BMW AG | Annual Report 2008

Annual Report 2008

A portrait of the Company

Bayerische Motoren Werke G.m.b.H. came into being in 1917, having been founded in 1916 as

Bayerische Flugzeugwerke AG (BFW); it became Bayerische Motoren Werke Aktiengesellschaft

(

BMW AG) in 1918.

Today, the BMW Group is one of the ten largest car manufacturers in the world and possesses, with

its BMW, MINI and Rolls-Royce brands, three of the strongest premium brands in the car industry.

The BMW Group also has a strong market position in the motorcycle sector and operates success-

fully in the area of financial services.

The Number ONE strategy, adopted in 2007, has set the BMW Group on course for a successful

future. The business has been given a new strategic direction with the emphasis on profitability and

long-term value growth. The BMW Group’s activities will remain firmly focused on the premium

segments of the international automobile markets.

The mission statement up to the year 2020 is clearly defined: The BMW Group is the world’s leading

provider of premium products and premium services for individual mobility.

Dual binding

The two books slide apart to reveal the index register.

This provides for fast and easy access to individual chapters.

0

6

8

BMW Group in figures

0

Report of the Supervisory Board

1

4

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds in 2008

Disclosures pursuant to §289 ꢀꢁꢂ and §315 ꢀꢁꢂ HGB

Financial Analysis

1

4

6

2

4

0

2

5

7

4

5

7

9

1

2

5

7

8

Group Internal Management System

Earnings Performance

Financial Position

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on Financial Statements of BMW AG

6

2

8

Risk Management

Outlook

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and Expenses recognised

in Equity

79

Notes to the Group Financial Statements

79

88

94

Accounting Principles and Policies

Notes to the Income Statement

Notes to the Balance Sheet

115 Other Disclosures

129 Segment Information

1

32 Responsibility Statement by the

Company’s Legal Representatives

33 Auditors’ Report

34 Corporate Governance

1

34 Members of the Supervisory Board

37 Members of the Board of Management

38 Corporate Governance in the BMW Group

40 Compliance in the BMW Group

41

Compensation Report

Sub-section of Management Report)

(

147 Declaration of the Board of Management and

of the Supervisory Board pursuant to §161 AktG

148 Other Information

1

48 BMW AG Principal Subsidiaries

50 BMW Group Ten-year Comparison

52 BMW Group Locations

54 Glossary

56 Index

59 Financial Calendar

60 Contacts

ꢃꢄ

BMW Group in figures

Deliveries of automobiles

Revenues

in thousand units

in euro billion

ꢊ,ꢅꢃꢃ

ꢅꢅ

ꢅꢃ

ꢆꢅ

ꢆꢃ

ꢇꢅ

ꢇꢃ

ꢊ,ꢆꢃꢃ

ꢊ,ꢇꢃꢃ

ꢊ,ꢋꢃꢃ

ꢊ,ꢊꢃꢃ

ꢊ,ꢃꢃꢃ

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

ꢊ,ꢋꢃꢌ.ꢈ ꢊ,ꢇꢋꢌ.ꢃ ꢊ,ꢇꢈꢆ.ꢃ ꢊ,ꢅꢃꢃ.ꢈ 1,435.9

ꢆꢆ.ꢇ

ꢆꢄ.ꢈ

ꢆꢉ.ꢃ

ꢅꢄ.ꢃ

53.2

Profit before financial result

Profit before tax

in euro million

ꢆ,ꢅꢃꢃ

ꢇ,ꢈꢅꢃ

ꢇ,ꢃꢃꢃ

ꢋ,ꢋꢅꢃ

ꢊ,ꢅꢃꢃ

ꢈꢅꢃ

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

ꢀꢁ^*

ꢀ5

ꢀꢂ

ꢀꢃ

08

ꢇ,ꢈꢈꢆ

ꢇ,ꢈꢉꢇ

ꢆ,ꢃꢅꢃ

ꢆ,ꢋꢊꢋ

921

ꢇ,ꢅꢌꢇ

ꢇ,ꢋꢌꢈ

ꢆ,ꢊꢋꢆ

ꢇ,ꢌꢈꢇ

351

*

adjusted for new accounting treatment of pension obligations

ꢃꢈ

BMW Group in figures

ꢋꢃꢃꢆ

ꢋꢃꢃꢅ

ꢋꢃꢃꢄ

ꢋꢃꢃꢈ

2008

Change in %

Deliveries to customers

BMW

ꢊ,ꢃꢋꢇ,ꢅꢌꢇ

ꢊꢌꢆ,ꢇꢅꢈ

ꢈꢉꢋ

ꢊ,ꢊꢋꢄ,ꢈꢄꢌ

ꢋꢃꢃ,ꢆꢋꢌ

ꢈꢉꢄ

ꢊ,ꢊꢌꢅ,ꢃꢌꢌ

ꢊꢌꢌ,ꢃꢈꢈ

ꢌꢃꢅ

ꢊ,ꢋꢈꢄ,ꢈꢉꢇ

ꢋꢋꢋ,ꢌꢈꢅ

ꢊ,ꢃꢊꢃ

1,202,239

232,425

1,212

–ꢅ.ꢌ

ꢆ.ꢇ

MINI

Rolls-Royce

ꢋꢃ.ꢃ

–4.3

Automobile deliveries total

1,208,732

1,327,992

1,373,970

1,500,678

1,435,876

ꢊ

Motorcycles

ꢉꢋ,ꢋꢄꢄ

ꢉꢈ,ꢆꢈꢆ

ꢊꢃꢃ,ꢃꢄꢆ

ꢊꢃꢋ,ꢆꢄꢈ

101,685

–ꢃ.ꢌ

Vehicle production

BMW

ꢊ,ꢃꢅꢉ,ꢉꢈꢌ

ꢊꢌꢉ,ꢆꢉꢋ

ꢌꢈꢅ

ꢊ,ꢊꢋꢋ,ꢇꢃꢌ

ꢋꢃꢃ,ꢊꢊꢉ

ꢄꢉꢋ

ꢊ,ꢊꢈꢉ,ꢇꢊꢈ

ꢊꢌꢄ,ꢄꢈꢆ

ꢌꢆꢈ

ꢊ,ꢇꢃꢋ,ꢈꢈꢆ

ꢋꢇꢈ,ꢈꢃꢃ

ꢊ,ꢃꢋꢉ

1,203,482

235,019

1,417

–ꢈ.ꢄ

–ꢊ.ꢊ

ꢇꢈ.ꢈ

– 6.6

MINI

Rolls-Royce

Automobile production total

1,250,345

1,323,119

1,366,838

1,541,503

1,439,918

ꢋ

Motorcycles

ꢉꢇ,ꢌꢇꢄ

ꢉꢋ,ꢃꢊꢋ

ꢊꢃꢇ,ꢈꢅꢉ

ꢊꢃꢄ,ꢅꢈꢅ

ꢊꢃꢆ,ꢇꢉꢄ

ꢊꢃꢈ,ꢅꢇꢉ

104,220

100,041

–ꢃ.ꢋ

–ꢈ.ꢃ

ꢇ

Workforce at end of year

BMW Group

ꢊꢃꢅ,ꢉꢈꢋ

ꢊꢃꢅ,ꢈꢉꢌ

Financial figures

in euro million

Revenues

ꢆꢆ,ꢇꢇꢅ

ꢆ,ꢇꢆꢈ

ꢋ,ꢄꢈꢋ

ꢄ,ꢊꢅꢈ

ꢇ,ꢈꢈꢆ

ꢇ,ꢅꢌꢇ

ꢋ,ꢋꢆꢋ

ꢆꢄ,ꢄꢅꢄ

ꢇ,ꢉꢉꢇ

ꢇ,ꢃꢋꢅ

ꢄ,ꢊꢌꢆ

ꢇ,ꢈꢉꢇ

ꢇ,ꢋꢌꢈ

ꢋ,ꢋꢇꢉ

ꢆꢌ,ꢉꢉꢉ

ꢆ,ꢇꢊꢇ

ꢇ,ꢋꢈꢋ

ꢅ,ꢇꢈꢇ

ꢆ,ꢃꢅꢃ

ꢆ,ꢊꢋꢆ

ꢋ,ꢌꢈꢆ

ꢅꢄ,ꢃꢊꢌ

ꢆ,ꢋꢄꢈ

ꢇ,ꢄꢌꢇ

ꢄ,ꢋꢆꢄ

ꢆ,ꢋꢊꢋ

ꢇ,ꢌꢈꢇ

ꢇ,ꢊꢇꢆ

53,197

4,204

3,670

4,471

921

–ꢅ.ꢃ

–ꢊ.ꢅ

Capital expenditure

Depreciation and amortisation

–ꢃ.ꢆ

ꢆ

Operating cash flow

–ꢋꢌ.ꢆ

–ꢈꢌ.ꢊ

–ꢉꢃ.ꢉ

–ꢌꢉ.ꢅ

Profit before financial result

Profit before tax

ꢅ

351

Net profit

330

1

excluding Husqvarna Motorcycles (13,511 motorcycles)

from 2006 including BMW G ꢄꢅꢃ X assembly by Piaggio S.p.A., excluding Husqvarna Motorcycles (14,232 motorcycles)

Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners.

reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from operating activities of the

Automobiles segment

2

3

4

5

adjusted for new accounting treatment of pension obligations

ꢃꢌ

Chairman of the Supervisory Board

Joachim Milberg

ꢃꢉ Report of the Supervisory Board

Ladies and Gentlemen,

The Supervisory Board oversaw the running of the BMW Group throughout the financial year 2008 on the

basis of detailed written and oral reports provided by the Board of Management and, in joint discussions,

advised the Board of Management on matters of governance. In a total of five meetings, the Supervisory

Board deliberated at length on the current performance and financial position of the BMW Group, risk

management issues (including the level of risk provisions recorded in the Group Financial Statements by

the Board of Management), short and long-term corporate planning and the composition of the Board

of Management.The Supervisory Board made use of regular reports prepared by the Board of Manage-

ment, followed up by talks and discussions, to keep abreast of business developments as well as the

Group’s performance, including variances from budget. The Supervisory Board additionally reviewed and

discussed a number of pertinent topics in more depth on the basis of reports and planning documents

provided by the Board of Management.

Apart from scheduled meetings, the Board of Management also kept the Supervisory Board informed of

the course of business, with particular regard to key performance indicators, personnel figures and other

significant matters.The Chairman of the Supervisory Board was also kept directly informed by the Chairman

of the Board of Management of all major business transactions and projects. The two chairmen ex-

change information regularly throughout the year.

Main focus of the Supervisory Board’s monitoring and advisory activities Over the past year, the

Supervisory Board paid particular attention to the implementation of the BMW Group’s business strategy

and corporate plan as well as its progress in achieving greater competitiveness by rolling out Efficient

Dynamics across the whole product range. Due to the business repercussions of the financial market crisis,

the Supervisory Board both monitored and provided advice to the Board of Management during the

financial year concerning risk management and risk provision.

In the light of declining vehicle residual values on certain markets, the Supervisory Board was kept fully

informed by the Board of Management both regarding the current situation and the future prospects of

the Financial Services segment. The two Boards held in-depth discussions on possible courses of action

in this area.

Furthermore, at the request of the Supervisory Board and in the course of joint discussions, the Board of

Management presented the strategies and measures adopted to optimise the value-added chain.

The Supervisory Board carefully considered the annual budget for the financial year 2009 together with

the Board of Management, including the matter of forecasting sensitivities in the face of current business

conditions. The Supervisory Board also kept itself well informed regarding the financial management of

the BMW Group, including the measures and concepts put forward by the Board of Management to

enhance profitability. The Supervisory Board expressed its support for the measures being taken by the

Board of Management. In this context, the Supervisory Board stressed the necessity of continuing the

dialogue with employee representatives in a fair and constructive manner. After extensive deliberations

on the long-term corporate plan drawn up on the basis of the strategy Number ONE and presented by the

Board of Management, the Supervisory Board granted its formal approval to the plan.

The Supervisory Board firmly believes that the package of measures known as “Efficient Dynamics” – de-

signed to reduce emissions and consumption without compromising the vehicle’s agility or vitality – provides

ꢊꢃ

answers to the needs and expectations of customers and thereby represents an important competitive ad-

vantage for the BMW Group. The Supervisory Board thus fully supports the Board of Management in its

endeavours to strengthen the BMW Group’s competitive edge in this area.

One Supervisory Board meeting was held in Steyr, Austria, where engines are developed and manufac-

tured. Using the Steyr plant as an example, the benefits of a production system based on a value-added

approach were demonstrated to the Supervisory Board. The Supervisory Board also took the opportunity

to witness a demonstration of the electrically powered MINI E.

Corporate governance and Declaration of Compliance The Supervisory Board and the Board of Manage-

ment jointly examined whether the corporate governance principles laid down in the previous year had

been applied during the financial year 2008 and also deliberated in detail on further corporate governance

developments within the BMW Group to be initiated during the current year.The two Boards issued a joint

Declaration of Compliance with the German Corporate Governance Code (GCGC) pursuant to § 161 AktG

and had it posted to the BMW Group’s website. The recommendations of the Government Commission

on the German Corporate Governance Code contained in the revised code issued on 8 August 2008 will

be complied with in the future with one exception: the Supervisory Board has delegated the task of deter-

mining both remuneration and the remuneration system – including the principal contractual components

and the regular review of the system – to the Personnel Committee. The full Supervisory Board is, however,

informed regularly and in great detail of the work of the Personnel Committee. From the point of view of

the Supervisory Board, this division of duties has proved beneficial for its work. All other GCGC recommen-

dations are being complied with. The BMW Group Corporate Governance Code was updated on the basis

of resolutions taken by the Board of Management and the Supervisory Board. The code, setting out the

principles of good corporate governance applied by the BMW Group, is available via the Group’s website.

A detailed report on the amount and structure of the compensation of the Board of Management and the

Supervisory Board can be found in the Corporate Governance Report (pages 141–146).

In conjunction with the code recommendations issued on 8 August 2008 and in preparation for the Finan-

cial Reporting Modernisation Act in Germany, the Supervisory Board transferred further duties relating to

financial reporting to the Audit Committee and extended the terms of reference accordingly.

The efficiency of the Supervisory Board’s work – which the GCGC recommends examining on a regular

basis – was also a separate topic of discussion for the full Supervisory Board. The subject was addressed

in the absence of the Board of Management and prepared for by the completion of a questionnaire pre-

viously devised and distributed by the members of the Supervisory Board. The Supervisory Board believes

that this kind of efficiency examination represents an important part of a continuous process of improving

its work, including cooperation with the Board of Management. As part of this improvement process,

one of the measures decided by the Supervisory Board is the scheduling of more time for the exchange of

information and opinions relating to major technological issues.

There was no indication of any conflicts of interest on the part of members of the Supervisory Board and

Board of Management during the past year.

During the financial year 2008, several changes were made to the composition of the Supervisory Board

(

see below). No member of the Supervisory Board failed to attend more than half of the Supervisory Board

meetings held during their period of office.

ꢊꢊ Report of the Supervisory Board

Description of Presiding Board activities and committee work In a total of six meetings, the Presiding

Board mainly focussed on preparations for the meetings of the full Supervisory Board (Plenum). The Pre-

siding Board selected additional topics for report and made further suggestions for the coverage of the

Board of Management’s reports to the Plenum. During the financial year 2008, the Presiding Board closely

followed the implementation of the Board of Management’s business strategy approved in 2007, including

the one-year and multi-period business plans. Particular attention was given to the impact of the financial

crisis on these plans. The Board of Management also reported to the Presiding Board on its intention to

take out directors’ and officers’ liability insurance on behalf of management. The Presiding Board also con-

sidered concepts for the compensation of Supervisory Board work in order to formulate a proposal for an

amendment to §15 of the Articles of Incorporation at the 2008 Annual General Meeting.

The Audit Committee convened three times during the period under report. One further Audit Committee

meeting took place in the form of a telephone conference. One meeting was devoted to preparing for the

Supervisory Board meeting in spring 2008 at which the financial statements were examined. As part of the

process of electing and engaging the external auditor for the financial year 2008, the Audit Committee also

obtained a Declaration of Independence from the external auditors and a fee proposal from the firm of

auditors subsequently elected as Company and Group auditor. After the Annual General Meeting and in

line with a resolution taken by the shareholders, the Audit Committee accordingly appointed KPMG as

auditor for the financial year 2008. The terms of engagement issued by the Audit Committee set out areas

of audit emphasis which also took account of suggestions made by the full Supervisory Board.

In two further meetings and one telephone conference, the Audit Committee considered the Board of

Management’s detailed reports on the latest risk situation, the risk management system, the risk pro-

vision measures proposed by the Board of Management (especially with respect to the Financial Services

segment) and the internal control system in place throughout the Group. The Audit Committee also re-

ceived reports from the Head of Group Internal Audit on the main areas of emphasis for Group Internal

Audit and from the Chairman of the Compliance Committee regarding progress in implementing the

new Compliance Organisation. In order to support its activities in monitoring the financial reporting

process, the Audit Committee engaged the external auditor to review the Group’s Six-Month Interim

Report.

The Personnel Committee held seven meetings during the financial year 2008 and conducted one further

meeting by telephone. One of the main points dealt with at these meetings was the pre-selection by

the Supervisory Board of two candidates for future membership of the Board of Management as well as

preparatory work on decisions for extending the mandates of current members. In accord with the Board

of Management, the Personnel Committee also deliberated on changes to the organisation of the Board

of Management. The Personnel Committee reviewed the parameters, level of compensation and pen-

sion benefits of current Board of Management members. It also considered the appropriateness of

members’ compensation arrangements in the light of their duties, individual performance and the current

financial condition of the BMW Group. Comparative data resulting from a remuneration study for the

automotive sector and other DAX companies were used in the process. In specific cases, the Personnel

Committee also reached decisions with respect to pension benefits for current and former members of

the Board of Management.

The Nomination Committee, set up in 2007 to find suitable candidates for election to the Supervisory

Board and for inclusion in the Supervisory Board’s proposals for election at the Annual General Meeting,

convened in January 2008 to propose candidates for the forthcoming elections at the Annual General

ꢊꢋ

Meeting 2008. A further meeting was held in February 2009 to propose candidates for the Annual General

Meeting 2009.

The statutory Mediation Committee (§27 ꢀꢍꢂ of the Law on Worker Participation) was not required to con-

vene during the financial year 2008.

The Chairman reported regularly and in depth at Supervisory Board meetings on the status of Presiding

Board and committee work.

Changes in composition and reorganisation of the Board of Management At its meeting on 13 March

2008, the Supervisory Board, in agreement with the Personnel Committee, appointed Ian Robertson as

member of the Board of Management with immediate effect. Mr. Robertson was appointed to the Board

with responsibility for Sales and Marketing after Stefan Krause left the Board of Management and the

company at his own request.

Ernst Baumann, who had been responsible for Human Resources and had held the post of Industrial

Relations Director since 1999, retired from office on 30 November 2008. The Supervisory Board thanked

Mr. Baumann for his 35 years of successful work for the BMW Group. Following the proposal of the Person-

nel Committee, the Supervisory Board appointed Harald Krüger as member of the Board of Manage-

ment for Human Resources and as Industrial Relations Director with effect from 1 December 2008.

Dr. Michael Ganal, member of the Board of Management, passed away on 4 December 2008 at the age of

54 after a serious illness. Up to that point, Dr. Ganal had held Board responsibility for Finances. Dr. Friedrich

Eichiner, who had initially deputised on a temporary basis in agreement with Dr. Ganal, was officially given

responsibility for Finances on 2 December 2008 as part of a Board reorganisation proposed by the Board

of Management and supported by the Personnel Committee. Dr. Ganal – whose return to work had been

hoped for until the end by the Board of Management, Supervisory Board and employees alike – had con-

sistently worked with great energy, discipline and diligence in the interests of the BMW Group, even during

his illness. The company is exceedingly indebted to him and will always remember him with high esteem.

The Group and Brand Development portfolio of tasks for which Dr. Eichiner was previously responsible

has been reallocated to the various Board members as part of a reorganisation of duties within the Board

of Management.

Changes in the composition of the Supervisory Board, Presiding Board and committees The names of

the members of the Supervisory Board committees appear in the Corporate Governance Report. Several

changes occurred in the composition of the Supervisory Board, Presiding Board and the Supervisory

Board’s committees during the financial year 2008: Maria Schmidt, member of the Works Council for the

Dingolfing site, was officially appointed by the District Court of Munich on 25 March 2008 as member of

the Supervisory Board in the role of employee representative. Prof. Dr. Reinhard Hüttl, Dr. Karl-Ludwig Kley

and Prof. Dr. Renate Köcher were newly elected to the Supervisory Board by the shareholders at the

Annual General Meeting on 8 May 2008. The mandates of Arthur L. Kelly, Heinz-Joachim Neubürger and

Dr. Hans-Dietrich Winkhaus came to an end at the close of the Annual General Meeting on 8 May 2008.

Mr. Konrad Gottinger resigned as member of the Supervisory Board with effect from 15 February 2008.

The Supervisory Board would again like to thank all members leaving office for their dedicated and

ꢊꢇ Report of the Supervisory Board

commendable services performed on behalf of the BMW Group. On 13 March 2008 Stefan Schmid was

elected to the Presiding Board and as a member of the Audit Committee and the Personnel Committee.

On 8 May 2008, after many years of service as member of the Supervisory Board, Prof. Dr. Jürgen Strube

was elected to the Presiding Board, the Personnel Committee, the Nomination Committee and the Audit

Committee. He took over the chair of the Audit Committee with effect from 2 December 2008.

Examination of financial statements and the profit distribution proposal The Company and Group

Financial Statements of Bayerische Motoren Werke Aktiengesellschaft for the year ended 31 December

2008 and the combined Company and Group Management Report were audited by KPMG AG Wirtschafts-

prüfungsgesellschaft, Munich, and given an unqualified audit opinion on 18 February 2008. The Audit

Committee initially examined these documents intensively at its meeting on 27 February 2009, discussing

matters in person with representatives of the external auditor. The Supervisory Board subsequently ex-

amined the relevant drafts of the Board of Management at its meeting on 12 March 2009, after hearing the

committee chairman’s report on the meeting of the Audit Committee. The external auditors were also

present at this meeting to report on the main findings of their audit and to provide additional information as

necessary. Documents relating to the Company and Group Financial Statements and to the combined

Management Report as well as the long-form audit reports of the external auditors were made available to

all members of the Supervisory Board in a timely manner. The Supervisory Board concurred with the

results of the external audit and approved the Company and Group Financial Statements of Bayerische

Motoren Werke Aktiengesellschaft for the financial year 2008 prepared by the Board of Management. The

Company Financial Statements are therefore adopted. The Board of Management’s profit distribution

proposal was reviewed by the Audit Committee and the Supervisory Board. They consider the proposal

appropriate and therefore concur with it. In accordance with the conclusion reached on the Supervisory

Board’s examination, no objections were raised.

During the second half of 2008, the BMW Group had to assert itself in the midst of difficult business con-

ditions brought on by a global crisis on the financial markets. The Supervisory Board wishes to thank the

members of the Board of Management, employees and employee representatives for their joint efforts in

strengthening the competitiveness of the BMW Group.

In the opinion of the Supervisory Board the BMW Group is on the right track with its new strategic focus

and its programme of rolling out Efficient Dynamics across the whole of the product range – a programme

which is having measurable success in reducing both emissions and fuel consumption.The Supervisory

Board is convinced that this programme forms a solid foundation for mastering the challenges presented

during a difficult economic period.

Munich, 12 March 2009

The Supervisory Board

Yours,

Chairman of the Supervisory Board

Joachim Milberg

ꢊꢆ

Group Management Report

A Review of the Financial Year

BMW Group’s performance adversely affected by

economic crisis

2008 fell by 5.0ꢏ to euro 53,197 million. Excluding the ex-

change rate impact, automobile business revenues would

have fallen by 5.4ꢏ and Group revenues would have slipped

by 0.8 ꢏ.

The economic climate deteriorated drastically in 2008.

Towards the end of the reporting year, the situation on the

international financial markets reached an unprecedented

pitch. At the same time, the effects of the crisis also spilled

over onto the world’s markets for goods and services.

The rapid pace of the economic downturn and ongoing

uncertainty as to how the economic crisis might proceed

took a heavy toll on the BMW Group’s performance in 2008.

ꢄꢁ

ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

The enormous impact of the economic downturn can be

seen most clearly in the change in reported earnings for

the year. In 2008, the BMW Group recognised an additional

risk provision expense for bad debts and residual value

risks amounting to euro 1,968 million. In addition to this,

expenditure in conjunction with previously announced

measures to cut back the size of the workforce reduced

Group earnings by euro 455 million. Under the weight of

these negative factors, the profit before finance result (EBIT)

decreased by 78.1ꢏ to euro 921 million. These substantial

expenses are also reflected in the profit before tax which

dropped by 90.9ꢏ to euro 351 million.

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Especially during the second half of the year, consumer

uncertainty resulted in a cutback in spending, affecting

nearly all of the world’s major car markets. In many coun-

tries, car sales volumes plummeted compared to the pre-

vious year. The ongoing weak state of the used car mar-

kets also had a negative impact on the reported figures of

the BMW Group. The situation was further exacerbated

by the significant increase of refinancing costs on the in-

ternational capital markets. The weakness of the US dol-

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

In line with its sales volume performance, automobile busi-

ness revenues in 2008 did not come up to the previous

year’s high level. Revenues generated by the Automobiles

segment fell by 9.4ꢏ to euro 48,782 million. The high level

of risk provision expenses for residual value risks in the auto-

mobiles line of business and expenditure incurred in

conjunction with previously announced measures to cut

back the size of the workforce meant that the profit before

finance result (EBIT) of the Automobiles segment, at euro

690 million, was 80.0ꢏ down on the previous year. The seg-

ment profit before tax for 2008 was euro 318 million

lar – particularly during the first half of the year – and the fall

in value of the British pound also had a negative impact.

Despite the sharp drop in raw material prices in the second

half of the year, price levels on the commodity markets

remained above-average for the year as a whole. In addi-

tion to the negative impact of external factors, it was also

necessary for the BMW Group in 2008 to recognise the

cost of implementing previously announced measures to

reduce the size of the workforce. Model life cycle factors

also contributed to a reduction in the number of cars sold

by the BMW Group compared to the previous year. In total,

the BMW Group sold 1,435,876 BMW, MINI and Rolls-Royce

cars during the year under report, 4.3ꢏ fewer than in the

previous year.

ꢀ

–ꢒꢐ.ꢓꢏꢂ.

The Motorcycles segment generated revenues totalling

euro 1,230 million in 2008, similar to the previous year’s level

ꢀ+ꢐ.ꢓꢏꢂ. In the face of difficult business conditions, the

segment profit before finance result (EBIT) fell by 25.0ꢏ to

euro 60 million and the segment profit before tax came in

at euro 51 million ꢀ–ꢓꢑ.ꢓꢏꢂ.

In its motorcycles business, the BMW Group almost

reached the previous year’s level with 101,685 motorcycles

sold in 2008 ꢀ–ꢐ.ꢑꢏꢂ, thus strengthening its competitive

position in a generally contracting market.

The total business volume of the Financial Services seg-

ment rose again in 2008. Revenues increased to euro 15,725

million, 12.8ꢏ up on the previous year. Particularly during

the second half of the year, increasingly adverse business

conditions had a massive impact on earnings in this line

of business. The Financial Services segment reported a

loss before tax of euro 292 million (2007: profit before tax of

euro 743 million) primarily as a result of the risk provision

expense recognised for residual value and bad debt risks.

Financial services business was also severely affected by

the knock-on effects of the global economic and financial

crisis. In particular, the tense situation on the international

used car markets and the higher level of bad debts incurred

necessitated the recognition, over the course of the

year, of substantial expenses for risk provision. In addition,

refinancing costs on the international capital markets in-

creased to reflect higher net interest spreads.

The effective tax rate for the Group, at 6.0ꢏ, was approxi-

mately 13 percentage points lower than in the previous

year. The income tax expense, at euro 21 million, was down

by 97.2ꢏ. The Group net profit for the year declined by

89.5ꢏ to euro 330 million.

Revenue and earnings hard hit by financial crisis

The BMW Group was unable to avoid the effects of global

economic developments in 2008. A slump in revenues in

the final months of the year meant that Group revenues for

ꢊꢅ Group Management Report

BMW Group Revenues by region

in euro million

ꢄꢃ,ꢃꢃꢃ

ꢅꢋ,ꢅꢃꢃ

Rest of Europe

ꢆꢅ,ꢃꢃꢃ

ꢇꢈ,ꢅꢃꢃ

North America

Germany

ꢇꢃ,ꢃꢃꢃ

ꢋꢋ,ꢅꢃꢃ

ꢊꢅ,ꢃꢃꢃ

Asia/Oceania

United Kingdom

Other markets

ꢈ,ꢅꢃꢃ

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

Rest of Europe

North America

Germany

ꢊꢃ,ꢅꢈꢆ

ꢊꢃ,ꢋꢃꢅ

ꢊꢊ,ꢉꢄꢊ

ꢆ,ꢉꢊꢅ

ꢊꢋ,ꢊꢆꢊ

ꢊꢃ,ꢉꢅꢈ

ꢊꢊ,ꢃꢃꢊ

ꢅ,ꢅꢇꢌ

ꢊꢇ,ꢋꢋꢄ

ꢊꢊ,ꢈꢈꢉ

ꢊꢃ,ꢄꢃꢊ

ꢄ,ꢋꢃꢃ

ꢊꢄ,ꢆꢅꢃ

ꢊꢋ,ꢊꢄꢊ

ꢊꢊ,ꢉꢊꢌ

ꢈ,ꢇꢅꢇ

15,780

12,461

10,739

7,523

Asia/Oceania

United Kingdom

Other markets

Total

ꢅ,ꢋꢆꢉ

ꢅ,ꢊꢋꢅ

ꢅ,ꢋꢊꢆ

ꢅ,ꢉꢆꢅ

4,913

ꢊ,ꢆꢇꢊ

ꢊ,ꢌꢉꢆ

ꢊ,ꢉꢈꢉ

ꢋ,ꢊꢉꢊ

1,781

44,335

46,656

48,999

56,018

53,197

Dividend lower than one year earlier

to 7.9 ꢏ ꢀꢓꢐꢐꢔ: ꢔ.ꢖ ꢏꢂ as a result of the lower level of

revenues.

The Board of Management and the Supervisory Board will

propose to shareholders at the Annual General Meeting

that the unappropriated profit available for distribution in

BMW AG, amounting to euro 197 million, be used to pay a

decreased dividend of euro 0.30 for each share of common

stock (2007: euro 1.06/–71.7ꢏ) and a decreased dividend of

euro 0.32 for each share of preferred stock (2007: euro

BMW Group sells majority shareholding in Cirquent

With effect from 30 September 2008, the BMW Group sold

72.9ꢏ of its shares in the IT consultancy company Cirquent

(formerly Softlab) to the Japanese company NTT Data.

The BMW Group continues to hold 25.1ꢏ of the shares.

The remaining 2.0ꢏ of shares are held by Cirquent itself.

1.08/–70.4ꢏ). The proposed reduction in the dividend for the

financial year 2008 reflects the earnings performance.The

distribution rate for 2008 would be 60.8ꢏ ꢀꢓꢐꢐꢔ: ꢓꢓ.ꢓꢏꢂ.

BMW Group Capital expenditure and operating cash flow

in euro million

Capital expenditure down on previous year

ꢈ,ꢃꢃꢃ

Capital expenditure, at euro 4,204 million (2007: euro 4,267

million/–1.5ꢏ), was lower than in the previous year. The

main focus of capital expenditure was on product invest-

ments in conjunction with the production start-ups of new

models such as the BMW ꢈ Series, the Zꢆ, the Xꢊ and

the MINI Convertible as well as infrastructure investments.

ꢄ,ꢃꢃꢃ

ꢅ,ꢃꢃꢃ

ꢆ,ꢃꢃꢃ

ꢇ,ꢃꢃꢃ

ꢋ,ꢃꢃꢃ

ꢊ,ꢃꢃꢃ

The BMW Group invested euro 2,980 million in property,

plant and equipment and other intangible assets ꢀ+ꢕ.ꢖꢏꢂ in

ꢀ

ꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

2

008. In addition, development expenditure of euro 1,224

million was recognised as assets in accordance with IFRS

2007: euro 1,333 million/–8.2ꢏ). The proportion of develop-

Capital

expenditure

ꢆ,ꢇꢆꢈ

ꢄ,ꢊꢅꢈ

ꢇ,ꢉꢉꢇ

ꢄ,ꢊꢌꢆ

ꢆ,ꢇꢊꢇ

ꢅ,ꢇꢈꢇ

ꢆ,ꢋꢄꢈ 4,204

ꢄ,ꢋꢆꢄ 4,471

(

Operating

cash flow

ment costs recognised as assets, at 42.7ꢏ, was at a similar

level to the previous year ꢀꢓꢐꢐꢔ: ꢁꢓ.ꢁꢏꢂ.

ꢊ

ꢋ

1

reported in the cash flow statement up to 2006 as cash inflow from operating activities

of Industrial Operations and from 2007 as cash inflow from operating activities of the

Automobiles segment

The capital expenditure ratio (i.e. the ratio of capital ex-

penditure to Group revenues) increased slightly in 2008

2

adjusted for new accounting treatment of pension obligations

ꢊꢄ

General Economic Environment

Financial crisis reaches the real economy

negative zone. Overall, the euro zone recorded a growth

of only 0.7ꢏ in 2008.

The world economy suffered a major setback in 2008. In

the period up to summer the primary causes were the high

prices of raw materials and the consequences of the re-

cession on the US property market. In the second half of

the year, however, the downturn worsened due to the

massive impact of the financial crisis. The problem was not

confined to the USA, but caused a crisis of confidence on

financial markets worldwide as well as a massive reduction

in lending volumes. The situation led to major disruptions

in the real economy.

In Germany too, the positive growth rate began to slide

from summer onwards. Exports, which had largely been

responsible for economic growth in recent years, ceased

to be the driving force for the economy when even they

began to drop towards the end of the year. Consumer

spending also remained weak. The positive impetus gen-

erated by the employment market right up to the end

of the year was not enough to relieve consumers of their

sense of uncertainty. It was only because of the robust

performance at the beginning of the year that the German

economy could record a growth rate of 1.3ꢏ for the full

year.

ꢄꢁ

ꢊꢆ

ꢄꢂ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Net Assets Position

The downturn in the US economy, which had already begun

mid-2007, continued to gather momentum over the course

of 2008. The decline in prices for residential properties and

cutbacks in housing construction investments worsened

during the year and there was still no end in sight by the

end of 2008.The crisis of confidence on the financial mar-

kets triggered by loan defaults on house mortgages went

on to have a far-reaching impact on the real economy.

American consumers in particular, who had generally been

quite willing to consume in recent years, became extremely

reluctant to spend. Companies increased their level of in-

vestment only slightly in 2008. Only foreign trade volumes

profited from the weakness of the US dollar through to the

middle of the year, allowing the US current account deficit

to be reduced further. Although the US economy grew by

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

Although the new EU member states were still growing

robustly in 2008, the growth rates registered were signifi-

cantly lower than in the previous year. This applied both

to domestic demand and to exports. The current account

deficits in these countries deteriorated noticeably.

It was originally thought that the Japanese economy

would only be marginally affected by the financial crisis.

As a result of the global downturn and the appreciation

of the yen, however, Japan too felt the knock-on effects

of the financial crisis, with recent export figures even

showing negative trends. Domestic demand also weak-

ened perceptibly. As a result economic output decreased

by 0.7 ꢏ.

1.3ꢏ over the full year, it nevertheless registered a downturn

towards the end of the year.

The euro zone was also unable to avoid the effects of the

financial crisis. Since summer 2008, its performance has

been significantly weaker than in preceding years. Only a

very small increase was registered in the area of private

consumer spending. The main aggravating factors were

sharp price rises during the first half of the year and the pe-

tering out of positive developments on the job markets

during the second half of the year. Companies were ex-

tremely reluctant to invest and export figures fell from sum-

mer onwards in the wake of the global downturn, causing

the euro zone current account balance to drop into the

The emerging economies of Latin America and Eastern

Asia continued to register the fastest growth rates along

with the Eastern European markets. Here too, however,

the negative factors outweighed the positive, resulting in

lower growth rates. While the credit markets in those re-

gions were far less affected than those of the industrial na-

tions, these countries were nevertheless hit by the finan-

cial crisis, particularly due to the outflow of capital and

lower export demand. The growth rate in China slowed

down, albeit still at a high level, and the export surplus

Exchange rates compared to the Euro

(

Index: 31December 2003 = 100)

ꢊꢅꢃ

ꢊꢆꢃ

ꢊꢇꢃ

ꢊꢋꢃ

ꢊꢊꢃ

ꢊꢃꢃ

ꢉꢃ

British Pound

US Dollar

Japanese Yen

ꢀ

ꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

Source: Reuters

ꢊꢈ Group Management Report

Oil price trend

Price per barrel of Brent Crude

ꢊꢄꢃ

ꢊꢆꢃ

ꢊꢋꢃ

ꢊꢃꢃ

ꢌꢃ

ꢄꢃ

ꢆꢃ

Price in US Dollar

Price in Euro

ꢋꢃ

ꢀ

ꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

Source: Reuters

shrank considerably. The rate of growth in India also re-

mained lower than the rates registered in preceding years.

Declining export volumes in particular caused the current

account deficit to widen.

means that it lost approximately 28ꢏ in value over the

course of 2008.

Prices of raw materials highly volatile

The global economic downturn caused demand for raw

materials to fall sharply worldwide during the second half

of the year. The price of crude oil reached its peak at ap-

proximately US dollar 150 per barrel in summer 2008. It

then proceeded to fall to under US dollar 40 by the end of

the year. Although reducing supplies to the market, OPEC

US dollar appreciates against the euro

The value of the US dollar against the euro increased sig-

nificantly during the second half of 2008. Having fallen to

an all-time low of almost US dollar 1.60 to the euro in April,

it went on to reach its highest level in two years at US dol-

lar 1.23 to the euro in November. By the end of the period

under report, it had stabilised at a level of approximately

US dollar 1.40 to the euro. The US dollar’s closing rate was

therefore 4.3ꢏ up on one year earlier.

Steel price trend

(

Index: January 2004 = 100)

ꢊꢌꢃ

ꢊꢈꢃ

ꢊꢄꢃ

ꢊꢅꢃ

ꢊꢆꢃ

ꢊꢇꢃ

ꢊꢋꢃ

ꢊꢊꢃ

ꢊꢃꢃ

Similarly, there was a sharp rise in the value of the Japanese

yen compared to the euro. After reaching its lowest level

for the year of almost yen 170 to the euro, by the end of

the year its value was fluctuating between yen 120 and yen

1

30 to the euro. The Japanese currency rose in value by

around 22ꢏ during the year, strengthening from yen 163 to

the euro at the beginning of the year to yen 127 to the euro

at the end of the year.

ꢀ

ꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

By contrast the British pound saw a massive drop in value

in 2008, with an exchange rate of GBP 0.95 to the euro. This

Source: German Federal Statistical Agency

Precious metals price trend

(

Index: 31December 2003 = 100)

ꢆꢃꢃ

ꢇꢅꢃ

ꢇꢃꢃ

ꢋꢅꢃ

ꢋꢃꢃ

ꢊꢅꢃ

ꢊꢃꢃ

Gold

Platinum

Palladium

ꢀ

ꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

Source: Reuters

ꢊꢌ

was unable to stop the price of oil falling. Despite these

developments, the average price of a barrel of Brent Crude

over the entire year was around US dollar 97, some 37ꢏ

above the previous year’s average.

maintain the high growth rates seen in previous years and

expanded by only 6ꢏ. In India, the market increased by

only 2ꢏ. While the South Korean market dipped by more

than 2ꢏ, car sales in Japan fell by almost 4ꢏ.

ꢄꢁ

ꢊꢆ

ꢄꢂ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

The price of steel also witnessed another sharp rise in

In contrast to the generally weaker performance elsewhere,

car markets in Latin America were again able to maintain

their momentum in 2008. Passenger car sales in Brazil

rose by more than 14ꢏ and sales in Argentina went up by

approximately 9ꢏ. In contrast, the Mexican market con-

tracted by almost 7ꢏ.

2

008, reaching its highest point in summer before starting

to fall. The prices of most precious metals dropped from

the middle of the year onwards, some of them drastically.

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Car markets in ꢀꢁꢁꢂ

The global economic downturn also had a severe impact

on the international car markets in 2008. After a long period

of growth, the number of passenger cars sold worldwide

fell for the first time in years. The three main traditional mar-

kets (the USA, Western Europe and Japan) suffered dra-

matic slumps in some areas, while the growth rates of the

emerging markets, while still at a high level, slowed down.

Net Assets Position

Motorcycle markets in ꢀꢁꢁꢂ

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

The economic and financial crisis also affected interna-

tional motorcycle markets in 2008, with hardly any markets

achieving the previous year’s sales levels. Worldwide mo-

torcycles sales in the 500 cc plus segment relevant for the

BMW Group were 6.5ꢏ lower than one year earlier.

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

In the USA, sales figures fell by more than 18ꢏ. The com-

bined effect of high fuel prices and the credit crisis caused

sales of light trucks to drop by approximately 25ꢏ. Only

In Europe, the decline in sales was even greater at 7.2ꢏ.

The German 500 cc plus motorcycle market contracted

by 9.4 ꢏ. The markets in Italy and the United Kingdom de-

clined by 9.4ꢏ and 5.7ꢏ respectively. The 12.1ꢏ drop in

sales in Spain was particularly sharp. The only motorcycle

market in the region to see any growth was France which

edged up by 0.2ꢏ.

13.2 million vehicles were sold in total. The market share for

American manufacturers also continued to shrink. With a

market share of only 47.6ꢏ, for the first time, less than half

of passenger cars registered in the USA were manufac-

tured by domestic carmakers.

Many markets outside Europe also failed to match their

prior year performance. In the USA, the largest motorcycle

market worldwide, motorcycle sales were 7.3ꢏ down on

the previous year. In Japan, the short-fall was 5.8ꢏ.

In Western Europe too the passenger car market experi-

enced sharp volume contraction. The number of new reg-

istrations fell by approximately 8ꢏ to 13.6 million vehicles.

The countries most badly hit were those in which the

property markets had suffered most. The number of new

registrations fell in the United Kingdom by 11ꢏ, in Italy

by 13 ꢏ and in Spain by more than a quarter. By contrast,

the reduction of nearly 1ꢏ recorded in France was quite

moderate.

Financial services market in ꢀꢁꢁꢂ

The worsening economic and financial crisis in 2008 also

presented enormous challenges for the financial services

sector. Financial services providers were forced to recog-

nise huge expenses in the face of a worldwide downturn

in economic growth, much higher financing costs and in-

creased levels of residual value and credit risk.

In Germany, almost 3.1 million passenger cars were sold in

2008, 2ꢏ fewer than in the previous year. Consumers re-

mained reluctant to spend in the face of the financial crisis,

After credit spreads had narrowed somewhat during the

first half of the year, massive losses incurred by numerous

financial institutions and the collapse of one of America’s

largest investment banks in September triggered wide-

spread disruption on the financial markets. Risk spreads

subsequently rose sharply, reaching a peak in December.

The loss of confidence conveyed by these developments

also made it more difficult to supply financial markets with

sufficient liquidity. In the area of leasing, several automo-

bile financial service providers and fleet operators reacted

by increasing prices sharply, confining their operations

to specific markets or even withdrawing altogether from

the leasing business.

the ongoing debate on the taxation of CO emissions and

2

high fuel prices.

After the strong growth rates achieved in the previous year,

Eastern European markets recorded a slight fall in 2008,

with the markets performing differently from one country

to the next. The momentum of the Russian market slowed

down and grew by 16ꢏ in 2008.

The impact of the global downturn in car markets was more

evident in Asia than in the emerging markets of other parts

of the world. The Chinese market was no longer able to

ꢊꢉ Group Management Report

Fluctuations in reference interest rates were extreme in

2

4

008. The American reference rate fell during the year from

.25ꢏ to a historic low (a range of 0ꢏ to 0.25ꢏ). After ini-

tially raising its reference interest rate by 0.25 percentage

points to 4.25ꢏ in July, the European Central Bank lowered

it in stages during the second half of the year to 2.50ꢏ.

The Bank of England lowered its reference rate from 5.50ꢏ

at the beginning of 2008 to 1.50ꢏ at the beginning of Janu-

ary 2009. Developments were also similar in other industrial

countries and in numerous emerging market states. The

prospect of further reference rate reductions also resulted

in a sharp drop in interest rates for contracts with medium-

term maturities.

The effect of the global economic downturn has also been

reflected in a sharp drop in prices on the international used

vehicle markets. The increasing number of insolvencies,

coupled with the reluctance of consumers and dealers to

spend during a period of ongoing uncertainty, resulted in

a huge drop in demand for used cars during the second

half of 2008.

ꢋꢃ

Review of Operations

Sales volume down on previous year’s high level

The car sales volume recorded by the BMW Group in 2008

was influenced – particularly during the second half of the

year – by the ongoing financial crisis and the resulting re-

luctance of consumers to spend. In total, the BMW Group

sold 1,435,876 BMW, MINI and Rolls-Royce cars during the

year under report, 4.3ꢏ fewer than in the previous year.

BMW Group – key automobile markets 2008

as a percentage of sales volume

USA

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

Other

Sales of BMW brand cars in 2008 were also adversely af-

fected by model life cycle factors relating to the BMW

ꢈ Series and the Zꢆ.The number of BMW brand cars sold

in 2008 fell by 5.8ꢏ to 1,202,239 units. The MINI brand

recorded a sales volume of 232,425 units, up 4.3ꢏ on the

previous year, benefiting amongst other things from the

success of the MINI Clubman. The BMW Group sold 1,212

Rolls-Royce cars ꢀ+ꢓꢐ.ꢐꢏꢂ, enjoying an additional boost

when the Rolls-Royce Phantom Coupé became available

from autumn 2008 onwards.

Spain

ꢆꢈ

Financial Analysis

Germany

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

France

China

Net Assets Position

Italy

United Kingdom

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

USA

ꢋꢊ.ꢊ

ꢊꢉ.ꢄ

ꢊꢃ.ꢄ

ꢄ.ꢇ

China

France

Spain

Other

ꢅ.ꢇ

ꢆ.ꢉ

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

Germany

United Kingdom

Italy

ꢆ.ꢋ

ꢋꢌ.ꢃ

Lower sales volumes recorded on many markets

The downturn in the global economy resulted in a signifi-

cant reduction in sales volumes in many countries, partic-

ularly in the second half of 2008. In North America, the BMW

Group recorded an 8.8ꢏ drop in retail sales for 2008 with

and Rolls-Royce brand cars in 2008, 3.8ꢏ fewer than one

year earlier. In Germany, the sales volume of 280,915 units

meant that the previous year’s level was matched despite

the exceptionally difficult business climate in 2008 (2007:

280,938 units). By contrast, the number of cars sold in the

United Kingdom dropped sharply to 151,527 units ꢀ–ꢕꢓ.ꢑꢏꢂ.

Sales were also down in Italy and Spain. With 90,470 units

sold in Italy, the sales volume was 15.4ꢏ down on the pre-

vious year. In Spain, the number of cars sold fell by 18.1ꢏ

to 59,658 units. In France, however, the BMW Group regis-

tered strong growth in 2008, with the sales volume up by

8.3ꢏ to 70,516 units. This was also due to the fact that the

3

31,798 units sold. This includes 303,639 units sold in the

USA, lagging 9.7ꢏ behind the previous year’s performance.

In Europe, the impact of the financial crisis was mostly

felt from mid-year onwards. Negative trends in Western

Europe could not be fully offset by positive growth rates

in Eastern Europe, which in some cases, were still quite

strong. In total, the BMW Group sold 864,583 BMW, MINI

BMW Group Deliveries of automobiles by region and market

in 1,000 units

ꢊ,ꢄꢃꢃ

ꢊ,ꢆꢃꢃ

ꢊ,ꢋꢃꢃ

ꢊ,ꢃꢃꢃ

ꢌꢃꢃ

Rest of Europe

North America

ꢄꢃꢃ

Germany

Asia

ꢆꢃꢃ

ꢋꢃꢃ

United Kingdom

Other markets

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

Rest of Europe

North America

Germany

ꢋꢉꢉ.ꢈ

ꢇꢊꢅ.ꢉ

ꢋꢌꢇ.ꢄ

ꢊꢃꢄ.ꢆ

ꢊꢆꢅ.ꢇ

ꢅꢈ.ꢌ

ꢇꢅꢃ.ꢌ

ꢇꢋꢉ.ꢃ

ꢋꢉꢅ.ꢉ

ꢊꢋꢅ.ꢈ

ꢊꢅꢄ.ꢋ

ꢈꢃ.ꢆ

ꢇꢈꢅ.ꢃ

ꢇꢇꢈ.ꢆ

ꢋꢌꢅ.ꢇ

ꢊꢆꢋ.ꢋ

ꢊꢅꢆ.ꢊ

ꢌꢃ.ꢃ

ꢆꢆꢇ.ꢄ

ꢇꢄꢆ.ꢃ

ꢋꢌꢃ.ꢉ

ꢊꢅꢉ.ꢅ

ꢊꢈꢇ.ꢌ

ꢈꢌ.ꢉ

432.2

331.8

280.9

165.7

151.5

73.8

Asia

United Kingdom

Other markets

Total

1,208.7

1,328.0

1,374.0

1,500.7

1,435.9

ꢋꢊ Group Management Report

taxation of vehicles in France is already emissions-based,

thus allowing the BMW Group to profit to a high degree

from its Efficient Dynamics technology.

BMW sales volume influenced by model life cycle

factors

In 2008, the sales volume performance of the BMW brand

was affected by global economic developments and model

life cycle factors. Sales of the BMW ꢊ Series in 2008 rose

sharply (+35.8ꢏ) to 225,095 units, mainlydue to the availability

of additional model variants since mid-2007. The perform-

ance of the BMW ꢇ Series in 2008 was adversely affected

by the life cycle impact of the Sedan and Touring variants.

The revised versions of these two variants did not become

available to customers until autumn 2008. In total, 474,208

units of the BMW ꢇ Series were handed over to customers

in 2008, a decrease of 14.6ꢏ on a year-on-year basis.

In Asia, some individual markets developed positively, with

the BMW Group achieving a total sales volume of 165,745

units in this region, 3.9ꢏ up on the previous year. Even

though growth on the Chinese markets (China, Hong Kong

and Taiwan) weakened during the second half of the year,

the sales volume on a full-year basis rose by 23.3ꢏ to 75,481

units. In Japan, by contrast, the number of BMW Group

vehicles sold (48,848 units) was well down ꢀ–ꢕꢒ.ꢓꢏꢂ on the

previous year.

Deliveries of BMW automobiles by model variant

in units

2008

ꢋꢃꢃꢈ

Change

in%

Proportion of

BMW deliveries

ꢓꢐꢐꢑ in %

BMW 1 Series

Three-door

Five-door

49,559

122,666

26,304

26,566

ꢇꢃ,ꢉꢌꢆ

ꢊꢇꢇ,ꢅꢋꢅ

ꢊ,ꢋꢌꢈ

ꢄꢃ.ꢃ

– ꢌ.ꢊ

–

Coupé

Convertible

ꢈ

–

225,095

165,803

35.8

18.7

BMW 3 Series

Sedan

246,231

93,191

79,248

55,538

ꢇꢊꢃ,ꢋꢈꢌ

ꢊꢃꢋ,ꢇꢉꢉ

ꢌꢉ,ꢅꢈꢋ

–ꢋꢃ.ꢄ

–ꢉ.ꢃ

Touring

Coupé

–ꢊꢊ.ꢅ

ꢆ.ꢌ

Convertible

ꢅꢋ,ꢉꢈꢃ

4

74,208

555,219

–14.6

39.5

16.8

BMW 5 Series

Sedan

156,825

45,462

ꢊꢌꢊ,ꢅꢇꢆ

ꢆꢉ,ꢇꢊꢊ

–ꢊꢇ.ꢄ

–ꢈ.ꢌ

Touring

202,287

230,845

–12.4

BMW 6 Series

Coupé

8,337

7,962

ꢉ,ꢉꢄꢈ

ꢉ,ꢄꢅꢉ

–ꢊꢄ.ꢆ

–ꢊꢈ.ꢄ

–17.0

Convertible

16,299

38,835

84,440

19,626

1.4

3.2

7.0

9.7

2.2

BMW 7 Series

BMW X3

44,421

111,879

120,617

–

–12.6

–24.5

–3.4

–

BMW X5

1

16,489

BMW X6

26,580

BMW Z4 Series

Coupé

4,035

ꢌ,ꢇꢄꢊ

ꢋꢃ,ꢃꢋꢋ

28,383

–ꢅꢊ.ꢈ

–ꢇꢃ.ꢋ

–36.6

Roadster

13,971

8,006

1

1.5

BMW total

1,202,239

1,276,793

–5.8

100.0

ꢋꢋ

The BMW ꢅ Series registered a 12.4ꢏ decrease in sales

volume, with 202,287 units sold in 2008. The BMW ꢄ Series,

of which 16,299 units were sold, also fell short of its prior

year performance ꢀ–ꢕꢔ.ꢐꢏꢂ.

Deliveries of BMW diesel automobiles

in ꢕ,ꢐꢐꢐ units and as a percentage of total volume

ꢈꢃꢃ

ꢄꢃꢃ

ꢅꢅꢃ

ꢅꢃꢃ

ꢆꢅꢃ

ꢆꢃꢃ

ꢇꢅꢃ

ꢇꢃꢃ

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

Both the BMW ꢈ Series and the BMW Zꢆ were in the final

stages of their life cycles in 2008. This resulted, as ex-

pected, in lower demand. The BMW ꢈ Series was handed

over to 38,835 customers in 2008 ꢀ–ꢕꢓ.ꢖꢏꢂ. The new BMW ꢈ

Series has been available since November 2008. The BMW

Zꢆ recorded a sales volume of 18,006 units in 2008 ꢀ–ꢍꢖ.ꢖꢏꢂ.

The new model was presented in December 2008 and will

be launched on the markets in spring 2009.

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

units

ꢇꢅꢋ.ꢅ

ꢇꢆ

ꢆꢇꢌ.ꢇ

ꢇꢉ

ꢆꢈꢋ.ꢈ

ꢆꢃ

ꢅꢋꢅ.ꢉ

ꢆꢊ

511.2

43

The number of BMW Xꢇ sold dropped by 24.5ꢏ to 84,440

units, partly as a result of the BMW Group’s targeted

management of the number of cars sold on the US market.

Sales figures for the BMW Xꢅ did not quite match the pre-

vious year’s performance, with the sales volume down

by 3.4ꢏ to 116,489 units.The BMW Xꢄ, which has been avail-

able on the markets since spring 2008 was handed over to

as a percentage

of total volume

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

Since the end of 2008, diesel BMW brand cars have also

been available in the USA. The BMW Group therefore fore-

casts that the proportion of diesel engines in the BMW

fleet will continue to increase.

26,580 customers during the period under report.

Proportion of diesel-powered BMW cars remains

at high level

Increase in MINI sales volume

The BMW Group sold a total of 232,425 MINI brand vehicles

worldwide in 2008, corresponding to a growth rate of 4.3ꢏ.

Despite difficult business conditions, the MINI brand was

therefore able to set a new sales volume record.

The proportion of diesel-powered BMW brand cars rose

by two percentage points to 43ꢏ in 2008. The diesel propor-

tion for Europe as a whole was 70ꢏ. In Portugal, the diesel

proportion was as high as 96ꢏ. Diesel-powered BMW cars

are also extremely popular in France ꢀꢒꢓꢏꢂ, Belgium and

Luxembourg ꢀꢒꢕꢏꢂ and Italy ꢀꢑꢒꢏꢂ.

The MINI brand continued to generate a high-value prod-

uct mix in 2008. Overall, 13.5ꢏ of customers opted for the

Deliveries of MINI automobiles by model variant

in units

2008

ꢋꢃꢃꢈ

Change

in %

Proportion of

MINI deliveries

ꢓꢐꢐꢑ in %

MINI

One

27,154

91,695

43,286

62,135

ꢋꢅ,ꢆꢆꢅ

ꢊꢃꢆ,ꢆꢇꢋ

ꢅꢋ,ꢉꢈꢄ

ꢄ.ꢈ

–ꢊꢋ.ꢋ

–ꢊꢌ.ꢇ

–11.3

Cooper

Cooper S

1

182,853

69.8

10.0

MINI Convertible

One

4,100

11,706

7,402

ꢄ,ꢋꢅꢈ

ꢊꢄ,ꢄꢌꢄ

ꢊꢋ,ꢊꢄꢅ

35,108

–ꢇꢆ.ꢅ

–ꢋꢉ.ꢌ

–ꢇꢉ.ꢋ

–33.9

Cooper

Cooper S

23,208

MINI Clubman

Cooper

31,741

15,341

ꢇ,ꢅꢅꢄ

ꢊ,ꢇꢅꢌ

4,914

–

Cooper S

47,082

20.2

MINI total

232,425

222,875

4.3

100.0

ꢋꢇ Group Management Report

MINI brand cars in 2008 – analysis by model variant

Automobile production of the BMW Group by plant in 2008

as a percentage of total MINI brand sales volume

in 1,000 units

ꢋ

_ꢊGraz

Shenyang

Goodwood

Rosslyn

MINI One

Regensburg

Leipzig

Dingolfing

MINI Cooper S

Spartanburg

MINI Cooper

(

including Cooper D)

Munich

Oxford

MINI Cooper

including Cooper D)

MINI Cooper S

MINI One

ꢋꢌ.ꢆ

ꢊꢇ.ꢅ

Regensburg

Dingolfing

Oxford

ꢋꢈꢆ.ꢃ

ꢋꢆꢊ.ꢇ

ꢋꢇꢅ.ꢃ

ꢋꢃꢋ.ꢉ

ꢊꢈꢃ.ꢈ

Leipzig

ꢊꢅꢃ.ꢃ

ꢆꢌ.ꢃ

ꢊ.ꢆ

(

ꢅꢌ.ꢊ

Rosslyn

Goodwood

ꢊ

Munich

Shenyang

ꢇꢇ.ꢈ

ꢌꢋ.ꢉ

ꢋ

Spartanburg

Graz (Magna Steyr)

MINI One, more than half for a MINI Cooper ꢀꢗꢑ.ꢕꢏꢂ and

8.4ꢏ for a MINI Cooper S. Sales of the MINI Convertible

1

Joint venture

Contract production

2

fell in 2008 due to model life cycle factors. This, however,

was more than offset by the success of the MINI Clubman.

The new MINI Convertible celebrated its world debut at

the Detroit Motor Show in January 2009 and will be availa-

ble to customers from spring onwards.

1,439,918 BMW, MINI and Rolls-Royce brand cars were

manufactured by the BMW Group’s worldwide produc-

tion network, a reduction of 6.6ꢏ on a year-on-year basis.

The BMW brand accounted for 1,203,482 units (–7.6ꢏ).

Rolls-Royce records strong growth

Rolls-Royce Motor Cars recorded strong sales volume

growth ꢀ+ ꢓꢐ.ꢐ ꢏꢂ, handing over 1,212 Phantom, Phantom

Drophead Coupé and Phantom Coupé vehicles to cus-

tomers in 2008. The Rolls-Royce brand therefore achieved

its fifth successive annual sales volume increase and re-

mains the most successful manufacturer in the super-luxury

segment. Since its market launch in autumn 2008, a total

of 137 units of the Rolls-Royce Phantom Coupé have been

handed over to customers.

A total of 235,019 MINI brand cars left the Oxford plant in

England during the year under report, a reduction of 1.1ꢏ.

This was partially due to the fact that production of the

previous MINI Convertible came to an end in August 2008

and production of the new MINI Convertible did not com-

mence until December.

A total of 1,417 Rolls-Royce vehicles were manufactured

in Goodwood, England in 2008, corresponding to a pro-

duction volume increase of 37.7ꢏ over the previous year.

Since summer 2008, the new Rolls-Royce Phantom

Coupé is also being manufactured at the Goodwood

plant.

Car production volume reduced on

year-on-year basis

The BMW Group reduced production volumes in 2008 in

line with lower demand on the car markets. In total,

Deliveries of Rolls-Royce automobiles by model variant

in units

2008

ꢋꢃꢃꢈ

Change

in %

Rolls-Royce

Phantom (including Phantom Extended Wheelbase)

644

431

137

ꢈꢅꢈ

ꢋꢅꢇ

–ꢊꢆ.ꢉ

ꢈꢃ.ꢆ

–

Drophead Coupé

Coupé

–

Rolls-Royce total

1,212

1,010

20.0

ꢋꢆ

Highly adaptable production network

practically no smell or emissions – has vast benefits both

for employees and for the environment. It also increases

yield while simultaneously reducing maintenance costs

and optimising tool utilisation times. By 2010, the entire

foundry at the Landshut plant will have been converted to

the use of inorganic sand core technology.

As a result of the reduction in global car sales volumes, the

BMW Group’s production network manufactured fewer

vehicles than originally planned in 2008. Even though a very

large proportion of cars under production are subject to

specific customer orders, production volume has been

adapted even more stringently to market demand. Further-

more, instruments such as flexible working hours and shift

models made it possible to implement reduced produc-

tion schedules to suit each individual plant. The consistent

value-added approach adopted resulted in further process

optimisation during the year. As a result, the targeted

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

At the BMW Regensburg plant, the four-millionth vehicle

to be manufactured since the plant was commissioned in

1986 rolled off the production line at the end of May 2008.

Key milestones in 2008 included the production start-up

of the new BMW Mꢇ Convertible and that of the revised

BMW ꢇ Series Sedan. Work on the extension of the press-

ing plant, which began in 2007, continued according to

schedule in 2008. The BMW Group is investing a total of

euro 90 million on the extension which will be taken into

operations in autumn 2009. From 2009 onwards, the new

BMW Zꢆ will be manufactured at the Regensburg plant.

The installation of the necessary equipment, involving

capital expenditure in the region of euro 100 million, was

begun in 2008.

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Net Assets Position

7

ꢏ to 8ꢏ annual improvement in cost productivity was

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

achieved once again.

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

The BMW Group launched a total of seven new models in

its various plants in 2008, two of which were revised models.

Production of the revised BMW ꢇ Series Sedan and revised

BMW ꢇ Series Touring commenced at the BMW Munich

plant in 2008. Working closely with the MINI plant in Oxford,

approximately 500 units of the MINI E were manufactured

in Munich. Since the beginning of 2009, these cars have

been tested in day-to-day use by selected customers in the

USA. The production of the MINI E enabled valuable know-

how in the use of lithium-ion technology to be gained at the

Munich plant.

Four different BMW models are currently being produced

at the BMW plant in Leipzig: the BMW ꢇ Series Sedan,

the BMW ꢊ Series three-door version, the Coupé and the

Convertible. At the end of May 2008 a “topping out” cere-

mony was held at the BMW Leipzig plant for the new

pressing plant which is adjoined to a component produc-

tion unit for doors, front hatches and rear hatches. The

BMW Group is investing approximately euro 100 million in

this extension project which is to be commissioned by the

end of 2009.

In September 2008, the chassis and powertrain component

production unit at the Dingolfing plant received the “Best

Plant in Europe” award for the outstanding quality of its

management system. In January 2008, the five-millionth

BMW ꢅ Series vehicle (now in its fifth generation) rolled

off the production line at the BMW plant in Dingolfing: it

was a ꢅꢇꢃd Sedan. Production of the new BMW ꢈ Series

began successfully in autumn. The high number of tech-

nical innovations in this car placed particularly high de-

mands on the various production units involved.

With the BMW Xꢄ also now included in its production pro-

gramme, more than 170,000 vehicles were produced for the

first time at the Spartanburg plant in the USA in 2008. Work

began in spring on the large-scale extension of the plant

and is scheduled to take several years. The BMW Group is

investing the equivalent of some euro 510 million in this

project which also includes the construction of a new paint

shop and an additional assembly building. Production of

the BMW Zꢆ at the Spartanburg plant was discontinued

mid-2008 and its successor will be manufactured at the

BMW plant in Regensburg. In its place, the next generation

of the BMW Xꢇ will be produced in Spartanburg and the

plant will become the main production centre for the

BMW X family.

Each of the production units at the Landshut plant played

its part in the successful production start-ups of the various

new and revised models in 2008. The Interior department

saw the commissioning of a new production line with inno-

vative injection moulding machines for the manufacture of

cockpits for the new BMW ꢈ Series. One of the year’s high-

lights for the Exterior department was the introduction of a

special cleaning plant, for the first time allowing large parts

of the outer body skin area to be cleaned. Thus simplifying

processes and minimising throughput times. Above all,

the new system also greatly reduces energy costs and

avoids wastewater entirely.

The first of the revised BMW ꢇ Series Sedans rolled off the

production line at the BMW plant in Rosslyn, South Africa

in 2008. The proportion of vehicles produced for the export

market at the plant during the reporting year rose further to

stand at 83ꢏ.

The introduction of inorganic sand core technology for

series production underlines the high technological manu-

facturing standards applied in the light alloy foundry.This

production method – using mineral binders which cause

At the end of October 2008 a milestone was reached in the

production of engines at the BMW plant in Steyr, Austria:

ꢋꢅ Group Management Report

The first “two-working-day engine” was supplied by the

BMW Steyr plant to the BMW car plant in Dingolfing.The

continuous improvement of production and logistics

processes has now made it possible to reduce the through-

put time from the installation of the first engine compo-

nent to the commencement of assembly at BMW car

plants in Germany to only two days. With this remarkable

throughput time, the BMW Group is setting new stand-

ards for production efficiency in the automotive industry.

In December, the expansion of the BMW development

centre for diesel engines in Steyr was commissioned with

a total investment volume of euro 14 million. The focus is

on increasing capacities in the area of vehicle measurement

technology and function testing. Series production of the

new six-cylinder diesel engine began at the BMW plant

in Steyr in 2008. This diesel engine is a component in the

BMW Group’s Efficient Dynamics package.

Motorcycle sales volume at previous year’s level

The BMW Group sold a total of 101,685 BMW motorcycles

in 2008 and therefore almost achieved the same sales

volume level as in the previous year ꢀ–ꢐ.ꢑꢏꢂ, despite the

overall contraction of the market. The positive perform-

ance by comparison with the competition was helped in

particular by the availability of the Rꢊꢋꢃꢃ GS (including

the Adventure version), F ꢄꢅꢃ GS and F ꢌꢃꢃ GS enduro

models from spring 2008 onwards.

Divergent sales volume performance on the

markets

In total, 71,889 BMW motorcycles were sold in Europe in

2008, only marginally ꢀ– ꢐ.ꢒꢏꢂ fewer than one year earlier.

Within the region, however, the individual markets con-

tinued to perform divergently. The BMW Group set itself

apart from these negative market developments in many

countries and increased market shares. This success was

largely due to the ongoing new model initiative. In Ger-

many, which is the largest single market for BMW motor-

cycles, the sales volume dropped sharply to 18,571 units,

a decrease of 13.7ꢏ against the previous year. There was

also a moderate fall in the number of motorcycles sold in

Spain, with the sales volume slipping by 2.2ꢏ to 10,152 units.

Sales of BMW motorcycles in other European countries

were well up on the previous year, in some cases quite con-

siderably. The 8,211 motorcycles handed over to customers

in France corresponded to a 7.9ꢏ sales volume increase.

More motorcycles were also sold in the United Kingdom

(5,618 units/+7.0ꢏ) and Italy(15,049 units/+4.3ꢏ) than in 2007.

Engines for both the BMW and the MINI brands are pro-

duced at the Hams Hall plant in the United Kingdom. In to-

tal, 371,269 engines were manufactured at the plant in 2008.

1

89,284 of these were produced for BMW brand cars and

81,985 for MINI brand cars. More than 1.5 million engines

have been built at Hams Hall since the plant was commis-

sioned in January 2001.

Activities at the Rolls-Royce Goodwood plant in 2008 were

primarily geared towards preparations for the new model

announced for 2010. The BMW Group is investing a total of

euro 50 million in the expansion of the plant. The work in-

cludes the installation of a second assembly line as well as

the extension of the paint, wood and leather workshops.

In the USA, the BMW Group recorded a sales volume of

11,617 units, 3.9ꢏ down on the previous year’s performance.

This was mainly due to the fact that the F ꢄꢅꢃ GS and the

F ꢌꢃꢃ GS did not become available on the US market until

the second half of the year (and hence later than in Europe).

The Motorcycles segment’s sales in Japan followed the

general market trend. The BMW Group sold 3,015 motorcy-

cles on this market in 2008, an 8.9ꢏ drop on a year-on-year

BMW motorcycles delivered

in ꢕ,ꢐꢐꢐ units

ꢊꢊꢃ

ꢊꢃꢅ

ꢊꢃꢃ

ꢉꢅ

ꢉꢃ

ꢌꢅ

ꢌꢃ

ꢀ

ꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08^*

ꢉꢋ.ꢇ

ꢉꢈ.ꢅ

ꢊꢃꢃ.ꢊ

ꢊꢃꢋ.ꢅ 101.7

*

excluding Husqvarna Motorcycles (13,511 motorcycles)

ꢋꢄ

comparison. The F ꢌꢃꢃ GS did not become available to

customers until January 2009.

BMW motorcycles in 2008 – analysis by series

as a percentage of sales volume

Numerous new models launched/presented

The Motorcycles segment expanded its product range

further in 2008, introducing several new models to the

markets. The revised versions of the Rꢊꢋꢃꢃ GS and

Rꢊꢋꢃꢃ GS Adventure enduro models, the new F ꢌꢃꢃ GS

and F ꢄꢅꢃ GS enduros and the high-performance HPꢋ

sports bike all became available to customers in time for

the start of the season in March. The G ꢆꢅꢃ X, an enduro

designed specifically for sports activities, was launched

in autumn 2008.

K Series

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

F Series

R Series

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

Other new models were presented at the world’s largest

motorcycle show, INTERMOT, in October: the Kꢊꢇꢃꢃ S

sports bike, the Kꢊꢇꢃꢃ R urban bike, Kꢊꢇꢃꢃ GT tourer and

the racing version of the S ꢊꢃꢃꢃ RR. More new models

were presented to the public for the first time during the

Italian EICMA Motorcycle Fair in November, including

the new F ꢌꢃꢃ R urban bike and the purist concept study,

the BMW Custom Concept. The Kꢊꢇꢃꢃ Series models

have been available since the beginning of February 2009,

the F ꢌꢃꢃ R from May onwards. The road version of the

S ꢊꢃꢃꢃ RR will go on sale at the end of the year.

R Series

F Series

ꢅꢅ.ꢅ

ꢇꢋ.ꢌ

K Series

ꢊꢊ.ꢈ

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

were manufactured during the period under report ꢀ–ꢐ.ꢓꢏꢂ.

Production at the Berlin plant increased by 6.2ꢏ to 101,964

units, while the number of motorcycles manufactured by

the cooperation partner, Piaggio S.p.A. in Noale, Italy, de-

creased by 73.1ꢏ to 2,256 units.

Numerous models came off the production lines for the

first time at the Berlin plant in 2008 in conjunction with the

segment’s new model initiative, including three K-Series

models (Kꢊꢇꢃꢃ S/R/GT), the HPꢋ Sport and the G ꢆꢅꢃ X.

