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Edited Transcript of BMW.DE earnings conference call or presentation 18-Mar-20 9:00am GMT

Q4 2019 Bayerische Motoren Werke AG Earnings Press Conference

Munich Mar 19, 2020 (Thomson StreetEvents) -- Edited Transcript of Bayerische Motoren Werke AG earnings conference call or presentation Wednesday, March 18, 2020 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Andreas Wendt

Bayerische Motoren Werke Aktiengesellschaft - Head of Purchasing & Supplier Network and Member of Management Board

* Ilka Horstmeier

Bayerische Motoren Werke Aktiengesellschaft - HR, Labour Relations Director & Member of Management Board

* Klaus Fröhlich

Bayerische Motoren Werke Aktiengesellschaft - Head of Development & Member of the Board of Management

* Maximilian Schöberl

Bayerische Motoren Werke Aktiengesellschaft - EVP of Corporate & Governmental Affairs

* Milan Nedeljkovic

Bayerische Motoren Werke Aktiengesellschaft - Member of Board of Management

* Nicolas Peter

Bayerische Motoren Werke Aktiengesellschaft - CFO & Member of Management Board

* Oliver Zipse

Bayerische Motoren Werke Aktiengesellschaft - Chairman of the Board of Management & CEO

* Pieter A. J. Nota

Bayerische Motoren Werke Aktiengesellschaft - Member of Management Board

* Torsten Schuessler

Bayerische Motoren Werke Aktiengesellschaft - Head of IR

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Conference Call Participants

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* Alan Tovey

* David McHugh

* Edward Taylor

* Markus Fasse

* Martin Hesse

* Max Hägler

* Oliver Sachgau

* Roland Losch

* Stefan Kroneck

* Stefan Stahl

* William Boston

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Presentation

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Maximilian Schöberl, Bayerische Motoren Werke Aktiengesellschaft - EVP of Corporate & Governmental Affairs [1]

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Good morning, ladies and gentlemen, colleagues at (inaudible). This year, everything is different. COVID-19 and the measures resulting from that have a firm grip on all of us. And against this background, we've decided to hold this year's annual accounts press conference as well as tomorrow's analyst and investor conference to hold that without audience and to only stream it online.

The health of our staff and of our employees have the highest priority. We've taken measures early on as the employees of 130,000 employers, were also responsible for our group's staying on course in this extreme situation. Head, Zipse will give you more insight into that in a moment.

Ladies and gentlemen, colleagues, let us come to this morning, the press conference, as always, will be simultaneously rendered into different languages. The languages available are shown in the live stream.

Today, we will report on the annual -- on the financial year 2019, and we will also give you an outlook for 2020. Our annual report will no longer be printed but only be published digitally. The same goes for the sustainability report.

Colleagues, I may now introduce the members of the managing board. I will start with Ilka Horstmeier, who has her first annual accounts press conference as a member of the board. She is responsible for Human Resources and Labor Relations.

Next to her, Dr. Milan Nedeljkovic, Production's Director, for him too this is a premier; Dr. Andreas Wendt follows. He is the Sales Director; Pieter Nota, responsible for customers, brands and sales; and well-known, Klaus Fröhlich, our Development Director. Very important, Dr. Nicola Peter, our CFO; and Oliver Zipse, our Chairman of the Board.

So what can you expect today?

First of all, we will hear a short statement on the current situation. Afterwards, Dr. Peter will give you a detailed overview on the financial year of 2019 and an outlook for 2020. Subsequently, head Zipse will give you some insights on current and future challenges. Your questions can be rendered via phone to all members of the board subsequently.

I will now give the floor to Head, Zipse.

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Oliver Zipse, Bayerische Motoren Werke Aktiengesellschaft - Chairman of the Board of Management & CEO [2]

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Ladies and gentlemen, also, I would like to bid you a good morning. In these times, we need responsible measures in our society because we are all in an extraordinary situation, and we are all personally affected. Experts in medicine and science tell us clearly what needs to be done in order to slow down the corona pandemic. The next couple of weeks are going to be essential. Many countries have already taken decisive measures, and we back these decisions.

As a company, in the situation, we've got various different tasks. First of all, we have to protect our employees and their families to the best of our ability to support our society in the fight against the virus but at the same time, our operative capability to act needs to be upheld, and we need to be prepared for the time after corona.

For that, we've taken far-reaching decisions for our day-to-day business. For many people in these days, it's about the essentials.

It's about their health, it's about their supply. Many traders and car dealerships in Europe are already closed for the time being because as is the case for many things, the demand for cars will significantly decrease. In our case, our production follows the forecast sales development, our production volume is flexibly adjusted to demand.

As of today, we start bringing down our European automotive plants and also the plant in Rosslyn in South Africa.

The production interruption is scheduled to last for 4 weeks until the 19th of April.

At BMW Group, we have highly flexible and effective working time instruments, both in the direct area, that is the production as well as in the indirect area that is administration.

And now we benefit from that. Our ability to work, we will continue to secure. That is very important. And at the same time, the risk of infection for our employees is reduced.

For that, we've got a far-reaching comprehensive package of measures that we've implemented. Employees, for instance, can work from home, wherever that is possible and wherever that makes sense. I would also like to thank our social partners that as is the case in the tried and tested BMW culture, we found solutions fast.

I would like to thank all employees for helping us to get through the situation together well.

I would like to thank specifically the purchasing and the logistics department and our partners for their flexibility, and I would like to thank our competence team, Corona.

The BMW group can deal with difficult situations. That is something that we have often proven. During the oil crisis in the early 1970s, for instance, we opened the Dingolfing Plant. In 2021, there, our new technology carrier, the iNEXT, will start to roll out there.

In the global economic and financial crisis of the years 2008 and 2009, we were in the black and the first all-round sustainable serial e-vehicle was launched. Today, the BMW i3 is one of the most sold e-vehicles in the world. Also in the current situation, we want to be guardedly confident because there is a time during corona and there will be a time after corona.

Therefore, we've decided to give you an outlook of what we want to do.

The current situation requires a strong joint effort. We are strong, and we fight this jointly.

So much for me for the time being. Nicolas Peter will now give you the numbers for financial year 2019 as well as our forecast for the ongoing year 2020, that short-term has been adjusted to the current situation. Thank you very much.

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Nicolas Peter, Bayerische Motoren Werke Aktiengesellschaft - CFO & Member of Management Board [3]

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Good morning, ladies and gentlemen, and welcome also from my side. Oliver Zipse has already mentioned, we are in a very extreme situation, even though we're well on track in -- from an operational point of view in many different areas.

The measures connected to the coronavirus will have a significant impact on to our business development in the ongoing year. Our short-term focus will be put especially on to the stabilization of liquidity and result.

And I will tell you more about this in my forecast towards the end of my speech. One thing holds true, in general, we are an adaptable and flexible company. Fast and consistent actions shape us.

But at the same time, we are and will remain a company with a long-term focus. Our strategic targets stand in a stable environment. We aim for an EBIT margin in the Automotive segment of 8% to 10% and a free cash flow of at least EUR 3 billion.

Ladies and gentlemen, let me first talk about the past financial year. In what was a challenging environment for the whole industry, the BMW Group was an active driver of transformation.

In 2019, we once again proved our performance power. With new and important models, as announced, we improved our results from quarter-to-quarter.

The new X7 and the 8 Series had great launches. With the launch of the 3 Series in China and in Mexico, in the spring of 2019, we also set ourselves up with an even broader production base in this important segment.

Also the new 1 Series had a successful start. As planned, we've clearly expanded our market share in the luxury segment, which enabled us a solid financial basis for the financing of our electric offensive.

At the same time, we've continues -- continued to work systematically and consistently on all levers in order to reach our ambitious long-term profitability goals. That we're well on the track in this regard is shown by our continuous performance increase over the past financial year.

The fourth quarter 2019 as expected was -- showed much better results than the previous year's quarter. It set a revenue record for -- in our history. In the Automotive segment, both in the operating result but also in profitability, we continued to improve our figures. And several factors played into this.

On the one hand side, the car sales volumes increased. And at the same time, we strengthened our portfolio in a targeted way in the upper segments. And therefore, clearly improved our car mix.

Our young and very attractive vehicle portfolio is also reflected in an improved price implementation. And finally, our continuous efficiency improvements have clearly paid off.

Our EBIT margin in the Automotive segment in the fourth quarter was at 6.8% in spite of continuously -- of a continuously high level of research and development expenses and in spite of increased production costs due to higher regulatory requirement -- requirements.

Ladies and gentlemen, as announced, we were able to continuously improve our performance after what had been and as expected, a very challenging first half year.

Overall, group revenues rose by 7.6% in 2019 to more than EUR 104 billion, crossing the EUR 100 billion threshold for the first time. That increase was especially due to improvements in the volume mix and in prices.

Adjusted for foreign exchange effects, our revenues rose by 6.1%. The earnings before tax at EUR 7.12 billion, as announced, were clearly below the previous year's level.

In April, the allegations of complaints were sent to us by the EU Commission regarding the cartel allegations.

In line with IFRS, we therefore created provision in the first quarter of around -- of close to EUR 1.4 billion, which clearly affected our result.

The EBIT -- EBT margin for the financial year 2019, therefore, amounted to 6.8%. In addition to this, our financial result, as expected, declined significantly. The result contribution of our Chinese venture -- joint venture, BBA, significantly increased by close to EUR 180 million to EUR 918 million. That was countered in addition to the operating result of the YOUR NOW Group also by value adjustments within the group regarding the restructuring. And an interest rate result that was reduced by EUR 330 million due to positive one-off effects in the year 2018.

