BMW Group Announces Future Strategic Realignment

The BMW Group’s goal is to resolutely maximize profitability and increase value over the long term. The Group’s strategic direction up to 2020 is clearly defined: The BMW Group is the world’s leading provider of premium products and premium services for individual mobility.

This strategic realignment includes, among other items, the following measures:

Capital-Efficiency Targets

The BMW Group intends to focus even more on the return on capital employed when monitoring company performance. The company set itself the following interim targets: The BMW Group aims to achieve a return on capital employed before taxes (RoCE) of 26% in the Automobile segment as of 2012. This results in an EBIT-based return on sales of between 8% and 10% for the Automobile segment.

Program to tap into efficiency potential

In order to achieve earnings targets for 2012, the BMW Group will launch a program to increase profitability. This will encompass all divisions and apply to both performance and costs. In terms of performance, the company plans to increase revenues and earnings per vehicle, while in terms of costs, it plans to reduce development, production, sales and administration costs per vehicle to achieve a cumulative efficiency effect of about 6 billion euros by 2012. The company intends to employ less capital than today when generating further growth. To this end, the BMW Group intends to reduce its capital expenditure ratio as well as capital employed per vehicle by 2012.

Growth Targets

The BMW Group is going to continue its product initiative. The BMW Group aims to achieve retail sales of more than 1.8 million vehicles by 2012. By then, the BMW Group plans to increase deliveries in the motorcycle business by 50% to 150,000 units per annum. The company intends to increase retail sales in the automobile business to clearly more than two million vehicles by 2020.

Change in Dividend Policy/Significantly Higher Dividend Planned for 2007

The Board of Management is convinced that the BMW Group’s continued strategic development will be successful over the long term. Therefore, the company plans to increase its dividend payout ratio substantially. The Board of Management will propose a first step for the business year 2007 to the Supervisory Board and the Annual General Meeting. In addition, BMW AG will keep the option of conducting a share buyback. However, this is not on the agenda for the next twelve months.

Transfer of Pension Obligations

BMW AG will gradually transfer its pension obligations in Germany of about 4 billion euros to an external fund in three steps starting in 2008.

Natural Hedging and Purchasing in US Dollars to be Expanded

In order to strengthen independence from currency fluctuations, the BMW Group will strategically step up natural hedging as well as purchasing in US dollars in particular. -BMW news