Strong Foundation for Upcoming TRW Acquisition: ZF Significantly Increases Sales and Earnings

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Bathsheba Parsons
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1 Page 1/6, March 10, 2015 Strong Foundation for Upcoming TRW Acquisition: ZF Significantly Increases Sales and Earnings Technology company increases sales by nine percent to EUR 18.4 billion Earnings before interest and taxes (EBIT) rise by 36 percent to EUR 1.1 billion Number of employees increases by five percent TRW integration planning well on its way Stuttgart/Friedrichshafen. ZF Friedrichshafen AG has successfully completed the year 2014 with sales growth of nine percent which once again is above the industry average. The technology company generated sales of EUR 18.4 billion. At the same time, ZF has improved profitability, with earnings before interest and taxes (EBIT) rising more than one-third to about EUR 1.1 billion. ZF's CEO Dr. Stefan Sommer thus confirmed last year's forecast of sales growth in the high single-digit percent range: 2014 was again characterized by heterogeneous market trends, explained Sommer on Tuesday during his presentation of the annual financial statements in Stuttgart. It is all the more gratifying that we reached our goal. Our employees contributed to this success with their extraordinary commitment. The main growth driver was business with automatic passenger car transmissions and axle systems. The 8-speed automatic transmission, whose second generation we launched last year, has been especially popular among customers, added Sommer. The market for commercial vehicles and off-road machinery, however, turned out to be more difficult. Growth drivers: North America and Asia-Pacific The regions of North America (EUR 3.7 billion) and Asia-Pacific (EUR 3.6 billion) were top contributors to the company's record sales of EUR 18.4 billion, with each region increasing sales by 21

2 Page 2/6, March 10, 2015 percent. In Europe, where ZF generated about 56 percent of sales, the company pulled in sales of EUR 10.3 billion, an increase of five percent compared to In comparison, market developments in South America were quite different, with sales dropping by approximately one-fifth due to the floundering economic situation. More than one billion invested in property, plant, and equipment As a result of the strong demand for ZF products, the company once again invested about EUR 1 billion in property, plant, and equipment last year; an amount that considerably exceeds depreciation. Our customers require our presence on site, and the company itself is continuously expanding its production and research network, explained Sommer. The Engineering Center in Shanghai, for instance, is being expanded on a massive scale; a new test center for transmissions is being built in Friedrichshafen, the headquarters of Corporate Research and Development at the ZF Group. Research and development further expanded In the year under review, ZF spent EUR 891 million on research and development (R&D), which is seven percent more compared to the previous year. This means that ZF has once again reached the target figure of five percent of sales for R&D. With more than 860 patent applications, the company was again ranked among the top 10 innovators in Germany. Earnings increased overproportionally In the year under review, earnings before interest and taxes (EBIT) surged by 36 percent to approximately EUR 1.1 billion, thus rising higher than sales in terms of percent. Driving factors included inter alia an increase in productivity and the positive contribution margins through sales increase. The Group achieved an even greater percentage increase in its net profit after tax, climbing 45 percent to EUR 672 million.

3 Page 3/6, March 10, 2015 Our focus on efficiency and the continuous enhancement of our portfolio is mirrored in the positive development of our financial key figures and confirms that we are on the right path, said ZF s CFO Dr. Konstantin Sauer. Positive net financial position and comfortable equity ratio prior to TRW acquisition The Group's equity ratio remained relatively constant at 34 percent by the end of The net financial position stayed positive at EUR 1.4 billion, rising 37 percent higher than the previous year. Regarding the acquisition of TRW Automotive, Sauer said: This means that prior to the TRW acquisition we are still net debt-free and continue to enjoy a very comfortable equity ratio. This is an outstanding starting position for the upcoming acquisition. At the time the TRW acquisition agreement was signed, ZF had already obtained loan commitments of over EUR 12.5 billion by banks in the form of bridge financing and longer-term bank loans. As a result of the successful bonded loan placement in the amount of EUR 2.2 billion in January 2015 and the sales proceeds from ZF Lenksysteme, the bridge financing has, in the meantime, already been reduced considerably new jobs created At the end of 2014, the ZF Group had a global workforce of employees, thereof in Germany. The Group created almost additional jobs worldwide an increase of five percent. By selling the Rubber & Plastics business unit consisting of a good employees and the South African subsidiary AIBC with almost 900 employees, the total number of employees dropped by approximately In contrast, the sale of the 50-percent stake in the former ZF Lenksysteme GmbH to Robert Bosch GmbH did not impact the ZF Group's sales or workforce figures due to the IFRS accounting rules. This transaction was concluded on January 30, 2015.

