# BMW layoffs so we can still afford their cars?



## rmorin49 (Jan 7, 2007)

I do remember the VWs that were assembled in PA, probably the worst models ever sold. Can't say if it was poor assembly, poor design, or just shoddy quality control, but it does make one think. I know my R32, assembled in Wolfsburg, is as tight and solid as any BMW I have ever driven in the last 25 years.


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## am_ver (Jul 12, 2005)

rmorin49 said:


> I do remember the VWs that were assembled in PA, probably the worst models ever sold. Can't say if it was poor assembly, poor design, or just shoddy quality control, but it does make one think. I know my R32, assembled in Wolfsburg, is as tight and solid as any BMW I have ever driven in the last 25 years.


My 98 Jetta was assembled in Mexico, felt solid, ran great and gave no problems. Has anyone been to the factory tour; the work is done 98% by robots. So if the robots are the same then it hardly matters for where the plant is. Actually I am all for a plant in California; somewhere next Bakersfield would make distribution to Nor and So Cal easy (isn't that over 50% of the US market for BMW?).

What about the X5, does that feel less than a BMW to you since it was made in SC?


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## iversonm (Nov 15, 2004)

Of interest is the fact that the Magna-International-built X3 has the highest quality ranking of all cars in Europe. So much for outsourcing.



X550-ED said:


> Thanks for pointing out my future option and the option of all
> other members on this forum who believe final assembly is still important as of today.
> 
> My brother in law and friends will certainly attest to having more problems in their South African made MB C-Class than my German made 2003 C-Class.
> ...


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## christianfahey (Apr 13, 2006)

*Sneaky way?*



gopctel said:


> This is US government's sneaky way to force companies to "in-source" employment back to the US, by allowing the dollar to drop like this.
> 
> It will be sad day if BMW is forced to manufacture more models like the 3 and 5 series in the US for US consumption.


I don't think it was sneaky. Bush's original team (think it was John Snow) were very clear that they INTENDED to push the dollar down in order to decrease imports, increase exports, and support domestic production.


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## am_ver (Jul 12, 2005)

christianfahey said:


> I don't think it was sneaky. Bush's original team (think it was John Snow) were very clear that they INTENDED to push the dollar down in order to decrease imports, increase exports, and support domestic production.


you must really like Bush?!


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## gopctel (Oct 9, 2007)

iversonm said:


> Unfortunately, you're a bit late for sentimentality. Global companies buy globally. I've had this lesson beaten into me over the last decade where we had the dollar propped at an artificial level, combined with one-sided trade agreements.
> 
> BMW builds 25% of their cars outside Germany, in places like South Africa, the US, the UK, and Austria. They are moving the Z4 replacement to Europe, and brining the X3 replacement to the US, to boost US production. I don't think you're going to see many more changes other than this. You might see a 3er plant, or perhaps an engine plant, but not much more. Assembly, while labor intensive, is not the biggest cost problem. The suppliers are going to bear the brunt of the cost reductions, as about 60% of the vehicle value is purchased components.
> 
> BTW, While assembled in the KY, the Corvette has a Canadian engine and a Mexican transmission.


Thank you for your insights on the auto industry. I know that globalization is here to stay, and there isn't much anybody can do about it. I certainly hope, for the welfare of BMW employees in Germany, that this trend doesn't continue any more than it already has. People choose different brands of cars for their own reasons, and many of us here buy BMW for its reputed status as a luxary "Import". Some companies go through hoops to keep that "Made in (domestic country)" label on their products, even if only the final assembly is done there. This is why the brand that we love is not called CMW (Chinese Motor Works).


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## gopctel (Oct 9, 2007)

christianfahey said:


> I don't think it was sneaky. Bush's original team (think it was John Snow) were very clear that they INTENDED to push the dollar down in order to decrease imports, increase exports, and support domestic production.


How many times have you heard Bush say that he supports "a strong dollar policy"? In fact, he just said this two day ago (http://www.reuters.com/article/politicsNews/idUSWAT00899420080228). His administration only pays lip service to a strong dollar policy.


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## Rugged Racer (Apr 22, 2007)

am_ver said:


> you must really like Bush?!


It true, the Administration "talked down" the value of the dollar. Bush hasnt been the only one to do it... it was done back in the early to mid 80's as well. Look up a book called _Currencies and Politics in the United States, Germany, and Japan _by C. Randall Henning


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## iversonm (Nov 15, 2004)

gopctel said:


> How many times have you heard Bush say that he supports "a strong dollar policy"? In fact, he just said this two day ago (http://www.reuters.com/article/politicsNews/idUSWAT00899420080228). His administration only pays lip service to a strong dollar policy.


