Operational currency management is based on the
results of currency risk analyses. The BMW Group
manages currency risk at both the strategic (medium
and long term) and operational level (short and medi-
um term). Medium- and long-term measures include
increasing production volumes and purchase volumes
in foreign currency regions (natural hedging). Cur-
rency risks are managed in the short to medium term
and for operational purposes by means of hedging on
financial markets. Hedging transactions are entered
into only with financial partners of good credit stand-
ing. Opportunities are also secured through the use
of options during specific market phases.
Risks and opportunities relating to raw materials
As a large-scale manufacturing company, the
BMW Group is exposed to purchase price risks, par-
ticularly in relation to raw materials used in vehicle
production. Basis for the analysis of raw material
price risk are planned purchases of raw materials and
components containing those raw materials. If risks
relating to raw material prices were to materialise, they
would likely have a low earnings impact over the two-
year assessment period. A low risk level is attached
to these risks. Significant opportunities could arise
if raw material prices developed favourably for the
BMW Group.
Changes in commodity prices are monitored on the
basis of a well-defined management process. The
principal objective is to increase planning reliability
for the BMW Group. Price fluctuations for precious
metals (platinum, palladium, rhodium) and non-fer-
rous metals (aluminium, copper, lead), and, to some
extent, on steel and steel ingredients (iron ore, coke-
coal) and energy (gas, electricity) are hedged using
financial derivatives and supply contracts with fixed
pricing arrangements.
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Opportunities
Risks and opportunities relating to
pension obligations
Pension obligations are influenced in particular by
fluctuations of market yields on corporate bonds, as
well as by other economic and demographic parame-
ters. Opportunities and risks arise depending on the
nature and scale of changes in these parameters. If
risks relating to pension obligations materialised, they
could have a high earnings impact over the two-year
assessment period. The risk level relating to pension
obligations is classified as medium. Within a favoura-
ble capital market environment, the return generated
by pension assets may exceed expectations and reduce
the deficit of the relevant pension plans. This could
have a significantly favourable impact on the net asset
position of the BMW Group.
Future pension payments are discounted by reference
to market yields on high-quality corporate bonds.
These yields are subject to market fluctuation and
therefore influence the level of pension obligations.
Changes in other parameters, such as rises in infla-
tion and longer life expectancy, also impact pension
obligations and payments. Most of the BMW Group’s
pension obligations are managed in external pension
funds or trust arrangements and the related assets are
kept separate from those of the Group. The amount
of funds required to finance pension payments out
of operations in the future is therefore substantially
reduced, since most of the Group’s pension obli-
gations are settled out of pension fund assets. The
pension assets of the BMW Group comprise inter-
est-bearing securities, equities, real estate and other
investment classes. Assets held by pension funds and
trust arrangements are monitored continuously and
managed on a risk-and-yield basis. Diversification
of investments also helps to mitigate risk. In order
to reduce fluctuations in pension funding shortfalls,
investments are structured to match the timing of
pension payments and the expected pattern of pen-
sion obligations. Remeasurements on the liability and
fund asset sides are recognised, net of deferred taxes,
in “Other comprehensive income” and hence directly
in equity (within revenue reserves).
Further information on risks in conjunction with
pension provisions is provided in
note 30 to the
Group Financial Statements.
see
note 30
Risks and opportunities relating to
the Financial Services segment
The categories of risk relating to the provision of
financial services comprise credit and counterparty
risk, residual value risk, interest rate risk, operational
risks and liquidity risk. Evaluation of liquidity risk
for the Financial Services segment is included in
the liquidity risk category for the Group as a whole.
The segment’s total risk exposure was covered at all
times during the 2016 financial year by the available
risk-covering assets, thus ensuring the Financial
Services segment’s risk-bearing capacity.
Credit and counterparty risks and opportunities
Credit and counterparty default risk arises with-
in the Financial Services segment if a contractual
partner (i. e. a customer or dealer) either becomes
unable or only partially able to fulfil its contractual
obligations, such that lower income is generated or
losses incurred. If credit and counterparty risks were
to materialise, they could have a medium earnings
impact over the two-year assessment period. The risk
level is classified as medium. The BMW Group classi-
fies potential opportunities in this area as significant.
As part of its credit and counterparty risk manage-
ment system, the Financial Services segment uses
a variety of rating systems in order to assess the
creditworthiness of its contractual partners. Credit
risks are managed at the time of the initial credit
decision on the basis of a calculation of the pres-
ent value of standard risk costs and subsequently,
during the term of the credit, by using a range of
risk provisioning techniques to cover risks resulting
from changes in customer creditworthiness. In this
context, individual customers are classified by cate-
gory each month on the basis of their current con-
tractual status, and appropriate levels of allowance
recognised in accordance with that classification. If
economies develop more favourably than assumed
in the outlook, credit losses may be reduced, leading
to a positive earnings impact.
Combined Management Report 99
Operational risks in the Financial Services
segment
Operational risks are defined in the Financial Ser-
vices segment as the risk of losses arising as a conse-
quence of the inappropriateness or failure of internal
procedures (process risks), people (personnel-related
risks), systems (infrastructure and IT risks) and exter-
nal events (external risks). These four categories of
risk also include related legal and reputation risks.
The comprehensive recording and measurement of
risk scenarios, loss events and countermeasures in
the operational risk management system provides
the basis for a systematic analysis and management
of potential or materialised operational risks. Annual
self-assessments are also carried out. If operational
risks were to materialise, they would be likely to have
a low earnings impact over the two-year assessment
period. The risk level is classified as low.
Legal risks
Compliance with the law is a basic prerequisite for the
success of the BMW Group. Current legislation pro-
vides the binding framework for the BMW Group’s
various business activities around the world. As a
result of its worldwide operations, the BMW Group
is exposed to a wide range of legal risks. If legal risks
were to materialise, they could have a high earnings
impact over the two-year assessment period. The risk
level attached to significant identified legal risks is
classified as medium. However, it cannot be ruled
out that new legal risks, as yet unforeseen, could
materialise that could have a high earnings impact
for the BMW Group.
The growing international scope of the BMW Group’s
operations and of business interdependencies in
general, combined with the variety and complexity
of legal provisions, including increasingly import and
export regulations, give rise to an increased risk that
laws may be violated simply through lack of aware-
ness. The BMW Group has established a Compliance
Organisation aimed at ensuring that its represen-
tative bodies, managers and staff act lawfully at all
times. Further information on the BMW Group’s
Compliance Organisation can be found in the section
“Corporate Governance”.
Residual value risks and opportunities
Risks and opportunities arise in conjunction with
lease contracts if the market value of a leased vehicle
at the end of the contractual term of a lease differs
from the residual value estimated at the inception
of the lease and factored into the lease payments. A
residual value risk exists if the expected market value
of the vehicle at the end of the contractual term is
lower than its estimated residual value at the date the
contract is entered into. If residual value risks were to
materialise, they could have a high earnings impact
over the two-year assessment period. A high and
medium earnings impact would then arise for the
affected Financial Services and Automotive segments,
respectively. The risk level is classified as medium for
the Group as a whole. Opportunities can arise out of
a positive deviation between the actual market and
the original residual value forecast. The BMW Group
classifies potential residual value opportunities as
significant.
Each vehicle’s estimated residual value is calculated
on the basis of historical external and internal data
and used to estimate the expected market value of
the vehicle at the end of the contractual period. As
part of the process of managing residual value risks,
a calculation is performed at the inception of each
contract to determine the net present value of risk
costs. Market developments are observed through-
out the contractual period and the risk assessment
updated.
Interest rate risks and opportunities
Interest rate risks in the Financial Services segment
relate to potential losses caused by changes in market
interest rates. They can arise when fixed interest
rate periods for assets and liabilities recognised in
the balance sheet do not match. If risks relating to
interest rate risk were to materialise, they could
have a medium earnings impact over the two-year
assessment period. The risk level is classified as
low. The BMW Group classifies potential interest
rate opportunities as material.
Interest rate risks in the Financial Services line of
business are managed by raising refinancing funds
with matching maturities and by employing inter-
est-rate derivatives.
If the relevant recognition criteria are fulfilled, deriv-
atives used by the BMW Group are accounted for as
hedging instruments. Further information on risks in
conjunction with financial instruments is provided in
note 37 to the Group Financial Statements.
see
note 37
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Opportunities
Internal Control
System and Risk
Management System
Relevant for the
Financial Reporting
Process
Like all internationally operating entities, the
BMW Group is confronted with legal disputes relat-
ing in particular to warranty claims, product liability,
infringements of protected rights and proceedings
initiated by government agencies. Any of these mat-
ters could, amongst others, have an adverse impact
on the Group’s reputation. Such proceedings are
typical for the sector and can arise as a consequence
of realigning product or purchasing strategies to suit
changed market conditions. Particularly in the US
market, class action lawsuits and product liability
risks can have substantial financial consequences
and cause damage to the Group’s public image. The
application of more rigorous consumer regulations
or the stricter interpretation of existing regulations
could result in a greater number of recalls. The high
quality of the Group’s products, which is ensured
by regular quality audits and ongoing improvement
measures, helps reduce this risk.
The BMW Group recognises appropriate levels
of provision for lawsuits. A part of these risks is
insured where this makes business sense. Some
risks, however, either cannot be estimated or only
to a limited extent. In other cases, the incurrence
of expenses or losses may be considered unlikely.
Such items are reported as contingent liabilities.
It cannot be ruled out, however, that losses from
damages could arise that are either not covered or
not fully covered by insurance policies or provisions,
or as contingent liabilities. In accordance with IAS 37
(Provisions, Contingent Liabilities and Contingent
Assets), the required information is not provided if
the BMW Group concludes that disclosure of the
information could seriously prejudice the outcome of
the relevant legal proceedings. Further information
on contingent liabilities is provided in
note 36 to
the Group Financial Statements.
see
note 36
Overall assessment of the risk and
opportunities situation
The overall risk assessment is based on a consolidated
view of all significant individual risks and opportu-
nities. The exposure to risks in the individual risk
categories is essentially stable. In view of the growing
importance of data and IT systems for its business, the
BMW Group sees an increased need for protection in
the area of information, data protection and IT systems.
In view of these changes, the overall risk level for the
BMW Group has increased slightly compared to the
previous year. Overall, there has been no significant
change in the opportunities situation compared to
the previous year.
In addition to the risk categories described above,
unforeseen events could have a negative impact on
business operations and hence on the BMW Group’s
results of operations, financial position and net assets,
and on its reputation. A comprehensive risk manage-
ment system is in place to ensure that the BMW Group
successfully manages these risks.
From today’s perspective, management does not see
any threat to the BMW Group’s going-concern status.
As in the previous year, identified risks are considered
to be manageable, but could – like the opportuni-
ties – have an impact on the BMW Group’s forecasts if
they were to materialise. The BMW Group’s financial
position is stable and cash needs are currently covered
by available liquidity and credit lines.
Combined Management Report * Disclosures
pursuant to
§ 289 (5) HGB
and § 315 (2)
no. 5 HGB.
reporting. Moreover, the internal audit department,
in its capacity as a process-independent function,
tests and assesses the effectiveness of the internal
control system and proposes improvements where
appropriate.
101
Controls
Extensive controls are carried out by managers and
staff in all financial reporting processes at an individ-
ual entity and Group level, thus ensuring that legal
requirements and internal guidelines are complied
with and that all business transactions are properly
executed. Controls are also carried out with the aid
of IT applications, thus reducing the incidence of
process risks. Moreover, the performance of controls
on accounts deemed to be exposed to risk are subject
to additional monitoring.
IT authorisations
All IT applications used in financial reporting pro-
cesses throughout the BMW Group are subject to
access restrictions, allowing only authorised persons
to gain access to systems and data in a controlled envi-
ronment. Access authorisations are allocated on the
basis of the nature of the duties to be performed. In
addition, IT processes are designed and authorisations
allocated using the dual control principle, as a result of
which, for instance, requests cannot be submitted and
approved by the same person. Technical monitoring
procedures and internal audits are also in place to
ensure appropriate authorisation security throughout
all IT systems.
INTERNAL CONTROL
SYSTEM* AND RISK
MANAGEMENT SYSTEM
RELEVANT FOR THE
FINANCIAL REPORTING
PROCESS
The internal control system in place throughout the
BMW Group is aimed at ensuring the effectiveness
of operations. It makes an important contribution
towards ensuring compliance with the laws that apply
to the BMW Group as well as providing assurance on
the propriety and reliability of internal and external
financial reporting. The internal control system is
therefore a significant factor in the management of
process risks. The principal features of the internal
control system and the risk management system, as far
as they relate to individual entity and Group financial
reporting processes, are described below.
Information and communication
One component of the internal control system is that
of “Information and Communication”. It ensures that
all the information needed to achieve the objectives
set for the internal control system is made available
to those responsible in an appropriate and timely
manner. Information relevant for the various finan-
cial reporting processes – at BMW AG, other consol-
idated Group entities and for the BMW Group as a
whole – is set out primarily in organisational manuals,
internal and external financial reporting guidelines,
accounting manuals and training documentation. This
information, which can be accessed at all levels via the
BMW Group’s intranet system, provide the framework
for ensuring that the relevant rules are applied consist-
ently throughout the Group. The quality and relevance
of these instructions are ensured by regular review as
well as by continuous communication between the
relevant departments.
Organisational measures
All financial reporting processes (including Group
finan cial reporting processes) are structured in
organisational terms in accordance with the principle
of segregation of duties, thus making an important
contribution to the early identification of errors and
the prevention of potential wrongdoing. Regular com-
parison of internal forecasts and external financial
reports, for example, improves the quality of financial
102
Internal Control
System and Risk
Management System
Relevant for the
Financial Reporting
Process
Disclosures Relevant
for Takeovers
and Explanatory
Comments
Internal control training for employees
All employees are appropriately trained to carry out
their duties and kept informed of any changes in
regulations or processes that affect them. Managers
and staff also have access to detailed best-practice
descriptions relating to risks and controls in the var-
ious processes, thus increasing risk awareness at all
levels. As a consequence, the internal control system
can be evaluated regularly and further improved
as necessary. Employees can, at any time and inde-
pendently, deepen their understanding of control
methods and design using an information platform
that is accessible throughout the entire Group.
Evaluating the effectiveness of the internal
control system
Responsibilities for ensuring the effectiveness of
the internal control system in relation to individual
entity and Group financial reporting processes are
clearly defined and allocated to the relevant managers
and are subject to internal audits (e. g. management
self-audits, internal audit department findings). Data
analysis tools are also employed to identify risks relat-
ing to business transactions. Continuous revision and
further development ensures the effectiveness of the
internal control system. Group entities are required
to confirm regularly as part of their reporting duties
that the internal control system is functioning prop-
erly. Effective measures are implemented whenever
weaknesses are identified and reported.
Combined Management Report DISCLOSURES RELEVANT
FOR TAKEOVERS* AND
EXPLANATORY COMMENTS
* Disclosures
pursuant to
§ 289 (4) HGB
and § 315 (4)
HGB.
Composition of subscribed capital
The subscribed capital (share capital) of BMW AG
amounted to € 657,109,600 at 31 December 2016
(2015: € 656,804,600) and, in accordance with Article 4
no. 1 of the Articles of Incorporation, is sub-divided
into 601,995,196 shares of common stock (91.61 %)
(2015: 601,995,196; 91.66 %) and 55,114,404 shares of
non-voting preferred stock (8.39 %) (2015: 54,809,404;
8.34 %), each with a par value of € 1. The Company’s
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
www.bmwgroup.com. The
full text of which is available at
right of shareholders to have their shares evidenced
is excluded in accordance with the Articles of Incor-
poration. The voting power attached to each share
corresponds to its par value. Each € 1 of par value
of share capital represented in a vote entitles the
holder to one vote (Article 18 no. 1 of the Articles of
Incorporation).
103
The Company’s shares of preferred stock are shares
within the meaning of § 139 et seq. AktG, which
carry a cumulative preferential right in terms of the
allocation of profit and for which voting rights are
excluded. These shares only confer voting rights in
exceptional cases stipulated by law, in particular 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 alongside the full preference
amount due for that year. With the exception of voting
rights, holders of shares of preferred stock are entitled
to the same rights as holders of shares of common
stock. Article 24 of the Articles of Incorporation con-
fers preferential treatment to the non-voting shares of
preferred stock with regard to the appropriation of the
Company’s unappropriated profit. Accordingly, 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
accruement
(b) payment of an additional dividend of € 0.02 per
€ 1 par value on non-voting preferred shares
(c) uniform payment of any other dividends on
shares on common and preferred stock, provid-
ed the shareholders do not resolve otherwise
at the Annual General Meeting
Restrictions on voting rights or the transfer
of shares
As well as shares of common stock, the Company has
also issued non-voting shares of preferred stock. Fur-
ther information relating to this can be found above
in the section “Composition of subscribed capital”.
When the Company issues non-voting shares of
preferred stock to employees in conjunction with its
Employee Share Programme, these shares are subject
as a general rule to a company-imposed blocking peri-
od of four years, measured from the beginning of the
calendar year in which the shares are issued.
Contractual holding period arrangements also apply to
shares of common stock acquired by Board of Manage-
ment members and certain senior department heads
in conjunction with the share-based remuneration
programmes (Compensation Report of the Corporate
Governance section;
note 39 to the Group Financial
Statements).
see
note 39
104
Disclosures Relevant
for Takeovers
and Explanatory
Comments
Direct or indirect investments in capital exceeding
10 % of voting rights
Based on the information available to the Company,
the following direct or indirect holdings exceeding
10 % of the voting rights at the end of the reporting
period were held at the stated reporting date: 1
in %
Stefan Quandt, Germany
AQTON SE, 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, Germany
Susanne Klatten Beteiligungs GmbH, Bad Homburg v. d. Höhe, Germany
1 Based on voluntary notifications provided by the listed shareholders as at 31 December 2016.
2 Controlled entities, of which 3 % or more are attributed: AQTON SE.
3 Controlled entities, of which 3 % or more are attributed: Johanna Quandt GmbH & Co. KG für Automobilwerte.
4 Controlled entities, of which 3 % or more are attributed: Susanne Klatten Beteiligungs GmbH.
Direct share of
voting rights
Indirect share of
voting rights
0.2
17.4
16.4
0.2
12.6
17.4 2
16.43
12.6 4
The voting power percentages disclosed above 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 shareholdings if such changes are
subject to mandatory notification rules.
Shares with special rights which confer control
rights
There are no shares with special rights which confer
control rights.
System of control over voting rights when
employees participate in capital and do not
exercise their control rights directly
Like all other shareholders, employees exercise their
control rights pertaining to shares they have acquired
in conjunction with the Employee Share Programme
and/or the share-based remuneration programme
directly on the basis of relevant legal provisions and
the Company’s Articles of Incorporation.
Statutory regulations and Articles of Incorporation
provisions with regard to the appointment and
removal of members of the Board of Management
and changes to the Articles of Incorporation
The appointment or removal of members of the Board
of Management is based on the rules contained in § 84
et seq. AktG in conjunction with § 31 of the German
Co-Determination Act (MitbestG).
Amendments to the Articles of Incorporation must
comply with § 179 et seq. AktG. All amendments must
be decided upon by the shareholders at the Annual
General Meeting (§ 119 (1) no. 5, § 179 (1) AktG). The
Supervisory Board is authorised to approve amend-
ments 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
otherwise explicitly required by binding provisions of
law or, when a majority of share capital is required,
by simple majority of shares represented in the vote
(Article 20 no. 1 of the Articles of Incorporation).
Authorisations given to the Board of Management
in particular with respect to the issuing or buying
back of shares
The Board of Management is authorised to buy back
shares and sell repurchased shares in situations spec-
ified in § 71 AktG, e. g. to avert serious and imminent
damage to the Company and / or to offer shares to
persons employed or previously employed by BMW AG
or one of its affiliated companies.
In accordance with the resolution passed at the
Annual General Meeting on 15 May 2014, the Board of
Management is also authorised – up to 14 May 2019 –
to acquire shares of non-voting preferred stock of the
Company via the stock exchange, up to a maximum
of 1 % of the share capital existing at the date of the
resolution. The consideration paid by the Company
per share of non-voting preferred stock (excluding
transaction costs) may not be more than 10 % above
or below the market price determined by the opening
auction on the date of trading of the stock in the
Xetra trading system (or a successor system having a
comparable function). Moreover, the Board of Man-
agement is authorised to use the acquired Company’s
own shares of non-voting preferred stock for all legally
admissible purposes, specifically including the right
Combined Management Report
105
— BMW AG acts as guarantor for all obligations aris-
ing from the joint venture agreement relating to
BMW Brilliance Automotive Ltd. in China. The
agreement grants an extraordinary right of termi-
nation to either joint venture partner in the event
that, either directly or indirectly, more than 25 %
of the shares of the other party are acquired by a
third party, or if the other party is merged with
another legal entity. The termination of the joint
venture agreement may result in either the sale of
the shares to the other joint venture partner or in
the liquidation of the joint venture entity.
— Framework agreements are in place with finan-
cial institutions and banks (ISDA Master Agree-
ments) with respect to trading activities with
derivative financial instruments. Each of these
agreements includes an extraordinary right of
termination, which triggers the immediate settle-
ment of all current transactions in the event that
the creditworthiness of the party involved is
materially weaker following a direct or indirect
acquisition of beneficially owned equity capital
that confers the power to elect a majority of the
Supervisory Board of a contractual party or any
other ownership interest that enables the acquir-
er to exercise control over a contractual party, or
which constitutes a merger or a transfer of net
assets.
— Financing agreements in place with the European
Investment Bank (EIB) entitle the EIB to request
early repayment of the loan in the event of an
imminent or actual change in control at the level
of BMW AG (partially in the capacity of guarantor
and partially in the capacity of borrower), if the
EIB has reason to assume – after the change in
control has taken place or 30 days after it has
made a request to discuss the situation – that the
change in control could have a significantly
adverse impact, or if the borrower refuses to hold
any such discussions. A change in control of
BMW AG arises if one or more individuals take
over or lose control of BMW AG, with control
being defined in the above-mentioned financing
agreements as (i) holding or having control over
more than 50 % of the voting rights, (ii) the right
to stipulate the majority of the members of the
Board of Management or Supervisory Board, (iii)
the right to receive more than 50 % of dividends
payable or (iv) any other comparable controlling
influence over BMW AG.
to offer and transfer shares to persons employed by
the Company or one of its affiliated companies up to
a proportionate amount of € 5 million of share capital.
The subscription rights of existing shareholders to the
new shares of preferred stock used for the purpose
stated above are excluded. The authorisations may
also be exercised in parts on more than one occasion.
In accordance with Article 4 no. 5 of the Articles of
Incorporation, the Board of Management is author-
ised – with the approval of the Supervisory Board – to
increase BMW AG’s share capital during the period
until 14 May 2019 by up to € 4,145,383 for the pur-
poses of an Employee Share Scheme by issuing new
non-voting shares of preferred stock, which carry the
same rights as existing non-voting preferred stock,
in return for cash contributions (Authorised Capital
2014). Subscription rights of existing shareholders to
the new shares are excluded. No conditional capital
is in place at the reporting date.
Significant agreements entered into by the
Company subject to control change clauses in the
event of a takeover bid
BMW AG is party to the following major agreements,
which contain provisions that would apply in the event
of a change in control or the acquisition of control as
a result of a takeover bid:
— An agreement concluded with an international
consortium 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, includ-
ing 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, or the right to
receive more than 50 % of the dividend or the
right to direct the affairs of the Company, or
appoint the majority of the members of the
Supervisory Board.
— A cooperation agreement concluded with Peu-
geot SA relating to the joint development and
production of a new family of small (1- to
1.6-litre) petrol engines entitles each of the
cooperation partners to give extraordinary noti-
fication of termination in the event of a compet-
itor acquiring control over the other contractual
party and if any concerns of the other contrac-
tual party concerning the impact of the change
of control on the cooperation arrangements are
not allayed during the subsequent discussion
process.
— In accordance with the agreement between
BMW AG, Daimler AG and AUDI AG pertaining
to the acquisition of entities of the HERE Group
and the related foundation of There Holding
B. V., each contractual party is required to offer
its shares in There Holding B. V. for sale to the
other shareholders in the event of a change in
control. If neither of the other two parties
acquires these shares, these other parties are
entitled to resolve that There Holding B. V. be
dissolved.
— The development cooperation agreement
between BMW AG, Intel Corporation and Mobil-
eye Vision Technologies Ltd., relating to the
development of technologies deployed in highly
and fully automated vehicles, may be terminat-
ed by any of the contractual parties if a competi-
tor of one of the parties acquires and
subsequently holds at least 30 % of the voting
shares of one of the contractual parties.
Compensation agreements with members of the
Board of Management or with employees in the
event of a takeover bid
The BMW Group has not concluded any compensation
agreements with members of the Board of Manage-
ment or with employees for situations involving a
takeover offer.
106
Disclosures Relevant
for Takeovers
and Explanatory
Comments
BMW Stock and
Capital Markets in
2016
— BMW AG is party to an agreement with SGL Car-
bon SE, Wiesbaden, relating to the joint operations
SGL Automotive Carbon Fibers LLC, Delaware,
USA and SGL Automotive Carbon Fibers GmbH &
Co. KG, Munich. The agreement includes call and
put rights in case – either directly or indirectly –
50 % or more of the voting rights relating to the rel-
evant other shareholder of the joint operations are
acquired by a third party, or if 25 % of such voting
rights have been acquired by a third party if that
third party is a competitor of the party that has not
been affected by the acquisition of the voting
rights. In the event of such acquisitions of voting
rights by a third party, the non-affected sharehold-
er has the right to purchase the shares of the joint
operations from the affected shareholder or to
require the affected party to acquire the other
shareholder’s shares.
— The framework cooperation agreement entered
into by BMW AG and Sixt SE amongst others,
relating to the foundation and operation of the
car-sharing joint venture DriveNow, may be ter-
minated by Sixt SE if a car hire company
acquires more than 50 % of the shares of com-
mon stock of BMW AG. In the event of such a
termination, Sixt SE may, at its own discretion,
stipulate the sale of BMW’s interest in the joint
venture to Sixt SE or the purchase of Sixt’s
interest in the joint venture by BMW AG or one
its subsidiaries.
— Several supply and development contracts
between BMW AG and various industrial cus-
tomers, all relating to the sale of components for
drivetrain systems, grant an extraordinary right
of termination to the relevant industrial custom-
er in specified cases of a change in control at
BMW AG (e. g. BMW AG merges with a third
party or is taken over by a third party; an auto-
mobile manufacturer acquires more than 50 % of
the voting rights or share capital of BMW AG).
Combined Management Report BMW STOCK
AND CAPITAL MARKETS
IN 2016
www.bmwgroup.com / ir
Capital markets and BMW stock were both impacted by
major political and economic uncertainties during the
past year. Thanks to its consistent focus on the future
and solid financials, the BMW Group continues to enjoy
the best ratings in the European automobile sector and
a high standing on international capital markets.
Political uncertainties weigh on stock markets
The stock market year 2016 was dominated by con-
cerns relating to political developments. During the
first half of the year, the approaching Brexit vote had
a negative impact on international financial markets.
Additionally, the US election on 8 November unsettled
markets towards the year-end. Uncertainties regard-
ing the economic situation in China also dampened
investor sentiment. The active role of central banks
over the course of the year tended to counteract these
influences, so that many stock exchanges closed – at
the end of a volatile year – higher than their previous
year’s level.
Development of BMW stock compared to stock
market indices since 30 December 2011
• 56
107
198.9
171.5
219.1
194.6
in %
240
120
0
BMW
preferred
stock
BMW
common
stock
Prime
Auto-
mobile
DAX
At the beginning of the year, speculation about the
cooling of the Chinese economy had a negative impact
on stock market indices worldwide. At 8,753 points,
the German stock exchange (DAX) reached its low for
the year on 11 February, 18.5 % down on its closing
level on 31 December 2015. The ECB’s decision to con-
tinue its expansionary monetary policies and, starting
8 June, to buy euro-denominated investment-grade
corporate bonds, had a positive impact on investor
sentiment. However, following the Brexit vote on
23 June and the uncertainties it triggered, indices
around the world slumped again. During the summer
months, stock markets proceeded to recover after the
difficult first half year. The active role of the Bank
of England was well received by investors. Reducing
the reference interest rate to a record low of 0.25 %
and the bank’s decision to purchase GBP 60 billion
worth of UK government bonds were interpreted as
positive signals. Good labour market figures coming
from the USA and the UK generated further gains
over the summer. During the last three months of
the year, the focus was on the US elections and the
ECB’s decision to extend its bond-buying programme
until December 2017. Stock markets generally tended
positively during this phase, with the consequence
that the DAX – despite a turbulent start to the year –
recorded a 6.9 % gain for the twelve-month period,
closing at 11,481 points on 30 December 2016. The
EURO STOXX 50 recorded a gain of 0.7 % in 2016,
closing at 3,291 points on 30 December.
108
Development of BMW stock compared to stock market indices
• 57
BMW Stock and
Capital Markets in
2016
Index: December 2011 = 100
Prime Automobile
BMW preferred stock
DAX
BMW common stock
200
150
100
50
2012
2013
2014
2015
2016
2017
200
150
100
50
Source: Reuters.
The Prime Automobile Index lost about one third of
its value towards the middle of the year, with subdued
demand for automobile stocks. The index recovered
during the second half of the year, finishing the report-
ing period at 1,506 points, 5.6 % below its closing level
on 30 December 2015.
BMW common stock followed the downward trend for
the sector index during the first half of the year, at one
stage falling 33 % below its previous year’s closing level.
It performed significantly better during the second
half of the year, closing at € 88.75 (– 9.1 %) thanks to
strong gains. BMW preferred stock fell by 6.1 % in
value compared to its closing price at the end of the
previous year and stood at € 72.70 at the end of the
stock market year 2016. With a market capitalisation
of approximately € 57 billion, the BMW Group was
among the ten most valuable German enterprises
listed on the stock market.
Employee Share Programme
BMW AG has enabled its employees to participate in
its success for more than 40 years. Since 1989, this
participation has taken the form of an Employee Share
Programme. A total of 305,029 shares of preferred
stock were issued to employees as part of this pro-
gramme in 2016.
In this context, and with the approval of the Super-
visory Board, the Board of Management increased
BMW AG’s share capital by € 305,000 from € 656,804,600
to € 657,109,600 by issuing 305,000 new non-voting
shares of preferred stock. This increase was executed
on the basis of Authorised Capital 2014 in Article 4
(5) of the Articles of Incorporation. The new shares
of preferred stock carry the same rights as existing
shares of preferred stock. The newly issued shares of
preferred stock for employees are entitled to receive
dividends with effect from the financial year 2017. In
addition, 29 shares of preferred stock were bought
back via the stock market.
Combined Management Report Dividend increase proposed
Reflecting the strong earnings performance, the
Board of Management and the Supervisory Board
will propose to the Annual General Meeting to use
BMW AG’s unappropriated profit of € 2,300 million
(2015: € 2,102 million) to pay a dividend of € 3.50 for
each share of common stock (2015: € 3.20) and a divi-
dend of € 3.52 for each share of preferred stock (2015:
€ 3.22), a pay-out ratio of 33.3 % for 2016 (2015: 32.9 %).
109
BMW stock
• 58
coMMon stock
Number of shares in 1,000
Stock exchange price in € 1
Year-end closing price
High
Low
preFerred stock
Number of shares in 1,000
Stock exchange price in € 1
Year-end closing price
High
Low
key dAtA per sHAre in €
Dividend
Common stock
Preferred stock
Earnings per share of common stock 3
Earnings per share of preferred stock 4
Operating cash flow Automotive segment
Equity
1 Xetra closing prices.
2 Proposed by management.
3 Annual average weighted amount.
4 Stock weighted according to dividend entitlements.
2016
2015
2014
2013
2012
601,995
601,995
601,995
601,995
601,995
88.75
92.25
65.10
97.63
122.60
75.68
89.77
95.51
77.41
85.22
85.42
63.93
72.93
73.76
53.16
55,114
54,809
54,500
54,260
53,994
72.70
74.15
56.53
3.50 2
3.52 2
10.45
10.47
17.45
72.08
77.41
92.19
58.96
3.20
3.22
9.70
9.72
18.02
65.11
67.84
74.60
59.08
2.90
2.92
8.83
8.85
14.35
57.03
62.09
64.65
48.69
2.60
2.62
8.08
8.10
15.19
54.25
48.76
49.23
35.70
2.50
2.52
7.77
7.79
13.98
46.66
Intensive communication with capital markets
continued
The BMW Group continued to inform analysts, inves-
tors, and rating agencies throughout 2016 with regular
quarterly and year-end financial reports. The compre-
hensive information programme provided for relevant
capital market participants also included numerous
one-on-one and group meetings, dedicated socially
responsible investment (SRI) roadshows for investors
using sustainability criteria in their investment deci-
sions, and debt roadshows for fixed-income investors
and credit analysts. Communication focused on the
new Strategy NUMBER ONE > NEXT, the profitability
of future business models, digitalisation and other
technological trends in the automobile industry, and
the relevance of alternative drive systems. In addition
to participating in various conferences and roadshows,
a series of product presentations and a technology
workshop were held for analysts and investors.
110
BMW Stock and
Capital Markets in
2016
Ratings remain at top level
The BMW Group continues to have the best ratings
in the European automobile sector. Since Decem-
ber 2013, BMW AG has had a long-term rating of A+
(stable outlook) and a short-term rating of A-1 from
the rating agency Standard & Poor’s, currently the
highest rating given by Standard & Poor’s to a Euro-
pean car manufacturer.
Company rating
Non-current financial liabilities
Current financial liabilities
Outlook
Moody’s
Standard &
Poor’s
A1
P – 1
stable
A+
A – 1
stable
On 25 January 2017, Moody’s raised its long-term
rating for BMW AG from A2 (positive outlook) to
A1 (stable outlook). The P-1 short-term rating was
reaffirmed. The main reasons for the improved ratings
were the forthcoming launches of attractive products,
the good position of the BMW Group with regard
to the challenges faced by the automobile industry,
a consistently strong operating performance and a
robust financing and capital structure.
The ratings underline the BMW Group’s robust
financial condition and excellent creditworthiness.
Thanks to these attributes, it not only has good access
to international capital markets, but also benefits from
attractive refinancing conditions.
