CHANGE BORN FROMRESPONSIBILITY
Annual Report 2016

MAHLE GROUP FIGURES
2016

2015

2014

2013

2012

Sales

12,322

11,486

9,942

6,941

6,159

EBITDA

1,079

1,093

1,022

771

725

EBIT

473

511

514

422

401

Result from business activities

228

309

401

307

267

Net income

63

122

279

236

149

3,029

2,888

2,446

2,167

1,561

563

564

488

397

324

2,722

2,667

2,555

2,207

1,775

6.0

6.0

8.5

7.1

5.0

76,63275,635

66,23464,34547,662in EUR million

Tangible fixed assets
Capital expenditure on tangible fixed assets(without first consolidation)
EquityDividend paid by MAHLE GmbH
Headcount (as at Dec. 31)

THE MAHLE PRODUCT PORTFOLIOENGINE SYSTEMS AND COMPONENTS

FILTRATION AND ENGINE PERIPHERALSAs a global market leader in our key market segments, we havedecades of systems and development expertise and extensive production experience to build on. Since our company’s early days,
the development of piston systems and cylinder components has
been a core competence of MAHLE. Because we ­understandthe interaction of all engine components, we can deliver optimal solutions to our customers. Products such as pistons, ­pistonrings, cylinder liners, bearings, as well as valve train systems andcomponents are used around the globe in two-wheeled vehicles,
passenger cars, commercial vehicles, and large engines. And
the range is continuously being expanded, so that emissions andfuel consumption in combustion engines can be further reducedin the future.

MAHLE manufacture filters, pump systems, and oil coolers for engine and transmission applications—all of which are designed toincrease the engine’s efficiency and service life and reduce emissions. We are thus contributing to clean air and preventing engine
damage resulting from oil and fuel contamination. Engine peripherals often vary due to different regional emissions regulations, individual car body shapes, and various power classes—even for
identical basic engines. To address this diversity, we have partnered with our customers in recent years to develop modular systems for every major product group. Here again, we are one of the
global market leaders.

THERMAL MANAGEMENTMECHATRONICS

An increasing electrification of the powertrain calls for superiorinnovative capacity in thermal management—for batteries andthe entire electric powertrain alike. As engines are downsized forthe purpose of lowering emissions, thermal management plays
an even greater role in improving the combustion engine’s performance. What’s more, air conditioning is expected to provide
comfort inside the cabin while keeping energy consumption low.
When it comes to the thermal management of batteries, MAHLE
is a technological pioneer. Our solutions ensure constant temperature levels and an even distribution of temperature between
battery cells, producing long-lasting storage systems that ­deliver
high performance.

Mechatronic components are playing an increasingly crucial role inenhancing the efficiency of the powertrain and advancing e-mobility. That is why, in early 2016, MAHLE merged the group’s mechatronics expertise in a new division, along with the product groupsof electric drives and auxiliaries as well as actuators. This division
is infused with our R&D and manufacturing expertise in electricmotors and electronics. Although these are used in a wide variety
of applications, their technology is closely related, which affords
synergies and economies of scale—two highly relevant factors in
the automotive industry.

MAHLE AT A GLANCE
As one of the world’s 20 largest suppliers and a development partneras in the development of new vehicle generations, not to mention

to the automotive industry, MAHLE offers innovative mobility solutions

the continuous improvement of series production applications.

that stand for clean air, fuel efficiency, and driving pleasure. Our product

Proof of our technological l­eadership is not least to be seen in our

portfolio for passenger cars and commercial vehicles demonstrates

successes in motorsport—be it in Formula 1 or in Le Mans. Moreover,

our unique systems competence, as it addresses all crucial ­issues

our innovative products are used in stationary applications, mobile

related to the powertrain and air conditioning technology—frommachinery, as well as in railroad, marine, and aerospace applications.

engine systems, filtration, and electrics/mechatronics through to

And of course, we also supply workshops and engine repair

thermal management. The group supports manufacturers as earlyworkshops with MAHLE products in original equipment quality.

SALES BY SEGMENT

15 %Profit centers

18 %Filtration andEngine Peripherals
business unit

Total
EUR 12.3 billion

3%
Mechatronics division
7%
Aftermarket
business unit

35 %Thermal Managementbusiness unit

For details on the organizational structure,see page 85

MAHLE AT A GLANCE

22 %Engine Systems
and Components
business unit

OUR SELF-PERCEPTION
The MAHLE Group is a leading global development partner to the automotive
industry and offers its customers complete systems from a productrange that is unrivaled in breadth and depth. Our new developments are
geared toward the further optimization of combustion engines and thermal
management solutions as well as the expansion of e-mobility. We also want
to set new future standards with our innovative solutions by consistently
using and expanding our knowledge and innovative strength.
With our strategic orientation, we are addressing megatrends such as
population growth, urbanization, globalization, connectivity, or limiting
emissions to promote climate protection. We not only see these as
an opportunity for further growth, but as an obligation to design our
technologies so that mobility on our planet is as environmentally friendly as
possible.
The Mahle brothers have bequeathed us a company structure that secures
our independence and the long-term orientation of the group. In accordancewith their specifications, we want to continue to successfully develop MAHLE
as a leading company and attractive employer.
“Change born from responsibility” summarizes the course we are on. We
are thus explicitly committed to fairness, legality, cultural diversity, andequal opportunities. Our relationship with our employees, customers, andsuppliers is based on these values. Assuming social responsibility is a
corporate objective set by our founders. It is always incorporated into all ofour decisions—now and in the future.

CONTENTS
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4

THE COMPANY
4  6

Editorial
Management Board

8

Report of the Supervisory Board

10

Impressions of 201614

MAHLE—a worldwide network

16

In dialog

20

MAGAZINE
20 Power from a small displacement
26 Only the team wins
32 Love of perfection
38 Think big. And electric.
44 Indispensable helpers
50 Toward new markets
56 A global network that is years ahead
62 Reliable endurance runner

68

RESPONSIBILITY
68 Human resources
74

Corporate Social Responsibility

78

MAHLE Foundation

82

GROUP MANAGEMENT REPORT
82 Detailed index

106

CONSOLIDATED FINANCIAL STATEMENTS

106

Detailed index

138

FURTHER INFORMATION

138

Supervisory Board

139

Management Board

140

Imprint/Contact

4

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MAHLE GROUP // ANNUAL REPORT 2016

Editorial

EDITORIAL

Over the past few years, the MAHLE Group has been decisively shaped by far-reaching change likenever before. The company has become considerably bigger and, above all, notably more diverse.
­Technological deve­lopments and, above all, changes in the automotive industry are the main driving
forces behind this all. Our sector is undergoing a fundamental transformation that will last for many years
to come. This is ­attributable to the use of new drive concepts, connected mobility and networked production technologies, and the growth in other emerging markets. From both an economic and technicalstandpoint, these factors call for widespread presence, great flexibility, and above all: continuous change.
A few years ago, we therefore started to broaden our company’s position in terms of portfolio and ­regionalpresence. We pursue a dual strategy: On the one hand, we are convinced that the ­combustion engine
will remain an important drive for a long time to come. This is why we are continuing to work ­intensively
on new solutions to raise the efficiency of these engines while lowering their emissions. At the same time,
we want to be a driver of e-mobility, just as we already are in the conventional market today.
In order to carry out the next step of this ongoing development, we need to assert our economic ­successand further enhance profitability, in particular. Because only by consistently expanding our financial
strength are we able to invest in research and development, establish new business areas, make strategic acquisitions, and position ourselves as a resilient company.
In the magazine section of this Annual Report, we provide you with a few examples of how we are­managing change in our day-to-day activities and which technical solutions we are offering our ­customers.
You will discover how broadly positioned MAHLE is and how special people stand behind our ­company’s
products and services. Because they are the real drivers of change with their enthusiasm for new solutions, contagious vigor, deep knowledge, and team spirit.
Many of the changes in our company are aligned with our strategic reorientation. We have divested someof our previous activities, and added new ones, such as vehicle electronics, for example. Such a process always involves changes for our employees and their environment. We are only too well aware ofthis and accept this responsibility. Firstly, because our founders, the Mahle brothers, bequeathed us withthe task of always keeping people first and foremost in mind besides economic success. And secondly,out of conviction: because MAHLE would not be so successful today without our dedicated employees.

“Change born from responsibility” is therefore our guiding principle for this year’s Annual Report because
it is pivotal to all our decisions, and will continue to be so in the future. Together with my colleagues on
the Management Board, I would like to thank the Supervisory Board, the members of MABEG—­Verein
zur Förderung und Beratung der MAHLE Gruppe e. V.—, and the employee representatives for theirstrong cooperation during the 2016 business year. But most importantly, our special thanks goes to our­close to 77,000 employees around the world. Their daily commitment ensures that MAHLE worldwide
stands for innovative spirit, high product quality, and a particular proximity to customers.

Wolf-Henning Scheider
Chairman of the Management Board
and CEO of the MAHLE Group

Wolf-Henning Scheider
Chairman of the Management Board
and CEO of the MAHLE GroupMANAGEMENT BOARD
As at March 31, 2017

Bernd Eckl

Arnd Franz

Wilhelm Emperhoff

Dr. Rudolf Paulik

January 1, 2017: joining

Automotive Sales and Applica-

Filtration and Engine Peripherals

until March 31, 2017:­tion Engineering, Aftermarket­business unit, Mechatronics ­division;

Engine Systems and Components

business unit

until October 31, 2016: Industrial­business unit, Corporate Quality­Filtration profit center­Management, Large and Smalleffective April 1, 2017:
Engine Systems and Components­business unit, Corporate Quality­Management, Large and Small
Engine Components profit center

Engine Components profit center

Dr. Jörg Stratmann
Thermal Management business unit,­Industrial Thermal Management,
Compressors, Control Units,
Front-end Modules profit centers

Wolf-Henning Scheider

Michael Glowatzki

Chairman

Director of Personnel,

Finance, Corporate Controlling,

Human Resources, Legal

Taxes, IT Services, Corporate

Research and Advanced ­E ngineering,
Corporate Planning, Corporate­Communications, External Affairs;­E ngineering Services, Motorsports,
and Special Applications profit centers

Michael FrickInsurances, Corporate Internal Audit

8

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MAHLE GROUP // ANNUAL REPORT 2016

Report of the Supervisory Board

REPORT OF THE
SUPERVISORY BOARD

For the MAHLE Group, the 2016 business year was influenced bydisparate conditions. While group sales grew by 7.3 percent to
EUR 12,322 million due to the positive global market development,
first consolidation effects, and exchange rate effects of ­importantnational currencies, the development of the financial result and net
income was disappointing. This was partly due to ­individual ­effects,
but also the operating performance in some business areas wasinadequate.
In particular asset adjustments and impairments in connection withplanned restructuring measures had a negative impact on profit.
The Supervisory Board has actively discussed and advised on alldecisions pertaining to the long-term strategic development of thegroup. These include the disposal of the industrial filter activities,
the sale of parts of our raw forging production, as well as the acquisition of the Spanish company Nagares to strengthen our mechatronic and electronic activities. The changes in future individual
mobility triggered by various effects over the past few years will
require considerable efforts on MAHLE’s part—particularly in thearea of portfolio management and product development. The importance of the internal combustion engine for passenger cars in
the MAHLE Group’s overall product portfolio will decrease over theyears. A concerted decision-making process between the Management Board, the Supervisory Board, and the shareholders needto ensure that this development is managed within a sustainablebusiness policy.
In the 2016 business year, the Supervisory Board met all of its obligatory responsibilities in accordance with the law, Articles of Association, and Rules of Procedure. It held a total of five meetings inthe business year.
During the year under review, the Supervisory Board was informed
regularly, promptly, and comprehensively through verbal communication and written documentation from the Management Boardand during meetings about the business development of the company, the group, its business segments as well as its participations.

Along with the operational and strategic issues, the implementation of the new law for the equal participation of women and men in­managerial positions was also discussed in these meetings.
Mr. Uwe Schwarte and Mr. Michael Kocken, the latter as the successor to Mr. Patryk Krause, were appointed to the ­Supervisory
Board by supplementary resolution of the district court, with­effect from January 19 and March 19, 2016 respectively. Professor
Dr. ­Gisela Lanza, holder of the professorship “Production Systems
and Quality Management” at the Karlsruhe Institute of ­Technology(KIT) and Head of the Institute for Production Technology (wbk)
was appointed a member of the Supervisory Board on July 1, 2016.
The Supervisory Board would like to extend its thanks to long-­
serving member Professor Dr. Hans-Joachim Schöpf, who retired
on June 30, 2016, for his constructive and trustworthy cooperation.
The Supervisory Board appointed Mr. Bernd Eckl as a member ofthe Management Board of MAHLE GmbH on January 1, 2017, where
he will be responsible for the Engine Systems and ­Components
business unit as well as the Large and Small Engine Components
profit center with effect from April 1, 2017. He is also responsible forcentral quality management at corporate level. In taking over theseduties, Mr. Eckl succeeds Dr. Rudolf Paulik, who will go into retirement on the same date.
The Supervisory Board expresses its thanks to Dr. Paulik for his almost 25 years of successful work in various positions in the group.
The appointed auditors PricewaterhouseCoopers AG audited theannual financial statements and management reports of the MAHLE
Group and of MAHLE GmbH for the 2016 business year, rendering
an unqualified audit opinion. The Supervisory Board agreed with theresults of the audit following in-depth analysis of the audit reports
and the report from the auditors in the Supervisory Board meeting.
The Supervisory Board approves the annual financial statements and the management reports of the MAHLE Group and of

MAHLE GmbH, and agrees with the proposal of the Management
Board for the appropriation of the income of the business year.

Professor Dr. Heinz K. Junker
Chairman of the Supervisory Boardof the MAHLE GroupThe Supervisory Board would like to express its thanks to the­Management Board and all employees of the MAHLE Group for
their commitment to the long-term success of the MAHLE Group.
Stuttgart/Germany, April 25, 2017
For the Supervisory Board

Professor Dr. Heinz K. Junker
Chairman of the Supervisory Boardof the MAHLE Group10

T H E C O M PA N Y

MAHLE GROUP // ANNUAL REPORT 2016

Impressions of 2016

IMPRESSIONS OF 2016
LAUNCH OF GLOBAL
PURCHASING EXCELLENCEPROGRAMThe central purchasing project “Global Purchasing Excellence Program” (GPEP) commences. The goal is to identify and implement savings along the entire supply chain.

VOLVO AWARDS MAHLE
NEW MECHATRONICS DIVISION
MAHLE merges the product divisions ofElectric Drives and Applications as well as
Actuators into the Mechatronics division.
The aim is to strengthen its market positionin this promising market segment.

January

The Volvo Group presents MAHLE with the
Supplier Award in the “Innovation and Fuel
Efficiency” category and particularly ­praises
the MAHLE Monoweld® steel pistons in the
power cell unit for commercial vehicles.

February

EXPANSION OF THE
COOPERATION WITHSCUDERIA FERRARI
The commitment to motorsports has
decades of tradition at MAHLE. In this context, the long-standing cooperation with
­Scuderia Ferrari has been stepped up. The
scope of the cooperation now includes the
optimization of the crank mechanism and thedevelopment of high-performance materials,
among others.

March
April

START OF THE ACTIVATRINNOVATION PROGRAM
MAHLE joins forces with other renowned
companies to take part in the ACTIVATR innovation program. During an eight-monthproject, interdepartmental teams work on
potential future products and businessmodels.

TEN YEARS OF MAHLE
TECHNOLOGIES HOLDING CHINA“IGNITION DAY” ON THE
TOPIC OF INDUSTRY 4.0

MAHLE Technologies Holding China (MTC)
Co., Ltd.—MAHLE’s Chinese headquarters
and R&D center in Shanghai—looks back on
a ten-year success story; during this period,
it has already been expanded twice.

MAHLE organizes the “Ignition Day” at thegroup headquarters. MAHLE product experts exchange ideas with external specialists on the possibilities of Industry 4.0—a
topic of great importance at MAHLE.

T H E C O M PA N Y

MAHLE GROUP // ANNUAL REPORT 2016

Impressions of 2016

MAHLE RECEIVES THE 2016
“RETROCLASSICCULTUR” AWARD
The RetroClassicCultur association awards
MAHLE this prize for its special contribution to the preservation of the historical­automotive cultural heritage. Whether Porsche,­Mercedes-Benz, or Jaguar: MAHLE Aftermarket offers a broad spectrum of engine parts forvintage, neoclassic, and modern classic cars.

A WORLD FIRST FOR THE OIL
SUPPLY IN COMMERCIALVEHICLES
With our world’s first controllable pendulum-slider oil pump, which is now also available for commercial vehicles, the pressureand volume flow are generated on demand,
reducing the required power to a minimum.

FORD AWARDS MAHLE
THE Q1 STATUS
Ford awards MAHLE Behr Charleston Inc./
USA the Q1 status in recognition of its­continuous achievement.

May

June

MAHLE IN SOUTH KOREARECEIVES SEVERAL AWARDSFROM GENERAL MOTORS
MAHLE Donghyun Filter Systems Co., Ltd./
Korea receives the “GM Supplier Quality­E xcellence Award” for the fourth time alreadyfor its plant in Ulsan, while the Hwasungplant wins it for the second time running.

MAHLE WINS SUPPLIER AWARDFROM PSA
The plant of MAHLE Metal Leve S.A. in­Itajubá/Brazil wins the PSA Peugeot Citroën
­supplier award LATAM in the “Best Plant”
category for its special achievements.

AWARD FROM RENAULT-NISSAN
FOR SPEED
Renault-Nissan presents MAHLE Izmir A.S./
Turkey with the Supplier Achievement Awardfor starting the production of steel pistonsboth quickly and efficiently.

11

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T H E C O M PA N Y

MAHLE GROUP // ANNUAL REPORT 2016

Impressions of 2016

MAHLE SIGNS THE DIVERSITYCHARTER

MAHLE BECOMES ONE OF
VW’S “A SUPPLIERS”

With this signature, MAHLE underscores its
commitment to the principles of the charterand to stepping up its measures to embed diversity in the corporate culture. This initiative
to promote diversity in companies under thepatronage of German Chancellor Dr. Angela
Merkel is one of the largest diversity corpor­
ate networks in Germany.

The Volkswagen Group assigns MAHLE­Filter Systems GmbH in Lorch/Germany the“A supplier” status for plastics and inline fuelfilters and certifies the “Formula Q Delivery
Capability.”

MAHLE OPENS THE VEHICLE
ENGINEERING CENTRE
MAHLE Powertrain, the Engineering Services
subsidiary, opens the VEC in Northampton/
Great Britain. It extends the range of products and services offered to automobile
manufacturers in the field of trendsetting
powertrain technology.

July

AugustSeptember

AUTOMECHANIKA—THE
LEADING TRADE FAIR FOR THE
AFTERMARKET
MAHLE exhibits world premieres at Automechanika, such as the CareMetix® cabin air filter, which absorbs odors perceptibly, as wellas the Recovery Only Unit for refrigerant recovery. The trade fair presence with tuning
specialist and video blogger JP is featured
in the MPULSE web magazine.

IAA COMMERCIAL VEHICLES—EFFICIENCY, RELIABILITY,
AND DRIVING COMFORT
MAHLE addresses these core issues with
its new products at the IAA. EU Commissioner Günther Oettinger (center) and VDA
President Matthias Wissmann pay a visit to
the MAHLE stand.

PERFECT THERMALMANAGEMENT OF BATTERIES
Thermoelectric battery conditioning is oneof the MAHLE highlights at the IAA. A ­single
component cools or heats the temperature-sensitive lithium-ion battery, which­increases its durability.

T H E C O M PA N Y

MAHLE GROUP // ANNUAL REPORT 2016

Impressions of 2016

MAHLE TEAM IS WORLDCHAMPION OF THE 2016
FORMULA STUDENT

2016 DTM CHAMPION
WITH MAHLE

BADEN-WUERTTEMBERG’SMINISTER OF ECONOMICAFFAIRS PAYS A VISITFirst-class performance: Marco Wittmann
wins the 2016 DTM in his BMW M4 DTM
at the final race at the Hockenheimring.
The winning car has technology from
MAHLE on board, including forged pistons and pins.

The “Rennteam Uni Stuttgart,” sponsored by
MAHLE, takes first place in the world ranking list of Formula Student. As a technology
partner, MAHLE supports a total of 24 teams
worldwide in the “Formula 1 for Students,”
of which seven are so-called “E-teams” withelectrically driven vehicles.

Dr. Nicole Hoffmeister-Kraut pays a visit to
MAHLE in Stuttgart/Germany. The central
topic of her visit is the integration of refugees
and their training at MAHLE. The Minister isimpressed by MAHLE’s commitment and theopportunities it offers to displaced people.
BMW Motorsport
Ofﬁcial Partner

December

OctoberNovember

EXTENDED TESTING CAPACITIESIN NORTH AMERICA
MAHLE Powertrain opens a new 4,200
square meter testing center in Plymouth,
Michigan/USA. It is equipped with seven lift
platforms, a four-wheel-drive chassis dynamometer, five powertrain test cells, and awiring-and-instrumentation laboratory for thedevelopment of powertrains.

FIAT CHRYSLER AUTOMOBILES
AWARDS MAHLE IN MEXICOFOR ITS QUALITY
Fiat Chrysler Automobiles selects the best
20 suppliers out of around 500 in M
­ exico aswell as Central and South America. MAHLE
Componentes de Motor de M­ éxico, S. de
R.L. de C.V. in Ramos Arizpe/Mexico is
one of the award winners; the plant is distinguished with the “Outstanding Quality­Performance Award.”

HIGHEST SALES IN THE
HISTORY OF THE COMPANY
With over EUR 12 billion, MAHLE achieves
the highest sales in the history of the company. This result consolidates our position
among the 20 largest automotive suppliers
worldwide.

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MAHLE GROUP // ANNUAL REPORT 2016

MAHLE—a worldwide network

MAHLE—AWORLDWIDENETWORKSTUTTGARTNORTHAMPTONBASCHARAGEŠEMPETER PRI GORICIAs at December 31, 2016

DETROITLOCKPORTAMHERSTWORLDWIDE

About 170 production locations
15 major development locations
About 77,000 employees

SÃO PAULOTOKYO
SHANGHAIPUNE

NUMAZUT H E C O M PA N Y

MAHLE GROUP // ANNUAL REPORT 2016

MAHLE—a worldwide network

EUROPE

AFRICADEVELOPMENT LOCATIONSCOUNTRIESCOUNTRIES

Bosnia and Herzegovina, Germany,
France, Great Britain, Italy, Luxembourg,
Austria, Poland, Portugal, Romania,
Russia, Slovakia, Slovenia, Spain, Czech
Republic, Turkey, Hungary, Belarus

South Africa

Bascharage/Luxembourg
Northampton/Great BritainŠempeter pri Gorici/Slovenia
Stuttgart – Bad Cannstatt/Germany
Stuttgart – Feuerbach/Germany

68 production locations
34,601 employees 1)

2 production locations
1,054 employees 1)

NORTH AMERICA

SOUTH AMERICA

DEVELOPMENT LOCATIONSCOUNTRIESCOUNTRIES

Canada, Mexico, USA

Argentina, Brazil

29 production locations
15,578 employees 1)

13 production locations
9,338 employees 1)

Amherst, New York/USA
Detroit – Farmington Hills, Michigan/USA
Detroit – Troy, Michigan/USA
Lockport, New York/USA
São Paulo – Jundiaí/Brazil

ASIA/PACIFICDEVELOPMENT LOCATIONSCOUNTRIES

Numazu/Japan
Pune/India
Shanghai/China
Tokyo – Kawagoe/JapanTokyo – Okegawa/Japan

China, India, Indonesia, Japan,
Philippines, Singapore, South Korea,
Thailand54 production locations
16,061 employees 1)

1)

Respectively
total number of employees by region, incl. development
­locations and sales branches

You will find the detailed list of our locations here:
mahle.com/mahle/en/about-mahle/locations/locations.jsp

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T H E C O M PA N Y

In dialog

IN DIALOG“TODAY, MAHLE IS
MUCH MORE
BROADLY POSITIONED
AND GEARED TOWARD
THE CHANGE IN THE
AUTOMOTIVE INDUSTRY.”

MAHLE GROUP // ANNUAL REPORT 2016

T H E C O M PA N Y

MAHLE GROUP // ANNUAL REPORT 2016

In dialog“WE ARE CONSISTENTLYEXPLOITING OUROPPORTUNITIES.”
Wolf-Henning Scheider on the change at MAHLE

The MAHLE Group has changed dramatically over the past few years. On the
one hand, it has grown considerably. The company ranks among the leading
automotive suppliers worldwide and is number four in Germany today. On theother hand, MAHLE is undergoing an intense process of structural change.
Wolf-Henning Scheider, Chairman of the Management Board and CEO, explains
how the company is implementing this change and its underlying strategies.

MR. SCHEIDER, HOW HAS MAHLE CHANGEDIN THE 2016 BUSINESS YEAR?

WILL THE BUSINESS FOR COMBUSTION ENGINEPRODUCTS SOON BE A THING OF THE PAST?

We took a number of important steps in 2016 and have made significant progress. This includes the integration of 9,000 employees
from our acquisitions along with the hiring of numerous new employees. We were very successful in integrating these people andthe knowledge they bring along into our company. This will help us
to tackle the challenges ahead of us.

No, I don’t think so. But what many people may not know:
today, MAHLE is already generating less than 50 percent of its total
sales from business segments that are dependent on the passenger car combustion engine. However, our sales from combustion
engine products have increased in absolute terms compared with
2006. This shows we should do anything but neglect this businesssegment. On the contrary: we still see great growth potential here
because the combustion engine will continue to play an importantrole in the automotive industry for many years to come. For example, in hybrid vehicles, or also in clean and economical vehicles forthe emerging markets. These vehicles will also need an efficient
combustion engine. In addition, MAHLE is working intensively on
the electrification of auxiliary aggregates. The trend toward hybridization is a very positive development for us.

COMPARED WITH MAHLE TEN YEARS AGO:WHAT IS DIFFERENT?
At first glance, the size of the company and our global presence.
Our structural changes, however, are of crucial importance to us.
Today, MAHLE is much more broadly positioned and decisively
geared toward the changes in the automotive industry. This is because we want to be one of the companies that significantly shape
the change in our sector. Examples include electrification, connectivity, and increasingly complex systems in vehicles.

17

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T H E C O M PA N Y

MAHLE GROUP // ANNUAL REPORT 2016

In dialog

IN YOUR EYES, WHAT SIGNIFICANCE DOESELECTRIFICATION HAVE?
Electrification covers more than just vehicles with purely electric
drives. It will still take some time before e-mobility becomes a mass
phenomenon in this form. We are already working intensely on promising solutions in this field. We need to look at it from a different
angle: electrification is a trend that affects all areas of the vehicle—from the drive to the auxiliary aggregates, such as pumps and air
conditioning compressors, through to new concepts for efficient­interior air conditioning. MAHLE already offers many innovative solutions that are in series production—both in conventional vehicles
and in electric vehicles.

SO YOU WANT TO ALIGN THE COMPANY
ON TWO FRONTS AT THE SAME TIME?
Yes, we are quite clearly orienting our company toward a dual strategy because we want and need to consistently exploit the opportunities that come our way. But we need to design the process­responsibly and with good judgement. It is undeniable that the future
belongs to electric drives. But it is equally clear that this change will
not happen overnight, since there are still many structural and technical issues to be resolved. You only have to think of the charging
station infrastructure, which is still limited today. The combustion
engine will thus continue to shape our business. This is why we aredeveloping further in this direction and are continuing to offer ourcustomers very promising solutions in this field.

cutting-edge technologies. We can only go down this path, ­however,if the group is successful and consequently generates the necessary
funds to invest in research and development. We are ­therefore questioning more than ever whether our current activities will ­advancethe group or not.

WHAT DOES THIS ASSESSMENT MEAN IN
CONCRETE TERMS?
Our strategic goal is “best in class.” We want all our business­segments to rank among the best. If there is no prospect of achieving this goal in the medium term, we need to assess whether weshould divest ourselves of these activities in keeping with our senseof corporate responsibility. In 2016, for example, we found a ­buyer
for our industrial filtration business, who has integrated and is­further developing the business segment as a core activity. And at
the ­beginning of 2017, we decided to look for a buyer for our joint­venture Bosch Mahle Turbo Systems, who is willing to invest further
to achieve larger quantities and the associated economies of scale.

WILL MAHLE THUS BECOME SMALLER AGAIN?
On the contrary, the company will continue to grow and its structure will continue to change. In 2016, we initiated smaller acquisitions that will be completed in 2017. These are associated with the
expansion of our electronic and thermoelectric activities and willthus further strengthen our mechatronics and thermal managementbusiness segments.

HOW CAN MAHLE MANAGE THIS DUAL STRATEGY?

WHAT WILL MAHLE LOOK LIKE IN 2030?

This is undoubtedly a challenge. Since we need to focus our development activities on two types of powertrains, we have substantiallyexpanded our research and development division over the past few
years. We thus invested around EUR 750 million, i.e., 6.1 percent
of our total sales in it in 2016. With success: in 2016, MAHLE registered at least one patent a day and received major new orders in

In 2030, our company will rank among the leading systems suppliers
for the powertrain and thermal cabin comfort, regardless of which
engine is powering the vehicle. Structurally, MAHLE will have an evenbroader position than today, and it will be close to its customers inall major markets with corresponding production and development
locations. Despite this considerable change, one thing will remain

MAHLE GROUP // ANNUAL REPORT 2016

T H E C O M PA N Y

In dialog“WE WANT TO DECISIVELYSHAPE THE CHANGE INOUR SECTOR.”

unchanged: the enthusiasm of the people at MAHLE for techno­logy,
new solutions, and their proximity to the customer. This enthusiasm
is the DNA of MAHLE and ensures that even tomorrow the customers will say: it’s good that it comes from MAHLE.

WHAT DO YOU HAVE PLANNED FOR 2017?
In 2017 too, the ongoing development of innovative ideas and products for the combustion engine will make an important contribution to achieving our goals. What’s more, we want to win additionallarge-scale production projects for electrified and electric powertrains within the framework of our dual strategy. Nagares, our l­atest
acquisition in the field of electronics, will give us further impetus inthis area. We can now fully tap and expand this additional electronics
expertise for the benefit of our customers. Moreover, we are again
aiming to strengthen our market position in the aftermarket business in 2017. In short: we see the various challenges of our industry as an opportunity for MAHLE and want to further consolidate
our position as a leading international development partner to theautomotive industry in 2017 as well.

19GREAT BRITAINA GLIMPSE BEHIND THE SCENESAT MAHLE POWERTRAIN
IN NORTHAMPTON,
EAST MIDLANDS/UK

MAGAZINE

THE CRADLE
OF FUTURE
POWERTRAINS22

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Power from a small displacement“IT REALLY
TAKES OFF,
DON’T YOUTHINK?”Mark Underwood, engineer at MAHLE Powertrain

Several jumbo jets without engines here, a
few old sport aircraft there. Between thema discarded trailer from a shipping company: the scenery at what was formerly­Bruntingthorpe airfield in the English Midlands seems somewhat bizarre. The silenceis broken by a thundering silver VW Golf.
A racing car secretly making its first laps on
the test track? The roaring engine suggests
this may be the case. “It can really take off,
don’t you think?,” laughs Mark Underwood,
accelerating the Golf on the back straightthat once saw Royal Air Force machines takeoff and land.
Later, when Underwood allows a look under
the hood, the surprise is huge. The charge
air cooler with the bold MAHLE logo hides
anything but a large-volume engine. “Thedisplacement is only 1.2 liters. But the Golf
has more than 260 hp,” explains the young­engineer, grinning with satisfaction. He is one
member of a very talented team, which hasdeveloped this highly impressive demonstrator, and such a speedster is totally to his­liking. “I have always been fascinated by cars
and technology,” he explains. He is currently
spending some of his free time trying to givean old hatchback somewhat more pep for the
racetrack—with the engine of a sports car.

WAY AHEAD OF THE MARKET
However, Underwood is not whizzing aroundthe test track in Bruntingthorpe for the funof it. The data from each lap is meticulously
recorded on a laptop and later evaluated at
MAHLE Powertrain in Northampton, 40 kilometers away. Over 400 MAHLE colleagues
are based there, providing top-notch

engineering services for the global automotive industry. This is where the engines aretested and analyzed, ranging from mechanical inspections through to complex optimizations in drivability. “Manufacturers verymuch appreciate the fact that we are often
way ahead of the market and can respondvery quickly to customer demands at thesame time. For instance, when it comes tooptimizing engines or even developing completely new units,” explains Simon Reader, Head of Engineering at MAHLE Powertrain UK.
It is interesting to note that there are a lot of
young people on the company premises.
“This is a visible sign that we are continuing

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Power from a small displacement

Simon Reader is the contact person
for customers all over the world.

to grow,” says Marketing Manager Daren
Mottershead, reinforcing this observation.
In 2016 alone, 40 new colleagues were recruited in Northampton. And more are stillneeded due to the enormous demand from­customers. The young engineers come to
the East Midlands from universities and­colleges spanning the entire United Kingdom. In addition to an exciting job, the young
people can also find affordable accommodation and pleasant living conditions here.
This is in total contrast to London, where thecost of living is astronomically high.

PROUD TRADITIONOF ENGINEERINGThe specialists at MAHLE Powertrain havealso enjoyed an outstanding reputation
for generations. Legendary powertrains
have been developed here for decades.

The engineering company was known as
Cosworth Technology before MAHLE took
over in 2005. All are incredibly proud of thistradition to this day. As a matter of fact, allof the engines for the Formula 1 racing cars
—with the exception of Ferrari—were developed in Northampton in the 1970s. ­Today,
the former racing division of Cosworth operates under this name in the immediate
vicinity.
However, the momentum for the powertrains of tomorrow comes from the rather
inconspicuous brick buildings across theway. “Through MAHLE, we have gained
a much larger operating radius,” reports
Reader. “Today, our customers come from
Europe, the USA, China, and the Middle
East.” In the meantime, the MAHLE subsidiary has ­accordingly adopted a global

23

“

WE OPTIMIZE
ENGINES OR
DEVELOPCOMPLETELYNEW DRIVES.
Simon Reader, Head of Engineering at MAHLE Powertrain UK

position. What’s more, it can fall back on
the broad expertise of an established group,
which has long-standing experience of theentire powertrain. And it goes without sayingthat MAHLE Powertrain is right at the forefront when it comes to shaping change inthe ­automotive industry. “With the hybridization of vehicles, we are no longer just talking
about engines. We are now tackling more
and more cross-system projects,” says
Reader, explaining the new strategic orientation of MAHLE Powertrain.

New approach in the shadow of old technology:
test drive on the former runway

This approach means that the knowledgeof the developers in Northampton needs tobe as broad as it is deep. Mark Underwood,
who joined MAHLE Powertrain as a graduate more than five years ago, reports fromhis own experience: “It takes more than ayear until the newcomers can really tackle projects by themselves.” By then, thespecialists from Northampton are so well­acquainted with the technical details of thepowertrain and control that they can achieve
noticeable improvements from an engine.

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Power from a small displacement

For example, by making a decisive contribution to the design process or the design of
new components. Or—like Underwood—bydeveloping the software for the ECU, whichis responsible for the precise management
and control of the engine.

