Networked technology for better quality of life Dr. Volkmar Denner, Chairman of the Bosch Board of Management,
Dr. Stefan Asenkerschbaumer, Dr. Bernd Bohr, and Dr. Stefan Hartung,
Members of the Bosch Board of Management

  • at the Annual Press Conference, April 18, 2013
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  • April 18, 2013
  • Business/economy
  • Presentations

press release

Ladies and gentlemen,

I too would like to extend a warm welcome to our annual press conference. It is a conference that takes place at a time of difficult yet necessary decisions – decisions that have negative consequences on part of our company but secure the company as a whole. Weighing one against the other is part of our responsibility. And with equal responsibility, we focus on what lies ahead. After all, the history of our innovations is at a turning point. For many years, it was above all the electronics in our products that drove our development forward. Now, the rapid progress of the interconnectivity is a new source of technological push. This is our subject today, in addition to our business review and outlook for the year ahead.

Our main messages are as follows:
  • When all is said and done, 2012 was also a year of dynamic development. True, the cooling economy slowed our sales growth, and result was unsatisfactory. But we were able to extend our market and technological position in many business areas and countries.
  • In 2013, we expect sales growth of between 2 and 4 percent, slightly higher than in the previous year. We will improve our operating result. To achieve this, we have introduced a series of measures whose effect will be lasting. In addition, because of the continuing risk of heavy losses, we have decided to withdraw from the crystalline photovoltaics business.
  • Over the longer term, we will rigorously pursue the main lines of our strategy – with systems for environmental protection, energy efficiency, and safety. In the process, we increasingly want to use the internet to open up new areas of business.
The Bosch name will continue to be associated with electronic systems, but we can now use the internet more than ever before to connect the most diverse systems with each other. This will give rise to unprecedented applications and services and give a whole new meaning to “Invented for life.” To illustrate this point, let’s look at a driver of the future. His anti-skid system will hear in advance about a slippery road surface around the next bend, because news of the hazard will be relayed automatically from vehicle to vehicle. When the car relays the information that the driver will soon be arriving home, the heating automatically powers up. I could give many other examples. Connected technology will increasingly give rise to what one might call connected life.

It is the internet of things and services, or web 3.0, that will make the lives of future generations safer, as well as more efficient and simple. Like barely any other company, Bosch is ideally positioned to play a role in this:
  • First, because of our know-how: not only in hardware, but also in software and especially in sensor technology.
  • Second, because of our diversification, which makes an especially high level of interconnection possible. Bosch’s broad footprint has never been as valuable as in the age of connected life.
I shall go into these strategic thoughts in more detail – together with Mr. Bohr for automotive technology and together with Mr. Hartung for energy and building technology. But first, Mr. Asenkerschbaumer will take a look back at the past business year. I will follow on directly from his remarks to give you an outlook for the current year. My comments will highlight the measures that will improve our currently unsatisfactory result. For example, we are reducing our fixed costs and making our personnel expenses more flexible in order to make Bosch agile even without any economic tailwind. This means we are back on course for the target we have set ourselves for result. It is in this context that you should see the past business year, which Mr. Asenkerschbaumer will now outline for you.

Business figures 2012 – economic activity slowed

Ladies and gentlemen, I would now like to go into the most important key data from the 2012 financial statements.

All in all, we cannot be satisfied with the Bosch Group figures. The economic slowdown put a brake on the Bosch Group’s sales developments. Moreover, result did not develop as we had hoped. However, this general impression hides the fact that a whole number of areas developed favorably. In addition, we made some important decisions for the future and further expanded our international presence.

But first of all, let’s look back at the economic environment in 2012. It deteriorated considerably, especially in the second half of the year. The recession in the European Union hampered the development of our sales. Generally speaking as well, global economic growth slowed in 2012, to 2.5 percent. In addition, the pace of growth slackened in the growth regions of Asia Pacific and South America, while developments in North America were relatively stable.

Global vehicle production rose 6 percent to 84 million vehicles. However, in the European Union, our largest market, 5 percent fewer vehicles were manufactured. In addition, the worldwide production of heavy trucks slumped by 11.5 percent. In this instance, the considerable decline in China played a significant role. One of the main reasons for this was the postponed introduction of new emissions standards.

In the capital goods industry, which is equally important for us, activity weakened considerably in the second half of the year. By contrast, worldwide demand for consumer goods was once again relatively robust, even though it fell back considerably in southern Europe.

The slowdown in economic activity inhibited sales growth in the Bosch Group over the course of the year. Sales in the year as a whole rose by just 1.9 percent to 52.5 billion euros, and were thus weaker than expected. After adjusting for exchange-rate effects, sales fell by 0.8 percent. At 1.4 billion euros, these effects were considerable in 2012.

