Mahle GmbH Business Report FY2006
Business Highlights
Financial overview
in
million euros (Consolidated) |
FY2006 | FY2005 | Rate of |
Factors |
Sales | 4,314.0 | 4,121.8 | 4.7 | See note 1) below |
Net Income | 191.8 | 159.0 | 20.6 | See note 2) below |
Sales by segments | ||||
Piston Systems Product Line | 1,279 | 1,262 | 1.3 | See note 3) below |
Cylinder Components Product Line | 483 | 460 | 5.0 | See note 4) below |
Valve Train Systems Product Line | 527 | 512 | 2.9 | See note 5) below |
Air Management Systems Product Line | 690 | 645 | 7.0 | See note 6) below |
Liquid Management Systems Product Line | 510 | 521 | (2.1) | See note 7) below |
-The Company has 17 German and 65 foreign subsidiaries
(consolidated).
Factors
1)
- The sales of the Group developed in line with the growth level of
the global automotive industry, with growth of approximately EUR 200
million (4.7%) in comparison with the previous year.
- Changes in the international currency exchange rate structures led
to an increase of EUR 25.7 million (0.6%) in reported sales. Positive
effects from the Polish zloty, the Korean won, and, in particular, the
Brazilian real were largely eroded by a devaluation of the Japanese
yen and the US dollar.
- On the other hand, additions of companies in 2006 resulting from acquisitions
brought
sales amounting to EUR 28.5 million (0.7%) into the consolidation group.
The major
company acquisitions were made in the industrial filtration business
segment.
- Allowing for currency and consolidation effects, the sales increase
amounted to 3.5%
and was thus on a similar scale to the quantity increases recorded by
the market as a whole. This shows that the considerable price reductions
on our products could be compensated for by gains of market share and
increasing systems supplies.
2)
- The operating profit of the Group also increased in line with the
rise in sales. Considerable improvements in profit generated by increased
sales volumes, the shutdown of unprofitable business divisions, and
improvements in productivity were offset by the strain on profit resulting
from reductions in sales prices, significant increases in material prices,
pay scale increases, and foreign currency changes. The unexpectedly
heavy strain prevented a more significant improvement in profit in comparison
with the previous year.
3)
Supported by the satisfactory economic situation in the worldwide automotive
industry, the product line recorded sustained high demand for piston/connecting
rod assemblies in the passenger car segment, thus becoming more firmly
established in its strategic positioning as a systems supplier. The
sales increase in the commercial vehicle sector in comparison
with the previous year was primarily due to the rising demand for single-piece
forged MONOTHERM steel pistons, which replaced articulated and
aluminum pistons on the market to some extent.
- In Europe, invoiced sales slightly exceeded the previous year窶冱
level, although a shift in sales occurred as a result of the discontinuation
and new startup of piston types, as well as changes in technology. In
terms of products, significant market success was recorded in the commercial
vehicle sector by MONTHERM pistons. Sales of pistons for passenger
cars fell slightly below the previous year's level, as passenger car
gasoline piston activities remained stable and slight declines were
recorded in passenger car diesel pistons.
- Sales in North America experienced slightly positive development in
comparison with the previous year. In its commercial vehicle piston
activities, the sales increase of 13.1% in comparison with the previous
year was positively affected by the tightening of emission regulations
from 2007 and the fact that purchases were brought forward accordingly.
In the passenger car sector, sales continued to shift from pure passenger
car pistons to passenger car piston/connecting rod assemblies. In the
2006 business year, sales of piston/connecting rod assemblies to North
American customers rose by approximately 46% in comparison with the
previous year.
- In South America, the Company's plants recorded a significant recovery
in unit sales in comparison with the previous year as a consequence
of the favorable economic conditions and the rise in local automobile
production (2.6 million units, an increase of 3% compared with the previous
year). Customer demand for pistons for both passenger cars and commercial
vehicle engines intensified. In the past business year, the region also
benefited from the resumption of direct supply to its North American
customers as part of the optimization of logistical processes.
- The sales achieved by the Asia/Pacific region in the 2006 business
year approximately equaled those of the previous year. Volume impetus
resulting from good overall economic development in Thailand and new
startups in its Chinese companies in Nanjing and Yingkou compensated
for declines in sales in Australia. Mahle's Japanese company achieved
sales around the previous year's level.
