As the world’s automotive industry braces for a tough year, BMW’s sales and marketing chief Ian Robertson tells Dave Leggett that he believes BMW is well placed to meet the challenges ahead. Moreover, he’s also expecting to see improvement for the whole industry in the second half of this year and is convinced that recovery is coming on the back of government stimulus packages.
BMW’s Ian Robertson has to tread a fine line, as does anyone with responsibility for top-line revenues right now. There is huge uncertainty about just where the global economy will go, where markets will end up and where your own company’s resultant revenues and profits will be. Some of that is in your control, but much of it isn’t.
It is perhaps important to manage expectations and avoid disappointing, but equally people need to be motivated to deliver and have conviction in what they are doing. The news on the telly may be bad, but let’s not chuck in the towel just yet.
Robertson believes we are in danger of overdoing the bad news at the moment and he’s old enough to have experienced past recessions. Human nature, he says, also lends itself to assuming that the good times will carry on rolling indefinitely and also, conversely, that there’s no end in sight to the gloom during a downturn.
“If you look at previous recessions, there are various timeframes,” he says.
“Some of them are two to two and a half years in duration, some last five years. This situation has happened really quickly, but that perhaps lends itself to a quick recovery also.”
Lehman’s failure in the autumn triggered the banking crisis, but Robertson believes governments did the right thing in quickly recapitalising banks and preventing a complete international financial collapse. He’s also optimistic about the eventual impact of government stimulus packages around the world, though he points out that they will take time to come through.
“For us, as for everyone else, the next six months are going to be very challenging,” he admits.
“But there are stimulus packages going in from virtually every government in the world now. They will be successful to a greater or lesser extent. Not all things are right, but there is probably more money than anyone could have imagined going to be pumped into the world’s major economies.”
And he stresses the need for government interventions to respect a level playing field across the world, so that competition is not distorted. Firms with plants in the US should be offered the same help in the US as the Detroit Three, he says.
“Firms need to be given the choice. If GM, Ford and Chrysler are offered some form of support, the same sort of support should be offered across America.
“We are a very big manufacturer in the US and we are the biggest car exporter from the US. We and all the others should be offered the same. It might not be appropriate for us, we might not want to do it, but we should be offered it. And it’s exactly the same in other countries, too.
“The level playing field for companies across the world is absolutely vital.”
Still on the US, he stresses the importance of the US manufacturing base in the context of the scale of the market for BMW products there.
“We are almost doubling our capacity in the US, which will come on line in the next eighteen months or so. We are investing almost a billion dollars in the US at the moment.
“We are moving the next generation X3 there, taking output to 240,000 a year. Our plans in the US are all on track, no delays, and the machinery is on the ships.”
Robertson maintains that the longer term – despite the current gloom – is what counts.
“You have to look at the longer term and the US will remain the largest premium car sales base in the world. China, Russia and India are increasing in big numbers, but the US has a centre of gravity that is a long way from them.
“Do not lose sight of your long-term plan.”
Scrappage incentives could ignite confidence
Robertson expects to see variation in the rate at which automotive markets come back when they do eventually recover.
“Western Europe isn’t all in the same position. The German car market has been pretty resilient. On the other hand, the Spanish and British car markets have seen big downturns.
“Equally, I think the recovery of these markets will be at a different pace as a result, because confidence will come back at different rates.”
Robertson rightly homes in on ‘confidence’ as a critical factor in turning things around. So, what will it take to get people confident and buying cars again? Besides the general government support for weakened economies, he reckons scrappage incentives can play a key role in getting car markets moving again. It is perhaps a surprising stance from the sales boss of a carmaker well known for its large cars.
But while they are generally seen as encouraging small car purchases, Robertson reckons they can play a more important psychological role that would benefit everyone right now.
“Scrappage allowances are quite an interesting thing. What do they aim to do? To sell more cars and to take old cars off the road, to improve fleet CO2 and to help stimulate a part of the economy. The French example of a few years ago proved that those things can be delivered.
“However, I think one of the other things it does is give people a reason to say, ‘Hmm, that’s interesting, let’s go and have a look at a car. Oh, maybe I’ll buy one.’
“It can act as a stimulus in a broader way – people feel that, ‘Actually, I can do this and maybe now is a go
od time to buy a car.’ And the whole market sees a benefit as the mood changes.”
