When BMW's Boss Talks, Nobody Listens
BMW's upper management tends to be more tight-lipped than treasure hunters. As a result, Wall Street sees the automaker's executive culture as closed-minded, overly proud and parochial. The Financial Times Deutschland (FTD) and the Financial Times report that Bimmer's boss has broken his vow of silence, trying to soothe the markets regarding the automaker's poor share performance. At a conference in London yesterday, Reithofer outlined BMW's plan to increase its return on capital to 26 percent and its return on sales to eight to ten percent by 2012. The propeller people promise to reduce R&D expenditures from 6.1 percent of sales to five percent, save millions on purchasing and cut 8k jobs. No one was buying it. One analyst said, "the market in its current state is not in any mood to buy cheques dated to 2012". Morgan Stanley said in a research note: "The company provided incremental detail on its cost- cutting efforts, but it offered precious little in terms of specific figures or intermediate milestones." And while Reithofer was speaking, BMW's share price slid five percent, on a market-friendly day. Reithofer left the conference after one hour, saying he felt sick, and canceled further appearances in New York and Boston. By day's end, BMW's share price had lost 2.8 percent, equivalent to €609 million.
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@ Landcrusher A guy can dream, right ? Update! USA Today reports that Chris Bangle has resigned today to join Swedish pop super group Abba for their 2008 world tour. BMW stock price soared at the closing bell.
Ok, so let me understand this, the financial geneiuses think BMW (A high-end auto maker) should actually cut its quality to stay competitive in this highly competitive business while other up and coming players are improving the quality of their products and gaining marketshare. I guess these guys are planning buying up Toyota stock for the long term and use the better short term earnings of BMW to fund it. Are these guys truly that clueless to not understand that the entire German auto industry has been taking MAJOR hits lately due to falling quality. Hell for that matter trading quality for profit has doomed the US auto industry. VW has already turned into a German version of GM in the 1980s. Mercedes is trying its best to be Cadillac of the 1970s. Porsche has been milking what is essentailly the same chassis for over a decade now (should we put the engine in front or behind the rear axle). Now BMW needs to make Wall St. happy? I thought it was the cars that made these folks smile! You know I guess with over 30 BILLION in bonuses this year on Wall St BMWs are now falling below the status line for the Masters of the Universe, so f$%k em!
They didn't say cut quality, they said cut costs. In my company in 2003 we counseled out 8 out of 12 people in one cube row of accountants, which churned out huge batches of things consumed inside their little group but not outside their group (i.e. useless things), and production by the remnant 4 of things consumed outside the group increased as well as quality of the output. Further, they had newfound spare time to take on more real work. This was good cost cutting. You get the same effect in any production environment, whether crunching numbers and making reports, or crunching tin and CAD output. +1 on the E30.
Unless BMW needs to raise cash it can safely ignore Wall Street and just look after the business. Take care of business well and the stock will do fine. Trying to push on the stock price instead of simply working the business is what gets so many managers into trouble. Wall Street got you worried? Just ignore them and do the job. "You get the same effect in any production environment, whether crunching numbers and making reports, or crunching tin and CAD output." Uh, only in really badly run companies. In many places getting rid of 8 out of 12 professionals has disastrous results. Do you really think Toyota would be a better company if they fired 50% of their white collar staff?