THE YEAR 2018

Dual strategy
We continued to pursue our dual strategy in 2018: as well
as optimizing the combustion engine, we are driving forward
the development of alternative mobility concepts.

Sales
MAHLE achieved sales of
EUR 12.6 billion—and thus strongorganic sales growth of 4.4 percent.*

Research and development
With investments of EUR 751 million,
we maintained our group-wide
research and development activities
at a high level.

* After adjustment for exchange rate effects
and changes to the consolidation group

Equity ratio
We have substantially increased theequity ratio to 36.4 percent.

Employees
MAHLE employed 79,564 people
worldwide (reference date: December
31, 2018) —1.6 percent more thanin the previous year.

MAHLE Group figures
2018

2017

2016

Sales

12,581

12,78812,322

EBITDAin EUR million

1,377

960

1,079

EBIT

773

355

473

Result from business activities

614

262

228

Consolidated net income
Tangible fixed assets
Capital expenditure on tangible fixed assets(without first consolidation)
EquityDividend paid of the MAHLE GmbH *Employees (as at Dec. 31)* Proposal for the specified business year

446

102

63

3,137

3,009

3,029

609

612

563

3,014

2,632

2,722

13.4

7.5

6.0

79,56478,277

76,632

Engine systems and components

Thermal management

As a global market leader in our key market
segments, we have decades of systems
and development expertise as well as extensive
production experience to build on. Since ourcompany’s early days, the development of piston
systems and cylinder components has beena core competence at MAHLE. Because we under­stand the interaction of all engine components,
we can deliver optimal solutions to our customers.
Our products are used around the globe in
two-wheeled vehicles, passenger cars, commercial
vehicles, and large engines. And the range iscontinuously being expanded, so that emissions
and fuel consumption in combustion engines
can be further reduced in the future.

The increasing electrification of the automotive andcommercial vehicle industry calls for superior innovative
strength in the thermal management of batteries andthe entire electric powertrain. Thermal management isalso essential for the ongoing development of the
combustion engine. For instance, increasingly effective
and efficient cooling systems are making a substan­tial
contribution toward reducing fuel consumption. Air
conditioning innovations are enabling new design con­cepts for interiors and helping to provide a high degreeof thermal comfort in vehicles alongside efficiency
improvements. Only innovative products from the ThermalManagement business unit for batteries, fuel cells,
power electronics, and electric drives make extended
cruising ranges, high levels of efficiency, and long service
lives possible and are thereby playing a significant rolein shaping the shift toward zero-emission powertrains.

Filtration and engine peripherals

Mechatronics

MAHLE manufactures filters, pump systems, andoil coolers for engine and transmission applications—
all of which are designed to increase 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. As a development partnerand global market leader, in recent years, MAHLE
has developed modular systems for every major
product group on behalf of its customers.

Mechatronic components are making the crucial
difference in enhancing the efficiency of the powertrain
and advancing e-mobility. With its Electric Drive
Systems, Actuators and Auxiliaries, and Control andPower Electronics product groups, MAHLE alreadyoffers relevant solutions in this area today. These
activities are founded on our expertise in the development and manufacture of electric motors andelectronic and mechatronic systems. Although these
are used in a wide variety of applications, theirtechnology is closely related, which affords synergies
and eco­nomies of scale—two decisive factorsof success in the automotive industry.

M A H L E AT A G L A N C E

PRODUCT PORTFOLIO

Page

06

Closing the loop
Electric compressors remove the link between air conditioning
systems and combustion engines — and are therefore becoming
key components in electric vehicle air conditioning.

Page

16

On the road
An American dream is combined with MAHLE’s
thermal management expertise to become a reality:
the fuel cell truck is on the road!

Page

26

There’s more than one way
to achieve your goal
Cutting fuel consumption by up to 5 percent—
MAHLE harnesses waste heat from the combustion

engine to reduce CO2.

Page

34

From Post-it to prototype
Shaping the future with tremendous enthusiasm
and commitment: two MAHLE corporate start-ups putvery special innovations on the road.

Solutions
The motto for our Annual Report 2018 is central to
MAHLE’s activities. We don’t just talk about what thesustainable transportation of the future will look like,we show how it’s done. And we’re already doing it today!
With intelligent solutions for alternative drives—whether
electric vehicles, fuel cells, or alternative fuels. And withreliable products that further improve the efficiencyof the combustion engine. At MAHLE, we think in manydifferent ways. And we travel in one direction: forward.
With strong solutions for a positive future!

ANNU

A L R E P O R T 2 0 18

You can also find this report online atwww.annualreport.mahle.com
MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Magazine
Solutions!

Contents

02

Magazine
Con t en t s

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

04 – 41
Mag a zine
Five questions to Dr. Jörg Stratmann – 04
Closing the loop – 06
On the road – 16
There’s more than one way – 26
From Post-it to prototype – 34

42– 55The compa ny
Our self-perception – 43
Letter from the CEO – 44
Report of the Supervisory Board – 46
Highlights 2018 – 48
MAHLE worldwide – 50
Members of the Supervisory Board – 52
Members of the Group Management Board – 53

56 –71
Responsibilit yCommitted employees – 57
Corporate Social Responsibility – 62
By people for people – 68

72– 97
Group management r epor t
Fundamental information
about the MAHLE Group – 74
Report on economic position – 78
Additional key performance indicators – 87
Opportunity and risk report – 92
Outlook – 95

98 –128
Consolidated fina ncia l state me nts
Imprint / contact – 129

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Magazine
Co n t e n t s

03

F

QU
IVE

ESTIONS TO DR. JÖRG S

T R ATMA

NN»We’re alreadydelivering theright solutions
today.«

Five short questions with five­s traight­f orward answers fromDr. Jörg Stratmann, Chairmanof the Management Board
and CEO of the MAHLE Group.

04

Five questions to
D r. Jö rg St rat man n

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Question

1

The Annual Report 2018 bears the title “Solutions!”
With an exclamation mark! What’s the message?
At the moment, the future of mobility is fraught with unanswered questions: What
will individual transportation mean in the future? What kind of infrastructure will we need?
What drive types will prevail in the long term? We’re addressing these questions withpractical answers. That’s what sets us apart at MAHLE, and we demonstrated this in 2018.
Our message is clear: we’re designing the ­individual mobility of tomorrow and alreadydelivering the right solutions today.

Question2

People create solutions. Is that also the case at MAHLE?
Of course! Our approximately 80,000 employees worldwide are specialists in their fields.
They know what they’re doing. They’re committed, focused on their work and on finding
solutions, and they always have the needs of our customers in mind. They persevere
and aren’t discouraged by setbacks. We have a top team!

Question3

Who or what impressed you the most in 2018?
We’re in the middle of a transformation. Last year was a case in point: lots of new
developments, lots of designs on the test bench, new challenges, and lots of new ideas.
It would be understandable if there were some uncertainty, but more than anythingelse, I sense optimism and pragmatism in the company: we’re tackling the issues of the
day without hesitation. That’s the right attitude. We see change as a great opportunity.

Question4

And the next solutions? What are the goals for 2019?
Uncertainties such as volatile markets, tariff and trade disputes, high raw m­ aterial
prices, and geopolitical developments will again be concerns in 2019. But we’re focusedon our goals. We’ll continue to work on our profitability and on our performancein 2019. And of course, we’ll bring new products and solutions onto the market.

Question

5

What’s your personal motto for 2019?
My motto is opportunities through change. We want to increase our profitability despite
the transformation. This is a major challenge that we will focus on and tackle with all
our strength in 2019. In doing so, we will create new opportunities through change. And forthat we need new ways of thinking. Because only those who think new can improve
what has been tried and tested, create something new and thus continue to be the best
partner for their customers in the future.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Five questions to
Dr. J ör g S t r a t ma n n

05

Closingtheloop

E-mobility requires many solutions — and MAHLE is driving them forward.
The battery is one of the most important components in an electricvehicle — in terms of cost as well as performance. Its significance is thus
comparable to that of the internal combustion engine — and it needs
to be looked after just as carefully. Maintaining the correct battery temperature not only determines the ­s ervice life of the battery, but also
the speed at which it can be charged and even the cruising range of thevehicle. If the battery temperature is managed properly and its capacity
handled carefully, you will get more out of it. The electric compressor from
MAHLE is already at the center of the air conditioning and refrigerant
circuit — ensuring the correct interior cabin temperature. Now it is also at
the center of the battery cooling function — ensuring the correct
battery temperature and it is becoming a key component in the e-mobility
drive system. Because if the battery runs optimally, so will e-mobility —to the point that it can be perfectly integrated into everyday life.

06

Magazine
Cl os in g t h e loo p

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

PROVIDER OF AIR

CON

DIT

IO

NI

NG

FO

R

EL

E

C

T

R

L

EMS

EV

IC

E

O

P

IN

TO

AN

O

R
VE

L
AL

T
SYS

H

TO

D

VE

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NG

IC

UI

S

HUS

MPRESSOR, MAHLE

D T

IS C

AN

ON

O—

TIN

TO

E-CO

AN ENABLER OF E
ILI

ITH

ITS

-MO
B

W

TY

Amherst,New York / USA
E-compressor product developmentŠempeter pri Gorici /Slovenia
Electric motors

Motilla del Palancar /Spain
Electronics

Balassagyarmat /Hungary
E-compressor production
MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Magazine
C lo s i n g t h e l o o p

07

AKEEM FRANCIS , electrical engineer
Amherst, New York / USA»	The power of the
e-compressor lies in thedetail. And this detailis the team striving for
perfection.«
The electric compressor is made up of many
precisely coordinated components. Just like theglobal team that is working intensively across borders on this product — from the United States throughSlovenia, Spain, Hungary, and Germany—and unitinga wide variety of disciplines at the same time.

E-mobility — a global project
Amherst / USA. The success story of the e-compressor originates in the region of Western New York.
Relatively far north on the border with Canada. Here,
where winter temperatures sometimes reach minus
30 degrees Celsius, things are heating up inside the
MAHLE building. Whirring, beeping, silence. Careful
listening in sound-insulated rooms. Testing, adjusting, testing again. Engineering design and development with a precision that cannot be seen by the
naked eye. This is where the engineers spend theirtime. Achieving absolute perfection. A walk throughthe product development and test laboratories, past
test equipment, screws, and sensors, shows how acentral component is brought to life from an idea at
MAHLE.
In the first test room, an electric vehicle is connectedto the laboratory through a complex array of cables
and instrumentation. The e-compressor is sitting
ready on the test bench. John O’Brien, systems engineer, begins: “The e-compressor is a crucial component for maintaining a comfortable cabin interior
and providing adequate battery cooling — bothduring vehicle operation and during charging.” His
team partner Jonathan Hammond, engineering manager, stands by his side and continues: “The coolingprovided by the e-compressor is key to improving
charging performance. You can speed it up.” He’sreferring to one of the­­­ essential characteristics thatwill help to make e-­mobility just as much a part of08

Magazine
Cl os in g t h e loo p

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

BOTTOM: Jonathan Hammond (left)
and John O’Brien (right) put the
e-compressor through its paces.

everyday life as combustion technology still is today.
“The key to popularizing e-mobility is making theend product familiar to the c­ onsumer. Rapid
charging is critical to that.” We continue through theengineering center. Workbenches, cabinets. Everyone is engrossed in their work.
It’s Friday. Delivery day. The next prototypes are going out to customers. There are components lined
up on tables. These include parts from Slovenia andSpain because some colleagues are not on site.
While MAHLE Electric Drives in Slovenia supplies the
motor, or as the team colleagues explain, the “heart”
with which the e-compressor can drive itself andhence be independent of the combustion engine,
MAHLE Electronics in Spain provides the “brain” ofthe e-compressor: the power electronics. These
components are now being assembled here in Amherst in the way that was planned at the very start.
The distinguishing feature of MAHLE’s e-compressor
is evident in this assembly: precision across all components. This is because MAHLE develops all of thecomponents itself. And precision is exactly what has
made MAHLE a pioneering automotive supplier since
day one. With countless tests, meticulous attention
to detail, and a huge amount of know-how. Akeem
Francis, electrical engineer, is age testing a motor
winding specimen with electric power. He adjusts thetest equipment providing current to the sample andthe wires start to glow. This is an extreme way of testing the limits of materials under specific conditions.
It is an extreme that will never be reached during normal use in the electric vehicle. But if you know thelimits, you can guarantee safety. In terms of high voltage, this means that the electrical charge must nothave any point of contact with the occupants of thevehicle.­“I primarily work on the insulation system of
the e-compressor,” says Akeem F­ rancis, summing
up his work in a nutshell. His colleague John O’Brien

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

09

SEBASTJAN MASERA , Head of Product Development
MAHLE Electric Drives, Šempeter pri Gorici / Slovenia»	E-mobility is like a bicycle race: it’s not
those who start fast and slow down at
the end who win, but the ones who planfor the whole race. That’s MAHLE.«

quickly brings the definition of precision to a charming, unprecedented level by proudly reformulating
this for his colleague: “The customer is growing increasingly interested in insulation resistance, which
Akeem focuses on. His work helps us tremendously.”
Akeem Francis smiles and adds: “It’s vital to keep
vehicle occupants and anyone else away from situations in which they could be exposed to the highvoltage of the battery.”
Just a few meters away, another member of the team,James Campbell, prototype lab technician, sits infront of several modules. He explains his work in acomprehensive, almost poetic way: “The engineering team designs the concept and commissions the
production of the parts. Then it comes to me.” When
asked if he turns the engineers’ dreams into reality,
he laughs and confirms: “In a way, yes.” His colleague Shelly Hamilton, senior mechanical engineer,
supports him: “I prepare the components according
to the desired configuration, and he assembles them.
Then I’ll go and run tests to see if the individual parts
perform as we need them to.” Anyone working day
after day in this environment quickly takes all of the
precision for granted. “The e-compressor is an incredibly precise machine. All the parts have to beflawless — that’s what keeps Shelly and James busy,”
adds John O’Brien. “Making sure that all the parts
fit together within our very narrow tolerance ranges.”Long before a single part can be put together, thework of Brett Bowman begins: “I con­ceptualize theelectric architecture that drives the e-compressor.
This ensures all three subsystems — electronics, motor, and compressor — operate together in the most­effective way to meet the demanding customer requirements.” He doesn’t have much space for thateither. The room erupts into laughter as Jonathan
Hammond clarifies the statement: “We are always
reducing his space. The mechanical designers arepressured by the customer to make things smaller

10

Magazine
Cl os in g t h e loo pand lighter. And then the electrical engineers figureout how to make it happen.” The field of electricalapplications is exciting and relatively new to everyone. Not just to MAHLE or the customer, but to thewhole world. E-mobility is in its infancy. That leaves
a lot of leeway for innovation. And completely new
answers. “You often have to work with the customer
to understand what they really need at the end of theday. The way to tackle such a challenge is to collaborate closely and figure it out together,” explains
Brett Bowman. The fact that so much is new can also
be heard in the feedback from the most recent teammember, Ilya Burdukov, mechanical design engineer.
He has been working on mechanical compressors foryears, but the electric compressor is a totally new
product. “I had to go through a big learning curve,
but I definitely enjoyed it.” In one of the last rooms,
James Faller, electronics engineer, is tinkering withthe electronics. He takes individual modules out of­a cabinet and tests them. It is highly detailed work:­“I inspect and confirm that each component performs
as designed and then test it on the e-compressor. If
there’s an issue, I try to debug, find solutions, andgive feedback to the team in Spain.” The researchand development center of MAHLE Electronics is located in Spain. MAHLE engineers from all over theworld work here on developing innovative electronics
solutions — and thus also for the e-compressor.

TOP: James Campbell has an eye for detail,whatever the component.
LEFT: Brett Bowman provided the ideas for theelectric architecture that drives the e-compressor.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

The e-compressor is now going into production in
Hungary, on the world’s first production line for
MAHLE e-compressors. The international team ­has
worked across the various time zones and languages to successfully commence series productionof the e-compressor. Despite the different cultures,
one thing above all unites them: the MAHLE mentality. James Faller explains what it is: “At MAHLE, it’s
never ‘No, you can’t do that,’ but rather ‘How can
we do it?’ It’s very liberating and empowering for us
to do what we do.”Magazine
C lo s i n g t h e l o o p

11

HOW AN ELECTRIC AIR CONDITIONING COMPRESSOR WORKS

The air conditioning compressor produces cool air from heat energy — for thewell-being of the vehicle occupants and the battery. It is based on the principleof an air conditioning circuit in which every single component counts.

1.

The e-compressor compresses the gaseous refrigerant andthus ensures high pressures andhigh temperatures. The hot gas isthen pumped to the condenser.

U

IT

2.

1

*

In the condenser, thegaseous refrigerant is cooled andliquefied by the ambient air.

NT

CI

R

C

e-compressor

condenser

REFR

IGE

RA

5

2
evaporator

4.

expansion
valve

The largely liquid refrigerant flows through the evaporator andthrough the chiller. This is where theevaporation process takes place.

4a

4a.

3
4b

chiller

expansionvalve

BATTERY
COOLINGCIRCUIT

high-voltage
battery

Heat is removed
from the air that passes throughthe evaporator and into the cabin,which is consequently cooled.

4b.

The refrigerant circuitand battery cooling circuit are con­­nected via the chiller. This enables thetransfer of heat from the battery
coolant circuit to the refrigerant circuit.

5.

The vaporized refrigerant
returns to the e-compressor, and thecycle begins again.

N

SI

T
DE

C
HE E- OMPRE

SS

O

R

I

* Simplified representationof the refrigerant circuit
without heat pump function

refrigerant inlet

3.

The liquid refrigerant passes
through an expansion valve, where its
pressure and temperature are reduced.

inverter (power electronics)

refrigerant outlet

electric motor
scroll compression
mechanism

12

Magazine
Cl os in g t h e loo p

DR. ARMIN FROMMER ,Head of Product Development E-Compressor
Amherst, New York / USA»	We once revolutionizedmobility with the aluminum
piston. The e-compressor
has the same potential.«

RIGHT: Shelly Hamilton’s work includes
ensuring that a first-class e-compressor
can be produced from the many highquality components.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

13

JOSE ANTONIO CASTILLO , Head of Development High-Voltage Electronics
MAHLE Electronics, Valencia / Spain»	Electronics is the new power ofmobility. With it, we created the mostpowerful e-compressor on the market.«

14

Magazine
Cl os in g t h e loo p

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

LEFT: Electrical engineering from Motilla del Palancar —MAHLE relies on international and interdepartmental

teams in its development work.

The customers are convinced by this too. Aside fromthe technology, Dr. Armin Frommer, head of ProductDevelopment E-compressors, sees yet another crucial element as the basis for this success: “Trust in
the team.” And adds: “We once revolutionized mobility with the aluminum piston. The e-compressor
has the same potential. We want to shape and develop this change too. Because one thing is certain:
it doesn’t matter whether mobility is old or new, thechallenges remain the same. We will carry on with
our work as usual. With passion and systematic development activities.”
Akeem Francis sees it from a very sporty perspective: “For me as someone from an athletic background, it’s somewhat fundamental for the team torecognize that we’re here to play, and we’re able towin. And we did. Anything else would have been
devastating.”
With the e-compressor, MAHLE is supplying the component that is central to the thermal management of
the electric powertrain. And all the other componentsthat are needed. It’s not just about offering systems
expertise for e-mobility. It’s about clearing the path
for anyone who wants to buy an electric vehicle. This
path begins at MAHLE. And MAHLE has — once
again — delivered.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

And let’s not forget ...
... all the many other product solutions, projects,
and initiatives that we delivered, initiated, and drove
forward in 2018. Here are some highlights.

TECHPRO ADAS
The patent-pending digital solution from
MAHLE saves time and money, because TechPROADAS now allows vehicle workshops to adjust
and calibrate driver assistance systems quickly andeasily—using a single digital calibration panel.
The new solution is continuously updated online andexpanded to cover more vehicles. With this
digital tool, MAHLE is setting new benchmarks inthis product group.

ADSORPTION AIR CONDITIONING
It’s possible to make standstill air conditioning
powerful, engine-independent, and thus very quiet—
with MAHLE . This new air conditioning conceptfrom MAHLE works using the cycle of evaporation,
adsorption, condensation, and desorption.
The MAHLE Integrated Thermal System is extremely
low-wear and absolutely noise-free. And thus
more efficient than conventional systems.

Magazine
C lo s i n g t h e l o o p

15

TH

UE
E F

L CE

LL TRUCK IS ON TH

E R

OA

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AN

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IT

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GO
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16

MagazineO n t h e roadOn theroad
Often, obvious solutions are identified
early on, yet they need the righttime and the right achievers to actually
implement them. At the age of six,
Trevor Milton, CEO of Nikola Motor
Company, decided that one day, hewould build the fuel cell truck.
Nikola was the first to successfully
accomplish this mission, together
with MAHLE as a systems specialist
for thermal management. Trevor Milton
and Matthias Fix, Vice President
Sales and Application Engineering
Commercial Vehicles at MAHLE , talkabout trust and a common goal.

Nikola Motor Company is an American hybrid
truck development company in Phoenix,
Arizona / USA. Founded in 2012 by Trevor Milton,
the young start-up is deemed to be a pioneer inthe field of electric high-performance applicationsin the transport sector. For the Nikola Two andNikola Tre fuel cell trucks, MAHLE supports Nikola
Motor Company with its thermal management
systems expertise. MAHLE is the development
partner and supplier for the truck’s entire coolingand air conditioning system.

MagazineO n t h e ro a d17Miles0

Nikola Two covers
1,000 kilometers —on one tank.
11:00. The Nikola Motor Company
headquarters in Phoenix. The sun is highin a brilliant blue sky, and palm leaves
stir in the breeze. The truck leaves theyard and threads its way to theWest Coast on the five-lane highway.

Phoenix, Arizona / USA. The large hall looks
like the typical start-up garage culture has simply
been transposed into a much bigger dimension.
Employees sit behind computers at scattereddesk clusters. These are interspersed withcouches, a barbecue grill, partitions with electric
circuit modules, workbenches, and garden tents
converted into conference rooms. On a banner
stretched across the hall, it reads “Dirty has neverbeen so clean.” This is where their hands actually
get dirty — for a very clean cause. In the midst of
all this, a dog bounds up to two men. They are
Trevor Milton and Matthias Fix. “He belongs to thefamily,” says Matthias Fix and greets the dog.
­Evidence that MAHLE also belongs to a special
team that has been resolutely pursuing a major
goal over the past few years—to bring the first fuelcell truck onto the market. While ­the truck is taking a test drive to Los Angeles, Trevor Milton andMatthias Fix jointly take stock, looking t­ o the past
once again and then far ahead to the future.

18

MagazineO n t h e roadMiles32

Nikola Two accelerates
twice as fast as a diesel truck.
11:25. Left on the fast lane to pass
another truck. Palm trees and taco bars
are replaced by scrub and wide open
spaces along the roadside.

The fuel cell truck is on the road. This is an exclamation mark for the use of fuel cells in long-­
distance hauling. What makes the fuel cell superior
to the battery?
TREVOR MILTON: Well, to begin with, there areclearly advantages to every type of technology out
there. The fuel cell is not the solution for everything,neither is the battery. They both have a place in theindustry.
MATTHIAS FIX: It’s important to differentiate thevarious applications before we talk about superiority.
Regarding the commercial vehicle, these applications can be inner-city distribution, regional, or longhaul. The farther you want to go, the bigger the battery needs to be.
TREVOR: But it’s not smart carrying a huge battery

mass with you, which doesn’t leave room for any
goods. This is where the fuel cell comes into play.

»	If you can bringinnovation andperfection together,you can do something really incredible. And this is what
we have achieved.«
TREVOR MILTON, CEO Nikola Motor Company

MagazineO n t h e ro a d

19

MATTHIAS: Commercial vehicles have to carry a lotof goods, they hold a lot of weight, and they happen
to deal with different climatic conditions. But batteries are rather heavy and they need space and acomfortable temperature range in order to function
properly, to mention only a few challenges. That
simply makes the battery an inferior solution for longhaul.
TREVOR: We still need a battery for our truck, but

the fuel cell makes the difference here as the primary source of energy. With a much better outcome.
MATTHIAS: In this case, you need a much smaller

battery, and a smaller battery means less weightand more space for goods.
TREVOR: This is the key for the fuel cell to lead theway to better mobility. It delivers more efficiency,
zero emissions, long capacities, low cost of operation, and instant torque power, while solving socialand environmental problems. It’s really the ultimate
fit for technology.
Driving long distances is one of the key questionsin the e-mobility universe. You are setting new
standards and traveling farther with the fuel cellthan everybody else: How far does it go?
MATTHIAS: The question is not only how far thetruck goes. It’s about how far the whole project isgoing. Trevor, you have a unique take on this as you
are providing the infrastructure for the refueling­stations as well. It’s another key topic to make thistechnology a success.

»	How far can thewhole fuel cellproject go? That’s
what unites us
with Nikola —thinking about thebigger picture.«
MATTHIAS FIX , Vice President Sales & Application
Engineering Commercial Vehicles at MAHLE

20

Miles100

Nikola Two is 10 tons lighter
than a comparable diesel.
13:35. The flowers at the roadside
are the same yellow as the road markings.
The next exit is called “Centennial,”
marking a period of 100 years. Nicola Twocontinues straight ahead.

TREVOR: Absolutely, this is why many have not suc-ceeded yet. It’s a typical chicken-and-egg problem.
MATTHIAS: You need both to make it work.
TREVOR: For us, this means that it’s not enough toonly build a truck. We also have to strategically buildhydrogen stations on those roads where the trucks
are sold. And this is what we’re doing. We produce
our own hydrogen, and the fuel cost comes included
with the truck purchase, so you don’t have the instability of fuel prices and network issues. We solve
the entire problem at once.
MATTHIAS: This is very important actually, in termsof our MAHLE strategy as well: pushing zero-emission technologies. With this project, we really gowell to wheel. You’re taking care of refueling stations
and how the energy is made available. It’s ­renewableenergy! This means that the operation of the truckis completely emission-free at the end of the day.
TREVOR: We have these huge wind farms all along

the roads here. Each day we experience peaks,
when there’s too much energy on the grid to be
used. This is what we’re doing now: we store thisenergy and generate hydrogen from it to use for our
trucks.
Nikola is ahead of its time with the fuel cell in every way. When did the idea of building a fuel cell
truck come up in the first place?
TREVOR: That story goes back to my dad, who was

the manager of the railroad. When I was a little boy,
I would sit right next to the conductor who drove
the locomotive. He would look over and see thetrucks on the road as we were driving parallel to thefreeways and say: One day they’ll be smart enough­to build the locomotive semitruck. That was the21Miles280

The 1,000 hp Nikola Two truck
cruises along the roads.
16:00. The truck proceeds along
Interstate 10. In the fields, wind turbines
rotate vigorously in the wind.

­ eginning—when I was six years old. Today, it’s stillb
the same picture on the roads, but with one big difference: our truck is out there too. And soon there
will be so much more to get excited about.
MATTHIAS: We’re really moving forward at highspeed. And this fits nicely with us at MAHLE . We
want to build the path for future mobility. It’s a crucial project for us to demonstrate this and prove ourexpertise. How long have we been working together
now? Two years, right?
TREVOR: Two years, yes.
MATTHIAS: But it feels like we’ve had this partnership for much longer. You have an ambitious ­target,
Trevor. And we have one of the key competences toachieve this target: thermal management. Together,
we’re making this happen.
TREVOR: This partnership is very beneficial to bothsides. Here at Nikola, we designed a truck that has
never been built before. We went through multiple
adjustments refining the entire thermo system. And
MAHLE was able to handle this. You’re the experts.
We’re the ones who try a lot of things and are notafraid to fail, which leads to great open discussions
with you.
MATTHIAS: Yes, this is what we provide—almost ahundred years of experience and the know-how tobring this high-volume production together, with theinnovative spirit of Nikola. This is the collaboration.
I appreciated your wording earlier, Trevor—combine
perfect German engineering ...
TREVOR: ... with the innovation strength of Ameri-can companies.
MATTHIAS: This combination has made the truck a
successful product.

22

TREVOR: This is what it takes. It’s important toknow what we’re good at, and we know what
MAHLE is good at. It is your philosophy to deliver aperfect solution and to have zero failure.
Talking about combining two worlds, Nikola Two
was built for the American market, and Nikola Tre
for the European market. The designs are different.
Are there any other differences?
TREVOR: European trucks cover half ­t he range ofUS trucks. They don’t need a range of 1,000 kilometers per day, just 500 kilometers or less is enough.
The main difference is more of an aesthetic nature.
Ultimately, they have the exact same technology.
MATTHIAS: The objective of the truck is the same
everywhere: we want to reduce CO2 emissions.
TREVOR: Around 30 percent of global emissions

stem from transportation. It’s the single biggest
source of emissions. With our truck, we’ll be taking
a bigger chunk out of the emissions production thanany other product in the world. Therefore, our goal
is simple: we want to build as many as we can.
As more and more commercial vehicles areneeded, it’s about time for the fuel cell to complement the internal combustion engine for long haul.
When will this happen?
TREVOR: Well, it begins now. The first test trucks

are on the road, and we start series production in
2022. European production will probably begin in
2023. The same applies for the refueling stations.
We’re building over 700 hydrogen stations in America over the next ten years and planning to do thesame in Europe. It will be the largest network of hydrogen stations in the world.

»	 We combine
perfect German
engineering andAmerican innovation strength.«
TREVOR MILTON , CEO Nikola Motor Company

23

Miles

400

Nikola Two is fully fueled up
in just 20 minutes.
18:00. Arrival at the Santa Monica Pierin Los Angeles. A man on the beach plays
guitar and sings “Breathe this air.” The sun
is shining. A quick call to Nikola in Phoenix.
“What about the tank?” Trevor Milton
wants to know. The answer: “Still half full.”

MATTHIAS: And again, there is not just one solution. We are convinced that the future lies in the
powertrain mix. Inner cities might have different
solutions, such as more battery vehicles. Long-distance transportation, where higher energy is needed,lends itself more to fuel cells. And there will still bea market for diesel engines for quite some time. So,
the ultimate question of whether and when the fuelcell will take over long-haul transportation, I think, isreally hard to predict. But changes are chances. The
fuel cell truck can gain significant momentum. We
are ready, and this project is a great start.
TREVOR: Yes, and, for now, we are just focusing on

getting this done and getting our two trucks on ­theroad around the world. Once this is achieved, I
mean, the sky is the limit. You can do whatever you
want with fuel cells. You can go into other modes oftransportation—even into aerospace.
MATTHIAS: MAHLE and Nikola — if you can think it,
you can do it.
TREVOR: So let’s do it!»	We have one
objective withthis truck: zeroCO2 emissions.«
MATTHIAS FIX , Vice President Sales & Application
Engineering Commercial Vehicles at MAHLE

24

And let’s not forget ...
... all the many other product solutions, projects,
and initiatives that we delivered, initiated, and drove
forward in 2018. Here are some highlights.