Combined Management Report GROUP FINANCIAL
STATEMENTS
Page 112 Income Statements for Group and Segments
Page 112 Statement of Comprehensive Income for Group
Page 114 Balance Sheets for Group and Segments
Page 116 Cash Flow Statements for Group and Segments
Page 118 Group Statement of Changes in Equity
Page 120 Notes to the Group Financial Statements
Page 120 Accounting Principles and Policies
Page 133 Notes to the Income Statement
Page 139 Notes to the Statement of Comprehensive Income
Page 140 Notes to the Balance Sheet
Page 161 Other Disclosures
Page 175 Segment Information
Page 180 List of Investments at 31 December 2016
3
3
Group Financial
Statements
Income Statements
Statement of
Comprehensive
Income
Balance Sheets
Cash Flow
Statements
Notes
112
BMW Group
Income Statements
for Group and
Segments
Statement of Com-
prehensive Income
for Group
BMW GROUP
INCOME STATEMENTS FOR GROUP AND SEGMENTS
STATEMENT OF COMPREHENSIVE INCOME FOR GROUP
Income Statements for Group and Segments
• 59
in € million
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income
Other operating expenses
Profit / loss before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit / loss before tax
Income taxes
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
Basic earnings per share of common stock in €
Basic earnings per share of preferred stock in €
Dilutive effects
Diluted earnings per share of common stock in €
Diluted earnings per share of preferred stock in €
Group
Automotive
(unaudited supplementary
information)
Motorcycles
(unaudited supplementary
information)
Financial Services
Other Entities
(unaudited supplementary
(unaudited supplementary
(unaudited supplementary
information)
information)
Eliminations
information)
Note
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
6
7
8
9
9
22
10
10
11
12
29
13
13
13
13
94,163
92,175
86,424
85,536
– 75,442
– 74,043
– 70,973
– 70,399
18,721
– 9,158
18,132
– 8,633
15,451
– 7,604
15,137
– 7,219
2,069
– 1,639
430
– 256
616
– 768
7,695
441
260
– 673
193
221
7,916
– 2,475
5,441
10
5,431
689
– 771
7,836
518
327
– 762
– 396
– 313
7,523
– 2,376
5,147
5
5,142
27
– 14
187
–
–
– 2
–
– 2
185
– 53
132
–
132
670
– 847
9,386
441
196
– 489
131
279
9,665
– 2,755
6,910
47
6,863
10.45
10.47
–
10.45
10.47
914
– 820
9,593
518
185
– 618
– 454
– 369
9,224
– 2,828
6,396
27
6,369
9.70
9.72
–
9.70
9.72
1,990
– 1,542
448
– 239
–
– 27
182
–
–
– 3
–
– 3
179
– 55
124
–
124
25,681
23,739
– 22,135
– 20,586
– 20,017
– 19,097
3,546
– 1,294
35
– 103
2,184
–
11
– 24
– 5
– 18
2,166
– 389
1,777
37
1,740
3,153
– 1,164
46
– 54
1,981
–
4
– 7
– 3
– 6
1,975
– 528
1,447
21
1,426
6
–
6
– 30
110
– 103
– 17
–
– 57
187
170
– 49
121
–
121
7
–
7
– 30
238
– 46
169
–
– 55
42
211
– 73
138
1
137
19,305
– 712
26
– 118
141
– 663
– 1,325
1,216
–
–
– 109
– 772
211
– 561
–
– 561
18,484
– 613
19
– 59
78
– 575
–
– 1,323
1,234
–
– 89
– 664
204
– 460
–
– 460
1,250
– 1,006
1,177
– 1,080
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income
Other operating expenses
Profit / loss before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit / loss before tax
Income taxes
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
Basic earnings per share of common stock in €
Basic earnings per share of preferred stock in €
Dilutive effects
Diluted earnings per share of common stock in €
Diluted earnings per share of preferred stock in €
Statement of Comprehensive Income for Group
• 60
in € million
Net profit
Remeasurement of the net defined benefit liability for pension plans
Deferred taxes
Items not expected to be reclassified to the income statement in the future
Available-for-sale securities
Financial instruments used for hedging purposes
Other comprehensive income from equity accounted investments
Deferred taxes
Currency translation foreign operations
Items expected to be reclassified to the income statement in the future
Other comprehensive income for the period after tax
Total comprehensive income
Total comprehensive income attributable to minority interests
Total comprehensive income attributable to shareholders of BMW AG
Note
2016
2015
6,910
– 1,858
529
– 1,329
40
2,008
43
– 721
– 230
1,140
– 189
6,721
47
6,674
30
17
29
6,396
1,413
– 401
1,012
– 170
– 1,301
71
516
765
– 119
893
7,289
27
7,262
Group Financial Statements
113
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income
Other operating expenses
Profit / loss before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit / loss before tax
Income taxes
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
Basic earnings per share of common stock in €
Basic earnings per share of preferred stock in €
Dilutive effects
Diluted earnings per share of common stock in €
Diluted earnings per share of preferred stock in €
Group
(unaudited supplementary
(unaudited supplementary
Automotive
information)
Motorcycles
information)
Financial Services
(unaudited supplementary
information)
Other Entities
(unaudited supplementary
information)
Eliminations
(unaudited supplementary
information)
Note
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
– 20,017
– 19,097
25,681
23,739
– 22,135
– 20,586
3,546
– 1,294
35
– 103
2,184
–
11
– 24
– 5
– 18
2,166
– 389
1,777
37
1,740
3,153
– 1,164
46
– 54
1,981
–
4
– 7
– 3
– 6
1,975
– 528
1,447
21
1,426
6
–
6
– 30
110
– 103
– 17
–
7
–
7
– 30
238
– 46
169
–
19,305
– 712
26
– 118
141
– 663
–
1,250
– 1,006
1,177
– 1,080
– 1,325
1,216
– 57
187
170
– 49
121
–
121
– 55
42
211
– 73
138
1
137
–
– 109
– 772
211
– 561
–
– 561
18,484
– 613
19
– 59
78
– 575
–
– 1,323
1,234
–
– 89
– 664
204
– 460
–
– 460
Income Statements for Group and Segments
• 59
in € million
Revenues
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income
Other operating expenses
Profit / loss before financial result
Result from equity accounted investments
Interest and similar income
Interest and similar expenses
Other financial result
Financial result
Profit / loss before tax
Income taxes
Net profit / loss
Attributable to minority interest
Attributable to shareholders of BMW AG
Basic earnings per share of common stock in €
Basic earnings per share of preferred stock in €
Dilutive effects
Diluted earnings per share of common stock in €
Diluted earnings per share of preferred stock in €
94,163
92,175
86,424
85,536
– 75,442
– 74,043
– 70,973
– 70,399
18,721
– 9,158
18,132
– 8,633
15,451
– 7,604
15,137
– 7,219
2,069
– 1,639
430
– 256
616
– 768
7,695
441
260
– 673
193
221
7,916
– 2,475
5,441
10
5,431
689
– 771
7,836
518
327
– 762
– 396
– 313
7,523
– 2,376
5,147
5
5,142
27
– 14
187
–
–
–
– 2
– 2
185
– 53
132
–
132
6
7
8
9
9
22
10
10
11
12
29
13
13
13
13
670
– 847
9,386
441
196
– 489
131
279
9,665
– 2,755
6,910
47
6,863
10.45
10.47
–
10.45
10.47
914
– 820
9,593
518
185
– 618
– 454
– 369
9,224
– 2,828
6,396
27
6,369
9.70
9.72
–
9.70
9.72
Statement of Comprehensive Income for Group
• 60
in € million
Net profit
Deferred taxes
Remeasurement of the net defined benefit liability for pension plans
Items not expected to be reclassified to the income statement in the future
Available-for-sale securities
Financial instruments used for hedging purposes
Other comprehensive income from equity accounted investments
Deferred taxes
Currency translation foreign operations
Items expected to be reclassified to the income statement in the future
Other comprehensive income for the period after tax
Total comprehensive income
Total comprehensive income attributable to minority interests
Total comprehensive income attributable to shareholders of BMW AG
1,990
– 1,542
448
– 239
–
– 27
182
–
–
–
– 3
– 3
179
– 55
124
–
124
6,396
1,413
– 401
1,012
– 170
71
516
765
– 119
893
7,289
27
7,262
Note
2016
2015
2,008
– 1,301
6,910
– 1,858
529
– 1,329
40
43
– 721
– 230
1,140
– 189
6,721
47
6,674
30
17
29
114
BMW Group
Balance Sheets for
Group and Segments
at 31 December
BMW GROUP
BALANCE SHEETS FOR GROUP AND
SEGMENTS AT 31 DECEMBER 2016
in € million
ASSetS
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 A nd lIAbIlItI eS
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Equity attributable to shareholders of BMW AG
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
Group
Automotive
(unaudited supplementary
information)
Motorcycles
(unaudited supplementary
information)
Financial Services
Other Entities
(unaudited supplementary
(unaudited supplementary
(unaudited supplementary
information)
information)
Eliminations
information)
Note
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
19
20
21
22
23
24
12
26
27
28
23
24
25
26
29
29
29
29
29
30
31
12
33
34
31
32
33
35
34
8,157
17,960
37,789
2,546
560
48,032
2,705
2,327
1,595
7,372
17,759
34,965
2,233
428
41,865
2,208
1,945
1,568
7,705
17,566
–
2,546
5,195
–
1,287
4,310
4,043
6,899
17,416
–
2,233
5,147
–
586
4,114
3,935
121,671
110,343
42,652
40,330
11,841
2,825
30,228
7,065
1,938
5,087
7,880
11,071
2,751
28,178
6,635
2,381
4,693
6,122
66,864
61,831
11,344
2,502
–
4,862
1,000
21,561
4,794
46,063
10,611
2,453
–
4,859
1,240
19,907
3,952
43,022
46
365
–
–
–
–
–
–
28
439
492
144
–
–
–
2
–
638
188,535
172,174
88,715
83,352
1,077
657
2,047
44,445
– 41
47,108
657
2,027
41,027
– 1,181
42,530
255
234
47,363
42,764
36,624
33,460
4,587
5,039
2,795
55,405
5,357
73,183
5,879
1,074
42,326
8,512
10,198
67,989
3,000
4,621
2,116
49,523
4,559
63,819
5,009
1,441
42,160
7,773
9,208
65,591
2,911
4,570
740
1,942
6,530
1,770
4,141
429
2,621
5,545
16,693
14,506
5,187
770
1,481
7,483
20,477
35,398
4,398
810
3,211
6,856
20,111
35,386
–
83
103
–
–
442
628
90
–
–
303
56
449
48
313
–
–
–
–
–
–
25
386
453
139
–
–
–
–
–
592
978
–
45
136
–
–
401
582
85
–
–
263
48
396
978
137,728
122,029
82,795
78,841
– 121,780
– 113,026
Total assets
1
–
–
–
–
–
1
–
48,032
41,865
405
29
–
3
221
389
3,093
97,306
5
178
30,228
1,504
44
5,417
3,046
424
30
–
2
236
222
2,469
86,396
7
158
28,178
1,354
37
4,540
1,359
45,134
41,148
– 7,345
– 6,183
6,585
5,966
– 11,223
– 10,687
1,780
263
27,120
35,749
1,985
205
22,268
30,425
– 583
– 2,635
– 599
– 2,596
– 32,689
– 27,129
– 54,475
– 47,194
– 630
– 699
1,329
894
1,121
1,104
40
811
44,782
45,379
– 66,675
– 65,133
40,422
35,633
47,046
48,416
– 67,305
– 65,832
11,049
9,948
16,744
15,225
– 17,054
– 15,869
77
353
6,755
17,718
29,413
54,316
599
255
27,368
702
43,439
72,363
55
313
6,158
16,030
23,613
46,169
518
223
23,038
630
41,503
65,912
1,516
1,130
31
28
36,328
31,471
– 4,748
– 583
– 4,499
– 599
601
835
– 31,629
– 25,835
8
408
24
13,071
30,121
14,107
16,610
– 630
– 699
13,362
27,545
– 67,136
– 65,525
– 67,766
– 66,224
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
1
–
13
48
3
49
24
ASSetS
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
Receivables from sales financing
equIty A nd lIAbIlItI eS
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Equity attributable to shareholders of BMW AG
Minority interest
Equity
Pension provisions
Other provisions
Deferred tax
Financial liabilities
Other liabilities
Other provisions
Current tax
Financial liabilities
Trade payables
Other liabilities
Current provisions and liabilities
38,506
33,495
– 36,960
– 30,933
Non-current provisions and liabilities
137,728
122,029
82,795
78,841
– 121,780
– 113,026
Total equity and liabilities
Total equity and liabilities
188,535
172,174
88,715
83,352
1,077
Group Financial Statements
Group
(unaudited supplementary
(unaudited supplementary
Automotive
information)
Motorcycles
information)
Financial Services
(unaudited supplementary
information)
Other Entities
(unaudited supplementary
information)
Eliminations
(unaudited supplementary
information)
Note
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
405
29
424
30
45,134
41,148
–
3
–
2
48,032
41,865
221
389
3,093
97,306
5
178
30,228
1,504
44
5,417
3,046
236
222
2,469
86,396
7
158
28,178
1,354
37
4,540
1,359
1
–
–
–
6,585
–
1,780
263
27,120
35,749
–
1
–
1,329
894
1
–
–
–
–
–
–
–
– 7,345
– 6,183
–
–
5,966
– 11,223
– 10,687
–
1,985
205
22,268
30,425
–
1
–
1,121
1,104
–
– 583
– 2,635
–
– 599
– 2,596
– 32,689
– 27,129
– 54,475
– 47,194
–
–
–
– 630
–
–
–
–
– 699
–
44,782
45,379
– 66,675
– 65,133
40
811
–
–
66,864
61,831
40,422
35,633
47,046
48,416
– 67,305
– 65,832
115
ASSetS
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
188,535
172,174
88,715
83,352
1,077
137,728
122,029
82,795
78,841
– 121,780
– 113,026
Total assets
255
234
47,363
42,764
36,624
33,460
11,049
9,948
16,744
15,225
– 17,054
– 15,869
equIty A nd lIAbIlItI eS
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Equity attributable to shareholders of BMW AG
Minority interest
Equity
Pension provisions
Other provisions
Deferred tax
Financial liabilities
Other liabilities
77
353
6,755
17,718
29,413
54,316
599
255
27,368
702
43,439
72,363
55
313
6,158
16,030
23,613
46,169
518
223
23,038
630
41,503
65,912
1,516
1,130
13
48
31
28
36,328
31,471
–
–
–
–
– 4,748
– 583
– 4,499
– 599
601
835
– 31,629
– 25,835
38,506
33,495
– 36,960
– 30,933
Non-current provisions and liabilities
3
49
8
408
14,107
16,610
24
13,362
27,545
24
13,071
30,121
–
–
– 630
–
–
–
– 699
–
– 67,136
– 65,525
– 67,766
– 66,224
Other provisions
Current tax
Financial liabilities
Trade payables
Other liabilities
Current provisions and liabilities
Total equity and liabilities
188,535
172,174
88,715
83,352
1,077
137,728
122,029
82,795
78,841
– 121,780
– 113,026
Total equity and liabilities
in € million
ASSetS
Intangible assets
Investments accounted for using the equity method
Property, plant and equipment
Leased products
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
Receivables from sales financing
equIty A nd lIAbIlItI eS
Subscribed capital
Capital reserves
Revenue reserves
Accumulated other equity
Equity attributable to shareholders of BMW AG
Minority interest
Equity
Pension provisions
Other provisions
Deferred tax
Financial liabilities
Other liabilities
Other provisions
Current tax
Financial liabilities
Trade payables
Other liabilities
Current provisions and liabilities
19
20
21
22
23
24
12
26
27
28
23
24
25
26
29
29
29
29
29
30
31
12
33
34
31
32
33
35
34
121,671
110,343
42,652
40,330
8,157
17,960
37,789
2,546
560
48,032
2,705
2,327
1,595
11,841
2,825
30,228
7,065
1,938
5,087
7,880
657
2,047
44,445
– 41
47,108
4,587
5,039
2,795
55,405
5,357
73,183
5,879
1,074
42,326
8,512
10,198
67,989
7,372
17,759
34,965
2,233
428
41,865
2,208
1,945
1,568
11,071
2,751
28,178
6,635
2,381
4,693
6,122
657
2,027
41,027
– 1,181
42,530
3,000
4,621
2,116
49,523
4,559
63,819
5,009
1,441
42,160
7,773
9,208
65,591
7,705
17,566
2,546
5,195
–
–
1,287
4,310
4,043
11,344
2,502
–
4,862
1,000
21,561
4,794
46,063
6,899
17,416
2,233
5,147
–
–
586
4,114
3,935
10,611
2,453
–
4,859
1,240
19,907
3,952
43,022
2,911
4,570
740
1,942
6,530
5,187
770
1,481
7,483
20,477
35,398
1,770
4,141
429
2,621
5,545
4,398
810
3,211
6,856
20,111
35,386
46
365
48
313
–
–
–
–
–
–
–
–
–
2
–
28
439
492
144
638
83
103
–
–
–
442
628
90
–
–
303
56
449
–
–
–
–
–
–
–
–
–
–
–
25
386
453
139
592
978
45
136
–
–
–
401
582
85
–
–
263
48
396
978
Non-current provisions and liabilities
16,693
14,506
116
BMW Group
Cash Flow
Statements for Group
and Segments
BMW GROUP
CASH FLOW STATEMENTS FOR GROUP AND SEGMENTS
in € million
Net profit
Reconciliation between net profit and cash inflow / outflow from operating activities
Current tax
Other interest and similar income / expenses
Depreciation and amortisation of other tangible, intangible and investment assets
Change in provisions
Change in leased products
Change in receivables from sales financing
Change in deferred taxes
Other non-cash income and expense items
Gain / loss on disposal of tangible and intangible assets and marketable securities
Result from equity accounted investments
Changes in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Change in other operating assets and liabilities
Income taxes paid
Interest received
Cash inflow / outflow from operating activities
Investment in intangible assets and property, plant and equipment
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investments
Proceeds from the disposal of investments
Investments in marketable securities and investment funds
Proceeds from the sale of marketable securities and investment funds
Cash inflow / outflow from investing activities
Issue / buy-back of treasury shares
Payments into equity
Payment of dividend for the previous year
Intragroup financing and equity transactions
Interest paid
Proceeds from the issue of bonds
Repayment of bonds
Proceeds from new non-current other financial liabilities
Repayment of non-current other financial liabilities
Change in current other financial liabilities
Change in commercial paper
Cash inflow / outflow from financing activities
Effect of exchange rate on cash and cash equivalents
Effect of changes in composition of Group on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
1 Interest relating to financial services business is classified as revenues / cost of sales.
Group
2016
2015
(unaudited supplementary
(unaudited supplementary
Automotive
information)
Financial Services
information)
2016
2015
2016
2015
6,910
6,396
5,441
5,147
1,777
1,447
2,670
131
4,998
883
– 2,526
– 8,368
85
– 15
– 4
– 441
– 104
– 749
– 93
738
1,229
– 2,417
142
3,173
2,751
239
4,686
296
– 3,299
– 6,637
77
47
– 144
– 518
– 293
298
– 566
– 25
550
– 3,323
132
960
– 5,823
– 5,889
– 5,699
– 5,791
– 10
Investment in intangible assets and property, plant and equipment
10
– 338
140
– 3,592
3,740
– 5,863
–
20
38
– 746
215
– 6,880
5,659
– 7,603
–
23
– 2,121
– 1,917
–
– 118
13,974
– 10,374
8,952
– 8,443
4,135
– 1,632
4,393
17
38
–
– 264
13,007
– 8,908
9,715
– 8,802
2,648
– 498
5,004
73
–
1,758
– 1,566
6,122
7,880
7,688
6,122
11,464
11,836
– 9,844
– 10,351
Cash inflow / outflow from operating activities
– 117
– 125
Reconciliation between net profit and cash inflow / outflow from operating activities
Depreciation and amortisation of other tangible, intangible and investment assets
Other interest and similar income / expenses
Net profit
Current tax
2,787
283
4,876
970
–
–
– 187
11
– 3
– 441
– 172
– 758
– 43
629
– 246
– 1,997
142
9
– 122
140
– 3,196
3,436
– 5,432
– 2,121
– 1,833
– 118
–
20
–
–
67
10
25
– 520
– 720
–
2,893
302
4,577
128
3
–
– 369
316
– 138
– 518
– 337
367
– 541
– 163
2,295
– 2,595
132
38
– 823
144
– 6,498
5,406
– 7,524
–
23
– 1,917
– 2,840
– 264
–
–
–
108
– 521
– 719
18
–
– 1,706
– 133
– 1
– 1
12 1
29
139
– 3,532
– 8,368
275
11
– 1
50
–
2
– 12
60
– 283
164
– 396
304
– 102
–
–
–
–
–
–
– 1
870
– 1,160
8,295
– 7,215
4,425
195
21
11
1 1
31
172
– 4,026
– 6,637
579
– 5
46
5
–
1
– 15
60
– 6
–
–
–
– 387
253
– 140
–
–
–
– 1
429
– 773
8,787
– 7,671
3,343
–
39
–
6,191
5,913
– 5,225
– 6,130
11,601
10,028
Gain / loss on disposal of tangible and intangible assets and marketable securities
Result from equity accounted investments
Change in provisions
Change in leased products
Change in receivables from sales financing
Change in deferred taxes
Other non-cash income and expense items
Changes in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Income taxes paid
Interest received
Change in other operating assets and liabilities
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investments
Proceeds from the disposal of investments
Investments in marketable securities and investment funds
Proceeds from the sale of marketable securities and investment funds
Cash inflow / outflow from investing activities
Issue / buy-back of treasury shares
Payments into equity
Payment of dividend for the previous year
Intragroup financing and equity transactions
Interest paid
Proceeds from the issue of bonds
Repayment of bonds
Proceeds from new non-current other financial liabilities
Repayment of non-current other financial liabilities
Change in current other financial liabilities
Change in commercial paper
Cash inflow / outflow from financing activities
Effect of exchange rate on cash and cash equivalents
Effect of changes in composition of Group on cash and cash equivalents
842
– 1,800
1,687
– 424
Change in cash and cash equivalents
3,952
4,794
5,752
3,952
1,359
3,046
1,783
1,359
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
Group Financial Statements in € million
Net profit
Current tax
Reconciliation between net profit and cash inflow / outflow from operating activities
Other interest and similar income / expenses
Depreciation and amortisation of other tangible, intangible and investment assets
Gain / loss on disposal of tangible and intangible assets and marketable securities
Result from equity accounted investments
Change in provisions
Change in leased products
Change in receivables from sales financing
Change in deferred taxes
Other non-cash income and expense items
Changes in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Income taxes paid
Interest received
Change in other operating assets and liabilities
Cash inflow / outflow from operating activities
Investment in intangible assets and property, plant and equipment
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investments
Proceeds from the disposal of investments
Investments in marketable securities and investment funds
Proceeds from the sale of marketable securities and investment funds
Cash inflow / outflow from investing activities
Issue / buy-back of treasury shares
Payments into equity
Payment of dividend for the previous year
Intragroup financing and equity transactions
Interest paid
Proceeds from the issue of bonds
Repayment of bonds
Proceeds from new non-current other financial liabilities
Repayment of non-current other financial liabilities
Change in current other financial liabilities
Change in commercial paper
Cash inflow / outflow from financing activities
Effect of exchange rate on cash and cash equivalents
Effect of changes in composition of Group on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
1 Interest relating to financial services business is classified as revenues / cost of sales.
2,670
131
4,998
883
– 2,526
– 8,368
85
– 15
– 4
– 441
– 104
– 749
– 93
738
1,229
– 2,417
142
3,173
10
– 338
140
– 3,592
3,740
– 5,863
– 118
13,974
– 10,374
8,952
– 8,443
4,135
– 1,632
4,393
–
20
–
17
38
2,751
239
4,686
296
– 3,299
– 6,637
77
47
– 144
– 518
– 293
298
– 566
– 25
550
– 3,323
132
960
38
– 746
215
– 6,880
5,659
– 7,603
–
23
–
– 264
13,007
– 8,908
9,715
– 8,802
2,648
– 498
5,004
73
–
– 2,121
– 1,917
117
Group
2016
2015
Automotive
(unaudited supplementary
information)
Financial Services
(unaudited supplementary
information)
2016
2015
2016
2015
6,910
6,396
5,441
5,147
1,777
1,447
Net profit
2,787
283
4,876
970
–
–
– 187
11
– 3
– 441
– 172
– 758
– 43
629
– 246
– 1,997
142
2,893
302
4,577
128
3
–
– 369
316
– 138
– 518
– 337
367
– 541
– 163
2,295
– 2,595
132
– 117
– 125
12 1
29
139
– 3,532
– 8,368
275
11
– 1
–
50
2
– 12
60
– 283
164
1 1
31
172
– 4,026
– 6,637
579
5
– 5
–
46
1
– 15
60
– 1,706
– 133
– 1
– 1
Reconciliation between net profit and cash inflow / outflow from operating activities
Other interest and similar income / expenses
Current tax
Depreciation and amortisation of other tangible, intangible and investment assets
Change in provisions
Change in leased products
Change in receivables from sales financing
Change in deferred taxes
Other non-cash income and expense items
Gain / loss on disposal of tangible and intangible assets and marketable securities
Result from equity accounted investments
Changes in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Change in other operating assets and liabilities
Income taxes paid
Interest received
11,464
11,836
– 9,844
– 10,351
Cash inflow / outflow from operating activities
– 5,823
– 5,889
– 5,699
– 5,791
– 10
9
– 122
140
– 3,196
3,436
– 5,432
–
20
– 2,121
– 1,833
– 118
–
–
67
– 520
– 720
–
38
– 823
144
– 6,498
5,406
– 7,524
–
23
– 1,917
– 2,840
– 264
–
–
108
– 521
– 719
–
–
–
–
– 396
304
– 102
–
–
–
– 6
–
–
–
– 387
253
– 140
–
–
–
6,191
5,913
– 1
870
– 1,160
8,295
– 7,215
4,425
195
– 1
429
– 773
8,787
– 7,671
3,343
–
– 5,225
– 6,130
11,601
10,028
10
25
18
–
21
11
39
–
Investment in intangible assets and property, plant and equipment
Proceeds from the disposal of intangible assets and property, plant and equipment
Expenditure for investments
Proceeds from the disposal of investments
Investments in marketable securities and investment funds
Proceeds from the sale of marketable securities and investment funds
Cash inflow / outflow from investing activities
Issue / buy-back of treasury shares
Payments into equity
Payment of dividend for the previous year
Intragroup financing and equity transactions
Interest paid
Proceeds from the issue of bonds
Repayment of bonds
Proceeds from new non-current other financial liabilities
Repayment of non-current other financial liabilities
Change in current other financial liabilities
Change in commercial paper
Cash inflow / outflow from financing activities
Effect of exchange rate on cash and cash equivalents
Effect of changes in composition of Group on cash and cash equivalents
1,758
– 1,566
6,122
7,880
7,688
6,122
842
– 1,800
1,687
– 424
Change in cash and cash equivalents
3,952
4,794
5,752
3,952
1,359
3,046
1,783
1,359
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
118
BMW Group
Group Statement of
Changes in Equity
BMW GROUP
GROUP STATEMENT OF CHANGES IN EQUITY
in € million
1 January 2016
Dividends paid
Net profit
Other comprehensive income for the period after tax
Comprehensive income 31 December 2016
Subscribed share capital increase out of Authorised Capital
Premium arising on capital increase relating to preferred stock
Other changes
31 December 2016
in € million
1 January 2015
Dividends paid
Net profit
Other comprehensive income for the period after tax
Comprehensive income 31 December 2015
Subscribed share capital increase out of Authorised Capital
Premium arising on capital increase relating to preferred stock
Other changes
31 December 2015
Subscribed
capital
Capital
reserves
Revenue
reserves
Accumulated other equity
Currency
translation
differences
Equity
Derivative
attributable to
financial
shareholders
Securities
instruments
of BMW AG
Total
Minority
interest
657
2,027
41,027
132
24
– 1,337
42,530
234
42,764
Note
29
–
–
–
–
–
–
–
–
–
–
–
–
20
–
– 2,102
6,863
– 1,329
5,534
–
–
– 14
29
657
2,047
44,445
Subscribed
capital
Capital
reserves
Revenue
reserves
Accumulated other equity
Currency
translation
differences
Equity
Derivative
attributable to
financial
shareholders
Securities
instruments
of BMW AG
Total
Minority
interest
656
2,005
35,621
– 723
141
– 480
37,220
217
37,437
Note
29
–
–
–
–
1
–
–
–
–
–
–
–
22
–
– 1,904
6,369
1,012
7,381
–
–
– 71
29
657
2,027
41,027
132
24
– 1,337
42,530
– 303
– 303
–
–
–
–
–
– 171
–
–
–
–
–
–
–
28
28
–
–
–
52
–
–
–
–
–
1,415
1,415
–
–
–
–
–
78
– 2,102
6,863
– 189
6,674
–
20
– 14
47,108
–
–
–
–
–
6,369
893
7,262
1
22
– 71
–
47
–
47
–
–
– 26
255
27
–
27
–
–
– 10
234
– 2,102
6,910
– 189
6,721
–
20
– 40
47,363
6,396
893
7,289
1
22
– 81
42,764
– 1,904
–
– 1,904
855
855
– 117
– 117
– 857
– 857
1 January 2016
Dividends paid
Net profit
Other comprehensive income for the period after tax
Comprehensive income 31 December 2016
Subscribed share capital increase out of Authorised Capital
Premium arising on capital increase relating to preferred stock
Other changes
31 December 2016
1 January 2015
Dividends paid
Net profit
Other comprehensive income for the period after tax
Comprehensive income 31 December 2015
Subscribed share capital increase out of Authorised Capital
Premium arising on capital increase relating to preferred stock
Other changes
31 December 2015
Group Financial Statements Other comprehensive income for the period after tax
Comprehensive income 31 December 2016
Subscribed share capital increase out of Authorised Capital
Premium arising on capital increase relating to preferred stock
Other changes
31 December 2016
in € million
1 January 2016
Dividends paid
Net profit
in € million
1 January 2015
Dividends paid
Net profit
Other comprehensive income for the period after tax
Comprehensive income 31 December 2015
Subscribed share capital increase out of Authorised Capital
Premium arising on capital increase relating to preferred stock
Other changes
31 December 2015
Note
29
Note
29
29
657
2,047
44,445
Subscribed
capital
Capital
reserves
Revenue
–
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
20
–
–
–
–
–
22
–
–
– 2,102
6,863
– 1,329
5,534
–
–
– 14
– 1,904
6,369
1,012
7,381
–
–
– 71
Subscribed
capital
Capital
reserves
Revenue
Accumulated other equity
Currency
translation
differences
Securities
Derivative
financial
instruments
Equity
attributable to
shareholders
of BMW AG
Minority
interest
Total
657
2,027
41,027
132
24
– 1,337
42,530
234
42,764
–
–
– 303
– 303
–
–
–
– 171
–
–
28
28
–
–
–
52
–
–
1,415
1,415
–
–
–
78
– 2,102
6,863
– 189
6,674
–
20
– 14
47,108
–
47
–
47
–
–
– 26
255
– 2,102
6,910
– 189
6,721
–
20
– 40
47,363
Accumulated other equity
Currency
translation
differences
Securities
Derivative
financial
instruments
Equity
attributable to
shareholders
of BMW AG
Minority
interest
Total
656
2,005
35,621
– 723
141
– 480
37,220
217
37,437
–
–
855
855
–
–
–
–
–
– 117
– 117
–
–
–
–
–
– 857
– 857
–
–
–
6,369
893
7,262
1
22
– 71
– 1,904
–
– 1,904
27
–
27
–
–
– 10
234
6,396
893
7,289
1
22
– 81
42,764
29
657
2,027
41,027
132
24
– 1,337
42,530
119
1 January 2016
Dividends paid
Net profit
Other comprehensive income for the period after tax
Comprehensive income 31 December 2016
Subscribed share capital increase out of Authorised Capital
Premium arising on capital increase relating to preferred stock
Other changes
31 December 2016
1 January 2015
Dividends paid
Net profit
Other comprehensive income for the period after tax
Comprehensive income 31 December 2015
Subscribed share capital increase out of Authorised Capital
Premium arising on capital increase relating to preferred stock
Other changes
31 December 2015
120
BMW Group
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
BMW GROUP
NOTES TO
THE GROUP
FINANCIAL
STATEMENTS
ACCOUNTING PRINCIPLES
AND POLICIES
01
Basis of preparation
The consolidated financial statements of Bayerische
Motoren Werke Aktiengesellschaft (BMW AG Group
Financial Statements or Group Financial Statements)
at 31 December 2016 have been drawn up in accord-
ance with International Financial Reporting Standards
(IFRS), as endorsed by the European Union (EU), and
the supplementary requirements of § 315a (1) of the
German Commercial Code (HGB). The Group Finan-
cial Statements will be submitted to the operator of
the electronic version of the German Federal Gazette
and can be obtained via the Company Register website.
Bayerische Motoren Werke Aktiengesellschaft, which
has its seat at Petuelring 130, Munich, is registered
in the Commercial Register of the District Court of
Munich under the number HRB 42243.
The Group currency is the euro. All amounts are dis-
closed in millions of euros (€ million) unless stated
otherwise.
The BMW Group and segment income statements are
presented using the cost of sales method.
In order to provide a better insight into the net
assets, financial position and performance of the
BMW Group, and going beyond the requirements of
IFRS 8 (Operating Segments), the Group Financial
Statements also include balance sheets and income
statements for the Automotive, Motorcycles, Financial
Services and Other Entities segments. The Group
Cash Flow Statement is supplemented by statements
of cash flows for the Automotive and Financial Ser-
vices segments. This supplementary information is
unaudited. Inter-segment transactions relate primarily
to internal sales of products, the provision of funds
for Group companies and the related interest. These
items are eliminated in the relevant “Eliminations”
columns. A description of the nature of the BMW
Group’s business and operating activities of segments
is provided in
note 44 (“Explanatory notes to seg-
ment information”).
The Board of Management authorised the Group
Financial Statements for issue on 14 February 2017.
see
note 44
Group Financial Statements
121
In the case of a joint operation, the parties that have
joint control of the arrangement have rights to the
assets and obligations for the liabilities, relating to the
arrangement. Assets, liabilities, revenues and expens-
es of a joint operation are recognised proportionately
in the Group Financial Statements on the basis of the
BMW Group entity’s rights and obligations (propor-
tionate consolidation). Together with SGL Carbon SE,
Wiesbaden, companies of the BMW Group are party to
three joint operations that manufacture carbon fibres
and carbon fibre cores used in vehicle production.
The BMW Group is also collaborating with Toyota
Motor Corporation, Toyota City, to develop a sports
car. This collaboration is accounted for as a joint
operation.
In the case of a joint venture, the parties which have
joint control only have rights to the net assets of the
arrangement.
As a general rule, associated companies and joint
ventures are accounted for using the equity method,
with measurement on initial recognition based on
acquisition cost.
The following changes took place in the Group report-
ing entity in the financial year 2016:
Included at
31 December 2015
Included for the
first time in 2016
No longer included
in 2016
Included at
31 December 2016
Germany
Foreign
Total
21
–
–
157
178
28
7
28
7
21
178
199
02
Group reporting entity and
consolidation principles
The BMW Group Financial Statements include
BMW AG, all material subsidiaries including one spe-
cial purpose securities fund and 40 structured entities,
over which BMW AG – either directly or indirectly –
exercises control. The structured entities are used
exclusively in conjunction with the BMW Group’s
asset-backed financing arrangements.
All consolidated subsidiaries have the same year-end as
BMW AG with the exception of BMW India Private Ltd.
and BMW India Financial Services Private Ltd., whose
year-ends are 31 March in accordance with local legal
requirements.
When assessing whether an investment gives rise to
a controlled entity, an associated company, a joint
operation or a joint venture, the BMW Group consid-
ers all relevant contractual arrangements and other
circumstances, and not just the structure and legal
form of the entity. The ultimate classification may
require the use of judgement. A new assessment is
made whenever there is an indication of a change
in the previous assessment regarding (joint) control.
An entity is deemed to be controlled if BMW AG –
either directly or indirectly – has power over it, is
exposed or has rights to variable returns from its
involvement with the entity and has the ability to
influence those returns through its power over the
entity.
An entity is classified as an associated company if
BMW AG – either directly or indirectly – has the
ability to exert significant influence over the entity’s
operating and financial policies. As a general rule,
there is a rebuttable assumption that the Group has
significant influence if it holds between 20 % and 50 %
of the associated company’s voting power.
Joint operations and joint ventures are forms of joint
arrangements. Such an arrangement exists when a
BMW Group entity jointly carries out activities on the
basis of a contractual agreement with a third party.
122
BMW Group
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
03
Foreign currency translation
The financial statements of consolidated companies
which are drawn up in a foreign currency are trans-
lated using the modified closing rate method. Under
this method, assets and liabilities are translated at the
closing exchange rate, whilst income and expenses are
translated at the average exchange rate. Differences
arising on foreign currency translation are presented
in “Accumulated other equity”.
Foreign currency receivables and payables in the sin-
gle entity accounts of BMW AG and subsidiaries are
measured on initial recognition using the exchange
US Dollar
British Pound
Chinese Renminbi
Japanese Yen
Korean Won
04
Accounting policies; assumptions, judgements
and estimations
Revenues from the sale of products are recognised
when the risks and rewards of ownership of the goods
are transferred to the dealership or customer, provided
that the amount of revenue can be measured reliably,
it is probable that the economic benefits associated
with the transaction will flow to the entity and costs
incurred or to be incurred in respect of the sale can
be measured reliably. Revenues are stated net of set-
tlement discount, bonuses and rebates.
If the sale of products includes a determinable amount
for services (“multiple-component contracts”), the
related revenues are deferred and recognised as
income over the service period. Amounts are normally
recognised as income by reference to the pattern of
related expenditure.
Profits arising on the sale of vehicles, for which a
Group company retains a repurchase commitment
(buyback contracts), are not immediately recognised.
The difference between the sales and buyback price is
accounted for as deferred income and recognised in
instalments as revenue over the contract term.
Revenues relating to operating lease arrangements
are recognised on a straight-line basis over the lease
term. Interest income arising on finance leases and
rate prevailing at the date of first-time recognition.
At the end of the reporting period, foreign currency
receivables and payables are measured using the clos-
ing exchange rate. The resulting unrealised gains and
losses, as well as the subsequent realised gains and
losses arising on settlement, are recognised in the
income statement in accordance with the underlying
substance of the relevant transactions.
The exchange rates of currencies which have a material
impact on the Group Financial Statements were as
follows:
Closing rate
Average rate
31. 12. 2016
31. 12. 2015
1.06
0.85
7.34
1.09
0.74
7.07
2016
1.11
0.82
7.35
2015
1.11
0.73
6.97
123.34
130.74
120.25
134.28
1,274.34
1,278.92
1,283.86
1,255.38
on retail customer / dealership financing is recognised
using the effective interest method.
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. The resulting income is recognised
in cost of sales over the periods necessary to match
them with the related costs which they are intended
to compensate.
Earnings per share are calculated as follows: Basic
earnings per share are calculated for common and
preferred stock by dividing the net profit after minor-
ity interests, as attributable to each category of stock,
by the average number of outstanding shares. The net
profit is accordingly allocated to the different catego-
ries 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 are calculated and sepa-
rately disclosed in accordance with IAS 33.
Purchased and internally-generated intangible assets
are recognised as 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
Group Financial Statements
123
If the reason for a previously recognised impairment
loss no longer exists, the impairment loss is reversed
up to the level of the recoverable amount, capped at
the level of rolled-forward amortised cost. Impairment
losses on goodwill are not reversed.
As part of the process of assessing recoverability, it is
generally necessary to apply estimations and assump-
tions – in particular regarding future cash inflows and
outflows and the length of the forecast period – which
could differ from actual amounts. Actual amounts
may differ from the assumptions and estimations
used if business conditions develop differently to the
BMW Group’s expectations.
The value in use is determined on the basis of a present
value computation. Cash flows used for the purposes
of this calculation are derived from long-term forecasts
approved by management. The long-term forecasts
themselves are based on detailed forecasts drawn up
at an operational level and, based on a planning period
of six years, correspond roughly to a typical product’s
life cycle. For the purposes of calculating cash flows
beyond the planning period, the asset’s assumed
residual value does not take growth into account.
Forecasting assumptions are continually brought up
to date and regularly compared with external sources
of information. The assumptions used take account
in particular of expectations of the profitability of the
product portfolio, future market share developments,
macroeconomic developments (such as currency,
interest rate and raw materials prices) as well as the
legal environment and past experience.
reliably. Such assets are measured at acquisition
and / or manufacturing cost, as a general rule without
borrowing costs, 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 amortised as a general rule over their estimated
useful lives of between three and 20 years.
Development costs for vehicle and engine projects are
capitalised at manufacturing cost, to the extent that
attributable costs (including development-related
overhead costs) can be measured reliably and both
technical feasibility and successful marketing are
assured. It must also be probable that the development
expenditure will generate future economic benefits.
Capitalised development costs are amortised system-
atically over the estimated product life (usually four to
eleven years) following the start of production.
Goodwill arises on first-time consolidation of an
acquired business when the cost of acquisition
exceeds the Group’s share of the fair value of the
individually identifiable assets acquired and liabilities
and contingent liabilities assumed.
If there is any indication of impairment of intangible
assets, or if an annual impairment test is required to
be carried out (i. e. intangible assets with an indef-
inite useful life, intangible assets during the devel-
opment phase and goodwill), an impairment test is
performed. Each individual asset is tested separately
unless the cash flows generated by the asset cannot
be distinguished to a large degree from the cash flows
generated by other assets or other groups of assets.
In this case, impairment is tested at the level of a
cash-generating unit.
For the purposes of the impairment test, the carrying
amount of an asset (or a cash-generating unit) is com-
pared with the recoverable amount. The first step of
the impairment test is to determine the value in use.
If the value in use is lower than the carrying amount,
the next step is to determine the fair value less costs to
sell and compare the amount so determined with the
asset’s carrying amount. If the fair value is lower than
the carrying amount, an impairment loss is recognised,
reducing the carrying amount to the higher of the
asset’s value in use or fair value less costs to sell.
124
BMW Group
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
Cash flows of the Automotive and Motorcycles
cash-generating units are discounted using a risk-ad-
justed pre-tax cost of capital (WACC). In the case of
the Financial Services cash-generating unit, a sec-
tor-compatible pre-tax cost of equity capital is used.
Calculations were based on the following discount
factors:
in %
2016
2015
Automotive
Motorcycles
Financial Services
12.0
12.0
13.4
12.0
12.0
13.4
The risk-adjusted interest rates, calculated using a
CAPM model, also take into account specific peer-
group information relating to beta-factors, capital
structure data and borrowing costs. In conjunction
with the impairment tests for cash-generating units,
sensitivity analyses are performed for the main
assumptions in order to rule out that conceivable
changes to the assumptions used to determine the
recoverable amount would result in the requirement
to recognise an impairment loss.
All items of property, plant and equipment are measured
at acquisition or manufacturing cost less accumulated
depreciation and accumulated impairment losses. The
cost of internally constructed plant and equipment
comprises all costs which are directly attributable
to the manufacturing process as well as an appro-
priate proportion of production-related overheads.
This includes production-related depreciation and
amortisation as well as an appropriate proportion
of administrative and social costs. As a general rule,
borrowing costs are not included in acquisition or
manufacturing cost unless they are directly attrib-
utable to the asset. The carrying amount of items of
depreciable property, plant and equipment is written
down recording scheduled usage-based depreciation –
as a general rule on a straight-line basis – over the
useful lives of the assets. Depreciation is recorded as
an expense in the income statement.
The following uniform useful lives are applied through-
out the BMW Group:
in years
Factory and office buildings, residential buildings, fixed
installations in buildings and outside facilities
Plant and machinery
Other equipment, factory and office equipment
8 to 50
3 to 21
2 to 25
For machinery used in multiple-shift operations,
depreciation rates are increased to account for the
additional utilisation. If there is any indication of
impairment of property, plant and equipment, an
impairment test is performed as described above for
intangible assets.
The use of judgement is required when the BMW Group
enters into lease arrangements, in particular when
assessing the transfer of economic ownership of a
leased item.
Leased items of property, plant and equipment that are allo-
cated to the BMW Group on the grounds of economic
ownership (finance leases) are measured on initial rec-
ognition at their fair value or at the net present value
of the minimum 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 other financial liabilities, measured
at their net present value.
Where Group products are recognised by BMW Group
entities as leased products under operating leases,
they are measured at manufacturing cost, plus any
initial direct costs. All other leased products are
measured at acquisition cost. All leased products are
depreciated over the period of the lease using the
straight-line method down to their expected residual
value. Changes in residual value expectations are rec-
ognised – in situations where the recoverable amount
of the lease exceeds the asset’s carrying amount – by
adjusting scheduled depreciation prospectively over
the remaining term of the lease. If the recoverable
amount is lower than the asset’s carrying amount,
an impairment loss is recognised for the shortfall.
A test is carried out at each balance sheet date to deter-
mine whether an impairment loss recognised in prior
years no longer exists or has decreased. In these cases,
the carrying amount of the asset is increased to the
recoverable amount, at a maximum up to the amount
of the asset’s amortised cost. Assumptions need to
be made regarding future residual values, given that
they represent a significant portion of future cash
inflows. In this context, internally available historical
data, current market data and forecasts of external
institutions are taken into account. The assumptions
applied are regularly validated by comparison with
external data.
Group Financial Statements Investments accounted for using the equity method are
(except when the investment is impaired) measured
at the Group’s share of equity, taking account of fair
value adjustments on acquisition.
Investments in non-consolidated subsidiaries, non-con-
solidated joint operations and interests in associated
companies, joint ventures and participations not
accounted for using the equity method, are reported
as other investments, measured at their fair value. If
this value is not available or cannot be determined
reliably, they are measured at cost.
A financial instrument is a contract that gives rise to a
financial asset of one entity and a financial liability or
equity instrument of another entity. Financial assets
are accounted for on the basis of the settlement date.
On initial recognition, financial assets are measured
at their fair value. Transaction costs are included in
the fair value unless the financial assets are allocated
to the category “financial assets measured at fair value
through profit or loss”.
The Group’s financial assets are allocated to either
cash funds or to the categories “loans and receivables”,
“available-for-sale”, “held for trading” or “fair value
option”.
The fair value option is applied by the BMW Group
for non-current marketable securities with embedded
derivatives. The related gains and losses are presented
in the income statement line item “Other financial
result”. Related interest income and expenses are
presented in the net interest result.
125
Subsequent to initial recognition, financial assets
which are available-for-sale or held-for-trading or for
which the fair value option is applied, are measured at
their fair value. The fair values shown are computed
using market information available at the balance
sheet date, on the basis of prices quoted by the
contract partners or using appropriate measurement
methods, e. g. discounted cash flow models.
Non-derivative financial assets that are not classified
as “loans and receivables” or “held-to-maturity invest-
ments” or as items measured “at fair value through
profit and loss” are classified as “available-for-sale”.
Financial assets that are classified as loans and receiva-
bles are measured at amortised cost using the effective
interest method. All financial assets for which pub-
lished price quotations in an active market are not
available and whose fair value cannot be determined
reliably are measured at cost.
An assessment is made on a regular basis whether
there is any objective evidence that a financial asset
or group of assets may be impaired. For the purposes
of assessing possible impairment, the BMW Group
takes account of all available information, such as
market conditions and prices as well as the length
of time and the scale of the decline in value. In the
case of equity capital instruments that are listed on a
stock market, it is assumed that an item is impaired if
its fair value falls significantly (more than 20 %) or on
a prolonged basis (more than 5 % over nine months)
below acquisition cost.
In those cases where hedge accounting is applied,
changes in fair value are recognised in the income
statement or in other comprehensive income as a
component of accumulated other equity, depending
on whether the hedging relationship is classified as
a fair value hedge or a cash flow hedge. In the case
of a fair value hedge, the results of the fair value
measurement of the derivative financial instruments
and the related hedged items are recognised in the
income statement. Fair value hedges are mainly used
to hedge the market prices of bonds, other financial
liabilities and receivables from sales financing. In the
case of a cash flow hedge, the effective portion of
the fair value gain or loss on the derivative financial
instrument is recognised directly in accumulated other
equity. The ineffective portion of the fair value gain or
loss is recognised in the income statement. Amounts
recorded in accumulated other equity are recognised
subsequently in the income statement when the
hedged item (usually external revenue) is recognised
in the income statement. If, contrary to the normal
case within the BMW Group, hedge accounting cannot
be applied, the gains or losses arising on the fair value
measurement of derivative financial instruments are
recognised immediately in the income statement.
Deferred taxes are recognised on all temporary dif-
ferences between the tax and accounting bases of
assets and liabilities and on consolidation procedures.
Deferred tax assets also include claims to future tax
reductions which arise from the expected usage of
existing tax losses available for carryforward to the
extent that future usage is probable. The calculation of
deferred tax assets requires assumptions to be made
with regard to the level of future taxable income and
the timing of recovery of deferred tax assets. These
assumptions take account of forecast operating results
and the impact on earnings of the reversal of taxable
temporary differences. Since future business devel-
opments cannot be predicted with certainty and to
some extent cannot be influenced by the BMW Group,
the measurement of deferred tax assets is subject to
uncertainty.
126
BMW Group
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
Receivables from sales financing are measured at amor-
tised cost using the effective interest rate method.
Impairment allowances are recognised both on a
specific-item and a group basis. For these purposes,
the main factors taken into consideration are past
experience, current market data (such as the level
of arrears), rating classes and scoring information.
Specific allowances are recognised if there is objective
evidence of impairment. In the retail customer credit
financing and leasing lines of business, the existence
of overdue balances or the incidence of similar events
in the past are examples of such objective evidence.
In the event of overdue receivables, allowances are
always recognised individually based on the length
of period of the arrears. In the case of dealership
financing receivables, the allocation of the dealership
to a corresponding rating category is also deemed to
represent objective evidence of impairment. If there is
no objective evidence of impairment, allowances are
recognised using a portfolio approach based on similar
groups of assets. Company-specific loss probabilities
and loss ratios, derived from historical data, are used
to measure allowances on similar groups of assets.
The recognition of impairment losses on receivables
relating to the industrial side of the business is also,
as far as possible, based on the same procedures
applied to financial services business. The impair-
ment losses are recorded in separate accounts and
are derecognised at the same time the corresponding
written-down receivables are derecognised.
Derivative financial instruments are used within the
BMW Group for hedging purposes in order to reduce
currency, interest rate, fair value and market price
risks arising from operating activities and the relat-
ed financing requirements. All derivative financial
instruments are measured at their fair value. The fair
values of derivative financial instruments are deter-
mined using measurement models, as a consequence
of which there is a risk that the amounts calculated
could differ from realisable market prices on disposal.
Observable financial market price spreads are taken
into account in the measurement of derivative finan-
cial instruments. The supply of data to the model used
to calculate fair values also takes account of tenor and
currency basis spreads.
In addition, the Group’s own default risk and that of
counterparties is taken into account on the basis of
credit default swap values for market contracts with
matching terms. The BMW Group applies the option
of measuring the credit risk for a group of financial
assets and financial liabilities on the basis of its net
exposure. Portfolio-based value adjustments to the
individual financial assets and financial liabilities are
allocated using the relative fair value approach (net
method).
Group Financial Statements 127
Provisions for pensions and similar obligations are meas-
ured using the projected unit credit method. Under
this method, not only obligations relating to known
vested benefits at the reporting date are recognised,
but also the effect of future expected increases in
pensions and salaries. The calculation is based on
an independent actuarial valuation which takes into
account all relevant biometric factors.
