BMW Accelerates With a 25.9% Revenue Surge : 1988’s $13.2-Billion Success Was Achieved Despite a 16% Skid in U.S. Sales
From their piston-shaped headquarters on the edge of Munich, BMW executives have a panoramic view the highway that rings this Bavarian capital. But what commands their attention is the growing number of flashy BMWs speeding past.
The maker of the swank cars, a favorite among European and U.S. yuppies, reported a dramatic surge in world sales in 1988, underscoring the image of Bavaria as BMW country.
The Bayerische Motoren Werke AG said in early February that its worldwide group revenues soared 25.9% since 1987, reaching a record 24.5 billion marks, which is about $13.2 billion.
“We must admit this result is somewhat abnormal,” BMW spokesman Michael Schimpke said at company headquarters. The sales jump came despite industry analysts’ predictions of a decline.
‘We Were a Bit Lucky’
“We had seven fat years, and predictions for 1988 were bad. But it went very well for us, indeed,” said Harry Roegner, a BMW economist. “We couldn’t have predicted such a turn of events, we couldn’t have known that our new models would hit the markets at just the right time. We were a bit lucky.”
In a letter to shareholders, BMW said the introduction of its swank new 5-series resulted in a “dramatic increase in demand.”
The upscale 7-series confirmed BMW’s leading position in Europe: BMW edged its great West German rival, Mercedes-Benz maker Daimler, as the market leader in the luxury class.
Without disclosing profit results, BMW said it expects earnings to reach 1987 levels, when the car maker netted 357 million marks, about $192.9 million.
The company said the 1988 growth was the biggest since the mid-1970s.
“The 5-series came at just the right time on the market,” Roegner said. “Daimler had nothing new to offer.”
Came Out ‘at the Perfect Time’
“When we were planning the 5-series, we had no idea that it would come out at the perfect time. But it did, and we had an immense boom.”
Nonetheless, their glowing account of the company’s performance obscured a troubling change in one of their key markets: the United States, where BMW declined 16% last year. A leap in European sales offset the drop.
Roegner said the U.S. dollar’s depreciation, which made West German exports more expensive in the United States--combined with uncertainties raised by the U.S. stock market collapse of October, 1987--contributed to the decrease in sales.
“Also, we noticed a certain reluctance in American buyers,” he said. “They seem to have been going for American cars, especially in the luxury class.
“But the 5-series models only were introduced in the American market at the end of 1988 and immediately generated a significant increase in demand.”
12-Cylinder 750i Flagship
While the mid-size 5-series proved successful, the company’s pride is the BMW 750i flagship, a 12-cylinder sedan crammed with high-tech gadgets.
The car is considered responsible for taking away the reputation of Mercedes-Benz as the market leader in the luxury class.
The 7-series cars have become a familiar sight on West Germany’s autobahns, cruising silently at 145 m.p.h. Company mechanics have installed a governing device to prevent the cars from going faster than that, because ordinary tires would blow out.
The BMW officials dismissed attempts by Japanese auto makers to move into the luxury market and said they consider their main competitors to be Daimler and Britain’s Jaguar.
“You get a feeling that the Japanese are building copies. As long as they concentrate on what their competitors are doing instead of taking advantage of their imagination, they will not be a threat in this class,” Roegner said.
“We try to cultivate our own strengths. And the fact that the 7-series is selling well in Japan shows that we have something to offer that they can’t.”
‘Real Car Freaks’
“Our engineers are real car freaks, they have fun designing cars,” Schimpke said. “We are a development company and we have the experience. The Japanese want to jump from today to tomorrow immediately, and that’s not possible in this class of cars.”
With analysts widely predicting leaner years of slowing demand, Schimpke conceded that the future “is not exactly rosy.”
But industry experts say BMW plans to introduce a new 3-series, its smallest car, later this year in another sales-boosting move.
Company spokesmen declined to discuss the project, but one added, “we’ll have something new to present in Frankfurt,” where the fall’s big auto show is held.
