Annual Report 2001 - KSPG AG

Kolbenschmidt Pierburg AG
Rheinmetall Allee 1
40476 Düsseldorf, Germany
Postfach 104261
40033 Düsseldorf
Phone (+49-2131) 520-2115
Fax (+49-2131) 520-2116
www.kolbenschmidt-pierburg.com
Annual Report 2001
Kolbenschmidt Pierburg AG

Division Air Supply & Pumps Pistons Plain Bearings Aluminum
Technology
Product groups
Major locations
Sales
(€million)
Organization and management structure
of the Kolbenschmidt Pierburg Group as of March 1, 2002
Kolbenschmidt Pierburg AG
(listed)
Sales: €1.8 billion
Employees: 11,600
Systems and
components for air
supply, fuel supply,
emission control
Oil and water pumps,
vacuum pumps,
fuel delivery units
Germany
France
Italy
Spain
USA
Brazil
China (joint venture)
Passenger car pistons
Piston modules
Commercial-vehicle
pistons
Large-bore pistons
Germany
France
Czech Republic
USA
Canada
Brazil
China (joint venture)
Plain bearings
Bushings
Thrust washers
Dry bearings for
low-maintenance and
maintenance-free
operation (Permaglide)
Nonferrous extrusions
Germany
USA
Brazil
Germany
Motor Service
Engine blocks Automotive parts for
engine repair and
workshops
820 570 150 140 150
Employees 4,000 5,400 1,000 800 400
Germany
France
Great Britain
Turkey
Brazil
Czech Republic

Kolbenschmidt Pierburg at a glance
€million 1997 1) 1998 1999 2000 2) 2001
(HGB) (HGB) (HGB) (IAS) (IAS)
Net sales
EBITDA (earnings before interest,
1,076.3 1,473.3 1,527.1 1,776.2 1,825.5
taxes, depreciation and amortization)
EBIT (earnings
142.8 167.2 184.4 202.0 238.2
before interest and taxes) 63.3 68.3 69.2 54.5 90.3
EBT (earnings before taxes) 57.4 61.9 61.1 21.6 49.5
Net income 51.6 54.0 26.6 7.4 31.8
EpS (earnings per share) (€)
DVFA/SG 1.74 3) 1.37 1.21
IAS 0.28 1.18
Cash dividend per share, net (€) 0.51 0.77 0.77 0.77 0.50
plus bonus plus bonus
of €0.26 of €0.53
Capital expenditures
(excl. financial assets) 82.9 125.5 177.9 171.1 174.6
Amortization/depreciation 92.7 110.7 129.0 147.5 147.9
Capital stock 68.0 68.0 68.1 68.1 71.7
Accounting equity 323.0 327.3 263.2 319.9 345.1
Cash flow 132.5 161.0 150.3 160.8 174.4
Employees (Dec. 31) 10,804 11,443 11,789 12,164 11,662
1) Fiscal 1997 includes the former Kolbenschmidt Group only prorated from April 1 to Dec. 31, 1997
2) Consolidated financial statements retroactively restated to conform to IAS
3) Determined according to the DVFA/SG formula of 1996

Annual Report 2001
Kolbenschmidt Pierburg AG

Contents
Agenda of the
annual stockholders’ meeting
Supervisory and Executive Boards
Report of the Supervisory Board
Letter to the stockholders
Report of the Executive Board
Kolbenschmidt Pierburg stock
Management report on the
Kolbenschmidt Pierburg Group
The divisions
Parent’s financial statements 2001 *
Consolidated financial statements 2001
Notes
4
6
8
10
11
12
13
15
18
21
24
31
35
36
40
44
48
52
56
62
63
66
67
68
69
70
74
84
98
103
104
105
109
110
112
Reporting format
Business trend
Results of operations
Capital and capital expenditures
Employees
Research and development
Risks of future development (risk report)
Prospects
Air Supply & Pumps
Pistons
Plain Bearings
Aluminum Technology
MotorEngineering
Motor Service
Balance sheet
Income statement
Consolidated balance sheet
Consolidated income statement
Cash flow statement
Statement of changes in equity
Segment report
Accounting principles
Comments on the consolidated balance sheet
Comments on the consolidated income statement
Comments on the cash flow statement
Comments on the segment reports
Supplementary disclosures
Auditor’s report and opinion
Group of consolidated companies
Supervisory and Executive Boards
* For the full annual accounts of Kolbenschmidt Pierburg AG
(including the notes), visit us at
www.Kolbenschmidt-Pierburg.com
or, to obtain a hard copy, write to:
Rheinmetall Allee 1, 40476 Düsseldorf, Germany

4
Kolbenschmidt Pierburg AG
Agenda
for the annual stockholders’ meeting
Our stockholders are hereby invited
to the annual stockholders’ meeting
to be held on Wednesday, June 05,
2002, at 11 a.m., in the Festhalle
Harmonie, Allee 28, Heilbronn,
Germany.
(1)
Presentation of Kolbenschmidt Pierburg
AG’s adopted annual accounts
and management report, as well as of
its consolidated financial statements
and Group management report and
the Supervisory Board report, all for
fiscal 2001
(2)
Vote on the appropriation of net
earnings
(3)
Vote on the official approval of the
acts and omissions of the Executive
Board for fiscal 2001
(4)
Vote on the official approval of the
acts and omissions of the Supervisory
Board for fiscal 2001
(5)
Appointment of statutory auditors for
fiscal 2002
(6)
Election of supplementary Supervisory
Board members
(7)
Authorization to acquire treasury stock
under the terms of Art. 71(1)(8) AktG
The preceding agenda text has been
abridged. Legally binding will be the
agenda of the Company’s annual stockholders’
meeting as published in the
German Federal Gazette (“Bundesanzeiger”).
Final inspection of a DC intake
manifold at the Nettetal plant

6
Kolbenschmidt Pierburg AG
Supervisory and Executive Boards
Supervisory Board
Klaus Eberhardt
Düsseldorf,
Executive Board Chairman of Rheinmetall AG,
Düsseldorf
Chairman
Dr. rer. soc. Rudolf Luz *)
Weinsberg,
Union secretary of the German Metalworkers
Union (“IG Metall”), Heilbronn/Neckarsulm office,
Neckarsulm
Vice-Chairman
Wigand Frhr.v.Salmuth
Heidelberg,
Chairman of the Stockholders' Committee of
Röchling Industrie Verwaltung GmbH, Mannheim
Additional Vice-Chairman
(up to June 12, 2001)
Dr. jur. Erich Coenen
Frankfurt/Main,
Executive Board member of Commerzbank AG,
Frankfurt/Main (up to June 12, 2001)
Dr.-Ing. Ludwig Dammer *)
Düsseldorf,
Central Production Engineering,
Pierburg AG, Neuss
Rolf Dollmann *)
Neckarsulm,
Chairman of the General Works Council of
KS Kolbenschmidt GmbH, Neckarsulm
(up to March 31, 2002)
Dipl. rer. pol. Werner Engelhardt
Karlsruhe,
Management Board Chairman of Röchling
Industrie Verwaltung GmbH, Mannheim
(up to January 14, 2002)
Additional Vice-Chairman
(from September 10, 2001, to January 14, 2002)
Georg Hadlaczki *)
Mühlhausen,
Member of the Works Council of the
St. Leon-Rot plant of KS Gleitlager GmbH,
St. Leon-Rot
Dr. jur. Martin Hirsch
Frankfurt/Main,
Lawyer and partner of the law firm
Gleiss Lutz Hootz Hirsch,
Frankfurt/Main
Dr. Bernd M. Hönle
Weisenheim a. S.,
Management Board member of
Röchling Industrie Verwaltung GmbH,
Mannheim (as from June 12, 2001)
Erich Hüskes *)
Nettetal,
Member of the Works Council of the Nettetal
plant of Pierburg AG, Neuss
Dr. jur. Klaus Kessler
Stuttgart,
Lawyer
Dr. Schelling & Partner GbR
Deutsche Schutzvereinigung für
Wertpapierbesitz e.V., Stuttgart
Heinrich Kmett
Fahrenbach/Robern
Works Council Vice-Chairman of
KS Kolbenschmidt GmbH, Neckarsulm
(as from April 1, 2002)
Jürgen Lemmer
Bad Homburg,
Executive Board member of
Commerzbank AG, Frankfurt/Main
(as from June 12, 2001)
Dr. rer. oec. Herbert Müller
Bochum,
Executive Board member of
Rheinmetall AG, Düsseldorf
(as from March 28, 2002)
Dr. Siegfried Roth *)
Rüsselsheim,
Secretary at the General Secretariat of
IG Metall, Frankfurt/Main
*) elected by the employees
For details of further board memberships of
Supervisory Board members, see pages 112 et seq.
Executive Board
Dr. Gerd Kleinert
Gottmadingen
Chairman
Development, Coordination
(as from November 1, 2001)
Dr. Dieter G. Seipler
Meerbusch
Chairman
R&D, Coordination
(up to October 31, 2001)
Dr. W. Hans Engelskirchen
Kaarst
Production
Dr. Jörg-Martin Friedrich
Ludwigsburg
Human Resources
Heinz-Ludger Heuberg
Wülfrath
Finance, Controlling
(up to February 28, 2002)
Georg Liebler
Düsseldorf
Sales
Dr. Peter Merten
Herrsching
Finance, Controlling
(as from March 1, 2002)
For details of further board memberships of Executive Board members,
see page 114.
7

8
Kolbenschmidt Pierburg AG
Report of the Supervisory Board
Klaus Eberhardt
Chairman of the Supervisory Board
In fiscal 2001, Kolbenschmidt Pierburg
AG’s Supervisory Board performed the
functions and duties incumbent on it
under law and the memorandum &
articles of association. The Supervisory
Board monitored the Company’s management
and conduct of business by
the Executive Board.
The Executive Board regularly reported
to the Supervisory Board on the Company’s
and the Group’s position and
development, as well as on fundamental
issues of business policy, management
and corporate planning, including
finance, capital expenditure and
human resources planning. In addition,
the Supervisory Board was regularly
briefed in writing on the Kolbenschmidt
Pierburg Group’s business position
and trend.
The Supervisory Board met twice each
in the first and the second half-year
periods of 2001. The Supervisory
Board’s Personnel Committee members
convened three times in fiscal 2001
(April 25, 2001; September 10, 2001;
and November 22, 2001) and took the
actions considered necessary.
When the Finance Committee met on
April 3, 2001, it dealt with the preparatory
deliberations about the 2000
annual accounts and, on June 20, with
the preparations for, and voting on,
the capital increase by means of the
distribute-capture method. There was
no reason for the Slate Submittal
Committee to convene.
The full Supervisory Board was duly informed
about its committees’ activities.
At the full Supervisory Board meetings,
the members discussed in detail the
situation and development of the
Group, the various divisions and all
major Group companies in Germany
and abroad, as well as all material
transactions.
Furthermore, the Supervisory Board
dealt with issues of strategic and
organizational orientation and, at its
meeting of November 22, 2001,
deliberated on the Group's mediumterm
plan. All Executive Board actions
requiring Supervisory Board approval
were timely and fully submitted to the
Supervisory Board for information and
decision. After scrutiny and detailed
discussion, all issues were approved.
In particular, the Supervisory Board
dealt with and approved
– the financial reorganization concept
for KUS Zollner, the US Pistons
subsidiary,
– the conclusion of a P&L transfer
and direct-control agreement with
Pierburg AG,
– the changeover to IAS as primary
group accounting system,
– the capital increase through a
distribute-recapture transaction.
The annual accounts and management
report of the Company, as well as the
consolidated financial statements and
Group management report of Kolbenschmidt
Pierburg AG for the fiscal year
ended December 31, 2001, including
the accounting system, were all audited
by Düsseldorf-based PwC Deutsche
Revision AG, Wirtschaftsprüfungsgesellschaft,
which had been appointed
as statutory auditors by the
annual stockholders’ meeting of June
12, 2001. On March 22, 2002, the statutory
auditors issued their unqualified
opinion on both sets of financial statements.
In the scope of their audit engagement,
the statutory auditors also
had to examine whether the Executive
Board implemented the legally required
procedures, especially set up a monitoring
system that would early on
identify any risks likely to jeopardize
the Company’s continued existence as
a going concern. The auditors stated
that the Executive Board met the requirements
of Art. 91(2) German Stock
Corporation Act (“AktG”). At a joint
meeting held on April 8, 2002, with the
auditors (who reported on major audit
conclusions and answered queries),
the Supervisory Board’s Finance
Committee discussed the separate
annual accounts of the Company and
the consolidated financial statements
for the fiscal year ended December 31,
2001, on the basis of the audit reports
and findings. No objections were
raised. All members of the Supervisory
Board received their copies of both
sets of financial statements, the management
reports and audit reports in
due course prior to the Supervisory
Board’s annual accounts meeting on
April 18, 2002. At this meeting, in
which the statutory auditors also participated
to the extent that the separate
and consolidated financial statements
were discussed, the Supervisory Board
carefully reviewed all of these documents
and concurs with the results of
the auditors' examination after its own
review of the separate and consolidated
financial statements, the management
reports on the Company and
the Group, and the profit appropriation
as proposed by the Executive Board.
No objections were raised. At its meeting
of April 18, 2002, the Supervisory
Board approved the annual accounts
for fiscal 2001 as submitted by the
Executive Board, which are thus adopted.
The Executive Board proposes for
the appropriation of the net earnings
for fiscal 2001 that a cash dividend of
€0.50 per no-par share be distributed.
The Executive Board argued that the
dividend had to be reduced in the
wake of the difficult business and
shrinking results of operations in the
year under review which affected
both the Company and the Group.
The Supervisory Board endorses the
profit distribution as proposed by the
Executive Board. The Executive Board’s
report concerning affiliations for fiscal
2001 according to Art. 312 AktG and
the pertinent report of the statutory
auditors were submitted to the Supervisory
Board, which examined the
report of the Executive Board and concurs
with it, as with the results of the
examination by the statutory auditors.
The auditors issued the following
opinion on the dependency report of
the Executive Board concerning
affiliations:
“Based on our examination, which we
performed with due professional care,
and on our evaluation we certify that
(1) the facts stated in the report are
valid;
(2) the Company’s consideration for
the legal transactions referred to
in the report was not unreasonably
high.”
After reviewing the final results of its
own examination, the Supervisory
Board has found no reasons for objections
to the Executive Board’s concluding
representation in the report on
affiliations for fiscal 2001.
Versus the year before, the Supervisory
Board changed as follows: With effect
as of the close of the annual stockholders’
meeting on June 12, 2001,
Wigand Frhr. v. Salmuth and Dr. Erich
Coenen stepped down from this Board,
and so did Mr. Werner Engelhardt as
of January 14, 2002. Mr. Rolf Dollmann
resigned from the Supervisory Board
as of March 31, 2002, to go into retirement
at April 1, 2002. The Supervisory
Board thanks Wigand Frhr. v. Salmuth,
Dr. Erich Coenen, Mr. Werner Engelhardt,
and Mr. Rolf Dollmann for their
dedicated work in the Company’s best
interests. At the election of supplementary
Supervisory Board members,
the Company’s annual stockholders’
meeting of June 12, 2001, elected
Dr. Bernd M. Hönle and Jürgen Lemmer
Supervisory Board members. The Supervisory
Board meeting of June 12, 2001,
appointed Dr. Hönle to the Company’s
Finance Committee. The Düsseldorf
Local Court of Registration appointed
Dr. Herbert Müller and Mr. Heinrich
Kmett as Supervisory Board members.
In fiscal 2001 and early 2002, Kolbenschmidt
Pierburg AG’s Executive Board
changed, too: Executive Board Chairman
Dr. Dieter Seipler and Mr. Heinz-
Ludger Heuberg asked to be released
from their Executive Board duties with
effect as of October 31, 2001, and
February 28, 2002, respectively. The
Supervisory Board complied with both
requests and appointed Dr. Gerd
Kleinert Executive Board Chairman
effective November 1, 2001, and
Dr. Peter Merten Executive Board member
with effect as of March 1, 2002.
The Supervisory Board thanks
Dr. Seipler and Mr. Heuberg for their
services on behalf of Kolbenschmidt
Pierburg AG.
Moreover, the Supervisory Board thanks
all employees of the Kolbenschmidt
Pierburg Group for their dedication and
commitment in the fiscal year 2001.
Düsseldorf, April 18, 2002
The Supervisory Board
Klaus Eberhardt
Chairman
9

10
Kolbenschmidt Pierburg AG
Letter to the stockholders
Dear Stockholders:
Fiscal 2001 was a period in which the
Kolbenschmidt Pierburg Group
successfully upheld its position in a
market that is becoming more difficult.
Given the worsening economy, it was
inevitable that the Group’s operating
results would decline. Still, with an
EBIT margin of 4.9 percent, we were
able to largely compensate for the
burdens piling up in the marketplace
in 2001. The driving force behind this
positive result was organic growth
inside Europe. With sales up by 2.8
percent in 2001, Kolbenschmidt Pierburg
again managed to outpace the
market.
Nonetheless, we still did not achieve
in 2001 our basic target of a sustained
EBIT-based return on sales (ROS) of
6.3 percent, mainly due to the ailing
US economy.
Forecasts indicate that the economy
will continue to contract in the United
States and Europe in 2002. We are
facing up to these challenges and endeavoring
to improve our performance
through further consolidation and enhancement
of our operating results.
Kolbenschmidt Pierburg will focus on
its core business in the period ahead,
review marginal activities, and concentrate
on enhancing shareholder
value through operational improvements.
Earnings growth with limited
capital employed will, even more
than up to now, take priority over sheer
sales growth, in particular business
expansion engendered through acquisitions.
A review of our non-core businesses in
2001 prompted us to shed our majority
stake in the MotorEngineering division.
This logical decision proved successful
not only for our group but also for the
employees all of which were taken
over by the new owner.
At four major locations, whose losses
are currently burdening our earnings
at around €50 million, extensive restructuring
programs have been in
force since the end of 2000. Most of
these will be successfully completed
in the course of 2002. As these lossmakers
are gradually eliminated, the
earnings generated by other subsidiaries
will in future flow undiluted to
the Group’s profit.
Market capitalization/EBIT
Basis: Price as of Dec. 31
Dividend in €
Dividend incl. bonus
After only a few months, it is evident
that the year 2002 will not bring about
any economic relief. Yet thanks to our
sound technological and financial
bases plus the highly consistent valueadding
policies we have adopted, we
expect to close 2002 by again outperforming
the market. In the continuation
of this successful course, I ask
you, our stockholders, in the name of
my Executive Board colleagues, for
your ongoing confidence.
Sincerely,
Dr. Gerd Kleinert
Executive Board Chairman
5.3
3.7
2000 2001
1.30
0.53
0.77
2000
0.50
2001
Executive Board report
Kolbenschmidt Pierburg Stock
Share prices compared with M-DAX,
indexed to the Kolbenschmidt Pierburg stock price on January 2, 2001 (up to March 28, 2002)
16
14
12
10
8
6
€
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
01 01 01 01 01 01 01 01 01 01 01 01 02 02 02
M-DAX Kolbenschmidt Pierburg AG
Phoenix AG
Continental AG
Worldwide, 2001 was a period of
plunging stock prices, the most important
US barometer, the Dow Jones,
losing just under six percent, NASDAQ
as much as 19 percent. The Euro Stoxx
shed over 20 percent, tumbling from
4,770 to 3,806 points.
Compared with year-end 2000, the DAX
slumped by almost 20 percent from
6,433 to 5,160 points. Following the
events of September 11, the DAX was
at times 45 percent below December
31, 2000. This indicates that in the
final three months of 2001, these steep
losses were followed by a recovery,
which lifted the DAX over 1,600 points
above its yearly low. Sectorwise, automobile
shares put in the relatively
best performance in 2001, BMW rising
12 percent, DaimlerChrysler 8 percent,
with only Volkswagen receding almost
6 percent.
The M-DAX slid by 7.4 percent in 2001
(from 4,675 to 4,326 points) and was
thus caught up in the general trend of
the period.
Kolbenschmidt Pierburg AG stock
gained in the course of last year. At the
close of 2000, our stock had fallen to
an unsatisfactory €10.75, but then as
the year progressed, rebounded by
June, rising to €16.10 (+49.8 percent).
On an annual average, the stock price
was 18 percent higher than at the end
of 2000, a commendable performance
particularly against the background
of the capital increase obtained by
applying the distribute-recapture
method around mid-year. We will do
our utmost to perpetuate this trend in
the course of the present fiscal period.
Other comparable M-DAX listed automotive
stock, Phoenix and Continental,
fell by almost 20 percent, in contrast.
The early months of 2002 saw a continuation
of Kolbenschmidt Pierburg
stock’s upswing, with the year-end
2001 price of €12.65 gaining up to
€2 in the first months.
As to 2002, we expect the stock markets
to show a slight recovery, given a
revival in the world economy in the
second half of 2002. This will open
up further growth potentials for our
stock, which is still comparatively
underpriced.
Fiscal 2001 was again another very
successful year for our Investor Relations
efforts, the first annual accounts
conference for financial analyst being
held in Frankfurt/Main by Kolbenschmidt
Pierburg AG. The very many
interested analysts and their positive
response, endorsed the success of
our Investor Relations work. At a DVFA
conference staged at the IAA in
Frankfurt, Kolbenschmidt Pierburg AG
presented itself to a broad audience
of investors and, in October, a further
such event was organized to accompany
the opening of our Shanghaibased
joint venture. Completing the
picture are our quarterly teleconferences
on the current business situation.
Analysts, investors and banks alike
commend our enlightening annual
report and, in a survey conducted by
Manager Magazin, the annual report
2000 generally scored very high.
The rating agencies, too, have once
more confirmed that Kolbenschmidt
Pierburg AG pursues a circumspect
and safe financial policy and, despite
the tougher markets in 2001, rated
our company BBB/A-2 (S&P) and Baa2
(Moody’s), hence investor’s grade for
our debt securities.
11

