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Slow transition to electric cars dooms BMW chief Harald Krueger

FILES-GERMANY-ECONOMY-INDUSTRY-AUTO-BMW
Harald Krueger quit as CEO of BMW on July 5.
(Nicolas Asfouri / AFP / Getty Images)
Bloomberg

When BMW picked Harald Krueger to run the company more than four years ago, he was the perfect candidate. Young, with a personable manner and decades of experience across the company, Krueger appeared ready to guide the venerable luxury car maker into a future of electric, self-driving and shared automobiles.

But on Friday — two weeks before his contract came up for renewal — Krueger quit. Instead of leading the company through the biggest upheaval in a generation, he was felled by the transition as he failed to provide a road map to the future. In his farewell note, he cited the “enormous exertion” demanded of BMW employees as the company grapples with the unprecedented demands of the shift.

In the last few years, the industry “has been shaped by enormous changes, which have brought about more transformation than in the previous 30 years,” Krueger said in the note.

Krueger, 53, inherited a company at the top of its game. Under the previous chief executive — now chairman — Norbert Reithofer, BMW had outsold Mercedes-Benz and Audi for a decade. The company was a pioneer in electric vehicles with the i3 city car introduced in 2013. It was the first major automaker to use lightweight carbon fiber in mass-market models. And its traditional business of sumptuous-but-sporty sedans and SUVs was as robust as ever.

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But soon after Krueger took over, sales of the i3 hit a wall, calling into question the electric push. The plan to use carbon fiber turned out to be too costly. The strong-willed Reithofer never really exited the stage. The diesel crisis that shook rival Volkswagen sullied the reputation of the entire German car industry, and more recently the U.S.-China trade spat has hit profits.

“The path BMW set out for Krueger wasn’t easy,” said Frank Biller, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart. “BMW has traditionally picked executives with less emotional flair and more of a technical, engineering background. Car electrification is a very emotional topic.”

As Krueger puzzled over how to reinvent BMW for the electric age, it was almost a year before he presented his strategic vision — which was a bust. He delayed BMW’s next major electric car, effectively squandering its leadership in the field. Key engineers quit to set up an electric-vehicle start-up. And to help pay for the shift, Krueger doubled down on gas-guzzling, supercharged luxury cars such as the 8-Series sports car and full-size X7 SUV.

At Krueger’s first major public appearance, at the Frankfurt car show in September 2015, the CEO collapsed on stage minutes into a presentation. He blamed the episode on dehydration and too many hours flying, but it was an apt metaphor for his leadership, and the event haunted him with obvious discomfort speaking publicly in the months that followed.

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In this Friday, May 11, 2018 photo a man charges his BMW electric vehicle at the rest stop Brohltal
A driver charges his BMW electric vehicle in Niederzissen, Germany.
(Ferdinand Ostrop / Associated Press)

The company has since watched Daimler reclaim the luxury crown. Tesla Inc. has become the face of the electric-car revolution. And everyone from Ford Motor Co. to Ferrari is rushing to develop electric models, with scores of new offerings scheduled to hit the market in the next five years.

“BMW took its head start in electric cars for granted and then failed to hit the accelerator again when needed,” said Christian Ludwig, an analyst at Bankhaus Lampe in Bielefeld, Germany.

Krueger’s departure serves as a warning to the new executives running at least half a dozen of the industry’s top companies. Electric vehicles offer nowhere near the same returns as combustion vehicles. And selling electrics remains a struggle without major incentives as consumers balk at patchy charging infrastructure, high prices and limited driving range.

Like Krueger, most of the new executives come from engineering backgrounds. But they’ll be required to master technology-driven trends such as ride-hailing, while contending with Silicon Valley giants such as Tesla, which is aiming at BMW’s bread-and-butter 3-Series sedan and VW’s Golf with its Model 3, and Waymo, the self-driving unit of Alphabet Inc.

At Daimler, new CEO Ola Kallenius, 50, issued the company’s third profit warning in a year, citing provisions to cover recalls of diesel cars that need upgrades to improve emission technology. He took over from Dieter Zetsche in May. At Fiat Chrysler Automobiles, CEO Mike Manley failed in an attempted merger with Renault that would have delivered much-needed electric technology that Fiat eschewed under Sergio Marchionne, the long-serving CEO who died last year.

Krueger’s likely successor, Oliver Zipse, 55, is another insider with a similar career path. Like Krueger, Zipse worked at BMW’s Mini operations in England and then served as global head of production. Zipse is a champion of BMW’s strategy of keeping factories as flexible as possible, making hybrid and electric models alongside combustion cars around the world. That aligns him with Krueger, who in May defended his cautious approach on electric cars, saying no one knew how fast they’d take over or which technology might win out.

“We have taken numerous decisions that we are now bringing to the road,” Krueger said at a June presentation. “By 2021, we will have doubled our sales of electrified vehicles compared with 2019.”

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