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      06-19-2014, 10:11 AM   #1
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BMW CEO has been disappointed by 1 Series Costs

By Justin King Wednesday, Jun 18th, 2014 @ 12:08 PM

BMW is reportedly drafting a cost-cutting plan that aims to save up to 4 billion euros ($5.4 billion USD) annually.

CEO Norbert Reithofer is said to have been disappointed by high costs from both the BMW 1-Series lineup and the entire Mini brand, according to a report by German outlet Manager Magazin.

Development costs for several new models and new powertrains have been cited as contributing factors to lower margins in 2013 compared to the previous year, however the company still expects a significant gain in overall profits from the expanded lineup.

Reithofer has reportedly sought help from management consultancy firm McKinsey & Co. to help formulate a plan, which is expected to run through 2020.

The company earlier this year disclosed plans to reduce the percentage of revenue spent on research and development. The latest report suggests cost-cutting measures will also target production operations, though the company has not publicly outlined specific plans.


m.leftlanenews.com/bmw-cost-cutting-plan-aims-to-save-54b.html
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      06-19-2014, 10:57 AM   #2
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It's no secret that the 1-Series shares nearly everything with the 3-Series except a few inches of the wheelbase and minor decontenting (this especially true regarding E8x vs. E9x). It should come at no surprise then that when one of two effectively identical products, in terms of manufacturing costs, is offered at a lower MSRP that the margins will suffer.
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      06-19-2014, 11:09 AM   #3
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Are they not talking about the new Euro 1 series which is just a rebadged Mini?

Here in NA it is called the 2 Series Touring.
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      06-19-2014, 12:22 PM   #4
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Quote:
Originally Posted by vertebra View Post
By Justin King Wednesday, Jun 18th, 2014 @ 12:08 PM

BMW is reportedly drafting a cost-cutting plan that aims to save up to 4 billion euros ($5.4 billion USD) annually.

CEO Norbert Reithofer is said to have been disappointed by high costs from both the BMW 1-Series lineup and the entire Mini brand, according to a report by German outlet Manager Magazin.

Development costs for several new models and new powertrains have been cited as contributing factors to lower margins in 2013 compared to the previous year, however the company still expects a significant gain in overall profits from the expanded lineup.

Reithofer has reportedly sought help from management consultancy firm McKinsey & Co. to help formulate a plan, which is expected to run through 2020.

The company earlier this year disclosed plans to reduce the percentage of revenue spent on research and development. The latest report suggests cost-cutting measures will also target production operations, though the company has not publicly outlined specific plans.


m.leftlanenews.com/bmw-cost-cutting-plan-aims-to-save-54b.html
I dont like the sound of that
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      06-19-2014, 01:03 PM   #5
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This sounds like shareholder bait - try to get key investors excited about future profitability. $4-5B in reduced costs? Highly doubtful but makes for a great sound bite.

Remember VW group's statement about 800K vehicles in the US by 2018 (or whatever)? Again, complete fantasy, but I wouldn't be surprised if it bumped the stock a couple of points.
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      06-19-2014, 01:07 PM   #6
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Quote:
Originally Posted by mike@x-ph.com View Post
I dont like the sound of that
Hopefully he's talking about axing all of the niche vehicles: X4, 4/6 Gran Coupe, the 3 & 5-series GT's, etc.
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      06-19-2014, 04:21 PM   #7
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imo, he's talking about the f20/21.
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      06-19-2014, 04:25 PM   #8
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They'll use that $4-5 billion to buy more shares back, to keep up the illusion all is well. It's all the rage in the new normal.
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      06-19-2014, 06:22 PM   #9
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Ouch. Cut R&D. That's not generally a good option. They should go after some of their marketing budget instead. While I like some of their ads and promo videos, I could do without it if the tradeoff is less investment in solid engineering.