In the case of externally funded plans, the pension
obligation is offset against plan assets measured at
their fair value. If the plan assets exceed the pension
obligation, the surplus is tested for recoverability. In
the event that the BMW Group has a right of reim-
bursement or a right to reduce future contributions,
it reports an asset (within “Other financial assets”),
measured on the basis of the present value of the
future economic benefits attached to the plan assets.
If the plan is externally funded, a liability is recog-
nised under pension provisions where the obligation
exceeds fund assets.
Current income taxes are computed throughout the
BMW Group in accordance with tax legislation appli-
cable in each relevant country. In situations where
judgement was necessary to determine the amount
of a tax exposure to be recognised in the financial
statements, there is always a possibility that local tax
authorities may reach a different conclusion.
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 manufacturing cost and net realisable
value. Manufacturing cost comprises all costs which
are directly attributable to the manufacturing process
as well as an appropriate proportion of production-re-
lated overheads. This includes production-related
depreciation and amortisation and an appropriate
proportion of administrative and social costs. Bor-
rowing costs are not included in the acquisition or
manufacturing cost of inventories.
Cash and cash equivalents, comprising mainly cash on
hand and cash at bank with an original term of up to
three months, are measured at fair value.
Assets held for sale and disposal groups held for sale are
presented separately in the balance sheet in accord-
ance with IFRS 5, if the carrying amount of the rel-
evant assets will be recovered principally through a
sale transaction rather than through continuing use.
This situation only arises if the assets can be sold
immediately in their present condition, the sale is
expected to be completed within one year from the
date of classification and the sale is highly probable.
At the date of classification, property, plant and equip-
ment, intangible assets and disposal groups which are
being held for sale are measured at the lower of their
carrying amount and their fair value less costs to sell
and scheduled depreciation / amortisation ceases. This
does not apply, however, to items within the disposal
group which are not covered by the measurement
rules contained in IFRS 5. Simultaneously, liabilities
directly related to the sale are presented separately on
the equity and liabilities side of the balance sheet as
“Liabilities in conjunction with assets held for sale”.
128
BMW Group
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
The calculation of the amount of the provision requires
assumptions to be made with regard to discount
factors, salary trends, employee fluctuation and the
life expectancy of employees. Discount factors are
determined by reference to market yields at the end
of the reporting period on high quality fixed-interest
corporate bonds. The salary level trend refers to the
expected rate of salary increase which is estimated
annually depending on inflation and the career devel-
opment of employees within the Group.
Net interest expense on the net obligation and / or
net interest income on the net fund assets of defined
benefit plans are presented separately within the
financial result. All other costs relating to allocations
to pension provisions are allocated to costs by function
in the income statement.
Past service cost arises where a BMW Group compa-
ny introduces a defined benefit plan or changes the
benefits payable under an existing plan. This cost
is recognised immediately in the income statement.
Similarly, gains and losses arising on the settlement
of a defined benefit plan are recognised immediately
in the income statement.
Remeasurements of the net liability arise from
changes in the present value of the defined benefit
obligation, the fair value of the plan assets or the asset
ceiling. Reasons for remeasurements include changes
in financial and demographic assumptions as well as
changes in the detailed composition of beneficiaries.
Remeasurements are recognised immediately in
“Other comprehensive income” and hence directly
in equity (within revenue reserves).
Other provisions are recognised when the BMW Group
has a present obligation (legal or constructive) arising
from past events, the settlement of which is proba-
ble and when a reliable estimate can be made of the
amount of the obligation. Provisions with a remaining
period of more than one year are measured at their
net present value.
The measurement of provisions for statutory and
non-statutory warranty obligations (statutory, contractual
and voluntary) involves estimations. In addition to
statutorily prescribed manufacturer warranties, the
BMW Group also offers various categories of guar-
antee depending on the product and sales market
concerned. These provisions are recognised when
the risks and rewards of ownership of the goods are
transferred to the dealership or retail customer or
when a new category of warranty is introduced. In
order to determine the level of the provision, various
factors are taken into consideration, including estima-
tions based on past experience with the nature and
amount of claims. The future level of potential repair
costs and price increases per product and market are
also taken into account. Provisions for warranties are
adjusted regularly to take account of new circumstanc-
es and the impact of any changes recognised in the
income statement. Specific and expected warranty
items, such as vehicle recall actions, are also included.
Similar estimates are also made in conjunction with
the measurement of expected reimbursement claims,
which, if recognised, are presented as separate assets.
The recognition and measurements of provisions for
litigation and liability risks necessitates making assump-
tions regarding the probability of occurrence, the
amount involved and the duration of the legal dispute.
These assumptions, especially the assumption about
the outcome of legal proceedings, are subject to a high
degree of uncertainty.
If the recognition and measurement criteria relevant
for provisions are not fulfilled and the outflow of
resources to settle the matter is not probable, the
potential obligation is disclosed as a contingent liability.
Financial liabilities are measured on first-time recogni-
tion at their fair value. Transaction costs are also taken
into account, except for financial liabilities allocated to
the category “financial liabilities measured at fair value
through profit or loss”. Subsequent to initial recogni-
tion, liabilities are – with the exception of derivative
financial instruments – measured at amortised cost
using the effective interest method.
Group Financial Statements 129
Related party disclosures comprise information on
related individuals or entities which control
the BMW Group or which are controlled by the
BMW Group, unless such parties are already included
in the Group Financial Statements of BMW AG as con-
solidated 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
also cover transactions with associated companies,
joint ventures and individuals that have the ability
to exercise significant influence over the financial
and operating policies of the BMW Group. This also
includes close relatives and intermediary entities.
Significant influence over the financial and operating
policies of the BMW Group is presumed when a party
holds 20 % or more of the voting power of BMW AG.
In addition, the requirements contained in IAS 24
relating to key management personnel and close
members of their families or intermediary entities
are also applied. In the case of the BMW Group, this
applies to members of the Board of Management and
the Supervisory Board. Non-consolidated subsidiaries,
joint ventures and associated companies also qualify
as related parties. Details relating to these entities
note 45.
are provided in the list of investments in
see
note 39
see
note 45
Share-based remuneration programmes which are expect-
ed to be settled in shares are measured at their fair
value at grant date. The related expense is recognised
in the income statement (as personnel expense)
over the vesting period, with a contra (credit) entry
recorded against capital reserves. Share-based remu-
neration programmes expected to be settled in cash
are revalued to their fair value at each balance sheet
date between the grant date and the settlement date
and on the settlement date itself. The expense for such
programmes is recognised in the income statement
(as personnel expense) over the vesting period of the
programmes and presented in the balance sheet as
a provision.
The share-based remuneration programmes for
Board of Management members and senior heads of
department entitles BMW AG to elect whether to settle
its commitments in cash or with shares of BMW AG
common stock. Following the decision to settle in cash,
the share-based remuneration programmes for Board
of Management members and senior heads of depart-
ment are accounted for as cash-settled, share-based
remuneration programmes. Further information on
share-based remuneration programmes is provided
in
note 39.
130
BMW Group
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
05
Financial reporting rules
(a) Standards and Revised Standards significant for
the BMW Group and applied for the first time in
the financial year 2016:
Standard / Interpretation
Date of
issue by
IASB
Date of
mandatory
application
IASB
Date
of mandatory
application
EU
IAS 1
Presentation of Financial Statements
(Initiative to Improve Disclosure Requirements – Amendments to IAS 1)
18. 12. 2014
1. 1. 2016
1. 1. 2016
The Amendments to IAS 1 (Presentation of Financial
Statements) relate primarily to clarifications concern-
ing the presentation of, and disclosures in, financial
statements. The amendments emphasise the principle
that it is only necessary to disclosure information if it
is material for users of the financial statements, even
in cases where specific disclosures in an IFRS are
explicitly defined as minimum requirements.
(b) Financial reporting pronouncements issued by
the IASB that are significant for the BMW Group,
but have not yet been applied:
Standard / Interpretation
IFRS 9
IFRS 15
Financial Instruments
Revenue from Contracts with Customers
In this context, the BMW Group has examined the
contents of the Notes to the Group Financial State-
ments and the Combined Management Report and
applied the principle of materiality in the Group
Financial Statements for the year ended 31 Decem-
ber 2016, mainly by revising the presentation and
eliminating redundancies.
Date of
mandatory
application
IASB
1. 1. 2018
1. 1. 2018
Date
of mandatory
application
EU
1. 1. 2018
1. 1. 2018
Date of
issue by
IASB
24. 7. 2014
28. 5. 2014
11. 9. 2015
12. 4. 2016
IFRS 16
Leases
13. 1. 2016
1. 1. 2019
No
IFRS 9 (Financial Instruments) contains new require-
ments for the classification and measurement of
financial assets that are based on the reporting
entity’s business model and its contractual cash flow
characteristics (“Solely Payments of Principal and
Interest” (SPPI) criterion). IFRS 9 also gives rise to
a new model for determining impairment based on
expected credit losses. Furthermore, the requirements
for hedge accounting were revised with the aim of
bringing the accounting treatment more into line with
the reporting entity’s risk management activities.
The impact of adoption of IFRS 9 on the Group Finan-
cial Statements is currently being investigated. Based
on analyses to date, the accounting treatment for
specific financial assets that do not comply with the
stipulated cash flow criteria may have to be changed,
by reclassifying them from the “measured at amortised
cost” category to the “measured at fair value” cate-
gory. Based on the current assessment, the change
would only affect a limited volume of assets, with the
consequence that the impact on measurement is not
expected to be material.
Group Financial Statements
Implementation of the new impairment model requires
substantial modifications to existing processes and
systems, especially for the Financial Services segment.
These modifications have been stipulated centrally
and implemented to a large extent at subsidiary level.
The overall impact cannot be quantified reliably as
yet, however, given that the procedures for providing
data by the subsidiaries still requires validation and
some of the major implementation aspects of the
new standard – in particular the transfer criterion for
impairment levels – are not expected to be definitively
established until a later stage in the financial year 2017.
Based on preliminary findings, significant changes to
impairment amounts are not expected.
As far as the accounting for hedging relationships is
concerned, analyses to date indicate that it will be pos-
sible to account for the majority of commodity hedg-
ing contracts using hedge accounting rules. Moreover,
changes in the time value of options are required to be
recognised as “cost of hedging” in accumulated other
equity during the hedging period. This approach to
accounting for hedging relationships could significant-
ly reduce the volatility in the amounts reported for
financial result and Group earnings. The presentation
of the cost of hedging in the income statement has not
yet been definitively clarified. It is therefore possible
that shifts could arise between the line items “Profit
before financial result” and “Financial result”.
IFRS 9 contains a requirement that it should be
applied retrospectively for classification and meas-
urement, whereas the new rules for hedge accounting
are generally required to be applied prospectively. The
BMW Group intends to apply the exception granted
by the Standard not to restate comparatives for earlier
periods for classification and measurement (including
impairment).
131
The objective of the new Standard IFRS 15 (Revenue
from Contracts with Customers) is to assimilate all the
various existing requirements and Interpretations
relating to revenue recognition into a single Standard.
The new Standard also stipulates uniform revenue
recognition principles for all sectors and all categories.
The new Standard is based on a five-step model, which
sets out the rules for revenue from contracts with
customers. Revenues are required to be recognised
either over time or at a specific point in time.
A major difference to the previous Standard is the
increased scope of discretion for estimates and the
introduction of thresholds, thus influencing the
amount and timing of revenue recognition.
Accounting for buyback arrangements and rights
of return for vehicles sold, but which the Financial
Services segment will subsequently lease to customers,
will result in the earlier recognition of eliminations.
The adoption of IFRS 15 will result in a one-time
reduction in equity, which will be recognised retro-
spectively as of the date of the beginning of the first
accounting period presented on the basis of the new
requirements. The actual impact of adopting the new
Standard will depend on the level of inventories of
vehicles held by dealerships, the expected number of
leases to be concluded and the amount of inter-seg-
ment profits requiring to be eliminated at the date
of first-time adoption. Based on analyses to date and
the assumptions applied, it is estimated that equity
at 31 December 2016 will be reduced by € 650 mil-
lion. The impact in the period following first-time
adoption and in subsequent periods is not expected
to be significant.
In the case of multi-component contracts with variable
consideration components, changes in the allocation
of transaction prices will result in higher amounts
being recognised for vehicle sales and a lower level
of amounts deferred for service contracts. However,
the shift in the timing of revenue recognition is not
expected to have a significant impact at the date of
first-time adoption or in subsequent periods.
A different accounting treatment may be required if
buyback arrangements are in place with customers,
resulting in a shift in the timing of revenue recognition.
The resulting impact is not expected to be significant.
The BMW Group intends to apply the new Standard
entirely retrospectively at the adoption date.
132
BMW Group
Notes to the Group
Financial Statements
Accounting
Principles and
Policies
Notes to the
Income Statement
The new Standard IFRS 16 (Leases) stipulates a
completely new approach to accounting for leases
by lessees. Whereas under IAS 17, the accounting
treatment of a lease was determined on the basis of
the transfer of risks and rewards incidental to own-
ership of the asset, in the future, all leases will be
required to be accounted for as a general rule by the
lessee in a similar way to finance leases. Recognition
exemptions are available for short-term leases and for
leasing assets with a low value.
The accounting requirements for lessors, particularly
in relation to the requirement to classify leases, will
remain largely unchanged.
Given that the BMW Group is still in a very early phase
of considering the implications of introducing IFRS 16,
the impact of the Standard on the Group Financial
Statements from a lessee and lessor perspective cannot
be wholly foreseen at present. Similarly, the transi-
tion method to be used on first-time adoption of the
Standard has not yet been stipulated.
Early adoption of all of the new IFRS requirements is
permitted. Currently, the BMW Group does not intend
to adopt any of the new requirements early.
Group Financial Statements NOTES TO THE INCOME
STATEMENT
06
Revenues
Revenues by activity comprise the following:
in € million
2016
2015
Sales of products and related goods
Income from lease instalments
Sales of products previously
leased to customers
Interest income on loan financing
Other income
Revenues
68,681
9,507
9,258
3,455
3,262
68,643
8,965
8,181
3,253
3,133
133
Warranty expenses include the accrued expense for
vehicle recall actions, the cost of which is expected to
exceed amounts previously recognised. Accordingly,
a further amount of € 678 million was allocated to
the warranty provision for various issues, including
airbags supplied by the Takata group of companies,
the ISOFIX attachment system used for child car seats,
and costs relating to the provision of the network
service for telematics (2G).
Cost of sales is reduced by public-sector subsidies
in the form of reduced taxes on assets and reduced
consumption-based taxes amounting to € 69 million
(2015: € 71 million).
Research and development expenditure was as
follows:
in € million
2016
2015
94,163
92,175
Research and development expenses
An analysis of revenues by segment and region is
shown in the segment information in
note 44.
see
note 44
Amortisation
New expenditure for capitalised
development costs
Total research and development
expenditure
4,294
– 1,222
4,271
– 1,166
2,092
2,064
5,164
5,169
08
Selling and administrative expenses
Selling expenses amounted to € 6,030 million (2015:
€ 5,758 million) and comprise mainly marketing,
advertising and sales personnel costs.
Administrative expenses amounted to € 3,128 million
(2015: € 2,875 million) and relate mainly to personnel
and IT costs.
07
Cost of sales
Cost of sales comprises:
in € million
2016
2015
Manufacturing costs
43,175
43,685
Cost of sales relating to financial services
business
thereof: Interest expense relating
to financial services business
Research and development expenses
Warranty expenditure
Service contracts
Telematics and roadside assistance
Other cost of sales
Cost of sales
20,723
19,449
1,638
4,294
2,165
1,435
583
3,067
1,495
4,271
1,891
1,325
446
2,976
75,442
74,043
11
Other financial result
in € million
2016
2015
Income from investments in subsidiaries
and participations
thereof from subsidiaries:
Impairment losses on investments in
subsidiaries and participations
Result on investments
Income (+) and expenses (-) from
financial instruments
Sundry other financial result
Other financial result
13
13
– 192
– 179
310
310
131
1
–
– 25
– 24
– 430
– 430
– 454
134
BMW Group
Notes to the Group
Financial Statements
Notes to the
Income Statement
09
Other operating income and expenses
Other operating income and expenses comprise the
following items:
in € million
2016
2015
Exchange gains
Income from the reversal of provisions
Income from the reversal of impairment
losses and write-downs
Gains on the disposal of assets
Sundry operating income
Other operating income
Exchange losses
Expense for additions to provisions
Expense for impairment losses and
write-downs
Sundry operating expenses
Other operating expenses
262
115
51
46
196
670
– 249
– 303
– 28
– 267
– 847
323
172
27
173
219
914
– 311
– 192
– 76
– 241
– 820
Other operating income and expenses
– 177
94
Income from the reversal of impairment losses and
expenses for the recognition of impairment losses
relate primarily to impairment allowances on receiv-
ables.
10
Net interest result
in € million
2016
2015
Other interest and similar income
thereof from subsidiaries:
Interest and similar income
Expense relating to interest impact
on other long-term provisions
Net interest expense on the net defined
benefit liability for pension plans
Other interest and similar expenses
thereof to subsidiaries:
Interest and similar expenses
196
12
196
185
19
185
– 84
– 72
– 78
– 327
– 4
– 489
– 123
– 423
– 5
– 618
Net interest result
– 293
– 433
Group Financial Statements
12
Income taxes
Taxes on income comprise the following:
in € million
2016
2015
Current tax expense
Deferred tax expense
thereof relating to temporary
differences
thereof relating to tax loss
carryforwards and tax credits
2,670
2,751
85
80
5
77
52
25
Income taxes
2,755
2,828
Current tax expense includes tax income of € 174 mil-
lion (2015: tax expenses of € 164 million) relating to
prior periods.
135
Deferred taxes are computed using enacted or planned
tax rates which are expected to apply in the relevant
national jurisdictions when the amounts are recov-
ered. After taking account of an average municipal
trade tax multiplier rate (Hebesatz) of 425.0 % (2015:
425.0 %), the underlying income tax rate for Germany
was as follows:
in %
2016
2015
Corporation tax rate
Solidarity surcharge
Corporation tax rate including solidarity
surcharge
Municipal trade tax rate
German income tax rate
15.0
5.5
15.8
14.9
30.7
15.0
5.5
15.8
14.9
30.7
The tax expense was reduced by € 49 million (2015*:
€ 41 million) as a result of utilising tax loss carryfor-
wards, for which deferred assets had not previously
been recognised and in conjunction with previously
unrecognised tax credits and temporary differences.
* Previous year’s
figures adjusted.
Deferred taxes for non-German entities are calculated
on the basis of the relevant country-specific tax rates,
ranging in the financial year 2016 between 12.5 % and
45.0 % (2015: between 12.5 % and 46.9 %). Changes
in tax rates resulted in a deferred tax expense of
€ 70 million (2015: € 36 million).
The change in the valuation allowance on deferred tax
assets relating to tax losses available for carryforward
and temporary differences resulted in a tax expense
of € 38 million (2015*: € 82 million).
The difference between the expected tax expense
based on the underlying tax rate for Germany and
actual tax expense is explained in the following
reconciliation:
in € million
Profit before tax
Tax rate applicable in Germany
Expected tax expense
Variances due to different tax rates
Tax increases (+) / tax reductions (–) as a result of non-deductible expenses and tax-exempt income
Tax expense (+) / benefits (–) for prior years
Other variances
Actual tax expense
Effective tax rate
2016
2015
9,665
30.7 %
2,967
– 119
78
– 174
3
2,755
28.5 %
9,224
30.7 %
2,832
– 119
42
164
– 91
2,828
30.7 %
136
BMW Group
Notes to the Group
Financial Statements
Notes to the
Income Statement
Tax increases as a result of non-deductible expens-
es and tax reductions due to tax-exempt income
increased compared to one year earlier. As in the
previous year, tax increases as a result of non-tax-de-
ductible expenses were attributable primarily to the
impact of non-recoverable withholding taxes and
transfer price issues.
Tax income relating to prior years resulted primarily
from adjustments to income tax receivables and pro-
visions for prior years.
in € million
Intangible assets
Property, plant and equipment
Leased products
Other investments
Sundry other assets
Tax loss carryforwards and capital losses
Provisions
Liabilities
Eliminations
Valuation allowances on tax loss carryforwards and capital losses
Netting
Deferred taxes
Net
Tax loss carryforwards – for the most part usable with-
out restriction – amounted to € 637 million (2015:
€ 468 million). This includes an amount of € 464 million
(2015: € 345 million), for which a valuation allowance
of € 158 million (2015: € 100 million) was recognised
on the related deferred tax asset. For entities with
tax losses available for carryforward, a net surplus
of deferred tax assets over deferred tax liabilities is
reported at 31 December 2016 amounting to € 90 mil-
lion (2015: € 104 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 future taxable profits, against
which deductible temporary differences can be offset.
The line “Other variances” comprises various recon-
ciling items, including the Group’s share of taxes on
the earnings of companies accounted for using the
equity method.
The allocation of deferred tax assets and liabilities to
balance sheet line items at 31 December is shown in
the following table:
Deferred tax assets
Deferred tax liabilities
2016
2015
2016
2015
13
26
467
3
1,448
536
4,966
2,760
3,481
10
20
367
5
1,363
548
4,187
2,654
3,281
2,234
305
6,987
17
2,861
–
184
298
797
1,977
376
6,260
11
2,109
–
178
478
715
13,700
12,435
13,683
12,104
– 485
– 10,888
2,327
–
– 502
– 9,988
1,945
–
–
– 10,888
2,795
468
–
– 9,988
2,116
171
Capital losses available for carryforward in the United
Kingdom which do not relate to ongoing operations
decreased to € 1,926 million (2015: € 2,234 million) due
to currency factors. As in previous years, deferred tax
assets recognised on these tax losses – amounting to
€ 327 million at the end of the reporting period (2015:
€ 402 million) – were fully written down since they can
only be utilised against future capital gains.
Netting relates to the offset of deferred tax assets and
liabilities within individual entities or tax groups to
the extent that they relate to the same tax authorities.
Group Financial Statements 137
Deferred taxes recognised directly in equity amounted
to € 1,812 million (2015: € 2,004 million).
Changes in deferred tax assets and liabilities during
the reporting period can be summarised as follows:
in € million
Deferred taxes at 1 January (assets (–) / liabilities (+))
Deferred tax expense (+) / income (–) recognised through income statement
Change in deferred taxes recognised directly in equity
thereof relating to fair value gains and losses on financial instruments and marketable securities recognised directly in equity
thereof relating to the remeasurements of net liabilities for defined benefit pension plans
Exchange rate impact and other changes
Deferred taxes at 31 December (assets (–) / liabilities (+))
2016
2015
171
85
163
724
– 561
49
468
– 87
77
– 72
– 520
448
253
171
The tax returns of BMW Group entities are checked
regularly by German and foreign tax authorities. Tak-
ing account of a variety of factors – including existing
interpretations, commentaries and legal decisions
taken relating to the various tax jurisdictions and the
BMW Group’s past experience – adequate provision
has, to the extent identifiable and probable, been
made for potential future tax obligations.
Deferred taxes recognised directly in equity in the
financial year 2016 decreased by an additional € 29 mil-
lion (2015: increased by € 43 million) on currency
translation.
Deferred taxes are not recognised on retained prof-
its of € 38.7 billion (2015: € 33.7 billion) of foreign
subsidiaries, 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.
13
Earnings per share
Net profit for the year after minority interest
€ million
6,862.9
6,369.4
2016
2015
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
Basic earnings per share of common stock
Basic earnings per share of preferred stock
Dividend per share of common stock
Dividend per share of preferred stock
* Proposal by management.
€ million
€ million
6,289.2
573.7
5,839.6
529.8
number
601,995,196
601,995,196
number
54,809,375
54,499,460
€
€
€
€
10.45
10.47
3.50 *
3.52 *
9.70
9.72
3.20
3.22
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. As in the previous year, diluted earn-
ings per share correspond to basic earnings per share.
138
BMW Group
Notes to the Group
Financial Statements
Notes to the
Income Statement
Notes to the
Statement of
Comprehensive
Income
14
Personnel expenses
The income statement includes personnel expenses
as follows:
in € million
2016
2015
Wages and salaries
Pension and welfare expenses
Social insurance expenses
Personnel expenses
9,581
1,152
802
8,887
1,250
733
11,535
10,870
Personnel expenses include € 61 million (2015: € 48 mil-
lion) of costs incurred to adjust the workforce size.
The total pension expense for defined contribution
plans of the BMW Group amounted to € 90 million
(2015: € 71 million). Employer contributions paid to
state pension insurance schemes totalled € 607 million
(2015: € 571 million).
The average number of employees during the year was:
2016
2015
Employees
115,842
111,905
thereof at
proportionately-consolidated entities
Apprentices and students gaining work
experience
thereof at
proportionately-consolidated entities
204
214
7,913
7,783
1
2
Average number of employees
123,755
119,688
The number of employees at the end of the reporting
period is disclosed in the Combined Management
Report.
15
Fee expense for the Group auditor
The fee expense pursuant to § 314 (1) no. 9 HGB
recognised in the financial year 2016 for the Group
auditor and its network of audit firms amounted to
€ 23 million (2015: € 23 million) and consists of the
following:
in € million
2016
2015
Audit of financial statements
15
15
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
Other attestation services
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
Tax advisory services
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
Other services
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
Fee expense
thereof KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin
4
5
4
2
–
1
–
23
8
4
4
2
3
–
1
1
23
7
The fee expense shown for KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin, relates only to services
provided on behalf of BMW AG and its German
subsidiaries.
16
Government grants and government assistance
Income from asset-related and performance-related
grants, amounting to € 31 million (2015: € 33 million)
and € 126 million (2015: € 132 million) respectively,
were recognised in the income statement in 2016.
A large part of these amounts relate to public sector
grants for the promotion of regional structures and
to subsidies received for plant expansions.
Group Financial Statements
139
NOTES TO THE STATEMENT
OF COMPREHENSIVE
INCOME
17
Disclosures relating to the statement of total
comprehensive income
Other comprehensive income for the period after tax
comprises the following:
in € million
2016
2015
Remeasurement of the net defined benefit liability for pension plans
Deferred taxes
Items not expected to be reclassified to the income statement in the future
Available-for-sale securities
thereof gains / losses arising in the period under report
thereof reclassifications to the income statement
Financial instruments used for hedging purposes
thereof gains / losses arising in the period under report
thereof reclassifications to the income statement
Other comprehensive income from equity accounted investments
Deferred taxes
Currency translation foreign operations
Items expected to be reclassified to the income statement in the future
Other comprehensive income for the period after tax
Deferred taxes on components of other comprehen-
sive income are as follows:
– 1,858
529
– 1,329
40
79
– 39
2,008
1,458
550
43
– 721
– 230
1,140
– 189
1,413
– 401
1,012
– 170
– 26
– 144
– 1,301
– 2,619
1,318
71
516
765
– 119
893
in € million
2016
2015
Before
tax
Deferred
taxes
After
tax
Before
tax
Deferred
taxes
After
tax
Remeasurement of the net defined benefit liability for pension plans
Available-for-sale securities
Financial instruments used for hedging purposes
Other comprehensive income from equity accounted investments
Currency translation foreign operations
Other comprehensive income
– 1,858
40
2,008
43
– 230
529
– 12
– 680
– 29
–
3
– 192
– 1,329
28
1,328
14
– 230
– 189
1,413
– 170
– 1,301
71
765
778
– 401
53
459
4
–
115
1,012
– 117
– 842
75
765
893
Other comprehensive income arising at the level
of equity accounted investments is reported in the
Statement of Changes in Equity within “Currency
translation foreign operations” with a negative amount
of € 73 million (2015: positive amount of € 90 million)
and within “Financial instruments used for hedging
purposes” with a positive amount of € 87 million (2015:
negative amount of € 15 million).
140
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
NOTES TO THE BALANCE SHEET
18
Analysis of changes in Group tangible, intangible and investment assets 2016
in € million
Development costs
Goodwill
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
Property, plant and equipment
10,522
369
1,455
12,346
10,458
35,497
2,606
1,600
50,161
–
–
– 2
– 2
– 15
– 185
22
23
– 155
2,092
–
100
2,192
300
1,510
234
1,587
3,631
Leased products
42,334
316
18,339
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
1 Including first-time consolidation.
2 Including assets under construction of € 1,760 million.
2,233
233
656
28
917
–
2
–
–
2
513
321
56
–
377
Analysis of changes in Group tangible, intangible and investment assets 2015
in € million
Development costs
Goodwill
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
Property, plant and equipment
9,341
369
1,445
11,155
9,806
32,770
2,517
2,020
47,113
–
–
15
15
164
551
47
4
766
2,064
–
146
2,210
240
1,954
218
1,268
3,680
Leased products
36,969
1,738
18,011
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
1 Including mergers.
2 Including assets under construction of € 1,187 million.
1,088
226
641
–
867
–
3
–
–
3
1,293
68
15
28
111
Acquisition and manufacturing cost
1. 1. 2016 1
Translation
differences
Additions
Reclassi-
fications
Disposals
31. 12. 2016
1. 1. 2016 1
Current year
Disposals
31. 12. 2016
31. 12. 2016
31. 12. 2015
Translation
differences
Reclas si-
fications
Depreciation and amortisation
Carrying amount
–
–
–
–
231
691
32
– 954
–
–
–
–
–
–
–
1,130
11,484
–
58
369
1,495
1,188
13,348
34
1,589
222
3
10,940
35,924
2,672
2,253
1,848
51,789
15,401
45,588
200
2,546
56
2
–
58
500
710
28
1,238
1,130
4,263
7,221
6,351
–
58
5
923
364
572
364
657
1,188
5,191
8,157
7,372
Development costs
Goodwill
Other intangible assets
Intangible assets
26
1,566
214
–
– 4
– 2
4,786
27,092
1,951
6,154
8,832
721
5,915
9,593
660
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
Other facilities, factory and office equipment
–
2,253 2
1,591 Advance payments made and construction in progress
32,351
– 119
3,403
1,806
33,829
17,960
17,759
Property, plant and equipment
7,308
19
3,306
2,834
7,799
37,789
34,965
Leased products
–
2,546
2,233
Investments accounted for using
the equity method
192
484
2
308
226
26
157
245
26
428
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
–
192
–
3
678
560
Acquisition and manufacturing cost
1. 1. 2015 1
Translation
differences
Additions
Reclassi-
fications
Disposals
31. 12. 2015
1. 1. 2015 1
Current year
Disposals
31. 12. 2015
31. 12. 2015
31. 12. 2014
Translation
differences
Reclas si-
fications
Depreciation and amortisation
Carrying amount
–
–
–
–
883
–
152
10,522
369
1,454
1,035
12,345
295
1,362
34
– 1,691
–
–
–
–
–
–
–
75
1,168
215
4
10,430
35,469
2,601
1,597
1,462
50,097
14,452
42,266
148
2,233
64
–
–
64
233
656
28
917
883
–
152
4,171
6,351
5,453
5
797
364
657
364
682
1,035
4,973
7,372
6,499
Development costs
Goodwill
Other intangible assets
Intangible assets
62
1,150
208
–
4,515
25,876
1,941
5,915
9,593
660
5,625
8,930
613
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
Other facilities, factory and office equipment
6
1,591 2
2,014 Advance payments made and construction in progress
1,420
32,338
17,759
17,182
Property, plant and equipment
3,277
7,301
34,965
30,165
Leased products
–
2,233
1,088
76
411
2
489
157
245
26
428
164
244
–
408
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
4,171
5
797
4,973
4,516
25,891
1,942
2
–
76
411
2
489
3,888
5
763
4,656
4,181
23,841
1,902
6
29,930
6,804
–
62
398
–
460
– 28
– 100
–
–
3
3
9
–
–
–
–
–
–
–
11
11
77
390
43
–
510
238
–
2
–
–
2
1,222
–
181
1,403
320
2,865
218
–
–
116
76
–
1,166
–
175
1,341
319
2,795
204
–
3,318
3,536
–
12
13
2
27
–
–
–
–
4
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
–
–
–
–
–
–
Group Financial Statements
Acquisition and manufacturing cost
Depreciation and amortisation
Carrying amount
1. 1. 2016 1
Additions
Disposals
31. 12. 2016
Translation
differences
Reclassi-
fications
1. 1. 2016 1
Translation
differences
Current year
Reclas si-
fications
Disposals
31. 12. 2016
31. 12. 2016
31. 12. 2015
141
1,130
4,263
7,221
6,351
–
58
5
923
364
572
364
657
1,188
5,191
8,157
7,372
Development costs
Goodwill
Other intangible assets
Intangible assets
26
1,566
214
–
4,786
27,092
1,951
6,154
8,832
721
5,915
9,593
660
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
Other facilities, factory and office equipment
–
2,253 2
1,591 Advance payments made and construction in progress
1,806
33,829
17,960
17,759
Property, plant and equipment
2,834
7,799
37,789
34,965
Leased products
–
–
3
–
–
2,546
2,233
Investments accounted for using
the equity method
192
484
2
308
226
26
157
245
26
428
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
1,130
11,484
–
58
369
1,495
1,188
13,348
231
691
32
– 954
34
1,589
222
3
10,940
35,924
2,672
2,253
4,171
5
797
4,973
4,516
25,891
1,942
2
–
–
3
3
– 28
– 100
9
–
1,222
–
181
1,403
320
2,865
218
–
Leased products
42,334
316
18,339
15,401
45,588
7,308
19
3,306
1,848
51,789
32,351
– 119
3,403
–
76
411
2
–
–
–
–
–
116
76
–
–
–
–
–
4
2
– 4
– 2
–
–
–
–
–
–
in € million
Development costs
Goodwill
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
Property, plant and equipment
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
1 Including first-time consolidation.
2 Including assets under construction of € 1,760 million.
in € million
Development costs
Goodwill
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
Property, plant and equipment
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
1 Including mergers.
2 Including assets under construction of € 1,187 million.
10,522
369
1,455
12,346
10,458
35,497
2,606
1,600
50,161
2,233
233
656
28
917
9,341
369
1,445
11,155
9,806
32,770
2,517
2,020
47,113
226
641
–
867
–
–
– 2
– 2
– 15
– 185
22
23
– 155
–
2
–
–
2
–
–
15
15
164
551
47
4
766
–
3
–
–
3
2,092
–
100
2,192
300
1,510
234
1,587
3,631
513
321
56
–
377
2,064
–
146
2,210
240
1,954
218
1,268
3,680
68
15
28
111
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
295
1,362
34
– 1,691
200
2,546
56
2
–
58
500
710
28
1,238
883
–
152
10,522
369
1,454
1,035
12,345
75
1,168
215
4
10,430
35,469
2,601
1,597
1,462
50,097
64
–
–
64
233
656
28
917
Leased products
36,969
1,738
18,011
14,452
42,266
1,088
1,293
148
2,233
Acquisition and manufacturing cost
Depreciation and amortisation
Carrying amount
1. 1. 2015 1
Additions
Disposals
31. 12. 2015
Translation
differences
Reclassi-
fications
1. 1. 2015 1
Translation
differences
Current year
Reclas si-
fications
Disposals
31. 12. 2015
31. 12. 2015
31. 12. 2014
3,888
5
763
4,656
4,181
23,841
1,902
6
29,930
6,804
–
62
398
–
460
–
–
11
11
77
390
43
–
510
238
–
2
–
–
2
1,166
–
175
1,341
319
2,795
204
–
3,318
3,536
–
12
13
2
27
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
883
–
152
4,171
6,351
5,453
5
797
364
657
364
682
1,035
4,973
7,372
6,499
Development costs
Goodwill
Other intangible assets
Intangible assets
62
1,150
208
–
4,515
25,876
1,941
5,915
9,593
660
5,625
8,930
613
Land, titles to land, buildings, including
buildings on third party land
Plant and machinery
Other facilities, factory and office equipment
6
1,591 2
2,014 Advance payments made and construction in progress
1,420
32,338
17,759
17,182
Property, plant and equipment
3,277
7,301
34,965
30,165
Leased products
–
–
–
–
–
–
2,233
1,088
76
411
2
489
157
245
26
428
164
244
–
408
Investments accounted for using
the equity method
Investments in non-consolidated subsidiaries
Participations
Non-current marketable securities
Other investments
489
–
192
–
3
678
560
142
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
19
Intangible assets
Intangible assets mainly comprise capitalised develop-
ment costs on vehicle and engine projects as well as
subsidies for tool costs, licences, purchased develop-
ment projects, software and purchased customer lists.
Other intangible assets include a brand-name right
amounting to € 42 million (2015: € 48 million) which
is allocated to the Automotive segment and is not
subject to scheduled amortisation since its useful life
is deemed to be indefinite. The year-on-year change
is due entirely to currency factors. This line item also
includes goodwill of € 33 million (2015: € 33 million)
allocated to the Automotive cash-generating unit
(CGU) and goodwill of € 331 million (2015: € 331 mil-
lion) allocated to the Financial Services CGU.
20
Property, plant and equipment
No impairment losses were recognised in 2016 (2015:
€ 3 million).
As in the previous year, no borrowing costs were
recognised as a cost component of property, plant
and equipment in 2016.
Property, plant and equipment include a total of
€ 107 million (2015: € 110 million) relating to land and
buildings, for which economic ownership is attribut-
able to the BMW Group (finance leases). Leases to
which BMW AG is party, with a carrying amount of
€ 90 million (2015: € 102 million), run for periods up
to 2030 at the latest and contain price adjustment
clauses in the form of index-linked rentals as well as
extension and purchase options.
Intangible assets amounting to € 42 million (2015:
€ 48 million) are subject to restrictions on title.
Minimum lease payments are as follows:
As in the previous year, there was no requirement to
recognise impairment losses or reversals of impair-
ment losses on intangible assets in 2016.
As in the previous year, no borrowing costs were
recognised as a cost component of intangible assets
in 2016.
in € million
31. 12. 2016
31. 12. 2015
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
23
73
127
223
11
36
50
97
12
37
77
126
22
69
99
190
10
32
27
69
12
37
72
121
Group Financial Statements
143
21
Leased products
Minimum lease payments of non-cancellable oper-
ating leases amounting to € 17,850 million (2015:
€ 16,527 million) fall due as follows:
in € million
31. 12. 2016
31. 12. 2015
within one year
between one and five years
later than five years
8,692
9,154
4
8,079
8,445
3
Minimum lease payments
17,850
16,527
Contingent rents of € 46 million (2015: € 54 million),
based principally on the distance driven, were rec-
ognised in income. The agreements have, in part,
extension and purchase options.
Impairment losses amounting to € 384 million (2015:
€ 119 million) were recognised on leased products in
2016 as a consequence of changes in residual value
expectations. No income was recognised in 2016 from
the reversal of impairment losses (2015: € 24 million).
22
Investments accounted for using the equity
method
Investments accounted for using the equity method
comprise the joint venture BMW Brilliance Auto-
motive Ltd. (BMW Brilliance), the joint ventures
DriveNow GmbH & Co. KG and DriveNow Ver-
waltungs GmbH (DriveNow) and the interest in the
associated company THERE Holding B. V. (THERE).
BMW Brilliance (in which the BMW Group has a 50.0 %
shareholding) produces mainly BMW brand models
for the Chinese market and also has engine manufac-
turing facilities, which supply the joint venture’s two
plants with petrol engines.
DriveNow (in which the BMW Group has a 50.0 %
shareholding) offers car-sharing services in major
German cities and abroad.
In August 2015, BMW AG, Daimler AG, Stuttgart,
and AUDI AG, Ingolstadt, agreed with Nokia Cor-
poration, Helsinki, to acquire that entity’s maps and
location-based services business (HERE Group). The
HERE Group’s digital maps are fundamental for the
next generation of mobility and location-based ser-
vices, providing the basis for new assistance systems
and, ultimately, fully autonomous driving.
THERE Holding B. V. and its wholly owned subsidi-
ary, HERE International B. V. (until 28 January 2016:
THERE Acquisition B. V.) were founded in connection
with the acquisition. HERE International B. V. acquired
all of the shares of the HERE Group. Via BMW Inter-
national Holding B. V., the BMW Group has a 33.3 %
shareholding in THERE Holding B. V. THERE acquired
the HERE Group with effect from 4 December 2015.
The total purchase price of € 2.6 billion was financed by
using capital contributions (€ 2.0 billion) and via bank
loans taken up by HERE International B. V. (€ 0.6 bil-
lion). The BMW Group’s share of the purchase price
was approximately € 0.67 billion.
THERE is included in the BMW AG Group Financial
Statements as an associated company using the equity
method and allocated for segment reporting purposes
to the Automotive segment. In view of the proximity
of the reporting date and on the grounds of imma-
teriality, no fair value adjustments were recorded in
conjunction with the at-equity carrying amount at
31 December 2015, at which stage the investment
was accounted for at cost. During 2016, the Group’s
share of earnings was accounted for with one month’s
delay, which was caught up at 31 December 2016. The
purchase price allocation was completed during the
first quarter of 2016.
In December 2016, THERE Holding B. V. signed
contracts for the sale of a total of 25 % of the shares
of HERE International B. V. The contract relating to
the sale of 15 % of the shares to Intel Holdings B. V.,
Schiphol-Rijk, was completed in January 2017. 10 %
of the shares were sold to a consortium comprising
NavInfo Co. Ltd., Beijing, Tencent Holdings Ltd.,
Shenzhen, and GIC Private Ltd., Singapore. After
receipt of the approval of the relevant regulatory
agencies, the transaction is expected to be completed
during the first half of 2017.
144
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
Financial information relating to equity accounted
investments is aggregated in the following tables:
in € million
2016
2015
2016
2015
2016
2015
BMW Brilliance
THERE
DriveNow
dISCloSureS relAtInG to the InCome StAtement
Revenues
Scheduled depreciation
Profit / loss before financial result
Interest income
Interest expenses
Income taxes
Other comprehensive income
Total comprehensive income
Dividends received by the Group
12,991
13,220
486
1,328
30
2
363
30
1,061
134
380
1,399
40
15
369
150
1,081
144
1,240
52
– 149
1
22
3
– 4
– 171
–
–
–
–
–
–
–
–
–
–
58
–
– 15
–
–
–
–
– 15
–
47
–
– 6
–
–
–
–
– 6
–
in € million
2016
2015
2016
2015
2016
2015
BMW Brilliance
THERE
DriveNow
dISCloSureS relAtInG to the bAlAnCe Sheet
Non-current assets
Cash and cash equivalents
Current assets
Equity
Non-current financial liabilities
Non-current provisions and liabilities
Current financial liabilities
Current provisions and liabilities
reConCIlIAtIon of AGGreGAted fInAnCIAl
InformAtIon
Assets
Provisions and liabilities
Net assets
Group’s interest in net assets
Eliminations
Carrying amount
5,779
2,106
4,405
4,678
–
670
87
5,415
1,663
3,841
3,853
–
589
641
4,835
4,814
10,183
5,505
4,678
2,339
– 414
1,925
9,256
5,403
3,853
1,927
– 376
1,551
2,802
209
592
1,832
525
1,044
73
518
3,394
1,562
1,832
611
–
611
3,115
96
365
2,003
598
1,093
48
384
3,480
1,477
2,003
668
–
668
–
20
33
15 1
–
–
–
18
33
18
15
10 2
–
10
–
23
32
20 1
–
–
–
12
32
12
20
14 2
–
14
1 Corresponds to the consolidated equity capital provided by the shareholders of DriveNow GmbH & Co. KG and its subsidiaries.
