Annual Report 2003 2004

50
No supply bottlenecks
are expected in our
purchasing.
Procurement: We expect material expense of more than €24 billion in 2004/2005. One of the reasons
for the increase will be a higher proportion of purchased products and services. Raw materials and
steel will continue to be in short supply, depending on market developments in China. However, thanks
to our long-term supplier relationships, we do not anticipate any bottlenecks. We will generally buy
materials on the spot market in order to take advantage of downward price fluctuations. No bottlenecks
are expected in the procurement of operating materials, components and services. We will make
greater use of electronic procurement. For example, the new ThyssenKrupp RFQ platform enables us
to request quotes from suppliers worldwide and thus benefit from increased competition. Where
complex systems are concerned, however, we will place greater emphasis on partnerships and longterm
supplier relationships. Purchasing in low-cost countries is to be increased; we also intend to
buy more in the regions where we sell our products and services. The successful ThyssenKrupp best
purchasing initiative will be continued to further utilize potential for cost reduction.
Research and development: We will spend approximately €620 million on developing new products
and processes including quality assurance in the new fiscal year. This is slightly less than the previous
year. Basic research and development projects will account for €170 million, while €450 million has
been budgeted for customer-related projects including technical quality assurance. Central to many
projects will be the development of new materials in the steel area and optimized components in the
Automotive segment. Greater safety, comfort and environmental friendliness are important goals
of our development efforts, which will be carried out by approximately 3,000 university-educated
engineers, scientists and technicians.
Environmental protection: Around €400 million will be spent on ongoing environmental protection
programs in 2004/2005. Most of it will go towards reducing water and air pollution. In addition there
will be numerous expenditures for new environmental protection facilities, particularly in the Steel
segment. Waste recycling will be increased in order to preserve natural resources by better utilizing raw
materials. Systematic energy saving will also contribute to making our production lines environmentally
compatible.
Capital expenditures and financing: The volume of investment approved by the Supervisory Board
is €3.1 billion, roughly the same as the previous year. In 2004/2005, additions to fixed assets are
expected to total €2.0 billion, €0.5 billion above depreciation. We also intend to continue to meet
our gearing target of 60%.