Acquisitions and divestments result in a negative consolidation effect on sales of some 300 million euros in total. The was despite sales growth of some 300 million euros as a result of acquisitions. However, the divestment of the foundation brakes business of the former Chassis Systems Brakes division and the dissolution of Kefico, our South Korean joint venture for gasoline injection technology, resulted in negative sales effects of some 600 million euros. The largest acquisition of 2012, the takeover of the Service Solutions division of the U.S. company SPX Corporation, had only a slight effect, since it was not acquired until December 2012. This acquisition will strengthen the spare-parts and diagnostics business of our Automotive Aftermarket division. All in all, we spent some 1.5 billion euros on acquisitions in 2012.

I will now turn to the development of sales revenue by business sector. In Automotive Technology, sales rose by 2.1 percent. The negative consolidation effects I just mentioned played an especially important role here. Excluding these effects, sales growth was 3.6 percent.

The majority of divisions in the Automotive Technology business sector recorded a positive business performance, some with substantial increases. For example, sales of gasoline direct injection systems rose by 50 percent. Developments in the divisions that have a high share of components and systems for heavy trucks were not so favorable. The Diesel Systems division was especially hard hit.

Following a still favorable start to the year, the Industrial Technology business sector felt the effects of the steep decline in the capital goods industry. Sales stagnated at 8 billion euros. These economic developments primarily affected the Drive and Control Technology division, which supplies control solutions and drives for industrial and mobile applications. By contrast, we posted double-digit growth in packaging machinery, where our main customers are the pharmaceuticals and food industries, which are less prone to cyclical developments.

The situation in the Solar Energy division, on the other hand, was extremely difficult. Dramatic market developments, with prices once again dropping by roughly 40 percent, meant that it discloses a loss of one billion euros, including impairments. The entire industry is sustaining heavy losses. As announced, we will be discontinuing our activities in crystalline photovoltaics. As Mr. Denner has mentioned, following an in-depth review we cannot see any possibility of placing this division on an economically sound footing, given the extremely risky prospects it faces.

The Consumer Goods and Building Technology business sector, which includes business activities in power tools, heating systems, security technology, and household appliances, grew its sales by 2.5 percent in 2012, to 13.4 billion euros. While we had to sustain considerable losses in southern Europe, we recorded generally good developments in North America, Asia Pacific, and a number of eastern European countries.

Generally speaking, developments varied from region to region. Developments were especially unsatisfactory in Europe, where we generate more than half our revenues. However, we also had to shoulder significant decreases in South America, where business activity cooled significantly. We were able to grow our sales strongly in North America, where we were helped by a steep rise in automobile production. In Asia Pacific, an aggregate sales increase of 5.6 percent failed to come up to the strong growth of previous years. Although we achieved high rates of growth in the southeast Asian countries, growth in China and India remained below our expectations. For example, not only truck production but also the construction machinery market developed sluggishly in China.

Despite the unfavorable economic environment, our worldwide capital expenditure came to some 3.2 billion euros once again. We also expanded our presence in southeast Asia and eastern Europe. However, our original plans were considerably higher. Over the course of the year, we brought capital investment into line with sales developments. Of the total spend in 2012, roughly 2 billion euros were allocated to Europe, 800 million euros to Asia Pacific, and some 400 million euros to the Americas.

Our research and development expenditure rose considerably in 2012, by 600 million euros to 4.8 billion euros. The number of associates working worldwide in this area rose by some 4,300 to 42,800. Some 2,200 new R&D associates joined the company in Asia Pacific alone. We now employ some 13,800 researchers and engineers there, compared with 26,400 in Europe and 2,600 in the Americas.

Moreover, this high level of expenditure also reflects our considerable upfront investments in electromobility. In a moment, Mr. Denner will explain how we intend to place stricter limits on our upfront investments in growth areas.

This brings me to our figures for result. In terms of earnings before interest and taxes, or EBIT for short, we disclose a 2.5 percent return on sales, compared with 5.3 percent in 2011. This is unsatisfactory. Result was especially affected by the heavy losses in photovoltaics. Other reasons include the considerable upfront investments in growth projects I just mentioned, weak sales growth, and the delayed effect of cost-cutting measures. On this latter point, we are now making significant progress, and will continue to rigidly apply these measures. At 2.8 billion euros or 5.3 percent of sales, the result before taxes is better than in the previous year. This is due to financial result, which rose to 1.5 billion euros, above all as a result of the sale of our financial stake in Denso Corporation.