Kolbenschmidt Pierburg AG
Executive Board report
Management report on the Kolbenschmidt Pierburg Group
Reporting format
This report on 2001 is the first annual
report the Kolbenschmidt Pierburg
Group has prepared in accordance with
the IASB’s International Accounting
Standards (IAS). To ensure a meaningful
comparison, the prior-year data
(in 2000 still based on the German
Commercial Code, or “HGB”) was
subsequently restated to conform to
IAS and contrasted to the IAS-based
disclosures for fiscal 2001.
Kolbenschmidt Pierburg AG’s
Executive Board
Dr. Gerd Kleinert
The changeover to IAS as primary
accounting basis meant that three
special-purpose property companies
had to be additionally included in the
consolidation group as of December
31, 2000 as well as 2001.
Set up as of April 1, 2001, together
with SAIC, one of China's biggest
automotive companies, the joint
venture Kolbenschmidt Pierburg
Shanghai Nonferrous Components
Co. Ltd. (KPSNC), Shanghai, China,
has been included at equity in the
Air Supply & Pumps division.
MotorEngineering is a division operating
in the market for exhaust gas,
flowmeter and workshop measuring
equipment for developing and servicing
I.C. engines and accounts for a
mere 2 percent of the Group’s annual
sales. Thus, it is not eligible for inclusion
as one of the Kolbenschmidt
Pierburg Group’s core businesses
and therefore effective the turn of
2001/2002, AVL Holding GmbH, Graz,
Austria, as part of a joint venture
agreement, has taken over a majority
stake in the division’s parent company
Pierburg Instruments GmbH, in which
it is also exercising industrial management.
While this company’s income
statement is reflected in Kolbenschmidt
Pierburg AG’s consolidated
financial statements, its balance sheet
as of December 31, 2001, is not. In
future, this company will be included
at equity. Additionally, the 100-percent
stake held in Pierburg Instruments Inc.,
Auburn Hills, Michigan, USA, a company
serving the American market with
the development, manufacture, and
marketing of flowmeter and exhaust
gas measuring equipment, was deconsolidated
and sold as of January 1,
2001, to AVL Michigan Holding Inc.,
Plymouth, Michigan, USA.
As of January 1, 2001, Vehicle Spares
Ltd., Dublin, Ireland, was sold and
likewise deconsolidated.
Regarding changes in the consolidation
group, the comparative figures
for the past two years are those certified
in the annual accounts; due to
the marginal significance of such
changes, a comparable restatement
has been waived.
Dr. W. Hans Engelskirchen Dr. Jörg-Martin Friedrich Georg Liebler Dr. Peter Merten
12 13
Business trend
Fiscal 2001 for Kolbenschmidt Pierburg
was overclouded by the worsening
economic conditions in the course of
the year. Nonetheless, most of the
Group’s companies successfully upheld
their position in the markets, the
consequence being that Group sales
gained by 2.8 percent to €1,825.5
million. Five of the six divisions played
their part in improving sales revenues
over the previous year. The growth
regions in 2001 were Western Europe
and South America, whereas the
Group’s activities in North America
suffered from reduced customer calloffs
and project postponements.
World production down
Passenger car production by
selected regions
(million units)
Following the upswing of 2000, auto
and LCV production in Asia in 2001
re-declined (down 1.7 percent). It was
particularly in the volume markets of
Japan and South Korea that car production
fell by 2.1 and 3.4 percent,
respectively. LCV production in these
countries also dropped, by 6.0 and
1.7 percent, respectively. In contrast
and although from a relatively low
baseline, car production in China
again revved up, by 28.1 percent to
0.7 million units. Including the LCVs,
which account for a major slice of
automotive output in China, production
added up to 1.8 million units (up
10.4 percent).
On the basis of the existing projections,
world production of autos and
light commercial vehicles (LCVs, under
3.5 t) in 2001 dropped by 3.1 percent
to 53.6 million, of which automobiles
accounted for 39.8 million (down 2.3
percent) and LCVs for 13.8 million
(down 5.5 percent). A major problem
for the carmakers is the declining
sales in major world markets (NAFTA,
Japan), which are hardly retrievable
elsewhere.
Within NAFTA, the United States produced
much fewer autos (around 4.9
million, down 11.9 percent) and LCVs
(around 6.3 million, down 9.0 percent)
than back in 2000, even though the
final quarter of the period saw a number
of special campaigns such as zerointerest
financing, cash incentives,
and early re-leasing options, which
together did help prop up sales,
Western/Eastern Europe
2000
2001 (provisional)
NAFTA
Asia incl. Japan
8.4
7.4
Western Europe in 2001 again showed
a slight gain in the production of cars
and LCVs, this time by 1.4 percent to
16.8 million units. Whereas France
and Germany boosted production to
just over 3.5 million vehicles (up 7.8
percent) and 5.2 million (up 3.5 percent),
respectively, output in Italy fell
to a good 1.5 million units (down 9.5
percent) as in Spain to just under 2.9
million units (down 1.9 percent) and
Britain to just under 1.7 million units
(down 7.1 percent). In Germany, exports
rose by 5 percent to a good 3.6 million
units. In contrast, the number of newly
registered vehicles fell by 1.4 percent
in Western Europe. The number of
foreign makes registered declined by
though at the expense of severely
eroded earnings. Production figures
in Canada slumped too, cars falling to
1.3 million units (down 17.2 percent)
and LCVs to 1.2 million (down 8.4 percent).
In South America, the number of cars
and LCVs produced gained by 1.9 percent
to around 1.9 million units. Whereas
production in Brazil advanced by
over 8 percent, the figure for Argentina
crumbled by almost 31 percent due to
that nation’s economic woes.
–11.9%
Sales growth
despite
tough conditions
13.1
12.9
–1.5%
17.2
17.4 +1.2%
6 percent whereas German brands
gained by almost 1 percent.
Diesel engines
advancing
Diesel engine cars and station wagons
once more progressed in the markets
of Western Europe, particularly those
of the mass producers Volkswagen,
PSA, and Renault, which offer a large
number of diesel engines. In Germany
and France, the proportion of such
vehicles as a percentage of car and
station wagon production, rose by
almost 4 percent to some 38 and 41
percent, respectively.

14
Management report on the Kolbenschmidt Pierburg Group
Executive Board report
Non-German sales
over 66 percent at
Kolbenschmidt Pierburg
Sales breakdown by regions
(in %)
Sales growth in five
of six divisions
Kolbenschmidt Pierburg’s business
continues to be highly international.
Unchanged from 2000, Group sales
to customers outside of Germany
exceeded 66 percent. In fact, this
would have been even higher, but
for the dents inflicted by the North
American automotive market. For the
automotive vendor industry, this is an
important region, and here the proportion
of sales fell by 1 percentage point
from the prior-year level. Whereas
sales to customers in Western Europe
(excluding Germany) gained one
percentage point to 44 percent, the
proportion of sales in the other regions
remained unchanged. This also applies
to sales to German OEMs, which once
more accounted for 34 percent of the
total.
17
3
2 1
3 2 1
Europe (excl. Germany)
34
16
North America
2000 2001
South America
43
Germany
Asia
Other
Fiscal 2001 was a period in which five
out of the six divisions posted sales
growth, in some cases quite appreciable,
with Air Supply & Pumps and
Aluminum Technology stepping up
sales versus the previous year by
€49.4 million and €19.6 million, respectively.
In fact, Air Supply & Pumps
achieved a new record of €819.8
million. It was the Air Supply unit, in
particular, that grabbed an extra share
of business from the mounting wave
of diesel engine cars. Heavy year-earlier
cost input for preparing the series
production start-up of several new products
allowed Aluminum Technology to
grow its sales to €135.8 million.
Compared with the previous year,
steep sales hikes were recorded in
Europe (up €51 million) and Germany
(up €17 million). Business in Asia
throve, too, with additional sales of
€8 million. Within these three regions,
sales growth outpaced the local automotive
market. In contrast, sales in
North America dropped by around
€25 million. The South American
automotive market was likewise
infected by the situation in North
America, with the result that the
improvement fell short of the yearearlier
addition, reaching only around
€5 million.
44
34
Likewise successful performers in
their respective markets were Plain
Bearings (sales of €153.2 million),
MotorEngineering (€37.8 million)
and MotorService (€151.3 million)
with increases between €2 million
and €8 million. In fact, it was only
the Pistons division that had to
contend with sales losses of €35.0
million to €571.5 million, due to its
heavy involvement in the North
American market and the latter’s
feeble automotive economy.
Sales by divisions
(in %)
Compared with the previous year, there
were no substantial changes in the
shares of the divisions as a percentage
of consolidated sales. With an increase
of two percentage points, Air Supply &
Pumps managed to cement its position
as the highest sales generator among
the divisions, with Pistons falling back
correspondingly by two percentage
points.
The Kolbenschmidt Pierburg Group’s
core business in fiscal 2001 was once
again sales to automotive industry
Results of operations
Starting with the 2001 annual accounts,
the Kolbenschmidt Pierburg Group
changed its primary accounting basis
to IAS, thus adding transparency to
its consolidated financial statements.
Moreover, IAS-based financial information
facilitates comparative analyses
among other internationally operating
companies which use the same accounting
standards.
To create a reproducible starting basis,
the consolidated financial statements
2000, originally prepared in accordance
with the regulations of the
German Commercial Code (“HGB”),
were retrospectively restated to
conform to IAS rules. Apart from the
differences arising from the disparity
of HGB and IAS rules, also additional
material conclusions subsequently
reached in 2001 and retroactively
8
2
7
33
8
42
Plain Bearings
8
2000 2001
Aluminum Technology
shedding new light on business in
2000 were reflected in the restated
2000 financial statements, in due
accordance with the recommendations
published by IDW, the German Institute
of Sworn Public Auditors & Accountants,
in RH HFA 1.001. This approach meant
that, according to IAS, certain expenses
and income were allocated to other
periods than under HGB regulations.
While IAS rules hardly affected the
disclosure of sales in Kolbenschmidt
Pierburg’s consolidated financial statements,
the disclosure of earnings was,
inter alia, influenced by the different
rules for (i) goodwill capitalization
and amortization, (ii) accounting for
expenses for pension accruals, (iii)
the nonrecognition of HGB-based
accrued restructuring expenses, and
(iv) the accounting treatment of untaxed/special
reserves.
Air Supply & Pumps
Pistons
MotorEngineering
Motor Service
OEMs worldwide which account for
around 85 percent of the total volume
(down from 86 percent). And, as in the
previous year, about 10 percent of
Group sales revenues was generated
with engine repair shops and workshops
(spares, parts and measuring
equipment), while nonautomotive
business (such as large-bore pistons
for stationary applications and continuous
castings) contributed some
5 percent (up from 4 percent) of Group
sales.
2
7
31
Disclosure of earnings
rebased on IAS
8
44
15

Management report on the Kolbenschmidt Pierburg Group
Executive Board report
Earnings before taxes (EBT) by the
Kolbenschmidt Pierburg Group in
2001 reached €49.5 million, well
in excess of the year-earlier €21.6
million.
At €90.3 million, EBIT topped the
previous year’s €54.5 million, while
EBITDA in 2001 clearly surpassed the
year-earlier level to reach €238.2
million (up 18 percent).
Year-earlier EBT
well exceeded
Expense structure of the Group
(in %)
Value added
per capita up
by 8 percent
1.2
12.8
8.2
29.3
48.5
The pretax return on sales (EBT-based
ROS) for the Kolbenschmidt Pierburg
Group in 2001 amounted to 2.7 percent
(up from 1.2 percent), and EBIT-based
to 4.9 percent (up from 3.1 percent).
EBITDA as a proportion of sales came
to 13.1 percent (up from 11.4 percent).
From an operational viewpoint, earnings
are still heavily handicapped by
the weak US economy, which clearly
emphasized the need to restructure a
number of our companies in this region
of the world. As a consequence, the
already initiated restructuring and
reorganization programs for the US
locations were thoroughly revised
and amplified. One of the production
locations will substantially be closed
down in 2002 and facilities at another
will be reduced to two mass-produced
products. Even though such expenses
will partly burden earnings in 2002,
profitability improvements are budgeted
for the US activities of the Group
as early as this year.
Total operating
performance
€1,804.5 million
EBT
Sundry
Cost of materials as a percentage of
total operating performance rose, in
particular due to the geographical
relocation of value-adding processes,
whereas the Group’s payroll ratio was
slightly lower. The burdening effect
on earnings of the individual personnel
expense increases was outcompensated
within the Group through a
The Group’s earnings in 2001 were
squeezed by even keener pricing
competition in the automotive market
as well as by higher levels of the cost
of materials and personnel expenses.
This earnings pressure was counteracted
through sweeping rationalization
efforts, engineering improvements,
and a marked reduction in purchase
prices. Growth in excess of budget
led to unit cost economies of scale
while closer cooperation among the
international production locations
allowed us to consistently allocate
products to the least expensive of the
production locations.
Total operating
performance
€1,833.3 million
Amortiz./depreciation
Personnel expenses
2000 Cost of materials
2001
2.7
10.3
8.1
28.5
50.4
headcount reduction and the again
large share of production outside of
Germany. As a consequence, it proved
possible to raise sales per capita by
4.8 percent to €0.152 million (up
from €0.145 million). Concurrently,
value added per capita advanced by
8.0 percent to €0.054 million.
Kolbenschmidt Pierburg again invested
heavily in tangible assets during 2001
with the target of entrenching market
position and furthering growth. Total
amortization and depreciation remained
at around €148 million.
Among the divisions, Plain Bearings
and Motor Service (aftermarket) turned
in very creditable performances with
EBT-based ROS of 9.9 and 8.8 percent,
respectively. Pistons, too, managed
to largely absorb the burdens from its
extensive US operations through success
in Europe and South America to
achieve an ROS of 3.5 percent. Finally
and in its last year of full consolidation
by Kolbenschmidt Pierburg, the Motor-
Engineering division achieved a sharp
earnings improvement, attributable
to both the very successful operations
as well as the book gains related to
the transfer of the majority stake.
Despite the dividend payments partly
accruing through the disposal of the
Value added by the Kolbenschmidt
Pierburg Group in 2001 advanced by
around 4.9 percent to €645.2 million
and broke down as follows:
Distribution of value added 2000 2001
KSPG AG stockholders 3% 2%
Employees 86% 83%
Lenders 3% 3%
Treasury 6% 5%
Companies of the Group 2% 7%
majority stake held in the MotorEngineering
subsidiary, the biggest of the
divisions, Air Supply & Pumps (Pierburg),
fell short of expectations with
an ROS of only 1.5 percent. The same
applies to Aluminum Technology
which failed to break even in 2001,
generating a negative EBT of €3.6
million. Earnings at Pierburg were
squeezed by the need to restructure
the Berlin and Nettetal locations as
well as the poor performance of the
US subsidiary. At the engine block
division, Aluminum Technology,
concurrent production start-ups in
the summer of 2001 and the related
preproduction costs prevented any
profit from being achieved.
Big differences
in division returns
on sales
Group EBT by divisions 2000 2001
€million €million
Air Supply & Pumps 7.2 12.3
Pistons 14.0 20.2
Plain Bearings 4.5 15.1
Aluminum Technology (5.2) (3.6)
MotorEngineering (1.5) 7.5
Motor Service 10.4 13.4
Others/consolidation (7.8) (15.4)
Group 21.6 49.5
16 17

18
Management report on the Kolbenschmidt Pierburg Group
Executive Board report
The Kolbenschmidt Pierburg Group’s
net income for 2001 totaled €31.8
million (up from €7.4 million), which
limited the income tax load ratio to
35.8 percent of EBT. We assume that
the average income tax burden within
the Kolbenschmidt Pierburg Group will
Income tax load ratio
limited to 36 percent
remain at around 37 percent in the
years ahead. Net ROS 2001 (after taxes)
came to 1.7 percent. A decisive contribution
to the higher net income came
from the improved EBT; in contrast,
capitalized deferred tax assets in 2001
sank versus the year before. Deferred
taxes were recognized in 2001 for
temporary differences between the
financial statements and the tax accounts
as well as for loss carryovers
available short term to reduce the tax
load.
Achieving the long-term targets set
for the returns on sales and capital
proved impossible in the difficult
year 2001. In the current year 2002,
we will center our efforts on getting
closer to our self-set ambitious targets.
Targets and achievements Target Actual Actual
2000 2001
Return on sales (EBT-based ROS) 4.5% 1.2% 2.7%
Return on sales (EBIT-based ROS) 6.3% 3.1% 4.9%
Return on capital employed (ROCE) 15.0% 6.3% 10.1%
Capital expenditure
ratio almost unchanged
Capital expenditure by divisions
(in %)
Capital and capital expenditures
During fiscal 2001, the Kolbenschmidt
Pierburg Group spent altogether
€174.6 million (up from €171.1 million)
on intangible and tangible assets
(capitalized). The IAS-based disclosure
includes the additions of leased assets.
Despite the modestly higher amount
compared with the previous year, the
ratio of capital expenditures to sales
was again 9.6 percent.
1 1
Air Supply & Pumps
In 2000, capital expenditures had been
more or less fully shared between the
German and non-German operations.
In 2001, in contrast, the larger share
went into expanding the domestic
production operations (approximately
62 percent or €107.7 million).
Spending abroad accounted for around
38 percent or €66.9 million of the
funds invested, with emphasis on the
locations in Western Europe (€34.1
million). Due to the weak economy,
capital outlays in North America
dropped from €37.3 million to €23.1
million.
9
Pistons
12
7
2000
44
Plain Bearings
Aluminum Technology
MotorEngineering
7
2001
38
Motor Service
Other
33
1 1
46
Premachining a
BMW V8 engine block
at the Neckarsulm plant

20
Management report on the Kolbenschmidt Pierburg Group
Executive Board report
Investments in
innovative projects
Most of the capital expenditures by
Air Supply & Pumps during the past
fiscal year concentrated on completing
two production lines for intake manifolds
and setting up extra capacities
for electric throttle bodies. For the
growing segment of emission control
products, further production facilities
were created for manufacturing exhaust
gas recirculating valves and
control dampers in order to share in
the growth opportunities.
Outside of Germany, the European
water and oil pump operations were
further expanded. To address the
growing proportion of diesel engines
and the related demand for vacuum
pumps, this division's activities for
these products were again extended
in France and Italy. In the United States,
spending focused on the start-up of
a new line for manufacturing electric
throttle bodies.
Inside Germany, Pistons devoted its
efforts to enlarging capacities, both
in the foundries as well as in the
machining shops, in order to implement
new products related to new
engine programs of notable OEMs.
Efforts were also stepped up toward
automating the engine test rigs.
Gross cash flow
clearly improved
Investments at the US subsidiaries of
the Pistons division centered on the
restructuring and expansion of the
manufacturing lines in order to achieve
a further pronounced enhancement in
productivity. The subsidiaries in France
and the Czech Republic installed production
lines for new product start-ups.
Plain Bearings pushed ahead with
expanding the Papenburg-based plant.
As part of this project, further facilities
were set up for completing the connecting-rod
bearing production line
and other manufacturing equipment
for car engine bearings. Papenburg
also saw the start-up of a second
coating line for high-duty slide bearings
(sputter line). The St. Leon-Rot factory
spent most of the funds on facilities
for cladding and for mass-producing
bushings.
Aluminum Technology focused its
expenditure on extending the lowpressure
casting capacities to cater
for budgeted sales increases assured
through customer projects. Together
with an associate, this division also
continued work on setting up plant
for finish-machining engine blocks
used in the premium off-road vehicle
of a German carmaker.
Capital outlays by Motor Service
amounted to €1.0 million in fiscal
2001 (up from €0.8 million). Most
of the spending was related to the
relocation of a French subsidiary.
The Group’s gross cash flow for the
year ended December 31, 2001, was
ramped up significantly in comparison
to 2000, from €160.8 million to
€174.4 million. With amortization/depreciation
virtually unchanged and
With the transfer of our majority stake,
MotorEngineering’s capital expenditure
is no longer reflected in Kolbenschmidt
Pierburg AG’s consolidated financial
statements.
Financial investments in fiscal 2001
added up to €21.6 million, mainly
due to the new Chinese joint venture
by Air Supply & Pumps; this follows a
mere €1.1 million in the previous year.
Amortization and depreciation (excluding
goodwill amortization) by the
Kolbenschmidt Pierburg Group as of
December 31, 2001, amounted to
€145.6 million, approximating the
year-earlier level of €144.8 million.
Capital expenditures in 2001 exceeded
amortization and depreciation by
19.9 percent. Goodwill amortization
came to €2.3 million in 2001.
pension accruals receding, the improvement
was ascribable to the upgraded
net income. The €174.6 million
capital expenditures in 2001 were
almost fully funded from the cash
flow.
At €1,343 million as of December 31,
2001, total assets inched down €46
million from the year-earlier €1,389
million, despite the higher business
volume. The ratios and proportions
continued healthy on either side of
the balance sheet.
Fixed assets accounted for 59 percent
of total assets, thus definitely up in
relative and absolute terms (7.1 percentage
points or €71.6 million).
Tangible assets were increased to
secure future business but financial
assets rose, too, mainly due to the
fair valuation of one investee when
applying IAS 39 for the first time, and
to the addition of two joint ventures.
Employees
As of December 31, 2001, Kolbenschmidt
Pierburg AG along with its
subsidiaries in Germany and abroad
employed a workforce of 11,662, down
from 12,164 at December 31, 2000.
The decline by 502 was the outcome
of the deconsolidation of MotorEngineering
plus retrenchments at various
locations in Germany and abroad.
Affected by the measures were in
particular the Fort Wayne plant of
KUS Zollner Division Inc., as well as
the Greensburg site of KS Bearings Inc.
and the Berlin and Nettetal plants of
Pierburg AG. The retrenchment programs
at the Berlin plant of Pierburg AG,
to be continued this and next year,
have been accompanied by agreements
on a reconciliation of interests
and a severance package.
In contrast, the ratio of current to total
assets shrank by 7.1 percentage points
to 37.5 percent. The program to scale
down inventories and trade receivables
was successfully implemented. Cash
& cash equivalents were whittled down
by €33.6 million to €21.2 million.
Total equity (i.e., stockholders’ equity
plus minority interests) improved by
€25.1 million from €319.9 million to
€345.1 million. Kolbenschmidt Pierburg’s
equity base was strengthened
not only by the increased capital stock
and additional paid-in capital after the
dividends and bonuses distributed
for 2000 were recaptured but also
through the healthy net income. The
equity ratio gained accordingly, rising
from 23.0 percent in 2000 to 25.7
percent as of December 31, 2001.
Headcount down
During 2001, an average of 228 persons
were on limited-term contracts. This
compares with 165 the year before.
The domestic companies of the Kolbenschmidt
Pierburg Group had a
workforce of 6,160 as of December
31, 2001 (down from 6,328). Of these,
4,519 were blue- and 1,641 whitecollar.
German operations accounted
for around 53 percent of the total headcount.
Personnel expenses incurred by
Kolbenschmidt Pierburg AG and its
subsidiaries in 2001 added up to
€522.1 million. This total included in
2001 €414.4 million for wages and
salaries, €46.0 million for social
security taxes, and €61.7 million for
pension expenses.
Sound asset and
capital structure
In fiscal 2001, the collective agreement
for the metalworking industry signed
back in 2000 was in force and expired
February 28, 2002. This agreement
meant a 2.1-percent pay raise in Germany
as from May 1, 2001.
Domestic workforce
at 53 percent
The new parameters set by the collectively
negotiated agreement for preretirement
part-time arrangements
were applied on the basis of a general
works agreement. These are tailored
to the specific needs of the Kolbenschmidt
Pierburg Group’s German
operations and allow us to deploy
preretirement part-time to improve
age and skill structures at the various
operations and units.
21

Tool setting prior to machining
the large-bore pistons at the
Neckarsulm plant
Further agreements were concluded on
the deployment of flexible working
hour arrangements and the introduction
of group work at one of the plants.
Skilled and motivated employees in
Germany and abroad are essential if
we are to master the challenges posed
by our markets and enhance the value
of the Group. We prize employees that
identify with the Group and whose
know-how we are able to retain for
lengthy periods. The stock appreciation
rights (SAR) program for the second
and third management tiers was continued
in 2001. Hence, all managers
now have a part of their pay anchored
to Kolbenschmidt Pierburg’s stock price
performance and, as a consequence,
shareholder value notions are given
even greater emphasis throughout
the Group.
A large number of training courses not
only in the field of modern working
techniques but also in management
and communication were staged in
order to promote the skills of our employees
in and outside of Germany.
This ongoing enhancement of employee
skills and motivation is essential
in order to cope with changes due to
new technologies and the ongoing
progress toward state-of-the-art and
efficient forms of business organization.
One ingredient of this is the continuous
improvement process in effect at all
the plants. The corporate suggestions
schemes with their continuously growing
improvement potential are also
helping to fine-tune some of the internal
work flows. In submitting these
suggestions, employees are demonstrating
their interest in improving
the organization of the operations at
which they work.
Apprentice training was again pursued
resolutely and is necessary in order to
increase the efficiency of our operations
within the competitive environment.
As of December 31, 2001, we
employed 358 apprentices and vocational
trainees worldwide.
The employee representatives at all
the companies cooperated constructively
in putting into effect our measures.
This constructive cooperation
with the works councils, the spokesperson
committees of the managerial
employees and the employee representatives
on the Supervisory Board
was and is an important foundation
stone in the success of the Group as
a whole.
We thank all the employees of the
Kolbenschmidt Pierburg AG companies
for their dedicated efforts and commendable
achievements in fiscal 2001.
Stock appreciation rights
program continued
Employees 12-31-2000 12-31-2001 Change
Air Supply & Pumps 4,109 4,010 –99
Pistons 5,618 5,416 –202
Plain Bearings 1,094 1,045 –49
Aluminum Technology 689 772 +83
MotorEngineering 210 0 –210
Motor Service 396 381 –15
Others 48 38 –10
Total, Group
thereof
12,164 11,662 –502
Germany 6,328 6,160 –168
abroad 5,836 5,502 –334
23