SMALL ENGINES WITH
A GREAT FUTURE
In Bruntingthorpe, the team tests to see
whether the supposedly underpowered Golf
can be adjusted to attain the performance
profile of a sports car, for example. “We want
to show our customers that powertrains
can also be designed ­differently,” explains­Reader, Head of Engineering. From his pointof view, small engines have a great future
for various reasons. On the one hand, as
impressively demonstrated by the MAHLE
Golf, driving pleasure need not necessarily depend on a large displacement. And byusing the electric motor as a support unit forthe combustion engine, the l­atter can also
be somewhat smaller in future.
The experts in Northampton, however, areconcerned with much more than engines
in the compact car category. Parked in the
courtyard—well shielded from prying eyes—are vehicles that would make any sports
car enthusiast’s heart beat faster. And on
the former Bruntingthorpe airfield, whose
access is likewise heavily regulated, one ofMark Underwood’s colleagues announces
himself with a British luxury brand as he prepares to flash past the discarded aircraft at
high speed. Under the hood of this GT car
is yet again a machine that will u­ ndoubtedly
power a new model one day—equipped
once more with lots of new technology andknow-how from MAHLE Powertrain.

Mark Underwood tests his new
software on the track.

25

POWERTRAIN SOLUTIONS FROMA SINGLE SOURCE
MAHLE Powertrain is a development service provider that offers
solutions across the entire powertrain. The MAHLE subsidiary researches, develops, and manufactures conventional combustion
engines as well as hybrid systems and electric units. The goal is
to optimize powertrains, systems, and components so that theywork more efficiently, economically, and produce fewer emissions. MAHLE Powertrain supports vehicle manufacturers acrossall development phases: from initial trials through to prototype
construction, implementation of series production, and subsequent optimizations of the solution reached. One focal point forthe powertrain engineers is downsizing engines. These are extremely powerful, despite their significantly lower displacement.
A further example of MAHLE Powertrain’s achievements is the
MAHLE Jet Ignition® lean burn combustion process, which is
instrumental in improving the combustion of the fuel mixture.
MAHLE Powertrain has its origins in England. In 1958, Mike
Costin and Keith Duckworth founded the engine manufacturer
Cosworth Engineering. The company moved to Northampton
in 1964. Following a period of Audi ownership, Cosworth Engineering was taken over by MAHLE and has been operating as
MAHLE Powertrain since 2005.
Besides its largest branch in Northampton, MAHLE Powertrain
now operates additional locations in Stuttgart and Munich/Germany, Shanghai/China, São Paulo/Brazil, and Plymouth in greater Detroit/USA. In 2016, the development service provider employed around 600 people in total. Today, MAHLE Powertrain
supports customers all over the world and was the first service
supplier to gain approval from the Vehicle Certification Agency
for the so-called Real Driving Emissions (RDE) test routes, a newvehicle emissions testing procedure for Europe. MAHLE Powertrain is at the forefront of test procedure development to provide
ever greater support to the auto industry over the coming years.

SMALL DISPLACEMENT DELIVERS
FULL POWER
Small, but powerful: With a displacement of only 1.2 liters andthree cylinders, the downsizing engine developed by MAHLE
Powertrain is anything but an underperforming midget. The unit,
which is located under the striking cover, develops up to 190 kilowatts (262 hp). The engine can thus achieve a specific output of
160 kilowatts per liter; its maximum torque is 313 newton meters.
The engine was fitted in a silver Golf GTI. The comparison shows:
the MAHLE downsizing demonstrator vehicle is in no way inferior to the original as far as engine output is concerned. Moreover,its fuel consumption is up to 25 percent lower.
MAHLE Powertrain has been developing downsizing engines
since 2007. The technologies are being systematically further
optimized with a view to achieving more output with lower consumption and emissions. The latest generation is equipped witha 48-volt electric supercharger combined with a turbocharger. The electric supercharger builds up a continuous additionalpressure of up to 2 bar. It thereby makes it possible to achieve
high torques even at low speeds. In other words: the MAHLE
solution closes the so-called turbo lag—i.e., the low rpm range
where conventional turbocharging can’t kick in—whereas thelatter ensures the required mass flow for high outputs at highspeeds. What’s more, significant energy recovery is achieved
with the 48-volt system, which in turn contributes to up to 25%
less CO2 emissions.
This example also shows the possibilities offered by a 48-volt
electrical system. It can power many auxiliaries, which can thus
be disconnected from the engine and electrically operated on
demand. This relief increases the efficiency of the combustion
engine and lowers consumption. Electrically powered auxiliaries
such as pumps, air conditioning compressors, or even nonhydraulic brakes can also be found in electric vehicles. MAHLE isthus already developing solutions today for vehicles of the future,
independently of the powertrain technology used.

GERMANYONLY THE TEAM
WINS

CHANGES ARE PART OF
EVERYDAY LIFE AT THE MÜHLACKER
LOCATION—INCLUDING A
DEPARTURE FROM THE FAMILIAR

Peter Knieknecht, Head of the Mühlacker plant, is strongly committed topromoting entrepreneurial thinking and an open approach. He is talking
to production employee Vasiliki Pafili.

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Only the team wins

The boss is coming! Has something gonewrong?—In the past, it’s probable that theappearance of plant management in production triggered a queasy feeling in some. Today, however, there is no sign of this whenPeter Knieknecht strides through the hightech production hall of one of the largest MAHLE plants in Europe. On the contrary: the employees encounter the Head of
the Mühlacker plant without reservations.
They greet each other openly with a handshake, briefly exchange words—­sometimes
on private matters, too. And if something
is not running as it should, the “boss” getsto hear about it directly during his regularrounds. “Our open approach is one of themost important changes here at the lo­cationand is definitely part of our success,” explains Knieknecht, who has been working
at Mühlacker, located roughly 30 kilometers
west of Stuttgart, since 2001.

TRADITIONAL LOCATIONREINVENTS ITSELF
Changes are part of everyday life here. In
MAHLE’s leading thermal management
plant, around 1,300 employees manufacture a wide variety of products—from coolingcomponents through to complete modules.
Components from Mühlacker are installedby vehicle manufacturers all over the world.
Mühlacker is a location where labor costs
are high, which means it needs to offer efficiency and flexibility in order to hold its own
in the top league of the automotive industry.
It simply can’t afford to stand still. So it’s not

surprising that the focus here is more on implementing complex ideas in an innovative
way to create maximum added value for the
automotive industry and internal customers.
Powerful production technologies, lean processes, and a production system that is being continuously refined over the years havelong been a matter of course at Mühlacker,
forming the basis for high quality and delivery reliability. At the end of the day, how­ever, it’s not the technologies and processes that are pivotal, but the people behindthem who, through their committed teamwork and ongoing exchange of knowledge
and ex­perience, are contributing to our success story on a daily basis.
“The cost pressure is tremendous. If we
don’t constantly improve, then we’re outof the race,” Production Supervisor Patrick
Lachnit says, putting it in a nutshell, andpoints at a man-high structure with glittering aluminum fins and two tubes at the top
corners. What looks like an oversized heater
blower with ram horns, is in reality an impressive cooling module for a DAF truck.

At Mühlacker, where labor costs are high, lean processes are a must.
Employee motivation, however, is crucial to success.

INDUSTRY 4.0 IN PRACTICE
Production and assembly is done on one
level. “The shortest possible distances savetime and space,” explains Production Manager Vincenzo Sabetta. Over the last few
years, production has been constantly optimized according to the basic “one-pieceflow” principle—just one of many modifications. After final assembly, the finishedgiant coolers thus only need to be brought
through one single gate before they standin the courtyard, ready for shipment. The
preparation of such optimizations is meanwhile done using 3D scanners—just one example of how Industry 4.0 has since been
adopted in everyday plant life.
However, competitive advantage is not created by low-cost production alone. “The individual folded tubes on the cooler have a
totally new shape,” Sabetta points out a detail. This saves up to 25 percent in weight.
The cooling capacity is also greater, which
in turn improves the performance of the engine and ensures the strict Euro VI emission
standard is met.

“OUR OPEN APPROACH IS ONE OF THE
MOST IMPORTANT CHANGES HERE AT
THE LOCATION.”
Peter Knieknecht, Head of MAHLE’s Mühlacker plant

The change in Mühlacker is also impacting the training
workshop of the thermal management lead plant.

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Only the team wins

A cooler is much more than just a frame witha few flat tubes to cool down the temperatures of the hot fluids from the engine area.
This becomes apparent when you look overDieter Essig’s shoulder. The experienced
machine setter carefully examines a metal strip bent in the shape of a concertina.
“The height must be exact and the gills needto have a clean form,” he says, explaining
the purpose of the inspection. Gills? Sureenough, each metal strip consists of a delicate structure with fine incisions—just likegills. This improves the air permeability andincreases the cooling capacity.

MORE DIALOG ANDRESPONSIBILITY
A lot has changed for Essig since his firstday at the plant way back in April 1980.
Back then, masters behaved more likepatriarchs. Discussions were the exception. “­Today, I am specifically asked for my
opinion,” says Essig, describing the culture change, and adds: “This also means,however, that each of us has considerably
more respon­s ibility.” Patrick Lachnit—a­Supervisor who is responsible for 35 employees—also appreciates this open dialog:“I would have had problems with the former
type of interaction,” he admits. What’s more,this leadership style would no longer lead tothe desired result. On the contrary: “We canonly improve ourselves and save costs if weall pull together and everyone fully participates,” Lachnit stresses.
The change in Mühlacker is also impacting training manager Rüdiger Weik’s training workshop. Industry 4.0 is already included in the young people’s curriculum.
“While they are still using the filing vice as
before, the young people are simultaneously learning how handle a robot, among other things,” explains Weik. Yet, not only the
curriculum, but also the tone or attitude toward the young people have changed. Nowadays, instructors treat the trainees differently. “Today, it’s more about coaching theyoungsters find the right path to the solution,

If everyone fully participates, all can further
improve and save costs.

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Only the team wins

rather than just defining what’s right andwhat’s wrong. We therefore see ourselvesmore as learning partners than as masterteachers,” states Weik. Saying that, the instructors still need to establish a few basic
rules: “We make it quite clear that they are
not allowed to play around on their smartphones while working,” Weik grins about thisnewfangled fad, which is banned from his
training workshop.

NATURE OF TEAMWORK
REDEFINEDTo ensure team thinking benefits the entire plant, Peter Knieknecht and his management colleagues have redefined the nature of teamwork and have even imposed
appropriate rules of late. “That was quitean adjustment,” the manager admits. No
phones or laptops during meetings is justone example of how these rules are implemented in everyday working life. Thechange goes much deeper, however.
“Today, entrepreneurial thinking encompasses all areas and concerns every single one of us,” notes Knieknecht. “We canonly deal with the market pressure if we all
pitch in.” Speed and versatility define everyday life in Mühlacker today. “In 1980,
we had two products in our range. Today,
there are a good 80”, machine setter Essig says, describing the change. “What’smore, not only are the products becoming“

increasingly more complex, but the work
is getting more intricate because the raw
materials are not only expensive but alsodifficult to process,” clarifies Knieknecht.
“Vehicle manufacturers expect Mühlacker to deliver solutions that are as easy andcost-­effective as possible.”

TEAMWORK AS KEY TO
NEW PRODUCTS
Nadine Michels, Quality Manager in the areaof exhaust gas heat exchangers and vacuum brazing, has been observing the growing pressure for more than ten years. “Therequirements have increased significantly,”
she notes in retrospect. What’s more, flexibility and the ability to quickly adapt to market changes are more in demand than ever.
Nadine Michels underpins this with the example of a palm-sized aluminum part, behind which an exciting development is concealed. “The demand for such battery
coolers has increased considerably withina short period of time,” she explains. These
new MAHLE products, which are to be usedin small electric vehicles in China, are brazed
under special conditions, i.e., in a vacuum.
Top precision is called for here. “If something goes wrong, a whole batch is affected at the same time—with correspondingly high costs,” notes Michels in explaining
the challenge.

Such complex products and production
processes are created together with thedevelopers in Stuttgart using state-of-theart CAD technology. The requirements for
new products: high mechanical strength,
low material usage, and the lowest pos­sible
production costs. Innovative approaches arebeing simultaneously sought to give the customer a technical advantage. All of the divisions are involved: from development toproduction planning, to quality control, andlogistics. The optimized processes now alsomean that the machine setters can record
the latest data from the machines on siteusing a tablet. They are thus able to detect
wear and tear and any deviations at an early stage and react quickly.
And the next change for Mühlacker is already starting to materialize. Following themove of the MAHLE location from nearby
Pforzheim, the plant in Kornwestheim is now
due to follow. This recent merger will leadto further reorganization in Mühlacker. The
facade is already covered with scaffolding,and the cranes have been set up. Dozens
of workers dressed in orange are scurrying in and around a construction pit: a clear
sign that MAHLE in Mühlacker is once morein the process of reinventing itself. Yet one
thing will remain constant behind the oldand new walls: only the team wins.

TODAY,ENTREPRENEURIAL
THINKING IS EXPECTEDFROM EACH AND EVERYINDIVIDUAL.
Peter Knieknecht, Head of MAHLE’s Mühlacker plant

BETTER PERFORMANCE, LESS WEIGHTThe strict Euro VI emission standard also poses a new challenge
for thermal management, since the components have to copewith increased loads due to the higher temperatures, pressures,and quantities of heat. To that effect, MAHLE has improved theindividual elements of the truck cooling module while further­reducing its weight.
MAHLE cooling modules for commercial vehicles consist of acoolant cooler, a charge air cooler, a condenser, an expansiontank, and the necessary connecting lines. To make it Euro VI
compliant, it would have been easy to just make the c­ ooler bigger.
But that would have made the overall weight of the cooling module heavier—with negative consequences for fuel consumption.
MAHLE thus decided to take a different approach: the coolant
cooler has thus now been equipped with four-chamber, winglet
folded tubes and optimized trapezoidal corrugated fins, making it
only 42 mm deep instead of 52 mm. It thereby weighs 18 ­percent
less, yet it is much more powerful than its predecessor.
The charge air cooler also received optimized corrugated finsand turbulators, reducing the pressure drop by ten percent. This
also has a positive effect on fuel consumption. What’s more,
new tube headers were used for the charge air cooler, further
improving its operational strength.
The individual components come from Mühlacker itself as well
as from various European MAHLE plants. They are assembled
into five different cooling module variants in Mühlacker and thensent to the customers.

CHANGE BASED ON TRADITION
The Mühlacker plant, which sits just outside Stuttgart, has beenin operation for more than half a century. Its origins date back to
March 1959. At the time, Dr. Manfred Behr wrote a letter to themayor about buying premises for his company. Four years later,
production started in Lienzinger street. Incidentally, the building
with its striking tower was created by architect Fritz Leonhardt,
who also designed the landmark for the Swabian metropolis—
the Stuttgart television tower.
As with all other MAHLE locations, the products and production
processes in Mühlacker are subjected to constant change. From1975 onward, coolers were no longer made from nonferrous metal, but rather aluminum due to the fact that this material is lighterand more effective. 1990 saw the ten millionth aluminum cooler
roll off the production line. One year later, the lean production
pilot project was launched with the goal of making production
leaner and more efficient. At the same time, employees were
given more responsibility and cost-saving improvement suggestions were rewarded with an appropriate bonus.
Further changes followed at the start of the new millennium,
such as the just-in-sequence supply for BMW—a sophisticatedlogistics concept. Already in 2009, a special robot was commissioned to take over monotonous work steps in the welding
process and deliver more accurate results. More complex requirements also led to new career fields, such as warehouselogistics specialists or mechatronics engineers. The Mühlacker
location has been part of the MAHLE Group since 2013, following the acquisition of Behr.
The plant is now already preparing its next big step: Industry
4.0. It is thus currently investigating the future direct interaction­between humans and robots and how the use of tablets can
simplify maintenance work. Much has thus changed here. However, a location like Mühlacker, where labor costs are high, canonly achieve such sustainable success when the willingness tochange is backed by an equally dedicated and experienced team.

JAPANLOVING ATTENTION
TO DETAIL FOR
TOP QUALITY

ABSOLUTE PERFECTION IN
THE MANUFACTURING OF
THOUSANDS OF PRODUCTS—
DAY AFTER DAY

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Love of perfection

The Shihan, or tea mistress, lovingly rotates
the 200-year-old clay cup in her hands. A
scrutinizing look. She rotates it again andinspects the treasure. Then she pauses, abrief satisfied look flitting across her face.
During the more than 500-year-old Japanese tea ceremony, each hand movement
is prescribed. It takes about ten long yearsof learning about the many different aspectsof Japanese culture and a lot of practice before she passes to become a Shihan. Tradition, rules, the search for perfection inboth the big and small things in life: this isJapan. These values are internalized at avery young age. Gaikokujin, or foreigners,
are largely unaware of how important rituals, precise procedures, and processes are
and how intensely they are practiced—that
is, until they become a natural part of everyday Japanese life.
Turn, inspect—turn again and scrutinize
once more. The polished piston goes
through this procedure several times during
its genesis. As with the Shihan, the hand
movements here are also rehearsed, buthave a significant meaning. Personal accountability is implied each time a piston
is picked up. Because only absolutely perfect parts are permitted to leave the MAHLE
plant in Tsuruoka/Japan. Deviations areinconceivable.
Even the slightest variation in color, which
has nothing to do with its functionality, will
not be accepted. Neither on the production line in Tsuruoka nor of course, by theJapanese customers. For they also expect
absolutely perfect quality. And MAHLE in
Tsuruoka delivers: zero defects. Day after
day—all year long.

QUALITY BY TRADITION
MAHLE has a long tradition of placing a highvalue on quality. “Good quality is of crucial
importance. We can always do everythinga little better!” was the motto of the company founder Ernst Mahle. Today, quality
management using standardized tools andprocesses is integrated in all MAHLE business processes across the world—frompro­duct development to series launch and­beyond. And, just as in Ernst Mahle’s days,
lessons learned from all of our production
locations are used to continuously improve
all processes.

Quality, costs, delivery reliability: Japanesemanufacturers use this triad to measure
their suppliers. Like everywhere else in theworld, actually. And yet: something is different. “Our customers trust our processes right down to the tiniest detail,” explains
Plant Manager Hiroshi Ariji. His customers
inquire about all the production steps andprocesses long before the start of production. This can sometimes be a tight balancing act, because the supplier obviously does
not want to divulge all his business secrets.
It is therefore always a particular honor whena foreign company is allowed to supply Japanese car manufacturers. All the more remarkable if this then evolves into long-term
partnerships. “In the meantime, our customers see us more as a Japanese company
than a German one,” notes Ariji, visibly satisfied. The figures substantiate the ongoing success story of his team: a good 85
percent of the trucks on Japan’s roads are
powered by MAHLE pistons from Tsuruoka.
How do the employees implement the quality specifications? The Japanese customers

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Love of perfection“

WE ARE TAUGHT FROMAN EARLY AGE TO HAVE A
SPECIAL AFFINITY EVEN
TO THE SMALL THINGS.
Takahisa Yamashita, Head of the Filtration and Engine Peripherals business unit in Japan

look very closely at this area too. Because
they know: the human is the decisive factor.
This is also apparent in Tsuruoka. While robots are also in use here, turning, inspecting, turning again, and checking the semifinished parts, the community of flesh andblood is still way ahead of the machines:
due to their long-standing experience, highsense of responsibility, and incredible tenaciousness. “On average, our employees have been working for the company formore than 25 years,” says Plant Manager Ariji, perhaps revealing the biggest secret behind the daily precision. They are well versedand skilled in ­every s­ ingle hand movement.

ONE GLANCE IS ENOUGH
Yuichi Kobayashi found out how crucial thisdetail can be. The MAHLE filter expert had
the task of building a new production location for filters in Indonesia. “We adopted thetechnology from our plant in Tochigi. Nevertheless, there were significant differences. It was only then that I realized just how
deeply ingrained and how perfectly our Japanese employees understood the ­processes
and the importance of quality,” states the
production manager. Takahisa Yamashita,
responsible for the MAHLE Filtration andEngine Peripherals business unit in Japan,
is not surprised by this finding. “Our employees are so attuned to one another, one
glance is enough and the colleague knows
what is meant,” he says, revealing anothersecret of the Japanese recipe for success.

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Love of perfection“SAFETY IS AS IMPORTANT
TO US AS GOOD QUALITY.”
Hiroshi Ariji, Head of the Tsuruoka plant

And again a small ceremony. The teams
in Tsuruoka use it to tune themselves in at
the beginning of each shift. The colleagues
gather in a semicircle as the group leaders
provide them with information for that day:which of the 4,200 products are lined up,
as well as important observations from theprevious shift. This is followed by the daily
reminder to observe the safety regulations.
“Safety is as important to us as quality,” emphasizes Ariji. “Yoshi! Yoshi! Yoshi!—OK!,”chorus the team as they confirm the goals
ahead. Each individual in the semicircle isaware that they are taking over responsibility for the community—and that nothing isallowed to go wrong.

WITHOUT ANY DEVIATION
On every shift, the teams also go to the next
“gemba”, or the department next door, fora so-called “three-minute quality check.” Isthere is something to improve or learn there?
It is a finely spun network of test processes and communication at many different­levels—always on the lookout to make things
better. “Keizokuteki Kaizen,” or continuous
improvement, is a term that has long been
an integral part of the global production systems and has been implemented everywherein the MAHLE world for many years. And yet:Japan, as the motherland of the Kaizen philosophy, continues to have that extra edge.
Change of location to MAHLE Tochigi. Drive
two-and-a-half hours north of the metropolis of Tokyo and you will proudly be showna long row of awards from Japanese customers. In Tochigi, oil filters, oil coolers,
plastic cylinder head covers, and air intake
Top quality, day after day: Hiroshi Ariji, Head of the Tsuruoka plant,
can be proud of his team.

MAGA ZINE

MAHLE GROUP // ANNUAL REPORT 2016

Love of perfection

Each day before the start of the shift, the employees
tune in to ensure each hand movement fits faultlessly.

systems, among others, are being produced
for the MAHLE Filtration and Engine Peripherals business unit. Each hand movement of
the good 320 employees here also often resembles a small ceremony. The young employee’s hands smoothly rotate a bright blue
oil filter as she inspects the details. Because
she knows: the customers will not even accept a printing error on a label. Here it istotally irrelevant whether this rather insignificant deviation can be detected in the assembled state later on or not.

Again this loving gaze. Just like the Shihan—
the tea mistress. It only takes a blink of theeye, but is bestowed upon each individual
filter. A short moment of personal attachment. “In Japan, we are trained from an early age to develop this special affinity to thethings that we do. The teachers are strict
and teach us the processes until they reallystick,” explains Yamashita. “With ­Kaizen, we
can develop processes until they are absolutely perfect. However, we sometimes find it
difficult when taking an innovative or creative

approach,” admits Yamashita modestly. He
therefore deliberately encourages interaction
with MAHLE colleagues in other countries.
“We need to be more agile. We can learn
this from our colleagues all over the world
to get even better on a continuing basis.”
And they in turn visit the Japanese MAHLE
plants on a regular basis in order to get afeel for this very special quality philosophy
which also drives the entire MAHLE worldalong this path.

37

TEA PLEASURE IN ALL ITS PERFECTION
Traditions and rituals are fundamental aspects of the Japaneseculture. For centuries, this has also included the tea ceremony,
which has its origins in the Zen philosophy. The ritual preparesthe “Way of Tea” (Chado) and is aimed at turning participants
into “Tea People” (Chajin). According to Japanese teachings,
these are people who exercise self-restraint and promote thewell-being of others.
The ceremony is based on four principles: Harmony describes
the peaceful interaction between participants as well as with nature and space. Then there is respect for the host, guests, andutensils. Purity not only implies the cleanliness of the objects,
but also the spiritual purification of the mind. Tranquility stands
for the shared experience of inner peace.
The ritual is prescribed down to the smallest detail. The­ceremonies take place in a teahouse, which is located in a­garden. A small path (Roji) leads to the teahouse on which guests
disengage themselves from their everyday life. The hosting tea
master or mistress ­welcomes the guests at the teahouse withfresh water, with which the guests wash their mouths and hands
to cleanse themselves of all that is bad and evil.
The guests then remove their shoes and enter the teahouse.
They either kneel or sit cross legged on the floor to show humility and respect for the ceremony. The gong sounds five times
and the ceremony begins. The tea master symbolically polishes the utensils with a silk cloth, then brews the tea according to
the prescribed steps. Matcha tea is often used, which is told tohave a positive effect on the body and mind.
Once the tea has been prepared, the highest ranking guest­receives a bowl. He accepts it with a bow and offers it to the person sitting beside him, whereupon the latter declines and asks
the main guest to drink first. He then takes three sips and ­passes
the bowl back to the tea master who washes it and prepares
new tea. In this fashion, each guest receives the bowl in turn.
This attention to detail and the identification with routine process
steps—which are key features of the tea ceremony—can also befound at MAHLE’s Japanese locations. This clearly illustrates the
positive impact that a country’s culture and tradition can haveon everyday industrial life in the 21st century.

MAHLE IN JAPANThe first intensive cooperation in the Japanese market dates
back to 1968, when MAHLE entered into a close partnership withthe piston specialist Izumi Industries. In the following years, thegroup continued to expand its presence in Japan, soon strengthening its position in this important vehicle market with products
from the Filtration and Engine Peripherals business unit as wellas the piston business. 2002 saw the complete takeover of thefilter manufacturer Tennex Corporation, which is now trading as
MAHLE Filter Systems Japan Corporation.
MAHLE acquired Izumi Industries in 2003, and thus MAHLE­ ngine Components Japan Corporation came into being. Today,
E
MAHLE mainly produces pistons, filter modules and systems for
the Japanese market. When it comes to pistons for commercial vehicles, MAHLE is the country’s undisputed number one
among suppliers: 85 percent of all trucks on Japan’s roads are
powered by these MAHLE products.
ABS motors, ESC units for driving dynamics control, and EPS
motors for passenger cars, as well as products for small-sizedengines in industrial and recreational markets are also developed
and produced by MAHLE in Japan. These products come from
the Mechatronics division, which has combined all activities fromthis business segment since 2016. Kokusan Denki, which was
acquired in 2015 and today trades under the name of MAHLE
Electric Drives Japan Corporation, contributes to the Japanesemechatronics expertise. Production takes place in N
­ umazu, Gotemba, and Gojomemachi.
Overall, the MAHLE Group employs more than 2,500 people
at 16 different locations in Japan, including three development
centers in Okegawa, Kawagoe, and Numazu.

NORTH AMERICA

THINK BIG.
AND ELECTRIC.

BETWEEN THE CLASSIC
DRIVE AND THE MOBILITY OF
TOMORROW40

MAGA ZINE

MAHLE GROUP // ANNUAL REPORT 2016

Think big. And electric.

The engine is a real power pack: a swept
volume of 6.3 liters and more than 500 HP
drive the Dodge standing nearby. Despite
the impressive performance figures, this isan everyday car—at least in the USA. In theneighboring stand are RAM pickups; theseare powered with engines that are fitted in
medium-duty trucks in other parts of theworld. At the Detroit Motor Show, American automobile manufacturers are primari­ly demonstrating how they interpret mobil­
ity—or rather, what expectations customers
have when they buy a car. The principle: alittle more is welcome. Just think big.
“The challenges facing the North American
market cannot be compared with those inEurope or Asia,” explains Scott Ferriman.
The MAHLE Vice President of Sales in the
United States illustrates the difference usinga Chrysler Pacifica, which was just recently named “Utility Car of the Year,” or mostuseful everyday car, at the most important
American automotive show. “This is a typical second car with which mothers drive
their children to school or do the shopping,”says Ferriman, explaining the seven-seater’s

general use, which has a length of morethan five meters.

FLEXIBLE AND EXPERIENCED
When it comes to automobiles, North
America is a world of its own. “MAHLE isvery successful here because we meet theexact requirements of this market,” Ferriman proudly emphasizes. “Although our
products are global, we were able to adapt
perfectly to local conditions.” Indeed, there
is a lot of MAHLE technology in the Chrysler Pacifica: the power cell unit, intake manifold, air cleaner module, carbon canister,and last but not least, the HVAC module
including compressor. Numerous MAHLE
products can also be found in the pickups. For Ferriman, precisely these vehicles,
which are primarily used across the lengthand breadth of America, are evidence thatthe combustion engine will still play a very
influential role for a long time to come. And
what may at first come as a surprise in viewof the current debate: the pickup manufacturers are increasingly opting for diesel
technology.

MAHLE is already working closely withcustomers on the development phase of
new models. In Plymouth/Michigan, about
half an hour’s drive from Detroit, MAHLE
Powertrain is working on new solutions.
We are not talking about individual components here, but rather complete systems and engines. “Customers come tous because they appreciate our flexibility
and expertise,” Hugh Blaxill confirms withsatisfaction. He is Head of Engineering at
the powertrain branch in Plymouth. This iswhere MAHLE develops solutions specifically for the American customers. “One of
the reasons is the particular consumer expectations in this region. The legal requirements and other technical standards arealso different to those in Europe or Asia,
for example.” The customers also appreciate the special software knowledge of the
MAHLE experts in Plymouth, confirms Rob
Vischer, Sales Manager of MAHLE Powertrain North America: “For instance, we are
currently working intensively on solutions
to further protect the complex systems ofmodern vehicles against cyberattacks.”

MORE THAN

500 HPAND
6.3 liters
A DISPLACEMENT OFMAGA ZINE

MAHLE GROUP // ANNUAL REPORT 2016

Think big. And electric.

“WE ARE VERY
SUCCESSFULBECAUSE WE
MEET THE EXACTEXPECTATIONS OF
THIS MARKET.”
Scott Ferriman, Vice President of Sales North America

Scott Ferriman is forging ahead with MAHLE’s dual strategy
in the North American region.

MAHLE is already successful in North America with
its e-mobility solutions.

41

Mauricio Silva has direct contact withtthe e-mobility startups in California.

IN SAN FRANCISCO, CABLE CARSHAVE BEEN IN EXISTENCE SINCE

1837,

WHERE THEY USE STEEL R­ OPESTO MASTER THE STEEP STREETS.

MAGA ZINE

MAHLE GROUP // ANNUAL REPORT 2016

Think big. And electric.

Large engines and big car bodies should
not obscure the fact that the automotive industry in North America is also
in transition. “The Chrysler Pacifica isa good example of this. It is the first in
its class to be equipped with a plug-in
hybrid drive. Electrification is also in fullswing here,” asserts Scott Ferriman during
a tour of the Motor Show. An e-drive in conjunction with a combustion engine: here hesees a strong trend for his market. All the
manufacturers exhibiting their products in
Detroit are presenting appropriate solutions: European, Asian, and even all the
major American suppliers.

FOCUSSING ON CHANGE
As far as Ferriman is concerned, hybrid
drives will play a large role in the future:“This form of electrification also means thatthe combustion engine will still be used fora long time to come. With our dual strategy
of optimizing products for the internal combustion engine and concurrently developing
products for e-mobility, we are therefore absolutely on the right path at MAHLE.” Whenit comes to its e-mobility solutions, MAHLE
has even adopted an offensive approach at
the Motor Show in Detroit. Particularly striking is the “bad boy,” a kind of golf cart withrough tread wheels. With an electric drive
on both axles, you can even negotiate difficult terrain. “We want to show that we are
already in a position to offer solutions thatare ready for series production—from auxiliary aggregates through to fully electric vehicles,” stresses Ferriman. “Our company embodies the transition in drive technology andthat is exactly what we want to show here.”
Cut to the west coast of America: there,
Mauricio Silva is completely in his element„

THE ACCELERATION!
INCOMPARABLE!
  Mauricio Silva, Head of the MAHLE sales office in Silicon Valley

when he is on the road with an electric car.
“The acceleration! Incomparable!,” he enthuses. The sleek car is virtually silent as it
hums through the streets of San Francisco.
He sails past the famous cable cars in the
Tesla “Model S.” The tram, which masters
the steep streets with the aid of a steel rope,is proof that they were pioneering innovative drive concepts as early as in 1873. You
don’t need to worry about being strandedon the wayside with an empty battery whentraveling with an electric car, Silva assures:“The infrastructure is currently very good—at least here in California.”
In terms of e-mobility, California is thus several vehicle lengths ahead of the other U.S.
states. Numerous electric vehicle manufacturers have set up their company headquarters between San Francisco and Los Angeles. Mauricio Silva has also been running a
MAHLE office there since mid-2016. In theheart of Silicon Valley. Tesla, Google, or Apple are only a few minutes’ drive away. “Wewant to establish contacts and of courseshow what we at MAHLE have to offer,” heexplains. In fact, the company can scorepoints on the electric vehicle market witha whole series of products. “For ­example,
we have solutions which optimally control
the battery temperature,” explains Silva.
This is crucial, because the energy storage

systems develop a considerable heat when
they deliver power, and even fluctuations in
the outside temperatures can quickly havea detrimental impact on the precious cruising range. Besides battery conditioning,
for which the MAHLE Thermal Management business unit is responsible, the newly founded Mechatronics division offers a series of electric drives for main and auxiliary
aggregates—and is focusing more heavily
on passenger car applications.

DIFFERENT SPEED
However, new players in the field of e-mobility not only need different products to thoseof established vehicle manufacturers. Mauricio Silva also knows that the newcomers to
the automobile market have quite a different
approach. “They move at a much different
speed and are very open to innovation. Like
everyone who works in Silicon Valley,” indicates Silva. And end consumers opting for
an electric vehicle also have different habits to those which are customary in the market. Americans normally want to immediately take their car with them when they go toa dealership. In the case of an electric vehicle, however, they will need to reckon withwaiting times of several months. In many respects, the transition in North America has
already begun.

43

MAHLE IN NORTH AMERICA
MAHLE has been present in North America since the 1970s—
albeit initially only with deliveries to customers in the region. In
order to expand the cooperation, it soon set up its first production location in Morristown/Tennessee. 1978 saw the first pistons roll off the production line.
When numerous vehicle manufacturers started to relocate theirproduction to Mexico, MAHLE expanded its North Americanpresence there, too. The first Mexican MAHLE plant was thus
established in Ramos Arizpe in 1995—with MAHLE becoming
the first piston manufacturer to produce these components in
the USA’s southern neighboring country. Today, MAHLE employs the highest number of people in Mexico after Germany.
It also wasn’t long before MAHLE set up its filter business on
the North American continent. The acquisition of the filtration
activities from Siemens VDO in 2007 paved the way to the further addition of locations in Mexico, the USA, and Canada. The
course for expansion in this business segment was also set with
the integration of the Behr Group and the thermal managementbusiness from Delphi.
Today, MAHLE is represented in North America with all four business units—Engine Systems and Components, Filtration and Engine Peripherals, Thermal Management, and Aftermarket—aswell as with its profit centers. Overall, the group employs morethan 15,500 employees in the region, with sales of EUR 3.3 billion in 2016. They are employed at 29 different production locations and four development centers.
Production comprises systems and components for all of themarket’s established manufacturers of passenger cars andcommercial vehicles. MAHLE is already a strong partner of thenew, fully electric vehicle suppliers that have sprung up in the
USA in recent years. In order to intensify this cooperation, thecompany opened an office in Palo Alto/California in the heart of
Silicon Valley in 2016.

