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www.bmwgroup.com/sustainability

Sustainable Value Report 2001/2002

Environment, Economy, Social Responsibility: Meeting the Future

Additional information on the Internet The arrow symbol found throughout this report “ ”signifies additional informationavailable on the Internet. Links to the Sustainable Value Report 2001/2002 aresummarized on the following Web page:

Sustainable Value Report

Since 1997, the BMW Group has kept the public informed about the latest ecologicaldevelopments through an Environment Report published every two years. BMW hastaken this a step further in 2001 with its first Sustainable Value Report. Based on thecompany's sustainability policy, this new report outlines BMW Group personnel policiesand the company's sociopolitical commitments.


PublisherBayerische Motoren Werke AktiengesellschaftPetuelring 13080788 Munich, Germany

Internet: www.bmwgroup.comE-mail: [email protected]. +49.89.382.0

EditorDr. Raimund MedrischTel. +49.89.382.26689Fax +49.89.382.26342

Contacts for BMW Environmental PolicyEnvironmental ProtectionTel. +49.89.382.33304Fax +49.89.382.34746

Traffic and EnvironmentTel. +49.89.382.43405Fax +49.89.382.44861

RecyclingTel. +49.89.382.12260Fax +49.89.382.12255

Photo copyrightsBMW

Economic

Social

Environmental

1996 1997 1998 1999 Change in % 2000

Revenues Million euros 26,723 30,748 32,280 34,402 2.8 35,356

Vehicle production

BMW automobiles Units 639,433 672,238 706,426 755,547 10.5 834,519

Automobiles, total1) Units 1,143,558 1,194,704 1,204,000 1,147,420 – 10.5 1.026,755

Motorcycles2) Units 48,950 54,933 60,152 69,157 7.6 74,397

Delivered vehicles


Automobiles, total1) Units 1,151,364 1,196,096 1,187,115 1,180.429 – 14.3 1,011,874

Motorcycles Units 50,465 54,014 60,308 65,168 14.5 74,614

Investments Million euros 1,958 2,311 2,179 2,155 – 0.8 2,138

Results of ordinarybusiness activities Million euros 849 1,293 1,061 1,111 49.7 1,663

Annual net profit/loss Million euros 420 638 462 – 2,4873) n/a 1,026

1) Includes Rover Cars up until May 9, 2000 and Land Rover until June 30, 2000 2) Includes BMW F 650 assembly at Aprilia S.p.A. up until the end of 19993) Annual net profit prior to adjustments for one-time effects: e663 million

BMW Group Key Figures BMW Group Sites

1996 1997 1998 1999 2000

Energy consumption, total1) MWh 2,517,758 2,527,577 2,517,528 2,581,423 2,636,565

Energy consumption per unit produced MWh/U 3.94 3.76 3.56 3.42 3.16

Production process water input, total m3 2,917,520 2,717,549 2,737,398 2,650,677 2,481,127

Production process water input, per unit produced m/U 4.56 4.04 3.87 3.51 2.97

Production process wastewater, total m3 809,988 853,241 870,815 868,044 882,286

Production process wastewater, per unit produced m3/U 1.27 1.27 1.23 1.15 1.06

Carbon dioxide (CO2), total tons 786,879 780,271 803,386 833,232 870,862

Carbon dioxide (C02), per unit produced t/U 1.23 1.16 1.14 1.10 1.04

Waste, total tons 218,374 219,298 259,000 278,232 291,082

Waste, per unit produced kg/U 342 326 367 368 349

1) Figures for all BMW automobile production and assembly sites

1996 1997 1998 1999 2000

BMW Group employees at year's end1) 116,112 117,624 118,489 114,952 93,624

employees in Germany 64,236 65,426 67,661 68,848 68,905

employees outside of Germany 51,876 52,198 50,828 46,104 24,719

BMW Group employees according to segment

BMW automobiles 70,510 72,020 74,664 77,723 81,913

Rover automobiles 39,407 39,172 36,821 29,884 –

BMW motorcycles 1,754 1,905 2,039 2,191 2,397

Financial services 1,051 1,234 1,339 1,561 1,671

Other2) 3,390 3,293 3,626 3,593 7,643

BMW AG

Number of trainees 2,633 2,856 3,017 3,216 3.282

Employee seniority Years 12.8 13.3 13.4 13.9 14.2

1) Figures since 1998 excl. inactive employees, semi-retired employees, low-income employees 2) For 2000, incl. Oxford, Hams Hall, and other UK companies

Production PlantsBerlin, Germany

Birmingham, UK

Dingolfing, Germany

Eisenach, Germany

Hams Hall, UK

Landshut, Germany

Munich, Germany

Oxford, UK

Regensburg, Germany

Rosslyn, South Africa

Spartanburg, USA

Steyr, Austria

Swindon, UK

Tritec Motors Ltda., Curitiba, Brazil*

Wackersdorf, Germany

* In cooperation with DaimlerChrysler

Assembly Plants Toluca, Mexico

Amata City,Thailand

Cairo, Egypt

Jakarta, Indonesia

Kuala Lumpur, Malaysia

Manila, Philippines

Kaliningrad, Russia

Hanoi,Vietnam

● Headquarters

● Production

● Assembly

Plant Environmental certification Certifying authority Date Certificationsystem review

Berlin, Germany EMAS/ISO 14001 Gerling Cert 5/1997 5/2000

Munich, Germany EMAS/ISO 14001 TÜV 3/1997 3/2000

Dingolfing, Germany EMAS/ISO 14001 TÜV 1999 2002

Steyr, Austria EMAS/ISO 14001 TÜV 1/1998 1/2001

Rosslyn, South Africa ISO 14001/BS 8800 TÜV SA 11/1999 11/2002

Regensburg, Germany EMAS/ISO 14001 TÜV 9/1997 9/2000

Spartanburg, USA ISO 14001 TÜV NA 8/1997 8/2000

Oxford, UK ISO 14001 VCA 9/1997 9/2000

Hams Hall, UK ISO 14001 TÜV 7/2001 8/2004

Landshut, Germany EMAS/ISO 14001 TÜV 6/1997 6/2000

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Overview of Facts & Figures

Anthropogenic CO2 emissions in Germany 9

Specifications: BMW 750hL 12

Dow Jones Sustainability Group Index 16

BMW fleet consumption in Germany 28

Renewable raw materials 31

Specifications: MINI one 32

Specifications: C1 33

Specifications: 320d 34

Specifications: 530i 35

Specifications: 735i 36

Specifications: X5 3.0d 37

BMW Group figures 50–51

Vehicle production 50Emissions 50Water 50Waste 51Energy consumption 51Costs 51Paint and solvent emissions 51

Oil change intervals for BMW cars 55

Returned waste materials, BMW AG 55

Number of BMW Group employees 62

BMW Group employees according to segment 64

Trainees BMW AG 65

Personnel structure, BMW AG 65

Profit sharing, BMW AG 68

Bonus payments, BMW AG 68

Personnel costs, BMW Group 69

Cost of benefits, BMW AG 69

Frequency of industrial accidents, BMW AG 70

Percentage of handicapped workers,BMW AG 70

Proportion of foreign nationals, BMW AG 71

1

Contents

Foreword 2

BMW Sustainable Mobility: A visionary approach to the future 4CleanEnergy:The energy of the future will come from water and sunlight 10

BMW: Sustainable growth is the key to long-term success 14

The environment: Dialogue and management 20

The ultimate driving machine: Design for environment 26

Research & Development: A step into the future 38Reducing weight to benefit the environment 42

Clean production 46

Sales & Service:Serving the interests of the customer and the environment 52

Working together for progress 56

Value oriented: BMW Group personnel policy 60

BMW Group sustainability goals: Environmental, economic, social 72

BMW retrospective: Legacy for the future 78

Glossary of Terms 80

Index 82

Mag

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2

The success of a modern enterprise extends far beyond the purely economic aspects. Evenmore important is finding a balance betweeneconomic, environmental, and social goals.This triple bottom line of sustainability servesas the foundation for the long-term success ofa company.

Sustainability provides the basis for futureviability.This applies to the economy and societyas much as it does to political decision-makers.It applies even more to an enterprise that isinterested in actively positioning itself as a cor-porate citizen in society and gaining competitivestrength. In order to remain profitable and viablefor the future, companies have to offer solutionsfor the economic, social, and environmentalchallenges of today and tomorrow. Future viability creates value and principles. A premiummanufacturer must offer these as well. This iswhy sustainability management is so importantfor the BMW Group. It also explains why thenew report on our achievements is called theSustainable Value Report.

Our corporate policy integrates the economic,social, and environmental aspects of ourachievements. It leads to a long-term, viablebasis for the company’s values, as well as forits economic success. This is confirmed by thecontinuously positive development of our salesfigures and BMW’s share price.The strength ofthis strategy is also confirmed by the fact that,in 2000, BMW was once again rated in the DowJones Sustainability Group Index as the industryleader for sustainability management. BMW is

Prof. Joachim Milberg,Chairman of the Board, BMW AG

Foreword

3

one of the few automobile manufacturers listedon the new Ethics Index FTSE4Good-Europe.

A successful enterprise actively helps shapethe network of today’s markets, politics, andsociety. Public-private partnerships, cooperationwith social and economic associations, andjoint partnerships with research institutions arean integral part of the BMW Group sustainabilitystrategy.This is demonstrated by our member-ship in the United Nations Global Compactand our active involvement in the preparationsfor the World Summit 2002 in Johannesburg.It is also shown by our presence in the new“econsense” Forum, which was established in2001 by 19 major German corporations andnow has 21 members.

The creative potential of such networks isclearly shown by our vision of sustainablemobility on a global level based on the use ofhydrogen as a fuel source. BMW created thetechnical prerequisites for introducing hydrogen-powered automobiles.This can only succeedwith the support of business leaders and political decision-makers who are willing toensure the industrial production and full-scaledistribution of environmentally compatiblehydrogen.The BMW CleanEnergy World Tourpromoted the creation of a global public-privatenetwork for this purpose.The widespreadendorsement motivates us to continue our workin this area.

As a globally active automobile manufacturer,the BMW Group takes responsibility for theenvironment as well as for the social interests

of employees and society as a whole. With this new Sustainable Value Report 2001/2002,we make this commitment transparent to thepublic.This openness shared with our stake-holders – customers, employees, politicians,representatives of non-governmental organiza-tions, the media, suppliers, and the local com-munities where BMW plants are located – isregarded by the company as a basic principlethat justifies a sense of trust.

The new report goes beyond a representa-tion of the company’s environmental achievements. In contrast to our past environ-mental reports, the Sustainable Value Report is enhanced by key statements along with facts and figures pertaining to our economic development and social issues. Supplementingthis new report, we have published informationon the Internet to provide additional details onthe individual topics. We are aware that BMWis (still) one of the few companies to offer suchcomprehensive information. One of our aims isto create a productive dialogue that will enableus all to learn for the future.We warmly welcomeyour comments and questions.

Munich, August 2001

Joachim Milberg

4

BMW Sustainable Mobility:A visionary approach to the future

VisioBMW CleanEnergy exhibition in Munich from June to October 2000

5

nary Ideas

The long-term, sustainable development of the enterprise is a key elementof the BMW strategy. Despite prevailing industry trends, the BMW Groupimplemented this strategy to achieve continued growth in 2000.The medium-term production goal is to build one million automobiles each year.Production of the new MINI will add 25,000 vehicles to this number in 2001.In the following years, MINI production will be increased to 100,000 unitsannually. Beginning in 2004, production of the new 1-series BMW will belaunched with 150,000 vehicles per year rolling off the assembly line in theinitial phase. In comparison, 834,000 BMW automobiles were manufacturedby the BMW Group in 2000. Success is not defined by sales figures alone.Some of the things that make the BMW Group one of the world’s leadingcar manufacturers are the image of the MINI and BMW brand names aswell as the company’s practical approach to sustainability.

6

“Sustainability is evolving to become a primary approach to economical and social prosperity.It also facilitates the interaction between the market and democracy.The BMW Group will continue to pursue sustainable development as a principle corporate strategy.”BMW Executive Board resolution, February 21, 2000

Link to Executive Board resolution, Public Affairs Letter from 4/2000, p. 5

www.bmwgroup.com �Public Affairs �Publications �Public Affairs LetterLink to the respective models

www.bmw.de/auto/index.html

7

Sustainable mobility must support quality of life and economic prosperity. At the same time, the potential damage to the environment associated with individual mobility must be kept to a minimum.

The BMW sustainable mobility model

Intelligent networking of various means of transportation– Obtain maximum benefit from each carrier– Reduce transportation costs and the space required for vehicles

Continuous reduction of average fuel consumption– Conserve natural resources– Reduce vehicle exhaust emissions

Develop alternative drive concepts – Long-term preservation of quality of life and economical use of

personal transportation– Promote global implementation of hydrogen and the vision of using

hydrogen as a renewable energy source

Recyclable products and return/recycling of used vehicles– Conserve natural resources– Eliminate/reduce waste

Sustainability model

As a globally active enterprise, the BMW Groupis oriented to a pioneering sustainability model.One important aspect in the implementation of this visionary approach is that all BMWproduction sites adhere to uniform environ-mental standards. All BMW Group manufacturingfacilities are either certified according to theinternational DIN ISO 14001 standards forenvironmental management systems, or in fullcompliance with the European Eco-Managementand Audit Scheme (EMAS). On the productside, the focus is on sustainable mobility.Thisconcept developed by the BMW Group integratesenvironmental, economic, and social factors.

In this respect, it is necessary to link togetherthe relevant means of personal and publictransportation in order to take full advantage of the strengths of each one. At the same time, the BMW Group focuses on advancing conventional technologies and developingalternative drive concepts for motor vehicles.This approach leads directly to carbon-freeenergy sources.The CleanEnergy projectdeveloped by the BMW Group concentrates onthe cleanest possible fuel: hydrogen derivedfrom renewable energy.

Sustainability and the ultimate drivingmachine

BMW remains faithful to the ultimate drivingmachine philosophy.This is an integral aspectof the sustainable mobility concept. An environmentally compatible automobile mustcomply with today’s standards of comfort,performance, utilization, and safety while payingclose attention to consumer needs and preferences.This is the key to market success.Even when gas prices are relatively high, lowfuel consumption alone does not provide asufficient incentive to buy a new car.

The BMW Group follows two key objectives:Reducing average fuel consumption anddeveloping competitive, sustainable products.For BMW, the prospects do not lie in developingvehicles that do not offer clear customerbenefits, for example a car that uses only 3 litersper 100 km or a super-thrifty vehicle that travels100 km on 1 liter of fuel. Electrically poweredvehicles based on fuel cell technology do notoffer a long-term alternative for BMW due tothe disadvantages in the technical concept.

The BMW Group has already designed aseries production car that combines environ-mental compatibility with maximum comfortand functionality.The BMW 750hL sedan runson hydrogen power, which means that the car’s exhaust emissions primarily consist ofvaporized water.

8

German Federal Government transportation report

www.bmvbw.deResearch project: “stadtinfoköln” (Cologne City Information)

www.ifmo.de

H2

The BMW approach to hydrogen is confirmed

The decarbonized fuel concept developed byBMW has become widely recognized by thepolitical and business communities. At thebeginning of 2000, the Transport Energy Strategy(TES) project sponsored by BMW and otherautomobile manufacturers in conjunction withthe energy industry under the auspices of theGerman Federal Ministry of Transportation,Construction and Housing (BMVBW), showedvery promising results. In an overall assessmentof alternative energy and drive concepts, theconventional internal combustion engine powered by hydrogen received very high ratings.The BMW 750hL is the world’s first automobileto use this type of engine.

According to BMVBW, hydrogen createdfrom renewable energy sources is the fuel thatbest meets long-range criteria in terms ofavailability and reduced CO2 emissions.Thusthe TES follows exactly the same approach the

9

Hydrogen service station near Munich airport

BMW Group has focused on in its sustainablemobility concept. But reality paints a differentpicture:The infrastructure problems related tothe introduction of alternative fuels are immense.Although there are nearly 15,000 service stations in Germany alone, hydrogen fuel is onlycommercially available at one station locatednear Munich airport.This service point was setup with support from BMW. A self-servicehydrogen station for fleet vehicles is currentlyin operation in Hamburg.

Traffic networks: Untangling the knots

Dealing with increasing traffic volume requiresa more efficient infrastructure with more effectivecontrol of traffic flow. BMW operates its ownmobility research institute in Berlin and supportsthe development of new technologies basedon the principle of sustained mobility throughtraffic control.

Model policies: First series of hydrogen-powered cars

Advancements in environmental protectionand achieving commercial success are by nomeans mutually exclusive concepts. BMW Groupmodel policies are aimed at serving both ofthese objectives by consistently implementinga sustainable mobility concept. In the comingyears, the company will focus on the develop-ment of advanced technologies designed toreduce average fuel consumption. Alternativedrive concepts will be engineered for seriesproduction vehicles, and new market segmentswill be explored with innovative models intro-duced at the lower end of the market.

The latest BMW 3-series compact car withVALVETRONIC technology introduced a newera in gasoline powered engines. In the future,BMW engineers will continue to develop light-weight, low consumption vehicles.The BMWGroup has already announced plans for a new,hydrogen-powered, BMW 7-series car.

Share of anthropogenic CO2 emissions inGermany, 1999

Changes in anthropogenic CO2 emissions in Germany since 1990, in million tons

1990 1999

Cars and motorcycles 13% 104 115 (+ 11%)

Commercial vehicles/buses 7% 46 59 (+ 28%)

Other means of transport 2% 22 17 (- 23%)

Traffic sector total 172 191 (+ 11%)

Householdsand small consumers 20% 204 171 (- 16%)

Power station and districtheating power stations 38% 397 326 (- 18%)

Industry 20% 241 170 (- 29%)

Total CO2 1,014 859 (- 15%)

Carbon dioxide (CO2)859 million tons

10

CleanEnergy:The energy of the future will come from water and sunlight

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Fully automatic fill-ups in less than five minutes

11

Most cars manufactured over the past 100years have been powered by internal combustionengines. Although this is not likely to change inthe 21st century, the type of fuel will be different– and much cleaner: Hydrogen produced fromrenewable energy sources.The BMW Groupvision of the future focuses on CO2-free hydrogen.Leading experts from the science and politicalcommunities clearly support this concept.CleanEnergy is less concerned with environ-mentally compatible automotive technologythan it is with comprehensive, sustainableenergy strategies for the future. Integrated intoall BMW research activities, the objective of theCleanEnergy concept is to create a renewableenergy cycle based on hydrogen.

h – The formula of the future

The letter “h” stands for Hydrogen Power, themain focus of the BMW CleanEnergy strategy.This concept is currently demonstrated by theworld’s first hydrogen powered car, the BMW750hL sedan that was built in a limited series.The 12-cylinder hydrogen fueled engine in the750hL produces over 200 horsepower. Until a network of hydrogen fuel stations becomes

available, the bi-fuel internal combustion enginewill be capable of running on either hydrogenor gasoline. Switching between fuels – evenwhen the vehicle is in motion – is fully automaticor can be manually activated at the touch of a button. Hydrogen fuel extends the range ofthe BMW 750hL by around 350 kilometers.The hydrogen is stored in a 140-liter steel tanklocated behind the vehicle’s rear seat andmaintained in a cryogenic, liquid state at atemperature of minus 253°C. This system isdesigned to meet the highest safety standards.

One of the key advantages of hydrogentechnology is that the exhaust emissions primarily consist of vaporized water. When theliquid hydrogen fuel is produced from renewableenergy sources, noxious emissions are reducedby a substantial 99.9 percent compared toconventional gasoline-powered vehicles.

