BMW's glitzy new showroom, BMW World, dominates the
skyline. Walking into the futuristic building, with its steel roof, everything is geared towards promoting the BMW brand. There are restaurants, a café and a shop selling BMW merchandise. Since the luxury showroom opened its doors last autumn, more than a million visitors have flocked here. BMW chose the showroom as the venue for the company's annual press conference. Munich
The world's biggest premium carmaker sold a record 1.5 million vehicles in 2007, and says its on course to meet its target of selling 1.8 million cars in 2012, confident that sales of its BMW, Mini and Rolls-Royce brands will continue growing. The company's profit before tax was 3.9bn euros ($6.1bn; £3.0bn) in 2007, 6.1% down on the previous year, but still high.
Managers told reporters that despite the weak dollar and high commodity prices, the carmaker is hoping to increase its earnings this year. But there is one big cloud on the horizon. The BMW group is battling to limit the fall-out from the weakening dollar. In an interview with the BBC, BMW's chief executive, Norbert Reithofer, confirmed that the carmaker would be increasing production at its plant in the
"If I look into the future, we will increase our production capacities in the
USfrom 150,000 units to 240,000 units, the car plant in the helps us on the natural hedging side, it can reduce your total exposure," Norbert Reithofer said. The US United Statesis BMW's biggest single market and the group has a big plant in . Four out of five BMW Group cars are exported, so the company is exposed to exchange rate fluctuations. Spartanburg, South Carolina
The carmaker knows that it is operating in a tough economic climate. "During the first two months of this year, in January and February, we had a challenge in the
," said the company's chief executive. "We were able to compensate for the losses in car volume in the US elsewhere in the world. We have a very good market situation in US China, Germanyis going up, and we had good results in the . We are a global player and we are not just dependent on one market," he said. "From a financial hedging point of view, we are in a good position this year," Mr Reithofer said, smiling broadly. "It's not just one currency. We have three important markets, UK Japan, the UKand the ," Mr Reithofer explained. United States
BMW said that it has hedged itself completely this year with "all of the main currencies". However, currency fluctuations are taking their toll. They cost BMW 517m euros last year, while raw material price increases cost the group 288m euros. But that was offset by higher sales and improvements in efficiency.
Faced with tough competition from rivals, the German group is bent on cost-cutting. "Our major production cost is materials, which amounts to 26bn euros," Mr Reithofer said. We have to have discussions with our supplier networks about prices and we have to start an initiative to find out if we can we reduce the costs of our supplier companies and cut logistics costs. We have to buy more goods, that means more components for our cars, in the
. For our car plants in the US USand Europe."
The premium carmaker has announced that it is planning to axe more than 8,000 jobs, a decision that provoked outrage in
. And it is worried that a slowdown in the Germany market could affect its sales. "A slowdown of the car market in the US in 2008 could affect the whole car market. Look at our customers, we are a premium car manufacturer and that helps," Mr Reithofer said. "Over the last 10 years, during a recession, first volume car manufacturers are affected, then later it's premium carmakers. Will it affect us? We don't know, it depends on how deep the crisis will be," he added, sounding an ominous tone. US
Folks, let me assure you that I use the BMW for transportation. But, it's not what you're thinking. Rather, I use the bus, metro rail, and walk to get where I need to [rimshot! Take my wife pleeze, etc.] Seriously, though, the famed German automaker whose luxury sedans are technologically advanced enough to make Toyota's Prius seem like a gas guzzler by comparison is dealing with two ominous and interrelated headwinds. First is the infamous declining dollar and, conversely, the excessively mighty Euro denting profits. While BMW does hedge its transactions as most of its sales are outside the Eurozone--think forward purchases of euro--hedging is not exactly a costless endeavor. Moreover, the fallout from the subprime contagion is having effects on key markets like the US, home of the infamous Beemer-loving upwardly aspirational yuppies. Unsurprisingly, the company is looking to make more cars Stateside to lower production costs. From the BBC: