March 16, 2005


The BMW Group continued the successful course of previous years in 2004. Despite adverse global economic conditions, the Group achieved new highs for car sales volume, revenues and earnings. As a result, 2004 has been the most successful year to date in the Group’s history. “The BMW Group has continued to strengthen its earnings power and competitive position over the past year“, commented Helmut Panke, Chairman of the Board of Management of BMW AG at the Annual Accounts Press Conference in Munich on 16 March. “The success achieved during the past year shows that our product and market initiative is now paying off and generating the desired results.“

The BMW Group delivered a total of 1,208,732 cars in 2004, an increase of 9.4% compared to the previous year (2003: 1,104,916 cars). The Group profit from ordinary activities, at euro 3,554 million, surpassed the previous year’s figure by 10.9% (2003: euro 3,205 million). The net profit grew by 14.1% to euro 2,222 million and therefore also reached a new high (2003: euro 1,947 million). Earnings per share were euro 3.30 (2003: euro 2.89) per share of common stock and euro 3.32 (2003: euro 2.91) per share of preferred stock. Despite the currency impact, revenues in 2004, at euro 44,335 million, were 6.8% higher than in the previous year (2003: euro 41,525 million). The return on sales at a group level thus improved by 0.3 percentage points to 8.0% (2003: 7.7%).

Capital expenditure will remain at high level

The BMW Group will continue to strengthen its competitiveness through substantial capital expenditure: “The expected increase in cash flows over the coming years enables us to invest heavily in the future of the Group“, continued Panke. Against this background, some euro 19 billion will be used over the coming five-year period to expand operations. At the same time, it will generate cash flow surpluses on the back of the earnings and financial strength provided by the Group's operating activities.

Sales volume increase for all brands in 2005

The BMW Group continued its strategy of expanding the range of vehicle and is now represented in all relevant premium segments of the international car markets with the BMW, MINI and Rolls-Royce brands. The BMW X3, the BMW 6 Series Coupé and Cabrio models and the BMW 5 Series Touring were all launched during the first half of the year. The product range was further broadened in the second half of 2004 with the introduction of the BMW 1 Series and the MINI Convertible.

The BMW Group will also introduce a host of new models in 2005. Following the new BMW 3 Series, which became available on 5 March, the revised BMW 7 Series, the high performance BMW M5 and BMW M6 models and the BMW 130i will all be introduced to the market during the course of the year. In addition, from spring onwards, the dynamic four-wheel xDrive system will be available for the first time in a BMW sedan, namely in the BMW 525xi and 530xi.

Against the background of the product initiative, the BMW Group aims to achieve new car sales volume highs in 2005 with all three brands. “Today, the BMW Group has a larger product portfolio to offer its customers than ever before. Moreover, the BMW brand has the youngest range of automobiles in the premium segment“, said Panke. Overall, the BMW Group forecasts that the sales volume will grow in the high single-digit range.

Some adverse factors will arise in 2005 as a result of a combination of increased market competition, the effect of the US dollar exchange rate and an above-average increase in the price of important raw materials. Despite these adverse factors, the BMW Group aims for 2005 to achieve approximately the high earnings level of 2004.

Profitable growth with two new model series

As already announced, the BMW Group will continue to expand its range of vehicles by launching two new model series. The Group will thus open up opportunities to increase sales volume and profitability in the future by taking advantage of the increasingly differentiated development of the various segments of the international automobile markets. Both of the new series will contribute actively to the future growth of the BMW Group and thus enhance the value of the business.

One of these future model series will give a new meaning, in typical BMW fashion, to the concept of space; the combination of functionality and variability means that this product will differ from everything that has been on offer before. Driver and passenger alike will experience a newly defined and individualised sense of space, combined with the dynamic driving performance and elegant, sporty look of a BMW. The second of the two new model series will bring together the raised seating arrangements and four-wheel drive qualities of a Sports Activity Vehicle with the exterior feel of a coupé and the driving characteristics of a sporty passenger car. The two new models should be ready for launch from 2008 on.