CALIFORNIA—DRIVER OF
NEW MOBILIT Y IDEASThe USA, along with China and Japan, is among the countries
with the highest number of electric vehicles—although with a
total of almost 500,000 registered e-mobiles, this is still lessthan one percent of the entire fleet. The State of California is themain driver of this development with its “Mobile Source Strategy,”which aims to reduce vehicle emissions by up to 50 percent by
2030. To achieve this goal, car manufacturers are obliged to market a set percentage of vehicles with alternative drive systems.
California suffers from chronically congested roads and high pollution levels like no other region in the USA. In order to promote
car sharing, many highways are equipped with special lanes
on which only cars with at least two passengers are allowed
to travel. California wants to bring one million hybrid, plug-in
hybrid, electric, or fuel cell vehicles onto the state’s roads by
2020. This figure is expected to increase to 1.5 million by 2025.
As a purchasing incentive, Californians are receiving a bonus of
up to USD 10,000, depending on the drive type. This objective
has benefitted the founding and establishment of new manufacturers, such as Tesla in Palo Alto, for example. The Californian newcomer is attracting much attention with its all-electricsaloons. And Lion Bus has developed eLion, a school bus with
an e-drive, which is also to be produced in the region. Meanwhile, nowhere else in the USA is the charging infrastructure as
good as in California.
In Silicon Valley, south of San Francisco, other companies arealso experimenting with alternative vehicle concepts and drives.
Above all, IT companies, such as Google or Apple, are working
on automated driving solutions as well as the networking of vehicles, infrastructure, and users. One of the scientific breeding
grounds is Stanford University, which is also located in Palo Alto.
And since the summer of 2016, MAHLE can now also be contacted directly as a supplier of innovative drive solutions thanks
to its local office.

NORTH AMERICAEFFICIENTLY AND
FLEXIBLY TAILOREDTO THE CUSTOMER

MAHLE MAINTENANCE AND
DIAGNOSTIC SOLUTIONS46

MAGA ZINE

Indispensable helpers

Open the garage door, bring the vehicle
inside, connect it to the laptop: the silver
Chrysler is a routine case for Gary Chopp.
His computer quickly announces: ignition system check. “This device saves me
an enormous amount of time. And time ismoney,” states the 28-year-old mechanic to the point. The more maintenance orders he works through a month, the more
he earns—everyday life in an American repair shop. Gary therefore paid for a MAHLE
TechPRO® diagnostic system out of his own
pocket. For this is also customary in the
U.S. repair shops: the mechanics bringsome of their own equipment to work. “Allin all, this amounts to an investment of several thousand dollars,” he reports.
At his place of work in the Farmington gar­age, located in front of the gates of the motor city of Detroit, Chopp works on models
from various brands. “I therefore need a diagnostic system that can help me with all
kinds of cars,” he emphasizes. “And thatis what makes the MAHLE system unique.
It finds defects fast and reliably—no matter which vehicle is on the lifting platform,”
the young mechanic nods with satisfaction.
His boss Andy Massoll agrees with him. He
himself has bought additional equipmentfrom the MAHLE diagnostic family. “These
devices are playing an increasingly impor­tant role in our business,” stresses Massoll.

FUNDAMENTAL CHANGE
When his father founded the company in1980, electronic helpers were still the absolute exception in the repair shop business.
“Today, they are indispensable,” says thegarage boss. “We are all the more dependent on reliable systems.” Most customers
are unaware of this fundamental change inrepair shops: “The majority of them are onlyinterested in getting their car running again.
They have no idea what kind of complex
technology is meanwhile involved.” Repair
shop owner Massoll found out about the

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MAHLE GROUP // ANNUAL REPORT 2016

MAGA ZINE

Indispensable helpers

Repair shop boss Andy Massoll (left) wants to offer his
customers quick problem solving.

“

THE MAHLE SYSTEMENABLES US TOSERVICE A WIDERANGE OF VEHICLES.
Andy Massoll, owner of Farmington Garage, Detroit

47

48

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Indispensable helpers

California on behalf of MAHLE. “We were theonly company that could o­ ffer the solution
our customers wanted,” he adds proudly.

QUICK AND EASY

The diagnostic results can be retrieved via the smartphone.

MAHLE solutions through his trade association, where these systems were being
praised as a useful aid. Today he knows:“I made the right decision with the MAHLE
diagnostic system. Because it has enabled
us to service a wide range of vehicles.”Andreas Huber, who is responsible for
MAHLE Service Solutions in North ­America,
is delighted to hear such praise from theFarmington garage. “It shows us that we areon the right track.” The MAHLE Aftermarket operating he is in charge of may still be
young, but there is no mistaking that it has
a great deal of potential. It came into being
through the takeover of RTI’s service business in 2013. The company already had astrong position in North ­America; MAHLE
Service Solutions can thus ultimately lookback on a quarter of a century’s experience. “Now we want to offer more solutions to repair shops,” says Huber. One of
the best sales arguments for this is the factthat major North American manufacturers
also use the same systems to check their
new cars before they are shipped to the customer. “You won’t get a bigger vote of confidence than that,” says Huber. “In the repair shops, not many associate diagnostic
competence with MAHLE yet. We want tochange that.”
However, the experts at the car manufacturers—especially in the USA—are alreadyvery aware of the accuracy, performance,and ease of use of the MAHLE. Kia is justone of the manufacturers who trust in the“Made by MAHLE” software competence.
In Irvine, a good hour’s drive south of Los
Angeles, maintenance processes are tested
for new vehicle models. In the process, theA/C service diagnostic tool ArcticPRO® from
MAHLE is used. “Modern refrigerants arevery expensive. Exact dosing and complete
recuperation are therefore crucial,” says
Mohan Sethi, who supports Kia Motors in

The MAHLE system independently recognizes the various vehicle models and thus
automatically knows exactly how much of
the expensive refrigerant is required. It also
complies with the stringent legal requirements of the U.S. authorities. “The Kia ACX
1299 is a state of the art and easy to use air
conditioning diagnostic tool. The ACX M­ obileapplication further helps with the technician’s convenience and ­efficiency. What’smore, we can also integrate the solution in to
our warranty system,” explains Kia Manager
Lewis Thompson. The ­Korean manufacturer’s service department is testing how themaintenance work on new ­models can behandled more efficiently and with industry
compliance. These lessons learned will thenbe passed on to their dealerships throughout the USA. “However, these findings arealso very i­mportant for automobile manufacturers in ­order for them to boost customer
satisfaction and forecast the scope of work,
particularly when it falls within the warranty­period,” explains Mohan Sethi.
Word about the success of the MAHLE­diagnostic systems in North America is also
spreading to Europe. The MAHLE operating
line is enjoying the growing popularity. “Customers appreciate that we can quickly tailor
our solution to their specific needs,” ­stresses

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MAHLE GROUP // ANNUAL REPORT 2016

Indispensable helpers“

WE WERE THE ONLYONES WHO HAD A
SOLUTION AS
REQUESTED BY
CUSTOMERS.
Mohan Sethi, MAHLE Service Solutions, California

Erkan Dokuz, who is pressing ahead with
MAHLE Service Solutions’ establishment inEurope. “We want to play our part in making work in the repair shops run more efficiently,” he adds. The operating line may still
be young, but the industry is already talking
about it a lot. “We are highly enthusiastic
because the increasing recognition among
our customers is inspiring us. “The intuitiveand easy operation of our systems is being
praised time and again,” says Dokuz happily.
He no longer needs to convince Andy
­Massoll and Gary Chopp. The garage bossin Farmington, who has three businesses
with more than 30 employees, has long­noted that rapid order processing makes
the customer happy and reduces costs: “I
am therefore thinking about investing evenmore in diagnostic equipment in future, instead of leaving the employees to come up
with their own financial resources.”

Mohan Sethi is the contact person for the major
customers of MAHLE Service Solutions in the USA.

49

YOUNG OPERATING LINE WITH
A WEALTH OF EXPERIENCE
Established in 2013 as an operating line for the Aftermarket
business unit, MAHLE Service Solutions handles the development, production, and distribution of repair shop equipment. It
also supports customers with a wide range of services, such as
special training in the use of equipment, technical documentation, as well as direct contact with the respective product specialists. MAHLE Service Solutions emerged from the a­ cquisitionof the American diagnostic specialist RTI, which built up an­excellent reputation over many decades, especially in North
America. Well-known manufacturers have been using the systems for the final inspection of their newly manufactured vehicles
for years. This provides a good basis for MAHLE Service Solutions to rigorously expand in North America and Europe with its
growing number of products and services.
Apart from the ArcticPRO® A/C service unit series, the MAHLE
subsidiary’s portfolio also includes automatic transmission flushing equipment, as well as tire inflation systems. At the beginningof 2016, the vehicle diagnostic tool TechPRO® was launchedon the U.S. market, adding another highlight to its portfolio.
TechPRO® detects the respective vehicle identification number and performs a fault diagnosis within seconds. The system
works in real-time, automatically downloads all the necessary
vehicle information and software updates from the Internet, andthus stays up-to-date. Already 30 million vehicles in total are being scanned each year at more than 25,000 different aftermarket dealerships and repair shops with a product developed by
MAHLE Service Solutions.

THE ALL-ROUNDER IN A /C SERVICE
Vehicle A/C service made easy: with the ArcticPRO® ACX 1299
service unit, which was developed by MAHLE Service Solutions
for the R1234yf refrigerant, the A/C service practically runs on
its own. The unit is fully automated, saving the user a considerable amount of both time and money. To service the HVAC system, the equipment is connected to the vehicle where it begins
by completely extracting the refrigerant from the air conditioning system. Only then can the actual maintenance take place.
Once done, the system feeds the refrigerant back into the vehicle HVAC system again. Thanks to this device, the repair shop
can now offer an environmentally friendly service.
However, this is by no means all that the A/C service unit can accomplish: during maintenance, the equipment constantly checks
for any leak within the system. This ensures that the very expensive refrigerant does not escape. The ArcticPRO® ACX 1299 unit
is equipped with the TechPRO® diagnostic software. The user
can thus get a quick overview of the status of the air conditioning
system, including the vehicle’s identification number. The maintenance process can also be monitored via a smartphone app.
What’s more, the ArcticPRO® ACX 1299 service unit also offers
the possibility to immediately and automatically reorder consumables such as oil or filters because the unit can be networked
with the warranty processing system of the vehicle manufacturer. These integrated functions help the repair shops to carryout their service work both efficiently and economically. The advantages offered by MAHLE Service Solutions speak for themselves: since March 2016, Kia Motors America has equipped
more than 750 of its franchised dealerships in the USA with
ArcticPRO® ACX 1299 units.

SLOVENIA AND JAPANFROM LOCAL
EXPERTS TO KEY
GLOBAL PLAYERS

THE NEW MECHATRONICS DIVISIONPROMOTES THE DEVELOPMENT OF
ELECTRIC DRIVESWhite pyramids project from the walls of theroom, which is secured by a heavy metal
door. In its center is a directional antenna,consisting of pairs of metallic rods, which
is aimed at a motor. It’s a futuristic scenario vaguely reminiscent of the Starship Enterprise in the American science fiction series, Star Trek. One is tempted to call out:
“Beam me up, Scotty!” “Should I turn on
the devices now? Oh wait, that wouldn’t be
too good for us,” proclaims a laughing voicethrough the loudspeaker. “Scotty,” the HeadEngineer of controls and devices on the other side of the metal door, is called Gregor
Ergaver in real life. He explains the actual
reason behind the chamber with the whitepyramids: “Here, we are testing whether anelectromagnetic environment impacts our
motor’s performance and whether our motor produces electromagnetic emissions
that could disturb communication devices.”
Electric motors are a sophisticated technology, but developments such as WIFI andmobile networks are having completely new
effects that must be looked into.

VERSATILITY, POWEREDBY ELECTRICITYThe EMC chamber, where e­ lectromagnetic
compatibility (EMC) is investigated, is one ofmany testing facilities at MAHLE Letrika inŠempeter pri Gorici/Slovenia, a 30-minutecar ride away from Trieste/Italy. The MAHLE
location—with its approximately 1,500 employees—manufactures electric drives forsteering systems, starter motors, forklifts,
scooters, and, recently, also for a passenger car that’s scheduled to hit the market
in 2018. Over 60 different electric drives
are produced here. Šempeter pri Gorici isa hands-on example of what a motor factory of the future will look like when vehicles are no longer powered by combustion
engines. Glints of copper shine here, there,
and every­where; electric motors of every sizeare being assembled, tested, and packed forshipping to the customer.
All the while MAHLE engineers are experi­
menting with new solutions. Before sucha series electric motor can roll off the assembly lines, it must be adapted to meet“WE PREFER TO
PRODUCE OURSENSORS OURSELVES.
THEY ARE BETTER AND
MORE COST-EFFECTIVE.“
Marijan Kerševan, electronics production manager at MAHLE Letrika, Slovenia

a broad range of customer demands, aswell as passing numerous tests and undergoing load testing. One such test involves
subjecting up to four starter motors simultaneously to intense vibrations on a s­ haker
system, to determine whether the components are capable of withstanding these­stresses. NVH (noise, vibration, harshness)engineer Andrej Baša explains the reason
behind the vibration test: “In a large electricmotor, the rotor alone can weigh more thanten kilograms. If the electric motor is subjected to high vibration levels, the unwanted
movement of the rotor can cause damage
or even break a heavy-duty motor housing.”
Here, the drives of the future are sub­jected
to as much stress in just a few hours as
they might normally experience only over along motor life.

NOISE TRACKERSIn the next room over, they’re working at amore subtle level: NVH experts Borut ­Peljhan
and his colleagues are attempting to rootout the sources of noise produced by analternator. Their quest unfolds in a soundproof room equipped with sensitive microphones. “Sometimes, it’s the position of the
fan blades that causes disturbing n­ oises. In
that case, we have to reposition the blades,”says this detective of noise annoyance. Fansare a critical component in electric machines because these can generate enormous amounts of heat and would not lastlong without a cooling system.
Wrapping miles of copper wire around acoil is just the beginning when it comes tomaking advanced electric motors. Here, too,

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Toward new markets

SLOVENIAŠempeter pri Gorici

there’s no getting around electronics. The
right controls and sensors are produced
in clean rooms under the watchful eye of­Marijan Kerševan, electronics pro­duction
manager: “We used to buy the sensors
that measure things like drive axis revolutions from outside sources.” But the quality
was extremely inconsistent. So they de­cided
to manufacture their electronic components
in-house. And, as Kerševan happily reports:“Eventually, we were able not only to makebetter sensors, but also to save money­doing it.”A PILLAR OF THE MAHLE
GROUP“We have over 50 years of experience withall types of electric motors,” says Head
­Developer Robert Vodopivec. Until just a
few years ago, the Slovenian manufacturer
was only active in a few regional markets.
Today, MAHLE Letrika is a pillar of the new
Mechatronics division, which encompasses
all the Group’s operations in ­electric main
and auxiliary drives. “Since we’ve been apart of MAHLE, our range of operations has
expanded significantly. Today, we ­operate
on a global scale, and customers from allover the world are interested in our products,” ­reports Vodopivec, whose ­primarytask is to promote the development of drives
for the automotive industry.
Highly sensitive microphones detect disturbing ambient noises coming from alternators.

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SOLUTIONS FOR NEW
EMISSIONS LIMITSInterest from the automotive industry is
keen. Iztok Špacapan, Head of Development at MAHLE Letrika, tells why: “Manu­
facturers are under immense pressure because they will need to comply with theemissions limit of 95 grams CO2 per kilometer by 2021.” One way to meet these stringent regulations, he says, is to use electric
drives in combination with combustion engines. “Our 48-volt mild hybrid system witha 15-kilowatt output is an attractive solutionthat we can deliver to customers,” Špacapan
points out. The system is the result of yearsof experience devoted to developing andmanufacturing drives for industrial applications. “That’s how we know exactly what requirements these drives have to meet.”JAPAN
Numazucounterparts. “Previously, as Kokusan Denki
we focused primarily on our domestic Japanese market,” recalls Rikio Yoshikawa,­President of the Japanese operations. “Today, as MAHLE Electric Drives Japan, we’repart of a global player.”As electrical systems evolve from 12 to48 volts, Špacapan sees a trend that willchange the car in the coming years: “It’s astep that makes sense for vehicle manufacturers, because they’ll achieve a lot withrelatively straightforward investments,” explains the lead developer. Thanks to thehigher voltage, many engine accessories
such as pumps and fans can be decoupledfrom the engine. This lessens the load on
the engine, lowering fuel consumption andemissions. “We can deliver the right drive forall these units,” Špacapan notes.

As part of the Mechatronics division established in 2016, the Numazu location manufactures a range of electric drives. And like
Letrika, Kokusan Denki—a company with adeep heritage that’s located not far from thesnow-capped Mount Fuji—brought a vast
trove of knowledge to the table as it joined
the new MAHLE operation. “We have an extremely well-developed supplier network, forinstance, that gives us access to excellent
quality in a range of materials and intermediate products,” Yoshikawa reports.

Since the Slovenian location has beenpart of MAHLE, much has changed for themechatronics experts—not just in terms ofwhat they’re working on, but also how theywork. “Today, we operate in a global R&D alliance,” explains Vodopivec. Instead of traveling just a few hundred kilometers to thenearest customer in Europe, as he used todo, he now travels the world for MAHLE. The
Slovenian is also a frequent visitor to Asian
destinations, including Japan. He finds
common ground, in technology and in other aspects alike. The Japanese colleagues
are advancing this evolution toward e-mobility at MAHLE along with their Slovenian“One of our focus points is drives with an
output of under one kilowatt,” remarks theJapanese mechatronics specialist. His
teams are currently hard at work on developing solutions aimed at tapping anothermarket for MAHLE—one that is completely
new for the company. Yoshikawa remains
tight-lipped about the details. Series production is scheduled to launch in 2018, heintimates. Then, with a knowing smile, hequips: “In urban areas in particular, lots ofpeople want to get around without relying on cars. Now, wouldn’t a comfortable­bicycle sporting an e-drive be an a
­ ppealing
solution?”

TOWARD NEW MARKETSMAGA ZINE

MAHLE GROUP // ANNUAL REPORT 2016“

Toward new markets

ONE OF OUR
FOCUS POINTS IS
DRIVES WITH AN
OUTPUT OF UNDERONE KILOWATT.
Rikio Yoshikawa, President of MAHLE Electric Drives Japan

Rikio Yoshikawa wants to tap new market segmentswith the drives from Numazu/Japan.

55

NEW DIVISION WITHINNOVATIVE STRENGTH
2016 was the first full business year for the Mechatronics­ ivision. All MAHLE activities relating to electric main and auxd
iliary drives are concentrated in this unit. The division is present in Europe and Asia with eleven production locations and3,500 em­ployees in total. The already existing MAHLE activities have been merged with the newly acquired expertise. One
essential factor here is the takeover of Slovenia-based ­Letrika
in September 2014. The electric motor manufacturer from­Šempeter pri Gorici can draw on more than 70 years of experience. In addition to its electric motors, MAHLE Letrika also manufactures alternators as well as electric and mechatronic drive
systems for scooters and work machinery.
The division has a second top performer in the form of mechatronics specialist Kokusan Denki, which was acquired in 2015
and today operates as MAHLE Electric Drives Japan. The­Japanese company was founded as early as 1931. It has four
different locations in Japan and Thailand where it develops andmanufactures electric motors for ABS and ESC functions inbrake systems, and brushless electric motors for electric steering assistance and industrial applications. What’s more, the portfolio of the division also includes ignition components, alternators,
and fuel injection systems for motorcycles and small engines.
Today, MAHLE is mainly concentrating on large, powerful drives
in Slovenia whereas in Japan, the focus is on further developing
smaller electric motors, which are used in two-wheelers, among
others. Nevertheless, the development alliance in Germany,
Slovenia, and Japan, ensures that the still young division exhibits its remarkable innovative strength, which has awakened theinterest of many well-known customers around the world. Several newly developed products from 2016 are by now ready forthe start of production.

OLD PRINCIPLE WITH NEW APPLICATIONS
The basic principle of an electric motor is based on the­phenomenon of electromagnetism, which was discovered in
the early 19th century. The first e-drive was used on a motor boat
in St. Petersburg/Russia in 1838, and the first electrically driven tramway was already running in the streets of Berlin in 1881.
The operating principle is simple: a fixed element—the stator—
generates a permanent magnetic field. Encased in it is a rotor,
around which a coil of wire is wound. When a battery is connected, the electricity flows through the windings and thus creates a second magnetic field. The same poles then repel eachother and set the rotor in motion. A commutator ensures thatthe polarity of the magnetic field is repeatedly reversed so therotor remains in constant motion.
Electric motors have long been a reliable drive system in trains
and machines. Nevertheless, it would take almost 200 years before they could also be considered as an alternative to the combustion engine in automobiles. This is mainly due to the supplyof energy—i.e., the battery—since the charging capacity and infrastructure are the critical issue.
Batteries supply direct current, whereas e-drives—for vehicles,
for example—require three-phase current. The respective conversion is done by the inverter, which is fitted with modern powerelectronics. These also make it possible to convert the e­ lectricity
produced by braking and feed it back into the battery—the socalled recuperation process.
Electric drives for auxiliary components such as pumps, how­ever, are also gaining importance in automotive applications, because these drives can be controlled when required and thus
reduce fuel consumption. In order to ensure a powerful operating voltage for such applications, a 48-volt electrical system istherefore gaining greater popularity in vehicles.

INTERNATIONAL

CUSTOMERPROXIMITY, WITH AN
EYE TOWARD THE
FUTUREINNOVATIONS AT MAHLE’S RESEARCH
AND DEVELOPMENT CENTERS AREHELPING SHAPE CHANGES IN THE
AUTOMOTIVE INDUSTRY

Keiichi Maekawa’s development team in Kawagoe is working on filter solutions
for Japanese manufacturers.

A cross in a circle—hardly bigger than a lentil. Numbering in the thousands, elegant, activated carbon particles such as these ensure that no gasoline vapors can escapefrom the fuel tank. MAHLE’s high-tech solution in a carbon canister is called macroporous activated carbon. From the outside,
the canister looks like a black box with random openings. Nothing out of the ordinary,at first glance. But without it, no vehicle
would be granted type approval in the United States. “At least 80 percent of all Japanese vehicles sold in the United States today
are fitted with our activated carbon canisters,” notes ­Keiichi Maekawa, Head of the
MAHLE research and development centerin Kawagoe/Japan.
The think tank located just over an hour
north of Tokyo focuses primarily on filtration and air supply systems for vehicles.
Their latest development is a flap system tooptimize the engine air supply on demand.
“Before, there were two settings: open andclosed. Today, we can finely tune the system
to dispense the just amount needed, andElegant and efficient: these activated carbon parts
bind gasoline vapors.

even save fuel,” explains R&D engineer Junichi Matsuzaki. As he speaks, his colleagues
are pushing a new van into the soundproof
test workshop. Soundproof? That’s typical for the Tokyo metropolitan area, where
open spaces are rare and people live andwork in close proximity. In the workshop,
the flap solution will undergo countless intensive tests before it will be presented tocustomers. But the testing is not just taking
place in the vehicle. Engineers are also running tests in a cold chamber, for instance,

MAGA ZINE

MAHLE GROUP // ANNUAL REPORT 2016

A global network that is years ahead“AT LEAST 80 PERCENT OF ALL
JAPANESE VEHICLES SOLD IN THE
U.S. TODAY ARE FITTED WITH
ACTIVATED CARBON CANISTERS.”
Keiichi Maekawa, Head of the MAHLE development center in Kawagoe/Japan

chosen powertrain—and their efforts are actively shaping the changes currently taking
place in the automotive industry. They arealso developing tailor-made solutions to address specific requirements of local markets.

to determine whether the flaps will continue to operate properly even if the system issubjected to icy temperatures of minus 30
degrees Celsius.

RESEARCH AND
DEVELOPMENT INA GLOBAL NETWORKCan it be further improved? The macroporous
activated carbon is examined under the microscope.

The research and development centerin Kawagoe is part of a global network inwhich MAHLE develops new components
and systems in near-world conditions. As Dr.
Otmar Scharrer, Vice President C­ orporate
Research and Advanced Engineering, points
out: “These facilities are a continuation of
the work of our Research and Advanced Engineering.” This division has been a fundamental building block of our MAHLE DNA
since the company was founded almost
100 years ago. At that time, Ernst Mahle
developed the innovations that contributed
to the success story of the combustion engine from his workshop in Stuttgart. ­Today,
MAHLE engineers in 15 research and development centers worldwide are joining forces to make engines and vehicles last longer and perform better—regardless of the

To conduct research and development in a
global network, it takes an extensive know­
ledge base and a great deal of experience.
But the ability to take a broader view ofthings is equally essential. “We create expert committees to tackle defined strategic
issues, divide up the jobs to be performed,
and come together on a regular basis to discuss our work,” says Scharrer, in describing
the integrated approach to work that ensures
an efficient transfer of technology at MAHLE.
As diverse as the work is, however, engineers are continuously called upon to
strike a balance between diversification andstand­ardization. Particularly in markets thatseem quite disparate at first glance, it canbe particularly useful to identify synergies
and economies of scale, as these can give
MAHLE fresh momentum going beyond theregional scale.

FROM NATURAL GASTO TWO-WHEELERS
The range of topics is multifaceted. Developers in Stuttgart, for example, are currently directing much of their effort to discovering how to make engines run on naturalgas (CNG). “It’s an interesting alternative toconventional fuels, since it lowers CO2 emissions by nearly one third,” explains Scharrer.

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But a number of technical questions still remain, such as how to handle the increased
pressure and friction that arise in the combustion chamber. MAHLE is currently developing a strategy to address this phenomenon in a partnership with a large German
manufacturer.
In Numazu/Japan, within reach of MountFuji, the MAHLE colleagues are working
to come up with technical solutions for
two-wheeled vehicles. Their R&D efforts
are aimed specifically at addressing theneeds of Japanese motorcycle manufacturers. Scharrer provides the reasoning behind this strategic approach: “The focus at
our facilities simply rests on the customer—
because we need to have a sense today ofwhat our customers will be asking for eightor ten years from now.”A HOLISTIC VIEW OF THE
VEHICLE—FROM A SYSTEMSPERSPECTIVE
That’s just one reason why, for quite sometime now, developers at MAHLE have beenmonitoring the changes currently transforming the automotive industry. “We’re still looking at how we can improve the combustion

engine, since it will continue to power vehicles for a long time to come. At the sametime, however, we’re giving a great deal ofthought to how we can play an active role inshaping e-mobility,” explains S­ charrer. The
way this visionary sees it, the focus is notjust on the electric drive. “That’s already amature technology. In the future, the battery will be the actual engine. And ultimately, the battery determines a vehicle’s performance,” says Scharrer, summing it up in
a nutshell. He goes on, stressing just how
crucial it will be to take a holistic view of thevehicle as a system and to develop solutions
that will advance this approach: “MAHLE’s
R&D centers will play a key role in this effort.”

GLOBAL STANDARDS AND
AN ADDED-VALUE NETWORKAn active exchange of ideas among the
MAHLE think tanks calls for uniform standards across the various divisions. “We develop many of our measurement methods
in-house, since we typically break into newareas of technology in a pioneering role,”
explains Scharrer. This work is an ongoingprocess and cannot be underestimated, hesays, adding that it’s the only way to exploit
the facilities’ full capability. Findings from a

STUTTGARTNORTHAMPTONBASCHARAGEŠEMPETER PRI GORICIDETROIT

test bench in Jundiaí or Northampton canthus be implemented by colleagues in Stuttgart or Shanghai and used to develop new
products there. “This is where it becomes
evident that MAHLE’s global R&D network
really does provide tremendous prospects
for the company,” says Scharrer.
Tetsuya Handa, an R&D engineer in Numazu, describes an example of the resultsof such global cooperation: “Working together with our Thermal Management colleagues in Stuttgart, we developed a newfan. We suspected that a need would arisefor such a cooling unit at some point.” Andindeed, as the Japanese engineer proudly
recounts: “A short time later, our colleagues
in the U.S. were looking for a solution thatwould maintain the battery of an electric vehicle at the optimal temperature.” The new
MAHLE product is planned to go into series production in 2017—developed in Numazu and Stuttgart for a customer in the
United States. For R&D head Scharrer, that’s
no coincidence; it’s the result of the perfect collaborative interplay among MAHLE
engineers around the world: “It’s exactly
this type of cooperation that accounts for
MAHLE’s strength today.”

LOCKPORTAMHERSTTOKYOSHANGHAIPUNESÃO PAULO

Present in all world regions:the 15 MAHLE development centers

NUMAZUMAGA ZINE

MAHLE GROUP // ANNUAL REPORT 2016

A global network that is years ahead“

WE NEED TO HAVE A
SENSE TODAY OF WHATOUR CUSTOMERS WILL
BE ASKING FOR EIGHT ORTEN YEARS FROM NOW.
Dr. Otmar Scharrer, Vice President Corporate Research and Advanced Engineering

Dr. Otmar Scharrer sees great market opportunities for MAHLE
in the combustion engine as well as in the electric drives.

Tetsuya Handa is doing development work it in collaboration withcolleagues from Germany and the USA.

61

IDEAL FOR ALL ENGINE SPEEDSOne of the innovations that emerged from the MAHLE development center in Kawagoe/Japan is a controllable tumble flap
system for the air intake systems of highly efficient gasoline engines. Thanks to the tumble flow, the engine receives the actual
volume of air that is required for each speed. The tumble flow iscreated by a rotating flap valve around a horizontal axis. A precise air supply provides the basis for the correct mixture of fuelas it is the prerequisite to achieve optimum combustion in thecylinder, which in turn minimizes consumption and emissions.
The previous systems only had two positions: open or closed.
By contrast, the controllable flap solution from MAHLE has fivedifferent intermediate positions to regulate the air flow with pinpoint accuracy. The shape has also changed, reducing the flow
resistance.
But how exactly does the flap system work in detail? Low speeds
mean low engine output. A limiting narrow opening of the flap
generates tumble flow which promotes robust combustioneven with large volume of inert exhaust gas by EGR (exhaustgas re­circulation), which in turn contributes to CO2 reduction.
­Conversely at higher speed, the engine requires a higher air
flow. In this ­instance, a wider opening of the flap generates optimum tumble flow with minimum flow resistance, which also
promotes r­ obust combustion with a larger volume of inert exhaust gas. The flap system hence ensures an optimum air-fuelmixture in each speed range. As a result, combustion is morestable, facili­tating a boost in exhaust gas recirculation. The CO2
savings thus achieved amount to roughly 0.5 percent.
An electric actuator controls the flap whereby a sensor detects
the rotation of a magnetic field and thus the position of the tumble flap. The sensors used so far work with a grinding resistor.
They therefore tend to wear out after a certain time, thereby
preventing calibration. MAHLE uses a contact-free sensor instead. Calibration takes place after the assembly with the intake­manifold, providing high accuracy and preventing any wear andtear or associated inaccuracies.

ACTIVATED CARBON CANISTERS
Automotive fuels can contain hydrocarbons (HC), which areharmful to people and to the environment. For this reason, thesegases should not be permitted to escape from the fuel system.
Hydrocarbons are formed, for example, by high outside temperatures, which heat the tank and thus cause part of the fuelto evaporate. Without any countermeasures, the gases formed
would escape into the environment. The activated carbon canister developed by MAHLE ensures that these vapors are captured, stored, and burned in the engine instead.
The hydrocarbons from the tank are adsorbed in the carbon
canister by small, specially shaped carbon pellets—such as themacroporous activated carbon patented by MAHLE—whosemolecular properties ensure that the HC molecules remain in
the activated carbon canister. As soon as the engine starts running, fresh air is drawn into the carbon canister and cleans out
the gases. The hydrocarbons are sucked into the combustion
chamber where they are burned along with the fuel. As a result, these harmful gases are not released into the environment.
The carbon canister fulfills a number of tasks, depending on
the regulatory standard. In European fuel systems, the fuel filler
nozzle dispenses fuel out of the fuel storage tank whereby thedisplaced vapors are immediately drawn back to the storagetank. In this instance, the activated carbon canister only needs
to absorb the HC gases that are produced in the vehicle tank.
It’s completely different in North America: here, the carbon canister not only needs to capture gases generated by the vehicle
tank but also those produced during the refueling process. It
is therefore hardly surprising that the activated carbon canister
is an extremely important component when it comes to getting
approval to sell vehicles for the U.S. market.

GERMANYTHIRTY TIMES AROUNDTHE EARTH AND NO
WEAR AND TEAR

POWER CELL UNITS FROM
MAHLE RELIABLY WITHSTAND
ENORMOUS LOADS

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Reliable endurance runnerWithout them, food would neither get tothe consumers, products to the customers, nor production material to the factories. They reach even the remotest ofregions and are crucial to our modern logistics. We are talking about trucks: in Germany alone, they carry almost three quarters of all the goods transported and coverdistances in the order of 70 billion kilometers in total each year. And the trend is on
the rise: “We expect the truck, especiallyin long-distance hauling, to become evenmore crucial,” explains Matthias Fix, who is
responsible for the sales of commercial vehicle products at MAHLE. According to a
study, the quantity of goods to be transported in Germany will significantly increaseagain by 2030. And though electrification will
also find its way into commercial vehicles,
the focus in the foreseeable future is moreon equipping light urban distribution vehicles and city buses with the new powertraintechnologies. Conversely, the beginning of

A look inside the engine in returnfor a free engine rebuild.

the next decade will still see the combustion
engine playing a significant role in heavyduty, long-distance hauling trucks.

RISING EXPECTATIONSFOR DIESEL ENGINESThis initial position already makes it clearthat the demand for high-performance diesel engines for trucks will continue to riseover the coming years. However, the expectations for these units are also increasing, as
Matthias Fix confirms: “For logistics companies, the total cost of ownership (TCO), or
overall operating costs, is an extremely decisive factor. This is because they are underincreasing pressure to reduce costs despite
the rise in freight rates. Low fuel consumption thus plays a significant role in the bigger picture.” Trucks therefore not only need
to be fuel-efficient, but they also need to run
for as long as possible and, above all, without any problems. MAHLE has already beenaccompanying the development of trucks
since the company’s foundation in 1920.
Over the decades, the MAHLE technologies
for diesel engine solutions have been constantly refined and optimized to meet the increasingly stringent emission standards andmake the trucks “cleaner.” Modern trucks
have little in common with the trucks of earlier days. Forty years ago, the fuel was injected with a mere 180 bar. Today, injection
pressure amounts to 2,700 bar, with a muchfiner diesel distribution in the combustion
chamber—with top precision and electronic
operating map control for the optimum timeof injection. The fuel thus burns much more
efficiently at combustion chamber pressuresof up to 250 bar.

TAKING STOCK AFTER
1.2 MILLION KILOMETERS
The so-called power cell units—consistingof pistons, pins, piston rings, and cylinder
liners—need to reliably withstand this highcyclic pressure and the temperatures that
occur during combustion: kilometer after

Before (left) and after 1.2 million kilometers (right):
the MAHLE components had survived the prolonged
stress unaffected.

kilometer, route after route, year after year.
During the course of the field observation,
MAHLE grappled with the question: how
does a mileage of more than one million kilo­
meters impact a power cell unit? This was
the starting point of an exciting examination.
In the spotlight: a white Volvo truck, which
at first glance had obviously already experi­
enced quite a lot on its countless journeys
through Europe. The truck was borrowed
from a dealership. “We were allowed to lookinside the engine and in return the Volvo received an engine rebuild with new powercell units from MAHLE,” relates Dr. Andreas
Pfeifer, Head of Development Engine Systems and Components. The MAHLE teamthen took a look at the unit that so interested them under the driver’s cab: a six-cylinder turbocharged diesel engine with a displacement of 12.8 liters and an output of
480 hp (353 kW). The Volvo has alreadytravelled a long, long distance with this engine—more than 1.2 million kilometers in total, which corresponds to almost 30 times
around the earth.

