Annual Report 2003 2004

122
The strongly export-dependent German economy in particular would
be adversely affected by a greater than expected slow-down in the
world economy, all the more so as domestic demand in 2005 will only
see moderate growth, meaning that there can still be no talk of a selfsupporting
upward trend. With regard to economic policy, there is a risk
that the reform efforts to strengthen Germany’s competitiveness will
lose momentum.
Segment risks
The Steel segment counters the risks arising from cyclical trends in
the steel business by optimizing costs, adjusting production in a
timely manner and concentrating on exacting market segments. To
counteract financial risks through increased insurer’s premiums, the
Steel segment has integrated property insurance-related economic
and technical risk monitoring into the risk management process. To
further optimize preventive fire safety, common minimum standards
have been defined for the entire segment.
Quality and delivery deadline risks are minimized through the
optimization of the value chains. The segment counteracts currency
risks arising from procurement and sales transactions through
hedging.
The main risks for the Carbon Steel business unit include market
risks regarding sales and procurement, risks from loss of production
and increased expenditure for repairs following equipment breakdowns,
as well as currency exchange rate fluctuations.
The business unit reduces the risk of limited core markets through
globalization of manufacturing in downstream activities and enhanced
internationalization of sales. The business unit counteracts the high
competitive intensity in the market for carbon flat steel products
through its innovation strategy, allowing competitive advantages to
be attained, at least temporarily. The risk of rising raw material
prices (caused by the growth in demand on the Chinese market
(particularly for coke, ore and scrap, can only be counteracted to a
limited extent by alternative procurement sources and/or by passing
the prices on. Preventive maintenance, modernization and investments
work against the risk of an unplanned production standstill.
The Stainless Steel business unit is confronted with risks arising
on the one hand from market developments, particularly in Europe
and China, and on the other hand due to expected overcapacity in
stainless production, exacerbated by changes in worldwide supply
flows through existing or new access barriers to major markets outside
Europe. The companies of this business unit curtail such risks
through measures of distribution, capacity and production control.
Rising competitive pressure is countered by the development of new
applications for stainless steels and nickel-base materials and
innovative products from these materials, as well as modern and
cost-saving process technologies. Beyond this, all subsidiaries of the
business unit are strengthening their customer relationships through
customer-centric service offerings, further quality improvements and
better delivery performance.
The risks arising from the availability and the price development of
raw materials, especially for nickel and alloyed scrap, are minimized
by means of adequate contracts and assurance mechanisms.
The Automotive segment is lowering its dependence on regional
markets by an increasing global presence, in particular in growth
regions such as Asia and Latin America. Regardless of this, due to
the current sales structure, further developments in North America
are particularly important for the segment.
An ambitious segment-wide cost reduction program has been
introduced to compensate for increasing price pressure from
automotive manufacturers. The effects of these measures will be
strengthened by improvements in earnings from restructuring
measures introduced in the previous years.
Sales and earnings in the past fiscal year were affected by the
strengthening of the euro against the us-Dollar and the Brazilian Real.
The structural market development was characterized by
concentration trends on the part of automobile manufacturers and
competitors. ThyssenKrupp Automotive counteracts such trends
through dynamic internal and external, quantitative and qualitative
growth.
Automotive is countering possible risks arising from the
discontinuation of existing manufactured automotive products through