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.

—Robert Koehler, CEO of SGL Group

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 [earlier post] 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.

—Norbert Reithofer, BMW AG Management Board Chairman

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, the company said. In the Megacity Vehicle, which will be launched under a BMW sub-brand in the first half of the next decade, the high-strength yet ultra-light material will make up a significant proportion of the materials used. The combination of the advanced CFRP fibres developed by the SGL Group and the BMW Group's expertise in the industrial manufacture of CFRP components is making it possible, for the first time, to install CFRP on a large scale in a series vehicle at a competitive cost.

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, the partners said. 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 (US$27 million).

The overall investment for the joint venture will amount to approximately €230 million (US$341 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.

Precursor Joint Venture Agreed with Mitsubishi Rayon. 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.