PROVEN DURABILITY
The quality of the components was quite
apparent during the examination: “WeMAGA ZINE

MAHLE GROUP // ANNUAL REPORT 2016

Reliable endurance runner

Together, they work on solutions for the truck engines of tomorrow: Matthias Fix (left),
Vice President Sales Commercial Vehicles, and Dr. Andreas Pfeifer, Head of Development
Engine Systems and Components.

“BESIDES RELIABILITY AND
DURABILITY, LOW FUELCONSUMPTION PLAYS ANEXTREMELY CRUCIAL ROLE.”
Matthias Fix, Vice President Sales Commercial Vehicles

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Reliable endurance runner“WITH OUR SYSTEMICAPPROACH, EFFICIENCYAND FUEL CONSUMPTIONCAN BE IMPROVED BY
UP TO THREE PERCENT.”
Dr. Andreas Pfeifer, Head of Development Engine Systems and Components at MAHLE

measured the pistons and even we were
somewhat surprised: after this long periodof time, their tolerances were virtually indistinguishable from a new product.” The pistons weren’t the only parts that survived
the prolonged stress totally unaffected. The
other MAHLE components in the PCU also
demonstrated their high quality and dur­ability
by showing no significant wear. “Our analysis
has shown that we have developed components, which delivered what we promised thecustomer at the time: high quality and reliability,” reports the MAHLE truck developer
with satisfaction.

SOLUTIONS FOR THE TRUCKENGINES OF TOMORROW
The investigated piston comes from an engine that meets the Euro IV standard. The
emissions limits for the current “Euro VI” areconsiderably stricter, among other things.
Lower fuel consumption is also required inorder to reduce the total operating costs.
“The critical aspect of this approach today,

IN GERMANY ALONE,
THEY CARRY¾

OF ALL
TRANSPORTED
GOODS

AND

COVER TOTALDISTANCES OF

70

BILLIONKILOMETERS

is not only to implement individual measuresfor each component, but to ideally tune thecomplete system consisting of engine andperipherals,” stresses Dr. Andreas Pfeifer.
Improvements to the engine mechanics canalso off-load the oil circuit. “The optimization then takes place across the engine—especially at the functional interfaces. The
overall efficiency of the powertrain derives
even greater benefits: “Efficiency and thus
fuel consumption can be improved by up to
three percent in total.”Here, it becomes clear: changes in the commercial vehicle are the sum of many innovative steps, which not only have a novel
approach but also view the truck as a complete system. Matthias Fix and Dr. Andreas
Pfeifer unanimously define the goal in thisway: “We want to ensure that, in the future,
truck engines run reliably for even longer, require less fuel, and are less harmful to theenvironment. We are well on track with oursystemic approach.”

MAGA ZINE

MAHLE GROUP // ANNUAL REPORT 2016

Reliable endurance runner

An exciting examination with a white Volvo Truck as the main actor

67

THE COMPLETE SYSTEM IN VIEW
Commercial vehicles are subjected to extremely high loads. It
is therefore all the more important that their components andsystems can withstand this stress. However, the efficiency anddriving comfort of trucks are also a crucial criterion. This is why
MAHLE takes a holistic systems approach when developing
new products. In this context, not only individual components
but also their complex interplay with other systems in the vehicle are considered and optimized.
One ideal solution offered by MAHLE is the controllable pendulum-slider oil pump, which generates pressure and volume
flow on demand. This saves up to 1.5 percent of fuel. Because
it is both insensitive to contamination and extremely resilient, itworks efficiently and reliably. MAHLE also has developed solutions to off-load the complete oil system. MAHLE Stratum honing—a special surface treatment for cylinder liners—optimizes
the oil-holding capacity at the reversal points of the piston rings,
relieving the strain on the oil circuit. The new camshaft technology also protects the oil system, whereby conventional bearings are replaced by wear-free rolling bearings, which don’t require pressurized oil. Overall, the improved engine components
and more efficient oil supply achieve fuel savings of up to three
percent. This is only possible because MAHLE consistently focuses on the overall powertrain system and not just the individual components.
This holistic systems approach is also applied to HVAC systems. Conventional air conditioning systems consume on average around 0.2 liters of fuel per 100 kilometers. With the ECO
A/C system developed by MAHLE, the increase in consumption is limited to only 0.03 liters per 100 kilometers, which corresponds to a reduction of 83 percent. All components are optimized here too with regard to their interactions with each otherand the climate control system.

TIRELESSLY IN USE
The requirements for heavy-duty commercial vehicles are high:the engine must be able to deliver a mileage of 1.6 million kilometers. The power cell unit—the heart of the engine—consists ofpistons, piston pins and rings, cylinder liners, and the connecting
rod with bearing bushings. One of the PCUs MAHLE examinedfrom a randomly selected truck, which had already negotiated
1.2 million kilometers, provided proof of its quality: the components showed virtually no signs of wear and tear.
Some impressive figures were derived from the investigated
PCU: in its cylinder liner, the piston itself had covered roughly
370,000 kilometers. In around 600 million ignition cycles, morethan 65,000 liters of fuel were burned per cylinder. This gave
rise to piston temperatures of up to 450 degrees Celsius and apressure of up to 210 bar. At 1.2 million kilometers, the crankshaft had accomplished a total of 1.2 billion revolutions and thepiston 2.4 billion piston strokes. Over this period, 5.6 million liters of oil made sure the piston stayed cool.
The power cell unit contributes to the engine’s highest proportionof friction losses—around 40 percent. To optimize this high-performance system further, MAHLE takes the interaction of all theindividual components into account and further develops theirinterplay—for even less friction and thus reduced fuel consumption while keeping wear and tear to a minimum.

RESPONSIBILITYCOMMITTEDEMPLOYEES:FOUNDATION OF OUR
SUCCESS

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Human resources

Committed employees with outstanding
skills and capabilities are the foundation of
our success. Our HR activities have thus
been focusing on their careful selection, appropriate promotion, and further education
for many years. The ongoing technological changes in the automotive industry, theadvancing digitization, and the unremittinghigh competitive pressure are currently influencing the working environment more thanever before and are presenting our HR activities within the MAHLE Group with newchallenges.

EMPLOYER BRANDING ANDRECRUITING

Our processes and organizational structureneed to adapt to these new requirements so
we can fully tap the considerable potential of
our employees worldwide and continue toacquire new talented and motivated employees as an attractive employer. Last year, welaunched the “HR Boost!” strategic projectto support this development. It combines
various subprojects in the areas of employer branding, recruiting, career development,
and diversity. Existing HR processes andactivities are to be further developed, andstructures and processes examined, optimized, or even redesigned.

One example of this is the project welaunched in 2016 to use new virtual reality(VR) formats for employer branding and recruiting purposes. The first MAHLE VR image video was used with great success at
IAA Commercial Vehicles, A­ utomechanika,
and Formula Student Germany on the Hockenheim Ring. In the meantime, MAHLE is involved in Formula Student worldwide, whereby 24 teams “sponsored by MAHLE” inEurope, North and South America, as well
as Asia are now participating—both in the
Formula Student Combustion (FSC) and the
Formula Student Electric (FSE). In 2016, two

In order to position ourselves on the market
as an even more attractive employer, we havefurther intensified the employer branding activities of MAHLE. We are already using social
media activities and trade fairs not to mention specific recruiting events and collaborations with selected universities to target pupils, graduates, and young professionals inparticular. We want to pursue and support
these measures in the coming years throughthe use of new media and technologies.

new teams from Germany were included aswell as an FSE team from Slovenia for the firsttime. By supporting aspiring engineers with
our production and development expertise
as well as financially, we are able to comeinto direct contact with precisely the committed and innovative target group we want
to attract for the future successful development of the MAHLE Group.
We also maintain direct contact with students through our worldwide, close cooperation with around 28 selected key universities, of which there are five in Germany
alone. These cooperative ventures include
guest lectures from MAHLE experts at theuniversities, close contacts with professors,
as well as sponsoring activities and local
events. MAHLE awards scholarships to support young academics and honors students
with MAHLE Performance Awards for their
special achievements. In Germany, for example, we are involved in German scholarshipprograms at seven technical colleges, support technical students with scholarships in
Poland, and sponsor key universities in Brazil. In the USA, MAHLE is engaged in the Society of Women Engineers (SWE) in order to

MAHLE is meanwhile involved in Formula Student
on a worldwide basis.

New ways of recruiting and employer branding: the first virtual
reality image video was met with great interest at IAA Commercial
Vehicles.

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Human resources

approach female engineering students andmotivate them to join MAHLE, among other things.
Since we want to present ourselves to candidates in a uniform manner and make theinternal job market more transparent, we began with the successive rollout of our worldwide recruiting portal “eMploy” some timeago. It was rolled out to China in 2016; theportal is thus now being used in Europe,
North and South America, and Asia. Overthe coming years, our recruiting activities will
be increasingly concentrated in specialized
recruiting organizations in order to f­acilitateeven more efficient staffing. What’s more,
our own employees will also assist us in
the search for new professionals within theframework of our newly created employeereferral programs.

For us, qualified employees are essential

In the “vehicle mechatronics e-Mobility plus”

guarantors of success—all over the world.

cooperative study model, the specialists of tomorroware gearing themselves up for e-mobility.

CORPORATE TRAINING
In our commitment to attracting the brightest minds and most capable employees,
we at MAHLE not only rely on our targeted
personnel search, but have always placed
great emphasis on the internal training andfurther education of our professionals.
­Apprenticeships and cooperative studies
are also of particular significance here.
In the German MAHLE Group companies,
a total of 357 apprentices were trained in
18 occupational profiles, and 114 cooperative studies students were trained in elevencourses of study in 2016. In order to meetthe new requirements, we have also incorporated new courses of studies, which explore the new technologies in much greater
depth with regard to digitization.
The numerous awards and accolades that
our apprentices again won in 2016 show
just how successful the training is. Especially noteworthy here is the success ofa production engineer from the Gaildorf­location in Germany, who completed his­apprenticeship with the best national score.

Our training is also active in shaping new
courses of studies, in order to ensure that
our students are taught the necessary expertise for the challenges of the future. For
example, together with the Esslingen University of Applied Sciences and other partners, MAHLE conceived the “vehicle mechatronics e-Mobility plus” cooperative study
model in order to teach future specialists
the necessary basics in dealing with new
drive concepts and e-mobility. The successful cooperation of the Mechatronics, Electrical Engineering, Computer Science, and­Vehicle Technology faculties of the University of Esslingen, as well as vocational schools
and training organizations enables students
to do a practical mechatronics engineer apprenticeship in this five-year model before
graduating as a Bachelor of Engineering.
However, training doesn’t just play an important role in Germany. It is also of greatsignificance to our solid foundation of
employees with outstanding skills andknowledge in other countries. In Austria, 106
young men and women took part in similar
programs in eight apprenticeship opportunities. In order for Polish production to meetthe high demand for qualified technical personnel, a total of 110 apprentices embarked
upon several years of training in 2016. Brazil
has considerably intensified its internal training activities over the past few years for thesame reason. In 2016, 412 junior employees were trained in 15 occupational profiles in view of their subsequent takeoverby MAHLE. In Mexico, 84 specialists weretrained in a comprehensive, 18-week internal program that was specially tailored to
MAHLE’s specific requirements.
We cooperate with associations, schools,
and even kindergartens to promote interest in MINT subjects (mathematics, informatics, natural sciences, technology) within the framework of numerous initiatives andprojects worldwide. The group is meanwhilefirmly committed to some of these, such as

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Human resources“Girls’ Day” or “Technolino,” on an ongoing basis. Other activities have been added
and new ones are to be introduced. MAHLE
has been a member of the “Wissensfabrik”(Knowledge Factory) since 2016—an initiative to promote education and entrepreneurship in Germany. It works with ­scientificpartners to develop projects that can be implemented in kindergartens and schools
throughout Germany.
In addition to this professional commitment,
MAHLE also takes its social responsibility
very seriously: In the 2015 and 2016 business years and on the initiative of the Management Board, a total of 23 refugees were
offered vocational orientation internships inGermany; five were within the framework ofan orientation internship, and eight involved
attaining entry qualifications over a periodof six to eleven months. So far, three of the
refugees have been successfully taken on
as trainees by MAHLE, and we even madeit possible for two refugees to enroll for acourse of studies. We are planning to takeon more in the future.

GLOBAL DEVELOPMENT OF
PROFESSIONALSWith our comprehensive catalog of educational measures as well as national andinternational training programs, we ensurethat our employees obtain the necessary expertise and skills in order to meet the requirements of the future. Thus equipped, our employees play a crucial role in securing andshaping the success of the company.
On these grounds, one of the MAHLE Group’s
strategic goals is to primarily fill all manager­ial
positions from within the company. Various
national, regional, and i­nternational development programs are instrumental in specifically preparing our employees and executives
for new or enhanced areas of responsibility within the company. Participants in these
programs are identified by means of regular potential assessments and development
conferences. The company can thus recognize the strengths of the individual employees
in a timely manner and systematically promote them. Leadership skills are specificallytrained and developed.
The executive development programs at thedifferent hierarchical levels not only strengthen personal and professional skills, they also
serve to build and expand networks acrosscountries and functions. In order to meet thevarious challenges of the different management levels and cultures, we also offer specially tailored leadership and management

Since 2016, MAHLE has been involved in the “Wissensfabrik”(Knowledge Factory)—an initiative to promote education andentrepreneurship in Germany.

training activities on a regional and global basis. Individual development plans are increasingly being used to expand our active career
management process. We are enhancing thecontent of our personnel development programs with new topics, such as innovation
management, digitization, and Industry 4.0.

MOBILITY
As a globally operating company, we needpeople who think outside the box and work
together to advance the right ideas for
MAHLE. We have thus consistently encouraged the mobility of our employees over the
past years. The international assignment ofprofessionals supports the transfer of expertise. It opens up new prospects for employees and executives, promotes their individual
professional development, and expands theirpersonal horizons. A globally binding mobility
policy governs the framework conditions forworldwide assignments and helps to makethese both uniform and attractive.
What’s more, MAHLE even promotes foreign
assignments during training and the first few
years of work. For management trainees, residing outside the home country is an integral part of the training program. Students ofcooperative studies also have the opportunity to work at a MAHLE location around theglobe and gather intercultural experiences aspart of their practical training. Around 70 percent of the MAHLE students of cooperative
studies in Germany had completed such anoverseas placement by the time they graduated in 2016.

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Human resources

DIVERSITY AND
ADVANCEMENT OF WOMENInternational assignments are of prime importance when it comes to sharpening intercultural understanding, as well as promoting openness in an internationally oriented
corporate reality. Diversity, the keen senseof appreciation for variety and difference, isan important area of activity for globally operating companies such as MAHLE. By this,we particularly mean variety with regard togender, generations, as well as countries oforigin, and cultures. Our goal and aspiration
is to promote this diversity at MAHLE. We
are convinced this will not only bolster ourinnovative strength, but also the future viability of MAHLE. We are therefore rigorously
expanding our global activities to promote
diversity in our company within the scope of
the “HR Boost!” strategic project.
The focus here particularly lies on the further
internationalization of management, stepping up measures to further the advancement of women and provide family support,
as well as the introduction of working timemodels geared to the phases of life. To thisend, we are compiling a comprehensive
package of measures encompassing employer attractiveness, recruiting, personnel
development, flexible working times, as well
as work-life blending, leadership behavior,and communication.

Our aspiration is to promote diversity at MAHLE. We are therefore expanding
our worldwide activities within the framework of a strategic project.

We made this objective public with MAHLE’s
successful admission to the Diversity Charter business initiative (“Charta der Vielfalt”)
at the end of 2016. As a nonprofit association, the initiative is driving the s­ ubstantive
discussion on diversity and its promotion­thereof in several projects under the patronage of German Chancellor Dr. Angela
Merkel.

RECONCILING FAMILY AND
CAREER—HEALTHWith our employee-friendly working conditions such as flexible working hours, parttime work, or home office, we are alreadyhelping MAHLE employees to reconcile theirfamily and professional lives. MAHLE helps

women in particular to return to work during
and after parental leave through special parttime models, for example. Our in-house
day-care center with 40 places in Stuttgart/
Germany has been making an important
contribution to easing the pressure on families for years. In many countries, MAHLE either organizes its own holiday programs forthe children of employees, or runs them incooperation with associations.
Occupational health management and healthpromotion are also integral parts of our corporate culture. Numerous worldwide projects
and measures aim to improve the working
environment and raise employees’ awareness about maintaining their own health.
The activities and benefits we offer range
from company sports teams and special fitness programs to free vaccinations and other medical services as well as health classes
and advice on social issues. We particularly
attach great significance to awareness, prevention, and encouraging people to take responsibility for their own actions. Health daysat the MAHLE locations in numerous countries serve to familiarize employees with ahealthy diet and lifestyle concepts.

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Corporate Social Responsibility

At MAHLE, social commitment and sustainable business activities have always been key principles of thegroup. As an international company, MAHLE also feels socially responsible. We therefore incorporate these
aspects into all our decisions—this is what responsible change means to us. The group is thus working in allareas to consistently lower the impact on people and the environment with its innovations, resource-saving
technologies, and modern manufacturing processes. What is more, we see ourselves as an active member ofthe community in which we operate and therefore assume social responsibility.

ENVIRONMENTAL MANAGEMENT
MAHLE strives to make its products as energy- and resource-efficient as possible. Environmentally sound product design is an
important consideration when developing
new products.
These basic principles also apply to ouroperational processes, which are designed
to conserve energy and resources, following the ISO standards 14001 and 50001,
as well as OHSAS 18001. By taking appropriate measures, MAHLE also ensures thatenvironmentally harmful events are avoided
and limited in the case of damage. To thisend, we invest in environmentally friendly,
MAHLE received acclaim for its
sustainable business practices
in Brazil in 2016— here we take alook at our plant in Mogi Guaçu.

state-of-the-art technologies and actively
support global climate protection efforts.
Species conservation and diversity considerations are also taken into account in planning measures. Fulfilling the general obligation of due diligence in protected areas issecond nature to MAHLE.

ACTIVITIES IN 2016
In the 2016 business year, the environmental activities of the MAHLE Group—such
as FSC certification—were refined and­expanded further throughout the world.
These include a variety of modernizations,
audits, and new investments. In November
2016, the MAHLE Group obtained FSC (Forest Stewardship Council) certification, after

audits were carried out at the headquarters in Stuttgart and the production locationin Gebze/Turkey. This confirms, for example, that all paper filters in MAHLE products are derived from plants from sustainable sources.
In North and South America, the use of­acids containing chromium has been discontinued. At the Mühlacker location in­Germany, a thermal exhaust gas after-treatment system was commissioned, which hassignificantly reduced the plant’s emissions.
In Brazil and India, MAHLE has received
awards for its sustainable business operations. The Chennai location in India received
the “Golden Peacock” award from the Indian industry association for its sustainablemeasures to ensure the health and safetyof its employees.

CORPORATE SOCIALRESPONSIBILITY
For years, the MAHLE Group and its employees have been supporting numerous
projects and initiatives in many countries topromote social interaction, education, andthe fight against poverty and disease—often
in collaboration with the MAHLE Foundation.
At MAHLE, social commitment and the assumption of corporate responsibility are an
integral element of our corporate culture.

LOCAL COMMITMENT TOEDUCATION AND HEALTH
For several years, MAHLE has been
­involved in the project “Focus on iThemba”

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Corporate Social Responsibility(“iThemba” means “hope” in Zulu) in South
Africa, which promotes the schooling andfurther education of orphans. The focus
here is not just on financial support. The
young people are offered real prospects,
and some are subsequently taken on as
MAHLE employees. MAHLE also launched
the “Science2Go” initiative in 2015: a bus
was converted into a mobile laboratory tooffer 15,000 pupils in the vicinity of Durban
the possibility to experience physics andchemistry experiments. Due to the unsuitable equipment in many schools in the rural areas of South Africa, this would otherwise not be possible. In order to draw publicawareness to the importance of education
as the key to social advancement, MAHLE
and the nonprofit organization CASME(Center for the Advancement of Scienceand Mathematics Education) organized theworld’s largest scientific lesson with 2,100
pupils and 60 teachers in Durban in 2016,
and thus even made it into the Guinness
Book of Records.

INITIATIVES AROUNDTHE GLOBE
Offering prospects to socially disadvantaged
youngsters is also the goal of the MAHLE
Formare School in Brazil. Our employees
have been looking after and teaching around130 young people in technical subjects at
six of our Brazilian locations each year forthe past 15 years. More than 1,430 young
people were thus able to make a successful transformation: 75 percent subsequently
found a job, many of whom are now MAHLE
colleagues. The Dança e Cidadania project,which was launched 15 years ago, is aimed
at getting children from low-income families
off the street and providing them with newprospects through dance, art, and music.
MAHLE is supporting around 400 children at
the Brazilian locations Campinas and Mogi
Guaçu through this initiative. Another classin Itajubá with around 50 children and young
people was added in 2016.
MAHLE is supporting local primary schools
and kindergartens in Mnichovo Hradiště/Czech Republic with regular cash and noncash donations. MAHLE donations are also

Education is the key to social advancement. That’s why we are sponsoring specific educational
projects such as “Science2Go” in South Africa (left) and “Formare” in Brazil (right).

helping an orphanage near the Ostrów location in Poland, providing children in needwith school meals, food, and clothing. Our
North American locations, in contrast, havea long tradition of fund-raising and commitment to general health promotion. In 2016,
MAHLE sponsored a running event, whose
proceeds were donated to various charitable organizations that look after children
in the Charleston area. MAHLE employees
have also been involved for many years in
the “Tour de Cure” cycling race organizedby the American Diabetes Association. Bymeans of active participation and donations,they thereby contribute to further advancing
the development of improved treatment options for diabetes.

SUPPORTING SUSTAINABLE
HELP TO SELF-HELP
MAHLE is supporting the “Vergel” agricultural community near the Mogi Guaçu locationin Brazil, where around 100 small farmers
are operating a cooperative. They are now
even supplying our canteen in Mogi Guaçu
with organically grown produce. Until now,there has been a lack of childcare places inthe Vergel community, which is why MAHLE
joined forces with Instituto MAHLE and the
MAHLE Foundation to sponsor the construction of the Centro Educacional Ernst
Mahle, which opened in 2016. A total of 75
children ranging between the ages of fourmonths and six years now receive full-timecare there. What’s more, further kindergartens in Brazil have been expanded in cooperation with Instituto MAHLE. In 2016, a totalof 262 new childcare places were created,
and around 190 will follow in 2017.

NUMEROUS EMPLOYEEVOLUNTEER INITIATIVES
Above and beyond the aforementioned exemplary activities, MAHLE employees at ourworldwide locations display a high degree ofsocial commitment with their voluntary participation in many other initiatives—from supporting international aid organizations andhospitals, to providing help to people in needas well as children’s and old people’s homes,
through to various educational opportunities
designed to improve career prospects. The
charitable projects, donations, and fund-raising campaigns are often instigated and carried out on their own initiative. The MAHLE
Management Board would like to express
its heartfelt thanks and high regard to all the
dedicated helpers for their commitment.

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ENVIRONMENT
VIEWED AS A WHOLE:
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MAHLE Foundation

Change born from responsibility—this is
one way to summarize the activities of the
MAHLE Foundation in 2016, too. “We havemade a number of changes, especially in
the Filderklinik—our biggest funding project,” explains Jürgen Schweiß-Ertl, Managing Partner of the MAHLE Foundation. It was
the driving force behind the founding of theanthroposophical acute care hospital on theoutskirts of Stuttgart back in 1975 where it
held 40 percent of the shares, without, asyet, being represented on the Supervisory
Board of the clinic. The MAHLE Foundation
has significantly expanded this position in
2016: it now holds 70 percent of the sharesand its own members are also actively involved in the Supervisory Board.
“In this way, we want to accommodate thedynamic change in medicine and strengthen the clinic’s special orientation toward theholistic perception of humans,” Schweiß-Ertl
says, emphasizing this step. Dr. Bernhard
Volkmann, MAHLE’s former Chief Financial
Officer, brings a great deal of group experience to the hospital’s supervisory body. “Wehave meanwhile implemented some majorchanges in a bid to improve the institute’s

In the context of sustainable agriculture, the
MAHLE Foundation is also funding seed research.
One current project is to promote the return of the“Alb lentil,” which is an integral part of the Swabiannational dish (previous page).

Integrative medicine is based on a particularly trusting relationship between doctor and patient.

position in an environment heavily influenced
by cost pressure,” states Schweiß-Ertl.

FLAGSHIP FOR
INTEGRATIVE MEDICINE
The clinic takes a holistic approach to caring for its patients, taking their personality,
biography, living conditions, and potential
into consideration. As a result, the relationship between doctor and patient is usually very trusting. “Integrative medicine is becoming increasingly popular, which is why
we want to promote the clinic as the flagshipof integrative anthroposophical medicine,”
stresses Schweiß-Ertl. The interest among
patients and physicians is equally high. Thishas thus given rise to interesting collaborations: for example, the pediatric oncology
department of Charité in Berlin and the university clinic in Sao Paulo have also started
to use anthroposophical treatment methods.
“The three clinics also exchange information
with each other, despite their very different
local conditions,” enthuses Schweiß-Ertl.

The Filderklinik’s approach, which treatspatients on a holistic and individual basis,is also of particular concern to the MAHLE
Foundation. This can be traced back to thefounders of the MAHLE Group. Inspired byanthroposophist Rudolf Steiner’s presentations on social, economic, and societal
issues in the handling and use of capital,
brothers Hermann and Dr. Ernst Mahle decided to transfer their company shares in the
nonprofit foundation in 1964. In doing so,they thus based the activities of the company on these anthroposophical concepts.

MORE THAN 5,000 PROJECTSSPONSORED SINCE FOUNDATIONThe MAHLE Foundation holds 99.9 percentof the group’s shares and receives an annual dividend with which it finances its funding projects. The charitable company is thus
the guarantor for MAHLE’s independence. It
also ensures that 97 percent of the group’s
net income for the year is reinvested in the
MAHLE Group. To ensure the nonprofit

“WE ARE FUNDINGSCHOOL PROJECTSBECAUSE THESE YOUNGPEOPLE WILL BUILD
THE COMMUNITIESOF TOMORROW.”
Jürgen Schweiß-Ertl, Managing Partner of the MAHLE Foundation

Jürgen Schweiß-Ertl has supported over 150 projects of the
MAHLE Foundation all over the world.

status remains intact, the MABEG (Verein
zur Förderung und Beratung der MAHLE
Gruppe e.V.) exercises the voting rights andnot the MAHLE Foundation.

has many facets. We are thus also funding
school projects because the young peopleof today will build the communities of tomorrow. Every cent is well invested here.”

Promoting holistic nursing and health isjust one of the key topics addressed by the
MAHLE Foundation. In 2016, it funded morethan 150 projects. Over 500 inquiries in total were recorded and reviewed by four employees. At least two of the seven shareholders are always involved in the decisionon whether to approve funding. Since its inception, the MAHLE Foundation has accompanied and sponsored more than 5,000 different projects and initiatives in this way.

A healthy diet is also one focus point of the
MAHLE Foundation’s work. “Unlike i­ndustrial
suppliers, we promote seed propagation,
which means the seeds can be used by
the farmers for years to come, instead of
having to repeatedly buy them anew. This­accords with our understanding of sustainable ­agriculture,” emphasizes Schweiß-Ertl.
The demand for appropriately grown produce is rising significantly, especially in­Europe. The Foundation is promoting seed
research, which also takes regional particularities into account. Such new seed propagation is a very lengthy process: “It can taketen to even fifteen years until such seeds
have reached market maturity.”

EDUCATION—NUTRITION—SUSTAINABLE AGRICULTURE
Education is another priority for Jürgen
Schweiß-Ertl and his employees. That’s
why educators and teachers working at
the Waldorf schools and kindergartens arealso supported and trained to some extent. “We are witnessing a growing interestin eastern Europe—for example, in Russia
and Ukraine,” reports Schweiß-Ertl. However, the demand for qualified personnel isalso huge in China, where several hundred
Waldorf kindergartens have also sprung up
in the meantime. “As we see it, education

Foundation has been backing the “Shining
Eyes” initiative to improve the food and hygiene situation of the poorer social classes since 2010. Nutrition programs, in whichchildren and mothers learn how to preparea healthy meal, are an integral part of thisproject. The initiative also works together
with the villagers to create kitchen gardens
in which fruit and vegetables are grown. The
health and weight of children are checkedon a regular basis and vitamins and minerals are prescribed, if necessary. In this way,
“Shining Eyes” is contributing to permanently overcoming chronic malnutrition on thesubcontinent and is preventing many healthproblems from the outset.

The MAHLE Foundation is sponsoring sustainable agriculture and educational projects
in Brazil together with Instituto ­Mahle, which
was founded in 2007. Instituto ­Mahle is also
supporting the Casa Angela—a birthingclinic located in a disadvantaged district ofSão Paulo—which has even received state
recognition as Brazil’s sole birthing clinic outside a hospital. In India, the MAHLE

The “Shining Eyes” initiative in India improves the food andhygiene habits of the poorer social classes.

GROUP MANAGEMENTREPORT84

FUNDAMENTAL INFORMATION ABOUT
THE MAHLE GROUP

84

Business activities and corporate structure

84

Business segments

86Group strategy

87

REPORT ON ECONOMIC POSITION

87

Economic conditions

88

Business development

92

Net assets, financial position,and results of operations

96

ADDITIONAL KEY PERFORMANCE INDICATORS

96

Human resources

97

Technology and innovation

99

Purchasing

99

Production, quality, and environment

101

OPPORTUNITY AND RISK REPORT103

STATEMENT ON CORPORATE MANAGEMENT

104

OUTLOOK

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Fundamental information about the MAHLE GroupFUNDAMENTAL INFORMATIONABOUT THE MAHLE GROUP
nn

nn

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Products for the combustion engine and its peripherals, for electrified vehicles as wellas the complete thermal management system independent of the drive configuration
Dual strategy characterized by consolidation of technology and cost leadership inestablished business segments while expanding activities in the areas of e-mobility
and alternative powertrains
Expanded mechatronic activities now a strategic business segment

BUSINESS ACTIVITIESAND CORPORATE STRUCTURE
MAHLE is a global development partner and supplier to the automotive industry, and a technological driver for innovative and efficient mobility. Our products cover all crucial issues relating to thepowertrain and air conditioning technology. We are not only working on the ongoing development of the combustion engine, but are
simultaneously developing new drive concepts and solutions in thearea of e-mobility.
MAHLE products are fitted in every second vehicle worldwide. They
are used in two-wheeled vehicles, passenger cars, and commercial vehicles, as well as off the road—be it in stationary applications,mobile machinery, rail transport, or marine applications. Our motorsports components turn the world’s best racing teams into winners
and champions—from Formula 1 through to long-distance ­races
and rally championships.
The MAHLE Group is organized in four business units: Engine Systems and Components, Filtration and Engine Peripherals, ThermalManagement, and Aftermarket. At the beginning of 2016, we consolidated our mechatronic activities in a newly founded division. Six
further business fields are geared toward specific market and customer segments.
The nonprofit MAHLE Foundation holds 99.9 percent of the company’s shares. The voting rights are held by Verein zur Förderung und
Beratung der MAHLE Gruppe e.V. (MABEG), which exercises theshareholder rights and holds 0.1 percent of the shares. This structure safeguards the MAHLE Group’s corporate independence andallows us to plan for the long term and make appropriate investment
decisions. As a foundation-owned company, we voluntarily implement in a comparable manner the key elements of the German Corporate Governance Code in its version dated May 5, 2015, insofar
as they are suitable and appropriate with regard to the shareholder
and governance structure of MAHLE.

The operating result, a key figure similar to the EBIT, is an impor­tantmanagement tool for the MAHLE Group. Any differences comparedwith EBIT are essentially due to the amortization of goodwill as well
as depreciation and amortization on disclosed hidden reserves within the framework of purchase price allocations. Profitability must be
pursued in all areas and processes. In doing so, MAHLE secures
stable corporate development and generates sufficient funds fornecessary investments.

BUSINESS SEGMENTS
ENGINE SYSTEMS ANDCOMPONENTS BUSINESS UNIT
This business unit is the global market leader in its relevant market
segments and can build on decades of development and systems
competence as well as comprehensive production experience. Its
products include pistons, piston rings, cylinder liners, and bearings,
as well as valve train systems and components. These products areused worldwide in two-wheeled vehicles, passenger cars, commercial
vehicles, and large engines. We are continuously developing ourportfolio to further reduce emissions and fuel consumption in
combustion engines in the future.

FILTRATION AND ENGINE PERIPHERALS
BUSINESS UNIT
With its products, the business unit provides for clean air andprevents contaminations in oil and fuel from damaging the engine.
We produce filter and pump systems as well as oil coolers forengine and transmission applications and our products make adecisive contribution to increasing the efficiency and service lifeof engines and to reducing emissions. Because the peripherals
for even identical basic engines frequently differ due to varying
regional emission laws, individual car body shapes, and various
power classes, we, as a development partner to our customers,
have built modular systems for all major product groups over the
past years. MAHLE is one of the global market leaders in thisarea, too.

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Fundamental information about the MAHLE Group

MAHLE GROUP
Sales: EUR 12,322 million
Headcount: 76,632

DIVISION

BUSINESS UNITSPROFITCENTERSEngine Systems
and Components

Filtration andEngine Peripherals

ThermalManagement

Aftermarket

Mechatronics

Sales: EUR 2,683 million
Headcount: 28,293

Sales: EUR 2,191 million
Headcount: 10,796

Sales: EUR 4,293 million
Headcount: 22,767

Sales: EUR 899 million
Headcount: 1,555

Sales:EUR 374 million
Headcount: 3,243

Sales:EUR 1,882 million
Headcount: 9,978

Control
Units

Front-end
Modules

PROFIT CENTERS­Engineering ­Services,­Motorsports, and­Special Applications

Large and Small
Engine Components

Industrial
ThermalManagement

Compressors

As at Januar y 1, 2017

THERMAL MANAGEMENT BUSINESS UNIT
The increasing electrification of the powertrain requires a high degree of innovative strength in the thermal management of batteries and the entire electric powertrain. In addition, the downsizingof engines toward reducing CO2 and other emissions has resulted
in thermal management playing an increasingly crucial role in theperformance of the combustion engine. What’s more, the air conditioning has the task of providing comfort inside the cabin while
keeping energy consumption low. We have steadily expanded ourthermal management activities over the past few years and are
the world’s second largest supplier in this segment today. When it
comes to the thermal management of batteries, we are a technology pioneer and with our solutions; we can ensure a constant temperature level and distribution between the battery cells—this is aprerequisite for the high performance and long service life of theenergy storage system.

AFTERMARKET BUSINESS UNIT
This business unit supplies the trade, as well as workshops and engine repair partners worldwide with spare parts in original equipment quality—be it engine parts, filters, thermostats, or mechatronic

components. It also supplies diagnostic and air conditioning service units and offers a comprehensive range of services, including
training and technical support through our global network. Due tothe diverse nature of today’s vehicle technologies, cutting edge expertise is an essential criterion for the success of our business partners. At the same time, our short delivery times contribute significantly to the satisfaction of our customers because they can relyon limited downtimes in workshops.

