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Update: BMW denies struggle with cost cutting

Update: BMW denies struggle with cost cutting

Nelson Ireson June 6th, 2008 Nelson Ireson By Nelson Ireson Author June 6th, 2008
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December 31st, 1969 Update: BMW has responded to the reports of its difficulty in cutting its global overhead with a flat denial. The company says it has already had over 1,000 employees sign termination agreements, in stark contrast to the reports of only a few hundred terminations, first made by Germany's Handelsblatt. BMW insists its plan to cut costs by 6 billion euros by 2012 is "fully on track", according to Automotive News Europe. Original: Rising fuel costs and shrinking demand aren't the only worries facing carmakers. As the Detroit 3 have illustrated recently, reducing operating costs is a difficult and sometimes painful business. Despite strong U.S. sales, reports have stated BMW is also facing difficulty in shedding costs in its global operations. Over 8,000 BMW workers are to be put out of work this year, with many having already taken their last paycheck. But rising materials costs and the weak U.S. dollar are undoing the savings made by the lay offs. The company has a goal of reducing overhead by 500 million by the end of 2009, but the chances of reaching it are diminishing daily, reports Automotive News Europe. Nevertheless, the company will soldier on. Already most of the 5,000 temporary jobs targeted have been cut, but a wage agreement on full-time employees is hamstringing further efforts. The agreement prohibits firing workers until the end of 2013. The inability to cut back labor costs could explain why BMW is moving some of its production from contract producers like Magna Steyr to in-house facilities. The X3 is due to cease production in Austria in 2010, when it will move to BMW's Spartanburg plant alongside the X5 as part of BMW's plan to build models in the markets where they sell best. The X1 that had been planned to replace it in Magna's facility has been redirected to BMW's own Leipzig plant. The contract maker will produce the Mini SUV for BMW, however.
Update: BMW denies struggle with cost cutting

Update: BMW denies struggle with cost cutting

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Update: BMW has responded to the reports of its difficulty in cutting its global overhead with a flat denial. The company says it has already had over 1,000 employees sign termination agreements, in stark contrast to the reports of only a few hundred terminations, first made by Germany's Handelsblatt. BMW insists its plan to cut costs by 6 billion euros by 2012 is "fully on track", according to Automotive News Europe.

Original: Rising fuel costs and shrinking demand aren't the only worries facing carmakers. As the Detroit 3 have illustrated recently, reducing operating costs is a difficult and sometimes painful business. Despite strong U.S. sales, reports have stated BMW is also facing difficulty in shedding costs in its global operations.

Over 8,000 BMW workers are to be put out of work this year, with many having already taken their last paycheck. But rising materials costs and the weak U.S. dollar are undoing the savings made by the lay offs. The company has a goal of reducing overhead by 500 million by the end of 2009, but the chances of reaching it are diminishing daily, reports Automotive News Europe.

Nevertheless, the company will soldier on. Already most of the 5,000 temporary jobs targeted have been cut, but a wage agreement on full-time employees is hamstringing further efforts. The agreement prohibits firing workers until the end of 2013.

The inability to cut back labor costs could explain why BMW is moving some of its production from contract producers like Magna Steyr to in-house facilities. The X3 is due to cease production in Austria in 2010, when it will move to BMW's Spartanburg plant alongside the X5 as part of BMW's plan to build models in the markets where they sell best. The X1 that had been planned to replace it in Magna's facility has been redirected to BMW's own Leipzig plant. The contract maker will produce the Mini SUV for BMW, however.

Tags: Industry

Posted in: BMW, News


Comments (5 total)

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  1. By Roy #1, Posted: 6/5/2008

    Crazy, huh - the rest of the developed world is beginning to outsource their stuff to the US!

  2. By chris #2, Posted: 6/5/2008

    roy... i wouldn't jump on that idea too soon.. the manufacturing industry in the USA shrinks by something like 10% every year for the last 20 years. besides.. the production that they are moving to spartanburg will only offset the diminishing demand for the products that ARE getting moved there.

    they currently make the X5, and soon will be making the X3, and if they're lucky.. by the time that happens.. the combines sales of the two models will match the sales numbers that the X5 used to get.

  3. By Jim #3, Posted: 6/6/2008

    The X3 move to NC is to match the manufacturing site to the primary market. Z4 production will (has been?) move to Germany.

  4. By craigs #4, Posted: 6/6/2008

    Isn't the X6 also being produced in NC? I'm not too sure how that will sell, especially with a big thirsty V8.

    I think the X3 sales will increase as people buy less large SUV's. That being said, it is even more critical that the next generation X3 which is scheduled for 2010 I believe be a good product.

  5. By Jim #5, Posted: 6/7/2008

    Folks, BMW's USA facility is in Greer, SOUTH CAROLINA (SC)...very near Greenville SC. (and its a sight to behold). Also, recall that with the US dollar currently in the tank, any production in the SC facility that is then exported, will likely be very high-margin.

    And yes the X5 & X6 are produced in Greer and as MA has noted X3 is moving there as well.

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