Siemens VDO: Solid Progress in a Challenging Environment

Transcription

1 Siemens VDO: Solid Progress in a Challenging Environment Wolfgang Dehen, Group President and CEO Capital Market Days February 23-24, 2006

2 Safe harbor statement This presentation contains forward-looking statements and information that is, statements related to future, not past, events. These statements may be identified either orally or in writing by words as expects, anticipates, intends, plans, believes, seeks, estimates, will or words of similar meaning. Such statements are based on our current expectations and certain assumptions, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens control, affect its operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens worldwide to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. For us, particular uncertainties arise, among others, from changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products or technologies by other companies, lack of acceptance of new products or services by customers targeted by Siemens worldwide, changes in business strategy and various other factors. More detailed information about certain of these factors is contained in Siemens filings with the SEC, which are available on the Siemens website, and on the SEC s website, Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as anticipated, believed, estimated, expected, intended, planned or projected. Siemens does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated. Siemens Capital Market Days, February 23-24, 2006 Page 2

3 A merger that pays off: Highlights from the last 5 years at Siemens VDO In difficult market conditions, Siemens VDO is delivering above its target margin and securing its long-term success Profitable organic and exogenous growth in all major regions Portfolio: 95% of our products are in positions # 1-3 Innovation: approx. 1,000 new patents in FY 2005 Customer basis has been improved by adaptation to worldwide market needs and by acquisitions Foothold in the Chinese market strengthened by new contracts Major acquisitions in the U.S. and Korea Constant improvement of cost base and performance Quick turnaround after merger Achieved positive EVA in FY 2004 for the first time Increase in quality, productivity and financial performance WE DELIVER WHAT WE PROMISE Siemens Capital Market Days, February 23-24, 2006 Page 3

4 We have a strong organization focused on our customers Customers Key Account Management Powertrain Chassis & Carbody Interior & Infotainment Service & Special Solutions Gasoline Systems Diesel Systems Engine Actuators, Air & Emissions Management Fuel Supply Systems Sensors Restraint Systems, Safety Electronics Body & Chassis Electronics Electric Motor Drives Information Systems Passenger Cars Commercial Vehicles Cockpit Modules & Systems Infotainment Solutions Special OEM & Infotainment Service & Parts Transportation & Fleet Telematics Electronics & Drivetrain 50,800 Employees Siemens Capital Market Days, February 23-24, 2006 Page 4

5 We improved our performance for our customers in all crucial fields Logistics Quality Sales R&D Production CSS* FY CSS* FY Equal to the best competitor In the survey the informant was asked to evaluate the division on a scale from -5 to +5 compared to the most important competitor. The above results show the aggregated data for Siemens VDO. * Customer Satisfaction Survey We achieved major success with 4 initiatives (quality, design-to-cost, software, project management) We optimized our Customer Relationship Management through Business Excellent Account Management (BEAM) project We are driving progress by entering innovation partnerships with lead customers quality Drivers in the automotive business: - costs - innovations - flawless execution Siemens Capital Market Days, February 23-24, 2006 Page 5

6 Heading for "zero ppm" quality rates ppm (parts per million) months average FY 2002 FY 2003 FY 2004 FY 2005 Siemens Capital Market Days, February 23-24, 2006 Page 6

7 We are well on track to reach next CMMI level CMMI Capability Maturity Model Integration Survey of assessment in Siemens VDO 3 Division 1: 3.00 Division 2: 3.00 Division 3: 2.75 Division 4: Division 5: 2.50 Division 6: 2.50 Division 7: FY 2002 FY 2003 FY 2004 FY 2005 FY 2006E Siemens Capital Market Days, February 23-24, 2006 Page 7

8 Our high-cost reduction rates enable us to still outplay rising OEM price pressure Total cost reduction rate: 9% on average OEM price reduction 3% - 4% p.a. R&D 10% Admin. & Others 15% Production 25% Material 50% FY 2002 FY 2003 FY 2004 FY 2005 Total cost reduction FY : 3.4 bn Siemens Capital Market Days, February 23-24, 2006 Page 8

9 We deliver what we promise: Solid progress in a challenging environment 8.5 bn 8.4 bn 9.0 bn 9.6 bn 5.7 bn* SV target margin 5-6% 5.0% 6.2% 6.6% 0.8% 65 mn 418 mn 562 mn 630 mn Sales Group Profit EVA Group Profit margin % -4.6% mn * including VDO May-September 2001 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 Siemens Capital Market Days, February 23-24, 2006 Page 9