And how do you propose he strengthen the dollar?


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## gopctel (Oct 9, 2007)

iversonm said:


> And how do you propose he strengthen the dollar?


I'm not an expert on foreign exchange policy, but he can start with reducing the federal deficit. Also by promoting a more balanced trade policy will help. He can also temporary pause the dollar's decline with coordinated dollar purchases with other central banks. I know other countries and previous administrations have done this before, but I don't believe Bush administration has ever tried this. An administration that actually acts to defend the dollar will boost its confidence in the currency markets and give traders second thoughts about hedging against the dollar.

Maybe I'm asking too much, as this administration likes to define itself by the war on Iraq, and not much else.

I fear this thread is getting off-topic, as I don't intend on debating economic policy on this forum.


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## iversonm (Nov 15, 2004)

gopctel said:


> I'm not an expert on foreign exchange policy, but he can start with reducing the federal deficit. Also by promoting a more balanced trade policy will help. He can also temporary pause the dollar's decline with coordinated dollar purchases with other central banks. I know other countries and previous administrations have done this before, but I don't believe Bush administration has ever tried this. An administration that actually acts to defend the dollar will boost its confidence in the currency markets and give traders second thoughts about hedging against the dollar.
> 
> Maybe I'm asking too much, as this administration likes to define itself by the war on Iraq, and not much else.
> 
> I fear this thread is getting off-topic, as I don't intend on debating economic policy on this forum.


I'm in agreement on the off topic bit, so this is my last post on the subject. Iraq certainly is a major problem. We can't afford to stay, but but can't leave without it collapsing like a house of cards.

However, the balanced trade policy is the bigger problem, and easily has been brewing for 20 years. As long as we continue to import more than we export, and fail to attract investment, the dollar will decline. The actions you speak about above would only prop up the dollar for the benefit of the exporting nations, which is exactly what has been happening. Our notion of balanced trade pretty is open access to our markets, with limited access in return.

China has a 14% export subsidy on automotive parts. This is in a business where double digit profit margins are huge. Government approval is also required for a Chinese entitiy to send money abroad, so the ability to import into China is deliberately limited. This somehow isn't balanced trade.


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## mullman (Jan 5, 2006)

As the dollar continues to decline european goods will continue to get more expensive.
On the watch boards this weekend people are complaining as Rolex just increased their US prices 10-20% overnight (rolled out 3.1, fully effective Monday 3.3).

On the flipside, BMWs have always been much cheaper in the US than in other parts of the world.
We have great prices (compared to say Germany), but lack of selection.

In the whole scheme of things the market will ultimately decide the price of goods as people vote with their dollars.


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## iversonm (Nov 15, 2004)

iversonm said:


> I'm in agreement on the off topic bit, so this is my last post on the subject. Iraq certainly is a major problem. We can't afford to stay, but but can't leave without it collapsing like a house of cards.
> 
> However, the balanced trade policy is the bigger problem, and easily has been brewing for 20 years. As long as we continue to import more than we export, and fail to attract investment, the dollar will decline. The actions you speak about above would only prop up the dollar for the benefit of the exporting nations, which is exactly what has been happening. Our notion of balanced trade more or less is open access to our markets, with limited access in return.
> 
> China has a 14% export subsidy on automotive parts. This is in a business where double digit profit margins are huge. Government approval is also required for a Chinese entity to send money abroad, so the ability to import into China is deliberately limited. This somehow isn't balanced trade.


OK, one more post, just to fix my typos. That will teach me to post when I'm awake in the middle of the night.


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## Dave 330i (Jan 4, 2002)

mullman said:


> As the dollar continues to decline european goods will continue to get more expensive.
> On the watch boards this weekend people are complaining as Rolex just increased their US prices 10-20% overnight (rolled out 3.1, fully effective Monday 3.3).
> 
> On the flipside, BMWs have always been much cheaper in the US than in other parts of the world.
> ...


Will you please tell our government that handouts are not the solution? Who wants my $600 that is suppose to save our economy? That's certainly not helping the dollar's value. :rofl:


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## cosmos (Jan 18, 2002)

To get back on topic a bit. Why did BMW choose to not produce the 1er here in the USA?

And with this, does anyone see BMW offering USA delivery to EU customers for the X5/X6?


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## Dave 330i (Jan 4, 2002)

cosmos said:


> To get back on topic a bit. Why did BMW choose to not produce the 1er here in the USA?
> 
> And with this, does anyone see BMW offering USA delivery to EU customers for the X5/X6?


