Wolfgang Dehen, Group President and CEO Capital Market ... · Wolfgang Dehen, Group President and...

Siemens VDO: Solid Progressin a Challenging Environment

Wolfgang Dehen, Group President and CEO

Capital Market DaysFebruary 23-24, 2006

Siemens Capital Market Days, February 23-24, 2006

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, www.sec.govwww.siemens.com 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.


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


We have a strong organization focused on our customers

Powertrain Chassis & Carbody

Interior & Infotainment

Service & Special Solutions

50,800 Employees

Key Account ManagementCustomers

Special OEM & Infotainment

Service & Parts

Transportation & Fleet Telematics

Information SystemsPassenger Cars

Commercial Vehicles

Cockpit Modules &Systems

InfotainmentSolutions

Restraint Systems, Safety Electronics

Body & ChassisElectronics

Electric Motor Drives

Gasoline SystemsDiesel Systems

Engine Actuators, Air & Emissions

ManagementFuel Supply

SystemsSensors

Electronics &Drivetrain


We improved our performance for our customers in all crucial fields

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.

1.381.38

Logistics Quality Sales R&D Production

1.081.08

0.170.17

1.131.131.091.09

1.411.41

0.630.63

1.061.06

1.351.35

0.910.91

CSS* FY04CSS* FY04

CSS* FY02CSS* FY02+1.5

+1.0

+0.5

Equal tothe bestcompetitor

0

* 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) projectWe are driving progress by entering innovation partnerships with lead customers

Drivers in the automotive business:quality - costs - innovations - flawless execution


Heading for "zero ppm" quality rates

6-months average

ppm

89

70

30

167

FY 2002 FY 2003 FY 2004 FY 2005

(parts per million)


We are well on track to reach next CMMI level

Survey of assessment in Siemens VDOCMMI

2

3

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006E

Capability Maturity Model Integration

Division 1: 3.00

Division 2: 3.00

Division 3: 2.75

Division 4: 2.75

Division 5: 2.50

Division 6: 2.50

1Division 7: 2.25


Our high-cost reduction rates enable us to still outplay rising OEM price pressure

OEM price reduction

Admin.& Others

15%

R&D10%

Material50%

Production25%

Total cost reduction FY 2002 - 2005:

€3.4 bn

3% - 4% p.a.

FY 2002 FY 2003 FY 2004 FY 2005

Total cost reduction rate: 9% on average


We deliver what we promise:Solid progress in a challenging environment

€8.5 bn €8.4 bn

€9.6 bn

€65 mn€562 mn €630 mn

0.8%

6.6%

€9.0 bn

€5.7 bn*

SV target margin 5 - 6% 5.0%

6.2%

SalesGroup ProfitEVA

- €261 mn

€418 mnGroup Profit margin %

* including VDO May-September 2001

- 4.6%

FY 2005FY 2001 FY 2002 FY 2003 FY 2004


Our strategic direction and systematic approach ensure continuous success

prod

uct 1

prod

uct 2

prod

uct 3

prod

uct 4

prod

uct 5

prod

uct 6

prod

uct 7

prod

uct 8

prod

uct 9

prod

uct 1

0

prod

uct 1

1

prod

uct 1

2

prod

uct 1

3

prod

uct 1

4

prod

uct 1

5

prod

uct 1

6

prod

uct 1

7

prod

uct 1

8

prod

uct 1

9

prod

uct 2

0

prod

uct 2

1

prod

uct 2

2

prod

uct 2

3

prod

uct 2

4

prod

uct 2

5

prod

uct 2

6

prod

uct 2

7

prod

uct 2

8

1) Entertainemt SV Competence (E/E only) - medium Areas for External Growth2) for integrated functions of Clusters3) in a narrower sense "HMI" SV Competence (E/E only) - high

Search Areas for Growth

78 % 22 %

Technology portfolio

Cus

tom

erpo

rtfo

lio

Regional portfolio

Regions:Optimize global R&D and manufacturing footprintStrategic focus on Asia

Customers:Maintain / increase market sharein Europe and AmericasBecome a "Global Keiretsu" supplier to Asian OEMs

Technology: Strengthen leadership in upcoming growth applicationsFocus on safety / comfort, advanced propulsion and communication