Management report on the Kolbenschmidt Pierburg Group
Executive Board report
Research and development
Whereas the consolidation process
among the automotive manufacturers
has almost come to a standstill, the
relationship between manufacturers
and their vendors is still undergoing
change. Broader platform-based model
ranges together with the necessity to
Even now, Kolbenschmidt Pierburg
with its products “for every aspect of
the engine” is a longstanding and
successful partner of the international
carmakers in the development of
Expenses for R&D
again raised
differentiate among vehicle types, the
extension of product ranges but with
ever shorter model lifetimes as well
as a concentration on core competencies
all lead to the outsourcing of tasks
previously performed by the assemblers
themselves. This trend is also
true of development and production
functions, the vendors having to
functional, economic, low-emission
and cost-optimized engine components.
In order to maintain this reputation
and widen it within the product
sectors, where Kolbenschmidt Pierburg
is represented with the individual
components but still lacks sufficient
first-tier systems competence, the
internal and external expenses for
research and development in fiscal
2001 again rose, to €79.8 million,
exceeding the already high previous
R&D by divisions 2000 2001
€million €million
Air Supply & Pumps 45.3 49.3
Pistons 19.2 19.9
Plain Bearings 2.1 2.4
Aluminum Technology 8.0 5.0
MotorEngineering 4.5 3.2
Group 79.1 79.8
High technical competence
in the divisions
In fiscal 2001, the Group made quite
some progress toward its targets of
emission control, performance
gains, as well as consumption and
weight reduction through the series
start-up or ongoing development of
a number of innovative products.
The basis for this are the successful
R&D efforts within the Group's
divisions:
Air Supply & Pumps’ technical competence
was proven with numerous
innovative projects, such as electric
coolant pumps for the main cooling
circuit, regulated oil pumps, motorized
exhaust gas recirculating valves for
direct-injection gasoline and diesel
engines as well as complete predelivery
units for diesel applications. All these
projects were developed ready for
series production by interdisciplinary
teams. Furthermore, work started on
the gestation of sensors and valves
for fuel-cell propulsion systems. The
worldwide first steplessly variable
intake manifold module from thinwalled
magnesium for boosting performance
and torque went into series
shoulder ever greater responsibilities.
A decisive factor in the success or
failure of an automotive vendor industry
is more than ever before the
vendor’s ability to deliver innovative
contributions within the value-adding
chain culminating in the automobile.
year’s level. This is equivalent to 4.4
percent of sales (up from €79.1 million
or 4.5 percent). In all, in the Kolbenschmidt
Pierburg Group almost 6 percent
of the total workforce was entrusted
with research and development
tasks as of December 31, 2001.
production and proved successful.
Various electronically controlled throttle
bodies (drive-by-wire) and exhaust
gas recirculating valves for gasoline
and diesel engines on the European
and North American market, valueoptimized
oil and water pumps (for
commercial vehicles, too) likewise
came on stream.
Value engineering teams are busy finetuning
series products for improving
the cost/revenue situation. In this way,
potentials for current projects and
rationalization approaches for succeeding
product generations are worked
out and implemented.
Visual inspection of the
piston shaft coating at the
Neckarsulm plant
24 25

Coating unit for
high-duty plain bearings
at the Papenburg plant
In the Air Supply & Pumps division,
€49.3 million was spent in fiscal
2001 for research & development
activities, equivalent to 6.0 percent
of sales.
In the Pistons division, the share of
pistons for passenger car diesel
engines again climbed, a trend set
to continue over the years ahead. To
address this, R&D staff in 2001 developed
solutions for high-duty diesel
pistons in passenger car engines rated
at 55 kW and more per liter displacement.
For various European customers,
pistons are currently being developed,
with ratings partly clearly above today’s.
So far, there has not been any breakthrough
in the market for direct-injection
gasoline engines, despite the very
many development projects and some
successful series launches in the past
year. Kolbenschmidt Pierburg is well
prepared for a partial substitution of
conventional gasoline engines thanks
to its new casting technology matured
in the course of last year which enables
a less costly production of the necessary
complex surface geometry. Further
projects in this sector are under development.
In recent years, articulated pistons for
commercial vehicles have been developed
for various customers and are
now being or about to be series-produced.
We are already working on follow-up
models for cylinder pressures
of 250 bar or more. Steel pistons, also
for diesel engine commercial vehicles,
are being advanced according to plan.
A similar engineering trend as for commercial
vehicle engines is also evident
in the case of large-displacement engine
pistons. Continuously increasing
cylinder pressures require even higherduty
pistons and in answer to this,
multipart steel pistons are being produced
for several customers to take
the place of the existing spherical casting/steel
variety. Moreover, a onepiece
steel piston is being developed
for medium-diameter cylinders. The
first of both designs were delivered to
customers for field tests.
The mounting wave of development
projects and the growing complexity
of the project themselves place high
demands on the organization’s capabilities,
its processes, process stages
and structures. In order to dig deeper
into the market and secure technological
leadership, the KS OPUS project
(Optimized Processes Up to Series
production) is being advanced. KS
OPUS’s aim of vastly raising innovation
potentials and streamlining development
processes was impressively
achieved. The efficiency and effectiveness
of such processes were clearly
improved and it is planned to promote
the KS OPUS project outside of Europe.
In the Pistons division, expenses for
research & development activities
amounted to €19.9 million, or 3.5
percent of sales.
In 2001, the focus of R&D activities in
the Plain Bearings division was again
materials development against the
background of rising demands for
environmentally compatible materials
and the EU regulation regarding
scrapped cars to take effect in 2004.
In the case of steel/aluminum materials,
development activities headed
in two directions, on the one hand,
focusing on use in the high-duty
direct-injection diesels set for series
production in 2002, the aim being to
have the division grab a larger share
in the growth of this engine breed.
On the other hand, connecting-rod
bearings are being developed which
can be used on both direct-injection
gasoline as well as diesel engines.
In 2002, the first of these can go into
series production.
Efforts in the area of steel/plastic
composites for the maintenance-free
and low-maintenance Permaglide
bearings product group are intended
at further enhancing temperature resistance
through material refinements
and, at the same time, dispensing
with lead. Apart from compliance with
environmental requirements, this is
one way to tap further applications.
An engineering process for achieving
self-sufficiency in the growing market
of connecting-rod bearings used in
direct-injection engines was a major
development project within strategic
product planning.
The R&D expenses of Plain Bearings
totaled €2.4 million in 2001, equivalent
to 1.6 percent of sales.
27

28
Management report on the Kolbenschmidt Pierburg Group
Executive Board report
The core competence of Aluminum
Technology is the casting of engine
blocks from aluminum according to
various processes. Due to the ongoing
substitution of gray cast iron by lightweight
aluminum, the market is still
growing. Given the continuously rising
technical requirements and falling
market prices, close and cooperative
OEM teamwork and simultaneous
engineering have proven themselves.
The division’s development activities
focus on process refinements, further
and new developments of cylinder
sleeve concepts, material developments
including technologies for local
material reinforcement and added
downstream machining (vertical integration).
The strategy of sharpening
our profile over rivals through wideranging
concepts and specific problem
solutions over competitors is making
good progress.
Maintaining high quality standards
while keeping manufacturing costs
down calls for constant and reproducible
processes. The division’s process
development covers the entire production
chain from the casting to the
ready-to-ship product. Computer-aided
simulation tools for mold filling and
solidification are used in the development
of new products right from the
start. In fact, computer-aided process
planning comprises the entire valueadding
chain. Conventional engineering
techniques are constantly being
fine-tuned, too. The automatic monitoring
and controlling of the casting
process have become an integral
element of production technology.
New technical solutions concentrating
on the central and critical element of
the engine block, the cylinder sleeve,
will continue to be the force driving
new product concepts. The fact that the
division has all the standard solutions,
especially for gasoline engines, as
well as concepts of its own, will enable
it to stand out in the marketplace.
Within this context, a megaproject for
a new aluminum engine block to go
into a strong-selling V6 engine was
awarded by a German carmaker.
The commencement of new projects,
mainly in the low-pressure casting
sector, was a focal point of product
and process development. In recent
years, more and more high-performance
passenger car diesel engines
have been using an aluminum engine
block. In two ambitious projects, including
a ten-cylinder V-engine, the
preproduction phase was successfully
completed. In 2001, innovative
ideas for engineering the cylinder
sleeve were again explored.
This division’s R&D expenses amounted
to €5.0 million in the past fiscal
year, 3.7 percent of sales.
In fiscal 2001, R&D activities by Motor-
Engineering focused on the core areas
of exhaust gas measuring units, flowmeters,
and measuring equipment for
workshops.
In the measurement of exhaust gases,
product generation 4000 made further
advances. The same applies to the
CVS 4000 exhaust gas dilution system,
the particle collector, and the minidiluter.
A new automated CHD 4000
dynamometer saw development startup.
These efforts continued against
the background of employing only the
latest technologies to achieve the
prescribed cost reduction targets.
The expected series production of gasoline
engine high-pressure injection
systems (GDI) in Europe and the USA
was shelved beyond the year 2001
and hence resulted in a postponement
for Pierburg Instruments Inc. in the USA
in the use of precision flowmeters for
high-pressure applications. In 2002,
the product range is being rounded
off with a system metering the intake
air of I.C. engines in order to meet
customer demands for single-source
measuring units.
The measuring equipment for workshops
unit pushed ahead with a PCaided
version of the diesel opacimeter
for measuring diesel exhaust gases.
Work continued on an intelligent
interface for communicating with
automotive control units. The basis
for this are the expected EOBD regulations
(European On-Board Diagnosis)
as well as the alternative exhaust gas
inspection methods of a well-known
German carmaker. Work on a new
monochrome graphics adapter for
gas testers was also completed, as
was the origination of software for
bidirectional data communication
between gas tester and computer.
MotorEngineering spent €3.2 million
on R&D activities, equivalent to 8.4
percent of sales.
Final inspection at the
solenoid assembly line
at the Neuss plant

Production line for
car engine bearings shells
at the Papenburg plant
Risks of future development
(risk report)
Doing business inevitably entails risks
and rewards. At Kolbenschmidt Pierburg,
business opportunities are
seized and risks only accepted when
these are considered in all likelihood
to be controllable and conducive to
the economic success of the Group.
Given this, risk management is an
essential element of the processes
and decisions within our group.
General economic and industry
sector risks
Kolbenschmidt Pierburg AG and its
subsidiaries develop and manufacture
components, modules and systems
for the international automotive industry
and hence, the Group and its
subsidiaries are in their future business
development largely dependent on
how the automotive climate develops
worldwide.
The year 2001 was a period in which
the world's automotive industry was
battered by a recession unforeseeable
to this extent a year ago, and by the
terrorist attacks on the World Trade
Center in New York, and on the Pentagon,
Washington, on September 11,
2001. The reverberations will in all
likelihood be felt until far into the
current fiscal year 2002. According
to forecasts by market research organizations
and industry associations,
2002 will generally see declining production
and shipments in the three
most important automotive markets
of North America, Japan, and Western
Europe. Particularly lackluster are the
prospects in the USA. Ever since the
aftermath of the terrorist attacks, the
US manufacturers have been launching
zero-interest car financing programs.
This may have triggered demand but
The instruments for the identification,
analysis, control and monitoring of
risks as part of the risk management
system are defined groupwide.
Embedded in the annual strategic and
operative plans and accompanied by
monthly controlling reviews, risk reports
and meetings of the Risk Committee,
these risk management instruments
ensure that any potential risks
are identified in good time. In this way,
any necessary remedial action can be
initiated early on at the individual
companies, divisions, or at a Group
level. Moreover, whenever a defined
ceiling is exceeded, the Supervisory
Board is alerted.
the consequence is that new cars initially
planned for 2002 were bought
in 2001 in some instances. The decline
in Western Europe and Japan will
probably not be so severe as in North
America.
Some of our US customers have to
contend with financial problems and
the same applies to major rival suppliers
to the auto industry. Although
the Kolbenschmidt Pierburg Group
may in some instances benefit from
competitor weakness, itself it is exposed
to risk through the financial
problems of some customers. This is
reflected in reduced call-offs and fewer
orders placed with the Kolbenschmidt
Pierburg AG subsidiaries.
The impact of individual markets on the
economic situation of Kolbenschmidt
Pierburg is abated by the Group’s
measured globalization from an
economic point of view. Additionally,
downsizing measures already launched
the year before in the United States,
including programs for restructuring
and improved integration at individual
subsidiaries, are being hastened. At
the start of the new fiscal year, Kolbenschmidt
Pierburg AG decided to shut
down a part of the Ft. Wayne, Indiana,
plant at the turn of 2002/2003, in order
to accelerate the return to profit-
Verifying the risk management system
for workability is among the functions
of the statutory auditors (elected by
the stockholders’ meeting) during
their annual audit.
The potential risks to which the Kolbenschmidt
Pierburg Group is exposed
subdivide into general economic, industry
sector, performance, financial
as well as legal risks.
ability of the division’s US subsidiaries.
A consequence is that this plant at
Ft. Wayne will only be used for mass
production, the idled machines being
largely employed elsewhere by other
Group companies.
In the wake of the industry’s woes,
customers have stepped up their pressure
to obtain further price reductions.
This risk is contained by the creation
of additional product and process
innovations to generate broader
price/cost latitude and the realization
of product and process innovations
as well as the enactment of continuous
improvement processes and the enforcement
of strict cost management.
In the 2001 annual accounts, the accrual
for impending losses on uncompleted
contracts adequately provides
for any losses related to individual
products.
The current collective agreements
between the employer federations
and the German Metalworkers’ Union
expired February 28, 2002. At the end
of January, the Metalworkers’ Union
was demanding pay increases of 6.5
percent, which met with wide criticism.
Consensus will prove difficult and
industrial action at some of the
Group’s German locations cannot be
ruled out.
31

32
Management report on the Kolbenschmidt Pierburg Group
Executive Board report
Performance risks
Kolbenschmidt Pierburg intends to
continue to outpace the international
automotive industry by generating
better-than-average growth rates.
The steep organic growth budgeted in
Financial risks
Due to the international nature of the
Kolbenschmidt Pierburg Group’s business,
certain currency and interest
rate risks may arise which are profiled
centrally by Kolbenschmidt Pierburg
AG's Treasury and hedged by means
of currency futures and forwards, as
well as caps wherever possible. It is a
fact that the progressing globalization
of procurement, production and financing
will gradually curb the effect of
parities, especially between the dollar
Legal risks
Sufficient insurance contracts have
been taken out to adequately cover
risks from loss or damage by natural
forces and the resulting business interruption,
as well as warranty, product
liability, and callback risks. The existing
insurance cover is regularly reviewed
for adequacy and, where necessary,
adapted. At the same time,
ongoing projects for process reliability
as well as extensive quality assurance
programs aim at avoiding the occurrence
of such risks. In the 2001 balance
sheet, adequate accruals provide for
such risks where covered not at all or
not fully (deductible loss).
the sales plans for fiscal 2002 calls
for a large number of complex and
technologically advanced new-product
start-ups which because of their
number, extent and in some instances
the limited availability of skilled labor,
inherently involve risks. A comprehen-
and the euro, on the financial result.
Because of the nature and mix of our
customers, credit risks are very low.
The auto assemblers will continue to
download value-adding and engineering
development functions to the industry
vendors. This, in turn, premises
the considerable financial resources
required by the vendors if they are to
prefinance their R&D and fund the
cost input caused by the necessary
additions to tangible assets. Any
investment resources deployed by
A certain tax risk emanates from
unexercised option rights under the
warrant bond issue floated by Kolbenschmidt
AG. However, Kolbenschmidt
Pierburg AG assumes, supported by
the prevailing view of tax law pundits
and in jurisprudence publications,
that bond redemption is unlikely to
entail any tax burden; however, the
final judgment in a comparable case
has not yet been passed.
Moreover, certain risks exist from proceedings
pending before the court of
competent jurisdiction which have
been instituted by 10 stockholders for
review of the share exchange ratio
under the merger of Kolbenschmidt
Pierburg (Rheinmetall shareholdings),
as well as for additional cash compensation.
Kolbenschmidt Pierburg con-
sive project management scheme is
being applied through all the phases,
from conceptualization, invitation to
bid through to series start-up and
mass production to ensure that these
new products translate into profitable
growth.
any of the Kolbenschmidt Pierburg
Group’s divisions are therefore subject
to a particularly strict scrutiny in terms
of efficiency both during the budgeting
and PIA approval stages in order thus
to relieve cash flows. In view of the
gloomy economic prospects, further
possibilities of cutting back on capital
expenditure are presently being explored.
tinues to believe in the underlying
share exchange ratio fairly reflecting
corporate value relations and that
therefore the proceedings still underway
represent only a slight risk. An
additional provision in 1999 still allows
for the fees and charges associated
with such court proceedings.
From today’s vantage point, potentially
ruinous material risks do not exist for
Kolbenschmidt Pierburg AG or its divisions,
nor do any other risks that might
have a long-term significant adverse
effect on either the Company’s or the
Group’s net assets, financial position
or results of operations.
Final inspection of the steplessly
variable intake manifold on the
BMW V8 at the Nettetal plant

Final assembly of the variable
intake manifold on the GM V6
at the Nettetal plant
Prospects
At the start of 2002, production and
car sales were somewhat down in the
global automotive industry. In the
United States and following the financial
incentives of the final quarter of
2001, fewer vehicles were sold than a
year ago. In Western Europe, the first
two months of the current year failed
to match the year-earlier production
and sales figures.
There is still vast uncertainty regarding
what lies ahead in 2002. So far, the
markets have not collapsed as feared.
In all, we expect production figures in
2002 to show a worldwide decline,
most steeply probably in the United
States, whereas Europe and, especially,
Germany will only suffer slight losses.
As to the remaining markets important
to Kolbenschmidt Pierburg such as
Brazil and China, we expect 2002 to
show growth.
In terms of units sold, the heavy-duty
vehicles have suffered much more
than the light-duty. Among the lightduty,
it is the cars that are least affected
by the shrinkage.
Kolbenschmidt Pierburg managed to
contain its sales decrease in the first
two months of 2002 to less than 1 percent,
this being solely due to the deconsolidation
of the MotorEngineering
division, which this year is no longer
providing the Group with sales revenues.
Despite the further contraction
in the United States, the OEM markets
of Air Supply & Pumps, Pistons, Plain
Bearings, and Aluminum Technology
all showed marginal sales rises.
On the basis of orders and products
already placed or scheduled by our
customers for the months ahead, we
expect sales for the first half of 2002
to approximate the magnitude of the
previous year. For the year as a whole,
we expect, and contrary to market
trends, to show a slight uptrend versus
the 2001 level thanks to gains through
soon-to-be-launched products.
Once again, Kolbenschmidt Pierburg
will achieve this sales growth in 2002
through extensive investments in R&D
and additions to tangible assets.
Nevertheless and in view of stalling
business, special attention will be
paid to the cost efficiency of such
investments in 2002.
Our top priority in 2002 is to maintain
and enhance our own organic profitability.
This is a target we have set
ourselves in particular in view of the
lackluster market expected in 2002.
And this is why restructuring programs,
substantial productivity enhancements
and process improvements, in particular
with new-product start-ups, will
have to largely compensate for
increasing costs and heavier price
pressure. For 2002 and assuming
only slight increases in sales, the
Kolbenschmidt Pierburg Group is
targeting earnings of the magnitude
of the previous period.
Production figures
declining worldwide
in 2002
Same earnings
level envisaged
35

36
Management report on the Kolbenschmidt Pierburg Group
The divisions
Air Supply & Pumps
Air Supply & Pumps is our division that
develops, manufactures, and markets
systems and components for use in the
series production of autos. Air supply,
emission reduction, fuel supply, and
pumps are the subdivisions. As the
parent of Air Supply & Pumps, Pierburg
AG controls all shareholdings in the
division’s companies.
Changes to the
business portfolio
As of April 1, 2001, Pierburg AG founded
together with Shanghai Automotive
Industry Company Ltd. (SAIC) the
joint venture Kolbenschmidt Pierburg
Shanghai Nonferrous Components Co.
Ltd. (KPSNC) in Shanghai. Pierburg AG’s
stake amounts to 50 percent. The venture
makes it possible for Air Supply
& Pumps to access the strategically
important Chinese automotive market.
At the same time it is an excellent platform
to further widen sales opportunities.
The joint venture develops, manufactures
and markets intake manifolds,
cylinder heads, and steering gear
components. Moreover, it aims at
extending the range to complete firsttier
oil and water pump assemblies.
Air Supply & Pumps 2000 2001
€million €million
Net sales 770.4 819.8
EBIT 16.8 24.8
EBT 7.2 12.3
Net income 7.3 14.1
Capital expenditures 75.4 80.4
Headcount at Dec. 31 4,109 4,010
As of December 31, 2001/January 1,
2002, AVL Holding GmbH in Graz,
Austria, was merged into Pierburg
Instruments GmbH (previously wholly
owned by Pierburg AG) by capital increase.
AVL now holds a majority stake
in the joint venture and will take over
management control. Pierburg Instruments
GmbH’s stake in Pierburg Instruments
Inc., Auburn Hills, USA,
was completely sold to AVL Michigan
Holding Inc., Plymouth, USA, as of
January 1, 2001.
In fiscal 2001 and at €819.8 million,
sales by Air Supply & Pumps were
€49.4 million above the previous
year’s level of €770.4 million (up
6.4 percent), the main reason for the
sales increases being the mounting
wave of diesel vehicles in a high-volume,
yet stalling Western European
car market.
Sales gains due to
rising share of dieselengine
passenger cars
At Pierburg AG, sales amounted to
€470.1 million in 2001. Hence, the
previous year’s €465.6 million inched
up 1 percent. Sales advances in solenoid
valves, exhaust gas recirculating
valves, electric throttle bodies, and
electric auxiliary water pumps as well
as oil and vacuum pumps outcompensated
the budgeted declines in intake
manifolds and intake manifold modules
as well as electric fuel pumps.
All the division’s companies managed
to boost sales over the previous year.
Carbureibar S.A., Spain, up 19.9 percent
or €19.8 million, Pierburg Inc.,
USA, up 45.0 percent or €13.5 million
and Pierburg S.a.r.l., France, up 12.0
percent or €11.8 million, generated
better-than-average sales, whereas
Pierburg S.p.A., Italy, up 0.1 percent
or €0.2 million, gained only slightly.
In the air supply unit, the sales increase
by €36.7 million (7.9 percent)
was mainly attributable to the throttle
body, exhaust gas recirculating valve
and solenoid valve product groups,
these having benefited from the
launch of new product families, the
high proportion of diesel engines and
re-tightened exhaust gas regulations.
Intake module sales fell over the previous
year, chiefly due to the receding
shipments for a megaproject. Secondary
air systems sales continued at the
year-earlier level.
Fuel pump assembly line
at the Neuss plant

Assembly of the steplessly
variable intake manifold on the
BMW V8 at the Nettetal plant
The divisions
Air Supply & Pumps
Pump sales climbed €12.7 million to
€321.0 million (up 4.1 percent). The
oil pump, water pump and vacuum
pump groups had a good year. Fuel
pump sales shrank as a consequence
of a strategy of concentrating on
sophisticated and profitable types of
pump.
Earnings up
In fiscal 2001, earnings at Air Supply
& Pumps rose. EBT was boosted by
€5.1 million to €12.3 million, ROS
climbed from 0.9 to 1.5 percent.
In the year under review, Pierburg AG
posted an EBT gain of €5.3 million to
€9.0 million due to earnings improvement
from restructuring measures at
the Nettetal and Berlin locations as
well as extensive product-related
rationalization efforts. The OEMs’ ongoing
price squeeze eroded earnings.
Moreover, start-up losses for new
products likewise took a toll on EBT.
The return on sales was upped 1.9
percent (from 0.8 percent).
The division’s non-German companies
showed a mixed performance.
Carbureibar S.A., Spain, had a good
year, the company again improving
EBT over the previous period, and
hence largely contributing to the
division’s earnings, despite a slightly
poorer sales mix and several start-ups.
Pierburg Inc., USA, managed to upgrade
its performance over the prior
year, basically due to strong sales
gains while failing to break even because
of heavy start-up costs for new
projects and unbudgeted special
freight charges. At Pierburg S.à.r.l.,
France, productivity advancements
and climbing sales raised EBT. In all,
EBT was well in the black. Restructuring
expenditures from the takeover
of pump operations at Magneti Marelli
as well as declining sales from former
businesses at Pierburg S.p.A., Italy,
squeezed earnings to a degree only
partly compensated by productivity
enhancements. EBT was negative.
Another improvement
in financial indicators
The financial strength of the Air Supply
& Pumps division was continuously
built up in 2001, the period’s gross
cash flow reaching €83.0 million.
The capital expenditures of €80.4
million incurred in 2001 were thus
fully funded by the gross cash flow. In
comparison to the year before, total
assets crept down by an insignificant
€0.3 million to €554.8 million.
Accounting equity diminished by
€9.4 million to €143.7 million, slimming
the equity ratio from 27.6 percent
at December 31, 2000, to 25.9 at the
close of 2001.
Prospects
Despite the clouded climate in the
automotive markets of Western Europe
and North America, Pierburg AG and
Air Supply & Pumps expect 2002
sales to top the previous year’s level.
Momentum will be delivered by the
numerous start-ups of the year 2001,
for the first time having a full-period
impact and hence leading to sharp
sales rises, mainly for the intake manifold,
throttle body, vacuum pump and
water pump product groups.
For 2002, earnings are generally
expected to improve at Pierburg AG
and Air Supply & Pumps due to the
2001 cost input and lower burdens
from production start-ups.
39

