BMW 2004 Annual Report Download - page 27

Group Management Report 8
A review of the Financial Year 8
Outlook 29
Financial Analysis 30
--Earnings performance 30
--Financial position 33
--Net assets position 34
--Events after the
Balance Sheet date 37
--Value added statement 37
--Key performance figures 39
--Comments on the financial
statements of BMW AG 40
Risk Management 44
BMW Stock in 2004 48
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two percentage points each to 53% and 19%
respectively. The volume purchased in South
America, Africa, Central Europe and Eastern Europe
increased in proportion to the overall increase in
purchases and therefore remains constant in per-
centage terms.
As a consequence of the weaker US dollar and
the reduction in production volume for the Z4, the
proportion of purchases made in the NAFTA region
fell by three percentage points to 13%. In US dollar
terms, purchases from NAFTA countries by the
BMW Group fell by only 3%. Purchases in Asia and
Australia rose in absolute terms as a result of the
BMW Group’s activities in China, but fell in percent-
age terms by one percentage point to 2% because
of the above-average rise in purchases in Germany
and Western Europe.
Raw material markets under strain
Price increases and the supply of raw materials were
particularly important factors for the BMW Group in
2004, whereby market developments affecting steel
and crude oil were at the forefront. Steel prices rose
sharply, especially in the final quarter of 2004. For
example, the average price of cold-rolled steel plate
in 2004 was approximately 15% higher than in 2003.
The overall industrial commodity index rose by 15%
in US dollar terms and by 7% in euro terms. The
price of non-ferrous metals rose by 20 % in US
dollar terms and by 12% in euro terms. Thanks to
the strong euro, EU countries were not as affected
as much other economies by the increase in raw
material prices on the world’s markets.
To a large extent, long-term contracts were in
place in 2004 to hedge the price of the main raw
materials (steel,plastic) purchased bythe BMW Group.
In the case of precious metals (rhodium, palladium,
platinum), prices were managed with the aid of price
hedging arrangements.
Management of partner networks
The “Management of Partner Networks” (MoPN)
project has been initiated to take better advantage
of procurement market opportunities. This project
is intended to take effect at the early stage of a
product’s development and is meant to optimise
BMW Group’s exploitation of procurement market
opportunities in terms of innovation, system expertise
and non-automotive sector know-how. The focus of
MoPN in 2004 was to integrate system and module
suppliers for complex product groups (e.g. in the
area of chassis and doors) into the early stages of
the Product Evolution Process (PEP). This allows
solutions to procurement issues to be identified at
an early stage and provides a basis for measuring the
benefits of integrating the various partner networks
into the PEP concept.
Sustainability fixed in cooperation with new
partners
In 2003, the BMW Group formally integrated the
principles of sustainability into its procurement
terms and conditions. In this way, the BMW Group
encourages and supports its business partners and
suppliers to introduce and implement standards of
a similar high level, in particular those pertaining to
environmental care and social issues. Sustainability
principles have been applied in 2004 in a whole range
of processes, from supplier selection through to the
Regional mix of BMW Group purchase volumes 2004
in %, basis: production material
Germany
Rest of Western Europe
NAFTA
Central and Eastern Europe
Africa
Asia/Australia
South America 8
13
3
2
2
19
53