MTU Friedrichshafen in Its Seventh Consecutive Year with Sales and Profit Increase

• For the first time, mtu sales exceed one billion EUR
• Commercial applications account for about three quarters of mtu´s business
• New orders in the business year increased by 18%
• Investments and development effort at approx. EUR 100 million
• mtu market leader for MCFC fuel cells: first plant with 6000 operating hours
• mtu expects a sales increase of at least 10% for 2001

Friedrichshafen - MTU Friedrichshafen, together with its subsidiaries and associated companies, continued its successful corporate development in the business year 2000. With EUR 1.04 billion (previous year: EUR 0.96 billion), the company, a member of the DaimlerChrysler concern, managed to achieve a new sales record for the seventh time in a row, exceeding one billion EUR for the first time. The operating profit was increased by almost 13% to EUR 102 million (previous year: EUR 90 million), well above the return rate on net assets due DaimlerChrysler. MTU Friedrichshafen has thus fully achieved its ambitious targets, said Dr. Rolf A. Hanssen, President of the Board of Management and CEO of the Business Unit MTU/Diesel Engines of DaimlerChrysler AG on the occasion of the annual press conference on 26 March 2001 in Friedrichshafen. Moreover, the positive business development has resulted in the creation of 140 new jobs at mtu.

Dr. Hanssen emphasized that for mtu, the business year 2000 was strongly affected by far-reaching corporate decisions made by the parent company, DaimlerChrysler. After the purchase of the US engine manufacturer DDC, DaimlerChrysler has concentrated the business activities of the Business Units MTU/Diesel Engines and Powertrain (PTU) as well as DDC under the joint umbrella of the Commercial Vehicle Division in a new business unit called Daimler-Chrysler Powersystems. Within this business unit, the complete off-highway business of the DaimlerChrysler concern will now be concentrated, based on the previous market segments typical for mtu, such as marine, rail, power generation, construction & industrial/mining, agriculture and defense.

The aggregate sales of this off-highway business were approx. EUR 1.6 billion in 2000; in total, about 7,500 people are employed in this field. With sales of more than one billion EUR, MTU Friedrichshafen accounts for the largest part of the off-highway business. Approx. EUR 400 million is contributed by DDC and nearly EUR 150 million comes from PTU. Furthermore, a possible inclusion of VM Motori - a DDC subsidiary in Italy - in this business is presently being looked into.

At the moment, the off-highway business scopes of mtu, DDC, PTU and - possibly - VM Motori are being joined under one responsible management, resulting in the development of a new, powerful off-highway unit in the DaimlerChrysler concern with a business-volume increase of approx. 60 percent, which will be even better positioned in the world market in the future than it already is.

Commercial applications account for about three quarters of mtu´s business

In the business year 2000, MTU Friedrichshafen increased its sales volume by another EUR 75 million, now reaching EUR 1.04 billion. mtu has thus achieved a disproportionate increase in revenues of 8%, clearly exceeding the average growth rate of the overall market. In doing so, the portion of military applications has decreased considerably - in absolute as well as in relative figures. In the area of heavy military vehicles, sales dropped by around one fifth - analogous to the sagging market volume. Even more significant was the sales decrease in the segment of naval vessels, in which mtu had to cope with a drop of approx. 35% in a relatively stagnant market, mostly due to the postponement of several projects to the present business year.

Yet the fact that overall sales were increased markedly in 2000 results from commercial applications which now account for about three quarters of mtu´s sales volume, confirming more and more the wiseness of the company´s strategic decision of entering and/or expanding the high-volume commercial business while maintaining and consolidating the military business at the same time. To a large extent, mtu´s sales increase can be attributed to the segment of commercial vessels with a growth rate of about 35%, which almost compensated for the drop in sales of naval vessels.

In the field of rail applications, last year´s level was maintained; here, sales were focused on the present re-engining programs for V 218 mainline locomotives of Deutsche Bahn AG, as well as the delivery of 350 powerpacks to various manufacturers of diesel railcars.

Tremendous sales increases were achieved in the segment of decentralized energy systems, which accounted for 18% of the overall sales volume, thus doubling last year´s 9%. The drive-shaft product division was able to further extend its position as one of Europe´s leading drive-shaft manufacturers and increase its turnover to EUR 117 million as compared to last year´s EUR 106 million. For the first time, this product division sold more than one million drive shafts for passenger cars and light commercial vehicles in one year.

