BMW boss says automotive bail-outs could weaken the industry
BMW chairman Norbert Reithofer has warned that government bail outs could weaken productive companies during the worst car sales climate for 40 years.
Mr Reithofer broke ranks with other leading figures in the global car industry to warn that state rescue packages were a “mixed blessing”.
As Birmingham van maker LDV continued to fight for a government loan to secure the future of 7,000 UK jobs, Mr Reithofer cautioned that government intervention had its limitations.
He told BMW’s annual accounts press conference in Munich: “Our goal is to maintain the BMW group’s independence.
“Now more than ever we see that size is not everything. To survive this current market situation, even perfectly healthy companies need to show a high degree of flexibility, the ability to stand their ground in a fiercely competitive global environment as well as ideas and the strength to create and promote new forms of individual mobility.
“This is why government bail outs for private businesses are a mixed blessing.
“Don’t get me wrong: It is important that governments join hands with business under such exceptional circumstances and provide companies with certain instruments.
“However, we need to concentrate our attention on where government intervention begins - and where it should end. The key is to avoid a distortion of competition, which would weaken productive companies.”
Mr Reithofer’s warning came as LDV, Jaguar Land Rover and other leading vehicle manufacturers continued to press for government assistance to help kick start banking lending to the automotive sector.
But Mr Reithofer said that the financial footing of BMW, which has a 1,000-strong workforce at his Hams Hall engine plant near Coleshill, was “absolutely sound”.
“At the end of 2008 our liquidity was approximately 8.1billion Euros. Obviously, liquidity and free cash flow are top priorities in such economic times as these.
“Cash is king. We are in a position of financial security, which provides us with considerable room to manoeuvre. We managed to reduce costs, investments and capital expenditure per vehicle. I instructed all divisions and areas to do their very best to save costs. As a result, our fixed costs in 2008 were lower than in 2007.”
Mr Reithofer said that BMW was seeking to reduce material costs by four billion Euros by 2012.
Mr Reithofer said BMW had sold more than 1.43 million cars in 2008, the second best result in the German company’s history.
He said cost cutting had included a reduction in permanent staff by 7,498 to 100,041 by the end of 2008.
Meanwhile, board members’ pay in Germany had decreased by 40 per cent, senior executives’ remuneration by a third, and non-management employees would earn about 10 per cent less. He said he expected the recovery period for the economy to begin in 2010.
“Unfortunately, the current downturn in business still continues. And as a result there still exists uncertainty in the overall market.
“Therefore it makes no sense to offer a reliable forecast for 2009 right now. We do not expect to match our 2008 retail level this year.
“For this reason, we have developed several action scenarios depending on market development. From 2010 on, our sales will pick up pace thanks to our new product portfolio. This momentum will increase with the high profit contribution models to be launched between 2010 and 2012.”
Figures released by BMW last week showed that the Munich-based group had seen pre-tax profits plunge by nearly 91 per cent in 2008 from 3.9 billion Euros the year before to 351 million Euros last year.
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