BMW Plans Multi-Billion Cost Cuts Program
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BMW Plans Multi-Billion Cost Cuts Program
FRANKFURT -- BMW CEO Norbert Reithofer has hired management consultants from McKinsey to help draw up cost cuts aimed at saving between 3 billion to 4 billion ($4 billion to $5.4 billion) euros a year, a German business magazine said.
Reithofer is disappointed with costs at the company's Mini brand and for the BMW 1-series compact car, Manager Magazin said in a report today, citing company sources.
The cost savings are aimed at maintaining BMW's high profitability despite the company's growing investments in new drivetrain technologies, production expansion in markets such as the United States, Latin America and China, and the company's target to increase annual vehicle sales to 2.5 million by 2016 from nearly 2 million last year.
BMW has been investing heavily in new models and alternative powertrains for hybrid and electric cars to stay ahead of rivals Audi and Mercedes-Benz, which both target BMW's position as the top-selling global premium automaker.
The cost of investing in new cars, including a new generation of the Mini, as well as smaller models such as the 2 series, lowered BMW's automotive EBIT margin to 9.4 percent in 2013, from 10.8 percent in the year-earlier period.
BMW declined to comment on the report but said, "Generally speaking we are continually watching our costs, and seek to maintain and enhance our international competitiveness. We seek to achieve a sustainable EBIT margin of between 8 and 10 percent, our strategy is based on this profit target."
In the first quarter BMW's automotive EBIT margin, the best gauge to compare profitability with peers, was 9.5 percent, higher than the 7 percent achieved by rival Mercedes but short of the 10.1 percent achieved by Audi.
Last month, Munich newspaper the Muenchner Merkur said BMW intends to cut 100 million euros ($136 million) of German labor costs annually from 2015 onwards.
Arndt Ellinghorst, ISI Group's head of automotive research, said the reports highlight that BMW aims to focus on profitable growth and sustain a high margin level despite its record sales and earnings. "It is also a strong proof that BMW is mindful of the risk of complacency," he said in an e-mail to investors.
BMW Chief Financial Officer Friedrich Eichiner reiterated last month that the carmaker plans to rein in expenditures this year and move research and development spending as a proportion of sales “closer in line” with a target range of 5 percent and 5.5 percent from the 6.3 percent posted in 2013.
The company has forecast a “significant gain” in pretax profit this year, helped by new and refreshed models such as the 4-series Gran Coupe and the X4 mid-size sport-utility vehicle.
BMW's renewed focus on costs comes after Daimler, which makes Mercedes cars, said in April it would seek more cost cuts to narrow its profitability gap with peers.
Reithofer is disappointed with costs at the company's Mini brand and for the BMW 1-series compact car, Manager Magazin said in a report today, citing company sources.
The cost savings are aimed at maintaining BMW's high profitability despite the company's growing investments in new drivetrain technologies, production expansion in markets such as the United States, Latin America and China, and the company's target to increase annual vehicle sales to 2.5 million by 2016 from nearly 2 million last year.
BMW has been investing heavily in new models and alternative powertrains for hybrid and electric cars to stay ahead of rivals Audi and Mercedes-Benz, which both target BMW's position as the top-selling global premium automaker.
The cost of investing in new cars, including a new generation of the Mini, as well as smaller models such as the 2 series, lowered BMW's automotive EBIT margin to 9.4 percent in 2013, from 10.8 percent in the year-earlier period.
BMW declined to comment on the report but said, "Generally speaking we are continually watching our costs, and seek to maintain and enhance our international competitiveness. We seek to achieve a sustainable EBIT margin of between 8 and 10 percent, our strategy is based on this profit target."
In the first quarter BMW's automotive EBIT margin, the best gauge to compare profitability with peers, was 9.5 percent, higher than the 7 percent achieved by rival Mercedes but short of the 10.1 percent achieved by Audi.
Last month, Munich newspaper the Muenchner Merkur said BMW intends to cut 100 million euros ($136 million) of German labor costs annually from 2015 onwards.
Arndt Ellinghorst, ISI Group's head of automotive research, said the reports highlight that BMW aims to focus on profitable growth and sustain a high margin level despite its record sales and earnings. "It is also a strong proof that BMW is mindful of the risk of complacency," he said in an e-mail to investors.
BMW Chief Financial Officer Friedrich Eichiner reiterated last month that the carmaker plans to rein in expenditures this year and move research and development spending as a proportion of sales “closer in line” with a target range of 5 percent and 5.5 percent from the 6.3 percent posted in 2013.