CNG / LNG DRIVESFOR COMMERCIAL VEHICLESBoth the CNG (compressed natural gas) and the
LNG (liquefied natural gas) versions of natural gas
powertrains for commercial vehicles offer substantial
CO2 savings potential. Simply replacing fossil
diesel fuel with fossil natural gas reduces CO2 emissions by 15 percent. If synthetic methane fromrenewable power is used, engine operation is actually
CO2 neutral. The switch to gaseous fuels, however,presents us with new challenges. For gas-powered
drives, these include increased exhaust gas temperatures. To address this, MAHLE provides crucial
technologies to enable cooled exhaust gas recircu­
lation. These reduce combustion temperatures, pro­tect the engine components against thermal
damage, while preventing premature ignition in thecylinder, also known as “knocking.”

HYBRID AND ELECTRIC DRIVESIn hybrid electric drives or purely electric drives,it all starts with the battery. This is the most important element in an electric vehicle, and many
components contribute to it. MAHLE has expanded
its extensive product portfolio to include solutions
for the demand-based conditioning of temperaturesensitive traction batteries. These allow the coolingand heating architecture to be kept as simple
as possible and ensure fast and efficienttemperature regulation.

MagazineO n t h e ro a d25

There’smorethan oneway toachieveyour goal
MAHLE has developed a solution to increase the efficiency ofthe combustion engine in commercial vehicles. This solution opens
up further possibilities. More ways to meet statutory emissions­r egulations. More ways to improve transport using existing­t echnologies. MAHLE is the first to succeed in combining all these
possibilities in one compact box: using a waste heat recovery(WHR) system. Now is the time to tap into the immense potentialthat lies in the use of exhaust gas heat from combustion engines.
We take a look at a very special technology that is making
a major contribution to climate protection.

26

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MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

S AV I N G

FUEL

THR

OU

GH

WA

ST

E

HE

AT

R

EC

O

V

E
R

Y

30 percent
is the reduction in CO2emissions required by
the EU by 2030 for heavycommercial vehicles inthe EU vehicle classes
4, 5, 9 and 10.

3.8 million
is the expected numberof commercial vehicles
to be newly registeredworldwide in 2030.

80 percentof commercial vehicles
will still be equipped witha combustion engine
in 2030.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Magazine
Th e re ’s m ore t h a n o n e w a y27»	Waste heat recovery(WHR) has the ­potential to reduce CO2
emissions today—
not sometime in the
distant future.«

What do diesel engines and MAHLE have incommon? They’re both success stories. And they’veboth been established on the market for a long time.
MAHLE has been involved in combustion engine
technology from the outset. So, if anyone knowsthat the technology still has untapped potential, it’s
MAHLE . While the call for CO 2 reductions has
sparked a sometimes biased debate about the­internal combustion engine and brought local zero-­emissions powertrain technologies to the fore,
MAHLE has continued its development in all directions. And in doing so, we’ve found a way to ­reduce

HANNES MAR

LO

K,

W
H

R

Working beyond the limits of their individual
locations, the Berlin and Stuttgart teams join
forces to drive forward the WHR system.

proje
ct manager

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MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

CO2 right now—using special technology. After all,the combustion engine will continue to be an indispensable part of the diversified drive mix in the­future. Especially on long-distance routes in thecommercial vehicle segment—until well after 2030.
In addition to hybrid and purely electric power­traintechnologies, innovations in the combustion engine
are also playing a key part in the overall ­reductionof CO2.

“The technology isn’t unknown,” begins Hannes­Marlok, project manager in the WHR team. “But noone before us has ever managed to make the wholething ready for series production.” MAHLE has packaged “the whole thing” in a compact box with awidth of just 55 centimeters and developed a perfectly coordinated system, thus paving the way forseries production. “But there’s even more to comein the future, because the next generation of
the Boost Box will be much smaller than this,”­Marlok says with a grin. The box looks simple. But
it’s clear from the expressions on the faces of the
WHR team members who’ve gathered in the yard in
Berlin that something really special has beenachieved here. “The waste heat recovery box cuts
fuel consumption by up to 5 percent, thus also
­reducing CO2,” explains Michael Hötger, Managing
Director of MAHLE’s Berlin location.

Voltastraße, Berlin/Germany. The name “MAHLE” isprinted in large letters on the truck that’s turning into
the yard at our Berlin location on this cold December
morning. On this day in particular, the street bearing
the name of the electric battery’s inventor—Alessandro Volta—acts like a harbinger. Today, we’re focusing on the combustion engine and talking about
electrical energy at the same time. As the truck finishes turning and comes to a stop, a red box gleams
from underneath the vehicle frame, directly behindthe driver’s cabin. It bears the words “Boost Box.”
This box is a source of power, since it houses a
waste heat recovery system that converts the heatfrom the exhaust flow into electrical energy.

The technology is well-known, yet MAHLE is thefirst to really get it going. The reason is simple. “No­manufacturer wants to take on the risk and change
the entire vehicle structure, because that costs
money and requires time and effort. But we’ve­e liminated that risk with our box. Now the tech­
nology is easy for anyone to test without major­design effort,” ­explains Michael Hötger.

CO 2 CALCULATIONS
Are vehicles with exhausts bad? And ones without exhausts good?
If you want to compare the different powertrain technologies, you need to lookat them from various angles to appreciate their potential.

1.

2.

3.

From tank to wheel

From well to wheel

From cradle to grave

This analysis only takes into
consideration the CO 2 emitted
by a vehicle during use.
The potential of renewable fuels,
for example, isn’t covered, nor
are any CO 2 emissions produced
during electricity generation—
not tech­n ology-­n eutral dueto the choice of assessment
parameters.

In addition to a tank-to-wheel
perspective, this calculation also
accounts for the CO 2 emitted in
the production of the fuel orelectricity. This approach goessome way toward technologicalneutrality since it records thepotential of renewable fuels aswell as any CO 2 emitted aspart of electricity generation.

This analysis of CO 2 emissions
goes a step further than that described under point two. It also
includes the vehicle’s production
and its disposal at the end ofits life cycle. It’s the most complex
type of calculation, but due to its
holistic approach it’s also the
one that offers the highest degreeof technological neutrality.

Technological neutrality is important when it comes to clarifying the best technologicalsolutions from both an environmental and an economic point of view. With a technology-­
neutral assessment, different powertrains will remain on the market even if CO 2
thresholds become stricter, and the customer will be able to choose the technologicalsolution that best suits their primary objective.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Magazine
Th e re ’s m ore t h a n o n e w a y

29

CREATING USABLE ENERGY FROM EXHAUST GAS HEAT:HOW THE WASTE HEAT RECOVERY SYSTEM WORKS

engineelectric motor
8

9battery

1
WHR boxexhaust gas
aftertreatment

X

HR

)B

O

7

W A S T E H E AT R E C

OV

ER

Y

(W

2

evaporator

6
axial piston
expanderTHE

feed pump3

generator

N
NE

T

F
S O

4

PO

5

O

M

condenser

C

1.

Fuel is converted into kinetic
energy in the engine. However, a signi­f i­cant proportion of the energy held in thefuel is carried away in the form of heat via
the exhaust gas. This is where the waste
heat recovery system comes in. Insteadof releasing unused energy into theenvironment, it’s now put to efficient use.

2.

The hot exhaust gas ispassed through the evaporator after theexhaust gas aftertreatment.

3.

Inside the evaporator, theexhaust gases vaporize a working medium,
which drives an axial piston expander.

30

Magazine
T here’s mo re t h an on e way

4.

Kinetic energy is producedin the axial piston expander, which
drives a generator—thereby creating
electricity.

5.
6.

The exhaust steam is thenconverted into a liquid in the condenser.

A pump is used to pressurize
this liquid, which is then fed into theevaporator, heated, and turned into a
gas again. This completes the cycle.

7.
8.

The WHR box feeds theelectricity into the battery.

Energy recovery: Energy
is recovered when driving downhill andwhen braking. It’s stored temporarily
in the battery and is available whenneeded.

9.

The stored energy canbe retrieved whenever an “extra push”
is needed. When driving uphill, forexample. This reduces fuel consumption
and therefore also CO 2 emissions.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

the

MAHL

E locatio

n in

Be

rli

Intensively involved in the development of
the WHR system from the start—and delighted
that the technology is picking up speed.

M

I

A
CH

EL

HÖTG

ER, Man

agi

ng

Di

c

to

t
ra

n

re

»	We don’t ask: Should it
be diesel or not? But: How
can we reduce CO2?«

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Magazine
Th e re ’s m ore t h a n o n e w a y31»	We’re focusing on
precisely what mattersfor the environment:
efficiency.«

MICHAEL BUCH

ER

,p

ro

d
uc

te

Happy to be part of a diverse,
lively development unit in which
every member of the team cancontribute their own strengths.

Because even during the predevelopment phase in
Berlin, the team of 25 people always had one thingin mind: the needs of the customer. So, the teamalso knows what matters at the end of the day: “It’simportant that the truck is kept on the road. It’s only
by staying on the road that it earns money for its
owner. The WHR box is relatively simple to integrate
into the vehicle structure.”

xp
ert

in the WHR team

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MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

MAHLE focuses on the customer and the customer’s
needs. It’s a simple maxim and yet at the same timea big claim, which constantly requires new thinking.
Michael Hötger remembers one such instance at
an intermediate stage in the project: “There was amoment when we realized that, yes, we’ve got all
the components, but now we require a brand-new
approach. We had to think again and leave everything out that we didn’t need. And we packaged all
the technology into one box.” As a result, all the indi­vidual MAHLE components were brought together toform an integrated, ideally coordinated system,
which functions perfectly inside a box.

Take a truck and a box. And then we can get star­ted. “All we need is waste heat of 150 degrees andover for the WHR system to work. Within just one
and a half to two years—a short time frame when
you think about the future—the WHR box has already paid for itself. For the manufacturer. For thefreight forwarder. And, above all, for the environment.” Hannes Marlok translates this into a tangible
illustration: “The system saves 6 tons of CO 2 pertruck, per year. That equates to the CO2 output of
0.6 people or just under four passenger cars withan average mileage. If you think about how many
miles a vehicle like that covers and how much fuel it
consumes, 5 percent is a great deal of potential.”
MAHLE ’s WHR box attracted a lot of interest at
IAA 2018. “Customer feedback shows that we havea good product—one that the market has been
­waiting for,” says Michael Bucher, a product expert
in the WHR team. “One of our customers now evenwants to build the box himself. So, he calls us, looking for parts. We ask which components he wants
us to supply, He laughs and says: ‘All of them!’”At the very moment a harsh wind sweeps aroundthe truck in the yard in Berlin, another WHR box ison the road in China for initial testing with a ­customer.
When it comes to series production, MAHLE will
work as one across business areas, locations, andnational borders. All the hard work has paid off, andthe team is delighted with the positive feedback
the WHR box is receiving. Hannes Marlok adds: “We
don’t yet know what the powertrains of the future
will look like on our streets. But at MAHLE , we’re
ready. And above all, we’re open to the technolo­
gical possibilities that will enable a future with
CO2-neutral ­mobility.”

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

And let’s not forget ...
... all the many other product solutions, projects,
and initiatives that we delivered, initiated, and drove
forward in 2018. Here are some highlights.

THE MAHLE OIL MANAGEMENT MODULE
Our oil management module for vehicles withelectric drives enables the cooling of multiple
components: the electric drive motor, the transmission or oil-cooled battery, and even the powerelectronics. Further advantages are achieved byintegrating several individual components into
one compact module: weight reduction, lower
pressure loss, reduction of interfaces and thus
assembly effort compared with the individual components, optimal use of installation space, andoptimized thermal management.

THE VARIABLE VALVE TRAIN SYSTEM
In order to further optimize the efficiency of the
combustion engine in commercial vehicles,
MAHLE has developed a Shifting Roller Systemthat allows engine valve timings to be adjusted
to suit the requirements of different engine operating conditions. With this system, MAHLE
integrates crucial functions such as engine braking
into the valve train, thus making highly efficient
operating modes like the Miller / Atkinson cycle
possible and enabling exhaust gas temperature
management. Under certain cir­cumstances, thetechnology eliminates the need for expensive
retarders to be used as service brakes, while also
decreasing fuel consumption and optimizing
exhaust gas aftertreatment, which in turn resultsin lower emissions.

Magazine
Th e re ’s m ore t h a n o n e w a y

33

P

A
TE

M

S

PU

T

T

I
HE

R

FIR

S

N
T IN

O V AT

IONS ON THE ROAD

MA

HL

E C

OR

PO

RA

TE

ST

A

R

T-

U

From
Post-ittoproto­
type

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MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Solutions you simply believe in. That’s the first step to pushing ahead
with an idea. And you make more progress when you do it together. MAHLE
launched the Incubator innovation program last year and encouraged all
employees across Germany to submit their ideas. These were ideas that cameto them during a chat in the canteen, on the way home in the car, or at workon the production line itself. And all of the ideas have one thing in common:the desire to do something better. Two teams succeeded in impressing both theinternal jury and their first customers with their solutions. These solutions
prove that MAHLE ’s innovations don’t just catch the attention of our customers,
they reach out to everyone.
From a change of perspective ...
Stuttgart-Bad Cannstatt / Germany. At the heart of
MAHLE’s headquarters. “We’re not doing any otherwork now. We’re just focusing on chargeBIG,” says
Dr. Walter Krepulat, responding to our opening
question about whether they’ve come straight fromtheir “proper” jobs or from their Incubator project.
chargeBIG is a full-time job. This statement describes the dimension of their idea well. But let’s
start again at the beginning.

»	Everyone’s always striving
for higher, faster, further. And
now we come along and say,you don’t need to do that.«
SEBASTIAN EWERT , charge BIG team

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

35

As the name suggests, chargeBIG means charging
on a large scale, so it’s tackling one of the most important aspects of e-mobility. Although an increasing
number of battery-powered vehicles are on ourroads, one question remains unanswered: How are
we going to charge all of these electric vehicles?
From individual charging points to a nationwide network infrastructure, chargeBIG now has the answer
in the form of an intelligent charging system, which
is user-friendly and can be installed anywhere.

»	We give a lot andget a lot back. It’s oneof the best partsof the experience.«
NICOLE HEINRICH, charge BIG teamSebastian Ewert offers up a decisive calculation: “Onaverage, a car is driven only 40 kilometers per day.
That means it’s standing still for around 23 hours. So,
there’s no rush when it comes to charging it!” This
ingenious change of perspective clears the way for
intelligent charging. “It no longer needs to be
charged as quickly as possible, only as quickly asnecessary.” And with that, the room goes quiet andthere are smiles all around. These few words reveal
what makes chargeBIG unique: simple and low-costconnection to the existing electricity grid.

... to a trailblazer of e-mobility
We stand outside in MAHLE’s parking lot. The idea
moved on from the Post-it stage a long timeago. “This is the charging cabinet,” explains Nicole
Heinrich, indicating the electrical enclosure she’s
standing next to. “Distributors, fuses, relays, electronics controls, communication, and safety are alltucked away behind one large door.” Sebastian­Ewert adds: “It’s just what electricians are used to.
This way, our charging cabinet is easy to connect
and equally easy to maintain.” One charging cabinet
and lots and lots of parking spaces with charging
plugs. chargeBIG’s vision is for every parking space
to be equipped with a plug in the future. And the way
to achieve this is through an intelligent software
package, into which the team has invested a great
deal of hard work. T­ oday, they can smile about it, because “Now it works!” How exactly, the team won’t
reveal. The ­cables and plugs, which are attached tothe outside of the charging posts, are always in view.
“This way, drivers no longer have to carry cables withthem.” Sebastian Ewert knows what he’s talking
about. As a driver of an electric car, he keeps a lotof cumbersome loops of cables and other equipment
in his own trunk.
Sixty to seventy colleagues have collaborated on
the prototype so far. When asked if they can assist
the team, the response from every department
has been “Of course,” “Sure,” “No problem!” Or
even: “Can I help?” That’s teamwork in action. Alsofrom Max Gerstadt, a recent member of the team,
who has been involved too, developing an importantcomponent for chargeBIG as part of the final year
project for his degree.

CHARGEBIG TEAM

Sebastian Ewert, Max Gerstadt,
Nicole Heinrich, and Dr. Walter
Krepulat (from left to right)

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MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

»	Charging as quickly
as necessary is b
­ etterthan charging as
quickly as possible.«
Dr. Walter Krepulat, charge BIG teamchargeBIG STRUCTURE...
CHARGING FOR EVERYONE!
chargeBIG is a charging infrastructure that builds on
existing grid connections and makes maximum use ofthem. One charging cabinet supplies up to 36 charging
points, to which a corresponding number of electriccars can be connected. The intelligent system optimallycontrols charging and prevents overloading of the existing grid by ideally distributing the available electricity.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

»In our team, you cantell that people reallywant to achieve something. I got caught up
straightaway.«
Max Gerstadt, charge BIG teamMagazine
F rom P ost-it t o p ro t o t y p e37»	It’s quite possible that there’s never beena scenario before where a manufacturerof child seats has worked together witha manufacturer of air conditioners.«
MATTHIAS GANZ , Com4Kids team (second from left)

COM4KIDS TEAM

Yvonne Maier,Matthias Ganz,
Seyit Suemengen,Franziska Erhardt,
Dr. Mario Wallisch(from left to right),
Michael Conze(not pictured)

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A n n u a l R e p o r t 2 0 18

A mobile chargeBIG prototype charging cabinet cancharge 18 electric vehicles. The first customers wereconvinced by its potential immediately. The next
­target is one hundred vehicles. “We’re working
closely with our customers on this project so we
can incorporate their feedback directly.” And what
feedback has there been from MAHLE? The teammembers grin. The internal decision makers werealso in agreement. At the last meeting, they simply
asked: “What resources do you need to progress
further?”
Incidentally, the chargeBIG team is already cele­
brating its first customer order. The MAHLE corporate start-up is carrying out a project for Stuttgart
Airport that includes up to 110 charging points on its
parking lots for fleet and staff vehicles.

From large-scale expertise ...
A MAHLE co-working space in Stuttgart-Feuerbach /Germany, just a few kilometers from the company
headquarters. A child’s car seat lies on a table.
­Nothing unusual so far. Dr. Mario Wallisch, Franziska
Erhardt, Matthias Ganz, Michael Conze, Seyit­Suemengen, and Yvonne Maier from MAHLE havegathered around the seat. A child’s seat and MAHLE:
something new is happening here.
Dr. Mario Wallisch expresses the idea in a nutshell.
An intelligently air-conditioned child’s car seat, which
warms the child or prevents overheating. Franziska
Erhardt takes us back to where this completely new
idea came from: “In fact, Mario’s always sayingthat his children are sweating in their seats when
they drive to France on vacation, which is very
­unpleasant for them and therefore also unpleasantfor everyone else in the car.” Matthias Ganz adds
that many parents have tried to deal with the problem: “There are concepts where you seat the childon top of ice packs placed inside the seat.” Smiles
all around. “But that’s bad simply from a safety­p erspective, because it involves modifying theseat.” The team has been closely examining theworld of children’s seating in the last few months.
They’re familiar with every problem. And every­attempted solution.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

FROM EXPERIENCE COMESINNOVATION

New ideas arise when existing
concepts are reinterpreted.
The Com4Kids team with theirinnovative result: a child seatcombined with MAHLE ’s accumulated thermal management
expertise.

Magazine
F rom P ost-it t o p ro t o t y p e39»	Our productbrings the
comfort of
the adult world
into the worldof children.«
DR. MARIO WALLISCH , Com4Kids team

MAHLE INCUBATOR

1.

40

2.

3.

4.

5.

6.

Submissionof ideas

Selection of
the best ideas

Short-listingof teams

Qualifying
stage

Winningteams

New
solutions

MAHLE em­ployees throughout Germany areencouraged tosubmit their ideas.

The best ideas
are presented bytheir originators
via an internalmarketplace.

The teams
that make it
onto the shortlist take part ina Concept Day,
where they
develop theirideas.

The top teams
pitch their ideas
to a MAHLE jury
to qualify forthe boot camp.
The winningteams are chosen
after theboot camp.

With their own
budgets andlargely released
from day-today work, theteams develop
their solutions
into marketable­p roducts overthree to six
months.

The prototypes
are presented
to customers.

Magazine
F ro m Pos t -it t o pro t o t y p e

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

With the heating function of the seat, the team has
also improved safety. In conventional car seats,­children are often strapped in wearing thick winterjackets—with the result that the belt doesn’t work
as well as it should. If the seat is warmed up in advance, jackets are no longer needed and the beltmechanism is fully effective again.
This begs the question: Why can’t you buy such a
product already? “There have been market trials­offering a kind of air conditioning,” Yvonne Maiertells us. But MAHLE’s home advantage lies in doing
it properly, not “kind of.” “Thanks to our thermal
management systems, we’re specialists in vehicle
air conditioning. Now we’re applying this expertiseto seats for children.”... to comfortable mobility
for the little ones
Thermal comfort for kids—from the moment they
get into the vehicle to the moment they leave it. The
Com4Kids team has put this feature in a compact
module that connects to the child’s seat. It turns
the rigid plastic seat into a place where air is circulated—and where children finally feel comfortable.
Matthias Ganz holds the module in one hand. Whatlooks to the uninitiated like a small work of art
has been specifically developed for children. “In ourteam, we’re able to reach out to colleagues with
20 to 30 years of professional experience, for whommaking a new product reliable and marketable is apiece of cake,” says Dr. Mario Wallisch, showing
how the corporate structures in the background­s upport the start-up spirit. What’s more: “The
MAHLE name has meant people are willing to put
their trust in us. Manufacturers of children’s carseats know they’re not talking to amateurs with acrazy idea.”
The experts from MAHLE have held in-depth discussions with customers throughout the development of
the air-conditioned child seat. It may be this unusual
cooperation that explains why the seat has not­existed before. “The manufacturers have their areasof competence in design and ergonomics, but assoon as the focus moves to thermal comfort, they’reout.” And it’s over to MAHLE. With its great expertisein thermal management and with lots of ideas to getpeople moving in their everyday lives. Achieving
greater comfort. For all ages. 

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

And let’s not forget ...
... all the many other product solutions, projects,
and initiatives that we delivered, initiated, and drove
forward in 2018. Here are some highlights.

INCUBATOR CHINA
As an innovation manager at MAHLE , Mujib Bazhwal
has been following the Incubator program since its
inception, and he’s just as positive about it as he was ayear ago, when the initiative enjoyed a productive
launch in Germany. That’s not only because of the successful innovations that emerged from the first round,but also because Incubator has now been enthusiasticallytaken up by other locations too. Mujib Bazhwal had
barely sent off the inquiry to other countries when China
came forward with a positive response and promptly
got started. “It was crazy just how fast and flexible theywere,” remembers Mujib. In cooperation with Kun Hu
at MAHLE in China, the program was introduced at theindividual Chinese locations and the first ideas havealready been selected. Out of 120 ideas, ten are currently
in the running. “And you need to realize that, in our
culture, we’re not so familiar with thinking outside the box,”
says Kun Hu. “But when I saw the ideas, I knew that I
was mistaken.” Above all, Mujib is excited by the subjects:
many of the ideas are associated with digitalization. And
so, MAHLE ’s Incubator has begun its worldwide rollout.
Further regions will follow. And when it comes to thequestion of whether the individual teams are also able
to exchange ideas internationally, the answer is morethan just a YES and even clearer: “We are One MAHLE !”INSPEKTO
Innovations are shaping the working environment at
MAHLE . Another such development is now raising quality

inspection to a new level. Inspekto, a piece of software
based on artificial intelligence, is helping MAHLE employees with visual quality inspections by performing themin a fully automated process. The program was developedby a German–Israeli start-up in which MAHLE isa participant. The software is highly flexible and can be
implemented on any production line. Inspekto
prevents defects and thus saves time. This results inan even higher level of quality assurance.

Magazine
F rom P ost-it t o p ro t o t y p e41CHAPTER

The company
O ur s e lf- p e r c e ptio n

43

Let te r fr o m th e CEO

44

R e po r t of th e S u p e r vis o r y Bo a rd
H ig h lig ht s 2018
MA HLE wo r ld wid e

48
50

M e m b e r s of th e S u p e r vis o r y Bo a rd
M e m b e r s of th e G r o u p M a n ag e m e nt Bo a rd

42

The company
Con t en t s

46

52
53

MAHLE Group
Annual Report 2018

Ourself-perception
The MAHLE Group is a leading global development partner
to the automotive industry and offers its customers complete
systems from a product range that is unrivaled in breadth and depth.
Our new developments are geared toward the further optimizationof 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 ourknowledge 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 asenvironmentally friendly as possible.
The Mahle brothers have bequeathed us a company structurethat secures our independence and the long-term orientation of
the group. In accordance with their specifications, we want tocontinue to successfully develop MAHLE as a leading company andattractive employer.
This also means that we stand by our values—fairness,compliant conduct, cultural diversity, and equal opportunities—
and live by them every day in our relationships with our employees,­c ustomers, and suppliers. Assuming social responsibility
was an objective declared by our company founders. We remain ­bound by this ongoing commitment, and it is reflected in ourbusiness decisions. Now and in the future.

MAHLE G r o u p
Annual Report 2018

The company
S e l f - p e rc e p t i o n43Solutions
The motto of this Annual Report has always been our maxim: “Solutions!”
For us, this means doing rather than just talking! This attitude has its roots ­in our past, where actions have always spoken louder than words. As an international group, we act accordingly and provide our customers with specificsolutions. The projects presented in this Annual Report are proof of this.
On that note: take us at our word—and judge us by our actions!

4.4%

Organic growthThis development wasconsiderably higher than the average
global market growth.

44

The company
Ch airman o f t h e Man agem ent Board and C EO

MAHLE Group
Annual Report 2018

The developments in 2018 highlighted how MAHLE ismaking headway and driving forward its transformation.
We rose to the challenges presented by the changes inour sector: we continued to push ahead with many new
projects, exciting topics, and promising initiatives over
the year.
A good case in point is our innovative culture. Both ofthe corporate start-ups that we will present to you inthis Annual Report emerged from the Incubator project,
the name given to our company’s think tank. Here at
MAHLE, we were excited about the imagination, enthusiasm, and commitment of the two teams in 2018 — andso were our external customers.
We also provided our customers with solid technological solutions in 2018. Our new electric compressor, thethermal management solution for Nikola, and ­o ur
waste heat recovery system are just three of many projects that demonstrate both the outstanding engineering know-how and the superbly orchestrated,­interdepartmental cooperation between teams andacross borders enjoyed by our company.
In 2018, we focused particularly on the future viabilityof our portfolio. We consequently acquired ebikemotion,
the Spanish specialist for pedelec drives, and increased
our shareholding to 80 percent in Brain Bee—the Italianvehicle diagnostics and workshop equipment expert.
On January 1, 2020, we are also planning to take ­­over
all the shares in the former joint venture Behr Hella­Service, which markets products for cooling and air
conditioning in the automotive aftermarket.
All the following activities are contributing toward ourdual strategy: We are continuing to optimize the combustion engine, making it even more efficient and lowering its emissions still further, because it will also havea supporting role to play in the future drive mix. At thesame time, we are driving forward the development ofalternative drive concepts. The purpose of these efforts
is to make the individual mobility of the future more­sustainable, more efficient, and affordable and tostrengthen and develop our position as one of theworld’s leading development partners and suppliers to
the automotive industry.
The year under review, 2018, was generally challenging
for MAHLE. At EUR 12.6 billion, group sales fell slightly
short of the previous year’s level. After adjustment for
exchange rate effects and changes to the consolidation

MAHLE G r o u p
Annual Report 2018group, MAHLE achieved strong organic sales growth of
4.4 percent. This development was considerably higher
than the average global growth in automobile production. We also improved the result from business activities substantially from EUR 262 million to EUR 614 million, with special effects playing a key role. We wereunable to take further advantage of the earnings potential owing also to the noticeable slowdown in the global
economy, particularly at the end of the year u­ nder review.
We employed 79,564 people (reference date: December 31, 2018) worldwide— an increase ­of 1.6 percent.
MAHLE is able to create solutions for the sustainablemobility of today and tomorrow, because we can rely
on a strong team around the world, which is handlingthe transformation. Despite all the new developments
and political uncertainties that such a fundamental
change involves, our international MAHLE team is extremely committed, focused, and goal-oriented. Together with my colleagues on the Management Board,
I want to thank all our employees for their extraordinary
performance in 2018.
My gratitude also goes to the MAHLE Supervisory
Board, the members of MABEG (Verein zur Förderung
und Beratung der MAHLE Gruppe e. V.), and the employee representatives for their constructive discussions and cooperation, which were shaped by a great
deal of trust and a very positive relationship. Furthermore, I’d like to extend my thanks to our customers
and partners around the world whose trust, constructive dialog, and strong loyalty continued to motivate us
to perform at our best in 2018.
Twenty nineteen will be a demanding and busy year for
MAHLE. The global economic risks are high, and themarkets are developing less strongly. We'll continue todrive the transformation forward and improve our operating performance. It's not going to be easy. We want
to give our customers the most effective solutions forserving their markets once again in 2019. These aremajor challenges, but we'll tackle them with determination—because we see them as opportunities that
we’ll seize and transform into solutions for the mobilityof tomorrow.
I’d be delighted if you would continue to support
MAHLE on this journey.

Dr. Jörg Stratmann
Chairman of the Management Board
and CEO of the MAHLE GroupThe company
C h a ir m a n of th e M a n a ge m e n t Bo a rd a n d CE O

45

Report of the Supervisory Board

As in previous years, the MAHLE Group has benefited
from the positive global economic climate in the automotive and commercial vehicle industry. After adjustment for exchange rate effects and M & A activities,­organic growth increased by 4.4 percent, resulting ingroup sales of EUR 12.6 billion.
Overall, changes to the product portfolio arising from
M & A activities had minimal impact on the structure of
our sales distribution between products for passenger
car and light commercial vehicle combustion engines
on the one hand and unrelated products, including alternative drive systems, on the other. Our sales of
products for combustion engines have meanwhile
dropped to well below 45 percent. By contrast, the order intake for products for alternative types of drive(plug-in hybrid, battery electric, and fuel cell) has risen
considerably.
The shift in market share between gasoline and diesel
powertrains, which is especially apparent in Europe,
has resulted in markedly negative effects on sales andprofits at some of our production locations. This is all
the more regrettable since clean diesel technology canachieve CO2 and fuel consumption savings of around20 percent in real driving conditions.
The main strategic M & A activities were:— The sale of the activities of Bosch Mahle Turbo
Systems (development, ­production, and sale ofexhaust gas turbochargers) to the Chinese company FountainVest.
— The disposal of our 33.3 percent share in the­front-end module producer Hella Behr Plastic­Omnium to Plastic Omnium, our partner in thisjoint venture, in order t­o strengthen our focus on
MAHLE’s future group a­ ctivities.
— The purchase of an additional 60 percent share —bringing the total to 80 percent — in Brain Bee, aspecialist in automotive workshop equipment.
With this majority acquisition, Aftermarket is significantly expanding its European presence in thearea of equipment and services for workshops.

