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        home > news > Automobiles > BMW Buckling Down, Looks to Cut $5.5 Billion

        BMW Buckling Down, Looks to Cut $5.5 Billion

        German maker wants to keep margins between 8% and 10%.

        Michael Strong
        Michael Strong , Managing Editor
        June 19, 2014
        BMW CEO Norbert Reithofer says he wants to cut as much as $5.4 billion in costs between now and 2020.

        Rising costs and the subsequent squeeze on profit margins has BMW CEO Norbert Reithofer declaring war on costs: a nearly $5.5 billion war.

        The Bavarian Motors boss wants to cut between $4 billion and $5.4 billion in costs to keep the German maker’s profit margins between 8% and 10% in the coming years. In 2013, BMW reported a margin of 9.4%.

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        One area of bloat is the Mini brand as well as the development of the 1-Series, which should see costs come down some as it’s in production now, according to multiple media reports. BMW said in a released statement would seek to lower annual expenses “by several hundred million euros a year.”

        BMW plans to cut more than $135 million in labor costs, said Muenchner Merkur, a Munich newspaper, reported last month.

        (Dealers playing critical role in recall crisis. For more, Click Here.)

        While Reithofer expressed dismay, he has no official remedies for the company’s busted budgets so he’s brought in McKinsey & Co. to develop a plan that would run through 2020 to get those savings, Automotive News reported.

        (Click Here for details about Chrysler’s ignition switch problem.)

        The plan to reduce the company’s annual outlay comes as it’s also investing more and more in new drivetrain technologies, in particular the i-Series products, as well as trying keep up with Mercedes-Benz and Audi in the annual sales race worldwide.

        (To see how GM’s Mary Barra handled congressional grilling, Click Here.)

        Despite reporting record sales and earnings in recent years, the call to remain lean is “also a strong proof that BMW is mindful of the risk of complacency,” said Arndt Ellinghorst, ISI Group’s head of automotive research, in an investor e-mail. He expects BMW’s research and development as well as its capital outlays to peak this year, then decline until 2016.

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