4)
- A sales increase of 5% was generated exclusively by organic growth,
with all products contributing to this growth. The continuation of the
healthy economic situation in the commercial vehicle sector in 2006
had a particularly positive impact.
- Increases in sales of engine bearings were achieved primarily in the
commercial vehicle sector in the USA. Growth was achieved in piston
ring activities, particularly in Europe, as a result of increased sales
of piston rings for passenger car diesel engines and the new startup
of a new generation of engines in the commercial vehicle sector. The
healthy economic situation in the automotive industry also continued
in South America, leading to an increase in sales of piston rings. Piston
pin activities were positively affected by the South American automotive
industry and the good economic situation in the commercial vehicle sector
worldwide.
5)
- In the Valve Train Systems product line, sales were slightly above
the previous year's level. As a result of changes in the product mix,
shifts occurred within the product groups. For example, in the valve
seat inserts and valve seat guides segment, the trend toward increased
customer demand for sintered rather than cast products continued. The
lower price level of the sintered parts led to a decline in sales, despite
a significant rise in unit sales. As in previous years, unit sales of
other sintered parts in the European and South American markets increased
further. Sales of turbocharger parts were only slightly above the previous
year's level, but were characterized by considerable price reductions.
- In the composite camshafts segment, the further ramp-up of existing
series led to corresponding growth in sales. The Company's cast camshaft
activities generated significantly higher sales, particularly in the
North American market. End-of-series products in the valve actuator
segment could not be replaced because of price pressure from competitors
in countries where labor costs are low. The start of series production
of roller tappets for commercial vehicles led to sales increases in
the European market.
- MAHLE Powertrain Ltd. in England assembled significantly more complete
engines than in the previous year, intended for the Asian market, among
others. Unit sales of machined cylinder heads decreased slightly in
comparison with the previous year.
Sales growth in the valves segment was achieved as a result of new series
production parts in the European market. In particular, the strong market
presence with hollow valves was established more firmly in the past
business year. A decline was recorded in sales of valve timing parts,
which resulted from a change in one customer'fs engine design.
6)
- Overall, business development in the Air Management Systems product
line was satisfactory. Sales increased in comparison with the previous
year in all regions of the world. Even allowing for changes in exchange
rates, the regions exceeded the previous year's sales values. In particular,
the positive exchange rate effects for sales in the Korean won almost
offset the considerable negative impact of the Japanese yen in Asia.
- In Europe, sales were characterized by the unit sales figures for
intake modules and air filter elements produced in Austria. Together
with high tool sales, these sales more than offset the
discontinuation of a range of intake modules in Germany. In France,
air filter and air filter element activities remained below expectations.
However, this was partly compensated for by
higher tool sales. Sales growth was achieved in North America as a result
of the further expansion of cylinder head cover activities, particularly
for new engine types for Japanese customers. South America was included
in the product line's consolidation group for the first time. As a result
of the expansion of cylinder head cover activities in particular, the
sales increase was higher than expected. In Japan, sales declines in
the passenger car sector, allowing for foreign currency exchange rate
effects, could not be offset by the higher unit
sales in commercial vehicle activities. In contrast, sales of intake
modules and air filters in Korea, allowing for foreign currency exchange
rate effects, substantially exceeded the previous year's sales. At the
Chinese location in Tianjin, air filter and air filter element activities
developed more positively than planned. Production of air intake modules
for Chinese customers was also started.
Overall, further increases in unit sales were achieved with all product
groups in the product line. Production of air filters commenced at the
majority joint venture in Turkey, founded in 2005 to supply the Turkish
market. The new location in Guangzhou, China, which was founded to supply
mainly Japanese customers, commenced production of air filters in the
last quarter of the year. The location in Shanghai, China, was included
in the product line's consolidation group for the first time..
7)
- While sales of the Liquid Management Systems product line stagnated
in Europe, the activated carbon canister activities in North America
expanded considerably, primarily as a result of the acquisition of manufacturing
equipment. Declining sales in France and Germany were offset by corresponding
increases at the production plant in Austria. While OEM/OES sales rose
slightly, intra-Group sales in the aftermarket stagnated as a result
of the Group's general measures to reduce inventories. Stagnating sales
of fuel filters were offset by increasing sales of oil filter modules
and activated carbon canisters.