46

The company
R eport of t h e Su pervis or y Board

MAHLE Group
Annual Report 2018

Overall, the MAHLE Group increased the result fromordinary activities from EUR 262 million to EUR 614
million in the 2018 business year. Despite this pleasing development, the significant gaps that are still being identified in operational business areas prevented
a greater improvement in the result. A sustainable efficiency program for the operational and, in particular,
the administrative areas is therefore essential for the
coming years.
The Supervisory Board has thoroughly discussed andadvised on all other decisions relating to the development of a long-term strategy for the group. This includes the Management Board’s mission to develop
approaches for the future of the German locations inorder to also manufacture additional products for alternative drive concepts here.
In the 2018 business year, the Supervisory Board met
all of its obligatory responsibilities in accordance withthe law, Articles of Association, and Rules of Procedure. It held a total of five meetings in the businessyear. The Personnel Committee also met a number oftimes to examine current personnel issues. In addition,
the Chairman of the Supervisory Board and the Chairman of the Management Board consulted verbally andin writing on a regular basis to discuss and agree on
strategic and operational matters.
During the year under report, the Supervisory Board
was informed regularly, promptly, and comprehensively through oral and written reports from the Management Board and during meetings about the business development of the company, the group, its­business units, its profit centers, and its participations.
Alongside operational and strategic issues, the implementation of the law stipulating the equal participationof women and men in managerial positions was also
discussed in these meetings. The Supervisory Boardand the Management Board are both striving to increase the current proportion of women in managerial
positions.
In April 2018, the members of the Supervisory Board
were newly elected in accordance with the regulationsof the 1976 Codetermination Act; the constituent
meeting took place on April 24, 2018. The Supervisory
Board would like to express its particular thanks to
the departing members, Mr. Hans-Otto Assmus,
Mr. Martin Bücher, and Mr. Manfred Steidle, for their
many years of valuable cooperation. At its constituent
meeting, the newly composed Supervisory Board
elected Professor Dr. Heinz K. Junker as Chairman
and Mr. Uwe Meinhardt as Deputy Chairman.

MAHLE G r o u p
Annual Report 2018

The departure of Wolf-Henning Scheider as Chairmanof the Management Board of the MAHLE Group­resulted in numerous changes of personnel as of­February 1, 2018. In an extraordinary meeting, the Supervisory Board appointed Dr. Jörg Stratmann as
Chairman of the Management Board with effect fromFebruary 1, 2018, and on the same date Bernd Eckl
assumed responsibility within the Management Boardfor the Thermal Management business unit, and Georg
Dietz succeeded Mr. Eckl as member of the Management Board responsible for the Engine Systems andComponents business unit. Arnd Franz, member of theManagement Board and responsible for OE Sales and­Aftermarket, stepped down from the management
team on March 31, 2019. He was succeeded by Martin Wellhöffer as head of OE Sales ­­on the Management
Committee. In this role, Mr. Wellhöffer reports ­directly
to the Chairman of the Management Board. Due to thechanges in personnel on the ­Management Board, Olaf
Henning, Member of the ­Management Committee,­responsible for the Aftermarket business unit, also reports directly to the Chairman of the Management
Board.
The appointed auditors Pricewaterhouse-Coopers
GmbH audited the annual financial statements andmanagement reports of the MAHLE Group and of
MAHLE GmbH for the 2018 business year, which had
been set out in accordance with the German Commercial Code (Handelsgesetzbuch, HGB), rendering an
unqualified audit opinion. The Supervisory Board
agreed with the results of the audit following in-depth
analysis of the audit reports and the report from theauditors 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 does notraise any objections to the appropriation of income as
proposed by the Management Board.
The Supervisory Board would like to thank all employees of the MAHLE Group for their commitment to thelong-term success of the MAHLE Group.
Stuttgart / Germany, May 7, 2019
For the Supervisory Board

Professor Dr. Heinz K. Junker
Chairman of the Supervisory Boardof the MAHLE GroupThe company
Re por t of th e S u pe rv i s o r y B o a rd47

Highlights 2018
In the past fiscal year, we again initiated and pushed forward
many projects and initiatives. Here we present a small selectionof topics that we focused on in 2018.

2
WheelsElectrical engineers

A mobile future on two wheels: MAHLE purchased
ebikemotion, the Spanish specialist in pedelec drives,
HMI, and connectivity. This acquisition strengthens thetechnology group’s activities in the area of electricallypowered bicycles.

MAHLE opened its new research and development

80%

48

250
center for electronics in Valencia/Spain. In the future,around 250 electrical engineers, software developers,
and IT experts will work here on the development of
products and software solutions for vehicle electronics,
including electric drive systems and auxiliary components, charge management systems, and heating andcooling systems. With this new research and development center, MAHLE is strengthening its competence inthe area of power electronics and continuing on its
path to become a holistic systems supplier in this field.

2019

Participation

Opening

MAHLE increased its holding in Brain Bee, an

MAHLE opened its first production line for electric

Italian automotive workshop equipment specialist,
to 80 percent, thus taking another important step
toward becoming an integrated solutions provider.

­c ompressors in the Hungarian town of Balassagyarmat.
With this move, the technology group has built up its­s ystems competence in electric vehicles and consolidated
its market position in this business segment.
Series ­p roduction starts in 2019.

The company
Hi gh lig h t s 20 1 8

MAHLE Group
Annual Report 2018

2018

1st

Taking part in Formula E

Testing and certification center

MAHLE is now taking part in Formula E and an official
partner and team sponsor of HWA RACELAB in the ABB FIA
Formula E Championship 2018/2019, the world’s first series
for purely electric race cars. Through its involvement,
MAHLE is highlighting its performance capabilities in thee-mobility sector.

MAHLE opened a new WLTP- and R­ DE-capable

5th
Eco Rallye
MAHLE was an official sponsor of the fifth Eco Rallye:

the official FIA World Rally Championship for electricvehicles and alternative energies. The company is thus
actively promoting the sustainable use of vehicles
and encouraging efficient driving styles. MAHLE entered
two of its own teams into the competition, which took
place in Castellón, Valencia/Spain in 2018.

testing and certification center (RDEC) in Northampton/
UK—the first of its kind in Great Britain. MAHLE is
thereby reducing the current ­b ottlenecks in the application and certification of ­v ehicles and providing its customers with targeted ­s upport in handling the immense
challenges presented by the new approval standards.

200 kmCruising range
The German Design Council presented MAHLE with theprestigious German Design Award in the Excellent
Product Design—Conceptional Transportation category
for its urban vehicle concept MEET , MAHLE EfficientElectric Transport. MEET features numerous technicalhighlights, including a demand-based 48 V powertrain
and intelligent thermal management for the efficient
control of heating and cooling. This holistic approachand other energy-saving measures increase thevehicle’s cruising range: MEET runs for around200 kilometers without recharging.

>90
Awards
MAHLE was delighted to receive more than

90 accolades, including Product Transformation­C hampion 2018 for innovative production logistics,
which was awarded by corporate consulting
company Roland Berger in conjunction with German
trade m­ agazine Automobil Production.

MAHLE G r o u p
Annual Report 2018

The company
H ig h l i g h t s 2 0 1 849

A worldwide network –Our locations
Around 160 production locations
16 major research & development centers
More than 79,000 employees *Major research &development centers
EUR OPE

Northampton / Great BritainŠempeter pri Gorici / Slovenia
Stuttgart-Bad Cannstatt/Germany
Stuttgart-Feuerbach / Germany
Valencia / Spain
Foetz / Luxembourg
NORTH/SOUTH AMERICA

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

Numazu /Japan
Pune / India
Shanghai / China
Kawagoe, Tokyo /Japan
Okegawa, Tokyo /Japan

North America
25 production locations
17,090 employees *Sales of EUR 3,404 million
Canada, Mexico, USA

South America
9 production locations
9,074 employees *Sales of EUR 625 million* As at December 31, 201850

The company
M AHL E w o rldw ide

Argentina, Brazil

MAHLE Group
Annual Report 2018

EuropeAsia/Pacific

70 production locations
35,655 employees *Sales of EUR 6,016 million

55 production locations
16,697 employees *Sales of EUR 2,484 million

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

China, India, Indonesia,
Japan, Philippines,
Singapore, South Korea, Thailand

Africa2 production locations
1,048 employees *Sales of EUR 53 million
South Africa

MAHLE G r o u p
Annual Report 2018

The company
M A H LE w o r l d w i d e

51Members of theSupervisory Board
Prof. Dr.-Ing. Heinz K. Junker
Chairman
Former Chairman of the Management Board andCEO of MAHLE GmbH, Stuttgart / Germany

Uwe Meinhardt
Deputy Chairman

Dieter Kiesling
Chairman of the Central Works Council of MAHLE Behr andChairman of the Works Council of MAHLE Behr GmbH & Co. KG,
region Muehlacker / Germany

Executive Director of IG Metall,administrative office Stuttgart / Germany

Michael Kocken

Hans-Otto Assmus

Trade Union Secretary of IG Metall,administrative office Stuttgart / Germany(until April 24, 2018)
Director Global Product Management Business Unit Engine
Systems and Components MAHLE Group

Peter Bauer(since April 24, 2018)
Member of the Works Council of MAHLE Ventiltrieb GmbH,
Zell im Wiesental / Germany

Rolf Berkemann(since April 24, 2018)
Vice President Sales and Application Engineering Passenger
Cars 1 / Region Europe, MAHLE Group, Stuttgart / Germany

Dietmar Bichler
Chairman of the Supervisory Board of Bertrandt AG,
Ehningen / Germany

Martin Bücher
(until April 24, 2018)
Executive Secretary of the Central Works Councilof MAHLE Group Germany

Prof. Dr. jur. Wolfgang Fritzemeyer
Partner at international law firm Baker McKenzie,
Munich / Germany (until June 30, 2018)

Gerd Goretzky(since April 24, 2018)
Deputy Chairman of the Works Council of
MAHLE Behr GmbH & Co. KG, Stuttgart / Germany

Josef Häring
Chairman of the Works Council of MAHLE GmbH,plant Rottweil/ Germany

Karin Himmelreich
Managing Director MP Transaction andPartner at MPT Jamieson, Frankfurt / Germany

52

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

The company
M embers of t h e Su pervisor y Board

Prof. Dr.-Ing. Gisela Lanza
Head of the Institute of Production Science at the Karlsruhe
Institute of Technology (KIT), Karlsruhe / Germany

Thomas R. Letsch
Former Vice President Sales and Application Engineering
Commercial Vehicles of MAHLE Group

Dr. Franz-Josef Paefgen
Former CEO of AUDI AG, Bentley Motors Ltd and President of
Bugatti International S.A.

Prof. Dr.-Ing. Stefan Pischinger
Head of Institute, Institute for Combustion Engines,
RWTH Aachen University, Germany

Uwe Schwarte
Chairman of the Central Works Council of
MAHLE Group Germany and Chairman of the Works Councilof the MAHLE Filtersysteme GmbH, Stuttgart / Germany

Manfred Steidle(until April 24, 2018)
Chairman of the European Works Council of MAHLE Groupand Deputy Chairman of the Central Works Council of the
MAHLE Group Germany

Annette Szegfü
Spokesperson of Management IG Metall, Frankfurt / Germany

Dr. Bernhard Volkmann
Former Member of the Management Board and
CFO of MAHLE GmbH, Stuttgart / Germany

Georg Weiberg
Former Head of Global Truck Engineering,
Daimler AG, Stuttgart / Germany

MAHLE Group
Annual Report 2018

Members of theGroup Management Board
Dr. Jörg Stratmann ­Chairman and CEO(since February 1, 2018)
Research and Advanced Engineering, Corporate Quality
Management, Corporate Planning, Corporate Communications,
External Affairs; Engineering Services, Motorsports,
and Special Applications profit center(until January 31, 2018)
Thermal Management business unit; Industrial
Thermal Management, Compressors, Control Units,
and Front-end Modules* profit centers

Wolf-Henning Scheider
Chairman and CEO(until January 31, 2018)
Research and Advanced Engineering, Corporate Planning,
Corporate Communications, External Affairs; Engineering
Services, Motorsports, and Special Applications profit center

Wilhelm Emperhoff
Filtration and Engine Peripherals business unit,
Corporate Purchasing Processes and Methods, Corporate
MAHLE Production System, Mechatronics division

Arnd Franz
Automotive Sales and Application Engineering,
Aftermarket business unit

Michael Frick
Finance, Controlling, Taxes, IT Services,
Insurances, Revision and Risk Management,
Mergers & Acquisitions Coordination

Michael Glowatzki
Human Resources and Legal, Director of Personnel

Georg Dietz(since February 1, 2018)
Engine Systems and Components business unit,
Large and Small Engine Components profit center,
Environmental Management/Safety at Work for the group

Bernd Eckl
(since February 1, 2018)
Thermal Management business unit; Industrial
Thermal Management, Compressors, Control Units,
Front-end Modules profit center *(until January 31, 2018)
Engine Systems and Components business unit,
Corporate Quality Management, Environmental Management/
Safety at Work for the group, Large and Small Engine
Components profit center*  From February 1, 2018, until June 30, 2018: In the year under review,
we sold our shares in the joint venture Hella Behr Plastic Omnium (HBPO),
which had been run as the Front-end Modules profit center.

MAHLE G r o u p
Annual Report 2018

The company
M e m be r s of th e Grou p M a n a g e me n t B o a rd

53

Members of theGroup Management Board

From left to right:

Wilhelm Emperhoff
Michael Glowatzki
Georg Dietz
Michael Frick
Dr. Jörg Stratmann
Chairman
Bernd Eckl
as at April 1, 201954

The company
M embers of t h e Grou p M anagem ent Board

MAHLE Group
Annual Report 2018

MAHLE G r o u p
Annual Report 2018

The company
M e m be r s of th e Grou p M a n a g e me n t B o a rd55

CHAPTER

Responsibility
Co m m it te d e m ploye e s
Cor por ate So c i a l R e s po n s i bi l it y
By p e ople fo r p e ople

56

Responsibility
Con t en t

57 – 61
62 – 67
68 – 71

MAHLE Group
Annual Report 2018

Committed employees —The foundation of our successWith their diverse skills, commitment, and expertise,
our employees are the foundation of our success and the key
to the future of the MAHLE Group.

Employees

how, and commitment, they make a valuable c­ on­tribution to our corporate success every day.

Megatrends like digitalization, technological change,and globalization are having an impact on the worldof work and presenting us with new challenges.
We’re addressing these issues by continuously­optimizing and redesigning our HR activities andby aligning our concepts and processes on a global
basis. Our employees are our most important­resource and safeguard the future viability of ourcompany. Thanks to their wide range of skills, know-

It’s important to us that our employees are motivated, experience a respectful working environmentthat is free of prejudice, and are able to perform theirtasks effectively and efficiently. Key to achieving
this are targeted personnel marketing, staff recruitment, comprehensive support, and the opportunity
to gain qualifications and participate in ongoing development.

Reaching out
MAHLE ’s new HR campaign is particularly aimed at specialists

in electrical engineering, software engineering, and IT.

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Generating enthusiasm for
MAHLE — with a strong employer brandAs an employer, we want to position ourselves andour dual strategy purposefully on the job market
and get people excited about our company. In­addition to the target groups that have been our­focus until now — such as automotive and mechanical ­engineers — specialists in electrical engineering,
software engineering, and IT as well as those fromother fields of study are now increasingly gaining insignificance. These experts will help us to shape
our future in e-mobility and drive the technology­forward. This makes it all the more important that
we make these groups of people aware of our company. In our new, international personnel marketing
campaign, which we’ve developed in conjunction
with electrical engineers from various specialist
functions, we specifically approach experts in thefield of e-mobility and inform them about exciting
career opportunities.
As one of the key events aimed at addressing thistarget group, we organized an E-Mobility Nightin Stuttgart / Germany for the first time in 2018.
­Numerous electrical engineers and representatives

from the worlds of politics and science accepted
our invitation. They had the chance to find out more
about us and our activities in the field of e-mobility
in a relaxed, after-work atmosphere. The event also
provided an excellent opportunity for them to chatto our specialists and network.
The eTechathon at our location in Valencia / Spain
had a practical focus. At this competition for­up-and-coming electrical engineers, talented individuals based at our partner institution, Universitat
Politècnica de València, were able to prove their­expertise. This contest was a great opportunity
for us to get an idea of the participants’ specialist
qualifications and level of knowledge as well as achance to assess their creativity, problem-solving
skills, and ability to work in a team. The event was
initiated primarily as a consequence of our greatneed for highly qualified e-mobility specialists at our
expanded research and development center in­Valencia  /  Spain. In the future, around 250 engineers
and specialists in the fields of software development, control and power electronics, simulation,
validation, and electromagnetic compatibility (EMC)
will work here to develop new products and­solutions for sustainable mobility.

Interconnected
In the spring of 2018, MAHLE welcomed specialists fromfields including electrical engineering, software engineering,and IT to its first MAHLE E-Mobility Night.

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Attracting talent to
MAHLE — with a global HR, marketing,and recruitment concept
In line with the strategic direction of our business,
we’ve adapted our personnel marketing and­sourcing tools across the group and established a
global recruitment concept. The resulting harmonization and realignment of the Recruitment function
will allow us to identify the best candidates and attract them to our company. The new Recruitment
organization was introduced in Germany, Brazil, andthe USA during the year ­under review. A worldwide
rollout has now been planned.

Special highlights in terms of media engagement
include intensifying our work on LinkedIn for the­experienced professionals target group and thelaunch of our global Instagram account. Instagram
is a photography-based platform that is currently
used by over one billion people around the world.
This makes it the fastest-growing digital network andtherefore another important communication channel
for our target groups. Under @MAHLEcareers, we
provide authentic insights into our day-to-day work
to show the diversity of tasks and topics addressed
within our company.

Boosting skills for
MAHLE — with an extensive range

We’re making use of a wide range of opportunities
to draw attention to MAHLE among students andexperienced professionals in the e-mobility sector
through personnel marketing and sourcing instruments aimed at specific target groups. Whether byparticipating at career events, conducting global
media campaigns, or running talent retention­activities, our international colleagues used manyof these occasions to address talented people and­experienced specialists directly.
One of our personnel marketing instruments is, forexample, our global key universities concept. We
currently have a relationship with selected key­universities in 19 countries, at which we ensure aregular presence and dialog with professors and­selected students by means of guest lectures,­sponsorship activities, and cooperative measures.
As part of the MAHLE summer and winter 2018
Campus Tour, we visited the electrical engineering
faculties at our key universities in Germany to inform them about MAHLE as a potential employer
and to highlight career opportunities. In China, we­developed lecture series on the latest technologies
for students of mechanical engineering, automotive manufacturing, and thermodynamics in conjunction with Jiangsu University.
Our involvement in Formula Student, especiallyour cooperation in Formula Student Electric, is a­valuable personnel marketing instrument. Here,­students compete against teams from all over theworld in race cars they’ve designed and built themselves. MAHLE provides financial and technical­support to this initiative as well as offering training
activities. In the year under review, the 34 teams
we sponsored were very successful again.

MAHLE G r o u p
Annual Report 2018of training opportunities
We want to offer long-term prospects to passionate, motivated employees. That’s why we’ve
always ­focused on selected measures and instruments that support ongoing development andvocational ­training. Vocational training and cooperative studies have proven their worth at MAHLE andare highly valued. For us, a well-grounded apprenticeship is an ex­cellent opportunity to help future
generations of specialists gain the right qualifications and ensure our future requirements are met.
The apprenticeship system in Germany underwent
many changes in 2018. Topics related to digitalization, such as data security, online research, anddata networking, are now on the training schedule
for careers in metalworking, electrical engineering,and mechatronics. As a result, these appren­tice­ships are taking the digital transformation of
our sector into account. In 2018, we trained a totalof 478 employees in Germany. Of these trainees,
334 are employed in one of our 21 industrial orcommercial apprenticeship opportunities. One hundred and forty-four students are undertaking dualedu­cation in 12 courses of study. We’re also investing in initial vocational training in Europe andaround the world in order to prepare aspiring­specialists for their roles. In Austria, for example,
60 young people underwent an apprenticeshipin ten occupations, while 70 trainees completed
courses in Poland. In addition, 79 apprentices received training in seven professional fields in North
America, especially in Mexico.

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The ongoing personal and professional education of
our employees is also very important to us. Our
wide range of training options therefore covers over
300 subject areas, which are constantly reviewed
against current requirements. For example, thepresent catalog includes global opportunities in
the field of e-mobility as well as programs focusingon personal skills, such as self-management andresilience.
Our e-learning portal provides a particularly flexible
and convenient option for further training. It is­available to all our employees around the world andsupports independent learning using digital media.
With our Sales Online Academy, for instance, weoffer appropriate specialist training to our sales staff.
It contains a media library with short training videos,
which can be accessed as “learning nuggets” at
any time and from any location via our Learning@
MAHLE platform.
Another element of personal and professional­development at MAHLE is worldwide secondment.
We offer specialists, managers, trainees, and­s tudents the option to broaden their horizons,­exchange knowledge, and network with international colleagues at one of our locations outside
their home country. Foreign assignments are also
a key component of our International Trainee Program. We foster mobility and the establishment ofa global mind-set in order to continue to promote
the international transfer of know-how, cultural exchange, and the ability of our employees to cooperate around the world.
We give our managers a high level of support as partof their development and prepare them extensively
for their demanding roles. It’s important to us thatthey work closely together and prioritize the sustainable commercial success of the whole company intheir day-to-day work. We address the wide rangeof challenges in the various management levels ona national, regional, and global basis through development programs and leadership training. With thereorganization of our development programs as partof the strategic group initiative HR Boost!, we ran
the first Global Talent Circle in the year under review.
This is a worldwide initiative for the ongoing development of top executives and includes modules
in Brazil, China, and Germany. Region-specific­Regional Talent Circles and national Leadership­Development Programs also took place to further
support our managers. These measures contributetoward the ongoing development of the participants’60

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professional and personal skills, bolster the­ xpansion of cross-functional and internationale­networks, support interdepartmental dialog, andrepresent an important cornerstone of systematic
succession planning.

Supporting One MAHLE — withdiversity & inclusion
MAHLE has signed the Diversity Charter because
we’re convinced that diversity makes us more
­successful. We value our employees’ work — irrespective of characteristics like age, gender, religion,
sexual orientation, disability, nationality, and origin.
We celebrate our diversity on our annual Diversity
Day, held around the world. In 2018, the day ofevents at various locations in 15 countries — including China, Germany, Italy, Japan, Poland, Portugal,
Hungary, and the USA — focused on the topics
of gender diversity and generational diversity. In
workshops, discussions, and hands-on activities,
employees had opportunities to find out information,
participate, and exchange ideas.

To highlight how diverse our company already is, welaunched our global Role Model campaign. This
­initiative draws attention to a wide range of examples of diversity in practice at MAHLE. In 2018, we
also implemented a series of different activities tosupport women worldwide. In Argentina, Brazil,­G ermany, Japan, and Slovenia, local Female
Leader­ship Conferences took place for the first time.
They were addressed at all female managers withthe aim of raising the visibility of women in managerial positions, promoting networking among theattendees, and boosting the exchange of ideas. For
example, MAHLE in Great Britain organized an­International Women in Engineering Day event at its
locations in Rugby and Kilmarnock. International
Women’s Day was also celebrated with our­colleagues around the world. In this way, more thanten countries engaged with the topic of Women at
MAHLE through numerous activities.
Diversity is also closely linked to the subject of­ exibility. As an attractive employer, we want tofl­promote employee-friendly working conditions forour staff. These include flexible working hours aswell as options for mobile and part-time work, which
are features of our personnel policy in many
­countries. Above and beyond these parameters, weoffer our employees numerous options and offers
intended to support work–life balance as part of
the MAHLE forMe program. These range from a

MAHLE Group
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­laundry service, health promotion schemes, andsupport in caring for elderly relatives through childcare provision and company sports initiatives.
The family days in Rottweil / Germany, Šempeter
pri Gorici / Slovenia, and Gebze / Turkey are good
­examples of this approach. In the year under review,
these occasions once again gave the families ofmany employees the opportunity to see our locations for themselves and enjoy an exciting programof social events.

Our colleagues in Poland showed that MAHLEforMe
not only benefits our workforce, but can also be tiedin with charitable causes. The three locations at­Ostrów Wielkopolski, Krotoszyn, and Wrocław competed against each other in sports such as running,
cycling, and walking. The 90,000 kilometers covered in the events were converted to a sum ofmoney that was donated to charity. Thanks to thiswide range of activities, initiatives, and changes toour HR activities, we’re also strengthening the bond
between our employees and the company. By doing so, we aim to contribute to the well-being of
employees at MAHLE and provide them with aworking environment in which they’re happy to give
their best.

Supporting One MAHLE
On Diversity Day, employees from MAHLE locationsin 15 countries had the opportunity to get involved in workshops
and discussions and to exchange ideas.

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61Corporate Social
Responsibility
As a company that operates internationally, we accept our
responsibilities—toward the people who work for us andas part of society. At MAHLE , corporate activities and social
engagement go hand in hand. With our resource-efficienttechnologies, our sustainable product solutions, and our modern
production processes, we are helping to steadily reduce
the pressure on people and the environment. And we wantto keep on improving every day.

Responsibility toward employees
and the environment

Sustainability managementat MAHLE

We believe that one of our most important tasks­is to harmonize our corporate success with thewell-being of people and the environment. Consequently, we always aim to incorporate the environmental and social considerations alongside the economic factors in our decision-making.

What does MAHLE mean by the term “sustainability”? Sustainability means that we take the ecological and social considerations into account alongside the economic factors when making our decisions. The task of sustainability management istherefore to analyze and, where possible, reduce
any negative impacts arising from our business activities.

We accept our responsibilities and work to ensure
the well-being of our employees. To achieve this, weneed safe workplaces that do not pose a risk to thehealth of our staff. We also aim to conserve water
resources, reduce emissions and energy consumption, and minimize the negative impact of our business activities on the environment wherever possible.

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In addition to a high level of quality as well as innovative products, our customers also increasingly require us to make a clear contribution toward sustainable development. In practical terms, this means
using fair business practices, complying with social
standards, and actively protecting the environment.
We also place these requirements on our suppliers.
MAHLE applies internationally recognized standards that are typical for our industry, for example
in the design of our management systems with regard to the environment and safety at work.

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As a globally operating group, we are aware of ourcorporate responsibility toward the environment andthe people around us. This is why in February 2018
we created the Sustainability central position, whichis coordinating the subject and driving it forwardwith the relevant business areas in the company. In
the future, the topic of sustainability will be integrated even more strongly into MAHLE’s businessprocesses, including regular reporting about ourprogress.

We tackle the subject of safety at work proactively
across the group and raise awareness among our
employees and managers. The key performance indicator (KPI) is the accident rate, which is used torecord accidents involving at least one day of absence. Our objective is to decrease the accident
rate across the group to fewer than five accidents
per million hours worked by 2022.

Focusing on safety at work

In the business year under review, our figure for accidents per million hours worked fell significantly forthe second year running. Our accident rate for 2018thus fell to 5.7 percent, which was 16 percent lower
than in 2017.

Accident numbers continue to fall

In the 2018 business year, safety at work was a matter of priority for our activities in the field of health,safety, and environmental protection (HSE). We act
within the framework of our HSE guideline, andonce the new ISO 45001 standard is adopted, we
will gradually implement it at our locations and arrange for them to be certified accordingly.

Safe
Safety at work was a matter of priority for MAHLE ’s activities in thefield of health, safety, and environmental protection (HSE) in 2018.
This also included ensuring suitable protective equipment is worn whenentering production areas (pictured here: our plant in Jaguariúna / Brazil).

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Safety at work
as a managerial priority

Energy management as a key component of environmental management

In 2018, we developed and rolled out a training program on the subject of safety at work. It is initiallyaimed at our managers and raises their awarenessof safety at the workplace by means of practicalcase studies covering subjects such as how to recognize, evaluate, monitor, and minimize occupational risks. At a later date, we will also communicate our safety at work initiative to our other employees.

As a producing company, the energy consumption
at MAHLE’s locations is a pivotal aspect of its­impact on the environment. Smelting, casting, andplastics processing operations, such as injection
molding and deformation, are among the particularly energy-intensive production processes a­t
MAHLE. In 2019, our goal is to reduce our energy
intensity — energy consumption as measured
against sales—by 2 percent with the same production structure.

Safety initiatives at numerous
MAHLE locations
All of our locations actively drive forward safety atwork. In recent years, for example, our plant in Izmir /Turkey has been carrying out a project under scientific supervision to reduce ergonomic risks (e. g.,musculoskeletal overload) for our employees at theirworkplaces. As a result, there has been a significant
reduction in injuries caused by poor ergonomic conditions. The measures have caused absences at thislocation to drop substantially.
In Asia, we received several prestigious awards forsafety at work in our plants in 2018, including the
Cup of Safety & Health prize for outstanding companies for our thermal management plant in Wuhan/
China. MAHLE was one of 795 companies to receive
this award following stiff competition from 62,000
participants throughout China. To encourage ourplants in their efforts with regard to safety at work,
MAHLE has awarded the Safety Excellence Awardto outstanding plants since 2017. In 2018, the prize
went to our filter plant in Mogi Guaçu/Brazil, where
employees and managers were actively involved inour global safety initiative under the motto Safety
First and safe behavior was specifically recognized.
Together with other projects in this area, this meantthat there were no occupational accidents at all in
Mogi Guaçu in 2018.

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Energy-saving concepts worldwide
Our plant in McConnelsville / USA is a model for just
how much energy can be saved through systematic
reduction activities. By implementing various measures, we have cut on-site electricity consumption
by around 13.5 percent in five years, which is theequivalent of a CO2 saving of around 3,300 tons.
The steps taken to achieve this included the installation of an automated shut-off system for the radialfans located on the cooling section of the strip annealing line. The plant has also set up a function toremotely monitor and control production machinery,enabling the energy-efficient operation of several
furnaces thanks to programmed temperature reduction during idle times. Our location received the Energy Efficiency Champion Award of the electricity
supplier AEP Ohio for this successful energy-saving
program.
Other MAHLE locations are also implementing energy-saving measures. For example, our plants in La
Loggia/Italy and Izmir/Turkey optimized their furnaces. In Izmir alone, this has resulted in an annual
saving of 747,000 kWh of natural gas, corresponding to a reduction of 22 percent. By gradually changing our plant lighting over to energy-saving LEDs, weare making annual savings of around 360,000 kWhof electricity in our plants in Mühlacker/Germany
and Numazu/Japan, to take just two examples. The
Thermal Management business unit is also saving
more than 200,000 m3 of natural gas each year at its
location in Stuttgart/Germany through steps that include the optimization of its heating concept andthe renovation of its combined cycle power plant.