In 2018, also the purchase of the DriveNow shares of SIXT had a positive effect of EUR 209 million.

The annual surplus of the BMW Group was at EUR 5.02 billion.

Ladies and gentlemen, what sets us apart is our innovative power. Year after year, we invest several billions of euros in a targeted and very focused way. Over the past years, we've systematically enabled all our major plans for electric mobility. Our new intelligent vehicle architectures will be launched starting next year. Through this, against the volatile backdrop, we create the highest demand flexibility possible.

Investments mainly into fixed assets in 2019 due to the first accounting of use rights according to IFRS 16, rose to EUR 5.65 billion. Especially for the launches of our BMW volume models of the 1 and 3 Series, we took the necessary upfront investments.

And a main focal point was on the further development of our drivetrains, both for our new electric engines, but also for the new generation of our highly efficient internal combustion engines. We continue to invest 3-digit million amounts into our plans.

Overall, the investment ratio in the financial year 2019 was at 5.4%. And therefore, due to the switch to IFRS 16, slightly above the previous year.

Also when it comes to R&D expenditure, it becomes clear that we consistently keep shaping the BMW Group and focusing on the future.

For us, transformation hasn't just started, we are right in the midst of it. In 2019, our R&D expenditure according to IFRS grew by around EUR 630 million to close to EUR 6 billion, especially due to higher impairments and a lower capitalization ratio. The R&D ratio according to German Commercial Code, HGB, was at 6.2%. And therefore, as forecast, below the record level of the previous year.

Ladies and gentlemen, in spite of the high number of burdens and the declining financial result, the BMW Group in 2019 generated a very solid result.

That is why the Board of Management and the Supervisory Board propose a dividend of EUR 2.50 per share of common stock and a dividend of EUR 2.52 per share of preferred stock.

The payout ratio at 32.8% would be above the previous year's value and still within our targeted bandwidth of 30% to 40%. Subject to the approval of the Annual General Meeting, this would lead to a dividend amount of EUR 1.65 billion.

Ladies and gentlemen, let me now come to the development in individual segments, starting with our Automotive segment. Revenues on the basis of positive model mix effects and the strong sales in China rose by 6.8% to EUR 91.68 billion.

Deliveries increased for the first time to more than 2.5 million vehicles. As expected, the operating result declined mainly due to the mentioned provision to close to EUR 5.4 billion. Our EBIT margin at 4.9% was within our adapted target corridor.

Without the provision, the margin would have been at 6.4%. Let me now come to the EBIT bridge from the previous year. There was a positive effect in 2019 from the significantly improved product mix, especially the new X7 and the 8 Series just as well as the new version of the X5 met great response by the customers. At the same time, we were able to slightly improve price implementation in important markets. We spent EUR 600 million more on research and development than in the previous year, also higher manufacturing costs due to regulatory requirements, put a burden onto our result.

In addition to this, we had a planned increase of impairments. Headwinds compared to the previous year stand, as expected, from the development in foreign exchange and raw material prices, which put a burden of EUR 650 million onto our results.

We were able to balance a large part of these high burdens through our continuous efficiency measures and through optimizations in our sales force.

That was encountered by the provisions for cartel allegations under other costs and some expenses.

Ladies and gentlemen, also for 2020, we have clear targets. Free cash flow and profitability have high priority in our company control. All our measures and initiatives of the ongoing company program Performance > NEXT pay into these strategic threats. Be it on the sales side, in material costs or when it comes to indirect spending, we continue to work consistently on all levers.

Also when it comes to HR expenses, we early on and successfully counteracted and established measures, long-term package of measures of the past few months in cooperation with the Works Council.

Regarding our free cash flow, we focus especially on investments and a consistent management of our working capital. We continue to invest in a targeted manner and with a sense of proportion. Especially in -- when it comes to necessary structural measures in our plants, we rely on standardized solutions that can be flexibly used around the world.

In spite of the continuously high investments into the future technologies, I described before, and the lower surplus, our free cash flow in the Automotive segment has -- was still very solid. With EUR 2.57 billion, it is close to the level of the previous year.

Also when it comes to our liquidity position within the group, we saw a very solid development in 2019. Sufficient liquidity reserves secure our ability to act in our entrepreneurial independence at every time. At the end of the year, our group liquidity was at EUR 17.4 billion. This sends a strong message to our lenders and forms a good basis for continuous growth in our financial services business.

Ladies and gentlemen, our Financial Services segment showed another excellent performance in the year 2019. The number of contracts with new customers for the first time increased to more than 2 million contracts. The penetration rate at 52.2% was 2.1 percentage points above the previous year's level, especially due to growth in China and the United States.

Both in our leasing business, as in credit financing, our penetration rates have slightly increased. The pretax result, therefore grew in line with a good business development by 6.0% to new record level of EUR 2.27 billion. Our return on equity at 15.0% was as forecast on the previous year's level and continues to be above -- clearly above our minimum claim of 14%.

The risk situation in the segment in the past year continued to remain stable in spite of continued political and economical uncertainties.

The loan loss ratio was more or less flat at 0.26% and continue to remain on a very low level.

The price development on the sales -- on the used car markets in the premium segment remained in the expectable -- on the expectable level. We continue to take provisions on a continuous basis for the significant business risks. The current developments in connection with the coronavirus lead us to expect burdens on the risk situation for the year 2020. But according to our current estimates, we continue to be appropriately secured against residual value and credit risks.

Ladies and gentlemen, let's talk about our motorcycle segment. The number of deliveries as planned continue to grow to a solid figure of more than 175,000 units. That was the ninth increase of our deliveries in a row. The pretax result at EUR 187 million was EUR 18 million above the previous year's level.

The EBIT margin stood at 8.2% and was, therefore, once again in our target corridor of 8% to 10%.

Finally, the result of -- from our segment, Other Entities and eliminations. Compared to the previous year, it declined by around EUR 146 million, which was, amongst others, due to the market fluctuations, value fluctuations of interest rate derivatives, which we keep for hedging our financial services portfolio.

In the consolidations and eliminations, you all can also see the reflection of the increase in our leasing new business.

Ladies and gentlemen, that brings me to my outlook. Forecasts are difficult in these difficult times, but they aren't impossible.

Through the ongoing optimization of our core business, we continue to systematically strengthen our financial strength. We grow in the right segments. We set clear priorities. And through this, we finance the further ramp-up of emission-free mobility. Also in 2020, we will have high upfront investments for the further development of e-mobility, of autonomous driving and for vehicle connectivity. At the same time, we continue to implement the measures to fulfill the CO2 regulations in Europe.

The huge uncertainty that we currently have around the global spread and the consequences of the coronavirus make a clear forecast of the business development for the ongoing year difficult.

In our overall view for 2020, the BMW group on the basis of recent developments assumes that deliveries will develop negatively in all significant markets.

This is based on the assumption that the sales situations in all of the markets will normalize after some weeks.

Further, additional long-term consequences after another spread of the coronavirus and the linked volatility of the financial markets cannot be assessed at this point and have, therefore, not been included into our forecast.

Ladies and gentlemen, let me now come to the forecast of our individual KPIs. With our young and highly attractive model portfolio, we're in a great shape for the year 2020. Our continued efforts to improve our performance, both on the cost but also on the performance side, make important contributions to our results. We started early on, taken a variety of measures to further improve our performance strength in the future. Various initiatives in all areas of the company have delivered valuable contributions for close to 3 years now. Through a consistent, systematic and data-based approach, we ensure a maximum efficiency.

In addition to this, the fact that we won't have any cartel provisions as in 2019, we'll have a positive effect on the group result.

Before the outbreak of the coronavirus, we have therefore calculated with a strongly increased group result before taxes. Due to the burdens from the global spread of the disease, the pretax result should now be clearly declining.

The number of employees in the ongoing year will remain on the level of the previous year. From the reporting year 2020 onwards, only core and fixed term employees are included in our -- in the KPI, we report on this.

Employee groups such as apprentices, interns and doctoral candidates will no longer be included in our KPI here because they are here to be educated and trained and they're primarily here for securing our succession planning.

Due to the availability of new models, like the 8 Series, the X5, X6, the X7, the new 3 Series and the new 1 Series, initially, we had expected a slight increase in deliveries in the Automotive segment.

The spread of the coronavirus, unfortunately stopped growth in vehicle sales around the world. In line with the increase of the corona infections in all regions of the world, currently, especially in Europe and in North America, we now assume that global deliveries will be clearly below the previous year's level.

When it comes to the EBIT margin, our initial planning has estimated a value of between 6% and 8% for 2020.

Due to the sales decline in China and a similar development that is shaping up in other regions of the world, we now expect a result burden, especially over the first half year.

For the overall year, we currently expect a burden on the EBIT margin in the Automotive segment of around 4 percentage points. And therefore, our current plans foresee a margin in the corridor between 2% and 4%. The result adjustments will also have effects on the free cash flow in the ongoing year. Initially, we had assumed the free cash flow of more than EUR 3 billion. From today's point of view, we aim for a positive free cash flow for 2020.

Possible payments in connection with the cartel allegations of the EU Commission, have not been included in this estimate.

In our Motorcycles segment, deliveries in the forecast period should decline slightly. The EBIT margin is expected to be between 6% and 8%.

For Financial Services -- for the return on equity, we only expect a slight decline mainly due to higher risk provisions.

Ladies and gentlemen, we're monitoring the situation regarding the further development of the coronavirus very closely. And we will give you updates on the detailed effects on our business. Especially with the view to the described challenges, we continue to focus on a stringent working capital management and profitability. Both is as essential to be able to invest independently into new technologies and opportunities.