... and we constantly review and streamline our portfolio

region 1region 2region 3region 4region 5region 6regio 7region 8region 9region 10region 11

prod

uct 1

prod

uct 2

prod

uct 3

prod

uct 4

prod

uct 5

prod

uct 6

prod

uct 7

prod

uct 8

prod

uct 9

prod

uct 1

0

prod

uct 1

1

prod

uct 1

2

prod

uct 1

3

prod

uct 1

4

prod

uct 1

5

prod

uct 1

6

prod

uct 1

7

prod

uct 1

8

prod

uct 1

9

prod

uct 2

0

prod

uct 2

1

prod

uct 2

2

prod

uct 2

3

prod

uct 2

4

prod

uct 2

5

prod

uct 2

6

prod

uct 2

7

Very low SalesLow Sales Best estimation; current databases (SGI, ART) do not provide approriate details.Medium SalesHigh Sales

innovation - no market / sales yet

Fahrdynamik Antrieb Comm. AmBody Interior Driving Dynamics Powertrain Vehicles

Karosserie Interior

SV I CVSV I&I SV C&C SV C&C SV P

A s i a I n i t i a t i v e

region 1region 2region 3region 4region 5region 6region 7region 8region 9region 10region 11

prod

uct 1

prod

uct 2

prod

uct 3

prod

uct 4

prod

uct 5

prod

uct 6

prod

uct 7

prod

uct 8

prod

uct 9

prod

uct 1

0

prod

uct 1

1

prod

uct 1

2

prod

uct 1

3

prod

uct 1

4

prod

uct 1

5

prod

uct 1

6

prod

uct 1

7

prod

uct 1

8

prod

uct 1

9

prod

uct 2

0

prod

uct 2

1

prod

uct 2

2

prod

uct 2

3

prod

uct 2

4

prod

uct 2

5

prod

uct 2

6

prod

uct 2

7

Very low SalesLow Sales Best estimation; current databases (SGI, ART) do not provide approriate details.Medium SalesHigh Sales

innovation - no market / sales yet

SV I CVSV I&I SV C&C SV C&C SV P

Comm. AmBody Interior Driving Dynamics Powertrain Vehicles

Karosserie Interior Fahrdynamik Antrieb

Source: Siemens VDO


We are diversifying our customer base

DC GroupBMW GroupFord GroupVW GroupGM GroupPSA GroupRenault GroupHyundai GroupHonda GroupFiat GroupOthers

Top 3= 38% of

salesTop 5

= 53% of sales

Top 10= 68% of sales

2005


Siemens VDO is growing fasterthan the market

World vehicle production 2005: Moderate growth on high level

EuropeNAFTA

Asia

World

2005 2006E 2010E2005 2006E 2010E2005 2006E 2010E 2005 2006E 2010E

Light vehicleproduction

Heavy vehicleproduction

Millionunits

World + 6.7% + 2.7%

NAFTA + 26% - 0.3%

Asia + 11% + 6.9%

Siemens VDO* Market**

Europe - 0.5% - 0.5%

+2.7% +2.2%+9.8%

+1.1% +3.1%+14.7%

* Sales FY 2005 vs. FY 2004 ** Light vehicle production

+6.9% +4.8%+15.9%

+0.2% +1.4%+27.9% -0.5% +1.7% +5.5%

+1.8% +6.1% +6.9%-0.3% -0.9% +4.5%

+2.6% +4.4% -5.3%

Source: Global Insight (September 2005)


Our target: Regional balanceto improve our competitiveness

Sales to region

Europe NAFTA Asia-PacificImprove regional split by increasing salesin Asia-Pacific33% 33% 33%

1% Others

Target split

Major improvements have been made in NAFTA business

Bigger market share in European core markets due to merger of Siemens AT with VDO

FY 2005

FY 2002

61% 27% 10%

71% 21%

2% Others

1% Others

7%


A powerful product portfoliocovering the most attractive 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

4 - 6

6 - 7

6 - 8

6 - 8

7 - 12

ADAS

Cockpit/Interior

Active safety

Advanced propulsion

Infotainment

Comm. Veh.

Passive safety

SV coverageAvg. market profitability (in %, 2004)

9 - 10

Siemens VDO is well positioned in the most promising market segments

3 - 5

"Market entry" divisions

Divisions under improvement

Above / atpeer group profitability

Below peer groupprofitability


We continuously review and streamline our portfolio: M & A strategy

Mergers & Acquisitions Technology / Product Portfolio Regional Portfolio Customer Portfolio

2001 Mannesmann VDO

2004

2004 IDM

2004 Elcar

2005 e-stop

2005 Bontec / Autonet

2005 AEC

Huntsville Electronics


We continuously review and streamline our portfolio: Divestments

Divestments Technology / Product Portfolio Regional Portfolio Customer Portfolio

2001 Exit of wiringharness production

2002 Sale of Hydraulik-Ring to Hilite

2003 Disposal of bowden cables business to Capro Inc.

2003 Exit of assembly for complete tank systems

2001 Sale of air outlet manufacturing to Reum

2003 Exit of cockpit assembly

Overall sales volume of divestments €1.5 bnNumber of employees 12,500


The advantage of automotive electronics:Good prospects for suppliers on a long-term basis

Automotivesupplier marketaverage growth rate for entire supplier market: 3.4%Electrics / electronicscomponents & systems

55 75 93 124 168230

304

513587

356417

720+3.4%

+5.6%

+6.4%

CAGR

Electronics contentoutgrows vehicleproduction by far,increasingmarket share ofautomotiveelectronics

Automotivesupplier marketgrows faster thanvehicle productiondue to outsourcingby OEM to suppliers

EUR billions1990 1995 2000 2005 2010E 2015E

ElectronicsShare (%)

SuppliersShare (%)

VehiclesProduced(mn units p.a.)