10 Our strategic direction and systematic approach ensure continuous success Regions: Optimize global R&D and manufacturing footprint Strategic focus on Asia Regional portfolio Technology portfolio Customers: Maintain / increase market share in Europe and Americas Become a "Global Keiretsu" supplier to Asian OEMs Search Areas for Growth product 1 product 2 product 3 product 4 product 5 product 6 product 7 product 8 product 9 product 10 product 11 product 12 product 13 product 14 product 15 product 16 product 17 product 18 product 19 product 20 product 21 product 22 product 23 product 24 product 25 product 26 product 27 product 28 Customer portfolio region 1 region 2 region 3 region 4 region 5 region 6 regio 7 region 8 region 9 region 10 region 11 Karosserie Interior Fahrdynamik Antrieb Comm. A Driving Dynamics Powertrain Vehicles Body Interior A s i a I n i t i a t i v e region 1 region 2 region 3 region 4 region 5 region 6 region 7 region 8 region 9 region 10 region 11 product 1 product 2 product 3 product 4 product 5 product 6 product 7 product 8 product 9 product 10 product 11 product 12 product 13 product 14 product 15 product 16 product 17 product 18 product 19 product 20 product 21 product 22 product 23 product 24 product 25 product 26 product 27 SV I&I SV C&C SV C&C SV P SV I CV Very low Sales Low Sales Best estimation; current databases (SGI, ART) do not provide approriate details. Medium Sales High Sales innovation - no market / sales yet Technology: Strengthen leadership in upcoming growth applications Focus on safety / comfort, advanced propulsion and communication... and we constantly review and streamline our portfolio 78 % 22 % 1) Entertainemt SV Competence (E/E only) - medium Areas for External Growth 2) for integrated functions of Clusters 3) in a narrower sense "HMI" SV Competence (E/E only) - high Siemens Capital Market Days, February 23-24, 2006 Page 10 m product 1 product 2 product 3 product 4 product 5 product 6 product 7 product 8 product 9 product 10 product 11 product 12 product 13 product 14 product 15 product 16 product 17 product 18 product 19 product 20 product 21 product 22 product 23 product 24 product 25 product 26 product 27 Karosserie Interior Fahrdynamik Antrieb Comm. A Body Interior Driving Dynamics Powertrain Vehicles SV I&I SV C&C SV C&C SV P SV I CV Very low Sales Low Sales Best estimation; current databases (SGI, ART) do not provide approriate details. Medium Sales High Sales innovation - no market / sales yet Source: Siemens VDO m

11 We are diversifying our customer base 2005 DC Group BMW Group Ford Group VW Group GM Group PSA Group Renault Group Hyundai Group Honda Group Fiat Group Others Top 3 = 38% of sales Top 5 = 53% of sales Top 10 = 68% of sales Siemens Capital Market Days, February 23-24, 2006 Page 11

12 Siemens VDO is growing faster than the market World vehicle production 2005: Moderate growth on high level Siemens VDO* Market** Asia + 11% + 6.9% NAFTA + 26% - 0.3% Europe - 0.5% - 0.5% World + 6.7% + 2.7% Million units World +2.7% +2.2% Light vehicle production Heavy vehicle production +9.8% * Sales FY 2005 vs. FY 2004 ** Light vehicle production Asia +15.9% +6.9% +4.8% NAFTA Europe +1.1% +3.1% +14.7% +0.2% +1.4% +27.9% -0.5% +1.7% +5.5% -0.3% -0.9% +4.5% +2.6% +4.4% -5.3% +1.8% +6.1% +6.9% E 2010E E 2010E E 2010E E 2010E Source: Global Insight (September 2005) Siemens Capital Market Days, February 23-24, 2006 Page 12

13 Our target: Regional balance to improve our competitiveness Sales to region Target split Europe NAFTA Asia-Pacific 33% 33% 33% Improve regional split by increasing sales in Asia-Pacific 1% Others FY % 27% 10% Major improvements have been made in NAFTA business 2% Others FY % 21% 7% Bigger market share in European core markets due to merger of Siemens AT with VDO 1% Others Siemens Capital Market Days, February 23-24, 2006 Page 13

14 A powerful product portfolio covering the most attractive market segments Avg. market profitability (in %, 2004) SV coverage Advanced propulsion 9-10 Infotainment Active safety Passive safety ADAS Comm. Veh. Cockpit/Interior "Market entry" divisions Divisions under improvement Below peer group profitability Above / at peer group profitability Siemens VDO is well positioned in the most promising market segments ~ 75% of Siemens VDO s sales come from divisions with at / above-average profitability other divisions are on their way to peer-group standards Siemens Capital Market Days, February 23-24, 2006 Page 14

15 We continuously review and streamline our portfolio: M & A strategy Mergers & Acquisitions Technology / Product Portfolio Regional Portfolio Customer Portfolio 2001 Mannesmann VDO 2004 Huntsville Electronics 2004 IDM 2004 Elcar 2005 e-stop 2005 Bontec / Autonet 2005 AEC Siemens Capital Market Days, February 23-24, 2006 Page 15

16 We continuously review and streamline our portfolio: Divestments Divestments Technology / Product Portfolio Regional Portfolio Customer Portfolio 2001 Exit of wiring harness production 2001 Sale of air outlet manufacturing to Reum 2002 Sale of Hydraulik-Ring to Hilite 2003 Disposal of bowden cables business to Capro Inc Exit of assembly for complete tank systems 2003 Exit of cockpit assembly Overall sales volume of divestments 1.5 bn Number of employees 12,500 Siemens Capital Market Days, February 23-24, 2006 Page 16

17 The advantage of automotive electronics: Good prospects for suppliers on a long-term basis EUR billions average growth rate for entire supplier market: 3.4% % % +5.6% E 2015E Automotive supplier market Electrics / electronics components & systems CAGR Electronics content outgrows vehicle production by far, increasing market share of automotive electronics Electronics Share (%) Suppliers Share (%) Vehicles Produced (mn units p.a.) % 79 Automotive supplier market grows faster than vehicle production due to outsourcing by OEM to suppliers Source: Strategy Analytics, Research Insight, McKinsey, Siemens VDO Siemens Capital Market Days, February 23-24, 2006 Page 17

18 Global trends offer excellent opportunities for Siemens VDO: We care for sustainable mobility Trends Shift of economic gravity amongst regions Increasing mobility Growing demand for safety & security Growing need for environmental care Shortening of natural resources Comfort/Safety Communication Intra Car Infotainment /Navigation HMI Affordability Comfort Passive Safety Workload manager Improved Diagnostics Electric energy mgmt. Always on Key less cockpit E/E standards Gasoline/Diesel E/E standards HW standards E/E standards Zero emissions Alternative Fuels/ Propulsion Propulsion Zero accidents ADAS-Safety Platforms (passive safety) HW standards Active Safety Augmented Reality 1st gen ADAS New production concepts Affordability Damping Steering Braking Chassis Propulsion Comfort & Safety Communication Powertrain Chassis & Carbody Interior & Infotainment Service & Special Solutions "Zero emissions" "Zero accidents" "Always on" Source: Siemens VDO Siemens Capital Market Days, February 23-24, 2006 Page 18

19 We are realizing the car of the future - today Trends Drivers "Zero accident" pro.pilot Customer demand for safer vehicles Regulations to enforce driver and pedestrian protection Typical applications - a network of driver assistance systems "Zero emission" Increasing fuel costs and fleet consumption regulations Regulations to reduce vehicle emission (e.g. EURO V) Advanced Propulsion Systems - e.g. Piezo injection - e.g. Hybrids "Always on" Customer demand for better guidance and permanent connectivity Demand for integration of consumer electronic devices CESAR - the cockpit for the car of the future Siemens Capital Market Days, February 23-24, 2006 Page 19

20 Our vision of "Zero accidents": Advanced Driver Assistance Systems (ADAS) 94 % of all road traffic accidents could be prevented by intelligent assistants Siemens VDO is providing a variety of products to enhance safety: Radar technology for blind spot detection, Lidar technology for adaptive cruise control Lane departure warning Night Vision (with electronic pedestrian warning assistant) Driver monitoring Intelligent pedestrian protection Siemens Capital Market Days, February 23-24, 2006 Page 20

21 Towards "Zero emissions": Advanced propulsion systems Siemens VDO's systems know-how from tank to tail ensures efficient solutions for entire powertrain Additional advantage through joint venture with EMITEC on exhaust treatment Siemens VDO drives progress by improving existing technologies to reduce consumption of gasoline engines and lower diesel emissions Further target: Increase powertrain energy efficiency through new technologies In 2006, start of production of piezo direct injection for gasoline, saving up to 20% fuel Siemens VDO is introducing modular hybrid drives to improve exploiting electric power in the vehicle Siemens Capital Market Days, February 23-24, 2006 Page 21

22 "Always on": The latest infotainment technologies embedded in modular platforms CESAR fulfills market demand for an ergonomic cockpit with the latest safety features and infotainment technology for drivers and passengers CESAR satisfies OEM customers' need for modular, upgradeable cockpits that can be manufactured efficiently Platform approach and standardization initiatives with leading OEMs (like AUTOSAR and JASPAR) increase speed of innovation at lower cost Siemens Capital Market Days, February 23-24, 2006 Page 22