Munich. The BMW Group has continued its successful growth course in the financial year 2004 and achieved new record figures for sales volume and revenues. Despite adverse currency factors, Group revenues in 2004, at euro 44,335 million, were 6.8% higher than in the previous year (2003: euro 41,525 million). Revenues of the Automobile segment rose by 11.0% to euro 42,544 million (2003: euro 38,317 million). The Motorcycles segment recorded revenues of euro 1,029 million (-2.5%; 2003: euro 1,055 million). Revenues of the Financial Services segment rose by 8.5% to euro 8,226 million (2003: euro 7,582 million).

With 1,208,732 BMW, MINI and Rolls-Royce brand cars sold in 2004, the BMW Group beat the sales volume record set in the previous year by 9.4% (2003: 1,104,916 cars).

On the basis of this performance, Helmut Panke, Chairman of the Board of Management of BMW AG, has also confirmed the earnings forecast for 2004: “We have achieved all of the targets which were set for the year. The Group has been able to expand both its product range and its international market presence and acquired new dimensions. In line with this development, we will also achieve new record earnings for 2004.“

Capital expenditure still at high level
In 2004, the BMW Group invested euro 3,226 million in property, plant and equipment and intangible assets. In addition, development expenditure of euro 1,121 million has been recognised as assets in accordance with IAS, so that total capital expenditure for 2004 amounted to euro 4,347 million. This represents an increase of 2.4% compared to the previous year (2003: euro 4,245 million).

Production volume increased
As a result of the product initiative, the BMW Group also achieved new record figures in production volume terms. In total, 1,250,345 BMW, MINI and Rolls-Royce brand cars were manufactured, 11.7% more than in the previous year (2003: 1,118,940 cars).

Increase in number of apprentices
The BMW Group had a worldwide workforce of 105,972 employees at 31 December 2004, 1.6% more than at the end of 2003. The number of apprentices also rose again. At present, 4,464 young people are learning a profession with the BMW Group, an increase of 3.7% compared to one year earlier.

Automobiles: All brands achieve new record volumes
In 2004, the Group introduced more new models onto the market than ever before. The BMW X3, the BMW 6 Series Coupé and Convertible models and the BMW 5 Series Touring were all launched in the first half of the year. The product range was broadened again in the second half of 2004 with the introduction of the BMW 1 Series and the MINI Convertible.

For the first time in its history, the BMW brand surpassed the one million mark with sales of 1,023,583 cars (+10.3% / 2003: 928,151 units). The BMW 1 Series, available since September, recorded 39,247 unit sales. The fourth generation of the BMW 3 Series has been the most successful series in the BMW Group’s history: since its launch in 1998 more than three million new cars had been sold by the end of 2004. 449,732 BMW 3 Series cars were sold worldwide in 2004 (2003: 528,358 units), the 14.9% reduction being due to model life-cycle factors.

In 2004, more BMW 5 Series were delivered to customers than ever before: the sales volume reached 229,598 units, 23.8% more than in the previous year (2003: 185,481 units).

The strong demand for the new BMW 6 Series Coupé and Convertible models, which were launched in January and March respectively, has been extremely encouraging. By the year-end, 12,332 of the 6 Series Coupé and 8,708 of the 6 Series Convertible had been sold.

In its fourth year of production, the worldwide sales volume of the 7 Series was 47,689 units (-17.6% / 2003: 57,899 units). The BMW 7 Series has moved into first place in the top class in Germany and, with 7,671 vehicle registrations, it is the market leader in the segment for large limousines.

Demand for the BMW X5 continued at a high level. In the fifth full year of production, sales of this Sports Activity Vehicle totalled 104,988 units (-0.5% / 2003: 105,554 units). Since its market launch in 1999, more than 433,000 units of the BMW X5 have been sold. The BMW X3 was introduced onto the market in January 2004 and by the end of the year, 92,248 units had been delivered to customers. With the roadster segment contracting overall, a total of 38,483 BMW Z4 were delivered, 18.2% less than in the previous year (2003: 47,049 units).