And with this, I would like to hand back to our Chairman of the Board again. Oliver, the stage is yours. Thank you very much.

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Oliver Zipse, Bayerische Motoren Werke Aktiengesellschaft - Chairman of the Board of Management & CEO [4]

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Ladies and gentlemen, as we've already mentioned, the topic corona is dominating all areas of our lives. And still, we have to think ahead. We have to think about the time after corona. BMW Group is a company that thinks in the long-term and acts responsibly. And I'm convinced our business model is only strengthened by far-reaching technological and societal change. Why is that? Because we implement the desires of our customers intelligently and we open up new possibilities for them. Because with innovation, we give technological progress a face and thus, we also change our society.

And because in what we do, we are effective. Despite of corona, it remains our clear mission, we want to be a winner after transformation. Profitability is and remains a prerequisite in order to seize the chances that the future offers. And that's what we want. By 2025, more than EUR 30 billion will be invested in research and development. That shows our confidence that in the transformation during and also after the corona pandemic can be driven by us, and we can continue to offer solutions. 7 months ago, I took the chair of the BMW Group. Ever since then, I've had lots of conversations with employees, with industry colleagues, with investors, journalists, politicians. Many are insecure as far as the perspectives of our industry is concerned.

And indeed, the challenges are immense. For one thing because each and every challenge has a huge dimension in itself. And for another thing because different requirements have to be met in parallel. Being successful nowadays does not mean to only use individual technologies excellently, but the additional requirements that are posing themselves in the long-term in order to stay on top level means not to focus on singular strategies but to be able to fulfill diverse complexities on the permanently changing conditions.

That is the central management task of the 21st century. One example is our developed strategy work. Our environment, on the one hand, is shaped by stable trends: The forecast growth of the global premium segment until 2030; the accelerated increase of e-mobility; historically, meaningful drivers for vehicle ownership, such as size of household, income and the place people live in.

But on the other hand, there are lots of in secure developments to which we have to react flexibly. Trade conflicts, Brexit and quite currently, the massive impact of coronavirus. Strategy work, therefore, must be continued every day and every week.

In the board, the BMW Group's strategy has been adjusted to the relevant future fields and the core elements have been newly adjusted. And we have defined a clear attitude for us. What does the BMW group stand for? We face entrepreneurial, ecological and societal challenges. We take over our part of responsibility of the mobility for today and tomorrow by offering convincing offers and sustainable management. And that applies to all the things that we can shape and that we can influence. We've also defined how we reach that. Our value supplemented by the claim of highest performance remain our foundation. Our values are right and they fit our company culture.

At BMW Group, we continue to go our own way. We do the things as we deem them right on the basis of our own analysis, of our own conclusions. And we tackle tasks early on without announcing them upfront, doing instead of talking, that is our motto. So what are the big questions of our industry? What distinguishes BMW Group from others? How do you prevail in a highly competitive automotive market?

We know that our vehicles are more sought after than ever. In 2019, on group level, we've got the ninth sales record in sequence. Dr. Peter just told you about that. We've got best values with our brands, BMW, Rolls-Royce and BMW Motorrad.

Questions on our deliveries, Pieter Nota will answer later on.

How can we meet tough CO2 goals? In electrification, we are global leaders. Even today, in 2019, we sold more than 146,000 e-vehicles and plug-in hybrids, more than 0.5 million are on the street right now. Now we will follow with new attractive novelties. For a couple of people, the Mini Cooper SE has been -- a couple of days, the new Mini Cooper SE has been available. More than 8,000 orders have already come in. Most of those who ordered the MINI have not driven or did not drive a MINI before. That means the MINI Electric is right on time and is predestined for urban areas.

So how do you manage the coexistence of drivetrains efficiently and intelligently? We've got modular, scalable and intelligent architectures in our plants installed.

Therefore, depending on demand, we can scale fast and flexibly.

Currently, in 11 of our plants, we manufacture electrified vehicles. The customers always got a full BMW or MINI no matter which drivetrain has been implemented. The customer receives all BMW typical characteristics in the best possible overall package. Chris Lee will be glad to answer your questions later on and go into more depth as far as this topic is concerned.

How do you control the number of employees during transformation times? We keep the number of our employees stable. We continue to qualify them for new tasks. In 2019 alone, we spent some EUR 370 million for training and further training. That is about the budget of high-class football clubs. Ilka Horstmeier will also be able to give you more insights into the topic later on.

Every third employee has been qualified for e-mobility, altogether, more than 46,000. We've got the highest added value because e-motors and high-voltage batteries are manufactured in-house here.

In our plant in Dingolfing in Bavaria, the production of e-drive components is massively being increased. Over the medium term, 2,000 employees will work there.

In our trade (sic) [retail] organization, more than 100,000 employees have been trained for e-mobility. Where did you get IT talents and software know how? Alone 7,200 employees are active in the areas of IT and software here, thus BMW in Germany is one of the largest IT employers.

In the group, more than 5,300 employees have been trained in Delta (sic) [data] analytics. In 2018, we founded the joint venture, Critical TechWorks, in Portugal with more than 600 employees. In this start-up, we create digital services, sales and aftersales platforms.

How do you maintain long term profitability?

In 2017, Performance > NEXT was introduced. By the end of 2022, at least EUR 12 billion efficiency potential will have been realized. In addition to that, BMW Group has the best long-term ratings of all automotive manufacturers in Europe.

How can regional fluctuations be balanced out? And how can you remain efficient against that background? Our production network of 31 locations in 15 countries is highly flexible. We're close to our customers and therefore, short-term potentials for growth in the markets can be used.

Since summer of 2019, our new plant in Mexico has been contributing to that. The preparations for the new plant in Hungary are ongoing. Milan Nedeljkovic is responsible for our production and will be able to answer your questions later on.

Where do we get battery cells? And how do you secure the necessary raw materials for e-mobility? We have long-term delivery contracts with CATL and Samsung SDI.

The important raw materials, cobalt and lithium, as of this year, we will buy ourselves and make them available to our suppliers. And we make sure that environmental standards and human rights are adhered to -- in our supply chain. Andreas Wendt is responsible in the Board of management for that. We've got our own competence center for battery cells in Munich. There, we bundle our knowledge on mechanics and physics of battery cells. By 2030, the mileage of our battery cells as opposed to today's BMW i3 is supposed to be doubled.

Let me summarize in short. Instead of complaining, instead of announcing, we're pronouncing -- we're presenting solutions. We know what we do. And in particular, we know why we do that.

The essential ability for securing the future, from my point of view, is who is in a position to develop the highly complex and digitally network product automobile in the sense of the customers and their requirements of our society.

We call that system integration. And on that, we've got a short look movie.

(presentation)

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Oliver Zipse, Bayerische Motoren Werke Aktiengesellschaft - Chairman of the Board of Management & CEO [5]

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The car of the future is the most complex technical overall system that you can buy as a customer. Other than products in consumer electronics, a car has to work, be reliable for 10 to 20 years. There's nothing comparable where a technically complex and security relevant interplay is given into the hands of " Lay people and has to work. "

The sheet metal bending of today is the integration of hardware and software into an overall result that works. For that, we integrate market requirements, regulatory requirements and customer desires at the same time. We industrialize and scale these.

So what do we need for that deep value-added chains? Close cooperation of development and industrialization, worldwide deliverability and, of course, individualized products, 1000 times produced every day.

You need strong regional footprints. On a global scale, a deep understanding of your customers as well as technological and societal developments in more than 150 countries.

All these abilities have to work and cooperate with one another without a hitch and the complexity will continue to increase. The transformation in the automotive industry happens at the same time with growing requirements and claims. And we own the expertise and experience to master this complexity. And this is something that we see as an essential competitive edge because all of this happens in the sense of the customer.

The automobile enables them to be individually on the road, to be protected on the road. It creates privacy such as no other means and traffic.

The requirements of customers to their mobility are going to be more and more different according to world regions, countries, metropolis and also rural areas. The one world car is history. Different drivetrains will exist in the long-term next to one another. That is our conviction.

And thus, it is our task to make the necessary offers available because the customers will always decide for themselves, what is the best choice for their requirements. Of course, all on the basis of political regulation, and we try to convince our customers. We do not try to make their decisions for them. That is the power of choice. With the new CO2 goals, the decision-makers in the EU basically assume that demand by 2030 will increase by 40%.

All the more, it is important that the customers are given choices. One example for this is the popular BMW X3. Starting this year, it will be available with 4 different varieties of drivetrains. Petrol and diesel, as a plug-in hybrid, and also with the pure electric drive as the iX3. The iX3 will be manufactured in China and exported from China.

Also future model series will be offered with different drivetrains. And I can tell you today, also our flagship, the BMW 7 Series will be amongst these cars. The next-generation of the 7 series will come in 4 variants, as petrol and diesel car, as a plug-in hybrid and also fully electric. All drivetrain types will be created on one architecture, and also the top version of the 7 Series will have an electric drive.

Today, we have the concept car of the BMW i4 with us here on stage. The competitors should watch out. That was what the social media and the media, in general, wrote about after our global premier 2 weeks ago. And of course, we were delighted by this. And I would like to confirm, once again today, the design is very close to the Series model, which will be launched next year.

So we place e-mobility right at the heart of our core brand, BMW. The i4 is e-mobility without compromise, up to 600 kilometers of range based on WLTP, up to 530 HP and a true BMW, which will be built here in our home plant in Munich.

Here, the fully electric i4 and the conventionally driven BMW 4 Series Gran Coupe will run off the same balance, of the same structures.

That is, they will use the same production structures, the same press plants, body building, paint shop and assembly halls.