MECHATRONICS DIVISION
With the help of electric components, the efficiency of modern powertrains can continue to grow; they are thus increasing in importance. For this reason, we consolidated our mechatronics expertise in a newly founded division, with the product groups of electric
drives as well as actuators and auxiliaries, at the beginning of 2016.
At the heart of our activities is our development and production expertise in electric motors and electronics, which although used ina wide range of applications, are technically very closely related.
They thus afford economies of scale and synergies relevant for the
automotive industry.

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Fundamental information about the MAHLE GroupPROFIT CENTERS
Six business fields, organized as profit centers, serve special market and customer segments. With this structure, we can offer ourcustomers the highest degree of flexibility, support them in the development of specific new products, and provide them with tailor-made applications and components. These business fields include Engineering Services, Motorsports, and Special Applications,
Large and Small Engine Components, Industrial Thermal Management, as well as Compressors, Control Units, and Front-end Modules for automotive manufacturers.

GROUP STRATEGY
Crucial, long-term megatrends that the automotive industry needs
to confront are global population growth, increasing urbanization,
the even stronger economic importance of Asia in future, as well
as climate change and the political climate targets derived therefrom. We have analyzed these trends and compiled several futurescenarios based on this information. The findings gained from thiswork serve as the basis for developing our group strategy.
These megatrends will have a far-reaching impact on future mobility
solutions and thus on the automotive industry. Key issues here are
the increasing electrification of the powertrain, car sharing, the expansion of public transport, as well as connected and autonomous
driving. As to how fast this structural change takes place depends
heavily on political guidelines, on the one hand, and on the technical solutions that hold their ground in the market, on the other. In
the case of passenger cars and light commercial vehicles used forurban distribution transport, technologies such as hybrid and electric drives, as well as alternative usage models such as car sharing will gain in importance. For heavy-duty commercial vehicles, no
substitution products for combustion engines are yet in sight in the
short to medium term.

Over the next few years, the combustion engine will remain the technology of mobility both for passenger cars and for commercial vehicles—in light of the global increase in vehicle production and thefact that even hybrid vehicles cannot exist without the combustion
engine, we assume that demand for the corresponding components
and systems will even rise to begin with.
MAHLE has derived a dual strategy from these market conditions:
we will continue to be a technology leader in the ongoing development of the combustion engine and ensure the highest possible levelof competitiveness in terms of quality and costs. At the same time,
we will develop more innovative solutions and products for alternative drive technologies and build the appropriate business segments
in a targeted manner. Business segments, which are independent
on the OE business with the passenger car combustion engine, arealready accounting for more than 50 percent of group sales today.
Our dual strategy is also reflected in thermal management. Thus,
efficient thermal management will play an even more important rolein future—not only in conventional but especially in alternative drive
systems. We have expanded this business segment over the past
few years and pioneered the development of numerous innovations
for the thermal management of batteries and of electric powertrains
in electric vehicles and plug-in hybrids, making them ready for series production. Moreover, we will be significantly intensifying ourelectronic and mechatronic activities over the coming years. In doing so, we want to offer our customers a wider portfolio of electricmotors for passenger cars as well as two-wheeled vehicles suchas e-scooters and pedelecs, which in the context of urban mobility,
are growing in importance around the world. This also applies tothe electrification of auxiliary aggregates, such as electric air conditioning compressors.

MAHLE GROUP // ANNUAL REPORT 2016

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Report on economic position

REPORT ON ECONOMIC POSITION
nn

nn

nn

Increased group sales by 7.3 percent to EUR 12.3 billion, with an organic growthof 3.4 percent
Significant growth impulses in the Thermal Management, Mechatronics, andAftermarket business segments
Stable result from operational business activities with simultaneous
increase in cash flow from operating activities

ECONOMIC CONDITIONSOVERALL ECONOMIC DEVELOPMENT
According to the January 2017 report by the International Monetary Fund (IMF), the global economy grew by 3.1 percent in 2016.
It thus remained slightly below the forecast made at the beginningof the year and remained at the previous year’s level. With a plusof 1.6 percent, growth in the advanced economies was significantly lower than in the previous year (+2.1 percent). In contrast, development in several emerging markets was considerably stronger.
Growth in the European Union—which is still the most important region for the MAHLE Group—was slightly lower than in the previous
year with a plus of 1.9 percent; the euro zone grew by 1.7 percent.
In the USA, the economy grew by 1.6 percent during the period under review, while a reluctance to invest was observed ahead of thepresidential election. Brazil, the largest Latin American economy, lost
ground again with a minus of 3.5 percent. The governmental crisisand lower raw material prices led to a decline in consumer demand
and a lack of state and private sector investments.
With a plus of 6.7 percent, China’s economy exhibited a slightly more
restrained performance than in the previous year (+6.9 percent).
Apparently the economic restructuring toward more consumption
and services is making progress. This should be viewed critically, as it is predominantly based on government investments and a
sharp increase in credit services. In Japan, the government’s monetary and fiscal policy measures were thwarted by the appreciationof the yen. As a result, growth remained slightly below the previous
year at 0.9 percent. According to official figures, India achieved agrowth of 6.6 percent.

On the one hand, many of MAHLE’s major trading currencies depreciated against the euro as measured by the average market pricecompared with the previous year. These included not only the Argentine peso (–59 percent due to allowance of the floating exchangerate) and the British pound (–13 percent, as a result of the Brexit decision), but also the currencies of China, Mexico, and Turkey. Furthermore, the Brazilian real and the Russian ruble fell in value overthe course of the year—even though the exchange rate of both currencies rose again by the end of the year. On the other hand, theJapanese yen continued its appreciation against the euro, whichbegan in the previous year, by a further ten percent. On an an­nual
average, the U.S. dollar remained almost unchanged against theeuro, but gained considerable ground in the last quarter.
The partly severe exchange rate fluctuations underline the importance of MAHLE’s production location strategy in all major sales regions around the world. Such “natural hedging” enables the group
to increase its independence from currency fluctuations.

DEVELOPMENT OF THE MARKETS FOR PASSENGERCARS AND LIGHT COMMERCIAL VEHICLESOn the basis of our data collection, the global production of passenger cars and light commercial vehicles increased by aroundfive percent in the 2016 business year, thus considerably surpassing our forecast made at the beginning of the period under review(+2 percent).
A significant impetus came from China, where production rose by
14 percent. This is due to an anticipatory effect, since the government granted tax incentives for vehicles with a displacement of lessthan 1.6 liters, which were originally only valid until the end of 2016.
In the period under review, almost one third of the world’s vehicles
were produced in China.

EXCHANGE RATE DEVELOPMENT
Exchange rate movements are of great importance for transactions
in foreign currencies and affect the conversion of financial data foraccounting purposes. There were variations in the exchange rate
development in the period under review.

The number of vehicles produced in Europe also rose more sharply than expected—with a plus of three percent. The sustained highdemand in Spain, Italy, France, and Germany had a positive impact
here, whereby declines primarily in Russia were more than offset.

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In North America, production rose by two percent due to the increased demand in Mexico and Canada, whereas production in the
USA stagnated. In South America, the negative trend con­tinued witha double-digit minus due to the ongoing reluctance to buy.
In the Asia/Pacific region, the previous year’s value was exceededby seven percent. Not only China, but India, too, saw a significant
rise in its production figures, especially in the last quarter, whichmore than compensated for the falling figures in Japan and Korea.
More than half of all the passenger cars and light commercial vehicles produced worldwide came from Asia/Pacific in 2016.

DEVELOPMENT OF THE MARKETS

2016

Overall economy

Passenger cars Medium-sized andand light comheavy-duty commercial vehicles
mercial vehicles

ActualActualEuropeää

Actualä

North America

ä

ä

â

South America

æ

â

â

Asia/Pacific

á

á

á

BUSINESS DEVELOPMENTDEVELOPMENT OF THE MARKETS FOR MEDIUMSIZED AND HEAVY-DUTY COMMERCIAL VEHICLES
Based on our surveys, with a plus of almost six percent, the production of medium-sized and heavy-duty commercial vehicles exceeded the previous year’s figure and was thus above our expectations.
Around three percent more trucks and buses were produced in­Europe. The upturn in Spain, Italy, and France had a positive effect,
whereas demand fell in Russia and slumped in Turkey.
The significant drop in production of 17 percent in North America
was in line with our expectations. This can be attributed to a cyclical downturn and the reluctance of many fleet operators, in particular, to invest in heavy-duty commercial vehicles. Production figures
in South America also experienced a double-digit decline; the market thus contracted for the third successive year.
The Asia/Pacific region recorded an increase in the double-digit
percentage range—which was significantly higher than expected.
China gave the decisive boost here, particularly in the final quarter, with a rise of 28 percent. Following the dramatic decline in production in the previous year (–22 percent), the market thus settled
again at the level of 2014. More than a third of all medium-sized andheavy-duty commercial vehicles produced worldwide were manufactured in China in 2016. Production in India was also well up on
the previous year. The weak domestic demand in Japan, however,
had a detrimental effect; production figures remained below thoseof the previous year.

DEVELOPMENT OF THE MAHLE GROUP
In the 2016 business year, we once again succeeded in increasing
our total sales and achieved our forecast with a plus of 7.3 percent.
At EUR 12.3 billion, we achieved the highest level of sales in the history of the company—following EUR 11.5 billion in the previous year.
This result reinforces our position among the 20 largest automotive
suppliers worldwide. Changes in the consolidation group contributed to this growth in sales in the amount of EUR 529 million, whereas exchange rate effects of EUR 104 million had a negative impact.
Organic growth stood at 3.4 percent—which significantly surpassed
the previous year’s figure.
In 2016, we focused on the integration of the companies acquiredin the previous year. In addition, we primarily concentrated on further optimizing our quality and processes, improving our competitiveness, and taking advantage of new market opportunities. Thechanges to the consolidation group are a clear indication that wehave also strategically optimized and further developed our productportfolio. In the period under report, the sales from Delphi Thermaland MAHLE Electric Drives Japan (formerly Kokusan Denki), whichwere acquired on June 30, 2015, have now been included for theentire year for the first time. The additional consolidation effects
amounted to a total of almost EUR 600 million. Through the acquisitions, we have considerably expanded our areas of competence
in both thermal management and mechatronics as well as electric
drives. With the acquisition of the electronics specialist Nagares atthe end of 2016, which will be carried out in 2017, MAHLE is entering the field of vehicle electronics. As a result, we are sustainably

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Report on economic position

strengthening our competence in electrification and electric drives.
The mechatronics segment can thus build on additional expertisein control units, power converters, and power electronics for electric motors in future. With the undertaken and agreed acquisitions,
we will further strengthen our position as a systems provider to theautomotive industry.

DEVELOPMENT OF SALES 2012 – 2016
in EUR billion
15

11.5

12

9.9

9

6.2

Through the sale of the Industrial Filtration business, we have further concentrated the group’s orientation on mobility markets. The
reason for the sale was the low level of synergies with our core business, which is primarily geared toward the automotive industry. The
transaction was completed on October 31, 2016—as was the consequent deconsolidation of units with locations in Germany andeleven other countries. At the beginning of 2016, MAHLE König—a
50-percent joint venture—was deconsolidated and is now accounted for under the equity method. Both deconsolidations resulted ina negative effect on sales totaling EUR 70 million.
Exchange rate influences amounting to EUR 104 million also had anegative impact on sales. These can mainly be attributed to the devaluation of the Chinese renminbi, Argentine peso, and Brazilian real.
In addition to consolidation and currency effects, the effect from achange in the definition of sales was adjusted for the disclosure oforganic growth. This new regulation complies with the requirementsof the German Implementation Act (BilRUG) and had an effect of almost EUR 27 million for the 2015 business year.

DEVELOPMENT OF THE BUSINESS SEGMENTS
The individual business segments experienced varying developments: whereas sales in the Engine Systems and Components aswell as Filtration and Engine Peripherals business units remainedat the level of the previous year, the Thermal Management and Aftermarket business units as well as the Mechatronics division andprofit centers all achieved considerable organic growth.
In the year under review, structural changes in the group organization affected the profit centers; for better comparability we have included the adjusted values from the previous year. It is important tonote that sales from the 2015 acquisitions in the Thermal Management business unit and Mechatronics division have been included
for the entire year for the first time.

12.3

6.9

6
3
0

2012

2013

2014

2015

2016

ENGINE SYSTEMS AND COMPONENTS BUSINESS UNIT
In the period under review, the business unit achieved sales of
EUR 2.683 million, thus remaining 0.5 percent below the previous
year’s figure—when adjusted for exchange rate effects, sales werestable. We were able to make substantial gains in the assembled
camshaft business, which were attributable to production ramp-ups
in China and the USA as well as production expansion in ­Europe.
The demand for valves and power cell units—for both passenger
cars and commercial vehicles—also developed positively. For cylinder liners, bearings, and heavy-duty steel pistons, however, sales
declined slightly. In the year under review, we also laid the groundwork for the sale of our forging activities in Germany.

FILTRATION AND ENGINE PERIPHERALS
BUSINESS UNIT
With sales of EUR 2,191 million, the business unit concluded theyear under review at almost the same level as the successful year of2015 (EUR 2,196 million). Among the products generating the highest sales were air intake modules as well as air and oil filter modules. However, the biggest growth was achieved with cylinder head
covers, oil pumps, and oil coolers. In Santa Catarina/Mexico, we
have merged three locations into one plant and have expanded theplant in Timisoara/Romania. In addition, we have further optimized
our processes in order to increase production efficiency.

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SALES BY BUSINESS SEGMENT
in EUR million
2015 2016
5,000

4,293
3,761

4,000
3,000

2,698 2,683
2,196 2,191
1,675

2,000

835

1,000

1,882

899
321

374

0
Engine Systems andComponents

Filtration and Engine
Peripherals

Thermal Management

Aftermarket

Mechatronics

Proﬁtcenters

THERMAL MANAGEMENT BUSINESS UNITMECHATRONICS DIVISION

Integrating the Delphi Thermal units acquired in 2015 was a priority for the Thermal Management business unit in the year under review. This involved, among others, location consolidations and therelocation of projects in the USA, Brazil, and India. The acquisition
was also noticeable in the increased business volume: the business
unit surpassed sales from the previous year by around EUR 532 million or 14.1 percent. Even though about two thirds of growth canbe attributed to the first full-year inclusion of the acquired units, thebusiness unit still achieved strong organic sales growth of around
six percent. In total, it generated EUR 4,293 million—which equates
to 35 percent of group sales.

On January 1, 2016, we concentrated our mechatronics activities into a newly created division. The business year was therefore marked by the organizational merger and integration. We wereable to increase the sales in this—for MAHLE—still young businesssegment, by EUR 52 million to EUR 374 million (+16.3 percent). The
first-time full-year inclusion of MAHLE Electric Drives Japan (formerly Kokusan Denki), which we acquired on July 1, 2015, contributed significantly to this plus. This was partly offset by the intragrouptransfer of the spare parts business in the Aftermarket business unit.
Taking both effects into account, the Mechatronics division achieveda strong organic sales growth of almost seven percent.

AFTERMARKET BUSINESS UNIT

PROFIT CENTERS

The business unit achieved sales of EUR 899 million and grew by
7.7 percent in the period under review. The integration of the spareparts business for starter motors and alternators as well as electricmotors in the course of restructuring the Mechatronics division contributed largely to this growth. By contrast, negative exchange rate
effects amounting to EUR 37 million had a detrimental effect. An increase in organic revenue was realized in particular through spareparts for filtration and engine cooling. However, the heavy expansion of the portfolio in the repair shop equipment segment, which
led to a near doubling of sales, also contributed to the strong organic growth of around seven percent.

By addressing special market and customer segments, we generated total sales of EUR 1,882 million in the year under review andwere able to increase sales by 12.4 percent. Adjusted for structuralchanges and exchange rate effects, the profit centers achieved anorganic growth of a good five percent.
Noteworthy is the expansion of the air conditioning compressor
business, which made progress in the year under review. Althougha major part of the local sales growth stemmed from the first-timefull-year inclusion of the newly added units in 2015, we were alsoable to achieve considerable organic growth. The Control Units andGROUP MANAGEMENT REPORT

MAHLE GROUP // ANNUAL REPORT 2016

Report on economic position

Front-end Modules profit centers, which are operated as joint ventures, once again experienced strong growth. Adjusted for exchange
rate effects, the Engineering Services, Motorsports, and Special
Applications profit center also grew by around three percent. Overthe course of the business year, we expanded its capacity in North
America through the acquisition of a development center with stateof-the-art powertrain test bench technology. However, the sale ofthe Industrial Filtration business and the deconsolidation of MAHLE
König had a negative impact on sales.

DEVELOPMENT BY REGION
The MAHLE Group is represented in 32 countries with about 170
owned production or development locations. Thanks to this global presence, we can work intensively with our customers on site
and are in a position to offset temporary fluctuations in individual markets.
The inconsistent development of the global vehicle markets in 2016
also affected our sales in the world regions. While we once again had
to report declines in the relatively small market of South America due
to poor market conditions, we achieved growth in all other world markets, with Asia/Pacific, in particular, exceeding our expectations. The
business development by region illustrated below is based on sales
by country of production.

EUROPE
Europe again accounted for half of group sales in 2016. After achieving EUR 5,844 million in the previous year, we generated sales of
EUR 6,119 million, which corresponds to an increase of 4.7 percent.
Adjusted for consolidation and currency effects as well as changes
in the definition of sales according to commercial law, sales were agood two percent higher than in the previous year. This growth wasunderpinned by the lively demand in western Europe in particular.
Sales in the Engine Systems and Components business unit remained constant compared with the previous year. Noteworthy isthe expansion of production capacity for steel pistons for passenger
car diesel engines. In the Filtration and Engine Peripherals business
unit, our sales remained at the previous year’s level. Declining sales
revenues from individual filter components were offset by a growthin oil coolers and oil pumps. The Thermal Management business
unit significantly increased its sales by 10.6 percent, whereby the
Ostrow/Poland and Senica/Slovakia locations were included for a
full year for the first time due to their consolidation. Organic growthamounted to a good two percent. The Aftermarket business unit
achieved a plus of nine percent, which was mainly attributable tothe integration of the mechatronics business; its organic growth lay
at around two percent.

NORTH AMERICA
SALES BY REGION<1% › Africa
19% › Asia/Paciﬁc

5% › SouthAmerica

26% › North America

Total
EUR 12,322 million

50% ‹ Europe

Our development in North America was encumbered by the strong
cyclical decline in the commercial vehicle business. A slightly positive development in the passenger car and light commercial vehicle
market could not compensate for this. Despite this critical market
situation, we generated sales of EUR 3,267 million, which corresponds to a growth of twelve percent when compared with theprevious year. Although the first-time full-year consolidation of thethermal management activities acquired in 2015 played a major role
here, we were still able to grow organically by about four percent
and thus significantly exceeded the general market development.
The business units developed inconsistently in the second largest market for MAHLE. In the Engine Systems and Components
business unit, despite the good passenger car business, sales declined by around two percent due to the weak market for commercial vehicles. In the Filtration and Engine Peripherals business unit,

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however, sales revenues remained virtually unchanged with a ­minusof 0.1 percent. The Thermal Management business unit benefited
from higher sales in the passenger car sector. We thus achieved
organic growth of more than six percent in this business unit andwith sales of EUR 1,379 million, generated more than 42 percent ofNorth American sales. The Aftermarket business unit also showedvery positive development thanks to the increased demand for filter products and our newly established workshop equipment segment; it achieved an organic sales increase of about twelve percent.

SOUTH AMERICA
The severe economic crisis in South America continued to influence
most of the Latin American markets in 2016. The production and salesof passenger cars and commercial vehicles declined once more. In
this difficult environment, after adjustment for markedly negative exchange rate effects (EUR –44 million), we recorded an organic sales
deficit of 2.2 percent and thus minimized our organic sales losses incomparison with the overall sluggish market. In total, we generated
sales of EUR 572 million in South America—which corresponds to almost five percent of group sales.
Both the Engine Systems and Components (–13.3 percent), and Filtration and Engine Peripherals (–29.7 percent) business units were unable
to elude the further decline in the vehicle market. The Thermal Management business unit, on the other hand, benefited from the startup of a global platform for compact cars and increased its sales. The
Aftermarket business unit, which contributed to around one third ofgroup sales in this region, reported a drop in sales of around three percent. However, after adjustment for considerably negative exchange
rate effects, notably due to the devaluation of the Argentine peso, it
achieved an organic sales plus of around eleven percent.

ASIA/PACIFIC
In the Asia/Pacific region, we substantially improved our sales to
EUR 2,316 million. The increase of 10.6 percent was favored by thehighly dynamic growth in the vehicle market, particularly in China. The organic growth of 7.6 percent—to which all business units
contributed—was thus approximately in line with the developmentof the market.
The Engine Systems and Components business unit concluded theperiod under report with a plus of 6.5 percent—mainly generated

with pistons for passenger cars and commercial vehicles as wellas camshafts at the Chinese locations. The biggest MAHLE business unit in this region, Filtration and Engine Peripherals, grew by
1.4 percent. Apart from the increased focus on Southeast Asian
countries, we achieved sales increases in Japan thanks to several production ramp-ups for local manufacturers. Despite considerable negative exchange rate effects, the Thermal Managementbusiness unit accomplished significant sales growth with a plus of
16.8 percent. Here, we notably benefited from the rise in passenger
car production and made significant gains with our engine cooling
products, in particular. The Aftermarket business unit rounded off
the successful business development in the region with a growthof 12.1 percent thanks to new sales platforms and improved market access in China and Japan.

AFRICAIn Africa, we achieved sales of EUR 48 million, which corresponds
to an increase of 2.9 percent in comparison with the previous year.
Sales were mainly generated by the Thermal Management business
unit, which operates two locations in South Africa.

NET ASSETS, FINANCIAL POSITION,
AND RESULTS OF OPERATIONSRESULTS OF OPERATIONS
The increase in sales did not lead to an improved result in the 2016business year, in particular owing to acquisition and valuation effects as well as increased warranty expenses. Moreover, ­higher expenses for future-oriented research and development adversely affected the result. At EUR 1,079 million, we achieved EBITDA at theprevious year’s level (EUR 1,093 million). The operating result, a key
figure similar to EBIT used for internal steering, but adjusted for individual circumstances, also only marginally exceeded the value ofthe previous year.
Aside from operational influences, our profitability was reduced by
special effects. The financial result thus includes a significant burden from the profit and loss transfer and from the impairment of thecarrying amount of the joint venture Bosch Mahle Turbo Systems(BMTS). The depreciation and amortization on obligatorily disclosed
hidden reserves in accordance with the German Commercial CodeGROUP MANAGEMENT REPORT

MAHLE GROUP // ANNUAL REPORT 2016

Report on economic position(HGB) as part of the purchase price allocations also remained at ahigh level. Due to these effects, the result from business activities
could not be improved; it amounted to EUR 228 million (previous
year: EUR 309 million).

While both issues put a burden on the commercial result, they did
not fully lower the tax base. In addition, special effects connectedwith internal group reorganization raised the tax rate. Other taxes
remained at the previous year’s level.

Our key income statement items developed as follows: Cost of
sales rose to EUR 9,994 million—thus at a slower rate than sales—which resulted in a slight improvement in the gross margin from
18.7 percent to 18.9 percent. At EUR 1,089 million, selling expens­es and general administrative expenses remained at the previous
year’s level in relation to sales. Compared with sales, however, ex­penditure on research and development grew disproportionately.
The increase from EUR 657 million in the previous year to EUR 753
million in this year reflects our consistent pursuit of the dual strategy.
The balance from other operating income and expenses was slightly
negative with a minus of EUR 13 million and therefore fell by around
EUR 50 million compared with the previous year. This decline is due,among other things, to exchange rate effects, expenses associat­
ed with corporate transactions, and higher planned amortization of
goodwill. With the exception of research and development expens­es, all cost items were adversely impacted by the effects of purchaseprice allocations in accordance with the German Commercial Code
(HGB). In total, these amounted to EUR 149 million, of which EUR 56
million relate to planned amortization of goodwill.

CONSOLIDATED INCOME STATEMENT
in EUR million

2016

in %

2015

in %

Sales

12,322100.0

11,486

100.0

Cost of sales– 9,994– 81.1– 9,335– 81.3Gross profit on sales

2,328

18.9

2,151

18.7

Selling expenses and gene­ral administrative expenses–1,089– 8.8–1,020

– 8.9

– 753

– 6.1

– 657

– 5.7

Research anddevelopment expenses
Other operating income
and expenses

– 13

– 0.1

38

0.3

Financial result

– 245

– 2.0

– 203

–1.8

Result from businessactivities

228

1.9

309

2.7

Taxes on income

–132

–1.1

–156

–1.4

Result after taxes

96

0.8

153

1.3

Other taxes

– 33

–0.3

– 31

– 0.3

Consolidated net income

63

0.5

122

1.1

473

3.8

511

4.5

1,079

8.8

1,093

9.5

EBIT

Earnings before interest and taxes (EBIT) amounted to EUR 473
million with an EBIT margin of 3.8 percent. EBIT therefore remained
under the previous year’s value in absolute terms and in relation tosales. Adjusted for the effects of the purchase price allocations andthe amortization of goodwill, the EBIT margin was at 5.0 percent.
Below EBIT, the aforementioned charges on the financial result inconnection with the joint venture BMTS and an increased tax rate
resulted in a reduction of our net income for the year to EUR 63 mil­lion. The net expenses from the compounding of future pension
payments and from the increase in value of the pension assets re­mained at a high level, thereby negatively impacting the financial re­sult. In contrast, the tax expenses declined due to the lower result
from business activities. Taxes on income amounted to EUR 132 mil­lion, which corresponds to an income tax rate of around 58 percent.
The high tax rate is primarily due to higher planned amortization of
goodwill as well as increased losses from associated companies.

EBITDA

NET ASSETS POSITION
Our balance sheet total rose slightly from EUR 7,849 million to EUR
8,032 million in the year under review. The development is therefore
in line with the organic business expansion. Despite the extensionof the balance sheet, we have reduced our net debt.
Fixed assets fell by EUR 62 million to EUR 3,750 million in the year
under review. A significantly positive net expenditure on tangible
fixed assets was more than offset by amortization on intangible
assets and valuation allowances on our shares in the joint venture
BMTS. Most of the amortization on intangible assets in the year un­
der review related to goodwill and hidden reserves with respect totechnology and customer relationships that were disclosed in con­nection with purchase price allocations.

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As at the balance sheet date, current assets totaled EUR 3,992 million, corresponding to an increase of EUR 200 million. The rise of
EUR 27 million in inventories to EUR 1,269 million reflects a disproportionately low increase compared with the organic sales growthachieved. The increase in trade receivables was only partly offset by slight declines in other assets. Overall, receivables and other assets rose by EUR 111 million to EUR 2,350 million. Thanks toa positive cash flow, securities and liquid funds were increased by
EUR 62 million to EUR 372 million.
On the liabilities side, equity rose by EUR 55 million to EUR 2,722 million as a result of exchange rate effects and the retention of earnings,
among other things. At 33.9 percent, the equity ratio is almost thesame as the previous year (34.0 percent). The renewed increase inaccruals for pensions by around six percent to EUR 575 million canbe attributed in particular to a further drop in the interest rate level and the associated reduction in discount factors. Other accrualsrose in the year under review by EUR 50 million to EUR 1,463 million, largely owing to exchange rate and interest effects. In warranty
and risk accruals in particular, additions also exceeded consumptions and releases. As at the balance sheet date, trade payables
amounted to EUR 1,257 million. This corresponds to an increaseof EUR 160 million, which is disproportionately high compared withthe development of sales and greater than the rise in trade receivables. Liabilities to banks fell substantially in the year under review
and now amount to EUR 769 million compared with EUR 887 in theprevious year. As no bonds were issued in the year under review, thecorresponding liability remains at EUR 829 million. Other liabilities
also were virtually unchanged in comparison with the previous year.
Besides the circumstances depicted in the balance sheet, as at­December 31, 2016, there were significant off-balance-sheet transactions amounting to EUR 148 million (previous year: EUR 153 million) in connection with rental and leasing agreements for land andbuildings. Moreover, there were off-balance-sheet transactions of
EUR 125 million (previous year: EUR 146 million) relating to factoring, which contributed to the diversification of financing sources.

INVESTMENTS
In the past business year, we invested EUR 563 million in property, plant, and equipment (previous year: EUR 564 million). In relation to sales, the investment ratio remained slightly below the previous year’s level (4.9 percent) at 4.6 percent. With a ratio of around
129 percent, the investments substantially exceeded the depreciation on tangible fixed assets (previous year: 134 percent).
Aside from Germany, the regional focus of the investing activities
was primarily on eastern Europe and North America, as well as the
Asia/Pacific region. In addition to those in connection with customer projects, investments in eastern Europe included the expansionof plants in Poland, the Czech Republic, and Romania as well as
production facilities. Overall, capital expenditure on tangible fixed
assets in European markets made up 47 percent of the total volume. Approximately one quarter of the investments were madeBALANCE SHEET STRUCTURE OF THE MAHLE GROUP
in EUR million

AssetsFixed assets

Inventories

Receivables and other assets

Equity and liabilities

7,849

8,032

3,812

3,750

1,242

1,269

2,795

3,013
2015

2016

8,032

7,849

2,722

2,667

Equity

2,038

1,957

Accruals

3,272

3,225

Payables and other liabilities

2016

2015

MAHLE GROUP // ANNUAL REPORT 2016

GROUP MANAGEMENT REPORT

Report on economic positionin North America, where the focus was on the expansion of the
Mexican locations. Moreover, investments were carried out in the
USA in connection with the integration of the locations acquiredin the previous year. Around one fifth of all investments were accounted for in the Asia/Pacific region, particularly in China and Japan. In China, investments were increased, primarily for the new­Changshu plant from the Compressors profit center. The investments in Japan included the plant modernizations of our Mechatronics division. Overall, the investments made served to set thecourse for the MAHLE Group to achieve further growth within theframework of its dual strategy.

FINANCIAL POSITION
In line with its global growth, MAHLE has created a broad basis forthe group’s financing over the past few years. Our financing portfolio
not only includes syndicated credit lines, German private placementloans (“Schuldscheindarlehen”), and bilateral loans, but also eurodenominated corporate bonds. With a conservative financing policy,
we are aiming for an implicit investment grade risk. This positioning
is evident in the moderate leverage and adequate equity ratio.
In the 2016 business year, we considerably reduced our net debt.
This was essentially driven by a substantially improved cash flow fromoperating activities of EUR 856 million. The increase in comparison
with the previous year (EUR 638 million), despite the lower net income
for the year, was primarily owing to a lower additional commitment offunds in working capital. Investing activities resulted in a total cash

outflow of EUR 575 million. The cash flow from operating activities
thus completely covered the cash requirements for investments in
fixed assets. The considerably lower cash outflow compared withthe previous year (EUR −1,224 million) was due to the company
acquisitions undertaken in the 2015 business year. In addition, acash inflow was attributable to the sale of the industrial filtration
business in the 2016 business year. The negative cash flow fromfinancing activities of EUR 266 million resulted, among other things,
from the utilization of the cash flow from operating activities to repay
existing financial liabilities.
The syndicated credit line was renegotiated in the 2016 businessyear. A credit line of EUR 1.6 billion with a term of five years andtwo renewal options, each for one year, was agreed with the corebanks. The German private placement loans of EUR 128 million due
in November 2016 were repaid from the cash flow from operating
activities. As at the end of the year, the unused but firmly committed
credit lines amounted to EUR 1,883 million which, along with theliquid funds, contributed to the financial stability of the group. The
cash holding is diversified across various banks that are selectedaccording to rating criteria.

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Additional key performance indicators

ADDITIONAL KEY PERFORMANCE
INDICATORS
nn

High investments in the training and further education of employees, as well as
in research and development to secure future viabilitynnStart of an interdivisional purchasing project to achieve cost synergies

nn

Expansion of quality management system

HUMAN RESOURCES
As at the reference date of December 31, 2016, the MAHLE Group
employed 76,632 people worldwide and thus 1.3 percent more thanin the previous year. The gain of 997 employees was primarily attributable to increased sales; temporary employees were taken on
permanently in some instances. The sale of the Industrial Filtration
business reduced the overall headcount by 865 employees (Europe 729, North America 60, and Asia/Pacific 76).
As an automotive supplier, we are facing strong competition for talent. Highly motivated and qualified employees are the key to success for the sustainability and growth of the group. This is why weonce again invested intensively in the training and further educationof our employees to the sum of EUR 11.9 million in 2016 (EUR 11.8
million in the previous year). In addition to a variety of workplace-related instructions, our employees took part in 71,345 qualification
activities in the year under review. The global absence rate (excluding joint ventures) was 3.9 percent on average (previous year: 3.6).

HEADCOUNT DEVELOPMENT 2012 – 2016

80,00080

75,63570,00070

63,834

the MAHLE König joint venture. In Germany, the staffing level also
fell by 3.0 percent to 13,803 as a result of the sale of the MAHLE Industrial Filtration business. In North America, we employed 15,578
people as at the reference date and thus 1.9 percent more than in
the previous year. In South America, however, the headcount decreased by 3.2 percent to 9,338 due to the very difficult economic situation in this region. In the Asia/Pacific region, the headcountrose by 8.7 percent to 16,061 people in total as a result of good order levels. The staffing level in Africa also grew by 15.3 percent to1,054 owing to increased demand.

HEADCOUNT BY REGION
1% › Africa
21% › Asia/Paciﬁc

12% › SouthAmerica

Total
76,63245% ‹ Europe

21% › North America

76,632

66,23460,00060
50,00050

47,333HEADCOUNT BY BUSINESS SEGMENT

40,00040
30,00030
20,00020
10,000
10
0
0

2012

2013

2014

2015

2016

HEADCOUNT BY REGION
As at the reference date of December 31, 2016, there were 34,601
employees in Europe; this corresponds to a decrease of 1.2 percent.
Although we recorded growth in our eastern European locations dueto the increase in sales, the growth was overcompensated by thesale of the Industrial Filtration business and the deconsolidation of

In the Engine Systems and Components business unit, the number of employees remained constant. As at the reference date ofDecember 31, 2016, it employed a total of 28,293 people at 48
locations. With a 37 percent share of the workforce, this business unit employs the main share of people in the MAHLE Group.
10,796 people were employed at the 36 plants of the Filtration and­Engine Peripherals business unit, i.e., 2.6 percent more than in
the previous year. This corresponds to 14 percent of the group’s
total workforce. The Thermal Management business unit headcount increased by 5.8 percent, whereby 22,767 people were
employed at 41 locations as at the reference date. This ­accounts
for 30 percent of the group total, following 28 percent in the previous year. With regard to the Aftermarket business unit, theGROUP MANAGEMENT REPORT

MAHLE GROUP // ANNUAL REPORT 2016

Additional key performance indicators

HEADCOUNT BY BUSINESS SEGMENT
2015
30,0002016

28,304 28,293

25,00021,51722,76720,00015,00010,524 10,796

10,00010,615 9,978

5,000

1,582 1,555

3,093 3,243

0Engine Systems andComponents

Filtration and Engine
Peripherals

Thermal Management

number of employees remained more or less at the same level
as in the previous year with 1,555 people. As at the end of theyear, the Mechatronics division employed 3,243 people and thus
4.8 percent more than in the previous year. The headcount in
the profit centers fell by 637 to 9,978. This was exclusively attri­butable to the aforementioned changes in the consolidation group.

