MUNICH (Bloomberg) -- BMW AG will “significantly” surpass its goal of reducing spending on components and supplies by 4 billion euros ($5.2 billion) by 2012, helped by a partnership with Daimler AG's Mercedes-Benz.
Talks between BMW and Mercedes have yielded new projects over the past several months that will help each company reduce spending by 100 million euros a year by 2012, Herbert Diess, BMW's purchasing chief, said in an interview.
“We can say that from today's perspective we will certainly and easily reach the 4 billion-euro savings goal, and even significantly surpass it,” said Diess, the BMW management board member responsible for the cuts.
BMW is seeking to raise profitability as Mercedes-Benz and Volkswagen AG's Audi luxury unit step up pressure. Audi intends to dethrone Munich-based BMW as the luxury leader by 2015, while Mercedes, which was toppled by BMW in 2005, has vowed to take market share this year by growing at twice the pace of the global car market. BMW is responding by trimming costs and expanding product offerings.
“The strategy that BMW seems to be following is proliferation of product,” said Christoph Stuermer, an automotive analyst at IHS Global Insight in Frankfurt. “The question is can they still handle that? Or will it come back to bite them?”
In addition to rolling out a revamped 5 series and the new Mini Countryman this year, a line of electric-powered city cars is due to be introduced by 2013. The maker of Mini and Rolls-Royce vehicles is also developing front-wheel drive compacts for the namesake brand, as part of its target of boosting sales to 2 million vehicles by 2020 from at least 1.3 million this year.
BMW is seeking to lower costs by helping component makers improve efficiency and develop systems, such as start-stop technology, that they may be able to sell to other manufacturers.
“We'll never be able to lower costs just through volumes,” Diess said. New projects with Mercedes, BMW's closest competitor, “will lead to significant savings as well as technical advances.”
While joint purchasing can lead to savings, there are limits to the cooperation, which currently encompasses a few dozen components, Diess said. “We don't want to go too far, because the brand identities and customer expectations are different,” he said, adding that Daimler's recently announced partnership with Renault SA hasn't affected talks.
Because most of BMW's manufacturing is based in Germany, the carmaker is exposed to currency fluctuations and has sought to limit the risk by increasing purchases of components in currencies other than the euro.
The euro on Tuesday traded below $1.31 for the first time since April 2009 on concern a 110 billion-euro rescue package for Greece will fail to contain the region's debt crisis. The 16- nation currency fell the most in a week against the yen as bond yields from Spain to Portugal to Ireland rose on concern the crisis that began in Greece is spreading.