Also agree that they could have fewer models to help reduce R&D cost. They've expanded their lineup in the last few years with a number of lower volume cars. The GT sales are low and the X series Ms make no sense to me. I have yet to see an X5/6 M at the track. I've seen only a handful of the GTs anywhere. I understand they are making some sales on these but if they need to cut cost they should look at total profitability of each product and then subtract the development cost.

Last edited by Pyrat 2; 06-19-2014 at 06:28 PM..
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      06-19-2014, 06:43 PM   #10
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I don't think this article is researched very well. BMW AG is building a mega R&D (FIZ) center next to the old one, a few blocks up the street from the Welt. In fact I seem to remember reading or hearing on the radio here that BMW AG plans to spend something like 1B euros on this new R&D test center. BMW is spending more money than Audi right now. So like I said, I think this article is off base. Maybe @Scott26 can shed more light on this.

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      06-19-2014, 06:48 PM   #11
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Quote:
Originally Posted by Dackelone View Post
I don't think this article is researched very well. BMW AG is building a mega R&D (FIZ) center next to the old one, a few blocks up the street from the Welt. In fact I seem to remember reading or hearing on the radio here that BMW AG plans to spend something like 1B euros on this new R&D test center. BMW is spending more money than Audi right now. So like I said, I think this article is off base. Maybe @Scott26 can shed more light on this.

Dack
Ugh... BMW is spending more R&D money tha Audi... to bring along the x4/x7... and the spin off the 3 series coupe into the 4 series... Basically spending a ton of R&D to reskin and remarket slightly different cars for different niche markets...
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      06-20-2014, 08:51 AM   #12
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Quote:
Originally Posted by killerhurtalot View Post
Ugh... BMW is spending more R&D money tha Audi... to bring along the x4/x7... and the spin off the 3 series coupe into the 4 series... Basically spending a ton of R&D to reskin and remarket slightly different cars for different niche markets...
it's working- sales volume is kicking up pretty good.
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      06-20-2014, 11:30 AM   #13
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Quote:
Originally Posted by Dackelone View Post
I don't think this article is researched very well. BMW AG is building a mega R&D (FIZ) center next to the old one, a few blocks up the street from the Welt. In fact I seem to remember reading or hearing on the radio here that BMW AG plans to spend something like 1B euros on this new R&D test center. BMW is spending more money than Audi right now. So like I said, I think this article is off base. Maybe @Scott26 can shed more light on this.

Dack
I will reply later but this relates to lessons learned with current models of BMW 1er and separate MINI (Not the F56) and how to improve in the future in which the MINI and BMW alignment is going to be far more profitable for MINI than before and its benefits that will be incurred with BMW.

BMW have an ingenious way of cost effective cost-cutting that is actually hugely beneficial to future models. Learn more later...
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      06-20-2014, 06:57 PM   #14
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Quote:
Originally Posted by cheshirecat79 View Post
it's working- sales volume is kicking up pretty good.
Sure, but the new cars aren't nearly as interesting as the older cars lol. and doesn't perform that much better either.
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      06-21-2014, 06:33 AM   #15
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Quote:
Originally Posted by 135ivert View Post
This sounds like shareholder bait - try to get key investors excited about future profitability. $4-5B in reduced costs? Highly doubtful but makes for a great sound bite.

Remember VW group's statement about 800K vehicles in the US by 2018 (or whatever)? Again, complete fantasy, but I wouldn't be surprised if it bumped the stock a couple of points.
It's a private company.
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      06-21-2014, 09:16 AM   #16
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Quote:
Originally Posted by TheSt|G View Post
It's a private company.
No, it's not.

http://www.bmwgroup.com/bmwgroup_pro...home/home.html
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      06-23-2014, 08:04 AM   #17
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Originally Posted by cheshirecat79 View Post
The hell? I was sure it was a private company. Wrong I am.
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      06-23-2014, 08:38 AM   #18
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"Reithofer has reportedly sought help from management consultancy firm McKinsey & Co. to help formulate a plan, which is expected to run through 2020"

Often from a board's perspective if you have to bring in a consultant to form a plan they wonder why they need you and your management team.
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