2 The BMW Group holds 67.2 % (2015: 73.8 %) of the net assets at 31 December 2016. Due to the allocation of voting power within the decision-making bodies of the two entities,
operations remain subject to joint control.
Group Financial Statements 23
Receivables from sales financing
Receivables from sales financing comprise the fol-
lowing:
in € million
31. 12. 2016
31. 12. 2015
Credit financing for retail customers
and dealerships
Finance lease receivables
Receivables from
sales financing
61,602
16,658
52,915
17,128
78,260
70,043
Non-guaranteed residual values that fall to the ben-
efit of the lessor amounted to € 118 million (2015:
€ 165 million).
Impairment allowances
in € million
31. 12. 2016
31. 12. 2015
Gross carry amount of items with
impairment allowances recognised
on a specific-item basis
Impairment allowances recognised
on a specific-item basis
thereof for finance lease receivables
Gross carrying amount of items with
impairment allowances recognised
on a group basis
Impairment allowances recognised
on a group basis
Carrying amount without impairment
allowances
Net carrying amount
14,440
13,742
– 934
– 141
– 963
– 174
52,951
44,473
– 467
– 530
12,270
78,260
13,321
70,043
145
Allowances on receivables from sales financing –
which only arise within the Financial Services seg-
ment – developed as follows:
2016
Allowance for impairment
recognised on a
in € million
specific
item basis
group basis
Total
Balance at 1 January*
Allocated (+) / reversed (–)
Utilised
Exchange rate impact
and other changes
Balance at 31 December
963
248
– 304
27
934
535
– 25
– 41
– 2
467
1,498
223
– 345
25
1,401
* Balance at 1 January adjusted due to deconsolidation of entities.
2015
Allowance for impairment
recognised on a
in € million
specific
item basis
group basis
Total
Balance at 1 January
Allocated (+) / reversed (–)
Utilised
Exchange rate impact
and other changes
Balance at 31 December
1,000
265
– 319
17
963
515
30
– 22
7
530
1,515
295
– 341
24
1,493
The estimated fair value of collateral received for receiv-
ables on which impairment losses were recognised
totalled € 30,542 million (2015: € 26,992 million). 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 € 153 million
(2015: € 40 million).
146
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
Finance leases are analysed as follows:
Marketable securities and investment funds relate to
available-for-sale financial assets and comprise:
in € million
31. 12. 2016
31. 12. 2015
in € million
31. 12. 2016
31. 12. 2015
Fixed income securities
4,449
4,356
Stocks
Other debt securities
Marketable securities and
investment funds
734
104
561
344
5,287
5,261
The contracted maturities of debt securities are as
follows:
in € million
31. 12. 2016
31. 12. 2015
Fixed income securities
due within three months
due later than three months
Other debt securities
due within three months
due later than three months
Debt securities
780
3,669
699
3,657
104
–
344
–
4,553
4,700
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
5,921
12,574
32
5,974
12,816
134
18,527
18,924
5,348
11,278
32
5,429
11,572
127
16,658
17,128
Unrealised interest income
1,869
1,796
24
Financial assets
Financial assets comprise:
in € million
31. 12. 2016
31. 12. 2015
Marketable securities and
investment funds
Derivative instruments
Credit card receivables
Loans to third parties
Other
Financial assets
thereof non-current
thereof current
5,287
3,922
287
129
145
5,261
3,030
272
133
147
9,770
8,843
2,705
7,065
2,208
6,635
The amount by which the value of investment funds
exceeds obligations for part-time working arrange-
ments (€ 17 million; 2015: € 12 million) is reported
under other financial assets. Investment funds are
held to secure obligations relating to pre-retirement
part-time work arrangements. These funds are man-
aged by BMW Trust e. V., Munich, as part of Con-
tractual Trust Arrangements (CTA) and are therefore
netted against the corresponding settlement arrears
for pre-retirement part-time work arrangements.
Group Financial Statements
Allowances for impairment and credit risk
Receivables relating to credit card business comprise
the following:
in € million
31. 12. 2016
31. 12. 2015
Gross carrying amount
Allowance for impairment
Net carrying amount
296
– 9
287
280
– 8
272
Allowances for impairment losses on receivables
relating to credit card business developed as follows
during the year under report:
2016
Allowance for impairment
recognised on a
in € million
specific
item basis
group basis
Total
Balance at 1 January
Allocated (+) / reversed (–)
Utilised
Exchange rate impact and
other changes
Balance at 31 December
8
8
– 8
1
9
–
–
–
–
–
8
8
– 8
1
9
2015
Allowance for impairment
recognised on a
in € million
specific
item basis
group basis
Total
Balance at 1 January
Allocated (+) / reversed (–)
Utilised
Exchange rate impact and
other changes
Balance at 31 December
8
7
– 8
1
8
–
–
–
–
–
8
7
– 8
1
8
147
25
Income tax assets
Income tax assets totalling € 1,938 million (2015:
€ 2,381 million) include claims amounting to € 351 mil-
lion (2015: € 519 million), which are expected to be
settled after more than twelve months. Some of the
claims may be settled earlier than this depending on
the timing of proceedings.
26
Other assets
Other assets comprise:
in € million
31. 12. 2016
31. 12. 2015
Prepayments
1,914
1,527
Receivables from companies in which
an investment is held
Other taxes
Expected reimbursement claims
Receivables from subsidiaries
Collateral receivables
Sundry other assets
Other assets
thereof non-current
thereof current
1,217
1,135
779
422
387
828
893
1,036
711
716
412
966
6,682
6,261
1,595
5,087
1,568
4,693
Prepayments relate mainly to prepaid interest and
commission paid to dealerships. Prepayments of
€ 1,018 million (2015: € 795 million) have a maturity
of less than one year.
Collateral receivables comprise mainly customary
collateral (banking deposits) arising on the sale of
receivables.
148
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
27
Inventories
Inventories comprise the following:
in € million
31. 12. 2016
31. 12. 2015
Finished goods and goods for resale
Work in progress, unbilled contracts
Raw materials and supplies
Inventories
9,684
1,157
1,000
8,969
1,098
1,004
11,841
11,071
At 31 December 2016, inventories measured at their
net realisable value amounted to € 871 million (2015:
€ 1,054 million). Write-downs to net realisable value
amounting to € 101 million (2015: € 486 million) were
recognised in 2016. The write-down recorded in the
previous year resulted primarily from accidents and
natural disasters.
The expense recorded in conjunction with inven-
tories during the financial year 2016 amounted to
€ 55,129 million (2015: € 55,536 million).
28
Trade receivables
Trade receivables comprise the following:
in € million
31. 12. 2016
31. 12. 2015
Gross carrying amount
Allowance for impairment
Net carrying amount
2,882
– 57
2,825
2,847
– 96
2,751
The impairment allowance on trade receivables devel-
oped during the year under report as follows:
2016
Allowance for impairment
recognised on a
in € million
specific
item basis
group basis
Total
Balance at 1 January
Allocated (+) / reversed (–)
Utilised
Exchange rate impact
and other changes
Balance at 31 December
84
– 21
– 19
2
46
12
–
– 1
–
11
96
– 21
– 20
2
57
2015
Allowance for impairment
recognised on a
in € million
specific
item basis
group basis
Total
Balance at 1 January
Allocated (+) / reversed (–)
Utilised
Exchange rate impact and
other changes
Balance at 31 December
76
36
– 27
– 1
84
7
7
– 1
– 1
12
83
43
– 28
– 2
96
Some trade receivables were overdue for which an
impairment allowance was not recognised. Overdue
balances are analysed into the following time windows:
in € million
31. 12. 2016
31. 12. 2015
1 – 30 days overdue
31 – 60 days overdue
61 – 90 days overdue
91 – 120 days overdue
More than 120 days overdue
Balance at 31 December
174
23
29
17
64
307
128
20
10
15
22
195
Receivables that are overdue by between one and
30 days do not normally result in bad debt losses
since the overdue nature of the receivables is primar-
ily attributable to the timing of receipts around the
month-end. In the case of trade receivables, collateral
is generally held in the form of vehicle documents
and bank guarantees so that the risk of bad debt loss
is extremely low.
Group Financial Statements
29
Equity
number of shares issued
Number of shares issued
2016
2015
2016
2015
Preferred stock
Common stock
Shares issued / in circulation at 1 January
54,809,404
54,499,544
601,995,196
601,995,196
Shares issued in conjunction with Employee Share Programme
Less: shares repurchased and re-issued
Shares issued / in circulation at 31 December
305,029
309,944
29
84
–
–
–
–
55,114,404
54,809,404
601,995,196
601,995,196
149
All of the Company stock is issued to bearer and each
share has a par value of € 1.00. Preferred stock, to
which no voting rights are attached, bears an addi-
tional dividend of € 0.02 per share.
In 2016, a total of 305,029 shares of preferred stock
was sold to employees at a reduced price of € 44.14 per
share in conjunction with the Company’s Employee
Share Programme. These shares are entitled to receive
dividends with effect from the financial year 2017.
29 shares of preferred stock were bought back in
2016 via the stock exchange in conjunction with the
Company’s Employee Share Programme.
Issued share capital increased by € 0.3 million as a
result of the issue to employees of 305,000 shares of
non-voting preferred stock. The number of author-
ised shares and the Authorised Capital of BMW AG
amounted to 4.2 million shares and € 4.2 million
respectively at the end of the reporting period. The
Company is authorised to issue 5 million shares of
non-voting preferred stock amounting to nominal
€ 5.0 million prior to 14 May 2019.
Capital reserves
Capital reserves include premiums arising from the
issue of shares and totalled € 2,047 million (2015:
€ 2,027 million). The change related to the share cap-
ital increase arising in conjunction with the issue of
shares of preferred stock to employees amounting to
€ 20.1 million.
revenue reserves
Revenue reserves comprise the post-acquisition and
non-distributed earnings of consolidated companies.
In addition, remeasurements of the net defined ben-
efit liability for pension plans are also presented in
revenue reserves.
A proposal will be made that the unappropriated profit
of BMW AG for the financial year 2016 amounting to
€ 2,300 million be utilised as follows:
— Distribution of a dividend of € 3.52 per share of
preferred stock (€ 193 million).
— Distribution of a dividend of € 3.50 per share of
common stock (€ 2,107 million).
The proposed distribution was not recognised as a
liability in the Group Financial Statements.
Accumulated other equity
Accumulated other equity comprises all amounts rec-
ognised directly in equity resulting from the transla-
tion of the financial statements of foreign subsidiaries,
the effects of recognising changes in the fair value
of derivative financial instruments and marketable
securities directly in equity and the related deferred
taxes recognised directly in equity.
150
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
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
economic conditions and the risk profile of the under-
lying assets.
The BMW Group is not subject to any external
minimum equity capital requirements. Within the
Financial Services segment, however, there are a
number of individual entities which are subject to
equity capital requirements set by relevant regulatory
banking agencies.
In order to manage its capital structure, the
BMW Group uses various instruments, including the
amount of dividends paid to shareholders and share
buybacks. Moreover, the BMW Group pro-actively
manages debt capital, determining levels of debt
capital transactions with a target debt structure in
mind. An important aspect of the selection of finan-
cial 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 available on
the world’s capital markets to achieve diversification.
The capital structure at the end of the reporting period
was as follows:
in € million
31. 12. 2016
31. 12. 2015
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
47,108
32.5 %
55,405
42,326
97,731
67.5 %
42,530
31.7 %
49,523
42,160
91,683
68.3 %
Total capital
144,839
134,213
The equity ratio attributable to shareholders of
BMW AG increased during the financial year by
0.8 percentage points, primarily reflecting the
increase in revenue reserves.
Group Financial Statements 30
Pension provisions
In the case of defined benefit plans, the BMW Group
is required to pay the benefits it has granted to pres-
ent and past employees. Defined benefit plans may
be funded or unfunded, the latter sometimes covered
by accounting provisions. Pension commitments in
Germany are mostly covered by assets contributed
to BMW Trust e. V., Munich, in conjunction with a
contractual trust arrangement (CTA). The main other
countries with funded plans were the UK, the USA,
Switzerland, the Netherlands, Belgium and Japan.
151
In the meantime, most of the defined benefit plans
have been closed to new entrants.
The assumptions stated below, all of which depend
on the economic situation in the relevant country,
are used to measure the defined benefit obligation
of each pension plan. The following weighted aver-
age values have been used for Germany, the United
Kingdom and other countries:
in %
Discount rate
Pension level trend
Weighted duration of all pension obligations in years
Germany
United Kingdom
Other
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
1.80
1.78
21.3
2.51
1.60
20.5
2.51
2.55
20.9
3.58
2.43
19.2
3.70
–
17.6
3.83
0.02
18.4
The following mortality tables are applied in countries,
in which the BMW Group has significant defined
benefit plans:
Germany
United Kingdom
Mortality Table 2005 G issued by Prof. K. Heubeck (with invalidity rates reduced by 50 %)
SP2 tables with weightings
In Germany, the so-called “pension entitlement trend”
(Festbetragstrend) also represents a significant actu-
arial assumption for the purposes of determining
benefits payable at retirement and was left unchanged
at 2.0 %.
Based on the measurement principles contained in
IAS 19, the following balance sheet carrying amounts
apply to the Group’s pension plans:
in € million
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
Germany
United Kingdom
Other
Total
Present value of defined benefit
obligations
Fair value of plan assets
Effect of limiting net defined benefit
asset to asset ceiling
Carrying amounts at 31 December
thereof pension provision
thereof assets
11,112
8,643
–
2,469
2,469
–
9,215
7,855
–
1,360
1,360
–
10,311
8,714
–
1,597
1,597
–
9,327
8,153
–
1,174
1,174
–
1,476
958
1,384
922
22,899
18,315
19,926
16,930
3
521
521
–
3
465
466
– 1
3
3
4,587
2,999
4,587
–
3,000
– 1
152
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
Numerous defined benefit plans are in place through-
out the BMW Group.
Under the motto “THE NEXT 100 YEARS”, almost
all of the workforce received a special bonus in
conjunction with the BMW Group’s centenary
anniversary. Depending on opportunities available
in each country, the bonus was contributed to the
relevant pension plan or paid to the recipient in a
one-off amount.
The most significant of the BMW Group’s pension
plans are described below.
Germany
Both employer- and employee-funded benefit plans
are in place in Germany. Benefits paid in conjunction
with these plans comprise old-age retirement pen-
sions as well as invalidity and surviving dependents’
benefits. The Deferred Remuneration Retirement
Plan is an employee-financed defined contribution
plan with a minimum rate of return. The fact that the
plan involves a minimum rate of return means that
it is classified as a defined benefit plan. Employees
have the option to waive payment of certain remu-
neration components in return for a future benefit.
When the benefit falls due, it is paid on the basis
of the higher of the value of the depot account or a
guaranteed minimum amount. Defined benefit obli-
gations also remain in Germany, for which benefits
are determined either by multiplying a fixed amount
by the number of years of service or on the basis of
an employee’s final salary.
The defined benefit plans have been closed to new
entrants. With effect from 1 January 2014, new
employees receive a defined contribution entitle-
ment with a minimum rate of return. Under the
motto “THE NEXT 100 YEARS”, this entitlement was
enhanced by a special centenary bonus to employees,
made in the form of a starting contribution to a new
BMW supplementary benefit plan.
The assets of the German pension plans are admin-
istered by BMW Trust e. V., Munich, (German reg-
istered association) in accordance with a CTA. The
representative bodies of this entity are the Board
of Directors and the Members’ General Meeting.
BMW Trust e. V., Munich, currently has seven mem-
bers and three Board of Directors members elected
by the Members’ General Meeting. The Board of
Directors is responsible for investments, drawing
up and deciding on investment guidelines as well as
monitoring compliance with those guidelines. The
members of the association can be employees, senior
executives and members of the Board of Directors.
An ordinary Members’ General Meeting takes place
once every calendar year, and deals with a range
of matters, including receiving and approving the
association’s annual report, ratifying the activities
of the Board of Directors and adopting changes to
the association’s statutes.
united Kingdom
In the United Kingdom, the BMW Group has defined
benefit plans, which are primarily employer-funded
combined with employee-funded components based
on the conversion of employee remuneration. These
plans are subject to statutory minimum recovery
requirements. Benefits paid in conjunction with
these plans comprise old-age retirement pensions as
well as invalidity and surviving dependents’ benefits.
The defined benefit plans have been closed to new
entrants, who, since 1 January 2014, are covered by
a defined contribution plan.
The pension plans are administered by BMW Pen-
sion Trustees Limited, Hams Hall, and BMW (UK)
Trustees Limited, Hams Hall, both trustee companies
which act independently of the BMW Group. BMW
(UK) Trustees Limited, Hams Hall, is represented
by 11 trustees and BMW Pension Trustees Limited,
Hams Hall, by five trustees. A minimum of one
third of the trustees must be elected by plan partic-
ipants. The trustees represent the interests of plan
participants and decide on investment strategies.
Recovery contributions to the funds are determined
in agreement with the BMW Group.
Group Financial Statements The change in the net defined benefit liability for pension
plans can be derived as follows:
in € million
1 January 2016
ExpEnSE / IncoME
Current service cost
Interest expense (+) / income (–)
Past service cost
Gains (–) or losses (+) arising from settlements
remeASurementS
Gains (–) or losses (+) on plan assets, excluding amounts included
in interest income
Gains (–) or losses (+) arising from changes in the discount factor
Gains (–) or losses (+) arising from changes in demographic assumptions
Gains (–) or losses (+) arising from experience adjustments
Changes in the limitation of the net defined benefit asset to the
asset ceiling
Transfers to fund
Employee contributions
Pensions and other benefits paid
Translation differences and other changes
31 December 2016
thereof pension provision
thereof assets
in € million
1 January 2015
ExpEnSE / IncoME
Current service cost
Interest expense (+) / income (–)
Past service cost
Gains (–) or losses (+) arising from settlements
remeASurementS
Gains (–) or losses (+) on plan assets, excluding amounts included
in interest income
Gains (–) or losses (+) arising from changes in the discount factor
Gains (–) or losses (+) arising from changes in demographic assumptions
Gains (–) or losses (+) arising from experience adjustments
Changes in the limitation of the net defined benefit asset to the
asset ceiling
Transfers to fund
Employee contributions
Pensions and other benefits paid
Translation differences and other changes
31 December 2015
thereof pension provision
thereof assets
153
Defined
benefit
obligation
Plan assets
Total
Limitation of
the net defined
benefit asset to
the asset ceiling
Net defined
benefit liability
19,926
– 16,930
2,996
557
557
– 171
– 8
–
4,093
– 40
– 118
–
–
85
– 643
– 1,339
22,899
–
– 479
–
–
557
78
– 171
– 8
– 1,836
– 1,836
–
–
–
–
– 827
– 85
676
1,166
– 18,315
4,093
– 40
– 118
–
– 827
–
33
– 173
4,584
3
–
–
–
–
–
–
–
–
–
–
–
–
–
3
2,999
557
78
– 171
– 8
– 1,836
4,093
– 40
– 118
–
– 827
–
33
– 173
4,587
4,587
–
Defined
benefit
obligation
Plan assets
Total
Limitation of
the net defined
benefit asset to
the asset ceiling
Net defined
benefit liability
20,462
– 15,861
4,601
494
591
– 9
–
–
– 1,181
– 224
– 429
–
–
79
– 540
683
–
– 468
–
–
325
–
–
–
–
– 872
– 79
554
– 529
19,926
– 16,930
494
123
– 9
–
325
– 1,181
– 224
– 429
–
– 872
–
14
154
2,996
2
–
–
–
–
–
–
–
–
1
–
–
–
–
3
4,603
494
123
– 9
–
325
– 1,181
– 224
– 429
1
– 872
–
14
154
2,999
3,000
– 1
154
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
Past service cost results from a change in the defined
benefit pension plan in Germany. In future, 12 month-
ly pension payments will be paid to all plan benefi-
ciaries, with a guaranteed 1 % increase in pension
entitlements for benefits awarded since 1999.
Depending on the cash flow profile and risk structure
of the pension obligations involved, pension plan
assets are invested in various investment classes.
Plan assets in Germany, the UK and other countries
comprised the following:
in € million
2016
2015
2016
2015
2016
2015
2016
2015
Germany
United Kingdom
Other
Total
ComponentS of plAn ASSetS
Equity instruments
Debt instruments
thereof investment grade
thereof non-investment grade
Real estate
Money market funds
Absolute return funds
Other
1,726
5,439
3,752
1,687
–
–
–
–
1,807
4,834
3,525
1,309
–
–
–
–
611
6,071
5,564
507
–
26
82
–
1,340
4,623
4,437
186
–
255
33
–
235
458
422
36
25
11
–
5
224
420
383
37
20
19
–
–
2,572
11,968
9,738
2,230
25
37
82
5
3,371
9,877
8,345
1,532
20
274
33
–
Total with quoted market price
7,165
6,641
6,790
6,251
734
683
14,689
13,575
Debt instruments
thereof investment grade
thereof mixed funds
(funds without a rating)
thereof non-investment grade
Real estate
Cash and cash equivalents
Absolute return funds
Other
543
195
348
–
183
17
419
316
367
189
178
–
172
17
376
282
408
2
179
227
697
9
745
65
207
2
–
205
783
24
705
183
Total without quoted market price
1,478
1,214
1,924
1,902
31 December
8,643
7,855
8,714
8,153
3
1
–
2
123
1
46
51
224
958
3
1
–
2
105
–
34
97
239
954
198
527
229
1,003
27
1,210
432
3,626
577
192
178
207
1,060
41
1,115
562
3,355
922
18,315
16,930
consultants, with the aim of ensuring that investments
are structured to coincide with the timing of pen-
sion payments and the expected pattern of pension
obligations. Each of these measures helps to reduce
fluctuations in pension funding shortfalls.
Employer contributions to plan assets are expected to
amount to € 1,190 million in the coming year.
The BMW Group is exposed to risks arising from
defined benefit plans on the one hand and defined
contribution plans with a minimum return guarantee
on the other. The discount rates used to calculate
pension obligations are subject to market fluctuation
and therefore influence the level of the obligations.
Furthermore, changes in other actuarial parameters,
such as expected rates of inflation, also have an impact
on pension obligations. In order to reduce currency
exposures, a substantial portion of plan assets is either
invested in the same currency as the underlying plan
or hedged by means of currency derivatives. As part
of the internal reporting procedures and for internal
management purposes, financial risks relating to the
pension plans are reported on using a deficit-value-
at-risk approach. The investment strategy is also
subjected to regular review together with external
Group Financial Statements 155
The defined benefit obligation relates to current
employees, former employees with vested benefits
and pensioners as follows:
in € million
Current employees
Pensioners
Former employees with vested benefits
Defined benefit obligation
Germany
United Kingdom
Other
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
67.3
27.8
4.9
66.3
28.6
5.1
26.7
43.1
30.2
23.4
48.6
28.0
79.1
17.5
3.4
75.0
16.7
8.3
100.0
100.0
100.0
100.0
100.0
100.0
The sensitivity analysis provided below shows the
extent to which changes in individual factors at the
end of the reporting period influence the defined
benefit obligation.
It is only possible, however, to aggregate sensitivities
to a limited extent. Since the change in obligations
does not follow a linear pattern, estimates made on
the basis of the specified sensitivities are only possible
with this restriction. The calculation of sensitivities
using ranges other than those specified could result
in a non-proportional change in the defined benefit
obligation.
Change in defined benefit obligation
31. 12. 2016
31. 12. 2015
in € million
in %
in € million
in %
Discount rate
Pension level trend
Average life expectancy
increase of 0.75 %
decrease of 0.75 %
increase of 0.25 %
decrease of 0.25 %
increase of 1 year
decrease of 1 year
increase of 0.25 %
– 2,939
4,031
747
– 713
853
– 854
165
Pension entitlement trend
decrease of 0.25 %
– 158
– 12.8
– 2,577
– 12.9
17.6
3.3
– 3.1
3.7
– 3.7
0.7
– 0.7
3,253
655
– 610
632
– 633
134
– 128
16.3
3.3
– 3.1
3.2
– 3.2
0.7
– 0.6
In the UK, the sensitivity analysis for the pension
level trend also takes account of restrictions due to
caps and floors.
156
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
31
Other provisions
Other provisions changed during the year as follows:
in € million
1.1.2016
Translation
differences
Additions
Reversal of
discounting
Utilised
Reversed
31. 12. 2016
thereof due
within one year
Obligations for personnel and social
expenses
Obligations for ongoing operational
expenses
Other obligations
Other provisions
1,939
5,811
1,880
9,630
5
48
21
1,705
3,219
938
1
51
6
– 1,436
– 23
2,191
1,661
– 2,313
– 362
– 289
– 283
6,527
2,200
2,824
1,394
5,879
74
5,862
58
– 4,111
– 595
10,918
32
Income tax liabilities
Current income tax liabilities totalling € 1,074 million
(2015: € 1,441 million) include € 33 million (2015: 485
€million), which is expected to be settled after more
than twelve months. Some of the liabilities may be
settled earlier than this depending on the timing of
proceedings.
Current income tax liabilities of € 1,074 million
(2015: € 1,441 million) comprise € 269 million (2015:
€ 288 million) for taxes payable and € 805 million (2015:
€ 1,153 million) for tax provisions.
Provisions for obligations for personnel and social
expenses comprise mainly performance-related
remuneration components, early retirement part-time
working arrangements and employee long-service
awards.
Provisions for obligations for on-going operational
expenses comprise primarily warranty obligations.
Depending on when claims are made, it is possible
that the BMW Group may be called upon to fulfil
obligations over the whole period of the warranty
or guarantee. Expected reimbursement claims at
31 December 2016 amounted to € 779 million at the
end of the reporting period (2015: € 711 million). Also
included are other provisions for expected payments
for bonuses, rebates and other price deductions.
Provisions for other obligations cover numerous spe-
cific risks and obligations of uncertain timing and
amount, in particular for litigation and liability risks.
Income from the reversal of other provisions amount-
ing to € 480 million (2015: € 550 million) is recorded
in cost of sales and in selling and administrative
expenses.
Group Financial Statements
157
31. 12. 2016
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
9,242
6,765
10,251
10,063
3,852
1,656
497
25,496
9,683
9,709
3,997
3,316
–
1,496
130
–
644
133
–
179
622
Total
44,421
16,474
14,892
13,512
3,852
3,331
1,249
42,326
44,144
11,261
97,731
31. 12. 2015
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
10,124
23,283
6,912
5,046
9,030
9,719
5,415
2,198
628
8,585
3,194
3,657
–
2,245
325
–
496
133
–
107
586
Total
40,319
13,631
12,720
13,509
5,415
4,550
1,539
42,160
41,289
8,234
91,683
33
Financial liabilities
Financial liabilities include all liabilities of the
BMW Group at the relevant balance sheet dates
relating to financing activities. Financial liabilities
comprise the following:
in € million
Bonds
Asset backed financing transactions
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Derivative instruments
Other
Financial liabilities
in € million
Bonds
Asset backed financing transactions
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Derivative instruments
Other
Financial liabilities
Customer deposit liabilities arise in the BMW Group’s
banks, notably in Germany and the USA, which offer
a range of investment products.
158
Bonds comprise:
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
Issuer
BMW Finance N. V.
BMW US Capital, LLC
BMW Canada Inc.
Other
Issue volume
in relevant currency
(ISO-Code)
Weighted average
maturity period
(in years)
Weighted average
nominal interest rate
(in %)
EUR 6,101 million
GBP 67 million
SEK 1,950 million
AUD 690 million
CHF 300 million
CNH 300 million
EUR 15,214 million
GBP 2,700 million
HKD 1,093 million
JPY 49,100 million
NOK 1,650 million
SEK 1,750 million
EUR 1,500 million
GBP 250 million
NZD 30 million
USD 1,295 million
AUD 130 million
EUR 3,500 million
GBP 300 million
HKD 834 million
JPY 30,000 million
NZD 100 million
USD 8,210 million
CAD 500 million
CAD 1,600 million
AUD 700 million
CNY 2,000 million
INR 3,500 million
2.2
1.0
3.0
5.4
6.0
3.0
7.2
5.2
4.1
3.7
3.9
5.0
3.2
1.8
3.0
3.0
3.8
6.6
5.0
3.0
3.0
3.0
6.2
2.7
4.6
3.0
3.0
5.0
KRW 260,000 million
3.9
0.1
0.7
0.0
4.0
1.8
4.2
2.0
2.5
1.9
0.4
2.1
1.9
0.0
0.7
2.9
1.4
2.8
0.9
2.0
1.6
0.2
4.4
2.3
0.9
2.1
2.4
3.3
10.3
2.8
Interest
variable
variable
variable
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
variable
variable
variable
variable
fixed
fixed
fixed
fixed
fixed
fixed
fixed
variable
fixed
variable
fixed
fixed
fixed
The following details apply to the commercial paper:
Issuer
BMW Finance N. V.
BMW Malta Finance Ltd.
BMW US Capital, LLC
BMW India Financial Services Private Ltd.
Issue volume
in relevant currency
(ISO-Code)
Weighted average
maturity period
(in days)
Weighted average
nominal interest rate
(in %)
EUR 380 million
GBP 300 million
EUR 350 million
USD 2,722 million
INR 14,000 million
76
74
13
20
91
– 0.32
0.37
– 0.30
0.67
7.33
Group Financial Statements 159
31. 12. 2016
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
Total
2,599
847
501
807
615
99
71
4,659
10,198
4,238
130
387
–
–
–
21
147
4,923
419
7,256
–
5
–
–
–
–
977
893
807
615
99
92
10
434
4,816
15,555
31. 12. 2015
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
2,399
681
492
1,080
107
86
71
4,292
9,208
3,640
121
374
–
–
–
17
176
4,328
215
–
5
–
–
–
1
10
231
Total
6,254
802
871
1,080
107
86
89
4,478
13,767
34
Other liabilities
Other liabilities comprise the following items:
in € million
Deferred income
Advance payments from customers
Deposits received
Other taxes
Payables to other companies in which an investment is held
Payables to subsidiaries
Social security
Other
Other liabilities
in € million
Deferred income
Advance payments from customers
Deposits received
Other taxes
Payables to other companies in which an investment is held
Payables to subsidiaries
Social security
Other
Other liabilities
Sundry other liabilities include mainly bonuses for
services already performed as well as sales promotions,
commission payable and credit balances on customers’
accounts.
160
BMW Group
Notes to the Group
Financial Statements
Notes to the
Balance Sheet
Other Disclosures
Deferred income comprises the following items:
in € million
Deferred income relating to service contracts
Deferred income from lease financing
Grants
Other deferred income
Deferred income
31. 12. 2016
31. 12. 2015
Total
thereof due
within one year
Total
thereof due
within one year
4,412
2,241
382
221
1,474
1,037
30
58
7,256
2,599
3,910
1,922
299
123
6,254
1,397
915
32
55
2,399
Deferred income relating to service contracts arises
in conjunction with service and repair work as well
as telematics services and roadside assistance to be
provided under commitments given at the time of
the sale of a vehicle (multi-component arrangements).
Deferred income from lease financing relates primarily
to upfront lease payments.
Grants comprise primarily public sector funds to
promote regional structures and which have been
invested in the production plants in Brazil, Mexico,
Leipzig and Berlin. The grants are partly subject to
holding periods for the assets concerned of up to five
years and / or minimum employment figures. Grant
income is recognised over the useful lives of the assets
to which they relate.
35
Trade payables
Trade payables have the following maturities:
in Mio. €
31. 12. 2016
31. 12. 2015
Maturity within one year
8,512
7,701
Maturity between one and five years
Maturity later than five years
Trade payables
–
–
72
–
8,512
7,773
Group Financial Statements
161
other financial obligations
In addition to liabilities, provisions and contingent lia-
bilities, the BMW Group also has other financial com-
mitments, primarily under rental and lease contracts
for land, buildings, plant and machinery, tools, office
and other facilities. These contracts run for periods of
one to 85 years. Some of them contain extension and
purchase options as well as price adjustment clauses,
based on index-linked or graduated rentals, including
adjustments for inflation.
In the financial year 2016, an amount of € 432 million
(2015: € 315 million) was recognised as expense in
conjunction with operating leases.
The total of future minimum payments under non-
cancellable leases and rental contracts can be analysed
by maturity as follows:
in € million
31. 12. 2016
31. 12. 2015
due within one year
due between one and five years
due later than five years
Other financial obligations
447
1,102
895
2,444
371
1,003
816
2,190
The following obligations also existed for the
BMW Group at the end of the reporting period:
in € million
31. 12. 2016
31. 12. 2015
Purchase commitments for
property plant and equipment
Purchase commitments for
intangible assets
3,141
2,217
1,363
757
OTHER DISCLOSURES
36
Contingent liabilities and other financial
commitments
Contingent liabilities
The following contingent liabilities existed at the
balance sheet date:
in € million
Guarantees
Performance guarantees
Other
Contingent liabilities
31. 12. 2016
31. 12. 2015
67
–
474
541
93
–
213
306
Other contingent liabilities comprise mainly legal
disputes as well as risks relating to taxes and customs
duties.
Regulatory agencies have ordered the BMW Group
to recall various vehicle models that are fitted with
airbags supplied by the Takata group of companies.
Provision for the costs involved has been recognised
within warranty provisions. It cannot be ruled out,
however, that further BMW Group vehicles will be
affected by future recall actions. Further disclosures
pursuant to IAS 37.86 cannot be provided at present
in view of the fact that technical tests have not yet
been completed.
In June 2016, Germany’s Federal Cartel Agency con-
ducted searches at various carmakers and suppliers,
including the BMW AG, as part of an investigation
into the purchase of steel in the automotive industry.
The investigations have not yet been completed. More
detailed information is currently not available.
The BMW Group determines its best estimate of
contingent liabilities on the basis of the information
available at the date of preparation of the Group
Financial Statements. This assessment may change
over time and is adjusted regularly on the basis of new
information and circumstances. Some of the risks are
insured. In accordance with IAS 37, the BMW Group
does not disclose information relating to legal disputes
and risks relating to taxes and customs duties, if such
disclosures could be expected to prejudice seriously
the position of the BMW Group or if disclosure is not
practicable. From today’s perspective, the BMW Group
does not expect these proceedings to have a significant
adverse impact on the results of operations, financial
position or net assets of the Group.
162
BMW Group
Notes to the Group
Financial Statements
Other Disclosures
37
Financial instruments
The carrying amounts of financial instruments are
assigned to IAS 39 categories and cash funds as fol-
lows:*
in € million
ASSetS
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Marketable securities and investment funds
Loans to third parties
Credit card receivables
Other
Cash and cash equivalents
Trade receivables
Other assets
Receivables from subsidiaries
Receivables from companies in which an investment is held
Collateral receivables
Other
Total
lIAbIlItIeS
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Other
Trade payables
Other liabilities
Payables to subsidiaries
Payables to other companies in which an investment is held
Other
Total
Cash funds
Loans and receivables
Available for sale
Fair value option
Other liabilities
Held for trading
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
–
–
534
26
–
26
–
402
–
–
–
–
1,758
949
1,215
830
1,194
1,006
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,880
6,122
78,260
70,043
–
–
–
–
129
287
145
–
–
–
–
100
133
272
147
–
–
–
–
287
–
–
–
–
314
–
2,825
2,751
422
1,217
–
1,124
716
893
–
1,050
5,287
5,161
–
–
–
–
–
–
–
100
–
–
–
–
–
–
–
–
98
–
8,167
6,436
84,409
76,105
5,921
5,661
26
26
3,922
3,030
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44,421
14,892
13,512
3,852
16,474
–
–
–
1,249
8,512
99
615
40,319
12,720
13,509
5,415
13,631
–
–
–
1,539
7,773
86
107
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,694
870
767
2,535
563
1,452
5,535
5,075
109,161
100,174
3,331
4,550
Other derivative instruments
Marketable securities and investment funds
ASSetS
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Loans to third parties
Credit card receivables
Other
Cash and cash equivalents
Trade receivables
Other assets
Receivables from companies in which an investment is held
Receivables from subsidiaries
Collateral receivables
Other
Total
lIAbIlItIeS
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Other
Trade payables
Other liabilities
Payables to subsidiaries
Other
Total
Payables to other companies in which an investment is held
* The carrying amounts of cash flow and fair value hedges are allocated to the category “Held for trading” for the sake of clarity.
Group Financial Statements
Cash funds
Loans and receivables
Available for sale
Fair value option
Other liabilities
Held for trading
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
163
26
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,167
6,436
84,409
76,105
5,921
5,661
26
26
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44,421
14,892
13,512
3,852
16,474
–
–
–
1,249
8,512
99
615
40,319
12,720
13,509
5,415
13,631
–
–
–
1,539
7,773
86
107
5,535
5,075
–
–
1,758
949
1,215
–
–
–
–
–
–
–
–
–
–
–
–
830
1,194
1,006
–
–
–
–
–
–
–
–
–
–
3,922
3,030
–
–
–
–
–
–
–
–
–
–
1,694
870
767
2,535
563
1,452
–
–
–
–
–
–
–
–
–
–
109,161
100,174
3,331
4,550
ASSetS
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Marketable securities and investment funds
Loans to third parties
Credit card receivables
Other
Cash and cash equivalents
Trade receivables
Other assets
Receivables from companies in which an investment is held
Receivables from subsidiaries
Collateral receivables
Other
Total
lIAbIlItIeS
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Other
Trade payables
Other liabilities
Payables to subsidiaries
Payables to other companies in which an investment is held
Other
Total
7,880
6,122
2,825
2,751
Receivables from subsidiaries
Receivables from companies in which an investment is held
Collateral receivables
287
314
100
in € million
ASSetS
Other investments
Receivables from sales financing
Financial assets
Derivative instruments
Cash flow hedges
Fair value hedges
Loans to third parties
Credit card receivables
Other
Cash and cash equivalents
Trade receivables
Other assets
Other derivative instruments
Marketable securities and investment funds
Other
Total
lIAbIlItIeS
Financial liabilities
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Commercial paper
Asset backed financing transactions
Derivative instruments
Cash flow hedges
Fair value hedges
Other derivative instruments
Other
Trade payables
Other liabilities
Payables to subsidiaries
Other
Total
Payables to other companies in which an investment is held
78,260
70,043
–
534
402
–
5,287
5,161
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
129
287
145
–
422
1,217
–
1,124
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
133
272
147
–
716
893
–
1,050
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
98
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
* The carrying amounts of cash flow and fair value hedges are allocated to the category “Held for trading” for the sake of clarity.
164
BMW Group
Notes to the Group
Financial Statements
Other Disclosures
The following table shows the fair values and carrying
amounts of financial assets and liabilities that are
measured at cost or amortised cost and whose carrying
amounts differ from their fair value. Based on the
fact that maturities of some balance sheet items are
generally short, it is assumed in this case that their
fair value corresponds to the carrying amount.
in € million
Fair value
Carrying amount
Fair value
Carrying amount
31. 12. 2016
31. 12. 2015
Receivables from sales financing
Bonds
Liabilities to banks
Liabilities from customer deposits (banking)
Asset-backed financing transactions
81,621
45,140
14,942
13,545
16,556
78,260
44,421
14,892
13,512
16,474
72,309
40,701
12,783
13,543
13,611
70,043
40,319
12,720
13,509
13,631
Fair value measurement of financial instruments
The following interest rate structures were used to
discount financial instruments at 31 December 2016:
in %
Interest rate for six months
Interest rate for one year
Interest rate for five years
Interest rate for ten years
ISO Code
EUR
USD
GBP
JPY
CNY
– 0.23
– 0.20
0.08
0.67
1.21
1.18
1.98
2.37
0.60
0.55
0.87
1.25
– 0.20
0.02
0.08
0.23
2.94
3.77
4.44
4.85
Interest rates taken from interest rate curves were
adjusted, where necessary, to take account of the
credit quality and risk of the underlying financial
instrument.
Financial instruments measured at fair value are allo-
cated to different measurement levels in accordance
with IFRS 13. This includes financial instruments that
are
Commodity derivatives were measured on the basis
of the following quoted market prices:
1. measured at their fair values in an active market
for identical financial instruments (Level 1),
Raw material
31. 12. 2016
31. 12. 2015
Iron ore
Coke / coal
Aluminium
Palladium
USD / t
USD / t
USD / t
79.65
230.00
43.05
76.45
1,695.13
1,507.00
USD / oz
680.96
561.70
2. measured at their fair values in an active market
for comparable financial instruments or using
measurement models whose main input factors
are based on observable market data (Level 2), or
3. using input factors not based on observable mar-
ket data (Level 3).
Group Financial Statements The following table shows the amounts allocated to
each measurement level at the end of the reporting
period:
in € million
Marketable securities, investment funds and collateral assets – available-for-sale
Other investments – available-for-sale / fair value option
Derivative instruments (assets)
Interest rate risks
Currency risks
Raw materials price risks
Derivative instruments (liabilities)
Interest rate risks
Currency risks
Raw materials price risks
in € million
Marketable securities, investment funds and collateral assets – available-for-sale
Other investments – available-for-sale / fair value option
Derivative instruments (assets)
Interest rate risks
Currency risks
Raw materials price risks
Derivative instruments (liabilities)
Interest rate risks
Currency risks
Raw materials price risks
165
31. 12. 2016
Level hierarchy in accordance with IFRS 13
Level 1
Level 2
Level 3
5,387
213
–
–
–
–
–
–
–
–
1,933
1,842
147
1,402
1,479
450
–
–
–
–
–
–
–
–
31. 12. 2015
Level hierarchy in accordance with IFRS 13
Level 1
Level 2
Level 3
5,259
244
–
–
–
–
–
–
–
–
1,939
1,086
5
1,352
2,136
1,062
–
–
–
–
–
–
–
–
Other investments (available-for-sale) amounting to
€ 347 million (2015: € 184 million) are measured at
amortised cost since quoted market prices are not
available or cannot be determined reliably. These are
therefore not included in the level hierarchy shown
above. In addition, other investments amounting to
€ 213 million (2015: € 244 million) are measured at fair
value since quoted market prices are available. These
items are included in Level 1.
As in the previous year, there were no reclassifications
within the level hierarchy during the financial year
2016.
In situations where a fair value was required to be
measured for a financial instrument only for disclosure
purposes, this was achieved using the discounted cash
flow method and taking account of the BMW Group’s
own default risk. For this reason, the fair values cal-
culated can be allocated to Level 2.