Motorcycle production volume at previous

year’s level

Motorcycle production volume in 2008 was almost at the

previous year’s level. In total, 104,220 BMW motorcycles

BMW Group – key motorcycle markets 2008

as a percentage of sales volume

Germany

Other

Italy

United Kingdom

USA

France

Spain

Germany

Italy

ꢊꢌ.ꢇ

ꢊꢆ.ꢌ

ꢊꢊ.ꢆ

ꢊꢃ.ꢃ

France

ꢌ.ꢊ

ꢅ.ꢅ

United Kingdom

Other

USA

ꢇꢊ.ꢉ

Spain

ꢋꢈ Group Management Report

Financial Services segment severely affected by

economic crisis

acknowledge the quality of services provided by the BMW

Group to retail customers and dealers in the area of finan-

cial services.

The worldwide economic and financial crisis affected earn-

ings of the Financial Services segment in 2008 more se-

verely than expected. Above all else, the tense situation on

the international used car markets and the higher level of

bad debts risk necessitated the recognition of substantial

expenses for risk provision. For a current assessment of

risk in the financial services business, reference is made to

the risk report on pages 64–65.

Retail customer business continues to expand

Credit and lease business with retail customers, the seg-

ment’s largest line of business, again grew strongly in 2008.

The value of new contracts signed with retail customers in

2008 amounted to euro 29,341 million, representing a 3.1ꢏ

increase over the previous year. 1,197,871 new contracts

were signed in 2008, 10.3ꢏ more than one year earlier. Well

over half of these contracts related to new vehicles manu-

factured by the BMW Group.

The business volume in balance sheet terms at 31 Decem-

ber 2008 amounted to euro 57,587 million and therefore

increased by 12.3ꢏ on a year-on-year basis. 3,031,935 lease

and credit contracts were in place with dealers and retail

customers at 31 December 2008, 15.3ꢏ more than at the end

of the previous reporting period. The increase was due,

amongst other reasons, to the repurchase of a previously

off-balance-sheet portfolio of vehicles which had included

a part of the leasing business for Germany. The proportion

of new BMW Group cars leased or financed by the Finan-

cial Services segment in 2008 went up by 3.8 percentage

points to 48.5ꢏ.

Lease contracts accounted for 34.2ꢏ of new business with

retail customers. This was 4.0 percentage points down

on the previous year and is the result of a targeted shift in

focus towards credit financing. In terms of new contracts,

lease business was 1.4ꢏ lower and credit finance business

was 17.5ꢏ higher than in the previous year.

In the area of used car financing, the number of new con-

tracts rose by 22.2ꢏ. Almost three quarters of these related

to the credit financing of used BMW and MINI brand cars.

Targeted regional expansion continued

The Financial Services segment continued its strategy of

targeted regional expansion in 2008. In October 2008, an

agreement was signed with BMW Brilliance Automotive

Ltd., Shenyang, concerning the establishment of a joint

venture for financial services products in China. In conjunc-

tion with a cooperation agreement with Nordea Finance,

a subsidiary of Scandinavia’s largest bank, Nordea Bank,

financing products have also been available to retail cus-

tomers in Estonia, Latvia and Lithuania since July 2008.

During the first half of the year, the Financial Services seg-

ment received its banking licence for Russia. Retail cus-

tomer financing operations were commenced on this mar-

ket in July 2008.

At the end of the reporting period, the Financial Services

segment had a portfolio of 2,785,509 contracts with retail

customers, 16.0ꢏ more than one year earlier. The number

of contracts in place with retail customers in Germany

rose by 19.4ꢏ, partly due to the repurchase of a previously

off-balance-sheet portfolio of vehicles which had included

a part of the leasing business for Germany. The contract

portfolio in the remaining European markets grew by

13.9 ꢏ and in the Asia /Oceania/Africa region by 14.1 ꢏ.

The Americas region, with 916,509 contracts, continues

Contract portfolio of BMW Group Financial Services

in 1,000 units

Study bears out retail customer and dealer

satisfaction

ꢇ,ꢃꢃꢃ

ꢋ,ꢌꢃꢃ

The internationally renowned market research institute,

J.D.Power and Associates, published the results of its

Consumer Financing Satisfaction Study 2008 in

ꢋ,ꢄꢃꢃ

ꢋ,ꢆꢃꢃ

SM

ꢋ,ꢋꢃꢃ

December 2008. The BMW Group’s Financial Services

segment took first place in both award categories for

customer satisfaction in the USA.

ꢋ,ꢃꢃꢃ

ꢊ,ꢌꢃꢃ

ꢀ

ꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

SM

In the Dealer Financing Satisfaction Study 2008 pub-

lished in September 2008, the segment headed all cate-

gories for dealer satisfaction in the USA. These awards

ꢊ,ꢌꢆꢇ

ꢋ,ꢃꢌꢈ

ꢋ,ꢋꢈꢊ

ꢋ,ꢄꢇꢃ 3,032

ꢋꢌ

and fleet management, offering its services under the

brand name “Alphabet”. The contract portfolio for fleet

business continued to grow in 2008 despite difficult mar-

ket conditions. At the end of the reporting period, fifteen

Alphabet fleet management entities were managing a

portfolio of 322,755 contracts worldwide, 15.3ꢏ more than

one year earlier. Alphabet was thus able to strengthen its

market position further.

Contract portfolio retail customer financing of

BMW Group Financial Services 2008

as a percentage by region

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

Asia/Oceania/Africa

America

Germany

ꢆꢈ

Financial Analysis

Sharp volume rise in deposit business

Despite the difficult climate caused by the financial and

economic crisis, the Financial Services segment’s deposit

volume totalled euro 8,209 million at the end of the report-

ing period. This was 43.2ꢏ higher than the level one year

earlier.

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

Rest of Europe

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

America

Rest of Europe

ꢇꢋ.ꢉ

ꢋꢈ.ꢅ

Germany

ꢋꢄ.ꢄ

ꢊꢇ.ꢃ

Asia/Oceania/Africa

The number of securities custodian accounts maintained

at the end of the reporting period totalled 31,681, roughly in

line with the previous year (–0.4ꢏ).

to constitute the largest proportion of the contract portfo-

lio. Here, the growth rate compared to one year earlier was

Credit card business could not be maintained at the pre-

vious year’s level. The managed portfolio comprised

355,606 BMW and MINI credit cards at 31 December 2008,

a decrease of 9.7ꢏ. The BMW Card is included in the

product portfolio in ten countries and the MINI Card in four.

15.9ꢏ.

Dealer financing volumes up

The Financial Services segment supports the BMW Group

dealer organisation with a comprehensive range of prod-

ucts. Dealer financing business increased in 2008. At 31 De-

cember 2008, the managed business volume stood at euro

Growth in insurance business

In addition to credit financing and lease business, the Finan-

cial Services segment also operates as an agent for vehi-

cle and mobility-related insurance products in more than

30 markets. In this context, the Financial Services segment

maintains cooperative arrangements with local insurance

companies. The internationalisation of the retail customer

insurance line of business was continued in 2008.The range

of combined insurance and financing products was ex-

panded and adapted to meet a growing demand amongst

customers for one-stop solutions.

8

2

,887 million, up 6.3ꢏ against the previous year. In total,

46,426 dealer financing contracts were in place at the end

of the reporting period.

Multi-brand financing business up on

previous year

The multi-brand financing line of business was further ex-

panded in 2008. Under the brand name “Alphera”, credit

financing, leasing and other products are marketed to retail

customers via dealerships in 25 markets. In the previous

year, the “upꢋdrive” brand name was successfully intro-

duced for direct business. This sales channel was further

expanded in four markets during the year under report.

The outcome of these measures was that the number of

new business insurance contracts increased by 25.0ꢏ

to 493,672 contracts. During the course of 2008, the port-

folio of insurance contracts exceeded the one million mark

for the first time. 1,146,967 contracts were in place at 31 De-

cember 2008, 21.1ꢏ more than at the end of the previous

year.

In total, 172,317 new business multi-brand financing con-

tracts were signed in 2008, 38.3ꢏ more than in the previous

year. The largest proportion of new contracts related to the

Americas and Asia / Oceania / Africa regions.

Financial and economic crisis influences risk

situation

Fleet business continues to grow

The BMW Group’s international brand-neutral fleet busi-

ness operates in the fields of financing, full-service leasing

Credit and lease business was exposed to a higher level of

credit risk in 2008. Compared to the previous year, the bad

debts ratio rose by 13 basis points to 0.59ꢏ.

ꢋꢉ Group Management Report

The interest rate risk is managed within the Financial

Services segment using a risk-return approach. Diversified

value-at-risk , as measured to quantify the interest rate

risk, increased during the year from euro 37.3 million to

euro 51.0 million.

Size of workforce reduced

The BMW Group’s workforce was reduced by 7,498 em-

ployees (–7.0ꢏ) during the financial year 2008 to stand

at 100,041 employees at 31 December 2008. This is largely

due to the implementation of previously reported meas-

ures to reduce the size of the workforce and the sale

of business units in 2008. The workforce reduction pro-

gramme resulted in a sharp rise in the employee fluctua-

tion ratio at BMW AG.

*

Based on a 99ꢏ confidence level and a holding period of 10 days

Despite the overall reduction in personnel, the BMW Group

nevertheless recruited staff on a targeted basis in 2008.

In addition to the recruitment of almost 1,200 new appren-

tices, 226 permanent posts were also filled during the

course of the year at BMW AG. Approximately 74ꢏ of the

BMW Group’s workforce is employed in Germany.

Number of apprenticeships remains high

1

,177 young people started their apprenticeships with the

BMW Group at the beginning of the training year 2008.The

number of apprentices recruited has been consistently

BMW Group Apprentices at 31 December

ꢅ,ꢅꢃꢃ

ꢅ,ꢃꢃꢃ

ꢆ,ꢅꢃꢃ

ꢆ,ꢃꢃꢃ

ꢇ,ꢅꢃꢃ

ꢇ,ꢃꢃꢃ

ꢋ,ꢅꢃꢃ

ꢀ

ꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

ꢆ,ꢆꢄꢆ

ꢆ,ꢇꢅꢉ

ꢆ,ꢋꢌꢊ 4,102

BMW Group Employees

31.12.2008

ꢇꢊ.ꢊꢋ. ꢋꢃꢃꢈ

Change

in %

Automobiles

92,924

2,917

4,077

123

ꢉꢌ,ꢅꢆꢌ

ꢋ,ꢉꢌꢉ

–ꢅ.ꢈ

–ꢋ.ꢆ

– ꢃ.ꢅ

–ꢉꢇ.ꢅ

–

Motorcycles

Financial Services

Other

ꢆ,ꢃꢉꢈ

ꢊ,ꢉꢃꢅ

thereof consultancy/software

BMW Group

–

ꢊ,ꢈꢉꢇ

100,041

107,539

–7.0

ꢇꢃ

1

on a high level for many years. At the same time, due to

their good performance, many apprentices were able to

shorten their training periods, resulting in decreased num-

bers in statistical terms at the year-end. The BMW Group

employed 4,102 apprentices at 31 December 2008, 4.2ꢏ

fewer than one year earlier.

Employee fluctuation ratio BMW AG

as a percentage of workforce

ꢈ.ꢃ

ꢄ.ꢃ

ꢅ.ꢃ

ꢆ.ꢃ

ꢇ.ꢃ

ꢋ.ꢃ

ꢊ.ꢃ

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

BMW AG’s apprenticeship ratio in Germany (i.e. the ratio of

apprentices to the total workforce) increased slightly in 2008

by 0.2 percentage points to 5.0ꢏ. Starter programmes for

high school leavers and university graduates are also in

place to complement the range of opportunities available to

those about to start their careers with the BMW Group.

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

Net Assets Position

ꢋ

ꢊ.ꢉꢊ

ꢋ.ꢆꢅ

ꢋ.ꢄꢌ

ꢋ.ꢄꢄ

5.85

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

1

Number of employees on unlimited employment contracts leaving the company

after implementation of previously reported measures to reduce the size of the

workforce

Focused basic and further training

2

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

As a premium provider, the BMW Group attaches great im-

portance to both the basic and the further training of its

workforce. Further training is always tailored to suit require-

ments and carried out with specific objectives in mind.

The BMW Group continued to invest at a high level during

the financial year 2008. In response to difficult business

conditions, the BMW Group’s further training activities were

focused on selected target groups and specific priority

topics in 2008. As a consequence, total expenditure of euro

Attractiveness as employer confirmed

The BMW Group continued to be amongst the most at-

tractive employers in 2008. This fact was underscored by

numerous studies and ranking lists. In the study entitled

“Germany’s Most Popular Employers” (Trendence), young

academics from business and engineering fields judged

the BMW Group to be one of the most popular employers

in Germany. Another study, the “Universum Student Survey

2008” (Universum) also came to the same conclusion;

further confirmation of the fact that the BMW Group has an

excellent reputation amongst business and engineering

students.

154 million was 14.9ꢏ lower than in 2007.

Demand for positions abroad remains strong

The international transfer of know-how and networking at

all levels are crucial factors for businesses such as the

BMW Group. In view of this fact, specialists are, for exam-

ple, specifically sent to various manufacturing sites when

production start-ups commence for new models, thus

ensuring a consistent level of high quality during each start-

up throughout the entire production network. An increas-

ing number of employees are also taking on international

duties within the development and purchasing network.

“Today for Tomorrow” project – taking a proactive

approach to demographic realities

The ageing of society affects the economy as a whole as

well as each individual company. The BMW Group is there-

fore consciously taking up the challenges of demographic

change with an awareness of the opportunities it offers.

During the year under report, more than 650 BMW AG

employees worked outside their home country, Germany.

The main targets were North America, the United Kingdom

and China. Furthermore, approximately 175 employees

from non-German BMW Group locations were on assign-

ments in Germany or at international sites away from their

home countries. Employees on longer-term placements

spend an average of two-and-a-half years abroad. This is

a sufficient length of time for them to pass on process and

technical know-how, receive further training while abroad

and, at the same time, gain international experience which

will stand them in good stead during the course of their

subsequent careers.

The cornerstone for maintaining the ability of the BMW

Group’s workforce to perform with the appropriate set

of skills was laid in the wide-ranging project “Today for

Tomorrow”. The project was divided into five main areas

of action: health management and preventative care, quali-

fications and skills, work environment, individual working-

life time models and communication. During the second

half of 2008, further steps were taken in successfully imple-

menting the results of the project within the organisation.

Amongst a wide range of measures taken, a great deal of

effort was expended in 2008 to adapt production systems

ꢇꢊ Group Management Report

to the ergonomic needs of older employees. A good

example of this is the “Work System 2017” pilot project –

the only project of its kind currently being carried out with-

in the automotive industry. Under this project, the forecast

age structure for 2017 has been “reproduced” for everyday

work purposes in one production section at the Dingolfing

site, thus enabling a targeted evaluation of whether the

measures and instruments employed are practical and

effective. The aim now is to pass on the know-how gained

in the pilot project to other areas of the business, the ulti-

mate goal being more suitable technical and organisational

working conditions for older employees – particularly in

terms of workplaces, working hours and job structures.

greater consideration is given to the contribution made by

an individual when determining the overall level of remu-

neration. This approach takes better account of the under-

lying principle of performance and reward and is also an

effective way of motivating managers to meet their targets.

In future, annual bonuses will be linked to the post-tax re-

turn on sales, the net profit and the dividend level. Growth

and profitability strategies are therefore now directly linked

to the level of management remuneration at BMW AG.

Internationalisation of personnel activities

The Excellence in Human Resources (EHR) programme in

place since 2002 has consistently improved the efficiency

of the personnel and human resources function within the

BMW Group. An important objective of EHR is to ensure

that employees receive efficient service and competent

advice from members of the human resources department

and a swift response to their enquiries.

A new working time model, known as “Full-time Select”

was also introduced in 2008, giving employees the option

to take additional days off with corresponding reductions

in pay. This working time model was well received by the

workforce, providing additional scope for employees to

structure their own time.

Based on the experiences made in Germany, organisational

structures, procedures and supporting IT systems were

adapted for international use and successfully introduced

in the United Kingdom in November 2008. A system is now

in place that offers employees at the Hams Hall, Good-

wood and Oxford sites standardised procedures for con-

tacting the Human Resources department. Routine and

special topics relating to matters such as recruitment and

training have also been standardised and can be handled

centrally, thus improving efficiency whilst maintaining a

high quality of service. The changeover will be completed

in the United Kingdom with roll-out of the new system to

the Bracknell and Hook sites in 2009.

Competitive level of personnel expense

Maintaining a competitive level of personnel expense plays

a major role in the success of the BMW Group, and thus in

the securing of jobs. Personnel expense management is

therefore gaining in importance in an increasingly competi-

tive environment.

The BMW Group does not, however, take the one-sided

approach of simply focusing on reducing costs. The main

emphasis is placed on achieving greater efficiency by

increasing productivity. The high degree of motivation

amongst the workforce on the one hand and the em-

ployee-friendly orientation of the BMW Group on the other

are backed up by performance-based and profit-linked

remuneration arrangements and flexible working time

models. Remuneration, working time rules and other ben-

efits are reviewed and adjusted regularly in close coopera-

tion with employee representatives. In 2008, for example,

the corridor for employees with a BMW time account

was widened to +/– 300 hours. The flexibility thus gained

gives the BMW Group more scope to adapt production to

fluctuating demand without affecting employees’ pay or

personnel expense.

New structure for management remuneration

The remuneration system for middle and senior manage-

ment was restructured in 2008 in an attempt to embed the

BMW Group’s new strategic direction in the management

remuneration system at BMW AG. Under the new system,

ꢇꢋ

Further enhancements in environmentally

compatible vehicle design

Strict management of environmental care activities

The BMW Group applies the “Clean Production” phi-

losophy to its production activities. In line with this forward-

looking commitment to environmental care, the BMW

Group endeavours to achieve systematic and consistent

reductions in the volume of resources used and to lessen

the impact of production activities on the environment.

In order to monitor this, environmentally relevant indicators

are measured automatically and reported on a monthly

basis.

The BMW Group again set new milestones in improving

the environmental compatibility of its products in 2008.

One example of this is the creation of a comprehensive

product data system containing details of the material

composition of all components used in a vehicle. In May

2008, with the help of this system, the BMW Group became

the first carmaker to present a virtual “material balance

sheet” (for the new BMW ꢈ Series) conforming to interna-

tional standard ISO 22628.

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

The following key indicators – expressed as amounts per

vehicle produced – are integral components of the group-

wide target system and are managed accordingly:

Net Assets Position

Furthermore, in a large-scale industrial trial, the BMW

Group was able to demonstrate that, with the aid of post-

shredder technology, BMW Group-manufactured cars

are at least 85ꢏ recyclable and up to 95ꢏ recoverable. Un-

der the post-shredder method (after vehicles have been

dismantled and shredded mechanically), shredder residue

fractions are sorted and sifted into their various constituent

materials such as metals, plastics and minerals, in prepara-

tion for further processing.

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

– energy consumption

– water consumption

– process wastewater

– solvent emissions

– waste for disposal

CO emissions per vehicle produced are also recorded

2

Thanks to the extensive preparatory work carried out, the

BMW Group passed the preliminary tests of the relevant

licensing agency in May 2008. The BMW Group therefore

complies with the regulations of the European Directive

based on the amount of energy consumed and the energy

mix used.

The target for the global production network is to reduce

these key indicators by 30ꢏ between 2006 and 2012. This

entails achieving an average reduction of 5ꢏ p.a. These

targets can, however, vary as a result of model production

start-ups, discontinuations or changed production vol-

umes.The reduction across all key indicators is additionally

examined on the basis of an Environmental Efficiency

Ratio (EER). The EER computation for 2008 showed that

the improvement in resource efficiency remained within

the agreed target corridor.

2005/64/EG on type approval of motor vehicles with regard

to their reusability, recyclability and recoverability. The use

of recovered materials (recyclates) was also increased in

2008. The proportion of recyclates used in the new BMW

ꢈ Series for instance was increased by approximately 15ꢏ

compared to the preceding model. The use of quality-ap-

proved recyclates reduces costs and preserves resources

while still ensuring compliance with established quality

standards.

Energy consumed per vehicle produced

CO emissions per vehicle produced

2

in MWh/vehicle

in t/vehicle

ꢊ.ꢃꢅ

ꢇ.ꢊꢃ

ꢇ.ꢃꢃ

ꢋ.ꢉꢃ

ꢋ.ꢌꢃ

ꢋ.ꢈꢃ

ꢋ.ꢄꢃ

ꢊ.ꢃꢃ

ꢃ.ꢉꢅ

ꢃ.ꢉꢃ

ꢃ.ꢌꢅ

ꢃ.ꢌꢃ

ꢀꢃ^*

08

ꢀꢁ

ꢀ5

ꢊ

ꢀꢂ

ꢀꢃ

ꢋ

08

ꢀꢁ

ꢀ5

ꢀꢂ

ꢋ.ꢉꢆ

ꢋ.ꢉꢃ

ꢋ.ꢈꢌ

2.80

ꢃ.ꢉꢆ

ꢃ.ꢉꢉ

ꢃ.ꢉꢆ

ꢃ.ꢌꢆ

0.82

*

1

Basis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich,

Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall,

Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood,

Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang.

The increase is attributable to a change in the energy mix.

2

B asis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich,

Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall,

Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood,

Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang.

ꢇꢇ Group Management Report

Fewer resources, lower emissions

annual energy consumption of a German city of 170,000 in-

habitants. In financial terms, the resulting savings amounted

to approximately euro 62 million.

Energy savings totalling more than 650,000 MWh achieved

throughout the BMW Group reduced energy costs by

approximately euro 35 million in 2008. The reduction of other

key indicators such as water consumption, process water

and waste for disposal resulted in savings of approximately

euro 1.2 million in the year under report.

Most noticeably, the BMW Group was able to reduce its

electricity consumption in 2008. Due to the higher CO₂

emission factor for electricity compared to that for gas,

CO emissions per vehicle produced decreased from

2

The groupwide activities undertaken to reduce energy con-

sumption have been managed since the beginning of 2007

as part of an international energy project. Energy con-

sumption per vehicle produced, at 2.80 MWh, came very

close to the previous year’s level of 2.78 MWh. Considering

the 6.6ꢏ reduction in vehicle production compared to the

previous year, it was only possible to maintain this figure

at roughly the previous year’s level by reducing energy

consumption volumes in absolute terms. Some of the fac-

tors that contributed to the savings were the combined

heat and power plants used in the Landshut and Steyr

plants as well as the conversion of the heating system to

natural gas at the Swindon plant in the United Kingdom. A

wide range of analyses and measures to save even more

energy were carried out in a pilot project at the BMW plant

in Munich in 2008. The know-how gained will now be intro-

duced in stages at further locations throughout the pro-

duction network. At a series of energy awareness seminars,

BMW Group employees in the Berlin, Dingolfing, Leipzig,

Munich and Steyr plants were shown how they can make

an important contribution towards reducing energy con-

sumption at their workplaces.

0.84 tons of CO in 2007 to 0.82 tons in 2008.

2

Water consumption continued to be exceedingly low. In

2008, water consumption per vehicle produced was ap-

proximately 2.56 m³ (2007: 2.61 m³). In absolute terms, the

BMW Group used 335,000 m³ less water than in the pre-

vious year. Process wastewater per vehicle produced in

2008 remained steady at the previous year’s level of 0.64 m³.

Here too, the absolute amount was reduced by approxi-

mately 68,000 m³.

Waste for disposal (i.e. waste that could not be recycled)

decreased by more than 8ꢏ compared to the previous

year. The figure currently stands at 14.84 kg per vehicle

produced. In addition, improved separation and sorting

methods increased the proportion of recycled waste, there-

by reducing the volume of waste for disposal.

Solvent emissions per vehicle produced fell sharply (by

almost 17ꢏ) to a new low of 1.96 kg in 2008. Improvements

in painting processes at all manufacturing plants were a

major contributing factor for this performance.

The various energy-saving measures emerging from the

international energy project have resulted in total energy

savings of approximately 1.1 million MWh groupwide since

the beginning of 2007. This is roughly equivalent to the

Solvent emissions were also lowered by further reducing

the protective coating used on new cars. Overall, approxi-

mately 82 ꢏ of new vehicles were transported in 2008

without the use of surface protection such as wax, adhesive

*

Water consumption per vehicle produced

in m /vehicle

Process wastewater per vehicle produced

in m /vehicle

3

ꢇ.ꢃꢃ

ꢋ.ꢉꢃ

ꢋ.ꢌꢃ

ꢋ.ꢈꢃ

ꢋ.ꢄꢃ

ꢋ.ꢅꢃ

ꢊ.ꢃꢃ

ꢃ.ꢉꢃ

ꢃ.ꢌꢃ

ꢃ.ꢈꢃ

ꢃ.ꢄꢃ

ꢃ.ꢅꢃ

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ^*

08

ꢇ.ꢃꢇ

ꢋ.ꢄꢃ

ꢋ.ꢅꢄ

ꢋ.ꢄꢊ

2.56

ꢃ.ꢌꢇ

ꢃ.ꢈꢄ

ꢃ.ꢄꢈ

ꢃ.ꢄꢆ

0.64

*

B

The indicators for water consumption refer to the production sites of the BMW Group.

The water consumption includes the process water input for the production as well

as the general water consumption e.g. for sanitation facilities.

asis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich,

Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall,

Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood,

Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang.

ꢇꢆ

*

Waste for disposal per vehicle produced

Volatile organic compounds (VOC) per vehicle produced

in kg /vehicle

in kg/vehicle

ꢊꢈ.ꢅ

ꢊꢅ.ꢃ

ꢊꢋ.ꢅ

ꢊꢃ.ꢃ

ꢈ.ꢅ

ꢋ.ꢈꢅ

ꢋ.ꢅꢃ

ꢋ.ꢋꢅ

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

ꢋ.ꢃꢃ

ꢊ.ꢈꢅ

ꢅ.ꢃ

ꢊ.ꢅꢃ

ꢆꢈ

Financial Analysis

ꢀꢃ

08

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

*

08

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

ꢊꢄ.ꢊꢈ 14.84

ꢋ.ꢋꢄ

ꢋ.ꢃꢈ

ꢋ.ꢃꢆ

ꢋ.ꢇꢄ

1.96

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

*

B

“

Waste for disposal per vehicle produced“ became a performance indicator in 2007

asis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich,

and has been reported since then.

Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall,

Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood,

Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang.

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

foil or protective covers. One year earlier the equivalent

percentage stood at 72 ꢏ. In line with the BMW Group’s

policy to eliminate the use of surface protection, it was

possible to shut down the last remaining car body con-

servation facilities.

tional harbour in the USA made it possible to reduce the

distances travelled by trucks.

Sustainable mobility as the goal

Environmentally friendly transportation solutions

The BMW Group also managed to reduce the negative

environmental impact caused by transporting goods along

the whole chain from purchasing to delivery. The propor-

tion of goods transported by air freight to international

plants was halved in 2008 by further measures to optimise

the supply chain. Accordingly, air freight accounted for only

The BMW Group is aware of its responsibility to protect

the climate and is working with great determination on

solutions that promote sustainable mobility. The strategy

pursued can be subdivided into three phases:

1. The BMW Group is continuously improving the fuel

economy of its vehicles with a combination of highly

efficient engines, optimised energy management, inno-

vative lightweight construction and improved aero-

dynamics.

0

.1ꢏ of all goods transported ꢀꢓꢐꢐꢔ: ꢐ.ꢓꢏꢂ. The percentage

of goods transported by sea freight rose from 76.8ꢏ in

007 to 79.1ꢏ in 2008. The equivalent percentage for rail

2

fell slightly from 6.9ꢏ in 2007 to 6.3ꢏ in 2008, while that for

road was reduced from 16.1ꢏ to 14.5ꢏ.

2. In the medium term, the Group is additionally increasing

fuel economy by a wide range of measures from electri-

fication of the drive train through to hybrid solutions.

3. In the long term, the BMW Group is committed to the

forward-looking use of hydrogen gained from renewable

sources.

In all, 50.3ꢏ of all new vehicles left the BMW Group’s plants

by rail, a reduction of 4.5 percentage points against the

previous year. This was partly due to a shift in sales to mar-

kets that cannot be supplied by rail. The use of an addi-

Roadmap of the BMW Group for sustainable mobility

A fleet of approxi-

mately 500 purely

electrically driven

cars, the MINI E,

put to the test

in everyday traffic

conditions.

BMW Group cuts

fuel consumption in

Germany pursuant to

VDA agreement of

1990 by 2005 by almost

30ꢏ.

Introduction of

Efficient Dynamics

measures in nu-

merous BMW and

MINI models.

Adoption

of the Efficient

Dynamics

strategy.

First BMW Group

vehicles with

hybrid drive.

Use of regenerative

hydrogen as fuel in

motor traffic.

ꢅꢀꢀꢀ

ꢅꢀꢀ5

ꢅꢀꢀꢂ

ꢅꢀꢀꢃ

ꢅꢀꢀꢆ

ꢅꢀꢀ9

ꢅꢀꢄꢀ

long-term

BMW Hydrogen 7

is presented to the

public.

About 40ꢏ of the

BMW Group’s new

vehicles in Europe

emitting a maximum

More than one mil-

lion vehicles equip-

ped with Efficient

Dynamics.

BMW Group is pro-

viding vehicles for

sustainable mobility

in densely populated

areas.

of 140 g CO /km.

2

ꢇꢅ Group Management Report

Development of CO emissions of BMW Group cars in Europe (EU-1ꢇ)

2

(

Index: 1995 = 100; Basis: fleet consumption of newly registered cars in Europe (EU-15) measured on the basis of the New European Driving Cycle in accordance

with the ACEA commitment)

ꢊꢃꢅ

ꢊꢃꢃ

ꢉꢅ

ꢉꢃ

ꢌꢅ

ꢌꢃ

ꢈꢅ

ꢈꢃ

95

9ꢂ

9ꢃ

9ꢆ

99

ꢀꢀ

ꢀꢄ

ꢀꢅ

ꢀꢈ

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08^*

ꢊꢃꢃ.ꢃ

ꢊꢃꢊ.ꢃ

ꢊꢃꢋ.ꢆ

ꢊꢃꢊ.ꢃ

ꢉꢌ.ꢄ

ꢉꢄ.ꢈ

ꢉꢋ.ꢉ

ꢉꢆ.ꢌ

ꢉꢃ.ꢃ

ꢌꢌ.ꢄ

ꢌꢃ.ꢃ

73.3

*

CO2 emissions of newly registered cars in Europe for 2008 stood at 154 grams CO2 per kilometre driven (EU-15) and 156 grams CO2 per kilometre driven (EU-27).

Fleet fuel consumption drastically reduced

ternet service in the United Kingdom showed that the CO₂

emissions of newly registered BMW brand cars sold in the

first half of 2008 were 11.3ꢏ lower than those sold in the

corresponding period one year earlier. The BMW Group

The BMW Group has been working intensively for years

to reduce its fleet’s overall fuel consumption. Efficient

Dynamics was adopted as many as eight years ago as an

all-embracing development strategy. Efficient Dynamics

is an innovation package designed to boost fuel economy

and reduce CO₂emissions. It includes highly efficient

petrol and diesel engines, lightweight construction, im-

proved aerodynamics and a sophisticated energy manage-

ment system that includes Auto Start Stop and Brake

Energy Regeneration functions. These innovations are

helping the BMW Group to reduce the fuel consumption

of its new cars by up to 23ꢏ compared to the relevant

predecessor models. Efficient Dynamics is a global strategy

across all models and therefore brings benefits not only

for individual niche models but for the entire fleet.

thus made more progress in reducing the CO emissions

2

of its fleet than any other manufacturer. The latest Environ-

mental Defense Report published in the USA in the spring

of 2008 came to a similar conclusion. This independent

study of the fuel consumption of new vehicles sold be-

tween 1990 and 2005 in the USA points out that the BMW

Group reduced fleet CO emissions by 12.3ꢏ during the

2

period studied. During the same period, the number of cars

sold by the BMW Group in the USA quadrupled. Thanks

to this performance, the BMW Group is now undisputed

leader in the rankings for CO emissions reduction.

2

Numerous models fulfil EU5 and EU6 standards

The BMW Group is also market leader when it comes

to introducing vehicles that comply with the future EUꢅ

emissions standard. By spring 2009, the BMW brand

will be selling 49 models that fulfil the EUꢅ emissions

standard. Moreover, the new BMW ꢇꢇꢃd with optional

BMW BluePerformance technology is the first vehicle

that already (in model year 2009) complies with the EUꢄ

emissions standard that comes into force from 2014

onwards.

Since the beginning of 2009, the emissions of 27 BMW

Group models are a maximum of 140 grams of CO per kilo-

2

metre driven. This has resulted in the BMW Group reduc-

ing CO emissions of new cars sold in Europe (EU-15) by

2

almost 27ꢏ between 1995 and 2008. The BMW Group has

therefore met its targets under the ACEA voluntary com-

mitment. In fact, the BMW Group’s voluntary commitment

to reduce the fuel consumption of its EU fleet (EU-15) from

1

2

(

995 to 2008 by 25ꢏ has already been surpassed by nearly

ꢏ. CO₂emissions of newly registered cars in Europe

EU-27) in 2008 stood at 156 grams CO per kilometre driven.

BMW AdvancedDiesel with BluePerformance was intro-

duced in the USA and Canada in 2008. The first diesel

models have been available to customers in North America

since December 2008. The BMW AdvancedDiesel with

BluePerformance comprises a 3.0-litre straight six-cylinder

engine featuring a variable twin turbo and SCR system

(Selective Catalytic Reduction) with urea injection. This in-

2

The BMW ꢊꢊꢌd received the international World Green

Car of the Year Award in the USA in 2008. Studies made in

the United Kingdom and the USA highlight the extent to

which Efficient Dynamics reduces fleet fuel consumption

overall. An analysis published by the Clean Green Cars in-

ꢇꢄ

novative drive unit sets new standards for fuel consump-

tion and emission reduction. It also complies with the par-

ticularly stringent emission limits valid in California and

other US federal states. BMW AdvancedDiesel is being

offered as a so-called 50-state model (BINꢅ) throughout

the USA. The introduction of BMW AdvancedDiesel

represents another important aspect of the Efficient

Dynamics strategy designed to reduce fuel consumption

worldwide.

Driving in the long-term with hydrogen

In the long term, the BMW Group is committed to the use

of renewably produced hydrogen for sustainable automo-

bility and continues to pursue its vision of driving without

causing CO emissions. With the BMW Hydrogen ꢈ, the

2

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

pioneering use of hydrogen as a source of energy for indi-

vidual mobility is already becoming today’s reality. The

hydrogen-driven vehicle is powered by a twelve-cylinder

engine which generates 191 kW (260 hp). The dual-fuel

design allows either hydrogen or petrol to be used in the

engine’s combustion chambers. The switch from one

operating mode to the other can be made at any time at

the push of a button. The world’s first hydrogen-powered

luxury sedan for day-to-day use has been produced in a

small series of 100 vehicles and made available to a se-

lected group of people from politics, business and other

areas of society for daily use. By the end of 2008, the BMW

Hydrogen ꢈ had covered more than 3.5 million kilometres

across Europe, the USA and other regions of the world.

The intensive use of the hydrogen sedan in real-life con-

ditions proves that this drive concept is suitable for the

challenges of everyday driving and is a real sustainable

option for the future.

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

BMW ActiveHybrid – the next step towards

greater fuel economy

The use of hybrid technology is enabling the BMW Group

to realise potential efficiency improvements. The BMW

Group is developing a comprehensive hybrid modular

system in order to provide the optimal solution for each

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

model – the Best of Hybrid. The BMW Concept

ꢈ Series

ActiveHybrid combines a highly efficient Vꢌ twin turbo

petrol engine and an electric drive based on the “Mild

Hybrid” concept. The electric drive supports the combus-

tion engine in clearly defined driving situations, thus opti-

mising the propulsion unit. A newly developed lithium-ion

battery serves as the energy storage unit.

By contrast, the BMW Concept Xꢄ ActiveHybrid com-

bines an eight-cylinder petrol engine and the electric drive

with the help of an innovative two-mode active gearbox.

Unlike hybrid models that are currently available, BMW

ActiveHybrid technology will deliver efficiency benefits

not only in city traffic, but also out on the open road. Fuel

savings of up to 20ꢏ are possible in comparison to cars

powered by conventional combustion engines. The hybrid

models of the BMW Xꢄ and the BMW ꢈ Series will be

ready for series production in 2009.

Innovative concepts for tomorrow’s mobility

The BMW Group continues to work on solutions for sus-

tainable mobility. A separate organisational unit (known

as “project i”) has been set up as part of the Number ONE

strategy to develop new mobility concepts, especially for

densely populated areas. The first results of its work – the

MINI E electric vehicle – were presented at the Los Angeles

Auto Show in November 2008. In a pilot project, approxi-

mately 500 all-electric MINI E cars are being tested by

selected private and corporate customers in everyday use

in the US federal states of California, New York and New

Jersey. The MINI E is equipped with a 150 kW (204 hp)

electric motor powered by a lithium-ion battery. The car

is capable of covering distances of up to 250 kilometres

(

156 miles). The objective of the pilot project is to gain an

understanding of how individual mobility can be organised

on the basis of an all-electric vehicle. The findings made

and the response of customers will be incorporated into

the further development of electric vehicles.

3

7 Group Management Report

Research and development expense at

budgeted level

and a comprehensive range of passive safety systems

which are electronically controlled and coordinated to

react as intended in all situations.

In 2008 the BMW Group scaled down its research and de-

velopment expense intentionally by 8.9% to euro 2,864 mil-

lion. Detailed disclosures on research and development

expenditures are provided in the notes to the Group Finan-

cial Statements (Note 11 ). At 5.4%, the research and de-

velopment ratio – research and development expenditures

as a percentage of revenues – was 0.2 percentage points

lower than in the previous year. This targeted reduction

was mainly achieved by means of efficiency improvements

to work processes. The rigorous value-added approach

adopted ensures that all research and development activi-

ties create discernible benefits for the customer.

Driver assistance systems increase comfort

and safety

Numerous innovations in the areas of safety and comfort

were also introduced for the first time in 2008 with the

new BMW 7 Series. Based on an extensive analysis of

accidents, an integrated concept was developed, ranging

from assistance for the driver in normal driving situations

through to automatic emergency calls.

Useful functions of the driver assistance systems men-

tioned above include Active Cruise Control with Stop&Go

capability and Front Collision Warning, Lane Departure

and Lane Change Warning and the Night Vision Pedestrian

Detection and Warning system. These innovations are

successively being integrated into the whole of the BMW

Group’s range of cars.

During the year under report, some 9,ꢀ00 employees worked

within the BMW Group’s innovation network at eleven

locations in five countries.

Driving pleasure without emissions: the MINI E

At the beginning of 2009 the BMW Group became the

world’s first manufacturer of premium automobiles to de-

ploy a fleet of approximately 500 purely electrically driven

vehicles for private daily use. The MINI E is powered by a

The Active Cruise Control with Stop&Go function takes

away some of the tasks generally considered less pleasant

by drivers such as when driving in stop and go traffic. Ad-

ditional radar sensors warn the driver of possible collisions.

Within a range of between ꢀ0 and 180 km/h, the system

will maintain the speed set by the driver and, if required,

also regulate the distance kept to the car in front. In critical

situations, the driver is made aware of the situation. If the

situation becomes more dangerous an acute warning is

activated, still giving the driver the opportunity to take action.

150 kW (204 hp) electric motor fed by a rechargeable lithium-

ion battery which transfers its power almost soundlessly

and entirely free of emissions. Specially engineered for

automobile use, the lithium-ion battery can be plugged

into any conventional power outlet and has a range of up

to 250 kilometres. The MINI E exemplifies the BMW Group’s

resolve to reduce energy consumption and emissions

through targeted development and by drawing on its unique

technological expertise in the field of drive systems.

Putting some 500 cars on the road under real daily traffic

conditions will make it possible to gain widely applicable

hands-on experience. These findings will be subsequently

factored into the engineering of series-built vehicles.

The Lane Change Warning system monitors the space

behind the vehicle over a range of several lanes. When other

road users approach from behind in the next lane or if

they are already located in the car’s blind spot, the driver is

informed of the situation if the car is travelling at more than

5

0 km/h. A warning is given when the driver intends to

The BMW 7 Series as champion of innovation

The launch of the new BMW 7 Series in autumn 2008

saw the debut of numerous technological innovations in a

series vehicle. As well as a completely revised range of

engines, the new models make full use of lightweight con-

struction technology. The BMW 7 Series’ newly developed

chassis ensures optimal driving dynamics and comfort. A

unique combination of innovative driver assistance systems

has been incorporated in the new models. This includes

functions such as Lane Departure Warning, Speed Limit

Display, Lane Change Warning, Head-up-Display, High

Beam Assist, Active Cruise Control with Stop & Go

function, Night Vision (for the first time with Pedestrian

Detection and Warning system), Side View and Back-up

Camera. The new BMW 7 Series also offers maximum

occupant safety thanks to its optimised body structure

change lanes and another vehicle is located in the critical

area.

The Lane Departure Warning system keeps a check on lane

markings for a distance of up to 50 metres. The system is

mainly designed for primary routes and motorways. When

the driver unintentionally leaves a lane, a warning of the

critical situation is given before the vehicle crosses the lane

marking. If the lane change is intentional, for example if the

indicator has been activated, no warning is given.

BMW Night Vision improves visibility in the dark for a dis-

tance of up to ꢀ00 metres ahead. Any thermal radiation

emitted by the surroundings and objects is converted into

an image by the vehicle’s infrared camera and shown in the

control display. The second generation of the Night Vision

ꢇꢌ

system has been expanded to include a Pedestrian De-

tection system, which identifies persons via camera and

warns the driver of dangerous situations by displaying sym-

bols in the control display. The biggest benefit of BMW

Night Vision comes at night on unlit country roads where

restricted visibility in conjunction with high speeds creates

a higher risk of accident. Persons are identified within a

distance of approximately 100 metres. Depending on the

speed of the car, the driver is warned. The system also

gives a warning when persons approach the road from the

side.

presented during the New York International Auto Show,

pays tribute to vehicles and technologies that make a

measurable contribution to the reduction of emissions

symbolising the outstanding environmental awareness

of the relevant manufacturer. The recognition gained by

the BMW ꢊꢊꢌd can be largely attributed to the Efficient

Dynamics package.

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

In May 2008 the BMW Group won the “International Engine

of the Year” award for the fourth successive year. The title

was awarded to the 3.0-litre twin-turbo petrol engine, which,

as in the previous year, not only won the overall award, but

also the 2.5 to 3.0-litre engine category. In total, the BMW

Group came first in six of twelve categories, second in a

further six categories and third in one category. The BMW

Group was therefore, yet again, the most successful com-

pany in this engine competition, which is now in its tenth

year.

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Net Assets Position

Research into future mobility

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

Vehicle networking is the basis for future driver assistance

systems. The main focus for the BMW Group, apart from

achieving greater comfort, is on enhancing the driver’s con-

trol over the situation and increasing the safety of all road

users. Within the international forum of the CAR ꢋ CAR

Communication Consortium, European manufacturers are

working on inter-vehicle communication independent of

vehicle type. For its part, the BMW Group is showing how

the BMW cars and motorcycles in the future will be capable

of communicating with vehicles of other manufacturers.

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

In September the BMW Group won the ÖkoGlobe 2008

awarded by DEVK, the ACV Automobile Club and the

Center Automotive Research of the University of Gelsen-

kirchen in the category “Enhancement of the Combustion

Engine”. The award was presented for research into the

use of the thermal electric generator, which allows the

energy gained from heat loss in the combustion engine to

be re-used.

Cars will be interlinked with each other via wireless LAN

radio contact and able to exchange data with road infra-

structure such as traffic lights and road signs. This will en-

able car drivers to be informed immediately and in good

time of potentially dangerous road traffic situations. The

system can help to avoid accidents or reduce their effects,

particularly in situations such as tail-ends of traffic jams,

road works, accident scenes or slippery road surfaces.

In November 2008 the readers of Europe’s largest Sunday

newspaper, “Bild am Sonntag”, chose the BMW ꢊ Series

Coupé as the best new vehicle in the coupé class in 2008.

The BMW Group was presented with the Golden Steering

Wheel for this achievement.

In order to exploit the full potential of Car-to-X communi-

cation systems with blanket coverage, two preconditions

must be met: a joint technological base of operations to

determine interface standards and a uniform radio fre-

quency. A major milestone has been achieved in terms

of standardisation following the recent activation of the

5

.9 GHz European frequency band for Car-to-X communi-

cation applications (similar to those already existing in the

USA and in Japan).

Numerous awards for BMW Group’s development

work

The BMW Group’s research and innovation network again

underlined its strength in 2008, receiving numerous awards

for its development work. In March 2008 a panel of inter-

national automotive journalists voted the BMW ꢊꢊꢌd as

the “World Green Car of the Year”.The award, which was

ꢇꢉ Group Management Report

Creating efficient value-added chains

Regional mix of BMW Group purchase volumes 2008

The BMW Group’s Purchasing and Supplier Network was

driven in 2008 by the desire to achieve sustainable improve-

ments along the valued added chain in the areas of quality,

innovation, compliance with deadlines and cost. The focus

of activities was on reducing production costs whilst im-

proving quality. Despite worsening market conditions during

the second half of the year, the BMW Group was able, to-

gether with its suppliers, to achieve the challenging cost

and quality targets that had been set, both for ongoing se-

ries products and development projects.

in %, basis: production material

Africa

Asia/Australia

Central and

Eastern Europe

Germany

NAFTA

Rest of Western Europe

High volatility on raw materials markets

The price levels of all major raw materials and supplies

needed for car production rose again sharply during the

first half of 2008 as compared to 2007, creating additional

pressure along the whole of the value-added chain. Costs

rose substantially, particularly for steel and aluminium as

well as for precious metals such as platinum, palladium

and rhodium. Hedges already in place for precious metals

helped to cushion the immediate impact for the BMW

Group. During the second half of the year, the BMW Group

took advantage of falling prices to conclude new contracts

with medium and long-term price hedges for the coming

years.

Germany

ꢆꢅ

ꢋꢊ

ꢊꢇ

Central and Eastern Europe ꢊꢋ

Rest of Western Europe

NAFTA

Asia/Australia

Africa

ꢄ

ꢇ

Exploiting internal and external efficiency

synergies

The BMW Group continued to work closely with its sup-

pliers in 2008. Interdisciplinary teams from development,

purchasing, production and quality management came

together with suppliers to analyse potential opportunities

to reduce costs and improve quality along the entire value-

added chain. In addition to productivity improvements,

the main emphasis was on generating benefits which are

relevant for customers and which can be applied across

all models.

The BMW Group is responding to the increasing signifi-

cance and complexity of raw materials procurement by

centralising its raw materials management. This will allow

it to react even more swiftly and efficiently to price fluctu-

ations on raw materials markets in the future. Bundling

purchase volumes creates additional synergies in the area

of requirements forecasting, whilst also having a positive

impact on pricing structures.

Initiatives were also taken to raise productivity by using

common technologies for component production.

Analyses of existing systems and processes resulted in

significant reductions in the use of space, inventory

volumes and throughput times for products. At the same

time, quality was improved and costs reduced.

Natural hedging potential fully used

Purchasing production materials, goods for resale, services

and investment goods in the currencies of the sales mar-

kets in which the BMW Group operates helps to reduce

exchange rate exposures. Careful consideration is given

when selecting suppliers so that the natural hedging

potential is taken full advantage of in the NAFTA region,

China and Japan. Selections are made jointly with the in-

ternational purchasing network.

Sustainable development and production

processes in the supplier network

The application of high ecological and social standards

and compliance with strict environmental protection

requirements are regarded by the BMW Group as ex-

tremely important criteria for its suppliers. As part of

the process of nominating suppliers, the BMW Group

takes care to ensure that the companies involved ad-

here to internationally recognised standards of sustain-

ability.

The course has already been set for a significant increase

in foreign currency purchases for the BMW Xꢇ successor

and successor models of the current BMW ꢇ Series. By the

same token, favourable cost factors can also be exploited

in the relevant procurement markets.

ꢆꢃ

Numerous new models launched

The BMW Group continued to expand its model range in

The second major focus of marketing activities was the

market launch of the new BMW ꢈ Series. This model is

particularly significant within the BMW brand range of vehi-

cles, not least because of its role as a champion of inno-

vation. As well as aiming to achieve a good position on the

market in a short space of time, marketing activities were

also focused on evoking exceptional emotionality. One

milestone in these communication activities was the un-

veiling of the new BMW ꢈSeries on the Red Square in Mos-

cow: the biggest hourglass in the world was the setting for

the BMW ꢈ Series’ first public appearance on the Russian

market – a market crucial to the BMW Group’s activities.

2008. Numerous new or revised BMW brand models were

launched over the course of the year. The BMW ꢊ Series

was expanded by the introduction of the Convertible and

Coupé models. The BMW M range of vehicles was also

increased by two new variants (Convertible and Coupé).

The BMW ꢇ Series Sedan and the BMW ꢇ Series Touring

each received a model revision. The BMW Xꢄ was sold for

the first time as a Sports Activity Coupé during the year.

The new BMW ꢈ Series was also launched in 2008.

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢅꢀ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Net Assets Position

Two new MINI brand models were presented at the begin-

ning of 2008: the MINI John Cooper Works and the MINI

John Cooper Works Clubman, both of which have been

available to customers since summer.

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

MINI John Cooper Works presented

The new brand MINI John Cooper Works celebrated its

world debut in spring 2008 at the Geneva International

Motor Show. Both the MINI John Cooper Works and the

MINI John Cooper Works Clubman were presented to

the public at this event. In conjunction with the renewed

foundation and repositioning of John Cooper Works, the

brand image was revised and a new logo designed. A range

of communication measures was employed to support

the introduction of products onto the market, including a

campaign aimed at opinion leaders and an international

press event held in summer 2008. The MINI brand an-

nounced an addition to the model range when it presented

the MINI Crossover Concept at the Paris Auto Show.

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

Rolls-Royce also expanded its model range. Following

the introduction of the Rolls-Royce Phantom Coupé, the

Phantom family now comprises four models.

BMW Museum reopened

After two-and-a-half years of remodelling, the BMW Group

reopened the BMW Museum in mid-June. The museum

building has been extended so that 120 exhibits displayed

2

in an area of 5,000 m give visitors an insight into the history

of the company and an authentic experience of the BMW

brand. The new museum pursues the original museum

philosophy“continuation of the road in a new setting”. Roads

and paths connect the seven independent exhibition areas,

each of which is dedicated to a different theme. The

museum is not only an exhibition hall for unusual cars and

motorcycles from almost 90 years of BMW history; it also

reflects the dynamics and innovative strength of the BMW

brand and of the company as a whole. The newly designed

museum had already welcomed 230,000 visitors by the

end of the year.

Rolls-Royce launches the Phantom Coupé

The main emphasis of the marketing activities of Rolls-Royce

Motor Cars in 2008 was the market launch of the fourth

model within the Phantom family: the Phantom Coupé.

The world debut of the Phantom Coupé was celebrated

at the Geneva International Motor Show. The new model

was presented to members of the press in the course of

a journey right across Europe, starting in Goodwood and

ending in the South of France. In addition, several events

were held worldwide with the support of the dealer organi-

sation, giving customers the opportunity to get to know

the Coupé better. The response to the Phantom Coupé

was very positive: two thirds of purchases were first-time

customers for Rolls-Royce Motor Cars.

BMW Marketing’s main focuses

The main focuses for BMW Marketing in 2008 were the

continuation of the Efficient Dynamics campaign and the

market launch of the new BMW ꢈ Series.

The Efficient Dynamics package enabled the BMW brand

to assert itself in the premium segment as the market

Sales organisation restructured

In line with the BMW Group’s new strategic direction, sales

and marketing activities were focused even more sharply

on profitability and greater customer orientation.

leader for vehicles with low fuel consumption and CO emis-

2

sions. More than 800,000 BMW brand vehicles equipped

with Efficient Dynamics technology were sold in 2008.

Communicating this technical advantage stood at the fore-

front of BMW’s marketing activities during the year.

During the year under report, a decision was reached to

aggregate the administrative functions of the financial

ꢆꢊ Group Management Report

services companies and sales companies in selected

markets in order to generate synergies. Parallel to this

reorganisation the BMW Group continued to invest in im-

portant growth markets.

the introduction of additional BMW ConnectedDrive func-

tions. The BMW Group is therefore the first car manufac-

turer to offer unlimited access to the World Wide Web via

the car’s control display, underlining the pioneering role

played in the area of in-car online services.

The measures taken also covered dealers worldwide. The

BMW Group expanded the dealer organisation in emerg-

ing markets such as China and India, whereas streamlining

measures were undertaken in the more mature markets.

The number of partners in many European markets there-

fore decreased. The number of customer services points,

however, remained as high as ever, so that customers con-

tinued to receive the same high quality of service to which

they are accustomed.

Greater customer orientation is especially important for

customer support, which is one of the focal points of the

BMW Group’s strategic efforts. Expanding the range of

services on offer and implementing other measures not

only raised the quality of customer support even further but

also opened up growth opportunities for the BMW Group

and the dealer organisation. Other activities, such as BMW

TeleServices and BMW/MINI Service Inclusive offers,

which had already been able to prove their worth, were

further expanded in 2008.

BMW vehicles are sold via approximately 3,000 dealer show-

rooms worldwide. The MINI sales network comprises ap-

proximately 1,300 showrooms. Marketing activities continue

to emphasise the independence of the different brands.

At the end of 2008, MINI had just over 500 and Rolls-Royce

As well as having attractive products and services, it is a

vital aspect of premium customer care to have well-trained

sales and service staff in the dealer showrooms. Approxi-

mately 34,000 employees attended the BMW Group’s tech-

nical and non-technical training courses in 2008.

80 exclusive sales and service locations. Targeted training

of dealership staff and consistent application of selling

standards ensure that the quality and efficiency of the dealer

showrooms remain high. Training courses were held

around the world in conjunction with the market launch of

the Rolls-Royce Phantom Coupé, giving the dealer organi-

sation the opportunity to prepare for the new model and

strengthen its commitment to the brand.

The BMW Group’s involvement in retail customer business

at its own branches is becoming increasingly targeted on

strategically important cities, resulting in branch consolida-

tion at specific international locations.

The implementation of a European strategy for spare parts

logistics has brought about improvements in service and

efficiency and created the basis for forward-looking, com-

petitive logistics structures in Europe. According to a study

carried out by the US consultancy Carlisle & Company,

the BMW Group’s regional distribution centre in Hanover

was the most productive centre in Europe. In the same

study, the spare parts logistics operations for BMW, MINI

and BMW motorcycles achieved top marks in terms of

availability of parts.

Greater customer focus at all levels

Improving the BMW Group’s customer focus was at

the heart of all sales and marketing activities in 2008. The

same can be said for product design, as demonstrated by

the new iDrive in the latest BMW ꢈ Series, coupled with

ꢆꢋ

BMW Stock and Bonds in 2008

Stock markets tumble

via the stock exchange, up to a maximum of 10ꢏ of the

share capital in place at the date of the resolution and to

withdraw these shares from circulation without any further

resolution by the Annual General Meeting. At the same

time, the authorisation from 15 May 2007 to acquire treasury

shares was rescinded. The authorisation from 8 May 2008

is valid until 6 November 2009. There are no current plans

to exercise the authorisation.The option of a share buy-back

does, however, remain open to BMW AG.

The worldwide financial crisis worsened in 2008, climaxing –

at least for the time being – in the provision of government

support to numerous financial institutions and the potential

insolvency of whole countries. The ensuing turmoil also

took its toll on the markets for goods and services, casting

a dark shadow over the world’s major economies, particu-

larly during the second half of the year.

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

ꢁ

ꢆꢅ

ꢅ

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

ꢆꢈ

Financial Analysis

The world’s leading stock markets lost substantially in

value, with volatility at times reaching extremely high levels.

The German stock index, the DAX, was unable to escape

these developments. Compared to the final day of trading

at the end of the previous year, the index lost some 40ꢏ in

value, closing the year 2008 at 4,810.20 points (28 December

2007: 8,067.32 points). Due to one exceptional factor, the

Prime Automobile sector index performed slightly better

than the DAX, closing on the last day of trading 35.3ꢏ down

at 508.42 points (28 December 2007: 785.54 points). The

Dow Jones EURO STOXX ꢅꢃ ended the year 44.3ꢏ down.

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Buy-back of preferred stock for employee

share plan

Net Assets Position

For over 30 years, BMW AG has encouraged its employees

to participate in the company’s success. Since 1989, this

participation has been in the form of an employee share

programme. As a result, BMW AG acquired a total of

900,000 shares of preferred stock in 2008 via the stock mar-

ket and issued some of the acquired shares to employees.

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

BMW Group as a successful bond issuer on

international capital markets

The negative developments on the stock market were also

reflected in the performance of BMW stock. BMW com-

mon stock closed at euro 21.61 on the last day of trading of

Refinancing conditions deteriorated sharply over the course

of 2008 compared to the previous year. Especially in the

second half of the year, the credit markets experienced

significant disruption. However, coordinated measures im-

plemented by central banks and governments worldwide

were able to prevent a meltdown of the financial system.

2008, 49.0ꢏ below its level a year earlier. Despite this sharp

drop, BMW common stock was – against the background

of an exceedingly difficult year for the stock markets – one

of the best performers amongst European car manufac-

turers in 2008. BMW preferred stock finished 2008 with a

market price of euro 13.86, down 61.8ꢏ on a year earlier.

As part of the process of refinancing business undertaken

by the Financial Services segment, the BMW Group and

relevant Group entities were again active in 2008 as issuers

of bonds, notes and asset backed securities (ABS). As in

previous years, the instruments issued by the BMW Group

were highly sought after, both by institutional and private

investors. Good ratings and continuous provision of infor-

Authorisation to buy back shares of common

stock extended

At the Annual General Meeting on 8 May 2008, the Board

of Management was authorised to acquire treasury shares

Development of BMW stock compared to stock exchange indices

(

Index: 30.12.1998 = 100)

ꢇꢅꢃ

ꢇꢃꢃ

ꢋꢅꢃ

ꢋꢃꢃ

ꢊꢅꢃ

ꢊꢃꢃ

ꢅꢃ

9

ꢀꢀ

ꢀꢄ

ꢀꢅ

ꢀꢈ

DAX

ꢀꢁ

ꢀ5

ꢀꢂ

ꢀꢃ

08

BMW preferred stock

BMW common stock

Prime Automobile

ꢆꢇ Group Management Report

mation to the capital markets helped to reinforce the solid

reputation enjoyed by the BMW Group.

The BMW Group proved in 2008 that, despite difficult mar-

ket conditions, it had excellent access to the capital markets

and that the supply of liquidity was ensured at all times.

The underlying strength of the BMW Group as one of the

world’s leading suppliers of premium vehicles is therefore

also reflected in its dealings with the international capital

markets.

During the year, the BMW Group placed two benchmark

bonds with a total issue volume of euro 2.5 billion on Euro-

pean capital markets. In addition, bonds for an aggregate

equivalent amount of some euro 880 million were issued in

Swiss franks, Japanese yen and US dollars and private

placements were made in various currencies for an aggre-

gate amount of approximately euro 4.7 billion.

Capital markets acknowledge sustainability as

value driver

During 2008, the BMW Group continued its communication

drive on the capital markets with regard to Socially Re-

sponsible Investment (SRI). Road shows held in London

and Paris and an additional event in Zurich helped to pro-

mote and intensify the exchange of ideas with investors

and analysts interested in sustainability.

The BMW Group was also able to demonstrate its ability to

obtain funds via ABS transactions once again, securitising

transactions totalling euro 5.2 billion in 2008. This included

the placement of euro 2.5 billion each on US and European

capital markets via conduit transactions.

BMW stock

2008

ꢋꢃꢃꢈ

ꢋꢃꢃꢄ

ꢋꢃꢃꢅ

ꢋꢃꢃꢆ

Common stock

Number of shares in ꢕ,ꢐꢐꢐ

Shares bought back at the reporting date

601,995

ꢄꢃꢊ,ꢉꢉꢅ

–

ꢄꢃꢊ,ꢉꢉꢅ

–

ꢄꢋꢋ,ꢋꢋꢌ

ꢊꢇ,ꢆꢌꢌ

ꢄꢋꢋ,ꢋꢋꢌ

–

ꢊ

Stock exchange price in euro

Year-end closing price

High

21.61

42.73

17.04

ꢆꢋ.ꢇꢅ

ꢅꢃ.ꢈꢇ

ꢇꢉ.ꢌꢊ

ꢆꢇ.ꢅꢊ

ꢆꢄ.ꢆꢈ

ꢇꢅ.ꢅꢋ

ꢇꢈ.ꢃꢅ

ꢇꢉ.ꢉꢈ

ꢇꢋ.ꢃꢆ

ꢇꢇ.ꢋꢃ

ꢇꢈ.ꢆꢆ

ꢇꢊ.ꢈꢌ

Low

Preferred stock

Number of shares in ꢕ,ꢐꢐꢐ

Shares bought back at the reporting date

52,196

363

ꢅꢋ,ꢊꢉꢄ

–

ꢅꢋ,ꢊꢉꢄ

–

ꢅꢋ,ꢊꢉꢄ

–

ꢅꢋ,ꢊꢉꢄ

–

ꢊ

Stock exchange price in euro

Year-end closing price

13.86

36.51

13.00

ꢇꢄ.ꢇꢃ

ꢆꢈ.ꢅꢋ

ꢇꢇ.ꢄꢆ

ꢆꢇ.ꢅꢋ

ꢆꢅ.ꢉꢊ

ꢇꢊ.ꢌꢃ

ꢇꢇ.ꢃꢃ

ꢇꢇ.ꢉꢌ

ꢋꢆ.ꢆꢌ

ꢋꢆ.ꢌꢃ

ꢋꢄ.ꢋꢃ

ꢋꢋ.ꢌꢄ

High

Low

ꢋ

2008

ꢋꢃꢃꢈ

ꢋꢃꢃꢄ

ꢋꢃꢃꢅ

ꢋꢃꢃꢆ

Key data per share in euro

Dividend

ꢇ

Common stock

0.30

0.32

0.49

0.51

6.84

30.99

ꢊ.ꢃꢄ

ꢊ.ꢃꢌ

ꢆ.ꢈꢌ

ꢆ.ꢌꢃ

ꢉ.ꢈꢃ

ꢇꢇ.ꢋꢆ

ꢃ.ꢈꢃ

ꢃ.ꢈꢋ

ꢆ.ꢇꢌ

ꢆ.ꢆꢃ

ꢌ.ꢋꢊ

ꢋꢉ.ꢋꢆ

ꢃ.ꢄꢆ

ꢃ.ꢄꢄ

ꢇ.ꢇꢇ

ꢇ.ꢇꢅ

ꢉ.ꢊꢈ

ꢋꢅ.ꢊꢈ

ꢃ.ꢄꢋ

ꢃ.ꢄꢆ

ꢇ.ꢇꢇ

ꢇ.ꢇꢅ

ꢉ.ꢊꢇ

ꢋꢆ.ꢅꢋ

Preferred stock

ꢆ

Earnings per share of common stock

ꢅ

Earnings per share of preferred stock

ꢄ

Cash flow

Equity

1

Xetra closing prices

adjusted for new accounting treatment of pension obligations

proposed by management

annual average weighted amount

2

3

4

5

stock weighted according to dividend entitlements

6

calculated on the basis of operating cash flow: up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from operating activities

of the Automobiles segment

ꢆꢆ

In 2008, for the fourth time in succession, the BMW Group

was the sector leader in the Dow Jones Sustainability in-

dices and is thus the most sustainable car manufacturer in

the world. The BMW Group is the only enterprise from the

automobile sector to have been represented continuously

in this important group of sustainability indices since their

creation in 1999. In order to be included in the index, the

business, ecological and social performance of some 2,500

enterprises is analysed and the best in each sector chosen

to appear in the relevant Dow Jones Sustainability Index.

The analyses include an assessment of general sustain-

ability criteria as well as of measures implemented in re-

sponse to sector-specific challenges.

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to §ꢅꢆ9 (ꢁ)

and §ꢈꢄ5 (ꢁ) HGB

ꢁ

ꢅ

5

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

In the SAM Group’s corporate sustainability assessment

published at the beginning of 2008, the BMW Group re-

ceived three top awards with the titles Sector Leader, Gold

Class and Sector Mover. Each year the SAM Group as-

sesses more than 1,000 companies from 57 industrial sec-

tors on the basis of company-specific sustainability criteria.

The BMW Group is therefore the leading automotive com-

pany in terms of sustainable business (SAM Sector Leader),

picking up more than 75ꢏ of possible points (SAM Gold

Class) and making the most progress in the sector (SAM

Sector Mover). The BMW Group has also been included –

for eight consecutive years now – in the FTSEꢆGood indi-

ces, which focus on SRI.

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

The BMW Group keeps the public informed of its perform-

ance in the field of sustainable business by publishing its

Sustainable Value Report every two years. The report can

be downloaded from the internet at www.bmwgroup.com/

sustainability. A printed version can also be ordered at that

address. In March 2008, the most recent Sustainable Value

Report (for 2007/2008) was awarded first prize in the Best

Carbon Disclosure category of the Corporate Responsibility

Reporting Awards 2007 (CRRA). The CRRA 2007 are the

first global independent internet-based reporting awards,

acknowledging the best sustainability reports in nine dif-

ferent categories.The BMW Group won by a huge margin

in the category for the best report on climate protection.

The BMW Group’s next Sustainable Value Report will be

published in 2009.

ꢆꢅ Group Management Report

Disclosures pursuant to §289 ꢀꢁꢂ HGB and §315 ꢀꢁꢂ HGB and Explanatory Report

Pursuant to Article 4 ꢀꢕꢂ of the Articles of Incorporation,

BMW AG ’s share capital totalling euro 654,191,358 is sub-

divided into 601,995,196 shares of common stock and

The right of shareholders to have their shares evidenced in

writing is excluded.

5

2,196,162 non-voting shares of preferred stock, each with

Shareholders are only entitled to participate at the Annual

General Meeting and exercise their voting rights if, prior

to the meeting, they have given written notice (in the form

prescribed by §126b of the German Civil Code), either in

German or English, of their intention to participate at the

meeting. Shareholders are also required to provide evi-

dence of their entitlement to participate and exercise their

voting rights at the Annual General Meeting. For this pur-

pose, documentary evidence of the shareholding, issued

by the custodian bank (in the written form prescribed by

§126b BGB), in either German or English, is required. Votes

may also be exercised by proxy. The Company may deter-

mine that proxy authorisations may be granted electroni-

cally or by fax, and may stipulate the specific rules for

granting proxy authorisations (see Article 17 of the Articles

of Incorporation). The chairperson may determine a rea-

sonable time limit with respect to the right of shareholders

to raise questions and speak (Article 19 ꢀꢓꢂ of the Articles

of Incorporation).

a par value of euro 1.The shares are issued to bearer.The

rights and duties of shareholders derive from the German

Stock Corporation Act (AktG) in conjunction with the

Company’s Articles of Incorporation, the full text of which

is available at www.bmwgroup.com. The voting power

attached to each share corresponds to its par value. Each

euro 1 of par value of share capital represented in a vote

is entitled to one vote (Article 18 ꢀꢕꢂ of the Articles of Incor-

poration). The Company’s shares of preferred stock are

non-voting within the meaning of 139 et seqq. AktG, i.e.

they only confer voting rights in exceptional cases stipu-

lated by law such as when the preference amount has not

been paid or has not been fully paid in one year and the

arrears are not paid in the subsequent year. Except for

voting rights, shares of preferred stock confer the same

rights as shares of common stock. Article 24 of the Articles

of Incorporation confers preferential treatment to the non-

voting shares of preferred stock with regard to the ap-

propriation of the Company’s unappropriated profit. Ac-

cordingly, the unappropriated profit is required to be

appropriated in the following order:

When the Company issues shares to employees in con-

junction with its employee share programme, the shares

are subject to a company-imposed vesting period of four

years, during which time the shares may not be sold. The

shares issued in conjunction with the employee share pro-

gramme are shares of non-voting preferred stock which

are transferred solely and directly to employees. Like

all other shareholders, employees exercise their control

rights over these shares on the basis of relevant legal pro-

visions and the Company’s Articles of Incorporation.

(

a) subsequent payment of any arrears on dividends on

non-voting preferred shares in the order of accrue-

ment,

(

b) payment of an additional dividend of euro 0.02 per euro

1

par value on non-voting preferred shares and

c) uniform payment of any other dividends on shares

on common and preferred stock, provided the share-

holders do not resolve otherwise at the Annual General

Meeting.

Based on the information available to the Company, the

following direct or indirect holdings exceeding 10ꢏ of the

voting rights were held at the balance sheet date:^*

Direct share of

Indirect share of

voting rights (%) voting rights (%)

Stefan Quandt, Bad Homburg v.d.Höhe, Germany

ꢊꢈ.ꢆ

AQTON SE, Munich, Germany

ꢊꢈ.ꢆ

Stefan Quandt Verwaltungs GmbH, Bad Homburg v.d.Höhe, Germany

Stefan Quandt GmbH & Co. KG für Automobilwerte, Bad Homburg v.d.Höhe, Germany

Johanna Quandt, Bad Homburg v.d.Höhe, Germany

ꢊꢈ.ꢆ

ꢃ.ꢆ

ꢊꢄ.ꢇ

Johanna Quandt GmbH, Bad Homburg v.d.Höhe, Germany

Johanna Quandt GmbH & Co. KG für Automobilwerte, Bad Homburg v.d.Höhe, Germany

Susanne Klatten, Munich, Germany

ꢊꢄ.ꢇ

ꢊꢋ.ꢄ

Susanne Klatten Beteiligungs GmbH, Bad Homburg v.d.Höhe, Germany

Susanne Klatten GmbH, Bad Homburg v.d.Höhe, Germany

Susanne Klatten GmbH & Co. KG für Automobilwerte, Bad Homburg v.d.Höhe, Germany

ꢊꢋ.ꢄ

*

based on voluntary balance notifications provided by the listed shareholders at 31 December 2008

ꢆꢄ

The voting power percentages disclosed on the previous

page may have changed subsequent to the stated date

if these changes were not required to be reported to the

Company. Due to the fact that the Company’s shares are

issued to bearer, the Company is generally only aware of

changes in share-holdings if such changes are subject to

mandatory notification rules.

in control or the acquisition of control which could arise, for

example, from a takeover offer:

– An agreement, concluded with an international con-

sortium of banks relating to a syndicated credit line

(which was not being utilised at the balance sheet date),

entitles the lending banks to give extraordinary notice

to terminate the credit line (such that all outstanding

amounts, including interest, would fall due immediately)

if one or more parties jointly acquire direct or indirect

control of BMW AG. The term “control” is defined as the

acquisition of more than 50ꢏ of the share capital of

BMW AG, the right to receive more than 50ꢏ of the divi-

dend or the right to direct the affairs of the Company

or appoint the majority of members of the Supervisory

Board.

– A cooperation agreement concluded with Peugeot SA

relating to the joint development and production of a

new family of small (1 to 1.6 litre) petrol-driven engines

entitles each of the cooperation partners to give extra-

ordinary notification of termination in the event of a com-

petitor acquiring control over the other contractual party

and if any concerns of the other contractual party con-

cerning the impact of the change of control on the co-

operation arrangements are not allayed during the sub-

sequent discussion process.

– BMW AG acts as the guarantor for all of the obligations

arising from the joint venture agreement relating to BMW

Brilliance Automotive Ltd. in China. This agreement

grants an extraordinary right of termination to either joint

venture partner in the event that, either directly or indi-

rectly, more than 25ꢏ of the shares of the other party

are acquired by a third party or the other party is merged

with another legal entity. The termination of the joint

venture agreement may result in the sale of the shares

to the other joint venture partner or in the liquidation of

the joint venture entity.