Road testing of fifteen BMW 750hL sedanswas successfully completed in 2000.Thesecars were used for shuttle services provided atthe Expo 2000 world exposition in Hanoverand as part of the BMW CleanEnergy project inMunich.The hydrogen cars traveled over100,000 kilometers on German roads withoutany problems.

CleanEnergy

12

Fuel cells as standard equipment

CleanEnergy also focuses on fuel cell technology– not as a drive unit, but as an Auxiliary PowerUnit (APU) providing power for the electricalsystem.The compact fuel cell battery replacesthe standard wet-cell lead battery in the 750hL.Producing 5 kilowatts at 42 volts – even whenthe engine is switched off – the APU far exceedsthe performance of a conventional battery.TheBMW Group is conducting advanced researchon both gasoline and hydrogen (H2) fuel cellsin order to develop this technology for seriesproduction vehicles.

Phasing-in the automotive future ofhydrogen

After developing the fifth-generation 750hL toan advanced level of technical maturity, theBMW Group has clearly defined the directionthat hydrogen technology will be taking in thenext few years. Current plans call for at leastone hydrogen fuel station in each of the majorEU cities by 2005. By 2010, a full network ofservice stations will be phased in. Parallel to

the establishment of a hydrogen infrastructure,the BMW Group plans to introduce the firstseries-production model based on the zero-emission technology. According to BMWChairman of the Board Joachim Milberg: “TheBMW Group will be the world’s first manufacturerto offer a series-production hydrogen car.” Inother words, customers can look forward toseeing the “h” abbreviation on the pricelist forthe new-generation 7-Series BMW.

Depending on the production method, thecost of producing liquid hydrogen is still some-what higher than it is for gasoline.Therefore,the BMW Group would welcome governmentsupport in the initial phase. In this respect,one positive factor is that the political parties in Germany unanimously support the BMWCleanEnergy strategy.The exchange of information among 650 participants from thebusiness, political, and science communities at the HYFORUM 2000 international hydrogenconference, which took place in September2000 in Munich, raised public awareness onthe issue.This hydrogen dialogue was activelysupported by the BMW Group.

BMW 750hL Specifications

Power _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 150 kW/204 bhp

Displacement _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5,379 ccm

Cylinders _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 12

Top speed _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 226 km/h

Acceleration0 – 100 km/h _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 9.5 sec.

Fuel _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ liquid hydrogen/ high-octane gasoline

CO2 emissions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 0 g/km

Fuel consumption(average) Hydrogen _ _ _ _ _ _ _ _ _ _ _ _ approx. 2.8 kg H2/100 km

RangeHydrogen power _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 350 kmTotal range _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 950 km

Fuel cell output (electrical system) _ _ _ _ _ _ _ _ _ _ _ _ _ 5 kW/42 V

Generation of hydrogen from renewable energysources

Distributionthrough servicestations

Hydrogen useand technology H2�H2�H2�H2 �

13

Left:The BMW Group and the Deutsche Museum investedover $5 million in the futuristic architecture of the world’sfirst hydrogen exhibitionRight: CleanEnergy World Tour in Dubai, Brussels, Milan

CleanEnergy World Tour

The CleanEnergy exhibit at Expo 2000 in Munichpresented by BMW in cooperation with theDeutsche Museum also attracted extensivepublic attention. Over 150,000 visitors, includingschool groups, politicians, and representativesof the science community reviewed the interactive exhibits and were introduced tocomprehensive information on the future ofhydrogen mobility.

In order to publicize the future vision of“mobility based on sun and water,” theCleanEnergy World Tour is taking place fromJanuary to November 2001. Featuring a seriesof events for politicians, scientists, and mediarepresentatives, the tour was launched in Dubaiin January and will continue on to Milan, Brussels,Tokyo, and Los Angeles before returning toBerlin. Each stop on the tour highlights a different aspect of CleanEnergy. In Dubai themain theme was the production of hydrogenwith solar energy. In Brussels, the focus was onpolitical strategies for implementation.Thehydrogen infrastructure was the key theme inMilan, and in Tokyo it was the development of

urban traffic systems. In Los Angeles, the presentation concentrated on the strict Californianemission laws.

At the CleanEnergy exhibition presented inBrussels at the beginning of March 2001, BMWChairman of the Board Joachim Milberg intro-duced a four-point program to the public andthe political decision makers present at theevent.This concept is designed to help hydrogentechnology achieve a market breakthrough.The initial idea is to firmly establish the notionof a hydrogen-powered civilization among awide audience. Another key issue is theestablishment of a sound political and economicfoundation, for example, to gain acceptance forhydrogen-based technologies. BMW is hopefulthat hydrogen technology will be suitablyaddressed in the in 6th Research Programsponsored by the European Union. Milbergemphasized that the use of hydrogen as fuelsource should not be subjected to taxation inthe initial phases.

The BMW hydrogen initiative gained widespread political support during the CleanEnergy WorldTour. Loyola de Palacio,Traffic and Energy Commissioner and Vice President of the EuropeanCommission, is hopeful that the use of hydrogen in the transportation sector will create a newmarket for renewable energies:“In this field, the technical innovations must actively contribute tosecuring sustainable mobility.”According to Professor Klaus Töpfer, Director of the United NationsEnvironmental Program (UNEP) and an active supporter of the BMW initiative:“In light of thedramatic changes in the global climate, all major cities and towns should be sounding the alarm.”In Dubai, Dr. Mohammed Bin Fahed, chairman of the commission responsible for issuing theworld’s most coveted environmental award, called for clean energy sources for today’s motorvehicle traffic:“The efforts of the BMW Group are supported by environmental organizations andinstitutions worldwide. We must remain aware of the fact that the global supply of fossil fuelswill not last forever.”

Sustain

14

BMW: Sustainable growth is the key to long-term success

ability

15

A responsible commitment to the environment, to human concerns, to oursociety and to our employees, conscientiously observing the needs of ourcompany’s stakeholders and today’s consumer interest groups: Sustainablegrowth demands versatile thought and action. As a worldwide corporationcommitted to long-term expansion, the BMW Group is an active memberof the global community.This leads to far-reaching responsibilities. At theBMW Group, the pioneering concept of sustainability is regarded as a synthesis of added value and the strategic integration of economic,environmental, and social factors.The fact that this complex, future-orientedapproach to business administration pays off was confirmed in a recentstudy: 82 percent of managers agreed that sustainable growth increases acompany’s economic value.This information is based on the result of a survey conducted by Arthur D. Little Consulting of 481 board members andCEOs from European and North American companies.

16

“We regard our leadership position as a commitment to increasing the economic, environmental, and social value of our company.”Prof. Joachim Milberg, BMW Group Chairman of the Board

BMW: Automotive Industry leader in corporate sustainability

The success of the BMW Group substantiatesthe information obtained from the A.D. Littlesurvey. In both 1999 and 2000, BMW was listedat the top of the Dow Jones Sustainability GroupIndex (DJSGI) as the world’s automobile industryleader in sustainable growth.The increase inthe value of companies listed on the DJSGIclearly exceeded the Dow Jones Global Index.While the values in the C-DAX Automobileindex declined by 21 percent in 2000, BMWshare prices increased by 13.4 percent in thesame period.

Created by Dow Jones in cooperation withthe Swiss investment agency SAM SustainabilityGroup, the DJSGI lists over 200 enterprisesfrom 27 countries representing a market valueof nearly $5 trillion (end of July 2000). Onlycompanies that successfully use the shareholdervalue and sustainable management conceptsare included.

300

250

200

150

100%

Development of the DJSGI, DJGI and BMW shares from December 1993to May 2001

’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01

Dow Jones Sustainability Group Index (DJSGI), price increase from 12/93 to05/01: 110% (in USD)

Dow Jones Global Index (DJGI), price increase from 12/93 to 05/01: 76% (in USD)

BMW shares, price increase from 12/93 to 05/01: 174% (in USD)

“Following the guidelines of sustainable development, our companystrives to improve the quality of life without endangering the naturalresources that are so vital to future generations.”BMW Executive Board resolution, February 21, 2000

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In the 2000 rating, the SAM analysts gave highmarks to the BMW sustainable mobility conceptand the development of hydrogen technology.Other highlights included the company’s pioneering role in the introduction of powdercoating technology, the expanded range ofmodels in the compact car segment, and thecompany’s “outstanding programs focusing ontraining, employee incentives, and profit-sharing.”Also contributing to the analysts’ high rating ofthe BMW Group was the fact that BMW hasimproved fuel efficiency by over 30 percent since1979. BMW was also the world’s first carmanufacturer to introduce mandatory recyclingstandards and guidelines for recycling-orientedproduct development.

Commitment is the key to success…

The Dow Jones index is a clear indicator:Companies that go beyond economic factorsto integrate environmental and social criteriainto their management policies are more successful than their competitors. In other words,environmental protection, social commitment,employee orientation, and a commitment toinvestors and governments are not cost factors,they are keys to long-term success.The BMWapproach to sustainability also ranked high inthe Corporate Responsibility Rating published

in September 2000 by Oekom Research AG inMunich. Social, cultural, and environmental criteria were included in the evaluation of 19automobile industry companies.The result:“BMW was the only company to earn a positiveoverall rating.” Once again, the BMW Groupwas rated as an industry leader.

...at BMW plants worldwide

Social and environmental responsibility isdefined by the BMW Group on both global andlocal levels for all BMW operations worldwide.The BMW assembly plant opened in May 2000in Amata City,Thailand is a good example. Socialbenefits including health insurance plans, apension fund, and a medical treatment facilitywere introduced for the plant’s projected work-force of 700 employees. A shuttle bus systemtransporting workers to the plant and a Buddhist temple located on-site were also setup for the local workforce. Industrial safetystandards at the Amata City plant comply withthe guidelines set by BMW for its productionoperations worldwide. BMW is also fullycommitted to its new location in Kaliningrad,Russia where nearly 500 jobs were created forassembly workers and sales personnel.

The BMW commitment in South Africa overthe past 30 years has become somewhat of a

DJSGI development

www.sustainability-index.com SAM Sustainability Group

www.sam-group.comCorporate Responsibility Rating, Oekom Research AG

www.oekom.deMozambique BMW responds to crisis

www.bmwgroup.com/sustainability �Sustainable Growth�Discussing the Future

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Executive Board resolution, Public Affairs Letter from April 2000, No. 22, p. 5

www.bmwgroup.com �Public Affairs �Publications �Public Affairs Letter Explanation of the Capital CityTalks: Public Affairs Letter from December 2000, No. 26, p. 10

www.bmwgroup.com �Public Affairs �Publications �Public Affairs LetterInformation on the Herbert Quandt Foundation

www.herbertquandtstiftung.comBrochure:Taking Responsibility

www.bmwgroup.com �Public Affairs �Publications �Sustainable development

Above: Capital City Talks held in Berlin in September 2000 with Jean-Paul Picaper, German correspondentfor the French daily “Le Figaro”, former CDU party chairman Wolfgang Schäuble, newspaper editorHans Werner Kilz of the Süddeutsche Zeitung, Foreign Minister Joschka Fischer (Bündnis90/Die Grünen),and Political and Science Foundation director Christoph Bertram (from left to right)Left:The BMW 750hL fleet in front of the historic Brandenburger Gate in Berlin

19

BMW plants in Spartanburg, SouthCarolina and Rosslyn, South Africa

Helping the handicapped in South Africa

The BMW plant in South Africa supports physically and mentally impaired citizens in manydifferent ways. In addition to providing clothing,toys, and educational material to local schools,the company sponsors the Soshanguwe projectfor mentally ill children.This gives them the oppor-tunity to learn special skills like sewing or carpentryand earn their own livelihood in the future.

BMW focuses on cultural communication

Expanding horizons, transcending cultural borders, and looking beyond everyday work

situations:These are the goals of the BMWCultural Communication program aimed at theBMW workforce and local citizens.This comprehensive program includes the CultureMobile in Munich, a calendar of free or discount-priced cultural events published quarterly forBMW employees, and “Opera for Everyone”, aseries of free concerts sponsored by BMWsince 1997. BMW also sponsors a variety ofinternational art exhibitions and concerts alongwith the work of upcoming artists. Honoringover 30 years of international cultural support,the BMW Group received the 1999 AngelAward presented by the International Societyfor the Performing Arts in Vancouver.

tradition.This is where a comprehensive networkof social projects focusing on education, scienceand technology, sports, environmental protection,and community support has been developed.In 2000 alone, the BMW Group invested overZAR 4 million in a new hospital and school inthe province of East Cape. A BMW-sponsoredprogram promoting environmental awarenesshas been successful in over 100 South Africanschools since 1996.

Discussions create the future

The BMW concept of sustainable mobility andthe company’s environmental managementsystem has attracted an inquisitive audience.Presented in a number of BMW showrooms in1999 and 2000, the BMW Group EnvironmentalExhibition focused on the company’s environ-mental commitment.The corporate brochure“Taking Responsibility” published in December2000 provides an overview of the BMW Groupsustainability strategy and the company’ssocial, environmental, and economic activities.

Establishing an effective dialogue

A company focusing on sustainable economicgrowth has a responsibility to provide comprehensive information and establish aneffective dialogue with the public.This extendsfar beyond the latest financial figures andproduct developments. It concerns the cleardelineation of social policy and environmentalresponsibility.The BMW Group organizes thisdialogue based on a company-wide commitment.One important element of this dialogue is theseries of policy letters published by BMW since1995.These memoranda focus on current topics from the social, economic, and politicalarenas. Another effective instrument has beenthe Capital City Talks held in Berlin with socialand political leaders.This international forumorganized by the BMW Group in cooperationwith the Free University of Berlin and the Süddeutsche Zeitung (newspaper) takes placeregularly in Germany’s capital city. Focusing ontransatlantic, European, and Eurasian dialoguesince 1970, the Herbert Quandt Foundation aimsat intensifying the social and political under-standing.The organization sponsors regularly-scheduled expert roundtable discussionsfocusing on globalization, mobility, and theenvironment.

Stakehol20

The environment:Dialogue and management

BMW Chairman Joachim Milberg with South African President Thabo Mbeki at the BMW plant in Rosslyn, South Africa

An open dialogue with stakeholders is an integral part of the BMWsustainability strategy.The stakeholder concept is consistently pursued.Before making decisions, the BMW Group routinely considers the impact its actions and products will have on society. BMW Group stakeholdersinclude customers, employees and their families, shareholders, communities,trade unions, suppliers, the general public as well as social, environmental,and cultural organizations. Stakeholders are regarded by the BMW Groupas business partners whose trust and confidence serve as the basis forthe successful international positioning of the company. In order to informstakeholders about decisions and directly involve them in the decision-making process, regular discussions are held with various communityinterest groups at BMW business sites.

ders21

Responsib

22

The most important BMW Group stakeholders:

Regional support

Fulfilling its responsibilities as one of the world’sleading car manufacturers and employers, theBMW Group is actively involved on regional,national, and international levels. On a regionallevel, BMW is a member of the Bavarian Environ-mental Pact II involving nearly 900 companiesthat are firmly committed to environmental projects in the coming years. Another BMWregional commitment is based at the BMWSpartanburg plant opened in 1994.The BMWManufacturing Corp. recently joined 110 otherAmerican companies as a member of the newNational Environmental Achievement Tracksponsored by the US Environmental ProtectionAgency (EPA). In order to qualify for this newprogram, a company must be effectively engagedin environmental protection and consistentlymaintain an excellent relationship with thelocal community.The BMW commitment wasacclaimed by the EPA as exemplary for othercompanies striving for admission into the program. For the BMW plant in Spartanburg, thepath to sustainable environmental managementand effective communication with stakeholdersis nothing new.The BMW Manufacturing Corp. inSouth Carolina has already been honored withthe Governor’s Pollution Prevention Award and

is a member of the South Carolina EnvironmentalExcellence Program. Launched in 1997, thisproject is sponsored by the state governmentand regional industry.

Advocating added sustainability

In Germany, the BMW Group is a charter memberof “econsense,” a forum dedicated to sustainabledevelopment. Initiated in 2000 by the GermanIndustry Association (BDI), this organization is anetwork of leading companies working on thedevelopment of advanced environmental andeconomic solutions.The BMW Group addsemphasis to this theme with its prominentpresence in the Sustainability Forum: BMWChairman of the Board Joachim Milberg is amember of the advisory committee, and BMWDirector of Environmental Affairs Manfred Hellerrepresents the company on the forum steeringcommittee.

As a traditional enterprise deeply rooted inGermany, the BMW Group is also committed toits responsibilities from a historical perspective.As a charter member of the Remembrance,Responsibility and Future Foundation, BMWactively supports legislation to provide compen-sation for the people subjected to forced laborduring the Nazi period.

Customers Employees and their families

Discussion at the Spartanburg plant

bilityGovernment UnionsShareholders

23

Forum for Sustainable Development

www.econsense.deGlobal Compact

www.unglobalcompact.org

Global initiative for sustainable growth

The BMW Group has joined 400 other inter-national companies in supporting the UnitedNations Global Compact proposed by SecretaryGeneral Kofi Annan. BMW has made a commitment to ensure that its business activitiesconform with UN guidelines and to plan andimplement sustainable growth, respect humanrights, and adhere to worldwide social andenvironmental standards. One example of theBMW commitment is its support of the “Johannesburg World Summit 2002 on Sustainable Development”, a United Nationsglobal sustainability strategy. BMW activelyparticipates as a member of the relevant committees including the UNEP DTIE MobilityForum, which plays a leading role in preparingthe Johannesburg World Summit 2002.Thisconference will adopt a new charter that willserve as a basis for the sustainability policy inthe respective countries. As part of the Johannesburg World Summit 2002 activities, theBMW Group will be presenting themes rangingfrom CleanEnergy to foreign investment,environmental best practice, joint ventures,environmental supply chain management, andsocial programs.

Voluntary agreements vs. governmentcontrol

The BMW Group actively helps create thebasic conditions for the environmental policythat determines the company’s core activities.In general, the BMW Group supports the concept of voluntary agreements as opposedto government regulations. One example of avoluntary corporate management tool is thestandardized BMW environmental managementsystem. Examples of voluntary actions includethe use of sulfur-free fuel in all BMW fleet vehiclesand the recycling of used cars.The company’syears of experience will minimize the financialrisk for the BMW Group when the EU guidelineson end-of-life vehicles go into effect. BMWalready complies with the targeted recyclingquota of 85 percent specified for 2005.This isa result of a comprehensive network of recyclingfirms organized in the European Union since1991. BMW is currently the only car manufacturerto assign recycling tasks exclusively to certifiedcontract partners.

MediaSocial and culturalorganizations

Suppliers Local communitiesEnvironmentalgroups

Research and Innovation Center BMW plant in Berlin BMW 530i Draining fluids

International BMW Group environmental guidelines

www.bmwgroup.com/sustainability �International Environmental Guidelines Integrated Product Policy IPP

www.ipp-bayern.de

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Integrated product policy: Networkedapproach

In the framework of the new Bavarian Environ-mental Pact II, BMW is working on the IPP pilotproject for product-related environmental management for motor vehicles. Integratedproduct policies (IPP) are aimed at improvingproducts throughout their entire lifecycle tominimize negative effects on humanity and theenvironment. For highly complex products likeautomobiles, this concept offers a huge potentialfor minimizing environmental impact. One ofthe key advantages of IPP is the networkedapproach to the product lifecycle.This strategyinvolves research & development, manufacturing,sales, utilization, and final disposal.

