ZF Sales Up 11 Percent in 2004

European Market Leads the Way in Sales Increase; North American Sales Up 8 Percent

FRIEDRICHSHAFEN, Germany, April 27 -- ZF Friedrichshafen AG -- a leading worldwide supplier of driveline and chassis technology totaled $12.3 billion (euro 9.899 billion) in global sales for 2004 -- an increase of 11 percent over 2003. North American sales totaled $2 billion (euro 1.63 billion).

The increase is attributed to an upswing in the commercial vehicle and construction machinery markets, along with the success of new products.

ZF CEO Dr. Siegfried Goll announced at a press conference held today in Stuttgart, Germany, that several factors contributed to the 2004 results, "2004 was a successful year for ZF. We are still on the right track with our strategy of maintaining technological leadership and taking advantage of globalization opportunities."

In a bid to strengthen its technological position and international market presence, the company invested $703 million (euro 563 million) (5.7 percent of sales) in property, plant and equipment and $650 million (euro 520 million) (5.3 percent of sales) in research and development. ZF will continue focusing its attention on technological leadership and customer utility.

Global Market Presence

The ZF Group continued to expand its international market position in 2004 with new joint ventures in China for manufacturing automatic car transmissions and through its Rubber-Metal Technology Division. ZF also launched new axle systems projects for Land Rover in the UK, Ford and Mercedes-Benz in North America, and BMW and Audi in China. A new project for General Motors in Australia is planned for this year. The ZF Group currently operates 125 production facilities in 26 countries. ZF coordinates the growing regional presence of its corporate divisions and business units with holding companies in North America, Asia, and Australia.

The ZF workforce averaged 54,523 in 2004, a 2-percent increase over the previous year. More than 60 percent of ZF employees (34,481) work at plants in Germany where the company added 249 new jobs last year. ZF employs more than 6,000 in North America.

Development of ZF Divisions and Business Units

The Car Driveline Technology Division produced a total of 1.13 million car transmissions in 2004 (+12 percent) and increased sales by 16 percent to $2.17 billion (euro 1.74 billion). This performance is a result of new series production launches for 6-speed automatic transmissions and other products as well as export market gains achieved by ZF customers.

With a 13-percent increase in sales, the Car Chassis Technology Division generated sales of $2.15 billion (euro 1.72 billion). Growth was fuelled by new axle systems projects in Europe, Asia, and the USA. By the end of 2005, the division will launch series production of car axle systems in China, the USA, and Australia.

Sales in the Commercial Vehicle and Special Driveline Technology Division increased by 11 percent to $1.89 billion (euro 1.513 billion). ZF set a new production record last year with more than 220,000 transmissions for heavy- duty vehicles. The introduction of the AS Tronic mid and AS Tronic lite product lines for medium and light trucks will for the first time make advanced commercial vehicle transmission technology available for all vehicle models.

Sales in the Off-Road Driveline Technology and Axle Systems Division were up 16 percent to $1.57 billion (euro 1.257 billion). This growth was backed by a healthy market for construction machinery in Europe, North America, and Asia. The division's sales increase was also fuelled by a stronger demand for axle transmissions designed for off-road vehicles coupled with the introduction of new products including driveline components for mobile excavators.

The Powertrain and Suspension Components Division increased sales by 8 percent to $2.57 billion (euro 2.053 billion). Market demand focused primarily on powertrain components for commercial vehicles and diesel-powered cars. ZF Sachs gained additional projects for series production of electronic CDC shock absorbers.

Sales figures for the Rubber-Metal Technology Business Unit were up by 3 percent to $657 million (euro 526 million). This increase was backed by chassis and engine suspension products designed to comply with new legislation aimed at protecting pedestrians.

Stimulated by a growing global demand for recreational boats and commercial vessels including high-speed ferries and public transport ships, sales in the Marine Propulsion Systems Business Unit increased by 15 percent to $256 million (euro 205 million). The Aviation Technology Division generated sales of $61 million (euro 49 million), up 2 percent over the previous year. Faced with pricing pressures in the aftermarket business, the ZF Trading Division recorded a 2-percent decrease in sales to $738 million (euro 591 million).

ZF Lenksysteme GmbH, a joint venture with Robert Bosch GmbH, generated sales of $2.56 billion (euro 2.044 billion) (up 15 percent). Half of this figure is consolidated in the ZF Group financial statements. This increase was a result of high-volume production of electronic steering systems for the Volkswagen Group as well as the market launch of the new BMW models equipped with advanced active steering. ZF Lenksysteme also profited from the positive trend in the commercial vehicles market.

Outlook for 2005

The ZF Group faces a number of major challenges in 2005. Along with the currency risks associated with euro/dollar exchange rates, critical factors include the cost of raw materials and energy prices.

Particularly with respect to steel, ZF aims to find a fair compromise and share the additional cost burden with market partners on both the customer and supplier side. ZF plans to intensify measures for increasing productivity this year. Some of the key objectives for 2005 include strict cost management, optimized production site concepts, streamlined supply processes, and the expansion of global procurement markets.

With the exception of agricultural machinery, current forecasts for the ZF target industries in 2005 predict mild global growth ranging from 2 to 4 percent. Influenced by weak market conditions in Germany, only slight improvements are expected in Western European car production figures.

In North America, significant growth is only foreseen in the commercial vehicle market. Strong growth in light commercial vehicle production is expected in Asia. With this market outlook, ZF anticipates moderate sales growth of around 5 percent in 2005.

ZF Friedrichshafen AG is a leading worldwide supplier of driveline and chassis technology. Headquartered in Friedrichshafen, Germany, ZF is among the 15 largest automotive suppliers in the world. The company has a total workforce of 54,500 at 125 locations in 26 countries, and combined revenues for the group totaled more than $12 billion in 2004.

ZF operates a large manufacturing network in North America, combined with global research and development capabilities, to provide advanced technology to the region. The ZF Group North American Operations Headquarters and Technical Center is located in Northville, Mich., USA.