Only three years after its market launch, the 500,000th MINI rolled off the production line in Oxford in August 2004. Altogether, sales of MINI brand cars rose to 184,357 units in 2004, an increase of 4.5% compared to the previous year (2003: 176,465 units). Sales of the entry model MINI One went up by 6.8% to 47,641 units (2003: 44,623 units), bolstered by the sales volume of the diesel version, MINI One D, with 16,726 units sold (2003: 9,316 units). The MINI Cooper remains the most popular model, with 77,532 units sold (-11.3% / 2003: 87,378 units). The top model, the MINI Cooper S achieved a sales volume of 40,443 units (-9.0% / 2003: 44,461 units). The MINI Convertible was launched in July 2004 and, by the year-end, a total of 18,741 units had been sold.

792 Rolls-Royce Phantoms were handed over to customers in the past year (2003: 300 units). This is the largest number of Rolls-Royce brand vehicles to have been sold for 14 years. The Rolls-Royce is therefore the indisputable market leader in the absolute luxury class.

Motorcycles just below previous year’s level
The Motorcycles segment sold 92,266 units, just below the record sales volume achieved in the previous year (2003: 92,962 units / -0.7%).

Financial Services: growth course continued
The BMW Group expanded its activities in the Financial Services business and was able to continue its growth course in 2004. The volume of new customer financing contracts rose by 19.1% to euro 20,749 million, and hence a new record level (2003: euro 17,423 million). The proportion of new BMW and MINI cars financed by the Financial Services business in 2004 rose to 42.0% (2003: 38.3%).

Prospects 2005
In the past few years, the BMW Group has significantly expanded the range of products it offers in all of the relevant premium segments. The various new products launched in 2004 will be available in full throughout 2005. In addition, from spring onwards, the dynamic four-wheel xDrive system will be available for the first time in a BMW sedan, namely in the BMW 525xi and 530xi. The launch of the new BMW 3 Series Sedan in March will mark the start of the renewal of the core series. At the same time, series production will commence at the new BMW Leipzig plant.

The BMW Group therefore predicts a sales volume increase for all three brands and thus a new record sales volume level in 2005.

The BMW Group – an Overview 2004 2003 Change in %
Vehicle production
Automobiles (units) 1,250,345 1,118,940 +11.7
Motorcycles (units) 93,836 89,745 +4.6

Deliveries to customers
Automobiles (units) 1,208,732 1,104,916 +9.4
Motorcycles (units) 92,266 92,962 -0.7

Workforce at end of quarter1 105,972 104,342 +1.6


Revenues (euro million) 44,335 41,525 +6.8
thereof:
Automobiles (euro million) 42,544 38,317 +11.0
Motorcycles (euro million) 1,029 1,055 -2.5
Financial Services (euro million 8,226 7,582 +8.5
Reconciliations (euro million) -7,464 -5,429 +37.5
Capital expenditure (euro million) 4,347 4,245 +2.4
1the comparable number of employees at 31 December 2003 after adjusting for disposals and transfers of group companies was 104,250.

FRANKFURT -- A purchasing manager at BMW has been detained by authorities on suspicion of taking bribes, the Munich state prosecutor's office said on Wednesday.

The prosecutors suspect a 54-year-old man may have accepted a payment of $100,000 from a supplier in exchange for giving the firm preference during the allocation of contracts. A 45-year-old worker at the eastern German supplier was also detained.

BMW said the case was an isolated incident which it hoped would be cleared up quickly.

The news comes on the heels of a massive bribery scandal at Volkswagen, where two former personnel managers are under investigation for possible fraud and betrayal of confidence.

Volkswagen recently said it would seek to expand the probe to look into allegations of preferential treatment for works council members.

The affair grabbed headlines for weeks and led to the resignation of two senior VW figures, personnel chief Peter Hartz and works council boss Klaus Volkert.

BMW arch-rival Mercedes Car Group also became mired in a breach-of-trust investigation earlier this year following allegations that former employees used company assets for private construction projects or took bribes from a business partner of the carmaker.