40
Management report on the Kolbenschmidt Pierburg Group
The divisions
Pistons
The Pistons division develops, manufactures
and distributes pistons for
I.C. engines and piston compressors.
The product range stretches from
pistons for heavy-duty machines via
pistons for all kinds of applications in
passenger cars and trucks to pistons
for ships and stationary applications.
These pistons, which have a wide
variety of uses, measure between 20
and 640 mm in diameter, and are made
from aluminum, spherical castings and
steel or a mixture of these materials.
For a long time now, all the notable
engine manufacturers have counted
among our customers. KS Kolbenschmidt
GmbH is the division’s parent.
Sales drop
due to burdens
in US business
In the past fiscal year, total sales of
the Pistons division amounted to
€571.5 million, equivalent to a drop
of €35.0 million or 5.8 percent. The
division’s performance was highly
influenced by the North American automotive
economy, not only affecting
the indigenous operations but also
infecting the Brazilian subsidiary.
With a 3.2-percent gain, KS Kolbenschmidt
AG’s sales amounted to
€250.0 million, thus above the Western
European market for passenger
cars. Revenues generated from our
own production, especially of largebore
pistons, rose sharply, these
however partly being negated due to
Pistons 2000 2001
€million €million
Net sales 606.5 571.5
EBIT 32.8 40.1
EBT 14.0 20.2
Net income 1.3 9.3
Capital expenditures 65.0 57.7
Headcount at Dec. 31 5,618 5,416
expectedly reduced merchandise
sales as well as idle capacity in the
second half of the year at one location.
Within the small-bore pistons product
group, sales of pistons for diesel
engines (passenger cars) were clearly
lifted, however at the expense of the
gasoline engine (passenger cars) and
commercial vehicle varieties, this
matching the general market trend.
At the European subsidiaries, Société
Mosellane de Pistons S. A., Thionville,
mainly active on the French market,
managed to stabilize its sales of
€59.8 million at the high prior-year
level. The French carmakers’ strong
demand for diesel pistons balanced
any declines in gasoline engine
business. In fiscal 2001 and at €26.8
million, the Czech company Metal a.s.,
Ústí, slightly topped the previous
year’s sharp gain to €26.4 million.
A number of start-up postponements
prevented further growth.
The North American market, the
world’s biggest, was for the Pistons
division in 2001 a period of severe
sales problems. After €240.5 million
in the previous year, in 2001 sales of
only €208.9 million were generated,
the changed euro-dollar parity abating
the loss slightly. Apart from the general
market trend, as for instance, the
weakness of the US manufacturers
and the soft demand for commercial
vehicles, there were also internal
causes such as the phase-out of projects
and the loss of a parts distributor,
both factors sharing in this decline.
Affected are the two large companies
active on the US market. After €118.7
million in 2000, Karl Schmidt Unisia
Inc., Marinette, Wisconsin, generated
sales in 2001 of €95.7 million, and
KUS Zollner Division Inc., Fort Wayne,
Indiana, contributed €90,7 million
(down from €107.3 million) to the
total. With sales of €15.3 million in
2001, the Canadian production company
KUS Zollner Canada Ltd.,
Leamington, Ontario, on the other
hand, surpassed the previous year’s
€9,7 million.
After a steep sales surge to €102.5
million in the previous year, the Brazilian
subsidiary KS Pistões Ltda.,
Nova Odessa, had to contend with a
decline to €93.5 million in 2001.
Good domestic market sales failed
to compensate for lower exports to
North America and Western Europe.
Previous year’s earnings
clearly surpassed
For fiscal 2001, Pistons achieved an
EBT of €20.2 million, hence exceeding
the previous year’s €14.0 million. ROS
climbed to 3.5 percent.
3-D blank checking
at the Neckarsulm plant

Alfinizing of diesel piston ring
mounts at the Neckarsulm plant
The divisions
Pistons
For 2001, KS Kolbenschmidt GmbH’s
EBT amounted to a negative €43.0
million, compared to an equally negative
€1.7 million the year before. The
loss was exclusively caused by the
write-down of the stake held in KS
International Investment Corp., the
intermediate holding company for the
activities of Pistons and Plain Bearings
in the USA and Canada. Apart from the
strained earnings situation, especially
at KS Bearings Inc., Greensburg, and
KUS Zollner Division Inc., Fort Wayne,
extensive restructuring expenses
incurred for the realignment of both
companies, also contributed to this
loss. The previous year, too, had been
burdened by write-down, albeit clearly
below the 2001 level. This write-down
did not, however, impact on the division’s
bottom line. The good prior-year
operating result at KS Kolbenschmidt
GmbH was maintained. Under the P&L
transfer agreement with, the (HGBbased)
net loss of €46.5 million of KS
Kolbenschmidt GmbH was absorbed
by, Kolbenschmidt Pierburg AG.
All the European and South American
subsidiaries generated a positive EBT
in the period under review. Meriting
special mention is the Brazilian KS
Pistões, which generated a rising profit
thanks to changed parities and productivity
improvements. Again, the French
as well as the Czech subsidiaries
turned in slightly improved profits at
a stable sales level. The American Karl
Schmidt Unisia Inc., Marinette, had to
face a sharp drop in earnings chiefly
due to sales reasons. At KUS Zollner
Division Inc., Fort Wayne, falling sales
and a worsening product mix in connection
with cost burdens from restructuring
work and rising expenses for
health insurance and retirement were
not offset by productivity improvement
measures. For the company, this led
to a clear loss. Zollner Canada Ltd.,
Leamington, on the other hand, again
delivered an encouraging performance.
At the Chinese joint venture Kolbenschmidt
Shanghai Piston Co. Ltd. in
which KS Kolbenschmidt GmbH holds
a 35-percent stake and which is included
at equity in the division’s segment
accounts, sales were slightly
bettered over the previous year, and
the venture again closed the period
well in the black.
Capital expenditures
below the previous
year’s level
In fiscal 2001, capital outlays by
Pistons amounted to €57.7 million,
hence €7.3 million below the prior
year. The division’s gross cash flow
amounted to €56.2 million in 2001,
almost enough to fully fund the capital
investments made.
The total assets of €491.2 million
reported by the division included
equity of €154.0 million, equivalent
to an equity ratio of 31.4 percent, a
leap from the prior year’s 9.7 percent
mainly attributable to two factors:
Kolbenschmidt Pierburg AG increased
the additional paid-in capital by
€56.6 million and absorbed the net
loss.
Stable development
in 2002
Against the background of a presumably
slight global decline in the automotive
market in 2002, for Pistons we
predict an almost stable sales situation.
At KS Kolbenschmidt GmbH, and
especially at the North American companies,
planned project start-ups are
expected to stimulate sales.
From today’s vantage point, the aim
of the Pistons division is to avoid as
much as possible any negative impact
on profitability due to the–from today’s
vantage point–difficult environment
of 2002. Apart from the management
of numerous product start-ups, another
essential factor will be to boost performance
at the Fort Wayne location.
43

44
Management report on the Kolbenschmidt Pierburg Group
The divisions
Plain Bearings
This division’s business concentrates
on the development, manufacture and
marketing of metal bearings for engine
and other applications, as well as
maintenance-free dry bearings for the
automotive and mechanical engineering
sectors. Moreover, copper-based
continuous castings (tubes, bars, profiles)
are also produced. KS Gleitlager
GmbH is the division’s parent company.
Sales raised further
In the past fiscal year, the division’s
sales volume was stepped up from
the already high 2000 level by 3.2
percent to €153.2 million. KS Gleitlager
GmbH clearly increased sales,
by 9.2 percent to €135.1 million
(year-on-year). On account of the full
start-up of customer projects in the
engine bearings sector, incremental
sales of around €5.5 million were
achieved. With the division’s high-duty
plain bearings (sputter technology),
further shares were acquired in the
market for direct-injection diesel
engines.
Plain Bearings 2000 2001
€million €million
Net sales 148.4 153.2
EBIT 6.8 17.7
EBT 4.5 15.1
Net income 1.9 6.0
Capital expenditures 11.9 12.7
Headcount at Dec. 31 1,094 1,045
The Permaglide product group contributed
to the sales increase through
new automotive applications as well
as through higher market shares.
The mechanical engineering market,
crucial for the rising volume of continuous
castings business, was stable,
sales here advancing by around €2.2
million over the year before.
In fiscal 2001, KS Bearings Inc., USA,
generated sales revenues of €26.1
million, hence not re-achieving the
prior year’s €31.2 million. The sharp
economic downturn in the USA, especially
in the heavy-duty sector with
much reduced orders over 2000, is
mainly responsible.
The South American KS Bronzinas
Ltda., Brazil, boosted sales in fiscal
2001 from €1.8 million to €2.1 million
thanks to new customer projects and
intensified export activity.
Electroplating shop for
trimaterial bearings
at the Papenburg plant

46
Lagebericht und Konzernlagebericht
Checking the light-metal bushings
for shape and dimensions
at the Papenburg plant
The divisions
Plain Bearings
In fiscal 2001, the division’s EBT
soared from €4.5 to €15.1 million,
thus returning 9.9 percent on sales.
At KS Gleitlager GmbH, the significantly
improved earnings were ascribable to
the metallic plain bearings product
group. The pretax loss at KS Bearings
Inc., USA, worsened over the previous
year. Apart from the sales decrease
this was attributable to expenses for
a partial shutdown and relocation under
the approved and already initiated
restructuring program. KS Bronzinas
Ltda., Brazil, upgraded its EBT over
the previous year as a result of higher
sales.
Improved earnings
In the past fiscal year, the division
generated a gross cash flow of €16.0
million. The total investment volume of
€12.7 million was thus fully financed
from the annual cash flow. As of yearend
2001, Plain Bearings showed
sound capital ratios. With total assets
of €77.7 million, the division’s equity
came to €16.9 million, equivalent to
an equity ratio of 21.8 percent.
For KS Gleitlager GmbH, we presently
expect ongoing good business with
sales inching up for all product groups
and markets in Europe. With the commissioning
of another coating line for
high-duty plain bearings, the division’s
own production in Papenburg is being
extended in order to meet mounting
market demands.
Despite fiercer competition and the
sustained pressure on margins, KS
Gleitlager GmbH is targeting an EBT
level above that of fiscal 2001 due to
its product innovations and productivity
enhancements.
At the American subsidiary KS Bearings
Inc., the shutdown and partial
relocation project is top on the agenda
in 2002. Following the discontinuation
of some nonprofitable product groups
in 2001, the entire parts manufacture
at Greensburg is being relocated to
the new site at Fountain Inn, South
Carolina, and Papenburg. This project,
which is designed to re-achieve profitability,
is scheduled for completion
mid-2002.
With sales up, the Brazilian subsidiary
KS Bronzinas Ltda. expects to again
deliver a profit.
In 2002 as a whole, the division aims
at higher segment earnings than in
fiscal 2001.
47

48
Management report on the Kolbenschmidt Pierburg Group
The divisions
Aluminum Technology
Aluminum Technology subsumes the
Kolbenschmidt Pierburg Group’s manufacture
of cylinder crankcases (engine
blocks) from aluminum and aluminumsilicon
alloys. Pressure, low-pressure
and squeeze casting processes are
all applied. Through the planned collaboration
with a partner, the division
hopes to access the module manufacturing
market–downstream machining
and part assembly of engine blocks.
The necessary costs were already inputted
in 2001.
Sales clearly raised
Due to its specific product range, the
division managed in 2001 to generate
a net sales gain of €19.6 million to
€135.8 million, mainly at the parent
company KS Aluminium-Technologie
AG. The addition of a total €20.9
million at this company is made up of
Aluminum Technology 2000 2001
€million €million
Net sales 116.2 135.8
EBIT (1.7) 0.7
EBT (5.2) (3.6)
Net income/(net loss) (4.4) (3.1)
Capital expenditures 16.4 21.2
Headcount at Dec. 31 689 772
higher series production sales (up
€7.9 million) and a steep increase in
development and tooling revenues
(up €13.0 million). The rise in seriesproduction
business was ascribable
to higher shipments by our customers
in the large-displacement engine sector,
the start-up of new engine generations
and a slight improvement in
market shares. The again rising development
and tooling sales over the
high prior-year level reflect the division’s
intense activities in preparing
new products.
Visual inspection of a
BMW V8 engine block
at the Neckarsulm plant

Testing an engine block
for leakage at the
Neckarsulm plant
The divisions
Aluminum Technology
Less loss Further earnings
In 2001 and at a negative €3.6 million,
EBT at Aluminum Technology improved
over the previous year's pretax loss of
€5.2 million, as did the negative ROS
from 4.5 to 2.7 percent. In the past fiscal
year, KS Aluminium-Technologie
AG’s earnings were again burdened
by high start-up costs for new products
in the low-pressure casting sector.
Idle capacities at the new foundry as
well as a product cancellation depressed
EBT, customer compensation
failing to completely recover the costs.
From added tooling sales, no commensurately
higher profits were earned,
since tooling products incorporate
little added value. KS Doehler Jarvis
GmbH and Werkzeugbau Walldürn
GmbH again delivered slight profits,
however somewhat under the corre-
sponding year-earlier level. The collectively
negotiated pay raise and heavy
start-up costs for the new series products
generally burdened earnings.
The development costs and cost input
for process engineering required for
the new low-pressure casting products,
on the other hand, were clearly scaled
back.
The heavy investments in fiscal 2001
due to numerous series production
start-ups as well as the additional
preparation for more new products
(€21.2 million, up from €16.4 million)
were as in the year before not covered
by the gross cash flow of €8.7 million.
Due to the additional sales and the
necessary cost input, total assets
rose as of December 31, 2001, by 4.9
percent to €129.7 million, as expected.
With equity of €20.6 million at yearend
2001, the division’s equity ratio
amounted to 15.9 percent (down from
19.2 percent).
improvement
expected in 2002
In fiscal 2002, further product startups
will significantly contribute to
series-production sales, whereas
older models will slowly phase out.
Moreover, the current year will be
affected by the start-up management
of the products rolled out in 2001 and
ready for series production in 2002.
Despite the substantial cost input,
which will squeeze earnings, the
division expects a profit improvement
through further sales and productivity
enhancements.
51

52
Management report on the Kolbenschmidt Pierburg Group
The divisions
MotorEngineering
MotorEngineering comprises the
exhaust gas measuring equipment,
workshop equipment, and flowmeter
product groups.
Industrial management
transferred
Within the Kolbenschmidt Pierburg
Group, Pierburg Instruments GmbH
had been the parent company for
MotorEngineering until December 31,
2001. As part of a joint venture and
since the turn of 2001/2002, AVL
Holding GmbH, Graz, Austria, has
acquired and held a majority stake in
Pierburg Instruments GmbH and has
taken over industrial management.
At the same time, the wholly owned
subsidiary Pierburg Instruments Inc.,
Auburn Hills, Michigan, USA, operating
in the American market for the development,
production and marketing of
flowmeter and exhaust gas measuring
equipment, was sold and transferred
as of January 1, 2001, to AVL Michigan
Holding Inc., Plymouth, Michigan, USA.
MotorEngineering 2000 2001
€million €million
Net sales 30.4 37.8
EBIT (1.2) 8.4
EBT (1.5) 7.5
Net income/(net loss) (0.7) 6.1
Capital expenditures 0.3 0.8
Headcount at Dec. 31 210 --
24-percent sales rise
In fiscal 2001, sales by MotorEngineering
were revved up by around 24 percent,
from €30.4 million to €37.8
million.
Pierburg Instruments GmbH generated
sales of €34.3 million in 2001 (up from
€25.6 million), the measuring equipment
for workshops group posting
sales of €10.6 million after €7.6 million
a year before. The sales gain over
2000 resulted from rising sales of
workshop measuring equipment to
a leading German carmaker.
In 2001, the flowmeters unit generated
sales of €4.8 million, thus missing the
previous year’s record by only €0.2
million. The relocation in December
2001 of the entire production line including
the test rigs led to the slightly
lower level over the previous year. The
launch of the KMA 121 new measuring
system was well received by the market,
a megaorder by a carmaker largely
contributing to the tall order backlog.
Assembling the
PLU 401/121 measuring unit
at the Neuss plant

The PLU 401/121 for continuous
fuel consumption metering
at the Neuss plant
The divisions
MotorEngineering
Within Pierburg Instruments GmbH, the
exhaust gas measuring unit generated
sales of €18.9 million, hence €5.9
million higher than one year before.
The start-up difficulties encountered
with the new AMA 4000 measuring
system were successfully overcome.
A wave of incoming contracts led to
a very high order backlog, which, at
€15.2 million, already meets 75 percent
of the sales budgeted for all of
2002.
In 2001, Pierburg Instruments Inc.
posted sales of €5.4 million, €1.2 million
below the year 2000. The economic
situation in the USA meant that customers
were most unwilling to invest,
especially in the latter half of the year,
and thus order intake for this company
declined.
Adjusted ROS at 5.3
percent
In 2001, MotorEngineering yielded an
EBT of €7.5 million after the previous
year’s negative €1.5 million. Adjusted
for the book gains from the disposal
of Pierburg Instruments Inc. (€5.5 million),
EBT was €2.0 million, equivalent
to 5.3 percent of sales.
Within Pierburg Instruments GmbH,
the workshop measuring equipment
unit expects sales to stay steady for
this year. Due to high customer acceptance
of the new 4000 product generation
and tall order backlogs for the
exhaust gas measuring unit as well
as additional sales opportunities for
flowmeter products through the globally
present AVL distribution organization,
Pierburg Instruments GmbH
predicts healthy sales. Given these
circumstances the present fiscal year
2002 is expected to once again deliver
sound earnings which will be included
at equity in the consolidated financial
statements of, pro rata of the voting
interest held by, Kolbenschmidt Pierburg
AG.
55

56
Management report on the Kolbenschmidt Pierburg Group
The divisions
Motor Service
The Motor Service division subsumes
the Kolbenschmidt Pierburg Group’s
worldwide aftermarket activities for
engine repair shops and the workshop
trade. With economic effect as of January
1, 2001, the Irish company Vehicle
Spares Ltd. was sold to an Irish competitor
due to poor market presence
combined with faltering sales and
repeated losses. This investor still
represents the KS brand in Ireland.
Sales slightly widened
In fiscal 2001, the Motor Service division
generated sales of €151.3 million
(up from €149.0 million). The declining
sales at the subsidiaries were outcompensated
by rising sales at the
parent company MSI Motor Service
International GmbH. Despite the loss
of Irish business, sales were elevated
by more than €2 million over the previous
year.
Motor Service 2000 2001
€million €million
Net sales 149.0 151.3
EBIT 13.4 16.8
EBT 10.4 13.4
Net income 7.9 7.9
Capital expenditures 0.8 1.0
Headcount at Dec. 31 396 381
All the traditional product groups
posted, in some cases even steep,
growth rates over fiscal 2000. Sales
advanced especially in the regions of
Eastern Europe, the Near/Middle East,
Africa, Central America, and the Far
East. Also generating momentum were
improved customer service, customer
loyalty programs and more customer
staff training courses.
Earnings well up
With an EBT of €13.4 million, the previous
year’s earnings of €10.4 million
were again clearly raised. ROS thus
amounted to 8.9 percent following
the year-earlier 7.0 percent.
Apart from the added sales, the higher
earnings at the parent company MSI
Motor Service International GmbH
were also ascribable to better profit
contributions compared with one year
before. Moreover, the logistics, purchase
and sales units were streamlined
and thus rendered more efficient.
Despite much higher sales, headcount
growth lagged behind. The extra work
was handled through overtime.
The German subsidiary MTS Motorenteile-Service
GmbH managed to slash
its 2001 loss compared with 2000.
Due to the still difficult market environment
because of higher competitive
pressure by OEMs, the company failed
to break even. As part of a costs reengineering
program, the foundation
for a leaner organization was laid. All
the logistic processes are now handled
at a single location.
Checking pistons
prior to dispatch at
the Neckarsulm plant

Ecotec test rig
at the Neckarsulm plant
The divisions
Motor Service
The French KS Motorac S.A. also implemented
a restructuring program in fiscal
2001. The related expenses squeezed
earnings below the previous year’s
level. Besides reviewing customer
structures and product ranges, the program
mainly comprised the concentration
of warehousing functions at
Lyon. The warehouse in Paris was
closed by mid-year; apart from marketing,
which is still handled in Paris,
all the other corporate processes are
carried out from the Lyon location.
The British KS Winston Ltd. managed
to whittle down its loss over the previous
year. As of mid-2001, new management
was appointed in order to
achieve the company’s turnaround
in the year 2002. The second half of
2001 was characterized by restructuring
measures as, for instance, closing
two of the warehousing locations and
optimizing logistics processes.
In 2001, the environment for the Turkish
KS Istanbul A.S. company was
clouded by the plunging Turkish lira
and the related national economic
crisis. The loss in 2001 was mainly
caused by the necessity of revaluing
hard-currency liabilities. The Czech
distribution company KS Motor Servis
CZ s r.o. generated a slightly positive
EBT. Due to plunging sales because
of the devaluation of the Brazilian
currency over the US dollar and the
collapse of the Argentine market in
2001, KS Produtos Automotivos S.A.
showed a slump in earnings while not,
however, slipping into the red.
At €1.0 million (0.7 percent of sales),
capital expenditures in the Motor
Service division in 2001 were slightly
above the previous year’s €0.8 million
(0.5 percent of sales), absorbing only
a minor portion of the cash flow of
€9.6 million.
With equity of €18.2 million and a
related equity ratio of 16.5 percent in
2001 (down from 18.0 percent), the
division has sufficient funds for future
growth.
2002 at a high level
Fiscal 2002 is expected to result worldwide
for MSI and all of its subsidiaries
in a continuation of high-volume business
combined with sustained profitability.
In 2002, an important goal will
be to ensure groupwide product availability,
implement customer loyalty
programs while simultaneously securing
long-term supply sources. The
core product lineup will be augmented
by new production runs, especially of
the plain bearings and pistons, as
well as a program of items for “every
aspect of the engine.”
59

Balance sheet and income statement
for the year ended December 31, 2001
Kolbenschmidt Pierburg AG

62
Kolbenschmidt Pierburg AG
Balance sheet of Kolbenschmidt Pierburg AG, Düsseldorf
as of December 31, 2001, according to HGB
ASSETS
€million 12-31-2000 12-31-2001
Fixed assets
Intangible assets 0.0 0.0
Tangible assets 0.2 0.3
Financial assets 256.8 313.4
Current assets
Receivables and sundry assets
257.0 313.7
Trade receivables 0.0 0.6
Due from group companies 166.1 126.9
Sundry assets 0.4 3.3
Cash & cash equivalents 24.2 7.5
190.7 138.2
Prepaid expenses & deferred charges 0.0 0.0
EQUITY & LIABILITIES
447.8 452.0
€million 12-31-2000 12-31-2001
Stockholders’ equity
Capital stock 68.1 71.7
Additional paid-in capital 162.1 174.0
Reserves retained from earnings 49.9 22.3
Net earnings 34.6 14.0
314.7 282.0
Untaxed/special reserves 6.1 4.1
Accruals
Accruals for pensions and similar obligations 10.9 11.3
All other accruals 31.9 13.4
42.8 24.7
Liabilities
Due to banks 55.3 82.9
Trade payables 0.6 0.7
Due to group companies 28.2 57.5
Sundry liabilities 0.2 0.2
84.2 141.3
447.8 452.0
Income statement of Kolbenschmidt Pierburg AG
for the year ended December 31, 2001, according to HGB
€million 2000 2001
Income from investments 49.6 (4.0)
Net interest income 6.0 4.3
Net financial result 55.6 0.3
Other operating income 21.3 13.5
Personnel expenses (7.4) (7.4)
Amortization/depreciation/write-down (0.1) (0.1)
Other operating expenses (17.5) (15.5)
Earnings before taxes (EBT) 51.8 (9.2)
Income taxes (17.2) (4.4)
Net income/(Net loss) 34.6 (13.6)
Transfer from reserves retained from earnings 0.0 27.6
Net earnings 34.6 14.0
63