- In South America, a new distribution of production volumes between
the two filtration product lines led to declining sales for Liquid Management
Systems. In Japan, sales decreased slightly as a result of currency
exchange rate effects and the intensified price competition in certain
product segments, while sales increases were achieved in Thailand.
- In China, a new distribution of production between the Air Management
Systems and Liquid
Management Systems product lines also generated lower sales in comparison
with the previous year. In contrast, sales in India rose considerably.
- The new production plants constructed in the growth regions were successfully
integrated into the existing production network. In Timisoara, Romania,
the production of activated carbon canisters commenced. In addition,
the production of oil filters began in Shanghai, China, in a newly opened
production plant. In North America, the newly acquired manufacturing
equipment was integrated into the production plant in Murfreesboro,
USA, to expand the production of activated carbon canisters.
Strategic Acquisitions & Expansion of Production by J/V
(1) Engine Parts Group of the Dana Corporation
- The Company announced that it has entered into a stock and asset purchase agreement with Dana Corporation for the acquisition
of Dana's engine hard parts business. The engine hard parts business of Dana consists of 39 locations in 10 countries
with approximately 5,000 employees. The business had sales of approximately $670 million in 2005. The main products of
the engine hard parts business are piston rings, engine bearings, cylinder liners and camshafts manufactured and sold
under the Perfect Circle, Clevite, and Glacier Vandervell brands. (From a press release by the company on Dec.4, 2006)
(2) Air Intake Modules and Air Filtration Business Division of Siemens
VDO Automotive
- The Company announced that the acquisition of the air intake module
and air filtration business division from Siemens VDO (SVDO), a division
of Siemens AG, was success-fully concluded as of June 1, 2007. The acquisition
includes all worldwide units of Siemens VDO's business division "air
intake modules and air filtration" with locations in Canada, Mexico,
England and China. In 2006, the turnover of the division was approximately
EUR 300 million, generated by approximately 1,000 employees. The main
products are air intake modules and air filter systems for passenger
car gasoline and diesel engines. With this acquisition MAHLE is further
expanding its worldwide activities in the business division air intake
systems and air filtration. (From a press release on June 5, 2007)
(3) Global Expansion of the Engine Valves Products Group
- On January 16, 2007, the Company celebrated the grand opening ceremony of
the new valve company MAHLE Tri-Ring Valve Train (Hubei) Co., Ltd. in
Macheng, China. The joint venture negotiations have been finalized in
the end of 2006. In doing so, MAHLE has strengthened its position in
the currently largest automotive growth market. MAHLE holds 60% of the
shares of the joint venture. Hubei Tri-Ring Company Limited holds 40%.(From
a press release by the company on Jan. 25, 2007)
-The Company announced that MAHLE Metal Leve S.A., its Brazilian subsidiary,
has acquired the Argentinean company Edival, located in Rafaela, province
of Santa Fe. The acquisition includes the whole operation of Edival
comprising the industrial plant as well as the administrative, sales
and engineering offices. Edival, which was established in 1953, produces
mainly valves, valve guides and valve seat inserts for internal combustion
engines supplying to several different markets including OEM, aftermarket,
racing, and aircraft segments. In 2006, Edival is expected to reach
annual sales above 40 million USD. Edival has approximately 800 employees.
(From a press release on Mar. 21, 2007)
Outlook
- On the basis of the expected developments, the Company anticipates
a significant sales increase from 2006 to 2007. The Group's expected
profit, however, will be affected by the low operational earning power
currently prevailing in some areas, the imminent expenditure for restructuring
measures, and integration costs for parts of the acquired business segments,
and will not exhibit the expected profit relationships until subsequent
years.
R&D
R&D Structure
7 R&D centers are as follows :
-Stuttgart, Germany
-Northampton, UK
-Farmington Hills, near Detroit, USA
-Novi, near Detroit, USA
-Sao Paulo, Brazil
-Tokyo, Japan
-China, Shanghai
R&D Expense
in million Euros | FY 2006 | FY 2005 | FY 2004 |
R&D Expense | 242 | 219 | N.A. |
New Product Development
- New material development: A powder metal material infused with
copper for valve seat inserts was prepared for series production in
2006 for CNG-type passenger car engines. With a wear- and heat-resistant
matrix and a wear-resistant intermetallic phase, this material offers
significant advantages under extreme operating conditions.