– Regarding the trading of derivative financial instruments,

framework agreements are in place with financial insti-

tutions and banks (ISDA Master Agreements), each of

which contain extraordinary rights of termination which

trigger the immediate settlement of all current trans-

actions, in the event that the creditworthiness of the re-

spective party is materially weaker following the direct

or indirect acquisition of beneficial ownership of equity

securities having the power to elect a majority of the

Supervisory Board of a contractual party or any other

ownership interest enabling the acquirer to exercise

control of a contractual party or a merger or transfer of

assets.

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

ꢆꢋ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to §ꢅꢆ9 (ꢁ)

and §ꢈꢄ5 (ꢁ) HGB

ꢁ

5

There are no shares with special rights which confer con-

trol rights.

ꢁ

ꢃ

Financial Analysis

ꢁ

ꢃ

Internal Management System

Earnings Performance

Financial Position

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

The appointment and removal of members of the Board

of Management are based on the rules contained in §84 et

seq. AktG in conjunction with §31 of the German Co-De-

termination Law (MitbestG). In accordance with Article 7

of the Articles of Incorporation, the Board of Management

consists of two or more members. The Supervisory Board

determines the number of the members of the Board

of Management. It is responsible for appointing members

to the Board of Management and for revoking appoint-

ments. It also designates one of the members as the

Chairman of the Board of Management.

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

Amendments to the Articles of Incorporation must comply

with §179 et seqq. AktG. All amendments must be resolved

by the shareholders at the Annual General Meeting (§119 ꢀꢕꢂ

no.5, §179 ꢀꢕꢂ AktG). The Supervisory Board is authorised

to approve amendments to the Articles of Incorporation

which only affect its wording (Article 14 no.3 of the Articles

of Incorporation). Resolutions are passed at the Annual

General Meeting by simple majority of shares unless other-

wise explicitly required by binding provisions of law (§20

of the Articles of Incorporation).

In accordance with the resolution passed at the Annual

General Meeting on 8 May 2008, the Board of Management

is authorised, up to 6 November 2009 and subject to the

price limits stipulated in the resolution, to acquire shares of

common and/or non-voting preferred stock via the stock

exchange, up to a maximum of 10ꢏ of the share capital in

place at the date of the resolution. The Board of Manage-

ment is also authorised, without any further resolution by

the Annual General Meeting, to withdraw from circulation

the treasury shares (common and/or non-voting preferred

stock) acquired in accordance with the authorisation de-

scribed above. Furthermore, the Board of Management is

authorised to buy back shares and sell bought-back shares

in situations specified in §71 AktG, e.g. to avert serious

and imminent damage to the Company or for the purposes

of an employee share scheme. There is no authorised or

conditional capital at the reporting date.

The BMW Group has not concluded any compensation

agreements with members of the Board of Management

or with employees for situations involving a takeover offer.

BMW AG is party to the following significant agreements

which contain special provisions for the event of a change

ꢆꢈ Group Management Report

Analysis of the Group Financial Statements

Group Internal Management System

reached for a particular project, it is managed over time

using a value-based approach. Projects are monitored

continuously and resources reallocated according to re-

quirements.

In conjunction with the strategy Number ONE, the BMW

Group has also continued to develop its groupwide inter-

nal management system. Processes are now focused even

more sharply on profitability and long-term value growth.

Coherent management of capital employed at all levels

means that the efficient use of capital funds is a prime cri-

terion at project, segment and Group levels. The targets

set for the Automobiles, Motorcycles and Financial Services

segments all stem from this objective. Within the Auto-

mobiles and Motorcycles segments, capital employed is

managed at the level of individual product, process and

infrastructure projects. By contrast, the credit and lease

portfolios of the Financial Services segment are managed

primarily on the basis of a cash flow and risk approach.

The project decision and related project selection are

important aspects of value-based management for the

BMW Group. Project decisions are taken on the basis of

net present values (NPVs) and rates of return: this involves

computing the present value of cash flows and the inter-

nal project rate of return (or model rate of return in the case

of vehicle projects) expected to be generated by a project

decision and comparing the results with competitive mar-

ket values.

In this way, the amount by which a project will contribute

to the total value of the segment can be measured when

the project decision is taken. Targets and performance are

controlled using project-related target NPVs and individual

cash-flow-related parameters which have an impact on

those values.

Minimum rate of return derived from cost of capital

The cornerstone of the value-added management of the

BMW Group is the entity-specific minimum rate of return,

derived from capital market data and based on the weighted

average cost of capital (WACC) as follows:

Cost of equity capital x fair value of equity capital

Fair value of equity and debt capital

The NPV of a project programme is computed by identi-

fying the cash flows of all related projects and discounting

them back to a specific date. This value serves as an im-

portant target for the Automobiles and Motorcycles seg-

ments. The business value of each segment is measured

after adjusting for the fair value of debt capital. The objec-

tive for the Automobiles and Motorcycles segments is to

increase the value of the business continually.

WACC =

+

Cost of debt capital x fair value of debt capital

Fair value of total capital

The cost of equity capital is measured using the Capital

Asset Pricing Model (CAPM). The cost of debt capital is

based partly on the average interest rate paid for long-term

external debt and partly on the interest rate applicable for

pension obligations.

Capital employed by BMW Group

in euro million

Value management in the context of project control

Strategic priorities set at a functional level are based on

segment-specific strategies and on the project decisions

reached in accordance with those strategies. The close

link between segment-specific strategies and project

objectives ensures that the project development process

remains effective. Once a positive decision has been

2

008

ꢋꢃꢃꢈ

Group equity

21,766

2,832

ꢋꢃ,ꢇꢃꢇ

ꢋ,ꢋꢆꢈ

+

Financial liabilities

Pension provisions

3,717

ꢆ,ꢈꢈꢊ

Capital employed

28,315

27,321

Return on Capital Employed

Earnings for

ROCE purposes

in euro million

Capital

employed

in euro million

Return on

Capital Employed

in %

2008

ꢋꢃꢃꢈ

2008

ꢋꢃꢃꢈ

2008

ꢋꢃꢃꢈ

BMW Group

Automobiles

Motorcycles

639

690

60

ꢆ,ꢊꢉꢇ

ꢇ,ꢆꢅꢃ

ꢌꢃ

28,315

14,056

432

ꢋꢈ,ꢇꢋꢊ

ꢊꢇ,ꢉꢅꢇ

ꢆꢆꢆ

2.3

4.9

ꢊꢅ.ꢇ

ꢋꢆ.ꢈ

ꢊꢌ.ꢃ

13.9

ꢆꢌ

ROCE Automobiles

and Motorcycles

Profit before financial result

Capital employed

Capital employed by Automobiles segment

in euro million

=

2008

ꢋꢃꢃꢈ

ROE Financial

Services

Profit before tax

Equity capital

Capital employed

28,867

14,811

14,056

ꢋꢌ,ꢈꢊꢇ

ꢊꢆ,ꢈꢄꢃ

13,953

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

less: Non-interest bearing liabilities

Capital employed

Group ROCE is measured by dividing earnings for ROCE

purposes by the average amount of capital employed.

Capital employed is measured for the BMW Group by

reference to liabilities and comprises Group equity, pension

provisions and the financial liabilities of the Automobiles

and Motorcycles segments. The average level of capital

employed for the year is measured as the average capital

employed at the beginning of the year, at quarter-ends and

at the end of the year. In line with the computation of capi-

tal employed, earnings for ROCE purposes is defined as

profit before interest expense incurred in conjunction with

the pension provision and financial liabilities of the Auto-

mobiles and Motorcycles segments (profit before interest

expense and tax).

ꢁ

ꢃ

Financial Analysis

ꢁ

ꢃ

9

Internal Management System

Earnings Performance

Financial Position

Return on capital used to measure value on a periodic

basis

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Net Assets Position

General business conditions relevant for periodic planning

have a bearing on how product projects and the product

programme as a whole are managed. It is important that

period-specific targets are also monitored and managed

on a long-term basis. This helps to ensure that the BMW

Group’s earnings performance can develop at a steady

pace. Periodic performance is managed in the context of

defined accounting policies and external financial reporting

requirements. The BMW Group primarily uses profit before

tax and segment-specific rates of return as the key indica-

tor figures by which it assesses operating performance for

a given reporting period.

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

The ROCE of the Automobiles and Motorcycles seg-

ments is measured as the ratio of the profit before finan-

cial result (the operating profit of the two segments) and

the average amount of capital employed. The latter com-

prises all current and non-current operational assets and

liabilities after adjustment for specified liabilities which

are not subject to interest e.g. trade payables. Based on

the cost of capital as a minimum rate of return and com-

parisons with competitive market values, the target ROCE

for the Automobiles segment has been set at a minimum of

26ꢏ.

Instead of the previous return on assets, capital efficiency

within the BMW Group is now measured on the basis of

the return on capital employed (ROCE). This key indicator

takes account of capital employed across all lines of busi-

ness, thus reflecting the overall Group performance. In

line with the method applied at Group level, the return on

capital employed remains the primary performance indica-

tor for the Automobiles and Motorcycles segments. In

the Financial Services segment, the performance indicator

“

return on assets” has been replaced by the return on

ROE is defined as the profit before tax divided by the

average amount of equity capital allocated to the Financial

Services segment. The target is a minimum return on

equity of 18ꢏ.

equity (ROE). The ROE performance indicator is important

for the value-based management of the Financial Services

segment in that it focuses on equity as a resource with

limited availability and on the desire to use capital efficiently.

Long-term creation of value

The overall objective set for earnings is continuous growth;

the minimum rate of return required for each line of busi-

Profit before interest expense and tax

=

ROCE Group

Capital employed

Return on Equity

Profit

before tax

in euro million

Equity

Return

on Equity

in %

in euro million

2008

ꢋꢃꢃꢈ

2008

ꢋꢃꢃꢈ

2008

ꢋꢃꢃꢈ

Financial Services

–292

ꢈꢆꢇ

4,013

ꢆ,ꢊꢃꢅ

–

ꢊꢌ.ꢊ

ꢆꢉ Group Management Report

Key performance indicators

in %

*

2008

ꢋꢃꢃꢈ

ꢋꢃꢃꢄ

ꢋꢃꢃꢅ

Return on Capital Employed

BMW Group

2.3

4.9

ꢊꢅ.ꢇ

ꢋꢆ.ꢈ

ꢊꢌ.ꢃ

ꢊꢄ.ꢈ

ꢋꢊ.ꢈ

ꢊꢈ.ꢈ

ꢊꢅ.ꢊ

ꢋꢇ.ꢋ

ꢊꢈ.ꢌ

Automobiles

Motorcycles

13.9

Return on Equity

Financial Services

–

ꢊꢌ.ꢊ

ꢊꢈ.ꢄ

ꢊꢄ.ꢉ

*

Capital employed calculated on year-end basis

ness is used as the relevant parameter. These periodic tar-

gets are supplementary to project and programme targets.

value (quantified in terms of the NPV of the project pro-

gramme) as well as on earnings and rates of return. Multi-

project planning data gleaned from these procedures al-

lows ongoing comparison between dynamic multi-period

targets and periodic performance.

For each project decision reached, the impact of cash flows

on the NPV and on the model rate of return as well as

the impact on periodic earnings over the long term are

documented. The fact that the performance indicators also

take account of periodic financial reporting requirements

ensures consistency within the target and management

model. This approach enables the BMW Group to analyse

the effect of each project-based decision on business

Earnings Performance

The unfavourable business conditions described else-

where in this report had an adverse impact on the BMW

Group’s earnings performance for the financial year 2008.

Reported earnings were also negatively affected by ex-

Group Income Statement

in euro million

2008

ꢋꢃꢃꢈ^*

Revenues

53,197

–44,323

8,874

ꢅꢄ,ꢃꢊꢌ

–ꢆꢇ,ꢌꢇꢋ

12,186

Cost of sales

Gross profit

Sales and administrative costs

Research and development costs

Other operating income

– 5,369

–2,825

1,428

–1,187

921

–ꢅ,ꢋꢅꢆ

–ꢋ,ꢉꢋꢃ

ꢈꢇꢃ

Other operating expenses

–ꢅꢇꢃ

Profit before financial result

4,212

Result from equity accounted investments

Interest and similar income

Interest and similar expenses

Other financial result

26

685

ꢊꢊ

ꢄꢆꢅ

–930

–351

–570

351

–ꢌꢉꢈ

–ꢉꢌ

Financial result

–339

3,873

Profit before tax

Income taxes

–21

330

–ꢈꢇꢉ

Net profit

3,134

*

restated presentation of financial result

ꢅꢃ

penditure to implement previously announced measures

to reduce the workforce, by more pronounced adverse

currency factors and by the ongoing high prices of raw

materials.

Research and development costs decreased by 3.3ꢏ to

euro 2,825 million and represented 5.3ꢏ ꢀꢓꢐꢐꢔ: ꢗ.ꢓꢏꢂ of rev-

enues. They include amortisation of capitalised develop-

ment costs amounting to euro 1,185 million (2007: euro 1,109

million). Total research and development costs amounted

to euro 2,864 million (2007: euro 3,144 million). This figure

comprises research costs, development costs not recog-

nised as assets and capitalised development costs. The

research and development expenditure ratio for 2008 was

5.4ꢏ ꢀꢓꢐꢐꢔ: ꢗ.ꢖꢏꢂ.

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

The BMW Group recorded a net profit of euro 330 million

(

2007: euro 3,134 million) for the financial year 2008. The

post-tax return on sales was 0.6ꢏ ꢀꢓꢐꢐꢔ: ꢗ.ꢖꢏꢂ. Earnings per

share of common and preferred stock were euro 0.49 and

euro 0.51 respectively (2007: euro 4.78 and euro 4.80 respec-

tively).

ꢁ

ꢃ

Financial Analysis

ꢆꢈ

Internal ManagementSystem

Earnings Performance

Financial Position

ꢁ

5

9

ꢄ

Depreciation and amortisation of property, plant and equip-

ment and intangible assets included in cost of sales, sales

and administrative costs and research and development

costs amounted to euro 3,670 million (2007: euro 3,683 mil-

lion).

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Net Assets Position

Group revenues fell by 5.0ꢏ compared to the previous year.

Revenues from the sale of BMW, MINI and Rolls-Royce

brand cars decreased by 10.7ꢏ, while revenues from motor-

cycles business remained at the previous year’s level.

Revenues from financial services business grew by 14.9ꢏ

as a result of business volume growth. Revenues gen-

erated by “Other Entities” amounted to euro 146 million.This

largely related to the Cirquent Group which was part of

the BMW Group up to 30 September 2008. The compa-

rable revenues figure for “Other Entities” in 2007 was euro

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

The positive net amount from other operating income and

expenses increased by 20.5ꢏ to euro 241 million, mainly

reflecting the higher level of income from the reversal of

provisions. In contrast, gains from the sale of assets (in

particular marketable securities) fell significantly.

214 million.

The profit before financial result, at euro 921 million, was

euro 3,291 million or 78.1ꢏ below the previous year’s figure.

Revenues declined in almost all regions. A drop of 9.9ꢏ

was recorded in Germany and one of 7.6ꢏ for the remain-

der of Europe. Revenues generated in the Americas region

edged up by 2.2ꢏ. For the Africa, Asia and Oceania re-

gions, revenues fell overall by 2.5ꢏ, despite the fact that

revenues generated in China grew by 24.0ꢏ.

The financial result deteriorated by euro 231 million. Of this

amount, euro 253 million relates to the line “Other financial

result”. In 2007, this line had included a gain of euro 97 mil-

lion resulting from the settlement of the exchangeable

bond on shares in Rolls-Royce plc, London. Other financial

result also includes losses on other derivative financial in-

struments, in particular on stand-alone interest-rate deriva-

tives. The decrease in the fair values of these financial in-

struments reflected changes in the interest rate structure.

The result from equity accounted investments improved by

euro 15 million, and includes, in addition to the result from

the investment in BMW Brilliance Automotive Ltd., Shen-

yang, the Group’s share of the result of the Cirquent Group.

Net interest result improved by euro 7 million. Within net

interest result, the net expense from the reversal of dis-

counting on pension obligations and the income from the

expected return on pension plan assets increased by euro

11 million.

Cost of sales increased in absolute terms by 1.1ꢏ on a

year-on-year comparison. Cost of sales in 2008 include the

impact of expenses recognised for additional risk provi-

sions for residual value risks and bad debts totalling euro

1

,968 million. Unfavourable exchange rates and higher raw

material prices also contributed to the increase in cost of

sales. As a result of these adverse factors, the gross profit

fell by 27.2ꢏ, giving a gross profit margin of 16.7ꢏ ꢀꢓꢐꢐꢔ:

ꢓꢕ.ꢑꢏꢂ. The gross profit margin recorded by the Automo-

biles segment was 16.4ꢏ ꢀꢓꢐꢐꢔ: ꢕꢒ.ꢖ ꢏꢂ and that of the

Motorcycles segment was 25.8ꢏ ꢀꢓꢐꢐꢔ: ꢓꢑ.ꢕ ꢏꢂ.

Sales and administrative costs increased by 2.2ꢏ mainly

due to the fact that most of the expenditure incurred to

reduce the size of the workforce is presented within ad-

ministrative costs (euro 455 million). Sales and administra-

tive costs represented 10.1ꢏ of revenues, 0.7 percentage

points higher than in the previous year.

Taking into account the changes in the financial result

described above, profit before tax fell by 90.9ꢏ compared

to the previous year. The pre-tax return on sales was 0.7ꢏ

ꢀꢓꢐꢐꢔ: ꢖ.ꢒꢏꢂ.

ꢅꢊ Group Management Report

Revenues by segment

in euro million

2

008

ꢋꢃꢃꢈ

Automobiles

Motorcycles

Financial Services

Other Entities

Eliminations

Group

48,782

1,230

ꢅꢇ,ꢌꢊꢌ

ꢊ,ꢋꢋꢌ

15,725

191

ꢊꢇ,ꢉꢆꢃ

ꢋꢉꢃ

–12,731

53,197

–ꢊꢇ,ꢋꢅꢌ

56,018

Profit before tax by segment

in euro million

2008

ꢋꢃꢃꢈ

Automobiles

Motorcycles

Financial Services

Other Entities

Eliminations

Group

318

51

ꢇ,ꢋꢇꢋ

ꢈꢊ

–292

295

–21

351

ꢈꢆꢇ

ꢊꢄꢌ

–ꢇꢆꢊ

3,873

The Group net profit was euro 2,804 million or 89.5ꢏ below

the figure reported in the previous year. The significantly

lower effective tax rate was due primarily to higher tax reim-

bursements.

Financial position

The Group and Segment cash flow statements show the

sources and applications of cash flows for the financial

years 2008 and 2007, classified into cash flows from operat-

ing, investing and financing activities.

The Automobiles segment recorded a 4.3ꢏ decrease in

sales volume and a 9.4ꢏ decrease in revenues. Due to the

adverse factors described above, the segment profit fell by

Cash flows from operating activities are determined indi-

rectly starting with the Group net profit. By contrast, cash

flows from investing and financing activities are based on

actual payments and receipts. Cash and cash equivalents

in the cash flow statement correspond to the amount

disclosed in the balance sheet.

90.2ꢏ to euro 318 million.

Revenues of the Motorcycles segment edged up by 0.2ꢏ.

Difficult business conditions caused the segment profit to

drop by 28.2ꢏ to euro 51 million.

Operating activities of the BMW Group generated a

positive cash flow of euro 10,872 million in 2008, a de-

crease of euro 1,311 million or 10.8ꢏ compared to the pre-

vious year. Changes in net current assets during 2008

generated a cash inflow of euro 411 million (2007: euro

Revenues generated by the Financial Services segmentrose

by 12.8ꢏ to euro 15,725 million as a result of business vol-

ume growth. Higher risk provision expense and refinancing

costs resulted in a segment loss of euro 292 million in 2008.

2

69 million).The cash outflow for investing activities

The segment profit for the Other Entities segment was

euro 295 million (2007: euro 168 million). The increase here

was mainly due to the higher level of income from reversals

of provisions and a gain on the partial sale of the Cirquent

Group.

amounted to euro 18,652 million and was therefore euro

1,404 million higher than in 2007. Capital expenditure for

intangible assets and property, plant and equipment

resulted in the cash outflow for investing activities de-

creasing by euro 63 million on a year-on-year comparison.

ꢅꢋ

The cash outflow for net investments in financial services

activities increased by euro 1,288 million compared to the

previous year.

After adjustment for the effects of exchange-rate fluctua-

tions and changes in the composition of the BMW Group

amounting to a negative amount of euro 63 million (2007:

negative amount of euro 46 million), the various cash flows

resulted in an increase in cash and cash equivalents of

euro 5,061 million (2007: euro 1,057 million).

Financing activities in 2008 generated a positive cash

flow of euro 12,904 million (2007: euro 6,168 million). Cash in-

flows from the issue of bonds totalled euro 9,959 million

(2007: euro 6,038 million) while euro 5,080 million (2007: euro

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

Net interest-bearing assets relating to the Automobiles

segment (including inter-segment finance receivables)

amounted to euro 9,046 million at the end of the reporting

period, representing an increase of euro 1,692 million since

31 December 2007. Net interest-bearing assets relating

to the Automobiles segment comprise cash and cash

equivalents (euro 5,073 million), marketable securities (euro

557 million) and inter-segment finance receivables (euro

8,185 million) less the financial liabilities of the Automobiles

segment. Excluding derivative financial instruments, they

amount to euro 4,769 million.

4

,152 million) was used to repay bonds. The dividend pay-

ꢁ

ꢃ

Financial Analysis

ment for the financial year 2008 amounted to euro 694 mil-

lion. The net cash inflow from other financial liabilities and

commercial paper increased by euro 3,912 million.

ꢆꢈ

ꢆꢉ

Internal ManagementSystem

Earnings Performance

Financial Position

5

ꢄ

ꢅ

Net Assets Position

ꢅꢅ

ꢅꢈ

ꢅꢌ

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

58.3ꢏ ꢀꢓꢐꢐꢔ: ꢔꢐ.ꢖꢏꢂ of the cash outflow for investing activities

was covered by the cash inflow from operating activities.

The cash flow statement for the Automobiles segment

shows that the cash outflow for operating activities fell

slightly short (euro 81 million) of the cash inflow from in-

vesting activities (2007: surplus of euro 2,147 million). As ex-

pected, the cash flow statement for the Financial Services

segment shows that the cash inflow from operating activi-

ties did not cover the cash outflow for investing activities

due to the high level of capital expenditure on leased prod-

ucts and receivables from sales financing. The short-fall

was 39.4ꢏ ꢀꢓꢐꢐꢔ: ꢍꢑ.ꢔꢏꢂ.

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

Net Assets Position

The Group balance sheet total increased by euro 12,089 mil-

lion or 13.6ꢏ to euro 101,086 million. Currency effects,

largely attributable to a weaker British pound, held down

the increase in the balance sheet total in 2008. Adjusted for

changes in exchange rates, the balance sheet total would

Change in cash and cash equivalents

in euro million

ꢊꢇ,ꢃꢃꢃ

ꢊꢋ,ꢃꢃꢃ

ꢊꢊ,ꢃꢃꢃ

ꢊꢃ,ꢃꢃꢃ

ꢉ,ꢃꢃꢃ

ꢌ,ꢃꢃꢃ

ꢈ,ꢃꢃꢃ

ꢄ,ꢃꢃꢃ

ꢅ,ꢃꢃꢃ

ꢆ,ꢃꢃꢃ

ꢇ,ꢃꢃꢃ

ꢋ,ꢃꢃꢃ

ꢊ,ꢃꢃꢃ

–

ꢊ,ꢃꢃꢃ

ꢋ,ꢃꢃꢃ

ꢇ,ꢃꢃꢃ

ꢆ,ꢃꢃꢃ

ꢅ,ꢃꢃꢃ

Cash and cash

equivalents

Cash inflow

from operating

activities

Cash outflow

from investing

activities

Cash inflow

from financing

activities

Currency trans-

lation, changes in

Group composition

Cash and cash

equivalents

31.12. 2008

3

1.12. 2007

2

,393

+10,872

–18,652

+12,904

–63

7,454

ꢅꢇ Group Management Report

have increased by euro 15,044 million or 17.5ꢏ. The main

factors behind the increase on the assets side were the

increased level of cash and cash equivalents ꢀ+ꢓꢕꢕ.ꢗꢏꢂ, re-

ceivables from sales financing ꢀ+ꢕꢕ.ꢓꢏꢂ and leased products

59 million ꢀ–ꢐ.ꢑꢏꢂ to euro 7,290 million. Trade receivables

were 13.7ꢏ lower than at 31 December 2007.

Financial assets increased by 6.7ꢏ to euro 5,114 million,

mainly as a result of the higher fair values of derivative finan-

cial instruments.

ꢀ

+ ꢕꢁ.ꢑ ꢏꢂ. On the equity and liabilities side of the balance

sheet, the main increase related to financial liabilities

+ꢍꢔ.ꢗꢏꢂ.

ꢀ

Liquid funds increased by 86.3ꢏ to euro 8,107 million. Mar-

ketable securities and investment funds decreased as a

result of the transfer of assets to the newly founded BMW

Trust e.V., Munich, in conjunction with the creation of an

external fund for pension obligations.

Intangible assets amounted to euro 5,641 million, slightly

below their level one year earlier. Within this line item,

capitalised development costs went up by 0.8ꢏ to euro

5

,073 million. Development costs recognised as assets

during the year under report amounted to euro 1,224 million

–ꢑ.ꢓꢏꢂ, equivalent to a capitalisation ratio of 42.7ꢏ ꢀꢓꢐꢐꢔ:

ꢓ.ꢁꢏꢂ. The lower level of additions to capitalised develop-

ꢀ

ꢁ

Cash and cash equivalents rose by euro 5,061 million.

ment costs in 2008 was due to the smaller number of

projects in the series development phase. Amortisation on

intangible assets amounted to euro 1,185 million ꢀ+ꢖ.ꢒꢏꢂ.

On the equity and liabilities side of the balance sheet,

equity decreased by 6.8ꢏ to euro 20,273 million. The profit

for the year attributable to shareholders of BMW AG in-

creased equity by euro 324 million. Fair value changes rec-

ognised directly in accumulated other equity reduced

equity by euro 1,088 million (2007: euro 61 million). The latter

comprises translation differences, fair value gains and losses

on financial instruments and available-for-sale securities

as well as actuarial gains and losses on pension plans.

The carrying amount of property, plant and equipment

increased slightly by ꢕ.ꢔꢏ to euro 11,292 million. Capital

expenditure increased by euro 2,865 million or 6.7ꢏ, with

the main focus on product investments for production

start-ups and infrastructure improvements. Depreciation

on property, plant and equipment totalled euro 2,375 million

ꢀ

–ꢍ.ꢒꢏꢂ. Balances brought forward for subsidiaries being

Translation differences reduced accumulated other equity

by euro 711 million. The fair values of derivative financial in-

struments decreased by a further euro 601 million. Actu-

arial gains and losses within accumulated other equity

increased by euro 5 million. The fair values of marketable

securities fell marginally by euro 7 million. Deferred taxes

on fair value gains and losses recognised directly in equity

increased equity by euro 226 million in 2008.

consolidated for the first time amounted to euro 67 million.

Total capital expenditure as a percentage of revenues was

7

.9ꢏ ꢀꢓꢐꢐꢔ: ꢔ.ꢖꢏꢂ.

The amount reported for leased products in the balance

sheet rose sharply compared to the end of the previous

year, reflecting a general increase in business volumes as

well as the integration of the – previously off-balance-

sheet – vehicle portfolio of a leasing company which had

included a part of the leasing business for Germany.

Leased products rose by 14.8ꢏ to euro 19,524 million. Ad-

justed for changes in exchange rates, they would have

risen by 14.4ꢏ.

Minority interests amounted to euro 8 million. The equity

ratio of the BMW Group fell by 4.3 percentage points to

20.1ꢏ.

The equity ratio for the Automobiles segment was 42.3ꢏ

compared to 41.2ꢏ at the end of the previous year. The

equity ratio for the Financial Services segment fell from

6.9ꢏ to 5.4ꢏ.

The carrying amount of other investments increased by

5

4.1ꢏ to euro 322 million, mainly as a result of capital in-

creases at non-consolidated companies.

The amount recognised in the balance sheet for pension

provisions went down by 28.4ꢏ to euro 3,314 million. In the

case of pension plans with fund assets, the fair value of

fund assets is offset against the defined benefit obligation.

The reduction in pension obligations resulted primarily

from the transfer of pension obligations to the newly

Receivables from sales financing were up by 11.2ꢏ to euro

3

8,063 million due to higher business volumes. Of this

amount, customer and dealer financing accounted for euro

9,470 million ꢀ+ꢕꢓ.ꢖꢏꢂ and finance leases accounted for

euro 8,593 million ꢀ+ ꢖ.ꢖ ꢏꢂ. Inventories decreased by euro

2

ꢅꢆ

Balance sheet structure – Group

in euro billion

Non-current assets

ꢄꢋ%

ꢋꢃ%

ꢆꢊ%

Equity

ꢄꢆ%

ꢋꢆ%

ꢇꢌ%

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

Non-current provisions and liabilities

ꢁ

ꢃ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

Internal ManagementSystem

Earnings Performance

Financial Position

Current assets

ꢇꢌ%

ꢈ%

ꢇꢉ%

Current provisions and liabilities

ꢇꢌ%

ꢇꢄ%

ꢇ%

5

ꢅꢈ

ꢅꢌ

ꢅ

5

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

thereof cash and cash equivalents

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

2008

ꢅꢀꢀꢃ

2008

101

ꢌꢉ

101

Balance sheet structure – Automobiles segment

in euro billion

Non-current assets

ꢆꢆ%

ꢆꢋ%

Equity

ꢆꢄ%

ꢆꢊ%

ꢋꢊ%

ꢇꢌ%

ꢋꢄ%

ꢇꢋ%

Non-current provisions and liabilities

Current provisions and liabilities

Current assets

ꢅꢄ%

ꢅꢆ%

thereof cash and cash equivalents

ꢊꢃ%

ꢋ%

2008

ꢅꢀꢀꢃ

2008

53

ꢅꢋ

53

founded BMW Trust e.V. in conjunction with a Contractual

Trust Arrangement (CTA). Obligations also decreased be-

cause of the higher discount factor used.

Other provisions decreased by 11.3ꢏ to euro 4,882 million,

with the reduction mainly due to lower obligations for per-

sonnel-related and other expenses.

5

5 Group Management Report

Financial liabilities increased by 37.ꢀ% in conjunction with

the refinancing of the Group’s financial services business.

Within financial liabilities, bonds increased by 31.4% to euro

less pronounced since it is not affected by depreciation

and amortisation, which are higher than in the previous

year.

24,1ꢀ9 million. Liabilities to banks, asset-backed financing

obligations and deposit liabilities were all also up.

Once again, the bulk of the net value added (ꢁꢂ.ꢃ %) is ap-

plied to employees. The amount applied to providers of

finance increased to 27.0% as a result of the higher funding

volume required for the financial services business. The

government/public sector ꢄincluding deferred tax expenseꢅ

accounted for ꢀ.1%. The proportion of net value added

applied to shareholders, at 1.9%, was lower than in the pre-

vious year. The remaining proportion of net value added

(ꢆ.ꢇ%) will be retained by the BMW Group to finance future

operations. This represents a decrease of 16.1 percentage

points.

Trade payables amounted to euro 2,ꢀ62 million and were

thus 27.9% lower than one year earlier.

Other liabilities went up by 2.ꢀ% to euro 6,281 million,

mainly reflecting increases in deferred income relating to

service and repair contracts, deferred income from lease

financing and the valuation of financial instruments.

Compensation Report

The compensation of the Board of Management comprises

fixed and variable components. In addition, benefits are

also payable at the end of members’ mandates, primarily in

the form of pension benefits. Further details, including an

analysis of remuneration by individual, are disclosed in the

Compensation Report which can be found in the “Corpo-

rate Governance” section of the Annual Report on pages

141 –146. The Compensation Report is a sub-section of the

Group Management Report.

Subsequent Events Report

No events have occurred after the balance sheet date which

have a major impact on the earnings performance, financial

position and net assets of the BMW Group.

Value Added Statement

The value added statement shows the value of work per-

formed less the value of work bought in by the BMW Group

during the financial year. Depreciation and amortisation,

cost of materials and other expenses are treated as bought-

in costs in the value added calculation. The allocation

statement applies value added to each of the participants

involved in the value added process. It should be noted

that the gross value added treats depreciation as a compo-

nent of value added which, in the allocation statement, is

treated as internal financing.

Net value added by the BMW Group in 2008 decreased by

2ꢀ.7% to euro 10,469 million. The decrease over the pre-

vious year was largely attributable to the lower level of rev-

enues. The decrease in gross value added, at 10.6%, was

ꢅꢄ

BMW Group Value added statement

2

008

2008

in %

ꢋꢃꢃꢈ

in euro million

ꢋꢃꢃꢈ

in %

Change

in %

in euro million

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

Work performed

Revenues

53,197

–410

ꢉꢌ.ꢊ

–ꢃ.ꢈ

ꢅꢄ,ꢃꢊꢌ

–ꢊꢊꢆ

ꢉꢌ.ꢉ

–ꢃ.ꢋ

Financial income

Other income

Total output

1,428

54,215

ꢋ.ꢄ

ꢈꢇꢃ

ꢊ.ꢇ

100.0

56,634

100.0

–4.3

ꢁ

ꢃ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

Internal ManagementSystem

Earnings Performance

Financial Position

Cost of materials

Other expenses

Bought-in costs

30,648

5,447^*

36,095

ꢅꢄ.ꢅ

ꢊꢃ.ꢊ

66.6

ꢇꢊ,ꢃꢊꢉ

ꢅ,ꢇꢅꢅ

ꢅꢆ.ꢌ

ꢉ.ꢆ

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

5

ꢃ

36,374

64.2

–0.8

–ꢊꢃ.ꢄ

–25.7

ꢅꢌ

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

Gross value added

Depreciation and amortisation

Net value added

18,120

7,651

33.4

ꢊꢆ.ꢊ

19.3

20,260

ꢄ,ꢊꢄꢆ

35.8

ꢊꢃ.ꢉ

24.9

10,469

14,096

Applied to

Employees

6,781

2,823

535

ꢄꢆ.ꢌ

ꢋꢈ.ꢃ

ꢅ.ꢊ

ꢈ,ꢅꢊꢊ

ꢋ,ꢋꢈꢃ

ꢊ,ꢊꢌꢊ

ꢄꢉꢆ

ꢅꢇ.ꢇ

ꢊꢄ.ꢊ

ꢌ.ꢆ

–ꢉ.ꢈ

ꢋꢆ.ꢆ

Providers of finance

Government/public sector

Shareholders

–ꢅꢆ.ꢈ

–ꢈꢊ.ꢄ

–ꢉꢆ.ꢌ

–ꢋꢅ.ꢃ

–25.7

197

ꢊ.ꢉ

ꢆ.ꢉ

Group

127

ꢊ.ꢋ

ꢋ,ꢆꢇꢋ

ꢌ

ꢊꢈ.ꢇ

–

Minority interest

Net value added

6

–

10,469

100.0

14,096

100.0

*

including expenditure in conjunction with measures to reduce the size of the workforce

BMW Group Value added 2008

in %

ꢄꢆ.ꢌ%

Employees

Depreciation and amortisation

Other expenses

Net value added

ꢋꢈ.ꢃ%

Providers of finance

Cost of materials

ꢅ.ꢊ%

ꢊ.ꢉ%

ꢊ.ꢋ%

Government/public sector

Shareholders

Group

Net value added

Cost of materials

ꢊꢉ.ꢇ

ꢅꢄ.ꢅ

Depreciation and amortisation

Other expenses

ꢊꢆ.ꢊ

ꢊꢃ.ꢊ

ꢅꢈ Group Management Report

Key Performance Figures

2008

ꢋꢃꢃꢈ

Gross margin

%

16.7

8.6

ꢋꢊ.ꢌ

ꢊꢆ.ꢊ

ꢈ.ꢅ

EBITDA margin

EBIT margin

1.7

Pre-tax return on sales

0.7

ꢄ.ꢉ

Post-tax return on sales

0.6

ꢅ.ꢄ

Pre-tax return on equity

1.6

ꢋꢃ.ꢋ

ꢊꢄ.ꢆ

ꢋꢆ.ꢆ

ꢆꢊ.ꢋ

ꢄ.ꢉ

Post-tax return on equity

1.5

Equity ratio – Group

20.1

42.3

5.4

Automobiles

Financial Services

Coverage of intangible assets, property, plant and equipment by equity

119.7

ꢊꢋꢉ.ꢄ

Return on Capital Employed

Group

%

2.3

4.9

ꢊꢅ.ꢇ

Automobiles

ꢋꢆ.ꢈ^*

ꢊꢌ.ꢃ^*

Motorcycles

13.9

Return on Equity

Financial Services

%

euro million

%

–

10,872

18,652

58.3

ꢊꢌ.ꢊ

ꢊꢋ,ꢊꢌꢇ^*

ꢊꢈ,ꢋꢆꢌ

ꢈꢃ.ꢄ^*

Cash inflow from operating activities

Cash outflow from investing activities

Coverage of cash outflow from investing activities by cash inflow from operating activities

Net financial assets Automobiles segment

euro million

9,046

ꢈ,ꢇꢅꢆ

*

adjusted due to changed presentation

ꢅꢌ

Comments on the Financial Statements of BMW AG

Whereas the Group Financial Statements are drawn up in

accordance with IFRSs issued by the IASB, the financial

statements of BMW AG are drawn up in accordance with

the provisions of the German Commercial Code (HGB).

Where it is permitted and considered sensible, the princi-

ples and policies of IFRSs are also applied in the individual

company financial statements. The pension provision in

the individual company financial statements, for example,

is also determined in accordance with IAS 19 and the full

defined benefit obligation recognised. In numerous other

cases, however, the accounting principles and policies in

the individual company financial statements of BMW AG

differ from those applied in the Group Financial State-

ments. The main differences relate to the recognition of

intangible assets, depreciation and amortisation methods,

the measurement of inventories and provisions as well as

the treatment of financial instruments.

Adverse currency factors relating to the US dollar and

Japanese yen as well as continued intense competition on

the automobile markets had a negative impact on BMW

AG’s earnings.

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

In conjunction with measures to optimise the structure

of investments within the BMW Group, BMW AG incurred

a loss of the disposal of subsidiaries and a higher profit on

an existing profit and loss transfer agreement. Investments

were reduced as a result of this transaction.

ꢁ

ꢃ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

Internal Management System

Earnings Performance

Financial Position

Capital expenditure on intangible assets and property,

plant and equipment amounted to euro 2,064 million (2007:

euro 1,670 million), up 23.6ꢏ compared to the previous

year. The increase was mainly related to high product in-

vestments for the new BMW ꢈ Series and the new Zꢆ.

Depreciation and amortisation amounted to euro 1,569 mil-

lion.

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

5ꢆ

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

BMW AG develops, manufactures and sells cars and mo-

torcycles manufactured by itself and foreign subsidiaries.

These vehicles are sold through the Company’s own

branches, independent dealers, subsidiaries and import-

ers. The number of cars manufactured at German and

foreign plants in 2008 decreased by 6.6ꢏ to 1,439,918 units.

At 31 December 2008, BMW AG had 71,596 employees,

In order to secure obligations resulting from pre-retirement

part-time work arrangements and a part of the Company’s

pension obligations, an amount of euro 1,285 million was

transferred to the newly founded BMW Trust e.V., Munich,

in conjunction with a Contractual Trust Arrangement

(

CTA).

4

,468 fewer than one year earlier. This is largely due to the

Equity decreased by euro 310 million to euro 5,338 million.

The existing authorisation to acquire treasury common

stock shares was not exercised during the financial year

2008. Of the preferred stock treasury shares acquired dur-

ing 2008, 363,130 shares were held by the Company at the

end of the reporting period. The equity ratio decreased

from 25.0ꢏ to 22.9ꢏ. Long-term external capital (registered

profit-sharing certificates, pension provisions, the liability

to the BMW Unterstützungsverein e.V. and liabilities due

later than one year) increased by 48.8ꢏ to euro 6,054 mil-

lion. Despite the heightening of the financial crisis during

the second half of 2008, BMW AG had access to the credit

and financial markets at all times and was able to increase

its liquid funds significantly.

implementation of previously reported measures to re-

duce the size of the workforce. The expenditure incurred

in this context increased administrative costs.

Consumer reluctance to spend in the face of the current

financial crisis as well as model life cycle factors caused a

reduction in the number of cars sold by BMW AG. As a con-

sequence, revenues fell in 2008 by 8.3ꢏ. Sales to foreign

group sales companies accounted for euro 32.5 billion or

approximately 73.3ꢏ of the total revenues of euro 44.3 bil-

lion. In percentage terms, the decrease in cost of sales was

slightly more pronounced than the decrease in revenues.

Gross profit fell by euro 0.4 billion ꢀ–ꢗ.ꢖꢏꢂ and amounted to

euro 6.5 billion.

ꢅꢉ Group Management Report

BMW AG Balance Sheet at 31December

in euro million

2008

ꢋꢃꢃꢈ

Assets

Intangible assets

143

ꢊꢃꢉ

ꢆ,ꢉꢌꢄ

ꢆ,ꢌꢊꢆ

9,909

Property, plant and equipment

Investments

5,404

1,096

6,643

Tangible, intangible and investment assets

Inventories

2,586

982

ꢋ,ꢄꢅꢆ

ꢊ,ꢋꢊꢌ

ꢅ,ꢉꢇꢈ

ꢄꢆꢆ

Trade receivables

Receivables from subsidiaries

Other receivables and other assets

Marketable securities

Cash and cash equivalents

Current assets

6,098

623

2,360

3,970

16,619

ꢊ,ꢈꢄꢇ

ꢆꢇꢄ

12,652

Prepayments

Total assets

54

55

23,316

22,616

Equity and liabilities

Subscribed capital

654

1,991

2,496

197

ꢄꢅꢆ

ꢊ,ꢉꢉꢊ

ꢋ,ꢇꢃꢉ

ꢄꢉꢆ

Capital reserves

Revenue reserves

Unappropriated profit available for distribution

Equity

5,338

5,648

Registered profit-sharing certificates

Special untaxed reserves

34

13

34

Pension provisions

Other provisions

Provisions

3,791

6,142

9,933

ꢇ,ꢈꢉꢇ

ꢄ,ꢋꢉꢋ

10,085

Liabilities to banks

Trade payables

3,049

1,276

2,311

1,338

7,974

ꢇꢉꢆ

ꢊ,ꢈꢊꢄ

ꢋ,ꢅꢉꢈ

ꢋ,ꢃꢉꢆ

6,801

Liabilities to subsidiaries

Other liabilities

Liabilities

Deferred income

24

14

Total equity and liabilities

23,316

22,616

ꢄꢃ

BMW AG Income Statement

in euro million

2008

ꢋꢃꢃꢈ

Revenues

44,313

–37,833

6,480

ꢆꢌ,ꢇꢊꢃ

–ꢆꢊ,ꢆꢆꢌ

6,862

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

Cost of sales

Gross profit

Sales costs

–3,085

–1,366

–2,646

–641

–ꢋ,ꢈꢌꢄ

–ꢌꢌꢊ

–ꢋ,ꢌꢋꢌ

ꢈꢇꢊ

ꢁ

ꢃ

Financial Analysis

Administrative costs

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

Internal Management System

Earnings Performance

Financial Position

Research and development costs

Other operating income and expenses

Result on investments

Net Assets Position

1,807

–154

ꢋꢅꢅ

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

Financial result

–ꢇꢌ

5ꢆ

Profit from ordinary activities

395

1,315

ꢄꢋ

ꢄꢌ

Risk Management

Outlook

Income taxes

Other taxes

Net profit

3

–14

384

–ꢊꢊꢅ

–ꢊꢄ

1,184

Profit carried over from previous year

Transfer to revenue reserves

–

–187

197

ꢊ

–ꢆꢉꢊ

694

Unappropriated profit available for distribution

Revenues from the sale of vehicles to car rental companies

are not recognised when there is an obligation to take

back the vehicles. In accordance with the draft financial re-

porting pronouncement “Specific Issues relating to the

Transfer of Beneficial Ownership and Profit Realisation in

accordance with HGB” (IDW ERS HFA 13 revised version

dated 29 November 2006) issued by the German Institute

of Public Accountants (IDW), vehicles remain on the

balance sheet, measured at amortised cost, because, on

the basis of the criteria set out in the pronouncement,

beneficial ownership has not been transferred to the car

rental companies.

ꢄꢊ Group Management Report

KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, has

issued an unqualified audit opinion on the financial state-

ments of BMW AG, of which the balance sheet and the

income statement are presented here. The BMW AG finan-

cial statements for the financial year 2008 will be submitted

to the operator of the electronic version of the German

Federal Gazette and can be obtained via the Company

Register website. These financial statements are available

from BMW AG, 80788 Munich, Germany.

ꢄꢋ

Risk Management

Risk management in the BMW Group

tion that is permanently learning. Risk management is a

continuous process since changes in the legal, economic

or regulatory environment or changes within the company

itself could lead to new risks or to known risks being differ-

ently assessed. By regularly sharing experiences with

other companies, the BMW Group ensures that innovative

approaches and ideas flow into the risk management

system and that risk management is subject to continual

improvement. Regular basic and further training as well

as information events are invaluable ways of preparing

people for new or additional requirements with regard to

the processes in which they are involved.

All business activities involve an element of risk. Some

of those risks can be quite substantial. They may arise in

conjunction with business operations or they may affect

a company as a result of changes in external factors. Other

risks arise as business becomes more international. As a

globally operating organisation, the BMW Group is con-

fronted with numerous risks. Price fluctuations on the global

markets for currency, money, capital and commodities as

well as shorter innovation cycles result in ever-increasing

complexity, all of which place great demands on enterprises

with international operations. The downturn that has be-

fallen the world’s economies over the past year has also

affected the risk profile.

ꢄꢁ

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ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

Overall risk management within the BMW Group is man-

aged centrally and reviewed for its appropriateness and

effectiveness by external auditors and by the Group’s inter-

nal audit department. The findings reached serve as the

basis for further improvements.

ꢂꢅ

Risk Management

The BMW Group’s approach to business has long been

founded on the idea of consciously taking calculated

risks and making full use of the opportunities arising from

them. As part of the risk reporting system, the Board of

Management and the Supervisory Board are regularly in-

formed about risks which could have a significant impact

on business performance.This information is derived from

the BMW Group’s integrated risk management system.

Business decisions are reached after consideration of in-

depth project analyses which show both potential risks

and potential opportunities. In addition, as part of long-term

planning, annual budget and short-term forecasts, the

risks and opportunities attached to specific business

activities are evaluated and used as the basis for setting

targets and implementing appropriate risk-mitigation

measures. The groupwide risk management process

comprises the early identification of risks and opportuni-

ties, their measurement and the use of suitable instru-

ments to manage and monitor risks. The risk manage-

ment system comprises a wide range of organisational

and methodological components that are all finely tuned

to each other. The system’s decentralised structure also

encourages a balanced approach to risks at all organisa-

tional levels.

ꢄꢌ

Outlook

At present, no risks have been identified which could

threaten the existence of the BMW Group or which could

have a materially adverse impact on the net assets, finan-

cial position or results of operations of the Group. However,

risks can never be entirely ruled out.

The areas of risk relevant for the BMW Group are pre-

sented in the following section. Additional comments on

risks in conjunction with financial instruments are provid-

ed in note 39

of the consolidated financial statements.

Risks relating to the general economic

environment

As a globally operating enterprise, the BMW Group is affect-

ed by global economic conditions. This includes changes in

exchange rates as well as developments on the financial

markets. The financial crisis and its impact on the world’s

markets for goods and services had a major effect on re-

ported Group revenues and earnings for 2008. In addition

to the effect of changes in demand and refinancing con-

ditions, fluctuations in exchange rates also had a signifi-

cant impact on Group earnings.This related in particular to

the US dollar (the main single source of risk in the BMW

Group’s currency portfolio), the Japanese yen, the British

pound and the Chinese renminbi. Based on forecasts,

these four currencies account for some 65ꢏ of the foreign

currency exposure of the BMW Group.

The Group reporting system provides decision makers with

comprehensive, up-to-date information on performance

against targets and on new developments relating to the

market and competitors. Critical success factors are moni-

tored continuously to ensure that unfavourable develop-

ments are identified at an early stage so that appropriate

counter measures can be implemented and opportunities

exploited.

The BMW Group manages currency risks both at a strate-

gic and at an operating level. At a strategic level (i.e. in

the medium and long term), the BMW Group endeavours

to manage foreign exchange risks by “natural hedging”, in

Standardised rules and procedures, consistently applied

throughout the BMW Group form the basis for an organisa-

ꢄꢇ Group Management Report

other words by increasing the volume of purchases de-

nominated in foreign currency or increasing the volume of

local production. In the short to medium term (i.e. at an

operating level), currency risks are hedged on the financial

markets. Hedging transactions are entered into only with

financial partners of good credit standing. It must be noted,

however, that the financial crisis has resulted in a deterio-

ration of the creditworthiness of many financial institutions

and set in motion a process of consolidation within the

banking sector which has not yet been completed.The

BMW Group takes account of these circumstances by

adjusting counterparty limits as deemed appropriate. The

nature and scope of such measures are set out in guide-

lines applicable throughout the BMW Group. A cash-flow-

at-risk model and scenario analyses are used to measure

exchange rate risks. These instruments are also used as

part of the process of currency management for the purpose

of taking business decisions.

Despite all of those factors, the BMW Group was neverthe-

less not able entirely to extricate itself from the difficulties

facing the automobile sector. This is reflected in revised

long-term ratings published by the rating agencies: in

November 2008, Standard & Poor’s lowered its long-term

rating from A+ to A, while Moody’s changed its long-term

rating from Aꢊ to Aꢋ. Despite this development, the BMW

Group and the securities issued by its Group entities re-

tained the classification “investment grade”. Refinancing

conditions deteriorated markedly as a result of the general

crisis on financial markets during the second half of 2008.

The high level of liquidity reported at the year-end reflects

the BMW Group’s ability to obtain refinancing funds even

in the face of extremely difficult market conditions. Any

continued deterioration in these conditions entails the

risk of further drops in ratings for the entire automobile

sector.

Changes on international raw material markets also have an

impact on the business performance of the BMW Group.

In order to safeguard the supply of production materials

and minimise the cost risk, the commodity markets relevant

for the BMW Group are closely monitored. Changes in

prices of precious metals (such as platinum, palladium

and rhodium), steel and other non-ferrous metals have an

impact on production costs. Hedging strategies are de-

cided on for these metals and other raw materials as

part of the BMW Group’s commodity management proce-

dures.

As a general rule, the BMW Group reduces currency risk

by refinancing credit and lease business in the currency

of the relevant market. If funds are raised in a foreign cur-

rency, exchange rate hedges are concluded immediately

afterwards in the corresponding local currency in order

to reduce the risk exposure.

Interest-rate risks are managed within the BMW Group by

raising refinancing funds with matching maturities and

by employing derivative financial instruments. Interest-rate

risks are measured and limited both at country and Group

level on the basis of the value-at-risk concept. The risk-

return ratio is also measured regularly using simulated

computations in conjunction with a present-value-based

interest rate management system. Sensitivity analyses,

which contain stress scenarios and show the potential im-

pact of interest rate changes on earnings, are also used

as tools to manage interest rate risks.

Changes in the price of crude oil, an important basic mate-

rial in the manufacture of components, have an indirect

impact on production costs. Moreover, the price of crude

oil also directly influences the purchasing behaviour of

drivers when fuel prices change.

An escalation of political tensions, terrorist activities, natural

catastrophes or possible pandemics could have a negative

impact on the economic situation, the international capi-

tal markets and hence the business performance of the

BMW Group.

The deposit business operated by the Financial Services

segment, credit lines with various banks and the use of a

wide range of financing instruments ensure that sufficient

liquid funds are available to the Group. Liquidity risk is

continuously monitored at a separate entity level and doc-

umented in a rolling cash flow forecasting system.

Sector risks

Fuel prices, whether influenced by market or governmental

tax policies, and increasingly stringent requirements to

reduce vehicle fuel consumption and emissions, present

demanding challenges for the BMW Group’s engine and

product development activities. One manifest result of this

has been the reduction of consumption and emissions

achieved through the BMW Group’s Efficient Dynamics

programme.

Most of the financing and lease business undertaken by

the Financial Services segment is refinanced on the capital

markets. As a result of its good credit standing, reflected

in the long-standing first-class short-term ratings issued

by Moody’s (P-ꢊ) and Standard & Poor’s (A-ꢊ), the BMW

Group is able to obtain competitive terms and conditions.

ꢄꢆ

In conjunction with their “trilog debate”, the European

Commission, the European Parliament and the Council of

the European Union reached agreement in December

centives for all parties involved to contribute to the requi-

site development of efficient drive systems.

2

008 on the details of a CO regulation, which constituted

Operating risks

2

an important step towards the adoption of a CO regulation

Risks arising from business interruption and loss of pro-

duction are insured up to economically reasonable

levels with insurance companies of good credit standing.

The BMW Group’s highly flexible production network

and working time models also help to reduce operating

risks.

2

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ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

for passenger cars. The proposed weight-based CO₂

emission standards result in considerably higher efficiency

requirements for the BMW Group than for high-volume

and small-car manufacturers. However, a definitive as-

sessment of the situation is only possible after considering

the legal basis and the manner in which the new regula-

tions are transformed into national law. The proposed

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Close cooperation between manufacturers and suppliers

is usual in the automotive sector and whilst this provides

economic benefits, it also creates a degree of mutual de-

pendence. Partly reflecting increasing consolidation within

the automotive supply industry, certain suppliers have

become extremely important for the BMW Group. Delivery

delays, cancellations, strikes or poor quality can lead to

production stoppages and thus have a negative impact on

profitability. The currently adverse business climate is also

affecting the supply industry. Revenue contraction in the

automobile sector clearly has an impact on the earnings

performance of suppliers. Simultaneously, as a result of the

turmoil on the capital markets, the banks have only been

willing to provide credit to businesses – including those of

the supply industry – on a more restrictive scale and at

less favourable conditions. The availability of capital is be-

coming increasingly critical for suppliers with high levels of

debt. However, although the number of problem cases

increased in 2008, the BMW Group was not affected by any

defaults. In cooperation with other car manufacturers, the

BMW Group endeavours to maintain close contact with

its suppliers in order to identify troubled suppliers as early

as possible and find appropriate solutions. When selecting

suppliers, both their technical competence and financial

strength are evaluated. Once a supplier has been selected,

a comprehensive Supplier Relationship Management

system – also covering social and ecological aspects –

helps to reduce risk exposure.

Net Assets Position

regulations on CO emissions and fuel consumption could

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

2

influence the business of the Automobiles segment and

thus have a significant impact on Group earnings.

ꢂꢅ

ꢄꢌ

Risk Management

Outlook

The BMW Group is confronting these challenges by rigor-

ously applying its technological expertise and innovative

strength to reduce the CO emissions of its vehicles. The

2

package of measures known as Efficient Dynamics was

adopted in 2000: a combination of highly efficient engines,

improved aerodynamics, lightweight construction and

energy management reduces the average fuel consump-

tion of the vehicle fleet. In the medium term, the BMW

Group is working on achieving additional fuel economy

with the aid of a wide range of measures from electrifica-

tion of the drive train through to hybrid solutions. The

BMW Group is also endeavouring to make sustainable

mobility possible in densely populated areas. In this con-

text, towards the end of the financial year the BMW Group

presented the MINI E, a purely electrically powered vehicle.

As part of a large-scale field trial, approximately 500 MINI E

vehicles were made available to selected customers,

most of them in the USA, at the beginning of 2009. The

practical experience gained from this trial will be incor-

porated in the further development of electric vehicles. In

the long term, the BMW Group is committed to the use

of hydrogen gained from various renewable sources to

power engines.

The need to reduce consumption and emissions is fully

integrated in the Group’s product innovation process. A

specialist department is studying the interplay of energy

management, aerodynamics, lightweight construction,

Risks relating to the provision of financial services

The BMW Group’s leasing business also entails a volume-

induced increase in the residual value risk on vehicles re-

turned at the end of lease contracts. The volatility of used

car prices on the major sales markets has intensified as a

result of the financial crisis, thus increasing the residual

value risk. Residual values of BMW Group vehicles on used

car markets are continuously monitored over long periods

and future developments forecasted. External market ob-

servations are also used in this context. The overall risk po-

sition is measured by comparing forecasted market values

and contractual values by model and market. The return

performance and CO emissions. The BMW Group advo-

2

cates the use of differentiated CO limits for different vehi-

2

cle classes. These levels should be transparent and meet

customers’ expectations. Achieving real improvements for

the environment requires measures to be applied fairly to

all vehicle classes. The BMW Group therefore welcomes

the current debate on the best way of achieving ecologi-

cal improvements. The solution must provide sufficient in-

ꢄꢅ Group Management Report

ratio for lease vehicles is also computed. The resulting re-

valuation of the portfolio of vehicles exposed to residual

value risks and the losses incurred when selling preowned

cars has an additional negative impact on earnings of the

Financial Services and Automobiles segments. Expected

risks are covered in the balance sheet either by provisions

or by write-downs on the lease vehicles concerned.

gory. Risk criteria such as arrears and bad debt ratios are

analysed quarterly and used to actively manage the credit

portfolio and improve portfolio quality. Measures imple-

mented during 2008 helped in part to scale back the in-

creased credit risk. The credit decision process comprises

up to three phases. Depending on the credit volume applied

for and the credit risk rating of the party involved, financing

applications for international dealers, importers and fleet

customers are presented to the local, regional or global

credit committees for approval. The dual control and seg-

regation of duties principles apply worldwide and are rig-

orously implemented. In order to minimise risk further, the

BMW Group is continuously making efforts to standardise

its credit-decision processes and the quality of credit ap-

plications and to ensure that uniform and transparent rating

systems are in place worldwide. Allowances are recog-

nised in the balance sheet to cover identified risks.

The BMW Group strives to mitigate declining residual values

by actively managing the life cycle of current models, opti-

mising reselling processes on international markets and

implementing targeted price and volume measures. Re-

sidual values in the leasing business are reviewed regularly

and adjusted to take account of the latest market condi-

tions and expected future developments.

Operational risks relating to financial services business in-

clude the risk of damage caused by inappropriate or failed

internal procedures and systems, human error or external

factors. The scope of procedures applied in each country

to manage operational risks is set out in a Group manual

which, amongst other things, addresses the requirements

of the Basle II accord. The manual stipulates the rules for

identifying and measuring potential risk scenarios and for

computing key risk indicators on an ongoing basis. It also

sets out the Group’s systematic approach to recording

losses and the nature of any agreed risk-mitigation meas-

ures. Both qualitative and quantitative aspects need to be

taken into account in the decision process. The latter is

backed up by various system-based solutions, all of which

follow the principles of operational risk management,

such as separation of duties, dual control and the docu-

mentation of system changes. In addition, the effectiveness

and efficiency of the internal control system are tested

regularly.

Within the financial services business, the negative impact

on the credit risk portfolio was reflected in a higher level

of payment arrears and bad debts with retail customers. In

addition, the drastic fall in sales caused by changes in cus-

tomer purchasing behaviour is having an adverse impact

on the financial situation of the dealer network and in-

creases the risk of insolvency within the dealer organisa-

tion. Developments in 2008 necessitated higher risk pro-

visions in the areas of retail customer and dealer financing

business.

Legal risks

The BMW Group is not currently involved in any court or

arbitration proceedings which could have a significant im-

pact on its financial condition.

Compliance with the law is a basic prerequisite for the suc-

cess of the BMW Group. Current law provides the binding

framework for the BMW Group’s various business activities

around the world. The growing international scale of busi-

ness and the huge number of complex legal regulations

increase the risk of laws being broken simply because they

are not known or fully understood. The BMW Group takes

all necessary measures to ensure that its management

bodies, managers and staff act lawfully. It is essential for all

employees to know and to comply with current legal regu-

lations. The extent of those regulations is set out in cor-

porate guidelines and in the BMW Group’s stated set of

core principles. However, wrongdoing by individuals can

never be entirely ruled out. It is the BMW Group’s objective

to keep such risks to a minimum and to systematically un-

cover any cases of corruption, bribery or blackmail. Further

information on compliance in the BMW Group is included

in the Compliance Report on pages 140–141.

Credit risks affecting the retail customer business (leasing,

financing) on the one hand and the commercial customer

financing business (dealers, fleet customers, importers) on

the other, are continually monitored, assessed and meas-

ured. Risk-mitigating measures are put into place where

necessary. In line with the Group’s own mandatory guide-

lines on risk mitigation and the stringent requirements

imposed by Basle II, the main risk measurement methods

used are customer scoring (retail customer business) and

credit rating (commercial customer business). Close con-

tacts with borrowers, a good understanding of the leased

or financed vehicles involved, prudent measurement of

collateral and the use of local credit audits all help to pre-

vent losses. For risk management purposes, the BMW

Group reverts to normal good banking practices, such as

the use of maximum unsecured risks for each rating cate-

ꢄꢄ

Like all enterprises, the BMW Group is exposed to the risk

of warranty claims. Adequate provisions have been recog-

nised in the balance sheet to cover such claims. Part of the

risk, especially where the American market is concerned,

has been insured externally up to economically acceptable

levels. The high quality of BMW Group products, addition-

ally ensured by regular quality audits and ongoing improve-

ment measures, helps to reduce this risk. In comparison

with competitors, this can give rise to benefits and oppor-

tunities for the BMW Group.

yields on high-quality corporate bonds. These yields are

subject to market fluctuation and influence the level of

pension obligations. Furthermore, changes in other factors,

such as longer life expectancies, can also have an impact

on pension obligations. In the United Kingdom, the USA

and a number of other countries, funds intended to cover

the pension entitlements of BMW Group employees are

held in pension funds which are kept separate from corpo-

rate assets and mainly invested in fixed-income securities

(with a high level of creditworthiness), equities, property

and other investment classes. In 2008, a part of the pension

obligations arising in Germany was also transferred to an

external fund, namely to BMW Trust e.V. It is planned that

further pension obligations will be externalised in the

coming years.

ꢄꢁ

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ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

Changes in the regulatory environment may impair the

sales volume, revenues and earnings performance of the

BMW Group in individual markets or economic regions.

Further information is given in the section on sector-spe-

cific risks.

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢂꢅ

ꢄꢌ

Risk Management

Outlook

Risks affecting pension funds are monitored continuously

and managed from a risk and yield perspective. Regular

asset-liability studies are performed and used to match the

maturities of interest-generating investments with future

pension payments, thereby reducing the interest rate risk

relating to pensions. Investments are broadly spread in

order to reduce risk. In addition, risk limits for investment

activities have been defined for each pension fund and are

monitored continuously.

Personnel risks

As an attractive employer, the BMW Group has been in a

favourable position for many years in the intense compe-

tition for qualified technical and management staff. A high

level of employee satisfaction helps to minimise the risk

of know-how drift. The BMW Group’s attractiveness as an

employer also helps to ensure that appropriately qualified

staff can be recruited, particularly at a time when new

strategies are being implemented.

Risk indicators (e.g. value-at-risk) are regularly computed

in order to identify risks at an early stage and used to de-

velop measures to mitigate risk.

An ageing and shrinking population in Germany will have

a lasting impact on the conditions prevailing in the labour,

product, services and financial markets. Demographic

change will give rise to risks and opportunities which will

affect businesses more and more in the coming years.

The BMW Group sees demographic change as one of its

main challenges and is actively involved in planning for

its effect on operations.The focus is on the following areas

of action, aimed at creating and retaining a motivated

workforce in the long term:

Information and IT risks

In the BMW Group, great importance is attached to the

protection of data, business secrets and innovative devel-

opment to safeguard against unauthorised access, damage

and misuse. The protection of information and data is an

integral component of business processes and systems

are based on international security standards. Staff, process

design and information technology each play a role in the

overall security concept. Groupwide standards, which are

incorporated in the BMW Group’s set of core principles

and documented in detailed working instructions, require

employees to handle all information appropriately and to

ensure that information systems are properly used. Pur-

poseful communication and training measures create a

high degree of security awareness on the part of the em-

ployees involved. Employees receive training from the

Group’s Compliance Organisation to ensure compliance

with legal and regulatory requirements.

(

1) the creation of a working environment for the future,

2) promotion and maintenance of the workforce’s ability

to perform with the appropriate set of skills,

(

3) appropriate qualifications,

4) increasing employees’ awareness of their responsibility

to make personal provisions for their future and

5) individual employee working life-time models.

(

Risks relating to pension obligations

The BMW Group’s pension obligations to its employees

resulting from defined benefit plans are measured on the

basis of actuarial reports. In accordance with IAS 19, future

pension payments are discounted by reference to market

The technical data protection procedures used by the

BMW Group include process-specific security measures

ꢄꢈ Group Management Report

as well as standard activities such as virus scanners, fire-

wall systems and access controls at both operating system

and application level. Further measures include internal

testing procedures and the regular backing up of data. A

security network is in place groupwide to ensure compliance

with security specifications. Regular analyses and rigorous

security management ensure high-quality protection.This

includes the activities of the BMW Group’s Security Opera-

tions Centre which is responsible for the security of inter-

nal network communications. The Group’s core process

“Product Development” and the related IT infrastructure

have been audited and certified as conforming to interna-

tional security standard ISO 27001. The protection of BMW

Group-specific know-how also plays an important role in

cooperation arrangements and relationships with partner

companies. The BMW Group protects its intellectual

property by ensuring that the relevant departments have

clear instructions regarding data protection and the use of

information technology. Information pertaining to key areas

of expertise is subject to particularly stringent security

measures.

ꢄꢌ

Outlook

The economic environment in ꢀꢁꢁꢃ

lower interest rates plus the very high current account defi-

cit in the USA suggest that the US dollar will depreciate in

value once again. The British pound lost significant ground

against the euro in 2008. In contrast, the Japanese yen

appreciated sharply against the euro over the course of

the year. In 2009, the Japanese yen is forecast to remain

stable.

The BMW Group forecasts that the global economic down-

turn will continue throughout the whole of 2009. Economic

output in most industrial countries is likely to shrink in the

current year. The dynamism of emerging markets is also

likely to slacken noticeably. An end to the downturn is not

likely to come until confidence in the credit markets is re-

stored and the property markets recover. This, however, is

unlikely to happen before the end of 2009.

ꢄꢁ

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ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

Risks affecting economic growth

ꢆꢈ

Financial Analysis

The greatest risk for the global economy continues to

come from the world’s financial crisis and its knock-on

impact on markets for goods and services. If confidence in

the credit markets is restored more slowly than is currently

being predicted, the impact for the global economy would

be even more severe. The global recession will then be

longer and have more serious consequences.

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

The turmoil on the property and credit markets in the USA

will have a massive impact on the real economy in 2009.

The situation cannot be expected to calm down until the

second half of the year at the earliest. Consumer spending

in particular will remain weak in the USA. Both the US

Reserve Bank and the US Government are endeavouring

with all means available to them to prevent the recession

becoming any worse. These measures will, however, not

be able to prevent a drop in economic output on a full year

basis.

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢂꢆ

Risk Management

Outlook

Although energy and raw material prices fell sharply in 2008,

they still remain above long-term average levels. At present,

the global economic downturn is preventing higher prices

on the energy and commodity markets. Nevertheless, the

risk remains of excessive price reactions caused by specu-

lative forces.

Europe will also suffer heavilyin 2009 from the consequences

of the economic and financial crisis. The gross domestic

product is likely to shrink in this region too. Exports will

drop further in the wake of the global economic downturn

and consumer spending will falter in the face of uncertainty

as to how the future will unfold. Governments and central

banks in Europe will also apply countermeasures in the

form of fiscal and monetary policies.

Car markets in ꢀꢁꢁꢃ

The financial crisis will again have a massively adverse

impact on the global automotive economy in 2009. Overall,

the slump in the world’s industrial countries is expected to

be at least as severe as in 2008.

The growth rate in Germany in 2009 is also likely to be

negative. Consumer spending will once again fail to gen-

erate any growth, while shrinking exports will also have a

negative impact.

Impetus from the triad of traditional markets (the USA,

Japan and Western Europe) will once again be extremely

weak in 2009. Passenger car sales are again likely to drop

sharply. In Germany, the negative growth rate will probably

be even higher than in 2008.

The Japanese economy will also contract in 2009. The

negative trend with exports and the weakness of domestic

demand will continue. Due to its policy of low interest

rates to date, the Japanese Reserve Bank does not have

the option of reducing interest rates further. Manoeuvring

room for fiscal measures is also restricted due to the high

level of national debt.

Lower volumes, in some cases reflecting quite substantial

reductions, are also predicted for the majority of emerging

markets. Even markets such as China and India which

have experienced extreme high growth rates up to now

are likely to see fewer new registrations. In Russia the

reduction could even reach the double-digit range.The

same applies to most markets in Eastern Europe and

Latin America.

Growth rates in the emerging markets of Asia, Latin America

and Eastern Europe are also likely to weaken significantly

in 2009. In these regions, the global economic downturn

will primarily have a negative impact on exports.

Motorcycle markets in ꢀꢁꢁꢃ

One of the features of the motorcycle business is that

most sales are recorded by the middle of the year. Largely

because of this seasonal pattern, the BMW Group does

not now expect to see a recovery of the motorcycles mar-

kets in 2009. Since the financial crisis and resulting crisis in

Euro likely to remain strong

The value of the US dollar against the euro increased sig-

nificantly in the course of 2008. However, lower growth and

ꢄꢉ Group Management Report

confidence is likely to last throughout the entire year, the

performance of motorcycle markets will be severely affected

in 2009. In line with the overall trend, the BMW Group fore-

casts that motorcycle sales in the 500 cc plus segment will

be down in 2009.

The necessary flexibility was shown in early adoption of a

wide range of measures to bring car production volumes

into line with falling worldwide demand. The various meas-

ures implemented – such as flexible deployment of em-

ployees in the production network, the use of employee

time accounts and the option of employees taking sab-

baticals – are decided on in close cooperation with em-

ployee representatives. Production volumes are also being

managed by the use of temporary short-time working

arrangements at specific sites. The BMW Group has also

been able to reduce workforce numbers on a targeted

basis, especially in the production area, by introducing

efficiency improvements, thus enabling personnel ex-

pense to be adapted to changing conditions at an early

stage.

Financial services sector in ꢀꢁꢁꢃ

The business climate in the financial services sector is cur-

rently being overshadowed by a high degree of uncertainty,

which, in turn, is having a negative impact on the refinanc-

ing and liquidity situation and the bad debt risk exposure

of the whole sector. Until confidence in the financial markets

is restored, there can be little hope that refinancing condi-

tions will stabilise.

Based on recent developments, the situation on credit

markets is unlikely to ease quickly. If the economic down-

ward trend continues, the financial services sector too is

likely to have to bear further losses in conjunction with

credit risk. A recovery of the prices on the used car markets

is also not in sight before the end of 2009.

Due to its flexible manufacturing structures, the BMW Group

is second to none in competitive terms. The extreme flexi-

bility of the production network therefore provides a clear

competitive advantage, enabling the BMW Group to adjust

production capacities in line with changing situations on

the various sales markets. The Group’s customer-oriented

sales and production processes enable capacities and

sales processes to be adjusted flexibly and at short notice.

