Mercedes 1998 Annual Report Download - page 49

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AEROSPACE
45
FAVORABLE CONDITIONS OVERALL. The economic situation was
favorable for the Aerospace Division in 1998. Demand for civil
aircraft and aeroengines remained strong. Positive factors
included production clearance for the Eurofighter. On the other
hand, the very limited public budgets in Western Europe had a
negative effect. The dollar exchange rate, which on an annual
average barely changed in comparison to 1997, created stable
conditions for currency exchange.
Regardless of the favorable market situation in the commercial
sector, competition continued to intensify in this industry.
There is still a great need to reduce costs and combine forces
to remain competitive on an international level.
Dasa, the British GEC, the French Lagardère, and the Italian
Finmeccanica have agreed to merge their aerospace activities
as part of the process of Europeanization of the aerospace
industry. The new aerospace company, provisionally named
Newco, is due to be founded in June 1999, provided per-
mission is granted by the regulating bodies of the European
Union. In addition, we are continuing to pursue the goal of
establishing a European Airbus corporation.
BEST EARNINGS EVER. The favorable development of earnings
demonstrates that we have strengthened the earning power of
this division in the course of the past few years. The division’s
operating profit rose by € 339 million to € 623 million,
making 1998 the most successful year since Dasa’s founding.
Significant factors in this development included the success of
the restructuring and optimization programs we introduced
several years ago. We are now able to significantly improve
our position in an extremely competitive market.
REVENUES AND INCOMING ORDERS HIGHER THAN EVER.
The Aerospace Division increased its revenues by 12% as
compared to 1997 and set a new record at € 8.8 billion.
Except for the Satellites unit, which for accounting reasons
remained just under the previous year’s level at € 0.6 billion
(1997: € 0.7 billion), all of the business units contributed to
this success. The growth in revenues was especially
pronounced in the Commercial Aircraft unit at € 3.0 billion
(1997: € 2.4 billion), in Defense and Civil Systems at € 1.7
billion (1997: € 1.5 billion), in Aeroengines at € 1.7 billion
(1997: € 1.5 billion) and the helicopter business at € 0.7
billion (1997: € 0.6 billion). While the higher delivery volume
in the Airbus program had a significant effect in the
Commercial Aircraft unit, the growth in the Defense and Civil
Systems unit predominantly resulted from the integration of
SI Sicherungstechnik, accomplished in 1998, which was
acquired from Siemens.
Incoming orders reached € 13.9 billion in 1998 and were 40%
higher than in 1997. The largest share in incoming orders was
once again contributed by the Commercial Aircraft unit at
€ 5.2 billion (1997: € 4.6 billion). At € 2.7 billion (1997: € 1.0
billion), the largest growth was achieved in the Military
Aircraft unit due to production clearance for the Eurofighter.
Operating Profit
Revenues
Commercial Aircraft
Helicopters
Military Aircraft
Space Infrastructure
Satellites
Defense and Civil
Systems
Aeroengines
Investment in property,
plant and equipment
R&D
Employees (12/31)
Amounts in Millions
731
10,290
3,475
798
1,123
683
757
2,029
1,948
382
2,402
98
US $
98
€
97
€
623
8,770
2,962
680
957
582
645
1,729
1,660
326
2,047
45,858
284
7,816
2,433
620
846
565
741
1,453
1,515
255
2,233
43,521
The Aeroengines (€ 2.6 billion; 1997: € 1.4 billion), Defense
and Civil Systems (€ 2.1 billion; 1997: € 1.6 billion), Space
Systems Infrastructure (€ 0.5 billion; 1997: € 0.4 billion), and
Satellites (€ 0.6 billion; 1997: € 0.6 billion) units were able to
increase their incoming orders. At € 744 (1997: € 818) million,
orders in the helicopter business did not quite reach the 1997
level, which had been exceptionally high due to two large
contracts.
WORK FORCE AND CAPACITIES CAREFULLY EXPANDED. The high
volume of orders on hand has allowed us to carefully expand
the work force in almost all business units. At the end of 1998,
we employed a total of 45,858 persons in the Aerospace Divisi-
on (1997: 43,521 persons). We gained 1,142 new employees as a
result of the integration of SI Sicherungstechnik.
The award of the Eurofighter contract by the nations involved
made a large number of jobs more secure for the future, above
all in the Military Aircraft and Aeroengine units.
In the Commercial Aircraft unit, the volume of orders on hand
increased to 1,300 aircraft by the end of 1998 (1997: 1,009
units). This and the expectation of increased earnings in the
future once again led the Airbus consortium to increase
production rates in the A319/A320/A321 program from 16
aircraft per month in 1997 to 22 aircraft per month by
mid-2000.