The news, reported by the UK's iMotor, quotes an unnamed BMW spokesperson as saying, "Given the current economic crisis there is no business case for a full-on M version of the Z4." Given the weakness of the source, it's hardly a definitive statement on the matter, but the logic underlying the decision is undeniable.
As BMW's already full lineup grows, M models of certain cars are beginning to become non-starters - they'd encroach to heavily on higher-ranked vehicles, at least in terms of performance. See the 1-series for another prime example of this phenomenon.
This isn't really something you can fault BMW for, however - their standard, non-M vehicles have gotten so fast, so powerful, that simply upgrading them would put them in contention with a whole other rank of vehicle. From a consumer's standpoint, that's about the best way to lose a high-performance variant.
The standard Z4, for instance, gets a conservatively-rated 300hp (224kW) twin-turbo 3.0L inline six or a 255hp (190kW) variant of the same engine, sans-turbo. Even the lesser of these two roadsters dashes to 60mph in 5.6 seconds, with the turbo car threatening to break into the high 4-second range.
Adding another 50hp (37kW) and wringing even more out of the braking, suspension and chassis would just put the car into a price and performance class alongside the M3 - something which just doesn't make sense, even in BMW's expansive and overlapping lineup.
Instead of a 'full-on' Z4 M, there could be a Z4 'M Sport', with a tweaked and tuned ECU and exhaust system, visual enhancements, and interior upgrades, however.