Outlook for the BMW Group in ꢀꢁꢁꢃ

Towards the end of 2008 the situation on international

financial markets climaxed in an unprecedented fashion.

At the same time, the crisis also spilled over to the real

economy worldwide. The rapid pace of the economic

downturn and uncertainty as to how the economic crisis

will proceed make reliable forecasts extremely difficult,

even for the near future.

On the sales side, the BMW Group is responding to the

challenges it faces by intensifying its various sales strate-

gies. As part of the process of managing sales volume, this

also includes tailoring volumes to suit demand in individual

sales markets. This strategy allows the BMW Group to

react quickly to changes in demand with due regard to its

strong market position, customer satisfaction and the sta-

bility of the dealer organisation.

The current business environment will also make the year

2009 a challenging one for the BMW Group. By the same

token, the BMW Group has shown on numerous occasions

in the past its ability to adapt successfully to changing con-

ditions. Processes and structures have also been newly

aligned and continually improved at the same time. For

these reasons, the BMW Group has – now more than ever –

the necessary manoeuvring room to position itself appro-

priately during the economic crisis in order to ensure as

good a starting position as possible for the ensuing phase

of economic recovery.

The BMW Group took measures to allow for changing busi-

ness conditions at an early stage. For example, the first

signs of problems in 2008 triggered an early adjustment to

risk provisions when the portfolio of lease cars was reas-

sessed. This move took account of the specific risks iden-

tified as well as the impact on the lease portfolio.

In view of the currently adverse climate, the strategy

Number ONE is proving to be an appropriate and forward-

looking entrepreneurial decision for redirecting the BMW

Group. A great deal of preliminary work was carried out

in originally developing this strategy. With business condi-

tions having deteriorated so extremely, this preliminary

work is proving to be a highly useful instrument in man-

aging the business in the short term. The initiatives that

emerged from the strategy Number ONE are now helping

the business to charter its course through the crisis and

As long as the current situation shows no signs of easing,

the BMW Group will continue to charter its course through

this phase of extreme uncertainty by applying the neces-

sary combination of coordinated tactical measures and a

high degree of flexibility. In this way, the BMW Group is

bracing itself to cope with the market conditions that the

year 2009 brings with it.

ꢈꢃ

will significantly improve opportunities for the BMW Group

when the situation begins to ease.

Thanks to its broad expertise in the area of innovation, the

BMW Group will retain its ability to satisfy the needs of its

customers with its premium products and services.

In the subsequent phase of economic recovery – which is

generally expected to gather pace during the course of

2010 – the BMW Group will also benefit from the addi-

tional impetus generated by its renewed range of models.

Recently, for example, the new BMW Zꢆ and the MINI Con-

vertible were presented to the public at the North Ameri-

can International Auto Show in Detroit. At the beginning of

February, the new BMW ꢈ Series came onto the markets

(in the USA and Asia together with the extended wheelbase

version) and are receiving a positive response from cus-

tomers and the media alike. In 2009, the X range of vehicles

will be extended by the addition of the BMW Xꢊ.The BMW

Group will also expand its portfolio with the Progressive

Activity Sedan (PAS), the concept study of which was pre-

sented at the Geneva Motor Show.

Rising to the substantial challenges that it faces, the BMW

Group is now intensifying the various measures it has initi-

ated to implement its new strategic direction. The BMW

Group is convinced that these initiatives will yield benefits

for the business in the medium term.

ꢄꢁ

ꢊꢆ

ꢊꢄ

ꢋꢃ

ꢆꢋ

ꢆꢅ

Group Management Report

A Review of the Financial Year

General Economic Environment

Review of Operations

BMW Stock and Bonds

Disclosures pursuant to ꢎꢋꢌꢉ (ꢆ)

and ꢎꢇꢊꢅ (ꢆ) HGB

ꢆꢈ

Financial Analysis

ꢆꢈ

ꢆꢉ

ꢅꢊ

ꢅꢋ

ꢅꢅ

ꢅꢈ

ꢅꢌ

Internal Management System

Earnings Performance

Financial Position

This confidence is based, amongst other things, on a dis-

cernible trend towards smaller-sized and more efficient

drive systems that are nevertheless powerful. The BMW

Group recognised this trend at an early stage. After meas-

uring the impact on its own model programme, these

concepts have now been incorporated in future forecasts.

Net Assets Position

Subsequent Events Report

Value Added Statement

Key Performance Figures

Comments on BMW AG

ꢄꢋ

ꢂꢆ

Risk Management

Outlook

This trend and the move towards a CO emissions-based

2

tax are seen as the first important steps towards creating

stable legal conditions, thus giving the BMW Group a great

opportunity to increase its technological lead with Efficient

Dynamics.

After-sales business continues to gain in strategic impor-

tance for the BMW Group. A worldwide initiative is cur-

rently being implemented to tap the full potential of further

profitable growth in the service and spare parts lines of

business.

Automobiles segment

As a result of the massively adverse impact of the economic

crisis, the BMW Group does not expect to achieve the

car sales volume level it recorded in 2008. The prevailing

uncertainties make it difficult to forecast sales volumes

at present. The BMW Group is working on various market

and sales volume performance scenarios and is preparing

the appropriate measures.

Despite difficult conditions, the BMW Group has success-

fully managed to increase efficiency and operating per-

formance. Ongoing initiatives to improve efficiency and

productivity on a continuous basis ensure the sustainable

and economic use of resources. On the cost side, these

measures represent another important aspect of the

BMW Group’s new strategic direction. Good progress has

already been made in implementing the profitability pro-

gramme in the areas of fixed and variable costs. This is

being achieved by rigorous exploitation of benefits of scale,

standardisation of processes throughout the business and

targeted management of capital employed.

From today’s perspective, the BMW Group believes that

these uncertainties will remain throughout 2009 and the

following year. Since economic recovery generally lags

behind, it is not now expected that the targeted return on

sales and EBIT margin for 2010 will be achieved.

Motorcycles segment

The BMW Group’s research and development expense

ratio in 2008 was within the announced target range of 5.0ꢏ

to 5.5ꢏ of revenues. Despite its efforts to rationalise re-

search and development activities, the BMW Group will

continue to develop visionary products and technologies –

such as the MINI E – and thus ensure that the combustion

engine is not the only field in which it sets standards. The

BMW Group will also continue to invest in the future in or-

der to extend its competitive advantage. This also includes

the development of innovative mobility concepts in con-

junction with project i. In the current transitional phase, up-

front expenditure in this area provides an important basis

for opening up medium and long-term opportunities.

The BMW Group will continue the Motorcycles segment’s

new model initiative in 2009 in an attempt to counter the

reduction in consumer spending caused by the financial

crisis. Despite this, motorcycle sales volume is still forecast

to be lower than in 2008.

Financial Services segment

Business conditions for the Financial Services segment will

again be subjected to a high degree of volatility in 2009. The

availability of attractive credit and lease products for cus-

tomers of BMW, MINI and Rolls-Royce brand cars will remain

the basis for sustainable growth in the segment’s business

volume. The same applies in the area of dealer financing.

ꢈꢊ Group Management Report

If the situation on used car markets does not stabilise in

2

009, further losses on the sale of vehicles coming out of

leases cannot be ruled out. Given the current economic

situation, it seems unlikely that the bad debts risk for the

retail customer and dealer financing lines of business will

diminish in the short term.

As part of the strategy Number ONE, the further develop-

ment of the various lines of business will be reviewed in the

light of changed external parameters. As well as focusing

on service quality and process efficiency, greater impor-

tance will be attached to achieving a well-balanced earnings

and risk profile for the segment’s various lines of business.

Profitability targets for ꢀꢁꢄꢀ remain in place

Against the background of the business conditions de-

scribed above, it is not possible to provide any further quan-

titative earnings forecasts over and beyond those that are

necessarily made in conjunction with the preparation of

the Group Financial Statements and that are described in

the notes to the Group Financial Statements and in the

Group Management Report.

Since economic recovery will lag behind, the original fore-

cast for the financial year 2009 and the target for 2010 are

not attainable. The profitability targets for 2012 set in con-

junction with the strategy Number ONE nevertheless

remain in place. The BMW Group will continue to steer

its new strategic course by stepping up cost-cutting and

efficiency improvement measures and still intends to

achieve a return on capital employed (ROCE) in the Auto-

mobiles segment in excess of 26ꢏ and a return on sales

of between 8ꢏ and 10ꢏ.

With its strategy Number ONE and the rigorous value-

added approach adopted, the BMW Group is laying the

foundation for achieving its ambitious targets in the

future.

7

2

Group Financial Statements

BMW Group

Income Statement for Group and Segments

Note

Group

in euro million

2008

2007^*

Revenues

8

9

53,197

–44,323

8,874

56,018

–43,832

12,186

Cost of sales

Gross profit

Sales and administrative costs

Research and development costs

Other operating income

10

11

12

–5,369

–2,825

1,428

–1,187

921

–5,254

–2,920

730

Other operating expenses

–530

Profit before financial result

4,212

Result from equity accounted investments

Interest and similar income

Interest and similar expenses

Other financial result

13

14

15

26

685

11

645

–930

–351

–570

–897

–98

Financial result

–339

Profit before tax

351

3,873

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Income taxes

16

–21

330

–739

Net profit /loss

3,134

Attributable to minority interest

6

8

79

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Attributable to shareholders of BMW AG

324

3,126

Earnings per share of common stock in euro

Earnings per share of preferred stock in euro

17

0.49

0.51

4.78

4.80

1

1 5

1 2 9

*

adjusted for changed presentation of financial result

7

3 Group Financial Statements

Automobiles

Motorcycles

Financial Services

Other Entities

Eliminations

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

4

8,782

40,791

,991

53,818

–43,290

10,528

1,230

–913

317

1,228

–883

345

15,725

–15,332

393

13,940

–12,595

1,345

191

–145

46

290

–229

61

–12,731

12,858

127

–13,258

13,165

–93

–

7

–

4,572

2,714

–4,417

–2,805

552

–147

–111

3

–152

–115

2

–583

–

–606

–

–57

–

–76

–

–10

–

–3

–

559

31

25

891

–607

273

209

–145

49

–56

53

–58

70

–

574

–408

–2

–

–57

–216

–47

717

690

3,450

60

80

114

–84

2

5

11

710

–

1

–

2

–

2

1

2,102

–1,927

–154

22

–

1,768

–1,591

–58

–

–2,186

2,051

–

–1,835

1,575

3

7

66

–

1,036

–870

–69

–10

–

–9

–

–8

–2

26

–

127

372

–70

–76

–218

– 9

119

–135

–257

318

3,232

51

71

–292

743

295

168

–21

–341

–

92

26

–511

–14

37

–11

131

–269

–16

279

–5

–30

–51

57

2

2,721

60

–161

474

163

–284

6

8

–

220

2,713

37

60

–161

474

279

163

–51

–284

7

4

BMW Group

Balance Sheet for Group and Segments at ꢀꢁ December

Assets

Note

Group

in euro million

2008

2007

5,670

Intangible assets

20

21

22

23

24

25

26

27

5,641

11,292

19,524

111

Property, plant and equipment

Leased products

11,108

17,013

63

Investments accounted for using the equity method

Other investments

322

209

Receivables from sales financing

Financial assets

22,192

1,808

866

20,248

1,173

720

Deferred tax

Other assets

660

415

Non-current assets

62,416

56,619

Inventories

28

29

24

25

26

27

30

7,290

2,305

15,871

3,306

602

7,349

2,672

13,996

3,622

237

Trade receivables

Receivables from sales financing

Financial assets

Current tax

Other assets

1,842

7,454

38,670

2,109

2,393

32,378

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Cash and cash equivalents

Current assets

Total assets

101,086

88,997

79

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

1

1 5

Equity and liabilities

1 2 9

Note

Group

in euro million

2008

2007

Subscribed capital

Capital reserves

Revenue reserves

Accumulated other equity

Treasury shares

Minority interest

Equity

654

1,911

20,419

–2,709

–10

654

1,911

20,789

–1,621

–

8

11

31

20,273

21,744

Pension provisions

Other provisions

32

33

34

35

36

3,314

2,757

4,627

2,676

Deferred tax

2,757

2,714

Financial liabilities

30,497

2,201

21,428

2,024

Other liabilities

Non-current provisions and liabilities

41,526

33,469

Other provisions

33

34

35

37

36

2,125

633

2,826

808

Current tax

Financial liabilities

Trade payables

29,887

2,562

4,080

39,287

22,493

3,551

Other liabilities

4,106

Current provisions and liabilities

33,784

Total equity and liabilities

101,086

88,997

7

5 Group Financial Statements

Automobiles

Motorcycles

Financial Services

Other Entities

Eliminations

2008 2007

2

008

2007

2008

2007

2008

2007

2008

2007

5

,403

1,074

68

5,333

10,870

254

51

65

123

25

120

25

64

–

152

19

–

1

193

194

2

–

22,590

–

19,911

–

–3,334

–

–3,152

–

8

2

63

–

29

–

2

,693

6,121

–

25

23

5,348

–

5,319

–

–7,744

–

–11,254

–

22,192

424

20,248

349

238

92

1,381

160

14,055

21,037

762

219

11,015

17,486

–235

–1,125

–17,500

–29,938

–30

1

,346

,144

1,010

404

–

485

385

–894

–11,396

–26,726

2

–

1,961

47,825

392

2

3,248

24,147

244

259

41,453

7

,005

,070

–

7,036

2,438

–

277

292

119

–

9

122

9

80

–

4

13

35

–1

2

109

–

15,871

839

13,996

442

–

-415

–

–580

–

1,401

2,734

180

–

1,481

205

1,026

49

3

58

4,028

,073

–

39

8

–

1

2

5

14,630

1,249

28,267

–

3,034

2,053

21,967

2,879

789

21,109

328

19,937

355

–36,329

–

–35,337

–

5

–

9,935

386

411

18,203

23,127

21,415

–36,745

–35,918

3,183

52,414

630

670

69,792

59,656

44,164

38,901

–66,683

–62,644

Automobiles

Motorcycles

Financial Services

Other Entities

Eliminations

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

22,481

21,583

–

3,752

4,139

4,883

8,499

–10,843

–12,477

2

1

2

3

,847

,412

,931

,685

,986

3,831

2,354

2,062

715

122

63

2

111

62

28

252

31

258

317

30

654

2

–

2

3,096

10,030

14,128

27,534

2,725

18

12

–2,290

–236

–2,087

–13

–

7,663

18,018

586

13,063

418

2,024

10,986

252

439

285

460

12,020

22,697

–16,751

–19,277

–12,723

–14,823

1

3,861

18,969

14,149

1

,795

2,612

630

21

–

35

–

311

105

178

115

2

60

27

63

–4

–

–26

–

468

2

9

,599

,029

,950

2,087

–

15,207

364

10,806

612

12,495

9

10,198

18

–414

–

–598

2,769

160

10

191

162

13

210

–10

11,747

19,845

22,519

38,506

21,109

32,820

7,746

20,312

5,947

16,253

–36,145

–36,563

–34,710

–35,344

1

6,841

53,183

52,414

630

670

69,792

59,656

44,164

38,901

–66,683

–62,644

7

6

BMW Group

Cash Flow Statement for Group and Segments

Note

Group

1

in euro million

2008

330

2007

Net profit/loss

3,134

Reconciliation of net profit/loss to cash inflow from operating activities

Current tax

75

–169

6,763

3,676

–332

–51

1,002

–62

Other interest and similar income/expenses

Depreciation of leased products

4,698

3,689

221

Depreciation and amortisation of tangible, intangible and investment assets

Change in provisions

Change in deferred taxes

–256

111

Other non-cash income and expense items

Gain/loss on disposal of non-current assets and marketable securities

Result from equity accounted investments

Changes in current assets and current liabilities

Change in inventories

424

–21

–181

–11

–26

37

859

–700

398

Change in receivables

Change in liabilities

–485

–448

240

571

Income taxes paid

– 817

386

Interest received

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Cash inflow from operating activities

40

10,872

12,183

Investment in intangible assets and property, plant and equipment

Proceeds from the disposal of intangible assets and property, plant and equipment

Expenditure for investments

–4,204

177

–4,267

272

–142

–44

79

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Proceeds from the disposal of investments

Investment in leased products

2

16

–15,164

5,840

–61,630

56,562

–5,392

5,299

–18,652

–13,261

4,917

Disposals of leased products

1

1 5

Additions to receivables from sales financing

Payments received on receivables from sales financing

Investment in marketable securities

–54,573

49,813

–2,698

2,577

1 2 9

Proceeds from marketable securities

Cash outflow from investing activities

40

–17,248

Repurchase of treasury shares

Payment of dividend for the previous year

Interest paid

–10

–694

–312

9,959

–5,080

–

–458

–389

6,038

–4,152

–

Proceeds from the issue of bonds

Repayment of bonds

Internal financing

Change in other financial liabilities

Change in commercial paper

Cash inflow/outflow from financing activities

9,050

–9

3,603

1,526

6,168

40

12,904

Effect of exchange rate and changes in composition of Group on cash and cash equivalents

Change in cash and cash equivalents

–63

–46

5,061

1,057

Cash and cash equivalents as at ꢁ January

2,393

7,454

1,336

Cash and cash equivalents as at ꢀꢁ December

40

2,393

ꢂ

adjusted for changed presentation of interest

Interest relating to financial services business is generally classified as revenues/cost of sales.

ꢃ

7

7 Group Financial Statements

Automobiles

008 2007

Financial Services

1

2

2008

2007

226

2,721

–161

474

Net profit/loss

Reconciliation of net profit/loss to cash inflow from operating activities

Current tax

3

79

1,043

–155

4

–294

5

1

–

2

–

113

6

Other interest and similar income/expenses

Depreciation of leased products

6,591

26

4,324

24

3

,567

3,568

236

–459

98

Depreciation and amortisation of tangible, intangible and investment assets

Change in provisions

–

515

213

62

–109

358

–78

1

–

192

163

1

Change in deferred taxes

94

Other non-cash income and expense items

Gain/loss on disposal of non-current assets and marketable securities

Result from equity accounted investments

Changes in current assets and current liabilities

Change in inventories

–

22

25

–180

–11

–

9

97

71

–663

371

1

–1,177

268

3

–528

738

5

Change in receivables

85

Change in liabilities

–

281

91

,471

–589

177

–74

–98

Income taxes paid

2

1

–

Interest received

4

6,246

5,603

5,110

Cash inflow from operating activities

–

4,114

77

–4,103

270

–31

–

–110

Investment in intangible assets and property, plant and equipment

Proceeds from the disposal of intangible assets and property, plant and equipment

Expenditure for investments

1

2

–

319

2

–147

16

–

Proceeds from the disposal of investments

Investment in leased products

–

353

–359

354

–14,811

5,507

–61,630

56,562

–75

–12,902

4,563

–54,573

49,813

–

333

Disposals of leased products

–

Additions to receivables from sales financing

Payments received on receivables from sales financing

Investment in marketable securities

–

5,317

,039

4,552

–2,698

2,568

–4,099

5

260

9

Proceeds from marketable securities

–14,218

–13,198

Cash outflow from investing activities

–

10

–

–458

–147

–

Repurchase of treasury shares

Payment of dividend for the previous year

Interest paid

–

694

127

–

2

–

1,129

–1,412

3,768

6,405

–

1,127

–1,160

6,233

2,140

–

Proceeds from the issue of bonds

Repayment of bonds

–

2

,786

,858

–1,389

–333

845

Internal financing

2

Change in other financial liabilities

Change in commercial paper

Cash inflow/outflow from financing activities

–

868

3

,945

–1,482

9,890

8,340

–

40

–15

650

–11

–20

232

Effect of exchange rate and changes in composition of Group on cash and cash equivalents

Change in cash and cash equivalents

3

,824

1,264

1

,249

,073

599

789

557

Cash and cash equivalents as at ꢁ January

5

1,249

2,053

789

Cash and cash equivalents as at ꢀꢁ December

7

8

BMW Group

Statement of Income and Expenses recognised in Equity

in euro million

2008

–7

2007

–183

Fair value gains and losses on available-for-sale investments recognised directly in equity

Fair value gains and losses on financial instruments used for hedging purposes

recognised directly in equity

–617

–806

116

373

–422

559

Exchange differences arising on the translation of foreign subsidiaries

Actuarial gains and losses on defined benefit pension and similar obligations

Deferred tax on gains and losses recognised directly in equity

Gains and losses recognised directly in equity

226

–388

– 61

–1,088

Profit after tax attributable to shareholders of BMW AG

324

3,126

3,065

Aggregate amount of net profit for period and gains and losses recognised

in equity

–764

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

1

1 5

1 2 9

7

9 Group Financial Statements

BMW Group

Notes to the Group Financial Statements

Accounting Principles and Policies

1

Basis of preparation

The changes relate to the following:

The consolidated financial statements of Bayerische

Motoren Werke Aktiengesellschaft (“BMW Group Financial

Statements” or “Group Financial Statements”) at ꢄꢂ De-

cember ꢃꢅꢅꢆ have been drawn up in accordance with

International Financial Reporting Standards (IFRSs) as en-

dorsed by the EU. The designation “IFRSs” also includes

all valid International Accounting Standards (IASs). All Inter-

pretations of the International Financial Reporting Inter-

pretations Committee (IFRIC) mandatory for the financial

year ꢃꢅꢅꢆ are also applied.

– supplementation of the Group Income Statement with

segment income statements for the Automobiles,

Motorcycles, Financial Services and Other Entities seg-

ments,

– supplementation of the Group Balance Sheet with seg-

ment balance sheets for the Automobiles, Motorcycles,

Financial Services and Other Entities segments and

– supplementation of the Group Cash Flow Statement

with segment cash flow statements for the Automobiles

and Financial Services segments.

The Group Financial Statements comply with §ꢄꢂꢇa of

the German Commercial Code (HGB). This provision, in

conjunction with the Regulation (EC) No. ꢂꢈꢅꢈ/ꢃꢅꢅꢃ of the

European Parliament and Council of ꢂꢉ July ꢃꢅꢅꢃ, relating

to the application of International Financial Reporting

Standards, provides the legal basis for preparing consoli-

dated financial statements in accordance with interna-

tional standards in Germany and applies to financial years

beginning on or after ꢂ January ꢃꢅꢅꢇ.

Inter-segment transactions – relating primarily to internal

sales of products, the provision of funds and the related in-

terest – are eliminated in the “Eliminations” column. Fur-

ther information regarding the allocation of activities of the

BMW Group to segments and a description of the seg-

ments is provided in the explanatory notes to segment in-

formation on pages ꢂꢃꢉ –ꢂꢄꢂ. The differences between

the new and old method of presentation and a reconcilia-

tion of significant performance indicators can be found

on the BMW Group’s website at www.bmwgroup.com/ir.

The BMW Group and segment income statements are

presented using the cost of sales method. The Group and

segment balance sheets correspond to the classification

provisions contained in IAS ꢂ (Presentation of Financial

Statements).

In conjunction with the refinancing of financial services

business, a significant volume of receivables arising from

retail customer and dealer financing is sold. Similarly,

rights and obligations relating to leases are sold. The sale

of receivables is a well established instrument used by

industrial companies. These transactions are usually in

the form of asset-backed financing transactions involving

the sale of a portfolio of receivables to a trust which, in turn,

issues marketable securities to refinance the purchase

price. The BMW Group continues to “service” the receiv-

ables and receives an appropriate fee for these services.

In accordance with IAS ꢃꢊ (Consolidated and Separate

Financial Statements) and the interpretation contained in

SIC-ꢂꢃ (Consolidation – Special Purpose Entities) such

assets remain in the Group Financial Statements although

they have been legally sold. Gains and losses relating to

the sale of such assets are not recognised until the assets

are removed from the Group balance sheet on transfer of

the related significant risks and rewards. The balance

sheet value of the assets sold at ꢄꢂ December ꢃꢅꢅꢆ totalled

euro ꢆ.ꢊ billion (ꢄꢂ December ꢃꢅꢅꢊ: euro ꢈ.ꢄ billion).

In order to improve clarity, various items are aggregated in

the income statement and balance sheet. These items are

disclosed and analysed separately in the Notes.

In order to support the sale of its products, the BMW Group

provides various financial services – mainly credit and

lease financing – to retail customers and to dealers. The in-

clusion of the financial services activities of the Group has

a significant impact on the Group Financial Statements.

To coincide with the first-time application of IFRS

ꢆ

(

Operating Segments) at ꢄꢂ December ꢃꢅꢅꢆ, the previous

practise of providing additional information on the BMW

Group’s Industrial Operations and Financial Operations has

been discontinued and replaced by the uniform presenta-

tion of segment information. In addition to the mandatory

segment information disclosures required by IFRS ꢆ, addi-

tional detailed segment information is provided on a volun-

tary basis in order to provide a better insight into the earn-

ings, financial and net assets position of the BMW Group.

In addition to credit financing and lease contracts, the

Financial Services segment also brokers insurance busi-

ness via cooperation arrangements entered into with

8

0

local insurance companies. These activities are not mate-

rial to the BMW Group as a whole.

financial year ꢃꢅꢅꢆ will be submitted to the operator of the

electronic version of the German Federal Gazette and can

be obtained via the Company Register website. Printed

copies will also be made available on request. In addition

the Group Financial Statements and the Group Manage-

ment Report can be downloaded from the BMW Group

website at www.bmwgroup.com/ir.

The Group currency is the euro. All amounts are disclosed

in millions of euros (euro million) unless stated otherwise.

All consolidated subsidiaries have the same year-end as

BMW AG.

The Board of Management authorised the Group Financial

Statements for issue on ꢂꢆ February ꢃꢅꢅꢉ.

The Group Financial Statements, drawn up in accordance

with §ꢄꢂꢇa HGB, and the Management Report for the

2

Consolidated companies

The number of subsidiaries, special purpose securities

funds and other special purpose trusts included in the

Group Financial Statements changed in ꢃꢅꢅꢆ as follows:

The BMW Group Financial Statements include, besides

BMW AG, all material subsidiaries, ꢊ special purpose secu-

rities funds and ꢃꢏ special purpose trusts (almost all used

for asset-backed financing transactions).

Germany

Foreign

Total

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Included at ꢀꢁ.ꢁꢋ.ꢋꢌꢌꢍ

49

–

155

9

204

9

Included for the first time in ꢋꢌꢌꢎ

No longer included in ꢋꢌꢌꢎ

Included at ꢀꢁ.ꢁꢂ.ꢂꢃꢃꢄ

18

31

11

29

153

184

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

ꢇꢏ subsidiaries (ꢃꢅꢅꢊ: ꢈꢇ), either dormant or generating a

negligible volume of business, are not included. These

subsidiaries were not consolidated because the resulting

impact on the Group Financial Statements would not

influence the economic decisions of users taken on the

basis of the financial statements. Non-inclusion of operat-

ing subsidiaries reduces total Group revenues by ꢂ.ꢂ%

version of the German Federal Gazette. This list, along with

the “List ofThird Party Companies which are not of Minor

Importance for the Group”, will also be posted on the BMW

Group website at www.bmwgroup.com/ir.

1

1 5

1 2 9

BMW Roma S.r.l., Rome, BMW de Argentina S.A., Buenos

Aires, and BMW of Manhattan, Inc., Wilmington, Del., are

consolidated in the BMW Group Financial Statements for

the first time. In addition, SimeLease (Malaysia) Sdn Bhd,

Kuala Lumpur, and that entity’s subsidiary, SimeCredit

(

ꢃꢅꢅꢊ: ꢂ.ꢃ%).

The joint venture BMW Brilliance Automotive Ltd., Shen-

yang, and the participation in Cirquent GmbH, Munich,

are accounted for using the equity method. ꢂꢏ (ꢃꢅꢅꢊ: ꢂꢈ)

participations are not consolidated using the equity method

on the grounds of immateriality. They are included in the

balance sheet in the line “Other investments”, measured

at cost less, where applicable, accumulated impairment

losses.

(Malaysia) Sdn Bhd, Kuala Lumpur – acquired by BMW

Holding B.V., The Hague, on ꢂꢄ April ꢃꢅꢅꢊ following receipt

of approval from the relevant local authorities – were also

consolidated for the first time. The names of these entities

were changed to BMW Lease (Malaysia) Sdn Bhd, Kuala

Lumpur, and BMW Credit (Malaysia) Sdn Bhd, Kuala

Lumpur, immediately after acquisition.

A separate “List of Group Investments” pursuant to §ꢄꢂꢄ ꢐꢑꢒ

HGB will be submitted to the operator of the electronic

The purchase consideration for the two companies – all

settled with cash and cash equivalents – was euro ꢃꢄ million.

8

1 Group Financial Statements

Transaction costs were not incurred. The transaction in-

volved the acquisition of all issued share capital and voting

rights. Based on the purchase price allocation, the follow-

ing carrying amounts and fair values were attributed to the

assets and liabilities of the acquired companies at the ac-

quisition date:

in euro million

Carrying amount/

Fair value

Assets

Receivables from sales financing

Other assets

179

3

Liabilities

Provisions

4

141

28

Financial liabilities

Other liabilities

Net assets acquired

9

Acquisition cost

Goodwill

23

14

The excess of cost over the fair value of recognised net

assets amounted to euro ꢂꢏ million. This relates primarily

to potential synergy benefits that can be realised by ex-

panding lease and financing business. The full amount is

attributable to the Financial Services segment. This good-

will is tested annually for impairment.

from ꢄꢅ September ꢃꢅꢅꢆ, that entity and its subsidiaries

ceased to be consolidated companies on that date. Aveling

Barford Manufacturing (Pty) Ltd., Cape Town, entory S.A.

Luxembourg, Luxembourg, Midland Gears Ltd., Bracknell,

Lingford Australia Pty Ltd., Sydney, and BMW Vertriebs

GmbH, Munich – the latter due to its merger with BMW

Leasing GmbH, Munich – also ceased to be consolidated

companies.

BMW Lease (Malaysia) Sdn Bhd, Kuala Lumpur, and its

subsidiary, BMW Credit (Malaysia) Sdn Bhd, Kuala

Lumpur, recorded a net profit of euro ꢄ million in ꢃꢅꢅꢆ. Net

revenues of the two entities in ꢃꢅꢅꢆ amounted to euro

ꢂꢆ million.

The BMW Group reporting entity also changed by com-

parison to the previous year as a result of the first-time

consolidation of four special purpose trusts and the decon-

solidation of four special purpose trusts and ten special

purpose securities funds.

The companies entory AG, Ettlingen, axentiv AG, Darm-

stadt, Nexolab GmbH, Munich, and F.A.S.T. Gesellschaft

für angewandte Softwaretechnologie mbH, Munich, all

ceased to be consolidated companies in ꢃꢅꢅꢆ following

their merger with Cirquent GmbH, Munich. As a result of

the sale of ꢊꢃ.ꢉ% of Cirquent GmbH, Munich, with effect

The changes are not material, because the resulting im-

pact on the Group Financial Statements would not in-

fluence the economic decisions of users taken on the

basis of the financial statements.

3

Business disposals

GmbH, Munich, which can be exercised through to

ꢃꢅꢂꢃ.

ꢊꢃ.ꢉ% of the shares of Cirquent GmbH, Munich, were

sold with effect from ꢄꢅ September ꢃꢅꢅꢆ. Due to the fact

that this entity is no longer controlled in accordance

with the criteria stipulated in IAS ꢃꢊ, Cirquent GmbH,

Munich, and its subsidiaries arcensis GmbH, Stuttgart,

Silverstroke AG, Ettlingen, Cirquent Ges.m.b.H., Vienna,

Cirquent AG, Zurich, and Cirquent Ltd., Birmingham,

ceased to be consolidated companies. A put option

exists for the remaining ꢃꢇ.ꢂ% of the shares of Cirquent

The remaining interest in Cirquent GmbH, Munich, is

included in the Group Financial Statements as an invest-

ment accounted for using the equity method.

Income and expenses recorded by Cirquent GmbH, Munich,

and by its subsidiaries during the first nine months of ꢃꢅꢅꢆ

are included in the Group Financial Statements for the year

ended ꢄꢂ December ꢃꢅꢅꢆ.

8

2

4

Consolidation principles

Receivables, liabilities, provisions, income and expenses

and profits between consolidated companies (intragroup

profits) are eliminated on consolidation.

The equity of subsidiaries is consolidated in accordance

with IFRS ꢄ (Business Combinations). IFRS ꢄ requires that

all business combinations are accounted for using the

purchase method, whereby identifiable assets and liabili-

ties acquired are measured initially at their fair value. The

excess of the Group’s interest in the net fair value of the

identifiable assets and liabilities acquired over cost is

recognised as goodwill and is subjected to a regular review

for possible impairment. Goodwill of euro ꢉꢂ million which

arose prior to ꢂ January ꢂꢉꢉꢇ is netted against reserves.

The companies BMW Roma S.r.l., Rome, and BMW de

Argentina S.A., Buenos Aires, were consolidated for the

first time with effect from ꢂ January ꢃꢅꢅꢆ. The equivalent

date for BMW Lease (Malaysia) Sdn Bhd, Kuala Lumpur,

and BMW Credit (Malaysia) Sdn Bhd, Kuala Lumpur, was

ꢂ April ꢃꢅꢅꢆ, and that for BMW of Manhattan, Inc., Wilming-

ton, Del., was ꢂ October ꢃꢅꢅꢆ.

Under the equity method, investments are measured at

the BMW Group’s share of equity taking account of fair

value adjustments on acquisition, based on the Group’s

shareholding. Any difference between the cost of invest-

ment and the Group’s share of equity is accounted for in

accordance with the purchase method. Investments in

other companies are accounted for as a general rule using

the equity method when significant influence can be exer-

cised (IAS ꢃꢆ Investments in Associates). This is normally

the case when voting rights of between ꢃꢅ% and ꢇꢅ% are

held (associated companies).

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

5

Foreign currency translation

against accumulated other equity. Exchange differences

arising from the use of different exchange rates to translate

the income statement are also offset directly against accu-

mulated other equity.

The financial statements of consolidated companies which

are drawn up in a foreign currency are translated using

the functional currency concept (IAS ꢃꢂ: The Effects of

Changes in Foreign Exchange Rates) and the modified

closing rate method. The functional currency of a sub-

sidiary is determined as a general rule on the basis of the

primary economic environment in which it operates and

corresponds therefore to the relevant local currency. In-

come and expenses of foreign subsidiaries are translated

in the Group Financial Statements at the average ex-

change rate for the year, and assets and liabilities are trans-

lated at the closing rate. Exchange differences arising from

the translation of shareholders’ equity are offset directly

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Foreign currency receivables and payables in the single

entity accounts of BMW AG and subsidiaries are recorded,

at the date of the transaction, at cost. Exchange gains and

losses computed at the end of the reporting period are

recognised as income or expense.

1

1 5

1 2 9

The exchange rates of those currencies which have a

material impact on the Group Financial Statements were

as follows:

Closing rate

Average rate

31.12. 2008

31.12. 2007

2008

2007

US Dollar

1.40

0.95

1.46

0.73

1.47

0.80

1.37

0.68

British Pound

Chinese Renminbi

Japanese Yen

Australian Dollar

9.54

10.70

163.77

1.67

10.23

152.29

1.74

10.42

126.74

2.03

161.28

1.64

6

Accounting principles

Revenues from the sale of products are recognised when

the risks and rewards of ownership of the goods are trans-

ferred to the customer, the sales price is agreed or deter-

minable and receipt of payment can be assumed. Rev-

enues are stated net of discounts, allowances, settlement

The financial statements of BMW AG and of its subsidiar-

ies in Germany and elsewhere have been prepared for

consolidation purposes using uniform accounting policies

in accordance with IAS ꢃꢊ.

8

3 Group Financial Statements

discount and rebates. In the case of long-term construc-

tion work, revenues are generally recognised in accord-

ance with IAS ꢂꢆ (Revenue) and IAS ꢂꢂ (Construction Con-

tracts) on the basis of the stage of completion of work

performed using the “percentage of completion” method.

Revenues also include lease rentals and interest income

from financial services.

share are calculated for common and preferred stock by

dividing the net profit after minority interests, as attributa-

ble to each category of stock, by the average number of

outstanding shares. The net profit is accordingly allocated

to the different categories of stock. The portion of the

Group net profit for the year which is not being distributed

is allocated to each category of stock based on the number

of outstanding shares. Profits available for distribution are

determined directly on the basis of the dividend resolutions

passed for common and preferred stock. Diluted earnings

per share would have to be disclosed separately.

If the sale of products includes a determinable amount for

subsequent services (multiple-component contracts), the

related revenues are deferred and recognised as income

over the period of the contract. Amounts are normally rec-

ognised as income by reference to the expected pattern of

related expenditure.

Purchased and internally-generated intangible assets are

recognised as assets in accordance with IAS ꢄꢆ (Intangible

Assets), where it is probable that the use of the asset will

generate future economic benefits and where the costs of

the asset can be determined reliably. Such assets are

measured at acquisition and/or manufacturing cost and, to

the extent that they have a finite useful life, amortised on a

straight-line basis over their estimated useful lives. With

the exception of capitalised development costs, intangible

assets are generally amortised over their estimated useful

lives of between three and five years. Intangible assets

with finite useful lives are assessed regularly for recovera-

bility and their carrying amounts are reduced to the recov-

erable amount in the event of impairment.

Profits arising on the sale of vehicles for which a BMW Group

company retains a repurchase commitment (buy-back

contracts) are not recognised until such profits have been

realised. The vehicles are included in inventories and stated

at cost.

Cost of sales comprises the cost of products sold and the

acquisition cost of purchased goods sold. It includes all

directly attributable material and production costs and pro-

duction overheads, including depreciation/amortisation

of property, plant and equipment and intangible assets re-

lating to production and write-downs on inventories. Cost

of sales also includes freight and insurance costs relating

to deliveries to dealers and agency fees on direct sales.

Expenses which are directly attributable to financial services

business and interest expense from refinancing the entire

financial services business, including the expense of risk

provisions and write-downs, are reported in cost of sales.

Development costs for vehicle and engine projects are

capitalised at manufacturing cost, to the extent that costs

can be allocated reliably and both technical feasibility and

successful marketing are assured. It must also be prob-

able that the development expenditure will generate future

economic benefits. Capitalised development costs com-

prise all expenditure that can be attributed directly to the

development process, including development-related over-

heads. Capitalised development costs are amortised on

a systematic basis, following the commencement of pro-

duction, over the estimated product life which is generally

seven years.

Research costs and development costs which are

not capitalised are recognised as an expense when in-

curred.

In accordance with IAS ꢃꢅ (Accounting for Government

Grants and Disclosure of Government Assistance), public

sector grants are not recognised until there is reasonable

assurance that the conditions attaching to them have been

complied with and the grants will be received. They are

recognised as income over the periods necessary to match

them with the related costs which they are intended to

compensate.

All items of property, plant and equipment are considered

to have finite useful lives. They are recognised at acquisi-

tion or manufacturing cost less scheduled depreciation

based on the estimated useful lives of the assets. Depre-

ciation on property, plant and equipment reflects the pat-

tern of their usage and is generally computed using the

straight-line method. Components of items of property,

plant and equipment with different useful lives are depre-

ciated separately.

Basic earnings per share are computed in accordance

with IAS ꢄꢄ (Earnings per Share). Undiluted earnings per

8

4

Systematic depreciation is based on the following useful lives, applied throughout the BMW Group:

in years

Factory and office buildings, distribution facilities and residential buildings

Plant and machinery

8 to 50

5 to 10

3 to 10

Other equipment, factory and office equipment

For machinery used in multiple-shift operations, depre-

ciation rates are increased to account for the additional

utilisation.

The recoverability of the carrying amount of intangible as-

sets (including capitalised development costs and good-

will) and property, plant and equipment is tested regularly

for impairment in accordance with IAS ꢄꢈ (Impairment of

Assets) on the basis of cash generating units. This relates

primarily to capitalised development costs and property,

plant and equipment connected with vehicle projects.

If there is no indication of impairment during the year, an

annual impairment test is carried out at the year-end. An

impairment loss is recognised when the recoverable

amount (defined as the higher of the asset’s net selling

price and its value in use) is lower than the carrying

amount. The value in use is determined on the basis of a

present value computation. If the reason for the previously

recognised impairment loss no longer exists, the impair-

ment loss is reversed up to the level of its rolled-forward

depreciated or amortised cost.

The cost of internally constructed plant and equipment

comprises all costs which are directly attributable to the

manufacturing process and an appropriate portion of

production-related overheads. This includes production-

related depreciation and an appropriate proportion of

administrative and social costs.

Financing costs are not included in acquisition or manu-

facturing cost.

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Non-current assets also include assets relating to leases.

The BMW Group uses property, plant and equipment

as lessee and also leases out assets, mainly vehicles pro-

duced by the Group, as lessor. IAS ꢂꢊ (Leases) contains

rules for determining, on the basis of risks and rewards,

the economic owner of the assets. In the case of finance

leases the assets are attributed to the lessee and in the

case of operating leases the assets are attributed to the

lessor.

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Investments accounted for using the equity method are

measured at the Group’s share of equity taking account

of fair value adjustments on acquisition unless the invest-

ment is impaired.

1

1 5

1 2 9

Investments in non-consolidated subsidiaries reported in

other investments are measured at cost or, if lower, at their

fair value.

In accordance with IAS ꢂꢊ, assets leased under finance

leases are measured at their fair value at the inception of

the lease or at the present value of the lease payments,

if lower. The assets are depreciated using the straight-line

method over their estimated useful lives or over the lease

period, if shorter.The obligations for future lease instalments

are recognised as financial liabilities.

Participations are measured at their quoted market price

or fair value. When, in individual cases, these values are not

available or cannot be determined reliably, participations

are measured at cost.

Where Group products are recognised by BMW Group

leasing companies as leased assets under operating leases,

they are measured at manufacturing cost. All other leased

products are measured at acquisition cost. All leased

products are depreciated using the straight-line method

over the period of the lease to the lower of their imputed

residual value or estimated fair value. Residual value pro-

visions are treated as write-downs and offset against

leased products on the assets side of the balance sheet.

Non-current marketable securities are measured according

to the category of financial asset to which they are classi-

fied. No held-for-trading financial assets are included under

this heading.

Financial assets are accounted for on the basis of the

settlement date. On initial recognition, they are measured

at acquisition cost, including transaction costs.

8

5 Group Financial Statements

Subsequent to initial recognition, available-for-sale and

held-for-trading financial assets are measured at fair value.

When market prices are not available, the fair value of

available-for-sale financial assets is measured using appro-

priate valuation techniques e.g. discounted cash flow

analysis based on market information available at the end

of the reporting period.

requirements of IAS ꢄꢉ. This methodology results in the

recognition of impairment losses on individual assets and

groups of assets. If there is objective evidence of impair-

ment, the BMW Group recognises impairment losses on

the basis of individual assets. Within the customer retail

business, the existence of overdue balances or the inci-

dence of similar events in the past are examples of such

objective evidence. In the event of overdue receivables,

impairment losses are always recognised individually based

on the length of period of the arrears. In the case of dealer

financing receivables, the allocation of the dealer to a cor-

responding rating category is also deemed to represent

objective evidence of impairment. If there is no objective

evidence of impairment, impairment losses are recognised

on financial assets using a portfolio approach based on

similar groups of assets. Company-specific loss proba-

bilities and loss ratios, derived from historical data, are

used to measure impairment losses on similar groups of

assets.

Available-for-sale assets include financial assets, securities

and investment fund shares. This category includes all

non-derivative financial assets which are not classified as

“loans and receivables” or “held-to-maturity investments”

or as items measured “at fair value through profit and loss”.

Loans and receivables which are not held for trading, held-

to-maturity financial investments and all financial assets

for which published price quotations in an active market

are not available and whose fair value cannot be determined

reliably, are measured, to the extent that they have a fixed

term, at amortised cost, using the effective interest method.

When the financial assets do not have a fixed term, they

are measured at acquisition cost.

The recognition of impairment losses on receivables relat-

ing to industrial business is also, as far as possible, based

on the same process applied to financial services business.

In accordance with IAS ꢄꢉ (Financial Instruments: Recog-

nition and Measurement), assessments are made regularly

as to whether there is any objective evidence that a finan-

cial asset or group of assets may be impaired. Impairment

losses identified after carrying out an impairment test are

recognised as an expense. Gains and losses on available-

for-sale financial assets are recognised directly in equity

until the financial asset is disposed of or is determined to

be impaired, at which time the cumulative loss previously

recognised in equity is included in net profit or loss for the

period.

Impairment losses (write-downs and allowances) on re-

ceivables are always recorded on separate accounts and

are not written off until the corresponding receivables are

derecognised.

Items are presented as financial assets to the extent that

they relate to financing transactions.

Derivative financial instruments are only used within the

BMW Group for hedging purposes in order to reduce the

currency, interest rate and market price risks from operating

activities and related financing requirements. All derivative

financial instruments (such as interest, currency and com-

bined interest/currency swaps as well as forward currency

contracts) are measured in accordance with IAS ꢄꢉ at their

fair value, irrespective of their purpose or the intention for

which they are held. The fair values of derivative financial

instruments are measured using market information and

recognised valuation techniques. In those cases where

hedge accounting is applied, changes in fair value are rec-

ognised either in income or directly in equity under accu-

mulated other equity, depending on whether the transac-

tions are classified as fair value hedges or cash flow hedges.

In the case of fair value hedges, the results of the fair value

measurement of the derivative financial instruments and

With the exception of derivative financial instruments, all

receivables and other current assets relate to loans

and receivables which are not held for trading and they are

measured at amortised cost. Receivables with maturities

of over one year which bear no or a lower-than-market in-

terest rate are discounted. Appropriate impairment losses

are recognised to take account of all identifiable risks.

Receivables from sales financing comprise receivables from

retail customer, dealer and lease financing.

Impairment losses on receivables relating to the financial

services business are recognised using a uniform method-

ology that is applied throughout the Group and meets the

8

6

the related hedged items are recognised in the income

statement. In the case of fair value changes in cash flow

hedges which are used to mitigate the future cash flow

risk on a recognised asset or liability or on forecast transac-

tions, unrealised gains and losses on the hedging instru-

ment are recognised initially directly in accumulated other

equity. Any such gains or losses are recognised subse-

quently in the income statement when the hedged item

future increases in pensions and salaries. This involves

taking account of various input factors which are evaluated

on a prudent basis. The provision is derived from an in-

dependent actuarial valuation which takes into account all

relevant biometric factors.

Actuarial gains and losses are recognised, net of deferred

tax, directly in equity.

(

usually external revenue) is recognised in the income

statement. The portion of the gains or losses from fair value

measurement not relating to the hedged item is recog-

nised immediately in the income statement. If, contrary to

the normal case within the BMW Group, hedge account-

ing cannot be applied, the gains or losses from the fair

value measurement of derivative financial instruments are

recognised immediately in the income statement.

The expense related to the reversal of the discounting of

pension obligations and the income from the expected

return on pension plan assets are reported separately as

part of the financial result. All other costs relating to alloca-

tions to pension provisions are allocated to costs by func-

tion in the income statement.

Other provisions are recognised when the BMW Group

has an obligation to a third party, an outflow of resources

is probable and a reliable estimate can be made of the

amount of the obligation. Measurement is computed on

the basis of fully attributable costs. Non-current provi-

sions with a remaining period of more than one year are

discounted to the present value of the expenditures ex-

pected to settle the obligation at the end of the reporting

period.

In accordance with IAS ꢂꢃ (Income Taxes), deferred taxes

are recognised on all temporary differences between the

tax and accounting bases of assets and liabilities and on

consolidation procedures. Deferred tax assets also in-

clude claims to future tax reductions which arise from the

expected usage of existing tax losses available for carry-

forward (where future usage is probable). Deferred taxes

are computed using enacted or planned tax rates which

are expected to apply in the relevant national jurisdictions

when the amounts are recovered.

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Financial liabilities are measured on first-time recognition

at cost, which is equivalent to the fair value of the con-

sideration given. Transaction costs are included in this

initial measurement. Subsequent to initial recognition, lia-

bilities are, with the exception of derivative financial instru-

ments, measured at amortised cost. The BMW Group

has no liabilities which are held for trading. Liabilities from

finance leases are stated at the present value of the future

lease payments and disclosed under other financial lia-

bilities.

1

1 5

Inventories of raw materials, supplies and goods for

resale are stated at the lower of average acquisition cost

and net realisable value.

1 2 9

Work in progress and finished goods are stated at the

lower of average manufacturing cost and net realisable

value. Manufacturing cost comprises all costs which are

directly attributable to the manufacturing process and

an appropriate proportion of production-related over-

heads. This includes production-related depreciation

and an appropriate proportion of administrative and social

costs.

The preparation of the Group Financial Statements in ac-

cordance with IFRSs requires management to make cer-

tain assumptions and estimates that affect the reported

amounts of assets and liabilities, revenues and expenses

and contingent liabilities. The assumptions and estimates

relate principally to the groupwide determination of eco-

nomic useful lives, the recognition and measurement of

provisions and the recoverability of future tax benefits. All

assumptions and estimates are based on factors known

at the end of the reporting period. They are determined

on the basis of the most likely outcome of future business

developments. This includes the situation in the auto-

Financing costs are not included in acquisition or manu-

facturing cost.

Provisions for pensions and similar obligations are recog-

nised using the projected unit credit method in accord-

ance with IAS ꢂꢉ (Employee Benefits). Under this method,

not only obligations relating to known vested benefits at

the reporting date are recognised, but also the effect of

8

7 Group Financial Statements

motive sector and the general business environment.

Estimates and underlying assumptions are checked regu-

larly. Actual amounts could differ from those assumptions

and estimates if business conditions develop differently

to the Group’s expectations at the end of the reporting

period. Where new information comes to light, differences

are reflected in the income statement and assumptions

changed accordingly.

7

New financial reporting rules

(b) New financial reporting rules issued in ꢀ00ꢁ

(

a) Financial reporting rules applied for the first time in

The IASB revised the following Standards in ꢃꢅꢅꢆ:

the financial year ꢀ00ꢁ

The following Standards and Revised Standards were ap-

plied for the first time in the financial year ꢃꢅꢅꢆ:

– Amendments to IAS ꢄꢉ Financial Instruments: Recogni-

tion and Measurement and IFRS ꢊ Financial Instru-

ments: Disclosures (Reclassification of Financial Assets

and Reclassification of Financial Assets: Effective Date

and Transition)

– Amendments to IFRS ꢂ First-time Adoption of Interna-

tional Financial Reporting Standards and IAS ꢃꢊ Con-

solidated and Separate Financial Statements (Cost of

an Investment in a Subsidiary, Jointly Controlled Entity

or Associate)

– IFRS ꢂ First-time Adoption of International Financial

Reporting Standards (revised version)

– Amendment to IFRS ꢃ (Vesting Conditions and Cancel-

lations)

– Amendments to IAS ꢄꢃ Financial Instruments: Presen-

tation and IAS ꢂ Presentation of Financial Statements

(Puttable Financial Instruments and Obligations Arising

on Liquidation)

On ꢂꢄ October ꢃꢅꢅꢆ the IASB published amendments to

IAS ꢄꢉ Financial Instruments: Recognition and Measure-

ment and IFRS ꢊ Financial Instruments: Disclosures

(

Reclassification of Financial Assets) permitting the re-

classification of certain financial instruments. Due to

the necessity to be able to apply these amendments

with immediate effect in the light of the deterioration of

the financial market crisis during the third quarter ꢃꢅꢅꢆ,

the IASB’s usual due process was suspended. The re-

classification amendments can be applied retrospec-

tively from ꢂ July ꢃꢅꢅꢆ. On ꢃꢊ November ꢃꢅꢅꢆ, the IASB

published an update of these amendments (Reclassi-

fication of Financial Assets – Effective Date and Transi-

tion) in order to clarify the effective dates of the amend-

ments.

–

Amendment to IAS ꢄꢉ Financial Instruments: Recogni-

tion and Measurement (Eligible Hedged Items).

Reclassifications of the kind referred to in the amendments

are not made by the BMW Group.

The Amendments to IAS ꢄꢉ Financial Instruments: Recog-

nition and Measurement and IFRS ꢊ Financial Instruments:

Disclosures (Reclassification of Financial Assets and Re-

classification of Financial Assets: Effective Date and Tran-

sition) are mandatory from ꢂ July ꢃꢅꢅꢆ.

IFRS ꢆ (Operating Segments) was applied by the BMW

Group for the first time in the financial year ꢃꢅꢅꢆ, resulting

in changes in the preparation and presentation of seg-

ment information.

The following Interpretations were also applied early for

the first time:

The amended IFRS ꢂ (revised version) replaces the current

IFRS ꢂ and must be applied by entities drawing up IFRS

financial statements after ꢂ July ꢃꢅꢅꢉ.

–

IFRIC ꢂꢂ (IFRS ꢃ Group and Treasury Share Trans-

actions

IFRIC ꢂꢃ (Service Concession Arrangements), not

yet endorsed by the EU

IFRIC ꢂꢏ (IAS ꢂꢉ The Limit on a Defined Benefit

Asset, Minimum Funding Requirements and their

Interaction)

)

The amendments to IAS ꢄꢉ Financial Instruments: Rec-

ognition and Measurement (Eligible Hedged Items) are

mandatory for the first time for financial years beginning on

or after ꢂ July ꢃꢅꢅꢉ. The revised IAS ꢄꢉ is required to be

applied retrospectively.

All other amendments referred to above are mandatory for

the first time for financial years commencing on or after

ꢂ January ꢃꢅꢅꢉ.

Interpretations applied for the first time in ꢃꢅꢅꢆ did not

have a significant impact on the BMW Group.

8

BMW Group

Notes to the Group Financial Statements

Notes to the Income Statement

The IASB also published a revised version of IFRS

ꢄ

In addition, the following Interpretations were also issued:

(

Business Combinations) and IAS ꢃꢊ (Consolidated and

Separate Financial Statements) in ꢃꢅꢅꢆ. The new rules

come into effect for financial years beginning on or after

ꢂ July ꢃꢅꢅꢉ.

–

IFRIC ꢂꢇ (Agreements for the Construction of Real

Estate). This Interpretation is mandatory for the first time

for financial years beginning on or after ꢂ January ꢃꢅꢅꢉ.

IFRIC ꢂꢈ (Hedges of a Net Investment in a Foreign Oper-

ation). This Interpretation is mandatory for financial years

commencing on or after ꢂ October ꢃꢅꢅꢆ, whereby exist-

ing hedging relationships that do not meet the criteria

contained in IFRIC ꢂꢈ may be wound up prospectively.

The IASB has also published a collection of amendments

to various IFRSs (“Improvements to IFRSs”). This in-

cludes amendments to various existing IFRSs. The total

of ꢄꢇ amendments to ꢃꢅ IFRSs are presented in two parts:

Part I contains amendments that involve accounting

changes for presentation, recognition or measurement

purposes (ꢃꢏ improvements). Part II contains ꢂꢂ amend-

ments involving terminology or editorial changes with

minimal effect on accounting. Unless otherwise specified,

the amendments are effective for financial years begin-

ning on or after ꢂ January ꢃꢅꢅꢉ.

– IFRIC ꢂꢊ (Distributions of Non-cash Assets to Owners).

This Interpretation is mandatory for the first time for

reporting periods in financial years beginning on or after

ꢂ July ꢃꢅꢅꢉ.

These new financial reporting rules are not expected to

have a significant impact on the BMW Group. This also

applies to financial reporting rules issued in earlier periods

and for which application in ꢃꢅꢅꢆ is encouraged but not

mandatory.

These new financial reporting rules are not expected to

have a significant impact on the BMW Group.

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

8

Revenues

Revenues by activity comprise the following:

7

9

Notes

in euro million

2008

2007

79

88

94

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Sales of products and related goods

Income from lease instalments

Sale of products previously leased to customers

Interest income on loan financing

Other income

38,652

5,544

4,997

2,943

1,061

53,197

43,297

5,069

1

1 5

1 2 9

4,185

2,457

1,010

Revenues

56,018

An analysis of revenues by operating segment and geographical region is shown in the segment information on pages

ꢂꢃꢉ –ꢂꢄꢂ.

9

Cost of sales

Cost of sales comprises:

in euro million

2008

2007

Manufacturing costs

26,727

990

29,536

1,309

8,450

2,045

529

Warranty expenditure

Cost of sales directly attributable to financial services

Interest expense relating to financial services business

Expense for risk provisions and write-downs for financial services business

Other cost of sales

9,634

2,666

1,697

2,609

44,323

1,963

43,832

Cost of sales

8

9 Group Financial Statements

Cost of sales include euro ꢂꢄ,ꢉꢉꢊ million (ꢃꢅꢅꢊ: euro: ꢂꢂ,ꢅꢃꢏ

million) relating to the financial services business.

ꢄ million (ꢃꢅꢅꢊ: euro ꢂꢊ million). Cost of manufacturing is

reduced by public-sector subsidies in the form of reduced

taxes on assets and reduced consumption-based taxes

amounting to euro ꢃꢄ million (ꢃꢅꢅꢊ: euro ꢂꢈ million).

Manufacturing costs include impairment losses on intan-

gible assets and property, plant and equipment of euro

1

0

1

Sales and administrative costs

Administrative costs amounted to euro ꢂ,ꢄꢃꢃ million (ꢃꢅꢅꢊ:

euro ꢉꢊꢅ million) and comprise expenses for administra-

tion not attributable to development, production or sales

functions. This includes most of the expenditure incurred

to reduce the size of the workforce.

Sales costs amounted to euro ꢏ,ꢅꢏꢊ million (ꢃꢅꢅꢊ: euro

ꢏ,ꢃꢆꢏ million) and comprise mainly marketing, advertising

and sales personnel costs.

Research and development costs

Total research and development expenditure comprising

research costs, development costs not recognised as

assets and capitalised development costs were as follows:

Research and development costs of euro ꢃ,ꢆꢃꢇ million (ꢃꢅꢅꢊ:

euro ꢃ,ꢉꢃꢅ million) comprise all research costs and devel-

opment costs not recognised as assets as well as amorti-

sation of capitalised development costs of euro ꢂ,ꢂꢆꢇ million

(

ꢃꢅꢅꢊ: euro ꢂ,ꢂꢅꢉ million).

in euro million

2008

2007

Research and development costs

2,825

–1,185

1,224

2,864

2,920

–1,109

1,333

Amortisation

New expenditure for capitalised development costs

Total research and development expenditures

3,144

12

Other operating income and expenses

in euro million

2008

2007

Exchange gains

827

278

8

204

90

Income from the reversal of provisions

Income from the reversal of write-downs

Gains on the disposal of assets

Sundry operating income

38

50

229

169

730

265

1,428

Other operating income

Exchange losses

748

113

231

64

Expense for additions to provisions

Expenses for impairment losses

Sundry operating expenses

Other operating expenses

52

25

274

210

530

1,187

Other operating income and expenses

241

200

Other operating income includes public-sector grants of euro ꢄꢃ million (ꢃꢅꢅꢊ: euro ꢄꢈ million).

9

0

1

3

4

Result from equity accounted investments

and the result for the final three months of the financial

year ꢃꢅꢅꢆ relating to the remaining investment in Cirquent

GmbH, Munich.

The profit from equity accounted investments of euro

ꢃꢈ million (ꢃꢅꢅꢊ: euro ꢂꢂ million) includes the result of the

joint venture BMW Brilliance Automotive Ltd., Shenyang

Net interest result

in euro million

2008

2007

Expected return on plan assets

Other interest and similar income^*

360

325

358

287

thereof from subsidiaries euro ꢁꢌ million (ꢋꢌꢌꢍ: euro ꢁꢋ million)

Interest and similar income

685

645

Expense from reversing the discounting of pension obligations

Expense from reversing the discounting of other long-term provisions

Write-downs on marketable securities

–550

–96

–537

–86

–123

–161

–49

Other interest and similar expenses^*

–225

thereof to subsidiaries euro ꢁ million (ꢋꢌꢌꢍ: euro ꢁ million)

Interest and similar expenses

–930

–245

–897

–252

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Net interest result

*

Interest income and expenses relating to stand-alone derivatives are netted within the net interest result. Interest income includes net interest income of euro ꢂꢅꢃ million (ꢃꢅꢅꢊ:

euro ꢊꢅ million) relating to stand-alone derivatives.

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

1

5

Other financial result

in euro million

2008

2007

1

1 5

1 2 9

Income from investments

4

3

–

thereof from subsidiaries euro ꢑ million (ꢋꢌꢌꢍ: euro ꢁ million)

Expense of assuming losses under profit and loss transfer agreements

thereof from subsidiaries – euro ꢁ million (ꢋꢌꢌꢍ: –)

–1

Impairment losses on investments in subsidiaries

–6

– 3

–6

Result on investments

– 3

Losses and gains relating to financial instruments

–348

–95

Sundry other financial result

–95

Other financial result

–351

–98

Other financial result includes losses on other derivative

financial instruments, in particular on stand-alone interest

rate derivatives. The decrease in the fair values of these

financial instruments reflected the change in the interest

rate structure.

1

6

Income taxes

Taxes on income comprise the following:

in euro million

2008

2007

Current tax expense

Deferred tax expense

Income taxes

75

–54

21

1,002

–263

739

9

1 Group Financial Statements

Deferred taxes are recognised on temporary differences

between the carrying amount of assets and liabilities for

IFRS purposes and their tax bases. Deferred taxes are

computed using enacted or planned tax rates which are

expected to apply in the relevant national jurisdictions

when the amounts are recovered. A uniform corporation

tax rate of ꢂꢇ.ꢅ% applies in Germany from ꢂ January ꢃꢅꢅꢆ.

After taking account of the average multiplier rate (Hebe-

satz) of ꢏꢂꢅ.ꢅ% for municipal trade tax and the solidarity

charge of ꢇ.ꢇ%, the overall tax rate for BMW companies in

Germany is ꢄꢅ.ꢃ% (ꢃꢅꢅꢊ: ꢄꢆ.ꢉ%). This reduced rate was

already applied in the financial year ꢃꢅꢅꢊ to measure de-

ferred tax assets and liabilities. The non-deductibility of

municipal trade tax for corporation tax purposes with effect

from the beginning of the financial year ꢃꢅꢅꢆ has been

taken into account. The tax rates for companies outside

Germany range from ꢂꢃ.ꢇ% (ꢃꢅꢅꢊ: ꢂꢃ.ꢇ%) to ꢏꢈ.ꢉ% (ꢃꢅꢅꢊ:

ꢏꢅ.ꢊ%). A valuation allowance is recognised on deferred

tax assets when recoverability is uncertain. In determining

the level of the valuation allowance, all positive and nega-

tive factors concerning the likely existence of sufficient

taxable profit in the future are considered. These estimates

can change depending on the actual course of events.

An analysis of deferred tax assets and liabilities by position

at ꢄꢂ December is shown below:

Deferred tax assets

2008 2007

Deferred tax liabilities

in euro million

2008

2007

Intangible assets

Property, plant and equipment

Leased products

Investments

1

43

1

43

1,541

454

1,528

428

3,205

1

573

558

4,137

5

3

2

Other current assets

Tax loss carryforwards

Provisions

1,796

1,438

1,197

2,945

1,736

1,110

1,072

1,145

3,084

1,661

8,676

3,196

–

3,767

–

75

51

Liabilities

1,296

406

690

329

9,999

Consolidations

9,732

11,110

Valuation allowance

Netting

–513

–8,353

866

– 671

–7,285

720

–

–8,353

2,757

–

–7,285

2,714

Deferred taxes

“

Netting” relates to the offset of deferred tax assets and

assets are recognised on the basis of management’s

assessment of whether it is probable that the relevant

entities will generate sufficient taxable profits against

which deductible temporary differences can be offset.

liabilities within individual separate entities or tax groups.

Deferred tax assets on tax losses available for carryforward

and on capital losses increased on a net basis. Tax losses

available for carryforward, which for the most part can be

carried forward without restriction, totalled euro ꢄ.ꢆ billion

at the end of the reporting period (ꢃꢅꢅꢊ: euro ꢂ.ꢆ billion). A

valuation allowance of euro ꢄꢅ million (ꢃꢅꢅꢊ: euro ꢏꢄ million)

was recognised in ꢃꢅꢅꢆ on deferred tax assets relating to

tax losses available for carryforward. Capital losses in the

United Kingdom decreased to euro ꢂ.ꢊ billion in ꢃꢅꢅꢆ (ꢃꢅꢅꢊ:

euro ꢃ.ꢃ billion) due to exchange rate factors. As in pre-

vious years, these tax losses – amounting to euro ꢏꢆꢄ mil-

lion at the end of the reporting period (ꢃꢅꢅꢊ: euro ꢈꢃꢆ mil-

Deferred taxes recognised directly in equity amounted to

euro ꢄꢅꢄ million (ꢃꢅꢅꢊ: euro ꢂꢂꢈ million). The increase of

euro ꢂꢆꢊ million relates to deferred taxes on gains and losses

arising on items recognised directly in equity, namely on

marketable securities (negative amount of euro ꢂꢂ million),

on derivative financial instruments (positive amount of

euro ꢃꢄꢂ million) and on actuarial gains and losses relating

to defined benefit pension plans (negative amount of euro

ꢄꢄ million). The change also includes a euro ꢄꢉ million re-

duction in deferred taxes arising from the translation of for-

eign subsidiaries’ financial statements.

lion)

– were fully written down since they can only be

utilised against future capital gains. Capital losses are not

connected to on-going business operations.

Deferred taxes are not recognised on retained profits of

euro ꢂꢇ,ꢈꢏꢂ million (ꢃꢅꢅꢊ: euro ꢂꢄ,ꢉꢃꢇ million) of foreign sub-

sidiaries, as it is intended to invest these profits to maintain

and expand the business volume of the relevant companies.

A computation was not made of the potential impact of

income taxes on the grounds of disproportionate expense.

Deferred tax assets were recognised in ꢃꢅꢅꢆ for entities

which recorded tax losses in either ꢃꢅꢅꢆ or ꢃꢅꢅꢊ.These

deferred tax assets exceed deferred tax liabilities by

euro ꢂꢆꢇ million (ꢃꢅꢅꢊ: euro ꢄꢃꢇ million). Deferred tax

9

2

The tax returns of BMW Group companies are checked

regularly by German and foreign tax authorities. Taking

account of a variety of factors – including existing inter-

pretations, commentaries and legal decisions taken relat-

ing to the various tax jurisdictions and the BMW Group’s

The actual tax expense for the financial year ꢃꢅꢅꢆ of euro

ꢃꢂ million (ꢃꢅꢅꢊ: euro ꢊꢄꢉ million) is euro ꢆꢇ million (ꢃꢅꢅꢊ:

euro ꢊꢈꢊ million) lower than the expected tax expense of

euro ꢂꢅꢈ million (ꢃꢅꢅꢊ: euro ꢂ,ꢇꢅꢈ million) which would theo-

retically arise if the tax rate of ꢄꢅ.ꢃ% (ꢃꢅꢅꢊ: ꢄꢆ.ꢉ%), appli-

cable for German companies, was applied across the

Group. The difference between the expected and actual

tax expense is attributable to the following:

past experience

– adequate provision has, as far as

identifiable, been made for potential future tax obliga-

tions.

in euro million

2008

2007

Expected tax expense

106

1,506

Variances due to different tax rates

24

–49

–60

–

– 731

4

Tax reductions (–)/tax increases (+) as a result of non-taxable income and non-deductible expenses

Tax expense (+)/benefits (–) for prior periods

Other variances

–4

–36

739

Actual tax expense

21

The effects of the sale of Cirquent GmbH, Munich, are in-

cluded in the line relating to non-taxable income. Rulings

made by the European Court of Justice with regard to Ger-

man tax legislation have had a positive impact on the tax

expense of German entities.The impact in ꢃꢅꢅꢆ is included

on the line “Tax expenses/benefits for prior periods”. The

line “Variances due to different tax rates” includes a tax

expense of euro ꢂꢆ million relating to the revaluation of de-

ferred tax assets and liabilities as a result of changed tax

rates (ꢃꢅꢅꢊ: tax income of euro ꢏꢉꢂ million).

not previously been recognised amounted to euro ꢏ million

(ꢃꢅꢅꢊ: euro ꢂꢃ million). Moreover, the tax expense was re-

duced by euro ꢉ million (ꢃꢅꢅꢊ: euro ꢃ million) as a result of

deferred taxes on previously unrecognised temporary

differences. The tax expense for the valuation allowance

on deferred tax assets relating to tax losses available for

carryforward and temporary differences amounted to euro

ꢃꢂ million (ꢃꢅꢅꢊ: euro ꢏ million). Tax income from the re-

versal of previously recognised allowances amounted to

euro ꢃꢂ million (ꢃꢅꢅꢊ: euro ꢈꢊ million). Overall, the net tax

income from new or reversing temporary differences

totalled euro ꢈꢄ million (ꢃꢅꢅꢊ: tax expense of euro ꢃꢉꢄ mil-

lion).

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

1

1 5

1 2 9

The effect of the reduction in tax expense as a result of the

utilisation of tax losses for which deferred tax assets had

1

7

Earnings per share

2008

2007

Net profit for the year after minority interest

euro million

324.3

3,125.9

Profit attributable to common stock

Profit attributable to preferred stock

euro million

297.9

26.4

2,878.4

247.5

Average number of common stock shares in circulation

Average number of preferred stock shares in circulation

number

601,995,196

51,296,162

601,995,196

51,535,857

Earnings per share of common stock

Earnings per share of preferred stock

euro

0.49

0.51

4.78

4.80

Dividend per share of common stock

Dividend per share of preferred stock

euro

0.30

0.32

1.06

1.08

9

3 Group Financial Statements

Earnings per share of preferred stock are computed on the

basis of the number of preferred stock shares entitled to

receive a dividend in each of the relevant financial years.

Diluted earnings per share were not applicable in either the

current or prior year.

18

Other disclosures relating to the income statement

The income statement includes personnel costs as follows:

in euro million

2008

2007

Personnel costs

Wages and salaries

5,991

1,245

6,268

1,243

Social security, retirement and welfare costs

thereof retirement costs: euro ꢎꢁꢁ million (ꢋꢌꢌꢍ: euro ꢍꢓꢁ million)

7

,236

7,511

Personnel costs include euro ꢏꢇꢇ million of expenditure incurred to reduce the size of the workforce. The average number

of employees during the year was:

2008

2007

Employees

95,699

6,034

97,922

6,480

Apprentices and students gaining work experience

Average number of employees

101,733

104,402

For information regarding the number of employees at the

year-end, reference is made to pages ꢃꢉ–ꢄꢂ in the Group

Management Report.

The fee expense recognised in the financial year ꢃꢅꢅꢆ for

the auditors of the Group Financial Statements, KPMG AG

Wirtschaftsprüfungsgesellschaft and its affiliated entities,

pursuant to §ꢄꢂꢏ ꢐꢁꢒ no. ꢉ HGB amounted to euro ꢊ million

(

ꢃꢅꢅꢊ: euro ꢇ million) and consists of the following:

1

2

in euro million

2008

2007

Year-end audits

3

1

3

7

2

–

Audit-related services

Tax advisory services

3

5

ꢂ

Fee expense for KPMG Europe LLP

Fee expense for KPMG Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

ꢃ

The item “Year-end audits” includes fees for the audit of

annual financial statements of BMW AG, the audit of the

Group Financial Statements and the audit of the annual

financial statements of subsidiaries in Germany, the United

Kingdom, Switzerland and Spain.