23 Socio-economic changes and varying requirements determine automotive development Happy Driving EU 25 Evolution $7 per Gallon Case China Young Family Car Silver Midlife Car Independence Car Shift of economic gravity amongst regions Increasing mobility Growing demand for safety & security Growing need for environmental care Shortening of natural resources Relative high price and running costs Medium size car with state-of-the-art powertrain Significant electrification Significant alternative fuels share (CNG, ) Full equipped infotainment system State-of-the art reliability & quality Trend towards small entry car High quality and reliability, easy repair High comfort, self adapting car (e.g. sportive vs. comfort) Advanced HMI Good design High active and passive safety Environmental friendly and fuel efficient Driving dynamics (acceleration), freedom and individualism remain very important Americans accept alternative fuels and powertrains Buying trend toward lighter and safer cars Shrinking vehicle size at constant interior space Upgradeable car Siemens Capital Market Days, February 23-24, 2006 Page 23

24 "Being in the sweet spot": We cover the top 5 "Hottest Automotive Electronics Systems" for 2010 SV Osram ( ) "Hot Product Factor" (spectacular future growth rates) # 1 # 2 # 3 # 4 # Lane Depature Warning Systems Adaptive Front Lighting Systems Tire Pressure Monitoring Systems Passive Entry Systems Blindspot Monitoring Systems Source: Strategy Analytics, January 2006 Siemens Capital Market Days, February 23-24, 2006 Page 24

25 Our competitive advantage: Our focus on fast growing automotive electronics Bosch Denso Visteon Delphi Siemens VDO Sales FY 2004* ( bn) 25,273** 21,113 15,293 23,461 9,001 Profit Margin % 7.2%*** 7.8% -2.2% 1.6% 6.2% Regional Split Europe 68% 13% 21% 22% 69% SV is among the most profitable suppliers... All are still focused on one specific world region NAFTA 18% 21% 64% 74% 23% Asia / Pacific 14% 66% 15% 4% 8% Customer Base Diversified Focused Focused Focused Diversified Electronic share % 30% 33% 23% 25% 68% Technology Pool (Group) Medium / High Medium Low Low High Ownership Private Public Public Public Public Only SV and Bosch have a diversified customer portfolio... and focuses on electronics anticipating high growth SV has access to key technologies of Siemens All except Bosch are public * Competitors' data for FY 2005 not yet available ** Automotive sales *** Group profit; Automotive not released Siemens Capital Market Days, February 23-24, 2006 Page 25

26 Heading for the future Execute Asia strategy to expand business in China, Korea, Japan and India Growth Customers Boost business with innovations, e.g. Advanced Driver Assistance Systems Leverage cross-group opportunities to extend business, e.g. Telematics Continuously optimize product and innovation portfolio Worldwide roll-out of BEAM initiative to improve customer relationship management Become a regional supplier in Asia Reach zero ppm quality Continue to optimize worldwide manufacturing and R&D footprint Operational Excellence Intensify top + WIP to keep up with challenging business environment Next level performance in initiatives (quality, design-to-cost, software, project management) People Excellence Actively attract best talents in every region Increase local talent pools for R&D and management in Asia Strengthen expert careers with special regard to project management Siemens Capital Market Days, February 23-24, 2006 Page 26

27 Reconciliations and definitions Group profit from Operations is reconciled to Income before income taxes of Operations under Reconciliation to financial statements on the table Segment information. See Financial Reports/Fiscal 2006, Quarter 1 / Financial Statements at our Investor Relations website under ROE (Return on equity) margin for SFS was calculated as SFS income before income taxes divided by the allocated equity for SFS. Allocated equity for SFS as of September 30, 2005 was 983 million. See also Siemens Form 20-F at our Investor Relations website under The allocated equity for SFS is determined and influenced by the respective credit ratings of the rating agencies and by the expected size and quality of its portfolio of leasing and factoring assets and equity investments and is determined annually. This allocation is designed to cover the risks of the underlying business and is in line with common credit risk management standards in banking. The actual risk profile of the SFS portfolio is monitored and controlled monthly and is evaluated against the allocated equity. Siemens ties a portion of its executive incentive compensation to achieving economic value added (EVA) targets. EVA measures the profitability of a business (using Group profit for the Operating Groups and income before income taxes for the Financing and Real estate businesses as a base) against the additional cost of capital used to run a business, (using Net capital employed for the Operating Groups and risk-adjusted equity for the Financing and Real estate businesses as a base). A positive EVA means that a business has earned more than its cost of capital, and is therefore defined as value-creating. A negative EVA means that a business is earning less than its cost of capital and is therefore defined as value-destroying. Other organizations that use EVA may define and calculate EVA differently. A reconciliation of EVA may be found on our Investor Relations website under Siemens Capital Market Days, February 23-24, 2006 Page 27

28 Siemens Investor Relations Team Marcus Desimoni Frank Heffter Irina Pchelova Christina Schmöe Susanne Wölfinger Webpage: Investor Relations Fax: Siemens Capital Market Days, February 23-24, 2006 Page 28