While a very large part of the global car industry is still whimpering about the high price of oil, steel, pensions, healthcare, lay-off pay or the low price of the dollar, BMW is just giving it all a passing mention and rolling out its expansion plans.
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BMW’s AGM speech this morning was an extraordinary tour de force from the chairman Helmut Panke, and to a degree an introspective on how the success is being generated.
BMW cannot quite call itself the world’s most profitable volume car company because it only makes a million units and Toyota would just shade that title. Nor can it be called most profitable premium brand because Porsche has got that sewn up with 15% margins on volume lower than MG Rover was doing (120,000) when it went pop.
But it is doing magnificently well with operating margins of 8.5% in an industry where margins across the cycle average around 3%.
Panke spent a long time telling his adoring shareholders about the special BMW culture which is clearly a major part of the success story. But he gave insight into the production efficiency also. His plants across the world were running at 95% of capacity which is an absolute record for them and a record for the industry – much of which is endeavouring to close surplus space.
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By GlobalDataHe also disclosed the importance of the variability of production scheduling. The Dingolfing plant puts five, six and seven series cars down the same line, and when the three series demand bulged unexpectedly they shoved that down as well.
Just as important, Panke reckons, is the specification process. Dealers can take customer changes of specification right up to a few weeks before the “dream car” is built. The temptation by customers to add just one more option over and above what they thought was their maximum price is beyond endurance apparently, and 140,000 changes go through the web-based ordering process every month which enhances the final transaction price. No other car company can accommodate that rate of change.
Ten years ago, BMW was just starting to push out its boundaries with the opening of its Spartanburg plant in the US. Now it has production plants in 12 countries and sales companies in 34. Then it was a three model series. Now there are 10 models in the series including Rolls and Mini. Hungary is the latest sales company. Portugal came in last year. China is happening and India is being planned.
Despite all the overseas investment, Panke has made clear that Germany is still the heartland of production – giving the lie to the theory that German labour costs will rule out domestic production in the long run.
Leipzig was chosen for the largest expansion of all. “We can still do it at competitive terms and conditions. Taking the sum total of quality features we find here in Germany – education and training, infrastructure, high quality and motivation, tradition and high quality of the supply industry and co-operative and constructive workforce it was the right decision to make.”
Rob Golding