Lightweight construction:The use of aluminumreduces overall vehicle weight and significantlyimproves fuel economy. However, producingaluminum requires five times as much energyas steel production. Consequently, it is importantto determine whether the additional energyused to make aluminum can be saved throughlower fuel consumption and longer vehicle life.This is why the BMW Group focuses on intelligentlightweight construction.The IPP concept forBMW models directly involves the company’s

research and innovation center with its 6,000employees as well as the recycling and disassembly center. Other key themes fordiscussion include the energy and CO2 strategy,i.e. CleanEnergy, along with the implementationof the Transport Energy Strategy (TES).

Environmental management on an international level

The BMW Group also responds to the require-ments of a sustainable economic approach onan organizational level: All BMW productionsites worldwide are validated according to theEuropean Eco-Management and Audit Scheme(EMAS) or certified in compliance with DIN ENISO 14001 standards.This means that the entireBMW Group adheres to a uniform environmentalmanagement system.

The objectives of EMAS and DIN EN ISO14001 are integrated into the corporate structureby an international team of auditors. Approximately70 employees are directly involved in BMWenvironmental management. Environmentalaudit updates are conducted annually at eachof the company’s sites. An input/output balancereport listing the materials used at the productionplants is also prepared annually. Statements

Research & Development Production Utilization Recycling

Integrated Product Policy (IPP)

Management

Organization of environmental management on the corporate level

Environmental Steering Committee makes strategic decisions related to environmental issues

Plant environmental protection

Plants: Berlin, Birmingham UK,Dingolfing, Eisenach, Hams Hall UK,Landshut, Munich, Oxford UK,Regensburg, Rosslyn South Africa,Spartanburg USA, Steyr Austria,Swindon UK, Wackersdorf

Executive Board

25

Executivespokespersonfor traffic andenvironmentalprotection

Corporate Environmental Affairs Director

Head ofRecycling

Spartanburg plant: Documentation of chemicals

issued by the plants provide detailed informationon environment-related data and outline site-specific environmental goals. In addition tocontinuous monitoring of environmental management objectives, BMW has specifiedminimum technical requirements for all environ-mentally relevant areas. Directly involved in theimplementation of the environmental protectionplans, suppliers are required to comply withinternational environmental guidelines as wellas with BMW procurement regulations. In thisarea, special attention is paid to the BMWGroup rules pertaining to the environmentalcompatibility of products.

Information promotes involvement

One of the keys to successful implementationof the environmental management system iskeeping BMW employees informed.The workershave direct access to a pool of comprehensiveinformation. Environmental topics are addressedregularly in the BMW Group newspaper as well as in the management memos for upper-level supervisors and the leaders’ briefing documentation for team leaders. Special updateleaflets are published for insertion into the BMW Current Factbook (ALex). Information

available on the BMW Intranet and the ZEUSinformation system enables employees toselect only environmentally-compatible materialsfor use in their work areas and ensures properhandling of hazardous materials. Maintained by experts and available company-wide, theZEUS database contains complete informationon environmental as well as occupationalhealth & safety relevant materials.

The spectrum of environmental informationis supplemented by regular training. Environ-mental themes are integrated into the differentseminars offered to BMW employees with special workshops focusing on environmentaland occupational health & safety themes.Training topics include dangerous materialhandling, waste material separation and recycling, environmental protection regulations,and other legal restrictions. External contractorsresponsible for end-of-life vehicle recyclingreceive regular training in two-day workshopsheld at the BMW recycling and disassemblycenter.The goal is to keep participants up todate on environmental and technical progressas well as provide information on new laws anddirectives.

Automo26

The ultimate driving machine:Design for the environment

The automobile is regarded as an environmentally significant product. Its usehas a fundamental impact on people and the environment. In Germany, theanthropogenic proportion of CO2 emissions from cars and motorcycles isaround 13 percent. Globally, this share is much lower. In order to reduceemissions and secure the future of the automobile as a quality of life factorand an important source of economic prosperity, the BMW Group is workingon concepts to ensure the sustainability of personal transportation. Essentially,we are working for the future of the automobile.

biles27

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The environmental impact of an automobilemust be taken into consideration throughoutits entire lifecycle. BMW consistently pursuescomparative lifecycle analysis (eco-balance) for components as continuous optimizationprocess within the product development phase.The goal is to design environment-friendlyproducts. Lifecycle-analysis of componentsincludes design and engineering operations,as much as it does manufacturing and assembly,sales & service, and final recycling of end-of-lifevehicles.

In compliance with ISO 14040 eco-balanceguidelines, a detailed analysis is made of thepotential environmental impact of each product.This leads to further improvements and recommendations. From the very beginning ofthe product development process, this analysisis consistently applied in designing BMW parts.Within the framework of this approach, a careful assessment is made to determine, forexample, whether steel should be replacedwith other materials, e.g. aluminum, magnesium,or plastics, to reduce vehicle weight and lowerfuel consumption as well as exhaust emissions.

VALVETRONIC: Revolutionary enginedesign

During the entire lifecycle of an automobile, theenvironmental impact is highest during the usephase. BMW product planning and developmentis aimed at reducing environmental impact for the total lifecycle of the product. In additionto air pollution, negative environmental effectsinclude noise emissions and the results of traffic accidents.

The BMW Group concentrates on continuously lowering average fleet consumptionto meet the voluntary German/European auto-mobile industry commitments. For example, theVDA (Association of the German AutomotiveIndustry) agreed to reduce 2005 fleetconsumption by 25 percent compared to 1990figures. In 2000, BMW average fleet consumptionwas nearly 22 percent lower than 1990.The ACEA(European Automobile Manufacturers Association)and the EU Commission have endorsed thegoal of reducing CO2 emissions in the Europeanfleet to 140g/km (approx. 25%) between 1995 and 2008.This progress is supported by

The goal is it to minimize the environmental impact of the automobileover the entire product lifecycle to meet the needs of human healthand our natural habitat.

BMW 4-cylinder aluminum engine block with VALVETRONIC; BMW 3-series compact

120%

110%

100%

90%

80%

70%

60%

50%

’78 ’80 ’82 ’84 ’86 ’88 ’90 ’92 ’94 ’96 ’98 ’00 ’05

Introduction ofcatalytic converter

New European Driving Cycle (NEDC)(for comparison converted into the previous DIN 1/3 mix)

VDA commitment:Reduce fleet consumption by 25 percent from 1990 to 2005

BMW fleet fuel consumption for new registered vehicles in Germany(DIN 1/3 mix, weighted according to number of vehicles)

- 25%

Valvetronic

high-tech innovations like the new VALVETRONICtechnology developed by BMW. VALVETRONICelectronically controls intake valves and eliminates the need for conventional throttlevalves.This effectively lowers fuel consumptionby around 10 percent based on EU standards.In actual driving conditions, additional savingsof around 15 percent are possible comparedto the previous model with a performanceincrease of up to 20 percent.

The first BMW engine equipped with VALVETRONIC technology is the new 1.8-literfour-cylinder unit built at the BMW plant inHams Hall. Featured in the latest BMW 316ticompact model, this engine already complieswith the tough EU4 emission standards.Thenew BMW 7-series will also use advanced VALVETRONIC technology. By the end of 2002,VALVETRONIC will be standard in all BMWcars equipped with V-8 or 12-cylinder engines.

316ti compact: 6,9 l/100 km

Previous model: 7,8 l/100 km

Fuel economy316ti compact and previous model

Specifications BMW 316ti (N42B18)4-cylinder engine with VALVETRONIC

Engine _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ gasoline powered, inline 4

Power _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 85 kW/115 bhp @ 5,500 rpm

Torque _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 175 Nm @ 3.750 rpm

Displacement _ _ _ _ _ _ _ _ _ _ _ 1.796 ccm

CO2 emissions _ _ _ _ _ _ _ _ _ _ 167 g/Km

Emission rating _ _ _ _ _ _ _ _ _ EU4

Methodology of the ecological component balance (eco-balance)

Determination of research scope

System limitsFramework conditions

Target Definition

Analysis

Input/Output analysis

Lifecycle phases:ManufacturingUtilizationRecycling

Balance

Evaluation criteria

Primary energyconsumptionGreenhouse effects Use of resources

Assessment of Efficiency

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Recycling

30

BMW 3-series:Recyclable plastics

Design for recycling

The list of demands on a BMW automobile is extensive. It includes the typical BMWperformance features as well as active andpassive safety functions. At the same time, itmust ensure maximum passenger comfort andcomply with the highest standards of quality.Environmental compatibility is also a key factor.This becomes especially important when a BMW is recycled at the end of its long life.Design for recycling:This is the BMW approachto engineering environmental compatibility intothe vehicle in the early phases of productdevelopment.The BMW Recycling and Disassembly Center (RDZ) in Lohhof, Germanyconsistently exchanges information with theBMW research and innovation center.Theobjective is to develop solutions for environ-mentally and economically sensible recycling.This approach has proven successful.Today’sBMW vehicles can be economically, and almostcompletely, recycled.

Primary goal: Economical and environmentally safe recycling

Engineering new vehicle components involvesa careful assessment of the energy and eco-logical balance.The BMW Recycling and Disassembly Center conducts detailed disassembly analyses.These studies take aclose look at the amount of time and the toolsrequired for disassembling end-of-life vehicles.This information is then used as a basis fordetermining whether the vehicle constructionand materials are suitable for recycling.Recommendations are made regarding recycling-optimized design and the eco-efficient,i.e. ecological and economical recovery of

end-of-life vehicles. For good recycleability keyfactors are the choice of materials, the appro-priate marking of components and the joiningtechniques.This ensures that the componentscan be properly separated and recovered.Another important factor is the way the component parts are attached to the vehicle.The knowledge gained in this area flows directlyinto product development and productionoperations. Instead of focusing on the metalsused in manufacturing a car, which make up75 percent of its total mass and can be easilyrecycled, BMW specialists concentrate on theincreasing proportion of plastics used in modern cars to reduce weight and increase fuelefficiency.The current BMW 3-series cars, forexample, contain around 162 kilograms ofplastic materials.This is 15 percent more thanthe previous model. Nearly 90 kilograms ofthese plastics can be economically recycled in compliance with BMW recycling standards.

Recycling in the product developmentprocess

In the product development process, BMWengineers carefully consider the environmentallyrelevant characteristics of an automobile,called “PEP”. One objective is to formulate thedifferent requirements to synchronize the inter-disciplinary work. In order to ensure efficientvehicle recycling, the criteria in all decisionphases must be carefully evaluated.The established recycling objectives generally pertainto individual vehicle components.To optimizeproducts for recycling, the BMW Group usesdifferent methods in the product developmentphase. In addition to a list of specifications forthe entire vehicle, a detailed spec sheet listingmaterial identification codes and recycling

standards is created for the separate parts. Adisassembly analysis is conducted and recyclinginstructions are finalized along with an environ-mental/economic assessment of recycling-relevant components. In all phases of theproduct development process, these methodsensure that recyclability in consensus withother technical requirements are taken intoconsideration.

Increasing use of recyclates

In keeping with a sustainable product designstrategy, a number of options are available inthe choice of materials.These range from theuse of recyclates to the implementation ofrenewable raw materials.

With the increasing use of plastics in auto-mobiles, the recyclability of these materialsbecomes more important.The proportion ofplastics in a BMW vehicle is currently around12 percent. Depending on the model, 14 to 15 percent of these plastics are made fromrecyclates.The goal is to gradually increase

this proportion in conjunction with the marketconditions and technical feasibility. BMW qualitystandards apply to plastic recyclates as muchas they do to new materials. Consequently, theimplementation of recyclates in the productionof new parts must be coordinated with thedesign engineers who are also responsible forgranting final approval.Typical areas in whichrecyclates can be used include rear shelf sections and floor panel covering, cable conduits,engine compartment shrouds, housings, andbrackets.

Renewable raw materials

Natural fibers and other renewable raw materialsare used in BMW cars for sound insulation,inner door panels, as a fleece carrier material inthe luggage compartment, and as surface trim.The potential for further development is regardedby BMW as positive:These materials are light-weight, have a favorable environmental balance,and generally reduce costs.

Industrial materials used in the production of the current BMW 3-series cars

0

10

20

30

BMW 3-series

BMW 5-series

BMW 7-series

19.8 23.8 23.6

approx. 8 10.2 13.2 natural fibers (kg)

Overall weight of renewable raw materials (kg) including rubber, leather, wool, cotton

Implementation of renewable raw materials:Comparison of BMW models

Iron 60%

Light alloys (cast/forged) 8%

Non-ferrous metals 3%

Polymers 15%

Processed polymers 3%

Other materials andcomposites 4%

Electronics/electrical 1%

Operational materialsand aids 6%

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BMW Group Recycling and Disassembly Center (RDZ) in Munich-Lohhof

MINI Cooper

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MINI: Renewing an old friendship

The MINI plays a key role in lowering the average BMW fleet consumption.This new version of the popular subcompact car exemplifies the BMWstrategy of offering premium cars in all relevant market segments andproducing successful niche models.

First introduced in 1959, the MINI was soon followed by the sportyMINI Cooper in 1961. Now, some 40 years later, BMW has relaunchedthe car as the MINI One and MINI Cooper.This new subcompact is manufactured at the BMW plant in Oxford, which currently has a productioncapacity of nearly 100,000 units per year.

Spec Sheet: MINI One

As of 9/2001

Engine and performance data Engine _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ gasoline powered inline 4Displacement _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _1,598 ccm Power _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 90 bhp/66 kWTorque _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 140 Nm @ 3,000 rpm Top speed _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 185 km/h

WeightUnladen (EU) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1,115 kgMax. permissible _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1,470 kg

Fuel consumption (99/100/EG)City _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8.7 l/100 kmHighway _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5.2 l/100 kmCombined _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 6.5 l/100 kmCO2 emissions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 158 g/km

Emission ratings according to 99/102/EG Limited exhaust gas emissions (CO, HC, NOx) accordingto emission rating EU4

Noise emissions according to 99/101/EGAccelerated pass-by _ _ _ _ _ _ _ _ _ _ 74 dB (A)

Profile of BMW vehicles

Engine

The MINI is unmistakably a MINI – even though the new version is nearly 50 centimeters longer than its predecessor and now offers room for four passengers.Today’s MINI has a 1.6-liter, 16-valve, 4-cylinder enginegenerating 90 DIN bhp. Based on EU standards, aver-age fuel consumption is about 6.5 liters per 100 kilome-ters. It already meets the EU4 emission standards thatwill go into effect in Germany in 2005.

Meeting the highest recycling standards

Recycling was one of the primary objectives in designingthe new MINI. In order to achieve the highest possiblerecycling ratio, steps were taken in the early phases ofproduct development to ensure recycling-compatibleconstruction of the component parts.This is a prerequisitefor high value recycling in which entire assemblies canbe recycled and the materials recovered for future use.Examples include the catalytic converter, clutch assembly,transmission, water pump, crankshaft, alternator, starter,central control unit, air conditioner compressor, radio,etc. BMW engineers were able to comply with the BMWrecycling standard 113 99.0 as well as the guidelines ofthe BMW recycling manual for vehicle construction.Theeconomical disassembly of a variety of MINI componentsis optimized by special assembly techniques and acareful choice of materials. Examples include the instrument panel trim, the lining the rear deck lid, andfront seat backs.

C1

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BMW C1 redefines mobility

With the C1 the BMW Group introduced a vehicle concept that redefinesurban mobility.The C1 combines the typical comfort and safety featuresof an automobile with the driving characteristics and environmental advantages of a 2-wheel vehicle. Following its market launch in spring2000, the C1 has attracted attention in many southern and westernEuropean countries.

Spec Sheet: BMW C1

As of 9/2001

Engine and performance data Engine _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ single cylinder

four-stroke engine Displacement _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 125 ccm Power _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 15 bhp/11 kWTorque _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 12 Nm @ 6,500 rpmTop speed _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ approx. 100 km/h

WeightUnladen (EU) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 185 kgMax. permissible _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 360 kg

Fuel consumption At a constant 55 mph _ _ _ _ _ _ _ _ _ 2.9 l/100 kmCO2 emissions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 64 g/kmNoise level _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 77 dB (A)

Engine and emission control

The C1 is equipped with a single-cylinder, four-strokeengine (125 ccm) based on a design developed byBombardier-Rotax.This engine features an innovativeelectronic engine management system with a combinedmicroprocessor timing system for ignition, fuel injection,oxygen sensor, and idle speed regulation. Like all BMWtwo-wheel vehicles, the C1 concept was developed toinclude a regulated 3-way catalytic converter for reducedemissions.This results in a CO2 output of less than 64 grams per kilometer. At a constant speed of 90 km/h,fuel economy averages over 2.9 liters per 100 km.

Exhaust system

The exhaust system was adapted for the 3-way catalyticconverter and is designed to comply with noise levelrestrictions (77 dB, A) specified for motorcycles in thisclass.

Safety

The C1 safety concept essentially includes five modules:The crash deformation shroud above the front wheel, theBMWTelelever as an additional energy absorbing assembly,the main frame that serves as a safety cell for the driver,a special seat with head restraints, and a 3-point/2-pointseat belt. BMW C1 drivers are not legally required to weara helmet in many European countries.

320d

34

Shredder, metalextractor, mill

Mechanical-dynamic separation

Setting industry standards: BMW320d

The BMW 3-series sets the standards for recycling-optimized vehicles ofthe future.This car can be virtually 100% recycled in compliance witheconomic and environmental guidelines.The recycling concept is inte-grated into the design of many of the car’s components and assemblies.For example, the instrument panel is manufactured based on a newrecycling approach designed to enter excess materials into a high-qualityrecycling process.

Spec Sheet: BMW 320d

As of 9/2001

Engine and performance dataEngine _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ diesel powered inline 4Displacement _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1,995 ccmPower _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 150 bhp/110 kWTorque _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 330 Nm @ 2,000 rpmTop speed _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 216 km/h

WeightUnladen (EU) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1,450 kgMax. permissible _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1,875 kg

Fuel consumption (99/100/EG) City _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 7.7 l/100 kmHighway _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 4.5 l/100 kmCombined _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5.7 l/100 kmCO2 emissions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 152 g/km

Emission ratings according to 99/102/EGLimited exhaust gas emissions (CO, HC, NOx) accordingto emission rating EU3

Noise emissions according to 99/101/EG Accelerated pass-by _ _ _ _ _ _ _ _ _ _ 73 dB (A)

Engine

Under the hood of a BMW 320d is an innovative 4-cylinder diesel engine with direct fuel injection. Fuelconsumption for the 2-liter DI engine is from 10 to 15percent lower than the previous model:The BMW 320daverages 5.7 liters per 100 kilometers of diesel fuel. WithCO2 emissions reduced to 152 g/km, the 320d complieswith the EU3 emission standards.

Lightweight chassis

Lightweight construction is one of the key factors inimproving fuel economy. By integrating aluminum andmagnesium into the car’s chassis, BMW engineers wereable to reduce the car’s weight by nearly 8 kilogramscompared to the previous model.

Maintenance

Maintenance of the BMW 320d was optimized in keepingwith environmental and cost criteria.The car’s drivetrainis maintenance-free: Automatic/manual transmissionsand differentials use a permanent lubrication system.The service intervals for engine oil and filter (around20,000 kilometers), air and fuel filters (80,000 kilometers),and coolant (three years) were all significantly increased.

Recycling plan used for manufacturing instrument panels

Used or sub-standard parts,excess materialfrom stamping

Instrument panel ventilation assembly

530i

35

Smooth-running inline six: BMW 530i

BMW has been engineering inline 6-cylinder engines since 1968.Thisdesign concept not only ensures a smooth-running engine, it also offersmaximum driving comfort.The latest 3.0-liter inline six was introduced inthe BMW 530i in 2000. BMW engineers were tasked with creating asmoother, quieter, more powerful engine without increasing fuel consumptionor emissions. Result:The BMW 530i meets the EU3/D4 emissions standards with an average fuel economy of 9.5 liters per 100 kilometers.

