It is always good to see BMW on the back foot. Arrogant is perhaps too strong a word; self-confident does not really cover it. Just too pleased with themselves by half in an over-bearing sort of a way is the tone of it. Dr. Norbert Reithofer, the chairman of the board of BMW, was only minutes into his speech announcing the half-year financial results when he felt compelled to drop in that tired old piece of self-acclamation: “The group remains the world’s most successful premium car manufacturer.” Frankly fellers, is that true?
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We will be thoroughly impressed if you make nice cars that successfully win all the prizes. And we will admire successful returns for the shareholder. But keeping a few notches ahead of Mercedes in the volume race by dint of making lots of Minis in Cowley; is that really such a big deal? Is it not just a little bit subjective?
And should we not measure premium service as part of the score? If we do that here in the UK we learn from the dealers that they are absolutely fed up with BMW, and from the customers that they are fed up with the dealers.
There were signs of defensiveness in the presentation. Just after the disclosure of the 4.6% year-on-year increase in the retails comes the line: “At June 30, BMW employed a global workforce of about 107,000 people or 0.9% more than a year ago. The temptation to say “only 0.9% more” must have been almost overwhelming. Analysts and shareholders are fully aware that BMW is very heavily manned relative to the opposition and very late in cleaning house. Volkswagen has been a fabulous equity since a firm grip was taken on costs.
There is therefore a degree of support for the idea that a slip-up at BMW would be welcome. Then perhaps, the BMW management would need to show the decisive action of headcount reduction.
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By GlobalDataBoth the share price and the Q and A session suggested that a slip-up is imminent. The stock market read the statement saying that all was well and headed: “BMW right on track” and that the financial underperformance was due only to unexpected currency exchange shifts in the period, and whacked the share price down by 5% before lunch.
During the Q&A session, one questioner observed that the demeanour of Reithofer and his CFO Stefan Krause was “reserved.”
“I was not quite sure what you meant. Were you endorsing a profit warning?
“There are some sharp bullets coming in here,” Reithofer observed, and deftly passed the question to Krause.
Krause jumped. “You have got me wrong. We have not changed our forecast for the year. We might even look better [than the forecasts].”
The other sharp bullet that caused all the ducking and diving was the proposal that BMW might have lost its lead on profit margins in the premium sector to both Mercedes and Audi. There never really was scope within a Q and A session to get to the bottom of that one. Krause pushed it away with: “Let all our competitors come. We are not afraid to be seen in comparison with any of them.”
Maybe we should pick that one up as the yardstick to measure the battle for world’s most successful premium car manufacturer. That would really work with the customer wouldn’t it? “Morning sir. Yes of course I would be delighted to show you our new 5-Series Touring. Oh and did you know that we are better at making profit out of you than any other premium car manufacturer?”
Rob Golding
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