With factories running flat out to meet surging demand in China and the United States, German premium car makers were considered largely invulnerable to the crisis buffeting mass-market European car makers. But cracks are beginning to show.PASCAL LAUENER/Reuters
If you haven't been watching closely, you might have missed the sea change going on at BMW.
What has for so long has been a company living the slogan, "the ultimate driving machine," is now busy transforming itself into what CEO Norbert Reithofer referred to today as "a multi-brand company devoted exclusively to premium mobility." Huh?
At some point, BMW will need to massage that; "premium mobility" most definitely is not as sexy as "ultimate driving." But as Reithofer noted in discussing the company's earnings, BMW is refining its brands – BMW, Mini, Rolls-Royce and the upcoming electric i – "with new models and technologies to fit the times." And those times are uncertain, he said, both economically and politically.
China? The economy is slowing and all sorts of forces are at work that will likely affect what has been tremendous growth in the sale of new vehicles – especially for the German car companies, who all are milking big profits from China.
So called "crisis regions?" From here in Canada, the Middle East seems a long way off. But from Munich, in southern Germany where BMW is headquartered, countries in or near crisis are close by: Syria, Egypt, Israel, Iraq, Iran and even Russia. A big chunk of what I'll call BMW's neighbourhood is in turmoil or close to it.
Ah, turmoil. Reithofer need look no further than Europe to see a colossal mess. A whole host of Germany's neighbours are in economic crisis, from Italy to Spain to Portugal to Greece to Cyprus to even France. The rigid austerity measures championed by the German government in so many of these countries look to have stalled growth and created troubled political climates. If there is one thing Germans remember even now, it's the 1930s – and for some, 2013 looks a little like 1931.
Of course, CEOs of incredibly profitable car companies – BMW delivered more than 448,000 vehicles in the first quarter, and net profit hit €1.3-billion – are careful with their words, They are mindful of the risk they take in upsetting politicians who can make or break their companies and the industry as a whole with regulations. But when Reithofer says, "Europe needs to find the right balance between its belt-tightening measures and growth," he's surely criticizing austerity.
And when he says, "we expect the consolidation of public budgets to take several more years to be achieved," he's essentially warning that BMW expects more cuts to government spending right across Europe, and perhaps in many other parts of the world.
That said, BMW is a car company aiming for profit margins of 8-10 per cent. To get there, BMW must keep launching new models. In March, BMW began the roll-out of a revised Z4 roadster and the Paceman, the seventh Mini model. In May, the new BMW M6 Gran Coupé will arrive in some showrooms and by mid-year the new BMW 3-Series Gran Turismo will be available as the third variant of the current BMW 3 Series, he noted.
Then there's BMW's EV (electric vehicle) plan. BMW is soon to start real production of the i family of EVs. This fall, the fully-electric BMW i3 will hit the road and it will be in the hands of paying customers by the end of this year.
All in all, Reithofer delivered a sobering message tempered by some optimism on the product front and confidence that in a world of turmoil, BMW has a plan to keep the company healthy, growing and, most of all, profitable.