FRANKFURT -- BMW posted a 15-percent fall in quarterly pretax profit, missing analysts' expectations as pricing pressure, a weak dollar and high raw material prices weighed on the world's biggest premium carmaker.

Second-quarter earnings before tax fell to 916 million euros ($1.12 billion) from 1.08 billion euros a year ago.

"The negative currency impact caused by unfavorable transfer exchange rates, the additional cost of raw materials and more intense competition meant that the record levels achieved in the previous year could not be repeated," BMW said.

Pretax profit at the automobile division tumbled 17 percent to 808 million. The pretax margin there sank to 6.8 percent from 8.4 percent a year ago. BMW also has motorcycles and financial services segments.

"Its 6.8 percent automotive margin was clearly below our estimate of 7.6 percent and the topic that seems to be popping up throughout the quarterly report is pricing pressure," said Dresdner Kleinwort Wasserstein analyst Arndt Ellinghorst. He rates BMW an "add" with a 40 euro price target.

"Most of us were already factoring in currency and raw material effects. With BMW in the middle of its product lifecycle sweet spot, pricing pressure could become a bigger issue as its model range ages in 2006 and 2007," he added.

BMW shares fell 3.3 percent to 38.33 euros in morning trading.

EARNINGS VOLATILITY

The group reiterated it aimed to keep 2005 group earnings roughly at the same record level as last year despite an expected 6 to 9 percent increase in vehicle sales.

Finance chief Stefan Krause said the hit to profits from currencies should worsen in the course of this year, even though the group had almost entirely hedged its risk from fluctuations in major exchange rates.

"While we could no longer profit here entirely from the very attractive hedging rates from the past, we are nevertheless hedged this year at rates significantly below current spot rates," the CFO said.

Krause also reaffirmed that high raw material prices would hit company profits with a "low triple-digit-million" impact.

"Positive effects from efficiency improvements and the product momentum will act to compensate for these burdens, but as expected there is a time lag in the impact of these effects which leads to a considerable volatility in quarterly results," the CFO said in a conference call with reporters.

BUYBACK DETAILS EXPECTED

Net profit in the quarter slipped 1.2 percent to 663 million euros amid positive effects from one-off tax issues, beating market expectations. Revenues rose 2.1 percent to 12.16 billion.

Free cash flow at BMW's industrial division, which combines its motorcycle and core automobile businesses, rose to 2.67 billion euros in the second quarter from 1.32 billion a year earlier, boosted in part by a 1-billion-euro gain from the final instalment from Ford for BMW's sale of Land Rover.

Thanks in large part to the steady influx of cash, BMW has launched its first ever share buyback, aiming to purchase up to 10 percent of outstanding shares.

"We're in the final stage of making a decision, and will soon announce how and in what extent this authorization (to buy back shares) will be implemented," Krause said.

In July, BMW said group vehicle sales rose 9.4 percent to 646,531 units as BMW brand deliveries gained 8.6 percent to 538,132 and Mini sales rose almost 14 percent to 108,114 cars.

Chief Executive Helmut Panke told journalists that group car sales rose roughly by more than 10 percent in July.

The European relaunch of its best-selling BMW 3 series saloon in March as well as incremental volume from its new 1 series hatchback is expected to help it keep its lead over arch rival Mercedes-Benz this year as the world's most popular luxury car brand.

DETROIT - BMW of North America LLC will offer digital radios as a factory option in its 2006 7 Series models. The sedans go into production in the fall.

"We are the first to offer HD radio in a production car," says BMW spokesman Bill Scully.

Scully says digital radio - also known as high-definition or HD radio - has several advantages over analog in-car radio receivers. Digital radio receivers offer clearer reception. They also can display information such as weather, traffic, sports scores and stock reports.

And radio stations that broadcast over a digital network can simulcast multiple programming on the same band. Drivers in vehicles with digital radios can tune in those other programs with the touch of a button.