And with this car, we prove that you cannot divide our industry into an electric and a combustion engine area. Both parts are necessary if you want to be a global player. The i4 will be driven by the fifth generation of our electric drivetrain, which was completely redesigned by us. Through the new design of our e-engine, we can completely do without rare earths in this case. And the i4 only a little preview into what we have in our pipeline.

In 2021, we will launch the iNEXT, which is being built in Lower Bavaria in Dingolfind.

It will be the next major milestone, fully electric and at the same time, enabled for highly automated driving with Level 3 functions for Motorways.

BMW already today has 14 million connected cars on the road. This leads to even more security because already with our Active Level 2 systems, the number of accidents was reduced by 35%, and we're proud of that. Reliable systems and the benefits for the customers are at the focus for us, and we won't deviate from that.

You're familiar with our road map. 2021 -- by 2021, 1/4 of our new car fleet in Europe is to be electrified. For 2025, we aim at 1/3, and for 2030, at 1/2 of our fleet electrified. And the first months of this year, in spite of Corona, have confirmed that. As of February, the sales of electrified vehicles around the world increased by more than 26%. And in Europe, about every 10 vehicles sold in January and February was electrified.

A new McKinsey study calls Europe a hotspot of e-mobility. In 2019, Europe increased the share of the global market -- its share of the global market to more than a quarter.

BMW leads the German market for electrified cars with a share of 21% of the market and is the clear market leader here. The average share of battery electric vehicles and plug-in hybrids in the EU-28 plus Norway in 2019 was at more than 3%.

When it comes to the BMW Group, it was more than double that value. Overall, by the end of 2019, we had sold 330,000 plug-in hybrids globally. And now we have further innovations of the BMW group. The X1, the X2 and the 3 Series Touring following the 3 Series Sedan. Plug-in hybrids alleviate the burden on the environment, that is sure. And they make their contribution, even today, to reduce CO2 emissions to save on fossil fuels and to increase the air quality in our cities. And they are main trade blazers for the political goal of CO2-neutral mobility by 2050. We support our customers in the right usage of these vehicles.

Since the 12th of March, we've introduced the BMW eDrive zones. In the first 6 countries, they've become active. And over the course of the year, we will add further cities and countries. Our new plug-in hybrids automatically when entering into green or blue environmental zones or into the city centers will switch automatically to electric drive.

Through this, we can maximize the electric drive part and therefore, have locally emission-free driving within the cities where it has the largest effect. And the software necessary for this can also be installed over-the-air in the cars.

For the start, we started with around 80 cities and programmed them and that includes all major cities with green zones in Germany, just as well as cities in The Netherlands, in Belgium and France, Austria and Switzerland. And of course, we are more than willing to include additional cities. That is our offer to all the mayors of Europe. So e-mobility is picking up. But nevertheless, the combustion engine for many people in many regions remains the best drive for their needs. Anything else wouldn't reflect the facts. Therefore, it does make a lot of sense that we continue to further increase the efficiency of our internal combustion engines.

These effects are taken into account enough, even though they have a very quick and visible fact.

That is to say, if you don't invest in this regard, you just accept the status quo if you don't act in a sense of climate protection. Ever since 2007, we've used efficient dynamics in our fleets. And rest assured, efficient dynamics will continue. Just look at the new BMW 1 Series. We reduced the CO2 emissions depending on the variant by up to 15% compared to the predecessor model. That shows that we drive ahead climate protection in all segments and in all drive variants. That is how we live responsibility. And now we strengthen electrification and add another component.

In our combustion engines, we want to introduce mild hybrid systems with 48-volt consistently. We start with a targeted approach with the model variant that have the highest volumes. That leads to up to 0.4 liters less of consumption per 100 kilometers or to a reduction of up to 9 grams of CO2 per kilometer in NEDC based on the type of vehicle and its engine.

So ladies and gentlemen, all these measures show that we take climate protection seriously. We use all the levers at the same time. And we want to reach the CO2 targets in Europe 2020 and 2021.

We stick by this -- stand by this commitment.

Strongly simplified. We want to reach the CO2 fleet target in the following way for 2020: Through -- 1/3 through conventional vehicle measures, and 2/3 should stem from the ramp-up of e-mobility. Climate protection is most effective when it comes as a package. And we don't just announce this, but we implement what we do, and we do so quickly. And of course, the customers that then use the offered technologies.

Our understanding of responsibility has always comprised the whole value chain. This is nothing new for us. We've always had a holistic approach. And almost all the sustainability goals which we set ourselves in 2020 -- in 2012 rather, for the year 2020, have already been reached. And I would like to give you 4 examples for this.

In the year 2019, for example, we reduced the production-related CO2 emissions compared to the previous year by 25%, and we won't stay at this.

The second example. For each and every new plug-in hybrid, we have the footprint certified. So we look at raw material, purchasing, at the delivery chain, production and the utilization phases up to recycling. And we prove that the overall balance is right.

The third point. Our water consumption is benchmark in the industrial environment when it comes to the water use -- consumption per produced car.

And by the end of this year, the electricity for all our plants globally will stem from regenerative sources.

The targets of the Paris Climate agreements are compulsory, and on the Board of Management, we're right now discussing the next steps we want to take. You can expect from us that we will offer a high performance in this regard. We focus on what can be reached, what we can decide now and what you can hold us accountable for and not what may be; or not our successors, at one time, will be responsible for. That would be too easy. One doesn't shift responsibility to following generations. We act today. This is the direction we take. We will go deep into the upstream delivery chains and look at our purchasing processes with a clear focus on sustainability.

It's obvious that we will continue to work in partnership and in fairness with our suppliers. For a sustainability structure, the same holds true, which also fits to our IT strategy. They are both fixed parts of our company strategy.

Sustainable actions in IT automatically become part of all areas of the company. The BMW group already today is a digital company. We rely on a deeply integrated IT organization which identifies early on, together with the expert areas, the demands and offers flexible solutions for those.

We enable all of our employees, from the conveyor belt up to the Board of Management, to take data-driven decisions in the sense of our customers and our company. And for this, I would also like to give you 4 examples.

In purchasing, we exchange data with a blockchain technology in a way that cannot be falsified with our suppliers. And therefore, we can trace components in the entire supply chain at the push of a button. And this technology will now also be rolled out with additional suppliers.

The second example from Financial Services. Through digitalized processes, our customers at financial services are to be able to go through the whole financing process online. This is already possible in Germany today, from the selection of the fitting financing product up to the contract processing.

The third example stems from artificial intelligence. In the production of a vehicle, huge amounts of data are being generated. And with the help of artificial intelligence and smart data analytics, we can smartly manage production processes and analyze them. In vehicle assembly, we already today use AI for automated image recognition processes. And images of components are being assessed in milliseconds, and deviations from the standards are established in real time.

The fourth point: Digitalization in the vehicle. Over-the-air updates make sure that the vehicle is always up to speed, and that make sure that you can also enhance the functionality of the vehicle and extend it. Even today, for example, the high beam assistant of the vehicles can be digitally retrofit. And from July on, BMW will offer Android Auto in addition to Apple Carplay. The displays are being integrated on the control display and in the fitting form also in the information and head-up display.

Services enrich our mobility. Ever since 2019, we've had our mobility powerhouse, YOUR NOW. And together with the Daimler Group, in this highly dynamic market, we want to play a relevant role. To realize a maximum of synergies under the YOUR NOW holding, 3 business units have been formed. And through this consolidation, we support the further expansion of sustainable mobility in urban areas. We are deeply convinced of the potential of YOUR NOW, that is when we invest into the further buildup of our product and services offer.

And YOUR NOW services are now being offered in more than 1,300 cities and more than 90 million customers use these services. In the future, we will put a focus on those cities that offer long-term profitable growth. YOUR NOW therefore continues to be open for partners and investors to further successfully build up the business.

Ladies and gentlemen, we had -- the BMW group put the customer into the focus of our actions. Almost all of our models were -- model series were renewed over the past 2 years. This year, the BMW 2 Series Gran Coupe will follow high-margin BMW M models, our plug-in hybrids and e-models. So we offer something for each and every customer and we attack our competitors in all the segments.

But first of all, it's important to me that we, as a society, can get safely through the corona pandemic and can then return into our normal lives..

And with this, I would like to wish you and your families the best of health. Thank you very much.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [6]

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Okay, dear colleagues. Thank you, Mr. Zipse. Back with you. We will now come to your questions. And this year, your questions will be put by telephone. And for this, we're streaming this press conference once around the whole world. So please understand if there should be any small technical delays, we hope that won't be the case. But nevertheless, we don't assume this, but should your line be interrupted, you can also ask your questions via e-mail by sending them to [niemans-communication@bmw.de].

So this year, as well known, we stick to a tradition because the first question always comes from Boersen Zeitung. So please go ahead.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Now we have the first question Stefan Kroneck of Boersen Zeitung.

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Stefan Kroneck, [2]

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I have a couple of questions to the Board of Management. This -- that savings program. Do you have to tighten that in view of the pandemic?

And then another question regarding investments and your research and development spend. Will you also reduce those investments? What are your plans?

And then another question regarding the free cash flow. If we consider the possible penalties from the EU cartel allegations, could that become negative this year?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [3]

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Well, thank you very much, Mr. Kroneck, for this question. And those questions will be answered by our CFO, Mr. Peter.

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Nicolas Peter, Bayerische Motoren Werke Aktiengesellschaft - CFO & Member of Management Board [4]

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Mr. Kroneck, thank you very much for your questions. First of all, regarding free cash flow. I think we -- the statement was quite clear actually. We aim at a free cash flow, and that then contains -- doesn't contain possible payments to the EU commission following the cartel allegations. The free cash flow, according to our forecast, will be affected stronger in the first half of the year. And we assume that in the second half of the year, there will be a certain recovery and improvement.