4 Page 4/6, March 10, 2015 Agreed acquisition of TRW as most important milestone in 2014 ZF set an important strategic course in 2014, emphasized CEO Sommer. Important steps along the way included the founding of two new joint ventures in China: one with automotive manufacturer BAIC in the passenger car chassis sector and the other one with tractor manufacturer YTO in the agricultural machinery sector. The most important step, however, was, of course, the agreement to acquire TRW Automotive, which will help us considerably expand our expertise as a systems supplier, added Sommer. As a result, customers of ZF and TRW will have access to a broad product portfolio from a single source that will offer future mobility solutions in both driveline and chassis technology as well as safety and assistance systems. Integration workstreams with equal representation After the approval by the antitrust authorities, the acquisition is expected to be concluded as scheduled in the first half of Altogether, 13 workstreams, each headed by one representative of ZF and one of TRW, are working intensively on integration planning, for example, in the following areas: Sales, Research and Development, or Purchasing. All integration activities are globally coordinated by the Integration Management Office. A steering committee made up of Dr. Stefan Sommer and TRW CEO John Plant, among others, meets every 14 days.

5 Page 5/6, March 10, 2015 Integration in four phases Integration is to occur in four phases that will stretch out over a period of three to five years in total: Phase 1 involves preparing for Day 1 after the acquisition has been concluded. During Phase 2, TRW is to be integrated as a fifth division. Project-based cooperation is planned for Phase 3. Structural integration is not supposed to take place until Phase 4. Thereby, top priority is given to Sales, Aftersales, and Purchasing. Dr. Stefan Sommer added: We are approaching integration in a very structured but also pragmatic manner. Integration will not occur for integration's sake. On the contrary, we are concentrating on the areas that offer added value for our customers and the company. Press Photos: 1. Combination of two Highly Successful Technology Leaders: Both ZF and TRW have acknowledged technology positions in high-growth segments that profit from the megatrends towards fuel efficiency, increased safety requirements and autonomous driving. 2. The ZF Innovation Truck a truck prototype with a length of over 25 meters can be conveniently maneuvered via tablet remote control with zero local emissions. Photos: ZF Press contact: Martin Demel, Head of Corporate Communications and Public Affairs, Tel.: +49 (0) , martin.demel@zf.com Andreas Veil, Head of Business Press and PR, Tel.: +49 (0) , andreas.veil@zf.com

6 Page 6/6, March 10, 2015 ZF is a global leader in driveline and chassis technology with 113 production companies in 26 countries. In 2014, the Group achieved a sales figure of EUR 18.4 billion with approximately employees. In order to continue to be successful with innovative products, ZF annually invests about five percent of its sales (2014: EUR 891 million) in research and development. ZF is one of the ten largest automotive suppliers worldwide. In 2015, the company is celebrating its centennial. Originally named Zahnradfabrik GmbH, ZF was founded in Friedrichshafen in 1915 by Luftschiffbau Zeppelin GmbH among others. In its early years, the company developed, tested, and manufactured aircraft transmissions. After 1919, the company focus shifted under Alfred Graf von Soden-Fraunhofen, the first Managing Director and later member of the Board of Management and CEO, to the automotive and commercial vehicle industry. In this sector, the company established itself once and for all as a major technology supplier, registering numerous patents for innovative transmission technology. The first location outside Europe was founded in Brazil in 1958, launching a globalization drive that still continues today. In addition, ZF constantly expanded its range of expertise also through acquisitions. For instance, in 1984 ZF acquired the majority share in Lemförder Metallwaren & Co. KG, a move which extended the product portfolio to include chassis technology. Later, in 2001, ZF took over Mannesmann Sachs AG to strengthen its value creation chain with driveline and chassis components. It adopted the current name of ZF Friedrichshafen AG in Today's product range includes driveline and chassis technology such as transmissions, driveline and chassis components, as well as complete axle systems and modules. ZF products are used in passenger cars, commercial vehicles, construction and agricultural machinery, rail vehicles, and marine applications. The company also focuses on the wind power and electronic components business. In 2014, ZF announced its intention to acquire US automotive supplier TRW. The shareholders of ZF Friedrichshafen AG are the Zeppelin Foundation, administered by the City of Friedrichshafen, holding a share of 93.8 percent, and the Dr. Jürgen and Irmgard Ulderup Foundation, Lemförde, with 6.2 percent. The "Motion and Mobility" slogan clearly states the company's core mission: Right from its foundation, ZF has developed and manufactured innovative products for all people around the globe who want to move things reliably, comfortably, and safely and experience the ultimate in efficient mobility. Quality, technological leadership, and innovative power have always defined the Group's identity today as much as ever. For further press information and photos please visit:

ZF shows the latest innovations of the wind industry at the Hanover Fair 2015

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