9

4

BMW Group

Notes to the Group Financial Statements

Notes to the Balance Sheet

1

9

Analysis of changes in Group tangible, intangible and investment assets ꢅꢆꢆꢇ

Acquisition and manufacturing cost

1

in euro million

1.1. 2008

Translation

differences

Additions

Reclassi-

fications

Disposals

31.12. 2008

Development costs

Other intangible assets

Intangible assets

8,479

1,020

9,499

–

–11

1,224

115

–

13

848

175

8,855

962

1,339

1,023

9,817

Land, titles to land, buildings, including buildings on

third party land

6,623

–127

–330

–22

5

255

1,535

179

266

471

32

142

440

182

17

6,875

21,666

2,069

Plant and machinery

20,430

Other facilities, factory and office equipment

Advance payments made and construction in progress

Property, plant and equipment

2,062

1,019

896

–782

–13

1,121

30,134

–474

2,865

781

31,731

Leased products

20,860

63

–22

–

12,376

48

–

7,807

–

25,407

111

Investments accounted for using the equity method

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Investments in non-consolidated subsidiaries

Participations

261

8

–1

–

158

–

43

–

375

8

Non-current marketable securities

Other investments

21

–5

– 6

7

–

23

290

165

43

406

7

9

Notes

1

including gross balances brought forward for entities consolidated for the first time in the financial year

including impairment losses of euro ꢄ million

including assets under construction of euro ꢊꢃꢊ million

79

88

94

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

ꢃ

ꢄ

1

1 5

1 2 9

Analysis of changes in Group tangible, intangible and investment assets ꢅꢆꢆꢈ

Acquisition and manufacturing cost

1

in euro million

1.1. 2007

Translation

differences

Additions

Reclassi-

fications

Disposals

31.12. 2007

Development costs

Other intangible assets

Intangible assets

7,684

813

–

–11

1,333

250

–

538

43

8,479

1,009

9,488

8,497

1,583

581

Land, titles to land, buildings, including buildings on

third party land

6,425

19,640

2,055

740

–118

–315

–44

248

1,444

184

231

264

6

220

618

147

5

6,566

20,415

2,054

Plant and machinery

Other facilities, factory and office equipment

Advance payments made and construction in progress

Property, plant and equipment

–23

808

–501

–

1,019

28,860

17,628

82

–500

2,684

990

30,054

Leased products

–1,219

–

11,038

18

–

6,587

37

20,860

63

Investments accounted for using the equity method

Investments in non-consolidated subsidiaries

Participations

272

195

14

–1

–

54

–

64

187

–

261

8

Non-current marketable securities

Other investments

–1

– 2

8

21

481

62

251

290

ꢂ

including the gross balances brought forward of companies consolidated for the first time during the financial year

including impairment losses of euro ꢂꢃ million

including impairment losses of euro ꢇ million

ꢃ

ꢄ

9

5 Group Financial Statements

Depreciation and amortisation

Carrying amount

31.12. 2008 31.12. 2007

1

.1. 2008

Translation

differences

Current year

Disposals

31.12. 2008

3

,445

78

,823

–2

– 4

1,185

110

846

92

3,782

394

5,073

568

5,034

636

3

1,295

938

4,176

5,641

5,670

2

,626

4,783

,549

–58

–214

–18

202

2,002

171

52

423

130

–

2,718

16,148

1,572

1

4,157

5,518

497

3,945

5,635

510

1

3

1

–

1,120

11,292

1,018

11,108

2

1

8,959

–290

2,375

605

20,439

3

,847

28

–

3,975

–

1,967

–

5,883

–

19,524

111

17,013

63

–

7

6

5

–

6

–

3

–

79

5

296

3

185

3

–

23

21

8

1

6

3

84

322

209

Depreciation and amortisation

Carrying amount

31.12. 2007 31.12. 2006

1

.1. 2007

Translation

Current year

Disposals

31.12. 2007

differences

2

,874

10

,184

–

–4

– 4

1,109

103

538

36

3,445

373

5,034

636

4,810

502

3

2

3

1,212

574

3,818

5,670

5,312

2

,529

3,525

,515

–48

–200

–43

–

201

2,057

213

–

61

602

141

–

2,621

14,780

1,544

1

3,945

5,635

510

3,896

6,115

535

1

1,018

11,108

739

3

1

7,570

–291

2,471

2,475

–

804

18,946

11,285

3,289

–247

–

1,670

22

3,847

–

17,013

63

13,642

60

2

7

0

5

–

6

–

76

5

185

3

197

190

14

–

21

7

5

6

81

209

401

9

6

2

0

Intangible assets

Services GmbH, Stuttgart, and its subsidiaries and on the

acquisition of SimeLease (Malaysia) Sdn Bhd, Kuala Lumpur,

and its subsidiary SimeCredit (Malaysia) Sdn Bhd, Kuala

Lumpur. This item is not presented separately in the Group

balance sheet since the amount is not significant in rela-

tion to either the balance sheet total or intangible assets.

Intangible assets mainly comprise capitalised development

costs on vehicle and engine projects as well as subsidies

for tool costs, licences, purchased development projects

and software. Amortisation on intangible assets is pre-

sented in cost of sales, administrative costs, research and

development costs and other operating expenses.

As in the previous year there were no reversals of impair-

ment losses on intangible assets.

In addition, intangible assets include a brand-name right

amounting to euro ꢄꢊ million (ꢃꢅꢅꢊ: euro ꢏꢉ million) and

goodwill amounting to euro ꢂꢂꢂ million (ꢃꢅꢅꢊ: euro ꢂꢈꢄ mil-

lion) with indefinite useful lives. The latter comprises

goodwill arising on the acquisition of DEKRA SüdLeasing

Changes in intangible assets during the year are shown in

the analysis of changes in Group tangible, intangible and

investment assets on pages ꢉꢏ–ꢉꢇ.

2

1

Property, plant and equipment

ment at the Oxford plant, with a carrying amount of euro

ꢈ million (ꢃꢅꢅꢊ: euro ꢂꢉ million) at ꢄꢂ December, run for

periods up to ꢃꢅꢂꢂ at the latest. For each of the leases,

there is a recurring option to extend the leases by one

year. A purchase option was not agreed. The lease for

plant and machinery and other facilities, factory and office

equipment at the Hams Hall production plant, with a

carrying amount of euro ꢂꢅ million (ꢃꢅꢅꢊ: euro ꢂꢊ million)

runs until ꢃꢅꢂꢆ and may be extended for one year periods

thereafter. A purchase option was not agreed.

A break-down of the different classes of property, plant and

equipment disclosed in the balance sheet and changes

during the year are shown in the analysis of changes in

Group tangible, intangible and investment assets on pages

ꢉꢏ–ꢉꢇ.

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Property, plant and equipment include a total of euro ꢈꢆ mil-

lion (ꢃꢅꢅꢊ: euro ꢂꢅꢃ million) relating to operational buildings

used by BMW AG as well as leased plant, machinery and

other equipment used primarily at the Oxford and Hams

Hall production plants. Due to the nature of the lease ar-

rangements (finance leases), economic ownership of these

assets is attributable to the BMW Group. The leases for

buildings, with a carrying amount of euro ꢇꢅ million (ꢃꢅꢅꢊ:

euro ꢈꢅ million) run for periods up to ꢃꢅꢃꢆ at the latest.

Some of the leases contain extension and purchase op-

tions. The leases for plant and machinery and other equip-

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Disposals of land, titles to land and buildings, including

buildings on third party land relate primarily to a number of

properties which were sold and are being leased back.

1

1 5

1 2 9

Minimum lease payments of the relevant leases are as

follows:

in euro million

31.12. 2008

31.12. 2007

Total of future minimum lease payments

due within one year

67

202

157

85

318

201

604

due between one and five years

due later than five years

4

26

Interest portion of the future minimum lease payments

due within one year

9

27

49

16

48

due between one and five years

due later than five years

73

8

5

137

Present value of future minimum lease payments

due within one year

58

69

270

128

467

due between one and five years

due later than five years

175

108

3

41

9

7 Group Financial Statements

22

Leased products

The BMW Group, as lessor, leases out assets (predomi-

nantly own products) as part of its financial services busi-

ness. Minimum lease payments of euro ꢆ,ꢇꢂꢇ million (ꢃꢅꢅꢊ:

euro ꢊ.ꢏꢂꢉ million) from non-cancellable operating leases

fall due as follows:

in euro million

31.12. 2008

31.12. 2007

within one year

4,589

3,925

1

3,902

3,516

1

between one and five years

later than five years

Leased products

8,515

7,419

Contingent rents of euro ꢄꢅ million (ꢃꢅꢅꢊ: euro ꢂꢅ million),

based principally on the distance driven, were recognised

in income. The agreements have, in part, extension and

purchase options as well as price escalation clauses.

Changes in leased products during the year are shown in

the analysis of changes in Group tangible, intangible and

investment assets on pages ꢉꢏ–ꢉꢇ.

23

Investments accounted for using the equity

method and other investments

Investments accounted for using the equity method

comprise the Group’s interests in the joint venture BMW

Brilliance Automotive Ltd., Shenyang, and, for the first

time in ꢃꢅꢅꢆ, the investment in Cirquent GmbH, Munich.

The disclosures relating to the income statement include

the income and expenses of Cirquent GmbH, Munich,

since the deconsolidation of the Cirquent Group. The ag-

gregated interests of the Group are as follows:

in euro million

31.12. 2008

31.12. 2007

Disclosures relating to the income statement

Income

627

603

627

615

Expenses

Disclosures relating to the balance sheet

Non-current assets

139

234

106

259

Current assets

Equity

126

31

80

41

Non-current liabilities

Current liabilities

216

244

Other investments relate primarily to investments in non-

consolidated subsidiaries, participations and non-current

marketable securities.

consolidation of BMW Lease (Malaysia) Sdn Bhd, Kuala

Lumpur, BMW Roma S.r.l., Rome, and BMW de Argentina

S.A., Buenos Aires.

Additions to investments in non-consolidated subsidiaries

relate to the foundation of BMW Bank OOO, Moscow,

and an equity capital increase at the level of Husqvarna

Motorcycles S.r.l., Cassinetta di Biandronno.

Impairment losses on investments in subsidiaries relate to

BMW Philippines Corp., Manila.

A break-down of the different classes of other investments

disclosed in the balance sheet and changes during the

year are shown in the analysis of changes in Group tangible,

intangible and investment assets on pages ꢉꢏ–ꢉꢇ.

Items reported as disposals of investments in non-con-

solidated subsidiaries result primarily from the first-time

9

8

2

4

Receivables from sales financing

customers and dealers and euro ꢆ,ꢇꢉꢄ million (ꢃꢅꢅꢊ: euro

ꢆ,ꢅꢈꢄ million) for finance leases. Finance leases are

analysed as follows:

Receivables from sales financing, totalling euro ꢄꢆ,ꢅꢈꢄ mil-

lion (ꢃꢅꢅꢊ: euro ꢄꢏ,ꢃꢏꢏ million), comprise euro ꢃꢉ,ꢏꢊꢅ mil-

lion (ꢃꢅꢅꢊ: euro ꢃꢈ,ꢂꢆꢂ million) for credit financing for retail

in euro million

31.12. 2008

31.12. 2007

Gross investment in finance leases

due within one year

3,315

6,357

29

3,215

6,013

1

due between one and five years

due later than five years

9,701

9,229

Present value of future minimum lease payments

due within one year

2,932

5,634

27

2,886

5,176

1

due between one and five years

due later than five years

8,593

8,063

Unrealised interest income

1,108

1,166

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Contingent rents recognised as income (generally relating

to the distance driven) amounted to euro ꢇ million (ꢃꢅꢅꢊ:

euro ꢂꢃ million). Write-downs on finance leases amounting

to euro ꢇꢃ million (ꢃꢅꢅꢊ: euro ꢇꢃ million) were measured and

recognised on the basis of specific credit risks.

Receivables from sales financing include euro ꢃꢃ,ꢂꢉꢃ mil-

lion (ꢃꢅꢅꢊ: euro ꢃꢅ,ꢃꢏꢆ million) with a remaining term of

more than one year.

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Allowance for impairment and credit risk

1

1 5

1 2 9

in euro million

31.12. 2008

31.12. 2007

Gross carrying amount

Allowance for impairment

Net carrying amount

39,116

1,053

35,036

792

38,063

34,244

Allowances for impairment on receivables from sales financing developed as following during the year under report:

2

008

Allowance for impairment recognised on a

Total

in euro million

specific item basis

group basis

*

Balance at ꢁ January

Allocated/reversed

Utilised

672

543

125

10

797

553

–262

–15

–14

– 6

–276

–21

Exchange rate impact and other changes

Balance at ꢀꢁ December

938

115

1,053

2

007

Allowance for impairment recognised on a

Total

in euro million

specific item basis

group basis

*

Balance at ꢁ January

Allocated/reversed

Utilised

590

277

149

–3

739

274

–184

–16

–17

–4

–201

–20

Exchange rate impact and other changes

Balance at ꢀꢁ December

667

125

792

*

including entities consolidated for the first time during the financial year

9

9 Group Financial Statements

At the end of the reporting period, impairment allowances

of euro ꢂꢂꢇ million (ꢃꢅꢅꢊ: euro ꢂꢃꢇ million) were recognised

on a group basis on gross receivables from sales financing

totalling euro ꢂꢊ,ꢃꢊꢏ million (ꢃꢅꢅꢊ: euro ꢂꢆ,ꢉꢊꢉ million). Im-

pairment allowances of euro ꢉꢄꢆ million (ꢃꢅꢅꢊ: euro ꢈꢈꢊ mil-

lion) were recognised at ꢄꢂ December ꢃꢅꢅꢆ on a specific

item basis on gross receivables from sales financing total-

ling euro ꢊ,ꢊꢇꢇ million (ꢃꢅꢅꢊ: euro ꢇ,ꢏꢉꢄ million).

The estimated fair value of collateral received for receiva-

bles on which impairment losses were recognised totalled

euro ꢂꢏ,ꢇꢊꢅ million (ꢃꢅꢅꢊ: euro ꢂꢏ,ꢈꢂꢊ million) at the end of

the reporting period. This collateral related primarily to

vehicles. The carrying amount of assets held as collateral

and taken back as a result of payment default amounted to

euro ꢏꢏ million (ꢃꢅꢅꢊ: euro ꢄꢈ million).

As in the previous year, there were no receivables from

sales financing at the end of the reporting period which

have been renegotiated and which were otherwise over-

due or otherwise required recognition of an impairment

loss.

Receivables from sales financing which were not overdue

at the end of the reporting period amounted to euro ꢂꢏ,ꢅꢆꢊ

million (ꢃꢅꢅꢊ: euro ꢂꢅ,ꢇꢈꢏ million). No impairment losses

were recognised for these balances.

25

Financial assets

Financial assets comprise:

in euro million

31.12. 2008

31.12. 2007

Interest and currency derivatives

Marketable securities and investment funds

Loans to third parties

3,449

653

1,980

1,959

28

13

Credit card receivables

Other

253

260

746

568

Financial assets

5,114

4,795

thereof non-current

thereof current

1,808

3,306

1,173

3,622

The change in the line item “Interest and currency deriva-

tives” relates primarily to changed exchange rate parities

and the changed interest rate structure.

to the newly founded BMW Trust e.V., Munich, in con-

junction with the creation of an external fund for pension

obligations.

The decrease in marketable securities and investment

funds was primarily attributable to the transfer of securities

Marketable securities and investment funds relate to avail-

able-for-sale financial assets and comprise:

in euro million

31.12. 2008

31.12. 2007

Stocks

32

–

452

415

Investment funds

Fixed income securities

Sundry marketable securities

Marketable securities and investment funds

620

1

1,082

10

653

1,959

1

00

The contracted maturities of debt securities are as follows:

in euro million

31.12. 2008

31.12. 2007

Fixed income securities

due within three months

due later than three months

Sundry marketable securities

due within three months

due later than three months

Debt securities

–

620

1,082

1

–

1

9

621

1,092

Obligations resulting from pre-retirement part-time work

arrangements were previously secured by investment

funds maintained with the Deutsche Treuinvest Stiftung,

Frankfurt am Main. In ꢃꢅꢅꢆ, these investment funds were

transferred to the newly founded BMW Trust e.V., Munich,

in conjunction with a Contractual Trust Arrangement (CTA).

The value of the investment funds that exceeds the obli-

gations for pre-retirement part-time work arrangements

(settlement arrears) amounting to euro ꢄꢇ million is reported

under other financial assets.

Allowance for impairment and credit risk

Receivables relating to the credit card business comprise the following:

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

in euro million

31.12. 2008

31.12. 2007

Gross carrying amount

Allowance for impairment

Net carrying amount

268

15

267

7

9

Notes

253

260

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Allowances for impairment losses on receivables relating to credit card business developed as following:

1

1 5

1 2 9

2008

Allowance for impairment recognised on a

Total

in euro million

specific item basis

group basis

Balance at ꢁ January

1

28

–15

1

6

–5

–1

–

7

23

Allocated/reversed

Utilised

–16

1

Exchange rate impact and other changes

Balance at ꢀꢁ December

15

–

15

2

007

Allowance for impairment recognised on a

Total

in euro million

specific item basis

group basis

Balance at ꢁ January

1

–

4

12

–9

–1

6

5

12

–9

–1

7

Allocated/reversed

Utilised

–

Exchange rate impact and other changes

Balance at ꢀꢁ December

–

1

01 Group Financial Statements

26

Income tax assets

Income tax assets can be analysed as follows:

ꢀ

ꢁ December ꢂꢃꢃꢄ

Maturity

Total

in euro million

within one year later than one year

Deferred tax

–

498

866

104

970

866

602

Current tax

Income tax assets

1,468

ꢀ

ꢁ December ꢋꢌꢌꢍ

Maturity

Total

in euro million

within one year later than one year

Deferred tax

–

118

720

119

839

720

237

957

Current tax

Income tax assets

27

Other assets

Other assets comprise:

in euro million

31.12. 2008

31.12. 2007

Other taxes

373

425

554

641

Receivables from subsidiaries

Receivables from other companies in which an investment is held

Prepayments

103

104

848

729

Collateral receivables

291

135

Sundry other assets

462

361

Other assets

2,502

2,524

thereof non-current

thereof current

660

415

1,842

2,109

Receivables from subsidiaries include trade receivables

of euro ꢂꢄꢉ million (ꢃꢅꢅꢊ: euro ꢉꢈ million) and financial re-

ceivables of euro ꢃꢆꢈ million (ꢃꢅꢅꢊ: euro ꢇꢏꢇ million). They

include euro ꢏꢄ million (ꢃꢅꢅꢊ: euro ꢃꢇ million) with a remain-

ing term of more than one year.

Prepayments of euro ꢆꢏꢆ million (ꢃꢅꢅꢊ: euro ꢊꢃꢉ million)

relate mainly to prepaid interest, development costs not

eligible for capitalisation as non-current assets, insurance

premiums and rent. Prepayments of euro ꢏꢆꢄ million (ꢃꢅꢅꢊ:

euro ꢏꢉꢏ million) have a maturity of less than one year.

Receivables from other companies in which an investment

is held are, as in the previous year, all due within one year.

Collateral receivables comprise mainly customary collateral

arising on the sale of receivables.

1

02

28 Inventories

Inventories comprise the following:

in euro million

31.12. 2008

31.12. 2007

Raw materials and supplies

Work in progress, unbilled contracts

Finished goods and goods for resale

Inventories

596

803

632

871

5,891

7,290

5,846

7,349

At ꢄꢂ December ꢃꢅꢅꢆ, inventories measured at their net

realisable value amounted to euro ꢏꢃꢈ million (ꢃꢅꢅꢊ: euro

ꢏꢊꢄ million) and are included in total inventories of euro

ꢊ,ꢃꢉꢅ million (ꢃꢅꢅꢊ: euro ꢊ,ꢄꢏꢉ million). Write-downs to net

realisable value amounting to euro ꢏꢊ million (ꢃꢅꢅꢊ: euro

ꢏꢅ million) were recognised in ꢃꢅꢅꢆ.

2

9

Trade receivables

Trade receivables amounting in total to euro ꢃ,ꢄꢅꢇ million

(ꢃꢅꢅꢊ: euro ꢃ,ꢈꢊꢃ million) include euro ꢏꢅ million due later

than one year (ꢃꢅꢅꢊ: euro ꢄ million).

Allowance for impairment and credit risk

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

in euro million

31.12. 2008

31.12. 2007

Gross carrying amount

Allowance for impairment

Net carrying amount

2,373

68

2,717

45

2,305

2,672

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Allowances on trade receivables developed as following during the year under report:

1

1 5

1 2 9

2008

Allowance for impairment recognised on a

Total

in euro million

specific item basis

group basis

Balance at ꢁ January

38

32

– 8

–

7

2

45

34

Allocated/reversed

Utilised

–2

–1

6

–10

–1

Exchange rate impact and other changes

Balance at ꢀꢁ December

62

68

2

007

Allowance for impairment recognised on a

Total

in euro million

specific item basis

group basis

Balance at ꢁ January

68

–11

–18

–1

9

2

77

–9

Allocated/reversed

Utilised

–4

–

–22

–1

Exchange rate impact and other changes

Balance at ꢀꢁ December

38

7

45

As in the previous year, there were no trade receivables

at the end of the reporting period which have been rene-

gotiated and which were otherwise overdue or otherwise

required recognition of an impairment loss.

1

03 Group Financial Statements

Some trade receivables were overdue for which an impairment loss was not recognised. Overdue balances are analysed

into the following time windows:

in euro million

31.12. 2008

31.12. 2007

ꢁ

–ꢀꢌ days overdue

ꢁ–ꢓꢌ days overdue

301

81

3

327

63

ꢀ

ꢓꢁ–ꢔꢌ days overdue

24

ꢔꢁ–ꢁꢋꢌ days overdue

6

14

More than ꢁꢋꢌ days overdue

43

46

4

34

474

Receivables that are overdue by between ꢂ and ꢄꢅ days

do not normally result in bad debt losses since the overdue

nature of the receivables is primarily attributable to the

timing of receipts around the month-end. In the case of

trade receivables, collateral is generally held in the form of

vehicles documents and bank guarantees so that the risk

of bad debt loss is extremely low.

3

0

1

Cash and cash equivalents

Cash and cash equivalents of euro ꢊ,ꢏꢇꢏ million (ꢃꢅꢅꢊ: euro

ꢃ,ꢄꢉꢄ million) comprise cash on hand and at bank, all with

a maturity of under three months.

Equity

Equity of the BMW Group developed during the year under report as follows:

in euro million

Subscribed

Capital Revenue

Accumulated other equity

Treasury Minority

Total

capital reserves reserves

shares

interest

Trans- Securities Derivative Pension

lation dif-

ferences

financial

instru-

ments

obliga-

tions

ꢀ

ꢁ December ꢂꢃꢃꢉ

654

1,911

18,121

–837

214

178

–1,115

–

4

19,130

Dividends paid

–

–458

–

–422

–

7

–

31

–

–1

–

–458

–385

183

Translation differences

Financial instruments

–

–183

366

Actuarial gains and losses

on pension obligations

–

528

–

528

Deferred tax on transactions

recognised directly in equity

–

3,126

–

4

–

–113

–

–279

–

8

–388

3,134

Net profit ꢋꢌꢌꢍ

ꢀ

ꢁ December ꢂꢃꢃꢊ

654

1,911

20,789

–1,259

35

438

–835

11

21,744

Repurchase of treasury shares

Dividends paid

–

–10

–

–10

–694

–712

–608

–694

–

–806

–

Translation differences

Financial instruments

–

–16

–601

111

–

–1

–

–7

–

Actuarial gains and losses

on pension obligations

–

5

–

5

Deferred tax on transactions

recognised directly in equity

–

324

–

–11

–

224

–

13

–

6

226

330

Net profit ꢋꢌꢌꢎ

Other changes

–

– 8

8

– 8

ꢀ

ꢁ December ꢂꢃꢃꢄ

654

1,911

20,419

–2,065

17

45

–706

–10

20,273

1

04

Number of shares issued

ꢃꢅꢅꢆ by the amount of the net profit attributable to share-

holders of BMW AG amounting to euro ꢄꢃꢏ million and

were reduced by the payment of the dividend for ꢃꢅꢅꢊ

amounting to euro ꢈꢉꢏ million.

At ꢄꢂ December ꢃꢅꢅꢆ, common stock issued by BMW AG

was divided into ꢈꢅꢂ,ꢉꢉꢇ,ꢂꢉꢈ shares with a par-value of

one euro. Preferred stock issued by BMW AG was divided

into ꢇꢃ,ꢂꢉꢈ,ꢂꢈꢃ shares with a par-value of one euro, also

unchanged from the previous year. Unlike the common

stock, no voting rights are attached to the preferred stock.

All of the Company’s stock is issued to bearer. Preferred

stock bears an additional dividend of euro ꢅ.ꢅꢃ per share.

The unappropriated profit of BMW AG of euro ꢂꢉꢊ million

for ꢃꢅꢅꢆ will be proposed to the Annual General Meeting

for distribution. The proposed distribution must be au-

thorised by the shareholders at the Annual General Meeting

of BMW AG. It is therefore not recognised as a liability in

the Group Financial Statements.

During the financial year ꢃꢅꢅꢆ, BMW AG acquired ꢉꢅꢅ,ꢅꢅꢅ

treasury shares of preferred stock at an average price of

euro ꢃꢆ.ꢇꢏ per share. ꢇꢄꢈ,ꢆꢊꢅ of these shares were issued

to employees at a reduced price of euro ꢂꢄ.ꢊꢊ per share

in conjunction with an employee share scheme. These

shares are entitled to receive dividends for the financial

year ꢃꢅꢅꢉ. The remaining ꢄꢈꢄ,ꢂꢄꢅ shares of preferred stock

were held by BMW AG as treasury shares at ꢄꢂ December

ꢃꢅꢅꢆ. As a result of the buy-back of shares of preferred

stock and their subsequent issue, the preferred stock por-

tion of share capital remained unchanged at euro ꢇꢃ million.

The effect of applying IFRS ꢃ (Share-Based Payments)

to the employee share scheme was not material for the

Group.

Accumulated other equity

Accumulated other equity consists of all amounts rec-

ognised directly in equity resulting from the translation

of the financial statements of foreign subsidiaries, the

effects of recognising changes in the fair value of de-

rivative financial instruments and marketable securities

directly in equity, actuarial gains and losses relating to

defined benefit pension plans and similar obligations and

deferred taxes.

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Minority interest

Equity attributable to minority interests amounted to euro

ꢆ million (ꢃꢅꢅꢊ: euro ꢂꢂ million). This includes a minority

interest of euro ꢈ million (ꢃꢅꢅꢊ: euro ꢆ million) in the results

for the year.

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

At the Annual General Meeting of BMW AG on ꢆ May ꢃꢅꢅꢆ,

the shareholders again authorised the Board of Manage-

ment to acquire treasury shares via the stock exchange,

up to a maximum of ꢂꢅ% of the share capital in place at the

date of the resolution and to withdraw those shares from

circulation without any further resolution by the Annual

General Meeting. At the same time, the authorisation from

ꢂꢇ May ꢃꢅꢅꢊ to acquire treasury shares was rescinded.The

authorisation from ꢆ May ꢃꢅꢅꢆ is valid until ꢈ November

ꢃꢅꢅꢉ. The authorisation was not exercised in ꢃꢅꢅꢆ. It has

not yet been decided whether or the extent to which the

authorisation will be used in the future.

1

1 5

Capital management disclosures

1 2 9

The BMW Group’s objectives when managing capital are

to safeguard the Group’s ability to continue as a going

concern in the long-term and to provide an adequate return

to shareholders.

The BMW Group manages the capital structure and

makes adjustments to it in the light of changes in eco-

nomic conditions and the risk profile of the underlying

assets.

Capital reserves

Capital reserves include premiums arising from the issue

of shares and were unchanged at euro ꢂ,ꢉꢂꢂ million.

In order to manage its capital structure, the BMW Group

uses various instruments including the amount of divi-

dends paid to shareholders and share buy-backs.

Revenues reserves

Revenue reserves comprise the post-acquisition and non-

distributed earnings of consolidated companies. In addi-

tion, revenue reserves include both positive and negative

goodwill arising on the consolidation of Group companies

prior to ꢄꢂ December ꢂꢉꢉꢏ.

The BMW Group manages the structure of debt capital

on the basis of a target debt ratio. An important aspect of

the selection of financial instruments is the objective to

achieve matching maturities for the Group’s financing

requirements. In order to reduce non-systematic risk, the

BMW Group uses a variety of financial instruments avail-

able on the world’s capital markets to achieve optimal di-

versification.

Revenue reserves decreased marginally to euro ꢃꢅ,ꢏꢂꢉ mil-

lion during the year under report. They were increased in

1

05 Group Financial Statements

The capital structure at the end of the reporting period was as follows:

in euro million

31.12. 2008

31.12. 2007

Equity attributable to shareholders of BMW AG

Proportion of total capital

20,275

25.1%

21,733

33.1ꢕ

Non-current financial liabilities

Current financial liabilities

Total financial liabilities

Proportion of total capital

Total capital

30,497

29,887

60,384

74.9%

80,659

21,428

22,493

43,921

66.9ꢕ

65,654

Equity attributable to shareholders of BMW AG decreased

during the financial year by ꢈ.ꢊ%, mainly as a result of high-

er translation differences on various items within equity.

The decrease in percentage terms (equity attributable to

shareholders of BMW AG as a percentage of total capital)

was due to the higher funding requirements for financial

services business.

Moody’s in September ꢃꢅꢅꢇ remain valid. In November

ꢃꢅꢅꢆ Moody’s issued an Aꢃ rating (with negative outlook)

and Standard & Poor’s issued an A rating (with stable out-

look) for the BMW Group. On ꢂꢆ February ꢃꢅꢅꢉ Moody’s

revised the rating to “under review for possible downgrade”.

As a result of its good credit standing, reflected in the long-

standing first-class short-term ratings issued by Moody’s

(

P-1) and Standard & Poor’s (A-1), the BMW Group is also

The BMW Group is officially rated by the rating agencies

Standard & Poor’s and Moody’s. The long-term ratings

for the BMW Group published by Standard & Poor’s and

able to obtain competitive refinancing terms and conditions

in the short term.

Moody’s

Standard & Poor’s

Non-current financial liabilities

Current financial liabilities

Outlook

A2

P-1

A

A-1

*

under review

stable

*

rating under review for possible downgrade

32

Pension provisions

Post-employment benefit plans are classified as either de-

fined contribution or defined benefit plans. Under defined

contribution plans, an enterprise pays fixed contributions

into a separate entity or fund and does not assume any

other obligations. The total pension expense for all defined

contribution plans of the BMW Group amounted to euro

ꢏꢂꢃ million (ꢃꢅꢅꢊ: euro ꢏꢏꢃ million). This includes employer

contributions paid to state pension insurance schemes

amounting to euro ꢄꢊꢈ million (ꢃꢅꢅꢊ: euro ꢏꢅꢈ million).

Pension provisions are recognised as a result of commit-

ments to pay future vested pension benefits and current

pensions to present and former employees of the BMW

Group and their dependants. Depending on the legal, eco-

nomic and tax circumstances prevailing in each country,

various pension plans are used, based generally on the

length of service, final salary and remuneration structure

of the employees involved. Due to similarity of nature,

the obligations of BMW Group companies in the U.S. and

of BMW (South Africa) (Pty) Ltd., Pretoria, for post-em-

ployment medical care are also disclosed as pension pro-

visions. The provision for these pension-like obligations

amounts to euro ꢈꢈ million (ꢃꢅꢅꢊ: euro ꢇꢇ million) and is

measured, similar to pension obligations, in accordance

with IAS ꢂꢉ. In the case of post-employment medical care,

it is assumed that the costs will increase on a long-term

basis by ꢈ% p.a. (unchanged from the previous year). The

expense for medical care costs in the financial year ꢃꢅꢅꢆ

was euro ꢊ million (ꢃꢅꢅꢊ: euro ꢈ million).

Under defined benefit plans, the enterprise is required to

pay the benefits granted to present and past employees.

Defined benefit plans may be funded or unfunded, the lat-

ter sometimes covered by accounting provisions. Most of

the pension commitments of the BMW Group in Germany

relate to BMW AG. In ꢃꢅꢅꢆ BMW AG and a number of Ger-

man subsidiaries transferred some of their pension obli-

gations to the newly founded BMW Trust e.V., Munich, in

conjunction with a Contractual Trust Arrangement (CTA).

In addition, the existing deferred remuneration retirement

1

06

scheme, into which employees can make contributions

in the form of salary conversion, was transferred in full

to BMW Trust e.V., Munich. Obligations not covered by

assets held by the fund are covered by pension provisions.

The main other countries with funded plans were the

United Kingdom, the USA, Switzerland, the Netherlands,

Belgium and Japan.

Pension obligations are computed on an actuarial basis at

the level of the defined benefit obligation. This computa-

tion requires the use of estimates. The main assumptions,

in addition to life expectancy, depend on the economic

situation in each particular country. The following weighted

average values are used in the United Kingdom and in the

other countries:

ꢀ

ꢁ December

Germany

United Kingdom

Other

in ꢕ

2008

2007

2008

2007

2008

2007

Discount rate

6.00

3.25

2.25

5.50

3.25

1.75

6.01

4.01

3.11

5.53

4.39

3.38

5.44

3.58

1.86

5.78

3.36

1.90

Salary level trend

Pension level trend

The salary level trend refers to the expected rate of salary

increase which is estimated annually depending on in-

flation and career development of employees within the

Group.

Actuarial gains or losses may result from increases or de-

creases in either the present value of the defined benefit

obligation or in the fair value of the plan assets. Causes of

actuarial gains or losses include the effect of changes in

the measurement parameters, changes in estimates caused

by the actual development of risks impacting on pension

obligations and differences between the actual and ex-

pected return on plan assets. Past service cost arises where

a BMW Group company introduces a defined benefit plan

or changes the benefits payable under an existing plan.

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

In the case of externally funded plans, the defined benefit

obligation is offset against plan assets measured at their

fair value. Where the plan assets exceed the pension obli-

gations and the enterprise has a right of reimbursement or

a right to reduce future contributions, the surplus amount

is recognised in accordance with IAS ꢂꢉ as an asset under

sundry other assets. In the case of externally funded plans,

a liability is recognised under pension provisions where

the benefit obligation exceeds fund assets.

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Based on the measurement principles contained in IAS ꢂꢉ,

the following funding status applies to the Group’s pen-

sion plans:

1

1 5

1 2 9

Germany

United Kingdom

Other

2008

Total

2008

in euro million

2008

2007

2008

2007

Present value of pension benefits covered by accounting provisions

Present value of funded pension benefits

Defined benefit obligations

31

3,817

3,848

1,155

2,693

3,849

–

4,403

4,059

344

–

6,327

5,686

641

131

406

537

277

260

119

336

455

343

112

162

3,968

6,663

8,626

3,849

–

8,788 10,631

Fair value of plan assets

5,491

3,297

6,029

4,602

Net obligation

3,849

Income (+) expense (–) from past service cost

not yet recognised

–

4

–2

4

–2

Amount not recognised as an asset because of

the limit in IAS ꢁꢔ.ꢖꢎ

–

1

6

9

17

10

23

Balance sheet amounts at ꢀꢁ December

2,693

3,849

345

647

273

127

3,311

4,623

thereof pension provision

thereof pension assets (–)

2,693

–

3,849

–

345

–

651

–4

276

–3

127

–

3,314

–3

4,627

–4

1

07 Group Financial Statements

Pension provisions relating to pension plans in other coun-

tries amounted to euro ꢃꢊꢈ million (ꢃꢅꢅꢊ: euro ꢂꢃꢊ million).

This includes euro ꢂꢏꢇ million (ꢃꢅꢅꢊ: euro ꢆ million) relating

to externally funded plans.

in particular the depreciation of the British pound, had a

substantial impact on the measurement of the defined

benefit obligations and fund assets.

The changes in the pension provision and pension as-

sets (reimbursement claims or right to reduce future

contributions to the funds) as disclosed in the balance

sheet can be derived as follows:

The change in the defined benefit obligations was attribut-

able mainly to changes in the discount rates used in the

actuarial computation. In addition, exchange rate changes,

Germany

United Kingdom

Other

2008

Total

2008

in euro million

2008

2007

2008

2007

Balance sheet amounts at ꢁ January

Deconsolidation effects

3,849

–4

4,414

–

647

4

439

–

127

–

164

–

4,623

–

5,017

–

Expense from pension obligations

Pension payments or transfers to external funds

293

239

–80

76

52

30

–14

28

399

319

–194

–1,471

–98

–47

–67 –1,583

Actuarial gains (–) and losses (+)

on defined benefit obligations

–271

278

–776

–

–647

486

211

42

–1

8

2

– 919

868

–557

44

Actuarial gains (–) and losses (+) on plan assets

104

Employee contributions to the deferred

remuneration retirement scheme

20

–1

52

–

–123

345

–

–50

647

–

27

–

–8

20

– 97

52

–58

Translation differences and other changes

Balance sheet amounts at ꢀꢁ December

2,693

3,849

273

127

3,311

4,623

thereof pension provision

thereof pension assets (–)

2,693

–

3,849

–

345

–

651

–4

276

–3

127

–

3,314

–3

4,627

–4

The defined benefit plans of the BMW Group give rise to

an expense from pension obligations in the financial year

ꢃꢅꢅꢆ of euro ꢄꢉꢉ million (ꢃꢅꢅꢊ: euro ꢄꢂꢉ million), comprising

the following components:

Germany

United Kingdom

Other

2008

Total

2008

in euro million

2008

2007

2008

2007

Current service cost

117

209

–1

150

192

–103

–

59

316

4

64

323

–

31

25

29

22

207

550

2

243

537

Expense from reversing the discounting of pension obligations

Past service cost

–1

–

–103

–358

319

Expected return on plan assets (–)

Expense from pension obligations

–32

293

–303

76

–335

52

–25

30

–23

28

–360

399

239

The expense from reversing the discounting of pension

obligations and the income from the expected return on

plan assets are reported as part of the financial result. All

other components of pension expense are included in the

relevant income statement under costs by function.

Other equity instruments, property and alternative invest-

ments (e.g. infrastructure funds) are also considered.

The expected rate of return is derived on the basis of the

specific investment strategy applied to each individual

pension fund. This is determined on the basis of the rates

of return from the individual investment classes taking

account of costs and unplanned risks. This approach re-

sulted in the following expected rates of return on plan

assets (disclosed on the basis of weighted averages).

Depending on the risk structure of the pension obligations

involved, pension plan assets are invested in various in-

vestment classes, the most predominant one being bonds.

1

08

Germany

United Kingdom

Other

2008

in ꢕ

2008

2007

2008

2007

7.25

Expected rate of return on plan assets

5.43

–

5.93

5.75

6.99

Compared to the expected return of euro ꢄꢈꢅ million (ꢃꢅꢅꢊ:

euro ꢄꢇꢆ million), fund assets actually decreased in the

financial year ꢃꢅꢅꢆ by euro ꢇꢅꢆ million (ꢃꢅꢅꢊ: increase in

fund assets of euro ꢄꢂꢏ million). This gave rise to actuarial

losses on fund assets of euro ꢆꢈꢆ million (ꢃꢅꢅꢊ: euro ꢏꢏ mil-

lion). The actuarial losses on fund assets compare with

actuarial gains of euro ꢉꢂꢉ million (ꢃꢅꢅꢊ: euro ꢇꢇꢊ million) on

benefit obligations. This offsetting effect was attributable

primarily to the fact that the pension funds’ investment

strategy is based on the structure of the related benefit

obligations.

The level of the pension obligations differs depending on

the pension system applicable in each country. Since the

state pension system in the United Kingdom only pro-

vides a basic fixed amount benefit, retirement benefits are

largely organised in the form of company pensions on

the one hand and arrangements financed by the individual

on the other. The pension benefits in the United Kingdom

therefore contain contributions made by the employee.

The net obligation from pension plans in Germany, the

United Kingdom and other countries changed as follows:

Germany

Defined benefit obligation

Plan assets

2008 2007

Net obligation

in euro million

2008

2007

2008

2007

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

ꢁ

January

3,849

–4

4,414

–

3,849

–4

4,414

Deconsolidation effects

–

239

–

239

–

Expense from pension obligations

Payments to external funds

325

–

–32

293

7

9

Notes

–1,375

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Employee contributions (deferred remuneration

retirement scheme)

49

–99

52

–80

–29

3

–

20

–96

7

52

–80

Payments on account and pension payments

Actuarial gains (–) and losses (+)

1

1 5

–271

–1

–776

–

278

–

–776

–

1 2 9

Translation differences and other changes

–1

ꢀ

ꢁ December

3,848

3,849

–1,155

2,693

3,849

United Kingdom

Defined benefit obligation

Plan assets

Net obligation

in euro million

2008

2007

2008

2007

2008

2007

ꢁ

January

6,327

–24

6,568

–

–5,686

28

–6,134

–

641

4

434

–

Deconsolidation effects

Expense from pension obligations

Payments to external funds

Employee contributions

379

387

–

–303

–98

–335

–47

76

52

–

–98

–

–47

–

13

15

–13

–15

Pension payments

–285

–647

–1,360

4,403

–293

211

–561

6,327

285

293

–

Actuarial gains (–) and losses (+)

Translation differences and other changes

486

42

–161

–118

344

253

–51

641

1,242

–4,059

510

ꢀ

ꢁ December

–5,686

1

09 Group Financial Statements

Other

Defined benefit obligation

Plan assets

Net obligation

in euro million

2008

2007

2008

2007

2008

2007

ꢁ

January

455

1

450

–

–343

–

–298

–

112

1

152

–

Effects of first-time consolidation

Deconsolidation effects

–1

55

–

–1

–

Expense from pension obligations

Payments to external funds

Employee contributions

51

–

–25

–8

–23

–57

–1

30

–8

–

28

–57

–

1

–1

Pension payments

–17

–1

44

537

–16

8

11

6

– 6

103

29

260

–10

10

–11

112

Actuarial gains (–) and losses (+)

Translation differences and other changes

104

–15

–277

2

–39

455

28

ꢀ

ꢁ December

–343

Plan assets in Germany, the United Kingdom and other countries comprised the following:

Components of plan assets

Germany

United Kingdom

Other countries

Total

in euro million

2008

2007

2008

2007

2008

2007

2008

2007

Equity instruments

Debt securities

Real estate

379

641

–

642

2,620

278

1,266

3,135

487

151

101

7

205

111

6

1,172

3,362

285

1,471

3,246

493

Other

135

1,155

519

798

18

21

672

819

ꢀ

ꢁ December

4,059

5,686

277

343

5,491

6,029

For the first time, benefit obligations in Germany are being

financed partly by pension provisions and partly by fund

assets. In both Germany and the United Kingdom, a sub-

stantial portion of plan assets is invested in debt securities

in order to minimise the effect of capital market fluctua-

tions. Other investment classes, such as stocks, serve to

generate higher rates of return. This is necessary to cover

risks (such as longer life expectancies) not taken into ac-

count in the actuarial assumptions applied.

The present value of the defined benefit obligations and

the fair values of fund assets – as well as the experience-

based (actuarial) adjustments made for those two items –

have developed as follows over the last four years:

in euro million

2008

2007

2006

2005

Defined benefit obligation

8,788

5,491

3,297

–919

868

10,631

6,029

4,602

–557

44

11,430

6,432

4,998

– 400

–117

11,237

6,017

5,220

1,131

– 424

Fair value of plan assets

Net obligation

Actuarial gains (–) and losses (+) on defined benefit obligations

Actuarial gains (–) and losses (+) on plan assets

Experience adjustments on defined benefit obligations

are not disclosed since the amounts involved are immate-

rial. Actuarial gains on plan assets are primarily attributable

to experience adjustments.

1

10

3

Other provisions

Other provisions comprise the following items:

in euro million

31.12. 2008

31.12. 2007

Total

thereof

Total

thereof

due within

one year

due within

one year

Obligations for personnel and social expenses

Obligations for ongoing operational expenses

Other obligations

1,241

2,790

851

603

1,081

441

1,559

2,818

1,125

5,502

1,062

1,129

635

Other provisions

4,882

2,125

2,826

Provisions for obligations for personnel and social expens-

es comprise mainly performance-related remuneration

components, early retirement part-time working arrange-

ments and employee long-service awards.

Provisions for other obligations cover numerous specific

risks and obligations of uncertain amount.

Other provisions changed during the year as follows:

Provisions for obligations for on-going operational expens-

es comprise primarily warranty obligations.

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

2

in euro million

At Translation

.ꢁ.ꢋꢌꢌꢎ differences

Additions Reversal of

discounting

Utilised

Reversed

At

1

ꢁ

ꢀꢁ.ꢁꢋ.ꢋꢌꢌꢎ

Obligations for personnel and social expenses

Obligations for ongoing operational expenses

Other obligations

1,562

2,836

1,129

–7

–51

–28

–86

659

1,173

414

14

74

8

–950

–1,197

–213

–37

–45

1,241

2,790

851

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

–459

–541

5,527

2,246

96

–2,360

4,882

ꢂ

1

1 5

actuarial gains (-) and losses (+) on plan assets

including entities deconsolidated during the financial year

ꢃ

1 2 9

Of the amount shown as reversed, euro ꢃꢈꢄ million are included in costs by function in the income statement.

3

4

Income tax liabilities

ꢀ

ꢁ December ꢂꢃꢃꢄ

Maturity

Total

in euro million

within one year later than one year

Deferred tax

–

265

2,757

368

2,757

633

Current tax

Income tax liabilities

3,125

3,390

ꢀ

ꢁ December ꢋꢌꢌꢍ

Maturity

Total

in euro million

within one year later than one year

Deferred tax

–

378

2,714

430

2,714

808

Current tax

Income tax liabilities

3,144

3,522

1

11 Group Financial Statements

Current tax liabilities of euro ꢈꢄꢄ million (ꢃꢅꢅꢊ: euro ꢆꢅꢆ mil-

lion) comprise euro ꢉꢊ million (ꢃꢅꢅꢊ: euro ꢂꢈꢂ million) for

taxes payable and euro ꢇꢄꢈ million (ꢃꢅꢅꢊ: euro ꢈꢏꢊ million)

for tax provisions. In ꢃꢅꢅꢆ, tax provisions of euro ꢂꢏꢂ million

were reversed (ꢃꢅꢅꢊ: euro ꢆ million).

35

Financial liabilities

Financial liabilities include all liabilities of the BMW Group at the relevant reporting dates relating to financing activities and

comprise the following:

ꢀ

ꢁ December ꢂꢃꢃꢄ

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in euro million

Bonds

6,685

6,365

6,402

5,471

3,439

762

11,787

3,879

1,785

–

5,687

900

22

24,159

11,144

8,209

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

–

5,471

Asset backed financing transactions

Interest and currency derivatives

Other

5,263

796

–

8,702

63

1,621

763

207

108

6,780

1,078

Financial liabilities

29,887

23,717

60,384

ꢀ

ꢁ December ꢋꢌꢌꢍ

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in euro million

Bonds

5,230

4,548

5,030

5,445

1,638

105

8,945

1,450

702

4,208

503

–

18,383

6,501

5,732

5,445

6,346

616

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

–

Asset backed financing transactions

Interest and currency derivatives

Other

4,708

472

–

39

497

273

128

4,878

898

Financial liabilities

22,493

16,550

43,921

1

12

Bonds comprise:

Issuer

Interest

Issue volume

in relevant currency

Weighted

average maturity

period (in years)

Weighted

average effective

interest rate (in ꢕ)

(ISO-Code)

BMW Finance N.V., The Hague

variable

fixed

JPY 16,500 million

SKK 768 million

EUR 2,698 million

USD 111 million

JPY 98,700 million

EUR 7,740 million

USD 1,250 million

GBP 400 million

SEK 1,300 million

CZK 735 million

1.6

3.0

2.6

2.5

4.3

6.6

4.4

6.0

1.3

1.0

1.2

4.5

5.1

2.7

1.2

5.0

4.9

5.2

4.6

4.4

fixed

BMW (UK) Capital plc, Bracknell

variable

fixed

JPY 67,100 million

EUR 200 million

GBP 12 million

3.3

1.5

1.0

3.0

1.5

1.0

5.2

3.5

0.8

2.9

2.8

3.4

2.4

5.1

6.4

1.6

CZK 1,080 million

SEK 690 million

EUR 267 million

GBP 300 million

JPY 39,000 million

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

fixed

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

BMW US Capital, LLC, Wilmington, Del.

variable

fixed

JPY 10,000 million

USD 261 million

EUR 100 million

CAD 100 million

MXN 405 million

JPY 2,200 million

EUR 4,250 million

USD 1,212 million

MXN 1,725 million

CHF 1,150 million

2.0

3.4

3.0

5.0

3.0

7.1

8.1

4.4

1.0

1.8

2.9

2.3

8.7

1.1

4.4

5.3

7.8

2.9

1

1 5

1 2 9

fixed

*

Rolls-Royce Motor Cars Ltd., Bracknell

Other

variable

GBP 46 million

–

3.0

variable

fixed

JPY 22,200 million

EUR 660 million

SEK 800 million

USD 320 million

JPY 111,700 million

CHF 500 million

SEK 400 million

2.6

1.9

1.2

4.3

4.4

2.8

2.0

2.3

2.5

2.0

4.1

10.7

4.5

fixed

1.5

*

unlimited

1

13 Group Financial Statements

The following details apply to the commercial paper:

Issuer

Issue volume

in relevant currency

Weighted

average maturity

period (in days)

Weighted

average nominal

interest rate (in ꢕ)

(ISO-Code)

BMW AG, Munich

EUR 760 million

EUR 1,895 million

GBP 275 million

USD 3,580 million

24.8

40.2

30.7

25.0

5.1

4.7

5.2

2.4

BMW Finance N.V., The Hague

BMW (UK) Capital plc, Bracknell

BMW US Capital, LLC, Wilmington, Del.

36

Other liabilities

Other liabilities comprise the following items:

ꢀ

ꢁ December ꢂꢃꢃꢄ

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in euro million

Other taxes

335

30

–

8

–

6

335

44

Social security

Advance payments from customers

Deposits received

327

88

19

–

346

177

1

–

265

Payables to subsidiaries

Payables to other companies in which an investment is held

Deferred income

44

–

45

28

–

28

1,262

1,966

4,080

1,675

29

244

42

292

3,181

2,037

6,281

Other

Other liabilities

1,909

ꢀ

ꢁ December ꢋꢌꢌꢍ

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in euro million

Other taxes

537

46

–

537

46

Social security

Advance payments from customers

Deposits received

367

56

15

–

382

146

75

90

–

Payables to subsidiaries

Payables to other companies in which an investment is held

Deferred income

75

–

1,002

2,023

4,106

1,651

36

191

41

232

2,844

2,100

6,130

Other

Other liabilities

1,792

Deferred income comprises the following items:

in euro million

31.12. 2008

31.12. 2007

thereof

Total

thereof

due within

one year

Total

due within

one year

Deferred income from lease financing

Deferred income relating to service contracts

Grants

1,068

1,615

303

654

485

56

977

1,433

358

580

317

49

Other deferred income

195

67

76

56

Deferred income

3,181

1,262

2,844

1,002

1

14

Deferred income relating to service contracts relates to

service and repair work to be provided under commitments

given at the time of the sale of a vehicle (multi-component

arrangements). Grants comprise primarily public funds to

promote regional structures; this has been invested in the

construction of the production plant in Leipzig. In accord-

ance with IAS ꢃꢅ, they are recognised as income over

the useful lives of the assets to which they relate. Other

deferred income includes primarily the effects of the initial

measurement of financial instruments.

3

7

Trade payables

ꢀ

ꢁ December ꢂꢃꢃꢄ

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

2,562

Total

in euro million

Trade payables

2,525

37

–

ꢀ

ꢁ December ꢋꢌꢌꢍ

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

in euro million

Trade payables

3,516

35

–

3,551

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

The total amount of financial liabilities, other liabilities and trade payables with a maturity later than five years amounts

euro ꢊ,ꢅꢊꢃ million (ꢃꢅꢅꢊ: euro ꢇ,ꢂꢂꢅ million).

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

1

1 5

1 2 9

1

15 Group Financial Statements

BMW Group

Notes to the Group Financial Statements

Other Disclosures

38

Contingent liabilities and other financial commitments

Contingent liabilities

No provisions were recognised for the following contingent liabilities (stated at their nominal amount), since an outflow of

resources is not considered to be probable:

in euro million

31.12. 2008

31.12. 2007

Guarantees

83

8

132

13

Performance guarantees

Bills of exchange

Other

–

2

60

151

78

Contingent liabilities

225

Contingent liabilities relate primarily to non-group entities.

Guarantees include an amount of euro ꢇ million (ꢃꢅꢅꢊ: –) in

respect of non-consolidated subsidiaries.

primarily under lease contracts for land, buildings, plant

and machinery, tools, office and other facilities. The leases

run for periods of one to ꢉꢏ years and in some cases con-

tain extension and/or purchase options. In ꢃꢅꢅꢆ an amount

of euro ꢃꢄꢅ million (ꢃꢅꢅꢊ: euro ꢂꢈꢉ million) was recognised

as expense in conjunction with other financial commit-

ments.

Several liability applies in the case of investments in gen-

eral partnerships.

The usual commercial guarantees have been given in

relation to the sale of Rover Cars and Land Rover activities.

The total of future minimum lease payments under non-

cancellable leases can be analysed by maturity as follows:

Other financial obligations

In addition to liabilities, provisions and contingent liabilities,

the BMW Group also has other financial commitments,

in euro million

31.12. 2008

31.12. 2007

Nominal total of future minimum lease payments

due within one year

222

619

212

575

due between one and five years

due later than five years

695

683

Other financial obligations

1,536

1,470

The above amounts include euro ꢊ million (ꢃꢅꢅꢊ: euro ꢄ mil-

lion) in respect of non-consolidated subsidiaries and euro

ꢂ million (ꢃꢅꢅꢊ: euro ꢊ million) for back-to-back operating

leases.

Purchase commitments for property, plant and equipment

amount to euro ꢂ,ꢆꢉꢂ million (ꢃꢅꢅꢊ: euro ꢂ,ꢉꢃꢇ million).

Sundry other financial commitments amount to euro ꢂꢇꢆ mil-

lion (ꢃꢅꢅꢊ: euro ꢂꢈꢂ million).

1

16

3

9

Financial instruments

The carrying amounts and fair values of financial instruments are allocated below to IAS ꢄꢉ categories, cash funds, cash

flow hedges and fair value hedges:

ꢀ

ꢁ December ꢂꢃꢃꢄ

Cash funds

Loans

in euro million

and receivables

Fair value

Carrying

amount

Fair value

Carrying

amount

Assets

Other investments

–

Receivables from sales financing

Financial assets

37,839

38,063

Derivative instruments

Marketable securities and investment funds

Loans to third parties

–

13

Credit card receivables

Other financial assets

–

253

711

–

253

711

–

7,454

–

7,454

–

Cash and cash equivalents

Trade receivables

2,305

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Other assets

Receivables from subsidiaries

Receivables from companies in which an investment is held

Collateral receivables

–

425

103

–

425

103

–

291

–

291

–

Other

186

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Liabilities

Financial liabilities

Bonds

–

1

1 5

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Other financial liabilities

Trade payables

1 2 9

Other liabilities

Liabilities to subsidiaries

Other

–

*

Carrying amount corresponds to fair value.

1

17 Group Financial Statements

Held-to-maturity

investments

Other liabilities

Available-

for-sale

Fair value-

option

Held for

trading

Cash flow

hedges

Fair value

hedges

Fair value

Carrying

amount

Fair value

Carrying

amount

Carrying _*

amount

Carrying _*

amount

Carrying _*

amount

Carrying

amount

Carrying

amount

*

–

322

–

836

–

817

–

1,796

653

–

24,280

11,120

8,263

5,473

8,615

–

24,159

11,144

8,209

5,471

8,702

–

610

–

637

–

374

–

1,097

2,562

1,078

2,562

–

45

–

1,931

1

18

ꢀ

ꢁ December ꢋꢌꢌꢍ

Cash funds

Loans

in euro million

and receivables

Fair value

Carrying

amount

Fair value

Carrying

amount

Assets

Other investments

–

Receivables from sales financing

Financial assets

33,490

34,244

Derivative instruments

Marketable securities and investment funds

Loans to third parties

–

27

28

Credit card receivables

Other financial assets

–

260

568

–

260

568

–

2,393

–

2,393

–

Cash and cash equivalents

Trade receivables

2,672

Other assets

Receivables from subsidiaries

Receivables from companies in which an investment is held

Collateral receivables

–

641

104

–

641

104

–

135

1

135

1

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Other

78

Liabilities

Financial liabilities

Bonds

–

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Other financial liabilities

Trade payables

1

1 5

1 2 9

Other liabilities

Liabilities to subsidiaries

Other

–

*

Carrying amount corresponds to fair value.

1

19 Group Financial Statements

Held-to-maturity

investments

Other liabilities

Available-

for-sale

Fair value-

option

Held for

trading

Cash flow

hedges

Fair value

hedges

Fair value

Carrying

amount

Fair value

Carrying

amount

Carrying _*

amount

Carrying _*

amount

Carrying _*

amount

Carrying

amount

Carrying

amount

*

–

209

–

51

–

4

–

195

–

802

–

983

–

5

2

–

1,904

–

18,808

6,485

5,702

5,446

5,882

–

18,383

6,501

5,732

5,445

6,346

–

180

–

13

–

423

–

910

898

3,551

–

75

–

2,081

1

20

Fair value measurement of financial instruments

The fair values shown are computed using market informa-

tion available at the end of the reporting period on the

basis of prices quoted by the counterparties or using ap-

propriate measurement methods, e.g. discounted cash

flow models. In the latter case, amounts were discounted

at ꢄꢂ December ꢃꢅꢅꢆ on the basis of the following interest

rates:

ISO-Code

in ꢕ

EUR

USD

GBP

JPY

Interest rate for six months

Interest rate for one year

Interest rate for five years

Interest rate for ten years

2.1

2.0

3.3

3.8

1.8

2.0

2.1

2.5

3.0

3.1

3.2

3.5

1.0

1.1

0.9

1.2

These interest rates were adjusted, where necessary, to

take account of the credit quality and risk of the underlying

financial instrument.

possible – unlike in the past – that different models (e.g.

the par-method) could result in different fair values.

Closing out existing positions could have an impact on

profit or loss. The contracts involved have, however, been

entered into for hedging purposes, and it is therefore in-

tended to hold them until maturity.

As a result of the impact of the financial market crisis, some

of the interest rates used to measure the fair value of de-

rivatives are based on wider-than-normal credit and liquidity

spreads. It is therefore possible that the calculated fair

values cannot be traded at present on the markets.

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Gains and losses on financial instruments

The following table shows the net gains and losses arising

for each of the categories of financial instrument defined

by IAS ꢄꢉ:

Currency hedging contracts used to hedge cash flows

are measured on the basis of the zero-coupon method.

As a result of the financial crisis and current climate, it is

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

in euro million

2008

–208

2007

–39

1

1 5

Held for trading

1 2 9

Gains/losses from the use of derivative instruments

Available-for-sale

Gains/losses on sale and fair value gains/losses on available-for-sale securities;

including equity investments carried at cost

–195

4

49

3

Income from investments

Accumulated other equity

Balance atꢁ January

35

–18

20

214

–179

–168

35

Total change during the year

of which recognised in the income statement during the period under report

Balance at ꢀꢁ December

17

Loans and receivables

Impairment losses/reversals of impairment losses

Other income/expenses

–610

–41

–277

–12

Other liabilities

Income/expenses

–109

168

Gains/losses from the use of derivatives relate primarily to

fair value gains or losses arising on stand-alone derivatives.

The disclosure of interest income resulting from the un-

winding of interest on future expected receipts would nor-

mally only be relevant for the BMW Group where assets

have been discounted as part of the process of determin-

ing impairment losses. However, as a result of the assump-

tion that most of the income that is subsequently recovered

is received within one year and the fact that the impact is

not material, the BMW Group does not discount assets for

the purposes of determining impairment losses.

Write-downs of euro ꢂꢃꢄ million (ꢃꢅꢅꢊ: euro ꢏꢉ million) on

available-for-sale securities, for which fair value changes

were previously recognised directly in equity, were recog-

nised as expenses in ꢃꢅꢅꢆ. Reversals of write-downs on

current marketable securities of euro ꢇ million were recog-

nised directly in equity (ꢃꢅꢅꢊ: euro ꢃ million).

1

21 Group Financial Statements

Cash flow hedges

The effect of cash flow hedges on accumulated other equity was as follows:

in euro million

2008

2007

Balance atꢁ January

438

–393

–627

45

178

260

Total changes during the year

of which recognised in the income statement during the period under report

Balance at ꢀꢁ December

–260

438

During the period under report, an expense of euro ꢄꢃ mil-

lion (ꢃꢅꢅꢊ: euro ꢏ million) was recognised in the income

statement to reflect the ineffective portion of cash flow

hedges due to over-hedging.

to hedge interest rate risks attached to future transactions.

It is expected that euro ꢃꢊ million of net losses, recognised

in equity at the end of the reporting period, will be recog-

nised in the income statement in ꢃꢅꢅꢉ.

At ꢄꢂ December ꢃꢅꢅꢆ, the BMW Group held derivative in-

struments with terms of up to ꢏꢆ months (ꢃꢅꢅꢊ: ꢏꢂ months)

to hedge currency risks attached to future transactions.

It is expected that euro ꢃꢇꢆ million of net gains, recognised

in equity at the end of the reporting period, will be recog-

nised in the income statement in ꢃꢅꢅꢉ.

Cash flow hedges are used to hedge cash flows arising in

conjunction with the supply of vehicles to subsidiaries.

Fair value hedges

The following table shows gains and losses on hedging

instruments and hedged items which are deemed to be

part of a fair value hedge relationship:

At ꢄꢂ December ꢃꢅꢅꢆ, the BMW Group held derivative in-

struments with terms of up to ꢉꢈ months (ꢃꢅꢅꢊ: ꢂꢅꢆ months)

in euro million

31.12. 2008

31.12. 2007

Gains/losses on hedging instruments designated as part of a fair value hedge relationship

Gains/loss from hedged items

386

272

–271

1

–405

–

19

The difference between the gains/losses on hedging

instruments and the result recognised on hedged items

represents the ineffective portion of fair value hedges.

information on the credit-standing of the counterparty ob-

tained or historical data based on the existing business re-

lationship (i.e. payment patterns to date) reviewed in order

to minimise the credit risk, all depending on the nature and

amount of the exposure that the BMW Group is proposing

to enter into.

Fair value hedges are mainly used to hedge bonds and

other financial liabilities.

Credit risk

Within the financial services business, the financed items

(e.g. vehicles, equipment and property) in the retail cus-

tomer and dealer lines of business serve as first-ranking

collateral with a recoverable value. Security is also put up

by customers in the form of collateral asset pledges, asset

assignment and first-ranking mortgages, supplemented

where appropriate by warranties and guarantees. If an item

previously accepted as collateral is acquired, it undergoes

a multi-stage process of repossession and disposal in

accordance with the legal situation prevailing in the relevant

market. The assets involved are generally vehicles which

can be converted into cash at any time via the dealer organ-

isation.

Notwithstanding the existence of collateral accepted, the

carrying amounts of financial assets generally take account

of the maximum credit risk arising from the possibility that

the counterparties will not be able to fulfill their contractual

obligations. The maximum credit risk for irrevocable credit

commitments relating to the credit card business amounts

to euro ꢂ,ꢇꢊꢅ million (ꢃꢅꢅꢊ: euro ꢃ,ꢅꢆꢃ million). The equivalent

figure for dealer financing is euro ꢂꢃ,ꢏꢉꢅ million (ꢃꢅꢅꢊ: euro

ꢂꢃ,ꢅꢏꢄ million).

In the case of performance relationships underlying non-

derivative financial instruments, collateral will be required,

1

22

Impairment losses are recorded as soon as credit risks are

identified on individual financial assets, using a method-

ology specifically designed by the BMW Group. More de-

tailed information regarding this methodology is provided

in the section on accounting policies.

utilised by the BMW Group is therefore not considered to

be significant. A concentration of credit risk with particular

borrowers or groups of borrowers has not been identified.

In the context of the current climate for financing, it must

be reckoned with that assessments of individual counter

parties’ creditworthiness may need to be amended.

The use of comprehensive rating and scoring techniques

and credit monitoring procedures ensures the recoverabil-

ity of the value of receivables from sales financing which

are neither overdue nor impaired.

Further disclosures relating to credit risk, in particular im-

pairment losses recognised, are provided in the notes to

the relevant category of receivables on pages ꢉꢆ, ꢂꢅꢅ and

ꢂꢅꢃ.

The credit risk relating to derivative financial instruments

is minimised by the fact that the Group only enters into

such contracts with parties of first-class credit standing.

The general credit risk on derivative financial instruments

Liquidity risk

The following table shows the maturity structure of con-

tractual cash flows (undiscounted) for financial liabilities:

ꢀ

ꢁ December ꢂꢃꢃꢄ

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in euro million

Bonds

–7,755

–6,434

–6,639

–5,504

–3,670

349

–13,690

–4,236

–1,866

–

–5,900

–945

–26

–

–27,345

–11,615

–8,531

–5,504

–9,075

626

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Interest and currency derivative instruments

Trade payables

–5,405

383

–

7

9

Notes

–106

–

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

–2,525

–766

–37

–2,562

–1,129

–65,135

Other financial liabilities

–218

–145

–7,122

–

32,944

–25,069

1

1 5

1 2 9

ꢀ

ꢁ December ꢋꢌꢌꢍ

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in euro million

Bonds

–5,947

–4,736

–5,193

–5,474

–1,854

63

–10,627

–1,630

–774

–

–4,920

–21,494

–6,917

–5,967

–5,474

–6,897

429

Liabilities to banks

–551

Liabilities from customer deposits (banking)

Commercial paper

–

Asset backed financing transactions

Interest and currency derivative instruments

Trade payables

–5,043

234

132

–3,516

–497

–35

–

–3,551

–898

Other financial liabilities

–273

–18,148

–128

–5,467

–

27,154

–50,769

1

23 Group Financial Statements

The cash flows shown comprise principal repayments and

the related interest. The amounts disclosed for interest

rate and currency derivatives include all cash flows relating

to derivatives that have a negative fair value at the balance

sheet date as well as all cash flows relating to derivatives

that have a positive fair value at the balance sheet date but

which are part of a hedging relationship with a financial

liability.

Protection against such risks is provided at first instance

through natural hedging which arises when the values of

non-derivative financial instruments have matching matu-

rities and amounts (netting). Derivative financial instru-

ments are used to reduce the risk remaining after netting.

Financial instruments are only used to hedge underlying

positions or forecast transactions.

The scope of permitted transactions, responsibilities,

financial reporting procedures and control mechanisms

used for financial instruments are set out in detailed inter-

nal guidelines. This includes, above all, a clear separation

of duties between trading and processing. Currency and

interest rate risks are managed at a corporate level.

Solvency is assured at all times by managing and monitor-

ing the liquidity situation on the basis of a rolling cash flow

forecast.The resulting funding requirements are secured

by a variety of instruments placed on the world’s financial

markets. The objective is to minimise risk by matching

maturities for the Group’s financing requirements within

the framework of the target debt ratio.The long-term ratings

published by Standard & Poor’s (A) and Moody’s (A2)

enable the BMW Group to obtain financing on competitive

terms and conditions. Against the background of the

current financial market and economic crisis and the re-

sulting impact on the automobile sector, Moody’s revised

the rating on ꢂꢆ February ꢃꢅꢅꢉ to “under review for pos-

sible downgrade”. The BMW Group will continue to be

able to raise sufficient funds to refinance its business

even after taking account of forthcoming rating adjust-

ments.

Further disclosures relating to risk management are pro-

vided in the Group Management Report.

Currency risk

As an enterprise with worldwide operations, business is

conducted in a variety of currencies, from which currency

risks arise. Since a significant portion of Group revenues

are generated outside the euro currency region and the

procurement of production material and funding is also or-

ganised on a worldwide basis, the currency risk is an ex-

tremely important factor for Group earnings.

Short-term liquidity is managed primarily by issuing

money market instruments (commercial paper). As a result

of its good credit standing, reflected in the first-class

short-term ratings issued by Moody’s (P-1) and Standard

At ꢄꢂ December ꢃꢅꢅꢆ, derivative financial instruments were

in place to hedge exchange rate risks, in particular for the

currencies US dollar, British pound, Canadian dollar and

Japanese yen. The hedging contracts comprise mainly

option and forward currency contracts.

&

Poor’s (A-1), the BMW Group is also able to obtain com-

petitive terms and conditions in this area.

A description of how these risks are managed is provided

in the Group Management Report on page ꢈꢃ. The BMW

Group measures currency risks using a cash-flow-at-risk

model.

Also reducing liquidity risk, additional secured and un-

secured lines of credit are in place with first-class interna-

tional banks. Intragroup cash flow fluctuations are evened

out by the use of daily cash pooling arrangements.

The starting point for analysing currency risk with this

model is the identification of forecast foreign currency

transactions or “exposures”. At the end of the reporting

period, exposures for the coming year were as follows:

Market risks

The principal market risks to which the BMW Group is ex-

posed are currency risk and interest rate risk.

in euro million

31.12. 2008

31.12. 2007

Euro/US Dollar

3,631

2,291

835

6,140

3,484

1,263

Euro/British Pound

Euro/Japanese Yen

1

24

In the next stage, these exposures are compared to all

hedges that are in place. The net cash flow surplus repre-

sents an uncovered risk position. The cash-flow-at-risk

approach involves allocating the impact of potential ex-

change rate fluctuations to operating cash flows on the

basis of probability distributions. Volatilities and correla-

tions serve as input factors to assess the relevant proba-

bility distributions.

and exposures to a confidence level of ꢉꢇ% for each cur-

rency. Aggregation of these results creates a risk reduction

effect due to correlations between the various portfolios.

The following table shows the potential negative impact

for the BMW Group – measured on the basis of the cash-

flow-at-risk approach – attributable at the balance sheet

date to unfavourable changes in exchange rates for the three

principal currencies.

The potential negative impact on earnings for the current

period is computed on the basis of current market prices

in euro million

31.12. 2008

31.12. 2007

Euro/US Dollar

39

56

54

33

14

56

Euro/British Pound

Euro/Japanese Yen

The BMW Group’s currency risk relates primarily to the three

currencies shown.

These risks arise when funds with differing fixed-rate peri-

ods or differing terms are borrowed and invested. All items

subject to, or bearing, interest are exposed to interest rate

risk. Interest rate risks can affect either side of the balance

sheet.

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

Interest rate risk

The BMW Group’s financial management system involves

the use of standard financial instruments such as short-

term deposits, investments in variable and fixed-income

securities as well as securities funds. The BMW Group is

therefore also exposed to risks resulting from changes in

interest rates.

The fair values of the Group’s interest rate portfolios for the

three principal currencies were as follows at the end of the

reporting period:

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

1

1 5

1 2 9

in euro million

31.12. 2008

31.12. 2007

Euro

6,241

5,646

1,860

6,930

6,012

2,278

US Dollar

British Pound

Interest rate risks can be managed by the use of interest

rate derivatives. The interest rate contracts used for hedg-

ing purposes comprise mainly swaps which are accounted

for on the basis of whether they are designated as a fair

value hedge or as a cash flow hedge. A description of how

interest rate risk is managed is provided in the Group Man-

agement Report on page ꢈꢄ.

interest rate risks. This is based on a state-of-the-art

historical simulation, in which the potential future fair

value losses of the interest rate portfolios are compared

across the Group with expected amounts measured on

the basis of a holding period of three months and a con-

fidence level of ꢉꢉ%. Aggregation of these results creates

a risk reduction effect due to correlations between the

various portfolios.