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Annual Report 2018

Award winners
The exemplary energy-saving concept implemented by ourcolleagues in McConnelsville / USA cut electricity consumption at
the location by 13.5 percent—and earned them an award.

Reduced resource consumption

TERRA environmental program

All our locations around the world continuously
strive to further reduce waste volumes and water
consumption. These efforts are based on our environmental management system, which is certified
in accordance with the international standards
ISO 14001 and EMAS. In order to conserve valuable
resources, MAHLE has resolved to cut the volume
of waste it produces by 10 percent by 2022.

The TERRA program at our locations in SouthAmerica is a cross-functional, interdisciplinary initiative aimed at further improving our environmentalbalance sheet. Measured against production quantity, our target is a reduction of 2 percent in energy
and water as well as drop-off and wastewater(starting from 2016). By making adjustments to the
production machinery and training the operatingteams, w­ e have thus been able to reduce iron andsteel production scrap by around 8 percent in ourplant in Itajubá / Brazil, according to initial assessments. With the same approach at our production
location in Mogi Guaçu/Brazil, we even succeededin reducing plastic production waste by an averageof 80 percent.

At our piston plant in Tsuruoka /Japan, we collectthe cooling water arising during production and­reuse it in further processing. This has allowed us
to cut water consumption here by 30 percent(21,600 m3).

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ExcitingIn the annual Summer Click program organized by MAHLE
in Portugal, our employees’ children aged between 13 and 17 can enjoy
a range of activities—including a short internship in our company.

Social engagement
At MAHLE, engagement with society and social responsibility are important pillars of our corporate
culture. For this reason, the MAHLE Group and its
employees in many countries support numerous
projects and initiatives. Our engagement is primarily
focused on issues such as social interaction, education, and the fight against poverty and disease.
The driving force behind these efforts is our workforce, with our employees also acting on behalf ofothers outside of working hours. The ways in which
we offer assistance are as diverse as the projects
themselves: MAHLE has supported some initiatives
and institutions consistently for many years,
whereas other projects help to address acute problems through concerted one-off campaigns on the
ground.

Helping the needy at many
MAHLE locations
Bringing joy by making wishes come true for people
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world. For example, colleagues at our Polish locations take part annually in the Noble Gift (Szlachetna
Paczka) charity campaign, one of the largest andmost well-known fund-raising programs in Poland.
People in need are given furniture, food, clothing,­
or even medical equipment. While our company
funded such a gift once again last year, our employees themselves provided even greater support. Alsoin Poland, near the location in Ostrów Wielkopolski,
our colleagues support a children’s home and havedonated sports and leisure equipment for two recreational rooms.
Social engagement is also a top priority in GreatBritain. The Warwick Rotary Club's annual dragonboat race on the River Avon has become a highlight.
University graduates take part in this special race
during their first year at MAHLE UK. The 2018 team
had the task of recruiting rowers from all over thecompany and collecting charitable donations for a
local hospice as well as a children's hospital. Our
team named MAHLELICIOUS also won all threeraces and successfully raised GBP 777 for charity.

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In August 2018, our MAHLE plant in Wölfersheim/
Germany was one of the hosts of the Tour der Hoffnung (tour of hope). Germany’s largest privately organized charity cycle tour stopped at our location,
where the approximately 200 participants received
refreshments and a donation of EUR 7,500. Wellknown personalities from the worlds of politics,
business, and society ride in the Tour der Hoffnung
and collect donations for children suffering from leukemia and other types of cancer.
Eighteen colleagues from our Hwaseong location inSouth Korea provided special neighborly assistancein July 2018. They ran leisure activities that included
singing, dancing, and smile therapy for around 20
elderly people at a nearby senior center, giving theresidents of the home a welcome change from theeveryday routine.
In Brazil, we supported the Dança e Cidadania(dance and citizenship) program to give free dance
lessons to roughly 350 children and young people
from low-income families in Campinas, Mogi Guaçu,
Sumaré, and Itajubá. In their shows, the young
dancers impressed 3,500 people with their skills.
MAHLE has supported the project since 2002 andis its biggest sponsor.

Supporting our employees’ families
MAHLE is focused on supporting the families of its
employees. For example, every year MAHLE Portu-

gal organizes the Summer Click program, in order
to offer our employees’ children an exciting and instructive occupation during the holiday season.
Youngsters between 13 and 17 years old can complete a short internship in the company, which willcertainly help to better prepare them for their future
careers.

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Commitment to education
MAHLE also invests in the education of children andyoung people beyond the families of its employees
to equip them for the professional challenges of the
future.

The MAHLE location in Gaildorf/Germany has been
cooperating with two kindergartens since 2010. The
Technolino program is addressed at the very youngest children and, through various small projects, encourages them to research, investigate, and try
things out—and thereby discover science and technology in a fun way.
In North America too, MAHLE is supporting the education of high school pupils to boost their interestin scientific and technical careers in particular. In
2018, our US plants in Morristown, Troy, Lockport,
and Farmington Hills as well as our plant in Tilbury/
Canada took part in various robotics programs at
local schools. Supported by mentors from MAHLE’s
workforce, 110 pupils in senior high school designed and built working robots in teams, while also
solving everyday engineering challenges under budgetary and time constraints.
And that is not all. MAHLE employees at our worldwide locations show a high degree of social engagement with their voluntary participation in many more
initiatives. The charitable projects, donations, andfund-raising campaigns are often instigated andcarried out on their own initiative.
The MAHLE Management Board would like to thankall the dedicated helpers for this outstanding commitment.

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By people for people —the work of the
MAHLE Foundation
Whether seed research funding, the work carried out by the­F ilderklinik in Stuttgart or the children’s cancer center at the­C harité in Berlin, or adult education projects — in 2018, the MAHLE
Foundation supported around 160 projects and initiatives, opening
up new prospects for people in various different ways.

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In 2018, the nonprofit MAHLE Foun­dation received more than 480 requests
for support. Around 225 applications
were officially submitted and discussed
in the foundation’s committees.
The MAHLE Foundation supported
160 projects and initiatives in
the abovementioned categories.

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A guarantee
of independence

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MAHLE Foundation

The MAHLE Foundation holds 99.9 percent of the MAHLE Group’s shares.
Every year, it receives a dividend, which it uses to finance its funding pro­jects. The nonprofit organization thereby guarantees that MAHLE is able
to remain an independent company. This ensures that the majority of thegroup’s net income for the year is reinvested in the MAHLE Group MABEG e. V.
(Verein zur Förder­ung und Beratung der MAHLE Gruppe e. V.) exercises thevoting rights at MAHLE GmbH shareholder meetings. Since its inception over
50 years ago, the MAHLE Foundation has supported and sponsored morethan 5,000 different projects and initiatives.

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Health and nursing care
In 2018, the MAHLE Foundation supported the workof the Department of Pediatrics, Division of­Oncology and Hematology, at the Charité hospitalin Berlin. As one of Germany’s largest centers forchildhood cancer, the clinic covers the entire rangeof medical services. Pediatric care is becoming increasingly open to integrative medicine — alternative
treatments that complement conventional medicine.
For example, the pediatric oncology team has­developed an anthroposophic care and therapy
concept that is in its pilot stage and will be integrated into the clinic’s conventional nursing practice.
The approach includes training nursing staff in anthroposophic therapies and remedies. This care andtherapy concept aims to enhance the effect of medical treatments and thus significantly improve thewell-being of the young patients.
The Filderklinik GmbH — in which the MAHLE­Foundation is a 70 percent shareholder — continued
to be a priority for the organization’s funding­activities in the field of health and nursing care in

the year under review, 2018. The medical institution
has been active in the area of integrative, anthro­posophical medicine for over 40 years and is now
one of the lighthouse projects for this system insouthern Germany. The foundation’s main focus thisyear has been on supporting the strategic development and reorganization of the Filderklinik. One of
the key points of this process is, for example, to define future treatment priorities. “I’m delighted thatsuch good progress has been made toward implementing the ‘Filderklinik 2020’ strategy,” says
­Jürgen Schweiß-Ertl, managing partner of the
MAHLE Foundation. “The Kompetenznetzwerk­Integrative Medizin is also shaping up well.” The
network, which was founded by the Filderklinik andnine other clinics in 2017, is unique in Germany. Its
members work on the ongoing development of theintegrative medicine concept. Under this integrative
approach, natural healing methods, homeopathy,
and anthroposophical medicine are not viewed­primarily as an alternative to conventional medicine,
but they are instead combined with it to a high­standard.

Lighthouse project
The Filderklinik in Stuttgart / Germany has been active in thearea of integrative, anthroposophical medicine for over 40 years
and has earned itself an outstanding reputation.

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Diversity
The MAHLE Foundation supports the Forschung & Züchtung
Dottenfelderhof (Dottenfelderhof Research and Breeding) initiative,
which cultivates high-quality, mixed-population varieties of grainsthat are adapted to today’s environmental conditions.

Agriculture and food“Agriculture and food” has been one of the foundation’s funding priorities for decades, with a particular commitment to promoting biodynamic farming.
This includes seed breeding, especially the cultivation of varieties adapted to their respective growing­regions. “We continued to support certain research
projects in the field in 2018,” says Jürgen Schweiß-­Ertl.
For example, the Forschung & Züchtung Dotten­
felderhof (Dottenfelderhof Research and Breeding,
FZD) initiative has for many years been cultivating
delicious and healthy vegetables and cereal cropsthat are adapted to today’s environmental conditions. In one new approach, mixed-population­varieties of high-quality grains are grown alongsideisolated varieties. They are cultivated to be resistant to pests and weeds even without the use ofpesticides, synthetic fertilizers, or genetic engineering. The initiative also uses breeding methods thathave been handed down for centuries: selection
and crossing. By doing so, the FZD preserves and­exploits the genetic variety of cultivated plants.
Through its research, it is making a major contribution to maintaining the diversity, health, high quality,and productivity of cultivated plants in the future and70

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with a healthy and varied diet.

Education and upbringing
In 2019, the Waldorf educational philosophy celebrates its 100th anniversary, yet its approach is now
more topical than ever and its concerns relate to­future issues. The MAHLE Foundation is involved atmany levels. For instance, the foundation supports
the Emergency Pedagogy unit of the Freunde derErziehungskunst Rudolf Steiners e. V. (Friends of
Waldorf Education), based in Karlsruhe / Germany,
which carries out important work for people suffering from the effects of trauma. On the basis of its
many years of experience in the field, the unit hasdeveloped a Waldorf-derived concept of emergency
and trauma pedagogy that has proved its worth invarious contexts — whether international missions in
war zones and disaster-struck regions or work withtraumatized refugees.
The Lern-Praxis-Werkstatt (LPW) project in Weinheim, located in the Bergstraße region of Germany,
is committed to opening up new horizons for­people — including refugees — who don’t have any
professional qualifications. The LPW offers adults
who are unable to meet the requirements for an

MAHLE Group
Annual Report 2018

apprentice­ship or conventional vocational trainingan ­easier way to access education. In a workshop
provided by the project partners, a social education
worker and an occupational trainer teach basic­professional and technical skills, such as how to
use tools. Competences like reliability, motivation,
precision work, and the ability to work in a team arealso part of the teaching. The LPW thus facilitates
the shift from feeling helpless and hopeless to successfully accessing schooling, vocational training,or measures organized by the job center.
The MAHLE Foundation can also look back on avery successful lecture series, which it initiated incooperation with StadtPalais — Museum of Stuttgart
and Stuttgart’s cultural office. They organized seveninteresting talks by renowned figures from the fields
of culture, science, and religion, entitled “How webecame who we are — in the footsteps of our poets
and thinkers.” Originally planned as a short seriesof educational lectures, the event has evolved intoa crowd-puller, with around 2,000 visitors attending
the talks in Stuttgart’s StadtPalais so far. “We’ve
been pleasantly surprised by the public response
and the event’s success,” says Jürgen Schweiß-Ertl.
The MAHLE Foundation is already planning anotherseries for this year, focusing on the theme of inventors and innovators from Baden-Württemberg, theGerman federal state in which MAHLE is headquartered.

Art and culture
In terms of art and culture, the MAHLE Foundation
has funded a variety of initiatives in theater, music,
and eurythmy. One such activity is the Stuttgart-­
based Konzerte für Schulklassen project, whichteaches music to pupils aged six to eleven in stateschools using methods from the Waldorf educational philosophy. Waldorf educator Thomas Sträßer
visits the classes, which often include a high proportion of children from an immigrant background,and prepares them for a concert. The class is thenoffered the chance to participate in a concert in thecity’s instrument museum, where they can also findout about musical instruments that their school
doesn’t own. The subject is introduced using ­stories,
and pieces are chosen to suit each individual class.
In recent years, over 7,000 schoolchildren havebeen reached this way. The demand is very high,and between 30 and 40 concerts are plannedfor 2019.

Opportunities
The Lern-Praxis-Werkstatt (LPW) project offers people who
don’t have any professional qualifications an easier way to accesseducation, giving them new prospects.

MAHLE G r o u p
Annual Report 2018

Responsibility
MAHLE Foundation

71

CHAPTER

Group
management
report72 – 97

72

Group management report
Con t en t s

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

74 –77

G R O U P M A N AG EM EN T
R EP O RT

 Fund a menta l information a bout the MAHLE Group
Business activities and corporate structure – 74
Business segments – 75
Group strategy – 76

Repor t on economic position78 – 86

Economic conditions – 78
Business development – 80
Net assets, financial position, and results of operations – 83

Additiona l key per forma nce indic ator s

87– 91

Human resources – 87
Technology and innovation – 89
Purchasing – 90
Production, quality, and environment – 90

O ppor tunit y a nd r isk r epor t
O utlook

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

92– 9495 – 97

Group management report
Co n t e n t s73As one of the world’s
largest suppliers anddevelopment partners to theautomotive industry,
MAHLE strives to maketrans­portation more
efficient, more environ­mentally friendly,
and more comfortable.

We are among
the market leaders in ourbusiness segments.

Faced with a changing
mobility landscape, we arefocusing on a dual strategy.
This involves optimizations
to the combustion engine
as well as innovations
in alternative powertraintechnologies.

Fundamental information
about the MAHLE Group
BUSINESS ACTIVITIES ANDCORPORATE STRUCTURE
MAHLE has a global presence — as a leading international development partner and supplier to the automotive industry andas a technology pioneer for the mobility of the future. We arecommitted to making transportation more efficient, more environmentally friendly, and more comfortable. That is why we arecontinuing to optimize the combustion engine, drive forward theuse of alternative fuels, and lay the foundations for the widespread acceptance and worldwide introduction of e-mobility.

On the basis of a broad systems competence, our product portfolio consisting of engine systems and components, filtration,and thermal management addresses all the crucial issues relating to the powertrain and air conditioning technology. In addition,
our expertise in electric and electronic components and systems
enables us to offer integrated systems solutions for e-mobility.
MAHLE products are fitted in millions of passenger cars andcommercial vehicles. And that is not all: for decades, our components and systems have also been used on racetracks andoff the road — in stationary applications as well as for mobile
machinery, rail transport, and marine applications.

Our group consists of four business units: Engine Systems andComponents, Filtration and Engine Peripherals, Thermal Management, and Aftermarket. Added to this are the Mechatronics
division and five profit centers, which serve specific market andcustomer segments.

74

Group management report
F u n damen t al in fo rmat ion ab out the M AH LE Group

MAHLE is represented on five continents. We recognized theadvantages of the opportunities presented by globalization at
an early stage and enhanced our product portfolio by strate­
gically founding and acquiring new business activities. Today,
we operate around 160 production locations and 16 major research and development centers around the world, employing
just under 80,000 people overall.

The nonprofit MAHLE Foundation controls 99.9 percent of thecompany’s shares; 0.1 percent of the shares are held by Verein
zur Förderung und Beratung der MAHLE Gruppe e. V. (MABEG),
which also holds the voting rights and thus exercises theshareholder rights. This structure ensures our entrepreneurial
independence and allows us to make long-term plans andfuture-­oriented investment decisions.

OWNERSHIP STRUCTURE OF THE MAHLE GROUP
MABEG

MA HLESTIF TUNG GM BH

Company sharesCompany shares

Voting rights

Voting rights

No profit-participationrights

Receives dividends to finance
MAHLE Foundation projects

Verein zur Förderung und
Beratung der MAHLE Gruppe e. V.

0.1%

100 %

99.9 %
0%

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

MAHLE GROUP
Sales: EUR 12,581 million
Headcount: 79,564

BUSINESS UNITSDIVISIONPROFIT CENTERS
Engineering ­S ervices,
Motorsports, andSpecial Applications

Engine Systems
and Components

Filtration andEngine Peripherals

ThermalManagement

Large and Small
Engine Components
Aftermarket

Mechatronics
Industrial ThermalManagement
Compressors
Control Units

Sales: EUR 2,781 million
Headcount: 28,112

Sales: EUR 2,256 million
Headcount: 10,953

Sales: EUR 4,629 million
Headcount: 23,874

Sales: EUR 928 million
Headcount: 1,713

Sales: EUR 453 million
Headcount: 4,303

Sales: EUR 1,534 million
Headcount: 10,609

As at December 31, 2018

A core management tool for our group is our operating result —a key figure similar to EBIT. The main differences compared with
EBIT lie in the amortization of goodwill, the depreciation andamortization of hidden reserves, which are disclosed in purchase price allocations, and in the treatment of income from thesale of business activities.

BUSINESS SEGMENTS
Engine Systems and Components
business unit
Not only is the Engine Systems and Components business unit
one of the mainstays of our business, it also represents one of
MAHLE’s core fields of expertise. We have decades of development and systems competence in this area, are the world market leader in many segments, and enjoy a global presence withproduction locations for engine systems and components
around the world. Our range of products includes steel and aluminum pistons, piston rings, cylinder liners, and bearings as wellas valve train systems and components, which are used aroundthe globe in passenger cars, commercial vehicles, large engines,
and two-wheeled vehicles. We are continuously developing thisportfolio, paying particular attention to reducing emissions andenergy consumption in combustion engines.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Filtration and Engine Peripherals
business unit
We manufacture filter systems as well as components for theengine periphery and are among the world market leaders in thisbusiness segment. Our products improve air cleanliness andprevent contaminants in oil and fuel from damaging the engine,
thus increasing its efficiency and service life. In recent years, wehave worked in close cooperation with our customers to develop
modular systems for all the major product groups, because theproduct environment can vary significantly, even in identicalbasic engines. We have also taken another step forward withcomponents made of special plastics, which were previously
manufactured from metal. These are characterized by the highlevel of integration of functions that represent direct added value
for customers. For example, we are developing all-plastic oil
filter modules, which fully integrate the oil pump and oil coolingtechnology and are used in powertrains for electric vehicles.

Thermal Management business unit
Our products and ideas for the future are making a decisive contribution to the successful electrification of the powertrain. Only
our innovative products from the field of thermal management
for batteries, fuel cells, power electronics, and electric drives
make extended cruising ranges, high levels of efficiency, andlong service lives possible and are thereby playing a significant
role in shaping the shift toward zero-emission powertrains. Thermal management is also becoming more and more important in
the ongoing development of the combustion engine. For instance, our increasingly effective and efficient cooling systems
are making a substantial contribution toward reducing fuel consumption. Our air conditioning innovations are enabling newGroup management report
F u n da m e n ta l in f or m a tion a bou t th e MA HL E G ro u p

75

design concepts for interiors and helping to provide a high degree of thermal comfort in vehicles. In combination withhigh-performance mechanical and electric compressors andelectric auxiliary heaters, we are making crucial improvements
to consumption and range in the overall vehicle air conditioning
system. We are the world’s second largest supplier in the thermal management sector.

Aftermarket business unit
The Aftermarket business unit supplies a broad range of products and services in original equipment quality to the trade andto automotive workshops around the world. In addition to standard MAHLE spare parts, such as engine components, filters,
turbochargers, and mechatronics components, we are increasingly offering products for thermal management such as thermostats and air conditioning compressors. Vehicle diagnostics,
exhaust gas analyzers, and service equipment for maintaining
HVAC modules and automatic transmissions complete the product portfolio, which is supplemented by a wide range of services,
including technical support via our global network, customer
training, and service information. In view of the diversity of­today’s vehicle technologies in the fleet, innovative and solution-­oriented support is key to our business partners’ success. That
is why we work every day to expand our competences, services,and product areas. At the same time, MAHLE stands out thanks
to its adaptive product management, fast and reliable logistics
processes, strong brands, and competitive pricing. We are thus
able to offer our customers individual repair solutions and improve workshop efficiency — thereby increasing customer satisfaction.

Mechatronics division
Not only are electric passenger cars and commercial vehicles
gaining in importance, but so is lightweight, urban e-mobility.
This requires modular systems comprising highly efficient electric motors and the associated electronic control units. With thisin mind, we expanded our Mechatronics division in 2018 to include the Pedelec Drive Systems product group and introduced
new products and systems for battery-powered electric vehicles
and fuel cell vehicles. These activities are founded on our expertise in the development and manufacture of electric motors andelectronic and mechatronic systems. Although these technologies are used in a wide range of applications, they are technicallyclosely related. As a result, we — and therefore our customers — can benefit from even greater economies of scale and synergy effects.

Profit centers
Five business fields are organized as profit centers, which serve
specific market and customer segments. Specifically, these are:Engineering Services, Motorsports, and Special Applications;
Large and Small Engine Components; Industrial Thermal Management; Compressors; and Control Units. With this structure,
we offer our customers a high degree of flexibility as well as
tailor-­made applications and components, thereby supportingthem in the development of specific new products. In the year
under review, we sold our shares in the joint venture Hella Behr
Plastic Omnium (HBPO), which had been run as the Front-end
Modules profit center.

76

Group management report
F u n damen t al in fo rmat ion ab out the M AH LE Group

GROUP STRATEGY
Our group strategy is based on the analysis of relevant megatrends from which we have derived various future scenarios.
Four of these megatrends are having a particularly powerful impact on the automotive industry:—  Climate change (including the resulting politicalclimate targets)—  Increasing urbanization—  Global population growth—  The increasing importance of Asia
as an economic region
These megatrends call for new mobility solutions and present
the automotive industry with new challenges. In addition to the
expansion of car-sharing options and public transport, the increasing electrification of the powertrain, the growth in digital
networking of vehicles, and autonomous driving are taking center stage. But it is not just on the roads where digitalization isplaying an ever greater role — it is also becoming increasingly
important for our internal company processes, through subjects
such as Industry 4.0 and big data or even process automation.
And these megatrends are also changing our customer landscape as a whole through, for example, the emergence of new
suppliers of electric vehicles or of new digital business models.
How quickly this structural change will take place depends, on
the one hand, on which technical solutions will hold their groundin the market and, on the other, on ever-increasing politicaldemands. For passenger cars and light commercial vehicles inurban distribution transport, technologies such as hybrid andelectric drives will continue to gain further relevance alongside
alternative usage models such as car sharing. The combustion
engine will remain vitally important to heavy-duty commercial
vehicles in the short and medium term, but alternative drive
types such as the fuel cell are also becoming more importantand complementing existing technologies.
Overall, we expect the combustion engine to remain a central
feature of mobility both for passenger cars and for commercial
vehicles. In view of the worldwide increase in vehicle production
and the fact that combustion engines are also used in hybrid
vehicles, we anticipate that the demand for corresponding components and systems will initially continue to grow.
MAHLE has derived a dual strategy on the basis of theseassumptions and findings:
1. We will continue to be a technology leader in the ongoingdevelopment of the combustion engine and ensure the highest possible level of competitiveness in terms of quality andcosts. In the process, we will especially concentrate on
unlocking further CO2 savings potential with regard to friction, thermal management, and the air pathway. By doing
so, we are offering our customers solutions that comply
with current and future legislation and make a significant
contribution to reducing emissions.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

DUAL STRATEGYSHAPE THE F
A CHANGING MO UTUR
BIL
E
ITY INWO
R

EXISTINGOUREN OSITIONHTPNG KETRE AR
TMS

HIGHLY EFFICIENTCOMBUSTION ENGINESELECTRICAUXILIARIESEMERGING
MARKETSAFTERMARKETTHERMAL MANAGEMENTPOWERTRAIN

COMMERCIAL ­V EHICLES& OFF-HIGHWAY

THERMAL ­M ANAGEMENT
CABIN

2. At the same time, we will push ahead with the developmentof innovative solutions and products for alternative powertrain technologies and expand the appropriate businesssegments. Business segments that are independent of theOEM business for the passenger car combustion engine aretoday already accounting for more than 50 percent of groupsales — and we intend to consistently increase this share.
Our dual strategy is also reflected in our thermal management
activities. Overall, the importance of efficient thermal management will continue to grow — both in conventional and in alternative drive systems. Over the years, we have specifically
expanded this business segment, developing many thermalsoaking innovations — both for the interior and for the powertrain,including the battery — and launching them on the market. We
will continue to pursue this innovative approach resolutely.
We will substantially intensify our activities in electronics andmechatronics over the years ahead. By doing so, we plan toexpand our extensive competence in electronics with the aim ofsupplying our customers with even better systems solutions forelectric vehicles with regard to thermal management as well as
the powertrain. System-based solutions like this are preferredby our customers, especially those in Asia. Furthermore, we
intend to expand our portfolio of electric motors both for passenger cars and for two-wheeled vehicles, which are gaining
ever-greater importance in urban mobility around the world.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

LD

ELECTRIC DRIVESYSTEMSNEW BUSINESSFIELDS/START-UPS

POWER
ELECTRONICS

Overall, we are pursuing a holistic approach in terms of the optimization of the combustion engine and the development ofsolutions for alternative powertrain technologies. It is not theelectric motor alone that determines efficiency in an electricvehicle, but instead the interplay of various technologies. Thisis demonstrated by the example of MEET (MAHLE EfficientElectric Transport), our vehicle concept for future urban mobility.
Commercial vehicles also benefit from the combination of various technologies. For example, a combustion engine’s entire
system can be operated even more efficiently by using systems
designed to recover heat from exhaust gases.
Against the background of our dual strategy, we constantly
review our portfolio as well as the strategic direction and economic performance of the group. One of our strategic goals is
to evenly distribute sales across our core markets of Europe,
North and South America, and Asia / Pacific — with a particularfocus on the Asian growth market. We consider our global presence to be an important prerequisite for proximity to our customers and for developing innovations in line with the demandsof the individual markets.

Group management report
F u n da m e n ta l in f or m a tion a bou t th e MA HL E G ro u p

77We achieved a significant
organic increase in sales,
which, with a rise of
4.4 percent, grew much
faster than the market.

Due in part to positive
special effects, we achieved
considerable growth in
the result from businessactivities to EUR 614 million.

As a result, we improved
our equity ratio byover 4 percentage points
to 36 percent.

Report on economic position
ECONOMIC CONDITIONS
Overall economic development
According to the January report by the International Monetary
Fund (IMF), the rate of growth in the global economy of 3.7 percent in the 2018 business year was unchanged in comparison
with the previous year. However, the risks to the economy increased in the course of the year — the economic outlook wasdampened in particular by differences in trade policy, geopolitical tensions, and stricter financing conditions. Nevertheless, theupturn in the advanced economies continued at 2.3 percent,even though growth in some economic areas — such as in theeuro zone and Great Britain — weakened more than expected.
The very positive development in the emerging markets and developing economies continued with growth of 4.6 percent.
At 1.8 percent, economic growth in the euro zone was belowthat of the previous year, although strong demand, the upturn inthe job market, and loose monetary policy favored economic
development. On the other hand, the slowdown in export growth
had a negative effect. The national economies of Germany andFrance in particular grew less strongly than in the previous year.
It was a different story in the USA, where — at 2.9 percent — theeconomy expanded more vigorously than in 2017, thanks to tax
cuts and higher private consumer spending. Economic recovery
in Brazil underwent a slight acceleration with an increase of
1.3 percent.
In the Asia / Pacific region, growth in the Chinese national economy of 6.6 percent was still strong, but more restrained than inprevious years. Tensions over trade policy and protectionist tariffs put the country’s economy under strain — especially toward
the end of the year. At 0.9 percent, Japanese economic development was significantly lower than the growth of the previous
year, despite rising domestic demand.

78

Group management report
R eport on eco n o mic position

Exchange rate development
The MAHLE Group operates internationally and therefore alsotransacts business in foreign currencies. Exchange rate movements are thus of central importance as they influence the conversion of financial data for accounting purposes.
In the 2018 business year, exchange rate development wasmarked by the devaluation of key trading currencies relevant toour business against the euro, as measured by the average market price (direct quotation) compared with the previous year. For
example, the annual average exchange rates of the Argentine
peso (– 57 percent), Turkish lira (– 27 percent), and Brazilian real(– 16 percent) slumped sharply. The US dollar (– 4 percent) andthe Chinese renminbi (– 2 percent) also devalued against theeuro on average over the year.
MAHLE counters the risks associated with exchange rate fluctuations with a process known as natural hedging. In this way,
our strategy — of operating production locations in all major sales
regions around the world — aims to make the group less susceptible to currency turbulence and exchange rate fluctuations.

Development of the markets for passenger
cars and light commercial vehicles
Following the growth of the past few years, which has been
substantial in some cases, global production of passenger cars
and light commercial vehicles declined slightly in the year underreview.
The development in Europe fell short of expectations. Difficulties
in obtaining certification to Worldwide harmonized Light duty
Test Procedure (WLTP) standard as well as subdued demand inGreat Britain as a consequence of the Brexit negotiations led toa drop in vehicle registrations in western Europe. Added to thiswas a significant slump in the Turkish market. By contrast, therecovery in Russia continued and partially offset the decline inother European markets.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

DEVELOPMENT OF THE MARKETS 2018
EuropeOverall economy
Passenger cars
and light com­
mercial vehicles
Medium-sizedand heavy-duty
commercial vehicles
Exchange rates
Great Britain (GBP)

North America

Turkey (TRY)Asia/PacificOverall economy

Overall economy

Passenger cars
and light commercial vehicles

Passenger cars
and light commercial vehicles

Medium-sizedand heavy-duty
commercial vehicles

South America

Medium-sizedand heavy-duty
commercial vehicles

Exchange rate

Overall economy

Exchange rates

USA (USD)

Passenger cars
and light commercial vehicles

China (CNY)Japan (JPY)

Medium-sizedand heavy-duty
commercial vehicles
Exchange rates
Brazil (BRL)
Argentina (ARS)

Exchange rate development of various foreign currencies against the euro (EUR) as measured by the average market price compared with the previous year:
Argentine peso (ARS), Brazilian real (BRL), British pound (GBP), Chinese renminbi (CNY), Japanese yen (JPY), Turkish lira (TRY), US dollar (USD)

As in the previous year, a fall in demand had already been recorded in North America, but local production did benefit fromthe start-up of new production plants to some extent at least. In
South America, vehicle production continued to grow as expected in the year under review. However, this growth wassignificantly dampened by political and economic tensions,above all in Brazil and Argentina.
The vehicle markets in the Asia / Pacific region weakened slightly
and dropped below the previous year’s level. The primary cause
lay in the decline in the Chinese market, which shrank for the
first time since 1990. Uncertainty with regard to the trade dispute with the USA and rising living costs resulted in significant
caution among vehicle buyers, especially in the last quarter.
Japan remained only at the previous year’s level. India, on theother hand, stayed on track for growth at over 6 percent.

