1) German Federal Statistical Office, February 2009 2) Kiel Institute for the World Economy, December 2008 3) US Department of Commerce, February 2009 4) IMF, January 2009 5) ACEA, January 2009 6) ACT, December 2008 7) Beecroft Report II OVERVIEW OF BUSINESS DEVELOPMENT II.1 Overall Economic Conditions Economic growth slowed dramatically around the world over the course of 2008 and de- clined particularly sharply in the fourth quarter. Germany and the USA have experienced negative economic growth since the summer. The primary contributing factors were the financial crisis, the reluctance of banks to lend to companies, and generally weaker consum- er spending. In addition, raw material prices, which at times reached record levels ­ espe- cially for crude oil ­ put pressure on companies. Consequently, the banking crisis has also spilled over into the real economy. Last year, economic output in Germany rose only in the first quarter and has been on a downward path since the second quarter. The decline in the fourth quarter of 2.1% (com- pared to the previous quarter) represents the sharpest drop since reunification.1) For the entire year, however, growth of 1.5% is expected.2) In the USA, the economic output is still supposed to have expanded by about 1.3% for the entire year, despite the preliminary decline of 6.2% in the fourth quarter.3) Once again, Russia (plus 6.2%), Brazil (5.8%), and China (9.0%) were among the global drivers of growth, so that notwithstanding the crisis the global economy is still said to have expanded by 3.4% after 5.2% in 2007.4) Machine building and vehicle construction were particularly affected by weaker economic growth. After several record years, the demand for trucks and trailers positively collapsed in the fourth quarter. In view of high sales figures, manufacturers had increased capacities to some extent in 2008, whereas by now production has been sharply curtailed. For example, in December roughly 15% fewer heavy trucks (16 tons and heavier) were registered through- out Europe than in December 2007.5) Viewed over the course of the entire year, demand decreased only slightly by 2.2%.5) In North America, around 3.3% fewer trucks (Class 8) were manufactured than last year, according to preliminary figures. In 2007, the drop had amounted to about 43.6%, driven by regulatory pull-forward effects.6) As in the truck seg- ment, demand and production also fell in the trailer market in particular at the end of the year. For the entire year, the number of registrations remained stable in western Europe, while production declined by 0.6%.7) In the USA, trailer production decreased significantly by about 34%.6) II.2. Major Events in the 2008 Fiscal Year Demand for products from SAF-HOLLAND in fiscal year 2008 was influenced by various developments. Dynamic double-digit growth rates and optimistic forecasts in the first half of the year changed suddenly into startling slumps in sales and increasingly pessimistic outlooks for the future in the final months of the year. In the first and second quarters of 2008, SAF-HOLLAND still achieved sales growth of 11.3% compared to the previous year. Reflecting dynamic growth rates, particularly in the European trailer business, the Compa- ny's focus was on continually adjusting its capacities in response to the high demand. Through growth in the first half of the year, SAF-HOLLAND has further expanded and solid- ified its already strong international position as a leading partner for the truck and trailer industry. The Company was successful in rounding out the product range in its core markets in 2008 earlier than originally anticipated. Whether in North or South America, 02 >> SAF-HOLLAND 26 >> Management Report 60 >> Financial Statements 144 >> Additional Information 32 Group Management Report >> 26 ­58