The Automotive Technology business sector generated EBIT of 1.4 billion euros or a return on sales of 4.5 percent. Industrial Technology once more discloses a negative result. At some 710 million euros, it is due to the difficult situation in photovoltaics. The smallest decline was in Consumer Goods and Building Technology, despite the difficult European market. Here we generated EBIT of 620 million euros, or 4.6 percent of sales.

To close, let’s have a look at our statement of financial position. It remains sound, with an equity ratio of 48 percent. The increase in non-current liabilities is due to the increase in pension provisions, by 1.6 billion euros to 8.5 billion euros. The reason for this is the significant drop in interest rates in Europe.

Finally, I would like to mention the changes in consolidation in the current year. These changes will have considerable effects, especially on sales.

Up to now, fifty-fifty joint ventures have been included proportionately in the sales revenue we disclose. In the future, changed regulations will mean that there will no longer be any such proportionate consolidation. This especially concerns our joint ventures BSH Bosch und Siemens Hausgeräte GmbH and ZF Lenksysteme GmbH. If these rules are applied to 2012, our sales came to 45.6 billion euros.

In the future, the Bosch Group result figures will include the proportionate result after tax of the joint ventures, instead of the proportionate income and expense items. The new rules for disclosure will also affect the statement of financial position and headcount figures.

In addition, fiscal year 2013 will also see a change in segment reporting as a result of the creation of a fourth business sector, Energy and Building Technology, at the beginning of the year. We will speak about this business sector when we deal with strategy later on.

Outlook for 2013 – focus on strengthening earnings power

Ladies and gentlemen, now that Mr. Asenkerschbaumer has presented the figures from the 2012 financial statements, I would first of all like to give you an idea of our expectations for 2013, and also to outline the package of measures with which we intend to improve our earnings power.

How do we assess the economic environment? The global business climate has brightened, but we nonetheless expect only a slight year-on-year improvement in GDP growth in 2013, to 2.7 percent. While the stabilization of the EU sovereign debt crisis has heightened companies’ confidence in the European economy, the EU economy will nearly stagnate in 2013, with growth likely to be just 0.3 percent. In southern Europe, moreover, we have to be prepared for a lasting recession. And in the U.S., budget measures will limit growth opportunities, despite positive indicators. The emerging markets will likely disclose healthy growth.

In other words, we cannot expect any economic tailwind in 2013 either, and especially not in Europe, which remains the market where we generate most of our sales revenue. And we have to expect that global vehicle production will likely grow by only 3 percent in 2013, or by just half as much as in the previous year. In Europe, it will likely drop once again. We also expect demand for capital goods to remain weak for the time being. On a global scale, demand for consumer goods should be relatively stable. At the same time, we expect construction activity to pick up in important markets. Once again, however, this does not apply to southern Europe.

In this environment, Bosch Group sales displayed subdued development in the first three months of this year. Nonetheless, for the year as a whole, and in the new consolidated group, we expect to see sales growth of between 2 and 4 percent.

This makes it all the more important that we work hard on improving our earnings power. We have already begun our efforts to achieve this. Last year, we put a series of measures into practice, and further measures have now been defined and introduced.

To come straight to the point, it is important for us to lastingly strengthen our earnings power in order to finance our future growth. This is not about showy programs. The important things here are strict cost discipline and rigorous implementation.

To achieve this, we have agreed with the divisions on using budget caps as a management tool. We will limit capital expenditure and acquisitions according to clear criteria, and keep a close eye on upfront investments in growth areas. Moreover, we want to reduce our fixed-cost ratio. We need to do so in order to improve our cost-competitiveness, and to be able to react more flexibly to cyclical fluctuations. In this context, we are also in talks with the employee representatives about agreements to make personnel expenses more flexible. In Germany, we have already managed to reach an agreement with the combined works council that allows us, on an incremental basis, to cushion drops in sales of up to 20 percent without resorting to statutory schemes for shorter working weeks.

In addition, we are preparing for the risk of protracted economic stagnation in Europe. On this subject, the divisions are making very detailed analyses of the consequences for individual locations. Our considerations here are guided by our “Bosch way.” The locations should introduce measures that improve their competitiveness. But it is just as important for us that the divisions should tap into new growth potential, especially in Europe. We certainly believe this is possible, with innovative products and business models. Wherever personnel adjustments become necessary, they should be carried out in as socially acceptable a way as possible. In such a case, our aim is to work jointly with the employee representatives to find constructive solutions.

Not least, we are relentless in our efforts to achieve our target for return, which is 8 percent of sales in terms of EBIT. We will not manage it this year, even if we do want to improve EBIT compared with 2012. However, our divisions have been given clear result targets for the years ahead. These targets take their lead from the respective divisions’ competitors, and progress toward them will be closely and systematically monitored.

Before my colleagues and I talk about the rest of our strategy, I would like to say a few words about the exit from crystalline photovoltaics we announced in March. Here too, our objective was to do things the Bosch way. By means of a comprehensive package of measures, therefore, we initially tried to put photovoltaics on an economically viable footing. But despite extraordinary efforts on the part of associates, we were unable to offset the massive drop in prices, which was as much as 40 percent in each of the past two years. It is not only a Bosch problem: the entire industry has been making heavy losses due to global overcapacity.

At Bosch, the loss in photovoltaics comes to roughly one billion euros in 2012 alone, as Mr. Asenkerschbaumer already mentioned. Over the past few years, the loss came to some 2.4 billion euros. Due to continuing high risks of loss, and in order to avert further damage to the company as a whole, we have decided to withdraw from crystalline photovoltaics. This was a very difficult decision. When we entered this field in 2008, we did do full of optimism and confidence. And we remain convinced that photovoltaics will play an important role in future power generation over the long term. But such huge losses cannot be borne for ever.

We are currently holding initial talks on selling individual units. Our aim here is to save jobs. In all, this withdrawal from photovoltaics affects 3,000 associates.

However, it does not mean we are abandoning the corporate strategy we have pursued so far. Protecting the environment remains an important pillar of that strategy. For energy efficiency in particular, our product portfolio is extraordinarily broad. It ranges from systems for economical internal-combustion engines and electromobility to the recycling of automotive components, to energy-saving heating systems and household appliances, and to highly efficient hydraulic drives. In addition, we offer solutions that utilize industrial waste heat and, not least, we are increasingly offering energy advice.

Our strategy – interconnected and invented for life

In the comments on our strategy that now follow, we will go into these subjects in more depth. But even the above outline of our efficiency portfolio shows that even if we ourselves never spoke of a “green Bosch,” the necessity of environmental protection and resource conservation remains a decisive megatrend for us. Of course, it is not the only one. So what are the trends, apart from the scarcity of energy resources, that we orient our strategy to? Here again, I will limit myself first of all to a brief outline:

  • Globalization, which is being accelerated further by the rapid economic growth in Asia and the weak growth in Europe,
  • The need for safety and accident prevention, which is becoming more acute as society ages and traffic becomes more dense.
  • New ideas for mobility and powertrains, that are becoming more important with increasing urbanization worldwide.
  • And finally, the interconnection of things, services, and people on the internet, at which I hinted at the start of my talk.
In all this, we realize that not every megatrend will become established mega-fast. Some things have developed faster than forecast, such as the speed of growth in Asia or the progress of the internet. But others are coming about more slowly, or more complicatedly, than first supposed – such as the move to alternative forms of energy. The most recent discoveries of shale gas may mean that the transition to the age of renewable energy takes a lot longer – in the U.S. as well as elsewhere. For Bosch, what is important here is to be prepared for a volatile environment, even in our strategic deliberations. In other words, we have to think more in terms of scenarios and anticipate where developments could go wrong.

However necessary it is to adapt to changed circumstances, the salient points of our strategy remain valid – and especially our strategic imperative “Invented for life.” All over the world – and this especially includes the emerging markets – our focus is on systems for environmental protection, energy efficiency, and safety. Nearly half our research and development spending continues to go into eco-friendly products. And safety accounts for roughly 20 percent. In terms of total sales, these areas account for roughly 40 and 15 percent respectively.

Our portfolio therefore reveals common features, and increasingly we are combining our expertise from such ostensibly disparate domains as automotive technology and building technology. Especially the internet of things and services makes it possible to network our know-how in a way that was unimaginable only a few years ago. It will give rise to ever new solutions that offer better quality of life. However, this opportunity also involves a challenge: networked technology is usually complex technology, yet life with this technology must not become more complex, but simpler. This is why we are deliberately integrating user experience into our development process, employing a strong team of designers and psychologists. Creating beneficial solutions for a connected life – this is a new strategic aim for Bosch. And it is this that we want to present to you now – in a number of different examples.

We make our products – including sensors – web-enabled

When we talk about interconnectedness today, we mean far more than the synergy that has always existed between the Bosch divisions. That said, we can see some new, and at times surprising, examples of this effect.

For example, we are launching an oil-fired condensing boiler that significantly reduces fuel and maintenance costs. What makes this so exciting is that its injection valve and lambda control have been adapted from our gasoline systems. This is a premiere for automotive components in heating systems.

