BMW Stepping on the Gas After a Bumpy Ride
It was only three years ago that those steering the elite and notoriously independent Bayerische Motoren Werke were thrown out of the driver’s seat for having taken a disastrous wrong turn in acquiring Britain’s troubled Rover.
For decades synonymous with speed, greed and gusto, BMW saw its luster dulled by association with the down-market commodity cars rolling off the assembly lines at Rover.
Sales and profits tumbled, heads rolled and the road ahead looked bumpy when mild-mannered engineering professor Joachim Milberg became chief executive in 1999 with a mandate to contain the damage.
The company’s recovery under Milberg has turned more heads than has its latest luxury model, and the 58-year-old leader attributes the turnaround to swift recognition of the Rover mistake and even swifter swallowing of company pride in correcting that error.
When months of haggling failed to produce a serious buyer, Milberg dumped the losing enterprise in March 2000 for a symbolic 10 pounds--about $15--to a group of British investors.
“BMW Group is now the only car manufacturer with different brands but all focused on premium segments,” Milberg said in an interview at company headquarters here. “Our experience from the Rover time is that premium brands and value-oriented products don’t fit well under one roof.”
He describes the quick turnaround as the result of “courageous decisions,” acknowledging the public uproar after the divestiture.
Thousands of British auto workers lost jobs and their German union counterparts howled at a move that couldn’t have been executed under this country’s strict labor laws.
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Auto Maker Not Hit Hard by Recession
Even after absorbing the Rover losses, BMW posted record sales and output last year, delivering 905,657 cars to customers and forecasting a rise in sales of more than 7% when final 2001 results are reported this month. And despite the gloomy outlook for economic growth in Germany, its No. 1 market, and uncertain prospects for solid recovery across the Atlantic, company executives expect another banner year in 2002.
BMW shares, traded on the Frankfurt exchange, have risen steadily to about 42 euros from the mid-20s at the start of 2000.
“Premium sectors are more independent from economic cycles than are mass-market products,” said Milberg, explaining BMW’s purring performance last year, when recession hit bigger rivals hard in their bottom lines.
Although BMW’s management was able to boast in a letter to shareholders last month that “2001 was by far the most successful year in the history of the BMW Group,” Milberg diplomatically declined to discuss the pitfalls of their volume-oriented competitors.
U.S.-German auto giant DaimlerChrysler, for instance, was battered with $1.9 billion in losses last year, when recession and worries about terrorism after the Sept. 11 terrorist attacks prompted many consumers to put off buying cars.
Mercedes, the flagship Daimler product, fared far better than the higher-volume U.S. brands, posting a 3% boost in profit from 2000.
The U.S. market remains second to Germany for BMW, but it is the most important export venue and fastest-growing segment, especially for the higher-powered cars, corporate affairs director Peik von Bestenbostel said.
He added that gasoline prices in the U.S. are only a third of those in Europe, explaining the enduring appeal of the big Beamers in America while many Germans have opted for more modest models.
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New Mini Expected to Generate Buzz
One part of Rover retained by BMW was its Mini, the boxy little compact that came to fame in the 1960s, when British pop icons such as the Beatles and “Pink Panther” star Peter Sellers got behind the wheel in movies.
The Mini, expected in the U.S. market this spring, made a splashy comeback in Europe last summer, still bearing its signature squat outline but now outfitted with top-line BMW technology and interior comforts.
The Oxford, England, plant is working hard to keep up with demand and plans to produce 100,000 this year.
Chief Financial Officer Helmut Panke, who will replace Milberg in May when the chief executive takes early retirement, cautions against seeing the Mini as a departure from the newly embraced mantra of premium only.
“Premium doesn’t mean only a certain price level. It means having an elite player in each category, whether a unique car like the Mini or a physically big car like the 7-series,” said Panke, 55, who earlier headed U.S. operations and has brought back a relaxed American demeanor.
Panke smiles when reminded of his jackets-off, first-name-basis approach with colleagues and visitors, a striking contrast to the formality of most German corporations.
“I don’t know that you can say I have a more American style of management, although I have certainly been affected by my U.S. experience. But I’ve been a member of the board since 1996 and we have brought about this reorientation as a team,” Panke said.
“The current management style will continue, even if my personality means I speak louder and faster.”