As stated there, the BMW Group applies a value-at-risk

approach for internal reporting purposes and to manage

1

25 Group Financial Statements

In the following table the potential volume of fair value

fluctuations – measured on the basis of the value-at-risk

approach – are compared with the expected value for the

interest rate relevant positions of the BMW Group for the

three principal currencies:

in euro million

31.12. 2008

31.12. 2007

Euro

52

119

7

76

109

10

US Dollar

British Pound

Other risks

A further exposure relates to the residual value risk on

vehicles returned to the Group at the end of finance lease

contracts. The risks from financial instruments used

in this context were not material to the Group in the past

and at the end of the reporting period. A description of

how these risks are managed is provided in the Group

Management Report on pages ꢈꢃ–ꢈꢄ. Information re-

garding the residual value risk from operating leases is

provided in the section on accounting policies.

The BMW Group is exposed to raw material price risks. A

description of how these risks are managed is provided

in the Group Management Report on pages ꢈꢃ–ꢈꢄ. De-

rivative financial instruments are used on a relatively small

scale to reduce these risks, primarily for the purchase of

precious metals. The risk from these derivatives was not

material to the Group in ꢃꢅꢅꢆ and ꢃꢅꢅꢊ and remains small

at the present time. For this reason, a sensitivity analysis

for these derivatives is not provided.

40

Explanatory notes to the cash flow statements

The cash flow statements show how the cash and cash

equivalents of the BMW Group and of the Automobiles

and Financial Services segments have changed in the

course of the year as a result of cash inflows and cash out-

flows. In accordance with IAS ꢊ (Cash Flow Statements),

cash flows are classified into cash flows from operating,

investing and financing activities. The Group and segment

cash flow statements are presented on pages ꢊꢈ–ꢊꢊ.

as part of the cash flow from investing activities. If the

BMW Group acts as the lessee in a finance lease, the

cash flows are reported as part of the cash flows from

operating and investing activities.

If the BMW Group acts as the lessor in an operating

lease, cash flows are reported as part of the cash flow

from investing activities. In the final case, where the

BMW Group acts as the lessee in an operating lease,

cash flows are reported as part of the cash flow from

operating activities.

Cash and cash equivalents included in the cash flow state-

ment comprise cash in hand, cheques, and cash at bank,

to the extent that they are available within three months

from the end of the reporting period and are subject to an

insignificant risk of changes in value.The negative impact

of changes in cash and cash equivalents due to the effect

of exchange rate fluctuations in ꢃꢅꢅꢆ was euro ꢏꢏ million

In ꢃꢅꢅꢆ, some of the shares of Cirquent GmbH, Munich,

were sold to NTT Data Corporation, Tokyo. The cash

inflow for the purchase consideration, amounting to euro

ꢂꢇꢄ million, was not reported on a separate line within in-

vesting activities on the grounds of materiality. The sale of

Cirquent GmbH, Munich, resulted in an outflow of cash

funds amounting to euro ꢃꢂ million. The amounts of assets

and liabilities of Cirquent GmbH, Munich, summarised by

major category pursuant to IAS ꢊ.ꢏꢅ (d), are not disclosed

on the grounds of materiality.

(

ꢃꢅꢅꢊ: euro ꢏꢊ million).

The cash flows from investing and financing activities are

based on actual payments and receipts. The cash flow

from operating activities is computed using the indirect

method, starting from the net profit of the Group. Under

this method, changes in assets and liabilities relating to

operating activities are adjusted for currency translation

effects and changes in the composition of the Group.The

changes in balance sheet positions shown in the cash

flow statement do not therefore agree directly with the

amounts shown in the Group and segment balance sheets.

Cash outflows for taxes on income and cash inflows for

interest are classified as cash flows from operating activi-

ties in accordance with IAS ꢊ.ꢄꢂ and IAS ꢊ.ꢄꢇ. Cash out-

flows for interest are presented on a separate line within

cash flows from financing activities.

Cash flows from dividends received amounted to euro ꢏ mil-

lion (ꢃꢅꢅꢊ: euro ꢄ million).

If the BMW Group acts as the lessor in a finance lease, the

relevant cash flows are reported in the cash flow statement

1

26

4

1

Related party relationships

ꢂꢅꢄ million). As in the previous year there were no payables

from Group companies to BMW Brilliance Automotive Ltd.,

Shenyang, at the end of the reporting period.

In accordance with IAS ꢃꢏ (Related Party Disclosures),

related individuals or entities which have the ability to con-

trol the BMW Group or which are controlled by the BMW

Group, must be disclosed unless such parties are not al-

ready included in the consolidated financial statements as

consolidated companies. Control is defined as ownership

of more than one half of the voting power of BMW AG or

the power to direct, by statute or agreement, the financial

and operating policies of the management of the Group.

Business transactions of the BMW Group with participa-

tions all arise in the normal course of business and are

conducted on the basis of arm’s length principles. With

the exception of Cirquent GmbH, Munich, business rela-

tionships with such entities are on a small scale. Group

companies did not provide any services to Cirquent GmbH,

Munich, during the fourth quarter ꢃꢅꢅꢆ. During the final

three months of ꢃꢅꢅꢆ Group entities purchased services

and goods from Cirquent GmbH, Munich, for euro ꢏꢇ mil-

lion. At ꢄꢂ December ꢃꢅꢅꢆ, receivables of Group compa-

nies from Cirquent GmbH, Munich, totalled euro ꢂ million.

Payables of Group companies to Cirquent GmbH, Munich,

amounted to euro ꢃꢆ million.

In addition, the disclosure requirements of IAS ꢃꢏ also

cover transactions with participations, joint ventures and

with parties which have the ability to exercise significant

influence over the financial and operating policies of the

BMW Group. This also includes close relatives and inter-

mediaries. Significant influence over the financial and

operating policies of the BMW Group can arise when a

party holds ꢃꢅ% or more of the shares of BMW AG or is a

member of the Board of Management or Supervisory

Board of BMW AG.

Stefan Quandt is a shareholder and Deputy Chairman

of the Supervisory Board of BMW AG. He is also sole

shareholder and Chairman of the Supervisory Board of

DELTON AG, Bad Homburg v.d.H., which, via its sub-

sidiaries, performed logistics services for the BMW Group

during the financial year ꢃꢅꢅꢆ. In addition, companies of

the DELTON Group purchased vehicles from the BMW

Group. These service and sales contracts are not material

for the BMW Group, arise in the course of ordinary activi-

ties and are made, without exception, on the basis of arm’s

length principles.

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

For the financial year ꢃꢅꢅꢆ, the disclosure requirements

contained in IAS ꢃꢏ only affect the BMW Group with re-

gard to business relationships with non-consolidated sub-

sidiaries, joint ventures and participations as well as with

members of the Board of Management and Supervisory

Board of BMW AG.

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

1

1 5

1 2 9

The BMW Group maintains normal business relationships

with non-consolidated subsidiaries. Transactions with

these entities are small in scale, arise in the normal course

of business and are conducted on the basis of arm’s length

principles.

Susanne Klatten is a shareholder and member of the Su-

pervisory Board of BMW AG, and also a shareholder and

Deputy Chairman of the Supervisory Board of Altana AG,

Wesel, which purchased vehicles from the BMW Group

during the financial year ꢃꢅꢅꢆ. These sale contracts are

not material for the BMW Group, arise in the course of

ordinary activities and are made, without exception, on the

basis of arm’s length principles.

Transactions of BMW Group companies with the joint ven-

ture, BMW Brilliance Automotive Ltd., Shenyang, all arise

in the normal course of business and are conducted on

the basis of arm’s length principles. Group companies

sold goods and services to BMW Brilliance Automotive

Ltd., Shenyang, during ꢃꢅꢅꢆ for an amount of euro ꢏꢅꢈ mil-

lion (ꢃꢅꢅꢊ: euro ꢃꢉꢄ million). At ꢄꢂ December ꢃꢅꢅꢆ, receiva-

bles of Group companies from BMW Brilliance Automotive

Ltd., Shenyang, amounted to euro ꢂꢅꢃ million (ꢃꢅꢅꢊ: euro

With the exception of these related party transactions,

BMW Group companies did not enter into any significant

contracts with members of the Board of Management or

Supervisory Board of BMW AG. The same applies to close

members of the families of those persons.

1

27 Group Financial Statements

4

2

3

4

Declaration with respect to the Corporate

Governance Code

The Board of Management and the Supervisory Board

of Bayerische Motoren Werke Aktiengesellschaft have

issued the Declaration of Compliance pursuant to §ꢂꢈꢂ

of the German Stock Corporation Act. The Declaration

of Compliance is reproduced on page ꢂꢏꢊ and is also

available to shareholders on the BMW Group website at

www.bmwgroup.com/ir.

Shareholdings of members of the Board of

Management and Supervisory Board

The members of the Supervisory Board of BMW AG hold

in total ꢃꢊ.ꢊꢅ% of the issued common and preferred

stock shares, of which ꢂꢈ.ꢂꢃ% relates to Stefan Quandt,

Bad Homburg v.d.H. and ꢂꢂ.ꢇꢆ% to Susanne Klatten,

Munich.The shareholdings of the members of the Board

of Management of BMW AG is, in total, less than ꢂ% of

the issued stock shares.

Compensation of members of the Board of Management and Supervisory Board

The compensation of current members of the Board of Management and Supervisory Board amounted to euro ꢂꢄ.ꢄ mil-

lion (ꢃꢅꢅꢊ: euro ꢂꢆ.ꢊ million) and comprised the following:

in euro million

2008

2007

Short-term employment benefits

Post-employment benefits

Compensation

12.5

0.8

18.0

0.7

13.3

18.7

The remuneration of the members of the Board of Manage-

ment for the financial year ꢃꢅꢅꢆ amounted to euro ꢂꢅ.ꢉ mil-

lion (ꢃꢅꢅꢊ: euro ꢂꢇ.ꢃ million). This comprised fixed compo-

nents of euro ꢄ.ꢂ million (ꢃꢅꢅꢊ: euro ꢃ.ꢊ million) and variable

components of euro ꢊ.ꢆ million (ꢃꢅꢅꢊ: euro ꢂꢃ.ꢇ million).

Further details about the remuneration of current mem-

bers of the Board of Management and the Supervisory

Board can be found in the Compensation Report on

pages ꢂꢏꢂ –ꢂꢏꢈ. The Compensation Report is part of the

Group Management Report.

In addition, an amount of euro ꢅ.ꢆ million (ꢃꢅꢅꢊ: euro ꢅ.ꢊ mil-

lion) has been granted to current members of the Board

of Management after the end of their employment relation-

ship. This relates to the expense for allocations to pension

provisions.

The remuneration of former members of the Board of

Management and their surviving dependants amounted

to euro ꢄ.ꢂ million (ꢃꢅꢅꢊ: euro ꢏ.ꢄ million).

Pension obligations to former members of the Board of

Management and their surviving dependants are fully cov-

ered by pension provisions amounting to euro ꢏꢏ.ꢄ million

(ꢃꢅꢅꢊ: euro ꢄꢆ.ꢄ million), computed in accordance with IAS ꢂꢉ.

The compensation of the members of the Supervisory

Board for the financial year ꢃꢅꢅꢆ amounted to euro ꢂ.ꢈ mil-

lion (ꢃꢅꢅꢊ: euro ꢃ.ꢆ million), comprising only fixed compo-

nents (ꢃꢅꢅꢊ: euro ꢅ.ꢂ million for fixed components and euro

ꢃ.ꢊ million for variable components).

Members of the Board of Management and the Supervisory

Board holding a credit card issued by BMW Bank GmbH,

Munich, during the financial year ꢃꢅꢅꢆ had a credit line of

up to euro ꢊ,ꢇꢅꢅ (ꢃꢅꢅꢊ: euro ꢃꢇ,ꢇꢈꢇ). The amounts arising

from credit card usage were all within the agreed limits.

The compensation system for members of the Board of

Management and the Supervisory Board does not include

any stock options, value appreciation rights comparable to

stock options or any other stock-based compensation

components.

The names of the members of the Supervisory Board and of

the Board of Management are disclosed on pages ꢂꢄꢏ–ꢂꢄꢊ.

1

28

4

5

Application of §ꢅꢋꢌ (ꢀ) and §ꢅꢋꢌb HGB

A number of companies and incorporated partnerships (as

defined by §ꢃꢈꢏa HGB) which are affiliated, consolidated

entities of BMW AG and for which the consolidated financial

statements of BMW AG represent exempting consolidated

financial statements, apply the exemptions available in

§

ꢃꢈꢏ ꢐꢀꢒ and §ꢃꢈꢏb HGB with regard to the drawing up of a

management report. The exemptions have been applied

by:

–

Bavaria Wirtschaftsagentur GmbH, Munich

BMW Fahrzeugtechnik GmbH, Eisenach

BMW Fuhrparkmanagement Beteiligungs GmbH,

Stuttgart

–

BMW Hams Hall Motoren GmbH, Munich

BMW Ingenieur-Zentrum GmbH + Co., Dingolfing

BMW M GmbH Gesellschaft für individuelle Automobile,

Munich

–

BMW Vertriebs GmbH & Co. oHG, Dingolfing

Rolls-Royce Motor Cars GmbH, Munich

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

In addition, the following entities apply the exemption avail-

able in §ꢃꢈꢏ ꢐꢀꢒ and §ꢃꢈꢏb HGB with regard to publication:

–

Bavaria Wirtschaftsagentur GmbH, Munich

BMW Fuhrparkmanagement Beteiligungs GmbH,

Stuttgart

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

–

BMW Hams Hall Motoren GmbH, Munich

– BMW Ingenieur-Zentrum GmbH + Co., Dingolfing

BMW INTEC Beteiligungs GmbH, Munich

– BMW Vertriebs GmbH & Co. oHG, Dingolfing

Rolls-Royce Motor Cars GmbH, Munich

–

1

1 5

129

–

1

29 Group Financial Statements

BMW Group

Notes to the Group Financial Statements

Segment Information

46

Explanatory notes to segment information

Information on reportable segments

Eliminations comprise the effects of eliminating business

relationships between the operating segments.

For the purposes of presenting segment information, the

activities of the BMW Group are divided into operating

segments in accordance with the rules contained in IFRS ꢆ

Internal management and reporting

Segment information is prepared in conformity with the

accounting policies adopted for preparing and presenting

the Group Financial Statements. There were no changes

in accounting policies compared to previous periods.

Inter-segment receivables and payables, provisions, in-

come, expenses and profits are eliminated in the column

(

Operating Segments). Operating segments are identified

on the same basis that is used internally to manage and

report on performance and takes account of the organisa-

tional structure of the BMW Group based on the various

products and services of the reportable segments.

“

Eliminations”. Inter-segment sales take place at arm’s

The activities of the BMW Group are broken down into the

operating segments Automobiles, Motorcycles, Financial

Services and Other Entities.

length prices.

The role of “chief operating decision maker” with re-

spect to resource allocation and performance assess-

ment of reportable segments is embodied in the full

Board of Management. In order to assist the decision-

taking process, various measures of segment result and

of segment assets have been set for the different operat-

ing segments.

The Automobiles segment develops, manufactures, as-

sembles and sells cars and off-road vehicles, under the

brands BMW, MINI and Rolls-Royce as well as spare parts

and accessories. BMW and MINI brand products are sold in

Germanythrough branches of BMWAG and by independent,

authorised dealers. Sales outside Germany are handled

primarily by subsidiary companies and, in a number of mar-

kets, by independent import companies. Rolls-Royce brand

vehicles are sold in the USA via a subsidiary company and

elsewhere by independent, authorised dealers.

The Automobiles and Motorcycles segments are man-

aged on the basis of the profit before financial result. Capi-

tal employed is the corresponding measure of segment

assets used to determine how to allocate resources. Capi-

tal employed comprises all current and non-current opera-

tional assets of the segment, adjusted for liabilities used

operationally which are not subject to interest.

The Motorcycles segment develops, manufactures, as-

sembles and sells BMW brand motorcycles as well as

spare parts and accessories.

The performance of the Financial Services segment is

measured on the basis of profit or loss before tax. Net

assets, defined as all assets less all liabilities, are used as

the basis for assessing the allocation of resources.

The Financial Services segment focuses primarily on car

leasing, fleet business, retail customer and dealer financing,

customer deposit business and insurance activities.

Holding and Group financing companies are included in

the Other Entities segment. This segment also includes

the operating companies (BMW Services Ltd., Bracknell,

The performance of the Other Entities segment is assessed

on the basis of profit or loss before tax. The corresponding

measure of segment assets used to manage the Other

Entities segment is total assets less tax-related assets and

investments.

and BMW (UK) Investments Ltd., Bracknell) which are

not allocated to one of the other segments. It also includes

the income and expenses recorded by the Cirquent Group

in the first nine months of ꢃꢅꢅꢆ.

1

30

Segment information by operating segment is as follows:

Segment information by operating segment

Automobiles

Motorcycles

in euro million

2008

2007

2008

2007

External revenues

Inter-segment revenues

Total revenues

37,877

10,905

48,782

42,435

11,383

53,818

1,222

8

1,223

5

1,230

1,228

Segment result

690

14,367

4,467

3,450

15,108

4,462

60

423

55

80

440

45

Segment assets

Capital expenditure on non-current assets

Depreciation and amortisation on non-current assets

*

3,567

3,566

70

86

*

including impairment losses of euro ꢄ million (ꢃꢅꢅꢊ: euro ꢂꢊ million)

Interest and similar income of the Financial Services seg-

ment totalling euro ꢃ million (ꢃꢅꢅꢊ: euro ꢃ million) are in-

cluded in segment result. Interest and similar expenses of

the Financial Services segment amounted to euro ꢆ mil-

lion (ꢃꢅꢅꢊ: euro ꢃ million). The Other Entities segment

result includes interest and similar income amounting to

euro ꢃ,ꢂꢅꢃ million (ꢃꢅꢅꢊ: euro ꢂ,ꢊꢈꢆ million) and interest and

similar expenses amounting to euro ꢂ,ꢉꢃꢊ million (ꢃꢅꢅꢊ:

euro ꢂ,ꢇꢉꢂ million).

the Other Entities segment profit is the result from equity

accounted investments amounting to euro ꢂ million in ꢃꢅꢅꢆ.

In the previous year, the Other Entities segment did not

record any profit/loss from equity accounted investments.

Segment assets of the Other Entities segment at ꢄꢂ De-

cember ꢃꢅꢅꢆ included investments accounted for using

the equity method amounting to euro ꢃꢉ million ꢐꢋꢌꢌꢍ: –ꢒ.

The information disclosed for capital expenditure and

depreciation and amortisation relates to property, plant and

equipment, intangible assets and leased products.

7

2

4

6

8

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

7

9

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

The profit of the “Other Entities” segment was influenced

above all by the partial sale of the Cirquent Group and the

reversal of a provision no longer required. Also included in

Segment figures can be reconciled to the corresponding

Group figures as follows:

1

1 5

129

in euro million

2008

2007

Reconciliation of segment result

Total for reportable segments

753

–381

–21

4,441

–227

–341

3,873

Financial result of Automobiles segment and Motorcycles segment

Elimination of inter-segment items

Group profit before tax

351

Reconciliation of segment assets

Total for reportable segments

57,090

5,616

53,106

5,482

Non-operating assets – Other Entities segment

Operating liabilities – Financial Services segment

Interest-bearing assets – Automobiles segment

Liabilities of Automobiles and Motorcycles segments subject to interest

Elimination of inter-segment items

66,040

24,849

14,174

–66,683

101,086

55,517

23,899

13,637

–62,644

88,997

Total Group assets

Reconciliation of capital on non-current assets

Total for reportable segments

19,368

–2,788

16,580

17,528

–2,223

15,305

Elimination of inter-segment items

Total Group capital expenditure on non-current assets

Reconciliation of depreciation and amortisation on non-current assets

Total for reportable segments

9,989

–2,344

7,645

7,787

–1,629

6,158

Elimination of inter-segment items

Total Group depreciation and amortisation on non-current assets

1

31 Group Financial Statements

Financial

Services

Other Entities

Reconciliation to

Group figures

Group

2

008

2007

2008

2007

2008

2007

2008

2007

1

3,952

,773

5,725

12,146

1,794

146

45

214

76

–

–12,731

–

–13,258

53,197

–

56,018

–

1

13,940

191

290

53,197

56,018

–

292

,752

4,842

,339

743

4,139

295

38,548

4

168

33,419

9

– 402

43,996

–2,788

–2,344

–568

35,891

–2,223

–1,629

351

101,086

16,580

7,645

3,873

88,997

15,305

6,158

3

1

13,012

4,124

6

13

11

In the case of segment information by geographical region,

external sales are based on the location of the customer’s

registered office. Revenues with major customers were

not material overall. The information disclosed for non-

current assets relates to property, plant and equipment,

intangible assets and leased products. The reconciling

item disclosed for non-current assets relates to leased

products.

Information by region

External

revenues

Non-current

assets

in euro million

2008

2007

2008

2007

Germany

10,739

11,349

4,913

15,780

8,471

1,945

–

11,918

11,110

5,945

16,450

8,691

1,904

–

21,916

11,081

1,739

3,337

549

18,111

11,549

2,302

USA

United Kingdom

Rest of Europe

Africa/Asia/Oceania

Rest of America

Eliminations

Group

3,101

498

1,169

–3,334

36,457

1,382

–3,152

33,791

53,197

56,018

IFRS ꢆ was applied early with effect from ꢂ January ꢃꢅꢅꢆ. The comparative figures for ꢃꢅꢅꢊ have been adjusted accordingly.

Munich, ꢂꢆ February ꢃꢅꢅꢉ

Bayerische Motoren Werke

Aktiengesellschaft

The Board of Management

1

32

Responsibility Statement by the Company’s Legal Representatives

Statement pursuant to §ꢍꢈy No.ꢎ of the Securities

Trading Act ꢏWpHGꢐ in conjunction with §ꢅꢑꢈ (ꢂ)

sentence ꢍ and §ꢍꢎꢒ (ꢁ) sentence ꢋ of the German

Commercial Code ꢏHGBꢐ

“To the best of our knowledge, and in accordance with the

applicable reporting principles, the consolidated financial

statements give a true and fair view of the assets, liabilities,

financial position and profit of the Group, and the Group

Management Report includes a fair review of the develop-

ment and performance of the business and the position of

the Group, together with a description of the principal op-

portunities and risks associated with the expected develop-

ment of the Group.”

Munich, ꢂꢆ February ꢃꢅꢅꢉ

Bayerische Motoren Werke

Aktiengesellschaft

The Board of Management

72

74

76

78

Group Financial Statements

Income Statements

Balance Sheets

Cash Flow Statements

Statement of Income and

Expenses recognised

in Equity

79

Notes

7

8

9

8

4

Accounting Principles

and Policies

Notes to the Income

Statement

Notes to the Balance Sheet

Other Disclosures

Segment Information

1

1 5

1 2 9

1

33 Group Financial Statements

BMW Group

Auditors’ Report

We have audited the consolidated financial statements

prepared by Bayerische Motoren Werke Aktiengesell-

schaft, comprising the income statement, the balance

sheet, statements of changes in equity, cash flow state-

ment and the notes to the consolidated financial state-

ments and its report on the position of the Company

and the Group for the business year from ꢂ January to

ꢄꢂ December ꢃꢅꢅꢆ. The preparation of the consolidated

financial statements and Group Management Report in

accordance with IFRS, as adopted by the EU, and the

additional requirements of German commercial law

pursuant to § ꢄꢂꢇa ꢐꢁꢒ HGB are the responsibility of the

parent company’s management. Our responsibility is to

express an opinion on the consolidated financial state-

ments and on the Group Management Report based

on our audit.

nomic and legal environment of the Group and expecta-

tions as to possible misstatements are taken into account

in the determination of audit procedures. The effective-

ness of the accounting-related internal control system

and the evidence supporting the disclosures in the con-

solidated financial statements and in the Group Manage-

ment Report are examined primarily on a test basis within

the framework of the audit. The audit also includes as-

sessing the annual financial statements of those entities

included in consolidation, the determination of entities

to be included in consolidation, the accounting and con-

solidation principles used and significant estimates made

by management, as well as evaluating the overall presen-

tation of the consolidated financial statements and Group

Management Report. We believe that our audit provides

a reasonable basis for our opinion.

We conducted our audit of the consolidated financial

statements in accordance with §ꢄꢂꢊ HGB and German

generally accepted standards for the audit of financial

statements promulgated by the Institut der Wirtschafts-

prüfer (IDW). Those standards require that we plan and

perform the audit such that material misstatements

materially affecting the presentation of the net assets,

financial position and results of operations in the con-

solidated financial statements in accordance with the ap-

plicable financial reporting framework and in the Group

Management Report are detected with reasonable assur-

ance. Knowledge of the business activities and the eco-

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the con-

solidated financial statements comply with IFRSs, as

adopted by the EU, the additional requirements of German

commercial law pursuant to §ꢄꢂꢇa ꢐꢁꢒ HGB and give a true

and fair view of the net assets, financial position and results

of operations of the Group.The Group Management Report

is consistent with the consolidated financial statements

and as a whole provides a suitable view of the Group’s po-

sition and suitably presents the opportunities and risks of

future development.

Munich, ꢃꢊ February ꢃꢅꢅꢉ

KPMG AG

Wirtschaftsprüfungsgesellschaft

(

formerly KPMG Deutsche Treuhand-Gesellschaft

Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft)

Dr. Schindler

Wirtschaftsprüfer

Pastor

Wirtschaftsprüfer

1

34

Corporate Governance

Members of the Supervisory Board

*

Prof. Dr.-Ing. Dr.h.c. Dr.-Ing. E.h.

Joachim Milberg

Konrad Gottinger

(until ꢂꢃ.0ꢀ.ꢀ00ꢁ)

Chairman

Deputy Chairman

Former Chairman of the Board of

Management of BMW AG

Member of the Works Council, Dingolfing

Member of the Presiding Board, Personnel Committee,

Audit Committee and Mediation Committee

Chairman of the Presiding Board, Personnel Committee

and Nomination Committee; member of Audit Committee

and the Mediation Committee

Prof. Dr. Jürgen Strube

Mandates

Deputy Chairman

Chairman of the Supervisory Board of BASF SE

Bertelsmann AG

FESTO AG

SAP AG

Chairman of the Audit Committee;

member of the Presiding Board, Personnel Committee

and Mediation Committee

ZF Friedrichshafen AG (since ꢂꢇ.ꢅꢏ.ꢃꢅꢅꢆ)

Deere & Company

Mandates

*

Manfred Schoch

Deputy Chairman

Allianz Deutschland AG

BASF SE (Chairman)

Chairman of the General Works Council

Industrial Engineer

Bertelsmann AG (Deputy Chairman)

Commerzbank AG (until ꢂꢇ.ꢅꢇ.ꢃꢅꢅꢆ)

Fuchs Petrolub AG (Chairman)

Hapag-Lloyd AG

Member of the Presiding Board, Personnel Committee,

Audit Committee and Mediation Committee

Linde AG (until ꢅꢄ.ꢅꢈ.ꢃꢅꢅꢆ)

Stefan Quandt

Deputy Chairman

Industrial Engineer

Dr. Hans-Dietrich Winkhaus

(until 0ꢁ.0ꢃ.ꢀ00ꢁ)

Deputy Chairman

Former Chairman of the Board of

Henkel AG & Co. KGaA

Member of the Presiding Board, Personnel Committee,

Audit Committee, Nomination Committee and Mediation

Committee

Member of the Presiding Board, Personnel Committee,

Audit Committee and Nomination Committee

Mandates

DELTON AG (Chairman)

DataCard Corp.

Mandates

1

34

37

Corporate Governance

Members of the Supervisory Board

Members of the Board of

Management

Deutsche Lufthansa AG (until ꢃꢉ.ꢅꢏ.ꢃꢅꢅꢆ)

ERGO Versicherungsgruppe AG (until ꢅꢇ.ꢅꢇ.ꢃꢅꢅꢆ)

Henkel AG & Co. KGaA (until ꢂꢏ.ꢅꢏ.ꢃꢅꢅꢆ)

138

Corporate Governance in the

BMW Group

*

Stefan Schmid

1

40

41

47

Compliance in the BMW Group

Compensation Report

Declaration of the Board of

Management and of the Supervisory

Board pursuant to ꢗ161 AktG

Deputy Chairman

Chairman of the Works Council, Dingolfing

Member of the Presiding Board, Personnel Committee,

Audit Committee and Mediation Committee

*

Employee representative

Membership of other statutory supervisory boards

Membership of equivalent national or foreign boards of business enterprises

1

35 Corporate Governance

*

Ulrich Eckelmann

Susanne Klatten

Head of the Industry, Technology and

Environment section

IG Metall Executive Board

BSc., MBA

Honorary Senator of the

Technical University of Munich

Mandates

VOITH AG (since ꢂꢂ.ꢅꢄ.ꢃꢅꢅꢆ)

ALTANA AG (Deputy Chairman)

UnternehmerTUM GmbH (Chairman)

*

Bertin Eichler

Executive Member of the

Executive Board of IG Metall

Dr. jur. Karl-Ludwig Kley

(since 0ꢁ.0ꢃ.ꢀ00ꢁ)

Mandates

Chairman of the Executive Management of

Merck KGaA

ThyssenKrupp AG (Deputy Chairman)

BGAG Beteiligungsgesellschaft der

Gewerkschaften GmbH (Chairman)

Mandates

Bertelsmann AG

WestLB AG (until ꢄꢂ.ꢂꢃ.ꢃꢅꢅꢆ)

Franz Haniel

Engineer, MBA

Prof. Dr. rer. pol. Renate Köcher

Mandates

(

since 0ꢁ.0ꢃ.ꢀ00ꢁ)

DELTON AG (Deputy Chairman)

Franz Haniel & Cie. GmbH (Chairman)

Heraeus Holding GmbH

Metro AG (Chairman)

Director of Institut für Demoskopie Allensbach

Gesellschaft zum Studium der öffentlichen

Meinung mbH

secunet Security Networks AG

Giesecke & Devrient GmbH

Mandates

Allianz SE

BASF SE (until ꢂꢏ.ꢅꢂ.ꢃꢅꢅꢆ)

Infineon Technologies AG

MAN AG

Prof. Dr. rer. nat. Dr.h.c. Reinhard Hüttl

(since 0ꢁ.0ꢃ.ꢀ00ꢁ)

Chairman of the Executive Board of

Helmholtz-Zentrum Potsdam Deutsches

GeoForschungsZentrum – GFZ

University professor

*

Willibald Löw

Chairman of the Works Council, Landshut

Prof.Dr.rer.nat.Drs.h.c. mult. Hubert Markl

Former President of Max-Planck-Gesellschaft

zur Förderung der Wissenschaften e.V.

Professor of Biology (retired)

Arthur L. Kelly

(until 0ꢁ.0ꢃ.ꢀ00ꢁ)

Managing Partner of

KEL Enterprises L.P.

Mandates

Münchener Rückversicherungs-Gesellschaft AG

Georg von Holtzbrinck GmbH

Sanofi-Aventis S.A. (until ꢂꢏ.ꢅꢇ.ꢃꢅꢅꢆ)

Mandates

BASF SE (until ꢂꢏ.ꢅꢂ.ꢃꢅꢅꢆ)

DataCard Corp. (until ꢄꢅ.ꢅꢈ.ꢃꢅꢅꢆ)

Deere & Company

Northern Trust Corp.

Robert Bosch Corp.

Snap-on Inc.

1

36

*

Franz Oberländer

Wolfgang Mayrhuber

Chairman of the Board of Management of

Deutsche Lufthansa AG

Member of the Works Council, Munich

Mandates

*

Anton Ruf

Eurowings Luftverkehrs AG (until ꢄꢂ.ꢂꢃ.ꢃꢅꢅꢆ)

Fraport AG

Director Product Line L7

LSG Lufthansa Service Holding AG (until ꢄꢅ.ꢅꢉ.ꢃꢅꢅꢆ)

Lufthansa Cargo AG (until ꢄꢅ.ꢅꢉ.ꢃꢅꢅꢆ)

Lufthansa Technik AG

Münchener Rückversicherungs-Gesellschaft AG

HEICO Corp.

*

Maria Schmidt

(

since ꢀꢃ.0ꢄ.ꢀ00ꢁ)

Member of the Works Council, Dingolfing

SWISS International Air Lines AG

*

Werner Zierer

Heinz-Joachim Neubürger

Chairman of the Works Council, Regensburg

(until 0ꢁ.0ꢃ.ꢀ00ꢁ)

Senior Advisor of Kohlberg Kravis Roberts & Co.

Managing Director of Kohlberg Kravis Roberts &

Co. Ltd.

Export Merchant, MBA

Mandates

Allianz Versicherungs-AG (until ꢃꢏ.ꢅꢏ.ꢃꢅꢅꢆ)

ProSiebenSat .1 Media AG (until ꢅꢇ.ꢅꢉ.ꢃꢅꢅꢆ)

*

Werner Neugebauer

Regional Executive Officer of IG Metall Bavaria

Mandates

ZF Sachs AG (since ꢂꢂ.ꢅꢉ.ꢃꢅꢅꢆ)

1

34

37

Corporate Governance

Members of the Supervisory Board

Members of the Board of

Management

138

Corporate Governance in the

BMW Group

1

40

41

47

Compliance in the BMW Group

Compensation Report

Declaration of the Board of

Management and of the Supervisory

Board pursuant to ꢗ161 AktG

*

Employee representative

Membership of other statutory supervisory boards

Membership of equivalent national or foreign boards of business enterprises

1

37 Corporate Governance

Members of the Board of Management

Dr.-Ing. Norbert Reithofer

Chairman

Dr. Michael Ganal

(† 0ꢅ.ꢂꢀ.ꢀ00ꢁ)

Finance (until 0ꢀ.ꢂꢀ.ꢀ00ꢁ)

Frank-Peter Arndt

Production

Stefan Krause

(until ꢂꢄ.0ꢄ.ꢀ00ꢁ)

Mandates

Sales and Marketing

BMW Motoren GmbH (Chairman)

BMW (South Africa) (Pty) Ltd. (Chairman)

Leipziger Messe GmbH

Mandates

Allianz Deutschland AG (until ꢃꢇ.ꢅꢏ.ꢃꢅꢅꢆ)

Ernst Baumann

Harald Krüger

(until ꢄ0.ꢂꢂ.ꢀ00ꢁ)

(since 0ꢂ.ꢂꢀ.ꢀ00ꢁ)

Human Resources, Industrial Relations Director

Mandates

Krones AG

BMW Brilliance Automotive Ltd.

Dr.-Ing. Herbert Diess

Ian Robertson

Purchasing and Supplier Network

(since ꢂꢄ.0ꢄ.ꢀ00ꢁ)

Sales and Marketing

Mandates

Dr.-Ing. Klaus Draeger

Development

Rolls-Royce Motor Cars Limited (Chairman)

Dr. Friedrich Eichiner

Corporate and Brand Development (until 0ꢀ.ꢂꢀ.ꢀ00ꢁ)

Finance (since 0ꢀ.ꢂꢀ.ꢀ00ꢁ)

Mandates

Allianz Deutschland AG (since ꢃꢇ.ꢅꢏ.ꢃꢅꢅꢆ)

BMW Brilliance Automotive Ltd. (Deputy Chairman)

BMW (US) Holding Corp.

General Counsel:

Dr. Dieter Löchelt

Membership of other statutory supervisory boards

Membership of equivalent national or foreign boards of business enterprises

1

38

Corporate Governance in the BMW Group

Corporate governance – in other words ensuring that ac-

tions are taken in accordance with the principles of re-

sponsible management in order to increase the value of

the business on a sustainable basis – is an all-embracing

issue for the BMW Group which affects all areas of the

enterprise. The corporate culture within the BMW Group

is founded on transparent reporting and internal commu-

nication, a policy of corporate governance aimed at the in-

terests of stakeholders, a fair and open approach towards

employees and between Board of Management and Super-

visory Board and compliance with the law.

by the Annual General Meeting) and ten employee re-

presentatives (elected by employees). The close interac-

tion between Board of Management and Supervisory

Board in the interests of the enterprise as described above

is also known as a “two-tier board structure”. The com-

position of the Board of Management and the Supervisory

Board and of sub-committees set up by the Supervisory

Board is disclosed on pages ꢂꢄꢏ to ꢂꢄꢊ of the Annual

Report.

Core principles

Within the BMW Group, the Board of Management, the

Supervisory Board and employees base their actions on

twelve core principles which create the cornerstone of

the success of the BMW Group:

Information on the Company’s governing

constitution

Bayerische Motoren Werke Aktiengesellschaft (BMW AG)

is a stock corporation (Aktiengesellschaft) based on the

German Stock Corporation Act (Aktiengesetz). It has three

representative bodies, namely Annual General Meeting,

Supervisory Board and Board of Management. The duties

and authorities of those bodies derive from the Stock Cor-

poration Act and the Articles of Incorporation of BMW AG,

the full text of which is published on the BMW Group’s

website. Shareholders – the owners of the business –

exercise their rights at the Annual General Meeting.The

Annual General Meeting decides in particular on the utili-

sation of unappropriated profit, the ratification of the acts

of the members of the Board of Management and of the

Supervisory Board, the appointment of the external auditor,

changes to the Articles of Incorporation, specified capital

measures and – in accordance with legislation applicable

to BMW AG relating to co-determination by employees –

on the composition of one half of the Supervisory Board.

The Board of Management manages the enterprise under

its own responsibility. Within this framework, it is monitored

and advised by the Supervisory Board. The Supervisory

Board appoints the members of the Board of Management

and can, at any time, revoke an appointment if there is an

important reason. The Board of Management keeps the

Supervisory Board informed of all significant matters regu-

larly, without delay and comprehensively, following the

principles of conscientious and faithful accountability and

in accordance with prevailing law and reporting duties allo-

cated to it by the Supervisory Board. The Board of Manage-

ment requires the approval of the Supervisory Board for

certain major transactions. The Supervisory Board is not,

however, authorised to undertake management meas-

ures itself.

Customer focus

The success of our company is determined by our cus-

tomers. They are at the heart of everything we do. The

results of all our activities must be valued in terms of the

benefits they will generate for our customers.

Peak performance

We aim to be the best – a challenge to which all of us must

rise. Each and every employee must be prepared to deliver

peak performance. We strive to be among the elite, but

without being arrogant. For us, it is the company and our

products that count – nothing else.

Responsibility

Every BMW Group employee has the personal responsi-

bility to ensure the company’s success. In team work,

every employee must assume personal responsibility. We

are fully aware that as we work to achieve our corporate tar-

gets, we have responsibility to each other – in the interests

of the company.

1

34

37

Corporate Governance

Members of the Supervisory Board

Members of the Board of

Management

Effectiveness

138

Corporate Governance in the

BMW Group

For our company, the only results that count are those with

a lasting effect. In evaluating leadership, we must consider

the effect of performance on improving results.

1

40

41

47

Compliance in the BMW Group

Compensation Report

Declaration of the Board of

Management and of the Supervisory

Board pursuant to ꢗ161 AktG

Adaptability

To ensure our long-term success, we must adapt to new

challenges with speed and flexibility. We see change as an

opportunity – and in order to capitalise on it, we need to be

adaptable.

In accordance with the regulations contained in the

German Co-determination Act, BMW AG’s Supervisory

Board comprises ten shareholder representatives (elected

Dissent (frankness)

As we strive to find the best solution, our employees are

encouraged to express opposing opinions, if they wish.

1

39 Corporate Governance

However, the solutions we agree upon will then be imple-

mented without exception by everybody involved.

continues to comply with the recommendations of the

GCGC with only one exception: The Supervisory Board

has delegated the task of determining the remuneration

and remuneration system (including the principal con-

tractual components and the regular review of the system)

to the Personnel Committee. The full Supervisory Board

is, however, informed regularly and in great detail of the

work of the Personnel Committee. From the perspective

of the Supervisory Board, this division of duties has proved

its worth and increases the efficiency of the Supervisory

Board’s work. All other recommendations are being com-

plied with. In addition, the Board of Management and

the Supervisory Board have, in past years, developed the

BMW Group’s own Corporate Governance Code based

on the GCGC in order to provide shareholders and other

stakeholders with a comprehensive and stand-alone

document covering the corporate governance practices

applied by the BMW Group. The BMW Group’s Corporate

Governance Code has been revised in conjunction with

the new version of the GCGC. A copy of it can be ob-

tained, along with other shareholder information, from the

BMW Group website.

Respect, trust, fairness

We trust each other with respect. Leadership is based on

mutual trust. Trust is rooted in fairness and reliability.

Employees

People make companies. Our employees are the strongest

factor in our success – which means our personnel deci-

sions will be among the most important we ever make.

Leading by example

Every manager must lead by example.

Sustainability

In our view, sustainability refers to our business success

which is the basis for the fulfillment of our ecological and

social responsibility.

Society

Social responsibility is an integral part of our corporate

self-image.

A coordinator responsible for all corporate governance

issues reports directly and on a regular basis to the Board

of Management and the Supervisory Board.

Independence

We are securing the corporate independence of the

BMW Group through sustained profitable growth.

Reportable securities transactions ꢏ“Directors’

Dealings”ꢐ

Declaration of Compliance and the BMW Group

Corporate Governance Code

Management and Supervisory Boards of companies listed

in Germany are required by law (§ꢂꢈꢂ German Stock Cor-

poration Act) to report once a year whether the officially

published and relevant recommendations issued by the

Members of the Board of Management and the Super-

visory Board and related persons of those members, are

required, pursuant to §ꢂꢇa of the German Securities

Trading Act, to give notice of any of their transactions with

BMW stock or related financial instruments, when the

total sum of such transactions exceeds an amount of euro

ꢇ,ꢅꢅꢅ during the calendar year. BMW AG gives notice of

any transaction reported to it on its website at the address

www.bmwgroup.com/ir and in its Annual Document pur-

suant to §ꢂꢅ ꢐꢁꢒ of the German Securities Prospectus Act.

“German Government Corporate Governance Code Com-

mission”, as valid at the date of the declaration, have been,

and are being, complied with. Companies affected are

also required to state which of the recommendations of

the Code have not been or are not being applied.

The Board of Management and Supervisory Board of

BMW AG believe that the recommendations and sugges-

tions contained in the German Corporate Governance Code

Shareholdings of members of the Board of

Management and the Supervisory Board

The members of the Supervisory Board of BMW AG hold

in total ꢃꢊ.ꢊꢅ% of the Company’s issued common and pre-

ferred stock shares of the Company, of which ꢂꢈ.ꢂꢃ% re-

lates to Stefan Quandt, Bad Homburg v.d.H. and ꢂꢂ.ꢇꢆ%

to Susanne Klatten, Munich.The shareholding of the

members of the Board of Management is, in total, less

(GCGC) contribute to an enhancement of the financial

markets in Germany, in particular for international investors.

At the joint meeting held in December ꢃꢅꢅꢆ, the Board of

Management and Supervisory Board of BMW AG issued

the current year’s declaration of compliance with the new

version of the GCGC valid from ꢆ August ꢃꢅꢅꢆ and posted

to the BMW Group’s website. The full text of the declaration

is also provided on page ꢂꢏꢊ of the Annual Report. BMW AG

than ꢂ

% of the issued stock shares.

1

40

Compliance in the BMW Group

legislation and thus supplement the Group’s compliance

activities.

Responsible and lawful conduct provides the basis for the

success of the BMW Group. This approach is integral to

the Group’s corporate culture and it is the reason why cus-

tomers, shareholders, business partners and the general

public place their trust in the BMW Group. The Board of

Management and the employees of the BMW Group are

obliged to act responsibly and in compliance with the law.

The Compliance Organisation comprises the whole set

of measures taken to ensure that the BMW Group, its

representative bodies, its managers and its staff act lawfully.

The various elements of the Compliance Organisation are

shown in the diagram below and are valid throughout the

BMW Group. To the extent that additional compliance re-

quirements apply to individual countries or for specific lines

of business, this is covered by local compliance measures.

This principle has been embedded in the Group’s internal

guidelines for many years now. All departments can avail

themselves of assistance from designated experts from

the relevant Legal and Patents, Group Internal Audit and

Group Security departments to ensure that legal provisions

are complied with.

The BMW Group Legal Compliance Code (“LCC”) forms

the centre of the Compliance Organisation.This document

explains the significance of legal compliance and provides

an overview of the various legal areas that are relevant for

the BMW Group. The LCC is available for download to

employees in German and English. Translations into seven

other languages will be available from ꢃꢅꢅꢉ onwards.

In order to ensure better protection against compliance-

related and reputational risks, the Board of Management

created a Compliance Committee in ꢃꢅꢅꢊ which is man-

dated to establish a worldwide Compliance Organisation

throughout the BMW Group.

Managers in particular bear a high degree of responsibility

and must set a good example in the process of avoiding

incidences of non-compliance. All managers are required

to inform the staff working for them of the content and

significance of the LCC and to draw attention to legal

risks. Managers must, at regular intervals and on their

The BMW Group Compliance Committee comprises the

heads of the following departments: Legal and Patents,

Corporate Communication and Governmental Affairs,Group

Internal Audit, Group Financial Reporting, Organisation/

In-house Consulting and Group Human Resources. It

manages and monitors activities necessary to avoid non-

compliance with the law (Legal Compliance). These ac-

tivities include training, information and communication

measures, following up potential cases of non-compliance

and implementing compliance requirements. The Com-

pliance Committee reports regularly to the Board of

Management on all compliance-related issues, including

the progress made in setting up the Compliance Organi-

sation, details of investigations performed, identified

cases of non-compliance, sanctions imposed and correc-

tive/preventative measures implemented. The BMW

Group Compliance Committee operates through the

newly established Compliance Committee Office which

is in organisation terms to the Chairman of the Board of

Management.

Compliance Committee

BMW AG Board of Management

Annual Status Report

Compliance

Committee

1

34

37

Corporate Governance

Members of the Supervisory Board

Members of the Board of

Management

138

Corporate Governance in the

BMW Group

1

4ꢆ

41

Compliance in the BMW Group

Compensation Report

Identification and

monitoring

Code of

conduct

147

Declaration of the Board of

Management and of the Supervisory

Board pursuant to ꢗ161 AktG

Communi-

cation

The Board of Management keeps the Audit Committee

Reporting

(

i.e. a part of the Supervisory Board) informed on the up-

Compliance

Committee Office

to-date status of compliance activities within the BMW

Group – both on a regular basis and on a case-by-case

basis where necessary. The Compliance Organisation was

implemented at BMW AG and a number of German sub-

sidiaries in ꢃꢅꢅꢆ and will be rolled out internationally in ꢃꢅꢅꢉ.

A whole new landscape of principles, guidelines and in-

structions was also put in place in ꢃꢅꢅꢆ. To some extent,

these internal rules stipulate processes that reflect current

Compliance

contact

Training

Implementation with

appropriate personnel

1

41 Corporate Governance

own initiative, check compliance with the law and commu-

nicate regularly with staff on this issue. Any indications

of non-compliance with the law must be rigorously investi-

gated.

In order to avoid this situation, the BMW Group’s employ-

ees are – via various internal channels – kept fully informed

of the tools and measures used by the Compliance Organi-

sation. The central channel of communication is the Com-

pliance website within the BMW Group Intranet where

employees can find compliance-related information and

also have access to training materials, in both German and

English. Employees can use the website to access fre-

quently asked questions (and related answers) on compli-

ance-related issues.

As part of the first implementation phase, more than ꢏ,ꢇꢅꢅ

managers received training in essential compliance matters

in ꢃꢅꢅꢆ. This training is obligatory for all managers working

for the BMW Group and is available in the form of web-

based training sessions in either German or English. Suc-

cessful participation in the relevant training sessions is

documented in a certificate. This basic training is also sup-

plemented by training sessions for specific target groups

covering specific compliance issues.

In the interest of investor protection and in order to ensure

that the BMW Group complies with regulations relating to

potential insider information, the Board of Management

appointed – as early as ꢂꢉꢉꢏ – an Ad-hoc Committee which

is made up from representatives of various specialist de-

partments and whose members examine the relevance of

issues for ad-hoc disclosure purposes. All persons work-

ing on behalf of the enterprise and with access to insider

information in accordance with existing rules have been,

and continue to be, included in an appropriate list – which

is regularly updated – and informed of the duties arising

from insider rules.

In order to avoid legal risks, all members of staff are ex-

pected to discuss matters with their managers and with

the relevant departments within the BMW Group, in par-

ticular the Legal Department, the Group Internal Audit

Department and the Group Security Department. As a fur-

ther point of contact (telephone or e-mail), the BMW Group

Compliance Contact was set up in ꢃꢅꢅꢆ for employees

and non-employees with questions regarding compliance.

This also applies if weaknesses or circumstances have

been identified which could result in non-compliance with

the law. Information can also be provided anonymously if

so desired.

Compensation Report

The BMW Group supports the endeavours of the German

Corporate Governance Code (GCGC) to increase trans-

parency in the disclosure of the components of compen-

sation. The following section therefore describes the

principles relating to the compensation of the Board of

Management and the stipulations set out in the statutes

relating to the compensation of the Supervisory Board. As

well as discussing the structure of remuneration, the com-

ponents of compensation are also disclosed in absolute

figures. In accordance with the recommendations of the

GCGC, the compensation of each member of the Board of

Management and the Supervisory Board is disclosed by

name and analysed into components.

Compliance-related queries and all matters to which atten-

tion has been drawn are documented and followed up by

the Compliance Committee Office, where necessary with

the assistance of Group Internal Audit, Group Security

and legal advisory departments. A reporting system is cur-

rently being established for the Compliance Organisation

which will enable compliance-relevant issues to be reported

to the Compliance Committee on a regular basis, and –

where necessary – on an ad hoc basis. This includes re-

porting on the status and the progress made in setting up

the Compliance Organisation, identified legal risks and

incidences of non-compliance as well as corrective/ pre-

ventative measures implemented.

ꢂ. Compensation of the Board of Management,

Responsibilities

In order to increase the efficiency of the Supervisory Board’s

work in personnel-related matters, the task of determining

the remuneration of the Board of Management has been

delegated to the Personnel Committee. The Supervisory

Board is informed regularly and in detail of the work of the

Personnel Committee.

Compliance with, and the implementation of, the LCC is

reviewed regularly by the Group Internal Audit and Group

Security departments. For this purpose, the Group Internal

Audit Department also performs on-site audits and inter-

views employees.

It is essential that employees are aware of, and comply with

applicable legal regulations. The BMW Group does not tol-

erate violations of law by its employees. Culpable violations

of law may result in employment-contract sanctions and

personal liability consequences for the employee involved.

Overall objectives

The compensation model used for the Board of Manage-

ment should be attractive in the context of the competitive

environment for highly qualified executives. The objective

of the variable component of compensation is to create

1

42

an incentive for exceptional individual performance, linked

to the performance of the BMW Group. The structure of

the compensation of the Board of Management should

also contain parallels to the compensation system applied

to employees and senior management.

euro ꢂꢇ,ꢅꢅꢅ (Chairman of the Board of Management) plus a

fixed amount. The fixed amount is made up of approximate-

ly euro ꢊꢇ for each year of service in the company before

becoming a member of the Board of Management plus

between euro ꢂꢇꢄ and euro ꢈꢅꢅ, for each full year of service

on the board (up to a maximum of ꢂꢇ years). Pension pay-

ments are adjusted by analogy to the rules applicable for

the adjustment of civil servants’ pensions: the pensions

of members of the Board of Management are adjusted

accordingly when the civil servants remuneration level Bꢈ

(excluding allowances) is increased by more than ꢇ%.

Components of compensation

The compensation of the Board of Management comprises

fixed and variable components. In addition, benefits are

also payable at the end of members’ mandates, primarily in

the form of pension benefits. For the purposes of deter-

mining the overall compensation of the Board of Manage-

ment, the Personnel Committee, having considered the

overall position and forecasts of the BMW Group, decides

on an overall remuneration framework, which will include a

high variable proportion.

If a mandate is ended early before the member of the Board

of Management reaches the age of ꢈꢅ, a transitional pay-

ment amounting to two-thirds of the pension theoretically

earned up to the date when a full pension can be drawn,

may become payable if, after a minimum of three years of

service as a member of the Board of Management, this is

considered appropriate on the basis of an objective evalu-

ation of all circumstances. Arrangements are in place con-

cerning the offsetting of other income against pensions

and transitional payments.

The Personnel Committee reviews the compensation

system at regular intervals, with regard to the structure

and amount of the remuneration of the Board of Manage-

ment. Fixed remuneration comprises a base remunera-

tion amount, which is paid as monthly salary, and other

remuneration elements. Other remuneration elements

comprise mainly the use of company cars as well as the

payment of insurance premiums, contributions towards

relocation costs and security systems.

No performance-based or compensatory payments have

been agreed for the event of the termination of members’

mandates.

The measures used to determine the variable component

of compensation are the BMW Group’s net profit and the

dividend level for the relevant year, the return on sales and

the individual performance of the Board of Management

members as evaluated by the Personnel Committee of the

Supervisory Board. Upper limits are in place for all Board

of Management members.

The amounts disclosed below as the annual pension pro-

vision allocation for each member corresponds to the

pension service cost.

Members of the Board of Management holding a credit card

issued by BMW Bank GmbH, Munich, during the financial

year ꢃꢅꢅꢆ had a credit line of up to euro ꢊ,ꢇꢅꢅ (ꢃꢅꢅꢊ: euro

ꢃꢇ,ꢇꢈꢇ). The amounts arising from credit card usage were

all within the agreed limits.

1

34

37

Corporate Governance

Members of the Supervisory Board

Members of the Board of

Management

The compensation system does not include any stock

options, value appreciation rights comparable to stock op-

tions, other share-based compensation components or

other long-term incentives. No compensation agreements

were concluded with members of the Board of Manage-

ment for situations involving a takeover offer. Similarly, they

did not receive any payments or benefits from third parties

in ꢃꢅꢅꢆ on account of their activities as the members of the

Board of Management.

Compensation of the Board of Management for the

financial year ꢀ00ꢁ (total)

138

Corporate Governance in the

BMW Group

1

40

41

47

Compliance in the BMW Group

Compensation Report

Declaration of the Board of

Management and of the Supervisory

Board pursuant to ꢗ161 AktG

The total remuneration of the current members of the Board

of Management of BMW AG for the financial year ꢃꢅꢅꢆ

amounted to euro ꢂꢅ.ꢉ million (ꢃꢅꢅꢊ: euro ꢂꢇ.ꢃ million). This

comprises fixed components (including other remunera-

tion) of euro ꢄ.ꢂ million (ꢃꢅꢅꢊ: euro ꢃ.ꢊ million) and variable

components of euro ꢊ.ꢆ million (ꢃꢅꢅꢊ: euro ꢂꢃ.ꢇ million).

Pension agreements are in place for the event of the ter-

mination of a mandate. Pensions are paid to former

members of the Board of Management who have either

reached the age of ꢈꢇ, or, if their mandate had terminated

earlier and had not been extended, to members who have

either reached the age of ꢈꢅ, or who are unable to work

due to ill-health or accident, or who have entered into early

retirement in accordance with a special arrangement. The

amount of the pension comprises, unchanged from the

previous year, a basic monthly amount of euro ꢂꢅ,ꢅꢅꢅ or

in euro million

2008

2007

Amount Proportion

in ꢕ

Amount Proportion

in ꢕ

Fixed remuneration

Variable remuneration

Total remuneration

3.1

7.8

28.4

71.6

2.7

12.5

15.2

17.8

82.2

*

10.9

100.0

*

calculated on the basis of an agreed upper limit.

1

43 Corporate Governance

The fixed remuneration of board members remained un-

changed for the financial year ꢃꢅꢅꢆ. The increase in the

total amount of fixed remuneration for all members was

primarily due to the fact that the Board of Management

comprised eight members for practically the whole of the

financial year ꢃꢅꢅꢆ, whereas this had only been the case

during the fourth quarter of the financial year ꢃꢅꢅꢊ.

to the expense for allocations to pension provisions (service

cost).

The amount paid to former members of the Board of

Management and their dependants was euro ꢄ.ꢂ million

(ꢃꢅꢅꢊ: euro ꢏ.ꢄ million). Pension obligations to former

members of the Board of Management and their depend-

ants are fully covered by pension provisions amounting

to euro ꢏꢏ.ꢄ million (ꢃꢅꢅꢊ: euro ꢄꢆ.ꢄ million), computed in

accordance with IAS ꢂꢉ.

In addition, an expense of euro ꢅ.ꢆ million (ꢃꢅꢅꢊ: euro ꢅ.ꢊ mil-

lion) was recognised for current members of the Board of

Management for post-employment benefits. This relates

Compensation of the individual members of the Board of Management for the financial year ꢀ00ꢁ ꢐꢋꢌꢌꢍꢒ

in euro

Fixed compensation

Other

compensation

Variable

compensation

Compensation

Total

Allocation for

year to pension

provision

Salary

Total

Norbert Reithofer

Frank-Peter Arndt

6ꢆꢆ,ꢆꢆꢆ

600,000)

16,271

(15,222)

616,271

(615,222)

1,65ꢆ,ꢆꢆꢆ

(3,139,200)

2,266,271

(3,754,422)

124,912

(161,124)

(

3ꢆꢆ,ꢆꢆꢆ

300,000)

19,7ꢆ8

(98,199)

319,7ꢆ8

(398,199)

825,ꢆꢆꢆ

(1,569,600)

1,144,7ꢆ8

(1,967,799)

69,327

(84,851)

1

Ernst Baumann

33ꢆ,ꢆꢆꢆ

360,000)

17,725

(15,737)

347,725

(375,737)

882,292

(1,818,300)

1,23ꢆ,ꢆ17

(2,194,037)

86,ꢆ79

(95,394)

Herbert Diess

Klaus Draeger

Friedrich Eichiner

3ꢆꢆ,ꢆꢆꢆ

29,762

(9,662)

329,762

(84,662)

825,ꢆꢆꢆ

(392,400)

1,154,762

(477,062)

89,93ꢆ

(28,909)

(75,000)

3ꢆꢆ,ꢆꢆꢆ

300,000)

26,276

(55,900)

326,276

(355,900)

825,ꢆꢆꢆ

(1,569,600)

1,151,276

(1,925,500)

7ꢆ,871

(85,602)

(

3ꢆꢆ,ꢆꢆꢆ

23,516

323,516

825,ꢆꢆꢆ

1,148,516

81,547

(75,000)

(11,068)

(86,068)

(392,400)

(478,468)

(25,157)

2

Michael Ganal

333,871

61,464

395,335

892,641

1,287,976

1ꢆ2,ꢆ93

(

360,000)

(14,220)

(374,220)

(1,818,300)

(2,192,520)

(122,013)

3

Stefan Krause

72,581

360,000)

3,697

(16,222)

76,278

(376,222)

36ꢆ,ꢆꢆꢆ

(1,818,300)

436,278

(2,194,522)

56,423

(72,557)

4

Harald Krüger

25,ꢆꢆꢆ

2,777

27,777

68,75ꢆ

96,527

4,616

(

–)

24ꢆ,323

–)

2,801,775

2,430,000)

(–)

5

Ian Robertson

1ꢆ2,938

343,261

66ꢆ,887

1,ꢆꢆ4,148

133,533

(

(–)

Total

304,134

3,105,909

7,814,570

10,920,479

819,331

(

(236,230)

(2,666,230)

(12,518,100)

(15,184,330)

(675,607)

ꢂ

Member of the Board of Management until ꢄꢅ November ꢃꢅꢅꢆ

Member of the Board of Management until ꢏ December ꢃꢅꢅꢆ

Member of the Board of Management until ꢂꢄ March ꢃꢅꢅꢆ

Member of the Board of Management from ꢂ December ꢃꢅꢅꢆ

Member of the Board of Management from ꢂꢄ March ꢃꢅꢅꢆ

ꢃ

ꢄ

ꢏ

ꢇ

ꢀ

. Compensation of the Supervisory Board

Responsibilities, regulation pursuant to the Articles

of Incorporation

Components of compensation

In line with the recommendations of the German Corpo-

rate Governance Code (section ꢇ.ꢏ.ꢈ paragraph ꢃ GCGC),

the members of the Supervisory Board receive fixed as

well as performance-related compensation.

The compensation of the Supervisory Board is deter-

mined by shareholders’ resolution at the Annual General

Meeting. The compensation regulation valid for the finan-

cial year ꢃꢅꢅꢆ is the result of the shareholders’ resolutions

taken at the Annual General Meeting on ꢆ May ꢃꢅꢅꢆ and

Each member of the Supervisory Board receives, in addi-

tion to the reimbursement of expenses, a fixed amount

of euro ꢇꢇ,ꢅꢅꢅ (payable at the end of the year) as well as a

profit-oriented compensation of euro ꢃꢃꢅ for each full euro

ꢅ.ꢅꢂ by which the earnings per share (EPS) of common

§

ꢂꢇ of the Articles of Incorporation of BMW AG. The Arti-

cles of Incorporation of BMW AG can be accessed via the

Internet.

1

44

stock reported in the Group Financial Statements for the

relevant financial year (compensation year) exceeds a mini-

mum amount of euro ꢃ.ꢄꢅ (payable after the Annual General

Meeting held in the following year). An upper limit of euro

ꢂꢂꢅ,ꢅꢅꢅ is in place for the performance-related compensa-

tion. Since the minimum EPS was not achieved in ꢃꢅꢅꢆ,

no performance-related compensation is payable for the

financial year ꢃꢅꢅꢆ.

In addition, each member of the Supervisory Board re-

ceives an attendance fee of euro ꢃ,ꢅꢅꢅ for each full meeting

of the Supervisory Board (Plenum) which the member

has attended (payable at the end of the financial year).

Attendance at more than one meeting on the same day is

not remunerated separately.

The Company also reimburses to each member of the

Supervisory Board any value added tax arising on their

remuneration. The amounts disclosed below are net

amounts.

The German Corporate Governance Code also recom-

mends that the exercising of chair and deputy chair posi-

tions in the Supervisory Board as well the chair and mem-

bership of committees should also be considered when

determining the level of compensation (section ꢇ.ꢏ.ꢈ para-

graph ꢂ GCGC).

Compensation of the Supervisory Board for the financial

year ꢀ00ꢁ (total)

In accordance with §ꢂꢇ of the Articles of Incorporation, the

compensation of the Supervisory Board for activities

during the financial year ꢃꢅꢅꢆ amounted to euro ꢂ.ꢈ million

(ꢃꢅꢅꢊ: euro ꢃ.ꢆ million). This includes fixed compensation of

euro ꢂ.ꢈ million (ꢃꢅꢅꢊ: euro ꢅ.ꢂ million). No variable compen-

sation is payable for ꢃꢅꢅꢆ (ꢃꢅꢅꢊ: euro ꢃ.ꢊ million) since the

conditions stipulated in the Articles of Incorporation (mini-

mum EPS of euro ꢃ.ꢄꢅ) were not met.

Accordingly, the Articles of Incorporation of BMW AG stip-

ulate that the Chairman of the Supervisory Board shall re-

ceive three times the amount and each Deputy Chairman

shall receive twice the amount of the remuneration of a

Supervisory Board member. Provided the relevant commit-

tee convened for meetings on at least three days during

the financial year, each chairman of the Supervisory Board’s

committees receives twice the amount and each member

of a committee receives one and a half times the amount

of the remuneration of a Supervisory Board member. If a

member of the Supervisory Board exercises more than one

of the functions referred to above, the compensation is

measured only on the basis of the function which is remu-

nerated with the highest amount, thus avoiding amounts

accumulating when more than one function is exercised.

in euro million

2008

Amount Proportion

in ꢕ

2007

Amount Proportion

in ꢕ

Fixed compensation

Variable compensation

Total compensation

1.6

–

100.0

–

0.1

2.7

2.8

3.6

96.4

*

1.6

100.0

*

calculated on the basis of an agreed upper limit.

1

34

37

Corporate Governance

Members of the Supervisory Board

Members of the Board of

Management

138

Corporate Governance in the

BMW Group

1

40

41

47

Compliance in the BMW Group

Compensation Report

Declaration of the Board of

Management and of the Supervisory

Board pursuant to ꢗ161 AktG

1

45 Corporate Governance

ꢂ

Compensation of the individual members of the Supervisory Board for the financial year ꢀ00ꢁ ꢐꢋꢌꢌꢍꢒ

in euro

Fixed compensation

Attendance fee

Variable

Total

compensation

Joachim Milberg (Chairman)

165,ꢆꢆꢆ

1ꢆ,ꢆꢆꢆ

(–)

175,ꢆꢆꢆ

(

18,000)

11ꢆ,ꢆꢆꢆ

12,000)

11ꢆ,ꢆꢆꢆ

(–)

(310,680)

(328,680)

Manfred Schoch (Deputy Chairman)

Stefan Quandt (Deputy Chairman)

Konrad Gottinger (Deputy Chairman)

1ꢆ,ꢆꢆꢆ

(–)

(207,120)

12ꢆ,ꢆꢆꢆ

(219,120)

(

(–)

1ꢆ,ꢆꢆꢆ

(–)

12ꢆ,ꢆꢆꢆ

(

12,000)

(–)

(207,120)

(219,120)

2

13,825

12,000)

(–)

(207,120)

13,825

(219,120)

3

Stefan Schmid (Deputy Chairman)

99,18ꢆ

1ꢆ,ꢆꢆꢆ

(–)

1ꢆ9,18ꢆ

(

5,967)

9ꢆ,765

6,000)

(–)

(102,993)

(108,960)

4

Jürgen Strube (Deputy Chairman)

1ꢆ,ꢆꢆꢆ

(–)

(103,560)

1ꢆꢆ,765

(109,560)

(

(–)

5

Hans-Dietrich Winkhaus (Deputy Chairman)

Ulrich Eckelmann

38,77ꢆ

12,000)

2,ꢆꢆꢆ

(–)

(207,120)

4ꢆ,77ꢆ

(219,120)

(

(–)

55,ꢆꢆꢆ

1ꢆ,ꢆꢆꢆ

(–)

65,ꢆꢆꢆ

(

6,000)

55,ꢆꢆꢆ

6,000)

55,ꢆꢆꢆ

6,000)

35,765

–)

19,385

6,000)

55,ꢆꢆꢆ

6,000)

35,765

–)

35,765

–)

55,ꢆꢆꢆ

6,000)

55,ꢆꢆꢆ

6,000)

55,ꢆꢆꢆ

6,000)

19,385

6,000)

55,ꢆꢆꢆ

6,000)

55,ꢆꢆꢆ

6,000)

55,ꢆꢆꢆ

6,000)

42,377

–)

55,ꢆꢆꢆ

6,000)

1,420,982

155,967)

(–)

(103,560)

(109,560)

Bertin Eichler

8,ꢆꢆꢆ

(–)

(103,560)

63,ꢆꢆꢆ

(109,560)

(

(–)

Franz Haniel

8,ꢆꢆꢆ

(–)

(103,560)

63,ꢆꢆꢆ

(109,560)

(

(–)

6

Reinhard Hüttl

8,ꢆꢆꢆ

(–)

43,765

(

(–)

7

Arthur L. Kelly

2,ꢆꢆꢆ

(–)

(103,560)

21,385

(109,560)

(

(–)

Susanne Klatten

8,ꢆꢆꢆ

(–)

(103,560)

63,ꢆꢆꢆ

(109,560)

(

(–)

8

Karl-Ludwig Kley

4,ꢆꢆꢆ

(–)

39,765

(

(–)

9

Renate Köcher

8,ꢆꢆꢆ

(–)

43,765

(

(–)

Willibald Löw

1ꢆ,ꢆꢆꢆ

(–)

(103,560)

65,ꢆꢆꢆ

(109,560)

(

(–)

Hubert Markl

8,ꢆꢆꢆ

(–)

(103,560)

63,ꢆꢆꢆ

(109,560)

(

(–)

Wolfgang Mayrhuber

1ꢆ,ꢆꢆꢆ

(–)

(103,560)

65,ꢆꢆꢆ

(109,560)

(

(–)

1

ꢆ

Heinz-Joachim Neubürger

Werner Neugebauer

Franz Oberländer

Anton Ruf

2,ꢆꢆꢆ

(–)

(103,560)

21,385

(109,560)

(

(–)

8,ꢆꢆꢆ

(–)

(103,560)

63,ꢆꢆꢆ

(109,560)

(

(–)

1ꢆ,ꢆꢆꢆ

(–)

(103,560)

65,ꢆꢆꢆ

(109,560)

(

(–)

1ꢆ,ꢆꢆꢆ

(–)

(103,560)

65,ꢆꢆꢆ

(109,560)

(

(–)

1

Maria Schmidt

Werner Zierer

Total

8,ꢆꢆꢆ

(–)

5ꢆ,377

(

(–)

1ꢆ,ꢆꢆꢆ

(–)

(103,560)

65,ꢆꢆꢆ

(109,560)

(

(–)

184,000

ꢏ–ꢐ

1,604,982

(

(–)

(2,691,993)

(2,847,960)

ꢂ

Fixed and variable compensation are calculated on a time-apportioned basis, i.e. based on the actual period of office during the financial year.

Member of the Supervisory Board until ꢂꢇ February ꢃꢅꢅꢆ

Deputy Chairman of the Supervisory Board from ꢂꢄ March ꢃꢅꢅꢆ

Deputy Chairman of the Supervisory Board from ꢆ May ꢃꢅꢅꢆ

Member of the Supervisory Board until ꢆ May ꢃꢅꢅꢆ

Member of the Supervisory Board from ꢆ May ꢃꢅꢅꢆ

Member of the Supervisory Board until ꢆ May ꢃꢅꢅꢆ

Member of the Supervisory Board from ꢆ May ꢃꢅꢅꢆ

ꢃ

ꢄ

ꢏ

ꢇ

ꢈ

ꢊ

ꢆ

ꢉ

ꢂꢅ

Member of the Supervisory Board until ꢆ May ꢃꢅꢅꢆ

Member of the Supervisory Board from ꢃꢇ March ꢃꢅꢅꢆ

ꢂꢂ

1

46

Members of the Supervisory Board holding a credit card

issued by BMW Bank GmbH, Munich, during the financial

year ꢃꢅꢅꢆ had a credit line of up to euro ꢊ,ꢇꢅꢅ (ꢃꢅꢅꢊ: euro

ꢃꢇ,ꢇꢈꢇ). The amounts arising from credit card usage were

all within the agreed limits.

None of the members of the Supervisory Board performed

advisory, agency or other services for the BMW Group in

a personal capacity in ꢃꢅꢅꢆ. In consequence, no additional

compensation was paid. It is BMW Group’s policy and

practice, not to enter into contractual relationships with

members of the Supervisory Board requiring them to pro-

vide personal services, in particular advisory and agency

services, in return for compensation (cf. Section ꢏ.ꢏ of the

BMW Group Corporate Governance Code).

In addition to the BMW Group Corporate Governance Code,

the Legal Compliance Code and the Articles of Incorpora-

tion, further information on the BMW Group’s business (in-

cluding financial publications) is available on the Group’s

website at www.bmwgroup.com/ir.

