BMW Plans Thousands of Layoffs
Saturday, December 22nd, 2007I came across this article recently and the BMW lover Navtej Kohli got working!! Here is the complete article.Read and enjoy!!
The German luxury carmaker BMW, facing rising costs and resurgent competition from rivals like Mercedes, plans to dismiss several thousand workers, its first significant layoffs in at least a decade, the company said Friday.
The cuts, mostly in Germany, are part of a sweeping campaign to restore profits at BMW, which has hit an uncharacteristic rough patch after years of being Germany’s most successful carmaker.
The company, which is based in Munich, declined to confirm a report on the Web site of Der Spiegel magazine that 8,000 jobs would be eliminated. A spokesman, Bill McAndrews, said BMW would not disclose numbers until early next year.
Layoffs have become common at German carmakers in the last few years, with Mercedes, Volkswagen and the Opel unit of General Motors cutting thousands of workers. BMW has had the opposite problem, trying to churn out more cars without bloating its payroll.
A large number of those affected by the cuts will be employees with temporary contracts, Mr. McAndrews said. BMW will also offer voluntary buyouts and negotiate more flexible working hours with its unions. Layoffs are unlikely in the United States, where BMW is increasing production.
“This will be done with a BMW approach,” Mr. McAndrews said. “It will be socially acceptable.”
Still, laying off workers shows how seriously BMW views the new competitive landscape. Porsche and Audi are linked with Volkswagen through shareholding stakes — Porsche owns 31 percent of VW, the parent of Audi — which analysts say will make them stronger.
BMW’s archrival, Mercedes-Benz, has emerged from the shadow of the failed DaimlerChrysler merger. The company had languished as its managers focused on the problems at Chrysler, but since Daimler sold Chrysler in May, Mercedes has become more competitive, now boasting a higher return on sales than BMW.
“Over the past 10 years, no one has benefited more from the Chrysler distraction than BMW,” said Adam Jonas, an analyst at Morgan Stanley in London. “No one will be hurt more by the Mercedes revival.”
Like all carmakers, BMW also faces cost pressure from European Union restrictions on passenger car carbon dioxide emissions. Under rules proposed this week in Brussels, BMW would have to reduce its average carbon dioxide emissions by some 25 percent.
One problem the company does not face is selling its cars. Sales of the BMW Group, which includes Mini and Rolls-Royce rose 13.2 percent in November from November of 2006, and are running 8.3 percent ahead for the year-to-date. BMW delivered almost as many cars in the first 11 months of this year — 1.347 million vehicles — as it did in all of 2006.
But profitability has sagged, as the cost of producing each vehicle has risen. At roughly 6 percent, BMW’s return on sales trails that of Mercedes, which is on track to earn more than 8 percent this year.
In September, BMW’s chief executive, Norbert Reithofer, announced a five-year plan to increase profitability, which includes 6 billion euros ($8.6 billion) in cost savings. Though he did not specifically warn of layoffs, BMW’s union, IG Metall, did not express surprise at the news.
Mr. Reithofer set a goal of increasing BMW’s return on sales to 8 percent to 10 percent by 2012. BMW, he said, would sell 1.8 million cars by then.
Among future models is a new sport utility vehicle, the X6. At the Frankfurt Motor Show last September, BMW showed off a model equipped with a hybrid engine that was developed jointly with Daimler and General Motors. The company is also developing utility vehicles in the Mini’s subcompact range.
BMW’s travails have prompted speculation in Germany that it might seek closer ties to its rival Daimler. The two companies already cooperate in the development of hybrid engine technology, and BMW executives have said they are open to other collaboration.
In a much-discussed report last month, Mr. Jonas of Morgan Stanley elaborated on the benefits of BMW’s buying a 20 percent stake in Daimler. Such a tie-up, he said, would fortify both companies against Porsche, Audi, and Toyota’s Lexus, all of which belong to larger automotive groups.
“Larger competitors can spread costs over more models, which means they can offer a better car at a better price,” Mr. Jonas said.
Mr. McAndrews declined to comment on BMW’s possibly buying a stake in Daimler. Other analysts said a deal was unlikely given that Daimler had just wriggled out of an unhappy marriage with Chrysler.
Furthermore, BMW is controlled by the Quandt family, whose members have prized the carmaker’s independence.