Annual Report 2001 - KSPG AG

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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
Page 1 and 2: Kolbenschmidt Pierburg AG Rheinmeta
Page 3 and 4: Kolbenschmidt Pierburg at a glance
Page 5 and 6: Contents Agenda of the annual stock
Page 7 and 8: 6 Kolbenschmidt Pierburg AG Supervi
Page 9 and 10: 10 Kolbenschmidt Pierburg AG Letter
Page 11 and 12: 14 Management report on the Kolbens
Page 13 and 14: 18 Management report on the Kolbens
Page 15 and 16: Tool setting prior to machining the
Page 17: Coating unit for high-duty plain be
Page 21 and 22: Final assembly of the variable inta
Page 23 and 24: Assembly of the steplessly variable
Page 25 and 26: Alfinizing of diesel piston ring mo
Page 27 and 28: 46 Lagebericht und Konzernlageberic
Page 29 and 30: Testing an engine block for leakage
Page 31 and 32: The PLU 401/121 for continuous fuel
Page 33 and 34: Ecotec test rig at the Neckarsulm p
Page 35 and 36: 62 Kolbenschmidt Pierburg AG Balanc
Page 37 and 38: Consolidated financial statements 2
Page 39 and 40: 70 Consolidated financial statement
Page 55 and 56: 102 Consolidated financial statemen
Page 61: 114 Consolidated financial statemen

Annual Report 2001 - KSPG AG

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