Because they don't want the quality to suffer? My car was built in Munich even though the Germans were drunk after Oktoberfest, not South Africa like those 325s. :rofl:


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## iversonm (Nov 15, 2004)

cosmos said:


> To get back on topic a bit. Why did BMW choose to not produce the 1er here in the USA?


Because they are already building the 1er in europe. The coupe and vert are variants of the existing hatchback, not new designs.


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## X550-ED (Aug 27, 2005)

Dave 330i said:


> Get over it. Your future option is not to buy a BMW. I think too many people over emphasize the importance of finally assembly...





Dave 330i said:


> Because they don't want the quality to suffer? My car was built in Munich even though the Germans were drunk after Oktoberfest, not South Africa like those 325s. :rofl:


 
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:dunno:
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:tsk:
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:loco:


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## mapezzul (Jun 14, 2005)

cosmos said:


> To get back on topic a bit. Why did BMW choose to not produce the 1er here in the USA?
> 
> And with this, does anyone see BMW offering USA delivery to EU customers for the X5/X6?


BMW chose not to produce the 1 here due to the numbers to be sold in the EU and the previous production (hatch) was made there. They are shifting 3 series production elsewhere to meet the demand. The SC plant is to be utilized by the SAV models since it is a single line plant they are all created together. The Z will be leaving with the next generation and cars are not in the plans currently to be produced there. The dollar dive can be offset by production in South Africa.



Dave 330i said:


> Because they don't want the quality to suffer? My car was built in Munich even though the Germans were drunk after Oktoberfest, not South Africa like those 325s. :rofl:


The cars produced in South Africa actually have had better repair and quality records than those produced in Germany. The Roslyn plant has won several independent awards for quality.

BMW utilizes the same processes and robots in each factory. The end products are indistinguishable aside from a change in the vin and window stickers. Robots account for the majority of the build anyways.

The design, engineering and build implementation are what makes a car. Not where it is produced. As long as equal standards and methods are used.

Best of luck!:thumbup:


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## mapezzul (Jun 14, 2005)

omerfar23 said:


> i hope massive saving plan doesn't include sourcing cheaper parts and material cause that would really suck. Usually "massive saving plan" means cutting jobs and cutting corners.
> 
> BMW quality has been improving over the past few years but if they start taking short cuts we will see quality issue soon. Also more US plants probably means no European delivery in the future.


No more US plants... no need just expansion. They will eventually move car production to the US for probably the 3 but that is years away and more than likely will not occur. 
BMW is over paying it suppliers who are making larger margins and profits than BMW as a whole. There will be supply chain changes and a reduction in R&D. There will be some collaboration with MB.

06.02.2008
Strategic Realignment in Decisive Phase

Increasing value and securing the future are primary focus +++ Four billion euros in material cost reduction planned +++ Personnel costs to drop by up to 500 million euros starting in 2009 +++

Munich. The BMW Group is entering a decisive phase in the implementation of its strategic realignment. "We are doing our homework to ensure our business success in the future. The implementation of our new strategy is not a 100-yard dash. This year, we are laying the foundation for a turnaround in profitability," said Norbert Reithofer, Chairman of the Board of Management of BMW AG, at an event with analysts in London on Wednesday. "By creating this new strategy, we have defined our own road to future success. All of the steps we take are designed to secure the future and increase value," he emphasized.

As part of the new Number ONE strategy, which the BMW Group presented at the end of September 2007, the first series of steps have already been triggered and will be taken as early as this year. In addition, further initiatives and projects were launched, the results of which will help the company hit its ambitious targets. The BMW Group aims to have its Automobile segment achieve a return on capital employed (ROCE) of more than 26% and a return on sales of between 8% and 10% by 2012.

Ganal: material cost-savings potential of 750 million euros p.a.

In order to achieve these targets, the BMW Group intends to improve costs and performance by about six billion euros by 2012, as compared with the company's original plans. "We believe that the lion's share of the targeted potential can be tapped in the area of material, production and development costs," BMW Group CFO Michael Ganal said at the same event. At some 25 billion euros, the cost of materials is clearly the company's biggest cost factor.

"In concrete terms, we expect that in this area, we will be able to realize two-thirds, or four billion euros, of the total potential, which amounts to some six billion euros. If we assume that we will reduce the cost of materials by 3% per year, this will translate into an annual potential of roughly 750 million euros. By 2012, this would result in approximately 4 billion euros," Ganal added.