Consolidated financial statements 2001
Kolbenschmidt Pierburg AG

Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Kolbenschmidt Pierburg Group
Consolidated balance sheet as of December 31, 2001
ASSETS
€million Note 12-31-2000 12-31-2001
Fixed assets (7)
Intangible assets (8) 50.5 53.5
Tangible assets (9) 657.4 681.7
Investments stated at equity (10) 5.2 27.5
Other financial assets (10) 5.8 27.8
Current assets
718.9 790.5
Inventories (11) 264.9 244.3
Trade receivables (12) 280.5 203.6
All other receivables and sundry assets (12) 19.3 34.5
Cash & cash equivalents (13) 54.8 21.2
619.5 503.6
Income tax assets (14) 46.3 45.3
Prepaid expenses & deferred charges 3.9 3.6
EQUITY & LIABILITIES
Total equity (15)
Kolbenschmidt Pierburg AG stockholders’ equity
1,388.6 1,343.0
Capital stock 68.1 71.7
Additional paid-in capital 162.1 174.0
Other reserves
Group net income proratable to
68.2 52.4
Kolbenschmidt Pierburg AG stockholders 7.6 32.1
306.0 330.2
Minority interests 13.9 14.9
Accruals
319.9 345.1
Accruals for pensions and similar obligations (16) 291.3 287.7
Other accruals (17) 144.9 121.4
Liabilities
436.2 409.1
Noncurrent financial debts (18) 209.4 199.1
Current financial debts (18) 138.3 77.9
Trade payables (18) 162.4 152.6
All other liabilities (18) 60.3 101.3
570.4 530.9
Income tax liabilities (19) 44.3 34.6
Deferred income (20) 17.8 23.3
1,388.6 1,343.0
Kolbenschmidt Pierburg Group
Consolidated income statement for fiscal 2001
€million Note 2000 2001
Net sales (21) 1,776.2 1,825.5
Net inventory changes, other work and material capitalized (22) 28.3 7.8
Total operating performance 1,804.5 1,833.3
Other operating income (23) 34.4 57.1
Cost of materials (24) (874.60) (924.0)
Personnel expenses (25) (528.0) (522.0)
Amortization/depreciation/write-down (26) (147.5) (147.9)
Other operating expenses (27) (238.8) (210.2)
Operating result 50.0 86.3
Net interest expense (28) (32.9) (40.8)
Net investment income and other financial results (29) 4.5 4.0
thereof profit shares of investees stated at equity 0.5 0.7
Net financial result (28.4) (36.8)
Earnings before taxes (EBT) 21.6 49.5
Income taxes (30) (14.2) (17.7)
Group net income 7.4 31.8
Minority interests (31) 0.2 0.3
Group earnings (after minority interests) 7.6 32.1
EBIT * 54.5 90.3
EBITDA ** 202.0 238.2
Earnings per share (EpS) (32) €0.28 €1.18
* EBT plus net interest expense
** EBT plus net interest expense and amortization/depreciation/write-down
66 67

68
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Kolbenschmidt Pierburg Group
Cash flow statement for fiscal 2001
€million Note (33) 2000 2001
Cash & cash equivalents at Jan. 1 (BoP) 45.2 54.8
Group net income 7.4 31.8
Amortization/depreciation/write-down of fixed assets 147.5 147.9
Change in pension accruals 5.9 (5.3)
Cash flow 160.8 174.4
Net result from fixed-asset disposal 0.2 0.1
Change in other accruals 27.9 (23.3)
Change in inventories
Change in receivables, liabilities (excl. financial debts)
(38.8) 9.5
and prepaid & deferred items 1.8 (24.3)
Gain from deconsolidation 0.0 (5.4)
Other noncash expenses and income, net (22.7) (3.5)
Net cash provided by operating activities 129.2 127.5
Cash outflow for additions to tangible and intangible assets (171.1) (174.7)
Cash inflow from the disposal of tangible and intangible assets 6.6 1.3
Cash outflow for additions to consolidated subsidiaries and financial assets (10.0) (11.9)
Cash inflow from the disposal of consolidated subsidiaries and financial assets 0.6 21.0
Net cash used in investing activities (173.9) (164.3)
Capital paid in 0.0 15.4
Dividends paid out (20.5) (34.6)
Financial debts raised 97.6 37.9
Financial debts redeemed (22.9) (15.7)
Net cash provided by financing activities 54.2 3.0
Cash-based change in cash & cash equivalents 9.5 (33.8)
Parity-related change in cash & cash equivalents 0.1 0.2
Total net change in cash & cash equivalents 9.6 (33.6)
Cash & cash equivalents at Dec. 31 (EoP) 54.8 21.2
Kolbenschmidt Pierburg Group
Statement of changes in equity
€million Note (15) Group
net income Stockproratable
holders’
Reserves to Kolben- equity of
Addi- Reserves from fair schmidt Kolbentional
retained Currency and Pierburg AG schmidt
Capital paid-in from translation other All other stock- Pierburg Minority Total
stock capital earnings differences valuation reserves holders AG interests equity
Balance at January 1, 2000 68.1 162.1 80.5 11.8 92.3 0.0 322.5 13.0 335.5
Capital contributions 0.0 0.0 0.0
Dividend payments (20.5) (20.5) (20.5) (20.5)
Currency adjustments (3.6) (3.6) (3.6) 1.1 (2.5)
Group net income 0.0 7.6 7.6 (0.2) 7.4
Balance
at December 31, 2000 68.1 162.1 60.0 8.2 0.0 68.2 7.6 306.0 13.9 319.9
Adjustment from the first-time
application of IAS 39 12.9 12.9 12.9 12.9
Balance at January 1, 2001 68.1 162.1 60.0 8.2 12.9 81.1 7.6 318.9 13.9 332.8
Capital contributions 3.6 11.9 0.0 15.5 15.5
Dividend payments (34.6) (34.6) (34.6) (34.6)
Currency adjustments 0.5 0.5 0.5 1.3 1.8
Differences from changes
in consolidation group (1.9) (1.9) (1.9) (1.9)
Other comprehensive income 7.6 (0.3) 7.3 (7.6) (0.3) (0.3)
Group net income 0.0 32.1 32.1 (0.3) 31.8
Balance
at December 31, 2001 71.7 174.0 31.1 8.7 12.6 52.4 32.1 330.2 14.9 345.1
69

70
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Kolbenschmidt Pierburg Group
Segment report by divisions (primary segments)
Segments Note (34)
€million 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001
Balance sheet
Segment assets 478.7 512.6 457.1 487.5 76.0 76.7 123.7 129.7 20.1 0.0 103.5 108.3 1,259.1 1,314.8 74.7 7.0 1,333.8 1,321.8
thereof investments at equity 0.0 19.9 5.2 7.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.2 27.5 0.0 0.0 5.2 27.5
Total equity 153.1 143.7 44.9 154.0 4.8 16.9 23.7 20.6 0.8 0.0 19.1 18.2 246.4 353.4 73.5 (8.3) 319.9 345.1
Segment liabilities 193.6 226.7 116.7 106.4 27.3 30.2 36.7 39.4 3.1 0.0 22.9 21.3 400.3 424.0 29.4 9.2 429.7 433.2
Capital employed 285.1 285.9 340.4 381.1 48.7 46.5 87.0 90.3 17.0 0.0 80.6 87.0 858.8 890.8 45.3 (2.2) 904.1 888.6
Net financial debts 5.9 15.5 176.4 111.1 24.3 10.2 54.9 60.6 14.1 0.0 58.7 65.8 334.3 263.2 (41.4) (7.4) 292.9 255.8
Income statement
Net external sales 758.8 813.6 589.2 551.2 136.0 138.5 115.9 135.3 27.5 35.7 148.6 150.9 1,776.0 1,825.2 0.2 0.3 1,776.2 1,825.5
Intersegment transfers 11.6 6.2 17.3 20.3 12.4 14.7 0.3 0.5 2.9 2.1 0.4 0.4 44.9 44.2 (44.9) (44.2) 0.0 0.0
Total segment sales 770.4 819.8 606.5 571.5 148.4 153.2 116.2 135.8 30.4 37.8 149.0 151.3 1,820.9 1,869.4 (44.7) (43.9)
1,776.2 1,825.5
thereof Germany (%) 42.6 40.9 19.2 19.9 57.8 58.3 63.7 56.2 45.0 64.0 11.0 9.8 34.8 35.0 0.0 0.0 33.7 33.7
thereof abroad (%) 57.4 59.1 80.8 80.1 42.2 41.7 36.3 43.8 55.0 36.0 89.0 90.2 65.2 65.0 0.0 0.0 66.3 66.3
EBITDA 1) 82.1 93.1 87.1 93.8 17.4 28.0 10.4 11.9 (0.7) 8.8 15.3 18.2 211.6 253.8 (9.6) (15.6)
202.0 238.2
thereof P/L of investments at equity 0.0 0.4 0.5 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.7 0.0 0.0 0.5 0.7
thereof write up 0.0 0.0 0.0 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 0.0 0.0 0.0 2.5
Amortization/depreciation/write-down (65.3) (68.3) (54.3) (53.7) (10.6) (10.3)
(12.1) (11.2) (0.5) (0.4) (1.9) (1.4) (144.7) (145.3) (2.8) (2.6) (147.5) (147.9)
thereof write-down 0.0 0.0 0.0 0.0 (1.4) (1.3) (0.5) 0.0 0.0 0.0 (0.1) 0.0 (2.0) (1.3) 0.0 0.0 (2.0) (1.3)
EBIT 16.8 24.8 32.8 40.1 6.8 17.7 (1.7) 0.7 (1.2) 8.4 13.4 16.8 66.9 108.5 (12.4) (18.2) 54.5 90.3
Net interest expense (9.6) (12.5) (18.8) (19.9) (2.3) (2.6) (3.5) (4.3) (0.3) (0.9) (3.0) (3.4) (37.5) (43.6) 4.6 2.8 (32.9) (40.8)
EBT 7.2 12.3 14.0 20.2 4.5 15.1 (5.2) (3.6) (1.5) 7.5 10.4 13.4 29.4 64.9 (7.8) (15.4) 21.6 49.5
Income taxes 0.1 1.8 (12.7) (10.9) (6.4) (9.1)
0.8 0.5 0.8 (1.4) (2.5) (5.5) (19.9) (24.6) 5.7 6.9 (14.2) (17.7)
Net income/(Net loss) 7.3 14.1 1.3 9.3 (1.9) 6.0 (4.4) (3.1) (0.7) 6.1 7.9 7.9 9.5 40.3 (2.1) (8.5) 7.4 31.8
EBIT margin (%) 2.2 3.0 5.4 7.0 4.6 11.6 (1.5) 0.5 (3.9) 22.2 9.0 11.1 3.7 5.8 0.0 0.0 3.1 4.9
Other data
Pension expense 10.0 8.3 8.9 10.2 2.3 1.1 1.5 0.9 0.5 0.2 0.2 0.3 23.4 20.8 1.0 1.0 24.4 21.8
Capital expenditures 75.4 80.4 65.0 57.7 11.9 12.7 16.4 21.2 0.3 0.0 0.8 1.0 169.8 173.0 1.3 1.6 171.1 174.6
ROCE 6.3 8.7 9.9 11.1 13.2 37.2 (2.3) 0.8 (8.7) 0.0 17.0 20.0 8.2 12.4 0.0 0.0 6.3 10.1
Headcount at Dec. 31 4,108.5 4,009.5 5,618.0 5,416.0 1,094.0 1,045.0 689.0 772.0 209.5 0.0 396.5 381.5 12,115.5 11,624.0 48.0 38.0 12,163.5 11,662.0
1) Operating result + net financial result + amortization/depreciation/write-down
Air Supply
& Pumps
Pistons Plain Bearings Aluminum
Technology
MotorEngineering Motor Service Aggregated total
of segments
Others/Consolidation/
Holding Company
Group
71

72
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Kolbenschmidt Pierburg Group
Segment report by regions (secondary segments)
Segments Note (34)
Germany
Net external sales by customer location 316.4 329.5 104.6 97.7 73.9 75.0 73.7 75.8 13.6 22.1 16.3 14.8 598.5 614.9
Segment assets 256.6 306.1 129.8 161.4 50.3 53.7 123.7 129.7 14.5 0.0 77.2 85.5 652.1 736.4
Capital expenditures 45.8 52.8 16.4 21.5 7.6 10.3 16.4 21.2 0.2 0.0 0.5 0.3 86.9 106.1
Other Europe
Net external sales by customer location 405.6 426.3 209.1 211.5 28.6 35.3 42.2 58.9 4.4 6.1 70.6 73.3 760.5 811.4
Segment assets 189.3 174.2 64.0 62.9 0.0 0.0 0.0 0.0 0.0 0.0 18.5 15.8 271.8 252.9
Capital expenditures 22.4 26.0 8.9 7.5 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.6 31.6 34.1
North America
Net external sales by customer location 27.7 44.7 243.0 204.5 28.7 24.7 0.0 0.0 6.4 5.4 2.6 4.6 308.4 283.9
Segment assets 29.1 29.0 200.5 200.1 22.1 19.0 0.0 0.0 5.6 0.0 0.0 0.0 257.3 248.1
Capital expenditures 5.7 1.6 27.3 20.1 4.2 1.5 0.0 0.0 0.1 0.0 0.0 0.0 37.3 23.2
South America
Net external sales by customer location 4.2 7.0 21.5 26.9 2.2 1.6 0.0 0.0 0.2 0.7 17.0 13.8 45.1 50.0
Segment assets 3.7 3.3 62.8 63.1 3.6 4.0 0.0 0.0 0.0 0.0 7.8 7.0 77.9 77.4
Capital expenditures 1.5 0.0 12.4 8.6 0.1 0.9 0.0 0.0 0.0 0.0 0.0 0.1 14.0 9.6
Other regions
Air Supply
& Pumps
Pistons Plain Bearings Aluminum
Technology
MotorEngineering Motor Service Aggregated total
of segments
€million 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001
Net external sales by customer location 4.9 6.1 11.0 10.6 2.6 1.9 0.0 0.6 2.9 1.4 42.1 44.4 63.5 65.0
Segment assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Capital expenditures 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
73

74
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Accounting principles
(1) General
The consolidated financial statements
of Kolbenschmidt Pierburg AG and its
subsidiaries for the fiscal year 2001
have for the first time been prepared
in accordance with the International
Accounting Standards (IAS) of the
International Accounting Standards
Board (IASB) and comprise balance
sheet, income statement, cash flow
statement, segment reports, and statement
of changes in equity.
All IAS effective at balance sheet date
have been applied, as have the Interpretations
of the Standing Interpretations
Committee (SIC). The requirements
of IAS 12 and IAS 19 (both
revised 2000) have voluntarily been
satisfied in the restated annual
accounts 2000. The IAS 39 rules are
applied as from Jan. 1, 2001, restatement
of the prior-year comparatives
having been waived under the terms
of IAS 39. The effects of the first-time
application of IAS 39 have been recognized
as of Jan. 1, 2001, in equity only
(other reserves).
For enhanced transparency of presentation,
certain items of the consolidated
income statement and
balance sheet have been subsumed
in captions, however, which are
broken down and detailed further
below in these notes. The consolidated
income statement has been
prepared in the total-cost format.
The consolidated financial statements
are presented in euro (€), based on
the official exchange rate of €1.00 =
DM 1.95583. Amounts are almost
throughout indicated in €million.
With its IAS-based consolidated financial
statements, Kolbenschmidt Pierburg
AG has exercised the exemption
option under the terms of Art. 292a
HGB, viz. to draw up the consolidated
accounts in accordance with internationally
accepted accounting principles
in lieu of consolidated financial
statements according to German
commercial accounting regulations.
The assessment of whether the consolidated
financial statements and
group management report meet the
prerequisites of Art. 292a HGB has
been made in conformity with the
DRSC interpretation in German
Accounting Standard DRS-1. The
present consolidated statements
substantially reflect the following
accounting and valuation methods in
derogation of the German Commercial
Code (HGB):
– capitalization of internally created
intangible assets
– recognition at fair value of certain
primary and derivative financial
instruments
– translation of non-euro receivables
and payables at the current closing
rate and recognition in net income
of the resulting translation
differences
– capitalization of the asset and
recognition of the residual liability
under capital leases according to
the definition criteria of IAS 17
– measurement of pension accruals
according to the projected unit
credit (PUC) method with due
regard to future pay rises and the
corridor rule of IAS 19
– waiver of providing for accrued
liabilities if the probability of accrual
utilization is below 50 percent
– discounting of noncurrent accruals
– accounting for deferred taxes
according to the liability method
The fiscal year of Kolbenschmidt Pierburg
AG and its subsidiaries equals
the calendar year. Kolbenschmidt
Pierburg AG prepares consolidated
financial statements on a voluntary
basis, waiving the optional exemption
under the terms of Art. 291(1) HGB.
Kolbenschmidt Pierburg AG’s consolidated
accounts will be included
through the voluntarily prepared
group accounts of Düsseldorf-based
Rheinmetall AG in the statutory consolidated
financial statements of
Röchling Industrie Verwaltung GmbH,
Mannheim, as the great grandparent
and highest tier of consolidation.
Rheinmetall AG's consolidated financial
statements will be deposited with
the Commercial Register of the Local
Court of Düsseldorf under number
HRB 39401, and those of Röchling
Industrie Verwaltung GmbH with the
Commercial Register of the Local
Court of Mannheim under number
HRB 3594.
75

76
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Accounting principles
(2) Transition to IAS By rebasing the primary accounting
system on IAS, international comparability
of Kolbenschmidt Pierburg AG’s
consolidated financial statements
and other financial information about
the Group has been enhanced.
Reconciliation
of equity to IAS
€million
The changeover to IAS has been based
on the assumption that the IAS had
The equity adjustments are mainly predicated on the following material facts:
always been applied (SIC-8). The differences
from restatements resulting
from the Jan. 1, 2000 opening balances
were recognized in equity only, to
the debit or credit of the other reserves
and the minority interests. The synopsis
below summarizes the reconciliation
of equity as of Dec. 31, 1999 (HGB),
to equity as of Jan. 1, 2000 (IAS).
Total equity (incl. minority interests) acc. to HGB at 12-31-1999 263.2
Goodwill 35.0
Tangible assets 56.8
Current assets 9.0
Untaxed/special reserves 11.2
Accruals for pension and similar obligations (50.6)
Other accruals 2.0
Income taxes 2.2
Sundry 6.7
Total equity (incl. minority interests) acc. to IAS at 1-1-2000 * 335.5
* IAS-based total equity (stockholders’ equity + minority interests) as of Jan. 1, 2000, includes minority interests of €13.0 million.
– Goodwill created on or after Jan. 1, 1995, from acquisitions is capitalized in accordance with IAS 22 and amortized
by straight-line charges over its useful life. Under HGB regulations, part of such goodwill was offset against the
reserves retained from earnings.
– Tangible assets, to which partly declining-balance depreciation had been charged, are now depreciated on a
straight-line basis, except for the property, plant and equipment of insignificant companies.
– Tangible assets held under capital leases (aka finance leases) are capitalized and the future rents (excluding
interest portion) concurrently recognized as liability. According to SIC-12, special-purpose leasing firms are
consolidated, too. Where sale & leaseback transactions are involved, the gains on asset disposal realized under
HGB regulations have been recognized as deferred income.
– Being based on tax regulations, untaxed/special reserves are not disclosed in the consolidated financial
statements according to IAS.
– The pension accruals, previously stated in the HGB-based accounts in accordance with Art. 6a German Income
Tax Act (“EStG”), have been redetermined and are annually remeasured to account for future pay, pension and
interest rate rises.
–Accruals for impending losses from uncompleted contracts are recognized at direct production cost with due regard
to directly proratable indirect materials and indirect labor, including production-related depreciation and pension
expenses but excluding any general administrative and selling expenses. In conformity with IAS 37, expenses are
not provided for.
– Assets and liabilities from any future income tax relief or burden (deferred taxes) are recognized according to the
liability method, based on the future tax load. Deferred taxes also include assets created by the offset of tax loss
carryovers against anticipated future profits, however, always provided that their realization is reasonably certain.
– Moreover, the Sundry line mainly mirrors the effects of IAS rules for the accounting treatment of development costs.
(3) Group of consolidated companies Besides Kolbenschmidt Pierburg AG,
the consolidated accounts include all
German and foreign subsidiaries in
which Kolbenschmidt Pierburg AG
holds the majority of voting rights
(whether directly or indirectly). Principally,
companies are initially consolidated
or deconsolidated when control
is transferred. Associated affiliates
and joint ventures are stated at equity.
The additions to investees stated at
equity involve the following:
12-31-2000 Additions Disposals 12-31-2001
Fully consolidated companies 47 -- (4) 43
thereof German 20 -- (1) 19
thereof foreign 27 -- (3) 24
Investees stated at equity 1 2 -- 3
thereof German -- 1 -- 1
thereof foreign 1 1 -- 2
The disposals from the consolidation
group concern, apart from Pierburg
Instruments GmbH, the following
companies:
– With effect as of December 31,
2001/January 1, 2002, the share
capital of Pierburg Instruments
GmbH was raised to admit a new
majority shareholder, thus reducing
the Kolbenschmidt Pierburg Group’s
equity interest in Pierburg Instruments
GmbH to a mere 49 percent.
As of December 31, 2001, this company
is carried at equity. While
Pierburg Instruments GmbH had
– As and when the controlling
majority was transferred as of
December 31, 2001, the shares in
Pierburg Instruments Inc. were
sold at a price of €6.0 million.
been fully consolidated in fiscal
2000, this company has been
carried at equity as from fiscal 2001.
– The other addition to investees
carried at equity refers to Kolbenschmidt
Pierburg Shanghai Nonferrous
Components Co. Ltd., a
joint venture formed in China with
effect as of April 1, 2001. The share
of €11.5 million was paid up cash.
– Moreover, the shares in Vehicle
Spares Ltd. were sold and transferred
at a price of £1 with economic
effect as of January 1, 2001.
– In the year under review,
SEM Bailly Compte S.A.S. was
merged into Pierburg S.à.r.l.
77