18 21 22 25 28 33

65 75

45 79+2.3%

Source: Strategy Analytics, Research Insight, McKinsey, Siemens VDO


Global trends offer excellent opportunities for Siemens VDO: We care for sustainable mobility

Powertrain

"Zero emissions"

Chassis & Carbody

"Zero accidents"

Interior & InfotainmentService & Special Solutions

"Always on"

Propulsion Comfort & Safety Communication

TrendsShift of

economic gravityamongst regions

Increasingmobility

Growingdemand for

safety & security

Growing needfor environ-mental care

Shorteningof naturalresources

Comfort/Safety

Com

munication

Affordability Comfort Passive Safety

Dam

ping

Stee

ring

Bra

king

HM

IInfotainm

ent/N

avigationIntra C

ar

Gasoline/DieselAlternative Fuels/

Propulsion Affordability

Cha

ssis

E/E standards

Active Safety

Key less cockpit

HW standards

New production concepts

Improved Diagnostics

E/E standards Augmented Reality

ADAS-Safety Platforms (passive safety)Electric energy mgmt.

Workload manager

1st gen ADAS

Propulsion

E/E standards

HW standards

Zeroaccidents

Zero emissions

Always on

Source: Siemens VDO


We are realizing the car of the future - today

DriversCustomer demand for safer vehiclesRegulations to enforce driver and pedestrian protection

Typical applicationsTrends"Zero accident" pro.pilot

- a network of driver assistance systems

"Zero emission"

"Always on"

Increasing fuel costs andfleet consumption regulationsRegulations to reduce vehicle emission (e.g. EURO V)

Advanced Propulsion Systems- e.g. Piezo injection- e.g. Hybrids

CESAR- the cockpit for the

car of the future

Customer demand for better guidance and permanent connectivityDemand for integration of consumer electronic devices


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


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


"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


Socio-economic changes and varyingrequirements determine automotive development

Relative high priceand running costs

Medium size carwith state-of-the-artpowertrain

Significantelectrification

Significant alternativefuels share (CNG, …)

Full equippedinfotainment system

State-of-the artreliability & quality

Happy Driving

China YoungFamily Car

EU 25 Evolution

Silver Midlife Car

$7 per Gallon Case

Independence Car

Shift of economic gravityamongst regions

Increasing mobility

Growing demand forsafety & security

Growing need forenvironmental care

Shortening of natural resources

Trend towards smallentry 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

Upgradeable car

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


"Being in the sweet spot": We cover the top 5"Hottest Automotive Electronics Systems" for 2010

Osram( )SV

2.73.2

3.7

7.6

5.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Lane DepatureWarningSystems

Adaptive FrontLighting

Systems

Tire PressureMonitoringSystems

Passive EntrySystems

BlindspotMonitoringSystems

"Hot Product Factor"

(spectacular futuregrowth rates)

Source: Strategy Analytics, January 2006

# 1 # 2 # 3 # 4 # 5


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%

Technology Pool (Group)

Medium / High Medium Low Low High

Ownership Private Public Public Public Public

Regional Split

Europe 68% 13% 21% 22% 69%

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%

SV is among the most profitable suppliers...

All are still focused onone specific world region

Only SV and Bosch have a diversified customer portfolio... and focuses on electronics anticipating high growthSV 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


Heading for the future

Growth

Execute Asia strategy to expand business in China, Korea, Japan and India

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

Customers

OperationalExcellence

Continue to optimize worldwide manufacturing and R&D footprint

Intensify top+WIP to keep up with challenging business environment

Next level performance in initiatives(quality, design-to-cost, software, project management)

PeopleExcellence

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

Worldwide roll-out of BEAM initiative to improve customer relationship management

Become a “regional” supplier in Asia

Reach zero ppm quality


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 www.siemens.com

”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 www.siemens.com

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 theprofitability 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 www.siemens.com


Siemens Investor Relations Team

Marcus Desimoni +49-89-636-32445

Frank Heffter +49-89-636-34095

Irina Pchelova +49-89-636-33693

Christina Schmöe +49-89-636-32677

Susanne Wölfinger +49-89-636-30639

Webpage: http://www.siemens.com Investor Relations

e-mail: [email protected]

Fax: +49-89-636-32830

Wolfgang Dehen, Group President and CEO Capital Market ... · Wolfgang Dehen, Group President and...

Documents

Transcript of Wolfgang Dehen, Group President and CEO Capital Market ... · Wolfgang Dehen, Group President and...