166
BMW Group
Notes to the Group
Financial Statements
Other Disclosures
offsetting of financial instruments
In the BMW Group, financial assets and liabilities
relating to derivative financial instruments would
normally be required to be offset. No offsetting takes
place for accounting purposes, however, since the nec-
essary criteria are not met. Since legally enforceable
master netting agreements or similar contracts are in
place, actual offsetting would be possible in principle,
for instance in the case of insolvency. Offsetting would
have the following impact on the carrying amounts
of derivatives:
in € million
31. 12. 2016
31. 12. 2015
Reported on
assets side
Reported on equity
and liabilities side
Reported on
assets side
Reported on equity
and liabilities side
Balance sheet amounts as reported
Gross amount of derivatives which can be offset in case of insolvency
Net amount after offsetting
3,922
– 1,169
2,753
3,331
– 1,169
2,162
3,030
– 1,285
1,745
4,550
– 1,285
3,265
Gains and losses on financial instruments
The following table shows the net gains and losses
arising for each of the categories of financial instru-
ment defined by IAS 39:
in € million
Held for trading
Gains / losses from the use of derivative instruments
Fair value option
Gains / losses on investments measured at fair value through profit and loss
Available-for-sale
Gains and losses on sale and fair value measurement of marketable securities held for sale
(including investments in subsidiaries and participations measured at cost)
Net income from participations and investments
Accumulated other equity
Balance at 1 January
Total change during the year
thereof 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
2016
2015
1,265
– 717
–
– 155
13
24
28
– 39
52
– 210
– 38
586
– 2
129
1
141
– 117
– 144
24
– 345
– 77
32
Gains / losses from the use of derivatives relate primar-
ily to fair value gains or losses arising on stand-alone
derivatives.
In the case of financial instruments for which the
fair value option is applied, no significant changes in
fair values arose in the financial year 2016 or on an
accumulated basis which were attributable to changes
in the default risk. Such credit-risk related changes in
fair values are calculated as a general rule by deducting
market-related changes in fair value from the overall
change in fair value.
Net interest expenses from interest rate and interest
rate / currency swaps amounted to € 120 million (2015:
€ 22 million).
Group Financial Statements
167
denominated in a foreign currency over the coming
44 months (2015: 55 months). The income statement
impact of the hedged cash flows will be recognised as
a general rule in the same periods in which external
revenues are recognised. It is expected that € 113 mil-
lion of net losses, recognised in equity at the end of
the reporting period, will be reclassified to the income
statement in the new financial year (2015: net losses
of € 623 million).
The BMW Group did not hold any derivative financial
instruments at 31 December 2016, which had been
designated at cash flow hedges to hedge against
interest-rate risks.
At 31 December 2016, the BMW Group held deriva-
tive financial instruments (mostly commodity swaps)
with terms of up to 58 months (2015: 58 months) to
hedge raw materials price risks. The income statement
impact of the hedged cash flows will be recognised
as a general rule in the same periods in which the
derivative instruments mature. It is expected that
€ 94 million of net losses, recognised in equity at the
end of the reporting period, will be reclassified to the
income statement in the new financial year (2015: net
losses of € 127 million).
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 € million
31. 12. 2016
31. 12. 2015
Gains / losses on hedging instruments
designated as part of a fair value hedge
relationship
Gains / losses from hedged items
Ineffectiveness of fair value hedges
– 158
134
– 24
– 269
276
7
The difference between the gains / losses on hedging
instruments (mostly interest rate swaps and com-
bined interest rate / currency swaps) and the results
recognised on hedged items represents the ineffective
portion of fair value hedges.
Impairment losses of € 76 million (2015: € 13 million)
were recognised in the income statement in 2016 on
available-for-sale securities accounted for as partici-
pations, for which fair value changes had previously
been recognised directly in equity. As in the previous
year, no reversals of impairment losses on marketable
securities occurred.
The disclosure of interest income resulting from the
unwinding of interest on future expected receipts
would normally only be relevant for the BMW Group
where assets have been discounted as part of the pro-
cess of determining impairment losses. However, as
a result of the assumption 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.
cash flow hedges
The impact of cash flow hedges on accumulated other
equity is analysed as follows:
in € million
2016
2015
Balance at 1 January
Total changes during the year
thereof reclassified to the income
statement
Balance at 31 December
– 1,337
1,415
550
78
– 480
– 857
1,318
– 1,337
Fair value gains and losses recognised on derivatives
and recorded initially in accumulated other equity
are reclassified to cost of sales when the derivatives
mature.
An amount of € 2 million (2015: € 8 million) attributable
to forecasting errors (and the resulting over-hedging
of currency exposures) was recognised as a loss in
“Financial Result” in the year under report. Losses
attributable to the ineffective portion of cash flow
hedges amounting to € 11 million were recognised in
“Financial Result” (2015: gains of € 9 million). As in
the previous year, no gains or losses were recognised
in “Financial Result” in 2016 in connection with
forecasting errors relating to cash flow hedges for
commodities. Gains attributable to the ineffective
portion of cash flow hedges amounting to € 17 million
were recognised in “Financial Result” (2015: losses of
€ 13 million).
At 31 December 2016, the BMW Group held deriva-
tive financial instruments (mainly forward currency
contracts) in order to hedge currency risks attached
to future or existing transactions / items. These deriv-
ative instruments are intended to hedge forecast sales
The credit risk relating to derivative financial instru-
ments 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 borrow-
ers or groups of borrowers has not been identified in
conjunction with financial instruments.
Further disclosures relating to credit risk – in particu-
lar with regard to the amounts of impairment losses
recognised – are provided in the explanatory notes
to the relevant categories of receivables in
notes 23,
24 and 28.
see
notes 23, 24
and 28
168
BMW Group
Notes to the Group
Financial Statements
Other Disclosures
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
fulfil their contractual obligations. The maximum cred-
it risk for irrevocable credit commitments relating to
credit card business amounts to € 1,461 million (2015:
€ 2,011 million). The equivalent figure for dealership
financing is € 27,494 million (2015: € 24,733 million).
In the case of performance relationships underlying
non-derivative financial instruments, collateral will
be required, information on the credit standing of
the counterparty obtained or historical data based
on the existing business relationship (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.
Within the financial services business, the financed
items (e. g. vehicles, equipment and property) in
the retail customer and dealership 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 pre-
vailing in the relevant market. The assets involved are
generally vehicles which can be converted into cash
at any time via the dealership organisation.
Impairment losses are recorded as soon as credit risks
are identified on individual financial assets, using a
methodology specifically designed by the BMW Group.
More detailed information regarding this methodol-
ogy is provided in the section on accounting policies
(
note 4).
see
note 4
Creditworthiness testing is an important aspect of
the BMW Group’s credit risk management. Every
borrower’s creditworthiness is tested for all credit
financing and lease contracts entered into by the
BMW Group. In the case of retail customer financing,
creditworthiness is assessed using validated scoring
systems integrated into the purchasing process. In
the area of dealership financing, creditworthiness is
assessed by means of ongoing credit monitoring and
an internal rating system that takes account not only
of the tangible situation of the borrower, but also of
qualitative factors such as past reliability in business
relations.
Group Financial Statements Liquidity risk
The following table shows the maturity structure of
expected contractual cash flows (undiscounted) for
financial liabilities:
169
in € million
Bonds
Asset backed financing transactions
Liabilities to banks
Liabilities from customer deposits (banking)
Trade payables
Derivative instruments
Commercial paper
Other financial liabilities
Total
in € million
Bonds
Asset backed financing transactions
Liabilities to banks
Liabilities from customer deposits (banking)
Trade payables
Derivative instruments
Commercial paper
Other financial liabilities
Total
The cash flows shown comprise principal repayments
and the related interest. The amounts disclosed for
derivatives comprise only cash flows relating to
derivatives that have a negative fair value at the bal-
ance sheet date. At 31 December 2016, irrevocable
credit commitments to dealerships which had not
been called upon at the end of the reporting period
amounted to € 9,194 million (2015: 7,552 million).
Solvency is assured at all times by managing and mon-
itoring 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
structure. The BMW Group has good access to capital
markets as a result of its solid financial position and
a diversified refinancing strategy. Depending on
financing requirements and market conditions, the
31. 12. 2016
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
9,954
7,161
11,238
10,140
8,512
1,983
3,853
72
26,766
10,089
9,938
4,234
3,446
–
2,395
–
178
–
558
133
–
187
–
601
Total
46,809
17,099
16,030
13,719
8,512
4,565
3,853
851
52,913
46,957
11,568
111,438
31. 12. 2015
Maturity within
one year
Maturity between
one and five years
Maturity later
than five years
10,774
24,241
7,230
5,195
9,464
9,805
7,701
2,564
5,416
261
8,849
3,485
3,990
72
3,366
–
372
–
405
133
–
174
–
570
Total
42,245
14,044
13,354
13,928
7,773
6,104
5,416
1,203
51,180
44,375
8,512
104,067
BMW Group issues commercial paper on the money
markets, corporate bonds and asset-backed financial
securities in various currencies. Customer deposits
at the Group’s in-house banks are also used as a
supplementary source of financing.
These refinancing activities are underpinned by the
longstanding long- and short-term ratings issued by
Moody’s and Standard & Poor’s.
Also reducing liquidity risk, additional secured and
unsecured lines of credit are in place with internation-
al banks, including a syndicated credit line totalling
€ 6 billion (2015: € 6 billion). Intra-group cash flow
fluctuations are evened out by the use of daily cash
pooling arrangements.
170
BMW Group
Notes to the Group
Financial Statements
Other Disclosures
market risks
The principal market risks to which the BMW Group
is exposed are currency risk, interest rate risk and raw
materials price risk.
Protection against such risks is provided in the first
instance through natural hedging which arises when
the values of non-derivative financial instruments
have matching maturities and amounts (netting).
Derivative financial instruments 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 mecha-
nisms used for financial instruments are set out in
detailed internal guidelines. This includes, above
all, a clear separation of duties between trading and
processing. Currency, interest rate and raw materi-
als price risks of the BMW Group are managed at a
corporate level.
Further information is provided in the “Report on
Outlook, Risks and Opportunities” section of the
Combined Management Report.
currency risks
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 is generated outside the euro currency
region and the procurement of production materials
and funding is also organised on a worldwide basis,
the currency risk is an extremely important factor for
Group earnings.
At 31 December 2016, derivative financial instruments,
mostly in the form of forward currency contracts, were
in place.
A description of the management of this risk is pro-
vided in the Combined Management Report. The
BMW Group measures currency risk 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, the principal exposures for the
relevant coming year were as follows:
in € million
31. 12. 2016
31. 12. 2015
Euro / Chinese Renminbi
Euro / US Dollar
Euro / British Pound
Euro / Korean Won
Euro / Japanese Yen
10,467
3,319
4,785
1,926
1,510
9,973
4,770
5,396
1,985
1,162
In the next stage, these exposures are compared to all
hedges that are in place. The net cash flow surplus
represents an uncovered risk position. The cash-
flow-at-risk approach involves allocating the impact
of potential exchange rate fluctuations to operating
cash flows on the basis of probability distributions.
Volatilities and correlations serve as input factors to
assess the relevant probability distributions.
The potential negative impact on earnings is computed
for each currency for the following financial year on
the basis of current market prices and exposures to a
confidence level of 95 % and a holding period of up to
one year. Correlations between the various currencies
are taken into account when the risks are aggregated,
thus reducing the overall risk.
The following table shows the potential negative
impact for the BMW Group – measured on the basis
of the cash-flow-at-risk approach – attributable to
unfavourable changes in exchange rates. The impact
for the principal currencies, in each case for the fol-
lowing financial year, is as follows:
in € million
31. 12. 2016
31. 12. 2015
Euro / Chinese Renminbi
Euro / US Dollar
Euro / British Pound
Euro / Korean Won
Euro / Japanese Yen
249
278
134
30
70
163
48
86
99
68
Currency risk for the BMW Group is concentrated on
the currencies referred to above.
Group Financial Statements Interest rate risks
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 exposed to risks resulting
from changes in interest rates.
Interest rate risks arise when funds with differing
fixed-rate periods 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 five main currencies were as follows at the end
of the reporting period:
in € million
Euro*
US Dollar
British Pound
Chinese Renminbi
Japanese Yen
* Previous year’s figures adjusted.
31. 12. 2016
31. 12. 2015
28,063
14,340
5,708
3,124
571
25,772
10,742
4,220
1,006
536
Interest rate risks can be managed by the use of inter-
est rate derivatives. The interest rate contracts used
for hedging purposes comprise mainly swaps, which,
if hedge accounting is applied, are accounted for as
fair value hedges. A description of the management
of interest rate risks is provided in the Combined
Management Report.
As stated there, the BMW Group applies a Group-wide
value-at-risk approach for internal reporting purpos-
es 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 250 days and a confidence level of 99.98 %.
Aggregation of these results creates a risk reduction
effect due to correlations between the various port-
folios.
171
In the following table the potential volumes of fair
value fluctuations – measured on the basis of the val-
ue-at-risk approach – are compared with the expected
value for the interest-rate-sensitive exposures of the
BMW Group:
in € million
Euro*
US Dollar
British Pound
Chinese Renminbi
Japanese Yen
* Previous year’s figures adjusted.
31. 12. 2016
31. 12. 2015
532
545
244
16
14
475
449
186
33
12
raw materials price risk
The BMW Group is exposed to the risk of price fluc-
tuations for raw materials. A description of the man-
agement of these risks is provided in the Combined
Management Report.
The first step in the analysis of the raw materials price
risk is to determine the volume of planned purchases
of raw materials (and components containing those
raw materials). These amounts, which represent the
gross exposure, were as follows at each reporting date
for the following financial year:
in € million
31. 12. 2016
31. 12. 2015
Raw materials price exposures
3,150
3,720
In the next stage, these exposures are compared to all
hedges that are in place. The net cash flow surplus
represents an uncovered risk position. The cash-
flow-at-risk approach involves allocating the impact
of potential fluctuations in raw materials prices to
operating cash flows on the basis of probability dis-
tributions. Volatilities and correlations serve as input
factors to assess the relevant probability distributions.
The potential negative impact on earnings is computed
for each raw materials category for the following finan-
cial year on the basis of current market prices and
exposure to a confidence level of 95 % and a holding
period of up to one year. Correlations between the
various categories of raw materials are taken into
account when the risks are aggregated, thus reducing
the overall risk.
172
BMW Group
Notes to the Group
Financial Statements
Other Disclosures
The following table shows the potential negative
impact for the BMW Group – measured on the basis
of the cash-flow-at-risk approach – attributable to fluc-
tuations in prices across all categories of raw materials.
The risk at each reporting date for the following finan-
cial year was as follows:
in € million
31. 12. 2016
31. 12. 2015
Cash flow at risk
135
155
38
Related party relationship
Transactions of Group entities with related parties
arise, without exception, in the normal course of the
business of each of the parties concerned and are
conducted on the basis of arm’s length principles.
A significant proportion of the BMW Group’s transac-
tions with related parties relates to the joint venture
BMW Brilliance Automotive Ltd. and the associated
company THERE Holding B. V.
in € million
2016
2015
2016
2015
2016
2015
2016
2015
Supplies and services
performed
Supplies and services
received
Receivables
at 31 December
Payables
at 31 December
BMW Brilliance Automotive Ltd.
5,316
4,815
THERE Holding B. V.
–
–
50
58
43
7
1,215
–
892
–
615
9
107
3
Business relationships of the BMW Group with other
associated companies and joint ventures as well as
with non-consolidated subsidiaries are small in scale.
Stefan Quandt, Germany, is a shareholder and Deputy
Chairman of the Supervisory Board of BMW AG. He is
also the sole shareholder and Chairman of the Super-
visory Board of DELTON AG, Bad Homburg v. d. H.,
which, via its subsidiaries, performed logistic-related
services for the BMW Group during the financial year
2016. In addition, companies of the DELTON Group
acquired vehicles from the BMW Group by way of
leasing.
Stefan Quandt, Germany, is also the indirect majority
shareholder of SOLARWATT GmbH, Dresden. Coop-
eration arrangements are in place between BMW AG
and SOLARWATT GmbH, Dresden, within the field
of electric mobility. The focus of this collaboration
is on providing complete photovoltaic solutions for
rooftop systems and carports to BMW i customers.
SOLARWATT GmbH, Dresden, leased vehicles from
the BMW Group in 2016.
Susanne Klatten, Germany, is a shareholder and
member of the Supervisory Board of BMW AG and
also a shareholder and Deputy Chairman of the Super-
visory Board of ALTANA AG, Wesel. ALTANA AG,
Wesel, acquired vehicles from the BMW Group during
the financial year 2016, mostly in the form of lease
contracts.
Susanne Klatten, Germany, is also the sole share-
holder and Chairwoman of the Supervisory Board
of UnternehmerTUM GmbH, Garching. During
the financial year 2016, the BMW Group bought in
services from UnternehmerTUM GmbH, Garching,
primarily in the form of consultancy and workshop
services.
Seen from the BMW Group’s perspective, the transac-
tions of BMW Group companies with the above-men-
tioned entities were as follows:
in € thousand
2016
2015
2016
2015
2016
2015
2016
2015
Supplies and services
performed
Supplies and services
received
Receivables
at 31 December
Payables
at 31 December
DELTON AG
SOLARWATT GmbH
ALTANA AG
3,546
309
2,690
3,617
287
2,764
–
458
22,554
22,818
1,331
2,476
64
1
337
37
7
312
3
324
769
–
50
–
–
276
UnternehmerTUM GmbH
29
–
1,227
–
–
585
Group Financial Statements
173
Apart from vehicle leasing and credit financing con-
tracts concluded on an arm’s length basis, companies
of the BMW Group have not entered into any contracts
with members of the Board of Management or Super-
visory Board of BMW AG. The same applies to close
members of the families of those persons.
BMW Trust e. V., Munich, administers assets on a
trustee basis to secure obligations relating to pensions
and pre-retirement part-time working arrangements
in Germany and is therefore a related party of the
BMW Group in accordance with IAS 24. This entity,
which is a registered association (eingetragener Vere-
in) under German law, does not have any assets of its
own. It did not have any income or expenses during
the period under report. BMW AG bears expenses on
an immaterial scale and performs services for BMW
Trust e. V., Munich.
For disclosures relating to key management personnel,
note 42 and the Compensation Report.
please see
see
note 42
see
note 29
39
Share-based remuneration
Three share-based remuneration programmes are in
place within the BMW Group, namely the Employee
Share Programme (for entitled employees of the
BMW Group), a share-based remuneration programme
for members of the Board of Management and a share-
based remuneration programme for senior heads of
department of BMW AG.
In the case of the Employee Share Programme,
non-voting shares of preferred stock in BMW AG were
granted to qualifying employees during the financial
year 2016 at favourable conditions (see
note 29 for
the number and price of issued shares). The holding
period for these shares is up to 31 December 2019. In
the financial year 2016, the BMW Group recorded a
personnel expense of € 7 million (2015: € 6 million) for
the Employee Share Programme, corresponding to the
difference between the market price and the reduced
price of the shares of preferred stock purchased by
employees. The Board of Management reserves the
right to decide anew each year with respect to an
Employee Share Programme.
For financial years beginning after 1 January 2011,
BMW AG has added a share-based remuneration
component to the existing compensation system for
Board of Management members.
Each Board of Management member is required to
invest 20 % of his / her total bonus (after tax) in shares of
BMW AG common stock, which are recorded in a sep-
arate custodian account for each member concerned
(annual tranche). Each annual tranche is subject to a
holding period of four years. Once the holding period
is fulfilled, BMW AG grants one additional share of
BMW AG common stock for each three held or pays
the equivalent amount in cash (share-based remuner-
ation component). Special rules apply in the case of
death or invalidity of a Board of Management member
or early termination of the contractual relationship
before fulfilment of the holding period.
With effect from the financial year 2012, qualifying
heads of department are also entitled to opt for a
share-based remuneration component, which, in most
respects, is comparable to the share-based remunera-
tion arrangements for Board of Management members.
The share-based remuneration component is measured
at its fair value at each balance sheet date between
grant and settlement date, and on the settlement date
itself. The appropriate amounts are recognised as per-
sonnel expense on a straight-line basis over the vesting
period and reported in the balance sheet as a provision.
The cash-settlement obligation for the share-based
remuneration component is measured at its fair
value at the balance sheet date (based on the closing
price of BMW AG common stock in Xetra trading at
31 December 2016).
The total carrying amount of the provision for the
share-based remuneration component of current
and former Board of Management members and
senior heads of department at 31 December 2016 was
€ 5,473,219 (2015: € 4,989,668).
The total expense recognised in 2016 for the share-
based remuneration component of current and former
Board of Management members and senior heads of
department was € 1,443,227 (2015: € 1,892,994).
The fair value of the programmes for Board of Man-
agement members and senior heads of department
at the date of grant of the share-based remuneration
components was € 1,950,853 (2015: € 1,605,147), based
on a total of 21,201 shares (2015: 18,143 shares) of
BMW AG common stock or a corresponding cash-
based settlement measured at the relevant market
share price prevailing on the grant date.
Further details on the remuneration of the Board
of Management are provided in the Compensation
Report for the financial year 2016.
40
Declaration with respect to the Corporate
Governance Code
The Board of Management and the Supervisory Board
of Bayerische Motoren Werke Aktiengesellschaft have
The total remuneration of former members of the
Board of Management and their dependants amount-
ed to € 6.5 million (2015: € 8.0 million).
Pension obligations to current members of the Board
of Management are covered by provisions amounting
to € 23.6 million (2015: € 23.2 million), computed in
accordance with IAS 19 (Employee Benefits). Pen-
sion obligations to former members of the Board of
Management and their surviving dependants, also
computed in accordance with IAS 19, amounted to
€ 86.4 million (2015: € 71.8 million).
The compensation systems for members of the Super-
visory Board do not include any stock options, value
appreciation rights comparable to stock options or any
other stock-based compensation components. Apart
from vehicle lease and financing contracts entered
into on customary market conditions, no advances
or loans were granted to members of the Board of
Management and the Supervisory Board of BMW AG
or its subsidiaries, nor were any contingent liabilities
entered into on their behalf.
Further details about the remuneration of current
members of the Board of Management and the
Supervisory Board can be found in the Compensation
Report, which is part of the Combined Management
Report.
43
Events after the end of the reporting period
No events have occurred since the end of the financial
year which could have a major impact on the results
of operations, financial position and net assets of
BMW AG and the BMW Group.
174
BMW Group
Notes to the Group
Financial Statements
Other Disclosures
Segment Information
issued the prescribed Declaration of Compliance pur-
suant to § 161 of the German Stock Corporation Act.
It is reproduced in the Annual Report 2016 of the
BMW Group and is also available to shareholders on
the BMW Group website at
www.bmwgroup.com / ir.
41
Shareholdings of members of the Board of
Management and Supervisory Board
The members of the Supervisory Board of BMW AG
hold in total 27.99 % (2015: 43.00 %) of the issued
common and preferred stock shares, of which 16.25 %
(2015: 31.26 %) relates to Stefan Quandt, Germany, and
11.73 % (2015: 26.74 %) to Susanne Klatten, Germany.
The differences compared to the previous year resulted
almost entirely from the fact that the shares held by
Johanna Quandt GmbH & Co. KG für Automobilwerte,
Bad Homburg v. d. Höhe, are no longer attributed to
Stefan Quandt and Susanne Klatten following the
dissolution of the community of heirs . As at the end of
the previous financial year, shareholdings of members
of the BMW AG Board of Management account, in
total, for less than 1 % of issued shares.
42
Compensation of members of the Board of
Management and Supervisory Board
The total compensation of the current members of the
Board of Management and the Supervisory Board of
BMW AG for the financial year 2016 in accordance
with IFRS amounted to € 46.9 million (2015: € 43.6 mil-
lion) and comprised the following:
in € million
2016
2015
Compensation to members of the
Board of Management
Fixed remuneration
Variable remuneration
Share-based remuneration component
Allocation to pension provisions
Benefits in conjunction with the
termination of an employment relationship
Compensation to members of the
Supervisory Board
Fixed compensation and attendance fees
Variable compensation
Total expense
thereof due within one year
37.6
7.8
29.0
0.8
2.8
1.1
5.4
2.0
3.4
46.9
43.3
35.9
7.7
27.1
1.1
2.6
–
5.1
2.0
3.1
43.6
39.9
Group Financial Statements
SEGMENT INFORMATION
44
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 oper-
ating segments in accordance with IFRS 8 (Operating
Segments). Operating segments are identified on the
same basis that is used internally to manage and report
on performance. The allocation also takes account of
the organisational 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 Automotive, Motorcycles,
Financial Services and Other Entities.
The Automotive segment develops, manufactures,
assembles and sells cars and off-road vehicles, under
the brands BMW, MINI and Rolls-Royce as well as
spare parts, accessories and mobility services. BMW
and MINI brand products are sold in Germany
through branches of BMW AG and by independent,
authorised dealerships. Sales outside Germany are
handled primarily by subsidiary companies and
by independent import companies in a number of
markets. Rolls-Royce brand vehicles are sold in the
USA, China and Russia via subsidiary companies and
elsewhere by independent, authorised dealerships.
The Motorcycles segment develops, manufactures,
assembles and sells motorcycles as well as spare parts
and accessories.
The principal lines of business of the Financial Servic-
es segment are car leasing, fleet business, multi-brand
business, retail customer and dealership financing,
customer deposit business and insurance activities.
Holding and Group financing companies are includ-
ed in the Other Entities segment. This segment also
includes operating companies – BMW Services Ltd.,
BMW (UK) Investments Ltd., Bavaria Lloyd Reise-
büro GmbH, and MITEC Mikroelektronik Mikro-
technik Informatik GmbH – which are not allocated
to one of the other segments.
175
Internal management and reporting
Segment information is prepared as a general rule in
conformity with the accounting policies adopted for
preparing and presenting the Group Financial State-
ments. The only exceptions to this general principle
are the treatment of inter-segment warranties (the
earnings impact of which is allocated to the Automo-
tive and Financial Services segments on the basis used
internally to manage the business) and cross-segment
impairment losses on investments in subsidiaries.
Inter-segment receivables and payables, provisions,
income, 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
respect to resource allocation and performance
assessment of the reportable segment is embodied
in the full Board of Management. In order to assist
the decision-taking process, different measures of
segment performance as well as segment assets have
been set for the operating segments.
The performance of the Automotive and Motorcycles
segments is managed on the basis of return on capital
employed (RoCE). The relevant measure of segment
results used is therefore profit before financial result.
Capital employed is the corresponding measure of
segment assets used to determine how to allocate
resources and comprises all current and non-current
operational assets after deduction of liabilities used
operationally which are not subject to interest (e. g.
trade payables).
The performance of the Financial Services segment is
measured on the basis of return on equity (RoE), with
profit before tax therefore representing the measure
of segment result used. For this reason, the measure
of segment assets in the Financial Services segment
corresponds to net assets, defined as total assets less
total liabilities.
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
asset-side income tax items and intragroup invest-
ments.
176
BMW Group
Notes to the Group
Financial Statements
Segment Information
Segment information by operating segment is as
follows:
in € million
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Automotive
Motorcycles
Financial Services
Other Entities
Reconciliation to Group figures
Group
SeGment InformAtIon
by operAtInG SeGment
External revenues
Inter-segment revenues
Total revenues
Segment result
Result from equity accounted investments
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
in € million
Segment assets
Investments accounted for using the equity method
67,977
18,447
86,424
7,695
441
5,699
4,702
68,045
17,491
85,536
7,836
518
5,792
4,559
2,062
7
2,069
187
–
114
75
1,984
6
1,990
182
–
92
69
24,122
1,559
25,681
2,166
–
25,105
9,606
22,144
1,595
23,739
1,975
–
23,689
8,686
2
4
6
–
–
–
2
5
7
–
–
–
–
–
94,163
92,175
– 20,017
– 19,097
–
–
– 20,017
– 19,097
94,163
92,175
– 553
–
– 6,756
– 6,271
– 980
–
– 5,672
– 5,119
9,665
441
24,162
8,112
9,224
518
23,901
8,195
170
211
SeGment InformAtIon
by operAtInG SeGment
External revenues
Inter-segment revenues
Total revenues
Segment result
Result from equity accounted investments
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
Automotive
Motorcycles
Financial Services
Other Entities
Reconciliation to Group figures
Group
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
9,411
2,546
10,024
2,233
600
–
557
–
11,049
–
9,948
–
75,363
71,709
92,112
79,936
188,535
172,174
Segment assets
–
–
–
–
2,546
2,233
Investments accounted for using the equity method
Group Financial Statements in € million
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Automotive
Motorcycles
Financial Services
Other Entities
Reconciliation to Group figures
Group
67,977
18,447
86,424
7,695
441
5,699
4,702
68,045
17,491
85,536
7,836
518
5,792
4,559
2,062
7
2,069
187
–
114
75
1,984
6
1,990
182
–
92
69
24,122
1,559
25,681
2,166
–
25,105
9,606
22,144
1,595
23,739
1,975
–
23,689
8,686
2
4
6
2
5
7
–
–
94,163
92,175
– 20,017
– 19,097
–
–
– 20,017
– 19,097
94,163
92,175
SeGment InformAtIon
by operAtInG SeGment
External revenues
Inter-segment revenues
Total revenues
170
211
–
–
–
–
–
–
– 553
–
– 6,756
– 6,271
– 980
–
– 5,672
– 5,119
9,665
441
24,162
8,112
9,224
518
23,901
8,195
Segment result
Result from equity accounted investments
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
Investments accounted for using the equity method
9,411
2,546
10,024
2,233
600
–
557
–
11,049
–
9,948
–
75,363
71,709
92,112
79,936
188,535
172,174
Segment assets
–
–
–
–
2,546
2,233
Investments accounted for using the equity method
Automotive
Motorcycles
Financial Services
Other Entities
Reconciliation to Group figures
Group
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
31. 12. 2016
31. 12. 2015
SeGment InformAtIon
by operAtInG SeGment
External revenues
Inter-segment revenues
Total revenues
Segment result
Result from equity accounted investments
Capital expenditure on non-current assets
Depreciation and amortisation on non-current assets
in € million
Segment assets
177
178
BMW Group
Notes to the Group
Financial Statements
Segment Information
Write-downs on inventories to their net realisable
value amounting to € 101 million (2015: € 486 million)
were recognised by the Automotive segment in the
financial year 2016. The write-down recorded in the
previous year resulted primarily from accidents and
natural disasters.
Impairment losses and fair value changes on oth-
er investments amounting to € 174 million (2015:
€ 17 million) relating to the Automotive segment and
recognised in the financial result are not included in
the segment result.
Financial Services segment result was negatively
impacted by impairment losses totalling € 384 million
(2015: € 406 million) recognised on leased products.
Income from the reversal of impairment losses on
leased products amounted to € 211 million (2015:
€ 81 million). No impairment losses were recognised
on other financial assets in the year under report
(2015: € 3 million).
The Other Entities’ segment result includes interest
and similar income amounting to € 1,250 million (2015:
€ 1,177 million) and interest and similar expenses
amounting to € 1,006 million (2015: € 1,080 million)
as well as impairment losses on other investments
totalling € 18 million (2015: € 7 million).
The information disclosed for capital expenditure and
depreciation and amortisation relates to non-current
property, plant and equipment, intangible assets and
leased products.
Segment figures can be reconciled to the correspond-
ing Group figures as follows:
in € million
2016
2015
Reconciliation of segment result
Total for reportable segments
10,218
10,204
Financial result of Automotive
segment and Motorcycles segment
Elimination of inter-segment items
Group profit before tax
Reconciliation of capital expenditure
on non-current assets
219
– 772
9,665
– 316
– 664
9,224
Total for reportable segments
Elimination of inter-segment items
30,918
– 6,756
29,573
– 5,672
Total Group capital expenditure
on non-current assets
24,162
23,901
Reconciliation of depreciation and
amortisation on non-current assets
Total for reportable segments
Elimination of inter-segment items
14,383
– 6,271
13,314
– 5,119
Total Group depreciation and
amortisation on non-current assets
8,112
8,195
in € million
31. 12. 2016
31. 12. 2015
Reconciliation of segment assets
Total for reportable segments
96,423
92,238
Non-operating assets –
Other Entities segment
Total liabilities –
Financial Services segment
7,432
7,132
126,679
112,081
Non-operating assets –
Automotive and Motorcycles segments
45,923
41,932
Liabilities of Automotive
and Motorcycles segments
not subject to interest
33,858
31,817
Elimination of inter-segment items
– 121,780
– 113,026
Total Group assets
188,535
172,174
Group Financial Statements In the case of information by geographical region,
external sales are based on the location of the custom-
er’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.
Eliminations disclosed for non-current assets relate
to leased products.
179
Information by region
in € million
Germany
China
USA
Rest of Europe
Rest of Asia
Rest of the Americas
Other regions
Eliminations
Group
External revenues
Non-current assets
2016
2015
2016
2015
13,776
16,619
16,000
30,544
10,466
3,507
3,251
–
13,394
15,856
18,155
28,617
9,582
3,361
3,210
–
94,163
92,175
29,741
23
23,249
13,910
1,439
2,628
261
– 7,345
63,906
28,786
23
21,000
13,099
1,197
2,053
121
– 6,183
60,096
180
BMW Group
Notes to the Group
Financial Statements
List of Investments
at 31 December 2016
LIST OF INVESTMENTS AT
31 DECEMBER 2016
45
List of investments at 31 December 2016
The List of Investments of BMW AG pursuant to § 285
and § 313 HGB is presented below. Figures for equity
and earnings are not disclosed if they are of “minor
BMW AG’s subsidiary at 31 December 2016
• 61
Companies
DoMEStIc 1
BMW Beteiligungs GmbH & Co. KG, Munich 6
BMW INTEC Beteiligungs GmbH, Munich 3, 6
BMW Bank GmbH, Munich 3
BMW Finanz Verwaltungs GmbH, Munich
BMW Verwaltungs GmbH, Munich 3, 6
BMW Hams Hall Motoren GmbH, Munich 4, 5, 6
BMW M GmbH Gesellschaft für individuelle Automobile, Munich 3, 5, 6
MITEC Mikroelektronik Mikrotechnik Informatik GmbH, Munich 4, 6
Alphabet International GmbH, Munich 4, 5, 6
Alphabet Fuhrparkmanagement GmbH, Munich 4
Rolls-Royce Motor Cars GmbH, Munich 4, 5, 6
BMW Vermögensverwaltungs GmbH, Munich
BMW Fahrzeugtechnik GmbH, Eisenach 3, 5, 6
BMW Anlagen Verwaltungs GmbH, Munich 3, 6
BMW Vertriebszentren Verwaltungs GmbH, Munich
Parkhaus Oberwiesenfeld GmbH, Munich
Bürohaus Petuelring GmbH, Munich
LARGUS Grundstücks-Verwaltungsgesellschaft mbH, Munich
Bavaria Wirtschaftsagentur GmbH, Munich 3, 5, 6
BAVARIA-LLOYD Reisebüro GmbH, Munich
FoREIGn 2
Europe 13
BMW Holding B. V., The Hague
BMW International Holding B. V., Rijswijk 11
BMW Österreich Holding GmbH, Steyr
BMW Malta Ltd., Floriana
BMW Malta Finance Ltd., Floriana
BMW Motoren GmbH, Steyr
BMW Financial Services (GB) Ltd., Farnborough
BMW España Finance S. L., Madrid
BMW (UK) Holdings Ltd., Farnborough
BMW (UK) Manufacturing Ltd., Farnborough
significance” for the results of operations, financial
position and net assets of BMW AG pursuant to § 286
(3) sentence 1 no. 1 HGB or if financial statements
for a company are not yet available. It is also shown
in the list which subsidiaries apply the exemptions
available in § 264 (3) and § 264 b HGB with regard
to the publication of annual financial statements
and the drawing up of a management report and / or
notes to the financial statements (footnotes 5 and 6).
The Group Financial Statements of BMW AG serve
as exempting consolidated financial statements for
these companies.
Equity
in € million
Profit/loss
in € million
Capital invest-
ment in %
5,794
3,558
1,988
325
153
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 5
–
–
– 1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,696
1,180
7,898
2,502
1,541
1,366
948
881
775
749
723
–
267
73
48
179
282
14
460
136
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
Group Financial Statements
BMW (Schweiz) AG, Dielsdorf
BMW Coordination Center V. o. F., Bornem
BMW France, Montigny-le-Bretonneux
BMW Finance S. N. C., Guyancourt
BMW Italia S. p. A., San Donato Milanese
BMW Iberica S. A., Madrid
BMW Belgium Luxembourg S. A. / N. V., Bornem
BMW (UK) Ltd., Farnborough
ALPHABET (GB) Ltd., Farnborough
BMW Financial Services Scandinavia AB, Sollentuna
Rolls-Royce Motor Cars Ltd., Farnborough
Alphabet Nederland B. V., Breda 11
BMW Finance N. V., The Hague
BMW Austria Leasing GmbH, Salzburg
BMW Russland Trading OOO, Moscow
Alphabet Belgium Long Term Rental NV, Aartselaar
BMW International Investment B. V., ’s-Gravenhage
BMW Austria Bank GmbH, Salzburg
APD Industries plc, Farnborough
BMW Financial Services Belgium S. A. / N. V., Bornem
BMW Austria Ges. m. b. H., Salzburg
Alphabet UK Ltd., Glasgow
Bavaria Reinsurance Malta Ltd., Floriana
BMW Vertriebs GmbH, Salzburg
BMW Bank OOO, Moscow
BMW Finanzdienstleistungen (Schweiz) AG, Dielsdorf
Swindon Pressings Ltd., Farnborough
BMW Sverige AB, Stockholm
BMW Financial Services (Ireland) DAC, Dublin
BMW Norge AS, Fornebu
Alphabet España Fleet Management S. A. U., Madrid
BMW Services Ltd., Farnborough
BMW Financial Services B. V., Rijswijk
Alphabet France Fleet Management S. N. C., Rueil-Malmaison
Alphabet France SAS, Rueil-Malmaison
BMW Retail Nederland B. V., Delft
BMW Hellas Trade of Cars A. E., Kifissia
BMW Financial Services Denmark A / S, Copenhagen
Alphabet Austria Fuhrparkmanagement GmbH, Salzburg
Alphabet Polska Fleet Management Sp. z o. o., Warsaw
Alphabet Fuhrparkmanagement (Schweiz) AG, Dielsdorf
BMW Portugal Lda., Porto Salvo
Alphabet Italia Fleet Management S. p. A., Rome
BMW Amsterdam B. V., Amsterdam
BMW Renting (Portugal) Lda., Porto Salvo
BMW Automotive (Ireland) Ltd., Dublin
Park Lane Ltd., Farnborough
BMW Services Belgium N. V., Bornem
BMW Roma S. r. l., Rome
BMW Financial Services Polska Sp. z o. o., Warsaw 12
BMW Distribution S. A. S., Montigny-le-Bretonneux
BMW Danmark A / S, Copenhagen
BMW Nederland B. V., Rijswijk
181
719
592
374
364
345
302
277
213
202
180
136
135
134
123
119
112
104
103
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
49
–
39
40
35
24
21
65
36
12
16
59
8
7
94
21
156
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
100
100
100
100
100
100
100
100
100
100
100
100
182
BMW Group
Notes to the Group
Financial Statements
List of Investments
at 31 December 2016
BMW Den Haag B. V., The Hague
Oy BMW Suomi AB, Helsinki
BMW Madrid S. L., Madrid
BMW Milano S. r. l., San Donato Milanese
Alphabet Luxembourg S. A., Leudelange
Société Nouvelle WATT Automobiles SARL, Rueil-Malmaison
BMW (UK) Investments Ltd., Farnborough
BMW (UK) Capital plc, Farnborough
Riley Motors Ltd., Farnborough
BMW Central Pension Trustees Ltd., Farnborough
Triumph Motor Company Ltd., Farnborough
BLMC Ltd., Farnborough
The Americas
BMW (US) Holding Corp., Wilmington, Delaware
BMW Bank of North America, Inc., Salt Lake City, Utah
BMW Manufacturing Co., LLC, Wilmington, Delaware
Financial Services Vehicle Trust, Wilmington, Delaware
BMW of North America, LLC, Wilmington, Delaware
BMW US Capital, LLC, Wilmington, Delaware
BMW Financial Services NA, LLC, Wilmington, Delaware
BMW SLP, S. A. de C. V., Villa de Reyes 12
BMW do Brasil Ltda., São Paulo
BMW Financeira S. A. Credito, Financiamento e Investimento, São Paulo
BMW de Mexico, S. A. de C. V., Mexico D. F.