TECHNOLOGY AND INNOVATIONRESEARCH AND DEVELOPMENT
We continued to further expand our group-wide research and development activities in 2016. We have thus invested EUR 753 million inthis area—which corresponds to 6.1 percent of sales and therefore
an increase of EUR 96 million or 14.7 percent compared with theprevious year (EUR 657 million), during which the research and development ratio was still at 5.7 percent. MAHLE has thus achieved
a new all-time high. In the period under report, we submitted 350
patents first-filings. By the end of 2016, a total of 5,996 researchers and developers (+1.3 percent) were working for MAHLE at 15
development locations and 12 competence centers.

Aftermarket

Mechatronics

Proﬁtcenters

will also increasingly contribute to improving efficiency in this vehicle sector in future. For example, even the partial electrification oflight commercial vehicles in urban distribution transport can havea significant impact in terms of fuel savings.
Thanks to our acquisitions over the past few years, we have significantly expanded our expertise in the fields of mechatronics andthermal management in particular. Numerous developments in thefield of electric drives are almost ready for series production. We are
already offering technologies that are a prerequisite for the breakthrough of e-mobility, such as systems for the thermal managementof batteries; we have already received numerous orders from aroundthe world. In all these solutions, we are driven by the desire to makevehicles even more efficient, reliable, and comfortable.

R&D EXPENDITURE 2012 – 2016
in EUR million

753

800

657

700

552

600
500

MAHLE is systematically embracing a dual strategy for research anddevelopment. On the one hand, we are working intensively on thefurther optimization of the combustion engine because this technology still has a great deal of potential that we intend to exploit. At
the same time, we are focusing more heavily on the development ofalternative drive concepts, such as battery-based e-mobility. In thecase of commercial vehicles, we are not limiting ourselves to the ongoing development of the conventional powertrain, as electrification

400
300

289

336

200
100
0

2012

2013

2014

2015

2016

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Additional key performance indicators

INNOVATIONS 2016
WORLD’S FIRST R744 AIR CONDITIONING SYSTEM
Since January 1, 2017, all newly registered vehicles in the European
Union are required to use a refrigerant with a GWP (Global Warming
Potential) below 150. GWP is a (relative) measure of the influence ofa substance on global warming. In addition to chemical solutions,the natural R744 (carbon dioxide) with a GWP of 1 offers itself as
an alternative to the previously used refrigerants. The world’s firstenvironmentally friendly R744 air conditioning system was developed for a premium German manufacturer in MAHLE’s development departments in Stuttgart. Since the early 1990s, MAHLE hasalready been working with the environmentally friendly refrigerant.
This expertise has made a substantial contribution toward finding
solutions to our customers’ high requirements for comfort as wellas the technical challenges of an R744 system in very short development times. This is because R744 places high technical demands
both on the components and the overall system, such as the significantly higher pressures of up to 130 bar, compared with current
refrigerants. In the meantime, we are delivering the air conditioning
unit and the evaporator in series.

CNG AND DOWNSIZING REDUCE CO2
As announced, MAHLE has investigated the potential of a downsizing engine designed exclusively for monovalent natural gas operation. With a compression ratio of 13:1, this design can realize meaneffective pressures of 30 bar and specific power output of 100 kW/l
at a natural gas consumption below 200 g/kWh. A VTG exhaustgas turbocharger can also improve the low-end torque, achieving
stoichiometric operation across the operating map. In combination with a stop-start function, up to 31 percent CO2 can thus besaved with identical driving performance. Many vehicles that use
compressed natural gas (CNG) were originally designed to run onconventional gasoline. With such bivalent motors, the fuel substitution only achieves a CO2 reduction of up to 24 percent while exhibiting reduced nominal power and reduced torque compared withthe monovalent design.

POTENTIAL CO2 REDUCTION FROM SYSTEMICENGINE OPTIMIZATION
The valve train and crank mechanism are the mechanical heart
and lungs of the combustion engine. Their design and optimization­remains a fundamental approach for further increasing fuel ­efficiency
and reducing emissions. The critical aspect of this approach today,
however, is not only to implement individual measures for eachcomponent, but to ideally tune the complete system of the engine
and its peripherals. MAHLE has therefore pushed its systemic developments for commercial vehicles, among others by relieving the oil
circuit through improved engine mechanics. In the process, MAHLE
is taking two complementary approaches for increasing efficiency
and reducing fuel consumption, thus lowering CO2 emissions: direct reduction of frictional loss within the engine mechanics andreduction of power consumption of auxiliary drives, such as the oiland cooling systems, by designing them to meet demand and applying specific operating point controls. The interaction of several
components thus takes center stage. This is how we address theengine and its peripherals in terms of subsystems, such as gas exchange, crank mechanism, as well as oil and cooling systems. The
optimization takes places across the engine, especially at the functional interfaces. In doing so, the overall efficiency of the commercial vehicle powertrain increases—in total by up to three percent.

CONTROLLABLE PENDULUM-SLIDER OIL PUMP, ALSOFOR COMMERCIAL VEHICLES
While many auxiliary aggregates are still designed to meet the maximum requirements, these are only required from time to time, which
increases consumption unnecessarily. This has also been true of theoil circuit so far. With our world’s first controllable pendulum-slider oilpump for commercial vehicles, the pressure and volume flow are generated on demand, reducing the required power consumption to aminimum. Depending on the control strategy, simply supplying oil tomeet demand can result in fuel savings of up to 1.5 percent. We havealready received numerous orders for our controllable pendulum-slider oil pumps from major European and American vehicle manufacturers—both in the passenger car and the commercial vehicle sector.

WORLD’S FIRST MAP-CONTROLLED THERMOSTAT FOR
COMMERCIAL VEHICLES
MAHLE has developed a map-controlled thermostat for commercial vehicle applications, which optimally adapts the coolant temperature to each driving situation for the first time. This increases
the efficiency of the engine. Our map-controlled thermostats react
very quickly and can already be actuated at low temperatures. They
should be ready for series production by 2018. The technology can
reduce fuel consumption in long-distance hauling applications by
up to 0.5 percent. The power requirements of the cooling system
are further optimized when the map-controlled thermostat works inconjunction with the controlled E-Visco® coolant pump and E-­Visco®
cooler. This lowers consumption and CO2 emissions can be reduced
by up to two percent.

MAHLE GROUP // ANNUAL REPORT 2016

GROUP MANAGEMENT REPORT

Additional key performance indicators

MAHLE ECO A/C SYSTEM FOR COMMERCIAL VEHICLES
Together with the BHTC (Behr-Hella Thermocontrol) joint venture,
which is managed as the Control Units profit center, MAHLE developed the ECO A/C system as an air conditioning system for heavy-­
duty commercial vehicles. Climate comfort in the cabin contributes
to a pleasant working environment, helps the driver to concentrate,and improves safety thanks to simple and intuitive operation of the
air conditioning system. At the same time, the ECO A/C system requires significantly less energy—a remarkable 83 percent less—thancomparable systems. Climate comfort and transport efficiency arethus no longer mutually exclusive.

PURCHASING
MAHLE’s most important raw materials include steel, aluminum,
nickel, copper, and resins. The prices for these largely remained
at a relatively low level over the course of 2016. In the last quarter,
however, some, raw materials such as aluminum, nickel, copper,
and tin, saw a sharp increase in price, which had a very different
regional impact. In Europe, for example, the trend was reinforcedby the depreciation of the euro against the U.S. dollar. Nevertheless, most of the raw materials were still significantly cheaper thanover the last three years.
The prices for steel and scrap also rose continuously in the second
half of the year under review. Oil prices saw a significant trend reversal, with prices increasing by a good 50 percent in 2016. Nonetheless, the averaged prices for crude oil were below the value of2015. In return, the prices of crude oil derivatives, such as resins,
remained largely stable. By contrast, energy prices showed regionalvariations, with prices tending to fall slightly in most countries. Continuous measures to increase energy efficiency have enabled us toreduce our consumption levels in all regions.
In the year under review, we further developed various areas of ourrisk management system for purchasing activities. A pilot project
was aimed at obtaining information on risks in the supply chain as
quickly as possible—be it natural disasters, strikes, or bankruptcies. In order to better identify such risks, a software collects andevaluates real-time data on suppliers in the second and third tierof the supply chain.
We also further scrutinized the basis of supplier relationships in 2016.
Our aim, among other things, was to identify risky relationships anddependencies. In such cases, we searched for and validated alternatives in order to limit the consequences of losing a supplier. In 2017,
we will be introducing a new audit process to evaluate the qualityof the supplier relationship and thereby further refine the frequency
and depth of the scrutiny.
The “Global Purchasing Excellence Program” (GPEP) is another central purchasing project, which we started in 2016 in order to identify and implement savings along the supply chain. The program
encompasses organizational structures as well as processes andtools used to procure product materials and investment goods. In
the course of its introduction, the purchasing organization will be
partially realigned across business units and centralized. Last but
not least, the organizational integration of the newly acquired business segments was also completed in Purchasing in 2016.

PRODUCTION, QUALITY, AND ENVIRONMENTGLOBAL PRODUCTION NETWORK
MAHLE produces at about 170 locations worldwide. In 2016, we expanded or modernized the production lines in numerous plants toimprove efficiency and product quality. These optimization measures
are part of a continuous improvement process, which ­encompasses
all areas of the company. In order to sustainably support this process,we are permanently developing our methods and standards further
through a global exchange of best practices. The findings are incorporated into a holistic MAHLE production system; the ­introductionof the system has already begun.

OPTIMAL PROCUREMENT
In Besigheim near Stuttgart/Germany, a new central warehousefor western and central Europe went into operation in the fall of
2016, taking logistics in the Thermal Management business unit
to the next level. With the “Point of Optimal Sourcing” (POS) project, which is unique in the automotive industry, we coordinate thetransport from our suppliers to MAHLE via our logistics center in
Ostrow/­Poland to ensure optimal utilization of the transport vehicles. A shuttle system regularly supplies the connected plants withmaterials. The result: on the one hand, POS reduces the volume oftransport by around a quarter, on the other hand, we need significantly less storage space in the plants, and can also respond flexibly to changes in customer demand.

99

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Additional key performance indicators

QUALITY MANAGEMENT
Our quality management system is fully integrated into all of thegroup’s business processes. All processes in the company are thus
recorded, evaluated, and scrutinized. The findings provide the basis for further optimization of the processes.
We aim to pursue the zero-defect principle. Potential defect ­sources
are already eliminated during product development. Quality management accompanies and safeguards series production. However, should any defects occur, they are handled using a standardized
solution procedure and promptly rectified.
Within the scope of the group-wide quality improvement program,
we further optimized the control loops in 2016 to ensure a better andfaster information flow. This measure has improved the quality of ourcomponents and systems on a sustainable basis. In 2017, we aim tofurther increase the quality awareness of employees as well as optimize the effectiveness of solutions to problems, the traceability ofdefect causes, and the quality of suppliers, among other things. In
addition, we will introduce preventive measures to improve quality.
A control loop, which is directly linked to the MAHLE Management
Board, monitors the progress. All activities are aimed at delivering“best-in-class quality” to our customers.

CUSTOMER SATISFACTION
To further improve customer satisfaction, we have introduced agroup-wide database in which all customer norms and standards
are recorded so that the various customer requirements can be
implemented more safely and efficiently. Furthermore, we have expanded our global database for handling customer complaints. As
a result, we now have an early warning system that allows us toget even closer to the customer and thus respond more quickly
to defects.

In 2016, the number of customer complaints fell group-wide byaround ten percent compared with the previous year. We also reduced the number of faulty delivered products in all business units.

ENVIRONMENT AND SAFETY
Comprehensive occupational health, safety, and environmental protection is a basic prerequisite for safe and environmentally friendly development and production processes at MAHLE. A consistent reviewof the group’s internal specifications in all business units is therefore
an integral part of the quality assurance process. We have invested in the ongoing development of our production systems in orderto keep the emissions of all production locations as low as possible,
and we have prescribed group-wide, uniform guidelines. We can thus
tap unused energy efficiency potential, lower energy costs, and reduce greenhouse gas emissions such as CO2. Since 2015, both therespective targets and their implementation have been jointly agreed
with representatives from all regions. Energy management is thus
making an important contribution to environmental protection. Compliance with MAHLE’s defined global uniform safety standards is also
reviewed at all locations. As a result, we ensure a safe environment
for our employees, smooth production processes, and compliancewith legal standards.

MAHLE GROUP // ANNUAL REPORT 2016

G R O U P M A N A G E M E N T R E P O R T 101

Opportunity and risk report

OPPORTUNITY AND RISK REPORTnnnn

Forward-looking, target-oriented management system to assess opportunities andrisks and thus to secure the long-term success of the company
Monitoring external influencing factors with impact on the automotive industry fortimely identification of trends, specifications, and requirements

We use a management system to evaluate the opportunities andrisks associated with our business operations. We draw appropriate conclusions from these findings and purposefully adapt ouractions. A globally active internal audit regularly verifies the compliance and efficiency of the processes and control systems bymeans of an audit plan, which changes on an annual basis. Dueto the strong growth of the group, we have continuously expanded
our risk management system since 2015. It is characterized by thefollowing main aspects.

MARKET AND TECHNOLOGICAL TRENDS
We identify long-term market and technological trends using a systematic scenario approach. As a framework, it comprises a baseline scenario including market developments in the business segments, regions, products, and markets until 2030. On this basis,
and using “extreme scenarios 2030,” we implement stress tests forour company on various aspects—including markets, regions, drive
types, quantities, and technologies. Taking market and technological trends into account in this systematic way ensures that we identify opportunities and risks at an early stage. The findings from theseanalyses are used in decisions about future business segments andnew production processes; the measures derived are included in
the strategic or budget planning. We monitor the implementation of
the agreed steps in the management reporting. Opportunities andrisks arise from the increasing environmental awareness of markets
and new standards to reduce emissions, for example. We therefore include all relevant topics in our international research and development activities at an early stage and rely on a wide range oftechnologies to increase the efficiency of the combustion engine,
the use of alternative drive configurations, as well as a holistic, intelligent thermal management system. Thereby, we offer our customers competitive and innovative products. With our continuously expanding portfolio of electric drives and auxiliary components,
we are benefiting from the growing hybridized motor vehicle market. We specifically strengthened these activities through multiple
acquisitions, which have meanwhile been integrated into the group.

Our mechatronics activities have been combined into a newly created division since the start of 2016—and so has our expertise inthis growth market. With a successful major acquisition in 2015,
we have decisively expanded our thermal management businessand our product portfolio to include air conditioning compressors.
We thus have the necessary resources to develop electric air conditioning compressors for the growing plug-in hybrid and electricvehicle market.
Economic fluctuations or changes to the political framework in individual regions or countries can have a significant impact on market
developments and subsequently on the business development of
the group. Our broad orientation and global presence are importantstabilizing factors here. We are therefore suitably placed to spread
our market and customer risks in the best possible way. Our highly
diversified customer and product portfolio also has a corresponding
impact. Possible declines in demand in individual markets or fromindividual customers can at least be partially offset by local growthpotential. In this context, we see a global market slump similar to
the economic crisis in 2009, which had a huge adverse effect on
profit, as one of the greatest risks for the group. Appropriate early
warning systems and action plans limit the repercussions.
We are monitoring the discussions about diesel emissions as a significant uncertainty factor for the whole automotive industry within
the scope of our strategic activities and acquisition decisions. We
are therefore in a position to mitigate the possible economic effects
of possible legislative changes as well as changes in technology,
such as the gradual phasing out of the passenger car diesel engine,at an early stage by taking appropriate action.

PROCUREMENT AND PRODUCTION
Our risk management system is also focused on minimizing thenegative impacts stemming from the procurement markets. Regular supplier assessments guard against unexpected supply bottlenecks and/or price increases in purchasing. We intensified these102 G R O U P M A N A G E M E N T R E P O R T

MAHLE GROUP // ANNUAL REPORT 2016

Opportunity and risk report

activities in 2016 and are making sure that the independence of our
suppliers is being maintained. Appropriate safety stocks and OTC
hedging transactions also reduce the procurement risks.
Our production plants all over the world continuously exchange bestpractices for the ongoing optimization of production ­processes. The
extensive measures to guarantee safety at work, optimized production processes, and high quality standards ensure that ­operationalrisks, such as unforeseeable circumstances, unexpected technical faults, accidents, and human error, cause as little hindrance aspossible to production operations. Thus far, the increasing amountof extreme weather conditions such as high water, floods, anddroughts have only impacted our production locations in isolatedcases. MAHLE addresses the resulting risks within the frameworkof an established environmental management system.
The MAHLE Group is audited and certified in accordance with all
major external standards and specifications, and is thus subjected to important external checks aiming at limiting risks. Disruptionsof operations resulting from damages, liability risks, and warranty
claims are covered by means of insurance policies to an economically prudent degree. We investigate quality and warranty claims
in an interdivisional working group in which Sales, Development,
Quality, Production, and Purchasing are represented. We identify the causes and determine countermeasures so that similar risks
are avoided in the future. Any known profit-related burdens, wherelegally required, are included as accruals in the consolidated financial statements, or taken into account within the framework of corporate planning.

FINANCE MANAGEMENT
Our systematic and group-wide finance management system ensures the optimized use of financing opportunities from the banking and capital market. The liquidity risk is covered by diversified­financing facilities with staggered maturity profiles that considerably
exceed the group’s foreseeable financial requirements. When designing the financing mix, we take security, flexibility, and cost factors into account. Our aim is to secure the financial independenceof the group, limit the financing risks, and ensure that business­opportunities can be exploited at all times.
We detect currency risks by means of a group-wide planning andreporting system. These are largely hedged with a horizon of up to

24 months. The hedging is executed on the basis of standardized
group-wide hedging principles that include no market forecast or
own opinion. As a rule, hedging transactions relate to OTC FX forwards or swaps in the form of portfolio hedges. The use of derivative financial instruments is necessarily linked to the existence ofan operational underlying transaction, whereby expected and not
yet invoiced currency risks are covered with continuously declining hedging grades. The resulting hedging relationships generatevaluation units in accordance with the critical term match method.
The interest rate risk is subjected to value-at-risk analyses. Counterparty risks with financial institutions arise from OTC hedging activities and other financial transactions, which are identified and evaluated across the group in a uniform reporting system. If predefined
thresholds are exceeded, the counterparty risk is influenced by thetargeted spread of risks.

HUMAN RESOURCES, IT, AND ACCOUNTINGFirst-class employees are a key factor for our sustainable success.
That is why it is important for us to attract them, encourage themon a continuous basis, help them gain further qualifications, and retain them in our company over the long term. We have developed
a comprehensive personnel marketing concept in order to establish early direct contact with potential candidates and recruit highly qualified employees. We thereby reduce the risk of not filling vacant positions or only with delay. In order to guarantee the group’s
long-term success and take advantage of the opportunities arisingfrom market and technological changes, our personnel requirement
planning is geared toward developments in the relevant markets
as well as strategically significant technologies and business segments. Performance-related remuneration systems, modern pension schemes, and advanced training activities counter the risk oflosing employees in strategically important positions.
In the IT division, security technologies protect against unauthorizedaccess or misuse of data by internal and external parties. Serverand storage systems are set up in such a way that they can be restored at short notice in the event of an emergency and in crisis situations. Defined security standards not only encompass the technicalspecifications of the hardware and software, but also the functional
security structures and organizational provisions. Detailed backup
and recovery procedures reduce the risk of severe disruptions, forexample, by securing access procedures as well as mirroring andarchiving data on a daily basis.

MAHLE GROUP // ANNUAL REPORT 2016

G R O U P M A N A G E M E N T R E P O R T 103

Statement on corporate management

STATEMENTON CORPORATEMANAGEMENTWith regard to the accounting process, the internal control and risk
management system is aimed at ensuring compliance with and effectiveness of accounting and financial reporting. Besides guidelines and principles, the system also includes measures to preventand uncover reporting errors. The consolidated financial statements
are compiled centrally with reporting data transferred from subsidiaries. We ensure compliance with the MAHLE guidelines by meansof systemic controls, specialist advice, and manual checks, as wellas through the validation of data plausibility by the group accounting department.

WOMEN IN MANAGERIAL POSITIONSThe Supervisory Board of MAHLE GmbH has set itself the goal ofincreasing its proportion of women to ten percent. The applicabledeadline for this is June 30, 2017. With regard to the Management
Board, the Supervisory Board has decided to maintain the status
quo—i.e., no female managing director—until June 30, 2017. For theGerman MAHLE companies, the Management Board of MAHLE
GmbH has set the quantitative target for the proportion of women
to at least 2.25 percent in the first two management levels below
the Management Board. The applicable deadline for achieving thistarget figure is also June 30, 2017.

REGULATIONS AND LEGISLATION
The introduction and implementation of directives alongside organizational and work instructions ensures that statutory requirements are observed. By integrating internal and external experts
into the processes from an early stage, we minimize risks and exploit opportunities that could arise from fiscal, occupational, competition, patent, antitrust, and environmental regulations and legislation, among others. Key elements of our compliance structure
include the new MAHLE Business Code, a global compliance organization, a training concept for risk areas relevant to compliance,and preventive measures.
The investigation proceedings for suspected restrictive practices
in automotive thermal products that were brought against the BehrGroup by the European Commission in May 2012 were concluded in
March 2017. A sufficient accounting provision for the risk of the proceedings had already been established in previous years. In addition,in the year under review, an accounting provision in the form of an
accrual was established for the investigation proceedings brought
against MAHLE Metal Leve in Brazil by local antitrust authorities for
suspected restrictive practices in the spare part business.

OVERALL ASSESSMENT
Overall, no risks that could endanger the continued existence of thegroup are currently observable.

By setting this target, both the Supervisory Board and the­Management Board would like to do as much justice as possible
to the German legislature’s intention to increase the number of women in managerial positions; however, they also need to take into account the current proportion of women at MAHLE as well as realistically achievable changes by June 30, 2017. Independently of thelegal requirements, MAHLE is pursuing the goal of employing more
women in upper and middle management worldwide by means oftargeted succession planning, the further development of female
junior executives, as well as measures to promote a healthy worklife balance, among others. In Germany, the proportion of womenacross all management levels at MAHLE lay at almost ten percent
as at the end of 2016. We will continue to increase this proportion.

104 G R O U P M A N A G E M E N T R E P O R T

MAHLE GROUP // ANNUAL REPORT 2016

Outlook

OUTLOOKnn

nn

Expectation of a slight organic increase in sales and above-average improvement in
profit under the assumption of a moderate development of vehicle markets
Dedicated continuation of our dual strategy

OVERALL ECONOMIC DEVELOPMENTDEVELOPMENT OF THE VEHICLE MARKETS

Despite a number of latent risks, the overall economic forecasts
for the 2017 business year envisage a somewhat better development than that of the period under report. In its January 2017 report, the International Monetary Fund (IMF) anticipates a growth of
3.4 percent—which is 0.3 percentage points more than in the previous year. The announced protectionist measures of the new U.S.
government are considered a factor of great uncertainty for the
global economic development. If the promised tax cuts and investment programs are implemented, this should lead to growth momentum in the USA.

MAHLE assumes an inconsistent development of the different regional vehicle markets in 2017. Overall, both the quantity of manufactured passenger cars and light commercial vehicles as well as
the number of medium-sized and heavy-duty commercial vehicles
produced worldwide will likely exceed the level of 2016.

In Europe, the consequences of the Brexit decision and the smoldering financial crisis in southern Europe could hamper further development. The upcoming election campaigns in major countries ofthe euro zone and, in light of this, the increasing demands for more
separation also represent a factor of uncertainty. The national economies are likely to benefit from continued moderate raw material
prices and, additionally, the euro zone from the European Central
Bank’s (ECB) continued expansionary monetary policy.
In China, a further growth of six percent—slightly below the level of
2016—is expected, although overheated local real estate and uncertain financial markets could dampen this development. Weakimpulses and only a slight increase in economic performance are
predicted for the Japanese market once again. The prospects are
more favorable in India, where growing demand and investment
confidence should ensure continued growth.
Provided crude oil prices continue to recover following OPEC’s
agreement to limit output, this should have a favorable impact on
raw material exporting countries—including Russia and Brazil, ­albeit
at a low level. In Latin America, there are signs that the severe recession has finally come to an end. It is currently not possible topredict when the region will return to its former strength.

Further growth in the production of both subsegments is expected
for Europe, although the trend may be hampered by political andeconomic uncertainty, for example in the United Kingdom or Italy.
In North America, we expect passenger car and commercial vehicle production to decrease slightly below the previous year’s level.
As far as heavy-duty commercial vehicles are concerned, we foresee a further decline, while in all likelihood the slowdown will not be
as strong as in 2016. South America is showing the first tentative
signs that the economic downturn of the past years—which affected Brazil in particular—is coming to an end. This may lead to a stabilization in the production of all types of vehicles.
In the Asia/Pacific region, the further development of the market forpassenger cars and light commercial vehicles essentially depends
on the consequences of the anticipatory effects in China. In 2016,
the government used tax incentives to encourage the purchase ofvehicles with a displacement of up to 1.6 liters, which led to markedly increased production. At the end of the year, it announced thisinitiative would be prolonged albeit on a reduced scale. We therefore expect that production will remain at around the same high level
as in 2016. We anticipate that the production figures for heavy-duty
commercial vehicles in Asia/Pacific will slightly exceed those of theprevious year, whereas production in China should remain at thelevel of the previous year, following the significant growth in 2016.

DEVELOPMENT OF THE MARKETS

2017

Overall economy

Passenger cars Medium-sized andand light comheavy-duty commercial vehicles
mercial vehicles

Expectation

Expectation

Expectation

EuropeäääNorth America

ä

à

æ

South America

à

à

à

Asia/Pacific

á

à

ä

MAHLE GROUP // ANNUAL REPORT 2016

G R O U P M A N A G E M E N T R E P O R T 105

Outlook

DEVELOPMENT OF THE MAHLE GROUP
The MAHLE Group is expecting a slight organic increase in sales(adjusted for changes in the consolidation group as well as exchange rate effects), in line with the development of the automotive
markets. With regard to the result from business activities, we are
anticipating above-average growth, following the many special effects experienced in 2016.
We continue to consistently pursue our dual strategy, and will workon optimized products relating to the combustion engine as well
as new solutions for alternative powertrains. Our goal is to further
reinforce our market position in the existing core businesses whiledeveloping and expanding new areas. In 2017, for example, we willfurther strengthen our thermoelectric activities—depending on theapplication, these can convert heat into electricity or electricity into
heat or cold. With these activities, we are expanding our portfolio
and offering our customers products and solutions to increase efficiency, for both combustion engines and electric vehicles, as wellas in thermal management. This means that we will also maintaina high level of expenditure on research and development in 2017.
We also anticipate growth in our strategic business segment of
Mechatronics in 2017—both through its own strength and throughacquisitions. With the acquisition of the electronics specialist
Nagares, which has already been agreed, we are entering the fieldof vehicle electronics and sustainably strengthening our competence in electrification and electric drives. Furthermore, some ofour developments in this area will soon be ready for series production, enabling us to open up new market segments. Electric auxiliary drives can relieve combustion engines and thus lower consumption and emissions.
We analyze and review the strategic direction and economic performance of the group on an ongoing basis. One of the framework
conditions is the agreement concluded in April 2016 to safeguard
employment at the German locations, which is valid until the endof 2019. In the course of our portfolio review, we have decided tosell our forging operations at the Plettenberg and Roßwein plantsin Germany. A corresponding agreement was concluded in the firstquarter of 2017. We are also looking for a buyer for the joint venture
Bosch Mahle Turbo Systems (BMTS), because further investments
are needed in order to achieve the necessary economies of scale.
We are taking a holistic systems approach to confront the trend in
vehicle construction toward increasingly networking components
and solutions. We will continue to intensify our interdivisional cooperation, as synergies and thus new innovative solutions emerge
from our knowledge in the various areas. In addition, we are also
rigorously extending our external networks as this will enable us
to tap into new trends that we want to exploit as quickly as possible. For several years now, we have therefore been involved in
venture capital funds that address issues such as connected mobility, energy efficiency, and new materials in vehicle construction.
We also promote entrepreneurial spirit in our own ranks, for example, through our participation in a start-up platform. Here, interdepartmental teams made up of MAHLE employees and the startup
scene work on future projects independently of our daily operations.
Our strategic goal is to evenly distribute sales across the core markets of Europe, North and South America, and Asia/Pacific to ensure we are well protected against individual economic influences. At
the same time, this global presence is an important prerequisite forsucceeding in a competitive market. In 2016, we therefore expandedvarious locations in China and Mexico, among others. We will further intensify our activities especially in Asia over the next few years.
A healthy balance sheet structure and moderate net gearing havehigh priority at MAHLE, because our goal is to ensure the ongoing
financial independence of the company. For this reason, a solid equity base and liquidity that is secured over the long term by meansof diversified financing sources and instruments are fundamental
pillars of our financial policy.
This report contains forward-looking statements that rely on current estimates of future developments and are therefore subject torisks and uncertainties that are beyond our control or precise assessment. As a result, the actual results may differ from the statements made here.

﻿NOTES TO THE
CONSOLIDATEDFINANCIALSTATEMENTS

﻿

106

CONSOLIDATED FINANCIAL STATEMENTS

108 Consolidated balance sheet
111 Consolidated income statement
112 Consolidated cash flow statement
114 Consolidated statement of changes in equity
116 Notes to the consolidated financial statements
116 Consolidation Group
118 E
 xemption provisions for domestic companies
118 M
 ethod of consolidation
118 A
 ccounting and valuation principles
120 C urrency conversion
120 N otes to the consolidated balance sheet
122 N otes to the consolidated income statement
124 O ther notes
128 C onsolidated statement of fixed assets
130 S hareholdings

137

Auditor’s Report

138

FURTHER INFORMATION

138

Members of the Supervisory Board

139

Members of the Management Board

140

Imprint/Contact

108 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Consolidated balance sheet

CONSOLIDATED BALANCE SHEETCONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2016
Dec. 31, 2016

Dec. 31, 2015

1. Purchased concessions, industrial and similar rights and assets, and licences in such rights and assets

332,085

416,261

2. Goodwill

297,849354,274

in EUR '000

ASSETSA.

Fixed assets

I.

Intangible assets

3. Prepayments

II.

774

905

630,708

771,440

Property, plant, and equipment
1. Land, leasehold rights, and buildings including buildings on third-party land

958,430

968,325

1,496,215

1,402,767

3. Other equipment, fixtures, and furniture

127,359

127,990

4. Prepayments and assets under construction

447,031389,289

3,029,035

2,888,371

1. Shares in affiliated companies

2,038

10,6002. Shares in associated companies

42,584

99,619

3. Equity investments

23,45921,311

4. Loans to companies in which participations are held

1,270

1,486

5. Long-term securities

6,017

5,396

6. Other loans

14,59913,929

2. Technical equipment and machinery

III. Financial assets

89,967

152,341

3,749,710

3,812,152

1. Raw materials, consumables, and supplies

513,433

472,999

2. Work in process

204,766

201,208

3. Finished goods and merchandise

614,590625,001

4. Prepayments

20,123

19,721

5. Prepayments received–84,073–76,603

1,268,839

1,242,326

1,956,082

1,806,637

B.

Current assets

I.

Inventories

II.

Receivables and other assets
1. Trade receivables
2. Receivables from affiliated companies
3. Receivables from companies in which investments are held
4. Other assets

III. Securities
IV.

Cash in hand, bank balances, and cheques

762

2,151

8,706

24,167384,795

406,6212,350,345

2,239,576

403

403

372,073309,625

3,991,660

3,791,930

C.

Prepaid expenses

20,911

23,249D.

Deferred tax assets

196,183

165,935

E.

Excess of plan assets over post-employment benefit liability

73,61355,5258,032,077

7,848,791

MAHLE GROUP // ANNUAL REPORT 2016

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 109

Consolidated balance sheet

in EUR '000

Dec. 31, 2016

Dec. 31, 2015

EQUITY AND LIABILITIESA.

EquityI.

Subscribed capital

150,000

150,000

II.

Capital reserves

166,430

166,430

III. Revenue reserves

1,872,395

1,811,594–35,496–60,747

6,109

6,015

IV.

Equity impact from currency translation

V.

Consolidated unappropriated retained earnings

562,507593,998

2,721,945

2,667,290

1,478

1,877

1. Accruals for pensions and similar obligations

575,336543,962

2. Accruals for taxes

66,73660,757

1,395,791

1,352,120

2,037,863

1,956,839

1. Bonds

829,000

829,000

2. Liabilities to banks

769,332

887,312

VI. Non-controlling interests

B.

BadwillC.

Accruals

3. Other accruals

D.

Liabilities

3. Payments received on account of orders

5,942

3,832

1,256,831

1,096,510

5. Liabilities on bills accepted and drawn

39,12537,831

6. Liabilities to affiliated companies

4,712

4,287

7. Liabilities to companies in which investments are held

17,9437,101

8. Other liabilities

267,595

271,628

3,190,480

3,137,501

4. Trade payables   thereof from taxes: 95,499 (prev. yr.: 90,724)   wthereof relating to social security and similar obligations: 32,483 (prev. yr.: 32,225)

E.

Deferred Income

80,311

85,2848,032,077

7,848,791

110 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

MAHLE GROUP // ANNUAL REPORT 2016

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

Consolidated income statement

CONSOLIDATED INCOME
STATEMENTCONSOLIDATED INCOME STATEMENT FROM JANUARY 1 TO DECEMBER 31, 2016				
2016

2015

1. Sales

12,321,783

11,486,133

2. Cost of sales–9,993,960–9,334,928

3. Gross profit on sales

2,327,823

2,151,205

4. Selling expenses–586,809–553,321

5. General administrative expenses–502,326–466,801

6. Research and development expenses–753,315–656,953

7. Other operating income

482,882

414,713–495,451–377,115–1,855,019–1,639,477

472,804

511,728

1,341

240

in '000

thereof from currency translation: 184,655 (prev. yr.: 210,426)
8. Other operating expenses
thereof from currency translation: –235,885 (prev. yr.: –217,963)

9. Investment income
thereof from affiliated companies: 914 (prev. yr.: 0)
10. Income from other securities and long-term loans

155

49

11. Result from associated companies–52,808–70,663

12. Other interest and similar income

54,627

18,763

13. Impairment of financial assets and of securities–92,899–9,091

14. Expenses from the transfer of losses–3,988–1,905–151,162–140,246–244,734–202,853

thereof from affiliated companies: 24 (prev. yr.: 110)
thereof income from discounting: 1,074 (prev. yr.: 999)

15. Interest and similar expenses
thereof to affiliated companies: –32 (prev. yr.: –204)
thereof expenses from discounting: –58,248 (prev. yr.: –46,931)
Result from business activities

228,070

308,875–132,189–155,842

17. Result after taxes

95,881

153,033

18. Other taxes–32,875–30,627

19. Consolidated net income

63,006

122,406

16. Taxes on income
thereof income from deferred income taxes: 22,900 (prev. yr.: 8,262)

20. Consolidated unappropriated retained earnings prior year

6,015

8,570

21. Dividend distribution–6,000–8,50022. Transfer to revenue reserves–56,599–66,394

23. Profit applicable to non-controlling interests–96,694–118,176

24. Loss applicable to non-controlling interests

96,381

68,10925. Consolidated unappropriated retained earnings

6,109

6,015

111

112 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Consolidated cash flow statement

CONSOLIDATED CASH FLOWSTATEMENTCONSOLIDATED CASH FLOW STATEMENT FROM JANUARY 1 TO DECEMBER 31, 2016
in EUR '000

1.

