Carbon fiber manufacturer SGL Group (Wiesbaden, Germany) and automaker BMW Group (Munich, Germany) announced on Oct. 29 the foundation of a joint venture to manufacture carbon fiber and fabric for the automotive industry. The joint venture will include the construction of two new sites, one in North America for the carbon fiber production and the other in Germany for the subsequent fabrics. The investment in the first stage of development for both production sites will be €90 million/$133.2 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 per annum. Construction of the production facilities will begin in 2010; material 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.

Through the 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 reduce CO2 emissions.Robert Koehler, CEO of SGL Group, said, ”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, said, "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.”

Carbon fiber 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 percent, BMW Group 49 percent 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/$26.6 million.

The overall investment for the joint venture will be about €230 million/$340.3 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 Mitsubishi Rayon (MRC, Tokyo, Japan) will establish a joint venture for the production of polyacrylonitrile (PAN) based precursor. 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 fiber for the automotive industry. Therefore an agreement in principle to form a joint venture with MRC (two-thirds) and SGL Group (one-third) 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 its Otake, Japan, site.