1

34

37

Corporate Governance

Members of the Supervisory Board

Members of the Board of

Management

138

Corporate Governance in the

BMW Group

1

40

41

47

Compliance in the BMW Group

Compensation Report

Declaration of the Board of

Management and of the Supervisory

Board pursuant to §161 AktG

1

47 Corporate Governance

Declaration of the Board of Management and of the Supervisory Board

of Bayerische Motoren Werke Aktiengesellschaft with respect to the

recommendations of the “Government Commission of the German Corporate

Governance Code” pursuant to §ꢂꢈꢂ German Stock Corporation Act

I. Declaration of compliance

The Board of Management and Supervisory Board of

Bayerische Motoren Werke Aktiengesellschaft (“BMW AG”)

declare the following with respect to the recommendations

of the “Government Commission on the German Corpo-

rate Governance Code”:

ꢂ. During the period since filing the most recent declaration

on ꢏ December ꢃꢅꢅꢊ, BMW AG has complied with all rec-

ommendations published on ꢃꢅ July ꢃꢅꢅꢊ in the official

section of the electronic Federal Gazette (Code version

dated ꢂꢏ June ꢃꢅꢅꢊ), except for the divergence from sec-

tion ꢏ.ꢃ.ꢃ paragraph ꢂ GCGC already declared on ꢏ Decem-

ber ꢃꢅꢅꢊ, namely that the discussion and regular review of

the structure of the compensation system of the Board

of Management is performed by the Personnel Commit-

tee and not, additionally, by the full Supervisory Board.

ꢃ. BMW AG will comply with all recommendations published

on ꢆ August ꢃꢅꢅꢆ in the official section of the electronic

Federal Gazette (Code version dated ꢈ June ꢃꢅꢅꢆ) except

for only one divergence, namely that the Supervisory

Board has delegated the task of taking resolutions re-

garding the Management Board remuneration system,

including the principal contractual components and the

regular review of that system, to the Personnel Commit-

tee (section ꢏ.ꢃ.ꢃ paragraph ꢂ GCGC).

II. Explanatory notes

The task of determining the Management Board compen-

sation system, including the principal contractual compo-

nents and the regular review of that system has been dele-

gated to the Personnel Committee in order to increase

the efficiency of the Supervisory Board’s work in personnel-

related matters. The Supervisory Board is informed regu-

larly and in detail of the work of the Personnel Committee.

Munich, December ꢃꢅꢅꢆ

Bayerische Motoren Werke

Aktiengesellschaft

Supervisory Board

Board of Management

1

48

Other Information

BMW AG

Principal Subsidiaries

Principal subsidiaries of BMW AG

at ꢀꢁ December ꢂꢃꢃꢄ

Equity

in euro million

Net result

in euro million

Capital investment

in ꢕ

1

Domestic

3

BMW INTEC Beteiligungs GmbH, Munich

3,769

268

247

47

–

100

3

BMW Bank GmbH, Munich

BMW Finanz Verwaltungs GmbH, Munich

117

–4

1

BMW Ingenieur-Zentrum GmbH+Co., Dingolfing

BMW Maschinenfabrik Spandau GmbH, Berlin

42

3

BMW Leasing GmbH, Munich

16

–

4

BMW Hams Hall Motoren GmbH, Munich

15

–

3

BMW Fahrzeugtechnik GmbH, Eisenach

11

–

3

5

BMW M GmbH Gesellschaft für individuelle Automobile, Munich

–

ꢂ

In the case of German subsidiaries, based on financial statements drawn up in accordance with HGB.

In the case of foreign subsidiaries, based on financial statements drawn up in accordance with uniform IFRSs accounting policies.

Equity and net result are translated at the closing rate.

profit and loss transfer agreement with BMW AG

profit and loss transfer agreement with a subsidiary of BMW AG

below euro ꢇꢅꢅ,ꢅꢅꢅ

ꢃ

ꢄ

ꢏ

ꢇ

1

48

50

52

54

Other Information

BMW AG Principal Subsidiaries

BMW Group Ten-year Comparison

BMW Group Locations

Glossary

1

156

158

159

160

Index

Index of graphs

Financial Calendar

Contacts

1

49 Other Information

Principal subsidiaries of BMW AG

at ꢀꢁ December ꢂꢃꢃꢄ

Equity

in euro million

Net result

in euro million

Capital investment

in ꢕ

2

Foreign

BMW Österreich Holding GmbH, Steyr

BMW Motoren GmbH, Steyr

1,950

740

136

127

63

394

144

130

3

100

BMW China Automotive Trading Ltd., Beijing

BMW Russland Trading OOO, Moscow

BMW Austria Gesellschaft m.b.H., Salzburg

10

BMW Holding B.V., The Hague

3,688

414

381

370

342

341

64

906

58

45

21

45

–64

2

100

BMW Italia S.p.A., Milan

BMW (Schweiz) AG, Dielsdorf

BMW Australia Finance Ltd., Melbourne, Victoria

BMW (South Africa) (Pty) Ltd., Pretoria

BMW Finance N.V., The Hague

BMW Overseas Enterprises N.V., Willemstad

BMW Japan Corp., Tokyo

297

347

213

175

153

118

53

7

BMW Japan Finance Corp., Tokyo

BMW Belgium Luxembourg S.A./N.V., Bornem

BMW France S.A., Montigny le Bretonneux

BMW Canada Inc., Whitby

26

22

61

–91

26

15

14

9

BMW Australia Ltd., Melbourne, Victoria

BMW Portugal Lda., Lisbon

BMW Hellas Trade of Cars SA, Athens

BMW Korea Co., Ltd., Seoul

46

25

BMW Automotive (Ireland) Ltd., Dublin

BMW Sverige AB, Stockholm

24

9

24

–9

5

BMW New Zealand Ltd., Auckland

BMW Nederland B.V., The Hague

22

19

7

BMW (UK) Holdings Ltd., Bracknell

BMW (UK) Ltd., Bracknell

1,084

868

805

168

105

–10

–21

90

100

BMW (UK) Manufacturing Ltd., Bracknell

BMW Financial Services (GB) Ltd., Hook

BMW (UK) Capital plc, Bracknell

–89

–18

BMW Malta Ltd., St. Julians

972

833

592

107

58

100

BMW Malta Finance Ltd., St. Julians

BMW Coordination Center V.o.F., Bornem

–2

BMW España Finance S.L., Madrid

BMW Ibérica S.A., Madrid

360

262

–3

21

32

100

BMW de Mexico, S.A. de C.V., Mexico City

–14

BMW (US) Holding Corp., Wilmington, Del.

BMW Manufacturing, LLC, Wilmington, Del.

BMW Financial Services NA, LLC, Wilmington, Del.

BMW of North America, LLC, Wilmington, Del.

BMW US Capital, LLC, Wilmington, Del.

1,206

690

577

242

233

5

135

–106

–60

20

100

1

50

BMW GroupTen-year Comparison

2

008

2007

IASs/IFRSs

Deliveries to customers

3

Automobiles

units

1,435,876

101,685

1,500,678

102,467

4

Motorcycles

Production

3

Automobiles

units

1,439,918

104,220

1,541,503

104,396

5

Motorcycles

Financial Services

Contract portfolio

contracts

3,031,935

57,587

2,629,949

51,257

Business volume (based on balance sheet carrying amounts)

euro million

Income Statement

Revenues

euro million

ꢕ

53,197

16.7

921

351

0.7

56,018

21.8

Gross profit margin Group

Profit before financial result

Profit before tax

euro million

ꢕ

4,212

3,873

6.9

Return on sales (earnings before tax/revenues)

Income taxes

euro million

ꢕ

21

739

Effective tax rate

6.0

19.1

Net profit/– loss for the year

euro million

330

3,134

Balance Sheet

Non-current assets

Current assets

euro million

ꢕ

62,416

38,670

20,273

20.1

56,619

32,378

21,744

24.4

Equity

Equity ratio Group

Non-current provisions and liabilities

Current provisions and liabilities

Balance sheet total

euro million

41,526

39,287

101,086

33,469

33,784

88,997

Cash Flow Statement

Cash and cash equivalents at balance sheet date

euro million

ꢕ

7,454

4,471

4,204

7.9

2,393

6,246

4,267

7.6

7

Operating cash flow

Capital expenditure

Capital expenditure ratio (capital expenditure/revenues)

Personnel

8

Workforce at the end of year

100,041

75,612

107,539

76,704

Personnel cost per employee

euro

Dividend

1

48

5ꢆ

52

54

Other Information

BMW AG Principal Subsidiaries

BMW GroupTen-year Comparison

BMW Group Locations

Glossary

Index

Index of graphs

Financial Calendar

Contacts

Dividend total

euro million

euro

197

694

Dividend per share of common stock/preferred stock

0.30/0.32

1.06/1.08

1

156

158

159

160

ꢂ

adjusted for new accounting treatment of pension obligations

ꢃ

ꢄ

ꢏ

ꢇ

reclassified after harmonisation of internal and external reporting systems

including Rover Cars up to ꢉ May ꢃꢅꢅꢅ and Land Rover up to ꢄꢅ June ꢃꢅꢅꢅ

excluding C1, sales volume to ꢃꢅꢅꢄ: ꢄꢃ,ꢆꢇꢉ units, excluding Husqvarna Motorcycles (ꢂꢄ,ꢇꢂꢂ motorcycles)

up to ꢂꢉꢉꢉ including BMW F 650 assembly by Aprilia S.p.A., from ꢃꢅꢅꢈ including BMW G 650 X assembly by Piaggio S.p.A./excluding C1 production by Bertone, production

volume C1 up to ꢃꢅꢅꢃ: ꢄꢄ,ꢏꢆꢉ units, excluding Husqvarna Motorcycles (ꢂꢏ,ꢃꢄꢃ motorcycles)

The net profit before exceptional items amounted to euro ꢈꢈꢄ million.

Figures (available since ꢃꢅꢅꢅ) are reported in the cash flow statement up to ꢃꢅꢅꢈ as cash inflow from operating activities of Industrial Operations and from ꢃꢅꢅꢊ as cash inflow from

operating activities of the Automobiles segment.

ꢈ

ꢊ

ꢆ

ꢉ

Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners.

adjustment to dividend due to buy-back of treasury shares

1

51 Other Information

2

006

2005

IASs/IFRSs

2004

IASs/IFRSs,₁

adjusted

2003

IASs/IFRSs

2002

IASs/IFRSs,₂

adjusted

2001

IASs/IFRSs

2000

IASs/IFRSs

2000

HGB

1999

HGB

IASs/IFRSs

1

2

,373,970

1,327,992

97,474

1,208,732

92,266

1,104,916

92,962

1,057,344

92,599

905,657

84,713

1,011,874

74,614

1,011,874

74,614

1,180,429

65,168

1

00,064

,366,838

03,759

1,323,119

92,012

1,250,345

93,836

1,118,940

89,745

1,090,258

93,010

946,730

90,478

1,026,775

74,397

1,026,775

74,397

1,147,420

69,157

1

,270,528

2,087,368

40,428

1,843,399

32,556

1,623,425

28,647

1,443,236

26,505

1,297,702

25,306

1,317,150

24,958

970,747

17,578

1,010,839

16,859

4

4,010

4

8,999

46,656

22.9

44,335

23.2

41,525

22.7

42,411

22.8

38,463

25.3

37,226

22.8

35,356

18.1

34,402

16.4

2

3.1

4

,050

,124

3,793

3,287

7.0

3,774

3,583

8.1

3,353

3,205

7.7

3,505

3,297

7.8

3,356

3,242

8.4

2,065

2,032

5.5

1,578

1,663

4.7

931

4

1,111

3.2

8

.4

,250

0.3

,874

1

2

1,048

31.9

1,341

37.4

1,258

39.3

1,277

38.7

1,376

42.4

823

637

448

3

40.5

38.3

40.3

6

2,239

2,242

1,947

2,020

1,866

1,209

1,026

–2,487

5

2

1

0,514

8,543

9,130

47,556

27,010

16,973

22.8

40,822

26,812

16,534

24.4

36,921

24,554

16,150

26.3

34,667

20,844

13,871

25.0

31,282

19,977

10,770

21.0

30,079

19,261

9,432

20,056

15,819

4,896

19,857

17,650

3,932

2

4.2

19.1

13.6

10.5

31,372

28,555

79,057

29,509

28,084

74,566

26,517

24,583

67,634

22,090

23,235

61,475

20,028

21,612

55,511

19,223

21,266

51,259

17,386

22,522

49,340

13,457

17,522

35,875

14,785

18,790

37,507

1

,336

,373

,313

1,621

6,184

3,993

8.6

2,128

6,157

4,347

9.8

1,659

4,970

4,245

10.2

2,333

4,553

4,042

9.5

2,437

4,304

3,516

9.1

2,927

3,966

2,781

7.5

2,879

–

2,055

–

5

4

2,138

6.0

2,155

6.3

8

.8

1

06,575

6,621

105,798

75,238

105,972

73,241

104,342

73,499

101,395

69,560

97,275

66,711

93,624

63,548

93,624

62,307

114,952

55,710

7

9

4

58

419

392

351

350

310

269

0

.70/0.72

0.64/0.66

0.62/0.64

0.58/0.60

0.52/0.54

0.46/0.48

0.40/0.42

1

52

BMW Group

Locations

—

S

—

S

—

R

S

—

R

—

R

—

R

—

P

—

A

—

S

—

S

—

A

—

P

—

S

—

S

—

H

Headquarters

The BMW Group is present in the world markets with

ꢅꢌ production and assembly plants, ꢌꢎ sales subsidiaries

and a research and development network.

—

R

Research and Development

BMW Group Research and Innovation Centre

(

FIZ), Munich

1

48

50

52

54

Other Information

BMW AG Principal Subsidiaries

BMW Group Ten-year Comparison

BMW Group Locations

Glossary

Index

Index of graphs

Financial Calendar

Contacts

BMW Group Forschung und Technik, Munich

BMW Group Car IT, Munich

BMW Innovations- und Technologiezentrum für

Leichtbau, Landshut

BMW Entwicklungszentrum für Dieselmotoren,

Steyr, Austria

BMW Group Designworks, Newbury Park, USA

BMW Group Technology Office, Palo Alto, USA

BMW Group Engineering and Emission Test Center,

Oxnard, USA

1

156

158

159

160

BMW Group Technology Office, Tokyo, Japan

BMW Group Entwicklungsbüro, Beijing, China

BMW Group Entwicklung USA, Woodcliff Lake, USA

1

53 Other Information

—

S

—

S

—

S

—

P

— S

— R

—

R — S

— A

—

S

— S

—

S

—

S

—

P — P

P

— S

—

P

—

P

— S

—

S

—

P

—

S

R

—

P

—

S

— S

—

S

—

S

—

P— P — S

—

A

— R — P — C

H— P

—

P

— P — R

—

S

— S

—

S

—

S

— S

—

A

—

P

—

S

—

S

—

A

—

S

— S

—

S

—

S

—

S

—

S

—

S

—

S

—

P

Production

— C Contract production

Magna Steyr Fahrzeugtechnik, Austria

— S Sales subsidiary markets

Berlin plant

Dingolfing plant

Eisenach plant

Argentina

Australia

Austria

Indonesia

South Africa

South Korea

Spain

Ireland

Italy

Goodwood plant, GB (headquarters of

Rolls-Royce Motor Cars Limited)

Hams Hall plant, GB

Landshut plant

Leipzig plant

Munich plant

Oxford plant, GB

Regensburg plant

Rosslyn plant, South Africa

BMW Brilliance Automotive Ltd., Shenyang,

China (joint venture with Brilliance China

Automotive Holdings)

— A Assembly plants

Belgium

Brazil

Bulgaria

China

Canada

Czech Republic

Denmark

Finland

Japan

Malaysia

Malta

Sweden

Switzerland

Thailand

USA

CKD production Cairo, Egypt

CKD production Chennai, India

CKD production Jakarta, Indonesia

CKD production Kaliningrad, Russia

CKD production Kulim, Malaysia

CKD production Rayong, Thailand

Mexico

Netherlands

New Zealand

Norway

Philippines

Poland

Portugal

Romania

Russia

France

Germany

Great Britain

Greece

Spartanburg plant, USA

Steyr plant, Austria

Hungary

India

Slovakia

Slovenia

Swindon plant, GB

Wackersdorf plant

Husqvarna Motorcycles S.r. l., Cassinetta di

Biandronno, Italy

1

54

Glossary

ACEA

Effectiveness

Abbreviation for “Association des Constructeurs Européens

d’Automobiles” (European Automobile Manufacturers

Association).

The degree to which offsetting changes in fair value or cash

flows attributable to a hedged risk are achieved by the

hedging instrument.

Common stock

Efficient Dynamics

Stock with voting rights (cf. preferred stock).

The aim of Efficient Dynamics is to reduce consumption

and emissions whilst simultaneously increasing dynamics

and performance. This involves a holistic approach to

achieving optimum automobile potential, ranging from

efficient engine technologies, lightweight construction

and comprehensive energy and heat management inside

the vehicle.

Cost of materials

Comprises all expenditure to purchase raw materials and

supplies.

DAX

Abbreviation for “Deutscher Aktienindex”, the German

Stock Index. The index is based on the weighted market

prices of the ꢄꢅ largest German stock corporations (by

stock market capitalisation).

Equity ratio

The proportion of equity (= subscribed capital, reserves,

accumulated other equity and minority interest) to the

balance sheet total.

Deferred taxes

Accounting for deferred taxes is a method of allocating tax

expense to the appropriate accounting period.

Free cash flow

Free cash flow corresponds to the cash inflow from operat-

ing activities of the Automobiles segment less the cash

outflow for investing activities of the Automobiles segment.

Derivatives

Financial products, whose measurement is derived princi-

pally from market price, market price fluctuations and ex-

pected market price changes of the underlying instrument

Gross margin

Gross profit as a percentage of revenues.

(

e.g. indices, stocks or bonds).

IASs

DJSI World

International Accounting Standards.

Abbreviation for “Dow Jones Sustainability Index World”.

A family of indexes created by Dow Jones and the Swiss

investment agency SAM Sustainability Group for com-

panies with strategies based on a sustainability concept.

The BMW Group has been one of the leading companies

in the DJSI since ꢂꢉꢉꢉ.

IFRSs

International Financial Reporting Standards, intended to

ensure global comparability of financial reporting and con-

sistent presentation of financial statements. The IFRSs are

issued by the International Accounting Standards Board

and include the International Accounting Standards (IASs),

which are still valid.

EBIT

Abbreviation for “Earnings Before Interest and Taxes”. The

profit before income taxes, minority interest and financial

result.

ISO ꢂꢅ00ꢂ

An internationally recognised standard for environmental

management systems.

EBITDA

Abbreviation for “Earnings Before Interest, Taxes, Depre-

ciation and Amortisation”. The profit before income taxes,

minority interest, financial result and depreciation/amor-

tisation.

Operating cash flow

Cash inflow from the Automobiles segment.

1

48

50

52

54

Other Information

BMW AG Principal Subsidiaries

BMW Group Ten-year Comparison

BMW Group Locations

Glossary

Preferred stock

Stock which receives a higher dividend than common

stock, but without voting rights.

1

156

158

159

160

Index

Index of graphs

Financial Calendar

Contacts

1

55 Other Information

Production network

Supplier relationship management

The BMW Group production network consists worldwide

of ꢂꢊ plants, six assembly plants and one contract produc-

tion plant. Within this network, the plants supply one an-

other with systems and components and are all character-

ised by a high level of productivity, agility and flexibility.

Supplier relationship management (SRM) uses focused

procurement strategies to organise networked supplier

relationships, optimise processes for supplier qualification

and selection, ensure the application of uniform standards

throughout the Group and create efficient sourcing and

procurement processes along the whole value added

chain.

Rating

Standardised evaluation of a company’s credit standing

which is widely accepted on the global capital markets.

Ratings are published by independent rating agencies,

e.g. Standard&Poor’s or Moody’s, based on their analysis

of a company.

Sustainability

Sustainability, or sustainable development, gives equal

consideration to ecological, social and economic develop-

ment. In ꢂꢉꢆꢊ the United Nations “World Commission on

Environment and Development” defined sustainable de-

velopment as development that meets the needs of the

present without compromising the ability of future genera-

tions to meet their own needs. The economic relevance

of corporate sustainability to the BMW Group is evident in

three areas: resources, reputation and risk.

Return on sales

Pre-tax:

Profit before tax as a percentage of revenues.

Post-tax: Profit as a percentage of revenues.

Risk management

An integral component of all business processes. Follow-

ing enactment of the Law on Control and Transparency

within Businesses (KonTraG), all companies listed on a

stock exchange in Germany are required to set up a risk

management system. The purpose of this system is to

identify risks at an early stage which could have a signifi-

cant adverse effect on the assets, liabilities, financial posi-

tion and results of operations, and which could endanger

the continued existence of the company. This applies in

particular to transactions involving risk, errors in accounting

or financial reporting and violations of legal requirements.

The Board of Management is required to set up an appro-

priate system, to document that system and monitor it reg-

ularly with the aid of the internal audit department.

Subscribed capital

The share capital of a company is computed by multiplying

the nominal value of the shares by the number of shares.

Subsidiaries

Subsidiaries are those enterprises which, either directly

or indirectly, are under the uniform control of the manage-

ment of BMW AG or in which BMW AG, either directly or

indirectly

–

holds the majority of the voting rights

has the right to appoint or remove the majority of the

members of the Board of Management or equivalent

governing body, and in which BMW AG is at the same

time (directly or indirectly) a shareholder

–

has control (directly or indirectly) over another enterprise

on the basis of a control agreement or a provision in the

statutes of that enterprise.

1

56

Index

A

E

Accounting principles

Annual General Meeting

ꢂꢏꢄ– ꢂꢏꢏ, ꢂꢇꢉ

ꢇꢆ

Earnings per share

Efficient Dynamics

ꢊꢅ, ꢂꢇꢏ

ꢏꢄ, ꢇꢅ, ꢊꢄ, ꢆꢄ, ꢉꢃ– ꢉꢄ, ꢂꢏꢄ

ꢅꢉ, ꢂꢄ, ꢃꢂ, ꢃꢇ, ꢄꢏ– ꢄꢈ, ꢄꢆ, ꢏꢅ, ꢈꢄ– ꢈꢏ,

ꢂꢂ– ꢂꢃ, ꢂꢇ, ꢏꢃ, ꢏꢇ– ꢏꢈ, ꢂꢅꢏ, ꢂꢄꢆ,

Application of §ꢃꢈꢏ ꢐꢀꢒ and §ꢃꢈꢏb of the German

Commercial Code (HGB) ꢂꢃꢆ

Employees

ꢅꢊ, ꢂꢃ– ꢂꢄ, ꢃꢏ, ꢃꢉ– ꢄꢂ, ꢄꢄ, ꢄꢊ, ꢏꢂ– ꢏꢃ, ꢏꢇ– ꢏꢈ,

ꢇꢇ–ꢇꢈ, ꢇꢆ, ꢈꢇ– ꢈꢈ, ꢈꢉ, ꢉꢄ, ꢂꢅꢏ– ꢂꢅꢈ, ꢂꢄꢆ– ꢂꢏꢃ, ꢂꢇꢂ

Equity ꢏꢄ, ꢏꢈ– ꢇꢅ, ꢇꢄ–ꢇꢏ, ꢇꢊ– ꢇꢉ, ꢊꢄ, ꢊꢇ, ꢊꢊ– ꢊꢆ, ꢆꢅ– ꢆꢃ,

ꢆꢏ– ꢆꢈ, ꢉꢅ– ꢉꢂ, ꢉꢇ, ꢉꢊ, ꢂꢅꢄ– ꢂꢅꢇ, ꢂꢅꢊ, ꢂꢅꢉ, ꢂꢃꢅ– ꢂꢃꢂ, ꢂꢄꢅ, ꢂꢄꢄ,

ꢂꢏꢆ– ꢂꢏꢉ, ꢂꢇꢂ, ꢂꢇꢏ

Apprentices

ꢃꢉ– ꢄꢅ, ꢉꢄ

B

Balance sheet structure ꢇꢏ

Exchange rates

ꢂꢈ, ꢇꢅ, ꢇꢃ– ꢇꢄ, ꢈꢃ, ꢆꢃ, ꢂꢃꢏ

Board of Management ꢅꢉ– ꢂꢄ, ꢂꢇ, ꢏꢃ, ꢏꢈ, ꢇꢇ, ꢈꢃ, ꢆꢅ, ꢂꢅꢏ,

ꢂꢃꢈ– ꢂꢃꢊ, ꢂꢄꢂ– ꢂꢄꢃ, ꢂꢄꢈ– ꢂꢏꢄ, ꢂꢏꢊ, ꢂꢇꢇ

Explanatory notes to the cash flow statements ꢂꢃꢇ

Bonds

ꢏꢃ– ꢏꢄ, ꢇꢃ, ꢇꢇ, ꢈꢈ, ꢊꢊ, ꢂꢅꢊ, ꢂꢃꢂ, ꢂꢇꢏ

F

Financial assets

Financial instruments

ꢆꢇ– ꢆꢊ, ꢉꢅ– ꢉꢂ, ꢂꢅꢄ–ꢂꢅꢏ, ꢂꢂꢏ, ꢂꢂꢈ, ꢂꢃꢅ– ꢂꢃꢇ, ꢂꢄꢉ

ꢇꢄ, ꢇꢊ, ꢊꢇ, ꢆꢏ– ꢆꢇ, ꢉꢉ, ꢂꢅꢅ, ꢂꢂꢊ, ꢂꢂꢉ, ꢂꢃꢂ– ꢂꢃꢃ

C

ꢏꢈ, ꢇꢅ, ꢇꢃ– ꢇꢄ, ꢇꢇ, ꢇꢆ, ꢈꢃ– ꢈꢄ, ꢊꢆ,

Capital expenditure

Cash and cash equivalents

Cash flow ꢅꢊ, ꢂꢇ, ꢏꢄ, ꢏꢊ, ꢇꢂ– ꢇꢃ, ꢈꢄ, ꢊꢉ, ꢆꢇ– ꢆꢈ, ꢂꢂꢈ– ꢂꢂꢊ,

ꢂꢇ, ꢃꢏ, ꢇꢃ– ꢇꢄ, ꢂꢄꢅ, ꢂꢇꢂ

ꢇꢃ– ꢇꢏ, ꢊꢊ, ꢆꢅ, ꢂꢃꢇ

Financial liabilities

ꢏꢊ– ꢏꢆ, ꢇꢃ– ꢇꢄ, ꢇꢇ, ꢊꢇ, ꢊꢊ, ꢆꢂ, ꢆꢏ, ꢆꢈ, ꢂꢅꢇ,

ꢂꢂꢂ, ꢂꢂꢏ, ꢂꢂꢊ, ꢂꢂꢉ, ꢂꢃꢂ– ꢂꢃꢃ

ꢂꢂꢉ– ꢂꢃꢂ, ꢂꢃꢄ– ꢂꢃꢇ, ꢂꢄꢄ, ꢂꢇꢂ, ꢂꢇꢏ– ꢂꢇꢇ

Cash flow statement ꢅꢊ, ꢂꢇ, ꢇꢂ– ꢇꢃ, ꢊꢈ, ꢊꢉ, ꢂꢃꢇ, ꢂꢄꢄ, ꢂꢇꢂ

Financial result ꢅꢈ– ꢅꢊ, ꢏꢆ– ꢇꢅ, ꢈꢅ, ꢊꢄ, ꢆꢈ, ꢉꢅ, ꢂꢅꢊ, ꢂꢃꢉ–ꢂꢄꢅ,

ꢂꢇꢂ, ꢂꢇꢏ

CO emissions

Compensation Report ꢇꢇ, ꢂꢃꢊ, ꢂꢏꢂ–ꢂꢏꢈ

Compliance

ꢂꢆ, ꢄꢃ– ꢄꢄ, ꢄꢇ– ꢄꢈ, ꢏꢅ, ꢈꢏ, ꢊꢅ, ꢂꢈꢂ

Financial Services ꢅꢉ, ꢂꢂ, ꢂꢏ, ꢃꢊ– ꢃꢉ, ꢏꢃ, ꢏꢊ– ꢏꢉ, ꢇꢂ, ꢇꢄ, ꢇꢊ,

ꢈꢄ, ꢈꢇ, ꢊꢅ, ꢊꢄ, ꢊꢇ, ꢊꢊ, ꢊꢉ, ꢆꢂ, ꢂꢃꢇ, ꢂꢃꢉ– ꢂꢄꢅ, ꢂꢏꢉ, ꢂꢇꢂ

Fleet consumption ꢄꢇ

ꢃ

ꢂꢅ– ꢂꢂ, ꢄꢃ, ꢄꢉ, ꢈꢇ– ꢈꢊ, ꢂꢃꢊ, ꢂꢄꢆ– ꢂꢏꢂ, ꢂꢏꢈ–ꢂꢏꢊ

Consolidated companies

ꢇꢄ, ꢆꢅ–ꢆꢃ, ꢂꢅꢏ, ꢂꢃꢈ

Foreign currency translation ꢆꢃ

Consolidation principles ꢆꢃ, ꢂꢄꢄ

Contingent liabilities

Corporate Governance

ꢂꢏꢄ– ꢂꢏꢏ, ꢂꢏꢈ– ꢂꢏꢊ

ꢆꢈ, ꢂꢂꢇ

ꢂꢅ, ꢂꢃ, ꢇꢇ, ꢂꢃꢊ, ꢂꢄꢏ, ꢂꢄꢆ– ꢂꢄꢉ, ꢂꢏꢂ,

G

Group tangible, intangible and investment assets

ꢉꢈ– ꢉꢊ

ꢉꢏ,

Cost of materials

Cost of sales

Current assets

ꢂꢄꢅ– ꢂꢄꢂ, ꢂꢇꢂ

ꢇꢇ– ꢇꢈ, ꢂꢇꢏ

ꢏꢉ– ꢇꢅ, ꢇꢆ, ꢈꢅ, ꢊꢄ, ꢊꢊ, ꢊꢉ, ꢆꢄ, ꢆꢆ– ꢆꢉ, ꢉꢈ

ꢇꢂ, ꢇꢏ, ꢇꢉ, ꢊꢇ, ꢊꢊ, ꢆꢏ– ꢆꢇ, ꢉꢂ, ꢉꢊ, ꢂꢅꢂ,

I

Income statement ꢏꢉ, ꢈꢅ– ꢈꢂ, ꢊꢃ, ꢊꢉ, ꢆꢃ, ꢆꢇ–ꢆꢆ, ꢉꢄ, ꢉꢊ, ꢂꢅꢊ,

ꢂꢂꢅ, ꢂꢃꢅ– ꢂꢃꢂ, ꢂꢄꢄ, ꢂꢇꢂ

Current provisions and liabilities

ꢇꢏ, ꢊꢇ, ꢂꢇꢂ

Income tax assets ꢂꢅꢂ

Current taxes

ꢊꢏ, ꢉꢅ, ꢊꢈ– ꢊꢊ, ꢂꢅꢂ, ꢂꢂꢅ– ꢂꢂꢂ

Income taxes ꢏꢉ, ꢈꢅ, ꢊꢄ, ꢊꢊ, ꢆꢈ, ꢉꢅ–ꢉꢂ, ꢂꢇꢂ, ꢂꢇꢏ

Income tax liabilities ꢂꢂꢅ

D

Intangible assets

ꢂꢇ, ꢇꢅ– ꢇꢂ, ꢇꢄ, ꢇꢊ–ꢇꢉ, ꢊꢇ, ꢊꢊ, ꢆꢄ– ꢆꢏ, ꢆꢉ,

DAX

ꢂꢂ, ꢏꢃ, ꢂꢇꢏ

ꢉꢂ, ꢉꢇ– ꢉꢈ, ꢂꢄꢅ– ꢂꢄꢂ

Internal financing ꢇꢇ

Dealer organisation

ꢃꢆ, ꢏꢅ– ꢏꢂ, ꢈꢇ, ꢈꢉ, ꢂꢃꢂ

Declaration to Corporate Governance Code ꢂꢏꢊ

Deferred taxes ꢇꢄ, ꢊꢊ, ꢆꢈ, ꢉꢂ– ꢉꢃ, ꢂꢅꢏ, ꢂꢇꢏ

Inventories

Investments

ꢇꢄ, ꢇꢉ, ꢊꢇ, ꢊꢊ, ꢆꢄ, ꢆꢈ, ꢂꢅꢃ

ꢂꢇ– ꢂꢈ, ꢏꢉ– ꢇꢅ, ꢇꢃ– ꢇꢄ, ꢇꢆ– ꢈꢅ, ꢈꢈ, ꢊꢄ, ꢊꢇ,

Development ꢂꢃ, ꢂꢇ, ꢃꢇ, ꢄꢅ, ꢄꢇ– ꢄꢉ, ꢏꢃ, ꢏꢈ– ꢏꢊ, ꢏꢉ– ꢇꢅ, ꢇꢄ,

ꢈꢅ, ꢈꢄ– ꢈꢏ, ꢈꢈ–ꢈꢊ, ꢊꢅ– ꢊꢂ, ꢊꢄ, ꢆꢄ– ꢆꢏ, ꢆꢉ, ꢉꢇ–ꢉꢈ, ꢂꢅꢂ, ꢂꢅꢈ,

ꢂꢄꢃ– ꢂꢄꢄ, ꢂꢄꢊ, ꢂꢇꢃ, ꢂꢇꢇ

ꢊꢊ– ꢊꢆ, ꢆꢅ, ꢆꢃ, ꢆꢏ– ꢆꢇ, ꢉꢅ–ꢉꢂ, ꢉꢇ, ꢉꢊ, ꢂꢅꢊ, ꢂꢂꢇ, ꢂꢂꢊ, ꢂꢂꢉ– ꢂꢃꢅ, ꢂꢃꢏ,

ꢂꢃꢉ– ꢂꢄꢅ

Investments accounted for using the equity method and

Dividend

ꢂꢇꢂ, ꢂꢇꢇ

ꢂꢇ, ꢄꢂ, ꢏꢄ, ꢏꢇ– ꢏꢈ, ꢇꢃ, ꢊꢊ, ꢆꢄ, ꢉꢃ–ꢉꢄ, ꢂꢅꢏ, ꢂꢃꢇ, ꢂꢏꢃ,

other investments

ꢉꢊ

1

48

50

52

54

56

Other Information

BMW AG Principal Subsidiaries

BMW Group Ten-year Comparison

BMW Group Locations

Glossary

Index

Index of graphs

Financial Calendar

Contacts

Dow Jones Sustainability Index World

ꢏꢏ, ꢂꢇꢏ

K

Key data per share ꢏꢄ

L

158

159

160

Lease business

Leased products

ꢃꢊ– ꢃꢆ, ꢈꢄ

ꢇꢃ– ꢇꢄ, ꢊꢇ, ꢊꢊ, ꢆꢏ, ꢉꢂ, ꢉꢇ, ꢉꢊ, ꢂꢄꢅ– ꢂꢄꢂ

Locations

ꢄꢅ, ꢄꢃ– ꢄꢏ, ꢄꢊ, ꢏꢂ, ꢂꢇꢃ

1

57 Other Information

M

S

Mandates of members of the Board of Management ꢂꢄꢊ

Mandates of members of the Supervisory Board ꢂꢄꢏ– ꢂꢄꢈ

Sales and administrative costs

ꢏꢉ– ꢇꢅ, ꢊꢄ, ꢆꢉ

Sales volume

ꢂꢏ, ꢃꢅ– ꢃꢄ, ꢃꢇ– ꢃꢈ, ꢇꢂ, ꢈꢈ, ꢈꢉ– ꢊꢅ, ꢂꢇꢂ

ꢊꢉ, ꢆꢊ– ꢆꢆ, ꢂꢃꢉ– ꢂꢄꢂ

Marketable securities

ꢇꢅ, ꢇꢃ– ꢇꢄ, ꢇꢉ, ꢊꢊ, ꢊꢉ, ꢆꢏ, ꢉꢅ– ꢉꢂ, ꢉꢇ,

Segment information

ꢉꢊ, ꢉꢉ– ꢂꢅꢅ, ꢂꢅꢏ, ꢂꢂꢊ, ꢂꢂꢉ–ꢂꢃꢅ

Shareholdings of members of the Board of Management

and the Supervisory Board ꢂꢃꢊ

Motorcycles

ꢅꢊ, ꢂꢏ, ꢂꢆ, ꢃꢇ– ꢃꢈ, ꢃꢉ, ꢄꢆ, ꢏꢅ–ꢏꢂ, ꢏꢊ– ꢇꢂ, ꢇꢊ–ꢇꢆ,

ꢈꢆ, ꢊꢅ, ꢊꢄ, ꢊꢇ, ꢊꢉ, ꢉꢊ, ꢂꢃꢉ– ꢂꢄꢂ, ꢂꢇꢂ, ꢂꢇꢄ

Stock

ꢂꢄꢆ– ꢂꢄꢉ, ꢂꢏꢃ, ꢂꢏꢏ, ꢂꢏꢊ, ꢂꢇꢂ, ꢂꢇꢏ– ꢂꢇꢇ

Subscribed capital ꢇꢉ, ꢊꢇ, ꢂꢇꢏ– ꢂꢇꢇ

ꢇꢄ, ꢇꢆ– ꢇꢉ, ꢊꢆ, ꢆꢅ– ꢆꢃ, ꢆꢏ, ꢉꢅ– ꢉꢂ, ꢉꢄ, ꢉꢇ– ꢉꢊ,

ꢂꢇ, ꢏꢃ– ꢏꢄ, ꢏꢇ– ꢏꢈ, ꢇꢅ, ꢇꢆ, ꢊꢄ, ꢆꢄ, ꢉꢃ– ꢉꢄ, ꢂꢅꢏ, ꢂꢃꢊ,

N

Net profit ꢅꢊ, ꢂꢏ, ꢄꢂ, ꢏꢉ–ꢇꢂ, ꢈꢅ, ꢊꢄ, ꢊꢊ– ꢊꢆ, ꢆꢂ, ꢆꢄ, ꢆꢇ, ꢉꢃ,

ꢂꢅꢄ–ꢂꢅꢏ, ꢂꢃꢇ, ꢂꢏꢃ, ꢂꢇꢂ

Subsidiaries

ꢂꢅꢂ, ꢂꢅꢏ– ꢂꢅꢇ, ꢂꢂꢄ, ꢂꢂꢇ, ꢂꢂꢊ, ꢂꢂꢉ, ꢂꢃꢂ, ꢂꢃꢈ, ꢂꢏꢅ, ꢂꢏꢆ– ꢂꢏꢉ, ꢂꢇꢃ, ꢂꢇꢇ

New financial reporting rules

Non-current assets ꢇꢏ, ꢊꢇ, ꢊꢊ, ꢆꢏ, ꢉꢊ, ꢂꢅꢂ, ꢂꢄꢅ– ꢂꢄꢂ, ꢂꢇꢂ

ꢆꢊ– ꢆꢆ

Supervisory Board

ꢂꢄꢆ– ꢂꢏꢊ

ꢅꢆ– ꢂꢄ, ꢂꢇ, ꢏꢈ, ꢈꢃ, ꢂꢃꢈ– ꢂꢃꢊ, ꢂꢄꢏ,

Non-current provisions and liabilities

ꢇꢏ, ꢊꢇ, ꢂꢇꢂ

Suppliers

ꢄꢉ, ꢏꢄ, ꢈꢏ

Sustainability ꢄꢉ, ꢏꢄ– ꢏꢏ, ꢂꢄꢉ, ꢂꢇꢏ– ꢂꢇꢇ

O

Other disclosures relating to the income statement ꢉꢄ

Other financial result ꢏꢉ– ꢇꢅ, ꢊꢄ, ꢉꢅ

T

Tangible, intangible and investment assets

ꢉꢈ– ꢉꢊ, ꢂꢄꢅ– ꢂꢄꢂ

ꢇꢉ, ꢊꢊ, ꢉꢏ,

Other investments

ꢇꢄ, ꢊꢇ, ꢆꢅ, ꢆꢏ, ꢉꢇ, ꢉꢊ, ꢂꢂꢊ, ꢂꢂꢉ

Other operating expenses

Other operating income

ꢏꢉ, ꢊꢄ, ꢆꢉ, ꢉꢈ

ꢏꢉ–ꢇꢅ, ꢈꢅ, ꢊꢄ, ꢆꢉ

Trade payables

Trade receivables

ꢏꢆ, ꢇꢇ, ꢇꢉ, ꢊꢇ, ꢂꢂꢏ, ꢂꢂꢊ, ꢂꢂꢉ, ꢂꢃꢃ

ꢇꢄ, ꢇꢉ, ꢊꢇ, ꢂꢅꢂ– ꢂꢅꢄ, ꢂꢂꢊ, ꢂꢂꢉ

Other provisions

ꢇꢏ, ꢇꢉ, ꢊꢇ, ꢆꢈ, ꢂꢂꢅ

Outlook

ꢈꢆ– ꢊꢂ, ꢂꢅꢇ

W

Workforce

ꢅꢊ, ꢂꢏ, ꢃꢉ– ꢄꢂ, ꢇꢅ, ꢇꢈ, ꢇꢆ, ꢈꢈ, ꢈꢉ, ꢆꢉ, ꢉꢄ, ꢂꢇꢂ

P

Pension provisions

ꢂꢃꢊ, ꢂꢏꢄ

ꢏꢊ– ꢏꢆ, ꢇꢄ, ꢇꢆ–ꢇꢉ, ꢊꢇ, ꢆꢈ, ꢂꢅꢇ–ꢂꢅꢊ, ꢂꢅꢉ,

Personnel costs

Prepayments

ꢆꢉ, ꢉꢄ

ꢇꢉ, ꢂꢅꢂ

Principal subsidiaries

ꢂꢏꢆ– ꢂꢏꢉ

Production ꢅꢊ, ꢂꢅ, ꢂꢇ, ꢃꢄ– ꢃꢈ, ꢄꢅ– ꢄꢏ, ꢄꢈ, ꢄꢉ, ꢏꢈ, ꢇꢄ, ꢈꢄ– ꢈꢏ,

ꢈꢉ, ꢆꢄ– ꢆꢏ, ꢆꢈ, ꢆꢉ, ꢉꢈ, ꢂꢂꢏ, ꢂꢃꢄ, ꢂꢇꢂ– ꢂꢇꢄ, ꢂꢇꢇ, ꢂꢈꢂ

Production network

ꢃꢄ– ꢃꢏ, ꢄꢅ, ꢄꢃ– ꢄꢄ, ꢈꢏ, ꢈꢉ, ꢂꢇꢇ

Profit before financial result ꢅꢈ– ꢅꢊ, ꢏꢆ– ꢇꢅ, ꢊꢄ, ꢂꢃꢉ, ꢂꢇꢂ

Profit before tax

ꢅꢈ– ꢅꢊ, ꢂꢏ, ꢏꢆ– ꢇꢂ, ꢊꢄ, ꢂꢄꢅ, ꢂꢇꢂ, ꢂꢇꢏ–ꢂꢇꢇ

Property, plant and equipment ꢂꢇ, ꢇꢅ– ꢇꢂ, ꢇꢄ, ꢇꢊ–ꢇꢉ, ꢊꢇ,

ꢊꢊ, ꢆꢄ– ꢆꢏ, ꢆꢉ, ꢉꢂ, ꢉꢇ–ꢉꢈ, ꢂꢂꢇ, ꢂꢄꢅ– ꢂꢄꢂ

Purchases

ꢄꢉ– ꢏꢅ, ꢈꢄ

R

Rating

ꢏꢃ, ꢈꢄ, ꢂꢅꢇ, ꢂꢃꢄ, ꢂꢇꢇ

Receivables from sales financing

ꢉꢉ, ꢂꢂꢊ, ꢂꢂꢉ, ꢂꢃꢃ

Related party relationships ꢂꢃꢈ

Report of the Supervisory Board

ꢇꢃ– ꢇꢄ, ꢊꢇ, ꢊꢊ, ꢆꢂ, ꢆꢇ, ꢉꢆ,

ꢅꢉ, ꢂꢂ, ꢂꢄ

Research

ꢃꢊ, ꢄꢊ– ꢄꢆ, ꢏꢉ–ꢇꢅ, ꢈꢅ, ꢊꢅ, ꢊꢄ, ꢆꢄ, ꢆꢉ, ꢉꢈ, ꢂꢇꢃ, ꢂꢇꢇ

Research and development costs

ꢆꢉ–ꢉꢅ, ꢉꢈ

ꢏꢉ– ꢇꢅ, ꢈꢅ, ꢊꢄ, ꢊꢊ,

Result from equity accounted investments

ꢇꢅ, ꢂꢄꢅ

Return on sales

Revenue reserves

Risk management ꢅꢉ, ꢂꢂ, ꢈꢃ, ꢈꢇ, ꢂꢃꢄ, ꢂꢇꢇ

ꢄꢂ, ꢇꢅ, ꢇꢊ, ꢊꢅ– ꢊꢂ, ꢂꢏꢃ, ꢂꢇꢂ, ꢂꢇꢇ

ꢇꢉ, ꢊꢇ, ꢂꢅꢏ

This version of the Annual Report is a translation

from the German version. Only the original German

version is binding.

1

58

Index of graphs

Finances

Profit before financial result ꢅꢈ

Profit before tax ꢅꢈ

Revenues

ꢅꢈ

BMW Group Capital expenditure and

operating cash flow ꢂꢇ

BMW Group Revenues by region

Exchange rates compared to the Euro ꢂꢈ

Oil price trend ꢂꢊ

ꢂꢇ

Precious metals price trend ꢂꢊ

Steel price trend ꢂꢊ

Contract portfolio of BMW Group Financial Services

ꢃꢅꢅꢆ

ꢃꢊ

Contract portfolio retail customer financing of

BMW Group Financial Services ꢃꢅꢅꢆ

Regional mix of BMW Group purchase

ꢃꢆ

volumes ꢃꢅꢅꢆ

ꢄꢉ

Change in cash and cash equivalents ꢇꢃ

Balance sheet structure – Automobiles segment ꢇꢏ

Balance sheet structure Group ꢇꢏ

BMW Group Value added ꢃꢅꢅꢆ

ꢇꢇ

Production and sales volume

Deliveries of automobiles ꢅꢈ

BMW Group Deliveries of automobiles by region

and market ꢃꢅ

BMW Group – key automobile markets ꢃꢅꢅꢆ

Deliveries of BMW diesel automobiles ꢃꢃ

ꢃꢅ

Automobile production of the BMW Group by

plant in ꢃꢅꢅꢆ ꢃꢄ

MINI brand cars in ꢃꢅꢅꢆ – analysis by model variant ꢃꢄ

BMW motorcycles delivered

ꢃꢇ

BMW Group – key motorcycle markets ꢃꢅꢅꢆ

BMW motorcycles in ꢃꢅꢅꢆ – analysis by series

ꢃꢈ

Workforce

BMW Group Apprentices at ꢄꢂ December ꢃꢉ

Employee fluctuation ratio BMW AG

Compliance Committee ꢂꢏꢅ

ꢄꢅ

Environment

CO emissions per automobile produced

ꢄꢃ

ꢃ

Energy consumed per automobile produced ꢄꢃ

Process wastewater per automobile produced ꢄꢄ

Water consumption per automobile produced ꢄꢄ

Roadmap of the BMW Group for sustainable mobility ꢄꢏ

Volatile organic compounds (VOC) per automobile

1

48

50

52

54

56

Other Information

BMW AG Principal Subsidiaries

BMW Group Ten-year Comparison

BMW Group Locations

Glossary

Index

Index of graphs

Financial Calendar

Contacts

produced

ꢄꢏ

Waste for removal per automobile produced ꢄꢏ

1

58

59

Development of CO emissions of BMW Group cars in

ꢃ

160

Europe (EU-ꢂꢇ)

ꢄꢇ

Stock

Development of BMW stock compared to stock

exchange indices ꢏꢃ

1

59 Other Information

Financial Calendar

Annual Accounts Press Conference

Financial Analysts’ Meeting

Quarterly Report to ꢄꢂ March ꢃꢅꢅꢉ

Annual General Meeting

ꢂꢆ March ꢃꢅꢅꢉ

ꢂꢉ March ꢃꢅꢅꢉ

ꢈ May ꢃꢅꢅꢉ

ꢂꢏ May ꢃꢅꢅꢉ

Quarterly Report to ꢄꢅ June ꢃꢅꢅꢉ

Quarterly Report to ꢄꢅ September ꢃꢅꢅꢉ

ꢏ August ꢃꢅꢅꢉ

ꢄ November ꢃꢅꢅꢉ

Annual Report ꢃꢅꢅꢉ

ꢂꢊ March ꢃꢅꢂꢅ

ꢂꢆ March ꢃꢅꢂꢅ

ꢇ May ꢃꢅꢂꢅ

Annual Accounts Press Conference

Financial Analysts’ Meeting

Quarterly Report to ꢄꢂ March ꢃꢅꢂꢅ

Annual General Meeting

ꢂꢆ May ꢃꢅꢂꢅ

Quarterly Report to ꢄꢅ June ꢃꢅꢂꢅ

Quarterly Report to ꢄꢅ September ꢃꢅꢂꢅ

ꢄ August ꢃꢅꢂꢅ

ꢄ November ꢃꢅꢂꢅ

1

60

Contacts

Business Press

Telephone +ꢏꢉ ꢆꢉ ꢄꢆꢃ-ꢃ ꢄꢄ ꢈꢃ

+

ꢏꢉ ꢆꢉ ꢄꢆꢃ-ꢃ ꢏꢂ ꢂꢆ

Fax

+ꢏꢉ ꢆꢉ ꢄꢆꢃ-ꢂ ꢅꢆ ꢆꢂ

E-mail

presse@bmwgroup.com

Investor Relations

Telephone +ꢏꢉ ꢆꢉ ꢄꢆꢃ-ꢃ ꢏꢃ ꢊꢃ

+

ꢏꢉ ꢆꢉ ꢄꢆꢃ-ꢃ ꢇꢄ ꢆꢊ

Fax

+ꢏꢉ ꢆꢉ ꢄꢆꢃ-ꢂ ꢏꢈ ꢈꢂ

E-mail

ir@bmwgroup.com

The BMW Group on the Internet

Further information about the BMW Group is available online at www.bmwgroup.com.

Investor Relations information is available directly at www.bmwgroup.com/ir. Information

about the various BMW Group brands is available at www.bmw.com, www.mini.com

and www.rolls-roycemotorcars.com

1

48

50

52

54

Other Information

BMW AG Principal Subsidiaries

BMW Group Ten-year Comparison

BMW Group Locations

Glossary

1

56

58

59

Index

Index of graphs

Financial Calendar

Contacts

16ꢆ

1

61 Other Information

The manufacture of, and the paper used for, the BMW Group’s Annual Report ꢃꢅꢅꢆ, have been certified in accordance

with the criteria of the Forest Stewardship Council (FSC). The FSC prescribes stringent standards for forest manage-

ment, thus helping to avoid uncontrolled deforestation, human rights infringements and damage to the environment.

Since products bearing the FSC label are handled by various enterprises along the processing and trading chain, the

FSC chain of custody certification rules are also applied to enterprises which process paper e.g. printing companies.

2

The CO emissions generated through the production of paper

for this report, as well as through print and production, were

neutralized by the BMW Group. To this end, the corresponding

amount of emission allowances was erased, with the transaction

identification DE75016 on ꢄ March ꢃꢅꢅꢉ.

NumberONE

Future

Growth

Customers

Profitability

The challenge of the future

03

Future

Growth

Customers

Profitability

st

The time has come not only to define mobility in the 21 century, but to realise it. Only the

best ideas and concepts will succeed: concepts which align our own needs with those of

our customers and with the challenges society faces – and in doing so create a new state

of balance that will benefit us all.

The challenge of the future

0

4

Chairman of the Board of Management

Norbert Reithofer

The challenge of the future

Norbert Reithofer

Chairman of the Board of Management

Preface

05

Ladies and Gentlemen,

2

008 has not been an easy year for any of us – and that applies equally to the BMW

Group. Who would have thought, at the start of the year, that we would see so much

turmoil in the international finance markets within a matter of months? That within

a few short weeks a whole series of reputable banking institutions would vanish from

the market? Or that entire countries would find themselves in financial difficulties?

During the course of the year, developments in the financial markets began to affect

the real economy. More than that, they shook the very framework and the mechanisms

of the global economic and financial system. Within the space of weeks, much valu-

able trust was lost. Consumers are naturally concerned – and their lack of confidence

is reflected in sales of automobiles.

Although most markets saw a major drop in sales from the previous year, the BMW

Group brands BMW, MINI and Rolls-Royce performed comparatively well under the

circumstances. Our company’s global automotive sales were 4.3% lower than the

previous year, but despite this decrease we were still able to achieve the second-best

sales figures in our company’s history. In fact, MINI was one of the few automotive

brands that reported growth in 2008. Our motorcycle business also performed well

and almost matched the previous year’s high level, with sales of 101,685 BMW motor-

cycles.

Nevertheless, the situation remains challenging and there is currently no improvement

in sight. The BMW Group will be confronted by economic developments no less

0

6

than other automobile manufacturers. Consumers’ reluctance to buy new vehicles;

the poor state of the pre-owned vehicle market and the resulting residual value

problems; and, not least, much higher refinancing costs – are all factors which have

affected our business and had a negative impact on earnings. However, although

we revised our forecasts for 2008, we were still able to close the year with positive

earnings.

At the same time, we also achieved a great deal during 2008: We made great strides

in implementing Strategy Number ONE, which gives us a significant competitive

edge and provides a clearly formulated vision. We took decisive action early on –

which has proved to be the right course in the current challenging circumstances.

You will find many examples of this in our annual report. Strategy Number ONE is our

compass out of this crisis and we will be stronger than before. And we will follow this

strategic path consistently.

We have continued to invest in Efficient Dynamics and other technologies – and thus

in our future. That future can be seen in the many new models which we introduced

in 2008.

We presented a new version of the BMW brand’s flagship 7 Series. From the positive

response it received in the media and particularly among our customers, it looks like

we truly hit the mark. We were also able to offer our customers exciting new products

in other segments: including the BMW ꢀ Series Convertible; revised models of the

BMW ꢁ Series Sedan and Touring; the BMW Xꢂ and the BMW Mꢁ; through to the

Rolls-Royce Phantom Coupé.

The challenge of the future

Norbert Reithofer

Chairman of the Board of Management

Preface

07

We also remain the world’s most sustainable automotive company. For the fourth

consecutive year we headed the Dow Jones Sustainability Index for our industry.

At the BMW Group, sustainability is deeply anchored within the company. This can be

seen most clearly in our products. For instance, by the end of 2008 we could already

boast claim to 2ꢃ models with emissions of less than 140 grams of CO per kilometre.

2

Many of our vehicles are already “best-in-class” when it comes to fuel economy.

Our Clean Production philosophy makes sustainability an integral part of vehicle

production. Our aim is for the BMW Group to use resources more efficiently than

any other company in the industry. Because we know that companies who practice

corporate sustainability shape their own future. And we want our future to be a

successful one!

We have substantially increased productivity in manufacturing our vehicles. In the

process we also cooperated with the BMW Group Works Council in the reduction of

our workforce. We took important steps in this direction at an early stage, and – what

is particularly important to me – by mutual agreement with employee representatives.

Rest assured that the Board of Management and I do not take such decisions lightly,

and that we are well aware of what it means for the people concerned. But today,

more than ever, we can see that this was an important and necessary step towards

securing the future of our plants and of the company as a whole.

We were also able to make substantial cost reductions and leverage potential effi-

ciencies in other key areas. And so, we start 2009 with a whole range of competitive

advantages, exciting products and sound liquidity. One thing is clear: This will be a

0

8

challenging year for our entire industry. It will be a year of transition in which every auto-

mobile manufacturer will be put to the test.

But it should also be clear that, despite all the challenges it faces, the BMW Group is

still a company that delivers a strong operating performance. The foundation of that

strength lies in the passion and dedication of all our employees. And so I would like to

take this opportunity to express my sincerest gratitude to all our employees for their

commitment over the past year. I know that we will continue to work extremely hard

this year and to use every means available to emerge as a winner from the crisis in our

industry. There is no denying that the crisis has filtered into people’s minds, but we

at the BMW Group like to think differently: We will look to the future, and that will assure

our position as a leader in our industry.

Yours

Chairman of the Board of Management

Norbert Reithofer

Everything we do, we do with con-

viction. We firmly believe that the

future of mobility demands a new

equilibrium.

A balance between individual de-

mands and ecological necessities;

between familiar approaches and

new ideas; between success and

responsibility.

All of our future decisions will be

measured against these standards –

that is how we will create the mobility

of tomorrow.

The challenge of the future

An age is dawning in which

sustainability will shape

our values.

In which a paradigm shift

will redefine the future of

individual mobility.

Our goals are clear. And

we will consistently realise

them.

Strategy Number ONE

MINI E

Target

Shaping future mobility

project i

Focussing on solutions

Challenges: Megacities

More than ꢄ,ꢅꢅꢅ dealers worldwide

Innovative service products

Target

increase from after-sales business

by ꢆꢅꢇꢈ

2

0^%

Service that spans a vehicle’s lifetime

Potential: over 14 million BMW Group vehicles on the road

Active safety systems

Integrated safety: so that accidents don’t have to happen

Driver assistance systems

Passive safety systems

Wastewater-free production

Waste prevention

Target

resource consumption per vehicle produced

by ꢆꢅꢇꢆ

–

30^%

CO reduction

ꢉ

Clean Production

Energy efficiency

The challenge of the future

Re-evaluating past ideas.

One thing is certain:

Premium will always be

premium. And yet still

reinvent itself.

The challenge of the future

This is how we create

vehicles that redefine the

premium concept.

Based on technological

innovation – and the

efficient and responsible

use of resources.

Redefining premium

Visionary thinking

Focussing on individuals

Making efficiency key

Going our own way

Promoting creativity

Act responsibly

Recognise mobility needs

Rethink mobility

Living sustainability

Demonstrate leadership

Master future challenges

Create fascination

Safeguard profitability

Keep thinking

The challenge of the future

Our vision: to be the leading

supplier of premium

products and premium

services for individual

mobility.

The challenge of the future

Contents

23

Preface

Norbert Reithofer

04

Introduction

The challenge of the future

09

Topic

Future

one

project i – reinventing urban mobility

24

Growth

two

Service that spans a vehicle’s lifetime

32

46

56

68

80

Customers

three

Integrated safety

Profitability

four

Clean Production

five

New products

six

The year ꢀꢁꢁꢂ

2

4

Topic

one

Ensuring individual mobility in the major cities of tomorrow requires setting

totally new solutions in motion today. It means developing not only fuel-saving

drive technologies, but also new vehicles and mobility services. It means

being prepared to question everything, even our own way of thinking.

Welcome to project i.

Reinventing

urban mobility.

project i.

The challenge of the future

Topic

Future

project i

one

25

Autumn 2007

Strategy Number ONEadopted

Example: Bangkok. Traffic researchers have found that

drivers in Thailand’s capital city now travel at no more than

5 kilometres an hour during rush hour. Traffic jams are so

1

common in this city of seven million that its traffic police

recently had to be trained in basic obstetrics – because

more and more women were giving birth in their cars.

On the streets of Mexico City, on the other hand, one of

3

0 megacities around the world with more than ten million

inhabitants, today’s 4.2 million vehicles create their own

microclimate. 99 percent of the carbon monoxide and

80 percent of the nitrogen oxides in the city’s air come from

the exhausts of cars, buses and motorcycles. The roads

are just as congested in Los Angeles. This city currently

has the world’s highest density of cars. The average com-

mute to and from work takes two hours – which means

commuters spend about three weeks out of every year

stuck in traffic.

In major conurbations the original concept of mobility –

easily getting from A to B within a certain amount of time –

is rapidly becoming a dream. At the same time more and

more people are flooding into the mega-metropolises. Over

2

80 million city dwellers already live in mega-cities. And

people keep on coming. The influx is growing. Space is

getting scarcer. There is less and less room to move

around.

2

6

December 2007

Launch of

project i

March 2008

Megacity analysis

completed

But what is the point of individual mobility if you are moving

All this brings to mind the excitement of the days when

start-ups were springing up all over the place; and, at first

glance, the project does indeed appear to have a lot in

common with a start-up. Set up as a largely autonomous

company within the company, project i is probably the

most far-reaching future project launched as part of the

Group’s corporate strategy Number ONE. Its mission is

nothing less than to completely rethink mobility for people

who live in the world’s metropolitan areas – and that in-

cludes everything from vehicle concepts to production

structures through to branding and service strategies.The

“i” in the project name ambitiously stands for intelligent,

innovative and international. “We have tremendous free-

dom,” says Inga Jürgens (ꢀꢁ), a graduate in management

information systems who joined project i from the BMW

Group’s strategy department. “Not just for the sake of

it,” she adds, “but because we strongly believe that the

premium mobility of the future cannot be developed from

the concepts of the past.”

no faster than a well-trained jogger? Or, to put it another

way: What kind of future urban mobility would enable people

to reach their destination reliably and without hassle once

again? Which vehicles would be needed, with which cli-

mate-neutral drive technologies – and how could we find

new ways of integrating them with other means of trans-

port? How many wheels should the ideal urban mobility

concept have? And which factors that nobody has even

thought of should planning take into account?

All these questions have been the subject of a radically

open discussion taking place in a plain factory building at

the heart of the BMW plant in Munich that began in spring

2

008. From the outside one would never guess that a

revolution is being planned right here. A grey-painted stair-

way leads through a restricted access area to a buzzing

open-plan office. The walls are covered with city maps,

charts, flow diagrams and hand-drawn sketches. Tele-

phones ring non-stop; engineers dash from one desk to

another. Standing right next to the doorway is a prototype

of a BMW electric bicycle with a sign reading “E-Parking

Only” hanging over it.

The challenge of the future

Topic

Future

project i

one

27

Challenge: London Inhabitants: ꢀ.5 million Inhabitants per square kilometre: 4,800

City centre toll: 8 pounds/day Vehicles in the toll zone: 130,000/day

April 2ꢁꢁꢂ

First prototype of the

MINI E

Inga Jürgens

Head of Planning

and Control

project i

Munich

2

8

Challenge: Los Angeles

Average commute: ꢁꢀ minutes

Inhabitants LA metropolitan area: 13 million Inhabitants per square kilometre: 3,33ꢀ

Percentage of commuter traffic comprised by cars: ꢂꢀ%

July 2008

Announcement

of field trial

November 2008

MINI E debuts at

Los Angeles Motorshow

in the USA 2009

For the 30-strong core team nothing is off-limits – apart

Kolling has spent the past few months fleshing out the

details of a climate-neutral vehicle of this kind together

with partners from the BMW Group’s global design net-

work.The first full-sized models are already parked in the

project i team’s office. “We are thinking about launching

a whole range of models in the first half of the next decade,”

confides Kolling. “Some with two wheels, some with four.

Obviously, a densely-built city like Barcelona needs com-

pletely different vehicles than the greater Los Angeles area

with its eight-lane highways and extensive network of

sprawling suburbs.”

from conventional thinking, that is. They welcome ideas

that would be tossed out as impractical anywhere else

and relish questions that challenge conventional wisdom.

They discuss unexpected approaches that open up new

possibilities. According to Jürgens, the biggest surprise

has been “how remarkably open the BMW Group has been

about taking risks. Not to mention the unusual way we are

allowed to work – and the speed with which our unconven-

tional ideas are turned into solutions for the future.”

Because, unlike a regular start-up, the project i team has

access to the combined know-how, resources and cutting-

edge technologies of a global company. And so it can also

deliver highly sophisticated answers to some extremely

complex challenges within a very short space of time. In

less than eight months project leader Ulrich Kranz’s team

developed a comprehensive vision of future mobility that

is as remarkable as it is persuasive.The team conducted

interviews with mobility researchers, urban planners and

architects from around the world.They also negotiated with

battery manufacturers and energy providers, because any

city vehicle of the future would be sure to incorporate at

least an electric motor. “Not only is an electric-powered

vehicle climate-neutral to drive,” explains Joachim Kolling

ꢂ44ꢃ, the project i team’s design head, “when you drive right

into the city centre, it also produces zero emissions. And,

in the future, that will be increasingly necessary to enter

mega-cities at all.”

The prototypes are still under wraps and can only be

accessed by team members. But out on the roads electric

mobility in its current form is already a reality.

The challenge of the future

Topic

Future

project i

one

29

Challenge: Mexico City

square kilometre: ꢄ,ꢅꢀꢀ

Inhabitants in the metropolitan area: ꢃꢀ million Inhabitants per

Annual growth in inhabitants: up to 1 million Minibus traffic: ꢄꢄ%

CO emissions from road traffic: ꢂꢂ%

Average age of vehicles: 1ꢄ years

ꢃ

Dr. Joachim Kolling

Head of Design and

Creative Processes

project i

Munich

ꢆ0

Challenge: New York

Inhabitants: ꢅ.1 million

Inhabitants NY metropolitan area: ꢃ1.ꢃ million

Inhabitants per square kilometre: ꢂ,ꢁꢀꢀ

Parking costs per day: ꢃꢀ–ꢇꢀ ꢈꢉ-$

Spring 2009

Delivery of

500 MINI E test vehicles

Just last December test drivers were out on the roads all

over Bavaria in a remodelled version of the MINI Cooper,

testing its performance in winter conditions. The MINI E

as it is known, was developed exclusively as a test vehicle.

It was built at the MINI plant in Oxford and fitted with an

electric drive in Munich. It features a 204-hp electric motor,

a top speed of 152 km/h and has a high-performance

lithium-ion battery where the rear seat would be.The energy

storage unit allows the car to drive a distance of up to

The MINI E is an extremely valuable “trial balloon on four

wheels” for the project i team. “We hope this project will

provide us with important insight as to how customers use

an electric car,” explains Jürgens. “And, of course, tell us

what we need to improve.”

,

For this purpose MINI E drivers will be monitored by market

researchers during the twelve-month field trial and regu-

larly surveyed about their driving experience. Also in Berlin,

where more MINI E cars will take to the roads in the spring

as part of a cooperative venture with the energy provider

Vattenfall Europe, researchers from the universities of

Chemnitz and Berlin will provide the pilot project with scien-

tific support. The goal here is also to find out more about

electric car drivers’ habits. The MINI E will also help re-

searchers explore electric cars’ potential for energy storage.

Many energy providers experience major difficulties with

fluctuations in the availability of energy from regenerative

sources depending on the weather: For instance, if it

250 kilometres ꢂ156 milesꢃ. It recharges within 2.5 hours and

runs perfectly when put to the test in snow at minus 12 de-

grees Celsius. Anyone who spotted the zero-emission car

driving around Bavaria would hardly have noticed anything

different from the regular MINI. In fact, the only visible dif-

ference is that there is no exhaust pipe – and, of course, no

engine noise either.

Once road trials have been completed, around 500 of these

1

00-percent emission-free MINI cars will be delivered to

customers in New York, Los Angeles and Berlin for testing.

This makes the BMW Group the first manufacturer world-

wide to put a vehicle with lithium-ion technology on the

roads in large numbers. The excitement the test vehicles

generated in the market surprised even the enthusiastic

project i members. Several thousand Americans applied

to drive a MINI E despite the relatively high lease rate of

is windy at night, the CO -free energy produced is rarely

needed at that time. On the other hand, wind power is

2

850 dollars a month.

The challenge of the future

Topic

Future

project i

one

ꢆꢊ

Challenge: Shanghai

Inhabitants in the urban area: ꢂ.ꢋ million

Inhabitants by ꢃꢀ1ꢄ: 13.ꢃꢄ million

Inhabitants per square kilometre: 1ꢃ,ꢂꢇꢁ

Spring 20ꢊ0

Evaluation of

MINI E field trial

not always available at peak times. But if, in the future,

However, the key question is one the project team has

you could hook up a large number of electric cars to

battery-charging stations for recharging at night, the fleet

of E-vehicles would work as a kind of gigantic, networked

battery. Electric vehicles would store the green energy as

soon as it was generated – helping to solve one of the

central problems of regenerative power generation and

meeting the challenges of urban mobility at the same time.

asked itself again and again, in every phase of the project.

And it is still heard every day in the office at the heart of

the BMW plant in Munich. The question is: “Which of our

customers’ problems does this solve?”

Every aspect of project i developments is measured against

this pivotal question. “Need-Offer-Fit” is what designer

Kolling calls this approach. It simply means that every prod-

uct and the services that go with it have to be developed

in ongoing dialogue with future users. This approach sub-

stantially improves its chances of success. “We want this

discussion to be as long and as intensive as possible,” says

Kolling, “because our future customers’ needs are chang-

ing just as dramatically as the cities themselves: We will

keep on adjusting and improving our vehicle concepts right

up until production starts.”

For now, those remain visions of the future. “But we are

making such tremendous progress on completely new

concepts for vehicles with electric drives within such a short

space of time,” Kolling points out, “that we don’t even

know what else is possible yet!” A lot of questions still need

to be answered – but that is precisely what project i is all

about.

But what does such a vehicle need to be able to do?

What could it potentially do without? What does mobility

mean for people in megacities? These are the questions

project i market researchers put to dozens of traffic plan-

ners, architects, environmentalists and creative types from

all over the world at the very outset of the project. They

travelled round the globe twice to interview people in Lon-

don and Paris, Los Angeles, Mexico City and Shanghai.

The first project i vehicles will roll off the assembly line be-

fore the middle of the next decade. Until then, there is

plenty of time for all those questions. And plenty of scope

for unconventional answers: answers which are sure to

get – and keep – tomorrow’s urbanites on the move.

“Many of them,” Kolling recalls, “were totally surprised how

openly we listened to what they had to say. And they are

now very keen to see what kind of solutions we will be able

to offer them.”

3

2

Topic

two

There are more than 14 million BMW Group vehicles on the roads today – which

means there are more than 14 million potential service customers. For this reason

the company is launching a global initiative which will systematically exploit the

huge sales potential of the service and parts business – and at the same time reach

out to entirely new customer groups.

Customer

service

Growth

driver

The challenge of the future

Topic

Growth

Customer service

two

33

Closing the driver’s door behind you for the first time; starting the

engine; slipping it into gear. For a BMW Group customer, driving

away in a new car is always a very special moment. It is also the

beginning of a relationship between customer and manufacturer

that often lasts for years. There are more than 14 million BMW

Group vehicles on the roads today – that means there are 14 million

potential service customers out there, all looking for the best

available long-term care.

Quality of service is one of the main criteria customers take into

account when buying a new vehicle. According to industry re-

ports, one in three automotive customers would be prepared to

switch providers to experience a more innovative approach to

service. From the BMW Group’s point of view, after-sales service

not only means satisfied customers, but also translates directly

into sales and profitability, since parts, accessories and services

have such tremendous growth potential. To make better use of

this potential, the BMW Group has launched a global initiative to

expand its after-sales offering.

3

ꢀ

Percentage of automotive customers who would switch to a more innovative service provider

30%

Projected growth in the automotive parts and

service business over the next five years

2

0%

The aim is to provide BMW Group customers with a comprehen-

sive range of services throughout the entire life of their vehicle –

improving customer loyalty and winning new customers in the

process. That is why one of the steps currently being taken is to

set up highly modernised “Dealer Metro Distribution Centres” in

4ꢁ major cities around the world, where dealers in that region will

be able to access the 10,000 to 15,000 most essential BMW and

MINI parts within a few hours.They offer customers fast and com-

prehensive service – including owners of older vehicles, many

of whom currently use independent garages they believe to be

cheaper.

The challenge of the future

Topic

Growth

Customer service

two

3ꢂ

Percentage of after-sales customers who would be prepared to switch service providers

ꢀ

0%

Some people are loyal to one brand of car their whole life. Meet some of our long-time BMW and MINI drivers with their vehicles in everyday situations on the following pages.

At the same time, the range of products offered – as well as the

positioning and advertising of the parts and services business –

will be systematically expanded. The goal is to generate at least

ꢃ0 percent more sales over the next five years. In this way, the

BMW Group will also strengthen the profitability and stability of

its extensive dealer network: For the ꢁ,000-plus BMW Group

dealerships worldwide, the service and parts business represents

a reliable source of revenue which is immune to economic fluc-

tuations. Customers, on the other hand, benefit from receiving the

best possible on-site service – from that first special moment to

the end of their vehicle’s lifetime.