2016

Cash flows from operating activities
Profit for the period (consolidated net income including profit and loss applicable to non-controlling interests)

63,006+/– Depreciation, amortisation and write-downs of fixed assets/reversals of write-downs of fixed assets

697,592+/– Increase/decrease in provisions–10,755+/– Other non-cash expenses/income–5,450

Increase/decrease in inventories, trade receivables and other assets not related–/+ to investing or financing activities–190,414

Increase/decrease in trade payables and other liabilities not related+/– to investing or financing activities

160,085–/+ Gain/loss on disposal of fixed assets–13,919+/– Interest expense/interest income

97,342–

51,467

Other investment income+/– Interest payments/receipts related to interest other than the provision of capital

9,773+/– Income tax expense/income

155,089–/+ Income taxes paid

–158,130855,686

2.

Cash flows from investing activities+

Proceeds from disposal of intangible fixed assets–

Payments to acquire intangible fixed assets+

Proceeds from disposal of tangible fixed assets–

Payments to acquire tangible fixed assets+

Proceeds from disposal of long-term financial assets–

Payments to acquire long-term financial assets–89,452+

Proceeds from disposals of entities included in the basis of consolidation

28,569–Payments to acquire entities included in the basis of consolidation+

Cash receipts from the investment of cash funds for short-term cash management

230,770–

Cash payments for the investment of cash funds for short-term cash management–191,917+

Interest received+

Dividends received–161–24,392
12,765–562,927
9,214

–228

10,7001,897–575,162

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 113

MAHLE GROUP // ANNUAL REPORT 2016

Consolidated cash flow statement

2016

in EUR '000

3.

Cash flows from financing activities+

Proceeds from capital contributions by shareholders of the parent entity+

Proceeds from capital contributions by minority sharesholders–

Cash payments to shareholders of the parent entity from the redemption of shares–

Cash payments to minority shareholders from the redemption of shares+

Proceeds from the issuance of bonds and from borrowings

460,527–

Cash repayments of bonds and borrowings–609,962+

Proceeds from grants/subsidies received–

Interest payment due to leasing agreements–

Interest paid–

Dividends paid to shareholders of the parent entity–6,000–

Dividends paid to minority shareholders–45,845+/– Profit/loss transfer (to/from parent company)

0
1,523
0
0

1,183
–2
–67,452

0–266,028

4.

Cash funds at end of period
Net change in cash funds (subtotals 1—3)+/– Effect on cash funds of exchange rate movements and remeasurements

14,496
18,939+/– Effect on cash funds of changes in the basis of consolidation–3,526+131,285

Cash funds at beginning of period

161,194

Cash-in-hand, bank balances and checks

309,625–

Bank balances with an initial term of more than 3 months–10,077+

Liabilities to banks with an initial term of less than 3 months–168,263

Cash funds at beginning of period

131,285

thereof from quota-consolidated entities

21,664Cash-in-hand, bank balances and checks

372,073–

Bank balances with an initial term of more than 3 months–9,629+Liabilities to banks with an initial term of less than 3 months–201,250

Cash funds at end of period

161,194

thereof from quota-consolidated entities

The short term liabilities which were netted against cash ­balances
contained EUR 115,226k (previous year EUR 62,036k) which were­related to short term liabilities based on a committed credit line witha r­ emaining tenor of more than one year.

38,692The option to dispense with the prior-year figures was applied in­accordance with the regulations of GAS 21.

114 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Consolidated statement of changes in equity

CONSOLIDATED STATEMENT OFCHANGES IN EQUITYCONSOLIDATED STATEMENT OF CHANGES IN EQUITY 1) FROM JANUARY 1 TO DECEMBER 31, 2016
Parent company

in EUR '000

As at January 1, 2015

Subscribed
capitalCapital reserves

Revenue reserves

Equity impact from­currency translation

150,000

166,430

1,741,723–92,943

Capital increase

0

0

0

0

Transfer to revenue reserves0066,3940

Dividend distribution

0

0

0

0

Currency translation

0

0

0

35,988Other items

0

0

–222

–93

Changes in the consolidation group

0

0

3,699

–3,699Consolidated net income
As at December 31, 2015

0

0

0

0

150,000

166,430

1,811,594–60,747

Adjustment of first consolidation
without effect on net income

0

0

–861

0

150,000

166,430

1,810,733–60,747

Capital increase

0

0

0

0

Transfer to revenue reserves0056,5990

Dividend distribution

0

0

0

0

Currency translation

0

0

0

30,751Other items

0

0

6,599

–7,036

Changes in the consolidation group00–1,536

1,536

Consolidated net income

0

0

0

0

150,000

166,430

1,872,395–35,496

As at December 31, 2015 (adjusted)

As at December 31, 20161)

The voluntary early adoption of GAS 22 “Group Equity” was exercised.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 115

MAHLE GROUP // ANNUAL REPORT 2016

Consolidated statement of changes in equity

Consolidated­unappropriated retained
earnings

Total

Non-controllinginterests

Consolidated
equity8,570

1,973,780

581,0142,554,794

0

0

2,428

2,428

–66,394000–8,500–8,500–24,769–33,269

035,988–6,60929,3790–315–7,902–8,217

0

0

–231

–231

72,33972,33950,067

122,406

6,015

2,073,292

593,998

2,667,290

0

–861

650

–211

6,015

2,072,431

594,648

2,667,079
1,669

0

0

1,669

–56,59900

0–6,000–6,000–41,684–47,684

030,751

10,784

41,535

0

–437

–47

–484

0

0

–3,176–3,176

62,69362,693313

63,006

6,109

2,159,438

562,5072,721,945

116 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSCONSOLIDATION GROUP
The consolidated financial statements include MAHLE GmbH (parent company), with registered office and district court in Stuttgart(commercial register number 638), 25 domestic and 134 foreignsubsidiaries. Furthermore, 43 companies are proportionately consolidated and nine companies were valued according to the equity method. The consolidated companies are included in the list ofshareholdings.
In the 2016 business year, the following company was fully consolidated for the first time. In previous years this company was not included in the consolidated financial statements on account of its
immateriality.

Two companies previously fully consolidated are now valued according to the equity method.
In the business year, four companies, which were not fully consolidated due to their immateriality, were excluded from the scopeof consolidation due to the divestment of the division Industrial
Filtration.
In the business year, eleven companies were not included in the
consolidated financial statements on account of their immateriality.
Eight companies were not valued according to the equity method
due to their immateriality.

KEY CHANGES TO THE CONSOLIDATION GROUP
nn

MAHLE Manufacturing Service Japan Corporation, Japan, as
of January 1

As of October 31, 2016, the following fully consolidated companies
were excluded from the scope of consolidation due to the divestment of the division Industrial Filtration:
MAHLE Industriefiltration GmbH, Germany
MAHLE Industrial Filtration (Benelux) B.V., Netherlands
nn MAHLE Filtration Industrielle SAS, France
nn MAHLE Industrial Filtration (UK) Ltd., Great Britain
nn MAHLE Industrial Filtration USA, Inc., USA
nn MAHLE Filter Systems s.r.o., Czech Republic
nn MAHLE Industrial Filter Systems (Shanghai) Co., Ltd., China
nn MAHLE Industrial Filtration Japan Corporation, Japannn MAHLE Industrial Filtration SRL, Romaniann

In the year under report MAHLE divested its division Industrial Filtration. Due to the disposal the assets, liabilities, and deferred income are excluded from the MAHLE Group balance sheet with thefollowing amounts:
Fixed assets

EUR 21,966k

Current assets

EUR 61,495k

nn

In the business year, four companies were merged with other groupcompanies.
One company was liquidated in the business year 2016.

Prepaid expenses

EUR 693k

Deferred tax assets

EUR 3,634k

Accruals

EUR 26,765k

Liabilities

EUR 36,126k

Sales decreased due to the disposal by approximately EUR 23,552k.
The other items in the income statement have changed accordingly.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

According to Sec. 301, Para. 2, Sentence 2 of the German Commercial Code (HGB), subsequent information on the acquisition of theformer Delphi Thermal companies was taken into account with noeffect on the result within twelve months after the initial consolida­tion date. This resulted in the following changes in the ­consolidatedbalance sheet:
Fixed assets

EUR 2,516k

Current assets

EUR –7,348k

Deferred tax assets

EUR 1,040k

EquityEUR –350k

Accruals

EUR 1,179k

Liabilities

EUR –4,621k

As the adjustment of the previous year’s figures to the new consolidation group would involve a disproportionate effort, the information
below is provided to make the consolidated financial statements ofthe current year comparable with the previous year’s statements:

CONSOLIDATED INCOME STATEMENT
2016

2016

2015

MAHLE Group

MAHLE Group

MAHLE Group with
6 months firsttime consolidated
companies

Sales

12,321,783

11,778,832

11,486,133

Cost of sales–9,993,960–9,508,217–9,334,928

Selling expenses–586,809–573,975–553,321

General administrative expenses–502,326–468,703–466,801

Research and development expenses–753,315–710,399–656,953

in EUR '000

Other operating income and expenses–12,569

8,141

37,598Financial result–244,734–238,329–202,853

Result from business activities

228,070

287,350

308,875

Taxes on income–132,189–140,833–155,842
153,033

Result after taxes

95,881

146,517

Other taxes–32,875–32,217–30,627

Consolidated net income

63,006

114,300

122,406117

118 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

EXEMPTION PROVISIONS FORDOMESTIC COMPANIESThe following subsidiaries are applying the exemption according toSec. 264, Para. 3, respectively Sec. 264b of the German Commercial Code (HGB), with regard to the disclosure of their annual financial statements and/or the preparation of the management reports:
MAHLE Aftermarket GmbH, Stuttgart; MAHLE Amovis GmbH,­ erlin; MAHLE Beteiligungen GmbH, Stuttgart; MAHLE Filter­Bsysteme GmbH, Stuttgart; MAHLE Immobilien GmbH, Stuttgart;
MAHLE Industrial Thermal Systems GmbH & Co. KG, Stuttgart;
MAHLE Industriebeteiligungen GmbH, Stuttgart; MAHLE Industrie­
motoren-Komponenten GmbH, Stuttgart; MAHLE Industry GmbH,
Stuttgart; MAHLE International GmbH, Stuttgart; MAHLE Klein­
motoren-Komponenten GmbH & Co. KG, Stuttgart; MAHLE Power­
train GmbH, Stuttgart; MAHLE Brandenburg GmbH, Wustermark;
MAHLE Ventiltrieb GmbH, Stuttgart; MAHLE Versicherungsver­
mittlung GmbH, Stuttgart

METHOD OF CONSOLIDATION
Subsidiaries that were fully consolidated until December 31, 2009,were consolidated using the book value method as in prior years.
Thereby, the value of the participation of the parent company at thetime of first consolidation, which took place at the time the participation was acquired, is to be offset against the proportionate shareof the subsidiary’s equity book value. In the case of companies thatwere consolidated for the first time from 2010 onward, the assets,­liabilities, as well as prepaid expenses and deferred income a­ cquiredwere revalued as part of the purchase price allocation at the timethat the company became a subsidiary. Goodwill is amortized overten years as the markets that are relevant to the MAHLE Group are
dominated by a small number of suppliers, have high barriers tomarket entry, and have historically shown that the average usefullife of acquired goodwill is ten years. Goodwill impairments in thebusiness year totaled EUR 400k.

The intra-group supply of goods and services as well as ­mutual­receivables and liabilities were offset and intercompany profits were
eliminated.
Deferred taxes resulting from consolidation measures with effect on
income were recorded using a tax rate of 24 percent.

ACCOUNTING AND VALUATION PRINCIPLES
The existing methods were retained and were also applied by the
associated companies.
Acquired intangible assets and property, plant, and equipment arevalued at acquisition costs or manufacturing costs minus depreciation and amortization. Depreciation was performed on a straight-line
basis using standard useful lives. If lower valuations were p­ rovided,
impairments were carried out. Internally developed trademarks andsimilar rights and assets were not capitalized.
Financial assets were stated at the lower of acquisition cost or fairvalue, if the impairment is expected to be permanent.
Inventories are capitalized at acquisition costs or manufacturingcosts. Unfinished and finished goods are valued taking into ­accountthe appropriate share of material and production overheads anddepreciation of fixed assets. If the market prices or fair values werelower than the book values, or marketability was limited, devaluations were performed to the extent necessary.
Receivables and other assets are recorded at nominal value.
­ ppropriate write-downs are recorded to account for receivablesA
with recognizable risks of nonpayment; a general valuation allowance is set up to cover the general credit risk.
Prepaid expenses have been recorded for payments made prior
to the balance sheet date where they represent expenditures for a
specific time after this date.

MAHLE GROUP // ANNUAL REPORT 2016

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 119

Notes to the consolidated financial statements

Accruals for taxes and other accruals adequately cover uncertain
liabilities and anticipated losses from pending transactions. Valuation is based on the settlement amount taking into account necessary cost increases. Accruals with a remaining term of more than
one year were discounted by using the average market interest rateof the past seven fiscal years provided by the German Central Bank.
Accruals for pensions and similar obligations are calculated groupwide in accordance with actuarial principles (using the projected
unit credit method) and discounted to present value. In 2015, the
MAHLE Group has opted for the voluntary early adoption of the new
regulation of discount rate computation for pension accruals according to Sec. 253 of the German Commercial Code (HGB). In the business year 2016, the calculation is based on the following discountrates: domestic 3.75–4.01 percent; foreign 1.10–5.20 percent. The
option to assume a standardized remaining term of 15 years was
not utilized. Expected salary increases of 0.00–5.68 percent andanticipated labor turnover rates of 2.03–5.75 percent were taken
into consideration. The mortality tables recognized in each c­ ountry
were taken as basis for the calculation.
Assets that serve exclusively to settle pension-related obligations
and cannot be utilized to settle claims of any other creditors (planassets in the form of long-term securities) were offset against the­accruals at their fair value. Excess amounts are recorded within
the position “Excess of plan assets over post-employment ­benefit
liability”.
Liabilities are stated at their settlement amount.
Receivables, bank balances, and liabilities in foreign currency witha remaining term of less than one year were valued using the mid
spot rate applicable at the balance sheet date. If the remaining term

was more than one year, the valuation was based on the exchange
rate applicable as of the acquisition date or the lower or higher­exchange rate at the balance sheet date.
Changes in exchange rates, commodity price variations and interest rates represent a risk to operational business that is very difficult
to estimate. To minimize this risk, appropriate hedging transactions
such as derivatives are therefore used. These transactions are only
concluded with banks that have a prime credit rating. Their use isbased on standard guidelines, subject to strict internal c­ ontrols, andrestricted to the hedging of operational business as well as that ofrelated investments and financing activities.
If effective hedging relationships existed between the underlying
operating transactions (basically future deliveries of goods and­services) or highly probable transactions and the hedging trans­
action, they were included in hedge accounting evaluation units­under the “frozen value method” (“Einfrierungsmethode”).
Deferred income has been recorded for payments received prior to
the balance sheet date where they represent income for a ­specifictime after this date.
Deferred tax assets and liabilities are set up to account for all temporary and quasi-permanent differences between the tax and balance sheet values. Furthermore, deferred taxes for tax loss and­interest carry forwards and tax credits were capitalized, provided
the tax benefit was reasonably recoverable within the next five years.
Deferred taxes were determined using tax rates that are expected
to apply at the time of recovery and are based on the regulations
adopted at the balance sheet date. Deferred tax assets and liabilities are presented as a net value. The tax rates fall within a rangeof 10.00–36.88 percent.

120 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

In the previous year, trade receivables (EUR 192k) as well as otherassets (EUR 5,627k) had a remaining term of more than one year.

CURRENCY CONVERSION
The financial statements of foreign companies were—if not preparedin Euro—converted as follows:
Equity:Exchange rate at date of acquisition (or first consolidation)
Other balance sheet items:
Mid spot rate at the balance sheet date

Other assets contain receivables from shareholders amounting
to EUR 135k (previous year: EUR 64k). Prepaid expenses include,
among others, the differences between net loan proceeds and­liabilities to banks (debt discounts) amounting to EUR 1,735k (pre­vious year: EUR 2,079k).

Income statement items:
Average exchange rate for the year
Exchange rate differences in connection with the use of the closing rate method were shown as “currency translation Jan 01” within the consolidated statement of fixed assets. Differences arisingfrom the conversion of movements during the current year wereshown in a separate column.
Any difference arising from the differentiated translation of the balance sheet items into Euro was included under “Equity impact fromcurrency translation” in the consolidated shareholders’ equity.
The “thereof” information on currency conversion in the income
statement includes both unrealized and realized exchange rate
differences.

NOTES TO THE CONSOLIDATED BALANCE SHEETRECEIVABLES AND OTHER ASSETS

in EUR '000

Trade receivables are included in the amount of EUR 40k (previous
year: EUR 366k) from affiliated companies and EUR 7,108k (pre­vious year: EUR 10,711k) from companies in which investments areheld. Of the receivables from companies in which investments areheld results EUR 218k from cash pooling.

EQUITYThe consolidated unappropriated retained earnings equal that of
the p­ arent company and contain the amount carried forward fromthe previous year of EUR 15k.

ACCRUALS FOR PENSIONS AND SIMILAROBLIGATIONS AS WELL AS OTHER ACCRUALS
Notes for offsetting pursuant to Sec. 246, Para. 2, Sentence 2 of
the German Commercial Code (HGB):in EUR '000

Carrying
amountDec. 31, 2016

Settlement amount of offset liabilities

503,688

Acquistion costs of assets

269,263

Fair value of assets

372,221

Offset income

49,236

Offset expenses

65,833Carrying
amountDec. 31, 2016

Thereof with aremaining termof more than
1 year

The difference for discounting with the seven-year average rate­according Sec. 253, Para. 6, Sentence 1 of the German Commercial Code (HGB) amounts to EUR 73,597k.

1,956,082

184

762

0

Other accruals primarily relate to anticipated losses from pending transactions, outstanding credit notes and rebates, as wellas outstanding purchase invoices. In addition, this item includes­obligations arising from employment contracts, risks from antitrust­proceedings as well as guarantee and warranty risks.

Accounts receivable
Trade receivables
Receivables from affiliatedcompanies
Receivables from companies
in which investments are held
Other assets
Total

8,706

0

384,795

10,4662,350,345

10,650C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

LIABILITIESin EUR '000

Thereof with a
Thereof with a
Thereof with a
Carrying amount ­remaining term of r­ emaining term of r­ emaining term ofDec. 31, 2016
up to 1 year more than 1 year more than 5 years

Bonds

829,000

0829,000

500,000

Liabilities to banks

769,332

285,626

483,706

176,335

5,942

5,934

8

0

1,256,831

1,256,191

640

039,125

39,1250

0
0

Payments received on account of order
Trade payables
Liabilities on bills accepted and drawn
Liabilities
to affiliated companies

4,712

4,712

0

to companies in which investments are held

17,943

17,94300267,595

232,449

35,146

18,5093,190,480

1,841,980

1,348,500

694,844

Other liabilities
Total

In the previous year, liabilities to banks (EUR 353,089k), payments received on account of order (EUR 3,825k), trade payables (EUR 1,095,405k), liabilities on bills accepted and drawn(EUR 37,831k), liabilities to affiliated companies (EUR 4,287k), liabilities to companies in which investments are held (EUR 7,101k)
and other liabilities (EUR 230,215k) had a remaining term of lessthan one year.
The liabilities to affiliated companies contain trade payables EUR
126k (previous year: EUR 1,688k). The liabilities to companies inwhich investments are held contain trade payables EUR 3,291k(previous year: EUR 1,726k) as well as EUR 3,038k payables related to cash-pooling.
Other liabilities do not contain any payables to shareholders (previous year: EUR 0k).

Of the liabilities to banks, EUR 0k is secured by property liens and
EUR 908k by similar rights.

DEFERRED TAXES
Deferred tax assets arise predominantly from differing accounting
treatment in intangible assets, property, plant, and equipment, andaccruals. The temporary differences in accruals essentially include
differing carrying amounts between the tax balance sheet and theconsolidated balance sheet for accruals for pensions and similar
obligations, as well as accruals that are not tax-deductible, suchas accruals for anticipated losses.
The deferred tax liabilities result predominantly from temporary­differences relating to tangible fixed assets owing to differing­carrying amounts and depreciation methods in the tax and consolidated ­balance sheets. In addition, the identified fair values ­disclosed
as part of the purchase price allocations of the acquisitions lead todeferred tax liabilities in particular in intangible and tangible fixed
assets.

121

122 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

Deferred tax assets of EUR 62,128k were set up on tax loss
­ arry forwards of EUR 323,656k that are recoverable within fivecyears. D­ eferred tax assets were written off by EUR 137,386k asof ­December 31, 2016, as their realization is not deemed suffici­
ently likely.

The other financial obligations include EUR 12,247k from quota-­
consolidated companies.

OFF-BALANCE-SHEET TRANSACTIONSCONTRIBUTION OF QUOTA-CONSOLIDATEDCOMPANIESAs of the balance sheet date, off-balance-sheet transactions exist inconnection with significant rental and leasing agreements for buildings and land (EUR 148,331k). Moreover, off-balance-sheet trans­
actions are in place in connection with factoring (EUR 125,176k).
These off-balance-sheet transactions led to a diversification of­financing sources as of the balance sheet date. Through these transactions cash outflows are generally postponed into the future. No
material risks are anticipated from these transactions.

Contingents from notes
Guarantees
thereof to associated companies

Carrying
amountDec. 31, 2016
19,903371
171

To our knowledge, the underlying obligations can be fulfilled in allcases by the companies concerned. We do not expect the contingent liabilities to be claimed. The contingent liabilities include
EUR 13,053k from quota-consolidated companies.
The contingent liabilities do not include any obligations concerning
retirement benefits.

OTHER FINANCIAL OBLIGATIONS

in EUR '000

Carrying
amountDec. 31, 2016

Purchase commitments from investments

324,505

Financial obligations resulting from rent and leaseagreements

55,728

thereof to affiliated companies
Othersthereof to affiliated companies

The balance sheet includes short-term assets of EUR 393,150k andlong-term assets of EUR 169,042k belonging to quota-­consolidated
companies. Current liabilities of EUR 302,483k as well as longterm debt of EUR 42,613k are recognized by quota-consolidated
companies.

NOTES TO THE CONSOLIDATEDINCOME STATEMENTCONTINGENT LIABILITIESin EUR '000

The other financial obligations do not include any obligations­concerning retirement benefits.

803
72,574
191

The income statement of the MAHLE Group has been prepared­according to the cost of sales method. Sales are thus set against
the expenses incurred in their realization, which are allocated inprinciple to the functions production, sales, general administration,and research and development.
The cost of sales comprises the material and production costs­incurred in the realization of sales, the landed costs of the tradebusiness, and the costs of the allocation to accruals for ­warranties.
Furthermore, this item also contains depreciation and amorti­zationon the hidden reserves disclosed as part of the purchase price­allocations of the acquisitions. These include technologies, tech­nicalequipment, and machinery as well as land and buildings.
The selling expenses include, in particular, personnel and non-­personnel expenses, depreciation allocated to the sales function,
as well as logistics, market research, sales promotion, shippingand handling, and advertising costs. Furthermore, they also contain amortization on the hidden reserves disclosed as part of thepurchase price allocations of the acquisitions. These include trademark rights and customer relationships.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 123

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

The general administration expenses include personnel and non-­personnel expenses as well as depreciation allocated to the­administrative function.
The personnel and non-personnel expenses and depreciation­allocated to the research and development function are substantial to the MAHLE Group. In order to present the economic s­ ituationof the group more clearly, they have been included as separate itemin the breakdown.

SALES BY AREA OF OPERATION
in EUR '000

2016

Engine Systems and Components business unit

2,683,399

Filtration and Engine Peripherals business unit

2,190,469

Thermal Management business unit

4,293,275

Aftermarket business unit

898,898

Profit centers, division and services

2,255,742

Total

12,321,783

Other operating income contains EUR 177,252k income relating
to other periods. This income is mainly related to the reversal of
accruals.

SALES BY GEOGRAPHICAL MARKET(TARGET AREA)

Other operating expenses contain EUR 5,353k expenses relating
to other periods. This expense is mainly related to disposals of­depreciable fixed assets.

Europe5,960,149

North America

3,349,821

in EUR '000

SALES AFTER CHANGES DUE TO BILRUG
Due to a revised regulation of Sec. 277, Para. 1 of the German
Commercial Code (HGB) the sales figures of the previous year are
not comparable to the figures reported in the current business year
since previous year’s sales figures were not adjusted accordingly.
Applying Sec. 277, Para. 1 of the German Commercial Code (HGB)in the revised version the sales figures of prior reporting period
would amount to EUR 11,512,837k. In particular charges to suppliers, atypical services and sales of energy and other utilities, income from canteens and letting or leasing as well as from sales to
employees are disclosed within sales instead of other operating income from the business year 2016 onwards.

South America
Asia/Pacific2016

504,824
2,421,330

Africa85,659Total

12,321,783

124 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

PERSONNEL EXPENSES

OTHER NOTES
2016

in EUR '000

Wages and salaries

2,270,371

Social security costs and other benefits

545,524

Old age pension costs

46,755

Total

2,862,650

2016

in EUR '000

606,540

thereof impairments

6,040

SUBSEQUENT VALUATION OF THE PURCHASE
PRICE ALLOCATION FOR THE ACQUISITIONS 1)
in EUR '000

78,226

Amortization within selling expenses

29,860

Release of subsidies within other operating income

15,537

relating to MAHLE Behr, MAHLE Letrika, former Delphi Thermal entities and MAHLE
Electric Drives JapanCONTRIBUTION OF QUOTA-CONSOLIDATEDCOMPANIES
The income statement includes income of EUR 1,291,945k and­expense of EUR 1,240,247k of quota-consolidated companies.

40,940Indirect employees

34,665

Total

75,605excluding apprentices

The total average annual number of employees includes a pro rata
figure of 2,552 employees from quota-consolidated companies.

DERIVATIVES
Derivatives in accordance with Secs. 285, 314 of the German Commercial Code (HGB) not yet settled as of the balance sheet date canbe broken down as follows:2016

Depreciation and amortization within cost of sales

1)

2016
Direct employees

1)

DEPRECIATION, AMORTIZATION, AND
IMPAIRMENTS OF INTANGIBLE AND TANGIBLE
FIXED ASSETS

Total

AVERAGE ANNUAL NUMBER OF EMPLOYEES 1)

in EUR '000

Nominalamounts
Dec. 31, 2016

Fair value 1)
Dec. 31, 2016

Transactions relating to interest

19,258–1,715

Transactions relating to currency

1,981,173–16,434

Transactions relating to currency
and interest

6,721

280

Transactions relating to commodities

16,519848

1)

The fair value of currency- and commodities-related transactions corresponds to themarket value of the derivatives as of the balance sheet date, which is identified inaccordance with the net present value method. All interest-related transactions are
based on recognized ﬁnancial/mathematical models.

The derivative contracts as of December 31, 2016, are placed in­relation to third parties exclusively with banks. Evaluation units were
established for hedging transactions with an effective relationship to
the underlying transaction. Accruals of EUR 681k were set up for allother hedging transactions that have resulted in anticipated losses.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 125

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

EVALUATION UNITS
The following evaluation units were created from derivatives:in EUR '000

Type ofevaluation unit

Amount of hedgedtransaction 2016

Balance sheet item
Trade receivables

Currency exposure
Recorded values

Portfolio hedge

57,623

Portfolio hedge

12,371

Bank balances

Portfolio hedge–1,876

Liabilities to banks
Trade payables

Portfolio hedge–34,025

Remaining currency exposure from eliminatedtransactions with affiliated companies

Portfolio hedge

431,351

Future transactions

Portfolio hedge

67,272

Recorded values

Micro hedge–6,721

Remaining currency exposure from eliminatedtransactions with affiliated companies

Micro hedge

9,708

Recorded values

Micro hedge–4,939Remaining currency exposure from eliminatedtransactions with affiliated companies

Micro hedge

0Portfolio hedge

14,997

Currency and interest exposure (cross currency swap)
Liabilities to banks

Interest exposure

Commodity exposure
Future transactions

Liabilities to banks

126 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

Volume of hedged­exposure 2016
Currency exposure in transaction currency

in '000

CAD

19,424

CNY

300

CZK

–78,622EUR

64,607

GBP

6,908

HUF

–3,550,000

JPY

9,672,980

MXN

1,236,036

PHP

82,798RON

14,574

RUB–913,102

THB–161,440

TRY

26,868USD–773,541

Currency and interest exposurein t­ ransaction currency

in '000

CNY–79,680

Interest fixed CNY/variable 3-month-Euribor
USD

1,238

Interest fixed USD/fixed THB
USD

5,847

such transactions are in the future. The hedging horizon for currency- and commodities-related hedging transactions which areincluded in hedge accounting relationships is generally two years
and, in exceptional cases, can be extended up to three years forcommodities hedging transactions. Past experience has shown that
this strategy has led to an effective hedging of cash flows in forecast evaluation units.
The hedging quota of a planned exposure increases over its lifetime.
When the planned exposure finally turns into a booked exposure
it will have been hedged fully via consecutive individual hedging
steps. At this stage the exposure is hedged via a portfolio of individual hedges which have been added gradually over time. At any
given point in time a number of individual booked exposures canmature, each with their own portfolio of hedges covering the exposure. The entirety of several booked exposures with their r­ espective
hedges create a portfolio hedge.
Currency and interest rate hedging transactions (cross ­currency
swaps) are entered into with the same maturity profile as the­respective underlying contracts and form a micro hedge with thecorresponding financial liability.

Interest fixed USD/variable CDIInterest exposure in transaction currency
IDR

in '000
70,000,000

The “critical term match method” is used to measure the effectiveness of the hedging relationship.

Interest fixed IDR/variable 3-month-IDR Jibor
Commodity exposure in reporting currency

in '000

REPORT ON POST-BALANCE SHEET DATE EVENTS

Aluminum

8,167

In December 2016, MAHLE Holding Espana S.L. signed a contract
for the acquisition of the Spanish electronics specialist Nagares SA.
The transaction is still subject to approval by antitrust authorities.

Copper3,088

Nickel

3,319

Tin

423

The changes in value in the underlying and hedging transactions
are offset during the hedging horizon, since risk positions (under­
lying transactions recognized on the balance sheet) are immedi­ately
hedged by means of forward exchange transactions of the sameamount, in the same currency, and with the same maturity period
in accordance with the guidelines of the group risk management.
The risk of potential future changes in cash flows arising from h­ ighlyprobable underlying transactions, basically future deliveries of goods
and services, is offset by using hedging transactions. The hedge­ratio of such future transactions is reduced over time, the further

In January 2017, MAHLE GmbH signed a contract for the ­disposalof its forging activities—MAHLE Motorkomponenten GmbH—to theAustrian Frauenthal Group.
In February 2017, MAHLE GmbH is expanding its expertise in thefield of thermoelectrics by taking over the start-up company O-Flexx
Technologies GmbH based in Duisburg/Germany.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Notes to the consolidated financial statements

APPROPRIATION OF EARNINGS

AUDITOR’S FEE

UNAPPROPRIATED RETAINED EARNINGS

The total fee for the business year charged by PricewaterhouseCoopers GmbH, the group auditor, pursuant to Sec. 314, Para. 1, No. 9of the German Commercial Code (HGB), consists of the following:in EUR '000

2016

Net income MAHLE GmbH12,894

Transfer to revenue reserves–6,800

Amount carried forward from prior year
Unappropriated retained earnings MAHLE GmbH

15
6,109

PROPOSED UTILIZATION OF RETAINED EARNINGSin EUR '000

2016

Unappropriated retained earnings

6,109

Dividend distribution to MAHLE-Stiftung GmbH

–6,000Carry forward to new account

109

REMUNERATION OF THE MEMBERS OF THE
MANAGEMENT BOARD OF MAHLE GMBH 1)
in EUR '000

2016
855

Other assurance services

321

Tax advisory services

718

Other services

1,098

Total

2,992

Stuttgart/Germany, March 17, 2017
The Management Board of MAHLE GmbH

Wolf-Henning Scheider
2016

Supervisory Board

300

Management Board

11,1091)

in EUR '000

Services for audit of financial statements

parent company

The total remuneration of the Management Board comprises fixedand variable components. The fixed portions for the 2016 ­businessyear amounted to EUR 3,117k and the variable compensation for2016 to EUR 8,178k. The remuneration shown also includes an­adjustment for the previous year. The fixed portions include ­benefits
in kind, which consist primarily of the noncash benefits of ­having
company cars.

Bernd Eckl

Wilhelm Emperhoff

Arnd Franz

Michael Frick

Michael Glowatzki

Rudolf Paulik

Remunerations paid to former members of the Management Boardand their descendants totaled EUR 1,830k.
An amount of EUR 22,725k is set aside for this group of persons in
the pension accruals as of December 31, 2016.

Jörg Stratmann127

128 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Consolidated statement of fixed assets

CONSOLIDATED STATEMENT
OF FIXED ASSETSCONSOLIDATED STATEMENT OF FIXED ASSETS FROM JANUARY 1 TO DECEMBER 31, 2016
Acquisition/manufacturing costs
Business year 2016
Acquisition/manu­fac­turing costs
Jan 1, 2016

Currencytranslation
Jan 01, 2016

1. Purchased concessions, industrial andsimilar rights and assets, and l­icencesin such rights and assets

752,392

2. Goodwill

711,881in EUR '000I.

