Financial overview

*The numerous product phase-outs and ramp-ups, such as for the BMW X5, impacted the sales and earnings development of the Automotive segment. Production shifts are always associated with reduced production volumes and non-recurring start-up costs. Therefore as had been forecasted, the segment's sales increased only slightly to EUR 574.8 million (2005: EUR 569.5 million). 

Business overview
- Production of headrests and seat covers for the new BMW X5 started in Mexico and the U.S. in the third quarter. Compared with the predecessor model, the order size has increased for Grammer since in contrast to the previous version, the new X5 is also available with a third row of seats.

The trend of the Company's business in China was also positive. 
-The Company produces interior components for Audi's A4 and A6 models. 
-In 2006, the Company received an order from General Motors for developing the center console for the Chinese and U.S. models of the Epsilon platform on which the mid-size models of the GM brands Buick, Opel, Saab and Saturn are based.  The center console of the GM Epsilon platform is the first system the Company has developed outside of Germany in the new Grammer Development Center in Shanghai.

-In Tianjin and Changchun, the Company produces interior components for Volkswagen and General Motors. 

Outlook
- Several new product ramp-ups will impact the business development of the Automotive segment in the first half of 2007. These include production starts for the next generation of the Mercedes-Benz C Class and the Skoda Fabia. This will be followed in the second half, for example, by the production start for the new Audi A4. Despite this, the Company anticipates positive sales and earnings development in 2007.

R&D Expenditure

New Product Developments
Crash active headrests
In a head-on collision, these headrests minimize the danger of cervical spine damage by extending the cushioning by several centimeters within milliseconds. This decreases the distance between the passenger's head and the headrest, which effectively lessens the impact of the collision. The module uses safety sensors that are already integrated into the vehicle so that few additional costs are incurred. In addition, the modules' compact structure makes them suitable for nearly all vehicle models.
This product has been added as a standard feature in the Mercedes E-Class and BMW 7-series.

Capital Expenditure

Overseas Investment
China
At the end of May 2006, the Company inaugurated two new plants in Tianjin and Changchun in China. At both of these locations, the Company manufactures armrests and headrests for AUdi and VW models, and starting in 2007, the Company will produce center consoles for the VW Passat.