Now you're familiar with our program, Performance > NEXT, which we've dealt with and have consistently implemented now for 3 years. And of course, we will consider which levers we can still intensify over the course of this year.

When it comes to investments in into future topics, I think we will have clear logics in that we say, "What are the topics that we have to deal with?" These are the future topics, the future investments which, for the company over the next 3 years, are of the highest importance. And independent of these topics, there might be others where we could say, "Okay, this is something we can postpone for a few months or a year." But that certainly won't be the topics that play a relevant role for the future of the company.

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Operator [5]

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The next question comes from Oliver Sachgau of Bloomberg.

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Oliver Sachgau, [6]

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Two questions. The first question, Herr Zipse, you said that your plants in Europe and in Rosslyn have been closed down. Can you also confirm that, Magna plants for instance, that there, the BMW production will be interrupted as well? Or what is the situation there?

Another question for Dr. Peter. You said a couple of weeks ago that you're still between 5% and 10% of growth expecting for China. So what is the situation in China for the rest of the year for you? What do you think?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [7]

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Yes, normally, the journalists shouldn't be corrected, but let's come back to the first part of your question relating to potential problems at the suppliers. I would like to first of all refer this question to our Production Director, Milan Nedeljkovic.

Please use the microphone.

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Milan Nedeljkovic, Bayerische Motoren Werke Aktiengesellschaft - Member of Board of Management [8]

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Yes. First of all, thank you very much for the question. As far as the topic Magna is concerned, Magna, on their own accord, suggested that they will drive down their production. We related our statement to our own production plants in Europe and -- that are going to be driven down due to the current situation. And yes, for 4 weeks, production will not be taken up there.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [9]

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Thank you very much. Second part of the question, growth in China. What about the development there? I would ask Pieter Nota to answer that question.

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Pieter A. J. Nota, Bayerische Motoren Werke Aktiengesellschaft - Member of Management Board [10]

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Yes, Mr. Sachgau, thank you very much for your question about China. In China, have a significant effect. We've seen a significant effect in the month of February as far as deliveries are concerned. But we also see that many signs are already starting to go in the right directions in China in March again. For instance, our car dealers are 95% online again and open and active again. In the beginning of February, that was quite different. And we can also see that incoming orders in China have significantly increased again.

From today's point of view, however, it is much too early to give a forecast for growth in China for the overall year. I can summarize once again, there is a clear impact in the month of February. There has been a clear impact in the month of February. But already now, signs are pointing in the right direction for March and for April. We also see that for April, things are developing in the right direction.

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Operator [11]

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Next question is Edward Taylor.

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Edward Taylor, [12]

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I've got a question about software platforms. There are a couple of competitors who maintain that higher efficiency degrees can be achieved with a software-first directed car architecture using artificial intelligence, for instance, in the batteries and thermal management. How do you see yourself shaping up as far as that is concerned? The 600 kilometers range that we have for some cars seem to be very competitive. Are you thinking about software strategy optimizations? And are you in good shape as far as the platforms are concerned?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [13]

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Thank you, Edward, the right expert here is Klaus Fröhlich. Please, Klaus.

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Klaus Fröhlich, Bayerische Motoren Werke Aktiengesellschaft - Head of Development & Member of the Board of Management [14]

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Thank you very much, Mr. Taylor for the question. The question has been answered in part by Oliver Zipse already. In our case, the software platform already exists more or less across all processes. So not only via the connected vehicle, but also beyond the operating processes.

And so far, artificial intelligence has already been implemented in the cars. When you think about the intelligent language assistant in the i3, then via the back end, it has already been secured that we have intelligent natural voice recognition that we use here.

And it goes without saying that as far as the operating strategies of subsystems are concerned, e-mobility, you mentioned, AI solutions have been integrated even today. We've got a clear separation of software and hardware that we implemented there as well so that the reuse of existing software solutions at BMW, independent of the hardware structures, can be driven.

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Operator [15]

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The next question from Markus Fasse, Handelsblatt.

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Markus Fasse, [16]

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I had 2 questions. For one thing, you do not give monthly figures as of the beginning of this year. But maybe you can tell us how, in comparison with last year, you're shaping up at the moment? So that we at least know the basis with which we go into the crisis -- or on which we go into the crisis now. So status quo as of now as opposed to last year? That's the first question for Mr. Nota.

Second question for Mr. Zipse. Against the background of the crisis developing at the moment, there have been initial considerations of watering down environmental standards and climate goals. And my question is, would it be helpful if the climate goals in the EU for 2021 would be postponed by 1 year in order to give the industry some air to breathe?

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Maximilian Schöberl, Bayerische Motoren Werke Aktiengesellschaft - EVP of Corporate & Governmental Affairs [17]

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Thank you very much, Herr Fasse. I think we will start with Pieter Nota and then Oliver Zipse. Pieter?

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Pieter A. J. Nota, Bayerische Motoren Werke Aktiengesellschaft - Member of Management Board [18]

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Yes. Thank you very much for your question, Herr Fasse. We started very well into this year as far as sales and deliveries are concerned, with growth in month January. But then due to the effects in China that I already mentioned, the sales, the deliveries development in February was negative. So as I said, in China, we already see a recovery again.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [19]

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Thank you very much, Pieter. Herr Zipse?

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Oliver Zipse, Bayerische Motoren Werke Aktiengesellschaft - Chairman of the Board of Management & CEO [20]

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Herr Fasse, very important question that you're posing. I think this is early days in the corona crisis in order to put into question everything that we have decided about in terms of regulation. What is much more important for us is that we understand ourselves as an integrated concert or group that, on the one hand, has to be able to deal with the corona crisis; but on the other hand, also has to be able to signal the readiness to operate and to prevail in this.

Let me give you a couple of examples. In July of this year, we will need vehicles in the market that fulfill the new RDE2 laws. And they go through the testing phase at the moment, through certification, and have to be driven-free, so to speak. And for that, employees are required that cannot be at the home office, that have to work under conditions that are not contagious. It goes without saying. But nevertheless, this work has to be done.

Let me give you another example. Our dealerships have to be able to supply police motorbikes, ambulances, fire trucks. There's lots of BMWs there as well. They still have to be serviced, these car. These are 2 examples only.

Much more important than a basic debate is that we're able to fulfill the conditions to be able to fulfill everything in the face of the current discussion. Everything else remains to be seen, but that is the basic requirement at the moment.

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Operator [21]

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Next question by Maximillian Hägler, Suddeutsche Zeitung.

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Max Hägler, [22]

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Three short questions. Software platform has already been mentioned. Now if you listened closely into what's going on at the FIZ development center here in Munich, there seems to be astonishment that no BMW operating system has been established in the speed that Volkswagen is aiming at. And that even for the new 7 Series, the time wouldn't be sufficient. So wouldn't that be an essential topic that BMW should tackle, that the different systems be combined in an operating system? That's the first question.

The second question then, is the situation now regarding coronavirus on the level of the financial crisis in 2008 and '09, regarding the economic consequences? Or is the situation even graver? So the question is how long of a standstill can be accepted? When will the stand still be too long so that demand decreases so much that the liquidity situation might become difficult?

And the third one then, specifically regarding the Board of Management. Now how does the Board of Management prepare for the situation? Do you have separate offices, different operational units, to remain -- to be able to perform? What do you plan in this regard?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [23]

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Okay. Thank you very much for your questions. I would like to start with Mr. Fröhlich then Mr. Peter. And then regarding measures to keep up operability in corona times, Ms. Ilka Horstmeier

Mr. Fröhlich?

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Klaus Fröhlich, Bayerische Motoren Werke Aktiengesellschaft - Head of Development & Member of the Board of Management [24]

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Well, We already have had a BMW operating system for several generations. So the system architecture of all the vehicles has been updated on 3 years. We have a service pack for this. That is to say the architecture's being configured by BMW. But as we consider that from the point of view of the customers' local solutions, for example in China or the U.S., need to be included. And Mr. Zipse has already mentioned Android and Apple Carplay. If we now consider the Chinese customers, they would like to have WeChat in the environment of their car with seamless integration.

Therefore, we have a core which is being set up and designed and driven ahead by BMW. But the link speed to 5G connectivity, which we will bring into Series production as the first car manufacturer in 2021, up to the customer solutions and infotainment, for all of these, we need links and so that we can connect to developers in the 3 different geological regions.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [25]

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Thank you very much, Klaus. Now Mr. Peter?

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Nicolas Peter, Bayerische Motoren Werke Aktiengesellschaft - CFO & Member of Management Board [26]

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Mr. Hagler, I would say it's different than the financial crisis. Why is that the case? Well, because the public life in some important markets has come to a standstill, basically. So in our risk management, we are prepared for situations like this. In our liquidity management, we cover scenarios like that.

Our liquidity position at the end of 2019 was even improved compared to the end of 2018, so we're now at EUR 17.4 billion of liquidity. And as I mentioned, we had a quite a strong free cash flow which we generate against a difficult market backdrop. We have the second-best rating globally under these framework conditions that we've reached. And we are working very focused together with our partners, both on the supplier side, just as well as on the dealer side, to take the necessary measures, to keep negative effects as low as possible. And at the same time, as I've mentioned, we're also working focused on 2 -- in focused way on 2 topics, namely liquidity and profitability, to keep those at a stable level.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [27]

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Thank you very much, Mr. Peter. Then the last part about measures regarding corona. For this, I would like to hand over to Horstmeier with the short piece of information, that she's head of the crisis committee, and they've done sensational work over the past few weeks.