2)

23,822

2,478

3,230

58

776,35917

85,1120–1567,930

4,121–4,786

0–58,855

905

–309

0

570

56

–334

–2

774

1,465,178

3,812–63,641

24,40987,6462,896

55

1,345,063

1. Land, leasehold rights, and buildings
including buildings on third-party land

1,599,841

26,898–25,851

18,608

5,639

16,821245

1,630,923

2. Technical equipment and machinery

4,882,121

120,956–97,518

130,084

59,879292,753

7,519

5,276,036

410,636

7,735–14,595

32,945

12,4094,656

264429,232

4. Prepayments and assets underconstruction

1)

Reclassi­
fications

Additions

Property, plant, and equipment

3. Other equipment, fixtures, and furnitureIII.

Disposals

Changes
at the Group

Intangible assets

3. Prepayments
II.

Acquisition/
manufac­turing costs
Dec 31, 2016

Currencytranslation ofcurrent year

391,578

1,653

–749

381,290

3,576–317,126–108452,9627,284,176

157,242–138,713

562,927

81,503–2,896

7,920

7,789,153

Financial assets
1. Shares in affiliated companies

29,713

2,918

–239

2,793

5,560

4

441

30,0702. Shares in associated companies

108,571–1

6,753

78,99153,668 1)–4

99

140,741

3. Equity investments

21,311

1,465

0

1,324

584

0

51

23,567

4. Loans to companies in which­participations are held

1,486

0

0

0

216

0

0

1,270

5. Long-term securities

7,670

2

–1,278

13

0

0

0

6,407

6. Other loans

13,931

404

–44

6,331

6,010

0

19

14,631

182,682

4,788

5,192

89,452

66,0380610

216,686

8,932,036

165,842–197,162

676,788

235,187

0

8,585

9,350,902

Includes results from continuation of equity approach as well as disposal due to dividend payments.
Thereof shares in affiliated companies measured according to the equity method: EUR 602k.			
					C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 129

MAHLE GROUP // ANNUAL REPORT 2016

Consolidated statement of fixed assets

Accumulated depreciation/amortization

Net book values

Business year 2016

Changes
at the Group

Depreciation/amortizationof thebusinessyear

Write-upsof thebusinessyear

Accumulated
depreciation/amortization
Jan 1, 2016

Currencytranslation
Jan 01, 2016

336,131

2,371–4,635

112,083

357,6070–58,872

56,458

Accumulated
depreciation/amortization
Dec 31, 2016

Disposals

Reclassi­
fications

Currencytranslation ofcurrent year

Net book
valuesDec 31, 2016

Net book
valuesDec 31, 2015

0

1,640

–270

234

444,274

332,085

416,261085,11200270,081

297,849354,274

0

0

0

0

0

0

0

0

0

774

905

693,738

2,371–63,507

168,541086,752–270

234

714,355

630,708

771,440

631,516

12,893–19,360

57,62742

2,605–8,371

835

672,493

958,430

968,325

3,479,354

93,450–95,498

337,383953,245

12,1796,207

3,779,821

1,496,215

1,402,767

282,646

5,762–10,828

40,8450

11,243–5,680371

301,873

127,359

127,990

2,289

–43

0

2,144

0

589

2,142

–12

5,931

447,031389,289

4,395,805

112,062–125,686

437,999

51

67,682270

7,401

4,760,118

3,029,035

2,888,371

19,113

2,488

–90

6,193

0

0

0

328

28,032

2,038

10,600

8,952

0

2,648

86,557000

098,15742,584 2)

99,619

0

0

0

103

0

0

0

5

108

23,45921,311
1,486

0

0

0

0

0

0

0

0

0

1,270

2,274

0

–143

5

1,746

0

0

0

390

6,017

5,396

2

133

0

41

50

97

0

3

32

14,59913,92930,341

2,621

2,415

92,899

1,796

97

0

336

126,719

89,967

152,341

5,119,884

117,054–186,778

699,439

1,847

154,5310

7,971

5,601,192

3,749,710

3,812,152

130 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Shareholdings

SHAREHOLDINGSAS AT DECEMBER 31, 2016
Shareholdings in companies included in consolidation, associated companies,
companies included in consolidation on a pro-rata basis and other companies
which serve the permanent business operations

Name and Location

Sharein equityin %Parent company			
MAHLE GmbH, Stuttgart/Germany
1. Fully consolidated subsidiariesa) F ully consolidated subsidiaries of MAHLE GmbHwith direct shareholding quota

Equityin EUR'000

Result of
the last
businessyear
in EUR'000

Name and Location

Sharein equity
in %MAHLE Componentes de Motores S.A.,
Murtede/Portugal

100.00

MAHLE Componenti Motori Italia S.p.A.,
La Loggia/Italy

100.00

MAHLE Composants Moteur France SAS,
Chavanod/France

100.00

MAHLE Compressores do Brasil Ltda.,
Jaguariúna/Brazil

100.00100.00Conso, LLC, Wilmington, Delaware/USA

100.00Kokusan MAHLE Siam Co., Ltd.,Samut Prakan/Thailand

99.999Letrika do Brasil Ltda., Jaguariúna/Brazil

99.9996

MAHLE Compressors Hungary Kft.,
Balassagyarmat/Hungary

100.00

MAHLE Compresores, S. de R.L. de C.V.,
Juarez Chihuahua/Mexico

100.00100.00

MAHLE Compressors (Suzhou) Co., Ltd.,
Suzhou/China

100.00100.00

MAHLE de México S. de R.L. de C.V.,
Ramos Arizpe/Mexico

100.00100.00

MAHLE Donghyun Filter Systems (Tianjin)
Co., Ltd., Tianjin/China

100.00100.00

MAHLE Donghyun Filter Systems Co., Ltd.,
Hwaseong/South Korea

100.00100.00

MAHLE Electric Drives Japan Corporation,
Numazu-shi, Shizuoka/Japan

100.00100.00

MAHLE Aftermarket France SAS,
Décines/France
MAHLE Aftermarket GmbH,
Stuttgart/Germany
MAHLE Aftermarket Inc.,
Farmington Hills, Michigan/USA
MAHLE Aftermarket Ltd.,
Bilston/Great Britain
MAHLE Aftermarket Pte. Ltd.,Singapore/Singapore
MAHLE Aftermarket S. de R.L. de C.V.,
Lerma/Mexico
MAHLE Aftermarket S.L.,
Alcalá de Henares/Spain

100.00

MAHLE Engine Components (Chongqing)Co., Ltd., Chongqing/China

MAHLE Aftermarket SAS,
Poissy Cedex/France

100.00

MAHLE Engine Components (Nanjing) Co.,
Ltd., Nanjing/China

100.00

MAHLE Aftermarket, ULC, Burlington/Canada

100.00

MAHLE Amovis GmbH, Berlin/Germany

100.00

MAHLE Engine Components (Thailand) Co.,
Ltd., Bangkok/Thailand

99.75

100.00

MAHLE Engine Components (Yingkou) Co.,
Ltd., Yingkou/China

100.0050.71

MAHLE Engine Components India Private­Limited, Pithampur/India

100.00100.00

MAHLE Engine Components Japan­Corporation, Okegawa-shi/Japan

100.00100.00

MAHLE Engine Components Slovakia s.r.o.,Dolný Kubín/Slovakia

100.00100.00

MAHLE Engine Components USA, Inc.,
Morristown, Tennessee/USA

100.00100.00

MAHLE Engine Peripherals and Tooling(Shanghai) Co., Ltd., Shanghai/China

100.00

MAHLE Anéis Participações Ltda.,
Mogi Guaçu/Brazil
MAHLE Behr GmbH & Co. KG,
Stuttgart/Germany
MAHLE Beteiligungen GmbH,
Stuttgart/Germany
MAHLE Componente de Motor SRL,
Timisoara/Romania
MAHLE Componentes de Motor de México,
S. de R.L. de C.V., Ramos Arizpe/Mexico
MAHLE Componentes de Motor España, S.L.,
Vilanova i la Geltrú/Spain

Equityin EUR'000

Result of
the last
businessyear
in EUR'000

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Shareholdings

Name and Location

Sharein equity
in %MAHLE Engine Systems UK Ltd.,
Kilmarnock/Great Britain
MAHLE Filter Systems (India) Private Limited,
Gurgaon/India
MAHLE Filter Systems Canada, ULC,
Tilbury/Canada
MAHLE Filter Systems Japan Corporation,
Tokyo/Japan
MAHLE Filter Systems Land Corporation,
Cavite/Philippines
MAHLE Filter Systems North America, Inc.,
Troy, Michigan/USA
MAHLE Filter Systems Philippines­Corporation, Cavite/Philippines

Equityin EUR'000

Result of
the last
businessyear
in EUR'000

Name and Location

Sharein equityin %100.00

MAHLE Industrial Thermal Systems
GmbH & Co. KG, Stuttgart/Germany

60.00 6)50.00 1)

MAHLE Industriebeteiligungen GmbH,
Stuttgart/Germany

100.00100.00

MAHLE Industriemotoren-Komponenten GmbH,
Stuttgart/Germany

100.00100.00

MAHLE Industries UK Ltd.,
Rugby/Great Britain

100.0066.67

MAHLE Industries, Incorporated,
Farmington Hills, Michigan/USA

100.00100.00

MAHLE Industry GmbH,
Stuttgart/Germany

100.00100.00

MAHLE International GmbH,
Stuttgart/Germany

100.00

MAHLE Japan Ltd., Tokyo/Japan

100.00

MAHLE Filter Systems UK Ltd.,
Telford/Great Britain

100.00

MAHLE Filtersysteme Austria GmbH,
St. Michael ob Bleiburg/Austria

MAHLE Kleinmotoren-Komponenten
GmbH & Co. KG, Stuttgart/Germany

100.00100.00

MAHLE Filtersysteme France SAS,
Seboncourt/France

MAHLE Konya Motor Parçalari San. ve
Tic. A.Ş., Konya/Turkey

100.00100.00

MAHLE Filtersysteme GmbH,
Stuttgart/Germany

MAHLE Letrika Bel OOO,
Grodno/Belarus

100.00100.00

MAHLE Filtration Systems (Hubei) Co., Ltd.,
Wuhan City/China

MAHLE Letrika Bovec d.o.o.,Bovec/Slovenia

100.00100.00

MAHLE Filtre Sistemleri A.S.,
Gebze, Kocaeli/Turkey

MAHLE Letrika d.o.o.,Šempeter pri Gorici/Slovenia

100.00100.00

MAHLE France SAS, Rouffach/France

100.00

MAHLE Letrika Italia, S.r.l.,
Reggio Emilia/Italy

100.00100.00

MAHLE Letrika Komen d.o.o.,
Komen/Slovenia

100.00100.00

MAHLE Letrika Laktaši d.o.o.,Laktaši/Bosnia and Herzegovina

100.00100.00

MAHLE Letrika (Suzhou) Automotive
Electrics Co., Ltd., Taicang City/China

98.45

100.00

MAHLE Luxembourg Sàrl,
Luxembourg/Luxembourg

100.00100.00

MAHLE Manufacturing Management, Inc.,
Farmington Hills, Michigan/USA

100.00100.00

MAHLE Manufacturing Service Japan­Corporation,Tokyo/Japan

100.00100.00

MAHLE Maquiladora LLC,
Farmington Hills, Michigan/USA

100.00

MAHLE Guangzhou Filter Systems Co., Ltd.,Guangzhou/China
MAHLE Holding (India) Private Limited,
Gurgaon/India
MAHLE Holding Austria GmbH,
St. Michael ob Bleiburg/Austria
MAHLE Holding España S.L.,
Montblanc/Spain
MAHLE Immobilien GmbH,
Stuttgart/Germany
MAHLE Immobilien Schweiz AG,
Grenchen/Switzerland
MAHLE Indústria e Comércio Ltda.,
Mogi Guaçu/Brazil

Equityin EUR'000

Result of
the last
businessyear
in EUR'000

131

132 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Shareholdings

Name and Location

Sharein equity
in %MAHLE Metal Leve S.A.,
Mogi Guaçu/Brazil
MAHLE Motor Parçalari San. ve Tic. A.Ş.,Izmir/Turkey
MAHLE Motorkomponenten GmbH,
Plettenberg/Germany
MAHLE Polska Spółka z o.o.,
Krotoszyn/Poland

Name and Location

Sharein equity
in %

70.00

MAHLE Versicherungsvermittlung GmbH,
Stuttgart/Germany

100.00100.00

MAHLE Vöcklabruck GmbH,
Vöcklabruck/Austria

100.00OSCON, LLC, Wilmington, Delaware/USA

100.00100.00OSNOC, LLC, Wilmington, Delaware/USA

100.00100.00PT. MAHLE Filter Systems Indonesia,
Jawa Barat/Indonesia

100.00PT. MAHLE Indonesia, Bekasi/Indonesia

100.00S.C.I. Daudet, Décines/France

100.00

MAHLE Powertrain GmbH,
Stuttgart/Germany

100.00

MAHLE Powertrain Ltd.,Northampton/Great Britain

100.00

MAHLE Powertrain, LLC,
Farmington Hills, Michigan/USA

100.00

MAHLE RUS, OOO, Village Dobrino/Russia

100.00

MAHLE S.A., Vilanova i la Geltrú/Spain

100.00

MAHLE Services (Thailand) Ltd.,Samut Prakan/Thailand
MAHLE Shanghai Filter Systems Co., Ltd.,
Shanghai/China
MAHLE Siam Filter Systems Co., Ltd.,Samut Prakan/Thailand

Equityin EUR'000

Result of
the last
businessyear
in EUR'000b) Fully consolidated subsidiaries of MAHLE Behr GmbH & Co. KG
with direct shareholding quota
Behr Asia Pacific Management (Shanghai) Co.
Ltd., Shanghai/China

100.00Behr RUS o.o.o., St. Petersburg/Russia

99.90

100.00

MAHLE Behr Berga GmbH,
Berga/Germany

100.0095.00

MAHLE Behr Charleston Inc.,
Charleston, South Carolina/USA

100.00100.0074.90

MAHLE Sistemas de Filtración de México S.A.
de C.V., Santa Catarina, Monterrey/Mexico

MAHLE Behr Components Spain S.L.,
L'Espluga de Francolí/Spain

100.00

MAHLE Technologies Holding (China) Co.,
Ltd., Shanghai/China

MAHLE Behr Dayton L.L.C.,
Dayton, Ohio/USA

100.00100.00

MAHLE Behr France Hambach S.A.S.,
Hambach/France

100.00100.00

MAHLE Behr France Rouffach S.A.S.,
Rouffach/France

99.995100.00

MAHLE Behr Gerenciamento Térmico Brasil
Ltda., Arujá/Brazil

99.994100.00

MAHLE Trading (Shanghai) Co., Ltd.,
Shanghai/China
MAHLE Trading Japan Co., Ltd.,Tokyo/Japan
MAHLE Tri-Ring Valve Train (Hubei) Co., Ltd.,
Macheng/China

Equityin EUR'000

Result of
the last
businessyear
in EUR'000

65.00

MAHLE Brandenburg GmbH,
Wustermark/Germany

MAHLE Behr Holding Deutschland GmbH,
Stuttgart/Germany

100.00

MAHLE Ventiltrieb GmbH,
Stuttgart/Germany

MAHLE Behr Holding GmbH,
Stuttgart/Germany

100.00100.00

MAHLE Behr Holýsov s.r.o.,Holýsov/Czech Republic

100.00C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 133

MAHLE GROUP // ANNUAL REPORT 2016

Shareholdings

Name and Location

Sharein equity
in %MAHLE Behr India Private Limited,
Pune/India

60.00

Equityin EUR'000

Result of
the last
businessyear
in EUR'000

Name and Location

Sharein equity
in %MAHLE Behr Senica s.r.o., Senica/Slovenia

100.00

MAHLE Behr Service America L.L.C.,
Troy, Michigan/USA

100.00

MAHLE Behr Italy s.r.l., Grugliasco/Italy

98.00

MAHLE Behr Japan K.K., Tokyo/Japan

100.00

MAHLE Behr Kirchberg GmbH,
Kirchberg/Germany

MAHLE Behr Service Asia Co., Ltd.,
Shanghai/China

100.00100.00

MAHLE Behr Korea Inc., Busan/South Korea

100.00

MAHLE Behr Service GmbH,
Schwäbisch Hall/Germany

100.00100.00

MAHLE Behr Service Mexico, S. de R.L.
de C.V., Ramos Arizpe/Mexico

100.00100.00

MAHLE Behr South Africa (Pty) Ltd.,
Durban/South Africa

100.00

MAHLE Behr Spain S.A., Montblanc/Spain

100.00

MAHLE Behr Kornwestheim GmbH,
Kornwestheim/Germany
MAHLE Behr Luxembourg Sàrl,
Luxembourg/Luxembourg
MAHLE Behr Manufacturing Management,
Inc., Troy, Michigan/USA

100.00

MAHLE Behr Maquiladora LLC,
Wilmington, Delaware/USA

MAHLE Behr Thermal Systems (Jinan) Co.,
Ltd., Jinan/China

100.00100.00

MAHLE Behr Mexico S. de R.L. de C.V.,
Ramos Arizpe/Mexico

MAHLE Behr Thermal Systems (Qingdao) Co.,
Ltd., Qingdao/China

100.00100.00

MAHLE Behr Troy Inc., Troy, Michigan/USA

100.00

MAHLE Behr USA Inc., Troy, Michigan/USA

100.00

MAHLE Behr Mnichovo Hradiště s.r.o.,Mnichovo Hradiště/Czech Republic

100.00

MAHLE Behr Námestovo s.r.o.,Námestovo/Slovakia

MAHLE Behr Versicherungsdienst GmbH,
Stuttgart/Germany

100.00100.00

MAHLE Behr Ostrava s.r.o.,Mošnov/Czech Republic

MAHLE Industrial Thermal Systems GmbH &Co. KG, Stuttgart/Germany

40.00 6)99.98

MAHLE Behr Ostrov s.r.o.,Mnichovo Hradiště/Czech Republic

100.00

MAHLE Behr Ostrów Wielkopolski Sp. z o.o.,Ostrów Wielkopolski/Poland

100.00

MAHLE Behr Ostrów Wielkopolski Park­ echnologiczny Sp. z o.o.,T
Ostrów Wielkopolski/Poland
MAHLE Behr Ostrów Wielkopolski Park
­Technologiczny Sp. z o.o. Sp. K.,
Ostrów Wielkopolski/Poland
MAHLE Behr Properties Management LLC,
Wilmington, Delaware/USA
MAHLE Behr Rio Bravo, S. de R.L. de C.V.,
Ramos Arizpe/Mexicoc) Fully consolidated subsidiaries of MAHLE Metal Leve S.A.
with direct shareholding quota
MAHLE Argentina S.A., Rafaela/Argentina

100.00

MAHLE Filtroil Indústria e Comércio de Filtros
Ltda., Mogi Guaçu/Brazil

60.00

MAHLE Hirschvogel Forjas S.A.,
Queimados/Brazil

51.00

100.00

MAHLE Industry do Brasil Ltda.,
Mogi Guaçu/Brazil

100.00100.00

MAHLE Metal Leve GmbH,
St. Michael ob Bleiburg/Austria

100.00100.00

MAHLE Metal Leve Miba Sinterizados Ltda.,
Indaiatuba/Brazil

60.00

100.00Equityin EUR'000

Result of
the last
businessyear
in EUR'000

134 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Shareholdings

Name and Location

Sharein equityin %Equityin EUR'000

Result of
the last
businessyear
in EUR'000d) F ully consolidated subsidiaries of MAHLE Industrial Thermal
Systems GmbH & Co. KG with direct shareholding quota
MAHLE Industrial Thermal Systems (Tianjin)
Co., Ltd., Tianjin/China
MAHLE Industrial Thermal Systems America,
L.P., Belmont, Michigan/USA
MAHLE Industrial Thermal Systems­Reichenbach GmbH,
Heinsdorfergrund/Germany

3. Proportionately consolidated companies

100.00Parent company

99.00

HBPO Beteiligungsgesellschaft mbH,
Lippstadt/Germanya) A ffiliated companies of MAHLE Behr GmbH & Co. KG
with direct shareholding quota

MAHLE Behr Thermal Noida Private Limited,
Gurgaon/India

100.00 3)

42
145

7
6

b) Other affiliated companies with direct shareholding quota
Compañía Rosarina S.A., Rosario/Argentinia

100.003)

33.33

Companies included in subgroup accounts of HBPO
Beteiligungsgesellschaft mbH with direct shareholding quota

100.00100.00 3) 5)

970–2,114HBPO Asia Ltd., Seoul/South Korea

100.00HBPO Automotive Hungária Kft.,
Györ/Hungary

100.00HBPO Automotive Spain S.L.,
Martorell/Spain

100.00HBPO Beijing Ltd., Beijing/China

100.00HBPO Brasil Automotive Servicos Ltda.,
Arujá/Brazil

100.00HBPO Canada Inc., Windsor/Canada

100.00HBPO China Ltd., Shanghai/China

100.00HBPO Czech s.r.o.,Mnichovo Hradiště/Czech Republic

100.00HBPO Germany GmbH, Meerane/Germany

100.00HBPO GmbH, Lippstadt/Germany

100.00

Eito Denki Co. Ltd.,
Gojome-machi, Minamiakita-gun, Akita/Japan

66.80 3)

215

11

Letrika Lab, d.o.o.,Šempeter pri Gorici/Slovenia

HBPO Ingolstadt GmbH,
Ingolstadt/Germany

100.00100.00 3)

118

1

HBPO Japan K.K., Tokyo/Japan

100.00HBPO Korea Ltd., Busan/South Korea

100.00HBPO Management Services Mexico S.A.
de C.V., Puebla/Mexico

100.00

MAHLE Engine Components Australia Pty Ltd.,Port Melbourne/Australia

100.00 4)

602

211

MAHLE Industrial Thermal Systems America,
Inc., Belmont, Michigan/USA

100.00 3)66

0MAHLE Industrial Thermal Systems­ erwaltung GmbH, Stuttgart/Germany
V

HBPO Manufacturing Hungary Kft.,
Kecskemét/Hungary

100.00100.00436

10HBPO Mexico S.A. de C.V., Puebla/Mexico

100.00

MAHLE InnoWa GmbH, Stuttgart/Germany

100.002,543

0HBPO North America Inc., Troy, Michigan/USA

100.000HBPO Pyeongtaek Ltd., Pyeongtaek/South Korea

100.00HBPO Rastatt GmbH, Rastatt/Germany

100.00HBPO Regensburg GmbH,Regensburg/Germany

100.00HBPO Services Mexico S.A. de C.V.,
Puebla/Mexico

100.00

MAHLE Kleinmotoren-Komponenten­Verwaltungs GmbH, Stuttgart/Germany

100.00Equityin EUR'000a) Subgroup HBPO that is managed by MAHLE Behr GmbH & Co. KG
and two more companies

2. Affiliated companies, not consolidated on account of its
immateriality for the presentation of the net assets, financial
position and results of operations

MAHLE Behr Sweden AB, Askim,
Göteborg/Schweden

Name and Location

Sharein equityin %27

Result of
the last
businessyear
in EUR'000

MG Immobilienentwicklungs- und Ansiedlungsgesellschaft mbH, Wolfsberg/Austria

74.00 3)

1

0

Ueno Industry Co. Ltd., Tokyo/Japan

100.00 3)

1

0

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 135

MAHLE GROUP // ANNUAL REPORT 2016

Shareholdings

Name and Location

Sharein equityin %HBPO Slovakia s.r.o., Lozorno/Slovakia

100.00HBPO UK Ltd., Banbury/Great Britain

100.00SHB Automotive Modules Company Ltd.,
Hwaseong/South Korea

50.00

Equityin EUR'000

Result of
the last
businessyear
in EUR'000

Name and Location

Sharein equityin %Equityin EUR'000

Result of
the last
businessyear
in EUR'000d) Proportionately consolidated group of companies that is managed
by MAHLE Behr GmbH & Co. KG and another company
Parent companyb) Subgroup Behr-Hella Thermocontrol that is managed by MAHLE
Behr GmbH & Co. KG and another company

Shanghai Behr Thermal Systems Co. Ltd.,
Shanghai/China

50.00

Subsidiaries with direct shareholding quota

Parent company

Chengdu Behr Automotive Thermal Systems
Co., Ltd., Chengdu/China

100.00Behr-Hella Thermocontrol GmbH,
Stuttgart/Germany

Shenyang Behr Automotive Thermal Systems
Co., Ltd., Shenyang/China

100.0050.00

Companies included in subgroup accounts of Behr-Hella
Thermocontrol GmbH with direct shareholding quota
Behr-Hella Thermocontrol (Shanghai) Co.,
Ltd., Shanghai/China

100.00e) Other proportionately consolidated companies with direct
shareholding quota that are managed by
MAHLE Behr GmbH & Co. KG and another company

Behr-Hella Thermocontrol EOOD,
Sofia/Bulgaria

100.00Behr Thermot-tronik Italia S.p.A.,
Grugliasco/Italy

50.00

Behr-Hella Thermocontrol Inc.,
Wixom, Michigan/USA

100.00

Dongfeng Behr Thermal Systems Co. Ltd.,
Wuhan/China

50.00

Behr-Hella Thermocontrol India Private­Limited, Pune/India

100.00Behr-Hella Thermocontrol Japan K.K.,
Kanagawa/Japanf) Other proportionately consolidated companies that are managed
by MAHLE GmbH and another company

100.00

BHTC Mexico S.A. de C.V., Queretaro/Mexico

100.00Allied Ring Corporation,
St. Johns, Michigan/USAc) S ubgroup Behr Hella Service that is managed by MAHLE BehrGmbH & Co. KG and another company
Parent company
Behr Hella Service GmbH,
Schwäbisch Hall/Germany

50.00

Companies included in subgroup accounts ofBehr Hella Service GmbH with direct shareholding quota

50.00

4. Associated companies, consolidated using the equity methoda) Associated companies of MAHLE Behr GmbH & Co. KG
with direct shareholding quota
Dongfeng-Paninco Automobile Aluminium
Heat Exchanger Co. Ltd., Shiyan/China

50.00

HICOM HBPO SDN BHD,
Shah Alam/Malaysia

40.00

Behr Hella Comércio de Pecas Automotivas
S.A., Arujá/Brazil

100.00Behr Hella Service North America L.L.C.,
Peachtree City, Georgia/USAb) Associated companies of MAHLE Metal Leve S.A.
with direct shareholding quota

100.00Innoferm Tecnologia Ltda.,
Mogi Guaçu/Brazil

Behr Hella Service South Africa (Pty) Ltd.,
Johannesburg/South Africa

100.00Behr Service IAM USA Inc.,
Troy, Michigan/USA

100.0033.33 2) 3)

3,892

–116

136 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T

MAHLE GROUP // ANNUAL REPORT 2016

Shareholdings

Name and Location

Sharein equityin %Equityin EUR'000

Result of
the last
businessyear
in EUR'000c) Other associated companies with direct shareholding quota
Bosch Mahle Turbo Systems GmbH &Co. KG, Stuttgart/Germany

50.00

Bosch Mahle Turbo Systems VerwaltungsGmbH, Stuttgart/Germany

50.00 2)

Cofap Companhia Fabricadora de Peças
Ltda., São Paulo/Brazil

31.65

28

3

India Nippon Electricals Ltd.,
Tamil Nadu/India

20.50 2) 3) 22,799

2,642

INPRIME d.o.o., Tolmin/Slovenia

20.84 2) 3)

–267

4

LangFang Kokusan Electric Co., Ltd.,
Hebei/China

40.00

Letrika SOL d.o.o.,Šempeter pri Gorici/Slovenia

41.57 2) 3)

729

–202

MAHLE Behr Verwaltung GmbH,
Stuttgart/Germany

23.08 2) 5) 17,005–667

MAHLE König GmbH, Rankweil/Austria

50.00

MAHLE König Kommanditgesellschaft
GmbH & Co. KG, Rankweil/Austria

50.00

MAHLE Letrika Roots India Private Limited,
Coimbatore/India
Pt Federal Izumi Manufacturing,
Bogor/Indonesia
SiEVA d.o.o., Šempeter pri Gorici/Slovenia

50.00 2) 3) 5)

596

–191

7,045

43

36.94
20.00 2) 3)

Shareholding 50% + 1 share
T he company was not measured using the equity method on account of its immateriality
for the presentation of the net assets, financial position and results of operations
3)
Local financial statements
4)
Affiliated company, consolidated using the equity method
5)Previous years figures according to last available financial statement
6)
From the Group's perspective, company is included by 100%

1)2)

MAHLE GROUP // ANNUAL REPORT 2016

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 137

Auditor’s report

AUDITOR’S REPORTThis audit report is issued on financial statements prepared in German language.
We have audited the consolidated financial statements prepared by
MAHLE GmbH, Stuttgart/Germany, comprising the balance sheet,the income statement, the cash flow statement, the statement ofchanges in equity, and the notes to the consolidated financial statements, together with the group management report for the businessyear from January 1 to December 31, 2016. The preparation of theconsolidated financial statements and the group management report in accordance with German commercial law is the responsibility of the parent company’s Management Board members. Our
responsibility is to express an opinion on the consolidated financial
statements and the group management report based on our audit.
We conducted our audit of the consolidated financial statements inaccordance with § (Article) 317 HGB (“Handelsgesetzbuch”: “German Commercial Code”) and German generally accepted standards
for the audit of financial statements promulgated by the Institut der
Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW).
Those standards require that we plan and perform the audit suchthat misstatements materially affecting the presentation of the net
assets, financial position, and results of operations in the consolidated financial statements in accordance with (German) principles
of proper accounting and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the group and
expectations as to possible misstatements are taken into accountin the determination of audit procedures. The effectiveness of theaccounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements andthe group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing
the annual financial statements of the companies included in consolidation, the determination of the companies to be included inconsolidation, the accounting and consolidation principles used andsignificant estimates made by the company’s Management Board
members, as well as evaluating the overall presentation of the consolidated financial statements and the group management report.
We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion based on the findings of our audit, the consolidated
financial statements comply with the legal requirements and give atrue and fair view of the net assets, financial position, and resultsof operations of the group in accordance with (German) principles
of proper accounting. The group management report is consistent
with the consolidated financial statements, complies with legal requirements, as a whole provides a suitable view of the group’s position and suitably presents the opportunities and risks of future
development.
Stuttgart, March 17, 2017
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft

sgd. Dieter Wißfeld		sgd. ppa. Renate Berghoff
Wirtschaftsprüfer			Wirtschaftsprüferin(German Public Auditor) 		
(German Public Auditor)

138 F U R T H E R I N F O R M AT I O N

MAHLE GROUP // ANNUAL REPORT 2016

Members of the Supervisory Board

MEMBERS OF THE
SUPERVISORY BOARD
PROF. DR.-ING. HEINZ K. JUNKERCHAIRMAN
Former Chairman of the Management Board and CEOof MAHLE GmbH, Stuttgart/Germany

PROF. DR.-ING. GISELA LANZA
effective July 1, 2016
Holder of the Chair for Production Systems and Quality­Management at the Karlsruhe Institute of Technology (KIT)and Head of the Institute for Production Technology (wbk)

UWE MEINHARDT
effective January 1, 2016

THOMAS R. LETSCHDEPUT Y CHAIRMAN

Former Vice President Sales and Application Engineering
Commercial Vehicles of MAHLE Group

Executive Director of IG Metall, administrative office
Stuttgart/Germany

DR. UWE MOHRDIETMAR BICHLER
Chairman of the Management Board of Bertrandt AG,
Ehningen/Germany

Vice President Corporate Research and Advanced Engineeringof MAHLE Group, effective September 1, 2016 Vice President
R&D Services

MARTIN BÜCHER

DR. FRANZ-JOSEF PAEFGEN

Executive Secretary of the Central Works Councilof MAHLE Group Germany

Former CEO of Bentley Motors Ltd. and President of Bugatti
International S.A.

PROF. DR. JUR. WOLFGANG FRITZEMEYER

PROF. DR.-ING. STEFAN PISCHINGER

LL.M., Attorney-at-Law Baker McKenzie, Munich/Germany

Head of Institute, Institute for Combustion Engines, University
RWTH Aachen/Germany

JOSEF HÄRING
Chairman of the Works Council of MAHLE GmbH,plant Rottweil/Germany

PROF. DR.-ING. DR.-ING. E. H.
HANS-JOACHIM SCHÖPF

KARIN HIMMELREICH

until June 30, 2016
Former Executive Vice President R&D of Mercedes Car Groupof Daimler AG, Stuttgart/Germany

Managing Director MP Transaction, Frankfurt/GermanyJÜRGEN KALMBACHUWE SCHWARTE

Chairman of the Works Council of MAHLE GmbH,plant Stuttgart/Germany

effective January 19, 2016
Chairman of the Central Works Council of MAHLE Group Germany and Chairman of the Works Council der MAHLE Filtersysteme
GmbH, Stuttgart/Germany

DIETER KIESLING
Chairman of the Central Works Council of MAHLE Behr andChairman of the Works Council of MAHLE Behr GmbH & Co. KG,
region Mühlacker/Germany

MICHAEL KOCKENMANFRED STEIDLE
Chairman of the European Works Council of MAHLE Group and
Deputy Chairman of the Central Works Council of the MAHLE
Group Germany

effective March 19, 2016
Trade Union Secretary of IG Metall, administrative office
Stuttgart/Germany

ANNETTE SZEGFÜ

PATRYK KRAUSE

DR. BERNHARD VOLKMANN

until March 18, 2016
Trade Union Secretary of IG Metall

Former Member of the Management Board and CFO of MAHLE
GmbH, Stuttgart/Germany

Spokesperson of Management IG Metall, Frankfurt/Germany

GEORG WEIBERG
Former Head of Global Truck Engineering, Daimler AG, Stuttgart/
GermanyC O N S O L I D AT E D F I N A N C I A L S TAT E M E N T 139

MAHLE GROUP // ANNUAL REPORT 2016

Members of the Management Board

MEMBERS OF THE
MANAGEMENT BOARD
WOLF-HENNING SCHEIDER
CHAIRMAN AND CEO
Research and Advanced Engineering, Corporate P­ lanning,­ orporate Communications, Corporate External Affairs,
C­Engineering Services, Motorsports, and Special Applications­profit center

MICHAEL FRICK
Corporate Executive Vice President and Chief Financial Officer­Finance, Controlling, Taxes, IT Services, Insurances, Internal
Audit

MICHAEL GLOWATZKI
Corporate Executive Vice President Human Resources, Legal

BERND ECKLJanuary 1, 2017: joining

DR. RUDOLF PAULIK
effective April 1, 2017
Corporate Executive Vice President and General Manager­Engine Systems and Components business unit, ­Corporate­Quality Management, Large and Small Engine Components­profit center

until March 31, 2017
Corporate Executive Vice President and General Manager­Engine Systems and Components business unit, C­ orporate­Quality Management, Large and Small Engine Components­profit center

WILHELM EMPERHOFF

DR. JÖRG STRATMANN

Corporate Executive Vice President and General Manager­Filtration and Engine Peripherals business unit, Mechatronics­division, until October 31, 2016: Industrial Filtration profit center

Corporate Executive Vice President and General M­ anager
Thermal Management business unit, Industrial Thermal­Management, Compressors, Control Units, and Front-end­Modules profit centers

ARND FRANZCorporate Executive Vice President and General Manager­Automotive Sales and Application Engineering, Aftermarket­business unit

140 F U R T H E R I N F O R M AT I O N

MAHLE GROUP // ANNUAL REPORT 2016

Imprint/Contact

IMPRINT/CONTACTIMPRINTPHOTOGRAPHY

PUBLISHED BYWPSTEINHEISSER PHOTOGRAPHY

MAHLE GmbH
Pragstraße 26–46
70376 Stuttgart/Germany
Phone +49 (0) 7 11-5 01-0
www.mahle.com
info@mahle.com

Kurfürstenstraße 22
71636 Ludwigsburg/Germany
www.wpsteinheisser.com
wp@wpsteinheisser.com

ADDITIONAL PICTURESOR PICTURE CREDITSCONTACT  
MAHLE INTERNATIONAL GMBH
Corporate Communications/Public Relations
Pragstraße 26–46
70376 Stuttgart/Germany
Phone +49 (0) 7 11-5 01-1 25 06

CONCEPT AND TEXTDALLADEA KOMMUNIKATION GMBH
Vaihinger Straße 24
71063 Sindelfingen/Germany
www.dalladea.de
info@dalladea.deVolvo › page 10
Ferrari › page 10
PSA › page 11
Renault-Nissan › page 11BMW › page 13
Thomas Stephan › page 134
Shining Eyes › page 137
KD Busch
MAHLE Archiv
MAHLE-Stiftung GmbH
Moritz Metzger
Andreas Koch

TRANSLATIONTARGET LANGUAGES GMBH

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www.kirchhoff.de
info@kirchhoff.de

Bahnhofsplatz 1
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info@target-languages.com

REPRO/PREPRESS/PRINT© MAHLE GmbH, 2017
You can also find this annual report and further information about the company on
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ELANDERS GMBH
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www.elanders.com/ger
info.GERMANY@elanders.com

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