Spec Sheet: BMW 530i

As of 9/2001

Engine and performance data Engine _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ gasoline powered inline 6Displacement _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2,979 ccm Power _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 231 bhp/170 kWTorque _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 300 Nm @ 3,500 rpmTop speed _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 250 km/h

WeightUnladen (EU) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1,605 KgMax. permissible _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2,070 kg

Fuel consumption (99/100/EG) City _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 13,1 l/100 kmHighway _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 7,4 l/100 kmCombined _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 9,5 l/100 kmCO2 emissions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 229 g/km

Emission ratings according to 99/102/EG Limited exhaust gas emissions (CO, HC, NOx) accordingto emission rating EU3/D4


Emission control

The concept of locating catalytic converters in closeproximity to the engine was carried over from the previousmodel.This improves cleaning efficiency by ensuring thatthe catalysts reach their operating temperature faster. Bychanging the cell density and implementing differentmetals in the catalytic converters, BMW engineers havemade it possible to convert a higher percentage of thehydrocarbons, carbon monoxide, and nitrogen oxidesinto non-toxic gases.

Double VANOS

Lower fuel consumption is achieved with the DoubleVANOS variable camshaft control.This technologysignificantly improves the torque curve of the 6-cylinderengine.The electromechanical throttle valve controlincreases fuel efficiency and provides smoother idling.Digital Engine Electronics (DME), another BMW 530iinnovation, ensures optimum performance with lowerfuel consumption and emissions.

Lightweight chassis

Like all of the latest BMW 5-series models, the 530i (E 39)is built on a lightweight chassis. Along with the integratedaluminum rear axle, this concept features an aluminumtwin A-arm front axle assembly to help reduce overallvehicle weight while reducing fuel consumption andexhaust emissions.

735i

36

Spec Sheet: BMW 735i

As of 9/2001

Engine and performance data Engine _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ gasoline powered V-8Displacement _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 3,600 ccmPower _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 272 bhp/200 kWTorque _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 360 Nm @ 3,700 rpmTop speed _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 250 km/h

WeightUnladen (EU) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1,935 kgMax. permissible _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2,440 kg

Fuel consumption (99/100/EG) City _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 15,0 l/100 kmHighway _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8,2 l/100 kmCombined _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 10,7 l/100 kmCO2 emissions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 259 g/km

Emission ratings according to 99/102/EG Limited exhaust gas emissions (CO, HC, NOx) accordingto emission rating EU4


Introducing a new standard: BMW735i

One of the engineering objectives was to create an innovative balancebetween economy, comfort, driving dynamics, and safety.The new BMW7-series that premieres at the IAA 2001 Motor Show in Frankfurt,Germany introduces a number of innovations designed to make drivingsafer, more relaxed, and environmentally compatible. One of the mostinteresting innovations is the iDrive concept that combines all functionsand reduces hands-on controls to a minimum. Instead of conventionalswitches and knobs on the center console, there is a control panel for traffic telematics including a navigation system and the individuallyconfigurable ASSIST-Online, the world’s first BMW Internet portal.

Higher performance – lower fuel consumption

BMW 7-series technical innovations include the new-generation 8-cylinder engines. With a 6-speed trans-mission, the new V-8 engine in the BMW 735i delivers 14 percent more horsepower (272 bhp) than the previous model. BMW engineers actually lowered thecar’s fuel consumption by the same amount (14%).Based on EU standards, the BMW 735i averages 10.7 liters per 100 kilometers.Thanks to a number of infinitely variable parameters including valve timing(Double VANOS), valve lift (VALVETRONIC), and theworld’s first adjustable intake manifold length, engineperformance can be perfectly adapted to the actualload conditions.The intelligent lightweight constructionof the new 7-series dramatically improves fuel economy.With features including active suspension control andelectronic damping, the entire BMW 7-series chassis ismade of aluminum.

Recycling-optimized design

The new BMW 7-series complies with the most stringentrecycling standards. Many of the car’s components andassemblies were designed for optimal recycling.Thisincludes the center console, rear deck ventilation, andthe engine shroud. Adding to the environmentallycompatible engineering approach is the central ignitioncontrol for all pyrotechnic elements in the passive safetysystem.The proportion of recyclates used in the car’splastic components was increased to 14 percent.

X5 3.0d

Safe and economical: BMW X5 3.0d

With the introduction of the first Sport Activity Vehicle, BMW continuedits successful niche product policy in the premium segment. From thevery beginning, the BMW X5 has ranked at the top of the customersurveys conducted by the J. D. Powers market research institute.TheBMW X5 also meets the highest safety standards. It was acclaimed as the safest car ever tested by the independent American Insurance Institute for Highway Safety.

Spec Sheet: BMW X5 3.0d (automatic transmission)

As of 9/2001

Engine and performance data Engine _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ diesel powered inline 6Displacement _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2,926 ccmPower _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 184 bhp/135 kWTorque _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 410 Nm @ 2,000-3,000 rpmTop speed _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 200 km/h

WeightUnladen (EU) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2,170 kgMax. permissible _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2,685 kg

Fuel consumption (99/100/EG) City _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 12,3 l/100 kmHighway _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8,2 l/100 kmCombined _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 9,7 l/100 kmCO2 emissions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 259 g/k

Emission ratings according to 99/102/EG Limited exhaust gas emissions (CO, HC, NOx) according to emission rating EU3


Focus on safety

A wide range of control systems adds to active passengersafety. Features on the BMW X5 with permanent all-wheeldrive include Dynamic Stability Control (DSC) and theAutomatic Differential Brake ADB-X that automaticallyapplies the right amount of braking pressure to eachwheel. Hill Descent Control (HDC) ensures sure-footedtraction in all driving situations.The Dynamic BrakeControl (DBC) supports the driver’s reaction by auto-matically sensing emergency situations and applying fullbraking power.

New diesel engine

The advanced engine technologies featured on the 6-cylinder inline diesel in the BMW X5 3.0d includeCommon Rail Injection, a turbocharger with variablegeometry, and four valve engineering. BMW X5 3.0d fueleconomy is favourable in its class. With average con-sumption rated at 9.7 liters per 100 kilometers of dieselfuel, the X5 3.0d automatic meets the stringent EU3emissions standards.

37

The demand for sustainability has added a newdirection in all areas of industrial management.At the same time public interest in this themestill focuses on personal mobility – primarilythe automobile. Ecology and energy efficiencyare so firmly established in the minds of customers that automobile designers can onlyincrease the safety, comfort, and performanceof their products if they pay close attention toconserving natural resources.This has becomean increasingly important factor in the advance-ment of automotive engineering. In the future,the issue of sustainability will be determined bythe technology leaders in the automobileindustry.

For BMW Group engineers, sustainabilityhas become the main focus of product develop-ment over the past few years.The SustainableValue Report 2001/2002 documents howBMW engineering has reinforced the company’sstanding as a technology leader. Examples of innovative BMW engineering include VALVETRONIC, a new technology that eliminatesthe need for mechanical throttle valves.Thenew electronically controlled intake valvesimprove fuel economy by up to 10 percent.

ConnectedDrive is another example of howpioneering information technology is used toset new standards in the interaction betweenthe driver, vehicle, and surroundings whilereducing traffic congestion and environmentalimpact.

The spectacular success of the BMW Groupin Formula 1 racing represents the cutting edgeof high-tech engineering. Lower fuel consump-tion and lighter vehicles are important successfactors in Formula 1. At BMW, this technologyflows into the development of today's seriesproduction cars.

Success on the racetrack is not an end initself. But it proves that high-tech and genuineinnovations must be consistently placed in thecontext of sustainability to ensure the ultimatedriving experience.

Munich, August 2001

Burkhard Göschel

38

Research & Development:A step into the future

Dr. Burkhard GöschelVice President,Development andProcurement

BMW Group research and development departments have a clear objective:Advanced product design with minimum environmental impact. At thesame time, it is important to ensure adequate mobility without limiting thequality of human life. BMW invested over g2.1 billion in 2000 for researchand development. In addition to new drive technologies, some of thecompany’s main research objectives include lightweight body constructiontechnology and the advanced engineering of driver assistance and information systems.This technology makes using traffic systems saferand more efficient for BMW drivers while avoiding traffic congestion.

Visions39

Innovative light technologyintegrated into parking light ring adds an instantlyrecognizable design accent.

Testing lab

Connected

40

ConnectedDrive

Benefits for the driver and the environment

Waiting in traffic is a waste of energy. In Germanyalone, up to 14 billion liters of fuel are wastedeach year as a result of traffic congestion.According to BMW figures, the annual financialloss in Germany amounts to nearly c100 billion.One way to reduce the resulting environmentalimpact is to use existing roads more efficiently.With this in mind, the BMW Group is workingintensively on the development of new driverassistance systems.

ConnectedDrive: A networked approach

The innovative BMW ConnectedDrive conceptlinks all driver assistance and information systems. BMW researchers follow the theorythat networking the different services improvessafety and comfort while reducing environmentalimpact.

ConnectedDrive is based on the interactionbetween the driver, vehicle, and environment.Special sensors record information on weatherand road conditions. At the same time, thedriver is informed about potential dangersituations and current traffic status.The conceptencompasses a variety of active drivingaspects to ensure smoother traffic flow andenhance safety.

An Internet portal in the ConnectedDrivevehicle provides direct access to all traffic relevant data and is networked with a satellitenavigation system to optimize road travel.

Dynamic online information services

Dynamic telematics applications will becomemore important in the future.The comprehensivenetworking of traffic information can significantlyimprove traffic flow and reduce environmentalimpact. BMW researchers have taken this astep further with Extended Floating Car Data.This system compiles vehicle informationincluding speed and current position and sendsit anonymously to a data collection point whereit is used to provide information to other driverson the road.

BMW innovations in this field include onlineservices. For example, the BMW parking assistantmakes it easier to find a parking space byactively searching for vacancies in the immediatearea. Known as BMW ASSIST, this system is acomponent of the ConnectedDrive packageavailable in the new BMW 7-series cars. UsingInternet technology, BMW drivers can takeadvantage of this and many other services. Auser-configured Internet portal provides directaccess to traffic information and notifies thedriver of traffic tie-ups or detours.These technologies work together to make personalmobility more compatible with environmentalobjectives.

Introducing SOFC

The number of electronic applications in modernautomobiles will continue to increase in thefuture. In order to make the electrical system in

Drive

ConnectedDrive

www.bmwgroup.com/connecteddrive Science Club

www.bmwgroup.com/scienceclubWilliams Formula 1

www.bmw.williamsf1.comBMW Motorsport

www.bmw-motorsport.com

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BMW Research andInnovation Center (FIZ)

new BMW cars more environmentally compatible,BMW researchers teamed up with an industryaffiliate to develop a gasoline powered fuelcell.The SOFC (Solid Oxide Fuel Cell) trans-forms gasoline into electricity much more efficiently than the conventional method usinga combination of engine, generator, and battery.An SOFC uses about half as much fuel to generate electricity as a normal internal com-bustion engine with generator.

BMW Research and Innovation Center

Located near the corporate headquarters inMunich, the BMW Research and InnovationCenter (FIZ) offers an ideal environment fordeveloping creative technical solutions. Built in the mid-eighties, the center employs nearly6,000 people.This is where information andknowledge come together enabling newsynergies that, despite modern communications,are often unachievable when designers are notlocated under the same roof. One of the keythemes at the center focuses on sustainablemobility of the future along with its social andenvironmental impact.

While the designers at the BMW Researchand Innovation Center concentrate on advancedautomotive engineering concepts, the 100employees at Technik GmbH in Munich-Moosachlay the groundwork for other innovative concepts. Independent of the current productrange, this “Think Tank” provides creative ideasthat flow into the development of new vehicleconcepts and components. Examples includethe revolutionary Mechatronic lightweight vehicle Z22 and the BMW C1 two-wheel vehicle,a totally new concept in environmentallycompatible, urban mobility.

Key technology: Lightweight construction

Since the company was first established in1985, one of the primary focuses at TechnikGmbH has been on intelligent lightweight construction. For BMW, this technology is thekey to reducing fuel consumption and complyingwith the stringent EU4 emission standards thatgo into effect in Europe in 2005.The importanceof the company’s research in this field isemphasized by the fact that lowering vehicleweight by 100 kg can improve fuel efficiency by0.5 liter per 100 kilometers.

The search for lightweight industrial materialsis running full speed ahead. BMW is hoping togain from the carbon fiber reinforced polymer(CFRP) technology used in Formula 1 racing.The development of CFRP has been successfulfor the BMW Williams F1 team. Also the engineof the team’s FW23 racecar is based onadvanced lightweight construction technologythat will be implemented in BMW series pro-duction models in the future.The engine’scylinder head is manufactured from aluminum.Other engine parts were developed at theBMW Innovation and Technology Center (LITZ)in Landshut where a special foundry is used inthe development of other innovations for seriesproduction technologies.

Lightweight automotive technologies

A new joint cooperation with the science community has been established to advancelightweight automotive construction. Initiatedby the BMW Group, a special curriculum forlightweight construction technology has beenestablished beginning with the winter semester2000/01 at the Landshut Technical Institute.This new course of study is being financed inthe first 5 years by the BMW Group with adonation of over c500,000.

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Mag

azin

e

Reducing weight to benefit the environment

43

New material with excellent environmental qualities

Losing weight is not only good for humanhealth, it also benefits the environment. When it comes to reducing the weight of a BMWautomobile, the “diet” must not reduce vehiclesafety, comfort, or driving enjoyment.

This approach led to a technological master-piece in lightweight automobile constructiondesigned by the BMW experts at Technik GmbHin August 2000. One of the characteristics thatmake the BMW Z22 unique from an environ-mental standpoint is its fuel economy. Althoughin terms of comfort, performance, and interiorspace the new car is comparable to a BMW530i touring, this technological wonder usesonly 6 liters of fuel per 100 km.The 35% weightreduction represents a quantum leap in light-weight construction technology.

Weighing just 1,100 kg (10kg/kW), the Z22 is the world’s first Mechatronic automobile.Mechatronic, which refers to a mechanical system with electronic control, represents anautomotive revolution. New Steer-by-Wire andBrake-by-Wire technologies in the Z22 replacethe mechanical steering and hydraulic brakesystems.

A team of engineering specialists developedthe 70 innovations and new composite materialsfeatured on the new technological tour deforce.The degree of project success borderson the phenomenal:The lightweight Z22 virtuallylaunched a technological chain reaction at BMW.

Based on Z22 project results, the companydecided to work more extensively with carbon

fiber reinforced polymers (CFRP). Since then,the BMW Group has been developing thismaterial for use in series production cars.

The material of tomorrow

CFRP is destined to become a familiar term forBMW owners. In the future, they may very wellfind themselves sitting in a passenger cabinmade from carbon fiber reinforced polymer.This is one more way in which BMW demon-strates its technological leadership in light-weight vehicle construction. CFRP currentlyshows the greatest weight saving potential incar body construction. It is 50 percent lighterthan steel and up to 30 percent lighter thanaluminum. BMW is developing CFRP technologyas part of its Design for the Environment pro-gram. Along with lower weight, the material iscorrosion resistant and performs extremelywell in vehicle crash testing.

International project team

An international project team made up ofmembers from all BMW divisions is currentlyworking on the development of CFRP for light-weight, series production auto bodies.Thisprocess is managed by the experts at the BMWResearch and Innovation Center in Munich.

One thing is already clear: BMW will onlystart using CFRP in series production when itbecomes cost neutral compared to aluminum.Along with environmental criteria, economy isan important aspect in the development of newlightweight materials.

Far left:Technology prototype Z22Left: Z22, central control panelRight: Z22, multi-function steering wheel

Side frame in deep-forged steel: 47.1 kg

Z22 side space frame in CFRP material: 21.3 kg

55% reduction in auto body weight

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Benchmarking recyclability

The prospects of using carbon fiber reinforcedpolymers still has one major drawback: CFRPstructural parts from end-of-life vehicles arenot suitable for a mechanical recycling due tothe high disassembly costs. Consequently,they will be thermally recovered in the future as a component of the automotive shredderresidue. In some cases this could lead to aconflict with the objectives of the lifetime environmental effects and compliance withmaterial recycling quotas in the EU end-of-lifevehicle directive. BMW material flow managersare optimistic in their approach to handling thewaste materials from production operations.By the time series production with CFRP islaunched, they expect to have a closed materialrecycling loop in place.

As part of its environmental commitment,the BMW Group strives to minimize theenvironmental impact of its products. In a directcomparison of environmental factors, includingvehicle recycling and lightweight construction,a minor impact on the environment must beregarded as acceptable as long as the primaryobjective is environmental compatibility. In orderto examine these relationships, BMW specialistsare conducting an environmental lifecycle

analysis on CFRP materials and components.Thus far, this research has shown positiveresults.

In a comparison with a BMW 5-series touring side frame made of steel, the lighterCFRP frame performed extremely well in termsof environmental compatibility, i.e. energyconsumption, potential greenhouse effects,and resource depletion.This goes to show thatCFRP is a valuable material when it comes to environmental aspects. It has outstandingpotential for environmental compatibility through-out the total lifecycle.

BMW has conducted further tests on CFRPmaterials in series production.These tests are designed to benchmark CFRP processesalong with the economic aspects of its use inmanufacturing.

From basic concepts to innovative stan-dards

Preparing for series production is one of the main tasks of the BMW Innovation and Technology Center where the CFRP pilot systemis located.The innovation center focuses ondeveloping basic concepts into innovativestandards. Opened in December 1999, thetechnical institute is located at the BMW plant

Z22 lightweight cockpit and side frames made from carbon fiberreinforced polymer (CFRP)

45

The Landshut Innovation and Technology Center is one of the focalpoints of the lightweight construction strategy followed by BMW indesigning new-generation automobiles.

BMW Group Landshut plant: LITZ light alloy die casting machine

in Landshut and consists of two main depart-ments focusing on plastics and light alloys,the primary materials used by the BMW Groupin advanced lightweight construction. Since the establishment of the technical institute,one of the major themes at the BMW Landshutplant is on testing lightweight materials andcomposites.

Making components lighter

The innovative strength behind lightweightconstruction technology goes beyond CFRPand is demonstrated by a number of advanceddevelopments for new BMW models. Lightalloys including magnesium or aluminum alsooffer significant weight reduction potential.

A lightweight cockpit and an optimized rearseat back assembly are included in the LITZdevelopment program. BMW will continue toexplore new approaches to weight reductionand examine each assembly unit to determinewhether lightweight construction can be intelligently implemented. Lightweight con-struction is not only relevant in the car body;the combination with other factors also playsan important role.BMW engineers are keenly interested in theprogress made in the development of fuel-efficient engines. Practical environmental benefits can be gained through optimizedengine performance – especially in small cars.VALVETRONIC and hydrogen power are perfectexamples.

Environmental 46

Powder coating

Clean production

Dr. Norbert ReithoferExecutive Vice PresidentProduction

Environmental protection, in any country –whether it is highly industrialized or a developingnation – is not a luxury. Consequently, an enter-prise must be capable of providing innovativeanswers to the critical questions of the future.This demands technically advanced productsthat satisfy a variety of customer needs and aresocially acceptable at the same time. It alsomeans product development and manufacturingbased on economic and ecological efficiency.Most importantly, it involves people who supportthe company’s success with a sense ofresponsibility.

Sustainable management is the keyword andit is substantially more than a modern catch-phrase. It is a synonym for the ability of themanagement to achieve economic success whilepaying close attention to its social responsibilityand the needs of the environment.

