Although BMW is once again a smallish, 800,000-vehicles-a-year company now that it has sold Rover Group, it is stable and highly profitable, says Helmut Panke, board member for finance and sales.
Panke says BMW, with its expensive cars and superior profit margins, is wellpositioned for the future.
Panke spoke with Automotive News Europe reporter Georg Auer about the company's long-term prospects and production of its new Mini.
BMW's research and development expenses are borne by a relatively small number of cars. How do you cover expenses?
As my father used to say, a fishmonger has to sell many herrings to earn as much as a jeweler does with one ring. That is it. Our quota for research and development on sales is marked by the fact that we sell very expensive cars.
Our shares are rising, contrary to most shares in the auto industry.
You don't see any financial danger for BMW?
No, to the contrary. We will cover our expenses for development of the new models out of our cash flow. Further growth is possible out of our own financial resources. BMW stands on a solid financial basis.
How will you proceed with further investments?
In recent years, BMW usually invested DM3.5 billion-DM4.5 billion (E1.8 billion-E2.3 billion) a year. This was between 6 and 8 percent of turnover. We will continue to do this.
The plant for the new small BMW will cost about DM1 billion divided across three to four years. That only accounts for about 7 percent of our planned future investment.
Can you do any cost-cutting at BMW?
Anyone who can do big cost cuts at one time has not been cutting costs during the year. We watch costs all the time, so that we do not have to do any spectacular cost-cutting suddenly.
I don't see myself as a cutter of costs. We do all that all the time, after talking to workers' councilors.
Engineers are always complaining that treasurers impede technical progress with their 'bean counting.' How do you find a way to use funds wisely while not hindering progress?
It is a process that is gone through with every project. The question in every case is: What is the market prepared to pay for a better technical solution?
You have to think in alternatives, and the one that seems most acceptable to the market situation is chosen, so that we also can earn some money with the car.
What is the right size for BMW?
That is not easy to answer. One cannot just give a straight figure.
When I joined BMW in 1985, the question was: Can BMW sell more than 500,000 cars a year without losing its stature as a luxury brand? This year we will sell more than 800,000 cars, but the position of the BMW brand has never been as well defined as it is today.
It is a dynamic theme. We still are a small manufacturer, with a market share of under 2 percent worldwide. Therefore, we have the duty to create products that fulfill the wishes of a small number of customers.
Of course, with 800,000 cars, we are not concentrated on Europe or Germany anymore but on the world as a whole, which serves to make our business more stable.
We are selling 180,000 cars a year in North America.
The Mini is a new experience for BMW. How will you make it profitable?
We have positioned it in the market so that the Mini Cooper will cost just under DM30,000. But it has to deliver the same results as any other model. Its profitability must be the same as for any other car. And it has to have the same quality as our large BMW models.
During the car's development, we made sure we had many suppliers on the Continent. So the value of the Mini's components and labor in sterling is about 40 percent of the value of the car.
How do you get the Mini workers at the factory in Oxford, England, dedicated to the car they are producing?
We have managed that in Spartanburg and all our other plants.
The workers from an existing BMW plant come over and help train the new workers. They quickly learn what it takes to produce a BMW.
Will you keep the engine plant in Hams Hall in England?
Yes. The plant is highly automated so wages don't weigh heavily as a factor. We looked at things closely and found the [sterling] exchange rate was not so depressing in this case.