- Production and process technology: In 2006, the Company was
able to introduce a number of improvements. For example, a roller-burnishing
process with improved manufacturing quality was developed for pressure
rolling the high-performance fillet radius on the flanges of cylinder
liners.
- New telemetry system: The newly introduced system allows component temperatures in the operating engine in the
range above 450ツー to be determined reproducibly with great precision. These temperatures occur in the combustion chamber
of the MONOTHERM steel pistons, which are subject to high loads. The potential of the MONOTHERM piston, which has been
in series production for several years, has by no means been fully exploited. The Company anticipates that the ongoing
development of this piston type will offer the Company an excellent opportunity to meet the requirements of new emission
regulations, such as EU5 or US10.
In the area of cylinder components, the Company have further expanded
its systems approach for the development of assemblies. The Company
gained important knowledge about the systems properties of piston rings
and cylinder liners for heavy commercial vehicle engines. In order to
lower the weight of the power cell components, the Company extended
the simulation to all relevant components, including the connecting
rod. In the future, the ongoing development of coating systems for a
variety of components subject to wear will become increasingly important
for its customers.
In connection with fully variable valve train adjustment concepts, the
Company are testing switchable rollertype cam followers. The CamInCam
camshaft systems have now been put into series production. They enable
variable valve timing, even with a single camshaft in the engine. An
additional valve lift setting feature will be the next modular step
in this direction.
The Company's fast-switching air impulse valve can be used as a system
for the dethrottling of gasoline engines. This allows dethrottling without
interfering with the valve train. Advantages can also be created in
terms of cold start characteristics and internal exhaust gas recirculation,
as well as support for supercharging systems. the Company is intensively
researching the future low-pressure exhaust gas recirculation design,
so that high exhaust gas recirculation rates can be achieved with an
innovative product, even under unfavorable pressure conditions.
- Air Management System: In order to reduce oil consumption and
comply with more stringent emissions legislation, the Air Management
Systems product line is setting standards with novel oil mist separators
integrated into the crankcase ventilation system. Cost-effective passive
impactors, which can be integrated into the cylinder head covers, are
used in this design. The Company's first active electric disk separator
worldwide met with great interest among its customers, particularly
in view of the extreme requirements in the commercial vehicle sector.
In 2006, the Company successfully started series production of plastic
cylinder head covers with integrated oil mist separation and pressure
regulation.
Another milestone in the development of intake modules is the commencement
of series production of a new three-stage resonance-charged intake module.
The two integrated, electrically operated valve actuators using innovative
molded-in assembly technology are MAHLE窶冱 first electrical actuators
developed and produced in house窶芭aking a crucial contribution to
its systems competence and increasing added value. Other new customer
projects for MAHLE mechatronics components are already in the series
production development phase.
- Liquid Managemant System: MAHLE has been developing highly integrated
modular solutions in the Liquid Management Systems product line for
many years. Significant progress in design and construction was made
through weight-optimized and cost-effective modules with added functionality.
Innovative all-plastic oil filter modules, in which the integration
of the oil/water heat exchanger is particularly important for the entire
module, already account for a significant market share. The elimination
of several machining steps in comparison with aluminum high-pressure
die casting housings and increased vertical integration during internal
production increase the added value and process reliability of these
assemblies. Series startups of all-plastic oil filter modules are planned
in various regions in the near future.
Another innovative product brought into series production is the MAHLE
oil pan top, which integrates oil filtration and engine oil cooling
and is inserted between the crankcase and the oil pan. This opens up
new design possibilities for the lubricating oil circuit and the positioning
of components affecting the oil circuit, and thus allows flexible solutions
that utilize the package constraint even more efficiently.