Following this approach, BMW Group executives endorsed international environmentalprotection guidelines in 1998.This course ofaction is based on the Agenda 21 principlesproposed at the world summit in Rio de Janeiro.A primary focus of Agenda 21 is to encourageglobal enterprises to follow the same standardsin their foreign plants as they do in their home-land.This strategy is strictly adhered to by theBMW Group worldwide.

A global BMW environmental standard representsa level of technology and knowledge transferthat extends far beyond the enterprise itself.

Every company that regards itself as globalplayer needs to have an environmental policythat functions both on global and regional levels.With this in mind, each BMW environmentalmanagement system is specifically adapted tothe local ecological and social conditions of therespective location. In contrast to a centralized,uniform way of doing things, this approachenables a substantially more effective manage-ment of the respective environmental andsocial aspects.

In the new BMW Group Sustainable ValueReport, we outline many of the innovative features of our products and our internationaloperations. We invite you to take a close lookat the worldwide BMW Group sustainabilitypolicies and to provide us with your commentsand opinions.

Munich, August 2001

Norbert Reithofer

Compatibility47

High quality is one of the most outstanding characteristics of BMW products.This is clearly reflected in the company’s premium car strategy. All fifteen ofthe BMW Group plants worldwide consistently meet the highest standardsof quality. A company committed to sustainable economic growth shouldalso integrate the highest environmental standards into its production quality.In addition to environment-friendly product engineering, the BMW Groupfocuses on environmental management in its manufacturing operationscompany wide.The goal is to minimize the environmental impact and theexploitation of resources while responding to the increasing demand forBMW products.

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Company-wide environmental management system

The BMW Group is the world’s first car manu-facturer to have both quality management andenvironmental management systems in placeat all of its production plants. Key environmentalfactors in automobile production include energyand water consumption, wastewater disposal,exhaust gas and noise emissions, waste andhazardous materials, carbon dioxide, and theuse of solvents. In order to ensure continuedprogress in these areas, the BMW Groupinvested c15.8 million in 2000 in environmentalprotection. Another c31.5 million is currentlybeing spent on environmental programs.

For example, based on the number of unitsproduced, BMW was able to reduce the use ofsolvents by nearly 30 percent since 1996. Alongwith water-soluble paints, the company’s newpowder coating technology will help reducesolvents even further.The BMW factory in Dingolfing, Germany was the world’s first auto-mobile manufacturing plant to introduce powdercoating technology.Today, the solvent-free finalcoat is applied without harmful emissions.Thenew pollution-free paint processes used inBMW plants are supported by investments inthe triple-digit million range.

Significant progress has also been made inother important environmental aspects over thepast five years. As a result, the CO2 emissionsper vehicle produced decreased by 15 percent,process water requirements dropped by overone-third, wastewater disposal by 16 percent,and energy consumption per unit by 20 percent.

Although the amount of excess productionmaterials increased slightly compared to 1996figures, the proportion of recovered materials hasbeen higher with a reduction of the percentageof disposed waste.

New environmental controls

In order to improve environmental protection inproduction operations, BMW Motoren GmbH inSteyr, Austria developed a new environmentalcontrol system in cooperation with the Universityof Linz. Once this system is successfullyimplemented in Steyr, the BMW Group plans to introduce it at all BMW production facilities.One of the key goals of the environmental controlsystem is it to use the scientific knowledgegained to systematically monitor and improvethe efficiency of environmental protection andsustainability programs.

Example: Great Britain

In the future, all BMW manufacturing operationswill benefit from the experience gained in Steyr.The international exchange of informationbetween Steyr and the new BMW engine plantin Hams Hall, England has resulted in thedevelopment of an environmental managementsystem at the new plant. In January 2001, seriesproduction of the new 4-cylinderVALVETRONICengine was launched at the Hams Hall plantnear Birmingham. Environmental certification ofthe new plant followed in July. In conjunctionwith the new environmental management system,special teams focusing on waste disposal,

Painting operations: Quality control

“Our goal is to meet the highest standards.”Prof. Joachim Milberg, BMW Group Chairman of the Board

“Similar to our approach to quality, our orientation to the environmentwill always be a top priority at BMW.”Dr. Norbert Reithofer, BMW Group Executive Vice President for Production

49

BMW engine plant in Hams Hall

Production _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BMW 4-cylinder engine with VALVETRONIC

Current capacity _ _ _ _ _ _ _ _ _ _ _ _ _ 60,000 units per year (2001 target)

Full production capacity _ _ _ _ _ 400,000 units per year

Series production launch _ _ _ January 2001

Environmental certification _ _ July 2001

Investment volume _ _ _ _ _ _ _ _ _ _ _ e610 million

Employees _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 650 (by Dec. 2001)

MINI production plant in Oxford

Production _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ MINI, MINI One, MINI Cooper

Capacity _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 100,000 units (from 2002)

Series production launch _ _ _April 2001

Environmental certification _ _ 1995

Investment volume _ _ _ _ _ _ _ _ _ _ _ e366 million

Employees _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2,500 (by Dec. 2001)

energy, and chemical control were formed.Working in cooperation with local employees,these teams are tasked with reducing environ-mental impact in their respective areas.Thisalso has a positive effect on the cost structure:The new waste material separation systemdesigned to sort 20 different materials hasalready paid for itself. In 2001 alone the plantexpects to generate nearly £100,000 fromrecovered waste materials.

Just three months after the Hams Hall plantopened, the first new MINI rolled off theassembly line at the BMW plant in Oxford onApril 26, 2001.This former Rover factory waschanged over for MINI production in less than10 months.The BMW Group invested overc360 million in body and assembly operations.

The paint shop at the Oxford plant wasrebuilt in 1998 and now ranks as the mostmodern of its kind in Europe.The modernizationproject aimed at reducing the environmentalimpact of the painting process to a minimum.Today, virtually all of the materials used in theplant’s paint operations are water-soluble.Thisapplies to the paint itself as well as to the waxused for sealing body parts.The paint is appliedusing an advanced electrostatic process.

In order to reduce harmful emissions, allpaint vapors are accumulated and purified.Painting jigs are cleaned in a special unit toensure total control over environmental pollutants.Wastewater treatment at the Oxford paint shopmeets the latest environmental standards.Thewater is purified in a special treatment plant toensure full compliance with water pollutionrestrictions. Recycling is also practiced in

painting operations at the Oxford plant.Thisapplies to wastewater as well as to wastematerials and solvents.

The MINI production operations in Oxfordmeet the same environmental and qualitystandards in force at all BMW Group plants.Environmental certification was completed atthe Oxford plant in 1995. All environmentalmanagement and control systems are in linewith ISO 14001 standards.This helps create theconditions for sustainable production whilepaying close attention to environmental factorsand the needs of local residents.

Suppliers: Environmental compatibility ofproducts required

BMW Group suppliers are also fully integratedinto the company’s policy of environmentallycompatible production. One important aspectof BMW procurement conditions is the environ-mental compatibility of all BMW products.Suppliers are informed about the objectives ofthe BMW environmental policy of minimizingthe negative impact on people and the environ-ment.The environmental requirements areclearly defined in the product developmentprocess and outlined in specification sheets.Evaluation criteria include the efficient use ofresources, suitability for recycling, materialsand component substances, and emissions.This makes it possible for the BMW Group to select suppliers according to their level ofcompliance with environmental criteria.

50

BMW Group Figures*

* BMW Group figures apply to the following car and engine manufacturing facilities: Automobile Assembly, Dingolfing; Component Assembly,Landshut; Automobile Production and Engine Assembly, Munich; Automobile Production, Regensburg; Automobile Production, Rosslyn,South Africa; Automobile Production, Spartanburg, USA; Engine Assembly, Steyr, Austria.

** Number of registered industrial accidents per 1 million man-hours.

*** Increase since 1998 resulting from outdated CDP dryer in Munich paint shop. Completion of new building and pretreatment facilityscheduled for 2002.

**** Survey conducted every two years.

***** Includes CO2 emissions of external electricity production.

Automobile Assembly,Dingolfing, Germany

Component Assembly,Landshut, Germany

Automobile Production and Engine Assembly,Munich

1996 1997 1998 1999 2000

Vehicle Production

BMW automobiles Units 639,433 672,238 706,426 755,547 834,519

Manufactured engines Units 640,940 672,962 713,329 792,026 876,656

Personnel in production No. 44,600 44,465 47,137 48,543 50,300

Frequency of industrial accidents** No. 24 16 15 14 17

Complaints from local residents*** No. 10 28 47 86 74

Land development**** % -- 20 -- 24.6 --

Property area m2 -- 11,923,975 -- 12,491,329 --

Emissions

Carbon dioxide (CO2)***** t 786,879 780,271 803,386 833,232 870,862

CO2 per unit produced t/unit 1.23 1.16 1.14 1.10 1.04

Nitrogen oxide (NOx) t 808 854 987 875 476

SO2 t 11 7 4 5 6

Carbon monoxide (CO) t 218 211 279 275 244

Volatile organic compounds (VOC) t 2,872 2,354 2,636 2,870 2,679

VOC per unit produced kg/unit 4.49 3.50 3.73 3.80 3.21

Particles, dust t 39 34 33 35 37

Water

Wastewater total m3 2,231,194 1,985,842 2,340,409 2,131,837 2,206,733

Water consumption/water input m3 3,736,900 3,468,948 3,423,820 3,403,209 3,344,939

Process water input m3 2,917,520 2,717,549 2,737,398 2,650,677 2,481,127

Process wastewater m3 809,988 853,241 870,815 868,044 882,286

Process wastewater m3 1.27 1.27 1.23 1.15 1.06per unit produced

Total heavy metals and kg 344 301 400 383 318heavy metal compounds

0.9

1.0

1.1

1.2

1.3

’96 ’97 ’98 ’99 ’00

1.23 1.16 1.14 1.10 1.04

CO2 emissions per unit producedin tons

Overview of BMW Group Figures

www.bmwgroup.com/sustainability �BMW Group Figures

Paint process Input: lacquer / paint Output emissions: escaping volatile organic compounds (VOC)

Pretreatment, CDP*, UBS** t 524.80 5.44

Filler t 370.90 15.80

Primer t 398.40 15.14

Clear coat t 398.40 21.54

Polishing compounds/sealing t 0.98 4.98

51

Paint and solvent emissions from partial processes based on figures from Spartanburg assembly plant in 2000:

Automobile Production,Regensburg, Germany

Automobile Production,Rosslyn, South Africa

Automobile Production,Spartanburg, USA

Engine Assembly,Steyr, Austria

1996 1997 1998 1999 2000

Waste

Total waste t 218,374 219,298 259,000 278,232 291,082

Total waste per unit produced kg/Unit 342 326 367 368 349

Materials to recycling t 190,287 200,629 236,532 257,817 268,998

Waste for removal t 28,087 18,668 22,468 20,415 22,084

Scrap t 225,012 232,002 268,334 284,567 297,838

Energy Consumption

Total energy consumption MWh 2,517,758 2,527,577 2,517,528 2,518,423 2,636,565

Energy consumption MWh/Unit 3.94 3.76 3.56 3.42 3.16per unit produced

Electricity (from outside sources) MWh 958,651 951,711 1,043,051 1,086,358 1,163,233

Electricity (produced internally) MWh 105,962 114,870 120,908 117,168 94,757

Heating oil MWh 91,730 33,743 8,948 45,119 23,729

Coal MWh 0 0 0 0 0

Remote heating MWh 225,645 186,985 189,773 192,559 117,896

Mineral oil MWh 0 0 0 0 0

Natural gas MWh 1,135,770 1,240,268 1,154,848 1,140,219 1,236,950

Expenditures

Environmental protection investments EUR 6,373,765 8,816,762 5,005,548 8,413,308 15,800,297(excludes major investments)

Current environmental expenditures EUR 21,730,539 25,229,857 26,657,584 29,799,187 31,500,000

0.9

1.0

1.1

1.2

1.3

’96 ’97 ’98 ’99 ’00

1.27 1.27 1.23 1.15 1.06

Process water per unit producedin cubic meters

3.00

3.25

3.50

3.75

4.00

’96 ’97 ’98 ’99 ’00

3.94 3.76 3.56 3.42 3.16

Energy consumed per unit produced in MWh

* Cathode Dip Bath** Underbody Sealing

188.3 tons total thinnerused in all process phases

Serv

52

Sales & Service: Serving the interests of the customerand the environment

ice

53

Comprehensive services meeting the highest standards of quality, safety,reliability, and environmental protection: For the BMW Group, these are thekey factors leading to customer satisfaction. Customers are among the mostimportant stakeholders in the BMW Group because they make a valuablecontribution to the company’s economic prosperity. In the BMW Group globalsales network consisting of 27 marketing companies, over 3,000 authorizedBMW dealerships and 1,300 MINI sales & service centers, customer satis-faction plays an essential role. BMW customers clearly appreciate the qualityof BMW service. In a customer satisfaction survey conducted by J.D. Powerand Associates in 2000, the BMW Group ranked number 3 among 37 carmanufacturers.

54

Sustainability in BMW dealerships

Humans

Work safety protects employee health

Ecology

Environmental managementreduces environmental impact

Economy

Quality management secures customer satisfaction and economic prosperity

In order to increase customer satisfaction,management performance, and market penetration, the BMW Group created the BMWQualityTrophy, a program designed to improveBMW dealership quality.To date, 190 BMWdealers have received this award based onindividual performance assessments. In 2001,six BMW dealers were commended as “BMWSuccess Partners.”

Quality – Safety – Environmental Protection

Along with work safety, employee health, andcommercial success, environmental protectionhas become a primary responsibility for BMWdealers worldwide.This is based on the realization that active environmental protectionnot only improves the corporate image, it is anindispensable aspect of quality management.It also significantly reduces costs in sales andservice operations. BMW customers reap thebenefits through extended service intervals andlow maintenance automobiles. In 1982, BMWbecame the first manufacturer to introduce anelectronic service interval indicator that automatically determines the level of servicerequired based on actual vehicle mileage anddriving conditions.This innovation has extendedthe average interval between oil changes for

gasoline engines to over 25,000 kilometers.For diesel engines, this figure was more thandoubled to 22,500 kilometers.

Lifetime oil in transmissions and differentialsand the extended life of spark plugs and airfilters to over 100,000 kilometers have alsodrastically reduced the amount of potentiallyhazardous waste materials.This is one moreway the BMW Group and BMW dealers havedecreased disposal and recycling costs.

Material recycling and recovery

BMW successfully developed a system forwaste disposal in BMW service centers. Byoffering BMW dealers targeted incentives forseparating recyclable materials, this systemhas resulted in significant reductions in thecosts of industrial waste disposal. Combiningdisposal methods and recycling a higher volumeof waste materials not only lowers costs, itsupports uniform environmental requirements.Working together with 800 BMW dealerships,the BMW Group developed the BMW communitydisposal system in 2000 for eliminating usedcommercial packing materials.Within this system,all packing materials can be returned forrecycling – an important contribution to environ-mental protection. In 2000 alone, 72 percent of

“Our focus is on the human aspect: Employees and customers.”Guiding principle from the Quality and Environment Management Manual publishedby the BMW manufacturer’s showroom in Frankfurt

“A car manufacturer’s responsibility does not end when the vehicle is delivered to the customer.The relationship between mobility and environmental responsibility is more important todaythan ever before. In the interests of environmental compatibility, this includes the materialrecovery cycle that begins when a new product is developed and continues until final disposal at the end of its lifecycle. As a pioneer in the field, the BMW Group began conductingrecycling studies in the mid-eighties.Today, BMW is an automobile industry leader in recycling-optimized design.”

Dr. Michael Ganal,Vice President of Marketing and Sales, BMW AG

55

Further information on IDIS

www.IDIS2.com

7,000

13,000

10,000

16,000

19,000

22,000

25,000

’99 ’00

10,000 km 22,500 km

12,500 km 25,000 km

Diesel

Gasoline

Extended motor oil service intervals for BMWautomobiles in kilometers

Amount of waste returned at no charge from the BMW dealership network in Germany

1999 2000

Used oil (engine/transmission) million liters 4.94 5.07

Scrap tires qty. 433,566 442,610

Front/rear glass sections qty. 100,500 99,702

Bumpers (plastic) qty. 59,095 58,903

Fuel tanks (plastic) qty. 590 482

Air cleaners qty. (million) 1.27 1.46

Batteries qty. 112,904 133,696

Plastics, mixed kg 824,939 985,570

Electrical/electronic scrap kg 36,474 47,607

Airbags, deflated kg 27 52

Radiator coolant liters 471,629 526,415

Brake fluid liters 275,706 291,886

the 2,000 tons of packing materials broughtinto circulation were returned for recycling.Thisnew system and the actual return rate wereevaluated and certified by industry experts.

End-of-life vehicle hotline: Environmentalservice for customers

BMW customer service extends to the environ-mentally compatible disposal of end-of-lifevehicles. In 1999, BMW became the first auto-mobile manufacturer to set up a telephonehotline to advise customers and provide information on local vehicle recycling companies.In Germany, a network was created with nearly100 BMW- approved recycling firms and 200vehicle drop-off points.These operations areaudited by the BMW Group, inspected annuallyby independent experts, and licensed in

compliance with end-of-life vehicle regulations.All BMW dealerships are certified as authorizeddrop-off points so that customers can rely ontotal service from a single source for the life oftheir cars.Within the framework of the “Togetherfor Recycling” program co-sponsored byMG Rover, Fiat, and Renault, the BMW Groupguarantees environment-friendly end-of-lifevehicle recycling in all major EU countries.European recycling firms are also supportedby the International Disassembly InformationSystem (IDIS), which was established underthe auspices of the BMW Group. IDIS providescomprehensive data for recycling cars madeby 21 different manufacturers worldwide andhelps ensure that end-of-life vehicles are efficiently and economically recycled.The currentIDIS 2.02 database is available in 8 languagesto over 5,000 recycling firms in Europe.

56

Employees at BMW dealership in Munich

Mag

azin

e

Working togetherfor progress

Website: BMW dealership in Frankfurt

www.bmw-frankfurt.deWebsite: BMW dealership in Munich

www.bmw-muenchen.de

“BMW concentrates on serving the needs of people, the environment,technology, economy, and progress: Future generations have a rightto a healthy environment.”

“Quality and Environment”guidelines published by the BMW dealership in Frankfurt

57

Customer interface: BMW dealerships inMunich and Frankfurt demonstrate howenvironmental protection and customersatisfaction go hand in hand

Collection bins are located throughout theservice garage. Six plastic containers in differentcolors are integrated into a rack system.Theracks are mounted on wheels so that they canbe easily rolled to the outdoor waste collectionpoint.The bins are clearly identified accordingto color: Green for plastic foils, blue for paper,red for air filters, yellow for rubber and plasticparts, silver for metal, and black for other wastematerials.

Environmental protection: Easy andeffective

In order to be effective and gain acceptance by employees, environmental protection andrecycling systems have to be easy to use.Thisis clearly demonstrated by the BMW dealershipsin Frankfurt, Germany.The waste collectionracks were specially developed for use in theservice garages at the 7 locations in Frankfurt.Separating waste has become standard

procedure for all employees, from managersto cafeteria personnel.The waste separation program outlines 47 different categories, and all employees know exactly what to do withwaste produced in their work areas.There’s no question that this approach pays off: Since the program was introduced two years ago,waste disposal costs have been reduced by50 percent.

Sustainability: A corporate principle

Environmental protection has been a primaryconcern of the BMW Group for many years. Inkeeping with this corporate principle, the environmental protection officers working atdealerships in Frankfurt receive full support.Special workshops are conducted on a regularbasis to ensure that all employees are familiarwith the company’s environmental policies.Environmental protection is also part of thestandard curriculum for BMW trainees.Thistheme is addressed on the BMW Intranet aswell as in the employee magazine and onposters. BMW environmental protection officersare always available to answer questions andrespond to employee suggestions.

