- Milestone in the serial application of carbon fibers in the automotive industry
- Construction of two production sites in Germany and North America with 180
  new jobs
- € 90 million investment volume in the first stage of development
- Precursor joint venture agreed with Mitsubishi Rayon

Wiesbaden / Munich, October 29, 2009. SGL Group (51%) and BMW Group (49%) announced today the foundation of a joint venture to manufacture carbon fibers and fabrics for the automotive industry. Within this joint venture, the construction of two new sites, one in North America for the carbon fiber production and the other in Germany for the subsequent fabrics, is planned. The investments in the first stage of development for both production sites will be € 90 million. The joint venture will create more than 180 jobs. In the final stage of development, annual carbon fiber and fabric consumption is expected in the range of several thousand tons p.a. Construction of the production facilities will begin in 2010. Production is expected to start in the first half of the next decade. The transaction is subject to the approval of the relevant antitrust authorities.

Robert Koehler, CEO of SGL Group: ”This joint venture with the BMW Group is a milestone for the use of carbon fibers on an industrial scale in the automobile industry. For the first time, carbon fibers are taking on an important role in series vehicle manufacture. This confirms our strategy and shows that carbon fiber technology is becoming increasingly important in the materials substitution process to lighter material. This material will help to reduce CO₂ emissions and save natural resources.”

Norbert Reithofer, BMW AG Management Board Chairman: "This joint venture is designed to be a classic win-win situation. We are acquiring pioneering future technologies and raw materials that we need for our Megacity Vehicle on competitive terms. The SGL Group is moving into the automobile business with us as a strong partner. With our concepts within project i, we are breaking new ground when it comes to vehicle architecture, lightweight design and the use of materials.”

Both companies will combine their core competencies in this joint venture. SGL Group contributes its know-how in high performance materials and its experience with carbon fiber based materials. As the only European carbon fiber and composite materials manufacturer, the company covers the entire value chain. Both partners have cooperated for many years in the area of carbon fiber composites.

Through this joint venture, BMW Group will secure access to key technologies and raw materials that will be used in the ‘Megacity Vehicle’ currently being developed. For the first time, carbon fiber composites will be used in an unprecedented dimension in the large scale production of automobiles and will take a leading role in the material mix. The large scale use of high performance materials like carbon fiber based fabrics developed for use in automotive applications has clear weight advantages and helps to lower CO₂ emissions.

Environmental, social, and economic aspects will be aligned along the entire supply chain. Carbon fibers and fabrics will be manufactured with careful consideration to environmental resources. Within the context of the joint venture, processes are being developed to recycle carbon fibers and fabrics. The North American production site will use hydropower as its energy source.

The joint venture will be structured as follows: SGL Group holds 51%, BMW Group 49% of the shares with both partners nominating management on an equal basis. Essential decisions require unanimous approval. In the build-up phase the joint venture will be consolidated at equity by both companies with investments totaling € 90 million. BMW Group will use its favorable access to the capital markets to ensure the funding of the debt financing for the joint venture. Both companies will each contribute initial equity of € 18 million.

The overall investment for the joint venture will amount to approximately € 230 million subject to BMW Group confirming all stages of development. BMW Group – as initially the only customer - guarantees certain minimum purchasing volumes at contractual agreed conditions in the context of safeguarding the overall project.

Simultaneously, SGL Group and the Japanese company Mitsubishi Rayon (MRC) will establish a joint venture for the production of polyacrylonitrile (PAN) based precursor, which is the raw material required to manufacture carbon fibers. This joint venture will further strengthen SGL Group’s longstanding strategic alliance with MRC to secure the long term supply of precursor for the production of specific carbon fibers for the automotive industry. Therefore an agreement in principle to form a joint venture with MRC 2/3 and 1/3 SGL Group shareholding was signed securing SGL Group essential supervision and minority rights. The contract closing is targeted for the end of 2009. The joint venture will be operated by Mitsubishi and located at their Otake site.

The intended separate joint ventures with the BMW Group and MRC do not restrict or limit any of the existing strategies and activities of SGL Group in their Business Area Carbon Fibers & Composites and have no impact on its main customers in the automotive, wind energy, industrial, and aerospace/defense areas.
 

SGL Group is one of the world’s leading manufacturers of carbon-based products. It has a comprehensive portfolio ranging from carbon and graphite products to carbon fibers and composites. SGL Group’s core competencies are its expertise in high-temperature technology as well as its applications and engineering know-how gained over many years. These competencies enable the Company to make full use of its broad material base. SGL Group’s carbon-based materials combine several unique properties such as electrical and thermal conductivity, heat and corrosion resistance as well as high mechanical strength combined with low weight. Due to the paradigm shift in the use of materials as a result of the worldwide shortage of energy and raw materials, there is a growing demand for SGL Group’s high-performance materials and products from an increasing number of industries. Carbon and graphite products are used whenever other materials such as steel, aluminum, copper, plastics, wood etc. fail due to their limited properties. Products from SGL Group are used predominantly in the steel, aluminum, automotive, chemical and glass/ceramics industries. However, manufacturers in the semiconductor, battery, solar/wind energy, environmental protection, aerospace and defense industries as well as in the nuclear energy industry also figure among the Company’s customers.

With 40 production sites in Europe, North America and Asia as well as a service network covering more than 100 countries, SGL Group is a company with a global presence. In 2008, the Company’s workforce of around 6,500 generated sales of €1.6 billion. The Company’s head office is located in Wiesbaden/Germany.

This press release contains statements on future developments that are based on currently available information and that involve risks and uncertainties that could lead to actual results deviating from these forward-looking statements. The statements on future developments are not to be understood as guarantees. The future developments and events are dependent on a number of factors, they include various risks and unanticipated circumstances and are based on assumptions that may not be correct. These risks and uncertainties include, for example, unforeseeable changes in political, economic and business conditions, particularly in the area of electric steel production, the competitive situation, interest rate and currency developments, technological developments and other risks and unanticipated circumstances. We see other risks in price developments, unexpected developments relating to acquired and consolidated companies and in the ongoing cost optimization programs. SGL Group does not intend to update these forward-looking statements.