Development of the markets for mediumsized and heavy-duty commercial vehicles

Production increased in Europe, with demand experiencing further recovery, especially in Russia. North America recorded
double-digit growth for the second consecutive year. This is attributable to the cyclical recovery in the market for heavy-duty
commercial vehicles. Production in South America also once
again achieved a double-digit recovery.
In 2018, the Asia / Pacific market was marked by a fall in thegrowth rate. Following an increase of roughly 20 percent in theprevious year, production in the year under review was justslightly above the previous year’s level. The reason lies in a cyclical downturn in the market for heavy-duty commercial vehicles in China, where the market contracted by almost 8 percent.
Production volumes also normalized in Japan in the year underreview. After a year of weaker results in 2017, when the new
emission level depressed the market, India regained its strong
growth with a high double-digit expansion in output.

Worldwide production of medium-sized and heavy-duty commercial vehicles increased during the year under review, whereas thegrowth rate fell substantially under the previous year’s double-­
digit figure.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Group management report
Re por t on e c on o mi c p o s i t i o n79

SALES BRIDGE
in EUR million
2017– 1.6 %

2018

12,90012,80012,788– 393

12,700+ 545

12,60012,581

12,50012,400– 359+ 4.4 %*

12,30012,20012,10012,00011,900Sales
2017

Exchange rate
effects

Changes to the­c onsolidation group

Organic
growthSales
2018* Calculated on 2017 sales adjusted for deconsolidations

BUSINESS DEVELOPMENT
In the year under review, the MAHLE Group generated sales of
EUR 12.6 billion. We therefore achieved strong organic sales
growth (i. e., after adjustment for exchange rate effects andchanges to the consolidation group) of 4.4 percent. With thissubstantial increase, MAHLE’s performance was significantly
above global market growth. We thus also successfully exceeded
our forecast from early 2018. Before adjustments, revenue was
1.6 percent below the previous year’s value. Negative exchange
rate effects of EUR 393 million and changes to the consolidationgroup of EUR 359 million had an adverse impact on our sales.
Among other influences, exchange rate developments affecting
the US dollar, Brazilian real, and Argentine peso depressed sales
figures. The sale of our shares in the joint venture Hella Behr
Plastic Omnium (HBPO), our profit center for front-end modules,
on June 26, 2018, also reduced our sales base.

We also want to continue pushing ahead in the thermal man­agement business segment, which is of central importance for­conventional as well as alternative drive types. For that reason,
we opened our first production plant for electric compressors in­Balassagyarmat / Hungary. The technology in these compressors
removes the link between air conditioning systems and combustion engines, and we have already won several customer projects
from international automobile manufacturers. Series productionis due to begin in 2019. We have also increased our participationin MAHLE Behr, which pools our expertise in vehicle air conditioning and engine cooling. We now hold a total of 57 percent of thecompany shares — up from 51 percent. The targeted developmentof our competence in thermal management has also paid off inother areas. We have been able to apply our expertise to support
the Nikola Motor Company in the development and industrialization of a truck with a fuel cell drive. This partnership includes the
air conditioning system for the driver’s cabin as well as the cooling systems for the drive components.

In the year under review, the development of the MAHLE Groupwas dominated by an intensified focus on our core fields of expertise. This involved the realignment of our group and a numberof portfolio decisions. We therefore sold our shares in the joint
ventures Bosch Mahle Turbo Systems (BMTS) and HBPO in order to align our future investments more strongly with our corebusiness as well as with promising technologies and fields ofapplication. In this way, we are following our dual strategy, which
we continue to drive forward.

In addition, we are strengthening our activities in the aftermarket
business segment. First, we increased our shareholding in Brain
Bee — a specialist in automotive diagnostics and workshop
equipment — to 80 percent during the year under review, whichtakes us a step closer toward becoming a holistic solutions provider. Second, we are establishing an even better position forourselves in the aftermarket business segment with the planned
acquisition of all the shares in the former joint venture Behr Hella
Service (BHS) in early 2020.

As part of this dual strategy, we further expanded our Mechatronics division. In an initial step, we opened our research anddevelopment center in Valencia / Spain, which has helped us tosignificantly enhance our competence in electronics in the year
under review. We also won our first series order in the onboard
charger business segment. In addition, our acquisition of 100
percent of the shares in ebikemotion will enable us to strengthen
our activities in the area of electrically powered bicycles andexpand our overall systems competence.

Significant organic sales growth has been recorded in all ourbusiness units, the Mechatronics division, and our profit centersin the year under review. In the Filtration and Engine Peripherals
and Thermal Management business units and the Mechatronics
division, sales exceeded the previous year, even in absolute values, although exchange rate effects substantially impaired sales
in some cases.

Development of the MAHLE Group

80

Group management report
R eport on eco n o mic position

Development of the business segments

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

SALES BY BUSINESS SEGMENT
in EUR million
2017

2018

+ 3.3 %

5,000

4,481

4,629

4,000

– 0.6 %
3,000

2,799

+ 0.5 %

2,781

2,246

– 19.3 %

2,256

2,000

1,900

– 3.0 %
956

1,000

928

1,534

+ 11.4 %
407

453

0
Engine Systems
and Components

Filtration and­Engine Peripherals

ThermalManagement

Engine Systems and Components business unit
Sales in the Engine Systems and Components business unit
amounted to EUR 2,781 million in the year under review, thus
remaining roughly at the previous year’s level. However, the saleof our German forging operations and of MAHLE Metal Leve
Miba Sinterizados in Brazil in 2017 had an adverse impact. Adjusted for these disinvestments and for the significant negative
exchange rate effects, the business unit generated organic
growth of just under 5 percent. We realized the largest sales increases — as was also the case in 2017 — in steel pistons for commercial vehicles and in assembled camshafts, and we further
expanded our production capacities for these products aroundthe world. Sales of passenger car diesel pistons in ­Europe substantially declined — a consequence of the ongoing debate surrounding diesel. From a regional perspective, we ­recorded
strong organic growth in South America in particular and benefited from the market recovery on this continent.
Filtration and Engine Peripherals business unit
At EUR 2,256 million, sales generated in the Filtration and Engine Peripherals business unit in 2018 remained at the previous

DEVELOPMENT OF SALES 2014 – 2018
in EUR billion– 1.6 %

15

11.5

12

12.3

12.8

12.6

2017

2018

9.9
9

6

3

0
2014

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

2015

2016

Aftermarket

Mechatronics

Profit centers

year’s level. Here too, negative exchange rate effects (amounting to EUR 66 million) had a detrimental effect on sales, althoughorganic sales growth exceeded 3 percent. Sales of cylinder head
covers and oil pumps saw the strongest growth in the year under review, while demand for oil filter modules shrank as a resultof the diesel question. Asia / Pacific and Europe proved to be thefastest-growing regions. Overall, the business unit had to deal
with increases in material prices in the period under review, but
we countered these with measures to boost productivity. As far
as development is concerned, we are focusing more strongly on
customer solutions that are unrelated to the combustion engine,such as the development of an oil management module for electric vehicles.

Thermal Management business unit
Sales in the Thermal Management business unit rose by 3.3 percent to EUR 4,629 million, despite substantial negative exchange rate effects of EUR 108 million. Organic growthamounted to just under 6 percent. Products for battery-powered
vehicles in particular saw strong demand and recorded notablesales growth. We likewise sold significantly more cooling modules, charge air coolers, and HVAC modules than in the previous
year. On a regional basis, development was extremely positivein North America above all. Here, the rise in demand led tostrong sales growth among commercial vehicle customers andfor SUVs, pickup trucks, and minivans.
Aftermarket business unit
In the Aftermarket business unit, we recorded sales totaling EUR
928 million in the 2018 business year. Although the acquisitionof further shares in the diagnostics specialist Brain Bee during
the year under review had a positive influence on sales, strong
negative exchange rate effects had a detrimental impact
amounting to EUR 71 million, which resulted in sales being
3 percent lower than in the previous year. Adjusted for consolidation and exchange rate effects, organic growth in Aftermarket
amounted to around 3 percent. In 2018, we also entered themarket and established our business in the areas of electronics

Group management report
Re por t on e c on o mi c p o s i t i o n81and air conditioning compressors. Looking at our global markets,
our South America and Asia / Pacific regions in particular developed very successfully. This was due, among other contributing
factors, to a positive trend as regards filter products in China andthe successful expansion of Service Solutions in the Chinese
market. Furthermore, the eastern European market recorded
continued growth.

Mechatronics division
Sales in our Mechatronics division grew by 11.4 percent to
EUR 453 million in the year under review. This figure takes into
account the acquisitions of MAHLE Electronics in the 2017 business year and of ebikemotion in 2018. Overall, organic growthamounted to just over 6 percent. As a result of increased demand from the markets for agricultural and construction machinery, our sales rose sharply, primarily in starter motors and alternators. In addition, we substantially intensified our engineering
activities in the high-voltage traction motors and power electronics product areas.
Profit centers
In our various profit centers serving specific market and customer segments, sales substantially declined to EUR 1,534 million in the year under review. This was primarily attributable tothe sale of our shares in the joint venture HBPO, which had been
run as the Front-end Modules profit center. Adjusted for thisconsolidation effect (EUR 361 million) and negative exchange
rate effects (EUR 41 million), the profit centers achieved organic
growth of more than 2 percent. Compressors — our strongest
profit center in terms of sales — contributed to this result, generating organic growth of 2 percent. The Large and Small Engine
Components, Industrial Thermal Management, and Control
Units profit centers all likewise achieved substantial sales increases. One highlight for the Engineering Services, Motorsports,
and Special Applications profit center was the opening of a test
center compatible with WLTP and RDE (Real Driving Emissions)in Great Britain.

Development of the regions
With production and development locations in 32 countries, the
MAHLE Group has a presence around the globe. Our international positioning ensures we are close to our customers andable to cooperate with them intensively while also responding
flexibly to regional market fluctuations.
In the year under review, our sales development in certain regions suffered greatly from negative currency exchange rate effects. From the group’s perspective, sales generated in North
America, South America, and Asia / Pacific in particular were impaired by the devaluation of important trading currencies against
the euro. In organic terms, however, we achieved sales growthin all regions, and this was significant in some cases. The detailof the development in the regions is as follows, based on sales
by country of production:

82

Group management report
R eport on eco n o mic position

SALES BY REGION<1 %Africa20 %Asia / Pacific

5%South America

TOTAL
EUR 12,581
million48 %Europe27 %North America) show the change in the proportion of sales
The directional arrows (compared with the previous year

EuropeSales in the Europe region amounted to EUR 6,016 million, thus
falling by 2.4 percent in comparison with the previous year. Thiswas primarily attributable to the sale of our shares in the joint
venture HBPO. By contrast, sales in Europe rose organically bya good 1 percent. Positive sales development was seen, above
all, in Germany and in the eastern European locations of Slovenia, Slovakia, Russia, and Romania. Our Filtration and Engine
Peripherals and Thermal Management business units grew particularly strongly — although discussions about the future of thediesel engine dampened demand for certain products.
North America
In North America, we generated sales of EUR 3,404 million,
which is 0.4 percent above the previous year’s level. Adjusted forsevere negative exchange rate effects amounting to EUR 160 million, primarily due to the US dollar, and for the sale of our shares
in HBPO, organic sales growth was very successful at more than
8 percent. In the year under review, we increased our sales in the
United States, Mexico, and Canada, where our Thermal Management and Engine Systems and Components business units
achieved significant organic sales growth.
South America
Sales in South America fell by 7.5 percent to EUR 625 million — essentially as a result of the negative exchange rate effects of EUR 146 million arising from the currency devaluations
in Argentina and Brazil. Excluding these effects, a strong risein organic sales of over 16 percent was achieved. MAHLE ’s
growth in the South America region was thus substantiallyabove the general market trend. In the Engine Systems andComponents business unit in particular — and above all in themarket for medium-sized and heavy-duty commercial vehicles — we significantly increased our organic sales. We also experienced strong growth in our Thermal Management business
unit — which benefited from new projects in Brazil — and in the
Aftermarket business unit.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

DEVELOPMENT OF EBITDA 2014 – 2018

DEVELOPMENT OF EBIT 2014 – 2018

in EUR million

in EUR million

1,377

1,400
1,200
1,000

1,022

1,093

773

800
700

1,079

600

960

500

800

514

511

473

400
600

355

300

400

200

200

100

0

0
2014

2015

2016

2017

2018

Asia / PacificIn the Asia / Pacific region, sales in the year under review slippedslightly below the previous year’s level at EUR 2,484 million.
Negative exchange rate effects (EUR 78 million, especially in
China, India, and Japan) had an impact here too, as did the saleof our shares in HBPO. Organic sales rose by just under 4 percent. Our sales grew in China in particular: first, demand forcommercial vehicles declined less steeply than expected andsecond, sales figures in the passenger car sector increased despite the weak market environment. Our Engine Systems andComponents and Filtration and Engine Peripherals business
units also experienced very successful development in the
Asia / Pacific region, with organic sales growth turning out to be
especially strong. Demand rose in the commercial vehicle sectorin particular. The Aftermarket business unit also grew strongly.
AfricaGrowth of 12.9 percent — or even as high as around 17 percent
in terms of organic growth — caused external sales of our African
locations to rise to EUR 53 million. Once again, the majority ofthis revenue in the MAHLE Group’s smallest region was generated by the Thermal Management business unit.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

2014

2015

2016

2017

2018

NET ASSETS, FINANCIAL POSITION,
AND RESULTS OF OPERATIONSResults of operations
In the 2018 business year, the MAHLE Group improved the result from business activities very substantially from EUR 262
million to EUR 614 million. We thus exceeded the moderate increase expected at the start of the year. This considerable improvement in the result was largely due to the absence of thewarranty expenses that had negatively impacted the previous
year’s result and income from the sale of our shares in the joint
venture HBPO in June 2018. These effects had a strong positive
influence on our operating income figures EBITDA and EBIT and,to some extent, on the operating result used for internal steering — a key figure similar to EBIT, but adjusted for individual circumstances. These effects more than compensated for burdens
on the operative business, such as sales declines due to thediesel question, increases in material prices, and one-off costs
associated with project start-ups.
The key income statement items developed as per the following
details: influenced by the reduction in warranty expenses, costof sales fell more sharply relative to sales in the year under­review and amounted to EUR 10,344 million; the cost of sales
ratio dropped to 82.2 percent. In addition, productivity improvements roughly offset further rises in material prices and personnel costs. Our selling expenses increased by EUR 18 million, andthe ratio in relation to sales also rose slightly to 4.7 percent.
Among other factors, this was due to high expenses arising fromexpedited freight and effects connected with the change to theconsolidation group. By contrast, general administrative expenses in 2018 remained unchanged at the previous year’s level.
At EUR 751 million or 6 percent of sales, our research and development expenses stayed at their high level and reflect thetargeted implementation of our dual strategy. Our profit figures
benefited greatly from the fact that the balance from operating
income and expenses rose significantly from EUR 107 million­to EUR 409 million, primarily driven by high levels of income
from portfolio adjustments. With the exception of research andGroup management report
Re por t on e c on o mi c p o s i t i o n

83

CONSOLIDATED INCOME STATEMENT
in EUR million

in %

2017

in %

Sales

12,581

100.0

12,788100.0

Cost of sales– 10,344– 82.2– 10,653– 83.3Gross profit on sales

2,237

17.8

2,135

16.7

Selling expenses and general administrative expenses– 1,109– 8.8– 1,091

– 8.5

– 751

– 6.0

– 748

– 5.9

Research and development expenses
Other operating income and expenses

409

3.3

107

0.9

Financial result

– 172

– 1.4

– 141

– 1.1

Result from business activities

614

4.9

262

2.1
– 1.0

Taxes on income

– 136

– 1.1

– 125

Result after taxes

478

3.8

137

1.1

Other taxes

– 32

– 0.3

– 35

– 0.3

Consolidated net income

446

3.5

102

0.8

EBIT
EBITDAdevelopment expenses, all cost items were adversely impacted
by the effects of purchase price allocations. In total, theseamounted to EUR 134 million and include EUR 48 million relating
to planned amortization of goodwill.
The development of the items in the income statement outlined
above resulted in a substantial rise in EBIT from EUR 355 million
to EUR 773 million. Accordingly, the EBIT margin improved significantly to 6.1 percent (previous year: 2.8 percent), mainly due
to the disposal gains. Adjusted for the effects of the purchaseprice allocations and the amortization of goodwill, the EBIT margin was at 7.2 percent.
The financial result worsened in 2018 — largely owing to higher
expenses from the discounting of future pension payments andthe negative market development of pension assets. This waspartially offset by the effects from the sale of the shares in BMTS.
For example, the expenses from the profit and loss transfer weremuch lower than in the previous year. In the year under review,
we have thus achieved an overall considerable increase in the
result from business activities to EUR 614 million.
Despite the significantly improved result, taxes on income rose
only moderately to EUR 136 million. This was mainly because
the income from the sale of the shares in HBPO did not increase
the tax base to the same extent as it did the commercial result.
Our income tax rate therefore reduced significantly in comparison with the previous year to 22.1 percent. Other taxes wereslightly below the previous year’s level at EUR 32 million. As aresult, we improved our net income for the year substantiallyfrom EUR 102 million to EUR 446 million.

Net assets position
As at the balance sheet date of December 31, 2018, our balance
sheet total had risen slightly to EUR 8,272 million. Fixed assets

84

2018

Group management report
R eport on eco n o mic position

773

6.1

355

2.8

1,377

10.9

960

7.5

increased to EUR 3,779 million in the 2018 business year, primarily due to the expansion of our tangible fixed assets, because our investments substantially exceeded depreciation. By
contrast, financial assets fell owing to the sale of the shares in
BMTS, while intangible assets were at the previous year’s levelas at December 31, 2018.
At EUR 4,167 million, current assets of the MAHLE Group corresponded to the level of the previous year. Our inventories rose
substantially by EUR 100 million to EUR 1,424 million, which was
mainly attributable to an increase in raw materials, consumables,and supplies. On the other hand, receivables and other assets
remained at the previous year’s level as at the balance sheet
date. Although trade receivables decreased as a consequenceof the abovementioned changes to the consolidation group, theeffect was nevertheless offset by a rise in other assets — in particular due to tax refund claims. Our liquid funds decreased primarily owing to the repayment of loans and, together with securities, amounted to EUR 407 million as at the balance sheet date.
The positive development of earnings allowed us to significantly
increase the MAHLE Group’s equity by EUR 382 million to
EUR 3,014 million in the year under review. This led to a corresponding rise in our equity ratio, from 32.1 percent to 36.4
­p ercent. As at the reporting date, accruals amounted to
EUR 2,106 million, thereby slightly exceeding the previous year’s
figure. The notable rise in accruals for pensions — largely owing
to interest effects — was partially offset by a decline in other accruals, which in turn was overwhelmingly attributable to changes
to the consolidation group. Furthermore, our warranty and risk
accruals decreased, as did personnel accruals. Trade payables
also experienced a slight decline in the year under review, which
was entirely due to the change to the consolidation group.
Other liabilities reduced significantly to EUR 407 million. The
main cause of the decrease is the repayment of liabilities in

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

BALANCE SHEET STRUCTURE OF THE MAHLE GROUP
in EUR million

AssetsEquity and liabilities

8,195

8,272

Fixed assets

3,702

3,779

Inventories

1,325

1,424

Receivables and other assets

3,168

2017

8,272

8,195

3,014

2,632

Equity

2,106

2,093

Accruals

3,069

3,152

3,470

Payables and other liabilities

2018

2018

2017

­ onnection with warranty claims that do not relate to 2018. As acresult of the early repayment of German private placement loans(Schuldscheindarlehen), liabilities to banks fell to EUR 716 million. Since no bonds were either issued or repaid in the business
year, the corresponding liabilities as at the balance sheet datestill amounted to EUR 829 million. Overall, we have decreased
our net debt to EUR 1,137 million in the year under review.

Equity ratio increased significantly to

36.4%
in 2018

Besides the circumstances depicted in the balance sheet, werecorded the following significant off-balance-sheet transactionsas at December 31, 2018: on the one hand, rental and leasing
agreements particularly for land and buildings to a total sum of
EUR 125 million (previous year: EUR 130 million) and, on theother, factoring amounting to EUR 108 million (previous year:
EUR 129 million), which we are utilizing to diversify financing
sources.

vested heavily in plant expansions and in the upgrade of production facilities in Poland, Slovenia, and Spain as well as in our
locations in Germany — at our thermal management plant in
Mühlacker, for example. In Hungary, we realized an additional,
important investment project linked to the opening of our production plant for electric compressors. More than one-quarterof our total investment was directed toward the Asia / Pacific region. In line with our business development, the majority of theseinvestments affected our Chinese locations, where plants weredeveloped and capacity expanded — alongside investments connected with customer projects. We also invested in existing production facilities in Japan. Almost one-fifth of our investments
were made in North America, with priority given to investments
in production facilities and customer projects at our US locations and to the relocation of capacity to Mexico.
In addition to capital expenditure on tangible fixed assets, we
also took advantage of strategic acquisitions during the year under review to expand our business activities as part of our dual
strategy. On the one hand, we increased our participation in
MAHLE Behr to strengthen our thermal management business.

INVESTMENTS BY REGION

Investments
At EUR 609 million, our investments in tangible fixed assets inthe 2018 business year were largely unchanged and at a highlevel (previous year: EUR 612 million). The investment ratio,
which shows the relationship between investments and sales,remained constant at 4.8 percent. Investments thereby notably
exceeded the depreciation on tangible fixed assets: with a ratioof 136 percent in relation to depreciation, we substantially expanded tangible fixed assets (previous year: 137 percent).

<1 %Africa26 %Asia / Pacific4%South America

T OTA LEUR 6 0 9 m illio n

52 %Europe18 %North America

From a regional perspective, we focused our investments in theyear under review in Europe, Asia/Pacific, and North America.
More than half of our investments were made in Europe. We in-

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Group management report
Re por t on e c on o mi c p o s i t i o n85CASH FLOWSin EUR million

1,000
900
800

+ 425

700

– 347

600
500
400

– 207
359

300

+ 10

240

Exchange rate andconsolidation
effects

Cash funds*
at endof period

200
100
0
Cash funds*at beginningof period

Cash flows
from operating
activities

Cash flows
from investing
activities

Cash flows
from financing
activities* Cash-in-hand, bank balances with an initial term less than 3 months, and checks
less liabilities to banks with an initial term of less than 3 months

On the other hand, we took over the diagnostics specialist Brain
Bee and are thereby gradually evolving into a holistic solutions
provider for the aftermarket.

Financial position
In line with its global growth, MAHLE has established a broad
basis for its group financing over the past few years and improved its diversification. Our financing portfolio not only includes syndicated credit lines, German private placement loans,and bilateral loans, but also euro-denominated corporate bonds.
With our conservative financing policy, we are pursuing the objective of an implicit investment grade risk. This positioning is
also reflected in the moderate leverage and solid equity ratio.
In the 2018 business year, we extended the term of the existing
syndicated credit line of EUR 1,600 million with our core banks
by one year to July 2023. We repaid matured German private
placement loans of EUR 15 million on November 30, 2018, at
which time we also repaid German private placement loans of
EUR 139 million that were not yet due. As at the end of the year,
the unused but firmly committed credit lines amounted to EUR
1,745 million, which, along with the liquid funds, contributed to
the financial stability of the group. Our cash holding is diversified across various banks that are selected according to rating
criteria.

86

Group management report
R eport on eco n o mic position

Due in part to the abovementioned repayment of German private
placement loans, we closed the 2018 business year with negative cash flows of EUR 129 million. By contrast, cash flows fromoperating activities amounted to EUR 425 million and were thus
noticeably lower than the previous year’s value. This is primarily due to high cash outflows in connection with warranty claims
from the previous year. At EUR 347 million, the net cash outflow
arising from our investing activities was, conversely, much lessnegative than in the previous year, because effects resulting
from disposals carried out in 2018 led to a high level of cash income. Nevertheless, high capital expenditure on tangible fixed
assets and on strategic acquisitions continued unchanged in theyear under review. Overall, we were able to completely cover the
cash requirements for investments in fixed assets through cash
flows from operating activities. Cash flows from financing activities showed net cash outflows of EUR 207 million, which — inaddition to interest and dividend payments — were primarily due
to the use of liquid funds to repay financial liabilities.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

As well as optimizing the
combustion engine, we are
driving forward the development of alternatives suchas hybrid or battery electric
powertrains and fuel cells.

We want to secure
the long-term success of
our company. In the year
under review, we therefore
employed an additional
1,300 new staff.

We are seizing theopportunities presented bydigitalization in a wide
range of areas, including,for example, purchasing
and production.

Additional key­performance indicators
HUMAN RESOURCES
As at the reference date of December 31, 2018, the MAHLE
Group employed 79,564 people worldwide and therefore 1.6
percent more than in the previous year, 2017. The increase of
1,287 employees resulted on the one hand from the positive­development in demand, which was accompanied by greater
staffing requirements, and on the other hand from the takeoverof the diagnostics specialist Brain Bee and the full consolidationof the former joint venture Behr Thermot-tronik Italia. Our headcount was, however, reduced as a consequence of the sale ofour shares in the joint venture HBPO and the closure of our location in Wellingborough / Great Britain.

again invested heavily in the training and further education of
our staff to the sum of EUR 12 million in the year under review(previous year: EUR 13 million). In addition to a variety of workplace-related briefings, our employees took part in 93,835 qualification activities in the year under review. The global absence
rate (excluding joint ventures) fell slightly in the year under review, amounting to 3.8 percent (previous year: 4 percent).

Headcount by region

Our employees are the key to the future viability of the MAHLE
Group. Their know-how, motivation, and commitment are thefoundation of our successful development. This is why we once

In Europe, the staffing level rose slightly by 746 people (or 2.1
percent) in the year under review to 35,655 employees in total.
This was mainly due to new appointments at the locations of our
Mechatronics division in Slovenia and Spain as well as the further expansion of the shared service center in Poland. The acquisition of Brain Bee in Italy saw 97 new employees join the
MAHLE Group. By contrast, the number of employees in Europe
fell by 306 following the sale of our shares in the joint venture

HEADCOUNT DEVELOPMENT 2014 2018

HEADCOUNT BY REGION
1%Africa+ 1.6 %
90,00080,00070,00075,63576,632

78,27779,56421 %Asia / Pacific

66,23460,00011 %South America

50,00040,000T O TA L
79,56445 %Europe30,00022 %North America

20,00010,00002014

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

2015

2016

2017

2018

) show the change in the proportion
The directional arrows (of employees compared with the previous year

Group management report
A ddition a l k e y pe r f or m a nc e i n d i c a t o r s

87

HEADCOUNT BY BUSINESS SEGMENT
2017

2018

+ 0.8 %
30,000+ 2.5 %

27,900 28,112

25,00023,288 23,874

20,000+ 0.0 %

– 0.6 %

15,00010,957 10,953+ 10.6 %10,00010,670 10,609+ 8.9 %
3,889

5,000

1,574

4,303

1,713

0
Engine Systems
and Components

Filtration and­Engine Peripherals

ThermalManagement

HBPO and by a further 115 due to the closure of our location in
Wellingborough / Great Britain. Despite the decline in staffing levels in certain areas, our headcount in Europe grew overall.

In North America, we recorded a total of 17,090 employees asat the reference date of December 31, 2018, and thus 621 (or3.8 percent) more people than in the previous year. The rise resulted both from the positive order levels in Mexico and from thehigh capacity utilization arising from the introduction of new
products in the USA, which was associated with the recruitmentof 260 additional employees.
In South America, the number of staff declined slightly by 2 percent compared with the previous year, to a total of 9,074 employees. In the Asia / Pacific region, personnel growth was moderate in the year under review with an additional 100 employees(+ 0.6 percent) bringing us up to a total of 16,697. In Africa, ourheadcount remained constant.

88

Group management reportA d dit ion al key perfo rmance ind icator s

Aftermarket

Mechatronics

Profit centers

Headcount by business segment
In our Engine Systems and Components business unit, the staffing level rose by 212 employees. At around 35 percent at theclose of the year under review, the majority of our group’s employees worked at one of its total of 44 locations. We employedaround 30 percent of our total workforce at the 38 locations of
the Thermal Management business unit. With an additional 586
employees, this is where we saw the greatest growth in absoluteterms in comparison with the previous year. The Filtration andEngine Peripherals business unit employed around 14 percentof the entire group workforce in its 36 plants. The number of employees in this business unit remained unchanged in comparison
with the previous year. With a 8.9 percent rise, Aftermarket, oursmallest business unit in terms of personnel, saw its staffing
level grow relatively strongly in comparison with the previous
year. At 10.6 percent, the Mechatronics division also experienced a sharp increase in its headcount and reached a 5.4 percent share of the total workforce. The staffing level in our profit
centers reduced by 0.6 percent. This figure was particularly impacted by the sale of the Front-end Modules profit center as aresult of the disposal of our shares in the joint venture HBPO.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

R& D EXPENDITURE 2014 – 2018
in EUR million+ 0.4 %

900
800
700
600

753

748

751

2016

2017

2018

657
552

500
400
300
200
100
0
2014

2015

TECHNOLOGY AND INNOVATIONIn the year under review, we maintained our group-wide researchand development (R & D) activities at a high level, investing
EUR 751 million in this area — following EUR 748 million of investment in the 2017 business year. The ratio in relation to sales
also remained virtually stable at 6 percent. The high level is animpressive demonstration of the relevance and significance of
research and development to the MAHLE Group. In terms of personnel, we have slightly expanded the R & D function and hired
new development engineers and technicians. As at the end of
2018, we employed 6,116 R & D staff. The quality of our research
can also be seen in the more than 320 first filings of patents that
we entered in the year under review. In addition, there werearound 550 records of inventions. At the same time, MAHLE supports flexible cooperation in global teams in order to push R & D
projects ahead more quickly in the future.