Forecasting just got more difficult
But how much difference would such schemes make in the current climate? Robertson acknowledges the uncertainties. In Germany, he says, the forecasts on the boost to the car market from the scrappage incentive there range from 200,000 units a year to 400,000. “But nobody really knows,” he admits.
However, he points out that the professional market forecasters are having great difficulty at the moment and he echoes the recently expressed sentiment of Fiat’s Sergio Marchionne who refused to give a forecast for the European car market on the grounds that it was not possible to confidently do so.
“If you look at the forecasts from the big forecasting houses, they all have several different scenario forecasts in place. The ranges are wide. They – like all of us – are not able to forecast where the market is going to be.”
And Robertson is also similarly reluctant to forecast where BMW Group’s sales volume will be this year, preferring to talk share (it was 1.435m units in 2008 and BMW calculates that was a 25.3% share of segment globally).
“I m not in the game of forecasting with the headwinds that are around at the moment. But I would like to maintain and grow segment share,” he says.
How is BMW adjusting to these uncertain economic times? Like others, it has looked to trim cost. But Robertson also stresses the importance of a flexible manufacturing set-up, able to respond and adjust quickly to rapidly changing circumstances.
Managing inventory is a BMW strength he highlights.
“We are managing our inventory very well and you will see that in our financial results. We are not pushing cars down a pipeline and we don’t have the vast stocks that some manufacturers have.
“We will continue to do that. We will look at what happens on a month-by-month and country-by-country basis and we will adjust our manufacturing to support that.
“One of the benefits of the BMW Group as that we have a very flexible manufacturing system backed up by agreements with our workforces right across the world. We are able to respond to changes very quickly and that gives us a big advantage.”
On the costs side, Robertson points out that headcount reduction has been happening.
“We have had a very strong efficiency programme running for the last 14 months. We announced we were going to take out 8,000-plus heads, we have done that. There have been no further announcements, but we will look at what we have to do.”
And there has been rationalisation on the components side.
“We have been driving down purchasing costs, taking initiatives in terms of components across the range of cars; there’s also a big plus point coming out of lower commodity and energy prices.
“The important thing is to retain flexibility to respond to changing conditions.”
And BMW is also happy to work selectively with others, though he firmly says acquisitions are not on the agenda.
“We have looked around the world at that and decided that we didn’t see anything that fits with us and therefore decided that’s not what we want to do. We have three great brands and that’s our focus.”
But the company is open to exploring cooperative possibilities with others and has a number of arrangements in place already.
“This industry has a history of such arrangements and I think there will be more in the future.
“But one thing we are focussed on is that the DNA on our cars is non-negotiable. We have to be certain that whatever we do has the capability to deliver for BMW, Mini and Rolls Royce.”
‘Recovery is coming’
A recurring theme in the discussion is a surprisingly upbeat assessment of the outlook. It’s not that Robertson comes across as pushing an overly optimistic company line, though he is clearly passionate about his company’s products.
He seems genuinely convinced that the overall picture for the industry is not as bad as often presented, that the current economic difficulties present a challenge like any other. The consumer is still out there and still buying, even if behaviours are changing and overall demand is down. Some companies do well in these conditions, some don’t. Crucially, he sees things getting better in the market by the latter part of this year and into 2010. It may be an uneven recovery, but he is adamant that it is coming.
And for him that translates into a series of bright spots and future opportunities for BMW. He enthuses over ‘efficient dynamics’, the electric Mini and notes that BMW hybrids are coming this year. Even the UK order bank for BMWs is building nicely for the March registration plate change (when there is a seasonal blip in UK sales) he claims.
For the Mini brand, there’s a further extension next year with the crossover 4-door model which will be more than 4-metres in length (made by Magna Steyr, in Austria), as well as the new Mini convertible launching this year. Robertson says the crossover design is ‘fantastic’ and that it comes with innovations that will further extend the brand.
In 2009, BMW Group will launch several new models – beginning with the Mini Convertible, followed by the Z4 Convertible, the Progressive Activity Sedan in the middle of the year, the S1 towards the end of the year and a new small Rolls Royce.
Robertson notes the headwinds impacting BMW, but says the company is performing very well competitively around the world and very conscious of where it wants to be in the future.
He is very confident about recovery in the market and BMW’s place in the automotive world. His feeling is that things will get better later this year, that the mechanisms are in place – in the shape of big government economic stimulus packages – to bring that about, but he acknowledges the uncertainties that persist over timing and a rebound of consumer confidence.
“Nobody can underestimate what’s happening in the world, but it will recover. What none of us know is exactly when?”