Investment Activities
Capital Expenditure:
EUR in millions | FY2006 | FY2005 | FY2004 |
Piston Systems Product Line | 75 | 87 | 87 |
Cylinder Components Product Line | 47 | 54 | 35 |
Valve Train Systems Product Line | 27 | 41 | 42 |
Air Management Systems Product Line | 35 | 35 | 35 |
Liquid Management Systems Product Line | 42 | 34 | 27 |
Investments by Segments
<Piston Systems Product Line>
-With capital expenditure on fixed assets of EUR 75 million, the investments
made by the Piston Systems product line amounted to 5.4% of its sales,
exceeding depreciation once again. Investments focused on rationalization
and additional quality improvement measures, as well as innovations
in its process technology, and for special customer projects. In the
2006 business year, investments in the commercial vehicle sector for
the recent expansion of capacities for MONTHERM steel pistons and the
optimization of its foundries were given priority.
- In Europe, the Company invested in expanding and optimizing its raw
production equipment and in building up capacities for MONOTHERM steel
pistons. In addition, the machining capacities for pistons for passenger
cars were expanded and automated. In North America, the expansion of
capacities for the production of MONOTHERM steel pistons was also a
focal area of investment. Additionally, the process for putting together
piston/connecting rod assemblies was optimized. In South America, the
partial renovation of output capacities for piston machining, the implementation
of customer projects, and automation measures formed the main areas
of investment. The Asia/Pacific region expanded its fleet of machinery
for melting and casting processes in Japan and Thailand. In addition,
the Nishikawa plant in Japan was closed and production was relocated
to Tsuruoka. In China, investments focused on its company in Nanjing,
to allow for the scheduled ramp-up of output capacities while maintaining
a constant level of quality.
<Cylinder Components Product Line>
- In the past business year, heavy investments were made once again,
although they fell below the previous year's value. The main area of
focus was expanding capacities for the startup of new products. In the
piston rings segment, capacities for commercial vehicle and passenger
car diesel applications were expanded. Investments in cylinder liners
concerned projects in the commercial vehicle sector as well as preparation
for new passenger car projects in Europe. Capacities for finish machining
of connecting rods for passenger car engines were expanded at its location
in Mexico for new customer projects in the USA. These capacities were
reused to a large extent by the Piston Systems product line for the
assembling of power cell units.
- In Brazil, additional capacities for manufacturing pre-products in
raw part manufacturing were created for the bearings product group.
In the piston pins segment, investments focused on rationalization measures
connected with the conversion to improved production processes in raw
part manufacturing.
In 2006, the Company continued with the construction of production facilities
for piston rings in China and expanded capacities for these activities.
Since the first half of the year, its Yingkou location in northern China
has produced piston rings in addition to bearings.
<Valve Train Systems Product Line>
- Investments in the business year focused primarily on rationalization
projects and the expansion of capacities. In Switzerland, a new plant
was built in order to concentrate the local sintering activities at
one location. An additional line was installed in Leibertingen, Germany,
for the production of composite camshafts. In Brazil, the foundry was
extended in order to supply the market in accordance with the increased
demand for camshafts made from chilled cast iron. At the location in
India, additional production capacities were built for the machining
of camshafts. In addition, capital expenditure was used to expand sample
and prototype construction of camshafts. In the cylinder heads product
segment, investments were made in mechanical machining so that unscheduled
orders could be accepted at short notice. At its Polish location, the
product line invested in the production of valve castings and valve
seat guides. Investments were also used to construct valve machining
facilities in China in connection with an existing order.
<Air Management Systems Product Line>
- In the year under report, the expansion of activities in Korea and
China was one of the main focuses of the product line's capital expenditure
on fixed assets. Capital expenditure in Korea was connected with the
construction of a new filter plant in Nam-Gu/Ulsan, which offers logistical
advantages on account of its proximity to major customers. Investments
in China focused primarily on the construction of the new production
plant in Guangzhou, along with the necessary production facilities for
air filters, intake modules, and cylinder head covers, and the expansion
of the plant in Tianjin for the production of intake modules. In addition
to these investments, capital expenditure focused, in particular, on
expanding capacities at the plants in Austria and Mexico.
<Liquid Management Systems Product Line>
- Investments focused on the acquisition-driven expansion of activated
carbon canister production in North America, the expansion of infrastructure
for the new location in Romania, and construction, of the new location
in Shanghai, China, for the production of screw-on filters, as well
as the optimization of production at the locations in Austria, Japan,
and Brazil. The majority of the investments, went toward equipment for
manufacturing new products in the startup phase.