78
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Accounting principles
The divestments and shareholding
reductions in the period impacted on
major asset and liability lines as of
December 31, 2001, and the consol-
€million
The subsidiaries and the investees
stated at equity which are included in
the consolidated financial statements
of Kolbenschmidt Pierburg AG are
idated income statement for fiscal
2001 as follows:
Fixed assets (0.6)
Current assets (excl. cash & cash equivalents) (19.1)
Cash & cash equivalents (0.3)
Income tax assets/prepaid expenses & deferred charges (0.3)
(20.3)
Pension accruals (2.1)
Other accruals (1.3)
Financial debts (0.6)
Trade payables and all other liabilities (1.9)
Income tax liabilities/deferred income (0.1)
(6.0)
Net sales (1.6)
Operating result 0.3
EBT 0.3
Net income 0.3
listed on pages 110 and 111. A comprehensive
listing of the shareholdings
of Kolbenschmidt Pierburg AG will be
deposited with the Commercial
(4) Consolidation principles The financial statements of consolidated
German and foreign companies
are prepared in accordance with
groupwide uniform accounting and
valuation methods.
Companies in which a direct or indirect
majority stake is held and over
which a controlling influence can be
exercised are subsidiaries. Subsidiaries
included for the first time
are consolidated according to the
purchase method, specifically the
book value method under the terms
Register of the Local Court of
Düsseldorf (HRB 34883).
of IAS 22, by offsetting the cost of
shares acquired against the subsidiaries’
prorated equity. Any difference
between cost and prorated
equity is, if based on hidden reserves
or burdens, allocated at the Group’s
percentage shareholding in such
hidden reserves or burdens to the
subsidiaries’ assets and liabilities.
Any net equity over cost is allocated
to the assets of companies acquired
and released over the assets’ average
useful lives. Any residual net equity
under or over cost is capitalized as
goodwill or badwill within intangible
assets. Goodwill is amortized over its
estimated useful life. Any residual
net equity under cost from pre-1995
acquisitions has been offset against
the Group's reserves retained from
earnings. Upon deconsolidation the
residual book values of goodwill and
badwill are accounted for accordingly
when measuring the net gain or loss
on disposal.
Expenses and income from intragroup
transactions, as well as intercompany
receivables and payables are elimi-
Variations in the year of major
currencies versus the €:
In the local-currency financial statements
of consolidated companies,
currency receivables and payables
nated in consolidation. Intercompany
profits and losses are eliminated unless
insignificant. Deferred taxes are
recognized for temporary differences
from consolidation, as required by
IAS 12.
Companies in which stakes between
20 and 49 percent are held and over
which a controlling influence is
exercised (so-called associated affiliates)
are stated at equity. To determine
their goodwill (if any), principles
analogous to consolidation are adopted,
goodwill amortization being
(5) Currency translation The functional currency concept has
been adopted to translate the annual
financial statements of non-German
group companies into €. As a rule,
their functional currency equals the
local currency, except for a Turkish
subsidiary. Therefore, assets and
liabilities are translated at the mean
current rates and the income statements
at the annual average rates.
The translation differences resulting
herefrom, as well as those from translating
prior-year carryovers are recognized
in, and only in, equity. Goodwill
created from the capital consolidation
are translated at the current rate while
for the translation of foreign-currency
cash & cash equivalents, the current
recognized in net investment income.
Joint ventures (jointly controlled companies
in which a 50-percent stake is
owned) are also carried at equity.
of non-German companies is carried
at historical cost.
The functional currency of the Turkish
subsidiary is the euro (€), and its
financial statements are accordingly
prepared in €. Nonmonetary assets
and liabilities are translated at the
historical rate, income statement lines
at the monthly average rates. The exchange
rate gains/losses from this
translation are recognized in financial
income or expense, as appropriate.
Mean rate in € at Annual average rate in €
12-31-2000 12-31-2001 2000 2001
1 Brazilian real 0.5513 0.4852 0.5883 0.4823
1 pound sterling 1.6044 1.6418 1.6431 1.6139
1 Canadian dollar 0.7179 0.7092 0.7276 0.7221
1 Czech koruna 0.0285 0.0312 0.0281 0.0294
1 US dollar 1.0750 1.1334 1.0791 1.1176
buying rate is used. Currency translation
differences are duly recognized
in the net financial result.
79

80
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Accounting principles
(6) Accounting and
valuation methods
The following unchanged useful lives
underlie amortization:
The following unchanged asset depreciation
ranges (ADRs) apply to
property, plant & equipment within
tangible assets:
Intangible assets
Purchased intangible assets are capitalized
at (acquisition) cost, internally
created intangibles from which the
Group is believed to derive future
economic benefits and which can
reliably be measured are recognized
at production cost, either type of
intangible asset being amortized by
straight-line charges over the estimated
useful life. Production cost covers
all costs directly allocable to the production
process, including any proratable
production-related overheads.
The cost of finance is not capitalized.
R&D costs are principally expensed.
Development costs are exceptionally
capitalized and amortized on a
straight-line basis if a newly developed
product or process can be
clearly defined, technologically realized
and used either internally or is
destined for marketing (IAS 38),
and if there is a reasonable assurance
that its costs will be recovered by
future cash inflows. If certain factors
hint at an impairment and the recoverable
amount is below amortized
cost, an intangible asset is written
down. Wherever the reason for writedown
has ceased to exist, the charge
is reversed and the asset written up
accordingly.
Concessions, franchises, industrial property rights 2-20 years
Development costs 5 years
Goodwill from consolidation or the
statement at equity is amortized
over its estimated period of benefit,
as a rule 15 to 20 years. The period
is estimated with due regard to the
Tangible assets
Tangible assets are carried at depreciated
cost less any write-down. The
production cost of internally made
tangible assets comprises all costs
directly allocable to the production
process, including the proratable production-related
overheads. Borrowing
expected benefits from the market
position achieved through the acquisition
and from the acquiree’s valueadding
potential.
costs are not capitalized as part of
cost. Tangible assets are principally
depreciated on a straight-line basis
over their estimated useful lives unless
in exceptional cases another
method better reflects the pattern of
use.
IAS 40 is not applied since no investment
properties exist.
Buildings 20-77 years
Other structures 8-20 years
Production plant and machinery 3-20 years
Other plant, factory and office equipment 2-23 years
Tangible assets obtained under capital
leases are capitalized at the lower
of their fair values or the present value
of minimum rents and depreciated
over the shorter of their estimated
useful lives or underlying lease terms
(IAS 17). If certain factors hint at an
impairment and the recoverable
amount is below depreciated cost,
a tangible asset is written down.
Wherever the reason for write-down
has ceased to exist, the charge is
reversed and the asset written up
accordingly.
Financial assets The shares in nonconsolidated group Long-term loans bearing interest at
companies and in associated affiliates
not stated at equity and the other
fair market rates are carried at par.
long-term securities, all shown as The shares in associated affiliates
financial assets, are carried at their and joint ventures disclosed as such
fair values. The fair value of nonlisted are stated at equity. Based on the cost
shares is derived from the going at share acquisition date, the invest-
concern value, the latter being determent book value is increased or
mined by means of generally accepted decreased to reflect the changes in
appraisal and valuation techniques. equity of the associated affiliates or
Changes in fair value are not recog- joint ventures to the extent such
nized in income until realized. changes are allocable to the shares
However, if a value has been impaired held by the Kolbenschmidt Pierburg
and fallen below cost, even unrealized
losses are recognized in net income.
Group.
Inventories and prepayments
received
Inventories are recognized at cost,
as a rule applying the average-price
method to acquisition cost whereas
production cost includes the absorbed
costs according to IAS 2 and is determined
on the basis of normal workloads.
Specifically, capitalized production
cost comprises direct costs
plus any portions of indirect materials,
indirect manufacturing costs (labor,
etc.), as well as production-related
depreciation and pension expenses,
but excludes any borrowing costs
(IAS 23). Risks inherent in inventories
due to reduced utility or to obsolescence
are adequately allowed for. If
the net realizable value (NRV) of any
inventories at balance sheet date is
below their carrying value, such in-
ventories are written down to NRV.
If the NRV of inventories previously
written down has risen, the ensuing
write-up is offset against cost of
materials (raw materials and supplies)
or shown as increase in inventories
of finished products and work in
process (WIP).
Prepayments received from customers
are recognized as liabilities.
Receivables and sundry assets Receivables and sundry assets are fair-valued as of the balance sheet
capitalized at cost. Adequate allowances
provide for bad debts and
doubtful accounts. Non-euro receivables
are translated at the mean
current rate. Short-term securities are
date. Changes in fair value are not
recognized in income until realized.
However, if a value has been impaired
and fallen below cost, even unrealized
losses are recognized in net income.
81

82
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Accounting principles
Deferred taxes
Deferred taxes are duly recognized on
the differences between the values of
assets and liabilities in the consolidated
balance sheet and those in the
individual companies' tax accounts if
such different values entail a higher
or lower taxable income than would be
the case if the consolidated balance
sheet prevailed. Differences between
the investment book value in the tax
accounts and the investee’s equity
are not recognized since, for lack of
any intention to dispose of such investees,
the valuation differences will
not reverse in the foreseeable future.
Deferred tax assets also include tax
reduction claims from the expected
future utilization of tax loss carryovers
(if their realization is reasonably certain).
If the recent history of a company
reports a series of losses, deferred
tax assets from unutilized tax
losses or credits are only recognized
to the extent that the company shows
sufficient taxable temporary differences
or that conclusive substantive
evidence exists which suggests with
reasonable assurance that sufficient
taxable income will be earned by the
company to utilize the hitherto unused
tax losses or credits. Deferred taxes
are determined by applying the local
tax rates current or anticipated in each
country at the time of realization.
Due to the reduction in corporate income
tax rates, resolved and meantime
enacted in Germany under the
tax reform, to a standard 25 percent,
the prior-year deferred tax rate had to
be clipped from 50 to 40 percent in
Germany. Deferred tax assets and liabilities
that reverse in future periods
were adjusted accordingly, to the
debit or credit of net income or equity,
depending on whether initially recognized
in net income or in reserves.
Deferred taxation rates outside of
Germany ranged between an unchanged
32.5 and 38 percent.
Minority interests Minority interests represent those equity as well as to Group net income.
Accruals
Accruals for pensions and similar obligations
are determined according to
the internationally accepted projected
unit credit (PUC) method, which is
predicated not only on expected future
pay and pension increases but
also other actuarial assumptions.
The actuarial gains and losses ensuing
from differences between actuarial
assumptions and actual trends
of the underlying parameters give rise
to a gap between the present value of
portions of a subsidiary’s net income
and equity which are allocable to
shares not held by Kolbenschmidt
Pierburg AG, whether directly, or indirectly
via other subsidiaries. Minority
interests are shown in separate lines,
in addition to debt and stockholders’
the defined benefit obligation (DBO)
and the pension liabilities accrued
in the balance sheet. Actuarial gains
and losses outside a 10-percent corridor
of the DBO are distributed over
the average residual service years of
employees. The fair market value of
any existing pension fund assets is
deducted from pension accruals.
Service cost is treated as personnel
expense while the interest portion of
pension provisions in the fiscal year
is shown within the net financial
result.
Minority interests in losses are offset
against the majority interests in the
Group’s equity and Group net income
unless a contractual obligation exists
for the minority shareholders to absorb
and offset such losses.
The remaining accruals according to
IAS 37 provide at balance sheet date
for all identifiable legal and constructive
commitments and obligations to
third parties if based on past transactions
or events and if their amount,
due date or maturity is uncertain. If
the probability of their utilization exceeds
50 percent, accruals are measured
at the best estimate of settlement
amount. Noncurrent accruals are
shown, if the effect of discounting is
significant, at the settlement amount
discounted as of balance sheet date.
Liabilities Pursuant to IAS 39, liabilities are capital leases are recognized at the
measured at amortized cost, which
as a rule equals their settlement or
repayment amounts. Liabilities under
Prepaid and deferred items Such items are shown to appropriately Public grants and subsidies for
recognize pro rata temporis (p.r.t.)
prepaid rents, interest, insurance
premiums, non-public investment
grants or allowances, etc.
present value of rents. Liabilities denominated
in any non-euro currency
are translated at the mean current rate.
capital expenditures are recognized
as deferred income in line with IAS 20.
Operating income and expenses Net sales (revenues) and other oper- Operating expenses are recognized
Derivative financial instruments
Within the Kolbenschmidt Pierburg
Group, financial derivatives are solely
used to hedge against currency and
interest rate risks from operations.
In the prior-year accounts as of Dec.
31, 2000, valuation units were regularly
created between an underlying
transaction and the offsetting hedge
provided that, if intended and viewed
at arm’s length, both the underlying
transaction and the hedge were interrelated
for one use and functional
purpose, with the result that gains
and losses from the underlying transactions
and the hedge would very
likely level. Where currency forwards
contrasted with an asset or liability
at balance sheet date, currency translation
was based on the hedged rate.
Where currency forwards referred to
cash inflows or outflows in foreign
currency, the derivative was not rec-
ating income are recognized upon performance
of the contract for goods/
services or upon passage of risk to
the customer.
ognized due to the offsetting effect
of the underlying transaction.
An accrual provided for impending
losses if a derivative was used to
hedge proposed currency transactions
and its market value was negative.
Future interest rate differences from
interest rate swaps were not recognized
due to the compensatory effect
of the underlying transaction. Option
premiums paid when contracting interest
rate or currency hedges, were
carried under sundry assets at the
lower of cost or market until the option
was either exercised or expired.
Upon the first-time application of IAS
39 Financial Instruments as from
January 1, 2001, a financial derivative
is initially recognized at settlement
date, which would normally lag just a
few days behind the trading date.
Principally, any changes in the fair
value of financial derivatives are
immediately recognized in net income
unless an effective hedge exists that
when caused or when the underlying
service, etc. is used.
satisfies the criteria of IAS 39. In this
case, the changes in the derivative’s
value would not impact on net income
until after the hedged underlying
transaction has fallen due or
been settled. If the derivative is a
cash flow hedge (CFH) and hence
used to effectively hedge expected
future cash flows, changes in the
financial derivative’s fair value are
recognized under the other reserves
only and not in net income.
Changes in the value of financial derivatives
used in fair value hedges
(FVHs) to effectively hedge the fair
value of recognized assets and liabilities
are posted to net income as
are any changes in the hedged assets
or liabilities (where appropriate, by
adjusting their book values), with the
result that the compensatory effects
are all reflected in the income statement.
83

84
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated balance sheet
(7) Fixed-asset analysis
€million
1-1-2001
First-time
application
of IAS 39
Book
Changes
in
consolidation
Translation 12-31-
Additions Disposals transfers group
differences 2001 1-1-2001 Additions Disposals Write-up
Intangible assets
Development costs
and other internally created intangible assets 8.7 0.0 4.3 0.0 0.0 0.0 0.0 13.0 3.8 1.7 0.0 0.0 0.0 0.0 0.0 5.5 4.9 7.5
Concessions, franchises, industrial property rights and licenses 18.9 0.0 1.1 2.7 0.3 (2.6) 0.0 15.0 13.9 1.8 2.7 0.0 0.0 (2.6) 0.0 10.4 5.0 4.6
Goodwill 61.5 0.0 0.0 0.0 (0.5) (1.3) 0.4 60.1 18.4 2.3 0.0 0.0 (0.5) 0.3 0.4 20.9 43.1 39.2
Badwill from consolidation (6.6) 0.0 0.0 0.0 0.0 0.0 0.0 (6.6) (3.8) 0.0 0.0 (1.6) 0.0 0.0 0.0 (5.4) (2.8) (1.2)
Prepayments on intangibles 0.3 0.0 3.4 0.0 (0.3) 0.0 0.0 3.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 3.4
Tangible assets
Land, equivalent titles and buildings
82.8 0.0 8.8 2.7 (0.5) (3.9) 0.4 84.9 32.3 5.8 2.7 (1.6) (0.5) (2.3) 0.4 31.4 50.5 53.5
(incl. buildings on leased land) 330.7 0.0 2.5 0.5 2.6 (0.2) 0.7 335.8 118.5 11.5 0.2 0.0 0.0 0.0 0.1 129.9 212.2 205.9
Production plant and machinery 1,016.8 0.0 65.6 17.5 25.8 (0.7) 8.0 1,098.0 685.2 95.8 17.1 0.0 0.5 (0.8) 4.8 768.4 331.6 329.6
Other plant, factory and office equipment 248.9 0.0 37.8 24.3 8.5 (3.5) (2.1) 265.3 183.4 34.8 23.7 0.0 0.0 (3.1) (1.8) 189.6 65.5 75.7
Prepayments on tangibles, construction in progress 48.1 0.0 59.9 1.3 (36.4) (0.2) 0.4 70.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 48.1 70.5
Financial assets
1,644.5 0.0 165.8 43.6 0.5 (4.6) 7.0 1,769.6 987.1 142.1 41.0 0.0 0.5 (3.9) 3.1 1,087.9 657.4 681.7
Shares in joint ventures 0.0 0.0 12.0 0.0 0.0 0.0 0.0 12.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.0
Shares in associated affiliates 7.7 0.0 8.4 0.6 0.0 0.0 0.0 15.5 2.5 0.0 0.0 2.5 0.0 0.0 0.0 0.0 5.2 15.5
Other long-term securities 3.7 21.6 0.0 0.0 0.0 0.0 0.0 25.3 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.3 3.4 25.0
Other long-term loans 2.5 0.0 1.2 0.8 0.0 0.0 0.0 2.9 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.1 2.4 2.8
13.9 21.6 21.6 1.4 0.0 0.0 0.0 55.7 2.9 0.0 0.0 (2.5) 0.0 0.0 0.0 0.4 11.0 55.3
Total 1,741.2 21.6 196.2 47.7 0.0 (8.5) 7.4 1,910.2 1,022.3 147.9 43.7 (4.1) 0.0 (6.2) 3.5 1,119.7 718.9 790.5
(8) Intangible assets The intangible assets mainly comprise
goodwill from consolidation, as well
as capitalized development costs.
In the year under review, research
expenses of €79.8 million were
incurred (up from €79.1 million).
Total amortization of intangible assets
of €5.8 million (down from €6.5 million)
includes write-down of €0.1 million
(up from €0 million). The badwill
was amortized to other operating income
at €1.6 million (up from €1.3
million).
Gross values Amortization/depreciation/write-down
Net values
Book
transfers
Changes
in
consolidation
group
(9) Tangible assets Depreciation in the period totaled
€142.1 million (down from €147.6
million) and includes write-down at
€1.3 million (down from €2.0 million).
Under an impairment test, one company
wrote down production plant and
machinery due to the closedown of
production lines which was approved
in a final restructuring plan.
Translation
differences
12-31-
2001
12-31-
2000
12-31-
2001
Encumbrances of €20.2 million (virtually
unchanged) rest on land and
buildings to collateralize long-term
investment loans. Moreover, production
plant and machinery of €9.7
million (up from €2.2 million) and
future fixed-asset additions of €4.0
million (down from €11.5 million)
were assigned as security for an investment
loan.
85

86
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated balance sheet
Rents falling due under capital leases
in the years ahead:
The tangible assets capitalized under
capital leases and from the consolidation
of special-purpose leasing
firms total €89.6 million (down from
€99.2 million), of which €44.8 million
(down from €46.2 million) is allocable
to a long-term property lease and to
the consolidation of several specialpurpose
leasing firms formed to fi-
Rents due in succeeding years under capital leases
nance various properties and buildings;
another €44.8 million (down
from €53.0 million) refers exclusively
to capital leases for production plant
and machinery used in current production.
Leases for personal property
principally provide for a purchase
option. Lease terms vary between
4 and 10 years.
€million 2002 2003-2006 after 2006
Rents 13.7 49.8 45.7
Discount 0.9 8.3 11.5
Present values 12.8 41.5 34.2
Rents include €37.4 million of
payments to banks of consolidated
special-purpose leasing firms.
Rents due in succeeding years under operating leases
€million 2002 2003-2006 after 2006
Land and buildings 2.0 5.5 23.1
Production plant and machinery 1.6 1.9 0.0
Other leases 0.6 1.4 0.0
The rents for land and buildings chiefly
refer to a long-term property lease that
neither includes a purchase option
nor a firmly agreed passage of title
and, therefore, is an operating lease.
4.2 8.8 23.1
In the year under review, €2.3
million was paid under operating
leases and recognized in net
income. No subleases existed.
(10) Financial assets Analysis of shares in joint ventures
and associated affiliates:
€million
Joint ventures
Kolbenschmidt Pierburg Shanghai
Nonferrous Components Co. Ltd. 0.0 11.6 0.5 0.0 0.0 0.1 12.0
Associated affiliates
Pierburg Instruments GmbH, a subsidiary
fully consolidated in 2000,
has been stated at equity as of
December 31, 2001.
Long-term securities
The Kolbenschmidt Pierburg Shanghai
Nonferrous Components Co. Ltd.
joint venture was formed with effect
as of April 1, 2001. The joint venture’s
€million
Book
value
1-1-2001 Additions
P/L share
Kolbenschmidt Shanghai Piston Co. Ltd. 5.2 0.0 0.5 0.6 2.5 0.0 7.6
Pierburg Instruments GmbH 0.0 7.9 0.0 0.0 0.0 0.0 7.9
5.2 7.9 0.5 0.6 2.5 0.0 15.5
Assets 1) 22.5
Equity 10.6
Debt 2) 12.0
Net sales 15.4
EBT 0.5
1) including income taxes and prepaid expenses & deferred charges
2) accruals, liabilities, income taxes, deferred income
The other long-term loans are carried
at amortized cost pursuant to IAS 39.
proratable assets, liabilities, income
and expenses presented the following
balances at Dec. 31, 2001:
€million 12-31- 12-31-
2000 2001
Book value 3.4 25.0
Fair value 25.0 25.0
Unrealized gain 21.6 21.6
All these securities are available for
sale. The first-time application of IAS
39 implied the initial fair valuation of
one investee. €21.6 million was recognized
as unrealized gain within equity.
Dividend
payments Write-up
Goodwill
amortization
Book
value
12-31-
2001
Long-term securities at a total book
value of €0.8 million for which no
quoted market price is available and
whose fair value cannot reliably be determined
are stated at amortized cost.
87

88
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated balance sheet
(11) Inventories
(12) Receivables and sundry assets
€million 12-31- 12-31-
2000 2001
Raw materials and supplies 79.7 81.0
Work in process 75.9 54.9
Finished products and merchandise 104.4 107.1
Prepayments made 4.9 1.3
The book value of inventories stated
at the lower NRV totals €68.9 million
(down from €74.7 million). In the
year under review, €2.8 million (down
from €4.9 million) of inventories pre-
The disclosed book values of the
monetary assets covered by these
items approximate their fair values.
Under an ABT program, the Kolbenschmidt
Pierburg Group sells trade
receivables on a revolving basis up
to a maximum volume of €129 million.
After these receivables had still re-
264.9 244.3
viously written down was written up
as NRV had risen.
Inventories do not collateralize any
liabilities.
€million thereof thereof
12-31- due after 12-31- due after
2000 1 year 2001 1 year
Trade receivables
thereof due from
280.5 0.0 203.6 0.1
group companies 0.0 0.0 3.4 0.0
joint ventures and associated affiliates 0.0 0.0 1.2 0.0
All other receivables and sundry assets 19.3 1.2 34.5 3.4
299.8 1.2 238.1 3.5
quired recognition as assets in 2000,
contract amendments effective as from
2001 resulted in the sold receivables
being treated as such pursuant to IAS
39 and hence no longer recognized in
the balance sheet. As of Dec. 31, 2001,
the receivables sold had a par value of
€99.0 million.
Breakdown of the remaining
receivables and sundry assets:
(13) Cash & cash equivalents
(14) Income tax assets
The deferred taxes include tax reduction
claims of €22.4 million (up from
€16.6 million) derived from loss carryovers
utilizable in future periods. Loss
carryovers are stated on the basis of
corporate planning data at the amount
of budgeted future taxable income.
€million 12-31- 12-31-
Accounts due for/from
2000 2001
non-income taxes 5.9 11.2
financing 1.9 7.8
prepayments made 1.1 6.2
guaranty fund 1.5 1.3
investment grants/allowances 1.0 0.9
sundry assets 7.9 7.1
€million 12-31- 12-31-
2000 2001
Cash on hand and in bank (incl. checks) 47.1 21.2
Due under intercompany finance arrangements 7.7 0.0
The accounts due under intercompany
finance arrangements result from the
investment of monies due on demand
from Rheinmetall Finanz GmbH.
Over and above the deferred tax assets
from loss carryovers and tax credits,
German and foreign tax loss carryovers
exist at a total €131.7 million
(up from €92.4 million) which was not
recognizable. The German loss carryovers
are not subject to expiration
19.3 34.5
54.8 21.2
Such investments are not exposed
to any valuation risk. Their fair value
approximates their book value.
€million 12-31- 12-31- thereof thereof not
2000 2001 recognized in recognized in
Deferred taxes net income net income
from temporary differences 22.7 18.4 18.3 0.1
from loss carryovers 16.6 22.4 22.4 0.0
39.3 40.8 40.7 0.1
Income tax refundable by the tax office 7.0 4.5 4.5 0.0
46.3 45.3 45.2 0.1
whereas the foreign ones as a rule are
(e.g., in the United States utilizable
within 20 years). Furthermore, deferred
tax assets from temporary
differences at a total €104.6 million
(up from €93.3 million) were not
recognized. Deferred taxes adjusted
89