3

6

Vehicle

BMW 3 SeriesTouring

2ꢄꢄ8

Purchased

Total distance travelled

Longest route

ꢅ,7ꢂꢄ km

BMW Welt Munich–Walldorf

The challenge of the future

Topic

Growth

Customer service

two

37

Percentage of automotive customers who already

changed their brand of car because of poor service

ꢁ5%

Dr. Lutz Bergau Aviation doctor

Alaska fan

Dr. Maren Rehfeld-Bergau Paediatrician Alaska fan

BMW drivers since

First BMW

ꢅ977

BMW 2ꢄꢄ2

3

8

Jan Hendrik Schönfeld

Real estate agent

2ꢄꢄꢅ

MINI Cooper

MINI driver since

First MINI

The challenge of the future

Topic

Growth

Customer service

two

39

Vehicle

MINI Cooper S Convertible

2ꢄꢄ7

Purchased

Total distance travelled

Longest route

ꢀ3,ꢄꢄꢄ km

Hanover–Milan–Hanover

ꢀ

ꢄ

Vehicle

BMW 3 Series

2ꢄꢄ8

Purchased

Total distance travelled

Longest route

9,ꢄꢄꢄ km

Muelheim–Tuscany–Muelheim

The challenge of the future

Topic

Growth

Customer service

two

ꢀꢅ

Percentage of sales generated by after-sales business in the German automotive industry

5

0%

Ghias Al-Tinawi

Internist

ꢅ983

BMW 3ꢅ6

BMW driver since

First BMW

ꢀ

2

Alice Fiedler

MINI driver since

First MINI

Marketing

2ꢄꢄꢅ

MINI Cooper

The challenge of the future

Topic

Growth

Customer service

two

ꢀ3

Vehicle

MINI Cooper S

Pina

Passenger

Purchased

2ꢄꢄ7

Total distance travelled

Longest route

22,ꢄꢄꢄ km

Frankfurt–Meran–Frankfurt

ꢀ

Vehicle

BMW Xꢂ

2ꢄꢄ8

Purchased

Total distance travelled

Longest route

ꢅ2,ꢄꢄꢄ km

Bremen–Gibraltar

Percentage of sales generated by after-sales business in the German automotive industry

2

3%

The challenge of the future

Topic

Growth

Customer service

two

ꢀꢂ

Thomas Greppmair

BMW driver since

First BMW of ꢅꢀ

Currency trader

ꢅ977

BMW 3ꢅ6

Overall distance travelled

ꢅ million kilometres

4

6

Topic

three

Intelligent brakes. Adaptive headlights. Systems that can see in the dark. Vehicles

that can detect a collision before it happens: Active safety systems in BMW Group

vehicles open up a whole new dimension in automotive safety.

A new concept

of safety. Smart

prevention.

Saving lives.

Active and

passive safety.

The challenge of the future

Topic

Access to technologies and customers

Safety

three

47

a

b

Image

a

b

Klaus Kompaß

After the crash

Head of vehicle safety at the BMW Group.

The new BMW 7 Series after a side impact at more than 56 km/h.

million passenger cars in Germany

14

1970

4ꢀ

2007

4

8

Image

a

Preparations

A dummy is lifted into the vehicle by a crane. The dummy weighs more than 8ꢁ kilograms.

b

Proper seating

The dummy’s exact seating position is crucial to readings. A dummy can record ꢂꢁ,ꢁꢁꢁ measurements per second.

billion kilometres driven by cars in Germany

2

01

1970

billion kilometres driven by cars in Germany

ꢀ92

a

b

The challenge of the future

Topic

Access to technologies and customers

Safety

three

49

2

007

Before an automobile can be sold worldwide it has to pass

at least 3ꢁ different crash tests. Then there are additional

tests to make sure it meets the BMW Group’s own high

safety standards. The company has been researching the

causes of accidents and the most effective ways of dealing

with them for more than 3ꢁ years. Developers have en-

dowed the Group’s vehicles with energy-absorbing defor-

mation zones, reinforced passenger compartments, re-

straint systems, airbags and many other “passive safety

systems” which save lives and protect drivers from injury

on a daily basis. The side head airbag alone, which the

BMW Group was the first automobile manufacturer world-

wide to offer as a standard feature back in ꢂꢃꢃꢄ, has drasti-

cally reduced the number and severity of head injuries in

the event of a side impact.The combined effectiveness

of these and other safety technologies is reflected in acci-

dent statistics: Although the total number of kilometres

driven on German roads more than tripled between ꢂꢃꢄꢁ

and ꢅꢁꢁꢄ, the number of road casualties fell by around

ꢄꢄ percent over the same period. Ironically, that has be-

come something of a problem.

Off to a spectacular start. The shriek of a siren warns of

an imminent impact. Almost immediately the building is

rocked by an ominous thud, and then – silence. The vehi-

cle’s tail-end has been severely crushed by the impact –

under glaring spotlights, with high-speed cameras cap-

turing every thousandth of a second of the crash.

Just another day at the largest of the BMW Group’s three

crash test facilities. The elongated cement-encased

building on the grounds of the Research and Innovation

Centre (FIZ) in Munich is sort of like an ultramodern scrap-

ping plant – only for research purposes. Every day the

technicians here send brand new automobiles fitted with

dozens of test sensors hurtling into a concrete block. Or

they have them rammed by a high-speed barrier. Or else

they find some other way to deliberately deform them.

And they do it all in the name of maximum and precision

safety.

It has now become virtually impossible to make drivers

and their passengers any safer – even with the most so-

phisticated passive safety systems. “Of course we could

add even more airbags to our vehicles or make the body

even more rigid,” says Klaus Kompaß, head of vehicle

safety at the BMW Group, “but these days we have pretty

much exhausted the potential of passive systems.” That

is why for some time now Kompaß and his colleagues

have been focussing their attention more on active safety,

where the primary goal is not to mitigate accidents and

their consequences but to avoid them altogether. This

requires developers to take a much broader view – and to

look beyond the vehicle to the surroundings in which it is

driving.

5

0

Image

a

b

c /d

Lights on

On your marks

Test in progress

One-and-a-half times brighter than the desert at noon – ꢂꢆ high-speed cameras need plenty of light.

Measuring acceleration over a ꢂ3ꢁ-metre track (longer than a football pitch).

Heading straight for the “tree” at ꢇꢈ km/h – the standards for passive safety are extremely high.

b

a

c

The challenge of the future

Topic

Access to technologies and customers

Safety

three

51

minutes average rescue time

outside of town

with BMW ConnectedDrive

1

1.7

minutes average rescue time

outside of town

21. 2

without BMW ConnectedDrive

d

5

2

percent of all road fatalities fall into one of four categories. For all four types of

accidents the BMW Group already has effective driver assistance systems on the

9

1

market or in development.

The details are even more revealing: 3ꢁ percent of acci-

dents in longitudinal traffic are rear-end collisions, often as

a result of lack of concentration, driving too closely or a

combination of both. We know today that in ꢆꢅ percent of

collisions at intersections the driver responsible for causing

the accident made no attempt to brake before the impact

and ꢈꢁ percent did not attempt a steering manoeuvre. Ac-

cording to official German statistics only about two percent

of accidents can be traced to technical defects – and those

are largely the result of poor vehicle maintenance. That

means accidents are nearly always due to drivers failing

to see things, driving inappropriately or misjudging the

situation.

In this they are assisted by engineers from the BMW

Group’s accident research team who analyse real-life acci-

dents and reconstruct the entire course of events using

computer models. For this purpose they evaluate their

own accident data as well as data from the German Federal

Statistical Office, the German In-Depth Accident Study

project GIDAS and the renowned William Lehman Injury

Research Center in Miami in the United States which

works closely with BMW safety experts. By meticulously

sifting through all the data, accident researchers discover

more about what happens on the roads and how dan-

gerous situations arise. For instance, they established that

in ꢆꢂ percent of all fatal road accidents the driver loses

control of the vehicle on a straight road. This is followed in

second place by accidents in longitudinal traffic – that is,

collisions with oncoming traffic or vehicles ahead. Colli-

sions while turning or crossing traffic account for ꢂ8 percent

of all road fatalities, and those involving pedestrians cross-

ing the road make up ꢂꢁ percent.

Accident type1:

These are shocking figures. But they reveal to engineers

like Klaus Kompaß where the remaining potential for pre-

vention lies. According to the BMW safety chief, “The

person driving the car is the decisive factor. Humans have

definite strengths when it comes to driving, and there

are lots of things they do better than any technology. But

there are also areas where technology is superior to human

beings and where we can use it to help the driver either

avoid accidents – or at least mitigate the consequences.”

4

1

percent = driving

accidents.

Standard features:

–

lane departure warning

high beam assistant

adaptive cornering lights

active steering

In research or development phase

:

–

curve info

Sophisticated driver assistance systems installed in BMW

Group vehicles today already monitor the driver’s sur-

roundings and provide the information needed to make

fast and responsible decisions. The active cruise control

system and the lane departure warning help the driver

manoeuvre safely. Intervention systems such as integral

active steering and the Dynamic Drive active stabiliser

system steady the car in dangerous situations and help

drivers perform their intended manoeuvres in the best way

possible. Intelligent navigation systems and the speed-

limit display supply the driver with relevant data on traffic

conditions and the maximum speed allowed.

The challenge of the future

Topic

Access to technologies and customers

Safety

three

53

b

a

Image

a

Always on track

with lane departure warning.

b

Safety begins in normal driving

Intelligent suspension control functions help avoid accidents.

That work is also economically advantageous. Innovations

such as active steering, lane departure warning, Dynamic

Drive and adaptive cornering lights have all been patented.

The fact that more and more people are opting for safety

features shows that customers increasingly consider road

safety a crucial part of their driving experience.

Accident type 2:

But none of these systems will ever take the steering wheel

out of the driver’s hands. “Drivers will always have to make

the final call,” says Kompaß. “We can only enable them

to make the best possible decision.” Many safety systems

within the vehicle are efficiently networked for that pur-

pose: A camera in the rear view mirror of the new BMW

7 Series provides data needed to display the applicable

speed limit as well as for the lane departure warning and

the high beam assistant. The 7 Series’ integrated chassis

management also interfaces with the transmission shift

characteristics, power-steering assist, integral active

steering, accelerator pedal response and dynamic damp-

ing control as well as the DSC and Dynamic Drive re-

sponse. Highly complex applications such as these, which

encompass the entire vehicle architecture, require quite

different development capabilities – and these cannot be

fully realised by external suppliers. “Our development

work gives the BMW Group access to future technologies

in-house and also from our suppliers,” explains Kompaß.

“What is typical about the BMW Group,” adds Kompaß, “is

our integrated approach to the topic. We analyse the en-

tire process chain – from accident prevention through to

what happens after the impact. That is how we ensure

maximum safety.”

2

2percent = accidents in

longitudinal traffic.

Standard features:

–

lane change warning

lane departure warning

adaptive brake assistant

Night Vision

high beam assistant

ACC

2-phase brake light

brake assistant

ABS, DSC, ASC

For instance, BMW Group engineers know, from their

study of accidents, that more than half of all fatal pedestrian

accidents take place at dusk or during the night – in other

words, in poor visibility. And although only around ꢅꢁ per-

cent of all driving is done at night, about ꢆꢁ percent of

all road fatalities occur in the dark. In response to this chal-

lenge BMW safety experts developed a uniquely intelligent

infrared system to warn the driver of pedestrians or ani-

mals on the road in the dark. “Night Vision,” as the technol-

ogy is called, uses an infrared camera to transmit moving

video images of the surroundings. The difference in tem-

perature allows its sensor to detect people and animals up

to 3ꢁꢁ metres away, even in complete darkness beyond

the range of the headlights. If Night Vision identifies a per-

son or animal moving along the roadside, the image is

shown on the control display; if there is any immediate dan-

ger the driver is also given a warning signal.

In research or development phase

:

–

signal warning driver of motorists

heading in the wrong direction

on highways

5

4

a

b

Image

a

b

c

Preventive safety for pedestrians and cyclists

The new BMW Night Vision detects pedestrians.

Looking around the corner with Side View.

Research for the future

The crossroads assistant uses vehicle-to-vehicle communications.

That is why BMW developers are already working on the

ultimate in assistance systems: vehicle-to-vehicle commu-

nication. Intelligent communication between vehicles

could, for instance, allow a car to alert traffic behind it to

patches of black ice. A vehicle approaching an intersection

could warn cross traffic of its approach, even though it

might still be concealed by a building. “Vehicle-to-vehicle

communication is still a long way off; and then, it would

only work if all brands could communicate with each other,”

explains Kompaß. “At the end of the day a system like this

can only be effective if as many vehicles as possible have

communications systems of this kind.” Nonetheless, last

summer the EU reserved standardised radio frequencies

for all member countries for Car2Car communications. A

research project sponsored by the German federal govern-

ment will soon explore the potential for this type of com-

munications between vehicles made by different manu-

facturers: The BMW Group has had concepts ready for

technical implementation for a long time.

Accident type ꢉ:

BMW developers are always looking ahead in their own

work, too.That is how they find answers today to challenges

which won’t fully emerge until farther down the road. One

such example is the expected increase in the number of

crossing accidents. Studies confirm that accidents that

occur when turning or crossing traffic are often caused

by obstructed visibility – for instance, when a driver is un-

able to see approaching cross traffic due to parked cars.

ꢊ 1percent = crossing

accidents.

Standard features:

–

Side View

bending light

ABS, brake assistant

In research or development phase

:

–

cross traffic assistant

traffic light info

The challenge of the future

Topic

Access to technologies and customers

Safety

three

55

c

between different types of accidents and the probability

of serious or life-threatening injuries. The instant one of

the ꢈꢁꢁ,ꢁꢁꢁ vehicles fitted with the emergency call system

is involved in an accident the system calculates the risk

of injury to the passengers from parameters such as type,

severity and direction of the impact and relays the data to

the dispatch centre, along with the vehicle’s exact GPS

position. At the same time the extended emergency call

system establishes a phone connection that allows the

BMW Call Centre and the emergency services to make

Of course, even the most visionary safety systems will

never be able to prevent all accidents. That is why the

BMW Group’s integrated safety concept includes not only

normal driving situations, but also the phase before, during

and after a collision. Just milliseconds before a crash,

the impact warning apparatus positions the brake pads and

primes the braking system. Then as soon as the driver

touches the brake, the brake action is optimised according

to the distance and relative speed data provided by the

ACC. Even before the impact occurs, an electric motor reels

in the seat belt to tighten it. After the crash the warning

lights automatically switch on to warn other road users. At

the same time the vehicle control system activates the in-

terior lights and unlocks the central locking to allow rescue

services to get in. In parallel the BMW ConnectedDrive

communications network automatically alerts the local

emergency dispatch centre and provides essential informa-

tion about the accident within seconds.

contact with the driver. This is the only system of its kind in

the world.

Accident type 4:

In this way the BMW emergency call system has ensured

a fast response to more than 3ꢁ,ꢁꢁꢁ incidents. Just recently

Klaus Kompaß read a report about a BMW driver who had

crashed his vehicle through the guardrail on a remote

US highway and rolled over. “The man was lying severely

injured off the side of the highway where he couldn’t be

seen,” explains Kompaß. “Under normal circumstances it

could have been hours or even days before anyone found

him there.” But the car’s BMW ConnectedDrive system

alerted the dispatch centre and an ambulance was rushed

directly to the scene of the accident. The man survived.

10 percent = accidents involving

pedestrians.

Standard features:

–

pedestrian detection

Night Vision

ABS, brake assistant

In research or development phase

:

–

active emergency braking

This unique system was jointly developed with traumatol-

ogists from the William Lehman Injury Research Center

at the University of Miami. At the core of the system is an

intelligent algorithm that calculates the likelihood of sus-

taining severe injuries using accident and vehicle data. It

is based on biomechanical accident analyses conducted

by doctors at the Lehman Center to establish connections

Before all these safety features become standard equip-

ment they undergo extensive and rigorous testing at the

BMW Group’s crash facilities. All this involves a tremen-

dous amount of time, effort, and also money. But it gives

the BMW Group access to future technologies which will

directly benefit the Group’s customers. And even though

it is heartbreaking to see all those new vehicles knocked

out of shape at the crash facility, every crash under test con-

ditions helps prevent real injuries on the roads.

5

6

Topic

four

The BMW Group is systematically improving resource efficiency throughout

its global production network: year after year, plant by plant. From 2006 to

2

012 water, energy, CO₂emissions, waste and solvent emissions will all be

reduced by no less than 30 percent – with tangible benefits for the environ-

ment as well as for the company’s earnings.

Reduce costs.

Save resources.

Clean Production.

The challenge of the future

Topic

Profitability

Clean Production

four

57

Target: minus 30% until 2012

Continually improve the environmental performance

starting in 2006

ꢀ

% perannum

More performance. Less consumption. Since the BMW Group became the first auto-

mobile manufacturer to appoint an environmental officer back in the early seventies, it has

continually improved its environmental performance. Its progress has also been reflected

in its ranking in the Dow Jones Sustainability Index World: The BMW Group is the only

automobile manufacturer to have been highly rated in this definitive global sustainability

index from the very start. In fact, over the past four years the company has consistently

ranked number one in its sector. This makes the BMW Group the world’s most sustainable

automobile manufacturer. The innovations implemented as part of the Efficient Dynamics

programme combine lower CO emissions with optimised driving dynamics throughout

2

the model range. The BMW Group has also established a systematic approach across its

entire worldwide production network which controls resource consumption and emissions

just as rigorously as, say, the use of financial resources. From the start of the project in

2

006 through to 2012, this will reduce energy and water consumption, solvent and carbon

dioxide emissions as well as waste and wastewater by an impressive 30 percent.

5

8

What is particularly attractive about this approach is that the key to continuous improvement

lies within the production network itself. Because each plant constantly scrutinises the

efficiency of its production processes, there are always certain locations which lead the

way with their ideas, technologies and processes. Thanks to the ongoing exchange of

information and experience the plants systematically benefit from what others have already

achieved.

For instance, American production engineers in the body shop at the Spartanburg plant

developed an adhesive that works without the previously necessary 120-degree Celsius

heat drying process. Hence Spartanburg was able to avoid not only investing in a body

shop dryer but also made huge energy savings in its manufacturing operations. Following

the example of Regensburg, the plants in Leipzig, Munich and Rosslyn in South Africa

are now switching to this resource and cost-saving technology. One-time investment costs:

around 400,000 euros. Savings: 1.5 million euros in energy costs and around 8,150 tons

fewer CO emissions per year.

2

Moreover, at the Landshut plant’s light-metal foundry production experts have been re-

placing the previously used synthetic resin binders with odourless, low-emission mineral

binders since late 2006.The new mineral binder will be used in the manufacture of new

products in the future.This will reduce the percentage of organic components in the

exhaust air by an impressive 98 percent. The whole foundry is slated to switch to this in-

organic binder system by 2010.

“It is often possible to make extensive improvements just by completely rethinking estab-

lished processes,” says Herbert Höltschl, the BMW Group’s corporate officer for sustain-

ability and environmental protection and one of the originators of the project. “Sometimes

you even have to invest less to save more: We profit from doing less.”

The challenge of the future

Topic

Profitability

Clean Production

four

59

The automotive industry’s body pressing plants traditionally use tensile oil to make sheet

metal easier to process. This procedure inevitably releases tiny oil particles into the air,

making elaborate filtering necessary. However, production planners at the Leipzig plant

found a way to dispense with tensile oils altogether by using better tools and press panels.

This not only cut investments in ventilation systems by more than half, it also reduced

running expenses for ventilation and heating by no less than 70 percent.

To identify potential efficiencies of this kind in the early stages, and avoid often costly

modifications later on, the BMW Group’s environmental officers are consulted on all in-

vestment decisions near the outset. Plant managers have also made a binding commitment

to reduce resource consumption by an average of five percent per year. A global bench-

marking system allows all plant managers to see how well they are managing resources

at any time compared with other BMW Group sites. Most importantly, they can call upon

the experience and expertise of the best-performing location to help optimise their own

plant. In this way the BMW Group’s production network practically has its own built-in

Savings from lower resource consumption over the previous year

in 2008

more than euro 3ꢁ million

“turbocharger” to drive improvements and constantly provide fresh momentum – thus

pre-empting predictable but inevitable price increases for resources and emissions.

Once you have a turbocharger like that up and running, there is no turning it off. And even

though the project’s goal of “minus 30 percent” is initially for a six-year period, its ambitions

stretch much further. “As a company we have set ourselves the goal of one day building

emission-free vehicles,” says Höltschl, “so of course we are also thinking about how we

can build those same vehicles emission-free.”

From that point of view, things are off to an ambitious start with a five percent optimisation

per year. But that is also just the beginning.

6

ꢂ

Image

a

b

c

d

Turbines installed on the grounds of the BMW plant in Spartanburg use methane gas to produce electricity and hot water.

A pipeline more than 15 km long supplies the BMW plant in Spartanburg with methane gas.

The power supply centre constantly monitors whether all systems are generating energy properly.

Waste materials at the Palmetto landfill decompose to produce the methane gas needed to generate energy.

a

b

Example 01

Topic: Energy and CO

2

Location: Spartanburg, USA

Energy provided by methane gas: ꢁ3%

CO emissions: ꢀꢃ,000 tons less per year

2

The challenge of the future

Topic

Profitability

Clean Production

four

6ꢄ

c

d

Reduction in the BMW Group’s energy consumption

in 2008

more than ꢁꢀ0,000 MWh

Energy for next to nothing in Spartanburg in the U.S. That is, as long as you have the

smart technology to take advantage of it. Since 2003 the BMW plant in Spartanburg has

been using methane gas from a nearby landfill to supply its paint shop with power. Today

the plant uses methane to meet around 63 percent of its energy requirements, cutting CO₂

emissions by an amount equal to the energy needed to heat and cool about 15,000 American

households over a year. The BMW Group’s European plants are just as resourceful, albeit

using a completely different technology: So-called heat wheels built into the ventilation

systems recover heat from the exhaust air. This free energy source meets up to 70 percent

of heat energy requirements. At the Research and Innovation Centre (FIZ) in Munich surface

groundwater is used to cool buildings in a way that conserves resources.Thanks to clever

innovations like these, today’s energy consumption is 18 percent lower than ten years ago

at 2.80 MWh per vehicle produced.

6

ꢅ

Image

a

b

c

Up until a few months ago equipment used to protect the surface of new vehicles stood here.

The vehicles are delivered to their new owners worldwide in closed freight cars.

Today more than half of all the BMW Group’s new vehicles leave the plant by rail.

a

Example 02

Topic: Surface protection

Plant: Regensburg, Germany

Solvent emissions: ꢆ0 tons less in 200ꢇ

The challenge of the future

Topic

Profitability

Clean Production

four

6ꢈ

b

c

Reduction in solvent emissions used in the BMW Group

in 2008

more than ꢇ00 tons

Paint is as much a part of car building as sheet steel and engines. Many paints contain

solvents that pose health and environmental concerns. That is why the BMW Group uses

water-based paints with low solvent content or completely solvent-free powder-based

paint technology at all company sites. The company has now largely done away with the

common methods of surface protection used to protect new cars from the elements during

transport, such as wax, protective films and covers. After a BMW Group study showed

that new vehicles could be transported in closed freight cars or cleaned after transport

without compromising quality, the last remaining surface protection systems to use wax

were switched off in 2008. In this way the plants in Regensburg, Dingolfing, Munich and

Rosslyn in South Africa not only use five grams less solvent per vehicle, but also cut

material, energy and labour costs. In 2008 alone solvent emissions were reduced by more

than 800 tons company-wide. Overall the BMW Group reduced its solvent emissions by

almost half between 1999 and 2008, to less than two kilograms per vehicle.

6

4

Image

a

Certain body seams have to be sealed off using PVC before painting. In the past up to 70 masking plugs –

plastic parts used only once – protected the body from getting an unwanted coat of PVC.

Superfine nozzles apply the PVC in such a precise, fine coating that only a single masking plug is needed.

Every single part is perfectly packed – and the same packaging can be used over and over again.

ꢀꢁ,ꢂ million reusable containers are in circulation between the BMW Group and its suppliers.

b

c

d

a

b

Example 03

Topic: PVC waste

Plant: Munich, Germany

PVC waste: minus ꢇ0%

Waste for disposal: 100 tons less in 200ꢇ

The challenge of the future

Topic

Profitability

Clean Production

four

65

c

d

Reduction in the total volume of waste produced in the BMW Group

in 2008

more than ꢁ0,000 tons

Reduce. Reuse. Recycle. When it comes to waste, the BMW Group follows a consistent,

three-phase strategy. Waste is avoided or reused as a resource wherever possible. Only

what cannot be reused without compromising quality is ultimately recycled. Finally, if

recycling is not an option, it is then disposed of as waste. The proportion of “waste for dis-

posal” fell from more than 16 kg per vehicle to 14.8 kg per vehicle between 2007 and 2008

alone. In the Munich plant’s paint shop, for instance, the pre-treatment process for bodies

awaiting painting has been optimised to eliminate 80% of the PVC waste from the under-

body coating process. But even residual waste can perform a useful function: As fuel for

heat and power plants it helps conserve fossil energy resources.

6

Image

a

As drilling emulsion, cooling fluid for milling and lathing, for washing and rinsing – water is indispensable for machining cylinder

heads, crankcases, crankshafts and connecting rods.

b

c

The BMW engine plant in Steyr, Austria builds around ꢃꢄ percent of all BMW engines.

Using a completely new combination of different membrane technologies all of the plant’s process wastewater is processed and

fed back into production.

a

b

Example 0ꢉ

Topic: Water and wastewater

Plant: Steyr, Austria

Wastewater: zero litres

Savings: up to 30 million litres per year

The challenge of the future

Topic

Profitability

Clean Production

four

67

c

3

Reduction in the water consumption of the BMW Group

in 2008

more than 33ꢀ,000 m

Wastewater as an inexhaustible source of water. Wherever possible the BMW Group

taps into the most sustainable source of water there is: its own wastewater. For instance,

the BMW engine plant in Steyr, Austria has a closed water cycle for mechanical production

that uses a series of filters to purify drain water until it becomes fresh water again. Since

the outlet to the local sewer system was closed off in late 2006, the plant has only drawn

fresh water to compensate evaporation losses. It means the plant uses up to 30 million litres

less water annually – about the same amount a small town of about 750 people uses.

Across the BMW Group the quantity of process wastewater per vehicle has fallen by more

than a quarter since 2004.

6

8

Topic

five

The BMW Group’s three brands, BMW, MINI and Rolls-Royce, are among

the automotive industry’s strongest premium brands. A wide range of new

models released in 2008 once again illustrates the innovative power and

performance of the BMW Group.

Setting milestones.

Creating fascination.

New products

in 2008.

The challenge of the future

Topic

New products

five

69

1

Series Convertible

BMW

The BMW 1 Series Convertible combines the pleasure of open-top driving with unbeatable fuel efficiency.

To take an example: The 11ꢀd Convertible has an average fuel consumption of 4.9 litres per ꢁ00 kilometres

in the EU Test Cycle and CO emissions of ꢁ29 grams per kilometre.

ꢂ

7

0

M3 Convertible

The BMW M3 Convertible combines outstanding driving dynamics with aesthetic looks to offer a unique

BMW

driving experience – in a car that is ideally suited to everyday driving. This fourth generation of the M3 Convertible

made its world debut at the Geneva Motor Show in March 2008.

The challenge of the future

Topic

New products

five

71

3

Series Touring

BMW

The BMW 3 Series is the epitome of sportiness in its class and has occupied the top slot

as the world’s bestselling premium vehicle for years. The BMW 3 Series is set to increase its

lead with revised versions of the Sedan and Touring.

7

2

7

Series

Redefining the benchmark: The fifth generation of the BMW 7 Series luxury sedan shows how to combine

driving pleasure with spacious opulence. The new BMW 7 Series is the product of stylish design and

exceptional engineering in drive train, chassis, safety, driver assistance systems and comfort functions.

BMW

The challenge of the future

Topic

New products

five

73

7

4

X6

BMW

The BMW X6, the world’s first Sports Activity Coupé, draws its fascination from characteristics

and abilities no other vehicle offers in a format of this kind. Its design unites the sporty

elegance of a large BMW Coupé with the strength and presence of the BMW X models.

The challenge of the future

Topic

New products

five

75

7

6

F ꢀꢃꢃ R

The new F ꢀꢃꢃ R is the first BMW in the

K13ꢃꢃ S

The new K13ꢃꢃ S is currently the fastest, most powerful

BMW

high-volume segment for medium-category

roadsters. It boasts a sporty, dynamic design

and an overall concept consistently geared

towards riding pleasure.

BMW series-production motorcycle available. It com-

bines top performance with outstanding allround charac-

teristics and active safety features such as BMW Integral

ABS, Anti-Slip Control (ASC) and ESA II Electronic Sus-

pension Adjustment as standard.

The challenge of the future

Topic

New products

five

77

John Cooper Works

MINI

A big name backed by a long tradition, excellent performance data and an

unforgettable driving experience: The MINI John Cooper Works is sporty to

the extreme and takes the passion for motor sports beyond the racetrack.

7

8

Phantom Coupé

Rolls-Royce

The Rolls-Royce Phantom Coupé is the fourth and most recent addition

to the Rolls-Royce Motor Cars product range. A particularly light and

extremely rigid aluminium chassis guarantees optimum safety, while the

tried-and-tested ꢄ.5-litre Vꢁ2 engine supplies its high-performance drive train.

The challenge of the future

Topic

New products

five

79

8

0

Topic

six

In review.

The pulsation of

the BMW Group.

The year 2008.

The challenge of the future

Topic

The year 2008

six

81

Top German Design

Award for the BMW

Group

The BMW

Five is a charm – five million BMW 5 Series

over five generations On January ꢂ9,

Group receives the Federal

Republic of Germany’s

Design Award for its G 650

BMW 118d voted “World

Green Car of the Year”

The BMW ꢁꢁ8d is named

“World Green Car of the Year”

at the opening of the New York

International Auto Show ꢂꢃꢃꢄ.

The title, which is awarded by a

jury of 47 automotive journalists

from ꢂ4 countries, recognises

vehicles and technologies that

are specially designed to

reduce emissions, and reflect

their manufacturers’ exceptional

environmental awareness.

ꢂꢃꢃꢄ the five-millionth BMW 5 Series rolls off

the assembly line at the Dingolfing plant: a

carbon black metallic 530d Sedan. It all started

back in 197ꢂ, when the very first generation of

the BMW 5 Series made its debut at the Inter-

national Motor Show in Frankfurt. The early

vehicles were initially built at the company’s

first plant in Munich, before production moved

to the newly opened BMW plant in Dingolfing

in the autumn of 197ꢅ. New generations came

along in 19ꢄ1, 19ꢄꢄ and 199ꢆ, and in ꢂꢃꢃꢅ the

current generation was born.

X

country.The one-cylinder

motorcycle earned a gold

award for its sporty and

lightweight design. The

Design Award of the Federal

Republic of Germany has

been presented by the Ger-

man Design Council on

behalf of the Federal Ministry

of Economics every year

since 19ꢀ9.

2

ꢇ, 2008

08, 2008

20, 2008

JAN

FEB

MAR

8

2

Premiere of ꢀ6^t^hBMW

Art Car by Olafur

Eliasson

The 1ꢀ^t^h

BMW Art Car premieres

at the Pinakothek der

Moderne in Munich, mak-

ing artist Olafur Eliasson’s

exhibit the newest addi-

tion to the long-standing

BMW Art Car Collection.

Eliasson’s work, titled

One-two finish for BMW F1

Sauber Team in Canada

The BMW Sauber Formula ꢁ team

scores the first win in its short

career at the Canadian Grand Prix.

In the one-two victory in Montreal,

Robert Kubica finishes ahead of

teammate Nick Heidfeld. Kubica

takes the lead in the drivers’ cham-

pionship, with the BMW Sauber Fꢁ

team in second place in the con-

structors’ championship. The sea-

son ended with the team placed

third in the constructors’ cham-

pionship; Robert Kubica came in

fourth and Nick Heidfeld finished

sixth in the drivers’ competition.

“

Your mobile expecta-

BMW M1 Hommage at the Concorso

d’Eleganza To mark the ꢅꢃth anniver-

tions – BMW H2R project”

replaced the outer shell

of the hydrogen-powered

H2R prototype with an

equally complex and

fragile skin made of two

reflective layers of super-

imposed metal. These

form a mesh over the

chassis which is then cov-

ered with multiple layers

of ice.

sary of the BMW Mꢁ super sports car, the

BMW Group unveils a design study that pays

tribute to this legendary model at the Concorso

d’Eleganza Villa d’Este ꢂꢃꢃꢄ. The BMW Mꢁ

was a superlative car, and a highly emotive

vehicle that was uncompromisingly primed for

the race track. This development originated

from the BMW Turbo, a concept car which

boasted a host of technical innovations in ad-

dition to its groundbreaking functional design.

2

5, 2008

2ꢈ, 2008

08, 2008

APR

MAY

JUNE

The challenge of the future

Topic

The year 2008

six

83

BMW Museum reopens after remodel-

ling

The BMW Museum reopens in June

after two and a half years of construction.The

completely redesigned ꢆ,ꢃꢃꢃ-square-metre

exhibition area houses 1ꢂꢃ exhibits for visitors

to explore. The rotunda located next door to

the BMW Group headquarters remains the

museum’s hallmark. A single-storey building

directly adjacent to the “Bowl”, as the building

has been known since it opened in 197ꢅ, adds

further exhibition space.

The new museum is true to the original con-

cept of bringing the road inside the building.

“

Roads” and ramps connect seven separate

exhibition “houses”, each focussing on a

specific theme. The museum is designed not

only to showcase exceptional automobiles and

motorcycles from past decades, but also to

reflect the dynamism and innovative power of

the BMW brand and the company. Between

the museum’s reopening and the end of the

year the BMW Group welcomed no less than

ꢂꢅꢃ,ꢃꢃꢃ visitors.

ꢁꢇ, 2008

8

4

BMW Group still number

one for sustainability

The SAM Group publishes

its latest evaluation for the

Dow Jones Sustainability

Indexes (DJSI). For the fourth

consecutive year the BMW

Group leads its sector, and,

as such, is the world’s most

sustainable automobile

manufacturer. The BMW

Group is the only company

in its industry to have been

listed in this important collec-

tion of corporate sustainabil-

ity indexes every year since

they were established in 1999.

The SAM Group analyses

the economic, environmental

and social performance of

approximately ꢂ,ꢆꢃꢃ compa-

nies and selects the best in

each sector for the Dow

State Opera for All in Berlin

What began in Munich in 199ꢀ with

the Bavarian State Opera is now

taking Berlin by storm: In ꢂꢃꢃ7, the

“Staatsoper Unter den Linden” opera

house and the BMW branch in Berlin

created a groundbreaking cultural

format to allow the general public to

enjoy free open-air opera and con-

certs under the motto “State Opera

for All”. This year a live broadcast

of Ludwig van Beethoven’s opera

“Fidelio” and his ninth symphony

conducted by Daniel Barenboim

opens the new season to an appre-

ciative audience of 4ꢆ,ꢃꢃꢃ.

“

Let’s MINI ꢁꢂꢂꢃ” – more

than ꢄ,ꢂꢂꢂ MINI fans in

Hildesheim On the

first weekend in July more

than ꢅ,ꢃꢃꢃ MINI fans flock

to Hildesheim Airport to

experience the MINI brand.

One of the event’s high-

lights was a rather unequal

race that pitted the Classic

Mini, driven by rally legend

Rauno Aaltonen, against the

MINI John Cooper Works

CHALLENGE.

Jones Sustainability Indexes.

General sustainability criteria

are considered as well as

industry-specific challenges.

0

ꢉ, 2008

30, 2008

0ꢉ, 2008

JULY

AUG

SEPT

The challenge of the future

Topic

The year 2008

six

85

Paris: BMW Group unveils three

concept cars The BMW Group

presents no fewer than three concept

vehicles at the Paris Motor Show: the

BMW Concept Xꢁ, the BMW Con-

cept ꢈ Series ActiveHybrid and the

MINI Crossover Concept.The BMW

Concept Xꢁ combines the function-

ality of a Sports Activity Vehicle and

the advantages of the premium com-

pact class in a vehicle that is both

modern and innovative.The BMW

Concept ꢈ Series ActiveHybrid is a

further step in the implementation of

Efficient Dynamics. This vehicle com-

bines a highly-efficient V8 cylinder

petrol engine with an electric drive in

this mild-hybrid concept.The MINI

Crossover Concept brings an entirely

new vehicle concept to the MINI

model range, offering more space and

versatility as well as a four-wheel drive.

The BMW Group’s

ꢀꢅꢂ-gram fleet

the end of ꢂꢃꢃꢄ the BMW

Group’s product range

includes ꢂ7 models that

produce 14ꢃ grams of

By

MINI E – the BMW Group’s

first electric car for a cus-

tomer

The BMW Group

CO per kilometre or less.

ꢂ

introduces a fully electric-

powered vehicle, the MINI E.

Already in ꢂꢃꢃ9, ꢆꢃꢃ MINI E

cars will be driving on the

roads in everyday traffic situa-

tions. Anyone living in the

metropolitan areas of Califor-

nia or New York interested in

driving a MINI E was able to

apply online. Feedback from

the field trial will be incorpo-

rated in series development

projects at a later stage.

This corresponds to a

fuel consumption of less

than ꢆ.1 litres diesel or

ꢆ.ꢄ litres petrol over 1ꢃꢃ kilo-

metres. The BMW Group

will continue to work

tirelessly to develop inno-

vative drive solutions in

the future.

You will find an overview

about the product range

on the next pages.

0

ꢉ, 2008

ꢁ8, 2008

3ꢁ, 2008

OCT

NOV

DEC

8

ꢆ

BMW 520d Sedan

BMW 520d Touring

BMW 320d Sedan

Fuel consumption

5.ꢁ l

Fuel consumption

5.3 l

Fuel consumption

ꢉ.8 l

CO emissions

ꢁ36 g

CO emissions

ꢁꢉ0 g

CO emissions

ꢁ28 g

2

BMW 318d Touring

BMW 123d 5-door

BMW 123d 3-door

Fuel consumption

ꢉ.8 l

Fuel consumption

5.2 l

Fuel consumption

5.2 l

CO emissions

ꢁ25 g

CO emissions

ꢁ38 g

CO emissions

ꢁ38 g

2

BMW 120d Coupé

BMW 118d 5-door

BMW 118d 3-door

Fuel consumption

ꢉ.8 l

Fuel consumption

ꢉ.5 l

Fuel consumption

ꢉ.5 l

CO emissions

ꢁ28 g

CO emissions

ꢁꢁꢇ g

CO emissions

ꢁꢁꢇ g

2

MINI Cooper

MINI Cooper D

MINI One Clubman

Fuel consumption

5.ꢉ l

Fuel consumption

3.ꢇ l

Fuel consumption

5.ꢉ l

CO emissions

ꢁ2ꢇ g

CO emissions

ꢁ0ꢉ g

CO emissions

ꢁ30 g

2

Consumption and emission data

for the BMW Group

The 140-gram fleet

87

BMW 320d Touring

BMW 320d Coupé

BMW 320d Convertible

BMW 318d Sedan

Fuel consumption

ꢉ.ꢇ l

Fuel consumption

ꢉ.8 l

Fuel consumption

5.3 l

Fuel consumption

ꢉ.ꢈ l

CO emissions

ꢁ30 g

CO emissions

ꢁ28 g

CO emissions

ꢁꢉ0 g

CO emissions

ꢁ23 g

2

BMW 123d Coupé

BMW 120d 5-door

BMW 120d 3-door

BMW 120d Convertible

Fuel consumption

5.2 l

Fuel consumption

ꢉ.8 l

Fuel consumption

ꢉ.8 l

Fuel consumption

5.ꢁ l

CO emissions

ꢁ38 g

CO emissions

ꢁ28 g

CO emissions

ꢁ28 g

CO emissions

ꢁ3ꢉ g

2

BMW 118d Convertible

BMW 116d 5-door

BMW 116d 3-door

MINI One

Fuel consumption

ꢉ.ꢇ l

Fuel consumption

ꢉ.ꢉ l

Fuel consumption

ꢉ.ꢉ l

Fuel consumption

5.3 l

CO emissions

ꢁ2ꢇ g

CO emissions

ꢁꢁ8 g

CO emissions

ꢁꢁ8 g

CO emissions

ꢁ28 g

2

MINI Cooper D Clubman

MINI Cooper Clubman

MINI Cooper Convertible

Fuel consumption

ꢉ.ꢁ l

ꢁ0ꢇ g

Fuel consumption

5.5 l

Fuel consumption

5.ꢈ l

ꢁ3ꢈ g

CO emissions

ꢁ32 g

CO emissions

2

Consumption data in litres/ꢁ00 km in the EU test cycle, CO₂emissions in g/km

8

Model

Urban

l/ꢁ00 km)

Extraurban

(l/ꢁ00 km)

Combined

(l/ꢁ00 km)

CO₂emis-

sions [g/km]

Model

Urban

(l/ꢁ00 km)

Extraurban

(l/ꢁ00 km)

Combined

(l/ꢁ00 km)

CO₂emis-

sions [g/km]

(

BMW

ꢁ

ꢁ6i 3-door⁶

ꢁ8i 3-door⁶

20i 3-door⁶

30i 3-door

ꢁ6d 3-door^ꢁ

ꢁ8d 3-door^ꢉ^,^ꢈ

20d 3-door^ꢉ^,^ꢈ

23d 3-door^ꢉ

ꢈ.5 (8.3)

ꢈ.ꢇ (8.2)

8.ꢈ (8.ꢉ)

ꢁ2.2 (ꢁ2.3)

5.3

ꢉ.8 (5.3)

ꢉ.ꢈ (5.0)

5.ꢁ (5.ꢁ)

6.0 (6.0)

3.ꢇ

5.8 (6.ꢉ)

5.ꢇ (6.2)

6.ꢉ (6.3)

8.3 (8.3)

ꢉ.ꢉ

ꢁ3ꢇ (ꢁ52)

ꢁꢉ0 (ꢁꢉ8)

ꢁ52 (ꢁ50)

ꢁꢇꢈ (ꢁꢇ8)

ꢁꢁ8

320i Touring⁶

8.5 (ꢇ.ꢁ)

ꢇ.ꢇ (ꢇ.8)

ꢁꢁ.0 (ꢁ0.ꢇ)

ꢁ0.0 (ꢁ0.ꢁ)

ꢁꢁ.ꢁ (ꢁꢁ.ꢁ)

ꢁ3.ꢉ (ꢁ3.2)

ꢁꢉ.2 (ꢁ3.ꢇ)

5.8 (ꢈ.5)

6.ꢁ (ꢈ.5)

6.ꢇ (8.0)

ꢈ.8 (8.2)

ꢈ.5 (8.ꢁ)

8.ꢉ (8.ꢇ)

ꢇ.2

ꢉ.ꢇ (5.3)

5.6 (5.ꢈ)

6.2 (6.3)

5.ꢈ (5.8)

6.3 (6.3)

6.ꢇ (ꢈ.0)

ꢈ.2 (ꢈ.ꢉ)

ꢉ.2 (ꢉ.8)

ꢉ.8 (ꢉ.ꢇ)

ꢉ.8 (5.2)

5.0 (5.3)

5.6 (5.8)

5.ꢉ

6.2 (6.ꢈ)

ꢈ.2 (ꢈ.2)

8.0 (8.0)

ꢈ.3 (ꢈ.ꢉ)

8.ꢁ (8.ꢁ)

ꢇ.3 (ꢇ.3)

ꢇ.8 (ꢇ.8)

ꢉ.8 (5.8)

ꢉ.ꢇ (5.8)

5.6 (6.0)

5.ꢇ (6.3)

6.6 (6.ꢇ)

6.8

ꢁꢉ8 (ꢁ60)

ꢁꢈ3 (ꢁꢈ3)

ꢁꢇ3 (ꢁꢇꢁ)

ꢁꢈ5 (ꢁꢈ8)

ꢁꢇꢉ (ꢁꢇꢉ)

222 (223)

235 (235)

ꢁ25 (ꢁ50)

ꢁ30 (ꢁ50)

ꢁꢉ6 (ꢁ5ꢇ)

ꢁ55 (ꢁ65)

ꢁꢈꢉ (ꢁ8ꢁ)

ꢁꢈ8

ꢁ

325i Touring

ꢁ

325i xDrive Touring

330i Touring

ꢁ

330i xDrive Touring

335i Touring

ꢁ

5.ꢉ (ꢈ.0)

6.ꢁ (ꢈ.3)

6.5 (ꢈ.3)

ꢉ.0 (ꢉ.6)

ꢉ.ꢁ (ꢉ.5)

ꢉ.ꢉ (ꢉ.6)

ꢉ.5 (5.5)

ꢉ.8 (5.5)

5.2 (5.6)

ꢁꢁꢇ (ꢁꢉ6)

ꢁ28 (ꢁꢉ6)

ꢁ38 (ꢁꢉ8)

ꢁ

335i xDrive Touring

3ꢁ8d Touring^ꢉ^,^ꢈ

ꢁ

3

20d Touring^ꢉ^,^ꢈ

ꢁ

ꢁ6i 5-door⁶

ꢁ8i 5-door⁶

20i 5-door⁶

30i 5-door

ꢁ6d 5-door^ꢁ

ꢁ8d 5-door^ꢉ^,^ꢈ

20d 5-door^ꢉ^,^ꢈ

23d 5-door^ꢉ

ꢈ.5 (8.3)

ꢈ.ꢇ (8.2)

8.ꢈ (8.ꢉ)

ꢁ2.2 (ꢁ2.3)

5.3

ꢉ.8 (5.3)

ꢉ.ꢈ (5.0)

5.ꢁ (5.ꢁ)

6.0 (6.0)

3.ꢇ

5.8 (6.ꢉ)

5.ꢇ (6.2)

6.ꢉ (6.3)

8.3 (8.3)

ꢉ.ꢉ

ꢁ3ꢇ (ꢁ52)

ꢁꢉ0 (ꢁꢉ8)

ꢁ52 (ꢁ50)

ꢁꢇꢈ (ꢁꢇ8)

ꢁꢁ8

320d xDrive Touring

325d Touring

330d Touring^ꢉ

330d xDrive Touring^ꢉ

335d Touring²

ꢁ

5.ꢉ (ꢈ.0)

6.ꢁ (ꢈ.3)

6.5 (ꢈ.3)

ꢉ.0 (ꢉ.6)

ꢉ.ꢁ (ꢉ.5)

ꢉ.ꢉ (ꢉ.6)

ꢉ.5 (5.5)

ꢉ.8 (5.5)

5.2 (5.6)

ꢁꢁꢇ (ꢁꢉ6)

ꢁ28 (ꢁꢉ6)

ꢁ38 (ꢁꢉ8)

ꢁ

3ꢁ6i Coupé^ꢁ

320i Coupé⁶

ꢈ.ꢈ

8.ꢈ (8.ꢇ)

ꢇ.8 (ꢇ.ꢈ)

ꢁ0.ꢇ (ꢁ0.8)

ꢇ.ꢇ (ꢇ.ꢇ)

ꢁꢁ.0 (ꢁꢁ.0)

ꢁ3.2 (ꢁ2.5)

ꢁꢉ.ꢁ (ꢁ3.8)

6.0 (ꢈ.ꢉ)

6.ꢈ (ꢈ.ꢇ)

ꢈ.6 (8.ꢁ)

ꢈ.3 (8.0)

8.3 (8.8)

ꢇ.ꢁ

ꢉ.ꢇ

ꢉ.ꢇ (5.ꢁ)

5.5 (5.6)

6.ꢁ (6.2)

5.6 (5.6)

6.2 (6.2)

6.ꢈ (6.ꢈ)

ꢈ.ꢁ (ꢈ.3)

ꢉ.ꢁ (ꢉ.ꢈ)

ꢉ.6 (ꢉ.8)

ꢉ.6 (5.ꢁ)

ꢉ.8 (5.2)

5.5 (5.ꢈ)

5.3

5.ꢇ

6.3 (6.5)

ꢈ.ꢁ (ꢈ.ꢁ)

ꢈ.ꢇ (ꢈ.ꢇ)

ꢈ.2 (ꢈ.2)

8.0 (8.0)

ꢇ.ꢁ (8.8)

ꢇ.ꢈ (ꢇ.ꢈ)

ꢉ.8 (5.ꢈ)

5.ꢉ (5.ꢇ)

5.ꢈ (6.2)

6.5 (6.8)

6.ꢈ

ꢁꢉ2

ꢁ5ꢁ (ꢁ56)

ꢁꢈ0 (ꢁꢈ0)

ꢁ8ꢇ (ꢁ8ꢇ)

ꢁꢈ3 (ꢁꢈ3)

ꢁꢇ3 (ꢁꢇ3)

2ꢁ8 (2ꢁ0)

232 (232)

ꢁ28 (ꢁꢉꢇ)

ꢁꢉ3 (ꢁ56)

ꢁ53 (ꢁ6ꢉ)

ꢁ52 (ꢁ6ꢉ)

ꢁꢈꢁ (ꢁꢈ8)

ꢁꢈꢈ

ꢁ

325i Coupé

ꢁ

25i Coupé

35i Coupé

20d Coupé^ꢉ^,^ꢈ

23d Coupé^ꢉ

ꢁꢁ.ꢉ (ꢁꢁ.ꢉ)

ꢁ3.0 (ꢁ3.2)

6.ꢁ (ꢈ.3)

5.ꢇ (5.ꢇ)

ꢈ.0 (6.ꢇ)

ꢉ.ꢁ (ꢉ.5)

ꢉ.ꢉ (ꢉ.6)

ꢈ.ꢇ (ꢈ.ꢇ)

ꢇ.2 (ꢇ.2)

ꢉ.8 (5.5)

5.2 (5.6)

ꢁꢇ0 (ꢁꢇ0)

220 (22ꢁ)

ꢁ28 (ꢁꢉ6)

ꢁ38 (ꢁꢉ8)

325i xDrive Coupé

330i Coupé

ꢁ

330i xDrive Coupé

335i Coupé

ꢁ

6.5 (ꢈ.3)

335i xDrive Coupé

ꢁ

ꢁ8i Convertible⁶

20i Convertible⁶

25i Convertible

35i Convertible

ꢁ8d Convertible^ꢉ^,^ꢈ

20d Convertible^ꢉ^,^ꢈ

23d Convertible^ꢉ

8.5 (8.ꢇ)

8.ꢇ (ꢇ.ꢁ)

5.0 (5.6)

5.2 (5.5)

6.0 (6.ꢁ)

ꢈ.ꢁ (ꢈ.0)

ꢉ.ꢉ (ꢉ.ꢇ)

ꢉ.3 (ꢉ.ꢈ)

ꢉ.6 (ꢉ.ꢇ)

6.3 (6.8)

6.6 (6.8)

8.ꢁ (8.ꢁ)

ꢇ.ꢉ (ꢇ.ꢉ)

ꢉ.ꢇ (5.8)

5.ꢁ (5.8)

5.ꢉ (5.ꢇ)

ꢁꢉꢇ (ꢁ6ꢁ)

ꢁ58 (ꢁ63)

ꢁꢇ5 (ꢁꢇ5)

22ꢉ (225)

ꢁ2ꢇ (ꢁ52)

ꢁ3ꢉ (ꢁ52)

ꢁꢉꢉ (ꢁ5ꢉ)

320d Coupé^ꢉ^,^ꢈ

320d xDrive Coupé

325d Coupé

330d Coupé^ꢉ

330d xDrive Coupé^ꢉ

335d Coupé²

ꢁ

ꢁꢁ.ꢈ (ꢁꢁ.6)

ꢁ3.3 (ꢁ3.5)

5.8 (ꢈ.3)

ꢁ

6.ꢉ (ꢈ.6)

ꢁ

6.ꢈ (ꢈ.6)

M3 Coupé³

ꢁꢈ.ꢇ (ꢁꢈ.0)

ꢇ.2 (ꢇ.0)

ꢁ2.ꢉ (ꢁꢁ.ꢇ)

2ꢇ5 (285)

3

ꢁ6i Sedan

ꢈ.ꢈ (8.5)

ꢈ.ꢇ (8.5)

8.ꢉ (8.ꢇ)

ꢇ.8 (ꢇ.ꢈ)

ꢁ0.ꢇ (ꢁ0.8)

ꢇ.ꢇ (ꢇ.ꢇ)

ꢁꢁ.0 (ꢁꢁ.0)

ꢁ3.2 (ꢁ3.ꢁ)

ꢁꢉ.ꢁ (ꢁ3.8)

5.ꢈ (ꢈ.3)

6.0 (ꢈ.3)

6.ꢈ (ꢈ.ꢇ)

ꢈ.6 (8.ꢁ)

ꢈ.3 (8.0)

8.3 (8.8)

ꢇ.ꢁ

ꢉ.ꢇ (5.2)

ꢉ.8 (5.2)

ꢉ.8 (5.ꢁ)

5.5 (5.6)

6.ꢁ (6.2)

5.6 (5.6)

6.2 (6.2)

6.ꢈ (6.ꢇ)

ꢈ.ꢁ (ꢈ.3)

ꢉ.ꢁ (ꢉ.6)

ꢉ.6 (ꢉ.8)

ꢉ.6 (5.ꢁ)

ꢉ.8 (5.2)

5.5 (5.ꢈ)

5.3

5.ꢇ (6.ꢉ)

6.ꢁ (6.5)

ꢈ.ꢁ (ꢈ.ꢁ)

ꢈ.ꢇ (ꢈ.ꢇ)

ꢈ.2 (ꢈ.2)

8.0 (8.0)

ꢇ.ꢁ (ꢇ.2)

ꢇ.ꢈ (ꢇ.ꢈ)

ꢉ.ꢈ (5.6)

ꢉ.8 (5.6)

5.ꢉ (5.ꢇ)

5.ꢈ (6.2)

6.5 (6.8)

6.ꢈ

ꢁꢉ2 (ꢁ5ꢉ)

ꢁꢉ2 (ꢁ52)

ꢁꢉ6 (ꢁ56)

ꢁꢈ0 (ꢁꢈ0)

ꢁ8ꢇ (ꢁ8ꢇ)

ꢁꢈ3 (ꢁꢈ3)

ꢁꢇ3 (ꢁꢇ3)

2ꢁ8 (22ꢁ)

232 (232)

ꢁ23 (ꢁꢉ8)

ꢁ28 (ꢁꢉ8)

ꢁꢉ3 (ꢁ56)

ꢁ53 (ꢁ6ꢉ)

ꢁ52 (ꢁ6ꢉ)

ꢁꢈꢁ (ꢁꢈ8)

ꢁꢈꢈ

320i Convertible⁶

325i Convertible

330i Convertible

335i Convertible

320d Convertible^ꢉ^,^ꢈ

325d Convertible

330d Convertible^ꢉ

M3 Convertible³

ꢇ.0 (ꢇ.ꢉ)

ꢁ0.ꢉ (ꢁ0.6)

ꢁ0.5 (ꢁ0.6)

ꢁ3.6 (ꢁ2.8)

6.ꢇ (ꢈ.ꢈ)

5.2 (5.ꢉ)

5.ꢇ (6.ꢁ)

6.0 (6.ꢁ)

ꢈ.ꢁ (ꢈ.0)

ꢉ.3 (5.0)

5.0 (5.3)

5.2 (5.ꢉ)

ꢇ.6 (ꢇ.ꢉ)

6.6 (6.ꢇ)

ꢈ.6 (ꢈ.8)

ꢈ.ꢈ (ꢈ.8)

ꢇ.5 (ꢇ.ꢁ)

5.3 (6.0)

6.ꢁ (6.ꢉ)

ꢁ2.ꢇ (ꢁ2.3)

ꢁ5ꢈ (ꢁ65)

ꢁ8ꢁ (ꢁ8ꢈ)

ꢁ85 (ꢁ8ꢈ)

226 (2ꢁꢈ)

ꢁꢉ0 (ꢁ5ꢈ)

ꢁ62 (ꢁꢈ0)

30ꢇ (2ꢇ3)

ꢁ8i Sedan⁶

8.0 (8.3)

ꢈ.ꢈ (8.2)

ꢁ8.ꢈ (ꢁꢈ.3)

3

ꢁ8d Sedan^ꢉ^,^ꢈ

520i Sedan

ꢇ.2 (ꢇ.ꢉ)

ꢁ0.ꢁ (ꢁ0.3)

ꢁ0.3 (ꢁ0.ꢉ)

ꢁꢁ.3 (ꢁꢁ.2)

ꢁ0.ꢇ (ꢁ0.8)

ꢁꢁ.5 (ꢁꢁ.6)

ꢁ5.8 (ꢁꢉ.ꢉ)

ꢁ6.6 (ꢁ5.5)

6.5 (ꢈ.5)

5.ꢉ (5.ꢉ)

5.ꢈ (5.ꢇ)

5.ꢈ (5.8)

6.2 (6.3)

5.8 (5.6)

6.2 (6.0)

ꢈ.ꢉ (6.ꢇ)

ꢈ.6 (ꢈ.2)

ꢉ.3 (ꢉ.6)

5.0 (5.3)

5.ꢉ (5.6)

6.ꢈ (6.ꢇ)

ꢈ.3 (ꢈ.5)

ꢈ.ꢉ (ꢈ.5)

8.ꢁ (8.ꢁ)

ꢈ.ꢈ (ꢈ.5)

8.2 (8.ꢁ)

ꢁ0.5 (ꢇ.ꢈ)

ꢁ0.ꢇ (ꢁ0.3)

5.ꢁ (5.6)

6.2 (6.5)

6.ꢈ (6.ꢇ)

ꢁ62 (ꢁ6ꢉ)

ꢁꢈꢉ (ꢁꢈ8)

ꢁꢈ6 (ꢁꢈ8)

ꢁꢇ3 (ꢁꢇ3)

ꢁ82 (ꢁꢈ8)

ꢁꢇꢉ (ꢁꢇ3)

250 (232)

260 (2ꢉ6)

ꢁ36 (ꢁꢉꢇ)

ꢁ65 (ꢁꢈ2)

ꢁꢈꢇ (ꢁ83)

3

20d Sedan^ꢉ^,^ꢈ

20d xDrive Sedan

25d Sedan

30d Sedan^ꢉ

30d xDrive Sedan^ꢉ

35d Sedan²

523i Sedan

525i Sedan

525i xDrive Sedan

530i Sedan

530i xDrive Sedan

5ꢉ0i Sedan

M3 Sedan³

ꢁꢈ.ꢇ (ꢁꢈ.0)

ꢇ.2 (ꢇ.0)

ꢁ2.ꢉ (ꢁꢁ.ꢇ)

2ꢇ5 (285)

550i Sedan

5

20d Sedan⁵

3

ꢁ6i Touring^ꢁ

ꢁ8i Touring⁶

ꢈ.ꢇ

5.ꢁ

6.ꢁ

ꢁꢉ6

525d Sedan

8.2 (8.5)

3

8.0 (8.6)

ꢉ.ꢇ (5.3)

6.0 (6.5)

ꢁꢉꢉ (ꢁ56)

525d xDrive Sedan

8.8 (ꢇ.ꢁ)

Consumption and emission data for the BMW Group

Vehicle fleet

89

Model

Urban

l/ꢁ00 km)

Extraurban

(l/ꢁ00 km)

Combined

(l/ꢁ00 km)

CO₂emis-

sions [g/km]

Model

Urban

(l/ꢁ00 km)

Extraurban

(l/ꢁ00 km)

Combined

(l/ꢁ00 km)

CO₂emis-

sions [g/km]

(

BMW

5

30d Sedan

8.6 (ꢇ.ꢁ)

ꢇ.2 (ꢇ.6)

ꢇ.0

5.ꢁ (5.2)

5.5 (5.5)

5.ꢉ

6.ꢉ (6.6)

6.ꢇ (ꢈ.0)

6.ꢈ

ꢁꢈ0 (ꢁꢈ6)

ꢁ83 (ꢁ86)

ꢁꢈ8

X6 xDrive35d²

ꢁ0.5

ꢈ.ꢁ

8.3

220

30d xDrive Sedan

35d Sedan²

Zꢉ sDrive23i^ꢉ

Zꢉ sDrive30i^ꢉ

Zꢉ sDrive35i^ꢉ

ꢁ2.ꢉ (ꢁꢁ.8)

ꢁ2.ꢉ (ꢁꢁ.ꢇ)

ꢁ3.5 (ꢁ2.6)

6.2 (6.ꢁ)

6.2 (6.2)

ꢈ.0 (6.ꢇ)

8.5 (8.2)

8.5 (8.3)

ꢇ.ꢉ (ꢇ.0)

ꢁꢇꢇ (ꢁꢇ2)

ꢁꢇꢇ (ꢁꢇ5)

2ꢁꢇ (2ꢁ0)

M5 Sedan³

2ꢁ.ꢈ

ꢁ0.2

ꢁꢉ.ꢉ

3ꢉꢉ

5

20i Touring

ꢇ.ꢉ (ꢇ.5)

ꢁ0.6 (ꢁ0.6)

ꢁ0.8 (ꢁ0.ꢈ)

ꢁꢁ.8 (ꢁꢁ.ꢈ)

ꢁꢁ.ꢁ (ꢁꢁ.0)

ꢁ2.0 (ꢁ2.ꢁ)

ꢁꢈ.0 (ꢁ6.ꢁ)

6.ꢈ (ꢈ.ꢈ)

8.ꢉ (8.6)

ꢇ.ꢁ (ꢇ.2)

8.8 (ꢇ.3)

ꢇ.6 (ꢇ.ꢇ)

ꢇ.2

5.6 (5.5)

6.0 (6.0)

5.ꢇ (6.0)

6.ꢉ (6.5)

6.0 (5.8)

6.ꢉ (6.3)

ꢈ.8 (ꢈ.5)

ꢉ.5 (ꢉ.ꢈ)

5.2 (5.ꢉ)

5.6 (5.ꢈ)

5.3 (5.3)

5.8 (5.6)

5.6

6.ꢇ (ꢈ.0)

ꢈ.ꢈ (ꢈ.ꢈ)

8.ꢉ (8.ꢉ)

ꢈ.ꢇ (ꢈ.ꢈ)

8.5 (8.ꢉ)

ꢁꢁ.2 (ꢁ0.ꢈ)

5.3 (5.8)

6.ꢉ (6.6)

6.ꢇ (ꢈ.0)

6.6 (6.8)

ꢈ.2 (ꢈ.2)

6.ꢇ

ꢁ66 (ꢁ6ꢈ)

ꢁ83 (ꢁ8ꢉ)

20ꢁ (20ꢁ)

ꢁ8ꢈ (ꢁ8ꢉ)

203 (20ꢁ)

26ꢈ (25ꢉ)

ꢁꢉ0 (ꢁ5ꢉ)

ꢁꢈꢁ (ꢁꢈ6)

ꢁ8ꢉ (ꢁ8ꢈ)

ꢁꢈ6 (ꢁ80)

ꢁꢇ2 (ꢁꢇ2)

ꢁ82

23i Touring

MINI

25i Touring

MINI One

6.8 (ꢇ.0)

6.ꢇ (ꢇ.ꢁ)

ꢉ.ꢈ (6.5)

ꢈ.ꢇ (ꢇ.ꢈ)

ꢇ.2

ꢉ.ꢉ (5.0)

ꢉ.5 (5.0)

3.5 (ꢉ.2)

5.2 (5.3)

5.6

5.3 (6.5)

5.ꢉ (6.5)

3.ꢇ (5.0)

6.2 (6.ꢇ)

6.ꢇ

ꢁ28 (ꢁ55)

ꢁ2ꢇ (ꢁ56)

ꢁ0ꢉ (ꢁ3ꢉ)

ꢁꢉꢇ (ꢁ65)

ꢁ65

25i xDriveTouring

30i Touring

MINI Cooper

MINI Cooper D

MINI Cooper S

MINI John Cooper Works^ꢁ

30i xDrive Touring

50i Touring

20d Touring⁵

25d Touring

MINI Cooper Convertible

ꢈ.ꢉ (ꢇ.3)

ꢉ.ꢈ (5.2)

5.ꢉ (5.ꢉ)

5.ꢈ (6.ꢈ)

6.ꢉ (ꢈ.ꢁ)

ꢁ3ꢈ (ꢁ6ꢁ)

ꢁ53 (ꢁꢈ0)

25d xDrive Touring

30d Touring

MINI Cooper S Convertible 8.ꢁ (ꢇ.ꢇ)

MINI John Cooper Works

Convertible^ꢁ

30d xDrive Touring

35d Touring²

ꢇ.3

5.8

ꢈ.ꢁ

ꢁ6ꢇ

M5 Touring³

2ꢁ.ꢈ

ꢁ0.5

ꢁꢉ.6

3ꢉ8

MINI One Clubman

MINI Cooper Clubman

MINI Cooper D Clubman

MINI Cooper S Clubman

MINI John Cooper Works

Clubman^ꢁ

6.ꢇ (ꢇ.ꢁ)

ꢈ.ꢁ (ꢇ.2)

ꢉ.ꢇ (6.6)

8.0 (ꢇ.8)

ꢉ.5 (5.ꢁ)

3.6 (ꢉ.2)

5.3 (5.ꢉ)

5.ꢉ (6.6)

5.5 (6.6)

ꢉ.ꢁ (5.ꢁ)

6.3 (ꢈ.0)

ꢁ30 (ꢁ58)

ꢁ32 (ꢁ5ꢇ)

ꢁ0ꢇ (ꢁ36)

ꢁ50 (ꢁ68)

6

30i Coupé

ꢁꢁ.2 (ꢁꢁ.0)

ꢁꢈ.8 (ꢁ5.ꢇ)

ꢇ.2

6.0 (5.8)

8.ꢁ (ꢈ.ꢉ)

5.6

ꢈ.ꢇ (ꢈ.ꢈ)

ꢁꢁ.ꢈ (ꢁ0.5)

6.ꢇ

ꢁ88 (ꢁ8ꢉ)

2ꢈꢇ (2ꢉꢇ)

ꢁ83

50i Coupé

35d Coupé²

30i Convertible

50i Convertible

35d Convertible²

ꢁꢁ.8 (ꢁꢁ.6)

ꢁꢇ.2 (ꢁ6.5)

ꢇ.6

6.3 (6.0)

8.8 (ꢈ.ꢈ)

5.8

8.3 (8.ꢁ)

ꢁ2.6 (ꢁ0.ꢇ)

ꢈ.2

ꢁꢇ8 (ꢁꢇ2)

2ꢇꢇ (258)

ꢁꢇ0

ꢇ.3

5.ꢈ

ꢈ.0

ꢁ6ꢈ

Rolls-Royce

M6 Coupé³

M6 Convertible³

2ꢁ.ꢉ

ꢁ0.2

ꢁꢉ.3

3ꢉ2

Rolls-Royce Phantom²

Rolls-Royce Phantom

extended Wheelbase²

Rolls-Royce Phantom

Drophead Coupé²

23.2

23.3

ꢁꢁ.3

ꢁꢁ.ꢉ

ꢁ5.ꢈ

ꢁ5.8

3ꢈꢈ

380

22.0

ꢁ0.6

ꢁꢉ.ꢈ

352

ꢈꢉ0i²^,^ꢉ

ꢈꢉ0Li²^,^ꢉ

ꢈ50i²^,^ꢉ

ꢈ50Li²^,^ꢉ

ꢈ30d²^,^ꢉ

ꢈ30Ld²^,^ꢉ

ꢁ3.8

ꢁꢉ.0

ꢁ6.ꢉ

ꢇ.5

ꢈ.6

ꢈ.ꢈ

8.5

5.ꢇ

6.0

ꢇ.ꢇ

ꢁ0.0

ꢁꢁ.ꢉ

ꢈ.2

232

235

266

ꢁꢇ2

ꢁꢇꢉ

23.2

ꢁꢁ.3

ꢁ5.ꢈ

3ꢈꢈ

Rolls-Royce Phantom Coupé²

ꢇ.6

ꢈ.3

X3 xDrive20i^ꢁ

X3 xDrive25i

X3 xDrive30i

X3 xDrive20d^ꢉ

ꢁ2.6

ꢁ2.8 (ꢁ3.ꢁ)

ꢁ3.ꢉ (ꢁ3.3)

8.2 (8.3)

ꢇ.ꢈ (ꢇ.ꢇ)

ꢇ.ꢈ

6.ꢇ

ꢈ.3 (ꢈ.ꢉ)

ꢈ.3 (ꢈ.6)

5.5 (5.8)

6.0 (6.ꢉ)

6.ꢈ

ꢇ.0

ꢇ.3 (ꢇ.5)

ꢇ.5 (ꢇ.ꢈ)

6.5 (6.ꢈ)

ꢈ.ꢉ (ꢈ.ꢈ)

ꢈ.8

2ꢁ5

22ꢉ (228)

22ꢇ (233)

ꢁꢈ2 (ꢁꢈ8)

ꢁꢇ6 (206)

208

Figures in brackets only valid for automatic transmissions.

1

X3 xDrive30d

_X₃_x_D_r_i_v_e₃₅_d2

only available with manual transmission

only available with automatic transmission

only available with SMG Drivelogic, 7-gear M transmission

EU5 comes as standard

ꢂ

ꢅ

4

ꢆ

ꢀ

7

X5 xDrive30si²

X5 xDriveꢉ8i²

X5 xDrive30d²

X5 xDrive35d²

ꢁ3.8

ꢁꢈ.0

ꢁ0.ꢉ

ꢁ0.5

8.3

ꢇ.3

ꢈ.0

ꢈ.ꢁ

ꢁ0.3

ꢁ2.ꢁ

8.2

2ꢉꢈ

28ꢇ

2ꢁꢈ

220

EU5 comes as standard for left-hand drive vehicles

also available as EU5 in selected markets from April ꢂꢃꢃ9

Consumption figures for automatic transmission on right-hand drive vehicles vary.

8.3

Further information and constantly updated data for the vehicles is available on the

Internet at www.bmw.com, www.mini.com and www.rolls-roycemotorcars.com.

X6 xDrive35i²^,^ꢉ

X6 xDrive50i²^,^ꢉ

_X₆_x_D_r_i_v_e₃₀_d2

ꢁꢉ.ꢇ

ꢁꢈ.ꢈ

ꢁ0.ꢉ

8.ꢇ

ꢇ.ꢇ

ꢈ.0

ꢁꢁ.ꢁ

ꢁ2.8

8.2

25ꢇ

2ꢇꢇ

2ꢁꢈ

as of March ꢂꢃꢃ9

Values measured in accordance with the New European Drive Cycle (EU Directive: ꢄꢃ/1ꢂꢀꢄ/EEC in the relevant

applicable version). Valid for vehicles with a European country specification.

9

0

The manufacture of, and the paper used for, the BMW Group’s Annual Report ꢂꢃꢃꢄ, have been certified in accordance

with the criteria of the Forest Stewardship Council (FSC). The FSC prescribes stringent standards for forest manage-

ment, thus helping to avoid uncontrolled deforestation, human rights infringements and damage to the environment.

Since products bearing the FSC label are handled by various enterprises along the processing and trading chain, the

FSC chain of custody certification rules are also applied to enterprises which process paper e.g. printing companies.

2

The CO emissions generated through the production of paper

for this report, as well as through print and production, were

neutralized by the BMW Group. To this end, the corresponding

amount of emission allowances was erased, with the transaction

identification DEꢈ50ꢁ6 on ꢅ March ꢂꢃꢃ9.