What makes interconnectedness special, however, is when cars and houses can exchange information. Automatic communication among devices and systems of all kinds – this is the decisive advance brought about by the internet of things and services, or “web 3.0” for short. For this we need more software expertise – expertise that will give rise to new services. Even now, Bosch employs some 10,000 software developers, and we generate sales of roughly 3 billion euros with services – a figure that is set to rise. Our advantage over the IT industry is that we have profound know-how in the world of things. Our task now is use the internet to connect things in such a way that beneficial services and profitable business are created.

We already have a catalyst of this development in the company in the shape of the roughly 500-strong team working for our subsidiary Bosch Software Innovations. The subsidiary is already present in major markets, including Germany, the U.S., and Singapore. It provides our divisions with a versatile software platform for web 3.0. In addition, it is involved in more than a dozen pilot projects relating to the internet of things and services. One example is “Fair Energy” in Reutlingen, Germany. This project groups distributed CHP plants to form a virtual power plant, which it controls according to electricity requirements. Most of the projects it has carried out so far, from Singapore and Milan to Berlin and Stuttgart, have to do with electromobility. One new trend we see here is networking of the various mobility providers and charge-spot operators, with the result that an electric car can roam between the networks in the different test regions. Here, our software platform acts as a kind of data hub.

However, for web-based control such as this, as many things as possible need to be web-enabled. Vehicles, smartphones, containers, machines – as early as 2015, more than six billion things will be connected to the internet. However, this will only mean additional benefit for people if the relevant information about these things is automatically collected and transmitted. What is needed is sensor-based connection – and it is precisely here that Bosch is now taking a decisive step forward.

We are one of the very few companies that has exactly what it takes for this. Each year, Bosch produces half a billion micromechanical sensors. We are the world’s largest supplier to the automotive industry, and the second largest to the consumer goods industry. In the future, our micromechanical sensors will also become part of the internet – small, cost-effective, and energy-saving.

Our hope is that this will be the breakthrough for the internet of things and services – and not least for connected life. For example, elderly patients will in the future wear a bracelet with an embedded chip for their telemedical care. These future web-enabled sensors can be embedded just as unobtrusively in buildings – in a window, for example, where they can automatically control the heating and the burglar alarm. We can see a whole series of possible applications.

We connect vehicles – more service, more safety

From the point of view of web 3.0, the car is a special case. Unlike a window, for example, it is already chockablock with electronics. So that it can enter the internet in a meaningful way, it has to read data from its control units and transmit them. For this purpose, Bosch has developed a “connectivity control unit.” In connection with vehicle condition monitoring, such a CCU paves the way for new services for fleet operators, such as timely error analysis and maintenance. A first application is planned for 2014, in collaboration with a major leasing company.

When it comes to the connected vehicle, our development efforts are basically two-pronged:
  • First, we are using vehicle data as the basis for new services for operations centers, insurance companies, fleet operators, and repair shops.
  • Second, we are making driving more efficient and above all safer by connecting cars with each other, as well as with the infrastructure.
This second line of activity leads toward a major objective – that of automated and above all accident-free driving. It is an objective that calls not only for car-to-car communication, but also for interface design that is as simple as possible.

In this context, we have come up with a driver information system for General Motors that can be controlled by natural voice input – in other words, by speaking as freely as you would to someone in the passenger seat. At the Consumer Electronics Show at the beginning of the year in Las Vegas, this solution won the car-tech innovation award. We are working on helping the driver’s workplace to keep pace with the development of automotive technology. Mr. Bohr will now go into this development in more detail.

We are automating driving – more driver assistance systems

When all is said and done, ladies and gentlemen, our automotive technology engineers are not working only for us and our customers. After all, the two main objectives of their development work – making cars safer and more eco-friendly – are clearly also for the good of society. Reducing CO2 emissions from traffic is an urgent task. But it is even more urgent to reduce the number of road deaths – a figure that is still rising worldwide year for year. We are providing technical answers to a number of political programs, whether devised by the European Union, the emerging countries, or the United Nations.

The most important life-saver after the seatbelt is a Bosch innovation: the ESP electronic anti-skid system.

More than 5,000 engineers are working on further improving our safety and driver assistance systems. These systems account for sales worth some five billion euros, and this figure will rise by 10 percent each year. We will generate most of this growth in the driver assistance market. There are signs that the long awaited boost for this market is coming, triggered by a new rating scheme for vehicle safety. What this means in a nutshell is that from 2014 new vehicles will only be awarded the top rating if they have at least one driver-assistance sensor on board. We are on the cusp of a dramatic increase in installation rates.