BMW de Argentina S. A., Buenos Aires
BMW Financial Services de Mexico S. A. de C. V. SOFOM, Mexico City
BMW Manufacturing Indústria de Motos da Amazônia Ltda., Manaus 12
BMW Leasing do Brasil, S. A., São Paulo
BMW Insurance Agency, Inc., Wilmington, Delaware
BMW Leasing de Mexico S. A. de C. V., Mexico City
BMW Acquisitions Ltda., São Paulo
Rolls-Royce Motor Cars NA, LLC, Wilmington, Delaware
BMW Consolidation Services Co., LLC, Wilmington, Delaware
SB Acquisitions, LLC, Wilmington, Delaware
BMW Extended Service Corporation, Wilmington, Delaware
BMW Auto Leasing, LLC, Wilmington, Delaware
BMW Facility Partners, LLC, Wilmington, Delaware
BMW FS Securities LLC, Wilmington, Delaware
BMW FS Funding Corp., Wilmington, Delaware
BMW Manufacturing LP, Woodcliff Lake, New Jersey
BMW FS Receivables Corp, Wilmington, Delaware
BMW Receivables 2 Inc., Richmond Hill, Ontario
BMW Receivables Limited Partnership, Richmond Hill, Ontario
BMW Receivables 1 Inc., Richmond Hill, Ontario
BMW of Manhattan, Inc., Wilmington, Delaware
BMW Canada Inc., Richmond Hill, Ontario
–
–
–
–
–
–
–
–
–
–
–
–
2,339
1,545
1,429
1,007
558
332
315
197
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
667
148
289
– 49
353
59
555
– 31
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
100
100
100
100
Group Financial Statements
Africa
BMW (South Africa) (Pty) Ltd., Pretoria
BMW Financial Services (South Africa) (Pty) Ltd., Midrand
Asia
BMW Automotive Finance (China) Co., Ltd., Beijing
BMW China Automotive Trading Ltd., Beijing
BMW Japan Finance Corp., Chiba
BMW Financial Services Korea Co., Ltd., Seoul
BMW Japan Corp., Tokyo
BMW Korea Co., Ltd., Seoul
BMW (Thailand) Co., Ltd., Bangkok
BMW India Financial Services Private Ltd., Gurgaon
BMW Manufacturing (Thailand) Co., Ltd., Rayong
BMW Malaysia Sdn Bhd, Kuala Lumpur
BMW Asia Pte. Ltd., Singapore
BMW India Private Ltd., Gurgaon
BMW Leasing (Thailand) Co., Ltd., Bangkok
BMW China Services Ltd., Beijing
PT BMW Indonesia, Jakarta
BMW Asia Technology Centre Sdn Bhd, Kuala Lumpur
BMW Asia Pacific Capital Pte Ltd., Singapore
BMW Credit (Malaysia) Sdn Bhd, Kuala Lumpur
BMW Tokyo Corp., Tokyo
BMW Lease (Malaysia) Sdn Bhd, Kuala Lumpur
BMW Holding Malaysia Sdn Bhd, Kuala Lumpur
BMW Osaka Corp., Osaka
Oceania
BMW Australia Finance Ltd., Mulgrave
BMW Australia Ltd., Melbourne
BMW Financial Services New Zealand Ltd., Auckland
BMW New Zealand Ltd., Auckland
BMW Sydney Pty. Ltd., Sydney
BMW Melbourne Pty. Ltd., Melbourne
183
682
177
987
535
384
320
310
196
108
107
–
–
–
–
–
–
–
–
–
–
–
–
–
–
394
194
–
–
–
–
63
5
154
160
66
54
151
20
83
7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 12
20
–
–
–
–
100
100
58
100
100
100
100
100
100
100
100
51
100
100
74
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
184
BMW AG’s non-consolidated companies at 31 December 2016
• 62
BMW Group
Notes to the Group
Financial Statements
List of Investments
at 31 December 2016
Companies
DoMEStIc 7
Equity
in € million
Profit/loss
in € million
Capital invest-
ment in %
Alphabet Fleetservices GmbH, Munich
Automag GmbH, Munich
Bavaria Betriebs-Gastronomie GmbH, Munich 4
BMW Car IT GmbH, Munich 4
ParkNow GmbH, Munich
PM Parking Ventures GmbH, Munich
FoREIGn 7
Europe
Alphabet Insurance Services Polska Sp. z o. o., Warsaw
BMW (GB) Ltd., Farnborough
BMW (P + A) Ltd., Farnborough
BMW (UK) Pensions Services Ltd., Hams Hall
BMW Car Club Ltd., Farnborough
BMW Drivers Club Ltd., Farnborough
BMW Group Benefit Trust Ltd., Farnborough
BMW i Ventures B. V., ’s-Gravenhage
BMW Motorsport Ltd., Farnborough
Cobalt Holdings Ltd., Basingstoke
Cobalt Telephone Technologies Ltd., Basingstoke
Content4all BV, Amsterdam
John Cooper Garages Ltd., Farnborough
John Cooper Works Ltd., Farnborough
OOO BMW Leasing, Moscow
Park-line Aqua B. V., ’s-Gravenhage
Park-line B. V., ’s-Gravenhage
Park-line Holding B. V., ’s-Gravenhage
Park-Mobile (UK) Limited, Basingstoke
Parkmobile Belgium BvBa, Antwerpen
Parkmobile Benelux B. V., Amsterdam
Parkmobile France SAS, Versailles
Parkmobile Group BV, Amsterdam
Parkmobile Group Holding BV, Amsterdam
Parkmobile Hellas SA, Athens
Parkmobile Licenses B. V., Amsterdam
Parkmobile Limited, Basingstoke
Parkmobile Software BV, Amsterdam
Parkmobile Suisse SA, Bulle
U. T. E. Alphabet España-Bujarkay, Sevilla
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
60
100
100
100
100
90
Group Financial Statements
The Americas
217-07 Northern Boulevard Corporation, Wilmington, Delaware
BMW Experience Centre Inc., Richmond Hill, Ontario
BMW i Ventures, LLC, Wilmington, Delaware
BMW Leasing de Argentina S. A., Buenos Aires
BMW Operations Corp., Wilmington, Delaware
BMW Technology Corporation, Wilmington, Delaware
Designworks / USA, Inc., Newbury Park, California
MINI Business Innovation, LLC, Wilmington, Delaware
ReachNow, LLC, Wilmington, Delaware
Toluca Planta de Automoviles, S. A. de C. V., Mexico City
Africa
BMW Automobile Distributors (Pty) Ltd., Midrand
BPF Midrand Property Holdings (Pty) Ltd., Midrand
Multisource Properties (Pty) Ltd., Midrand
Asia
BMW Finance (United Arab Emirates) Ltd., Dubai
BMW Financial Services Hong Kong Limited, Hong Kong
BMW Financial Services Singapore Pte Ltd., Singapore
BMW India Leasing Pvt. Ltd., Gurgaon
BMW Insurance Services Korea Co. Ltd., Seoul
BMW Philippines Corp., Manila
Herald International Financial Leasing Co., Ltd., Tianjin
THEPSATRI Co., Ltd., Bangkok 9
185
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
70
100
49
186
BMW AG’s associated companies, joint ventures and joint operations at 31 December 2016
• 63
BMW Group
Notes to the Group
Financial Statements
List of Investments
at 31 December 2016
Companies
Joint ventures – equity accounted
domeStIC
DriveNow GmbH & Co. KG, Munich 8
DriveNow Verwaltungs GmbH, Munich 8
foreIGn
BMW Brilliance Automotive Ltd., Shenyang 8
Associated companies – equity accounted
foreIGn
THERE Holding B. V., Amsterdam 8
Joint operations – proportionately-consolidated entities
domeStIC
SGL Automotive Carbon Fibers GmbH & Co. KG, Munich 8
SGL Automotive Carbon Fibers Verwaltungs GmbH, Munich 8
foreIGn
SGL Automotive Carbon Fibers, LLC, Dover, Delaware 8
Not equity accounted or proportionately-consolidated entities
DoMEStIc 1
Encory GmbH, Unterschleißheim
Digital Energy Solutions GmbH & Co. KG, Munich
The Retail Performance Company GmbH, Munich
Abgaszentrum der Automobilindustrie GbR, Weissach
PDB – Partnership for Dummy Technology and Biomechanics GbR, Gaimersheim
FoREIGn 1
BMW Albatha Leasing LLC, Dubai
BMW Albatha Finance PSC, Dubai
BMW AVTOTOR Holding B. V., Amsterdam
Stadspasparkeren B. V., Deurne
IP Mobile N. V., Brussels
Parkmobile International Holding BV, Utrecht 10
Mini Urban X Accelerator SPV, LLC, Wilmington, Delaware
Bavarian & Co. Ltd., Incheon
Equity
in € million
Profit/loss
in € million
Capital invest-
ment in %
38
–
– 2
–
4,678
1,061
50
50
50
2,003
–
33
43
–
44
–
–
–
–
–
–
–
–
–
–
–
–
10
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
49
49
49
50
50
50
25
20
40
40
50
30
25
18
46
20
Group Financial Statements
BMW AG’s participations at 31 December 2016
• 64
Companies
DoMEStIc 7
Deutsches Forschungszentrum für Künstliche Intelligenz GmbH, Kaiserslautern
GSB Sonderabfall-Entsorgung Bayern GmbH, Baar-Ebenhausen
Hubject GmbH, Berlin
IVM Industrie-Verband Motorrad GmbH & Co. Dienstleistungs KG, Essen
Joblinge gemeinnützige AG Berlin, Berlin
Joblinge gemeinnützige AG Leipzig, Leipzig
Joblinge gemeinnützige AG München, Munich
RA Rohstoffallianz GmbH i. L., Berlin
Racer Benchmark Group GmbH, Landsberg am Lech
SGL Carbon SE, Wiesbaden
FoREIGn 7
Chargemaster Plc., Luton
Gios Holding B. V., Oss
JustPark Parking Limited, London
Parkopedia Ltd., Birmingham
Carbon, Inc., Wilmington, Delaware
ChargePoint, Inc., Wilmington, Delaware
Desktop Metal, Inc., Wilmington, Delaware
Life360, Inc., Dover, Delaware
Nauto, Inc., Dover, Delaware
Rever Moto, Inc., Wilmington, Delaware
RideCell, Inc., Wilmington, Delaware
Scoop Technologies, Inc., Wilmington, Delaware
Srividya Tech, Inc., Wilmington, Delaware
striVB Labs., Inc., Camden, Delaware
Turo, Inc., Dover, Delaware
Zendrive, Inc., Dover, Delaware
ZIRX Technologies, Inc., Dover, Delaware
Moovit App Global Ltd., St. Ness Ziona
187
Equity
in € million
Profit/loss
in € million
Capital invest-
ment in %
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4.6
3.1
16.7
18.9
9.8
16.7
6.2
10.5
9.1
18.3
1.5
12.0
6.7
10.6
1.1
3.6
0.3
3.3
1.1
16.9
18.6
9.1
11.8
1.7
0.9
2.7
2.6
1.2
1 The amounts shown for the German subsidiaries correspond to the annual financial statements drawn up in accordance with German accounting requirements (HGB).
2 The amounts shown for the foreign subsidiaries correspond to the annual financial statements drawn up in accordance with uniform IFRS rules. Equity and earnings not denominated in euro are translated into
euro using the closing exchange rate at the balance sheet date.
3 Profit and Loss Transfer Agreement with BMW AG.
4 Profit and Loss Transfer Agreement with a subsidiary of BMW AG.
5 Exemption from drawing up a management report applied in accordance with § 264 (3) and § 264 b HGB.
6 Exemption from publication of financial statements applied in accordance with § 264 (3) and § 264 b HGB.
7 These entities are neither consolidated nor accounted for using the equity method due to their overall immateriality for the Group Financial Statements.
8 The amounts shown for entities accounted for using the equity method and for proportionately consolidated entities correspond to the annual financial statements drawn up in accordance with uniform IFRS
rules. Equity not denominated in euro is translated into euro using the closing exchange rate at the balance sheet date, earnings are translated using the average rate.
9 Including power to appoint representative bodies.
10 Significant influence.
11 Exemption pursuant to Article 2:403 of the Civil Code of the Netherlands applied.
12 First-time consolidation.
13 First-time consolidation in the financial year 2016: BMW Leasing (GB) Ltd., Farnborough.
188
BMW Group
Notes to the Group
Financial Statements
List of Investments
at 31 December 2016
Munich, 14 February 2017
Bayerische Motoren Werke
Aktiengesellschaft
The Board of Management
Harald Krüger
Milagros Caiña Carreiro-Andree Markus Duesmann
Klaus Fröhlich
Dr. Nicolas Peter
Dr. Ian Robertson (HonDSc)
Peter Schwarzenbauer
Oliver Zipse
Group Financial Statements CORPORATE
GOVERNANCE
Page 190 Statement on Corporate Governance (§ 289 a HGB)
(Part of the Combined Management Report)
Information on the Company’s Governing Constitution
Page 190
Page 191 Declaration of the Board of Management and
of the Supervisory Board pursuant to § 161 AktG
Page 192 Members of the Board of Management
Page 193 Members of the Supervisory Board
Page 196 Composition and Work Procedures of the Board of Management
of BMW AG and its Committees
Page 198 Composition and Work Procedures of the Super visory Board
of BMW AG and its Committees
Page 204 Disclosures pursuant to the Act on Equal Gender Participation
Page 205
Information on Corporate Governance
Practices Applied beyond Mandatory Requirements
Page 207 Compliance in the BMW Group
Page 212 Compensation Report
Page 223 Responsibility Statement by the Company’s
Legal Representatives
Page 224 BMW Group Auditor’s Report
4
4
Corporate
Governance
Company’s Govern-
ing Constitution
Board of
Management
Supervisory Board
Compliance
Compensation
Report
190
Information on the
Company’s
Governing
Constitution
STATEMENT ON
CORPORATE
GOVERNANCE
Good corporate governance – acting in accordance
with the principles of responsible management aimed
at increasing the value of the business on a sustainable
basis – is an essential requirement for the BMW Group
embracing all areas of the business. Corporate culture
within the BMW Group is founded on transparent
reporting and communication, corporate governance
in the interest of all stakeholders, fair and open coop-
eration between the Board of Management and the
Supervisory Board as well as among employees, and
compliance with existing laws. The Board of Manage-
ment and Supervisory Board report in this statement
on important aspects of corporate governance pursuant
to §§ 289, 315 (5) HGB and section 3.10 of the German
Corporate Governance Code (GCGC).
Information on the Company’s
Governing Constitution
The designation “BMW Group” comprises Bayerische
Motoren Werke Aktiengesellschaft (BMW AG) and
its group entities. BMW AG is a stock corporation
(Aktiengesellschaft) based on the German Stock
Corporation Act (Aktiengesetz) and has its registered
office in Munich, Germany. It has three representative
bodies: the Annual General Meeting, the Superviso-
ry Board and the Board of Management. The duties
and authorities of those bodies derive from the Stock
Corporation Act and the Articles of Incorporation of
BMW AG. Shareholders, as the owners of the business,
exercise their rights at the Annual General Meeting.
The Annual General Meeting decides in particular on
the utilisation of unappropriated profit, the ratification
of the acts of the members of the Board of Management
and the Supervisory Board, the appointment of the
external auditor, changes to the Articles of Incorpo-
ration and specified capital measures, and elects the
shareholders’ representatives to 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 for important reasons. The Board of
Management keeps the Supervisory Board informed of
all significant matters regularly, promptly and compre-
hensively, following the principles of conscientious and
faithful accountability and in accordance with prevail-
ing law and the reporting duties allocated to it by the
Supervisory Board. The Board of Management requires
the approval of the Supervisory Board for certain major
transactions. The Supervisory Board is not, however,
authorised to undertake management measures itself.
The close interaction between Board of Management
and Supervisory Board in the interests of the enterprise
as described above is also known as a “two-tier board
structure”.
Statement on Corporate Governance 191
Declaration of the Board of Management and of the
Supervisory Board of Bayerische Motoren Werke
Aktiengesellschaft with respect to the recommen-
dations of the “Government Commission on the
German Corporate Governance Code” pursuant to
§ 161 German Stock Corporation Act
The Board of Management and Supervisory Board
of Bayerische Motoren Werke Aktiengesellschaft
(“BMW AG”) declare the following regarding the rec-
ommendations of the “Government Commission on
the German Corporate Governance Code”:
1. Since issuance of the last Declaration in December
2015, BMW AG has complied with all of the rec-
ommendations published officially on 12 June 2015
in the Federal Gazette (Code version dated 5 May
2015), as announced with the exception of sec-
tion 4.2.5 sentences 5 and 6.
2. BMW AG will in future comply with all of the rec-
ommendations published officially on 12 June
2015 in the Federal Gazette (Code version dated
5 May 2015), with the exception of section 4.2.5
sentences 5 and 6.
3. It is recommended in section 4.2.5 sentences 5
and 6 of the Code that specified information per-
taining to management board compensation be
disclosed in the Compensation Report. These rec-
ommendations have not been and will not be
complied with, due to uncertainties with respect
to their interpretation and doubts as to whether
the supplementary use of model tables would be
instrumental in making the BMW AG’s Compen-
sation Report transparent and generally under-
standable in accordance with generally applicable
financial reporting requirements (see section 4.2.5
sentence 3 of the Code).
Munich, December 2016
Bayerische Motoren Werke
Aktiengesellschaft
On behalf of the
Supervisory Board
On behalf of the
Board of Management
Dr.-Ing. Dr.-Ing. E. h.
Norbert Reithofer
Chairman
Harald Krüger
Chairman
192
Members of the
Board of
Management
Members of the
Supervisory Board
MEMBERS OF THE
BOARD OF MANAGEMENT
harald Krüger (*1965)
Chairman
milagros Caiña Carreiro-Andree (*1962)
Human Resources, Industrial Relations Director
dr.-Ing. Klaus draeger (*1956)
Purchasing and Supplier Network
(until 30 September 2016)
Mandates
TÜV SÜD AG (since 15 July 2016)
markus duesmann (*1969)
Purchasing and Supplier Network
(since 1 October 2016)
Mandates
BMW Motoren GmbH (until 7 November 2016)
dr. friedrich eichiner (*1955)
Finance
(until 31 December 2016)
Mandates
Allianz Deutschland AG (until 30 June 2016)
Allianz SE (since 4 May 2016)
FESTO Aktiengesellschaft
BMW Brilliance Automotive Ltd.
(Deputy Chairman, until 1 January 2017)
FESTO Management Aktiengesellschaft
Klaus fröhlich (*1960)
Development
Mandates
HERE International B. V.
dr. nicolas peter (*1962)
Finance
(since 1 January 2017)
Mandates
BMW Brilliance Automotive Ltd.
(Deputy Chairman, since 1 January 2017)
dr. Ian robertson (hondSc) (*1958)
Sales and Marketing BMW,
Sales Channels BMW Group
Mandates
Weybourne Limited (since 3 January 2017)
Weybourne Group Limited (since 25 February 2016)
Weybourne Investments Holdings
(since 25 February 2016)
Weybourne Management Limited
(since 25 February 2016)
peter Schwarzenbauer (*1959)
MINI, Motorrad, Rolls-Royce,
Aftersales BMW Group
Mandates
Rolls-Royce Motor Cars Limited (Chairman)
oliver Zipse (*1964)
Production
Mandates
BMW (South Africa) (Pty) Ltd. (Chairman)
BMW Motoren GmbH (Chairman)
General Counsel:
dr. Jürgen reul
Membership of other statutory supervisory boards.
Membership of equivalent national or foreign boards of business enterprises.
Other mandates.
Statement on Corporate Governance MEMBERS OF THE
SUPERVISORY BOARD
Dr.-Ing. Dr.-Ing. E. h. norbert Reithofer (*1956)
Member since 2015
Chairman
Former Chairman of the Board of
Management of BMW AG
Mandates
Siemens Aktiengesellschaft
Henkel AG & Co. KGaA (Shareholders’ Committee)
Manfred Schoch 1 (*1955)
Member since 1988
Deputy Chairman
Chairman of the European
and General Works Council
Industrial Engineer
Stefan quandt (*1966)
Member since 1997
Deputy Chairman
Entrepreneur
Mandates
DELTON AG (Chairman)
AQTON SE (Chairman)
Entrust Datacard Corp.
193
Dr. jur. Karl-Ludwig Kley (*1951)
Member since 2008
Deputy Chairman
Chairman of the Supervisory Board of the E.ON SE
(since 8 June 2016)
Mandates
E.ON SE (Chairman, since 8 June 2016)
Bertelsmann Management SE (until 9 May 2016)
Bertelsmann SE & Co. KGaA (until 9 May 2016)
Deutsche Lufthansa Aktiengesellschaft
Verizon Communications Inc.
christiane Benner 2 (*1968)
Member since 2014
Second Chairman of IG Metall
Mandates
Robert Bosch GmbH
franz haniel (*1955)
Member since 2004
Entrepreneur
Mandates
DELTON AG (Deputy Chairman)
Franz Haniel & Cie. GmbH (Chairman)
Heraeus Holding GmbH
TBG Limited
Ralf Hattler 3 (*1968)
Member since 1 January 2017
Head of Indirect Purchasing
Stefan Schmid 1 (*1965)
Member since 2007
Deputy Chairman
Chairman of the Works Council, Dingolfing
prof. Dr. rer. nat. Dr. h. c. Reinhard Hüttl (*1957)
Member since 2008
Chairman of the Executive Board
of Helmholtz-Zentrum Potsdam
Deutsches GeoForschungsZentrum - GFZ
University Professor
1 Employee representatives (company employees).
2 Employee representatives (union representatives).
3 Employee representatives (members of senior management).
Membership of other statutory supervisory boards.
Membership of equivalent national or foreign boards of business enterprises.
Other mandates.
194
Members of the
Supervisory Board
prof. Dr. rer. nat. Dr.-Ing. E. h.
henning Kagermann (*1947)
Member since 2010
President of acatech – Deutsche Akademie
der Technikwissenschaften e. V.
Mandates
Deutsche Bank AG
Deutsche Post AG
Münchener Rückversicherungs-Gesellschaft
Aktiengesellschaft in München
Susanne Klatten (*1962)
Member since 1997
Entrepreneur
Mandates
ALTANA AG (Deputy Chairman)
SGL Carbon SE (Chairman)
UnternehmerTUM GmbH (Chairman)
prof. dr. rer. pol. renate Köcher (*1952)
Member since 2008
Director of Institut für Demoskopie
Allensbach Gesellschaft zum Studium der
öffentlichen Meinung mbH
Mandates
Allianz SE (until 3 May 2017)
Infineon Technologies AG
Nestlé Deutschland AG
Robert Bosch GmbH
Ulrich Kranz 3 (*1958)
Member from 2014 to 31 December 2016
Head of Product Line BMW i
Dr. h. c. Robert W. Lane (*1949)
Member since 2009
Former Chairman and Chief Executive Officer of
Deere & Company
Mandates
General Electric Company
Horst Lischka 2 (*1963)
Member since 2009
General Representative of IG Metall Munich
Mandates
KraussMaffei Group GmbH
MAN Truck & Bus AG
Städtisches Klinikum München GmbH
Willibald Löw 1 (*1956)
Member since 1999
Chairman of the Works Council, Landshut
Simone menne (*1960)
Member since 2015
Member of Management of Boehringer
Ingelheim Gruppe, Finance
(since 1 September 2016)
Mandates
Delvag Luftfahrtversicherungs-AG (Chairman)
(until 31 August 2016)
Deutsche Post AG
LSG Lufthansa Service Holding AG (Chairman)
(until 31 December 2016)
Lufthansa Cargo AG
(until 31 December 2016)
Lufthansa Technik AG
(until 31 December 2016)
FWB Frankfurter Wertpapierbörse
(Exchange Council)
(until 31 August 2016)
Miles & More GmbH (Chairman Advisory Board)
(until 31 August 2016)
1 Employee representatives (company employees).
2 Employee representatives (union representatives).
3 Employee representatives (members of senior management).
Membership of other statutory supervisory boards.
Membership of equivalent national or foreign boards of business enterprises.
Other mandates.
Statement on Corporate Governance
195
Dr. Dominique Mohabeer 1 (*1963)
Member since 2012
Member of the Works Council, Munich
Brigitte Rödig 1 (*1963)
Member since 2013
Member of the Works Council, Dingolfing
Jürgen Wechsler 2 (*1955)
Member since 2011
Regional Head of IG Metall Bavaria
Mandates
Schaeffler AG (Deputy Chairman)
Siemens Healthcare GmbH (Deputy Chairman)
Werner Zierer 1 (*1959)
Member since 2001
Chairman of the Works Council, Regensburg
196
Composition and
Work Procedures
of the Board of
Management of
BMW AG and its
Committees
COMPOSITION AND WORK
PROCEDURES OF THE
BOARD OF MANAGEMENT
OF BMW AG AND ITS
COMMITTEES
The Board of Management governs the enterprise
under its own responsibility, acting in the interests
of the BMW Group with the aim of achieving sustain-
able growth in value. The interests of shareholders,
employees and other stakeholders are also taken into
account in the pursuit of this aim.
The Board of Management determines the strategic
orientation of the enterprise, agrees upon it with the
Supervisory Board and ensures its implementation.
The Board of Management is responsible for ensuring
that all provisions of law and internal regulations are
complied with. Further details about compliance with-
in the BMW Group can be found in the “Corporate
Governance” section of the Annual Report. The Board
of Management is also responsible for ensuring that
appropriate risk management and risk controlling
systems are in place throughout the Group.
During their period of employment for BMW AG,
members of the Board of Management are bound by
a comprehensive non-competition clause. They are
required to act in the enterprise’s best interests and
may not pursue personal interests in their decisions
or take advantage of business opportunities intended
for the enterprise. They may only undertake ancillary
activities, in particular supervisory board mandates
outside the BMW Group, with the approval of the
Supervisory Board’s Personnel Committee. Each
member of the Board of Management of BMW AG is
obliged to disclose conflicts of interest to the Super-
visory Board without delay and inform the other
members of the Board of Management accordingly.
Following the appointment of a new member to the
Board of Management, the BMW Group Corporate
Governance Officer informs the new member of the
framework conditions under which the board mem-
ber’s duties are to be carried out – in particular those
enshrined in the BMW Group’s Corporate Govern-
ance Code – as well as the duty to cooperate when a
transaction or event triggers reporting requirements
or requires the approval of the Supervisory Board.
The Board of Management consults and takes deci-
sions as a collegiate body in meetings of the Board
of Management, the Sustainability Board, the Oper-
ations Committee and the Committee for Executive
Management Matters. At its meetings, the Board
of Management defines the overall framework for
business strategies and the use of resources, takes
decisions regarding the implementation of strategies
and deals with issues of particular importance to the
BMW Group. The full board also takes decisions at a
basic policy level relating to the Group’s automobile
product strategies and product projects inasmuch as
these are relevant for all brands. The Board of Man-
agement and its committees may, as required and
depending on the subject matters being discussed,
invite non-voting advisers to participate at meetings.
Terms of reference approved by the Board of Man-
agement contain a planned allocation of divisional
responsibilities between the individual board mem-
bers. These terms of reference also incorporate the
principle that the full Board of Management bears
joint responsibility for all matters of particular impor-
tance and scope. In addition, members of the Board of
Management manage the relevant portfolio of duties
under their responsibility, whereby case-by-case rules
can be put in place for cross-divisional projects. Board
members continually provide the Chairman of the
Board of Management with all information regarding
major transactions and developments within their
area of responsibility. The Chairman of the Board
of Management coordinates cross-divisional matters
with the overall targets and plans of the BMW Group,
involving other board members to the extent that divi-
sions within their area of responsibility are affected.
The Board of Management takes its decisions at
meetings generally held on a weekly basis which are
convened, coordinated and headed by the Chairman
of the Board of Management. At the request of the
Chairman, decisions can also be taken outside of
board meetings if none of the board members object
to this procedure. A meeting is quorate if all Board
of Management members are invited to the meeting
in good time. Members unable to attend any meeting
are entitled to vote in writing, by fax or by telephone.
Votes cast by phone must be subsequently confirmed
in writing. Except in urgent cases, matters relating to
a division for which the responsible board member is
not present will only be discussed and decided upon
with that member’s consent.
Unless stipulated otherwise by law or in BMW AG’s
statutes, the Board of Management makes decisions
on the basis of a simple majority of votes cast at meet-
ings. Outside of board meetings, decisions are taken
on the basis of a simple majority of board members.
In the event of a tied vote, the Chairman of the Board
of Management has the casting vote. Any changes
to the board’s terms of reference must be passed
Statement on Corporate Governance 197
unanimously. A board meeting may only be held if
more than half of the board members are present.
In the event that the Chairman of the Board of
Management is not present or is unable to attend
a meeting, the member of the board responsible for
Finance will represent him.
Minutes are taken of all meetings and the Board of
Management’s resolutions and signed by the Chair-
man. Decisions taken by the Board of Management
are binding for all employees.
The rules relating to meetings and resolutions taken
by the full Board of Management are also applicable
for its committees.
Members of the Board of Management not represent-
ed in a committee are provided with the agendas and
minutes of committee meetings. Committee matters
are dealt with in full board meetings if the committee
considers it necessary or at the request of a member
of the Board of Management.
A secretariat for Board of Management matters has
been established to assist the Chairman and other
board members with the preparation and follow-up
work connected with board meetings.
At meetings of the Operations Committee (general-
ly held every two weeks), decisions are reached in
connection with automobile product projects, based
on the strategic orientation and decision framework
stipulated at Board of Management meetings. The
Operations Committee comprises the Board of
Management member responsible for Development
(who also chairs the meetings), together with the
board members responsible for the following areas:
Purchasing and Supplier Network; Production; Sales
and Marketing BMW, Sales Channels BMW Group;
and MINI, Motorcycles, Rolls-Royce, Aftersales BMW
Group. If the committee chairman is not present or
unable to attend a meeting, the member of the board
responsible for Production represents him. Resolu-
tions taken at meetings of the Operations Committee
are made online.
The full board usually convenes up to twice a year in
its function as Sustainability Board in order to define
strategy with regard to sustainability and decide upon
measures to implement that strategy. The Head of
Corporate Affairs and the Representative for Sus-
tainability and Environmental Protection participate
in these meetings in an advisory capacity.
The Board’s Committee for Executive Management
Matters deals with enterprise-wide issues affecting
executive managers of the BMW Group, either in
their entirety or individually (such as the executive
management structure, potential candidates for exec-
utive management, nominations for or promotions to
senior management positions). This committee has,
on the one hand, an advisory and preparatory role
(e. g. making suggestions for promotions to the two
remuneration groups below board level and preparing
decisions to be taken at board meetings with regard
to human resources principles with the emphasis on
executive management issues) and a decision-taking
function on the other (e. g. deciding on appointments
to senior management positions and promotions to
higher remuneration groups or the wording of human
resources principles decided on by the full board).
The Committee has two members who are entitled to
vote at meetings, namely the Chairman of the Board
of Management (who also chairs the meetings) and
the board member responsible for Human Resources.
The Head of “Human Resources Management and
Services” as well as the Head of “Human Resources
Executive Management” also participate in these
meetings in an advisory function. At the request of
the Chairman, resolutions may also be passed outside
of committee meetings by casting votes in writing,
by fax or by telephone if the other member entitled
to vote does not object immediately. The Committee
for Executive Management Matters convenes up to
six times a year.
The Board of Management is represented by its Chair-
man in its dealings with the Supervisory Board. The
Chairman of the Board of Management maintains
regular contact with the Chairman of the Supervisory
Board and keeps him informed of all important mat-
ters. The Supervisory Board has passed a resolution
specifying the information and reporting duties of
the Board of Management. As a general rule, in the
case of reports required by dint of law, the Board of
Management submits its reports to the Supervisory
Board in writing. To the extent possible, documents
required as a basis for taking decisions are sent to
the members of the Supervisory Board in good time
before the relevant meeting. Regarding transactions
of fundamental importance, the Supervisory Board
has stipulated specific transactions which require
the approval of the Super visory Board. Whenever
necessary, the Chairman of the Board of Management
obtains the approval of the Supervisory Board and
ensures that reporting duties to the Supervisory Board
are complied with. In order to fulfil these tasks, the
Chairman is supported by all members of the Board
of Management. The fundamental principle followed
when reporting to the Supervisory Board is that the
latter should be kept informed regularly, without delay
and comprehensively of all significant matters relating
to planning, business performance, risk exposures,
risk management and compliance, as well as any major
variances between actual and budgeted figures.
198
Composition and
Work Procedures of
the Supervisory
Board of BMW AG
and its Committees
COMPOSITION AND WORK
PROCEDURES OF THE
SUPERVISORY BOARD OF
BMW AG AND ITS
COMMITTEES
BMW AG’s Supervisory Board is composed of ten share-
holder representatives (elected by the Annual General
Meeting) and ten employee representatives (elected in
accordance with the Co-Determination Act). The ten
Supervisory Board members representing employees
comprise seven Company employees, including one
executive staff representative, and three members elect-
ed following nomination by unions. The Supervisory
Board has the task of advising and supervising the Board
of Management in its management of the BMW Group.
It is involved in all decisions of fundamental importance
for the BMW Group. The Supervisory Board appoints
the members of the Board of Management and decides
upon the level of compensation they receive. The Super-
visory Board can revoke appointments for important
reasons.
The Supervisory Board holds a minimum of two meet-
ings per calendar half-year. Normally, five plenary
meetings are held per calendar year. One meeting each
year is planned to extend to several days and is used,
among other things, to enable an in-depth exchange on
strategic and technological matters. The main topics of
meetings in the period under report are summarised
in the Report of the Supervisory Board. Shareholder
representatives and employee representatives generally
prepare Supervisory Board meetings separately and
occasionally with members of the Board of Manage-
ment. Members of the Supervisory Board are specif-
ically legally bound to maintain secrecy with respect
to confidential reports they receive and confidential
discussions in which they partake.
The Chairman of the Supervisory Board coordinates
work within the Supervisory Board, convenes and
chairs its meetings, handles the external affairs of the
Supervisory Board and represents it before the Board
of Management.
The Supervisory Board has a quorum if all members
have been invited to the meeting and at least half the
members of whom it is required to comprise partic-
ipate in the vote. A resolution relating to an agenda
item not included in the invitation is only valid if none
of the members of the Supervisory Board who were
not present at the meeting object to the resolution
and if a minimum of two-thirds of the members are
present.
Resolutions of the Supervisory Board are generally
passed by a simple majority. The German Co-determina-
tion Act contains specific legal requirements with regard
to majorities and technical procedures, particularly with
regard to the appointment and removal of management
board members and the election of Chairman or Deputy
Chairman of the Supervisory Board. In the event of a
tied vote in the Supervisory Board, the Chairman of
the Supervisory Board has two votes in a renewed vote,
assuming it also results in a tie.
In practice, resolutions are regularly passed by the
Supervisory Board and its committees at meetings.
Supervisory Board members who are not present can
submit their vote in written, fax or electronic form via
another Supervisory Board member. This rule also
applies for the second vote of the Chairman of the
Supervisory Board. The Chairman of the Supervisory
Board can also grant a period of time in which all mem-
bers not present at a meeting may retrospectively vote.
In special cases, resolutions may also be passed outside
of meetings, in particular in writing, by fax or by elec-
tronic means. Resolutions and meetings are recorded
in minutes, which are signed by the relevant Chairman.
Following its meetings, the Supervisory Board generally
requests information on new vehicle models in the form
of a short presentation.
Following the election of a new Supervisory Board
member, the Corporate Governance Officer informs
the new member of the main framework for performing
duties, in particular the BMW Group Corporate Gov-
ernance Code and individual contributions required in
circumstances which trigger reporting obligations or are
subject to Supervisory Board approval.
Members of the Supervisory Board of BMW AG take
care to ensure that they have sufficient time to perform
their mandate. If members of the Supervisory Board of
BMW AG are also members of the management board of
a listed company, they may not accept more than three
mandates on non-BMW Group supervisory boards of
listed companies or in other bodies with comparable
requirements.
Statement on Corporate Governance 199
According to the rules of procedure, the Chairman of the
Supervisory Board is, by virtue of this function, member
and Chairman of the Presiding Board, the Personnel
Committee and the Nomination Committee.
The number of meetings held by the Presiding Board
and committees depends on requirements. The Pre-
siding Board, the Personnel Committee and the Audit
Committee generally hold several meetings in the course
of the year (see “Report of the Supervisory Board” for
details of the number of meetings held in 2016).
In line with the rules of procedure for the activities of
the plenum, the Supervisory Board has set out proce-
dural rules for the Presiding Board and committees.
Committees only have a quorum when all members
participate. Committee resolutions are passed by a
simple majority, unless otherwise stipulated by law.
Members of the Supervisory Board may not delegate
their duties to others. However, the Supervisory Board,
the Presiding Board and the committees may call on
experts and informed persons to attend meetings and
advise on specific matters.
The Supervisory Board, the Presiding Board and com-
mittees also meet without the Board of Management
when necessary.
BMW AG ensures that the Supervisory Board and its
committees are appropriately equipped to carry out
their duties. This includes providing a central Super-
visory Board office to support Chairpersons in their
coordination work.
In accordance with rules of procedure, the Presiding
Board comprises the Chairman of the Supervisory Board
and Deputies. The Presiding Board prepares Superviso-
ry Board meetings to the extent that the subject matter
does not fall within the remit of a committee. This
includes, for example, preparing the annual Declaration
of Compliance with the German Corporate Governance
Code and assessment of Supervisory Board efficiency.
The Supervisory Board regularly assesses the efficiency
of its activities. To this end, shared discussion is con-
ducted within the Supervisory Board and individual
meetings held with the Chairman, prepared on the basis
of a questionnaire sent in advance, which is drawn up
by the Supervisory Board.
Members of the Supervisory Board of BMW AG are
obliged to act in the best interest of the organisation as
a whole. They may not pursue personal interests in their
decisions or take advantage of business opportunities
intended to benefit the BMW Group.
Members of the Supervisory Board are obliged to inform
the Supervisory Board of any conflicts of interest, in
particular those resulting from a consulting or executive
role with clients, suppliers, lenders or other business
partners, so that the Supervisory Board can report to
the shareholders at the Annual General Meeting on
its treatment of the issue. Material and non-temporary
conflicts of interest of a Supervisory Board member
result in a termination of mandate.
In proposing candidates for election as members of the
Supervisory Board, care is taken that the Supervisory
Board collectively has the required knowledge, skills and
expertise to perform its tasks appropriately.
The Supervisory Board has stated specific targets for its
composition (see section “Composition targets for the
Supervisory Board”).
Members of the Supervisory Board are responsible for
undertaking any training required for the performance
of their duties. The Company provides them with appro-
priate assistance therein.
Taking into account the specific circumstances of the
BMW Group and the number of Board members, the
Supervisory Board has set up a Presiding Board and
four committees: the Personnel Committee, the Audit
Committee, the Nomination Committee and the Medi-
ation Committee (see “Overview of Supervisory Board
committees and their composition”). These serve to
raise the efficiency of the Supervisory Board’s work and
facilitate handling of complex issues. Establishment and
function of a mediation committee is prescribed by law.
Committee chairpersons report in detail on committee
work at each plenary meeting of the Supervisory Board.
Composition of the Presiding Board and the committees
is based on legal requirements, the Articles of Incor-
poration, rules of procedure and corporate governance
principles, while taking into particular account the
expertise of Board members.
In line with the recommendations of the German Cor-
porate Governance Code, the Chairman of the Audit
Committee is independent, and not a former Chairman
of the Board of Management, and has special knowledge
and experience in the application of financial reporting
standards and internal control procedures. He also
fulfils the requirement of being a financial expert as
defined by § 100 (5) and § 107 (4) AktG.
The Nomination Committee is charged with the task of
finding suitable candidates for election to the Super-
visory Board as shareholder representatives and to
propose them to the Supervisory Board for election at
the Annual General Meeting. In line with the recom-
mendations of the German Corporate Governance Code,
the Nomination Committee is exclusively composed of
shareholder representatives.
The establishment and composition of a mediation com-
mittee are prescribed by the German Co-determination
Act. The Mediation Committee has the task of making
proposals to the Supervisory Board if a resolution for the
appointment of a member of the Board of Management
has not been carried by the necessary two-thirds major-
ity of members’ votes. In accordance with statutory
requirements, the Mediation Committee comprises the
Chairman and the Deputy Chairman of the Supervisory
Board, one member selected by shareholder represent-
atives and one by employee representatives.
200
Composition and
Work Procedures of
the Supervisory
Board of BMW AG
and its Committees
The Personnel Committee prepares decisions of the
Supervisory Board with regard to the appointment and,
where applicable, removal of members of the Board of
Management and, together with the full Supervisory
Board and the Board of Management, ensures long-
term succession planning. The Personnel Committee
also prepares decisions of the Supervisory Board with
regard to Board of Management compensation and the
regular review of the compensation system for the Board
of Management. In conjunction with resolutions taken
by the Supervisory Board regarding the compensation
of the Board of Management, the Personnel Committee
is responsible for drawing up, amending and revoking
employment contracts or, when necessary, to prepare
and conclude other relevant contracts with members
of the Board of Management. In certain cases, the
Personnel Committee is also authorised to grant the
necessary approval of a business transaction on behalf of
the Supervisory Board. This includes cases of providing
loans to members of the Board of Management or Super-
visory Board, certain contractual arrangements with
members of the Supervisory Board, taking into account
related parties, as well as ancillary activities of members
of the Board of Management, including acceptance of
non-BMW Group supervisory board mandates.
The Audit Committee deals in particular with the super-
vision of the financial reporting process, effectiveness
of the internal control system, the risk management
system, internal audit system and compliance as well
as the performance of Supervisory Board duties in
connection with audits pursuant to § 20 of the German
Securities Trading Act (WpHG). It also oversees the
audit of financial statements, auditor independence
and any additional work performed by the auditor. It
prepares the proposal for the election of the auditor
at the Annual General Meeting, makes a relevant
recommendation, issues the audit engagement and
agrees on points of audit focus as well as the auditor’s
fee. The Audit Committee prepares the Supervisory
Board’s resolution relating to the Company and Group
Financial Statements and discusses interim reports
with the Board of Management prior to publication.
The Audit Committee also decides on the Supervisory
Board’s agreement on the use of Authorised Capital
2014 (Article 4 no. 5 of the Articles of Incorporation)
and on amendments to the Articles of Incorporation
which only affect its wording.
Statement on Corporate Governance 201
overview of Supervisory Board committees
and their composition
Principal duties, basis for activities
Members
preSIdInG boArd
— preparation of Supervisory Board meetings to the extent that the subject matter to be
— activities based on terms of reference
discussed does not fall within the remit of a committee
perSonnel CommIttee
— preparation of decisions relating to the appointment and revocation of appointment of
members of the Board of Management, the compen sation and the regular review of the
Board of Management’s compensation system
— conclusion, amendment and revocation of employment contracts (in conjunction with
the resolutions taken by the Supervisory Board regarding the compensation of the Board
of Management) and other contracts with members of the Board of Management
— decisions relating to the approval of ancillary activities of Board of Manage ment
members, including acceptance of non-BMW Group supervisory mandates as well as the
approval of transactions requiring Supervisory Board approval by dint of law (e. g. loans
to Board of Management or Supervisory Board members)
— set up in accordance with the recommendation contained in the German Corporate
Governance Code, activities based on terms of reference
Norbert Reithofer 1
Manfred Schoch
Stefan Quandt
Stefan Schmid
Karl-Ludwig Kley
Norbert Reithofer 1
Manfred Schoch
Stefan Quandt
Stefan Schmid
Karl-Ludwig Kley
AudIt CommIttee
— supervision of the financial reporting process, the effectiveness of the internal control
system, the risk management system, internal audit arrangements and compliance as
well as the performance of Supervisory Board duties in connection with audits pursuant
to § 20 of the German Securities Trading Act (WpHG)
performed by external auditor
— supervision of external audit, in particular auditor independence and additional work
— preparation of proposals for election of external auditor at Annual General Meeting,
engagement of external auditor and compliance of audit engagement, determination
of areas of audit emphasis and fee agreements with external auditor
Karl-Ludwig Kley 1, 2
Norbert Reithofer
Manfred Schoch
Stefan Quandt
Stefan Schmid
Group Financial Statements
— preparation of Supervisory Board’s resolution on Company and
— discussion of interim reports with Board of Management prior to publication
— decision on approval for utilisation of Authorised Capital 2014
— amendments to Articles of Incorporation only affecting wording
— establishment in accordance with the recommendation contained in the
German Corporate Governance Code, activities based on terms of reference
nomInAtIon CommIttee
— identification of suitable candidates (male / female) as shareholder representatives on the
Supervisory Board to be put forward for inclusion in the Super visory Board’s proposals for
election at the Annual General Meeting
— establishment in accordance with the recommendation contained in the German Corpo-
rate Governance Code, activities based on terms of reference
Norbert Reithofer 1
Susanne Klatten
Karl-Ludwig Kley
Stefan Quandt
(In line with the recommendations of the German Corporate Governance
Code, the Nomination Committee comprises only shareholder representa-
tives.)
medIAtIon CommIttee
— proposal to Supervisory Board if resolution for appointment of Board of Management
member has not been carried by the necessary two-thirds majority of Supervisory Board
members’ votes
— committee required by law
Norbert Reithofer
Manfred Schoch
Stefan Quandt
Stefan Schmid
(In accordance with statutory require ments, the Mediation Committee
comprises the Chairman and Deputy Chairman of the Supervisory Board
and one member each selected by shareholder representatives and
employee representatives.)
