At the Paris auto show Norbert Reithofer, BMWs new CEO, talked about issues affecting the German premium carmaker ranging from the weak dollar to profit margins and the need for flexible production. Reithofer, 50, joined BMW in 1987 as head of maintenance planning. He was president of BMWs US plant in Spartanburg, South Carolina, where the X5 premium SUV is produced. Most recently, Reithofer was the board member responsible for production. He spoke in Paris with Luca Ciferri, Automotive News Europe chief correspondent, and Diana T. Kurylko, Automotive News staff reporter.
Have you liked being a star at the show today now that you are CEO?
As head of production, you are more behind the stage. And as chief executive officer, you are more in the limelight. During the course of the day, I had a lot of fun in my new job. Its my first automobile show for BMW as chief executive, and I like the role very much.
There is a sense that BMWs margins need to improve. What are you doing, considering that sales are great?
To discuss margins in depth, I need three months in the job. In the car industry, to announce in March 2006 a pretax profit of 4 billion is a statement. In 2005, we had higher raw materials prices costing us more than 200 million. We had exchange issues costing us 680 million. Because we were able to improve our efficiency, we were able to compensate for 1 billion.
We are still a very successful company from a profitability and volume point of view.
Which comes first – profit or volume?
First comes profit, then volume. But you cannot grow your profits without growing your volumes. If you stay where you are [in terms of volumes], you wont be profitable in five years.
Is it still true that some car companies are too big to fail?
We used to say that big car companies with a volume of 5, 6, 7 or 8 million units a year will always be financially viable. This is not true anymore.
How can a carmaker succeed today?
The capability to quickly follow the changes in the markets is crucial for the future of any automaker, as size alone is no longer enough to survive. We are able to change specifications to a vehicle just six days before it is produced, but this flexibility was not obtained overnight. Between 1996 and 1997, we understood that the automotive market would become highly volatile, so we increased the flexibility of our plants.
Next year, BMW will begin selling gasoline direct-injection engines. What advantages do these engines have?
High-precision fuel injection cuts fuel consumption 8 percent compared with the latest generation Valvetronic six-cylinder unit. Valvetronic [a continuously variable valve-timing system] has already reduced fuel consumption by 14 percent.
Will premium cars win a bigger share of the new-car market?
In Germany, premium vehicles have a 30 percent share of the market. In the US, the share was 3.5 percent in 1990 and 11.6 percent last year. The US probably wont get to 30 percent, but a 15 percent to 20 percent share is a realistic target. This represents an enormous potential in terms of volume.
What are the greatest technical challenges faced by BMW?
Reducing CO2 emissions in Europe and cutting NOx emissions in the US.
Is Rolls-Royce a success?
For us, it was important to get it into the market and re-establish the brand. Then, we wanted to widen the model range with an extended-wheelbase car and a convertible. There is space for a car priced at about 250,000, and it cant be a BMW.
How about hybrids?
We entered into cooperation with General Motors and DaimlerChrysler to have a hybrid system. That moved me and the BMW group out of the corner.
How about a hydrogen-powered vehicle?
Its 20 to 25 years away.
Will the 1-series car be sold in the US?
We realize the market in the US is changing. We will definitely bring the 1 series to the US, but it will not be a hatchback. We have a 3-series model range, coupe, sedan, station wagon. You can have something like that for the 1 series.
You may e-mail Diana T. Kurylko at [email protected]