Bosch has been manufacturing radar sensors since 2000, and will reach the one-million mark in the next few weeks. But we will have delivered our second million by 2014, and ten million by the end of 2016.

Sensor development is continuing. In 2014, Bosch will be starting series production of a video camera that can see objects in stereo. This means we can now build an automatic emergency braking system for pedestrian protection – when children suddenly run out on to the street, for example – on the basis of just one sensor. Our sensor technology is also the basis for new comfort systems. For example, we are launching an enhanced parking assistant that includes a remote control for maneuvering cars in tight garage spaces. And next year we will be debuting a traffic jam assistant that keeps vehicles in their lanes during stop-and-go traffic. This will be the basis for a future traffic jam pilot that automatically changes lanes, and will allow drivers to check their emails while stuck in traffic jams.

Electronic co-pilots such as these will be on our roads toward the end of the decade, initially for specific traffic situations. Even today, we can already demonstrate automated driving in prototypes. But we have to safely integrate these future functions – with their sensors, control units, and actuators – into the car as a whole. And it is precisely this that will be Bosch’s strength. We are working on this with two teams – one for functions development in Palo Alto and one for systems integration in Abstatt.

Automated driving will only catch on if we comply with the “safety first” principle. Passengers have to be able to rely on it, just as they would rely on a taxi driver. This will still require considerable progress in four fields of development:
  • First, in security and reliability,
  • second, in electronics architecture,
  • third, in sensor design, and
  • fourth, in maps of vehicles’ surroundings.
For highly automated driving, these maps have to be accurate to the nearest ten centimeters, and above all more up-to-date than now – supplemented by information about the surroundings, which are also being gathered continuously by other vehicles. This brings us back to the topic of “Car2X” communication. As long as data exchange among vehicles is designed solely to trigger early warning of obstacles, it is enough if roughly 10 percent of cars on the road are exchanging data. To support safety functions such as an intersection assistant, this figure has to be at least 50 percent. Automated driving will be networked driving.

Even more efficient driving – through networked systems

Without networking, driving cannot be efficient and eco-friendly. For this purpose, we use the navigation system not least as a sensor of the outside world – it knows the speed limits along the route, as well as the course the road takes. This previous knowledge allows us to enhance the start-stop system and create a coasting assistant. In concrete terms, this allows us to compute exactly when drivers can take their foot off the gas pedal so that the car’s engine can be stopped and it can start gliding toward a built-up area or around a tight bend at the earliest possible point. On highways, we expect that this combination of networked technology and driver behavior can result in a fuel saving of up to 15 percent in real driving conditions.

This example illustrates the many ways in which Bosch is working to reduce consumption and CO2 emissions in road traffic. Our development work pursues three main avenues:

  • First, we are optimizing gasoline and diesel engines. Even this will allow us to reduce consumption by a further 20 percent compared with 2012. As climate protection becomes more important, unit sales of technology to make combustion engines more efficient are increasing. In 2012, we supplied more than five million gasoline direct injection systems, and by 2015 this figure will top nine million. Unit sales of our common-rail high-pressure diesel injection system will also increase over the same period from more than 8 to at least 12 million.

  • Second, we are ready for an upsurge in demand for CNG powertrains, which emit 25 percent less CO2 than gasoline engines. We supply the world’s smallest injectors for CNG-powered cars – more than a million of them this year. But that’s not all. We also offer flexible control units that are adapted to both gasoline and CNG injection. Currently, more than half the world’s CNG-powered cars are still to be found in Asia Pacific. But the discovery of new gas deposits could mean that the U.S. will become an emerging market for CNG powertrains.
  • Third, we are making electromobility economically viable – with a development team of 1,000 engineers. A volume market here will likely only develop after 2020, but by the end of 2014 at the latest we will have completed 30 projects relating to powertrain electrification in production vehicles. By the end of the decade, we want to have more than doubled batteries’ energy density, and to have developed motor designs that can make do with a smaller quantity of rare earth elements, or possibly no such elements at all. Most importantly, however, we have to optimize the way these components work together. Networked technology is especially crucial for electric driving.
So much for our solutions for the future of the car. But it is not only on our roads that there is potential for saving energy. On this subject, let me hand over to Mr. Hartung.

Saving energy in buildings – with technology and service

… Thank you, Mr. Bohr. You could well call Bosch an energy efficiency all-rounder. To explain why, let’s have a brief look at global energy consumption. Transport and traffic only account for 28 percent. Industry accounts for 32 percent, and existing buildings for 40 percent. Bosch can help save energy in all these areas. In Industrial Technology, for example, we have set up our “Rexroth 4EE” program. This reduces the energy consumption of entire factories, and this not only with economical systems, but also with systematic energy advice. We believe that the secret of our building technology’s success will lie precisely in this combination of technology and service.