1 Chair.
2 (Independent) financial expert within the meaning of §§ 100 (5) and 107 (4) AktG, no. 5.3.2 GCGC.
202
Composition and
Work Procedures of
the Supervisory
Board of BMW AG
and its Committees
Board of Management succession planning,
diversity concept
The Supervisory Board, in collaboration with the
Personnel Committee and the Board of Management,
ensures long-term succession planning. In their assess-
ment of candidates for Board of Management posi-
tions, the underlying suitability criteria applied by the
Supervisory Board are expertise in the relevant function,
outstanding leadership qualities, proven track record
and knowledge of the Company. The Supervisory Board
has adopted a diversity concept for the composition
of the Board of Management, which is also aligned
with recommendations of the German Corporate
Governance Code. In considering which individuals
would best complement the Board of Management, the
Supervisory Board also takes diversity into account. The
criteria diversity is taken by the Supervisory Board to
encompass in particular different, mutually comple-
mentary profiles, professional and life experiences also
at the international level and an appropriate gender
representation. In reaching its decisions, the Supervi-
sory Board also considers the following:
— The members of the Board of Management
should have a long-standing track record of
management experience, ideally with experi-
ence in different professional fields.
— At least two members should have international
management experience.
— At least two members of the Board of Manage-
ment should have a technical background.
— The Board of Management should collectively
have extensive experience in the fields of devel-
opment, production, sales and marketing,
finances and human resources.
— The Supervisory Board has stipulated a target
for the proportion of women on the Board of
Mana gement. This is outlined in the section
“Disclosures pursuant to the Act on Equal Gen-
der Participation”. The Board of Management
reports to the Personnel Committee and the
Supervisory Board at regular intervals on the
proportion and development of women in
se nior management positions, in particular at
executive levels.
— In accordance with the recommendation of the
German Corporate Governance Code, the
Supervisory Board has set a standard age limit
for Board of Management membership. This
aims at a retirement age of 60. Consideration is
also given to achieving an appropriate age-mix
within the Board of Management.
When selecting an individual for a particular Board of
Management position, the Supervisory Board decides
in the best interest of the Group and after due con-
sideration of all relevant circumstances.
Composition objectives of the Supervisory Board,
diversity concept
The Supervisory Board is to be composed in such a way
that its members collectively possess the knowledge,
skills and experience required to properly perform
its tasks.
To this end, the Supervisory Board has approved the
following concrete objectives for its composition, tak-
ing into account recommendations contained in the
German Corporate Governance Code. These objectives
also describe the concept for achieving diversity in
the composition of the Supervisory Board (diversity
concept):
— Four members of the Supervisory Board should
if possible have international experience or
specialist knowledge of one or more non-German
markets important to the BMW Group.
— The Supervisory Board should include if possi-
ble seven members who have acquired in-depth
knowledge and experience within the
BMW Group, though no more than two former
members of the Board of Management.
— Three of the shareholder representatives in the
Supervisory Board should if possible be entre-
preneurs or persons who have previous experi-
ence in the management or supervision of
another medium or large-sized company.
Statement on Corporate Governance — Three members of the Supervisory Board should
if possible be figures from the worlds of busi-
ness, science or research who have experience
in areas relevant to the BMW Group, e. g. chem-
istry, energy supply, information technology, or
who have specialist knowledge in fields relevant
for the future of the BMW Group, e. g. custom-
er requirements, mobility, resources or sustain-
ability.
— When seeking qualified individuals for the
Supervisory Board whose specialist skills and
leadership qualities are most likely to strength-
en the Board as a whole, consideration is also
to be given to diversity. When preparing nomi-
nations, the extent to which the work of the
Supervisory Board would benefit from diversi-
fied professional and personal backgrounds
(including international aspects) and from an
appropriate gender representation is also to be
taken into account. It is the joint responsibility
of all those participating in the nomination and
election process to ensure that qualified wom-
en are considered for Supervisory Board mem-
ber ship.
— Of the 20 members of the Supervisory Board at
least twelve should be independent members
within the meaning of section 5.4.2 of the Ger-
man Corporate Governance Code, including
at least six as representatives of the Company’s
shareholders.
— Two independent members of the Supervisory
Board should have expert knowledge of
accounting or auditing.
— No persons carrying out directorship functions
or advisory tasks for important competitors of
the BMW Group may belong to the Supervisory
Board. In compliance with applicable legisla-
tion, members of the Supervisory Board are to
take care that no persons will be nominated
for election with whom a serious, non-temporary
conflict of interests could arise due to other
activities and functions carried out by them out-
side the BMW Group, in particular advisory
activities or directorships with customers, sup-
pliers, creditors or other business partners.
203
— An age limit for membership of the Supervisory
Board of 70 years should generally be applied.
In exceptional cases, members may remain on
the Board until the end of the next Annual Gen-
eral Meeting after reaching the age of 73, in
order to fulfil legal requirements or to facilitate
smooth succession in the case of key roles or
specialist qualifications.
— As a general rule, members of the Supervisory
Board should not hold office for longer than
until the end of the Annual General Meeting at
which the resolution is passed ratifying the
member’s activities for the 14th financial year
after the beginning of the member’s first period
of office. This excludes the financial year in
which the first period of office began. This rule
does not apply to natural persons who either
directly or indirectly hold significant investments
in the Company. In the Company’s interest,
deviation from the general maximum period is
possible, for instance in order to work towards
another composition target, in particular diversi-
ty of gender and technical, professional and per-
sonal backgrounds.
The time schedule set by the Supervisory Board for
achieving the above-mentioned composition targets
is the period up to 31 December 2017. Proposals for
nomination made by the Supervisory Board at the
Annual General Meeting – insofar as they apply to
shareholder Supervisory Board members – should
take account of these objectives in such a way that
they can be achieved with the support of the appro-
priate resolutions at the Annual General Meeting. The
Annual General Meeting is not bound by nominations
for election proposed by the Supervisory Board. The
freedom of employees to vote for the employee mem-
bers of the Supervisory Board is also protected. Under
the rules stipulated by the German Co-Determination
Act, the Supervisory Board does not have the right
to nominate employee representatives for election.
The objectives which the Supervisory Board has set
itself with regard to its composition are therefore not
intended to be instructions to those entitled to vote
or restrictions on their freedom to vote.
In the Supervisory Board’s opinion, its composition
as at 31 December 2016 fulfilled the composition
objectives detailed above. In order to make it easier to
assess the actual composition and composition targets,
brief curricula vitae of the current members of the
Supervisory Board are available on the Company’s
www.bmwgroup.com. Information relating to
website at
members’ practised professions and to mandates in
other statutory supervisory boards and equivalent
national or foreign company boards, including the
length of their periods of service on the Supervisory
204
Composition and
Work Procedures of
the Supervisory
Board of BMW AG
and its Committees
Disclosures Pursuant
to the Act on Equal
Gender Participation –
Targets for the
Proportion of Women
on the Board of
Management and at
Executive Manage-
ment Levels I and II
Information on Cor-
porate Governance
Practices applied
Beyond Mandatory
Requirements
Board, is provided in the section “Statement on Cor-
porate Governance”. Based on this information, it
is evident that the Supervisory Board of BMW AG
is very diversified, with significantly more than the
targeted four members having international experi-
ence or specialist knowledge with regard to one or
more of the non-German markets important to the
BMW Group. In-depth knowledge and experience
from within the enterprise are provided by seven
employee representatives, as well as the Chairman
of the Supervisory Board. Only one previous Board of
Management member holds office in the Supervisory
Board. At least four members of the Supervisory Board
have experience in managing another company. The
Supervisory Board also has three entrepreneurs as
members. Most of the members of the Supervisory
Board – including employee representatives – have
experience in supervising another medium-sized or
large company. Moreover, more than three members
of the Supervisory Board have experience and special-
ist knowledge in subjects relevant for the future of the
BMW Group, such as customer requirements, mobility,
resources, sustainability and information technology.
For the purpose of assessing the independence of its
members, the Supervisory Board follows the recom-
mendations of the German Corporate Governance
Code. In the opinion of the Supervisory Board, the
fact that a member has a substantial shareholding
in the Company, or holds office as an employee
representative, or was previously a member of the
Board of Management, does not rule out that he or
she is independent. A substantial and not merely
temporary conflict of interests within the meaning
of section 5.4.2. of the German Corporate Governance
Code does not apply to any of the Supervisory Board
members. Employees holding office in the Supervi-
sory Board are protected by law when performing
their duties. All other Supervisory Board members
have a sufficient degree of economic independence
from the Company. Business with entities, in which
the members of the Supervisory Board carry out a
significant function, is conducted on an arm’s length
basis. The Supervisory Board has therefore concluded
that all of its members are independent. At least three
members meet the requirements for being designated
as an independent financial expert. At the end of
the reporting period, the Supervisory Board had six
female members (30 %), comprising three shareholder
representatives and three employee representatives.
The Supervisory Board has 14 male members (70 %),
comprising seven shareholder representatives and
seven employee representatives. The Company there-
fore complies with the statutory gender quota of at
least 30 % female members applicable in Germany
since 1 January 2016. The Supervisory Board does not
currently have any members more than 70 years old.
DISCLOSURES PURSUANT
TO THE ACT ON EQUAL
GENDER PARTICIPATION –
TARGETS FOR THE PROPOR-
TION OF WOMEN ON THE
BOARD OF MANAGEMENT
AND AT EXECUTIVE MAN-
AGEMENT LEVELS I AND II
The Act on Equal Participation of Women and Men
in Executive Positions in the Private and the Public
Sector (“Act on Equal Gender Participation”) was
passed into German law in 2015.
In accordance with this legislation, the Supervisory
Board of BMW AG is required to set a target for the
proportion of women on its Board of Management
and a time frame for meeting this target. Likewise, the
Board of Management of BMW AG is required to estab-
lish targets and a time frame for attaining these targets
with respect to the two executive management levels
below the Board of Management. As its target for the
Board of Management through to 31 December 2016,
the Supervisory Board had stipulated that the Board
of Management should continue to have at least one
female member. This target was achieved: the Board
of Management has one female member (12.5 %).
As its target for the proportion of women on the Board
of Management for the time frame from 1 January 2017
to 31 December 2020, the Supervisory Board has stip-
ulated that the Board of Management should continue
to have at least one female member. Assuming that
the Board of Management continues to comprise eight
members, this would correspond to a proportion of
at least 12.5 %. The Supervisory Board considers it
desirable to increase the proportion of women on the
Board of Management and fully supports the Board of
Management’s endeavours to increase the proportion
of women at the highest executive management levels
within the BMW Group.
For the first target attainment time frame up to
31 December 2016, target ranges of 10 to 12 % and 6 to
8 % respectively were set by the Board of Management
for the proportion of women to be represented in the
first and second levels of executive management. On
31 December 2016, the proportion of women within
the first and second executive management levels
Statement on Corporate Governance 205
INFORMATION ON
COR PORATE GOVERNANCE
PRACTICES APPLIED
BEYOND MANDATORY
REQUIREMENTS
Core values
Within the BMW Group, the Board of Management,
the Supervisory Board and the employees base their
actions on five core values which are the cornerstone
of the success of the BMW Group:
Responsibility
We take consistent decisions and commit to them
personally. This allows us to work freely and more
effectively.
Appreciation
We reflect on our actions, respect each other, offer
clear feedback and celebrate success.
transparency
We acknowledge concerns and identify inconsisten-
cies in a constructive way. We act with integrity.
trust
We trust and rely on each other. This is essential if we
are to act swiftly and achieve our goals.
openness
We are excited by change and open to new opportu-
nities. We learn from our mistakes.
stood at 10.2 % and 6.3 % respectively. The targets were
therefore achieved within the stipulated time frame.
For the next target attainment time frame, which has
been selected to run to 31 December 2020, the Board
of Management has set target ranges of 10.2 – 12 % for
the first level of executive management and 8 – 10 %
for the second.
Top management within the BMW Group is structured
in terms of functions, following a consistent job eval-
uation system based on Mercer.
proportion of female executives within
management / function levels I and II
at bmW AG
65
in %
12
6
0
10.2
6.3
Function level I
Function level II
Diversity contributes to greater competitiveness
and innovation at BMW Group. Working together
in mixed, complementary teams raises performance
levels and helps sharpen the focus on the customer.
The requirement of an appropriate gender balance is
seen as an essential component of the BMW Group’s
diversity concept. Further increase in the proportion
of women therefore remains an objective of the Board
of Management.
During 2016, the proportion of women in both the
workforce as a whole and in management positions
increased, reflecting the positive impact of long-term
measures, dialogue and information events. Further
information on the topic of diversity within the
BMW Group can be found in the section “Workforce”.
Further information on social responsibility towards
employees can be found in the section “Workforce”.
Sustainable business management can only be
effective, however, if it covers the entire value-added
chain. That is why the BMW Group not only sets high
standards for itself, but also expects its suppliers and
partners to meet the ecological and social standards it
sets and strives continually to improve the efficiency
of processes, measures and activities. For instance,
we consistently require our dealers and importers
to comply with ecological and social standards on a
contractual basis. Moreover, corresponding criteria
are embedded throughout the entire purchasing
system – including in enquiries to suppliers, in the
sector-wide OEM Sustainability Questionnaire, in our
purchasing terms and in our evaluation of suppli-
ers – in order to promote sustainability aspects in
line with the BMW Group Sustainability Standard.
The BMW Group expects suppliers to ensure that the
BMW Group’s sustainability criteria are also adhered
to by their sub-suppliers. Purchasing terms and con-
ditions and other information relating to purchasing
can be found in the publicly available section of the
BMW Group Partner Portal at
https: / / b2b.bmw.com.
We also work in close partnership with our suppliers
and promote their commitment to sustainability.
206
Information on Cor-
porate Governance
Practices applied
Beyond Mandatory
Requirements
Compliance in the
BMW Group
www.oecd.org and
Social responsibility towards employees and
along the supplier chain
The BMW Group stands by its social responsibilities.
Our corporate culture combines the drive for success
with openness, trust and transparency. We are well
aware of our responsibility towards society. Socially
sustainable human resource policies and compliance
with social standards are based on various interna-
tionally recognised guidelines. The BMW Group is
committed to the OECD’s guidelines for multinational
companies and the contents of the ICC Business
Charter for Sustainable Development. Details of the
contents of these guidelines and other relevant infor-
mation can be found at
www.iccwbo.org.
The Board of Management signed the United Nations
Global Compact in 2001 and, in 2005, together with
employee representatives, issued a “Joint Declaration
on Human Rights and Working Conditions in the
BMW Group”. This Joint Declaration was reconfirmed
in 2010. With the signature of these documents, we
have given our commitment to abide worldwide by
internationally recognised human rights and with the
fundamental working standards of the International
Labour Organization (ILO). These include in particular
freedom of employment, the principle of non-dis-
crimination, freedom of association and the right to
collective bargaining, the prohibition of child labour,
appropriate remuneration, regulated working times
and compliance with work and safety regulations.
The complete text of the UN Global Compact and
the recommendations of the ILO and other relevant
information can be found at
www.unglobalcompact.org and
www.ilo.org. The Joint Declaration on Human Rights
and Working Conditions in the BMW Group can
be found at
www.bmwgroup.com under the menu items
“Downloads” and “Responsibility”.
For the BMW Group, worldwide compliance of these
fundamental principles and rights is self-evident.
Since 2005 employees’ awareness of this issue has
therefore been raised by means of regular internal
communications and training on recent developments
in this area. The “Compliance Contact” helpline
and the BMW Group SpeakUP Line are available to
employees wishing to raise queries or complaints
relating to human rights issues. With effect from 2016,
human rights have been incorporated as an integral
component of the BMW Group’s worldwide Compli-
ance Management System, representing a further step
in the systematic implementation of the UN Guiding
Principles on Business and Human Rights.
Statement on Corporate Governance COMPLIANCE IN THE
BMW GROUP
Responsible and lawful conduct is fundamental to the
success of the BMW Group. It is an integral part of
our corporate culture and the reason why customers,
shareholders, business partners and the general public
place their trust in us. The Board of Management and
the employees of the BMW Group are obliged to act
responsibly and in compliance with applicable laws
and regulations.
This principle has been embedded in BMW Group’s
internal rules of conduct for many years. In order to
protect itself systematically against compliance-relat-
ed and reputational risks, the Board of Management
created a Compliance Committee several years ago,
mandated to establish a worldwide Compliance
Management System throughout the BMW Group.
The BMW Group Compliance Committee comprises
the heads of the following departments: Legal Affairs,
Corporate and Governmental Affairs, Corporate Audit,
Group Reporting, Organisational Development and
Corporate Human Resources. It manages and moni-
tors activities necessary to avoid non-compliance with
the law. These activities include training, information
and communication measures, compliance controls
and following up cases of non-compliance.
207
The BMW Group Compliance Committee reports
regularly to the Board of Management on all compli-
ance-related issues, including the progress made in
refining the BMW Group Compliance Management
System, details of investigations performed, known
infringements of the law, sanctions imposed and
corrective / preventative measures implemented. This
ensures that the Board of Management is immediately
notified of any cases of particular significance.
BMW Group compliance Management System
66
Supervisory Board BMW AG
board of management bmW AG
bmW Group Compliance Committee
bmW Group Compliance Committee
office
company-wide compliance
network
Annual
Report
Annual
Report
Annual
Compliance
Reporting
Compliance Instruments and
measures of the bmW Group
Compliance
Risk Analysis
Compliance
Investigations
and Controls
Compliance
Reporting
Compliance
Contact and
SpeakUP Line
Legal Compliance Code
and Regulations
Compliance
Communication
Compliance
Training
Compliance
Governance and
Processes
The decisions taken by the BMW Group Compliance
Committee are drafted in concept, and implement-
ed operationally, by the BMW Group Compliance
Committee Office. The BMW Group Compliance
Committee Office comprises 13 employees and is
allocated in organisational terms to the Chairman of
the Board of Management.
208
Compliance in the
BMW Group
The Chairman of the BMW Group Compliance Com-
mittee keeps the Audit Committee (which is part of the
Supervisory Board) informed on the current status of
compliance activities within the BMW Group, both on
a regular and a case-by-case basis as the need arises.
The Board of Management keeps track of and analyses
compliance-related developments and trends on the
basis of the Group’s compliance reporting and input
from the BMW Group Compliance Committee. Meas-
ures to improve the Compliance Management System
are initiated on the basis of identified requirements.
In 2016, to strengthen local compliance manage-
ment, local compliance functions were established
at 69 BMW Group affiliated companies. Their activi-
ties follow a standardised management process with
clearly defined tasks and responsibilities.
A coordinated set of instruments and measures is
employed to ensure that the BMW Group, its repre-
sentative bodies, its managers and staff act in a lawful
manner. Particular emphasis is placed on compliance
with antitrust legislation and the avoidance of corrup-
tion risks. Compliance measures are supplemented
by a whole range of internal policies, guidelines and
instructions, which in part reflect applicable legisla-
tion. The BMW Group Policy “Corruption Prevention”
and the BMW Group Instruction “Corporate Hospi-
tality and Gifts” deserve particular mention: these
documents deal with lawful handling of gifts and
benefits and define appropriate assessment criteria
and approval procedures for specified actions. In 2016
a new BMW Group Policy “Antitrust Compliance”,
was introduced in 2016 to establish binding rules of
conduct for all employees across the BMW Group to
prevent unlawful restriction of competition.
Compliance measures are determined and priori-
tised on the basis of a group-wide compliance risk
assessment covering all 340 organisational units and
functions worldwide within the BMW Group. The
assessment of compliance risks is updated annually.
Measures are realised with the aid of a regionally
structured compliance management team covering
all parts of the BMW Group, which oversees a network
of more than 210 Compliance Responsibles.
The various elements of the BMW Group Compliance
Management System are shown in the diagram on the
previous page and are applicable for all BMW Group
organisational units worldwide. To the extent that
additional compliance requirements apply to indi-
vidual countries or specific lines of business, these
are covered by supplementary compliance measures.
The BMW Group Legal Compliance Code is the corner-
stone of the Group’s Compliance Management System,
spelling out the Board of Management’s commitment
to compliance as a joint responsibility (“tone from
the top”). This document, which was revised and
expanded in 2016, explains the significance of legal
compliance and provides an overview of the various
areas relevant for the BMW Group. It is available both
as a printed brochure and for download in German
and English. In addition, translations into nine other
languages are available in the BMW Group intranet.
Managers in particular bear a high degree of respon-
sibility and must set a good example with regard to
preventing infringements. Managers throughout the
BMW Group acknowledge this principle by signing
a written declaration, in which they also undertake
to inform staff working for them of the content and
significance of the Legal Compliance Code and make
them aware of legal risks. Managers must, at regular
intervals and on their own initiative, verify compliance
with the law and communicate regularly with staff on
this issue. Any indication of non-compliance with the
law must be rigorously investigated.
More than 32,500 managers and staff worldwide have
received training in essential compliance matters
since the introduction of the BMW Group Compli-
ance Management System. The training material is
available on an Internet-based training platform in
German and English and includes a final test. Suc-
cessful completion of the training programme, which
is documented by a certificate, is mandatory for all
BMW Group managers. Appropriate processes are in
place to ensure that all newly recruited managers and
promoted staff undergo compliance training. In this
way, the BMW Group ensures full training coverage
for its managers in compliance matters.
In addition to this basic training, more in-depth
training is also provided to certain groups of staff on
specific compliance issues. Since 2013, employees
have been trained related to an extended Antitrust
law training, targeting employees who come into con-
tact with antitrust-related issues as a result of their
functions within sales and marketing, purchasing,
production or development. Around 16,900 employees
have already completed this training. The relevant
divisions also implemented and stepped up further
antitrust compliance measures and processes in 2016
to make employees who participate in meetings with
competitors or work with suppliers or sales partners
sufficiently aware of antitrust risks.
Statement on Corporate Governance Additional compliance coaching has also been imple-
mented for international sales and financial service
locations in local markets. These multi-day classroom
seminars strengthen the understanding of compliance
in selected organisational units and enhance cooper-
ation between the central BMW Group Compliance
Committee Office and decentralised compliance
offices. In 2016, market coaching was conducted in
Italy, Belgium, Austria, China and Japan.
In order to avoid legal risks, all members of staff are
expected to discuss compliance matters with their
managers and with the relevant departments within
the BMW Group, in particular Legal Affairs, Corporate
Audit and Corporate Security. The BMW Group Com-
pliance Contact serves as a further point of contact for
both employees and non-employees for any questions
regarding compliance.
Employees also have the opportunity to submit infor-
mation – anonymously and confidentially – via the
BMW Group SpeakUP Line about possible breaches
of the law within the company. The BMW Group
SpeakUP Line is available in a total of 34 languages
and can be reached via local toll-free numbers in
all countries in which BMW Group employees are
engaged in activities.
Compliance-related queries and concerns are
documented and followed up by the BMW Group
Compliance Committee Office using an electronic
Case Management System. If necessary, Corporate
Audit, Corporate Security, the Works Council and
legal departments may be called upon to assist in the
investigation process.
Through the group-wide reporting system, Com-
pliance Responsibles throughout the BMW Group
report on compliance-relevant issues to the Compli-
ance Committee on a regular basis, and, if necessary,
on an ad hoc basis. This includes reporting on the
compliance status of the relevant organisational units,
on identified legal risks and incidences of non-com-
pliance, as well as on corrective or preventative
measures implemented.
Compliance with and implementation of the Legal
Compliance Code are audited regularly by Corporate
Audit and subjected to control checks by Corporate
Security and the BMW Group Compliance Committee
Office. As part of its regular activities, Corporate Audit
carries out on-site audits. The BMW Group Compli-
ance Committee also engages Corporate Audit to
perform compliance-specific checks. In addition, three
BMW Group Compliance Spot Checks, sample tests
specifically designed to identify potential corruption
risks, were carried out in 2016. Compliance control
activities are coordinated by the BMW Group Panel
209
Compliance Controls. Any necessary follow-up meas-
ures are organised by the BMW Group Compliance
Committee Office.
It is essential that employees are aware of and comply
with applicable legal regulations. The BMW Group
does not tolerate violations of the law by its employees.
Culpable violations of the law result in employment-
contract sanctions and may involve personal liability
consequences for the employee involved.
To avoid this, BMW Group employees are kept fully
up-to-date with the instruments and measures used
by the Compliance Management System via various
internal channels. As of 2014, all new staff receive
a welcome email underscoring the BMW Group’s
special commitment to compliance when they join
the company. The central means of communication
is the Compliance website within the BMW Group’s
intranet, where employees can find compliance-
related information and access training materials
in both German and English. The website contains a
special service area where various practical tools are
made available to employees to help them deal with
typical compliance-related matters. Since mid-2015,
BMW Group employees have also had access to an
IT system, which helps them verify legal admissibility
and approve and document benefits, especially in
connection with corporate hospitality.
In the same way that the BMW Group is committed
to lawful and responsible conduct, it expects no less
from its business partners. In 2012, the BMW Group
developed a new Business Relations Compliance pro-
gramme aimed at ensuring the reliability of its business
relations. Relevant business partners are checked and
evaluated with a view to identifying potential compli-
ance risks. These procedures are particularly relevant
for relations with sales partners and service providers,
such as agencies and consultants. Depending on the
results of the evaluation, appropriate measures – such
as communication measures, training and possible
monitoring – are implemented to manage compliance
risks. The Business Relations Compliance programme
has already been introduced in 37 organisational units
since its launch and, over the coming years, will be
rolled out successively throughout the BMW Group’s
worldwide sales organisation. In 2016, the company
also continued integrating compliance clauses to pro-
tect contractual relationships into dealer and importer
contracts. An IT system to verify customer integrity
was developed and introduced in 20 markets under
expanded anti-money-laundering measures.
210
Compliance in the
BMW Group
The BMW Group is committed to respecting inter-
nationally recognised human rights, in particular
the UN Guiding Principles on Business and Human
Rights, the ten principles of the UN Global Compact
and the ILO Core Labour Conventions. The company
focuses on topics and areas of activity where it can
leverage its influence as a commercial enterprise.
The BMW Group underlined its position back in 2005
with the Joint Declaration on Human Rights and
Working Conditions at the BMW Group. This was
followed by systematic introduction and upgrading of
measures to protect human rights. Henceforth, these
already established measures were integrated into the
BMW Group’s group-wide Compliance Management
System in 2016.
Compliance is also an important factor in safeguarding
the future of the BMW Group workforce. With this
in mind, the Board of Management and the national
and international employee representative bodies
of the BMW Group have agreed on a binding set of
Joint Principles for Lawful Conduct. In doing so, all
parties involved made a commitment to the principles
contained in the BMW Group Legal Compliance Code
and to trustful cooperation in all matters relating to
compliance. Employee representatives are therefore
regularly involved in the process of refining compli-
ance measures within the BMW Group.
In the interest of investor protection and to ensure
that the BMW Group complies with regulations
relating to potential insider information, the Board of
Management appointed an Ad-hoc Committee back in
1994, consisting of representatives of various specialist
departments, whose members examine the relevance
of issues for ad-hoc disclosure purposes. All persons
working on behalf of the company who have access
to insider information in accordance with existing
rules have been, and continue to be, included in a
corresponding, regularly updated list and informed
of the duties arising from insider rules.
Reportable securities transactions
(“Managers’ transactions”)
Pursuant to Article 19 of the EU Market Abuse Regu-
lation (MAR), members of the Board of Management
and the Supervisory Board and any persons closely
related to those members are required to give notice
to BMW AG and the Federal Agency for the Super-
vision of Financial Services (BaFin) of transactions
with equity or debt instruments of BMW AG or with
related derivatives or other financial instruments, if
the total sum of such transactions reaches or exceeds
an amount of € 5,000 during any given calendar year.
BMW AG publishes such information without delay
and communicates it to the Companies Register
for archiving. Notice of publication is issued to the
Federal Agency for the Supervision of Financial Ser-
vices. Securities transactions notified to BMW AG
during the financial year 2016 are also reported on
the Company’s website.
Shareholdings of members of the Board of
Management and the Supervisory Board
The members of the Supervisory Board of BMW AG
hold in total 27.99 % of the Company’s shares of com-
mon and preferred stock (2015: 43.00 %), of which
16.25 % (2015: 31.26 %) relates to Stefan Quandt,
Germany, and 11.73 % (2015: 26.74 %) to Susanne
Klatten, Germany. The change from the previous
year is almost entirely due to shares held by Johanna
Quandt GmbH & Co. KG für Automobilwerte no
longer being attributed to Stefan Quandt and Susanne
Klatten following the dissolution of the community of
heirs. The shareholdings of the members of the Board
of Management total less than 1 % of all issued shares.
Statement on Corporate Governance 211
Under the terms of the Employee Share Programme,
in 2016 employees were entitled to acquire packages
of between four and eleven shares of non-voting pre-
ferred stock with a discount of € 22.72 (2015: € 20.83)
per share compared to the market price (average
closing price in Xetra trading during the period from
4 to 9 November 2016: € 66.86). All employees of
BMW AG and its (directly or indirectly) wholly owned
German subsidiaries (if agreed to by the directors
of those entities) were entitled to participate in the
programme. Employees were required to have been
in an uninterrupted employment relationship with
BMW AG or the relevant subsidiary for at least one
year at the date on which the allocation for the year
was announced. Shares of preferred stock acquired
in conjunction with the Employee Share Programme
are subject to a blocking period of four years, starting
from 1 January of the year in which the employees
acquired the shares. A total of 305,029 (2015: 309,944)
shares of preferred stock were acquired by employees
under the programme in 2016; 305,000 (2015: 309,860)
of these shares were drawn from Authorised Capital
2014, the remainder were bought back via the stock
exchange. Every year the Board of Management of
BMW AG decides whether the scheme is to be con-
tinued. Further information is provided in
notes 29
and 39 to the Group Financial Statements.
see
note 39
see
notes
29 and 39
Share-based compensation programmes for
employees and members of the Board of
Management
Three share-based remuneration schemes were
in place at BMW AG during the year under report,
namely the Employee Share Programme (under which
entitled employees of BMW AG have been able to
participate in the enterprise’s success since 1989 in
the form of non-voting shares of preferred stock), a
share-based remuneration programme for Board of
Management members, and a share-based remuner-
ation programme for senior heads of department
(relating in both cases to shares of common stock).
The share-based remuneration programme for Board
of Management members is described in detail in
the Compensation Report (see also the “Share-based
remuneration” section in the Compensation Report
and
note 39 to the Group Financial Statements).
The share-based remuneration programme for qual-
ifying heads of department, introduced with effect
for financial years beginning after 1 January 2012, is
closely based on the programme for Board of Manage-
ment members and is aimed at rewarding a long-term,
entrepreneurial approach to running the business on
a sustainable basis.
Under the terms of the programme, participants give
a commitment to invest an amount equivalent to 20 %
of their performance-based bonus in BMW common
stock and to hold the shares so acquired for a min-
imum of four years. In return for this commitment,
BMW AG pays 100 % of the investment amount as a net
subsidy. Once the four-year holding period require-
ment has been fulfilled, the participants receive – for
each three common stock shares held and at the
Company’s option – one further share of common
stock or the equivalent amount in cash.
212
Compensation
Report
COMPENSATION REPORT
The following section describes the principles govern-
ing the compensation of the Board of Management
and the stipulations set out in the statutes relating
to the compensation of the Supervisory Board. In
addition to explaining the compensation system, the
components of compensation are also disclosed in
absolute figures. Furthermore, the compensation
of each member of the Board of Management and
the Supervisory Board for the financial year 2016 is
disclosed per individual member and analysed in its
component parts.
1. board of management compensation
responsibilities
The full Supervisory Board is responsible for deter-
mining and regularly reviewing Board of Management
compensation. The necessary preparation for these
tasks is undertaken by the Supervisory Board’s Per-
sonnel Committee.
principles of compensation
The compensation system for the Board of Man-
agement at BMW AG is designed to encourage a
management approach focused on the sustainable
development of the BMW Group. One further prin-
ciple applied when designing remuneration systems
at BMW is that of consistency at different levels. This
means that compensation systems for the Board of
Management, senior management and employees
of BMW AG are composed of similar elements. The
Supervisory Board carries out regular checks to ensure
that all Board of Management compensation compo-
nents are appropriate, both individually and in total,
and do not encourage the Board of Management to
take inappropriate risks on behalf of the BMW Group.
At the same time, the compensation model used for
the Board of Management needs to be sufficiently
attractive for highly qualified executives in a compet-
itive environment.
The compensation of members of the Board of Man-
agement is determined by the full Supervisory Board
on the basis of performance criteria and after taking
into account any remuneration received from Group
companies. The principal performance criteria are the
nature of the tasks allocated to each member of the
Board of Management, the economic situation and the
performance and future prospects of the BMW Group.
The Supervisory Board sets ambitious and relevant
parameters as the basis for variable compensation.
It also ensures that variable components based on
multi-year assessment criteria take account of both
positive and negative developments and that the pack-
age as a whole encourages a long-term approach to
business performance. Targets and other parameters
may not be changed retrospectively. The Supervisory
Board reviews the appropriateness of the compensa-
tion system annually. In preparation, the Personnel
Committee also consults remuneration studies. The
Supervisory Board reviews the appropriateness of the
compensation system in horizontal terms by compar-
ing compensation paid by other DAX companies and
in vertical terms by comparing board compensation
with the salaries of executive managers and with the
average salaries of employees of BMW AG based in
Germany, in both cases with regard to their various
levels and to changes over time. Recommendations
made by an independent external remuneration
expert and suggestions made by investors and analysts
are also considered in the consultative process.
compensation system, compensation components
The compensation of the Board of Management com-
prises both fixed and variable remuneration as well as
a share-based component. Retirement and surviving
dependants’ benefit entitlements are also in place.
fixed remuneration
Fixed remuneration consists of a base salary (paid
monthly) and other remuneration elements, which
comprise mainly the use of company and leased cars
as well as the payment of insurance premiums, con-
tributions towards security systems and an annual
medical check-up. Members of the Board of Manage-
ment are also entitled to purchase vehicles and other
services of the BMW Group at conditions that also
apply in each relevant case for employees.
The basic remuneration of members of the Board of
Management was unchanged from the previous year,
namely € 0.75 million p. a. for a board member during
the first term of office, € 0.9 million p. a. for a board
member from the second term of office or fourth
year of office onwards and € 1.5 million p. a. for the
Chairman of the Board of Management.
Variable remuneration
The variable remuneration of Board of Management
members comprises variable cash remuneration on
the one hand and a share-based remuneration com-
ponent on the other.
Variable cash remuneration, in particular bonuses
Variable cash remuneration consists of a cash bonus
and share-based remuneration component equiva-
lent to 20 % of a board member’s total bonus after
taxes, which the board member is required to invest
in BMW AG common stock. Taxes and social insur-
ance relating to the share-based remuneration are
also borne by the Company. In justified cases, the
Statement on Corporate Governance 213
Supervisory Board also has the option of paying an
additional special bonus.
The bonus comprises two components, each equally
weighted, namely a corporate earnings-related bonus
and a personal performance-related bonus. The target
bonus (100 %) for a Board of Management member,
for both components of variable compensation, totals
€ 1.5 million p. a., rising to € 1.75 million p. a. from the
second term or fourth year of office onwards. The
equivalent figure for the Chairman of the Board of
Management is € 3 million p. a. The bonus figure is
capped for all Board of Management members at 200 %
of the relevant target bonus.
The corporate earnings-related bonus is based on the
BMW Group’s net profit and post-tax return on sales
(which are combined in a single earnings factor) and
the level of the dividend (common stock). The corpo-
rate earnings-related bonus is derived by multiplying
the target amount fixed for each member of the Board
of Management by the earnings factor and by the
dividend factor. In exceptional circumstances, for
instance when there have been major acquisitions or
disposals, the Supervisory Board may adjust the level
of the corporate earnings-related bonus.
An earnings and dividend factor of 1.00 would give
rise to an earnings-based bonus of € 0.75 million for
the financial year 2016 for a member of the Board
of Management during the first period of office and
one of € 0.875 million during the second term of
appointment or from the fourth year in office. The
equivalent bonus for the Chairman of the Board of
Management is € 1.5 million. The earnings factor is
1.00 in the event of a Group net profit of € 3.1 billion
and a post-tax return on sales of 5.6 %. The dividend
factor is 1.00 in the event that the dividend paid on
the shares of common stock is between 101 and 110
cents. If the Group net profit were below € 2 billion,
or if the post-tax return on sales were less than 2 %,
the earnings factor for the financial year 2016 would
be zero. In this case, no corporate earnings-related
bonus would be paid.
The personal performance-related bonus is derived by
multiplying the target amount set for each member
of the Board of Management by a performance factor.
The Supervisory Board sets the performance factor
on the basis of its assessment of the contribution
of the relevant Board of Management member to
sustainable and long-term oriented business devel-
opment. In setting the factor, equal consideration is
given to personal performance and decisions taken
in previous planning periods, key decisions affecting
the future development of the business and the effec-
tiveness of measures taken in response to changing
external conditions as well as other activities aimed
at safeguarding the future viability of the business
to the extent not included directly in the basis of
measurement. Performance factor criteria include
innovation (economic and ecological, e. g. reduction
of carbon emissions), customer focus, ability to adapt,
leadership accomplishments, shaping corporate cul-
ture and promoting integrity, contributions to the
Company’s attractiveness as an employer, progress
in implementing the diversity concept, and activities
that foster corporate social responsibility. The target
bonus and the key figures used to determine the cor-
porate earnings-related bonus are fixed in advance for
a period of three financial years, during which time
they may not be amended retrospectively.
Share-based remuneration programme
The compensation system includes a share-based
remuneration programme, in which the level of share-
based remuneration is based on the amount of bonus
paid. The system is aimed at creating further long-term
incentives to encourage sustainable governance.
This programme envisages a share-based remuner-
ation component equivalent to 20 % of the board
member’s total bonus after taxes, which the board
member is required to invest in BMW AG common
stock. Taxes and social insurance relating to the share-
based remuneration component are borne by the
Company. As a general rule, the shares must be held
for a minimum of four years. As part of a matching
plan, at the end of the holding period the Board of
Management members will normally receive from
the Company either one additional share of common
stock or an equivalent cash amount for three shares
of common stock held, to be decided at the discretion
of the Company (share-based remuneration compo-
nent / matching component). Special rules apply in the
case of death or invalidity of a Board of Management
member or early termination of the contractual rela-
tionship before fulfilment of the holding period.
Retirement and surviving dependants’ benefits
The provision of retirement and surviving depend-
ants’ benefits for Board of Management members
was changed to a defined contribution system with a
guaranteed minimum return with effect from 1 Janu-
ary 2010. However, given the fact that board members
appointed for the first time prior to 1 January 2010 for
the most part had a legal right to receive the benefits
already promised to them, these board members were
given the option to choose between the previous sys-
tem and the new one.
In the event of the termination of mandate, Board
of Management members appointed for the first
time prior to 1 January 2010 are entitled to receive
certain defined benefits in accordance with the rules
of an older (defined benefit) pension plan. Under the
214
Compensation
Report
defined benefit plan, the entitlement to retirement
benefits arises at the earliest on reaching the age of
60 or in case of invalidity. The amount of the pen-
sion comprises a basic monthly amount of € 10,000
plus a fixed amount. The fixed amount is made up
of approximately € 75 for each year of service in the
Company before becoming a member of the Board of
Management plus between € 400 and € 600 for each
overview of compensation system and
compensation components
full year of service on the board (up to a maximum
of 15 years). Pension payments are adjusted based
on the rules applicable for the adjustment of civil
servants’ pensions, i. e. the pensions of members of
the Board of Management are adjusted when the civil
servants remuneration level B6 (excluding allowances)
is increased by more than 5 % or in accordance with
the Company Pension Act.
Component
Parameter / measurement base
BASIc coMpEnSAtIon p. A.
VArIAble CompenSAtIon
Bonus
a) Corporate earnings-related bonus
(corresponds to 50 % of target bonus if target is 100 % achieved)
b) Performance-related bonus
(corresponds to 50 % of target bonus if target is 100 % achieved)
Special bonus payments
Share-based remuneration programme
a) Cash compensation component
b) Share-based remuneration component
(matching component)
other CompenSAtIon
Member of the Board of Management:
— € 0.75 million (first term of appointment)
— € 0.90 million (from second term of appointment onwards or fourth year in office)
Chairman of the Board of Management:
— € 1.50 million
Target bonuses p. a. (if target is 100 % achieved):
— € 1.50 million (first term of appointment)
— € 1.75 million (from second term of appointment onwards or fourth year in office)
— € 3.00 million (Chairman of the Board of Management)
— Quantitative criteria fixed in advance for a period of three financial years
— Formula: 50 % of target bonus x earnings factor x dividend factor (common stock)
— The earnings factor is derived from the Group net profit and the Group post-tax return
on sales
— Primarily qualitative criteria, expressed in terms of a performance factor aimed at
measuring the board members’ contribution to sustainable and long-term performance
and the future viability of the business
— Formula: 50 % of target bonus x performance factor
— Criteria for the performance factor also include: innovation (economic and ecological,
e. g. reduction of CO2 emissions), customer orientation, ability to adapt, leadership
accomplishments, corporate culture and promoting integrity, attractiveness as employer,
progress in implementing the diversity concept and activities that foster corporate social
responsibility
May be paid in justified circumstances on an appropriate basis, contractual basis,
no entitlement
— Requirement for Board of Management members to each invest an amount equivalent to
20 % of their total bonus (after tax) in BMW AG common stock
— Earmarked cash remuneration equivalent to the amount required to be invested in
BMW AG shares, plus taxes and social insurance contributions
— Once the four-year holding period requirement is fulfilled, Board of Management mem-
bers receive for each three common stock shares held either – at the Company’s option –
one further share of common stock or the equivalent amount in cash
Contractual agreement, main points: use of Company cars, insurance premiums,
contributions towards security systems, medical check-up
Statement on Corporate Governance 215
retIrement And SurVIVInG dependAntS’ benefItS
Model
a) Defined benefits
(only applies to board members appointed for the first time before
1 January 2010; based on legal right to receive the benefits already
promised to them, this group of persons is entitled to opt between
(a) and (b)
b) Defined contribution system with guaranteed minimum rate of return
Principal features
Pension of € 120,000 p. a. plus fixed amounts based on length of Company
and board service
Pension based on amounts credited to individual savings accounts for contributions paid
and interest earned, various forms of disbursement
Pension contributions p. a.:
Member of the Board of Management: € 350,000 – € 400,000
Chairman of the Board of Management: € 500,000
remunerAtIon CA pS (mAxImum remunerAtIon)
in € p. a.
Member of the Board of Management
in the first term of appointment
Member of the Board of Management
in the second term of appointment or from fourth year in office
Chairman of the Board of Management
Share-based compensation programme
Cash compen-
sation for share
acquisition
Monetary value
of matching
component
Bonus
Possible
special bonus
Total*
3,000,000
700,000
700,000
1,000,000
4,925,000
3,500,000
6,000,000
800,000
800,000
1,400,000
1,400,000
1,200,000
1,500,000
5,500,000
9,850,000
* Including basic remuneration, other fixed remuneration elements and pension contribution. The overall cap is lower than the sum of the maximum amounts for each of the individual components.
