Despite achieving production and sales records in 2004, BMW will continue to look for ways to cut costs.
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The German automaker hired 70 engineers into its purchasing department to help identify potential savings, said BMW CEO Helmut Panke at the redesigned 3 series sedan launch in Valencia.
“They had to be engineers who could talk to suppliers about engineering and design changes,” he told Automotive News Europe. “We gave our purchasing department more clout.”
The new 3 series should help BMW remain profitable in 2005 despite the weak dollar and the fact that BMW loses some of its hedging protection this year.
Panke said BMW would take further actions in 2005 to hedge against the weakness of the US dollar. He did not specify what that those actions might be, but said they would not include opening any further US manufacturing facilities.
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By GlobalData“We will do something in 2005,” he said. “We will not see an €800 million hit.”
That’s the figure some analysts have predicted the weak dollar would knock off BMW’s profits.
BMW has already reported record revenues of €44.3 billion and says it will report record profits at its financial meeting in March.
Max Warburton, analyst for Goldman Sachs in London, said: “They’ll be casting their eye around looking for cost savings. I would probably be nervous if I was a supplier, a dealer or Frank Williams.” (Williams runs the BMW Williams Formula One team).
But Warburton predicted BMW might have a tough time if it seeks to wring any concessions out of suppliers, especially in Germany.
“The big debate with BMW is even if the hedging expires they’re still a profitable carmaker. They are still making 4 to 5% margins. Is it possible for a car maker to go on a drive to restore 8% margins in corporate Germany? Can you get that aggressive in corporate Germany?”
One way BMW is cutting costs is by platform and component sharing.
The new 3 series shares its all-new platform with the 1 series entry-premium model that was introduced last autumn.
