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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 |
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, 12:22 PM | #4 | |
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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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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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06-20-2014, 08:51 AM | #12 |
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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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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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06-21-2014, 06:33 AM | #15 | |
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06-21-2014, 09:16 AM | #16 |
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06-23-2014, 08:04 AM | #17 | |
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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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