If a mandate is terminated, the new defined contribu-
tion system provides entitlements which can be paid
either (a) in case of death or invalidity as a one-off
amount or in instalments, or (b) upon retirement –
depending on the wish of the ex-board member con-
cerned – in the form of a lifelong monthly pension,
as a one-off amount, in instalments, or in a combined
form (for instance a combination of a one-off payment
and a proportionately reduced lifelong monthly pen-
sion). Former members of the Board of Management
are entitled to receive the retirement benefit at the
earliest upon reaching the age of 60, or in the case
of entitlements awarded after 1 January 2012, upon
reaching the age of 62.
The amount of the benefits to be paid is determined
on the basis of the amount accrued in each board
member’s individual pension savings account. The
amount on this account arises from annual contribu-
tions paid in, plus interest earned depending on the
type of investment.
If a member of the Board of Management with a
vested entitlement dies prior to the commencement
of benefit payments, a surviving spouse or otherwise
surviving children – in the latter case depending on
their age and education – are entitled to receive ben-
efits as surviving dependants. In case of invalidity or
death, the minimum benefit promised is based on
the number of annual contributions possible up to
the age of sixty (up to a maximum of 10). In addition,
following the death of a retired board member who
has elected to receive a lifelong pension, 60 % of that
amount is paid as a lifelong widow’s pension. Pensions
are increased annually by at least 1 %.
Depending on the length of membership in the Board
of Management and previous activities, the annual
contribution to be paid amounts to between € 350,000
and € 400,000 for each member of the Board of Man-
agement and € 500,000 for the Chairman of the Board
of Management. The guaranteed minimum rate of
return p. a. corresponds to the maximum interest rate
used to calculate insurance reserves for life insurance
policies (guaranteed interest on life insurance policies).
When granting pension entitlements, the Supervisory
Board considers the targeted level of pension provision
in each case as well as the resulting expense for the
BMW Group.
Contributions falling due under the defined con-
tribution model are paid into an external fund in
conjunction with a trust model that is also used to
fund pension obligations to employees.
Income earned on an employed or a self-employed
basis up to the age of 63 may be offset against pension
entitlements. In addition, certain circumstances have
216
Compensation
Report
been specified, in the event of which the Company no
longer has any obligation to pay benefits. Transitional
payments are no longer provided.
contractual period. The Company will make a final
pension contribution of € 0.167 million on behalf of
Dr Eichiner for the financial year 2017.
Board of Management members who retire immedi-
ately after their service on the board and who draw a
retirement pension are entitled to purchase vehicles
and BMW Group services at conditions that also apply
for Company pensioners and to lease BMW Group
vehicles in accordance with the guidelines applicable
to senior heads of departments. Retired Chairmen
of the Board of Management are entitled to use a
BMW Group vehicle as a company car on a similar
basis to senior heads of departments, and depend-
ing on availability and against payment, use BMW
chauffeur services.
termination benefits on premature termination of
board activities, benefits paid by third parties
In conjunction with the consensual early termina-
tion of Dr Eichiner’s Board of Management mandate
with effect from the expiry of 31 December 2016, the
Company also reached an agreement with Dr Eichiner
concerning an amendment to his service contract,
which ends on 31 May 2017. For the period from
the termination of his board mandate through to
31 May 2017, he continues to receive fixed compen-
sation of € 0.38 million. A payment of € 0.75 million,
payable in 2017, was agreed to settle all other com-
pensation entitlements for the remainder of the
No commitments or agreements exist to pay com-
pensation for early termination of a board member’s
mandate in the event of a change of control or a take-
over offer. No members of the Board of Management
received any payments or benefits from third parties
in 2016 on account of their activities as members of
the Board of Management.
remuneration caps
The Supervisory Board has stipulated caps for variable
remuneration components and for the remuneration
of Board of Management members in total. The caps
are shown in the table “Overview of compensation
system and compensation components”.
total compensation of the board of management for
the financial year 2016 (2015)
The total compensation of the current members
of the Board of Management of BMW AG for the
financial year 2016 amounted to € 37.6 million (2015:
€ 35.5 million), of which € 7.8 million (2015: € 7.7 mil-
lion) relates to fixed components (including other
remuneration). Variable components amounted to
€ 29.0 million (2015: € 27.1 million) and the share-
based remuneration component to € 0.8 million (2015:
€ 0.7 million).
2016
2015
in € million
Amount
Proportion in %
Amount
Proportion in %
Fixed compensation
Variable cash compensation
Share-based compensation component*
Total compensation
7.8
29.0
0.8
37.6
20.8
77.1
2.1
100.0
7.7
27.1
0.7
35.5
21.7
76.3
2.0
100.0
* Matching component; provisional number or provisional monetary value calculated at grant date (date on which the entitlement became binding in law). The final number of matching shares is determined in
each case when the requirement to invest in BMW AG common stock has been fulfilled.
Statement on Corporate Governance 217
Compensation of the individual members
of the board of management for the
financial year 2016 (2015)
Fixed compensation
Variable cash
compensation
Share-based
compensation component
(matching component) 1
Compensation
Total
Total value of
benefits
allocated in
financial year 2
in € or
number of matching shares
Basic
compensation
Other
compensation
Total
Number Monetary value
Harald Krüger
1,500,000
18,719
1,518,719
5,947,178
1,752
161,622
7,627,519
7,545,122
(1,280,645)
(21,809)
(1,302,454)
(4,786,438)
(1,478)
(130,079)
(6,218,971)
(6,088,892)
Milagros Caiña Carreiro-Andree
900,000
74,461
974,461
3,469,214
1,097
101,198
4,544,873
4,443,675
(825,000)
(74,717)
(899,717)
(3,058,588)
(1,014)
(89,242)
(4,047,547)
(3,958,305)
Klaus Draeger 3
675,000
29,440
704,440
2,601,910
823
75,922
3,382,272
3,404,174
(900,000)
(24,797)
(924,797)
(3,293,863)
(1,092)
(96,107)
(4,314,767)
(4,218,660)
Markus Duesmann 4
187,500
13,929
201,429
743,403
(–)
(–)
(–)
(–)
288
(–)
21,629
966,461
944,832
(–)
(–)
(–)
Friedrich Eichiner 5
900,000
25,413
925,413
3,469,214
1,097
101,198
4,495,825
4,492,451
(900,000)
(23,982)
(923,982)
(3,293,863)
(1,092)
(96,107)
(4,313,952)
(4,217,845)
Klaus Fröhlich
750,000
57,311
807,311
2,973,589
(750,000)
(71,792)
(821,792)
(2,823,290)
876
(871)
80,811
3,861,711
3,780,900
(76,657)
(3,721,739)
(3,645,082)
Ian Robertson
900,000
18,735
918,735
3,469,214
1,097
101,198
4,489,147
4,483,005
(900,000)
(14,501)
(914,501)
(3,293,863)
(1,092)
(96,107)
(4,304,471)
(4,208,364)
Peter Schwarzenbauer
862,500
32,689
895,189
3,345,313
(750,000)
(31,101)
(781,101)
(2,823,311)
Oliver Zipse
750,000
114,694
864,694
2,973,589
(475,806)
(44,089)
(519,895)
(1,791,119)
1,058
( 936)
876
(457)
97,601
4,338,103
4,240,502
(82,377)
(3,686,789)
(3,604,412)
80,811
3,919,094
3,838,283
(48,602)
(2,359,616)
(2,311,014)
Total 6
7,425,000
385,391
7,810,391
28,992,624
8,964
821,990
37,625,005
37,172,944
(7,333,870)
(318,440)
(7,652,310)
(27,105,316)
(8,032)
(715,278)
(35,472,904)
(34,757,626)
1 Provisional number or provisional monetary value calculated at grant date (date on which the entitlement became binding in law). The final number of matching shares is determined in each case when the
requirement to invest in BMW AG common stock has been fulfilled. See note 39 to the Group Financial Statements for a description of the accounting treatment of the share-based compensation component.
2 Value of benefits granted for work performed on the Board of Management during the financial year 2016 plus the amount falling due for payment in conjunction with a share-based remuneration component
granted in a previous year and for which the holding period requirements were met.
3 Member of the Board of Management until 30 September 2016.
4 Member of the Board of Management since 1 October 2016.
5 Member of the Board of Management until 31 December 2016.
6 Disclosures for the previous year include amounts relating to a member of the Board of Management who left office during the financial year 2015.
In addition, an expense of € 2.8 million (2015: € 2.6 mil-
lion) was recognised in the financial year 2016 for
current members of the Board of Management for
the period after the end of their service relationship,
which relates to the expense for allocations to pension
provisions.
Total benefits paid to former members of the Board of
Management and their surviving dependants for the
financial year 2016 amounted to € 6.5 million (2015:
€ 8.0 million).
Pension obligations to former members of the Board of
Management and their surviving dependants are cov-
ered by pension provisions amounting to € 86.4 million
(2015: € 71.8 million), recognised in accordance with
IAS 19.
218
Compensation
Report
Share-based component of the individual members
of the board of management for the
financial year 2016 (2015)
in €
Harald Krüger
Milagros Caiña Carreiro-Andree
Klaus Draeger 2
Markus Duesmann 3
Friedrich Eichiner 4
Klaus Fröhlich
Ian Robertson
Peter Schwarzenbauer
Oliver Zipse
Total 5
Expense in 2016
in accordance with
HGB and IFRS
Provision at
31.12. 2016 in
accordance with
HGB and IFRS1
279,932
(166,581)
15,276
(109,760)
102,338
(90,275)
2,130
(–)
127,176
(133,415)
76,878
(34,245)
68,865
(224,354)
95,615
(59,311)
61,370
(9,915)
557,844
(369,498)
284,247
(268,970)
465,494
(497,690)
2,130
(–)
489,900
(497,259)
111,253
(34,375)
435,753
(491,185)
196,362
(100,747)
71,285
(9,915)
829,579
2,614,266
(1,106,057)
(2,959,655)
1 Provisional number or provisional monetary value calculated on the basis of the closing price of BMW common stock in the Xetra trading system on 30 December 2016 (88.75 €)
(fair value at reporting date).
2 Member of the Board of Management until 30 September 2016.
3 Member of the Board of Management since 1 October 2016.
4 Member of the Board of Management until 31 December 2016.
5 Disclosures for the previous year include amounts relating to a member of the Board of Management who left office during the financial year 2015.
Statement on Corporate Governance pension entitlements
in €
Harald Krüger
Milagros Caiña Carreiro-Andree
Markus Duesmann 1
Friedrich Eichiner 2
Klaus Fröhlich
Ian Robertson
Peter Schwarzenbauer
Oliver Zipse
Total 3
Klaus Draeger 4
219
Service cost in
accordance with
IFRS for the
financial year 20165
Service cost in
accordance with
HGB for the
financial year 20165
Present value of
pension obliga-
tions (defined
benefit plans),
in accordance
with IFRS6
Present value of
pension obliga-
tions (defined
benefit plans),
in accordance
with HGB6
507,444
(175,287)
510,811
4,764,941
4,763,838
(358,331)
(3,993,819)
(3,992,702)
358,490
360,785
1,879,851
1,879,263
(360,767)
(364,656)
(1,427,599)
(1,427,072)
87,500
(–)
189,754
(201,018)
354,365
(350,000)
424,411
(448,139)
87,500
622,236
620,307
(–)
(–)
(–)
407,706
6,856,658
5,622,284
(408,960)
(5,465,539)
(5,163,692)
356,743
1,935,142
1,935,142
(350,000)
(1,510,725)
(1,510,706)
408,564
4,469,471
3,502,860
(411,555)
(3,279,690)
(2,968,379)
357,203
359,548
1,481,134
1,480,940
(360,305)
(364,312)
(1,081,408)
(1,081,155)
355,045
(221,667)
357,410
1,621,507
1,620,978
(221,667)
(1,188,313)
(1,187,721)
2,634,212
2,849,067
23,630,940
21,425,612
(2,301,249)
(2,888,441)
(23,198,892)
(22,343,033)
174,793
(184,066)
407,706
7,864,591
5,649,230
(408,960)
(5,251,799)
(5,011,606)
1 Member of the Board of Management since 1 October 2016.
2 Member of the Board of Management until 31 December 2016.
3 Disclosures for the previous year include amounts relating to a member of the Board of Management who left office during the financial year 2015.
4 Member of the Board of Management until 30 September 2016.
5 Service cost differs due to the different valuation bases used to measure pension obligations for HGB purposes (expected settlement amount) and for IFRS purposes
(present value of the defined benefit obligation).
6 Based on a legal right to receive the benefits already promised to them, Board of Management members appointed for the first time prior to 1 October 2010 were given the option of choosing between the
previous defined benefit model and the new defined contribution model.
220
Compensation
Report
2. Supervisory Board compensation
Responsibilities, regulation pursuant to
Articles of Incorporation
The compensation of the Supervisory Board is specified
either by a resolution of the shareholders at the Annu-
al General Meeting or in the Articles of Incorporation.
The compensation regulation valid for the financial
year under report was resolved by shareholders at the
Annual General Meeting on 14 May 2013 and is set
out in Article 15 of BMW AG’s Articles of Incorpo-
ration, which can be viewed and / or downloaded at
www.bmwgroup.com / ir under the menu items “Facts about
the BMW Group” and “Corporate Governance”.
compensation principles, compensation components
The Supervisory Board of BMW AG receives a fixed
compensation component as well as a Company per-
formance-related compensation component, which is
oriented toward sustainable growth and based on a
multi-year assessment. The Company performance-
related component is based on average earnings per
share of common stock for the remuneration year and
the two preceding financial years.
The fixed and performance-related components in
combination are intended to ensure that the compen-
sation of Supervisory Board members is appropriate
in relation to the tasks of Supervisory Board members
and the Company’s financial condition and also takes
account of business performance over several years.
In accordance with the Articles of Incorporation, each
member of BMW AG’s Supervisory Board receives, in
addition to the reimbursement of reasonable expens-
es, a fixed amount of € 70,000 (payable at the end of
the year) as well as a Company performance-related
compensation of € 170 for each full € 0.01 by which
the average amount of (undiluted) earnings per share
(EPS) of common stock reported in the Group Finan-
cial Statements for the remuneration year and the two
preceding financial years exceed a minimum amount
of € 2.00 (payable after the Annual General Meeting
held in the following year). An upper limit correspond-
ing to twice the amount of the fixed compensation
is in place for the Company performance-related
compensation. The limit for a member of the Supervi-
sory Board with no additional compensation-relevant
function is therefore set at € 140,000.
With this combination of fixed compensation ele-
ments and a Company performance-related com-
pensation component oriented toward sustainable
growth, the compensation structure in place for
BMW AG’s Supervisory Board complies with the rec-
ommendation on supervisory board compensation
contained in section 5.4.6 paragraph 2 sentence 2 of
the German Corporate Governance Code (version
dated 5 May 2015).
The German Corporate Governance Code also recom-
mends in section 5.4.6 paragraph 1 sentence 2 that
the exercising of chair and deputy chair positions in
the Supervisory Board as well the chair and member-
ship of committees should also be considered when
determining the level of compensation.
Accordingly, the Articles of Incorporation of BMW AG
stipulate that the Chairman of the Supervisory Board
shall receive three times the amount and each Deputy
Chairman shall receive twice the amount of the remu-
neration of a Supervisory Board member. Provided the
relevant committee 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 that is
remunerated with the highest amount.
In addition, each member of the Supervisory Board
receives an attendance fee of € 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 of more than one meeting
on the same day is not remunerated separately.
The Company also reimburses to each member of
the Supervisory Board reasonable expenses and any
value-added tax arising on the member’s remunera-
tion. The amounts disclosed below are net amounts.
For performance of his duties, the Chairman of the
Supervisory Board has the use of an office with admin-
istrative support, as well as the BMW car service.
Statement on Corporate Governance total compensation of the Supervisory Board for the
2016 financial year
In accordance with Article 15 of the Articles of Incor-
poration, the compensation of the Supervisory Board
for activities during the financial year 2016 totalled
€ 5.4 million (2015: € 5.1 million). This amount includes
fixed compensation of € 2.0 million (2015: € 2.0 million)
and variable compensation of € 3.4 million (2015:
€ 3.1 million).
221
in € million
Fixed compensation
Variable compensation
Total compensation
Supervisory Board members did not receive any fur-
ther compensation or benefits from the BMW Group
for advisory and / or agency services personally ren-
dered.
2016
2015
Amount
Proportion in %
Amount
Proportion in %
2.0
3.4
5.4
37.0
63.0
100.0
2.0
3.1
5.1
39.2
60.8
100.0
222
compensation of the individual members of the Supervisory Board for the financial year 2016 (2015)
Compensation
Report
Responsibility
Statement by the
Company’s Legal
Representatives
in €
Norbert Reithofer (Chairman)
Manfred Schoch (Deputy Chairman) 1
Stefan Quandt (Deputy Chairman)
Stefan Schmid (Deputy Chairman) 1
Karl-Ludwig Kley (Deputy Chairman)
Christiane Benner 1
Franz Haniel
Reinhard Hüttl
Henning Kagermann
Susanne Klatten
Renate Köcher
Ulrich Kranz
Robert W. Lane
Horst Lischka 1
Willibald Löw 1
Simone Menne
Dominique Mohabeer 1
Brigitte Rödig 1
Jürgen Wechsler 1
Werner Zierer 1
Total 2
Fixed
compensation
Attendance fee
Variable
compensation
210,000
(134,055)
140,000
(140,000)
140,000
(140,000)
140,000
(140,000)
140,000
(140,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(44,685)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
70,000
(70,000)
1,820,000
10,000
(8,000)
10,000
(10,000)
10,000
(10,000)
10,000
(10,000)
8,000
(4,000)
10,000
(10,000)
8,000
(10,000)
10,000
(10,000)
8,000
(10,000)
10,000
(10,000)
10,000
(10,000)
10,000
(10,000)
8,000
(10,000)
10,000
(8,000)
10,000
(10,000)
10,000
(8,000)
10,000
(10,000)
8,000
(10,000)
8,000
(8,000)
10,000
(10,000)
188,000
390,660
(223,986)
260,440
(233,920)
260,440
(233,920)
260,440
(233,920)
260,440
(233,920)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
130,220
(74,662)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
130,220
(116,960)
Total
610,660
(366,041)
410,440
(383,920)
410,440
(383,920)
410,440
(383,920)
408,440
(377,920)
210,220
(196,960)
208,220
(196,960)
210,220
(196,960)
208,220
(196,960)
210,220
(196,960)
210,220
(196,960)
210,220
(196,960)
208,220
(196,960)
210,220
(194,960)
210,220
(196,960)
210,220
(127,347)
210,220
(196,960)
208,220
(196,960)
208,220
(194,960)
210,220
(196,960)
3,385,720
5,393,720
1 These employee representatives have – in line with the guidelines of the Deutsche Gewerkschaftsbund – requested that their remuneration be paid into the Hans Böckler Foundation.
2 Figures for the previous year include the remuneration of members of the Supervisory Board who left office during the financial year of 2015.
(1,820,768)
(190,000)
(3,042,241)
(5,053,009)
3. other
Apart from vehicle lease and financing contracts
entered into on customary conditions, no advances
or loans were granted to members of the Board of
Management and the Supervisory Board of BMW AG
or its subsidiaries, nor were any contingent liabilities
entered into on their behalf.
Statement on Corporate Governance
223
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 4 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 development and performance of
the business and the position of the Group, together
with a description of the principal opportunities and
risks associated with the expected development of
the Group.”
Munich, 14 February 2017
Bayerische Motoren Werke
Aktiengesellschaft
The Board of Management
Harald Krüger
Milagros Caiña Carreiro-Andree Markus Duesmann
Klaus Fröhlich
Dr. Nicolas Peter
Dr. Ian Robertson (HonDSc)
Peter Schwarzenbauer
Oliver Zipse
224
BMW Group
Auditor’s Report
BMW GROUP
AUDITOR’S REPORT
We have audited the consolidated financial statements
prepared by the Bayerische Motoren Werke Aktien-
gesellschaft, comprising the income statement for
group and statement of comprehensive income
for group, the balance sheet for group, cash flow
statement for group, group statement of changes in
equity and the notes to the group financial statements,
together with the group management report for the
business year from 1 January to 31 December 2016.
The preparation of the consolidated financial state-
ments and the group management report in accord-
ance with IFRSs, as adopted by the EU, and the
additional requirements of German commercial law
pursuant to § 315 a Abs. 1 HGB [Handelsgesetzbuch
“German Commercial Code”] are the responsibility
of the parent company’s management. Our respon-
sibility is to express an opinion on the consolidated
financial statements and on the group management
report based on our audit.
We conducted our audit of the consolidated financial
statements in accordance with § 317 HGB [Handels-
gesetzbuch “German Commercial Code”] and German
generally accepted standards for the audit of financial
statements promulgated by the Institut der Wirtschaft-
sprüfer [Institute of Public Auditors in Germany]
(IDW). Those standards require that we plan and
perform the audit such that misstatements materially
affecting the presentation of the net assets, financial
position and results of operations in the consolidated
financial statements in accordance with the applica-
ble financial reporting framework and in the group
management report are detected with reasonable
assurance. Knowledge of the business activities and
the economic and legal environment of the Group and
expectations as to possible misstatements are taken
into account in the determination of audit procedures.
The effectiveness of the accounting-related internal
control system and the evidence supporting the dis-
closures in the consolidated financial statements and
the group management report are examined primarily
on a test basis within the framework of the audit. The
audit includes assessing the annual financial state-
ments of those entities included in consolidation, the
determination of entities to be included in consoli-
dation, the accounting and consolidation principles
used and significant estimates made by management,
as well as evaluating the overall presentation of the
consolidated financial statements and group man-
agement 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 consolidated financial statements comply with
IFRSs, as adopted by the EU, the additional require-
ments of German commercial law pursuant to § 315 a
Abs. 1 HGB and give a true and fair view of the net
assets, financial position and results of operations of
the Group in accordance with these requirements.
The group management report is consistent with the
consolidated financial statements, complies with
the German statutory requirements, and as a whole
provides a suitable view of the Company’s position
and suitably presents the opportunities and risks of
future development.
Munich, 24 February 2017
KpmG AG
Wirtschaftsprüfungsgesellschaft
Sailer
Wirtschaftsprüfer
Feege
Wirtschaftsprüfer
Statement on Corporate Governance OTHER
INFORMATION
Page 226 BMW Group Ten-year Comparison
Page 228 Glossary
Page 230 Index
Page 232 Index of Graphs
Page 233 Financial Calendar
Page 234 Contacts
5
5
Other
Information
Ten-year
Comparison
Glossary
Index
Index of Graphs
Financial Calendar
Contacts
226
BMW Group
Ten-year
Comparison
BMW GROUP
TEN-YEAR COMPARISON
SAleS Volume
Automobiles
Motorcycles 1
produCtIon Volume
Automobiles
Motorcycles 1
fInAnCIAl SerVICeS
Contract portfolio
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
units
units
units
units
2,367,603
2,247,485
2,117,965
1,963,798
145,032
136,963
123,495
115,215
1,845,186
1,668,982
1,461,166
1,286,310
1,435,876
1,500,678
106,358
104,286
98,047
87,306
101,685
102,467
2,359,756
2,279,503
2,165,566
2,006,366
145,555
151,004
133,615
110,127
1,861,826
1,738,160
1,481,253
1,258,417
1,439,918
1,541,503
113,811
110,360
99,236
82,631
104,220
104,396
contracts
5,114,906
4,718,970
4,359,572
4,130,002
3,846,364
3,592,093
3,190,353
3,085,946
3,031,935
2,629,949
Business volume (based on balance sheet carrying amounts) 2
€ million
123,394
111,191
96,390
84,347
80,974
75,245
66,233
61,202
60,653
51,257
Business volume (based on balance sheet carrying amounts)2
InCome StAtement
Revenues
Gross profit margin 3
Earnings before financial result
Earnings before tax
Return on sales (earnings before tax / revenues)
Income taxes
Effective tax rate
Net profit for the year
bAlAnCe Sheet
Non-current assets
Current assets
Capital expenditure (excluding capitalised development costs)
Capital expenditure ratio (capital expenditure / revenues)
Equity
Equity ratio
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 flow Automotive segment 4
perSonnel
Workforce at year-end 5
Personnel cost per employee
dIVIdend
Dividend total
€ million
94,163
92,175
80,401
76,059
76,848
68,821
60,477
50,681
53,197
56,018
%
€ million
€ million
%
€ million
%
€ million
€ million
€ million
€ million
%
%
€ million
€ million
€ million
19.9
9,386
9,665
10.3
2,755
28.5
6,910
19.7
9,593
9,224
10.0
2,828
30.7
6,396
121,671
110,343
66,864
3,731
4.0
25.1
73,183
67,989
61,831
3,826
4.2
42,764
24.8
63,819
65,591
21.2
9,118
8,707
10.8
2,890
33.2
5,817
97,959
56,844
4,601
5.7
37,437
24.2
58,288
59,078
20.1
7,978
7,893
10.4
2,564
32.5
5,329
86,193
52,184
4,967
6.5
35,600
25.7
51,643
51,134
€ million
47,363
188,535
172,174
154,803
138,377
131,835
123,429
110,164
101,953
101,086
€ million
€ million
7,880
11,464
6,122
11,836
7,688
9,423
7,671
9,964
8,370
9,167
7,776
8,110
7,432
8,149
7,767
4,921
7,454
4,471
2,393
6,246
124,729
122,244
116,324
110,351
€
99,575
97,136
92,337
89,869
105,876
100,306
89,161
84,887
95,453
83,141
96,230
72,349
100,041
107,539
75,612
76,704
€ million
2,300
2,102
1,904
1,707
1,640
1,508
852
197
197
694
Dividend per share of common stock / preferred stock
€
3.506 / 3.52 6
3.20 / 3.22
2.90 / 2.92
2.60 / 2.62
2.50 / 2.52
2.30 / 2.32
1.30 / 1.32
0.30 / 0.32
0.30 / 0.32
1.06 / 1.08
Dividend per share of common stock / preferred stock
1 Excluding Husqvarna, sales volume up to 2013: 59,776 units; production up to 2013: 59,426 units.
2 Amount computed on the basis of balance sheet figures: until 2007 from the Group balance sheet, from 2008 onwards from the Financial Services segment balance sheet.
3 Research and development expenses included in cost of sales with effect from 2008.
4 Figures are reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations.
5 Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners.
6 Proposal by management.
20.2
8,275
7,803
10.2
2,692
34.5
5,111
81,305
50,530
4,151
5.4
30,606
23.2
52,834
48,395
21.1
8,018
7,383
10.7
2,476
33.5
4,907
74,425
49,004
2,720
4.0
27,103
22.0
49,113
47,213
18.1
5,111
4,853
8.0
1,610
33.1
3,243
67,013
43,151
2,312
3.8
23,930
21.7
46,100
40,134
10.5
289
413
0.8
203
49.2
210
62,009
39,944
2,383
4.7
19,915
19.5
45,119
36,919
11.4
921
351
0.7
21
6.0
330
62,416
38,670
2,980
5.6
20,273
20.1
41,526
39,287
21.8
4,212
3,873
6.9
739
19.1
3,134
56,619
32,378
2,933
5.2
21,744
24.4
33,469
33,784
88,997
SAleS Volume
Automobiles
Motorcycles 1
produCtIon Volume
Automobiles
Motorcycles 1
fInAnCIAl SerVICeS
Contract portfolio
InCome StAtement
Revenues
Gross profit margin 3
Earnings before financial result
Earnings before tax
Income taxes
Effective tax rate
Net profit for the year
bAlAnCe Sheet
Non-current assets
Current assets
Return on sales (earnings before tax / revenues)
Capital expenditure (excluding capitalised development costs)
Capital expenditure ratio (capital expenditure / revenues)
Equity
Equity ratio
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 flow Automotive segment 4
perSonnel
Workforce at year-end 5
Personnel cost per employee
dIVIdend
Dividend total
Other Information
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2,367,603
2,247,485
2,117,965
1,963,798
145,032
136,963
123,495
115,215
1,845,186
1,668,982
1,461,166
1,286,310
1,435,876
1,500,678
106,358
104,286
98,047
87,306
101,685
102,467
2,359,756
2,279,503
2,165,566
2,006,366
145,555
151,004
133,615
110,127
1,861,826
1,738,160
1,481,253
1,258,417
1,439,918
1,541,503
113,811
110,360
99,236
82,631
104,220
104,396
contracts
5,114,906
4,718,970
4,359,572
4,130,002
3,846,364
3,592,093
3,190,353
3,085,946
3,031,935
2,629,949
227
SAleS Volume
Automobiles
Motorcycles 1
produCtIon Volume
Automobiles
Motorcycles 1
fInAnCIAl SerVICeS
Contract portfolio
Business volume (based on balance sheet carrying amounts) 2
€ million
123,394
111,191
96,390
84,347
80,974
75,245
66,233
61,202
60,653
51,257
Business volume (based on balance sheet carrying amounts)2
€ million
94,163
92,175
80,401
76,059
76,848
68,821
60,477
50,681
53,197
56,018
20.2
8,275
7,803
10.2
2,692
34.5
5,111
81,305
50,530
4,151
5.4
30,606
23.2
52,834
48,395
21.1
8,018
7,383
10.7
2,476
33.5
4,907
74,425
49,004
2,720
4.0
27,103
22.0
49,113
47,213
18.1
5,111
4,853
8.0
1,610
33.1
3,243
67,013
43,151
2,312
3.8
23,930
21.7
46,100
40,134
10.5
289
413
0.8
203
49.2
210
62,009
39,944
2,383
4.7
19,915
19.5
45,119
36,919
11.4
921
351
0.7
21
6.0
330
62,416
38,670
2,980
5.6
20,273
20.1
41,526
39,287
188,535
172,174
154,803
138,377
131,835
123,429
110,164
101,953
101,086
21.8
4,212
3,873
6.9
739
19.1
3,134
56,619
32,378
2,933
5.2
21,744
24.4
33,469
33,784
88,997
€ million
€ million
7,880
11,464
6,122
11,836
7,688
9,423
7,671
9,964
8,370
9,167
7,776
8,110
7,432
8,149
7,767
4,921
7,454
4,471
2,393
6,246
124,729
122,244
116,324
110,351
€
99,575
97,136
92,337
89,869
105,876
100,306
89,161
84,887
95,453
83,141
96,230
72,349
100,041
107,539
75,612
76,704
€ million
2,300
2,102
1,904
1,707
1,640
1,508
852
197
197
694
InCome StAtement
Revenues
Gross profit margin 3
Earnings before financial result
Earnings before tax
Return on sales (earnings before tax / revenues)
Income taxes
Effective tax rate
Net profit for the year
bAlAnCe Sheet
Non-current assets
Current assets
Capital expenditure (excluding capitalised development costs)
Capital expenditure ratio (capital expenditure / revenues)
Equity
Equity ratio
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 flow Automotive segment 4
perSonnel
Workforce at year-end 5
Personnel cost per employee
dIVIdend
Dividend total
Dividend per share of common stock / preferred stock
€
3.506 / 3.52 6
3.20 / 3.22
2.90 / 2.92
2.60 / 2.62
2.50 / 2.52
2.30 / 2.32
1.30 / 1.32
0.30 / 0.32
0.30 / 0.32
1.06 / 1.08
Dividend per share of common stock / preferred stock
1 Excluding Husqvarna, sales volume up to 2013: 59,776 units; production up to 2013: 59,426 units.
2 Amount computed on the basis of balance sheet figures: until 2007 from the Group balance sheet, from 2008 onwards from the Financial Services segment balance sheet.
3 Research and development expenses included in cost of sales with effect from 2008.
4 Figures are reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations.
5 Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners.
6 Proposal by management.
units
units
units
units
%
%
%
€ million
€ million
€ million
€ million
€ million
€ million
€ million
%
%
€ million
€ million
€ million
19.9
9,386
9,665
10.3
2,755
28.5
6,910
66,864
3,731
4.0
25.1
73,183
67,989
19.7
9,593
9,224
10.0
2,828
30.7
6,396
61,831
3,826
4.2
42,764
24.8
63,819
65,591
21.2
9,118
8,707
10.8
2,890
33.2
5,817
97,959
56,844
4,601
5.7
37,437
24.2
58,288
59,078
20.1
7,978
7,893
10.4
2,564
32.5
5,329
86,193
52,184
4,967
6.5
35,600
25.7
51,643
51,134
121,671
110,343
€ million
47,363
SAleS Volume
Automobiles
Motorcycles 1
produCtIon Volume
Automobiles
Motorcycles 1
fInAnCIAl SerVICeS
Contract portfolio
InCome StAtement
Revenues
Gross profit margin 3
Earnings before financial result
Earnings before tax
Income taxes
Effective tax rate
Net profit for the year
bAlAnCe Sheet
Non-current assets
Current assets
Return on sales (earnings before tax / revenues)
Capital expenditure (excluding capitalised development costs)
Capital expenditure ratio (capital expenditure / revenues)
Equity
Equity ratio
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 flow Automotive segment 4
perSonnel
Workforce at year-end 5
Personnel cost per employee
dIVIdend
Dividend total
228
Glossary
GLOSSARY
Asset-backed financing transactions
A form of corporate financing involving the sale of
receivables to a financing company.
Bond
A securitised debt instrument in which the issuer
certifies its obligation to repay the nominal amount
at the end of a fixed term and to pay a fixed or variable
rate of interest.
Business volume in balance sheet terms
The sum of the balance sheet line items “Leased prod-
ucts” and “Receivables from sales financing” (current
and non-current), as reported in the balance sheet for
the Financial Services segment.
Capital expenditure ratio
Investments in property, plant and equipment and
other intangible assets (excluding capitalised
development costs) as a percentage of Group
revenues.
Capitalisation rate
Capitalised development costs as a percentage of
research and development expenditure.
Commercial paper
Short-term debt instruments with a term of less than
one year which are usually sold at a discount to their
face value.
Consolidation
The process of combining separate financial state-
ments of Group entities into Group Financial State-
ments, depicting the financial position, net assets
and results of operations of the Group as a single
economic entity.
Credit default swap (CDS)
Financial swap agreements, under which creditors of
securities (usually bonds) pay premiums to the seller
of the CDS to hedge against the risk that the issuer of
the bond will default. As with credit default insurance
agreements, the party receiving the premiums gives
a commitment to compensate the bond creditor in
the event of default.
Earnings per share (EPS)
Basic earnings per share are calculated for common
and preferred stock by dividing the net profit after
minority interests, as attributable to each category of
stock, by the average number of shares in circulation.
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.
Cash flow
Liquid funds generated (cash inflows) or used (cash
outflows) during a reporting period.
EBIT
Abbreviation for “Earnings Before Interest and Taxes”,
equivalent in the BMW Group income statement to
“Profit / loss before financial result”.
Cash flow at risk
Similar to “value at risk” (see definition below).
Cash flow hedge
A hedge against exposures to the variability in fore-
casted cash flows, particularly in connection with
exchange rate fluctuations.
EBIT margin
Profit / loss before financial result as a percentage of
revenues.
Effective tax rate
The effective tax rate is calculated by dividing the
income tax expense by the Group profit before tax.
Other Information 229
Return on Capital Employed (RoCE)
RoCE in the Automotive and Motorcycles segments
is measured on the basis of relevant segment profit
before financial result and the average amount of
capital employed in the segment concerned. Capital
employed corresponds to the sum of all current and
non-current operational assets, less liabilities that do
not incur interest.
Return on Equity (RoE)
RoE in the Financial Services segment is calculated as
segment profit before taxes, divided by the average
amount of equity capital attributable to the Financial
Services segment.
Value at risk
A measure of the potential maximum loss in value of
an item during a set time period, based on a specified
probability.
Equity ratio
Equity capital as a percentage of the balance sheet
total.
Fair value
The amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing
parties in an arm’s length transaction.
Fair value hedge
A hedge against exposures to fluctuations in the fair
value of a balance sheet item.
Goodwill
Goodwill corresponds to the consideration paid to
acquire an entity, less the fair value of the separate
assets acquired and liabilities assumed. The buyer
is willing to pay the additional amount in return for
future expected earnings.
Gross margin
Gross profit as a percentage of Group revenues.
Post-tax return on sales
Group net profit as a percentage of Group revenues.
Pre-tax return on sales
Group profit / loss before tax as a percentage of Group
revenues.
Research and development expenditure
The sum of research and non-capitalised development
cost and capitalised development cost (not including
the associated scheduled amortisation).
Research and development expense ratio
Research and non-capitalised development costs as a
percentage of Group revenues.
230
Index
INDEX
A
Accounting policies
Apprentices
Automotive segment
57
B
Balance sheet structure
Bonds
70, 157 et seq.
122 et seq.
42 et seq.
72
C
5, 65 et seq.
67 et seq., 162 et seq.
5, 68 et seq., 116 et seq.
67 et seq., 116 et seq.
4, 39, 61, 86 et seq.
212 et seq.
Capital expenditure
Cash and cash equivalents
Cash flow
Cash flow statement
CO2 emissions
Compensation Report
Compliance
Connected Drive
Consolidated companies
Consolidation principles
Contingent liabilities
Corporate Governance
Cost of materials
Cost of sales
207 et seq.
133
74 et seq.
52 et seq.
121
121
161
190 et seq.
F
80, 146 et seq., 162 et seq.
162 et seq.
70, 157 et seq.
Financial assets
Financial instruments
Financial liabilities
Financial result
Financial Services segment
Fleet emissions
65, 78
4, 39, 61, 86
49 et seq.
G
Group tangible, intangible and investment
assets
124, 140 et seq.
I
63, 77, 112 et seq., 133 et seq.
Income statement
Income taxes
Intangible assets
Inventories
Investments accounted for using the equity method
and other investments
65, 135 et seq., 156
80, 142
71, 80, 148
143 et seq.
K
Key data per share
109
L
Lease business
Leased products
Locations
List of investments
24 et seq.
49 et seq.
143
180 et seq.
D
23, 55
Dealer organisation /dealerships
Declaration with respect to the
Corporate Governance Code
Digitalisation
Dividend
Dow Jones Sustainability Index World
23, 45, 51, 55, 85, 96
109, 137
191
E
5, 137
Earnings per share
EBIT margin / return on sales
Efficient Dynamics
Employees
Equity
Exchange rates
4, 39, 57 et seq., 85
73, 149
52
35, 84, 97, 122, 170
M
Mandates of members of the Board of Management
61
Mandates of members of the Supervisory Board
192
193 et seq.
Marketable securities
Motorcycles segment
67 et seq., 125, 140 et seq.
48
5, 29 et seq., 40, 65, 86
N
Net profit
New financial reporting rules
5, 63
130 et seq.
Other Information O
134
Other financial result
Other investments
Other operating income and expenses
Other provisions
Outlook
82 et seq.
165
156
T
Tangible, intangible and investment assets
134
140 et seq.
Trade payables
Trade receivables
160
148 et seq.
231
P
73, 80, 127, 151 et seq.
4 et seq., 29 et seq., 39 et seq.,
138
44 et seq.
Pension provisions
Performance indicators
85 et seq.
Personnel expenses
Production
Production network
Profit before financial result
65 et seq.
Profit before tax
Property, plant and equipment
Purchasing
54
5 et seq., 39, 65, 85, 87
142
24 et seq., 44 et seq.
5 et seq., 63 et seq.,
R
71, 145 et seq.
110
69 et seq.
212 et seq.
172 et seq.
Rating
Receivables from sales financing
Refinancing
Related party relationships
Remuneration system
Report of the Supervisory Board
Research and development
Result from equity accounted investments
Return on sales
Revenue reserves
Revenues
Risks and opportunities
RoCE
5, 29 et seq., 40, 86
RoE
5, 29 et seq., 40, 65, 86
5, 30 et seq., 41, 87
51 et seq.
88 et seq.
149
8 et seq.
5, 40 et seq., 63, 66 et seq., 78, 86 et seq., 133
65
S
4, 39 et seq., 42 et seq., 48, 86 et seq.
175 et seq.
Sales volume
Segment information
Selling and administrative expenses
Shareholdings of members of the Board of Manage-
ment and the Supervisory Board
Statement of Comprehensive Income
Stock
Sustainability
107 et seq.
59 et seq.
112, 139
65,133
174
232
Index of Graphs
Financial Calendar
INDEX OF GRAPHS
Finances
BMW Group in Figures
BMW Group Value drivers
Contract portfolio of Financial Services segment
29
6
49
49
BMW Group new vehicles financed or leased by
Financial Services segment
Contract portfolio retail customer financing of
Financial Services segment 2016
Development of credit loss ratio
Regional mix of BMW Group purchase volumes
2016
BMW Group Change in cash and cash equivalents
50
51
54
68
70
72
BMW Group Financial liabilities
Balance sheet structure – Group
Balance sheet structure – Automotive segment
BMW Group value added 2016
75
Risk management in the BMW Group
107, 108
Development of BMW stock
BMW Group Compliance Management System
88
72
207
Sales volume and locations
BMW Group Locations
BMW Group – key automobile markets 2016
BMW Group sales volume of motorcycles
BMW Group – key motorcycle markets 2016
24 et seq.
48
42
48
Workforce
57
BMW Group apprentices at 31 December
Proportion of female employees in management
functions at BMW AG / BMW Group
Employee attrition rate at BMW AG
Proportion of female executives within management
58
59
205
Sustainability
Materiality matrix
60
Further information
Exchange rates compared to the euro
Oil price trend
Precious metals price trend
Steel price trend
36
37
36
35
Other Information FINANCIAL CALENDAR
233
2017
21 March 2017
Annual Accounts Press Conference
22 March 2017
Analyst and Investor Conference
4 May 2017
Quarterly Report to 31 March 2017
11 May 2017
Annual General Meeting
3 August 2017
Quarterly Report to 30 June 2017
7 November 2017
Quarterly Report to 30 September 2017
2018
21 March 2018
Annual Report 2017
21 March 2018
Annual Accounts Press Conference
22 March 2018
Analyst and Investor Conference
4 May 2018
Quarterly Report to 31 March 2018
17 May 2018
Annual General Meeting
2 August 2018
Quarterly Report to 30 June 2018
7 November 2018
Quarterly Report to 30 September 2018
234
Contacts
CONTACTS
Business and Finance Press
Telephone + 49 89 382-2 45 44
+ 49 89 382-2 41 18
+ 49 89 382-2 44 18
presse@bmwgroup.com
Fax
E-mail
Investor Relations
Telephone + 49 89 382-3 16 84
+ 49 89 382-2 53 87
+ 49 89 382-1 46 61
ir@bmwgroup.com
Fax
E-mail
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Other Information
P U B L I S H E D B Y
Bayerische Motoren Werke
Aktiengesellschaft
80788 Munich
Germany
Telephone +49 89 382-0