BMW could cut thousands of jobs in Germany this year, despite achieving record sales.
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According to a Spiegel magazine strory published just before Christmas, BMW is planning the job cuts as part of a far-reaching cost-saving programme designed to stop the decline in its earnings. A figure of 8,000 job cuts was described as “not inplausible”.
A BMW spokesperson told the magazine several thousand jobs would go, but that no announcements had yet been planned. The main targets would be hourly workers. Hourly workers form a particularly significant proportion of the workshop at BMW’s Leipzig plant. Some salaried posts are also expected to be axed.
BMW currently has 107,000 employees.
BMW achieved record sales in 2007 but has fallen behind its competitors in earnings. To address this, BMW CEO Norbert Reithofer said recently that the company would aim to save around EUR6bn in the next few years.
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By GlobalDataAccording to dpa-afx, the automaker’s main union, IG Metall, was not surprised by the planned job cuts. The number of hourly workers is expected to fall this year with the changeover to the redesigned 7-series model amongst other things.
This is an unusual position for BMW. In the past, it has managed to maintain employment levels or create new jobs. Some of the job cuts will be achieved by not filling vacancies as they arise but some redundancy offers will have to be made, according to dpa-afx.
BMW is expected to record a profit before tax of at least EUR3.75m this financial year, but this is due partly to special items related to high profits in previous years. The company’s return on sales has fallen to below 6%, well below target. This is attributed mainly to the high value of the euro and high raw material prices.
A recent bank survey found that BMW has less ‘free cash flow’ than Daimler or Volkswagen. This is how much funding a company has left over from investments after it has paid for things such as research and development. The size of this free cash flow is often considered a more realistic indicator of a company’s financial position than profitability.
The Unicredit analysis showed that Daimler has the most cash thanks to its recent sale of Chrysler. In 2007 it generated EUR7.1bn free cash flow. Volkwagen ranked second with EUR4.3bn while BMW was third with estimated free cash flow of EUR1-2bn.