The mtu subsidiary L'Orange, Stuttgart, increased its sales in business year 2000 by almost 14% to a new record figure of EUR 63,4 million. The basis of this result was the Common-Rail fuel injection system developed together with mtu. The demand for this modern injection system was also responsible for the new record figure of EUR 4.7 million for orders received, and an order backlog valued at EUR 37.2 million. Through this excellent order situation, the more than 600 jobs at L'Orange were secured, and more than 40 new positions were created.

With regard to the regional distribution of mtu sales, the 40% increase in Asia must be emphasized. Including Australia, the sales share of the overall Asian-Pacific region was thus raised again to the previous 25%. Positive developments were also registered in Europe (excluding Germany) and North America. In contrast, the sales share of domestic business has now dropped to less than 30%.

New orders in the business year increased by 18%

mtu managed to achieve an increase of more than EUR 180 million in new orders compared with last year, now reaching EUR 1.2 billion. This corresponds to a growth rate of 18%, which results essentially from tripling the number of new domestic orders and an increase of about 10% in new orders received from the Asian-Pacific region. Of the individual applications, the 260% increase in new orders for decentralized energy systems is by far the largest.

Investments and development effort at approx. EUR 100 million

With EUR 42 million, investments in the business year 2000 were slightly higher than last year´s. For new and further development of products, the company spent EUR 57 million last year. The main focus was on the further development and expansion of its sales program; here, the market introduction of the new Series 8000 must be emphasized - with 9000kW, the most powerful engine series ever built by mtu.

With the EuroPowerPack for tracked military vehicles, mtu also set an important milestone: the powerpack of Development Stage 2 was uprated to 1214kW (1650HP) and is now available in the Leopard 2 main battle tank as well.

mtu market leader for MCFC fuel cells: first plant with 6000 operating hours

In the area of New Technologies, the future technologies of fuel cell and electrolyzer were field-tested in business year 2000. Both the Hot Module high-temperature fuel cell and the pressurized electrolyzer for hydrogen generation have proven themselves in various field-test plants. For mtu, these plants are an important step on the way to making the new technologies ready for standard production.

A 250kW plant at the University of Bielefeld is presently being field-tested. In 2000, this plant logged 6000 operating hours, generating 723MW hours of electrical power and reaching an overall efficiency of 47%. This proof of fitness for normal service is an important milestone for mtu on the way to standard production of Hot Modules, which is scheduled for 2004. For the production of MCFC fuel cells, mtu is closely cooperating with Fuel Cell Energy Inc. (FCE), a US corporation listed on the stock exchange. During 2001, mtu will install a total of eight Hot Modules in Germany, the US and in Japan.

In the meantime, the Hot Module has found recognition not only with the respective operators: last year, two mtu development engineers were awarded the German gas industry´s innovation prize. In Friedrichshafen, mtu has established an additional project center called PEM Fuel Cell to adapt the PEM fuel-cell system developed by DaimlerChrysler for off-highway vehicle applications. mtu is planning to install these low-temperature fuel cells in ships and locomotives as well as use them for decentralized energy supply.

mtu expects a sales increase of at least 10% for 2001

Dr. Hanssen emphasized that, with its growth-oriented corporate policy, his company will adhere to the target of continuous strong business expansion. In doing so, mtu can count on the generally positive prognoses for economic development of the major markets.

The planning - based exclusively on the previous scope of responsibilities of the Business Unit MTU/Diesel Engines - therefore assumes a sales increase of at least 10% for the present business year. For the same period, mtu also plans to double its investments to nearly EUR 100 million. This exceptionally large amount is substantially influenced by expenses for capacity expansion so that the planned increase in production volumes can be coped with. Regarding the result and rate of return, the company intends to maintain the high level it has presently reached for the upcoming years as well.

The integration of mtu and the off-highway portions of DDC and PTU, as well as - possibly - VM Motori to form a powerful and successful off-highway unit within the DaimlerChrysler concern is regarded as the greatest challenge for the near future by Dr. Hanssen.