Number of R & D staff

6,116

as at December 31, 2018

MAHLE also continued to pursue a dual strategy during the pastbusiness year. This means that, on the one hand, we are further
optimizing the combustion engine to make it even cleaner andmore efficient. And on the other hand, we are driving forward
the development of alternative drive concepts — hybrids, battery
electric powertrains, and fuel cell technologies. In this context,
particular note should be made of MEET, our forward-looking
vehicle concept for urban mobility, which combines efficiency,
comfort, and agility. Electronic systems are becoming increasingly important in modern vehicles. The powertrain of the future

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

is a system consisting of hardware and software that communicates and interacts within the vehicle in an intelligent and interconnected manner. As a pioneer of future mobility solutions,
MAHLE is therefore continuously expanding its activities in thearea of electronics, with the company’s new research and development center for electronics, opened by MAHLE in Valencia / ­Spain in November 2018, representing a significant element of
this approach. In the future, around 250 employees in Valencia
will work on developing new products and concepts for sustainable mobility. At almost the same time — late October
2018 — MAHLE commissioned its very first production plant in
the world for e-compressors. Compressors are the heart of air
conditioning systems — and the electric compressor that MAHLE
has finished developing in the last few years will remove the link
between air conditioning systems and combustion engines.
MAHLE also aims to push forward the technology used in thecommercial vehicle market by means of a future-oriented drive
mix. Specifically, we are working toward being able to offer themarket a perfect mix of various types of drive — combustion engines, hybrids, and electric drives through to fuel cell technology — whose operation will also be as low in emissions and as
low cost as possible. With regard to the combustion engine, we
recently presented the e-Waste Heat Recovery System, whichconverts exhaust gas heat into electrical energy, thereby enabling economically efficient hybrid technology for long-distancehauling and distribution transport with significant fuel savings.
To achieve even greater levels of efficiency in commercial vehicle combustion engines, we also presented an innovative valve
train system with which MAHLE integrates functions such as engine braking or exhaust gas temperature management into thevalve train. We are advancing the field of hybrid technology with
our Visco® hybrid fan drive. This solution, which has been specially designed for hybrid drives, results in greater efficiency andenables energy recovery at the same time. The fuel cell drive isan increasingly promising alternative to the combustion engine — particularly for heavy-duty commercial vehicles. In recent
years, MAHLE has specifically developed near-series solutions
for these systems, which it is now adapting for use in commercial vehicles. For example, we showcased a flat membrane­humidifier at IAA, which aims to ensure that the supplied air ­ishumidified reliably — essential to the efficiency and service life ofa fuel cell. At the same event, we also presented our production-­ready solutions for the temperature control of batteries, electronics, and electric motors as well as our solutions for monitoring the fuel cell stack.

Which technology concepts and drive mix will ultimately prevailon the market is a question both of the cost to operators of vehicle fleets and of legislation, especially with regard to CO2 regulations. For this reason, we are working on the assumption thatthe drive mix for commercial vehicles will be subject to an ongoing process of change and diversification, and that the combustion engine will continue to play a supporting role for sometime to come. Diversification between the combustion engine,
hybrid and electric drives, and hydrogen technology on the basis of a systems approach thus remains a major theme of research and development at MAHLE. In the process, we are consciously making advance investment in this area and want toGroup management report
A ddition a l k e y pe r f or m a nc e i n d i c a t o r s

89

supply our customers today with all the technologies that theyneed to operate successfully. In doing so, we are proactively
seizing the opportunities currently offered by the dynamic
vehicle markets.

PURCHASING
As was already the case in the 2017 business year, we also
faced a difficult raw materials market in the year under review.
In particular, the rising prices of steel, aluminum, and resinsproved a challenge on the supply side — these raw materials arevery important to MAHLE. In addition, the procurement of therequired resources was hampered by shortages as well as tradebarriers and isolationism. This resulted in escalating purchaseprices, a decrease in the proportion of procurement from lowwage countries, and the relocation of purchasing volumes from
China to the USA, for example. Furthermore, the procurementof raw materials and preproducts was impaired by unfavorable
currency trends, especially in the US dollar, the Brazilian real,
and the Turkish lira. Ultimately, the availability of raw materials
was also affected, because some of our suppliers struggled withstrike action and other force majeure events. The associatedchallenges — primarily to ensure security of supply — were successfully overcome by MAHLE’s Purchasing function. We also
made preparations in the year under review to supply our plants
after Brexit and in the event of a no-deal Brexit.
In the future, our procurement team intends to concentrate toan even greater extent on guaranteeing capacity and on the security of supply to our production locations. Another objective
is to focus more strongly on improving our working capital. We
are therefore making efforts to extend payment terms and consignment storage agreements. Finally, we want to organize ourpurchasing processes to be more efficient overall, by, for example, increasing the digitalization of processes, pooling our purchasing volumes more systematically, and increasingly handlingtransactional and purely operational activities via shared service
centers.

PRODUCTION, QUALITY,
AND ENVIRONMENT
MAHLE Production System
All of MAHLE’s approximately 160 production locations and business areas are involved in a continuous improvement process.
We are constantly advancing this process and sharing successful practices around the world. On the basis of this exchange, a
global team has identified the most important principles, methods, and standards for the MAHLE Production System (MPS) to
systematically eliminate waste in manufacturing and thus makeit more efficient.
This global core team was enlarged in the year under review and
now employs 40 additional MPS staff. We also established additional lighthouse plants in North America, Europe, and theAsia / Pacific region in 2018 in order to drive forward the production system’s implementation across the group. With the MAHLE
Production System, we aim not only to establish excellent aswell as efficient processes and methods throughout the group,
but also to bring about a sustainable change of culture at thesame time — toward even more transparency, solution-oriented
thinking, and responsiveness. In doing so, the MAHLE Production System is contributing to the competitiveness of our production operations — and thus to the sustainable and profitable
growth of our company.
In the year under review, we also introduced a new function intended to push forward the subject of Industry 4.0 within thecontext of the MAHLE Production System. The manager responsible is a central contact for all questions relating to Industry 4.0.
He pools together and coordinates all related activities, connects those involved, and encourages the global exchange ofknowledge at MAHLE.

Quality management at MAHLE
Innovative, defect-free, and reliable products and systems are
the foundation of our long-term success. Quality targets are
therefore a fundamental element of our annual business plan:
they are regularly defined from the top down, fleshed out fromthe bottom up, and consolidated across the operational business areas. In addition, a group-wide quality management system has been in use at MAHLE for many years and is integrated
into all our business processes. This system was expanded
during the business year. The risk management process was defined in more detail, and we introduced a more precise evaluation process into our contingency plan.
We launched the group-wide MAHLE Quality Improvement Program in the 2017 business year and continued it in the year under review. We are consistently advancing the quality of our
products and processes in eleven projects dealing with various
aspects of quality management. The overarching goals are to90

Group management reportA d dit ion al key perfo rmance ind icator s

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Environment and safety at work

achieve best-in-class quality and zero defects. We therefore
want to eliminate potential sources of defects as early as the
product development phase, and the quality management system also supports series production. Supplier quality, training,
and further education are included in the program as well. Our
employees around the world take part in quality round tables todiscuss the results delivered by the MAHLE Quality Improvement
Program and the upcoming challenges facing quality management. The findings thus obtained then feed into and improve ourprocess flows.

From research and development to production and recycling,
we take a holistic approach to the protection of our staff as wellas to the health of our employees and that of the environment.
In 2018, we made further progress with the implementation of
our corresponding group-wide guidelines and requirements. In
this context, we also further developed our reporting system inorder to better monitor the impact and success of our measurestaken.

MAHLE received around

One of our areas of focus in 2018 was the continuation of thesafety at work offensive, which we began in the previous year.
As a first result, we were able to substantially reduce the accident rate. We want to establish this important issue even more
firmly in all our employees’ minds.

80

quality awards in 2018

The 2018 business year was also marked by a new automotive
standard (IATF 16949:2016). This was introduced and certified
on schedule by September 2018 at all production locations
working in the automotive sector. The aim of the standard is toraise customer satisfaction and continually optimize all our process flows by means of regular audits. Our development centers
and nonautomotive locations likewise successfully passed therecertification audit to ISO 9001:2015. Here too, we review andaudit our process flows at regular intervals in order to identify
potential for improvement.
Data relating to our quality performance is presented in a variety of ways in our customers’ portals. For this reason, we are
currently working to develop a group-wide database featuringconsistent reporting. The aim is to standardize the information
relevant to MAHLE that originates from the various customer
portals and thereby make more targeted use of any potential for
improvement it offers.
Our efforts with regard to quality are paying off: We achieved
further reductions in the number of customer complaints, andthe number of faulty delivered parts did not increase despite
growing volumes in the year under review. In 2018, we once
again received awards from numerous customers in recognitionof the quality of our products.

Accident rate fell by

16%

in comparison with the previous year

To achieve this, we are running training programs for executives
and employees and offering round-table discussions on thesubject of safety. We also began to introduce safety at work
management systems, certified according to ISO 45001, in theyear under review, which we intend to gradually extend to all
locations.
When it comes to environmental protection, our focus also continues to be on energy management, with the aim of making theoperation of all our locations as energy efficient, as low in emissions, and therefore as environmentally friendly as possible. By
using our database, which documents lessons learned and­successful processes, we are striving to tap areas of energy efficiency potential. Furthermore, we are encouraging dialog onenergy-related topics through meetings held at a national and,increasingly, also at a regional and global level.

Number of customer complaints reduced by

7%compared with the previous year

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Group management report
A ddition a l k e y pe r f or m a nc e i n d i c a t o r s

91The opportunities andrisks identified by our risk
management system
are the guidelines on which
our corporate activities
are consistently based.

We are using our dual
strategy to counter therisks posed by possible
shifts in technology.

We do not currently
see any risks that could
endanger MAHLE’scontinued existence.

Opportunity andrisk report
We use a management system to evaluate the opportunities andrisks associated with our business operations. In this way, we
gain knowledge from which we draw conclusions and adapt ouractions accordingly. Our globally active internal audit regularly
verifies the compliance and efficiency of our processes and control systems by means of an audit plan, which changes on anannual basis. Because our group will continue to grow in theyears ahead, we are constantly developing our risk management
system — with the following areas of focus.

MARKET AND TECHNOLOGICAL TRENDS
We identify long-term market and technological trends using asystematic scenario approach. As a framework, it provides abaseline scenario including the developments in our businessareas, regions, products, and markets until 2030. On this basis,

Extreme scenarios for

2030

Stress test for market andtechnology trends

and using “extreme scenarios 2030,” we implement stress tests
for our company on various aspects — such as markets, regions,drive types, quantities, and technologies. By taking market and92

Group management reportO p port u n it y an d ris k rep or ttechnological trends into account in this systematic way, we ensure that we identify opportunities and risks at an early stage.
The findings from these analyses are used to make decisions
about future business segments and new production processes;
we include the measures derived in our strategic and budget
planning. In the course of preparing management reports, wemonitor whether and how the agreed steps are implemented.
Opportunities and risks arise from the markets’ increasingawareness of environmental considerations and from 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 focus our attention on a wide
range of technologies to increase the efficiency of the combustion engine, on alternative drive configurations, and on a holistic,
intelligent thermal management system. As a result, we are able
to offer our customers competitive, innovative products. With
our steadily growing portfolio of electric drives and auxiliarycomponents, we are benefiting from the expanding market forelectric vehicles. We have specifically strengthened these activities through multiple acquisitions, which have been pooled
within our Mechatronics division and are now integrated into thegroup. Through acquisitions made in recent years, we have significantly expanded our thermal management business and our
product portfolio to include air conditioning compressors.
MAHLE therefore has the necessary resources to develop electric air conditioning compressors for the growing plug-in hybrid
and electric vehicle market.
Impediments to trade such as Brexit and the tariff dispute between the USA and China, economic fluctuations, changes tothe political framework in individual regions or countries, and

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

the growing number of competitors from Asia in particular canhave a major impact on market developments and thus on thebusiness development of our company. On the subject of Brexit,
we have set up a working group that is continually monitoring
the developments relating to the possible exit of the United Kingdom from the European Union and drawing up and maintaining
appropriate response options. As things stand at present, thevarious scenarios are not expected to result in any significant
effects on business activities. In general, our broad market baseand global presence serve as important stabilizing factors andhelp us to counter market and customer risks. Our highly diversified customer and product portfolio also has a corresponding
impact. Consequently, possible declines in demand in individual
markets or from individual customers can at least ­be partially
offset. We therefore consider a global market slump — as in theeconomic crisis of 2009 — with a major adverse effect on profit,
as one of the greatest risks for our group. We limit the repercussions by means of appropriate early warning systems and actionplans. The discussions about diesel emissions and possiblebans on older diesel models are significant uncertainty factors
for the whole automotive industry. By implementing suitablemeasures, we aim to mitigate at an early stage the potential economic effects of a shift in technology. These effects could also
be due to possible legislative changes — such as a ban on combustion engines in passenger cars applicable from a certain
point in time. Through our dual strategy of maintaining our position as a technology leader in the ongoing development of the
combustion engine while also driving forward innovative solutions for alternative powertrain technology, we are readying ourselves for ­future developments of this kind. Business segmentsthat are independent of the OEM business for the passenger car
combustion engine today already account for more than 50 percent of group sales. We want to continuously increase this proportion of sales that is unrelated to the passenger car combustion engine.

Proportion of sales by business segments> 50%

independent of the OEM businessfor the passenger car combustion engine
PROCUREMENT AND PRODUCTION
Our risk management system is also focused on minimizing thenegative impacts stemming from the procurement markets. Regular supplier assessments prevent unexpected supply bottlenecks and / or price increases in purchasing. We have steppedup these activities in recent years and are making sure that theindependence of our suppliers is maintained. In addition, we
have been using a tool to monitor risks worldwide, which enables a rapid overview of the impact of natural disasters, strikes,
and insolvencies. This increases transparency and thus decreases risk in the supply chain. Appropriate safety stocks and

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

OTC hedging transactions also serve to reduce procurement

risks. To optimize our business processes further, our production plants all around the world cooperate with each other on an
ongoing basis. Our Safety First campaign, launched in 2017 andcomprising extensive measures to guarantee safety at work,
continued in the business year. By means of improved production processes and high quality standards, we aim to ensure that
operational risks — such as unforeseen circumstances, unexpected technical issues, accidents, and human error — hinder
production operations as little as possible. Thus far, the increasing number of extreme weather events, such as floods, inundations, and droughts, have impacted our production locations
only in isolated cases. MAHLE counters the associated risks using an established environmental management system.
Our group has been audited and certified in accordance withcurrent external standards and specifications relevant to our industry — for example, ISO standards for quality, environmental
protection, and safety at work — and is thus subjected to important external checks that serve to limit risks. We have arranged
an economically prudent degree of cover by means of insurance
policies for the disruption of operations resulting from damage
as well as liability risks. However, there were again very significant quality incidents and warranty claims in 2018. To improve
our ability to avoid similar risks in the future, we have definedcross-functional countermeasures. In this way, development
processes in particular will be scrutinized and optimized in moredetail. Financial burdens incurred in the year under review are
fully included in the group result. Where legally required, financial burdens resulting from quality incidents and warranty claims
originating and known as at the balance sheet date, and which
are expected to result in cash outflows, are covered by accruals
as part of risk provisioning.

FINANCE MANAGEMENT
Using our systematic and group-wide finance management­ ystem, we aim to ensure our optimized use of financing oppors
tunities from the banking and capital market. The liquidity risk
is covered by diversified financing facilities with staggered maturity profiles that considerably exceed our group’s foreseeable
financial requirements. When designing our financing mix, wetake security, flexibility, and cost factors into account. Our aim
is to secure the financial independence of our group, limit thefinancing risks, and ensure we are able to exploit business opportunities at all times. We detect currency risks by means ofour group-wide planning and reporting system. In accordancewith standardized group-wide principles, we counter these risks
extensively using nonpredictive hedging transactions over a
horizon of up to 24 months. 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 of an operational underlying transaction; expected and not yet invoiced currency risks are thereby covered
with continuously declining hedging grades. The resulting hedging relationship generates valuation units in accordance with thecritical term match method. The interest rate risk is subjected
to value-at-risk analyses. OTC hedging activities and otherGroup management report
Oppor tu n ity a n d r i s k re p o r t93­financial transactions give rise to counterparty risks with financial institutions, which we identify and evaluate across the groupin our uniform reporting system. If predefined thresholds are exceeded, the counterparty risk is influenced by the targeted
spread of risks.

HUMAN RESOURCES, IT,
AND ACCOUNTING
Highly qualified and motivated employees are a cornerstone of
our success both today and in the future. That is why it is important for us to attract suitable staff, support them on a continuous basis, help them gain further qualifications, and retain
them in our company over the long term. We have developed acomprehensive personnel marketing concept and set up a recruitment organization in order to establish direct contact withpotential candidates at an early stage and recruit qualified employees. We are thereby reducing the risk of not filling vacant
positions or filling them only after some delay. In order to guarantee our group’s long-term success and take advantage of theopportunities arising from 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 of losing employees in strategically important positions. In the IT function, security technologies protect against unauthorized access to or misuse of databy internal and external parties. Server and storage systems are
set up in such a way that they can be restored at short notice inthe event of a disaster and in crisis situations. Defined security
standards not only encompass the technical specifications­o f the hardware and software, but also the functional security

94

Group management reportO p port u n it y an d ris k rep or t

structures and organizational provisions. Detailed backup andrecovery procedures reduce the risk of severe disruptions, forexample, by securing access procedures as well as mirroring
and archiving data on a daily basis. With regard to the accounting process, the internal control and risk management system
is aimed at ensuring the compliance and effectiveness of accounting and financial reporting. Besides guidelines and principles, the system also includes measures to prevent and uncoverreporting errors. The consolidated financial statements are compiled centrally with reporting data transferred from subsidiaries.
We guarantee compliance with the MAHLE guidelines by meansof systemic controls, specialist advice, and manual checks aswell as through the validation of data plausibility by the groupaccounting function.

REGULATIONS AND LEGISLATION
The introduction and implementation of directives alongside organizational and work instructions ensure that statutory requirements are observed. By integrating internal and external experts
into the processes from an early stage, we minimize risks andexploit opportunities that could arise, for example, from fiscal,
occupational, competition, patent, antitrust, and environmental
regulations and legislation as well as from trade rules. Key elements of our compliance structure include the MAHLE Business
Code, a global compliance organization, a training concept forrisk areas relevant to compliance, and preventive measures.

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

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

We anticipate overall
stable development in thevehicle markets forthe 2019 business year.

We expect slight organic
sales growth. The result
from business activities islikely to fall significantly
as the special effects that
boosted the result nolonger apply.

Cooperation between
our business segments,
functions, and regions will
become even more
intensive in 2019, allowing
us to offer our customers
even better solutions.

Outlook
OVERALL ECONOMIC DEVELOPMENT
In its January report, the International Monetary Fund (IMF) projects generally subdued economic prospects for 2019. According
to the IMF’s estimates, the rate of growth in the global economy
is likely to be below that of previous years, with growth driven
mainly by developing and emerging markets, and to a lesser
extent by industrial nations. Overall, worldwide economic development could be weakened by economic risks, such as tradebarriers and restrictive financing conditions, as well as by political uncertainties.
In the European Union and the euro zone, growth in the year
ahead is anticipated to fall slightly below the 2018 rate at justunder 2 percent. Sustained strong demand, falling unemployment, and continued relaxed monetary policy are expected tocontribute to growth. While growth in Italy, Spain, and Germany
is likely to deteriorate, the IMF anticipates stable expansion in
the French economy compared with the previous year.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

At a good 2 percent, the IMF also projects less dynamic growththan in 2018 for the USA. Here, fiscal incentives are likely to bescaled back in 2019, which will probably also impact the USA’s
trading partners. According to the IMF, South America’s largest
national economy Brazil will continue to expand by over 2 percent
in 2019, essentially as a result of growing private consumption.

IMF forecast

3.5%

economic growth in 2019

In the Asia / Pacific region, India’s strong economy remains oneof the drivers of growth — not only in the region, but also worldwide. The expansion of the Chinese economy, by contrast, is
continuing to slow down — with one reason being the trade dispute with the United States. Conversely, slightly higher growththan in the previous year is expected in Japan in 2019.

Group management report
Outlook95

DEVELOPMENT OF THE MARKETS — FORECAST FOR 2019

EuropeOverall economy
Passenger cars
and light commercial vehicles
Medium-sizedand heavy-duty
commercial vehicles

North America
Overall economy
Passenger cars
and light commercial vehicles
Medium-sizedand heavy-duty
commercial vehicles

Asia/PacificOverall economy
Passenger cars
and light commercial vehicles

South America
Overall economy

Medium-sizedand heavy-duty
commercial vehicles

Passenger cars
and light commercial vehicles
Medium-sizedand heavy-duty
commercial vehicles

DEVELOPMENT OF THE
VEHICLE MARKETSIn the 2019 business year, we expect the global production ofpassenger cars and light commercial vehicles to maintain its
sideways trend. The international market for medium-sized andheavy-duty commercial vehicles will, however, probably contract
as a result of the anticipated downturn in the Chinese market.
Vehicle production in Europe is likely to develop at the previous
year’s level. This applies to passenger cars and light commercial
vehicles as well as to medium-sized and heavy-duty commercial
vehicles. We expect western European markets to weakenslightly. It is unlikely that this trend can be offset by Russia, since
the market here is also likely to normalize.
Passenger car and light commercial vehicle sales in North America will probably continue to shrink in 2019, although production
will still benefit from the relocation of capacity to the region. As
regards the medium-sized and heavy-duty commercial vehicle
class, we predict that the cyclical upturn in heavy-duty commercial vehicles will reach its peak in 2019 and therefore expect only
limited growth. In South America, we anticipate a normalizationof demand in both vehicle categories.
In the Asia / Pacific region, production figures for passenger cars
and light commercial vehicles are expected only to reach theprevious year’s level. For China in particular, we predict a restrained development, and a continued contraction in produc-

96Group management report
O ut loo ktion is forecast in Japan. By contrast, a continuation of the positive trend is expected in India. For the region, however, we anticipate a significant decline in the medium-sized and heavy-duty
commercial vehicles market segment. Nevertheless, demand forcommercial vehicles in India is likely to benefit from a new emissions standard, which is expected to lead to vehicle purchases
being brought forward and thus a rise in production. However,this will probably only partially compensate for the cyclical
downturn in the largest market, China.

DEVELOPMENT OF THE MAHLE GROUP
For the 2019 business year, we anticipate a slight organic increase in sales (when adjusted for changes to the consolidationgroup as well as exchange rate effects) — subject to a stableglobal automotive market. We expect a marked decline in the result from business activities in 2019, because factors such as the
one-time effects that boosted the result in 2018 no longer apply.
We will proceed with our dual strategy in 2019. We intend tocontinue to expand and push forward the areas of growth that
we have already opened up in previous years. Using venture
capital, we will therefore further additional innovative projects
related to our dual strategy and initiatives beyond the scope of
our core business. We will additionally cooperate with start-ups
to develop new ideas and solutions. Our MAHLE Incubator projects and the MAHLE Innovation Hub ideation platform likewise
provide our employees with an environment in which they can

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

propose product solutions as well as new processes and business models, and drive these forward in an agile manner. With
these initiatives, we are also supporting group-wide dialog andnetworking between our innovative staff.

Focus for2019

intensive collaboration for
innovative solutions

The latter example in particular shows the direction that we wantto take to a greater extent in 2019. We are focusing morestrongly on closer cooperation between the business segments,
functions, and regions, so that we are able to develop even better solutions for our customers. Among other measures, we areusing our Manufacturing Days for this purpose — events that wehave been running on an international basis since the fall of
2018. In this way, we are encouraging dialog between businesssegments with regard to pilot projects and processes as well as
to the subject of shared standards and best practices. Owing to
its great success, we will continue this series of events in 2019.
A further initiative to promote closer cooperation is the MAHLE
Top Thinkers Circle, where highly innovative employees from all
MAHLE regions and business segments are brought together incross-functional teams to devise new business models and work
together to tackle relevant issues. Finally, our acquisition teams
will cooperate more closely across functions and regions withthe goal of strengthening our sales expertise and further improving our response time for the benefit of our customers.

MAHLE G r o u p
A n n u a l R e p o r t 2 0 18

Another important issue for our company is and will remain thedigital transformation, which is progressing with tremendous
momentum and is one of the most important drivers of economic development — for MAHLE and beyond. In the 2018 business year, we were still focused on formulating our digitalization
strategy — in 2019, we aim to realize the targets we have set. Our
approach is highly oriented toward benefits, and we always havethe creation of value in mind — for MAHLE and for our customers.
By digitalizing all our business areas, our goal is both to open
up new business activities and to make our processes more efficient. Digital technologies should, on the one hand, improve
products and, on the other, streamline production processes
and optimize administrative workflows. For example, MAHLE isinvesting in artificial intelligence in the form of a fully automatedquality inspection process based on camera systems in order tosave costs and time and increase production quality from theperspective of the customer. In addition, we are taking advantage of big data technologies in a pilot project to optimize production with regard to Industry 4.0.
Our economic success is the foundation on which we realize our
future strategies. It enables us to invest in research and development, establish new business areas, and make acquisitions
that complement our portfolio with a view to the future. With thisin mind, and to maintain and enhance this strong foundation, weare striving for further sales growth while at the same time increasing profitability. Our financial independence and ability towithstand potential crises are always our priorities. We therefore
set great store by a healthy balance sheet structure and moderate net gearing. The mainstays of our financial policy are thus asolid equity base and liquidity that is secured over the long term
and built on stable operating cash flows as well as diversified
financing sources and instruments.
This report contains forward-looking statements that rely on current estimates of future developments and are therefore subject
to risks and uncertainties that are beyond our control or precise
assessment. Consequently, the actual results may differ fromthe statements made here.

Group management report
Outlook97

CHAPTER

Consolidated
financialstatements
98 – 12898

Consolidated financial statements
Con t en t s

MAHLE G r o u p
Annual Report 2018

Consolid ated ba la nce she et

10 0

Consolid ated income statement

103

Consolid ated c ash flow statement

104

C O N S O L I DAT ED F I N A N C I A L
STAT EM EN T S

Consolid ated statementof cha nges in e quit y
10 6Notes to the consolid atedfinancia l state me nts
108
Consolidation group – 108
Exemption provisions for domestic companies – 109
Method of consolidation – 109
Accounting and valuation principles – 109
Currency conversion – 111
Notes to the consolidated balance sheet – 111
Notes to the consolidated income statement – 113
Other notes – 114
Consolidated statement of fixed assets – 118
Shareholdings – 120

MAHLE G r o u p
Annual Report 2018

Auditor’s r epor t

126

Impr int/contact

129

Consolidated financial statements
Co n t e n t s99Consolidated balance sheet
CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2018
Dec. 31, 2018

Dec. 31, 2017

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

223,551

246,455

2. Goodwill

317,688296,642611

745

541,850

543,842in EUR ’000

ASSETS
A. Fixed assets
I.

Intangible assets

3. Prepayments

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

951,255

939,316

1,575,813

1,532,812

3. Other equipment, fixtures, and furniture

139,695

131,615

4. Prepayments and assets under construction

469,827

405,163

3,136,590

3,008,906

2. Technical equipment and machinery

III. Financial assets
1. Shares in affiliated companies

2,504

4,948

2. Shares in associated companies

39,114111,496

3. Equity investments

10,1458,065

4. Loans to companies in which participations are held
5. Long-term securities
6. Other loans

0

32

4,908

7,480

43,974

17,128100,645

149,149

3,779,085

3,701,897

1. Raw materials, consumables, and supplies

593,349

529,566

2. Work in process

216,199

225,199

3. Finished goods and merchandise

678,221637,085

4. Prepayments

14,19817,594

5. Prepayments received– 77,503– 84,744

1,424,464

1,324,700

1,948,907

1,980,232

B. Current assets
I.

Inventories

II. Receivables and other assets
1. Trade receivables
2. Receivables from affiliated companies

1,054

721

3. Receivables from companies in which investments are held

2,212

9,411

4. Other assets

III. Securities
IV. Cash in hand, bank balances, and checks

100

383,127

351,229

2,335,300

2,341,593

32

429

407,197

503,126

4,166,993

4,169,848

C. Prepaid expenses

26,27823,599

D. Deferred tax assets

235,547

226,413

E. Excess of plan assets over post-employment benefit liability

64,16173,392

8,272,064

8,195,149

Consolidated financial statements
Con s olidat ed balan ce sheet

MAHLE G r o u p
Annual Report 2018

Dec. 31, 2018

Dec. 31, 2017

150,000

150,000

II. Capital reserves

166,430

166,430

III. Revenue reserves

2,343,108

2,039,704

IV. Equity impact from currency translation– 153,307– 169,564

13,5687,594

in EUR ’000

EQUITY AND LIABILITIES
A. Equity
I.

V.

Subscribed capital

Consolidated unappropriated retained earnings

VI. Non-controlling interests

494,301

437,940

3,014,100

2,632,104

1. Accruals for pensions and similar obligations

657,605

577,797

2. Accruals for taxes

70,00077,9801,378,694

1,437,206

2,106,299

2,092,983

1. Bonds

829,000

829,000

2. Liabilities to banks

715,521830,270

B. Accruals

3. Other accruals

C. Liabilities

3. Payments received on account of orders
4. Trade payables

6,743

9,820

1,200,471

1,233,929

5. Liabilities on bills accepted and drawn

41,18639,987

6. Liabilities to affiliated companies

1,121

3,899

7. Liabilities to companies in which investments are held

4,900

9,198

286,379

438,954

3,085,321

3,395,057

66,34475,005

8,272,064

8,195,149

8. Other liabilities   thereof from taxes 82,302 (prev. yr.: 92,625)   thereof relating to social security and similar obligations 32,705 (prev. yr.: 31,932)

D. Deferred Income

MAHLE G r o u p
Annual Report 2018

Consolidated financial statements
C on solida te d b a l a n c e s h e e t

101

102

Consolidated financial statements

MAHLE G r o u p
Annual Report 2018

Consolidated
income statement
CONSOLIDATED INCOME STATEMENT FROM JANUARY 1 TO DECEMBER 31, 2018
in EUR ’000

2018

2017

1. Sales

12,580,768

12,788,045

2. Cost of sales– 10,343,944– 10,652,852

3. Gross profit on sales

2,236,824

2,135,193

4. Selling expenses– 597,311– 579,060

5. General administrative expenses– 511,938– 511,614

6. Research and development expenses– 750,798– 748,114

7. Other operating income

771,842

485,200– 362,582– 378,181– 1,450,787– 1,731,769

786,037

403,424

1,118

500

0

189

thereof from currency translation 188,488 (prev. yr.: 180,420)
8. Other operating expenses
thereof from currency translation – 232,670 (prev. yr.: – 207,771)

9. Investment income
thereof from affiliated companies 41 (prev. yr.: 232)
10. Income from profit transfer agreements
11. Income from other securities and long-term loans

149

542

12. Result from associated companies– 2,417– 38,982

13. Other interest and similar income

9,889

18,285

thereof from affiliated companies 10 (prev. yr.: 18)
thereof income from discounting 251 (prev. yr.: 205)
14. Impairment of financial assets and of securities– 27,444– 257

15. Interest and similar expenses– 153,133– 121,241– 171,838– 140,964

thereof to affiliated companies –10 (prev. yr.: – 56)
thereof expenses from discounting – 64,489 (prev. yr.: – 50,505)
Result from business activities

614,199

262,460– 135,700– 124,879

17. Result after taxes

478,499

137,581

18. Other taxes– 32,138– 35,370

19. Consolidated net income

446,361

102,211

16. Taxes on income
thereof income from deferred income taxes 35,878 (prev. yr.: 60,109)

20. Consolidated unappropriated retained earnings prior year

7,594

6,109

21. Dividend distribution– 7,500– 6,000

22. Transfer to revenue reserves– 304,450– 169,265

23. Profit applicable to non-controlling interests– 205,439– 104,951

24. Loss applicable to non-controlling interests

77,002

179,490

25. Consolidated unappropriated retained earnings

13,5687,594

MAHLE G r o u p
Annual Report 2018

Consolidated financial statements
C on solida te d in c om e s t a t e me n t

103

Consolidated
cash flow statement
CONSOLIDATED CASH FLOW STATEMENT FROM JANUARY 1 TO DECEMBER 31, 2018
in EUR ’000

1.

