BMW’s Road Show Goes Nowhere
February 08, 2008

By Michelle Krebs 

Maybe BMW’s chief executive Norbert Reithofer should have stayed home this week.

Reithofer became the first BMW chief to take the company’s show on the road this week. His goal was to ease the worries of investors.

He didn’t convince them.

Reithofer’s tour was unprecedented and seen as a cultural break from BMW tradition, the Financial Times noted. His first -- and as it turned out, only -- stop was London, where he presented analysts and shareholders with BMW’s four-year plan to cut nearly $9 billion from its costs.

That very day, BMW’s stock fell sharply as Reithofer apparently failed to convince investors. The stock closed Wednesday down 3 percent and was one of the biggest lowers on Germany’s benchmark DAX index, which was up. To be fair, stocks of other European carmakers have dropped recently too after last year’s surge. Investors are concerned over the U.S. economy and slowing vehicle sales in Western Europe.

It didn’t help that Reithofer’s road show coincided with BMW’s announcement that its global sales fell 1.6 percent in January. In contrast, BMW’s German competitors, Mercedes-Benz and Audi, reported higher sales this week.

Reithofer was to have been in the U.S. meeting with analysts and investors for the rest of this week. However, the Financial Times reported Thursday that BMW said he would not be traveling to New York and Boston after all because he was suffering from flu.

BMW Sales Dip; Competitors’ Rise

BMW reported Thursday sales dipped to 92,629 vehicles, from 94,101 in January 2007. The drop came on the back of the BMW brand, which had sales fall 4.1 percent to 77,156 vehicles. Mini sales, however, rose 13 percent to 15,432 cars. Mini recently added a new model -- the Clubman -- to its line.

Mercedes-Benz Cars division sold 90,400 cars and SUVs in January for a 16 percent gain, putting it within a couple thousands units of BMW. Mercedes attributed the double-digit hike to strong sales of the new C-Class and smart models.

Audi reported January sales totaled 78,700, up 4.7 percent largely due to strong sales in China.

Despite lower January sales, BMW predicts a record sales year, Stefan Krause, BMW’s sales and marketing chief, said in a statement, thanks to two new models -- the 1-Series and the X6 crossover. ``In 2008, the BMW Group will once again maintain its top position as the world's leading manufacturer of premium vehicles,'' Krause said in the statement.

It’s Profits, Not Vehicle Sales, that Count, Investors Complain

Still, it’s not the vehicle sales that concern investors; it is profitability. Investors have been concerned for some time now that Mercedes and other luxury makes are more profitable. Mercedes’ return on sales in the third quarter, for instance, was 9.5 percent compared with 5.4 percent.

To that end, Reithofer presented a plan that calls for a 3 percent reduction in material costs by 2012 and an 8,000-worker reduction in the employment ranks, which now total 107,000. Those cuts would help BMW achieve its goal for a return on sales of 8 to 10 percent by 2012, equaling where Mercedes is now.

But analysts say that’s not quick enough.

Perhaps Reithofer is home sharpening his pencil as he recovers from the flu.

Posted by Michelle Krebs at 4:19 AM under Business , Companies | Comments (0) | digg this | Seed Newsvine