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6. Profitability Improvement Program
Reinforcing our own strengths
Alongside internal and external growth resulting from investments and targeted acquisitions,
strengthening the Group through in-house improvement measures is a key objective of efforts to
secure and enhance the competitive position of Salzgitter AG. Our strategic orientation towards independence,
profitability and growth requires that we consistently avail ourselves of opportunities to
optimize in all divisions.
Internal benchmarking
“You can only improve what you can measure.” In keeping with this guiding principle, opportunities
to improve performance within the Salzgitter Group are identified with consistent rigor, put into practice
and monitored through controlling measures. We keep systematic records of the extent to which
such opportunities to optimize contribute to earnings improvement as part of the Profitability
Improvement Program (PIP).
The very pleasing level of Group earnings in 2007 reflects both the positive economic environment
and the result of our efforts to use the PIP as a way of achieving continuous improvements in processes
in all functional areas of the Group companies. The PIP is more than just a program designed to partially
or temporarily reduce costs and enhance quality: it is a uniform management instrument used
across the whole Salzgitter Group to raise profitability on a sustainable basis. Despite confidence that
global demand for rolled steel and steel tube products will remain strong in the medium term, we
regard the PIP as a long-term management undertaking. We will implement the measures consistently,
irrespective of the economic environment, to ensure that we permanently secure our success.
Conclusion of PIP 2
The results of the PIP concluded in 2006 are extremely gratifying. The projects included in the program
generated a sustainable annual improvement in earnings, the so-called full year effect (FYE), of
€ 178 million, which exceeded the targeted level of € 170 million. This improvement is the fruit of
338 measures that we reported and evaluated as part of PIP 2. We regard the PIP as a long-term task
which will be enriched by adding new activities.
Start of PIP 3
We successfully implemented the successor PIP 3 program in 2007. Following the long-term objectives
of the PIP concept, the relaunch of the program has once again been developed entirely by employees
at the Group companies. Many new ideas and measures were included in the project catalog provided
they satisfied the strict PIP criteria. At the same time as integrating the new projects, we reviewed
the PIP 2 measures already under way. If there were any projects which, upon completion, still had
additional potential, these projects were incorporated into PIP 3.
We registered 180 active measures and 75 ideas during the first year of PIP 3, which runs from 2007 to
2010. We have set the full year effect (FYE) for these projects of € 148 million, in other words a contribution
which is higher than in the comparable period of PIP 2 (first-year FYE: € 138 million). This is
also the result of the permanent challenge we set ourselves of identifying and implementing new
measures that improve profitability. It is also proof that both employees and managers have once
again set themselves ambitious goals.