Separating waste for recycling at the BMW dealership in Munich

58

Facts & Figures, BMW dealership in Frankfurt, Germany

Data from 2000

Employees _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 578

including trainees _ _ _ _ _ _ _ _ _ _ _ _ _ _ 121

Number of showrooms _ _ _ _ _ _ _ _ 7

Sales _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ e292 million

Units sold, new cars _ _ _ _ _ _ _ _ _ _ _ 6,043

Units sold, used cars _ _ _ _ _ _ _ _ _ 5,930

ISO 14001 EnvironmentalCertification _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1999 0

50

100

150

200

250

300

’98 ’99 ’00

287 t 239 t 266 t

amount recycled (in tons)

216 t 223 t 248 t

Amount of waste produced/recycled by BMWdealership in Frankfurt (in tons)

“We consistently inform the public on our company’s environmentalimpact and environmental protection programs.”Environmental policy, BMW dealership Munich

In many cases, the small measures determinethe success of a sustainable managementapproach. Sustainability is a primary focus at thesecond-largest BMW dealership organization.

Quality and environment go hand in hand

Management guidelines published by theFrankfurt dealerships ensure that quality andenvironmental management go hand in hand.The comprehensive quality management system introduced in Frankfurt was followed in 1999 by an environmental management program in compliance with ISO 14001 inter-national standards. In April 2000, environmentalcertification was awarded to the dealershipslocated in Darmstadt and Offenbach. Certificationis planned for the other dealerships in theFrankfurt area.

Environmental protection at Munich dealerships

The BMW dealerships in Frankfurt were the firstto achieve environmental certification – butcertainly not the last. Just 400 kilometers south,

the BMW dealerships in Munich introduced anenvironmental management system in compli-ance with ISO 14001 standards in November2000. With over 1,200 employees, the Munichdealership is the largest in the BMW Group.

Plans call for all BMW dealerships to becertified by October 2001.The Munich organiza-tion has also developed a detailed programoutlining environmental objectives for 2001.These measures will be gradually implementedand employees will be familiarized with theenvironmental program requirements.

Motivation based on information

Special environmental training is conducted on a regular basis to inform and motivate BMWpersonnel. Additional information is providedon the BMW Intranet and local bulletin boards.Keeping the general public informed of BMW-sponsored environmental protection programsis a top priority for the Munich dealerships.The goal is to maintain a good relationship withthe local neighborhood. Automobiles and theenvironment are important themes for BMWcustomers.This was demonstrated by the

59

Facts & Figures, BMW dealership in Munich,Germany

Data from 2000

Employees _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1,193

including trainees _ _ _ _ _ _ _ _ _ _ _ _ _ _ 252

Number of showrooms _ _ _ _ _ _ _ _ 9

Sales _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ e541 million

Units sold, new cars _ _ _ _ _ _ _ _ _ _ _ 9,445

Units sold, used cars _ _ _ _ _ _ _ _ _ _ 8,960

ISO 14001 Environmental Certification _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2000 5,000

10,000

7,500

12,500

15,000

17,500

20,000

’97 ’98 ’99 ’00

12,557 m3 11,701 m3 7,275 m3 8,365 m3 amount of wastewater

water consumption19,340 m3 16,182 m3 12,467 m3 12,030 m3

* in service garage and car wash

Water consumption and amount of wastewater*in cubic meters, BMW dealership in Munich (main showroom on Frankfurter Ring)

Energy consumption, BMW dealership in Munich (main showroom on Frankfurter Ring)

1997 1998 1999 2000

Electricity KWh 4,898,020 4,669,020 4,783,526 4,658,745

Long-distance heat MWh 5,321.9 4,940.7 4,568.8 2,983.4

Natural gas m3 139,323 153,277 135,427 149,587

Car wash, Munich dealership

positive response to the BMW Group Environ-mental Exhibition presented in February 2000at the BMW showroom on Dachauer Strasse inMunich.To enhance the dialogue with the publicand municipal government, the BMW dealer-ship is represented on the district council.

Conserving water and energy

The efforts to save water at the Munich dealer-ship have been extremely effective. Operatingthe two wash bays located in the parkinggarage on the lower level of the main showroomin Munich requires a huge quantity of water:Over 200 liters are needed to wash a single car.With an average of 120 vehicles passing throughthe car wash each day, this adds up to a lot ofwater. In 2000, the new wastewater treatmentplant at the showroom on Frankfurter Ringeffectively reduced the volume of wastewaterby 30 percent compared to 1997 figures.Overall water consumption decreased by nearly40 percent.

Another focus in Munich is on reducingenergy consumption. Current plans call for a 20percent reduction in energy use by the end of

2001. New fast-reaction garage doors will helplower energy consumption by conserving heatin the service area.The positive effects of thisaction are not to be underestimated: In a deal-ership servicing 250 to 300 cars per day, thegarage doors open and close several times aminute – and Munich winters can be extremelycold! This is only one example of the on-goingefforts being made in Munich. BMW has oneprimary environmental objective: Continuousimprovement.

60

Value oriented:BMW Group personnel policy

What makes a company successful? The peoplewho work there make all the difference.Throughtheir skills and performance, our employeescontribute directly to the success of the BMWGroup.This philosophy forms the core of ourcompany’s value-oriented personnel policy,something that has a long tradition at BMW.Working as a member of the BMW Group meansmeeting the high standards of a premiumautomobile manufacturer and sharing a spiritof enthusiasm for the brand name and theproducts. It also means high quality work, awillingness to learn, and versatility on the job.Most importantly, it means contributing to thecontinued success of the BMW Group in keeping with the company’s approach to sustainability. Following the principle “Compen-sation for Performance,” the BMW Group offersexcellent employment conditions and socialbenefits.This is what makes BMW one of theworld’s best places to work.

In order to attract the best-qualified personneland encourage a sense of commitment, acompany has to offer the right personnel policies.It also has to be appealing.The work histories

and life plans of today’s workforce are morediverse than ever before. Employers of thefuture are evaluated according to four criteria:A stimulating atmosphere (great company),challenging work (great job), above averageremuneration (great pay), and high compatibilitybetween work and private life (great balance).

At the BMW Group, responsibility for theworkforce and social involvement are not justpassing fads. Both of these attributes havebeen an integral part of our corporate ethos formany years. We plan to continue to set thestandards in these areas and serve as a modelfor other companies. In other words, we aredoing everything we can to ensure that ourresponsibility to our workforce and to the societyas a whole continue to meet “premium”standards – today and tomorrow.

Munich, August 2001

Ernst Baumann

Ernst Baumann Executive Vice President Human Resources

The success of a company depends on its employees. A value-orientedpersonnel policy was clearly defined by BMW in 1983.The company’s sustainable growth is based on its employee-oriented personnel policies.This is absolutely essential to the prosperity of the BMW Group.The successof this approach is demonstrated by the fact that in the past 39 years, therehave been no layoffs resulting from operational conditions.

People

61

62

As of December 31, 2000, BMW Group employees at the company’s 15 productionsites and sales points worldwide numberednearly 94,000. Due to corporate restructuringinvolving the sale of Rover, Land Rover, andMG, and the takeover of the jet engine divisionby Rolls-Royce PLC, the number of BMW Groupemployees decreased by 18.6 percent in 2000.Following the termination of its involvement withRover/Land Rover, BMW placed top priority onretaining jobs at the plants in England.ThePhoenix consortium and the Ford Motor Com-pany took over nearly 19,000 of the employees.This process of separating the different companies took place in close cooperation withemployee representatives and did not requireany plant closures. In Germany, over 2,200 newjobs were created in 2000 with 300 newpositions added in South Africa and nearly1,000 in the USA. BMW Group personnel costsin 2000 totaled around c5.98 billion.

Improving qualifications

Improving employee qualifications and securingtheir jobs are top priorities for the BMW Group.A comprehensive new project aims at qualitativeand quantitative personnel planning to identifyfuture personnel needs.This enables the

BMW Z3 production, Spartanburg, USA

0

20,000

40,000

60,000

80,000

100,000

120,000

’96 ’97 ’98 ’99 ’00

116,112 117,624 118,489 114,952 93,624

51,876 52,198 50,828 46,104 24,719

64,236 65,426 67,661 68,848 68,905

Foreign countries

Germany

Number of BMW Group employees

63

BMW Group value-oriented personnel policy guidelines:

Employee relations are based on mutual respect. We consistentlystrive for a positive negotiating atmosphere.

Taking national and cultural differences into account is of primaryimportance.

Employee earnings are based on performance and results.

Teamwork is more than the sum of individual employee performance.

We offer secure, well-paid jobs to motivated and responsibleemployees.

5

4

3

2

1

company to enhance the long-term qualificationsof current employees and help external traininginstitutes prepare for the educational needs ofnew employees. In 2000, the BMW AG TrainingCenter conducted over 6,700 classes and seminars attended by nearly 45,000 employees.Compared to 1995, this reflects a 30-percentincrease in the number of participants attendingover twice as many training sessions.The electronic human resources project (e-HR) isanother component enabling innovative organi-zational structures and continued corporatedevelopment. Within the framework of themigration of existing personnel systems to aWeb-based platform by 2004, internal processeswill see major improvements with reducedadministrative activities and more effectiveinternal customer service.This step benefits BMWemployees as much as it does the company.

Focus on personnel secures economicgrowth

BMW Group sustainable personnel policies are aimed at the needs of the employees andthe economic growth of the enterprise.Theemployees are the ones who can best identifyproblems in their work areas and point outpotential improvements.This is why BMW

actively involves all employees in the on-goingdevelopment of the company. This process isenhanced by regularly conducted employeesurveys and the targeted integration of employeesinto operational improvement processes. In 2000,an average of three suggestions per employeewere submitted at the BMW plant in Steyr,Austria.The subsequent improvements resultedin cost savings of over c7 million – an averageof c3,000 per employee. Company-wide,BMW AG saved over c46.8 million in 2000, anincrease of 115 percent over 1995.

Positive response for future security

Full-coverage electronic surveys of BMWemployees were conducted in 2000 at allBMW plants in Germany. On the average, over96 percent of the workers surveyed indicatedthat they regard BMW as a “great place towork.”This overwhelmingly positive response isan outstanding asset that clearly demonstratespersonal identification with the company andthe overall appeal of BMW as an employer. Thehigh level of employee satisfaction is also evident in the very low annual turnover rate ofonly 1.4 percent at BMW AG.The positiveimage of BMW as a highly rated employer hasalso been confirmed in studies conducted by

NewTalent

64

Number of BMW Group employees accordingto segment

0

20,000

40,000

60,000

80,000

100,000

120,000

’96 ’97 ’98 ’99 ’00

116,112 117,624 118,489 114,952 93,624

3,390 3,293 3,626 3,593 7,643

1,051 1,234 1,339 1,561 1,671

1,754 1,905 2,039 2,191 2,397

39,407 39,172 36,821 29,884 --

70,510 72,020 74,664 77,723 81,913

Other*

Financial services

BMW motorcycles

Rover automobiles

BMW automobiles

* 2000 figures, incl. Oxford plant,Hams Hall, and other affiliatedcompanies in the UK

external sources. In Germany this is reflectedby the high ratio of qualified applicants to openpositions at BMW (approx. 30 to 1).

Training for tomorrow

The company's responsibility for training andeducation is a primary focus of the BMWGroup personnel policy. In 2000, the companyinvested around c100 million in employeetraining programs. During this period, nearly3,300 trainees were employed by BMW AG inover 40 occupations.This places the proportionof trainees at about 5 percent – the highest inthe German automobile industry.

The BMW Group invested over c15 millionin a new training center opened during September 2000, at the largest BMW plant inDingolfing, Germany.This facility is in operationyear round for local employees and around12,000 other BMW seminar participants.TheEuro Apprentice exchange program is offeredby the BMW Group to qualified candidates.Working in cooperation with the BMW plants in

the UK, the trainees spend 9 months in Englandand, upon completion of the program, are eligible for the German IHK (Chamber of Industryand Commerce) certificate as well as theequivalent British qualification.

1,500 employees, around half of the work-force at the BMW plant in Rosslyn, South Africaare currently participating in courses to attainhigher job qualification certificates.This programrequires 720 hours of training to reach thehighest of the four stages. In the past year, BMWSouth Africa offered free intensive training to300 members of the local community.Thistraining provided participants the opportunityto learn the basic skills required to qualify for ajob in the industry. BMW production increasesmade it possible for 250 of the trainees to behired immediately after completing the program.

Young talent in the “Fast Lane”

In order to help young people get started innew careers, the BMW Group has set up anumber of sponsorship programs.These

65

BMW Group, Careers

www.bmwgroup.com �CareersALex Current Factbook

www.bmwgroup.com �News & Information�Current Factbook

2,000

2,300

2,600

2,900

3,200

3,500

3,800

’96 ’97 ’98 ’99 ’00

2,633 2,856 3,017 3,216 3,282

BMW AG trainees

0

20,000

10,000

30,000

40,000

50,000

60,000

70,000

’96 ’97 ’98 ’99 ’00

7,556 7,813 8,214 7,586 7,921

51,864 52,780 55,846 56,199 58,341

Female

Male

BMW AG personnel structure

programs are designed to provide a pool ofupcoming talent on a long-term basis. Oneexample is the new talent support program(NFP) open to qualified high school graduates.This gives them an opportunity to combineprofessional training at BMW with a collegeeducation.

The “Fast Lane” program launched in 2000is open to qualified students who have com-pleted their fourth semester of college. Fast Laneparticipants are assigned to special mentors.This helps recruit dedicated students whocompleted an internship at BMW into permanentpositions with the company.

Cooperation with local universities is ofcentral importance to the BMW Group.The BMWplant in Spartanburg USA donated $1 millionto the University of South Carolina to sponsorstudents in the Masters of International Businessprogram. Other partnerships with regional universities include scholarships, employeememberships, and teaching contracts for BMWemployee training programs.

According to a BMW employee paradigm,“the success of the company is determined by the employees.” How is this basic principle implemented?Schoch: The deciding factor is whetherthese principles are practiced on aneveryday basis. We focus on ensuringthat the work environment is appro-priate and that BMW employees aremotivated to do their job.This enablesthem to make a significant contributionto the company’s success.

What are the factors that determinea positive work environment in theBMW Group? Schoch: The employees expect to beadequately remunerated for theirwork. In addition to the monthly salary,vacation pay, and annual Christmasbonus, BMW AG offers a profit sharingprogram that was established in theearly seventies. Employees have consistently shared in company profits,even in 1999, the year of the neworientation. BMW employees alsobenefit from a variety of other attractive

programs.These include flextime workschedules, a 4-day workweek, anddiscounts on public transportation toand from work. In the area of employeehealth, we have the “Move”health center located at the Munich plant.The works council is actively involvedin these initiatives.

How does the works council influence environmental protectionat BMW? Schoch: Environmental protection in the BMW Group focuses on threeaspects: People, production, andproducts. We strive to make BMWemployees aware of this theme – evenwhen it comes to the small details.This applies, for example, to separatingwaste materials.The works councilalso has an influence on environment-friendly product design. In many areas,BMW emission levels are far belowthe legal requirements.The newpowder coating technology is a goodexample. In order to effectively imple-ment its sustainability strategy, BMWmanagement relies on the cooperationof employee representatives.

How would you characterize therelationship between the workscouncil and BMW management? Schoch: We judiciously follow alldevelopments from the employee’sviewpoint and place special importanceon sharing a constructive dialogue

with management. In areas where thereare deficits, we attempt to makeimprovements. For instance, we consistently support the promotion ofwomen into top positions. We canachieve a lot when everyone – employees, works council, executiveand supervisory boards – worktogether.This was extremely importantin getting through the difficulties thecompany experienced in 1999.Today,the BMW Group is stronger than ever.We set new records in 2000 with thehighest profits in company history!

Did the new orientation in 1999 provethat globalization strategies in theautomobile industry endanger jobs? Schoch: I don’t think this applies toBMW.The company added nearly4,000 new jobs worldwide in 1999.Most of these jobs were at BMWplants in Germany. So it’s obvious that globalization can secure jobs in Germany when it comes to internationalmanufacturing operations. One exampleis the V-8 engines manufactured at theBMW plant in Munich and used in theBMW X5 produced at the Spartanburgplant in the USA.

What are the major challenges forthe future? Schoch: We must continue to bringour work at BMW in line with the bestinterests of human beings and therequirements of environmental protec-tion. Our main mission, of course, is tomanufacture automobiles in order tosecure the economic success of thecompany and create new jobs. But Ithink it goes beyond that. We need topay close attention to social issues

and high environmental standardsthroughout all BMW divisions. I amconvinced that the future of the BMWGroup will be even better if environ-mental, social, and economic require-ments are considered in unison.

66

“Sharing a constructive dialogue”An interview with Manfred Schoch, Chairman of the EURO Committee and National WorksCouncil, Deputy-Chairman of the BMW Group Supervisory Board

67

Knowledge management: A competitiveedge

Knowledge is one of the most importantresources of the future. Instead of following the trend of packing knowledge into electronicdatabases, the BMW Group pursues a long-term strategy focusing on the promotion of aknowledge culture.This approach is based onthe principle that a knowledge culture createsthe basic conditions to support BMW employeesin their efforts to makes better use of internaland external information.

Based on information obtained from empiricalstudies, BMW recognized at an early stage thatknowledge management often requires highlyfunctional information technology (IT). At thesame time, it must not run parallel to, or con-tradict the business processes. A key factor inlong-term success, however, is the work on theknowledge culture in a world, in which “sharingknowledge” is often contrary to the “knowledgeis power” concept.

Consequently, a majority of the measuresare aimed at strengthening the awareness indealing with knowledge and to provide sustain-ability, for example, by implementing this frameof mind in the corporate principles.This includesqualifying personnel within the framework of

target-group specific training, as well as thecreation of suitable incentives and performanceappraisal systems.

Another focus of attention is on the prepa-ration and organization of communication plat-forms to ensure that experiential knowledgecan flow beyond the limitations of departmentsand company plants.This includes, for example,facilitating an exchange of experience viaIntranet platforms face-to-face encounters,and communication spaces in the productionplants. Knowledge within the corporation canonly gain effectiveness through the maximumnetworking of knowledge carriers and knowledgetransfer.

Sharing success

Profit sharing and financial participation plansare components of the employee-oriented BMWGroup personnel policies.

In 1973 BMW AG successfully introduced a profit sharing plan essentially based on thepayment of dividends. In 2001, BMW AG distributed around c235 million in profit sharingbased on the 2000 financial year.This is over2.5 times more than the amount paid out fiveyears ago. In 2000, the total bonus paymentsincluding profit sharing, vacation pay, and

BMW plants in Spartanburgand Dingolfing

Is knowledge managementintegrated into the existingbusiness processes, or is itregarded as “extra”work?

Source: BMW

To what extent does thecorporate culture promotethe sharing of knowledgeand the use of knowledgefrom others?

IT

People/Culture

Processes/Organization

Is user orientationassured (interfacebetween IT anduser)?