Personnel cost reduction as another of the strategy's building blocks

A further step en route to achieving the targeted return goals is the reduction in personnel costs. Comprehensive efficiency enhancements - above all in manufacturing - will allow the company to decrease headcount by around several thousand employees. In this area, the BMW Group will primarily take advantage of the flexibility afforded by employing temps, who commonly go to another company on expiration of their work contracts.
Measures are also envisioned for the permanent workforce. These solutions are socially compatible and have been agreed on as a result of a constructive dialogue with the Works Council. These involve allowing personnel to enter into partial retirement arrangements starting in 2008 as well as not re-staffing vacancies. Furthermore, staff members will receive offers relating to the voluntary termination of employment relationships. "With the help of this package, we want to realize a total of up to 500 million euros in cost savings per year, starting in 2009," Ganal emphasized. With a view to rising to the diverse challenges in the future as well, the BMW Group will continue to hire highly qualified skilled workers and executives worldwide.

Further profitability improvements through cooperation

The BMW Group will continue to leverage its cooperative ventures in order to improve its profitability. For example, the company is in talks with other manufacturers to explore the possibility of using shared components or engines in order to achieve economies of scale and cost reductions. "The talks are making good headway, but they have not yet been finalized," Ganal said. Today, the BMW Group already derives an economic benefit from its joint venture with PSA that supplies engines for the second-generation MINI brand cars. "The importance of cooperations in the field of drive-trains is evidenced by the fact that engine costs account for about 25% of a vehicle's total production cost," underscored Ganal.

The BMW Group also intends to tap further synergies internally by stepping up the use of components based on a construction kit system for various models. The company sees a lot of potential, especially as regards the construction kit approach. Drive engineering is another area where the BMW Group wants to become more efficient. In the next few years, the company aims to reduce variant engineering costs, despite the rising number of variants caused by differences in emissions regulations worldwide.

"Besides cost-cutting, we are focusing on placing the company's future on a firm foundation," Ganal emphasized further. The BMW Group will invest in emission-reduction technologies and new, attractive premium cars and motorcycles in the upcoming years as well. Says CFO Ganal: "Unlike other companies, we do not want to positively influence earnings by dramatically reducing our research and development expenditure ratio. In addition to efficiency enhancements, our list of targets includes technology and innovation leadership with a view to securing the company's future. As company management, we feel committed to this vision."

Nevertheless, the BMW Group aims to achieve a significant reduction in its R&D quota. This is the ratio of research and development to revenue. In the last five years, it accounted for an average share of 6.1%. In the next few years, the company intends to spend between 5.0% and 5.5% of revenue on new products and technologies.

BMW Group plans to reduce dependence on foreign exchange rates

A large portion of the adverse effects on the company's earnings in recent years has stemmed from negative currency effects. In light of its successful retail trend in the USA, the BMW Group wants to expand its natural hedging sustainably over the medium term and thus significantly reduce its dependence on volatile foreign exchange rates. "It will take some time to step up natural hedging, although we have already achieved some substantial improvements in the past. Therefore, we will not set our sights on achieving a return on sales between 8% and 10% in the automobile business over the short term, based on current foreign exchange rates, or entirely independent of currency exchange rates," Ganal underscored.

The BMW Group will expand production capacity at its US plant in Spartanburg from some 150,000 to 240,000 units by 2012. Plans for the expansion are already underway. Capacity at the Oxford MINI plant is to be increased to 260,000 units per annum-without making further investments in infrastructure. The BMW Group will take the first step towards expanding its capacity in China by raising it from 30,000 to 44,000 units a year.
Furthermore, the company will work on strategically increasing purchasing in US dollars. One aspect is the local content of the vehicles manufactured in the USA. In recent years, it was increased from about 30% to more than 60%. Another aspect is purchasing in the NAFTA region for production in Europe and other regions. In 2006, the NAFTA region accounted for some 9% of BMW's global purchasing.

BMW Group set to tap new business fields

The BMW Group will continue to grow by introducing new models going forward. In addition, the company will develop new fields of business and operate along the vehicle lifecycle as well as along the value-added chain. This includes the planned development of new sales channels in the accessories business. In the pre-owned vehicle business, the company operates in the premium pre-owned segment. Both activities are lucrative, since a mere 25% of the revenue generated over a vehicle's lifecycle stems from the new car business. Moreover, the BMW Group plans to offer entirely new individual mobility services as well as service modules.

By adopting this new strategy, the BMW Group has set the course for a future of success. "We will continue to write the BMW Group's success story. Our entire management team is committed to this," Reithofer declared.

For questions please contact:

Corporate Communications

Mathias Schmidt, Finance Communications
Telephone: (+ 49 89) 382-24118, Fax: (+ 49 89) 382-24418


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