Joint-Venture in China established as planned

Progress-Werk Oberkirch AG continues its targeted strategy of international growth. The company has now completed the process of establishing a joint venture with Korean-based TAE HWA Enterprise Co., LTD., announced on March 9th. TAE HWA is the market leader in high-end metal components (among others electric motor housings) in Asia. Thus, serial production of an order placed by a major European customer of PWO, will commence according to plan in the coming months. The sampling phase for these components is set to begin in October. Revenue from this contract is expected to amount to approx. ?2 million in 2007.

PWO and TAE HWA each hold a fifty per cent interest in the joint venture based in Hong Kong. Preparations for the actual production process are being managed by a wholly owned Chinese subsidiary of the joint venture at a plant operated by the Korean partner in Suzhou, near Shanghai. The required operational premises are being leased, as a result of which initial investments are limited mainly to the purchase of production equipment. The joint venture will be focusing on the manufacture of housings for electric motors and assemblies destined for the local automotive market. Thus, the components parts are produced using market-driven technologies.

Karl Schmidhuber, Speaker of the Management Board, explains on today?s Capital Markets Day at the headquarter in Oberkirch once again PWO?s growth strategy: ?We have set our sights on capturing a substantial higher share of the growth markets in Eastern Europe, Asia and the NAFTA region in the coming years. As part of our international expansion efforts, Group revenue its to be increased from ?220 million today to ?350 million by the year 2010; of this total, revenue of at least ?10 million is to be generated in China. After last year's successful market entry into the Czech market and now into China, PWO is currently charting its course for market entry in Mexico. International expansion is being planned in close coordination with PWO's customers. With this strategy we build up capacities focussed on our clients requirements and aim at a good utilisation from the very beginning.?

Oberkirch, September 13, 2006

The Executive Board

Progress-Werk Oberkirch AG

Industriestraße 8

77697 Oberkirch

Germany

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