Basic questions of knowledge management

68

300

350

400

450

500

550

600

’96 ’97 ’98 ’99 ’00

364 408 479 512 526

Bonus payments paid by BMW AG in million euros*(year paid)

* Includes Christmas bonuses, profit sharing, vacation pay

80

100

120

140

160

180

200

’96 ’97 ’98 ’99 ’00

93 111 163 174 181

BMW AG profit sharing dividends in million euros (year paid)

Halfway around the world and back, daily

The BMW plant in the Bavarian town of Dingolfing, Germany employs around 20,000workers. Following the takeover of the factorysite from Hans Glas GmbH in 1973, BMWdeveloped the property by adding a largeassembly facility. By building in a relativelyremote area, far away from major cities, BMWhelps counteract urban sprawl. An intelligentlyorganized bus system with nearly 300 vehiclestransports 14,400 BMW employees to and

from work each day. Many of these people liveup to 100 kilometers away.This shuttle serviceinvolves 18 different transportation companiesworking in cooperation with BMW.The busescover a total distance of up to 40,000 kilometers– halfway around the world and back – daily.The associated costs of around e10 millionare subsidized by BMW.This project not onlyenables BMW workers to continue living intheir hometowns, it also reduces the amountof road traffic and contributes to a cleanerenvironment.

Shuttle service, BMW Dingolfing

Christmas bonus paid to the average employeewere equivalent to three gross monthly salariesfor a full-time employee with six years seniorityat BMW.The financial benefits and BMW Grouptraining program were rated as “exemplary” inthe Dow Jones Sustainability Index 2000. BMWemployees in Germany received over c526 million in the form of bonus payments in 2000.

BMW AG pension and investment plans include the BMW asset development programintroduced in 1974. Since 1989, employeeshave had the option to purchase preferredBMW shares.This program was used in 2000by over 46 percent of eligible participants inGermany. In November 2000, the national workscouncil and BMW Group executive boardsigned an agreement enabling BMW AG workers to participate in a private pensionfund.This personal retirement capital is basedon a system of deferred payments. During anemployee’s years of active service with thecompany, a percentage of the gross monthlyincome is set aside in an investment fund untilthe person reaches retirement age. Althoughthere is no ceiling on the potential net yield,the minimum interest rate is currently 3.25 percent. Other retirement plans include theBMW pension fund and a life insurance policy.

Work-Life-Balance: Well-adjusted workers

The Work-Life-Balance model aims at combiningcareers with other tasks and interests to thegreatest extent possible.This gives employeesa chance to follow through with their personallife plans.The company benefits by attractinghighly-qualified, committed employees who arelooking for more than a good salary.

Flextime models are an important factor injob satisfaction. Over one-third of all BMWworkers are on flextime schedules. Altogether,the company offers over 300 different workschedules. For example, nearly 15,000 employeesat 5 BMW plants work a 4-day week. At 3.3percent, the BMW Group has one of the highestproportions of part-time employees in the German automobile industry.

Flextime work schedules are also an impor-tant aspect of the Work/Life Balance model.Over 1,000 BMW AG employees participate for example in alternating teleworking plan.Thegrowing number of employees on sabbaticalleave is a clear indicator of the overall acceptanceof progressive work programs at BMW. Lastyear, over 600 BMW employees took sabbaticals.Nearly 2,000 employees have participated inthis program since it was first launched in 1994.

BMW workers at Rosslyn, South Africa and Spartanburg, USA

1,000

1,200

1,400

1,600

1,800

2,000

2,200

’96 ’97 ’98 ’99 ’00

1,542 1,571 1,748 1,817 2,000

Cost of benefits paid by BMW AG in million euros*

* includes paid sick days, cash bonuses, social benefits,retirement pay, social services, social welfare, training expenses

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

’96 ’97 ’98 ’99 ’00

5,033 5,535 5,896 6,177 5,976

3,144 3,198 3,516 3,722 4,001

Includes BMW AG personnel costs in million euros*

BMW Group personnel costs in million euros*

* includes base pay and benefits

69

70

Teleworking and part-time employment optionsplay an important role in supporting careerdevelopment among the women who make up12 percent of the BMW workforce. In recognitionof its innovative development of future-orientedemployment planning, the BMW Groupreceived the Bavarian “Advancement of WomenAward 2000.”

The personal initiatives of BMW employeeshave also proven successful. In 2001, the seconddaycare center for infants and young childrenwas set up in Munich by a parent’s initiative ofBMW employees. BMW provides the space andsupplies the food for this project free of charge.

A special part-time work program for senioremployees introduced on May 1, 1998 offersmore flexible options for early retirement fromBMW AG. Over 2,300 BMW AG employeeshave already taken advantage of this program.Sports, recreation, wellness, childcare programs,and other services including a relocation program offer a variety of individualized options.

Integrating handicapped citizens

Within the framework of a long-term personnelpolicy, the BMW Group takes special respon-

* Number of registered industrial accidents per 1 million man-hours

5

6

7

8

9

10

11

12

’96 ’97 ’98 ’99 ’00

11.7 9.8 8.3 7.8 6.6

Frequency of industrial accidents at BMW AG*

1%

2%

3%

4%

’96 ’97 ’98 ’99 ’00

2.9% 3.0% 3.0% 3.2% 3.4%

Percentage of handicapped workers at BMW AG

BMW sponsored project

www.fassmichnichtan.de

BMW workers at the Munich plant

sibility for integrating people with disabilitiesinto the work process.The company also outsources work to government-approvedemployers of disabled citizens.

BMW AG employs over 2,000 handicappedpersons who represent 3.4 percent of thecompany’s workforce. Work orders to handi-capped suppliers reached a total volume ofnearly c21 million in 2000. In this way, BMW AGmakes a significant contribution to helping thehandicapped secure meaningful employment.

Further improvement to health and worksafety

Today’s jobs in industrial enterprises must besecured both economically and in terms ofemployee health. Over the past 10 years, BMWhas consistently reduced the frequency ofindustrial accidents.The number of reportedjob-related accidents involving hourly workersat BMW AG totaled 396 in 1999.This figuredecreased by 18 percent in 2000 to 326.Theprimary focus of BMW Group health protectionis on prevention. Along with a comprehensivesports and recreation program, the BMWplant in Munich provides a fitness center for

employees. In 1999 this was supplemented bythe “MOVE” center offering physical therapy foremployees suffering from muscular or skeletalailments. Medical facilities available at variousBMW sites include health centers with doctor’soffices, mental health services, and substanceabuse programs.This targeted approach toemployee health at BMW AG contributed to adecrease in the hours lost due to sicknessfrom 5.1 percent in 1995 to 4.4 percent in 2000.

Campaign for tolerance

BMW employees come from over 100 differentnations. Around 12.4 percent of BMW AGworkers are from countries outside of Germany.Consequently, the guidelines of the long-termBMW Group personnel policy focus on tran-scending national and cultural borders. Forover 30 years, this principle has been a mainstayof BMW campaigns to prevent discriminationboth inside and outside of the company.The main emphasis of this work is on cross-cultural learning designed to bring differentnationalities and ethnic groups together.

Proportion of foreign nationals at BMW AG*

* Includes all non-German citizens

“If we, as a company, are made to ‘feel at home’ everywhere in the world,then it must be important for us to ensure that everyone who comes towork for BMW is treated equally and respected as an individual.”Professor Joachim Milberg, BMW Group Chairman of the Board

BMW workers at the Kaliningrad plant

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

’96 ’97 ’98 ’99 ’00

8,185 8,130 8,409 8,229 8,205

(13.8%) (13.4%) (13.1%) (12.9%) (12.4%)

Foreign nationals

Percentage

51,235 52,463 55,651 55,556 58,057 German nationals

71

The BMW Group is the world’s only multiple-brand automobile manufacturer pursuing a premium brand strategy. Increasing profitability in all business divisions and promoting sustainable growth are essential aspects of the company’s intelligent approach to the “premium” concept. Following this strategy, the BMW Group defines corporate targets inthe areas of environmental, economic, and social sustainability.

On-going objectives from the 1999/2000 reporting period

Environmental Goals

StatusAction

Deploy VALVETRONIC technology in 8- and 12-cyclinder gasoline engines by the end of 2002; increase use of lightweight components,supplement the range of compact models (1-series, MINI)

Expansion of a customer-friendly, full-scale returnand recycling system for BMW end-of-life vehiclesin Germany, Austria, Italy, France, Sweden, theNetherlands and Japan

Development of new economical technologies for processing and recycling end-of-life vehicles at the BMW Recycling and Disassembly Center;includes glass removal equipment and a fluidextraction station for draining fuel/oil

Expansion of an economical material recoverysystem used primarily for recycling plastics;complete recycling of old/new plastic bumpercomponents

72

BMW Group sustainability goals:Environmental, economic, social

Goal

Emissions

Meet the BMW commitment for reducing CO2

emissions in compliance with the ACEA fleetaverage of 140g by 2008 resulting in a 25 percentdecrease compared to 1995

Recycling

Environmentally compatible recycling of BMWvehicles and components

Action

Increase technical/economic recycling quotas

Development of software tools for the virtual disassembly and evaluation of BMW models

Comparative environmental component evaluationof alternatives for internal combustion engines(gasoline, diesel, natural gas, hydrogen) and innovative concepts for structural parts

New rules pertaining to the environmental compatibility of products specified in the procurement conditions and made compulsoryfor parts suppliers

Update parts specification sheets for engineeringservice providers

Introduction of powder coat technology at theDingolfing plant

Installation of a zero-solvent powder coat systemfor applying bonding agents

Installation of a combined heat/power unit at Dingolfing plant

Certification/auditing of all BMW productionplants

Centralized data system for monitoring environment related systems

ABIS waste information system to compile dataon costs and waste control

StatusGoal

Environmentally compatible new car design

Joint cooperation with suppliers

Reduce emissions

Elimination of solvent emissions

Save energy

More efficient energy use

Environmental management

Introduction of an environmental managementsystem

Water conservation

Environmental protection

Waste materials

Create more transparency

completed in progress

73

An overview of the BMW Group goals and programs

www.bmwgroup.com/sustainability �BMW Group Sustainability Goals

74

New goals for the 2001/2002 report

Environment

Action

Participation in the Transport Energy Strategy(TES) project designed to develop a strategy forthe full-scale market introduction of hydrogen as a promising, long-term fuel source

Involvement in the development of uniform technical standards in Europe for introducinghydrogen as an alternative fuel in the context ofthe European Integrated Hydrogen Project (EIHP)

Implementation of EU end-of-life vehicle guidelines:– full-scale return and recycling system in all EU

member states– substitution of components containing heavy

metal (lead, cadmium, mercury, hexavalentchrome)

– return system for used parts from BMW servicepoints

Implementation of a worldwide BMW recyclingstrategy: BMW will integrate the successful European strategy in all major BMW sales markets

Development of new recycling concepts forinnovative components and industrial materials,e.g. for alternative drive systems

Development of a simulation tool for long-termdesign and maintenance of an environmentallysafe end-of-life vehicle disposal system.

Development of new recycling techniques toincrease process quality for BMW end-of-life vehicle salvage firms:– innovative shock absorber oil extraction system– first recycling facility for disposal of pyrotech-

nical components (airbags, belt tensioners)

Facilitate the development and implementation of an assessment method for evaluating the recyclability of vehicles within the framework of a model testing certification and creation ofappropriate ISO standards

Comparative environmental evaluation of conceptsfor body-in-white and electrical system supplies

Gradual increase in the proportion of recyclatesused in plastic components for future models

Year

current

current

April 2002

current

current

2002

2002

2002

current

current

Goal

Emissions

Determine potential for long-term CO2 reduction

Recycling

Environmentally compatible recycling of BMWvehicles and components

Environmentally compatible new car design

75

Action

Common environmental homepage on corporateintranet joint supplier workshops list of recycling-relevant components in procurement conditions

More efficient electrical systems to supportadded safety and convenience features; develop-ment of the SOFC fuel cell technology for seriesproduction

Connected Drive: Advancement of driver assistancesystems to handle routine tasks behind the wheel

Introduction of an environmental managementsystem in all central BMW Group productiondepartments

Integration of environmental quality and health &safety management systems.

Implementation of a group-wide information management system

Introduction of environmental and social factorsinto BMW Group procurement instruments

Extension of environmental management systemsto the assembly plants

Completion of a sustainable management systemimplementation-pilot project in the design department

Introduction of powder clear-coat technology atadditional production plants

New pretreatment area and introduction of water-soluble paint at Munich and Dingolfing plants

Goal

Joint cooperation with suppliers

Customer satisfaction

Increase customer satisfaction through addedsafety and convenience

Environmental management

Advancement and integration of managementsystems

Paint shops

Low emission paint operations

Year

2002

2006

current

current

2002

current

current

current

current

current

Action

Conduct regular full-scale employee surveys inthe BMW Group followed up with improvementprocess

Migration of the existing personnel system;development and integration of new applicationsin a Web-based system within BMW AG

Goal

High level of employee satisfaction

e-HR (electronic Human Resources)

Increase process efficiency in personnel depart-ments by reducing administrative expenses

Increase employee satisfaction with personnelmanagement through automated workflows

Increase employee satisfaction through “Employee Self-Service” offers

Year

current

2004

76

Action

Expansion of premium makes BMW, MINI, Rolls RoyceProduct promotion campaigns:MINIRolls RoyceNew 1 seriesNew 6-seriesExpansion of BMW X lineAdded production capacity: new plant in Leipzig

Expansion of the global networks with newdealerships and locations(production/CKD/sales/procurement)

Implementation of sustainability strategy

Implementation of quality strategy

Shorten the internal cycle from 30 to 10 days

Implementation of procurement strategy

Implementation of procurement guidelines

UNEP: Mobility ForumUN: Global CompactECONSENSE: Sustainable Development Forum

Expand stakeholder dialogue: Employees,customers, suppliers, social groups, governmentpolicymakers, industrial trade associations

Goal

Principal BMW Group goal:Profitable growth through

- Above-average profitability- Premium strategy- Above-average growth

Reinforcement of the worldwide presence

Sustainable corporate management

Long-term increase in value in sustainability(DJSGI, FTSE4Good Europe)

Expand the top positioning of the BMW plants(J.D.Powers)

Consolidate top position as build-to-ordermanufacturer

Secure top position in the supplier satisfactionindex (SSI)

Involvement in global and national sustainabilityinitiatives and Rio +10 process

High quality reporting

Economic Goals

Social Goals

Year

current

200120032004openopen2004

current

current

current

2003

2003

current

current

current

77

Year

2001/2002

current

2002

2002

2001/2002

2001

2001

2001

Action

Continued development of qualitative/quantitativepersonnel planning, concept, and implementation

In-house qualification of employees and/orinfluence on external training institutes, personnelrecruitment, and employee commitments

Optimize existing processes

Development of group-wide program management

Development of a new, integrative future model

Pilot implementation of employee homepages(voluntary homepages focusing on individual skills)

Development of existing tools and creation of new instruments to promote in-house knowledgetransfer. Examples:– lessons learned – passing on knowledge when changing jobs – guidelines for Practice Communities or groups

designed to share experiences

Further development of the personnel systemsbased on the LPP world-wide

Goal

Personnel planning oriented to medium andlong-term goals

Recognition of important long-term qualitative/quantitative personnel needs in cooperation withthe specialized departments

Improvement of BMW AG in-house recruitingactivities

Max. 15 workdays between personnel requisitionand submission of applications

At least one to three qualified candidates pervacant job for personnel shortage qualifications

Selection process complete within 15 to 22 work-days with total transparency at all plant sites

Implementation of program management(multi-project control) for BMW Group personneldepartments in order to achieve the following:

Group-wide transparency in strategic projects,optimal resource and interface control,establishment of clear decision-making processes,and creation of uniform project standards

Create a balanced work situation and goodquality of life in a performance-oriented culture while taking into consideration futurecorporate challenges and the changing interests of employees

The following elements should be combined into an attractive package: Work hours, pay,orientation to phase of life, job content, personaldevelopment opportunities, health, personallifestyle, work environment .

Support in the further development of a knowledge culture

Intensified implementation of key elements in the long-term personnel policy (LPP) worldwide

78

1913–––––Founding of the Rapp Motoren-werke and the Otto Werke.Thesecompanies were renamed tobecome the Bayerische MotorenWerke AG in 1922.

1930–––––The BMW 3/15 Wartburg is thefirst BMW with a metal alloy body.

1964–––––A fuel saving low-friction alternatoris introduced in the BMW 1800.

1967––––– BMW takes over car manufacturerHans Glas GmbH in Dingolfingand Landshut, Germany.

The first BMW motorcycle rolls offthe assembly line in Berlin.

1968––––– BMW begins operations at its newplant in Rosslyn, South Africa.

1971––––– The BMW 3.0Si with electronicfuel injection is introduced to themarket. Modern technology lowersfuel consumption and emissions.

BMW works with other enterprisesto establish a hazardous wastedisposal system in Bavaria.

1972––––– The Olympic Games are held inMunich. BMW introduces the firstelectric-powered car.

1973––––– BMW is the world’s first carmanufacturer to appoint an environmental protection officer.This person is responsible forestablishing the basis for preven-tive environmental protection.

Introduction of a profit sharing planfor BMW employees.

Production begins at the new BMWplant in Dingolfing.

1978––––– The BMW 528i is equipped with a catalytic converter for the US market.

Continued development of flextimework schedules.

1979––––– BMW plant opens in Steyr, Austria.

The first hydrogen-powered BMWautomobile is introduced.

1980––––– The BMW plant in Steyr isequipped with a combined heatand power system.

1982––––– Introduction of an Electronic Service Interval Indicatordramatically extends maintenanceintervals on BMW cars.

1983––––– BMW formulates the goals for avalue-oriented personnel policy.

1985––––– BMW is the first German carmanufacturer to offer catalyticconverters in all models.

1986––––– A new BMW plant opens inRegensburg.

BMW is the first German auto-mobile manufacturer to introducea 4-day working week to meetgrowing demand. Plant operationis no longer dependent on employee work hours resulting inhundreds of new jobs.

1987––––– BMW introduces an electric-powered vehicle with an extended-capacity battery.The companystarts recycling used catalyticconverters.

1988––––– The introduction of digital dieselengine electronics in the BMW524i results in a dramatic reduc-tion of exhaust gas emissions.

1989––––– The first European paint shop touse water-soluble paint technologygoes into operation at the BMWplant in Regensburg.

BMW AG employees are offeredpreference shares.

The ZEUS hazardous materialinformation system is introduced.

1990––––– BMW is the first car manufacturerto set up a pilot project for vehicledisassembly at the company’splant in Landshut.

1991––––– Beginning of cooperation with acompany that provides environ-mentally safe recycling of end-of-lifevehicles based on BMW standards.

Introduction of group work inassembly operations.

1992––––– Introduction of the BMW Mobilcard:All BMW employees in Munich areentitled to unrestricted use of thecity’s public transportation systemfree of charge.

World’s first manufacturer to institute its own recycling-optimizedvehicle construction standard(BMW N 113 99,0).

1993––––– BMW management principles areextended to include environmentalguidelines that are mandatory forall employees.

The first manuals are publishedfor vehicle recycling operationsensuring ecological/economicdisassembly and recovery of BMWmodels.

1994––––– Acquisition of British carmanufacturer Rover Group Ltd.with Rover, MG, Land Rover andMINI brand.

BMW AG creates more part-timejobs.

Production begins at the newBMW plant in Spartanburg/USA.

Together for recycling: BMWcooperation with Renault and Fiatto build up a European networkfor recycling end-of-life vehicles.

BMW retrospective: Legacy forthe future Every step of the way, the BMW Group focus for the future has been on environmental protection, employee orientation, social commitment, market globalization, and sustainability.The following presents an overview of the BMW Group economic, social, and ecologicalmilestones:Yesterday, today, tomorrow.

1930BMW 3/15Wartburg

1964BMW 1800

1979The firsthydrogen-poweredBMW

1995––––– The BMW 316g compact is thefirst series-production car poweredby natural gas.

Introduction of a teleworkingalternative (working partially athome and in the office) at BMW.

A new BMW handbook documentsand secures the company’s environmental management system.