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Ilka Horstmeier, Bayerische Motoren Werke Aktiengesellschaft - HR, Labour Relations Director & Member of Management Board [28]

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Let me just quickly report on how we've started to deal with this situation. In January, we formed the competence team, corona, as Mr. Zipse mentioned, which is consistently monitoring the developments and is in close contact with the local authorities, with the health authorities. And based on this, we introduced a large number of measures to protect our employees and also to continue our business. And they hold true for our employees, just as well as for the members of the Board of Management that goes to events, that goes to meetings, goes to our company restaurants and all of this. And we have clear regulations. You can see that we keep a distance. As you can see also on stage, that we have many meetings which are also being performed as video conferences or via Skype.

So we've introduced several measures to safeguard our employees, and at the same time, maintain our business. It's been successful so far. And we keep assessing the situation. So that's brought us to the decision that, from a sales point of view, we need to stop production in plants and that almost follows the same process. We analyze the situation, we prepare and then we implement measures. And that includes that we talk to our social partners, to the trade unions and the employee representatives and to take agreements -- establish agreements with them and implement them together.

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Operator [29]

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The next question is by Martin Hesse of Der Spiegel.

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Martin Hesse, [30]

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So Far, you've only talked about the plants in Europe and South Africa. What about -- do you have a timetable or a roadmap for plans outside of this region, especially in the United States? As you said, you would adapt that also to the sales expectations. And you can expect a further worsening of the delivery situation in the U.S., I would assume.

And the second question, in how far are you concerned about the stability of your suppliers regarding coronavirus, both in Europe and elsewhere? Is there the danger that your production might be affected by the failure of some of these? And over the long term, if any of these suppliers should fail, have you had any considerations on how to tackle these questions?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [31]

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Thank you very much, Mr. Hesse. I would like to generate these -- to give these questions to Dr. Wendt and Mr. Nedeljkovic.

So Dr. Wendt, if you start with the situation at the suppliers.

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Andreas Wendt, Bayerische Motoren Werke Aktiengesellschaft - Head of Purchasing & Supplier Network and Member of Management Board [32]

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Thank you for the question. First of all, I can report that as of today, we haven't had any major issues with any supply chain due to 2 elements.

First of all, that is due to the leadership of our partners and the supplier network. And we would like to thank them all for their efforts.

And it's also due to the competence and skills of our employees in logistics and procurement, who for weeks now, have monitored the entire supply chain in a very detailed way and trying to find the best solutions there. And so far, we have been well on track with all of this.

Now looking into the future, we can currently see that just, as the situation that we face, also partners and the supplier network, reduce their production step-by-step. Regarding financial consequences, well, it's difficult to estimate the situation right now. But in general, in purchasing, we're prepared for supporting companies that come into a difficult situation, to assess the situation together, and to a certain degree also, to give them support.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [33]

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Thank you very much, Mr. Wendt.

Milan Nedeljkovic?

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Milan Nedeljkovic, Bayerische Motoren Werke Aktiengesellschaft - Member of Board of Management [34]

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Well, as Ms. Horstmeier has already mentioned, in all of the plans, we've taken good measures to stop the spread of the coronavirus, and they've been highly effective so far. Now in Europe, due to the sales situation, we have taken the first decision to stop production here.

But for Mexico and the United States -- well then Mexico, in the week after next, we will have a planned business interruption which was planned for a new setup there. And we will see how the situation will develop and what the delivery situation is like. And the same holds true for the U.S. at this point. It's too early to take any solid forecast on what will happen there in the plants over the next few weeks.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [35]

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I know that this is a special situation right now, and we would be glad to answer further questions. So let me ask around once again. Are there international questions that you want to direct to us?

All right.

Potentially, we will then switch to China, maybe.

But I would like to give the podium to Mr. Peter for intermittent comments. Is there anything else that you would like to mention at this time? Zipse, anything from your side? No? Nothing anymore.

If there are no further questions -- once again, also to the German journalists, if there are no further questions, we would otherwise end the question-and-answer session.

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Operator [36]

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The next question is...

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [37]

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Well, maybe let me try it in writing. We have a couple of written questions that we got from China upfront. Let me get started with that.

That is about auto fares. Auto fairs have been postponed or canceled. Does that influence the plans of BMW Group with a view to product launches?

Maybe Pieter, that is a question about how we're going to deal with auto fairs in the future? Are there problems also relating to our products? How do you see that, Pieter Nota?

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Pieter A. J. Nota, Bayerische Motoren Werke Aktiengesellschaft - Member of Management Board [38]

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yes. Thank you very much for the question. For one thing, already in early March, we've had the auto trade fair in Geneva, the auto salon in Geneva, where we had a concerted effort to intervene here. And from Munich, we communicated the important messages on the i4 concept very successfully. So that didn't have any impact on product launches directly.

It was also foreseen, when we're talking about China, the Beijing Motor Show was scheduled for April. That has been postponed to July. But that didn't have any impact on timing or communication for launches, at least not a direct impact. We will find different ways for that.

And for another thing, we're also very innovative in terms of our communication. Last year, we had our next-gen event in late June here at BMW World. And we also plan this concept to be repeated later on in this year and building on the messages of today, also the future ability and the innovation -- and the innovative force to be shown during such events.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [39]

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Thank you very much, Pieter. And maybe I can supplement here. Of course, it's nice to have a digital press conference. But at the end of the day, it is much nicer to have you all in the room again. I believe, in future, we will have to find a good balance between digital press conferences and events and events on site. That is certainly also in your interest.

Right. We've got a next question.

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Operator [40]

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The next question comes from [Olaf Price], Welt.

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Unidentified Participant, [41]

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I've got 3 questions to the Board. For one thing, Herr Zipse, you mentioned this cross-section platform earlier on with the different drivetrains that you want to base all the models on. At BMW, over the medium term, will there be a development of a pure e-vehicle, E3 or ED3 at Volkswagen? That is one question.

The second question would be, which role will the hydrogen cell play in terms of the drivetrains over the next couple of years?

And the next question, it's always difficult to mention competitors directly or to compare with competitors directly. But without using names, Mercedes or Tesla, how do you see yourselves shaping up towards the way to electromobility versus your main competitors?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [42]

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Well, if you allow, I would like to summarize 2 questions for the Chairman of the Board.

The first topic, pure e-vehicle and maybe on our way to the e-mobility, how are we shaping up? I think a basic statement of the company is required here.

And then as far as hydrogen or fuel cells are concerned, I would ask somebody else later on.

But Herr Zipse first of all.

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Oliver Zipse, Bayerische Motoren Werke Aktiengesellschaft - Chairman of the Board of Management & CEO [43]

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Thank you very much for this important question that is -- that we've been contemplating as well. In the year 2020, we have the following answer. Under the headline power of choice, behind that headline, we've got several concepts. The iNEXT, for instance, which will be launched next year, is on a singular platform. It doesn't belong to the category that we also have of integrated platforms, but it's got a singular body basically and only users building blocks that are otherwise used as well, for instance, in the 7 Series. So that is a very specific form. But what is also correct is it is produced in a normal plant. So here, a special case that you've already mentioned, we're already doing this.

On the other hand, and I think that's going to be essential for the next decade. We will also have a flexible architecture. And I mentioned that the next 7 Series will also be available as a pure EC 7 Series. And I think that's essential because we are certain that the same driving characteristics that apply to a BMW can be integrated in such a way until, for customers, it's a real, authentic, high-reach, high-mileage vehicle. So we do both things at the same time.

At the end of the day, we -- it's always a nice and well that we find maximum synergies by driving and combining system integration and plans to such an extent that a customer value product is the outcome. And at the same time, also in terms of yield requirements, it is something that is feasible for us.

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Maximilian Schöberl, Bayerische Motoren Werke Aktiengesellschaft - EVP of Corporate & Governmental Affairs [44]

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Thank you very much. Klaus Fröhlich?

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Klaus Fröhlich, Bayerische Motoren Werke Aktiengesellschaft - Head of Development & Member of the Board of Management [45]

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Yes. thank you very much. About the hydrogen question. First of all, I want to answer that question from the vehicle point of view and then from the environment point of view as well. Hydrogen technology, fuel cells, development of that is that, the state of electromobility of 10 years ago, roughly. It's based very strongly on an e-vehicle and then replaces part of the battery by this charging device, the fuel cell and the hydrogen storage that is behind it.

Together with Toyota, we developed generation of fuel cells. And the next generation of fuel cells will be launched in a small series in '22 and a target vehicle that we think is particularly relevant that is a large SUV, X5-based. We will launch a small series there, and that will put us into a position in the second half of the decade to start scaling when the external framework conditions have been set. That means our car will be finished when the framework conditions have been set. And up until then, we will have done our homework so that we are scale -- able to scale and do not only launch a pilot.

But it's about the framework conditions that are essential. Hydrogen only makes sense if it's green. That means if it's not a crude byproduct and it's not available as a crude byproduct, but it has to come from regenerative energies, electricity-based regenerative energies. And for that, we do not have enough industrialization perspective or sufficient perspectives. But we think that it's going to be possible to become scalable, also on the supply side of this green hydrogen. In which industry this hydrogen is going to flow is a question that remains open that the economies will have to clarify in parallel.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [46]

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Thank you, Klaus. I hear the lines are filling up again. And yes, for the next question, please.

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Operator [47]

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The next question comes from William Boston, The Wall Street Journal.

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William Boston, [48]

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A couple of questions. For one thing, it's almost late March now. So a little bit more clarity about the development in the first quarter should be there, Nicolas Peter. So can you tell us a little bit about that?