Let’s make no bones about it: for many people, saving energy within their own four walls is more difficult than on four wheels. Even though buildings consume the most energy, they are far less state-of-the-art than vehicles. For example, the heating systems installed in Germany are nearly twice the age of the vehicle fleet. Clearly, it is easier to buy a modern car than to make a house more energy efficient. For this reason alone, we have to offer the owners of houses and commercial buildings a combination of technology and service. This integrated portfolio is the basis of our new Energy and Building Technology business sector.

Exchanging old heating systems for new is generally only the first step toward improving buildings’ energy efficiency. We can do far more. For example, we can intelligently link the generation and consumption of electricity and heat. This will make power supply even more efficient, as well as more decentralized. To achieve this, the new business sector brings relevant sets of competence together – from the control of heating and security systems to energy management services. In this way, we can help save energy, and tap into new market potential as well.
It is above all rising energy costs that are driving this market. Investments in efficient technology will therefore pay back faster than before. Furthermore, it is also part of companies’ social responsibility to reduce energy consumption, and thus CO2 emissions. Energy management has become a top management issue.

Against this background, the new Energy and Building Technology business sector has huge potential – economically and ecologically. Its sales, which were five billion euros in 2012, will likely reach eight billion euros by 2020. How do we want to achieve this? Let me give you a rough outline of its three main areas of business: residential buildings, commercial buildings, and company services…

  • Let’s look at residential buildings first. While we do not want put the central heating on the sofa, we can certainly operate it from there. In the private sphere, smart devices are becoming increasingly popular – so why not also use them for controlling power supply? For our heating systems alone, we already offer 15 different apps. Saving energy should not just be about doing without. It should be fun too, and simpler at the very least. This is why we posted an energy advisory service on the web one month ago. To use it, all house-owners have to do is enter their building data. Using figures computed by the Fraunhofer Institute for Building Physics, it then presents them with suggestions for renovating their house, from roof insulation to the boiler. Up to now, such ease of use was only available when choosing extras for a car. Not least, this helps boost unit sales of our efficient technology. Mr. Denner has already spoken about our new boiler equipped with a lambda sensor. It is also the world’s first oil-fired boiler with an integrated web interface. We are making energy saving attractive for the internet generation.

  • In commercial buildings, we are dealing with different customers – people who build and manage large complexes. Efficient technology can help them as well. We have already installed 1,200 combined heat and power plants and waste heat power plants, with this figure set to exceed 5,000 by 2020. But it is especially in business premises that the intelligent networking of energy systems is important. This calls for two things. First, process and monitoring technology – in other words, the kind of know-how we already have by virtue of our security systems business. Second, professional advice – a competence that is contributed by our subsidiary Bosch Energy and Building Solutions. Its engineers can unlock even hidden potential for efficiency. Recovering heat from exhaust air, controlling ventilation according to actual demand, using air compressors to utilize waste heat from production to heat offices – with measures such as these, we can already achieve an average 20 percent saving in energy costs in commercial buildings. Our subsidiary has only existed for just over a year, yet even the projects it is already working on reduce annual CO2 emissions by 80,000 metric tons – as much as the emissions of a small town. In the years ahead, the market for projects such as these will grow by 12 percent a year.

  • This alone shows that we expect to see especially high rates of growth with services for companies. We are taking on this business in two ways. First, through Bosch Energy and Building Solutions, and second, through our communication centers. Together, they currently generate sales of 140 million euros, and we aim to reach the billion mark by 2020. The communication centers alone are expected to increase their business volume by as much as 15 percent per annum. What started out as emergency operations centers has now grown far beyond the monitoring of security systems. With 5,000 associates in 14 countries, the communication centers perform services in 30 languages. Their broad portfolio of services allows customers to outsource entire business processes. This may be processing and monitoring air freight, for example. Our security systems also make cloud-based security possible – a virtual patrol from video camera to video camera. But even in our services business, we find ourselves coming back full circle to the subject of energy: we currently act as a central service for the operation of more than 1,000 combined heat and power plants.

Sales activities will also bring together the business sector’s diverse areas. We are deliberately encouraging cross-selling. As a rule, the divisions of Energy and Building Technology are involved in the planning of major projects from an early stage – which means they can open doors for other divisions as well. In South America alone, we have already identified 30 cross-selling projects in target industries such as mining, hotels, and stadiums. In the future, we will also tailor our product portfolio to these industries. In 2012, Bosch already generated sales of some 300 million euros in cross-selling projects, and as much as 500 million euros are expected this year.