1996––––– Construction of new clear-coatpaint line integrating low-emissionwater-borne paint technology intoseries production operations atthe BMW plant in Munich.

A new BMW 7-series car is capableof operating on liquefied naturalgas or hydrogen.

1997––––– All BMW Group manufacturingfacilities in Germany, Austria andthe UK are certified according to ISO EN 14001 standards orvalidated in compliance with theeuropean Eco-Management andAudit Scheme (EMAS).

BMW formulates its vision ofmanagement and internal cooperation creating the employeeand leadership model “We at BMW”.

Powder coating technology isintroduced in series productionoperations at the BMW plant inDingolfing.

1998––––– Introduction of flexible retirementprogram for BMW AG employees.

DRIVE, the new entry-level recruit-ment program for new collegegraduates replaces the formertrainee program.

The BMW Group Executive Boardadopts the company’s new inter-nationally oriented environmentalguidelines.The corporation commits itself to sustainable environment protection.

Establishment of the TransportEnergy Strategy (TES) projectsponsored by BMW.TES is aimedat developing and implementing a market-wide alternative fuelstrategy.

1999––––– All BMW Group manufacturingfacilities are certified according toISO EN 14001 standards orvalidated in compliance with theEco-Management and AuditScheme.

The BMW Group is the first carmanufacturer to initiate an end-of-life vehicle hotline.

BMW is recognized in the newDow Jones Sustainability GroupIndex as the worldwide automobileindustry leader for corporate sustainability.

For its role in supporting culture,the BMW Group receives theAngel Award from the InternationalSociety for the Performing Arts.

A new system to improve management-employee relationsis introduced.

The BMW Innovation and Technology Center opens inLandshut.

2000––––– Strategic reorientation of thecompany as a premium manufac-turer with the sale of Rover GroupLtd. and separation of the brandsRover, Land Rover, and MG.

The International DismantlingInformation System (IDIS) becomesavailable in eight languages toover 5,000 recycling firmsthroughout Europe.

BMW confirms its role as a worldindustry leader in the corporatesustainability ranking in the DJSGIRating and the Oekom CorporateResponsibility Ranking.

In conjunction with Expo 2000,15 hydrogen-powered BMW 750hLsedans cars traveled over 62,000miles without a single problem.

Joining 50 other internationalcompanies, the BMW Group supports the Global Compactproposed by UN Secretary GeneralKofi Annan for globally sustainabledevelopment.

A new training center is opened atthe largest BMW plant in Dingolfing.

Market launch of the BMW C1redefines urban mobility.

2001––––– Focusing on the theme “mobilitybased on sun and water,” theCleanEnergy World Tour promotesthe BMW sustainable mobilitymodel worldwide.

The BMW Group clean energyconcept is awarded the Energy2001 innovation prize sponsoredby the German Institute for Inter-national Research and a leadingindustry trade journal.

The new BMW engine plant inHams Hall, England begins production on the new 4-cylinderVALVETRONIC engine.

Production of the new MINI islaunched at the BMW plant inOxford.

A strategic partnership with an international supplier for thedevelopment of a gasoline-powered fuel cell for the electricalsystem of BMW vehicles isannounced.

BMW is listed on the new FinancialTimes Ethic Index FTSE4Good-Europe.

79

1995BMW 316g powered bynatural gas

2000Hydrogen-powered BMW750hL

2000BMW C1

80

Glossary of Terms

AACEA European Automobile ManufacturersAssociation (Association des ConstructeursEuropéens d’Automobiles)

Agenda 21 At the United Nations conferenceon the environment and sustainable develop-ment held in Rio de Janeiro in 1992, a globalapproach to poverty, population policies, urbandevelopment, human rights, trade, agriculture,environmental protection, research and technology was adopted under the auspicesof Agenda 21.The primary objective was toensure sustainable development, i.e., to eliminate exploitation of the natural resourcesand limit environmental pollutants to the greatest extent possible.

APU Auxiliary Power Unit, supplies vehicleelectrical power. BMW is working to replacethe conventional battery with gasoline orhydrogen powered fuel cell technology.

Audit Assessment of an environmental management system.

Auto Shredder Residue (ASR) Materialsremaining after metals are extracted from theshredding process; primarily consists of plastics, rubber, glass, fibrous materials, paint,and residual metals.

CCarbon dioxide (CO2) A by-product resultingfrom burning fossil fuels, e.g. coal, oil, and natural gas. CO2 is a primary contributor to thegreenhouse effect (global warming).

CFRP Carbon fiber reinforced polymer withexcellent potential for use in lightweight auto-mobile construction.

Combined Heat and Power station A highlyefficient system used to generate both heatand electrical power.

CleanEnergy strategy BMW Group approachto using liquid hydrogen from renewable energy sources as a fuel for cars of the future.The internal combustion process emits primarily vaporized water.

Compressed Natural Gas (CNG) In orderto carry more fuel in the vehicle, natural gas is pressurized to 200 bar. Natural gas (CH4) primarily consists of methane, which is lighterthan air and is highly evaporative.

ConnectedDrive Links all in-vehicle assistance features and information systems.Based on the interaction between driver,vehicle, and environment, this BMW concept isdesigned to optimize safety, comfort, and environmental compatibility (see Telematics).

DDIN 1/3 mix A fuel consumption standardvalid in Germany from 1978 to 1995.The DIN1/3 mix combines the average amount of fuelconsumed at constant speeds of 90 km/h,120 km/h, and the European driving cycle.Replaced in January 1996 by a new EU fuelconsumption standard. (see below EU Normcycle)

DIN EN ISO 14001 A worldwide series ofstandards for environmental management systems used in different types of companies.Includes guidelines for environmental audits,which in contrast to the EU Eco-audit, do nothave to be published. Since April 1997 it hasbeen possible to link the ISO 14000 standardswith the EU Eco-audit.

DJSGI Dow Jones Sustainability GroupIndex developed by Dow Jones and the SwissSAM Sustainability Group. A rating system forcompanies with strategies based on the sustainability concept. In 1999 and 2000, theBMW Group was ranked by the DJSGI as theautomobile industry leader.

EEco-Audit (EMAS) A component of the Eco-Management system, EMAS (Eco-Managementand Audit Scheme) includes an ecologicalreport that evaluates adherence to specifiedenvironmental objectives and regulations.

Econsense Forum for sustainable develop-ment initiated by the German IndustryAssociation (BDI).The BMW Group is a chartermember of this organization, which was established in summer 2000.

Electrolysis Process using electrical currentto separate water into hydrogen and oxygen.Hydrogen is an environmentally friendly energysource when the electricity required to make itis produced with renewable energy.

Environmental information systemComputer-supported system for the collectionand administration of environmental statisticswith the goal of enhancing data transparencyand benchmarking.

Environmental Protection Agency (EPA)American federal government agencyresponsible for establishing and monitoringenvironmental standards.

EU norm cycle Based on Euro-norm93/116/EG, this standard was introduced in1996 to specify fuel consumption.The EU normcycle New European Driving Cycle (NEDC)replaced the DIN 1/3 mix standard (see above).In addition to the former city-driving norm,which included the fuel consumed for coldstarts, this standard includes the new highwaydriving cycle.

FFIZ BMW Research and Innovation Center inMunich. Serves, among other things, as a linkbetween BMW research and series productionoperations.

Fleet consumption Weighted average fuelconsumption for a series of new vehicles produced by a single manufacturer or by theoverall automobile industry.

FTSE4Good-Europe Index New ethicsindex (Financial Times Stock Exchange). BMWis one of only two European car manufacturerslisted in this index.

Fuel cell Efficient means of generating electricity.The functional principle is similar toa conventional battery but, instead of beingcharged, a fuel cell is continuously loaded withgas.The electricity is generated by an electro-chemical reaction between anodes and cathodes separated by electrolytes (“cold burn”).

HHydrogen service station The first fullyautomatic, robotic hydrogen fuel station wasopened with BMW support near the Munichairport.

IIntegrated product policy (IPP) Conceptaimed at improving BMW products throughoutthe entire life of the product and reducingenvironmental/human impact. One key advan-tage of IPP is the networked approach to theproduct lifecycle.

International Dismantling Information System (IDIS) Electronic disassembly data-base for end-of-life vehicles.The dismantling information system manual was developedunder the auspices of the BMW Group and is currently used by nearly 5,000 vehicle salvagecompanies in Europe.

KKnowledge management BMW knowledgemanagement creates a positive knowledgeculture along with the technical conditions forpromoting knowledge within the BMW Group.

81

LLatent heat accumulator Stores excessengine heat for several days and makes itavailable as needed. BMW is the first carmanufacturer to offer this system in series-production vehicles. Enables an engine toreach its operating temperature faster after acold start.The latent heat accumulator increasesenvironmental compatibility since fuelconsumption and exhaust gas emissions arehighest in the first few minutes after a cold start.

Lifetime lubricants Fluids (transmission and differential lubricants) are filled into sealed systems during manufacturing and do notneed to be changed for the life of the product.This conserves resources and reduces operating costs.

Lightweight construction A key technologyfor reducing fuel consumption. Lowering vehicle weight by 100 kg can save up to 0.5 liter of fuel per 100 km.

Liquefied Natural Gas (LNG) In order tocarry more fuel in the vehicle, natural gas iscooled to a liquid state at -160° C (–256° F).Not to be confused with LPG (Liquid Petroleum Gas), which is typically used incamping stoves, etc.

LITZ Landshut Innovation and TechnologyCenter Engineering center located at theBMW plant in Landshut, Germany. Activitiesfocus on lightweight construction, plastics,and alloys.

MMechatronic Mechanical system with electronic control. Includes Brake-by-Wire system that replaces the conventionalhydraulic braking system.

Methane (CH4) Gaseous hydrocarbon; maincomponent of natural gas. Forms when fossilfuels are not completely burned, or as a resultof fermentation processes (biogas). Not toxicto humans, but a contributor to the greenhouseeffect.

NNoise Vehicle noise emissions measured indB(A).

OOnboard Diagnosis Systems Systems usedin the vehicle to monitor exhaust emissions.

PPolyurethane (PUR) Synthetic material basedon isocyanates and polyols. Used in carmanufacturing as polystyrene foam (trim), softfoam (seats, head restraints, damping material),and in combination with renewable rawmaterials (flax and sisal fibers) in door linings.

ppm (part per million) Measurement usedto express extremely low-level concentrationsof a substance in air, water, soil, etc.

Powder coat A form of clear coat lacquerapplied as the final layer on a new vehicle.BMW was the first manufacturer to use clearcoat in series production operations world-wide. Powder coat is emission-free and 99percent recyclable.

RRecycling and Disassembly Center (RDZ)In 1991, BMW became the first car manufacturerto establish its own disassembly operations(BMW Landshut plant).This pilot project wasfurther developed and a new recycling anddisassembly center was opened in 1994 at theBMW plant in Unterschleissheim near Munich.The RDZ was certified in 1998 as an end-of-life vehicle recycling center in compliance withEU guidelines.

Resources The goals of sustainable management include the objective of preservingrenewable raw materials. In this context, theterm “resources” refers to fossilized organicmaterials (e.g. oil and natural gas) as well asinorganic natural resources (e.g. economicallydegradable metals and metal ores, rare earthelements).

Renewable resources Organic materials ofvegetable or animal origin used as raw materialsfor industry or as energy sources. In contrastto fossilized raw materials (e.g. petroleum),these resources are systematically regenerated.Applications in the automobile industry includeseat upholstery, textiles, rear shelves, insulationmaterials in doors, etc.

SSolid Oxide Fuel Cell (SOFC) Gasoline-powered fuel cell planned for use by BMW asa fuel-saving energy source for vehicle electricalsystems (see APU and fuel cell).

Stakeholders Groups who have a vestedinterest in an enterprise. For the BMW Group,these include customers, employees, share-holders and special interest groups as well asthe municipalities where BMW plants arelocated.

Sustainability Primarily refers to sustainabledevelopment (see Agenda 21).

TTelematics Products and services designedto enhance mobility and traffic safety throughadvanced telecommunications and satellite-based positioning systems (GPS).

Transport Energy Strategy (TES) Projectsponsored by BMW and other automobilemanufacturers in conjunction with the energyindustry under the auspices of the FederalRepublic of Germany.TES is aimed at selectingand implementing alternative fuels.

UUltra Low Emission Vehicles (ULEV) Refersto vehicles that comply with stringent Californiaemission standards. Corresponds roughly toEuro IV regulations.

VVALVETRONIC BMW innovation in motormanagement technology that effectivelyenables fuel consumption savings of around10 percent.VALVETRONIC controls valve liftand the amount of gas entering the cylinder.Replaces the function of the throttle valves.

ZZEUS BMW hazardous material informationsystem that provides important information fordealing with emergency situations. ZEUS issupported by manufacturers and suppliers ofpotentially hazardous materials who providecomplete details on all materials used in production operations.

82

Index

ACEA 28ALex 25, 65Alternative drive concepts 7, 9Alternative fuel 9, 74Anthropogenic CO2 emissions 9APU 12Audit 7, 24

BDI 22BMW share prices 16Bonuses 67, 68

Capital CityTalks, Berlin 18Citymobil C1 33Carbon dioxide (CO2) 9Careers 65Certification 7, 24, 49, 73CFRP 43Childcare 70Clean production 46CleanEnergy 10CO2 emissions 9, 27ConnectedDrive 40Costs 51Cultural communication 19Customer satisfaction 75Customers 57

Dealerships 54Decarbonization 8Design for recycling 30DIN 1/3 mix 28DIN EN ISO 14001 7, 28Dow Jones SustainabilityGroup Index 16, 76Driver assistance system 40, 75

Eco-Audit (EMAS) 24Eco-balance 28Economy 76Econsense 22electronic Human Resources(e-HR) 63, 76EMAS 7, 24Emission reduction 72Emissions 50, 72Employee benefits 69Employee orientation 63Employee satisfaction 63Employees 60End-of-life vehicle guidelines 23End-of-life vehicle hotline 55End-of-life vehicle disposal 54Energy consumption 51Environmental Steering Committee 25Environmental controls 48Environmental guidelines 24Environmental management 21, 74Environmental management system 7, 24, 48, 73Environmental goals 72, 74Environmental Protecting Agency(EPA) 22Environmental Protection Officer 57Environmental standards 7EU norm cycle 29Exhaust emissions 7, 28Expo 13

Fleet consumption 28Flextime 69

Foreign national employees 71Foreword 2Frankfurt dealership 57Frequency of accidents 70Fuel cell 7, 12

Global compact 23Glossary of Terms 78Goals 72

H2 11Hams Hall 48Handicapped 70Hazardous material management 54Health 71Herbert Quandt Foundation 18Hydrogen 7, 11Hydrogen powered automobiles 9Hydrogen service stations 9HYFORUM 13

ifmo 8Integrated Product Policy (IPP) 24International Dismantling Information System (IDIS) 55Investments in environmental protection 51ISO 14040 28

Johannesburg World Summit 2002 23

Knowledge management 67

Landshut Innovation and Technology Center (LITZ) 45Lifecycle analysis 29Lifetime lubricants 54Lightweight construction 42

Materials 31Mechatronic 41MINI 32MINI production plant 49Mozambique 17Munich dealership 57

Natural fibers 31Noise emissions 34

OeKom 17Oil change intervals 55Oxford 48

Personnel costs 69Personnel numbers 62Personnel planning 63, 77Personnel policy 60Personnel policy guidelines 63Personnel structure 65Powder coat 47Premium strategy 47Product lifecycle 28Production 50Profit sharing 68

Qualifications 66Quality 7, 30, 54

Recyclates 30Recovered materials 48Recruiting 64, 77

Recycled materials 51Recycling 28, 30, 44, 72Recycling and Disassembly Center 24, 30, 72Renewable energy 8, 11Renewable raw materials 31Research & Development 38Research and Innovation Center (FIZ) 41Resources 7Retirement 70Retrospective 78

Sabbaticals 69Sales & Service 52SAM Group 17Shuttle service 68Social goals 76SOFC fuel cell 40Solvents 48South Africa 19Stakeholders 20Statistics 50Sulfur-free fuel 23Suppliers 49Sustainability 6, 15, 22, 54Sustainability objectives 72Sustainable development 23Sustainable development forum 22Sustainable energy strategy 11Sustainable growth 14, 23Sustainable mobility 4, 7

Telematics services 36Together for Recycling 55Tolerance 71Trainees 65Training 64Training events 64Training programs 64Transport Energy Strategy (TES) 8, 24

Ultimate driving machine 26UNEP 23

VALVETRONIC 28Vanos 35Vehicle profiles 32VOC 51Voluntary commitment 23, 28

Waste, waste quantities 51, 55, 73Wastewater 50Water consumption 50, 59Water protection 73Work safety 71Work-Life-Balance 69Works council 66World Summit on Sustainable Development 23

Z22 43ZEUS 25

Page Page Page

Economic

Social

Environmental

1996 1997 1998 1999 Change in % 2000


Vehicle production




Delivered vehicles









1996 1997 1998 1999 2000









Waste, total tons 218,374 219,298 259,000 278,232 291,082



1996 1997 1998 1999 2000





BMW automobiles 70,510 72,020 74,664 77,723 81,913


BMW motorcycles 1,754 1,905 2,039 2,191 2,397


Other2) 3,390 3,293 3,626 3,593 7,643

BMW AG





Birmingham, UK

Dingolfing, Germany

Eisenach, Germany

Hams Hall, UK

Landshut, Germany

Munich, Germany

Oxford, UK

Regensburg, Germany


Spartanburg, USA

Steyr, Austria

Swindon, UK





Amata City,Thailand

Cairo, Egypt

Jakarta, Indonesia


Manila, Philippines

Kaliningrad, Russia

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Economic

Social

Environmental

1996 1997 1998 1999 Change in % 2000


Vehicle production




Delivered vehicles









1996 1997 1998 1999 2000









Waste, total tons 218,374 219,298 259,000 278,232 291,082



1996 1997 1998 1999 2000





BMW automobiles 70,510 72,020 74,664 77,723 81,913


BMW motorcycles 1,754 1,905 2,039 2,191 2,397


Other2) 3,390 3,293 3,626 3,593 7,643

BMW AG





Birmingham, UK*

Dingolfing, Germany

Eisenach, Germany

Hams Hall, UK

Landshut, Germany

Munich, Germany

Oxford, UK

Regensburg, Germany


Spartanburg, USA

Steyr, Austria

Swindon, UK

Tritec Motors Ltda., Curitiba, Brazil**


* sold in 7/2001** In cooperation with DaimlerChrysler


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Cairo, Egypt

Jakarta, Indonesia


Manila, Philippines

Kaliningrad, Russia

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Photo copyrightsBMW

Economic

Social

Environmental

1996 1997 1998 1999 Change in % 2000


Vehicle production




Delivered vehicles









1996 1997 1998 1999 2000









Waste, total tons 218,374 219,298 259,000 278,232 291,082



1996 1997 1998 1999 2000





BMW automobiles 70,510 72,020 74,664 77,723 81,913


BMW motorcycles 1,754 1,905 2,039 2,191 2,397


Other2) 3,390 3,293 3,626 3,593 7,643

BMW AG





Birmingham, UK

Dingolfing, Germany

Eisenach, Germany

Hams Hall, UK

Landshut, Germany

Munich, Germany

Oxford, UK

Regensburg, Germany


Spartanburg, USA

Steyr, Austria

Swindon, UK





Amata City,Thailand

Cairo, Egypt

Jakarta, Indonesia


Manila, Philippines

Kaliningrad, Russia

Hanoi,Vietnam

● Headquarters

● Production

● Assembly









Oxford, UK ISO 14001 VCA 9/1997 9/2000



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Photo copyrightsBMW

sustainable value report 2001/2002

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