The second question, is in the last couple of days and month, I've been assuming that you've been going through lots of scenarios in order to make your own prognosis. What is your basic assumption for the industry in 2020? For the first half of the year, what do you expect? There are already prognosis that in Europe, up to 20% of sales will be lost. And on a global scale, it's not going to be much different. So how do you see the global market in this year?

And my third question is what do you have specifically -- what have you learned from your experiences in China that you can now use for reactions in Europe? You've gone through a cycle in China where factories and plants were closed and now are going online, more or less, again. So what have you learned from that cycle that we can use now?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [49]

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Thank you very much, Bill. We will start with Nicolas Peter with the first 2 questions.

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Nicolas Peter, Bayerische Motoren Werke Aktiengesellschaft - CFO & Member of Management Board [50]

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Well, Mr. Boston, I believe part of the answer, I've already given. Developments in quarter 1, I would say, the first half year, the burdens that I've been talking about. That is something that we have to reckon with. Turnover, free cash flow are both going to be burdened particularly in the first half year. And what is also difficult to forecast is how do currencies develop? How will raw materials and commodity prices develop? That can go in both directions.

And the China experience, we also -- that is the China experience. We also assume that there's going to be a normalization, okay? As far as the question is concerned, what we've learned, it's always best to take a look at the Chairman of the Board, and I'll give the podium to the Chairman of the Board.

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Oliver Zipse, Bayerische Motoren Werke Aktiengesellschaft - Chairman of the Board of Management & CEO [51]

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Well, Mr. Boston, I think that's a very important question. We are a global manufacturer and we can observe at the same time what happens in the Asian and China area, what happens in Europe and what happens in the Americas. We can observe all that and draw our conclusions from that. As far as coronavirus is concerned, china was the trailblazer in inverted commas, if you will. There were a couple of basic behavioral topics we have started translating into Europe and into the United States, pretty quickly, almost at the same time.

The point is a very quick social separation is absolutely necessary. That doesn't necessarily have to lead to you stopping everything and send everybody in home offices. Wherever that's possible, that is one effective means. But then it's also important that you keep teams at a distance, that you reduce the numbers there, that you give them a relation, so to speak. And these basic principles that we've introduced very quickly, they were introduced here in Europe immediately as well. So this parallel form of separating on one hand, but on the other hand, trying to keep our operations running. That is something that we've learned there.

And digitalization, both for our internal organization, like the simple things, meeting management that can be done digitally and remotely very easily, but also how do people behave when there are social meetings that cannot be prevented. It's a question of meeting etiquette, keeping at a distance. We've learned a great deal there. That is what is essential.

European economy will not be cured by everybody staying at home. But if this parallel approach, and only in the after-corona time, this is going to be important so that we can drive up production again even if not all corona cases have been dealt with. And that's going to be our big challenge. We learned a great deal from China, and we can translate that also.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [52]

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Thank you very much. So next international question, please.

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Operator [53]

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Next up, we have the first question from the International line by Alan Tovey, Daily Telegraph.

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Alan Tovey, [54]

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Coronavirus has exposed the fragility of global supply chains. Is BMW [considering changing to blockchains] or just-in-time manufacturing as a result of the recent events? Or are these [not necessary] for manufacturing and car production?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [55]

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So we have a question to the operator. The line is really bad. We can't understand anything. I'm sorry about this.

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Operator [56]

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Okay, then I suggest that we switch to the next question and Alan Tovey calls us again. Sorry, there seems to be a line problem.

Then I'll come to the next International question by David McHugh's -- Associated Press.

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David McHugh, [57]

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Have there been any measures or any exceptional measures in Spartanburg? And what have you told the employees there?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [58]

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Okay. As far as we've understood this correctly, it was about Spartanburg and exceptional measures. And I'll hand over to Milan Nedeljkovic.

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Milan Nedeljkovic, Bayerische Motoren Werke Aktiengesellschaft - Member of Board of Management [59]

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Thank you very much for the question. The measures which we've taken in Spartanburg are just the same as we've taken in all the other locations. And as Horstmeier's already reported, that early on, we started with initiatives to keep employees at a certain distance to avoid any body contact and avoid any spreading of the virus this way. And what we've done additionally in the production areas is that we've reduced the size of the teams and limited rotations and try to make sure that teams have the same breaks. Through this, we reduced the number of interfaces of our employees to each other and reduce spread of the virus or restrict it at least, if one employee should fall ill, that only a small set of people will be affected.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [60]

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Okay, good. The next question from the international area.

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Operator [61]

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Then we will try again with Alan Tovey's line of Daily Telegraph.

Mr. Tovey, your line is open. You can speak now.

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Alan Tovey, [62]

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(inaudible) fragility...

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Operator [63]

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Sorry, we still have line issue, and we cannot hear you, sorry.

We come to another question by [Angela Hau].

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Unidentified Participant, [64]

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Thank you so much. This is Angela from [Chinese Media]. I have 2 questions for Mr. Zipse. The first one is about Chinese market. I know Mr. Zipse already mentioned partially about the current situation of BMW now in China. My question is, how will this current virus outbreak will affect BMW's operation in China in 2020? Both from the perspective of manufacturing side and sales expectation, considering also the huge uncertainties ahead.

The second question is about, recently, [we could say] analysis show that the world economy is falling into recession this year. Do you agree? If so, as leading car manufacturer with over a century's history, what kind of advices or suggestions you could give to the other car manufacturers, including the suppliers, which could be hit the most?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [65]

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Thank you very much to China for the questions. I would like to separate this in 2 parts. I would ask Pieter Nota once again to maybe develop a certain scenario for the Chinese market. And after that, I would ask Mr. Peter to once again tell us a little bit about the financial developments there and the financial consequences.

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Pieter A. J. Nota, Bayerische Motoren Werke Aktiengesellschaft - Member of Management Board [66]

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Yes. Thank you very much. What we've seen in China was that the government and the authorities very quickly and effectively responded and reacted to the situation, which had drastic-al effects initially. But we can also see, even today, that there are the first signs of a certain recovery.

And as I've said, in the month of February, we saw a clear impact on our sales, whereas in the month of March, we've seen recoveries in certain early -- lead indicators that we've identified, certain leads which we generate. Also the number of dealerships open and the -- our order books and how far they've been filled.

So if the situation will continue to develop positively with a low number of new infections, we can assume that following the dip in the month of February, in the month of March and April, we will see a further effect of sales developing into the right direction.

Once again, too early to make a forecast for the overall year. But what we've seen so far is that in the month of March, and we have the same expectation for the month of April, that there will be a certain recovery. So effective measures were taken by both the authorities and from our side, where we cooperated effectively with our dealers to remain in contact, also, with our customers.

Now the second part of the question, global economy, possible recession. Now it's a little bit like reading a crystal ball, but nevertheless, I'll hand this over to our CFO, Nicolas Peter.

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Nicolas Peter, Bayerische Motoren Werke Aktiengesellschaft - CFO & Member of Management Board [67]

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That is definitely trying to look into a crystal ball. But we have our experiences, especially from the financial crisis. And when at the time, the right measures, the right responses, were taken. And we're doing exactly the same thing today With a strong focus on our working capital. That's why we've taken these quick and strong measure on the production side. We have a very comprehensive liquidity management concept which we've set up for these cases, and which we've of course, activated now. And we're quite confident that we can consistently control all of this over the coming weeks.

I think what's important in this context, and that was also part of the -- of your question, we have a certain blueprint from China that we can use on how the development can happen in a market. And we've then consequently include this into our forecast for the overall year.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [68]

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Okay. Now we have a good 10 minutes left for your questions. So I would like to ask the German line once again, and ask for the next question there.

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Operator [69]

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The next question comes from [Jan Poles, Johnson Reuters].

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Unidentified Participant, [70]

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I've got 2 questions on production interruptions. For one thing, you said, Mr. Nedeljkovic, that in the course of this week, you want to drive down production. Can you say exactly for each plant when the last shift will take place?

My second question is, how many employees are affected by the production interruptions, particularly here in Germany?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [71]

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Thank you very much, [Paul]. It's Milan Nedeljkovic.

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Milan Nedeljkovic, Bayerische Motoren Werke Aktiengesellschaft - Member of Board of Management [72]

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Well, thank you very much for the question. Relating to driving down production in individual locations, and I'll give you 2 examples. In Munich and in Dingolfing, we had a production stop scheduled for the Easter period anyway. This was supposed to be used for the production of new vehicles and structural adjustments for said production.

In order to carry out such measure, systems have to be emptied out, if you will, and certain operative states have to be prepared. Since this is more expansive in different locations, in every location, we drive down to exactly that state of operations to be prepared for these rebuilding measures. And so far, there is no definitive point in time where each and every plant comes to a standstill, but we phase out in such a way that we have adjusted them to the right operative state.

In summary, we're talking about all the European locations, Oxford, Rosslyn, Leipzig, [Greensburg], Dingolfing and Munich. And we've got about 30,000 employees that respectively are affected by this interruption.

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Operator [73]

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Next question from Roland Losch, DPA.

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Roland Losch, [74]

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How many employees are affected here in Germany? Are they all conducting short work? Or is it enough to have hours accounts that are driven into the minus? Or are all employees that can send -- can be sent into home office, have they been sent into a home office?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [75]

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Frau Horstmeier.

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Ilka Horstmeier, Bayerische Motoren Werke Aktiengesellschaft - HR, Labour Relations Director & Member of Management Board [76]

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Well, 2-part answer. The number of staff or employees here in Germany is something that we cannot oversee at the moment because certain works, we will also have to conduct during interrupted production. So we're still trying to get those figures.