2018

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

446,361+/– Depreciation, amortization, and write-downs of fixed assets/reversals of write-downs of fixed assets

631,110+/– Increase/decrease in provisions– 14,408+/– Other non-cash expenses/income– 23,952

Increase /decrease in inventories, trade receivables, and other assets–/+ not related to investing or financing activities– 224,171

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

32,561–/+ Gain / loss on disposal of fixed assets– 31,592+/– Interest expense/interest income

137,299–

Other investment income+/– Expenditure / income of exceptional size or incidence+/– Interest payments/ receipts related to interest other than for the provision of capital

1,299– 342,825– 886+/– Income tax expense / income

171,577–– 164,500

Cash payments relating to expenditure of exceptional size or incidence–/+ Income taxes paid

– 193,291
424,582

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

211– 18,638
24,379– 608,546+

Proceeds from disposal of long-term financial assets–

Payments to acquire long-term financial assets

43,225–

Payments to acquire entities included in the basis of consolidation+

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

145,988–

Cash payments for the investment of cash funds for short-term cash management– 155,306+

Cash receipts relating to income of exceptional size or incidence

367,218+

Interest received+

Dividends received– 5,866– 146,490

5,041
2,163
– 346,621

104

Consolidated financial statements
Con s olidat ed cas h flo w statem ent

MAHLE G r o u p
Annual Report 2018

in EUR ’000

2018

3.

Cash flows from financing activities+

Proceeds from the issuance of bonds and from borrowings

191,205–

Cash repayments of bonds and borrowings– 316,051+

Proceeds from grants/subsidies received–

Interest payment due to leasing agreements–

Interest paid–

Dividends paid to shareholders of the parent entity– 7,500–

Dividends paid to minority shareholders– 27,493

2,984
– 23
– 50,292– 207,170
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+

Cash funds at beginning of period– 129,209
9,864
359,091
239,746

Cash-in-hand, bank balances, and checks

503,126–

Bank balances with an initial term of more than 3 months– 4,642+

Liabilities to banks with an initial term of less than 3 months– 139,393

Cash funds at beginning of period

359,091

thereof from proportionately consolidated companies

Cash-in-hand, bank balances, and checks

40,912

407,197–

Bank balances with an initial term of more than 3 months– 4,139+

Liabilities to banks with an initial term of less than 3 months– 163,312

Cash funds at end of period

239,746

thereof from proportionately consolidated companies

The short term liabilities which were netted against cash balances contained EUR 110,768k (previous year: EUR 86,599k)
which were related to short term liabilities based on a committed credit line with a remaining tenor of more than one year.

MAHLE G r o u p
Annual Report 2018

– 8,771

Cash funds amounting to EUR 751k that are restricted on disposal are included.

Consolidated financial statements
C on solida te d c a sh f lo w s t a t e me n t

105

Consolidated statementof changes in equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FROM JANUARY 1 TO DECEMBER 31, 2018

PARENT COMPANY

in EUR ’000

As at December 31, 2016
 Adjustment acc. to GAS 23.148 without effecton net income

Revenue reserves

166,430

1,872,395
524

0

0

0

0

0

Transfer to revenue reserves00

169,265

Dividend distribution

0

0

0

Currency translation

0

0

0

Other items

0

0

– 489

Changes in the consolidation group00– 1,991

Consolidated net income

0

0

0

150,000

166,430

2,039,704

Capital increase

0

0

0

Transfer to revenue reserves00304,450Dividend distribution

0

0

0

Currency translation

0

0

0

Other items

0

0

23

Changes in the consolidation group00– 1,069

Consolidated net income

0

0

0

150,000

166,430

2,343,108

As at December 31, 2018106

Capital reserves

150,000

Capital increase

As at December 31, 2017

1

Subscribed capital

Including effects from hyperinflation adjustments for the country Argentina in accordance with IAS 29

Consolidated financial statements
Con s olidat ed s t at ement of changes in eq uity

MAHLE G r o u p
Annual Report 2018

Equity impact fromcurrency translation 1

Consolidated unappropriatedretained earnings

Total

Non-controlling interests 1

Consolidated equity– 35,496

6,109

2,159,438

562,5072,721,945

0

0

524

0

524

0

0

0

3,682

3,682

0

– 169,265

0

0

0

0

– 6,000– 6,000– 35,388– 41,388– 136,398

0– 136,398– 22,704– 159,102

339

0

– 150

0

–150

1,991

0

0

4,382

4,382

0

176,750

176,750– 74,539

102,211– 169,564

7,594

2,194,164

437,940

2,632,104

0

0

0

172

172

0

– 304,450

0

0

0

0

– 7,500– 7,500– 27,387– 34,887

15,6690

15,669– 10,690

4,979

– 481

0

– 458

– 54,204–  54,662

1,069

0

0

20,033

20,0330317,924

317,924

128,437

446,361– 153,307

13,5682,519,799

494,301

3,014,100

MAHLE G r o u p
Annual Report 2018

Consolidated financial statements
C on solida te d sta te m e n t of c h a ng e s i n e q u i t y107

Notes to the consolidated
financial statements
CONSOLIDATION GROUP
The consolidated financial statements include MAHLE GmbH(parent company), with the registered office and district court in
Stuttgart (commercial register number 638) as well as 24 domestic and 134 foreign subsidiaries. Furthermore, 17 companies
were consolidated proportionately according to the percentageof shares, and seven companies were valued according to theequity method. The consolidated companies are included in thelist of shareholdings.

The following proportionately consolidated companies were nolonger consolidated as of June 26, 2018 due to the divestitureof the HBPO subgroup:	In the previous years these companies were excluded fromthe valuation according to the equity method due to theirimmateriality.

HBPO Beteiligungsgesellschaft mbH, Germany— — 
HBPO Asia Ltd., South Korea— 
HBPO Automotive Hungária Kft., Hungary— 
HBPO Automotive Spain S.L.U., Spain— 
HBPO Beijing Ltd., China— 
HBPO Brasil Automotive Servicos Ltda., Brazil— 
HBPO Canada Inc., Canada— 
HBPO Czech s.r.o., Czech Republic— 
HBPO Germany GmbH, Germany— 
HBPO GmbH, Germany— 
HBPO Ingolstadt GmbH, Germany— 
HBPO Management Services Mexico S.A. de C.V., Mexico— 
HBPO Manufacturing Hungary Kft., Hungary— 
HBPO Mexico S.A. de C.V., Mexico— 
HBPO North America Inc., USA— 
HBPO Pyeongtaek Ltd., South Korea— 
HBPO Rastatt GmbH, Germany— 
HBPO Regensburg GmbH, Germany— 
HBPO Services Mexico S.A. de C.V., Mexico— 
HBPO Slovakia s.r.o., Slovakia— 
HBPO UK Ltd., Great Britain— 
HBPO Vaihingen/Enz GmbH, Germany— SHB Automotive Modules Company Ltd., South Korea— 
MAHLE Ebikemotion S.L.U. (formerly Ebikemotion Technologies S.L.), Spain, as of October 31

For one company occurred an upward change from proportionate consolidation to full consolidation.

The following companies were newly incorporated and fully
consolidated for the first time during 2018:

Five companies were merged in the reporting year.

During 2018, the following companies were fully consolidated
for the first time due to the acquisition of additional shares. The
acquisitions did not affect the comparability of the consolidated
financial statements with the previous year.
MAHLE Behr Verwaltung GmbH, Germany, as of January 1— — MAHLE Aftermarket Italy S.p.A. (formerly Brain Bee S.p.A.),
Italy, as of May 1— 
MAHLE Aftermarket Deutschland GmbH (formerly Brain Bee
Deutschland GmbH), Germany, as of May 1— 
M AHLE Aftermarket Iberica S.A.U. (formerly Brain Bee
Iberica S.A.U.), Spain, as of May 1— 
MAHLE Engineering Services India Private Limited, India,
as of January 1— 
MAHLE Automotive Technologies (Suzhou) Co., Ltd., China,
as of November 15
In addition, the following company, which was excluded fromconsolidation due to immateriality in the previous year, was fully
consolidated for the first time:

One proportionately consolidated company was liquidated in
the business year 2018.
In the business year, nine companies were excluded from theconsolidated financial statements due to immateriality. Fivecompanies were not valued according to the equity method dueto their immateriality.

— 
MAHLE Shared Services Mexico, S. de R. L. de C.V., Mexico,
as of January 1

108

Consolidated financial statements
Not es t o t h e co n s olida ted financial statem ents

MAHLE G r o u p
Annual Report 2018

Key changes to the consolidation group
During 2018, the HBPO subgroup was divested. Due to thedivestiture the assets, liabilities, and deferred income were
excluded from the MAHLE Group balance sheet at the time ofsale in the following amounts:

in EUR ’000

Fixed assets

31,074Current assets

135,457

Prepaid expenses

1,519

Deferred tax assets

6,819

Accruals

41,897

Liabilities

100,758

Sales decreased due to the divestiture by approximately
EUR 360,000k. Other immaterial items in the income statement have changed accordingly.

EXEMPTION PROVISIONS FORDOMESTIC COMPANIESThe following subsidiaries are applying the exemption according
to Sec. 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,
Berlin; MAHLE Beteiligungen GmbH, Stuttgart; MAHLE Brandenburg GmbH, Wustermark; MAHLE Filtersysteme GmbH,
Stuttgart; MAHLE Immobilien GmbH, Stuttgart; MAHLE Industrial
Thermal Systems GmbH & Co. KG, Stuttgart; MAHLE Industrie­
beteiligungen GmbH, Stuttgart; MAHLE Industriemotoren-Komponenten GmbH, Stuttgart; MAHLE International GmbH, Stuttgart;
MAHLE Kleinmotoren-Komponenten GmbH & Co. KG, Stuttgart;
MAHLE Powertrain GmbH, Stuttgart; MAHLE Ventiltrieb GmbH,
Stuttgart; MAHLE Versicherungsvermittlung GmbH, Stuttgart.

METHOD OF CONSOLIDATION
Consolidated subsidiaries, using the book value method priorto December 31, 2009, will continue to be consolidated under
the same method as in prior years. Thereby, the value of the investment held by the parent company, at the time of acquisition
and first consolidation, is to be offset against the attributableshare of the subsidiary’s equity book value. In the case of companies that were consolidated for the first time from 2010
onward, the assets, liabilities, prepaid expenses, and deferredincome acquired were revalued at fair value as part of thepurchase price allocation at the time that the company becamea subsidiary.

MAHLE G r o u p
Annual Report 2018

At the balance sheet date, a total goodwill of EUR 317,688k is
disclosed which contains a goodwill of EUR 42,680k that occurred in the financial statements of the entities included in the
consolidation group. Goodwill is amortized over ten years dueto the relevant markets which are dominated by a small numberof suppliers and have high barriers to market entry. These markets have shown that the average useful life of acquired goodwill
is historically ten years. Additionally, the recoverability of goodwill is tested (impairment test) at least once a year to determine
if an impairment exists according to GAS 23.129 Sentence 1.
Thereby, the amount of the write-down is determined by comparing the fair value of the investment in the subsidiary with thetotal of the carrying amount of the net assets held by the subsidiary in the consolidated financial statements and the net carrying amount of goodwill. Goodwill impairments in 2018 totaled
EUR 879k.
The first consolidation of the Brain Bee Group (consistingof MAHLE Aftermarket Italy S.p.A., MAHLE Aftermarket
Deutschland GmbH, and MAHLE Aftermarket Iberica S.A.U.) resulted in goodwill of EUR 7,224k and the first consolidation of
MAHLE Ebikemotion S.L.U. resulted in goodwill of EUR 4,059k.
In addition, MAHLE Beteiligungen GmbH increased its shareholding in MAHLE Behr GmbH & Co. KG from 50.71 percent to55.71 percent and its shareholding in MAHLE Behr VerwaltungGmbH from 23.08 percent to 55.71 percent as of January 1,
2018 by the acquisition of shares from non-controlling shareholders. This resulted in goodwill of EUR 54,282k. Thereby, theincrease in shares in subsidiaries without affecting their statusas subsidiaries were recognized as acquisition.
The transition from proportional consolidation to full consolidation of MAHLE Behr Grugliasco S.p.A. (formerly Behr Thermottronik Italia S.p.A.) as of August 1, 2018 resulted in a negative
consolidation difference with equity characteristic of EUR 449k
which was recognized as income in the business year 2018.
The intra-group supply of goods and services as well as mutual
receivables and liabilities were offset, and intercompany profits
and losses were eliminated.
Deferred taxes resulting from consolidation measures with effecton income were recorded using a tax rate of 23 percent.

ACCOUNTING AND ­VALUATION
PRINCIPLES
The existing accounting and valuation methods were retained
and were also applied by the material associated companies.

Consolidated financial statements
N ote s to th e c on solida te d f in a n c ia l s t a t e me n t s109Acquired intangible assets and property, plant, and equipment
are valued at acquisition costs or manufacturing costs minus
depreciation or amortization. Depreciation was performed ona straight-line basis using standard useful lives. If lower valuations were provided, impairments were recorded. Internallydeveloped trademarks and similar rights and assets were notcapitalized. Furthermore, the intangible assets contain hidden
reserves disclosed as part of the purchase price allocation of
the acquisitions. These comprise of trademark rights, customer
relationships, technological licenses, and development services.
Depending on the categories, the useful lives for intangible
assets were based on 5 to 10 years.
Financial assets were stated at the lower of acquisition cost or
fair value if the impairment is expected to be permanent.
Inventories are capitalized at acquisition cost or manufacturingcost. Unfinished and finished goods are valued by considering
the appropriate share of material, production overhead, anddepreciation of fixed assets. If the market prices or fair values
were lower than the book values, or marketability was limited,devaluations were performed as necessary.
Receivables and other assets are recorded at nominal values.
Appropriate write-downs are recorded to account for receivables
with recognizable risks of nonpayment; a general valuation allowance is set up to cover the general credit risk.
Prepaid expenses were recorded for payments made before thebalance sheet date for expenditures related to a specific time
period after this date.
Accruals for taxes and other accruals are to adequately cover
uncertain liabilities and anticipated losses from pending transactions. The 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 rate of the past seven fiscal years
provided by the German Central Bank. If appropriate, an average local market interest rate of the past seven years was determined for the remaining term in order to depict the actual
economic situation for the discounting of obligations in foreign
currency.
Accruals for pensions and similar obligations are calculatedgroup-wide in accordance with actuarial principles (using the
projected unit credit method) and discounted with the averagerate of ten years in accordance with Sec. 253 of the German
Commercial Code (HGB) to present value. In 2018, the calculation was based on the following discount rates: domestic 2.69 –3.33 percent; foreign 0.98 – 4.43 percent. The option to assume
a standardized remaining term of 15 years was not utilized. Expected salary increases of 1.50 – 3.50 percent and anticipatedlabor turnover rates of 2.00 – 3.68 percent were taken into consideration. The mortality tables recognized in each country wereused as a basis for the calculation.

110

Consolidated financial statements
Not es t o t h e co n s olida ted financial statem ents

Assets that serve exclusively to settle pension-related obligations and cannot be utilized to settle claims of any other creditors (plan assets in the form of long-term securities) were offset
against the accruals at their fair value. Excess amounts arerecorded within the position “Excess of plan assets over postemployment benefit liability”.
Liabilities are stated at their settlement amount.
Receivables, bank balances, and liabilities in foreign currency
with a 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 basedon the exchange rate applicable at the acquisition date or the
lower or higher exchange 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 used. These transactions
are only established with banks that have a prime credit rating.
Their use is based on standard guidelines, subject to strict
internal controls, and restricted to the hedging of operational
business as well as that of related investments and financing
activities.
If effective hedging relationships existed between the underlying
operating transactions and/or highly probable transactions (basically future deliveries of goods and services) and the hedging
transaction, they were combined into a hedge accounting evaluation unit and valuated together under the so-called “frozen
value method” (“Einfrierungsmethode”).
Deferred income has been recorded for payments received prior
to the balance sheet date for income related to a specific time
period after this date.
Deferred tax assets and liabilities are set up to account for ­alltemporary and quasi-permanent differences between the tax
and German Commercial Code (HGB) values. Furthermore, deferred taxes for tax loss and interest 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 timeof 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 range of 10.00 – 34.00
percent.

MAHLE G r o u p
Annual Report 2018

CURRENCY CONVERSION
The financial statements of foreign companies were, if not
prepared in Euro, converted as follows:

Equity:Exchange rate at the date of acquisition (or first consolidation)
Other balance sheet items:
Mid spot rate at the balance sheet date

During the previous year, trade receivables (EUR 217k) as wellas other assets (EUR 11,684k) had a remaining term of morethan one year.
Trade receivables are included in the amount of EUR 152k (previous year: EUR 91k) from affiliated companies and EUR 1,482k(previous year: EUR 7,140k) from companies in which investments are held.
Only other assets contain receivables against shareholders
amounting to EUR 6k (previous year: EUR 127k). Prepaid expenses include, among others, the differences between net loan
proceeds and liabilities to banks (debt discounts) amounting to
EUR 1,046k (previous year: EUR 1,391k).

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
arising from the conversion of movements during the current
year were shown in a separate column.
Any difference arising from the translation of the balance sheet
items into Euro was included under “Equity impact fromcurrency translation” in the consolidated shareholders’ equity.

EquityThe consolidated unappropriated retained earnings equal thatof the parent company and contain the amount carried forwardfrom the previous year of EUR 94k.

Accruals for pensions and similar obligations
as well as other accruals
Notes for offsetting pursuant to Sec. 246, Para. 2, Sentence 2of the German Commercial Code (HGB):

The “thereof” information on currency conversion in the income
statement includes both unrealized and realized exchange rate
differences.

Dec. 31, 2018
in EUR ’000

For the company in the hyperinflation country Argentina, thefinancial statements were prepared based on a general priceindex in accordance with IAS 29.

522,495

Acquistion costs of assets

244,572

Fair value of assets

357,191

Offset income

NOTES TO THE C­ ONSOLIDATEDBALANCE SHEET

Carrying amount

Settlement amount of offset liabilities

Offset expenses

315
40,598

Receivables and other assets
The difference for discounting with the seven-year average rateaccording to Sec. 253, Para. 6, Sentence 1 of the German Commercial Code (HGB) amounts to EUR 89,140k.

Dec. 31, 2018

in EUR ’000

Carrying amount

Thereof with aremaining term of
more than 1 year

1,948,907

2,207

1,054

0

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

MAHLE G r o u p
Annual Report 2018

2,212

0

383,127

12,211

2,335,300

14,418Other accruals primarily relate to outstanding credit notes andrebates and outstanding purchase invoices, guarantee and warranty risks, as well as obligations arising from employment contracts.

Consolidated financial statements
N ote s to th e c on solida te d f in a n c ia l s t a t e me n t s111

Liabilities
Dec. 31, 2018

Carrying amountWith a remaining
term of up
to 1 year

With a remaining
term of morethan 1 year

Thereof with aremaining term of
more than 5 years

Bonds

829,000

29,000800,000

0

Liabilities to banks

715,521

185,298

530,223

193,099

6,743

6,736

7

0

1,200,471

1,199,131

1,340

0

41,186

41,186

0

0

1,121

1,121

0

0

in EUR ’000

Payments received on account of orders
Trade payables
Liabilities on bills accepted and drawn
Liabilities
to affiliated companies
to companies in which investments are held
Other liabilities
Total

During the previous year, liabilities to banks ( EUR 140,373k),
payments received on account of order (EUR 9,813k), trade payables (EUR 1,232,567k), liabilities on bills accepted and drawn(EUR 39,987k), liabilities to affiliated companies (EUR 3,899k),
liabilities to companies in which investments are held
( EUR 9,198k), and other liabilities ( EUR 403,531k) had aremaining term of up to one year.
The liabilities to affiliated companies contain trade payables
EUR 239k (previous year: EUR 216k). The liabilities to companies
in which investments are held contain trade payables EUR 1,564k(previous year: EUR 5,059k).
The liabilities contain payables to shareholders amounting to
EUR 7k (previous year: EUR 0k).
No liabilities to banks are secured by property liens or similar
rights.

112

Consolidated financial statements
Not es t o t h e co n s olida ted financial statem ents

4,900

4,900

0

0

286,379

253,724

32,655

19,531

3,085,321

1,721,096

1,364,225

212,630

Deferred taxes
Deferred tax assets arise predominantly from differing accounting treatment in intangible assets, property, plant, and equipment, and accruals. The temporary differences in accruals
essentially include different carrying amounts between the tax
balance sheet and the consolidated balance sheet related to accruals for pensions and similar obligations and accruals that are
not tax-deductible, such as accruals for anticipated losses.
The deferred tax liabilities result predominantly from temporary
differences relating to tangible fixed assets due to different
carrying amounts and depreciation methods in the tax and consolidated balance sheet. In addition, the identified fair values
disclosed as part of the purchase price allocations of the acquisitions lead to deferred tax liabilities, in particular in intangible
and tangible fixed assets.
Deferred tax assets of EUR 421,689k were set up as tax loss
carry forwards of EUR 83,428k that are recoverable within five
years. EUR 181,499k of deferred tax assets were written off asof December 31, 2018, as their realization is not deemed sufficiently likely.

MAHLE G r o u p
Annual Report 2018

Off-balance-sheet transactions
As of the balance sheet date, off-balance-sheet transactions exist in connection with significant rental and leasing agreementsin particular for buildings and land (EUR 124,705k). Moreover,off-balance-sheet transactions are in place in connection withfactoring (EUR 108,351k). These off-balance-sheet transactions
led to a diversification of financing 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.

Contingent liabilities
Dec. 31, 2018
in EUR ’000

Contingents from notes

Carrying amount39,061

Guarantees

320

thereof to associated companies

120

Warranties

163

To our knowledge, the underlying obligations can be fulfilled in
all cases by the companies concerned. We do not expect thecontingent liabilities to be claimed. The contingent liabilities
include EUR 31,501k from proportionately consolidated companies.
The contingent liabilities do not include any obligations concerning retirement benefits.

Other financial obligations
Dec. 31, 2018
in EUR ’000

Carrying amount

Purchase commitments from investments

290,435

Financial obligations resulting fromrent and lease agreements

60,137

Others50,315

thereof to affiliated companies

158

The other financial obligations include EUR 16,741k from proportionately consolidated companies.

NOTES TO THE CONSOLIDATEDINCOME STATEMENT
The income statement of the MAHLE Group has been preparedaccording to the cost of sales method. Sales are thus matchedwith the expenses incurred in their realization, which are allocated in principle to the functions production, sales, generaladministration, and research and development.
The cost of sales comprises of the material and production
costs incurred in the realization of sales, the landed costs of the
trade business, and the costs of the allocation to accruals forwarranties. Furthermore, this item also contains depreciation
and amortization on the hidden reserves disclosed as part ofthe purchase price allocations of the acquisitions. These include technologies, technical equipment and machinery, as wellas land and buildings.
The selling expenses include, in particular, personnel andnon-personnel expenses, depreciation allocated to the sales
function, as well as logistics, market research, sales promotion,
shipping and handling, and advertising costs. Furthermore, theyalso contain amortization on the hidden reserves disclosed aspart of the purchase price allocations of the acquisitions. These
include trademark rights and customer relationships.
The general administration expenses include personnel andnon-personnel expenses as well as depreciation allocated to theadministrative function.
The personnel, and non-personnel expenses, and depreciation
allocated to the research and development function are substantial to the MAHLE Group. In order to present the economic situation of the group more clearly, they have been included as aseparate item in the breakdown.
Other operating income contains EUR 108,004k income relating
to other periods. This income is mainly related to the reversal of
accruals. Income from financing includes gains of EUR 39,686k(previous year: EUR 58,314k) from currency translation and gains
of EUR 0k (previous year: EUR 12k) from derivative financial­instruments.
Other operating expenses contains EUR 10,694k expenses relating to other periods. This expense is mainly related to disposals of depreciable fixed assets. Expenses from financing include
losses of EUR 87,438k (previous year: EUR 90,600k) from currency translation and expenses of EUR 266k (previous year: EUR
988k) from derivative financial instruments.

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

Contribution of proportionately consolidated
companies
The balance sheet includes short-term assets of EUR 317,344k
and long-term assets of EUR 135,146k belonging to proportionately consolidated companies. Current liabilities of EUR 204,742k
as well as long-term debt of EUR 79,653k are recognized by proportionately consolidated companies.

MAHLE G r o u p
Annual Report 2018

Consolidated financial statements
N ote s to th e c on solida te d f in a n c ia l s t a t e me n t s

113

Sales by area of operationin EUR ’000

Engine Systems and Components business unit

Subsequent valuation of the purchase priceallocation for the acquisitions*2018
2,781,150

Filtration and Engine Peripherals business unit

2,256,459

Thermal Management business unit

4,628,913

Aftermarket business unit

927,672

Mechatronics division452,943

Profit centers and services
Total

1,533,631

Depreciation and amortization within cost of sales

74,841

Amortization within selling expenses

25,240

Release of subsidies within other operating income

13,432* Concerns MAHLE Behr, former Delphi Thermal entities, MAHLE Electric Drives,
MAHLE Electronics and former Brain Bee entities

12,580,768

Sales by geographical market (target area)in EUR ’000

2018

in EUR ’000

2018

Europe5,860,985

North America

3,472,958

South America

578,834

Asia/Pacific2,579,267

Africa88,724

Total

12,580,768

Contribution of proportionately consolidated­companies
The income statement includes income of EUR 1,035,662k andexpenses of EUR 987,359k of proportionately consolidated companies.

OTHER NOTES
Average annual number of employees*
2018

Personnel expenses

in EUR ’000

Wages and salaries

2018

43,181

Indirect employees

35,455

Total

78,636* Excluding apprentices

2,399,899

Social security costs and other benefits

528,339

Old age pension costs

47,323

Total

Direct employees

2,975,561

The total average annual number of employees includes a pro
rata figure of 2,593 employees from proportionately consolidated companies.

Depreciation, amortization, and impairments
of intangible and tangible fixed assets
in EUR ’000

Total
thereof impairments

114

Consolidated financial statements
Not es t o t h e co n s olida ted financial statem ents

2018
604,067
7,297

MAHLE G r o u p
Annual Report 2018

Derivatives
Derivatives in accordance with Secs. 285, 314 of the German
Commercial Code (HGB) not yet settled as of the balance sheet
date can be broken down as follows:in EUR ’000

Dec. 31, 2018

Dec. 31, 2018

Nominalamounts*­Fair value**

Transactions relating to interest

5,486

– 172

Transactions relating to currency

2,027,456– 7,369

Transactions relating to­currency and interest

4,834

– 202

Transactions ­relating
to commodities

18,098– 2,002** The nominal amounts of the derivative financial instruments are based on
absolute values, that means long & short positions are being added with theirnominal values.
** The fair value of currency and commodities related transactions corresponds
to the market value of the derivatives as of the balance sheet date, which is
identified in accordance with the net present value method. All interest relatedtransactions are based on recognized financial/mathematical models.

The derivative contracts as of December 31, 2018 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 393k
were set up for all other hedging transactions that have resulted
in anticipated losses.

Evaluation units
The following evaluation units were created from derivatives andare shown with their netted values:

Dec. 31, 2018
Type ofevaluation unit

Amount ofhedged transaction

Balance sheet item

Portfolio hedge

102,699

Trade receivables

Portfolio hedge

12,423

Bank balances

Portfolio hedge– 6,913

Liabilities to banks

Portfolio hedge– 48,004

Trade payables

Remaining currency exposure from ­eliminatedtransactions with affiliated companies

Portfolio hedge

622,743

Future transactions

Portfolio hedge– 28,482

Recorded values

Micro hedge

0Remaining currency exposure from ­eliminatedtransactions with affiliated companies

Micro hedge

4,834

Recorded values

Micro hedge– 2,424

Remaining currency exposure from ­eliminatedtransactions with affiliated companies

Micro hedge

0Portfolio hedge

18,098in EUR ’000

Currency exposure
Recorded values

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

Interest exposure
Liabilities to banks

Commodity exposure
Future transactions

MAHLE G r o u p
Annual Report 2018

Consolidated financial statements
N ote s to th e c on solida te d f in a n c ia l s t a t e me n t s

115

Dec. 31, 2018
Volume of hedges

Currency exposure in transaction currency
CAD

in ’000

23,858CNY

88,701

CZK– 88,502

EUR– 39,482

GBP

14,859HUF– 2,210,000

JPY

10,176,706

MXN– 487,586

PLN– 34,000

RON

38,293RUB– 929,997

THB– 407,007

TRY

15,704USD– 786,211

Currency and interest ­exposurein transaction currency
CNY

in ’000– 39,680

Interest: fixed CNY/variable 3-month-Euribor
Interest exposure in transaction currency
IDR

in ’000

40,000,000

The risk of potential future changes in cash flows arising fromhighly probable underlying transactions, basically future deliveries of goods and services, is offset by using hedging transactions. The hedge ratio of such future transactions is reduced
over time; the further such transactions are in the future. The
hedging horizon for currency and commodities related hedging
transactions which are included in hedge accounting relationships is generally two years and, in exceptional cases, can beextended up to three years for commodities hedging transactions. Past experience has shown that this strategy has led toan 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 overtime. At any given point in time a number of individual booked
exposures can mature, each with their own portfolio of hedges
covering the exposure. The entirety of several booked exposureswith their respective hedges creates a portfolio hedge.
Currency and interest rate hedging transactions (cross currency
swaps) are entered into with the same maturity profile as the respective underlying contracts and form a micro hedge with thecorresponding financial liability.