Looking beyond the current year, we see especially great challenges for our research and development. Pioneering technology for efficient power supply that is as decentralized as possible – that is our objective. The road to this goal takes in intelligently controlled energy storage devices of the kind we are testing in pilot projects. Bosch increasingly sees itself as a systems supplier for energy and building technology. And with that, I would like to hand back to Mr. Denner.

Our global network – new and agile ways of working

… Thank you. It is striking that two subjects were at the forefront of both Mr. Hartung’s and Mr. Bohr’s presentations: energy efficiency and safety. These are subjects that have to be taken up by all our divisions, since they are a matter of concern for people, companies, and governments the world over. Energy efficiency and safety are global tasks. At Bosch, we respond to them by providing technical solutions that – increasingly – are adapted locally. This alone is reason enough to make our global network even tighter.

Above all, this means more technical presence, especially in the emerging markets. While it is true that the new research center we are currently building is in Renningen near Stuttgart – a campus where 1,200 technical trailblazers will work when it opens two years from now – this center is nonetheless part of a global network. And the people who will work there see themselves as part of a global collective of 42,800 developers, more than one-third of whom already work beyond Europe. In Asia Pacific alone, the growth region par excellence, they number 13,800. And this figure will nearly double by the end of the decade.

To exploit the dynamism of this region, we need products that are tailored to local specifics. For example, our center for two-wheeler safety, which is based in Yokohama, Japan, has come up with not just one, but two new solutions:
  • First, a stability control system that identifies the best possible braking intervention when the motorcyclist is leaning into a bend. An innovation for the premium class, worldwide.
  • On the other hand, there is an antilock braking system that focuses solely on controlling the front wheel. This cost-effective feature for extra safety will go into series production with an Indian motorcycle manufacturer. It is aimed at a market of more than 17 million vehicles in India and China alone in 2013.

Solutions such as these can only emerge from a global development network. Such a network calls for new forms of collaboration. Let me give you two examples:
  • The first is the “Enterprise 2.0” project. Based on social media, it is encouraging networking within our company. Even now, some 20,000 associates are using the “Bosch Connect” online platform to share knowledge in 26 pilot projects. Our initial impression is one of shorter processes, a wealth of ideas, and more collaboration among experts from diverse divisions. By mid-year, this internal social network will be available for all associates.
  • The second is the “Bosch internal open source” project, or BIOS for short. It encourages software development across divisional and national boundaries. Here, communities of 20 to 50 specialists come together on a voluntary basis. They may develop an internet interface for a heating or navigation system, or a Linux platform for our control units.
The vertical organization is nonetheless important for efficient operations. But we are now supplementing this hierarchy with open networks. This is the type of collaboration that is needed to open up new areas of business on the internet. And it is also precisely the kind of collaboration that digital natives expect to find in our company. In each of the past three years, we have taken on some 10,000 university graduates. They are the source of many networking initiatives.

Bosch remains agile in a difficult environment

Whether with a creative team or with clear and sometimes hard leadership decisions, Bosch remains agile in a difficult environment. We have built up a entire repertoire of options for action. Let me close by naming three salient points:

  • First, when there is a need for structural adjustments, our locations get to work early to develop solutions of their own for greater competitiveness.
  • Second, we view the rapid progress of the internet as an opportunity. We are taking the initiative in creating a bridge from the physical to the virtual world, and contributing our strengths to both.
  • And third, Bosch is a company that thinks long-term and acts dynamically. We have just won a number of orders for new vehicle generations, especially with regard to the future Euro 6 emissions standard. At the same time, we are rapidly opening up new areas of business. This is shown by the success of our Drivelog online portal for drivers, which, just six months after launch, has 150,000 visitors a month. And with our e-bike drive systems, we are the European market leader after just two years. Last year, we sold 170,000 such systems.
In all this, Bosch has a solid, strong basis in its innovative strength and quality leadership. Again and again, our strategic imperative “Invented for life” drives us on to create beneficial solutions for people and society. As a matter of principle, innovative companies need both staying power and dynamism. This is why the idea of connected life is more than just thinking about the business of the future. Even now we are creating the technical conditions for this future development. Our company is working hard for more growth and earnings this year, and is at the same time paving the way for the growth opportunities of the years ahead.

Thank you.

Curriculum vitae Dr. Volkmar Denner
Curriculum vitae Dr. Stefan Asenkerschbaumer
Curriculum vitae Dr. Bernd Bohr
Curriculum vitae Dr. Stefan Hartung

RF00185 - April 18, 2013

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