About 460 of the largest 13,000 U.S. radio stations have switched to digital radio. Nineteen offer simulcast programming.

"Digital radio offers advantages over regular radio," says Scully. "AM is upgraded to FM quality and FM is upgraded to CD quality."

BMW has not announced the price of the option. Digital radios retail from $499 to $999 in the automotive aftermarket.

Robert Struble, president of iBiquity Digital Corp., said digital radio has gotten a warm reception from import-brand automakers. He said digital radio receivers will be featured in the next few years as a factory-installed option on eight brands and 30 models.

iBiquity develops and licenses software that allows radio transmissions to be broadcast and received in a digital format.

Struble would not identify the specific manufacturers that will offer the technology, but said European and Asian companies are leading the charge.

"Five years from now you won't be asking for a digital radio," Struble says. "You will be asking for a radio and it will automatically be a digital radio. Just like you don't ask for a color TV; you ask for a TV and it is already color because that is the standard."

iBiquity is based in Columbia, Md. The company was founded in 1991 through a partnership of CBS Inc. and Gannett Co.

Back in time along the data highway

Whether it is highlights of car and motorcycle history, photos from the 1920s or biographies of famous motor racing personalities – anyone wishing to find out about the company and product history of the BMW Group can do so at the click of a mouse thanks to the Historical Archive System. With immediate effect, the BMW Group company archive has recourse to a server which allows fast and systematic access to its historical databases. That makes the BMW Group the only vehicle manufacturer in the world to offer fans of the BMW brand, owners of historic BMW and Mini models, journalists and agencies a freely researchable archive on the internet in this complex format.

If one includes the early days of the factory in Eisenach, the company’s history covers a period of around 100 years. The aim of the company archive is to gather together all documents of significance to the company and product heritage, systematically organize, process, evaluate, and present them. On the internet, important documents from the founding days of the company to the year 1975 can be researched, while around 16,5000 images are available for viewing and ordering. “Thanks to the electronic archive we are now able to offer all internet users the possibility of a virtual tour through the history of the BMW and MINI brands,” says Johann Raiger, who heads the BMW Group company archive.

The database is designed to enable users at all levels of technical expertise and knowledge and with different objectives to find what they are looking for as quickly as possible. In all, there are four search functions to choose from: a simple search for users without previous experience, a field and text search for experienced database users, a thesaurus search for researchers, and an image search. One special feature of electronic searching is that all the data is linked up. For example, if you are seeking information on a particular model, you will be shown not only photos and technical data, but also links to key personalities who played a role in the development of the model.

Large image database for journalists, researchers and private customers

A simple guest login allows any internet user to research the archive. A user name and password are only required for ordering images. Pictures can be ordered using a shopping basket system.

A further service consists of a so-called “lightbox” that activates after login and allows accessed data or entire lists of hits to be deposited in working folders. These entries remain stored and can be accessed again at the next login.

Furthermore, the company archive offers owners of historic BMW models the option of ordering certificates of authenticity. These certificates are made of forgery-proof paper and list individual specifications along with the exact completion and delivery date, the engine and chassis number and – if available – details on equipment levels of the relevant car or motorcycle.

The archive can be accessed on the internet in an English and German version at www.historicalarchive.bmw.com.

How much is a letter worth? When it comes to branding hot cars, BMW says it has invested at least $260.7 million internationally over nearly 30 years promoting its M series.

So it took offense when a Nissan Canada ad campaign used "the M is coming" - with a capital M and a Nissan logo - to advertise the Infiniti M35 and M45.

BMW sued Nissan in Canada's federal court, alleging trademark infringement. It says it fears even aficionados could confuse Nissan and BMW cars.

But BMW has not produced any evidence of harm, the judge noted in denying BMW's request for an injunction to stop the ads.

No proof, no injunction.

The judge, acknowledging the importance of the M cachet to BMW, told the companies the case would be heard as soon as possible, perhaps late this year.

BMW sued Nissan in Canada's federal court, alleging trademark infringement. It says it fears even aficionados could confuse Nissan and BMW cars.