The company has forecast a “significant gain” in pretax profit this year, helped by new and refreshed models such as the 4-series Gran Coupe and the X4 mid-size sport-utility vehicle.
BMW's renewed focus on costs comes after Daimler, which makes Mercedes cars, said in April it would seek more cost cuts to narrow its profitability gap with peers.
they can start by not having a million different variants for each model. Manufacturing overhead is huge to keep track of all of the variants
http://www.bmwusa.com/standard/conte...,Z4,M,BMW%20i3
http://www.bmwusa.com/standard/conte...,Z4,M,BMW%20i3
BMW intends to cut 100 million euros ($136 million) of German labor costs annually from 2015 onwards.
Lexus Champion
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From: The Woodlands, TX
also, make more options as standard equipment to streamline manufacturing and reduce the number of parts in inventory.
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Pole Position
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You guys are brutal today.
My ex bosses' 2014 M5 would not be considered pedestrian. How can any of us say the 6 series gran coupe is pedestrian?
It is normal for businesses to make cost savings a strategic item.
In this case BMW has expanded both in volume and product scope and they are saying the beans are out of whack (really just not up to goal) and they are going to fix that.
My sense is, the volume on the 2,1, 0.5 and 0.25 series cars is not what they were hoping for so the cheapo units are bringing down the profit for the whole ship.
My ex bosses' 2014 M5 would not be considered pedestrian. How can any of us say the 6 series gran coupe is pedestrian?
It is normal for businesses to make cost savings a strategic item.
In this case BMW has expanded both in volume and product scope and they are saying the beans are out of whack (really just not up to goal) and they are going to fix that.
My sense is, the volume on the 2,1, 0.5 and 0.25 series cars is not what they were hoping for so the cheapo units are bringing down the profit for the whole ship.
I have often wondered how Mini remains a viable brand today. When they returned in the United States years ago, it was largely a fad that seems to have fizzled out in time. The Mini Cooper is too niche a product to try to build an entire brand from, and in my opinion, the models (ranging from some coupe that looks like an elephant sat on the roof to an SUV-esque model) are mostly ugly bastardizations of a once-iconic design.
"A total of 301,526 Mini vehicles were sold worldwide in 2012. The largest national market was the United States, with 66,123 units sold, followed by the United Kingdom with 50,367. The Mini Countryman sold a total of 102,250 units in the year."
Is 300,000 cars really sustainable? I guess so, but that seems tough...
"A total of 301,526 Mini vehicles were sold worldwide in 2012. The largest national market was the United States, with 66,123 units sold, followed by the United Kingdom with 50,367. The Mini Countryman sold a total of 102,250 units in the year."
Is 300,000 cars really sustainable? I guess so, but that seems tough...
but bmw has no choice. like it or not, bmw is or will be competing with just about EVERY maker on the planet in one segment or another.
since they're not part of a bigger co. like porsche or audi, they're much more impacted by things like cafe standards here so they will need to sell a greater percentage of low end cars or pay massive fines. and those lower end cars will need to be competitive with increasingly sophisticated and refined offerings from even supposedly 'low end' brands so they must reduce costs to have competitive pricing.
since they're not part of a bigger co. like porsche or audi, they're much more impacted by things like cafe standards here so they will need to sell a greater percentage of low end cars or pay massive fines. and those lower end cars will need to be competitive with increasingly sophisticated and refined offerings from even supposedly 'low end' brands so they must reduce costs to have competitive pricing.
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I have often wondered how Mini remains a viable brand today. When they returned in the United States years ago, it was largely a fad that seems to have fizzled out in time. The Mini Cooper is too niche a product to try to build an entire brand from, and in my opinion, the models (ranging from some coupe that looks like an elephant sat on the roof to an SUV-esque model) are mostly ugly bastardizations of a once-iconic design.
"A total of 301,526 Mini vehicles were sold worldwide in 2012. The largest national market was the United States, with 66,123 units sold, followed by the United Kingdom with 50,367. The Mini Countryman sold a total of 102,250 units in the year."
Is 300,000 cars really sustainable? I guess so, but that seems tough...
"A total of 301,526 Mini vehicles were sold worldwide in 2012. The largest national market was the United States, with 66,123 units sold, followed by the United Kingdom with 50,367. The Mini Countryman sold a total of 102,250 units in the year."
Is 300,000 cars really sustainable? I guess so, but that seems tough...
Take a look at the interior of the 3/4 series and you'll see where they've been cutting. Lexus manages to pull through on the top notch interior of the IS again and this is where Lexus is gaining more share.