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

in ’000

Aluminum– 10,240

Copper

– 4,374

Nickel

– 3,075

Tin

– 409

The changes in value in the underlying and hedging transactions
are offset during the hedging horizon, since risk positions (underlying transactions recognized on the balance sheet) are immediately hedged by means of forward exchange transactionsof the same amount, in the same currency, and with the same
maturity period in accordance with the guidelines of the grouprisk management.

116

Consolidated financial statements
Not es t o t h e co n s olida ted financial statem ents

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

Report on post-balance sheet date events
As of January 1, 2019 MAHLE Beteiligungen GmbH increased
its share in MAHLE Behr GmbH & Co. KG and MAHLE Behr Verwaltung GmbH to 60.71 percent by the acquisition of sharesfrom other shareholders.
MAHLE Behr Service GmbH plans to acquire all the shares in
Behr Hella Service GmbH, its current joint venture with Hella, asof January 1, 2020. The planned transaction is still subject tothe approval by the antitrust authorities.

Through the acquisition of the transmission specialist ZG-Zahnräder und Getriebe GmbH based in Eching near Munich in
January 2019, MAHLE GmbH is expanding its expertise in the
powertrain as a whole.

MAHLE G r o u p
Annual Report 2018

Appropriation of earnings
Unappropriated retained earnings

in EUR ’000

2018

Net income MAHLE GmbH68,874

Transfer to revenue reserves– 55,400

Amount carried forward from prior year
Unappropriated retained earnings MAHLE GmbH94
13,568The total remuneration of the Management Board comprises
fixed and variable components. The fixed portions for 2018
amounted to EUR 4,607k and the variable compensation for2018 to EUR 11,225k. 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.
Remunerations paid to former members of the Management
Board and their descendants totaled EUR 1,876k.
An amount of EUR 25,089k is set aside for this group of persons
in the pension accrual as of December 31, 2018.

Proposed utilization of retained earnings

in EUR ’000

Auditor’s fee
2018

Unappropriated retained earnings

13,568Dividend distribution to MAHLE-Stiftung GmbH

– 13,400

Carry forward to new account

The total auditor’s fee for 2018 charged by the group auditor
PricewaterhouseCoopers GmbH, pursuant to Sec. 314, Para. 1,
No. 9 of the German Commercial Code (HGB) consists of thefollowing:

168
2018

in EUR ’000

Services for audit of financial statements

Remuneration of the members of the­Management Board of MAHLE GmbH(parent company)

Other assurance services

36

Tax advisory services

870

Other services

72

Total
in EUR ’000

999

1,977

2018

Supervisory Board

851

Management Board

17,003

Stuttgart/Germany, March 19, 2019
The Management Board of MAHLE GmbH

Jörg Stratmann

Georg Dietz				Bernd Eckl 				Wilhelm Emperhoff

Arnd Franz				Michael Frick				Michael Glowatzki

MAHLE G r o u p
Annual Report 2018

Consolidated financial statements
N ote s to th e c on solida te d f in a n c ia l s t a t e me n t s

117Consolidated statementof fixed assets
CONSOLIDATED STATEMENT OF FIXED ASSETS FROM JANUARY 1 TO DECEMBER 31, 2018
Acquisition/manufacturing costs

BUSINESS YEAR 2018
Jan. 1, 2018

Jan. 1, 2018

Accumulatedacquisition/
manufac­turing costs

Currencytranslation

Changes at
the Group

1. P
 urchased concessions,industrial and similar rights
and assets, as well as licencesin such rights and assets

791,988– 1,638–14,056

2. Goodwill

570,9080

15,970in EUR ’000

I.

Dec. 31, 2018

Accumulatedacquisition/
manufac­turing costs

Disposals

Reclassi­
fications

Currencytranslation ofcurrent year 3

85,967

7,412–1,179340

854,010

53,660157,75100482,787

AdditionsIntangible assets

3. Prepayments

745

–4

0

453

108

–475

0

611

1,363,641– 1,6421,914

140,080

165,271–1,654340

1,337,408

1. L
 and, leasehold rights, andbuildings including buildingson third-party land

1,607,092

11,959981

26,65822,09534,695

1,908

1,661,198

2. Technical ­equipment
and machinery

5,313,399– 918– 8,802

184,421

127,102

234,837

23,1595,618,994

439,767377– 14,876

45,918

14,205

10,192

1,116

468,289

II. Property, plant, and equipment

3. O ther equipment, ­fixtures,and furniture
4. P repayments and ­assets­under construction

410,977

1,100– 3,953

351,929

3,972–278,070

333

478,3447,771,235

12,518– 26,650

608,926

167,374

1,654

26,5168,226,825

1. Shares in affiliated companies

28,340– 1,395

42

222

11,6360–715,566

2. S hares in associated companies

164,060

28– 8,943

2,262

114,518 1

0– 1,129

41,760

8,233

230

1

1,819

102

0

34

10,215

32

0

– 48

19

0

–3

0

0

6,430

–7

0

4

0

0

0

6,427

III. Financial assets

3. E
 quity investments
4. L oans to companies in which
participations are held
5. L
 ong-term securities
6. Other loans

1
2
3

118

16,7444– 1,204

53,189751

3

867,993

223,839– 1,140– 10,152

57,515127,0070– 1,094

141,961

9,358,715

9,736– 34,888

806,521459,652

025,762

9,706,194 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 597k
Including effects from hyperinflation adjustments for the country Argentina in accordance with IAS 29

Consolidated financial statements
Con s olidat ed s t at ement of fixed assets

MAHLE G r o u p
Annual Report 2018

Depreciation/amortization

Net book values

BUSINESS YEAR 2018
Jan. 1, 2018

Jan. 1, 2018

Accumulated
depreciation/amortization

Currencytranslation

Changes at
the Group

Depreciation/amortizationof thebusiness year

Write-upsof thebusiness year

545,533– 969– 14,894

107,738

274,266

0048,585000819,799– 969

667,776

Dec. 31, 2018

Dec. 31, 2018

Dec. 31, 2017

Disposals

Reclassi­
fications

Currencytranslation ofcurrent year 3

Accumulated
depreciation/amortization

Net book
valuesNet book
values

0

7,276

– 46

373

630,459

223,551

246,455

0

157,75200

165,099

317,688296,642

0

0

0

0

0

0

611

745

– 14,894

156,3230

165,028– 46

373

795,558

541,850

543,842

6,331

652

50,44538

15,069– 960

806

709,943951,255

939,316

3,780,587

2,105

145

351,452

0

114,243

3,367

19,7684,043,181

1,575,813

1,532,812

308,152717– 8,383

41,6620

12,864– 1,760

1,070

328,594

139,695

131,615

5,814

– 72

–5

4,185

0

816

– 601

12

8,517

469,827

405,163

4,762,329

9,081– 7,591

447,74438

142,992

46

21,656

5,090,235

3,136,590

3,008,906

23,392– 1,465

0

223

138

8,943

0

–7

13,062

2,504

4,948

52,564000049,918

0

0

2,646

39,114 2

111,496

168

8

0

0

103

0

0

–3

70

10,145

8,065

0

0

0

0

0

0

0

0

0

0

32

– 1,050

–1

0

2,570

0

0

0

0

1,519

4,908

7,480

– 384

– 125

0

24,651

122

1

0

0

24,01943,974

17,12874,690– 1,583

027,444363

58,8620– 1041,316100,645

149,149

5,656,818

6,529– 22,485

631,511401

366,882022,0195,927,109

3,779,085

3,701,897

MAHLE G r o u p
Annual Report 2018

Consolidated financial statements
C on solida te d sta te m e n t of f i x e d a s s e t s

119

Shareholdings
Shareholdings in companies included in consolidation, associated companies,
proportionately consolidated companies, and other companies which serve thepermanent business operations.

AS AT DECEMBER 31, 2018

NAME AND LOCATION

Sharein equityin %Equityin EUR ’000Result of
the last
business year
in EUR ’000

PARENT COMPANY
MAHLE GmbH, Stuttgart / Germany
1. Fully consolidated subsidiariesa) Fully consolidated subsidiaries of
MAHLE GmbH with direct shareholding quota

120

Conso, LLC, Wilmington, Delaware / USA

100.00

MAHLE Aftermarket Deutschland GmbH, Gunningen / Germany

100.00

MAHLE Aftermarket France SAS, Décines / France

100.00

MAHLE Aftermarket GmbH, Stuttgart / Germany

100.00

MAHLE Aftermarket Iberica S.A.U., Terrassa / Spain

100.00

MAHLE Aftermarket Inc., Farmington Hills, Michigan / USA

100.00

MAHLE Aftermarket Italy S.p.A., Parma / Italy

80.00

MAHLE Aftermarket Ltd., Bilston / Great Britain

100.00

MAHLE Aftermarket Pte. Ltd., Singapore / Singapore

100.00

MAHLE Aftermarket S. de R.L. de C.V., Lerma / Mexico

100.00

MAHLE Aftermarket S.L.U., Alcalá de Henares / Spain

100.00

MAHLE Aftermarket SAS, Poissy / France

100.00

MAHLE Amovis GmbH, Berlin / Germany

100.00

MAHLE ANAND Filter Systems Private Limited, Gurgaon / India

50.001

MAHLE Anéis Participações Ltda., Mogi Guaçu / Brazil

100.00

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

100.00

MAHLE Automotive Technologies (Suzhou) Co., Ltd., Changshu / China

100.00

MAHLE Behr GmbH & Co. KG, Stuttgart / Germany

57.46

MAHLE Behr Verwaltung GmbH, Stuttgart / Germany

55.71

MAHLE Beteiligungen GmbH, Stuttgart / Germany

100.00

MAHLE Brandenburg GmbH, Wustermark / Germany

100.00

MAHLE Componente de Motor SRL, Timisoara / Romania

100.00

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

100.00

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

100.00

MAHLE Compressores do Brasil Ltda., Jaguariúna / Brazil

100.00

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

100.00

MAHLE Compressors Hungary Kft., Balassagyarmat / Hungary

100.00

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

100.00

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

100.00

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

100.00

MAHLE Ebikemotion S.L.U., Palencia / Spain

100.00

MAHLE Electric Drives (Taicang) Co., Ltd., Taicang City / China

99.64

MAHLE Electric Drives Bel OOO, Grodno / Belarus

100.00

MAHLE Electric Drives Bosnia d.o.o., Laktaši / Bosnia and Herzegovina

100.00

MAHLE Electric Drives Bovec d.o.o., Bovec / Slovenia

100.00

MAHLE Electric Drives Italy S.r.l., Reggio Emilia / Italy

100.00

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

100.00Consolidated financial statements
S hareh oldin gs

MAHLE G r o u p
Annual Report 2018

AS AT DECEMBER 31, 2018

NAME AND LOCATION

Sharein equity
in %MAHLE Electric Drives Komen d.o.o., Komen / Slovenia

100.00

MAHLE Electric Drives Slovenija d.o.o., Šempeter pri Gorici / Slovenia

100.00

MAHLE Electronics S.L.U., Motilla del Palancar / Spain

100.00

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

100.00

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

100.00

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

99.75

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

100.00

MAHLE Engine Components India Private Limited, Pithampur / India

100.00

MAHLE Engine Components Japan Corporation, Okegawa-shi / Japan

100.00

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

100.00

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

100.00

MAHLE Engine Systems UK Ltd., Kilmarnock / Great Britain

100.00

MAHLE Engineering Services India Private Limited, Pune / India

40.005

MAHLE Filter Systems Canada, ULC, Tilbury / Canada

100.00

MAHLE Filter Systems Japan Corporation, Tokyo / Japan

100.00

MAHLE Filter Systems Land Corporation, Cavite / Philippines

66.67

MAHLE Filter Systems North America, Inc., Troy, Michigan / USA

100.00

MAHLE Filter Systems Philippines Corporation, Cavite / Philippines

100.00

MAHLE Filter Systems UK Ltd., Telford / Great Britain

100.00

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

100.00

MAHLE Filtersysteme France SAS, Seboncourt / France

100.00

MAHLE Filtersysteme GmbH, Stuttgart / Germany

100.00

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

100.00

MAHLE Filtre Sistemleri A.S., Gebze / Turkey

100.00

MAHLE France SAS, Rouffach / France

100.00

MAHLE Guangzhou Filter Systems Co., Ltd., Guangzhou / China

100.00

MAHLE Holding (India) Private Limited, Gurgaon / India

100.00

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

100.00

MAHLE Holding España S.L.U., Montblanc / Spain

100.00

MAHLE Immobilien GmbH, Stuttgart / Germany

100.00

MAHLE Immobilien Schweiz AG, Grenchen / Switzerland

100.00

MAHLE Indústria e Comércio Ltda., Mogi Guaçu / Brazil

100.00

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

60.005

MAHLE Industriebeteiligungen GmbH, Stuttgart / Germany

100.00

MAHLE Industriemotoren-Komponenten GmbH, Stuttgart / Germany

100.00

MAHLE Industries UK Ltd., Rugby / Great Britain

100.00

MAHLE Industries, Incorporated, Farmington Hills, Michigan / USA

100.00

MAHLE International GmbH, Stuttgart / Germany

100.00

MAHLE Japan Ltd., Tokyo / Japan

100.00

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

100.00

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

100.00

MAHLE Luxembourg Sàrl, Foetz / Luxembourg

100.00

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

100.00

MAHLE Manufacturing Service Japan Corporation, Tokyo / Japan

100.00

MAHLE Maquiladora LLC, Farmington Hills, Michigan / USA

100.00

MAHLE G r o u p
Annual Report 2018

Equityin EUR ’000Result of
the last
business year
in EUR ’000

Consolidated financial statements
S h a re h o l d i n g s

121

AS AT DECEMBER 31, 2018

NAME AND LOCATION

Sharein equity
in %MAHLE Metal Leve S.A., Mogi Guaçu / Brazil

70.00

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

100.00

MAHLE Polska Spółka z o.o., Krotoszyn / Poland

100.00

MAHLE Powertrain, LLC, Plymouth, Michigan / USA

100.00

MAHLE Powertrain GmbH, Stuttgart / Germany

100.00

MAHLE Powertrain Ltd., Northampton / Great Britain

100.00

MAHLE RUS, OOO, Dobrino / Russia

100.00

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

100.00

MAHLE Services (Thailand) Ltd., Samut Prakan / Thailand

100.00

MAHLE Shanghai Filter Systems Co., Ltd., Shanghai/ China

95.00

MAHLE Shared Services Mexico, S. de R.L. de C.V., Monterrey / Mexico

100.00

MAHLE Shared Services Poland Spółka z o.o., Wrocław / Poland

100.00

MAHLE Siam Electric Drives Co. Ltd., Samut Prakan / Thailand

100.00

MAHLE Siam Filter Systems Co., Ltd., Samut Prakan / Thailand

74.90

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

100.00

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

100.00

MAHLE Trading (Shanghai) Co., Ltd., Shanghai/ China

100.00

MAHLE Trading Japan Co., Ltd., Tokyo / Japan

100.00

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

65.00

MAHLE Ventiltrieb GmbH, Stuttgart / Germany

100.00

MAHLE Versicherungsvermittlung GmbH, Stuttgart / Germany

100.00

MAHLE Vöcklabruck GmbH, Vöcklabruck / Austria

100.00MG Immobilienentwicklungs- und Ansiedlungsgesellschaft mbH, Wolfsberg / Austria

100.00OSCON, LLC, Wilmington, Delaware / USA

100.00PT. MAHLE Filter Systems Indonesia, Pasirranji / Indonesia

100.00PT. MAHLE Indonesia, Pasirranji / Indonesia

100.00S.C.I. Daudet, Décines / France

100.00Equityin EUR ’000Result of
the last
business year
in EUR ’000b) Fully consolidated subsidiaries of
MAHLE Behr GmbH & Co. KG with direct shareholding quota

122

IQENTO GmbH, Stuttgart / Germany

100.00

MAHLE Behr Berga GmbH, Berga / Germany

100.00

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

100.00

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

100.00

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

100.00

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

100.00

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

100.00

MAHLE Behr Gerenciamento Térmico Brasil Ltda., Arujá / Brazil

100.00

MAHLE Behr Grugliasco S.p.A., Grugliasco / Italy

100.00

MAHLE Behr Holding Deutschland GmbH, Stuttgart / Germany

100.00

MAHLE Behr Holding GmbH, Stuttgart / Germany

100.00

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

100.00

MAHLE Behr India Private Limited, Pune / India

60.00

Consolidated financial statements
S hareh oldin gs

MAHLE G r o u p
Annual Report 2018

AS AT DECEMBER 31, 2018

NAME AND LOCATION

Sharein equity
in %MAHLE Behr Italy s.r.l., Grugliasco / Italy

100.00

MAHLE Behr Japan K.K., Tokyo / Japan

100.00

MAHLE Behr Kirchberg GmbH, Kirchberg / Germany

100.00

MAHLE Behr Korea Inc., Busan / South Korea

100.00

MAHLE Behr Kornwestheim GmbH, Kornwestheim / Germany

100.00

MAHLE Behr Luxembourg Sàrl, Foetz / Luxembourg

100.00

MAHLE Behr Manufacturing Management, Inc., Troy, Michigan / USA

100.00

MAHLE Behr Maquiladora, LLC, Wilmington, Delaware / USA

100.00

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

100.00

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

100.00

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

100.00

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

100.00

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 Rio Bravo, S. de R.L. de C.V., Ramos Arizpe / Mexico

100.00

MAHLE BEHR RUS LLC, St. Petersburg / Russia

100.00

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

100.00

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

100.00

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

100.00

MAHLE Behr Service GmbH, Stuttgart / Germany

100.00

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

100.00

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

100.00

MAHLE Behr Spain S.A.U., Montblanc / Spain

100.00

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

100.00

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

100.00

MAHLE Behr Troy Inc., Troy, Michigan / USA

100.00

MAHLE Behr USA Inc., Troy, Michigan / USA

100.00

MAHLE Engineering Services India Private Limited, Pune / India

60.005

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

40.005Equityin EUR ’000Result of
the last
business year
in EUR ’000c) 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

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

100.00d) Fully consolidated subsidiaries of
MAHLE Industrial Thermal Systems GmbH & Co. KG with direct shareholding quota
MAHLE Industrial Thermal Systems (Tianjin) Co., Ltd., Tianjin / China

100.00

MAHLE Industrial Thermal Systems America, L.P., Belmont, Michigan / USA

99.00

MAHLE G r o u p
Annual Report 2018

Consolidated financial statements
S h a re h o l d i n g s

123AS AT DECEMBER 31, 2018

NAME AND LOCATION

Sharein equityin %Equityin EUR ’000Result of
the last
business year
in EUR ’000

100.00 3, 674

17

2. Affiliated companies, not consolidated on account of their immateriality for thepresentation of the net assets, financial position and results of operationsa) Affiliated companies of
MAHLE Behr GmbH & Co. KG with direct shareholding quota
MAHLE Behr Sweden AB, Gothenburg/  Swedenb) Other affiliated companies
with direct shareholding quota
Compañía Rosarina S.A., Rosario / Argentina

99.99 3,6

276

– 139

Eito Denki Co. Ltd., Gojōme-machi, Akita / Japan

66.75 3203

62

MAHLE Engine Components Australia Pty Ltd., Melbourne / Australia

100.00 4597

16

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

100.00 361

0MAHLE Industrial Thermal Systems Verwaltung GmbH, Stuttgart / Germany

100.00454

9MAHLE Kleinmotoren-Komponenten Verwaltungs GmbH, Stuttgart / Germany

100.0027

0MAHLE Thermoelektronik GmbH, Duisburg / Germany

100.00116

2Retromotion GmbH, Stuttgart / Germany

100.00

– 430

– 465

Ueno Industry Co. Ltd., Tokyo / Japan

100.00 3545

29

3. Proportionately consolidated companiesa) Subgroup Behr-Hella Thermocontrol that is managed by
MAHLE Behr GmbH & Co. KG and another company
PARENT COMPANY
Behr-Hella Thermocontrol GmbH, Stuttgart / Germany

50.00

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

100.00Behr-Hella Thermocontrol EOOD, Bozhurishte / Bulgaria

100.00Behr-Hella Thermocontrol Inc., Wixom, Michigan / USA

100.00Behr-Hella Thermocontrol India Private Limited, Pune / India

100.00Behr-Hella Thermocontrol Japan K.K., Atsugi / Japan

100.00

BHTC Finland Oy, Tampere / Finland

100.00

BHTC Mexico S.A. de C.V., San Miguel de Allende / Mexico

100.00b) Subgroup Behr Hella Service that is managed by
MAHLE Behr GmbH & Co. KG and another company
PARENT COMPANY
Behr Hella Service GmbH, Schwäbisch Hall / Germany

50.00

Companies included in subgroup accounts of Behr Hella Service GmbHwith direct shareholding quota

124

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

100.00Behr Hella Service North America L.L.C., Peachtree City, Georgia / USA

100.00Behr Hella Service South Africa (Pty) Ltd., Johannesburg / South Africa

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

100.00Consolidated financial statements
S hareh oldin gs

MAHLE G r o u p
Annual Report 2018

AS AT DECEMBER 31, 2018

NAME AND LOCATION

Sharein equityin %Equityin EUR ’000Result of
the last
business year
in EUR ’000

2,707

– 79

47,365

6,931

566

– 94

415

– 148

7,248

54

c) Proportionately consolidated group of companies that is managed by
MAHLE Behr GmbH & Co. KG and another company
PARENT COMPANY
Shanghai MAHLE Thermal Systems Co., Ltd., Shanghai/ China

50.00

Subsidiaries with direct shareholding quota
Chengdu MAHLE Automotive Thermal Systems Co., Ltd., Chengdu / China

100.00

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

100.00d) Other proportionately consolidated companies withdirect shareholding quota that are managed by
MAHLE Behr GmbH & Co. KG and another company
Dongfeng MAHLE Thermal Systems Co., Ltd., Wuhan / China

50.00

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

50.00

b) A
 ssociated companies of
MAHLE Metal Leve S.A. with direct shareholding quota
Innoferm Tecnologia Ltda., Mogi Guaçu  /  Brazil

33.33 2, 3c) O ther associated companies with direct shareholding quota
Cofap Companhia Fabricadora de Peças Ltda., Mogi Guaçu / Brazil
India Nippon Electricals Ltd., Chennai/ India
LangFang Kokusan Electric Co., Ltd., Langfang / China
Letrika Sol d.o.o., Šempeter pri Gorici / Slovenia
MAHLE König GmbH, Rankweil / Austria
MAHLE König Kommanditgesellschaft GmbH & Co. KG, Rankweil / Austria
MAHLE Letrika Roots India Private Limited, Coimbatore / India
Pt Federal Izumi Manufacturing, Bogor / Indonesia
SiEVA d.o.o., Šempeter pri Gorici / Slovenia

31.65
20.52 2, 3
40,00
41.57 2, 3
50.00
50.00
50.00 2, 3
36.94
20.00 2, 3

Shareholding 50% + 1 share The 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
From the Group’s perspective, company is included by 100%
6Previous year figures according to last available financial statements
1
2

MAHLE G r o u p
Annual Report 2018

Consolidated financial statements
S h a re h o l d i n g s

125Auditor’s report
This audit report is issued on financial statements prepared in German language.

INDEPENDENT AUDITOR’S REPORTTo MAHLE GmbH, Stuttgart

Audit Opinions
We have audited the consolidated financial statements of
MAHLE GmbH, Stuttgart, and its subsidiaries (the Group), which
comprise the consolidated balance sheet as at 31 December
2018, and the consolidated income statement, consolidated
cash flow statement, and consolidated statement of changes inequity for the financial year from 1 January to 31 December 2018,
and notes to the consolidated financial statements, including
the presentation of the recognition and measurement policies.
In addition, we have audited the group management report of
MAHLE GmbH for the financial year from 1 January to 31 December 2018.
In our opinion, on the basis of the knowledge obtained in theaudit,

Basis for the Audit Opinions
We conducted our audit of the consolidated financial statements
and of the group management report in accordance with § 317
HGB in compliance with German Generally Accepted Standards
for Financial Statement Audits promulgated by the Institut der
Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW).
Our responsibilities under those requirements and principles arefurther described in the “Auditor’s Responsibilities for the Auditof the Consolidated Financial Statements and of the Group Management Report“ section of our auditor’s report. We are independent of the group entities in accordance with the requirements of German commercial and professional law, and we havefulfilled our other German professional responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinions on the consolidated financial statements and on the group management report.

Other Information
The executive directors are responsible for the other information.

— the accompanying consolidated financial statements comply, in all material respects, with the requirements of German commercial law and give a true and fair view of theassets, liabilities and financial position of the Group as at
31 December 2018 and of its financial performance for thefinancial year from 1 January to 31 December 2018 in compliance with German Legally Required Accounting Principles, and— the accompanying group management report as a wholeprovides an appropriate view of the Group’s position. In allmaterial respects, this group management report is consistent with the consolidated financial statements, complies
with German legal requirements and appropriately presents
the opportunities and risks of future development.
Pursuant to § [Article] 322 Abs. [paragraph] 3 Satz [sentence] 1
HGB [Handelsgesetzbuch: German Commercial Code], we declare that our audit has not led to any reservations relating to thelegal compliance of the consolidated financial statements andof the group management report.

126

Consolidated financial statements
A udit o r’s repo rt

The other information comprises the annual report – excluding
cross-references to external information – with the exception of
the audited consolidated financial statements, the audited groupmanagement report and our auditor’s report.
Our audit opinions on the consolidated financial statements andon the group management report do not cover the other information, and consequently we do not express an audit opinion
or any other form of assurance conclusion thereon.
In connection with our audit, our responsibility is to read theother information and, in so doing, to consider whether the otherinformation— is materially inconsistent with the consolidated financial
statements, with the group management report or our
knowledge obtained in the audit, or— otherwise appears to be materially misstated.

MAHLE G r o u p
Annual Report 2018

Responsibilities of the Executive
Directors and the Supervisory Board for
the Consolidated Financial Statements
and the Group Management Report
The executive directors are responsible for the preparation of
the consolidated financial statements that comply, in all material
respects, with the requirements of German commercial law, andthat the consolidated financial statements give a true and fairview of the assets, liabilities, financial position and financial performance of the Group in compliance with German Legally Required Accounting Principles. In addition the executive directors
are responsible for such internal control as they, in accordancewith German Legally Required Accounting Principles, have determined necessary to enable the preparation of consolidated
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group’s ability
to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting
based on the going concern basis of accounting, provided no
actual or legal circumstances conflict therewith.
Furthermore, the executive directors are responsible for the
preparation of the group management report that, as a whole,provides an appropriate view of the Group’s position and is, inall material respects, consistent with the consolidated financial
statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible forsuch arrangements and measures (systems) as they have considered necessary to enable the preparation of a group management report that is in accordance with the applicable German
legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the group management report.
The supervisory board is responsible for overseeing the Group’s
financial reporting process for the preparation of the consolidated financial statements and of the group management report.

Auditor’s Responsibilities for the Auditof the Consolidated Financial Statements
and of the Group Management Report
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole arefree from material misstatement, whether due to fraud or error,
and whether the group management report as a whole provides
an appropriate view of the Group’s position and, in all material
respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with
the German legal requirements and appropriately presents theopportunities and risks of future development, as well as to issue an auditor’s report that includes our audit opinions on the

MAHLE G r o u p
Annual Report 2018

consolidated financial statements and on the group management report.
Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with
§ 317 HGB and in compliance with German Generally AcceptedStandards for Financial Statement Audits promulgated by theInstitut der Wirtschaftsprüfer (IDW) will always detect a material
misstatement. Misstatements can arise from fraud or error andare considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements and this group management report.
We exercise professional judgment and maintain professional
skepticism throughout the audit. We also:— Identify and assess the risks of material misstatement of
the consolidated financial statements and of the groupmanagement report, whether due to fraud or error, design
and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate
to provide a basis for our audit opinions. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
— Obtain an understanding of internal control relevant to theaudit of the consolidated financial statements and of arrangements and measures (systems) relevant to the auditof the group management report in order to design audit
procedures that are appropriate in the circumstances, but
not for the purpose of expressing an audit opinion on theeffectiveness of these systems.
— Evaluate the appropriateness of accounting policies used by
the executive directors and the reasonableness of estimates
made by the executive directors and related disclosures.
— Conclude on the appropriateness of the executive directors’
use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor’s reportto the related disclosures in the consolidated financial
statements and in the group management report or, if suchdisclosures are inadequate, to modify our respective audit
opinions. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease
to be able to continue as a going concern.
— Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures, and whether the consolidated financial statements
present the underlying transactions and events in a mannerConsolidated financial statements
A u d i t o r ’s re p o r t127that the consolidated financial statements give a true andfair view of the assets, liabilities, financial position and financial performance of the Group in compliance with German Legally Required Accounting Principles.
— Obtain sufficient appropriate audit evidence regarding thefinancial information of the entities or business activities
within the Group to express audit opinions on the consolidated financial statements and on the group management
report. We are responsible for the direction, supervision andperformance of the group audit. We remain solely responsible for our audit opinions.
— Evaluate the consistency of the group management reportwith the consolidated financial statements, its conformity
with German law, and the view of the Group’s position it
provides.
— Perform audit procedures on the prospective information
presented by the executive directors in the group management report. On the basis of sufficient appropriate audit
evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of
the prospective information from these assumptions. We
do not express a separate audit opinion on the prospective
information and on the assumptions used as a basis. Thereis a substantial unavoidable risk that future events will differ
materially from the prospective information.

128

Consolidated financial statements
A udit o r’s repo rt

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of theaudit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Stuttgart, March 19, 2019

PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft

sgd. Jürgen Berghaus
Wirtschaftsprüfer		(German Public Auditor)

sgd. ppa. Renate Berghoff
Wirtschaftsprüferin(German Public Auditor)

MAHLE G r o u p
Annual Report 2018

Imprint
Contact
Published by
MAHLE GmbH
Pragstraße 26 – 4670376 Stuttgart/Germany
Phone +49 (0)711-501-0
www.mahle.com
info@mahle.com

Contact
MAHLE INTERNATIONAL GMBH
Corporate Communications/Public Relations
Pragstraße 26 – 4670376 Stuttgart/Germany
Phone +49 (0)711-501-12506

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a nd tex t
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Türkenstraße 55 – 57
80799 Munich/Germany
www.hwdesign.de

Photog r a phy
AEP Ohio, Andreas Pohlmann, Ben Schmehe,Charlotte Fischer, Dirk Bruniecki, KD Busch,
MAHLE Archiv

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info.GERMANY@elanders.com© 2019 MAHLE GmbH, 00007844EN2.5.5/19

annualreport.mahle.com