90
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated balance sheet
in prior periods were written up at
€0.6 million (up from €0 million).
According to the German Tax Reduction
Act of Oct. 23, 2000, the changeover
from the imputation system to
the split rate system (split income
taxation) is accompanied by a 15-year
transition period during which dividends
distributed from EK-40 equity
portions formerly subject to the full
(15) Total equity Kolbenschmidt Pierburg AG’s capital
stock amounts to €87.1 million and is
divided into 28,003,395 no-par bearer
shares of fully voting common stock.
There is no unpaid capital subscribed.
The Executive Board is authorized to
raise the capital stock on or before
June 30, 2003, after first obtaining the
Supervisory Board’s approval, by issuing
once or several times new stock
against cash contributions for an aggregate
maximum of €25.6 million, duly
granting the stockholders their subscription
rights. However, the Executive
Board is authorized with the Supervisory
Board’s prior approval to exclude
subscription rights to fractions and,
moreover, to the extent required to
grant the holders of option or conversion
rights under bonds (whether
floated or yet to be issued) the same
statutory subscription right of Kolbenschmidt
Pierburg AG stockholders as
if such stock options or conversion
rights had already been exercised
(authorized capital I). In the year under
review, part of the authorized capital I
was utilized pursuant to Art. 4(2) of
the Company’s articles of association
to raise the capital stock by €3.6 million
by issuing 1,400,200 no-par bearer
shares of common stock. After this increase,
a total 28,003,395 bearer
shares of issued common stock have
been outstanding.
German income tax now entail a corporate
income tax reduction and
those distributed from EK-02 equity
portions exempt from corporate income
tax increase corporate income
tax. As of December 31, 2001, EK-40
portions no longer existed and, therefore,
no potential for any deferred tax
relief did either. The potential for deferred
tax burdens amounts to €0.5
million.
Furthermore, the Executive Board is
authorized to raise the capital stock
on or before June 30, 2003, after first
obtaining the Supervisory Board’s
approval, by issuing once or several
times new stock against cash contributions
for an aggregate maximum of
€6.6 million. With the Supervisory
Board’s prior approval, the Executive
Board may generally exclude the
subscription rights if issuing the new
stock at a price that is not significantly
below the market price. If the Executive
Board does not exercise its authority
to exclude subscription rights, such
subscription may with the Supervisory
Board’s approval nonetheless
be excluded for fractions and to the
extent required to grant the holders
of option or conversion rights under
bonds (whether already floated or yet
to be issued) the same statutory subscription
right of Kolbenschmidt Pierburg
AG stockholders as if such stock
options or conversion rights had
already been exercised (authorized
capital II).
Moreover, the Executive Board has
been authorized to acquire on or before
December 12, 2002, treasury stock
equivalent to an aggregate maximum
of 10 percent of the current capital
stock. In the year under review, the
authority to repurchase any of the
Company’s stock was not exercised.
€million
Upon transfer of the stock premium
from the capital increase, the additional
paid-in capital rose by €11.9
million to €174.0 million.
The other reserves include, besides
the reserves retained by Kolbenschmidt
Pierburg AG from earnings,
also the other comprehensive income,
which breaks down into the reserve
for adjustments due to the first-time
application of the IAS (which are recognized
in equity only), differences
from currency translation, as well as
reserves from fair valuation.
The analysis in 2001 of such reserves
presents the following picture:
Initial application of IAS 39 (Jan. 1, 2001)
Deferred taxes on differences
0.0 21.6 21.6
from the first-time application of IAS 39 (Jan. 1, 2001) 0.0 (8.7) (8.7)
Balance at January 1, 2001 0.0 12.9 12.9
Changes in the fair valuation of derivatives (0.4) 0.0 (0.4)
Deferred taxes on changes in the hedge reserve 0.1 0.0 0.1
Balance at December 31, 2001 (0.3) 12.9 12.6
(16) Accruals for pensions and
similar obligations
Hedge
reserve
The differences from the fair valuation
of interest rate swaps (which mature in
2005) were transferred to the hedge
reserve.
These accruals provide for obligations
under vested rights and current pensions
payable to eligible active and
former employees and their surviving
dependants. Such commitments
primarily encompass pensions, both
basic and supplementary. The individual
confirmed pension entitlements
are based on benefits that vary according
to country and company and,
as a rule, are measured according to
service years and employee pay.
Being a noncurrent provision for the
accumulated postretirement benefit
obligation, the accrued health care
obligations to the retirees of some
US group companies are also included
in the pension accruals recognized
hereunder.
Securities
available
for sale
Reserves
from fair
valuation
The separate financial statements of
Kolbenschmidt Pierburg AG close the
fiscal year with net earnings of €14.0
million, proposed to be distributed in
full to pay a cash dividend of €0.50
per no-par share of stock.
The company pension system consists
of both defined-contribution and defined-benefit
plans. Under a DCP, the
company incurs no obligations other
than the payment of contributions to
earmarked funds. These pension expenses
are shown within personnel
expenses. In the year under review,
a total €32.6 million (up from €31.9
million) was paid to DCPs.
Under defined benefit plans, a company
is obligated to meet its confirmed
commitments to active and former
employees. In accordance with IAS 19,
the projected unit credit (PUC) method
is used to measure accrued defined
benefit obligations. To this end, the
present value of the defined benefit
91

92
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated balance sheet
obligation (DBO) is determined
through actuarial techniques on the
basis of assumptions about mortality,
pay and pension rises, employee
turnover, interest rate trends, as well
as additional parameters. The fair
The following actuarial parameters
has been assumed to determine
the present value of the DBO of all
German pension obligations:
Analysis of pension accruals
as of December 31:
Breakdown and reconciliation of pension accruals:
value of current plan assets is offset
against the accrual. Service cost is
disclosed within personnel expenses,
interest cost and expected return on
plan assets being shown under the
net interest result.
in % 12-31- 12-31-
2000 2001
Discount rate 6.25 5.75
Pay rise 3.00 3.00
Pension rise 1.25 1.25
Expected return on plan assets 8.84 8.87
Locally adjusted assumptions
underlie the obligations to employees
abroad.
€million 2000 2001
Carryover 272.4 291.3
Translation difference 11.2 3.8
Change in consolidation group 7.6 (2.2)
Pensions paid (25.0) (24.9)
Annual provision 25.1 19.7
Balance at December 31 291.3 287.7
€million 12-31- 12-31-
2000 2001
Present value of non-funded DBO 252.9 273.9
Present value of plan-funded DBO 118.6 133.7
Total present value of DBO 371.5 407.6
Plan assets at fair value (77.7) (80.7)
Adjustment for unrecognized actuarial losses (2.5) (39.2)
Accruals for pensions and similar obligations 291.3 287.7
Breakdown of plan assets:
Breakdown of pension expense:
The €36.7 million hike of the unrecognized
adjustment of actuarial losses
to €39.2 million was caused at €9.9
million by the reduced German DBO
discount rate (down from 6.25 to 5.75
percent). Another €13.9 million of the
increase was attributable to the negative
variance of the expected return
on the US plan assets from the actual
income realized in the fiscal year.
The rising retiree rate in 2001 and the
€million 12-31- 12-31-
2000 2001
Guaranteed deposits 6.6 8.1
Equities 45.5 38.8
Government and corporate bonds 25.3 18.3
Cash & cash equivalents 0.3 15.5
Plan assets 77.7 80.7
In 2001, plan assets returned a loss of
€4.6 million, comparing with a profit
of €1.5 million the year before.
higher health care costs stepped up
actuarial losses by €6.9 million and
€4.6 million, respectively. The remaining
surge in actuarial loss was
accounted for by the lower discount
rate for US DBO, down from 7.0 to
6.5 percent. Under the terms of IAS 19,
actuarial gains and losses are expensed
over the average residual
service years if outside a corridor
of 10 percent of total DBO.
€million 2000 2001
Current service cost 8.4 4.5
Amortized actuarial gains and losses (0.1) 0.1
Past service cost 0.1 0.1
Effects of plan curtailments/settlements 0.0 0.1
Expected return on plan assets (7.0) (6.9)
Compounding of expected pension obligations 23.0 23.9
24.4 21.8
93

94
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated balance sheet
(17) Other accruals (18) Liabilities
€million
1-1-2001 Utilized
Released
Added/
newly
provided
Compounded
Change in
consolidation
group
Translation
differences/
sundry
Warranties 24.3 (6.0) (2.8) 3.4 0.2 (0.3) 0.2 19.0
Identifiable losses 29.9 (17.3) (0.8) 2.8 0.0 0.0 0.8 15.4
Yet unbilled costs 4.3 (3.9) (0.1) 6.2 0.0 (0.2) 0.0 6.3
Restructuring 5.4 (2.9) (0.5) 0.9 0.0 0.0 0.1 3.0
Personnel 55.6 (36.4) (1.0) 36.1 0.0 (0.8) (0.1) 53.4
Other 25.4 (10.2) (2.8) 11.6 0.2 0.0 0.1 24.3
€million
12-31-
2001
144.9 (76.7) (8.0) 61.0 0.4 (1.3) 1.1 121.4
Known specific warranty risks are
accrued at the anticipated amount of
the obligation.
Accruals for identified losses provide
for binding purchasing obligations.
Any economic risks beyond are also
adequately provided for.
Accruals for obligations to personnel
basically provide for accrued vacation,
residual annual leave, overtime and
flextime at a total €22.0 million
(down from €24.5 million), for preretirement
part-time work at €10.6
within 1 year
million (down from €11.1 million),
and for termination benefits at €8.4
million (up from €6.3 million).
The other accruals cover environmental
risks, bonuses, discounts and
rebates, as well as legal, consultancy
and audit fees.
Unchanged versus the year before,
no refunds are expected from accruals.
The following cash outflows are expected
from each of the noncurrent
accrual categories:
1-5 years
after 5 years
Warranties 15.4 3.6 0.0 19.0
Identifiable losses 15.4 0.0 0.0 15.4
Yet unbilled costs 6.3 0.0 0.0 6.3
Restructuring 2.6 0.4 0.0 3.0
Personnel 45.2 6.7 1.5 53.4
Others 23.2 0.7 0.4 24.3
Total
108.1 11.4 1.9 121.4
€million
Financial debts
due to banks 193.1 29.8 53.2 168.9 45.9 30.5
due to nonconsolidated group companies 0.0 0.0 0.0 18.5 18.5 0.0
under leases 58.1 12.0 18.1 88.5 12.8 32.5
other 96.5 96.5 0.0 1.1 0.7 0.4
347.7 138.3 71.3 277.0 77.9 63.4
Trade payables 162.4 162.4 0.0 152.6 152.6 0.0
All other liabilities
prepayments received on orders 10.4 10.4 0.0 3.4 3.4 0.0
notes payable 5.2 5.2 0.0 5.2 5.2 0.0
sundry liabilities 44.7 44.7 0.0 92.7 91.2 0.0
The sundry liabilities break down as follows:
12-31-
2000
thereof
due
within

96
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated balance sheet
The analysis below reflects the terms
and book and fair values of financial
debts:
Due to banks
Weighted average
rate 2001
%
Weighted average
rate 2001
%
Rates fixed
up to
Book value
12-31-2000
€million
Fair value
12-31-2000
€million
Book value
12-31-2001
€million
Fair value
12-31-2001
€million
4.5 2002 31.4 31.4 44.9 44.9
4.9 2004 46.0 43.8 46.0 45.8
7.9 2005 51.9 53.1 52.4 58.0
5.4 2020 25.6 20.5 25.6 19.8
Due to the banks of nonconsolidated special-purpose leasing firms
Due under capital leases
Weighted average
rate 2001
%
Rates fixed
up to
5.96 2008 38.2 35.3 37.4 37.6
Rates fixed
up to
Book value
12-31-2000
€million
Book value
12-31-2000
€million
Fair value
12-31-2000
€million
Fair value
12-31-2000
€million
Book value
12-31-2001
€million
Book value
12-31-2001
€million
Fair value
12-31-2001
€million
Fair value
12-31-2001
€million
4.0 2002 5.3 4.9 0.0 0.0
6.5 2003 3.7 4.0 0.8 0.9
6.1 2004 6.5 7.3 3.3 3.5
5.9 2005 7.0 7.0 3.1 3.2
5.1 2006 0.0 0.0 6.8 7.3
8.1 2008 6.7 6.7 15.6 18.6
6.5 2009 1.4 1.3 1.2 1.3
6.5 2010 4.0 3.9 3.7 4.0
6.5 2011 2.0 1.9 2.0 2.1
7.7 2020 0.0 0.0 7.6 9.3
The monies maturing in 2002 are
short-term borrowings whose book
values approximate their fair values.
(19) Income tax liabilities
€million
Deferred taxes 4.2 17.9 9.2 8.7
Current income taxes 40.1 16.7 16.7 0.0
The deferred tax assets and liabilities refer to the following:
(20) Deferred income
12-31-
2000
The deferred public grants and subsidies
mainly refer to investment grants.
In the year under review, grants of
€4.1 million (down from €5.3 million)
were received.
12-31-
2001
thereof
recognized in
net income
thereof not
recognized in
net income
44.3 34.6 25.9 8.7
€million 12-31- 12-31- 12-31- 12-31-
2000
assets
2000
liabil.
2001
assets
2001
liabil.
Loss carryovers and tax credits 16.6 0.0 22.4 0.0
Tangible assets 15.3 (56.5) 13.4 (67.0)
Pension accruals 25.1 0.0 22.6 0.0
Other accruals 12.1 (0.4) 9.8 0.0
Liabilities 56.3 (38.6) 89.3 (75.8)
Sundry 12.3 (7.1) 31.5 (23.3)
Offset (98.4) 98.4 (148.2) 148.2
39.3 (4.2) 40.8 (17.9)
€million 12-31- 12-31-
2000 2001
Deferred grants by customers 10.6 19.7
Deferred public grants and subsidies 7.2 3.6
17.8 23.3
97

98
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated income statement
(21) Net sales For a breakdown of the net sales of
€1,825.5 million (up from €1,776.2
(22) Net inventory changes, other
work and material capitalized
(23) Other operating income
(24) Cost of materials
€million 2000 2001
Change in inventories
of finished products and work in process 17.0 (11.3)
Other work and material capitalized 11.3 19.1
The cost of materials decreased in 2001
as inventories were written up at €2.8
million (down from €4.9 million).
28.3 7.8
€million 2000 2001
Cost of raw materials, supplies,
million) by divisions and regions, see
the segment reports.
€million 2000 2001
Income from the release of accruals 4.0 7.8
Income from damages/claims 2.2 6.8
Gain from the deconsolidation of subsidiaries
Income from the payment of bad debts charged off
0.0 4.8
and from the reversal of bad-debt allowances 1.5 3.0
Income from credit notes for prior periods 1.9 2.7
Income from investment grants 1.9 1.6
Income from the release of badwill 1.3 1.6
Rental income 1.8 1.5
All other 19.8 27.3
34.4 57.1
and merchandise purchased 808.7 841.7
Cost of services purchased 65.9 82.3
874.6 924.0
(25) Personnel expenses
(26) Amortization/
depreciation/write-down
€million 2000 2001
Wages and salaries 420.8 414.4
Social security taxes
Expenses for pensions
46.2 46.0
and related employee benefits 61.0 61.6
Pension expense primarily reflects
the annual provision for accrued
pension liabilities — cf. Note (23) —
and the DCP contributions.
The companies consolidated for the
last time in 2000 accounted for 217
employees.
For a breakdown by amortization and
depreciation, see the notes to the respective
fixed-asset lines.
Write-down was charged to tangible
and intangible assets at €1.3 million
528.0 522.0
Annual average headcount 2000 2001
Air Supply & Pumps 4,077 4,058
Pistons 5,772 5,563
Plain Bearings 1,115 1,069
Aluminum Technology 677 725
MotorEngineering 210 193
Motor Service 395 390
Other 49 42
12,295 12,040
(down from €2.0 million), largely
for impairment losses of production
plant and machinery which, due to
restructuring, can no longer be used
in the future.
99

100
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated income statement
(27) Other operating expenses
€million 2000 2001
M&R 47.7 55.1
Other general administration 36.7 43.8
Selling, promotion and advertising 29.7 25.7
Rheinmetall Group allocations and service fees 13.1 16.9
Legal, consultancy and audit fees 7.3 10.9
Rents 11.2 10.4
Other payroll incidentals 12.4 9.0
Non-income taxes 6.5 6.6
Losses from damaging events 0.4 5.9
Severance packages, termination benefits, preretirement part-time work 5.6 5.8
Insurances 6.0 5.6
Outsourced support services 3.6 2.7
Warranties 7.1 2.2
Write-down of current assets 6.4 1.8
All other 45.1 7.8
(28) Net interest expense
Income from the release of accruals
was offset at €20.6 million (up from
238.8 210.2
€11.6 million) against other operating
expenses.
€million 2000 2001
Interest income
return on plan assets 7.0 6.9
from long-term loans and financial receivables 0.0 0.2
other interest and similar income 1.7 0.9
Interest expense
8.7 8.0
from capital leases (2.6) (2.8)
compounding of pensions (23.0) (23.9)
compounding of other noncurrent accruals (0.3) (0.4)
other interest and similar expenses (15.7) (21.7)
(41.6) (48.8)
(32.9) (40.8)
(29) Net investment income and
other financial results
(30) Income taxes
€million 2000 2001
Net investment income
from joint ventures 0.0 0.4
from associated affiliates 0.5 2.8
from other long-term securities 0.7 0.8
Other financial results
1.2 4.0
from foreign exchange 3.3 0.3
from financial derivatives 0.0 (0.3)
The table below reconciles the expected
to the recognized tax expense,
which is determined by multiplying
EBT by a tax rate of 40 percent (down
4.5 4.0
€million 2000 2001
Current income tax expense 31.1 18.1
Refunds for prior years (0.5) (4.0)
Deferred taxes (16.4) 3.6
14.2 17.7
from 50). This tax expense comprises
German corporate income tax, the
solidarity surtax thereon, and municipal
trade tax.
€million 2000 2001
EBT 21.6 49.5
Expected tax expense 10.8 19.8
Differences from German tax rates 1.0 (1.0)
Differences from foreign tax rates (1.4) (1.3)
Losses of subsidiaries not subjected to deferred taxation 11.4 11.1
Tax-exempt income and nondeductible expenses (5.3) (3.5)
Nondeductible goodwill amortization 0.7 1.2
Adjustment for nonperiod income taxes 0.6 (0.5)
Reduction of deferred taxes due to tax rate change (1.3) 0.0
Tax privileges for capital expenditures 0.0 (2.4)
Tax changes from accounting for the tax burden on next-year distribution (3.3) (4.9)
Other 1.0 (0.8)
Effective tax expense 14.2 17.7
Effective tax rate in % 66% 36%
Expected tax rate in % 50% 40%
101

102
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the consolidated income statement
(31) Minority interests Minority interests in profit came to
€0.9 million (down from €1.4 million)
and in loss to €1.2 million (down from
€1.6 million).
(32) Earnings per share (EpS) EpS is obtained by dividing the weighted
average number of shares issued
and outstanding in the fiscal year into
the Group’s earnings. The capital was
increased by issuing 1,400,200 new
no-par shares in mid-July 2001.
Neither as of December 31, 2001 nor
2000, were any shares outstanding
that could dilute earnings per share.
Therefore, both in the year under review
and the previous year, the undiluted
EpS equals the diluted EpS.
€ 2000 2001
Group earnings
(after minority interests) 7,563,080 32,123,570
Weighted average number of shares 26,603,195 27,244,953
Earnings per share (EpS) 0.28 1.18
Comments on the cash flow statement
(33) Cash flow statement The cash flow statement conforms with
IAS 7 and breaks down into the cash
flows generated by operating, investing
and financing activities. The effects of
changes in the consolidation group are
eliminated but they and parity changes,
if impacting on cash & cash equivalents,
are shown in separate lines.
Starting from the beginning of period
(BoP) balance of cash & cash equivalents,
this statement shows a slightly
higher cash flow of €174.4 million.
The net cash provided by operating
activities was virtually unchanged at
€127.5 million and included a cash
inflow from interest of €1.1 million
(down from €1.7 million) and a cash
outflow for interest of €21.3 million
(up from €15.3 million). Income taxes
paid came to €37.6 million (up from
€21.5 million), those refunded totaling
€1.5 million (down from €2.6 million).
The dividends received from associated
affiliates and investees amounted to
€0.7 million (up from €0.6 million).
The net cash used in investing activities
sank €9.6 million to €164.3 million.
The cash outflow for acquisitions totaled
€11.6 million and represented
the purchase price of Kolbenschmidt
Pierburg Shanghai Nonferrous Components
Co Ltd., an investee carried at
equity. The disposal of Pierburg Instruments
Inc. produced a cash inflow of
€6.0 million. When the stake in Pierburg
Instruments GmbH was transferred,
a €14.4 million loan was repaid. All
acquisitions and disposals were settled
in cash.
Cash inflows and outflows from
financing activities almost balanced.
The remaining finance requirements
are shown in the change in cash &
cash equivalents. Cash & cash equivalents
are identical in the cash flow
statement and balance sheet.
103

104
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Comments on the segment reports Supplementary disclosures
(34) Segment reports In accordance with the Kolbenschmidt
Pierburg Group’s internal controlling
organization, the Group breaks down
into six divisions, viz.
– Air Supply & Pumps
– Pistons
– Plain Bearings
– Aluminum Technology
– MotorEngineering
– Motor Service
as primary segments.
The “Others/consolidation” column
includes, apart from the Group’s
parent (Kolbenschmidt Pierburg AG),
further companies not allocable to any
defined segment, as well as
consolidation transactions.
With economic effect as of December
31, 2001, the MotorEngineering division
was deconsolidated, which is
why no balance sheet data is reported
for 2001 for this segment.
Responsibilities are clearly separated
between the segments and Kolbenschmidt
Pierburg AG, which performs
the functions of a strategic management
holding company. Both corporate
governance and internal reporting
have been structured accordingly.
The companies belonging in each
segment/division result from the list
headed “Group of consolidated companies”
on pages 110 and 111. In line
with the Kolbenschmidt Pierburg
Group’s shareholder value concept,
segment assets and liabilities include
the essential assets (excluding cash
& cash equivalents) and liabilities (excluding
pension accruals and financial
debts). Capital employed (CE), which
is used to generate EBIT, is deter-
mined as the difference between
segment assets and liabilities. The
return on capital employed (ROCE)
equals EBIT divided into average
capital employed (average of the
balances at December 31, 2000 and
2001). Net financial debts reflect the
sum total of financial debts (current
and noncurrent) less cash & cash
equivalents.
The intersegment transfers principally
indicate sales among divisions and
are priced as if at arm’s length.
EBITDA means earnings before interest,
taxes, depreciation and amortization.
Write-up of badwill has consistently
been included in EBITDA. The EBIT
margin equals EBIT divided into total
segment sales.
Capital expenditures and amortization/depreciation
refer to tangible
and intangible assets (including
goodwill).
(35) Contingent liabilities
Contingent liabilities under bonds and
guaranties total €2.6 million (up from
€1.9 million), while none exist to joint
venture creditors.
Due to its hardly probable utilization,
the provision for several accrued liabilities
with a potential impact on
future net incomes of €0.9 million
(up from €0 million) had to be waived.
(36) Other financial obligations As of December 31, 2001, the commitments
to purchase tangible and intangible
assets totaled €36.6 million (up
from €31.4 million).
(37) Subsequent events After closing the fiscal year, Kolbenschmidt
Pierburg AG’s Executive Board
decided to shut down part of the
Ft. Wayne, Indiana, plant at the turn
of 2002/03 in order for the US Pistons
subsidiaries to return to sustained
profitability as early as possible.
(38) Stock appreciation rights
(SARs)
Since 1999, the Kolbenschmidt Pierburg
Group has granted qualifying
managerial staff SARs for them to
participate in any stock appreciation.
SAR programs are basically phantom
stock option plans under which participants
receive a cash compensation
upon exercise that equals the difference
between the stock price at exercise
date and the base (reference)
price. There are two different programs.
For managerial staff, this base price
has been fixed at the arithmetic mean
of the closing prices quoted on the 10
market days preceding plan commencement;
for executive board members,
the base price is determined at
50 percent from the arithmetic mean
of the closing prices of Kolbenschmidt
Pierburg common stock and, at 25
percent each, from the arithmetic
Refunds of €0.3 million (up from €0
million) are expected for contingent
liabilities.
One consequence is that this plant at
Ft. Wayne will be reformatted for its
use as mass production location only,
the idled machines being largely employed
elsewhere by other companies
of the Group.
mean of Rheinmetall preferred and
common stock. Either SAR program
has an overall term of 7 years: after
a 3-year qualifying period, SARs may
be exercised during defined time windows
during the residual 4-year term.
If not exercised during such period or
when eligible staff leave Kolbenschmidt
Pierburg for any reason other than retirement
or death, the SARs become
forfeited and lapse. SARs cannot be
exercised unless and until the base
price has been exceeded by 25 percent
or more on the day of exercise.
105