The second thing is it's a temporary dip, basically. And that's also a temporary closure. So in the first priority, we're using our work time flexibility models, which have been very high ever since 2008. When we have come to an agreement to the -- with the Supervisory Board as far as flexibility is concerned, so we've got time accounts, hours accounts that can be used plus/minus 300 hours. And that will be one essential element in all locations.

On top of that, we're prepared to take the next steps as well. With this trade -- with the social partners, we've already come to an agreement as far as short work is concerned. And as far as short work is concerned, we've also come to the agreement that the net income will be increased to 93%, which makes sure that the employees can get through this crisis.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [77]

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I've got 2 written questions. I will start with the first one, and I will read it out to you.

Does BMW Group think that there will be a postponement of customer acquisitions or customer purchases on the global market? What is your evaluation of automotive sales in the first half year of 2020?

Pieter, question for you.

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Pieter A. J. Nota, Bayerische Motoren Werke Aktiengesellschaft - Member of Management Board [78]

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Thank you very much for this question. First of all, at the moment, it is very difficult to give you an exact statement as far as that is concerned. What we see is, in many European countries, in Italy and France, also in Austria and in Switzerland, in Belgium, almost all car dealerships are closed right now. And that's got a direct impact, obviously.

How long this is going to take and also whether and to what extent customer purchases are going to be affected? It's difficult to make forecasts on -- for that purpose, we've already confirmed once again this morning. Mr. Peter also confirmed, that worldwide sales, we expect to be significantly below the previous year on a global scale. So I cannot break that down exactly for the European market.

We've bet a great deal, also in countries where dealerships are closing down, to stay in touch with our customers via digital channels, which we benefit from. We've already seen in China that our digital direct customer approach there has already been effective.

Also after the end of the crisis, that can lead to incoming orders being driven up pretty quickly again.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [79]

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Then I've got another written question Dr. Wendt.

Is the global supply network of BMW Group affected? And what measures have BMW taken in order to ascertain the global supply chain?

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Andreas Wendt, Bayerische Motoren Werke Aktiengesellschaft - Head of Purchasing & Supplier Network and Member of Management Board [80]

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Thank you very much for the question. We're trained to an extent, if I may say so, because at the last couple of weeks, where our supply chains, with the first focus of the corona crisis in China had to be ascertained and secured, it was always about the question of deliveries of Chinese suppliers into Chinese plants, Chinese suppliers to Europe and the rest of the world and the other way around. Also, suppliers outside of China into China. And very accurately, we took a look and analyzed the entire chain. And depending on the current situation, we try to bring them together, to integrate them in such a way so that, so far, we haven't had any big issues in the supply chain.

It is the case, actually, that our components are also in distributed production capacities manufactured across the globe. Not everything comes from one location there are various different zones of the world where we produce components. And you try to balance that out, you try to adjust within that network. And this is the way we're going to handle it in the future as well.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [81]

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Thank you very much, Dr. Wendt. One question by Joe Miller from Financial Times.

The first part is -- and I translate that. If there are considerations to postpone EU climate chain -- climate goals, if BMW would be on board?

We are on course, I think, and that the Chairman of the Board has already said that the CO2 goals for this year apply, that other political issues or topics are not our focus at the moment.

And the second part, United States planned for Spartanburg, a potential shutdown in Spartanburg because the Big 3 in the United States have already been shut down?

Milan Nedeljkovic, maybe you can answer that question once again.

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Milan Nedeljkovic, Bayerische Motoren Werke Aktiengesellschaft - Member of Board of Management [82]

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Well, thank you very much. I already said earlier on that in the United States, we're still observing the situation. The possibilities are very dynamic. And I would ask your understanding that I cannot give you statements here, how we're going to decrease volumes. That there is a necessity to do something is quite clear, and we will adjust according to the situation we find there.

At the moment, we're still driving production and we're glad to be able to do that for the next couple of days. That has also something to do with the fact that there, the topic coronavirus in our plant, hasn't even arrived yet. And we will continue to observe the situation, as I said. But changes are very dynamic, and we will adjust as need be.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [83]

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Okay. Then I ask for the last 2 questions. I would say.

We've got one more question from the Daily Telegraph, which is also about supply chains

(technical difficulty)

about 70% of our added value is in the supplier market. And we've got a basic approach when we take a look at our own performance and also third-party performances. There are always strategic aspects, employee and staff aspects that we have considered. And this is an approach that has been tried and tested for many years. And we will continue that as well. I don't think that the current situation is going to lead to a basic change in that approach.

Then the last question, please.

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Operator [84]

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We've got one more question from Germany. [Douglas Roldof, Something Europe.]

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Unidentified Participant, [85]

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[Christian Hansen] here. I've got 3 questions, and I'll keep that short. There are financial helps in many industries. And do you see a moral hazard that other parties could be at a disadvantage?

Then the topic of the U.K. As an important car manufacturer, are you in touch with the U.K. government? And do you recommend that the talks about the future trade relations with the U.K. should also be postponed and stretched out?

And coupled to that, has many -- because of -- against the background of the current situation, the right to be guaranteed and secured in the company would -- a sale of many be even feasible? Or is that something that is considered?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [86]

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Let's start with the talks with the U.K. government and MINI, Oliver Zipse.

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Oliver Zipse, Bayerische Motoren Werke Aktiengesellschaft - Chairman of the Board of Management & CEO [87]

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I think here, we also have to take a short-term approach. MINI has its home in the United Kingdom. And just because of a corona crisis or Brexit, nothing is going to change. We've always confirmed that. It's important for us that all the disadvantages that we might have in the supply chain that are caused by the exit of the U.K. of the EU is reduced to an absolute minimum or even to 0. We always said that, and we still stand by that statement. That's got nothing to do with the current corona crisis.

And the rights of many to remain a part of this company or industry, you never have such rights. Because everything we do has got to make sense for the company. But at the moment, there is no reason to speculate about that whatsoever.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [88]

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Second part is potential security networks, financial security networks for the industry. And I would ask the CFO of BMW.

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Nicolas Peter, Bayerische Motoren Werke Aktiengesellschaft - CFO & Member of Management Board [89]

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Well, also because of the financial crisis, we got through that very well. And on our own accord. And if you look back, we were one of the few companies who had a slightly positive result in those days and we had a free cash flow that was around 0. We could achieve that in that situation.

And in the years following that, within the framework of our risk management, our liquidity control, our core processes, our IT systems were further improved. And therefore, I am very confident that we will get through this crisis on our own accord without bailout funds.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [90]

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Herr Zipse would like to add to that as well.

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Oliver Zipse, Bayerische Motoren Werke Aktiengesellschaft - Chairman of the Board of Management & CEO [91]

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I think what is important now and what needs to be proven now is that the necessary processes that have to go on, that they are organized without the danger of contagion. That is something that we learned from China because I think lots of other societal processes, such as the food industry, the chemical industry, hospitals, police, all these have to continue to function as well. And I think the image that we have in our hands that everything comes to a standstill and everybody's got to go home, that doesn't hit the mark of -- as far as this challenge is concerned.

But us as an industry and us as BMW, we have to show a way how processes can be kept up with a minimal risk to the employees and to the consumers.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [92]

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Thank you very much Herr Zipse. I wanted to close the Annual Accounts Press Conference, but I'm glad to have such vivid exchange with questions and answers. And therefore, one last question.

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Operator [93]

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The next question comes from Stefan Stahl, Augsburger Allgemeine.

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Stefan Stahl, [94]

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Stefan Stahl. Good morning from the home office here. The overall board -- Supervisory Board Chair said that there are flexible accounts -- flexible work time accounts. Have I understood you correctly? That you, first of all, use these flexible accounts, and then this instrument of short works could also be used?

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [95]

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Thank you very much, Herr Stahl, for this question because this question is a very important one. And I will refer that question to Frau Horstmeier.

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Ilka Horstmeier, Bayerische Motoren Werke Aktiengesellschaft - HR, Labour Relations Director & Member of Management Board [96]

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Herr Stahl, thank you very much for the question. You've given the answer yourself, that's exactly what we're going to do. We will use our flexible work time instruments because they are the legal prerequisite to go into short work in the first place. And then we will prepare the next steps according to the situation. And that will also be location-individual, plant-individual because we find different situations in different locations, obviously.

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Torsten Schuessler, Bayerische Motoren Werke Aktiengesellschaft - Head of IR [97]

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Okay. Frau Horstmeier, dear colleagues

,Thank you very much.

I hear we'd have lots and lots and lots of further questions. I'm glad to hear that, I have to be honest here. And that shows that even such a form of a press conference finds its resonance and its response. But I ask your understanding here. We close the Annual Accounts Press Conference.

And yes, colleagues, ladies and gentlemen, One personal statement that I would like to make, and maybe the camera can find him. Klaus Fröhlich has his last Annual Accounts Press Conference today. And I would -- also on behalf of my colleagues, I would like to say thank you to you.

This is not a farewell, not at all. He still is with us until the 30th of June. And whoever knows us, knows him, knows that he's going to work around the clock. He's going to be active. We know that from him, but I would like to seize this opportunity to say thank you. We will miss him because he's always been a big supporter of communication, which does not always go without saying.

He sometimes admonishes and said he doesn't need all that. But whenever he was in responsibility, whenever he was on stage, he did a perfect job. So dear Klaus, also from my part, that's going to be possible also during such difficult time, a heartfelt thank you.

Having said that, colleagues -- and that was spontaneous, but I think it was important. We need to do things like that also in these difficult times. Thank you very much for participating. All the best to you. Stay healthy. And hopefully, we will see each other in person in the near future again. Thank you very much, and goodbye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]