They do like to lead with the chin at BMW. As with the cars they build, the attitude of the presenters at the 2005 results meeting in Munich today was punchy – almost aggressive.
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The task was to explain away the year-on-year drop in pretax profit from 3.6bn Euros to 3.3bn, while emphasising that this was actually a good result (blame it all on the depreciated dollar and the write-down on the worth of the Rolls-Royce aero-engine holding). But just as important, it seems, was the message that BMW – on a variety of measures – was the “best premium car manufacturer”.
The aim was to land a blow on Mercedes. It always has been. What other companies they dignify with the title of premium competitors they did not say. But it was quite extraordinary how often the “we-are-the-greatest/fastest/prettiest” line came up. Privately, the BMW tacticians admit that “biggest” is a vitally important marketing tool that Mercedes used to good effect for years and BMW is not about to pass up a golden marketing opportunity.
The other interesting weapon chairman Dr.Helmut Panke had for bashing the domestic opposition was oblique criticism of the drastic restructuring operations being undertaken by both Mercedes and Volkswagen. “Many companies laid off employees last year when they restructured. Over the last five years the German Top 30 corporations cut 300,000 jobs. In the same period BMW has created 11,000 jobs in Germany alone and 12,000 jobs worldwide.”
This sounds goofy. While VW and Mercedes are quite clear that their German-domiciled labour costs are a crippling burden, BMW seems more than willing to carry them. Very simply, they say, they are just going to raise flexibility of production further and continuously improve productivity – “like we did in the past.” And like they will do again in the future, presumably.
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By GlobalDataIt would be something of a deception to pretend that they have a tighter wage structure. The truth is more that they have an offset for high costs. That offset is the quantity of cars that are built to order. Michael Ganal, the sales and marketing director, said that around 65% of cars were now sold to customer order. Encouragement of that has been a huge success. So flexible is the system that 140,000 specification changes (usually additional expenditure) are processed every month. The upside in satisfying the heart’s desire of the most finicky customer is to avoid the use of discounts in making a sale.
The large part of BMW’s success in growing the top line over the last five years has been new product introduction. The moment that BMW had to dump Rover it turned inward to find new routes to market for an expansion of the business. First came Mini of course which is now 20% of group production, but that was quickly followed by other model variants. So while six years ago there were just six models flowing from the single brand of BMW, there are now ten flowing from the three of BMW, Mini and Rolls. Within two years it will be 12 from three as BMW launch the so called “Room-functional Concept” and the Sports Activity Vehicle.
Not content with bragging about the successes of the past, the board was content with a forecast of raising pre-tax profit to 4bn Euros this year despite the probability of declining markets and conditions.
It would be a heavy blow to the self-esteem if they dropped short; even worse if the slip was accompanied by compulsory job losses in Germany. It would be good theatre though. There are many who would derive great joy from seeing Panke wave the white hanky.
Rob Golding