106
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Supplementary disclosures
(39) Hedging policy and
financial derivatives
Key parameters of the SAR programs
launched to date:
SAR
program
Executive board
Exercisable
after
Base
price
Number
issued
thereof
forfeited
after
12-31-00
thereof
forfeited
in
2001
SARs as of
12-31-01
1998 end-2001 18.09 70,000 0 30,000 40,000
1999 end-2002 12.95 60,000 0 30,000 30,000
2000 end-2003 9.24 60,000 0 30,000 30,000
100,000
Managerial staff
1999 end-2002 15.07 247,500 5,000 7,500 235,000
2000 end-2003 13.29 247,500 0 2,500 245,000
At the end of 2001, Kolbenschmidt Pierburg
AG’s Executive Board resolved to
continue the SAR program. The SARs
under the 2001 program will mostly be
granted in Q1/2002, a minor portion
having been promised within the year
The operations and financial transactions
of Kolbenschmidt Pierburg as
an international group are exposed to
financial risks, mainly from exchange
rate volatility and interest rate changes.
In accordance with the groupwide implemented
risk management system
of Kolbenschmidt Pierburg AG, such
risks are not only identified, analyzed
and measured but also managed
through derivative financial instruments.
No such derivatives may be acquired
for speculation. Counterparties of Kolbenschmidt
Pierburg Group companies
for contracting financial derivatives are
exclusively German and foreign banks
of prime standing. By setting these
high standards on counterparties, the
risk of uncollectible debts is minimized.
All transactions involving financial derivatives
are subject to stringent monitoring,
which is particularly ensured by
the strict segregation of the contracting,
settlement and control functions.
480,000
under review. Obligations under SARs
are fair-valued pro rata temporis by
using an option price model. An accrual
of €0.3 million (up from €0 million)
provides for the obligations incurred up
to December 31, 2001.
Currency risk
Due to the international nature of the
Kolbenschmidt Pierburg Group’s business,
certain operational currency
risks arise from the fluctuating parity
of the euro to other currencies. Open
positions exposed to a currency risk
are principally hedged through financial
derivatives, generally currency
forwards or futures.
Interest rate risk
The Kolbenschmidt Pierburg Group’s
financing activities also use such
funding tools as floating-rate facilities.
Interest rate hedges such as caps/
floors/collars and interest rate swaps
contain the risks emanating from
market rate changes.
These hedges are contracted centrally
by Kolbenschmidt Pierburg AG. The
interest rate swaps are embedded in
a cash flow hedge with loan arrange-
ments and, therefore, the differences
from fair value remeasurement are
recognized in equity only (reserves
retained from earnings).
As of December 31, 2001, the currency
and interest rate hedges tabled below
have existed, their notional volumes
being shown non-netted and thus reflecting
the total amounts of all indiv-
idual contracts. Being marked to the
market at December 31, the fair values
of financial derivatives correspond to
prices in arm’s length transactions.
Currency hedges
Notional volume Maturing after
Fair market values
€million 12-31-00 12-31-01
(months) 12-31-00 12-31-01
Currency forwards/futures 98.9 40.6 3 (0.9) (0.5)
Interest rate hedges
Notional volume Maturing after
Fair market values
€million 12-31-00 12-31-01
(months) 12-31-00 12-31-01
Swaps 15.6 15.2 42 (0.9) (1.5)
Other derivatives 25.0 25.0 33-35 0.1 0
(40) Transactions with
related companies
The subsidiaries consolidated by Kolbenschmidt
Pierburg AG directly or
indirectly maintain ordinary business
relations with many nonconsolidated
group companies, as well as associated
affiliates and joint ventures. Any and
all trade transactions conducted in the
scope of ordinary day-to-day business
with unconsolidated related companies
conform with the arm’s length principle.
In addition, Rheinmetall AG as Kolbenschmidt
Pierburg AG’s majority stockholder
as well as Rheinmetall service
companies provide extensive services
to companies of the Kolbenschmidt
Pierburg Group, including (without
being limited to) legal, tax and PR consultancy
and support, data processing
and insurance services.
In the scope of the cash management
system of majority stockholder Rheinmetall
AG, the Kolbenschmidt Pierburg
Group invests and/or borrows cash &
cash equivalents within the Rheinmetall
Group. All cash management
business is transacted as if at arm’s
length.
107

108
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Notes
Supplementary disclosures
Volume of services provided to/by
related companies:
€million Volume of
services rendered
2000 2001 2000 2001
Rheinmetall AG 0.2 0.2 6.4 4.9
Rheinmetall Service Gesellschaft mbH 0.0 0.0 0.0 1.2
Rheinmetall Finanz GmbH 0.1 0.0 0.0 0.0
Rheinmetall Informationssysteme GmbH 1.5 1.6 20.9 22.6
Jagenberg London Ltd. 0.0 0.0 0.2 0.2
(41) Supervisory and Executive Boards
For their duties performed on behalf of
the parent and its subsidiaries, Executive
Board members received a total
€1.9 million in the year under review
for 2001 and €0.1 million for 2000; in
fiscal 2000, they had received a total
€2.5 million for 2000. For the accrued
pension obligations to former Management
or Executive Board members and
their surviving dependants, a total
€3.8 million has been provided (up
from €3.5 million). Supervisory Board
fees amounted to €0.2 million in fiscal
2001 (virtually unchanged).
Düsseldorf, March 21, 2002
Kolbenschmidt Pierburg AG
The Executive Board
Volume of
services utilized
Dr. Kleinert
Dr. Merten Liebler
Dr. Engelskirchen Dr. Friedrich
Auditor’s report and opinion
Kolbenschmidt Pierburg AG
Düsseldorf, Germany
Independent group
auditor’s report and opinion
We have audited the consolidated financial
statements prepared by Kolbenschmidt
Pierburg AG and consisting
of balance sheet, income statement,
statement of changes in equity,
cash flow statement and the notes
thereto, for the fiscal year ended December
31, 2001. The consolidated
financial statements in accordance with
the IASC’s International Accounting
Standards (IAS) are the responsibility
and assertions of the Company’s
Executive Board. Our responsibility
is, based on our audit, to express an
opinion on whether the consolidated
financial statements conform with IAS.
We have conducted our audit of the
consolidated financial statements in
accordance with German auditing
regulations and with due regard to
generally accepted standards on the
audit of financial statements as established
by IDW, the Institute of Sworn
Public Auditors in Germany. Those
standards require that we plan and
perform the audit to obtain reasonable
assurance about whether the consolidated
financial statements are free of
any material misstatement. An audit
includes examining, on a test basis,
the evidence supporting the amounts
and disclosures in the consolidated
financial statements. The audit also
involves assessing the accounting
principles used, and significant estimates
made, by the Executive Board,
as well as evaluating the overall presentation
of the consolidated financial
statements. We believe that our audit
provides a reasonable basis for our
opinion.
Based on our audit, it is our opinion
that the consolidated financial statements,
in accordance with the IAS,
present a true and fair view of the
Group’s net assets, financial position
and results of operations as well as of
its cash flows in the fiscal year under
review.
Our audit, which in accordance with
German auditing regulations also
covered the group management report
as prepared by the Executive Board
for the fiscal year ended December 31,
2001, has not resulted in any objections
or exceptions. It is our opinion
that the group management report
presents fairly both the Group’s overall
position and the risks inherent in its
future development. In addition, we
confirm that the consolidated financial
statements and group management
report for the fiscal year ended
December 31, 2001, satisfy the requirements
for exempting the Company
from preparing consolidated financial
statements and a group management
report in accordance with German law.
Düsseldorf, March 22, 2002
PwC Deutsche Revision
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Bovensiepen Schwalm
Wirtschaftsprüfer Wirtschaftsprüfer
109

110
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Group of consolidated companies
Group of consolidated companies as of December 31, 2001
Kolbenschmidt Pierburg AG, Düsseldorf € 283,484,550
Equity Interest held (%)
(IAS) direct indirect
Air Supply & Pumps
Pierburg AG, Neuss 3) € 109,501,360 100
Carbureibar S.A., Abadiano, Spain € 28,526,688 100
Pierburg S.à r.l., Basse-Ham (Thionville), France € 21,100,554 100
Pierburg Inc., Fountain Inn (Greenville), SC, USA US$ 4,677,391 100
Pierburg do Brasil Ind. e Comércio Ltda., Nova Odessa, Brazil Rs 5,724,735 100
Pierburg S.p.A., Lanciano, Italy € 9,342,155 100
Société Mosellane de Services Holding S.A., Basse-Ham (Thionville), France € 3,321,034 100
Société Mosellane de Services S.C.I., Basse-Ham (Thionville), France € 10,151,913 100
Kolbenschmidt Pierburg Shanghai Nonferrous Components Co. Ltd., Shanghai, China 2) Yuan 153,872,081 50
Calor Grundstücksverwaltungsgesellschaft mbH & Co KG, Grünwald € (2,011,045) 95
MotorEngineering
Pierburg Instruments GmbH, Neuss 2) € 18,120,537 49
Pistons
KS Kolbenschmidt GmbH, Neckarsulm 3) € 172,742,684 100
KS Pistões Ltda., Nova Odessa, Brazil RS 97,346,268 100
KS International Investment Corp., Southfield, MI, USA US$ 159,168,982 100
Karl Schmidt Unisia Inc., Marinette, WI, USA US$ 59,245,348 80
KS Large Bore Pistons Inc., Marinette, WI, USA US$ 5,511,929 100
Karl Schmidt Unisia, Zollner Division, Inc., Fort Wayne, IN, USA US$ (77,790,358) 80
Zollner Canada Limited, Leamington, Canada Can$ 6,989,642 80
KS France S.A., Paris, France € 18,600,757 100
Société Mosellane de Pistons S.A., Basse-Ham (Thionville), France € 19,435,736 100
Metal a.s., Ústí, Czech Republic Ck 405,060,697 87
Kolbenschmidt Shanghai Piston Co., Ltd., Shanghai, China 2) ˘
Yuan 182,616,790 35
Tiro Grundstücks-Verwaltungsgesellschaft mbH & Co KG, Grünwald € (331,382) 0
Plain Bearings
KS Gleitlager GmbH, St. Leon-Rot 3) € 13,106,935 100
KS Bearings Inc., Greensburg, USA US$ 326,148 100
KS Bronzinas Ltda., Nova Odessa, Brazil Rs 7,542,972 100
Aluminum Technology
KS Aluminium-Technologie AG, Neckarsulm € 16,700,200 100
Werkzeugbau Walldürn GmbH, Walldürn € 709,725 100
KS Doehler-Jarvis GmbH, Neckarsulm € 986,174 65
KS Aluminium Beteiligungs-GmbH, Neckarsulm € 3,571 100
Motor Service
MSI Motor Service International GmbH, Neckarsulm 3) Equity Interest held (%)
(IAS) direct indirect
€ 15,811,430 100
G. Krull Gesellschaft mit beschränkter Haftung, Neckarsulm € 10,269 100
MTS Motorenteile-Service GmbH, Neuenstadt € (450,857) 100
KS Motorac S.A., Le Blanc Mesnil, France € 1,280,795 100
KS Winston Ltd., Maidenhead, UK £ (171,840) 100
Kolbenschmidt Istanbul Dis Ticaret ve Pazarlama A.S., Istanbul, Turkey € 1,983,772 51
KS Produtos Automotivos Ltda., São Paulo, Brazil Rs 9,596,188 92
KS Motor Servis CZ s.r.o., Trmice, Czech Republic Ck ˘
15,352,681 64
Litos Grundstücks-Verwaltungsgesellschaft mbH & Co KG, Grünwald € (802,270) 0
Other
Kolbenschmidt Liegenschaftsverwaltung GmbH Berlin, Berlin € 7,273,979 100
KS Grundstücksverwaltung Beteiligungs-GmbH, Neckarsulm € 28,989 100
KS Grundstücksverwaltung GmbH & Co. KG, Neckarsulm € 10,702,325 100
IDEKO Industrie Einkauf- und Koordination GmbH, Neckarsulm € 55,204 100
KS Airbag AG, Neckarsulm € 46,736 100
KS Auto- und Motorteile AG, Neckarsulm € 47,203 100
Kolbenschmidt Pierburg K.K., Yokohama, Japan ¥ 6,669,726 100
1) consolidated pro rata
2) included at equity
3) P&L transfer agreement with Kolbenschmidt Pierburg AG
111

112
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Supervisory Board
Supervisory Board
Dipl.-Math. Klaus Eberhardt,
Düsseldorf,
Executive Board Chairman
of Rheinmetall AG, Düsseldorf
Chairman
Dr. rer. soc. Rudolf Luz *)
Weinsberg,
Union secretary of the German
Metalworkers Union (“IG Metall”),
Heilbronn/Neckarsulm office,
Neckarsulm
Vice-Chairman
Member of comparable German or foreign
boards:
- Aesculap AG & Co. KG, Tuttlingen
advisory board member
- Wirtschaftsfördergesellschaft
Raum Heilbronn GmbH, Heilbronn
supervisory board member
Dipl.-Ing. Wigand Frhr. v. Salmuth
Heidelberg,
Chairman of the Stockholders’
Committee of
Röchling Industrie Verwaltung GmbH,
Mannheim
Additional Vice-Chairman
(up to June 12, 2001)
Member of further supervisory boards:
- Rheinmetall DeTec AG, Ratingen
chairman
- STN ATLAS Elektronik GmbH, Bremen
chairman
- ADITRON AG, Düsseldorf (as from April 2, 2001)
2nd Member of further supervisory boards:
- Rheinmetall AG, Düsseldorf
additional vice-chairman
vice-chairman (as from June 8, 2001)
- Rheinmetall DeTec AG, Ratingen
- Jagenberg AG, Neuss
vice-chairman
chairman
- Rheinmetall Elektronik AG, Düsseldorf
- Rheinmetall Elektronik AG, Düsseldorf
chairman
(as from March 20, 2001)
- STN ATLAS Elektronik GmbH, Bremen
chairman
2
- Pierburg AG, Neuss
chairman
Member of comparable German
or foreign boards:
- Preh Group, Bad Neustadt/Saale
chairman of the shareholder committee
- Shareholder Committee EMG, Hamburg
chairman
nd vice-chairman
- ADITRON AG, Düsseldorf
2nd vice-chairman
- Jagenberg AG, Neuss
2nd vice-chairman
- Pierburg AG, Neuss
2nd vice-chairman
- Mauser Waldeck AG, Waldeck
vice-chairman
- DeTeWe Beteiligungs AG, Berlin
vice-chairman
Dr. jur. Erich Coenen
Frankfurt/Main,
Executive Board member
Commerzbank AG, Frankfurt/Main
(up to June 12, 2001)
Member of comparable German
or foreign boards:
- Security Capital European Realty, Luxembourg
- CargoLifter AG, Berlin
Dr.-Ing. Ludwig Dammer *)
Düsseldorf,
Central Production Engineering,
Pierburg AG, Neuss
Member of further supervisory boards:
- Rheinmetall AG, Düsseldorf
Rolf Dollmann *)
Neckarsulm,
Chairman of the General Works
Council of KS Kolbenschmidt GmbH,
Neckarsulm
(up to March 31, 2002)
Dipl. rer. pol. Werner Engelhardt
Karlsruhe,
Management Board Chairman of
Röchling Industrie Verwaltung GmbH,
Mannheim (up to January 14, 2002)
Additional Vice-Chairman
(from Sep. 10, 2001–Jan. 14, 2002)
Member of further supervisory boards:
- Rheinmetall AG, Düsseldorf
chairman
- ADITRON AG, Düsseldorf
chairman
- Rheinmetall DeTec AG, Ratingen
- STN Atlas Elektronik GmbH, Bremen
- Pierburg AG, Neuss (up to Jan. 14, 2002)
- BEA Holding AG, Düsseldorf
chairman
- DeTeWe - Deutsche Telephonwerke
Beteiligungs AG, Berlin
chairman
- Francotyp-Postalia Beteiligungs AG,
Birkenwerder
chairman
- Seeber Beteiligungs AG, Mannheim
chairman
- Gossen-Metrawatt GmbH, Nürnberg
chairman
- Jagenberg AG, Neuss
Member of comparable German
or foreign boards:
- Seeber Srl., Leifers, Italy
- Camille Bauer AG, Wohlen, Switzerland
Georg Hadlaczki *)
Mühlhausen,
Member of the Works Council
of the St. Leon-Rot plant of
KS Gleitlager GmbH, St. Leon-Rot
*) employee representative
Dr. jur. Martin Hirsch
Frankfurt/Main,
Lawyer
Law firm of Gleiss Lutz Hootz Hirsch,
Frankfurt/Main
Member of further supervisory boards:
- Rheinmetall AG, Düsseldorf
- ADITRON AG, Düsseldorf
- BARTEC Barlian Holding AG, Bad Mergentheim
chairman
- Bestfoods Deutschland GmbH & Co. OHG,
Heilbronn
Dr. Bernd M. Hönle
Weisenheim a. S.,
Management Board member of
Röchling Industrie Verwaltung GmbH,
Mannheim (as from June 12, 2001)
Member of further supervisory boards:
- Rheinmetall AG, Düsseldorf
- ADITRON AG, Düsseldorf
- Pierburg AG, Neuss
- STN ATLAS Elektronik GmbH, Bremen
- Jagenberg AG, Neuss (as from March 2001)
- Rheinmetall DeTec AG, Ratingen
(as from AGM 2001)
- BEA Holding AG, Düsseldorf
- DeTeWe - Deutsche Telephonwerke
Beteiligungs AG, Berlin
- Francotyp-Postalia Beteiligungs AG,
Birkenwerder
- PFEIFFER & MAY Grosshandel AG,
Karlsruhe
- Seeber Beteiligungs AG, Mannheim
Erich Hüskes *)
Nettetal,
Member of the Works Council
of the Nettetal plant of
Pierburg AG, Neuss
Dr. jur. Klaus Kessler
Stuttgart,
Lawyer
Dr. Schelling & Partner GbR
Deutsche Schutzvereinigung für
Wertpapierbesitz e.V., Stuttgart
Member of a further supervisory board:
- Schleicher & Co. International AG, Markdorf
Heinrich Kmett
Fahrenbach/Robern
Works Council Chairman of
KS Kolbenschmidt GmbH,
Neckarsulm (as from April 1, 2002)
Member of a further supervisory board:
- KS Kolbenschmidt GmbH, Neckarsulm
Jürgen Lemmer
Bad Homburg,
Executive Board member of
Commerzbank AG, Frankfurt/Main
(as from June 12, 2001)
Member of further supervisory boards:
- Buderus AG, Wetzlar
- Clearing Bank Hannover AG, Hannover
chairman
- GKN Automotive International GmbH, Lohmar
chairman
- Commerz International Capital Management
GmbH, Frankfurt/Main
Member of comparable German
or foreign boards:
- ARGOR-HERAEUS S.A., Mendrisio, Switzerland
Director
- Banque Marocaine du Commerce Extérieur,
Casablanca, Morocco
Director
- Korea Exchange Bank, Seoul, Korea
Non-Standing Director
- Majan International Bank SAOC, Ruwi,
Sultanate of Oman
Director
- Verlagsbeteiligungs- und Verwaltungsgesellschaft
mbH, Frankfurt/Main
advisory board member
- ADIG-Investment Luxemburg S.A., Luxembourg,
Luxembourg
Director
- Commerz (East Asia) Ltd., Hong Kong, China
Chairman of the Board of Directors
- Commerz Securities (Japan) Company Ltd.,
Hong Kong/Tokyo
Director
- Commerzbank Europe (Ireland) Unltd., Dublin,
Ireland
Chairman of the Board of Directors
- Commerzbank International (Ireland Unltd.,
Dublin, Ireland
Chairman of the Board of Directors
- Commerzbank International S.A. (DISAL),
Luxembourg, Luxembourg
Director
- Commerzbank (South East Asia) Ltd.,
Singapore
Chairman of the Board of Directors
Dr. rer. oec. Herbert Müller
Bochum,
Executive Board member of
Rheinmetall AG, Düsseldorf
(as from March 28, 2002)
Member of further supervisory boards:
- Pierburg AG, Neuss
- Rheinmetall DeTec AG, Ratingen
- ADITRON AG, Düsseldorf
- Rheinmetall Elektronik AG, Düsseldorf
- Jagenberg AG, Neuss
Dr. Siegfried Roth *)
Rüsselsheim,
Union Secretary at
the General Secretariat of IG Metall,
Frankfurt
Member of further supervisory boards:
- Ford-Werke AG, Cologne
- Ford Deutschland Holding GmbH, Cologne
113

114
Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG
Executive Board of Kolbenschmidt Pierburg AG
Executive Board
Dr. rer. nat. Dipl.-Phys.
Dieter G. Seipler
Meerbusch
Chairman (up to Oct. 31, 2001)
Development, Coordination
Supervisory board memberships:
- KS Kolbenschmidt GmbH, Neckarsulm
- KS Gleitlager GmbH, St. Leon-Rot
(chairman)
Member of comparable German
or foreign boards:
- Karl Schmidt Unisia Inc., Marinette, USA
(chairman)
- Pierburg S.p.A., Lanciano, Italy
- Carbureibar S.A., Abadiano, Spain
Dr. Gerd Kleinert
Gottmadingen
Chairman (as from Nov. 1, 2001)
Development, Coordination
Supervisory board memberships:
- KS Kolbenschmidt GmbH, Neckarsulm
- KS Gleitlager GmbH, St. Leon-Rot
(chairman)
Member of comparable German
or foreign boards:
- Karl Schmidt Unisia Inc., Marinette, USA
(Chairman)
- Pierburg S.p.A., Lanciano, Italy
- Carbureibar S.A., Abadiano, Spain
Dr.-Ing. W. Hans Engelskirchen
Kaarst
Production
Supervisory board memberships:
- KS Kolbenschmidt GmbH, Neckarsulm
- KS Gleitlager GmbH, St. Leon-Rot
- KS Aluminium-Technologie AG, Neckarsulm
(chairman)
Dr. jur. Jörg-Martin Friedrich
Ludwigsburg
Human Resources
Supervisory board memberships:
- KS Gleitlager GmbH, St. Leon-Rot
- KS Aluminium-Technologie AG, Neckarsulm
Member of comparable German
or foreign boards:
- Kolbenschmidt Istanbul Dis Ticaret
ve Pazarlama A.S.,
Istanbul, Turkey
- KS International Investment Corp.,
Southfield, USA
- KS France S.A., Paris, France
Dipl.-Kfm. Heinz-Ludger Heuberg
Wülfrath
Finance/Controlling
(up to Feb. 28, 2002)
Supervisory board memberships:
- KS Kolbenschmidt GmbH, Neckarsulm
- KS Gleitlager GmbH, St. Leon-Rot
- KS Aluminium-Technologie AG, Neckarsulm
Dipl.-Betriebswirt Georg Liebler
Düsseldorf
Marketing
Supervisory board memberships:
- KS Kolbenschmidt GmbH, Neckarsulm
(chairman)
- KS Aluminium-Technologie AG, Neckarsulm
- Société Mosellane de Mécanique S.A.,
Thionville, France
Member of comparable German
or foreign boards:
- Karl Schmidt Unisia Inc., Marinette, USA
- Carbureibar S. A., Abadiano, Spain
- Pierburg Inc., Fountain Inn (Greenville), USA
- Hirschmann Ges.m.b.H., Rankweil, Austria
- Märkisches Werk Halver GmbH, Halver
advisory board chairman
- Preh Group, Bad Neustadt/Saale
Member of the shareholder committee
Dr. Peter P. Merten
Herrsching
Finance/Controlling
(as from Mar. 1, 2002)
Supervisory board memberships:
- KS Kolbenschmidt GmbH, Neckarsulm
- KS Gleitlager GmbH, St. Leon-Rot
- KS Aluminium-Technologie AG, Neckarsulm
115