[T Bone]

I know we don't talk about the WSJ here too much....but the here is the article translated to terms we understand.

• Big price hikes for the US market coming shortly
• No more cheap leases for US - so all the people stretched out financially to get into a BMW will be chopped off
• We already see their disasterous ///M roadmap for cars
• They are going to focus on specific markets which means soccer moms driving fast trucks

For the finance guys on this group.....look at the near 500M Euro charge they took for residuals.....the era of cheap leases is GONE.

BMW is in danger of losing enthusiasts like me if they are going to focus on fast trucks for soccer moms and a diluted ///M badge.

Voice your concerns to BMW.





BMW Posts 33% Drop in Net,
Warns on Outlook

By EDWARD TAYLOR
August 1, 2008 1:08 p.m.

FRANKFURT -- German premium auto maker BMW AG issued a hefty profit warning Friday and signaled a return to more conservative sales tactics, reversing a policy of using steep discounts and cheap leases to win U.S. market share.
BMW said it would cut production and raise prices globally, especially in the U.S., as it revealed that second-quarter net profit fell 33% to €506 million ($789.4 million), down from €751 million in the year-earlier period. Revenues were down 0.9% to €14.6 billion from €14.7 billion.
Like other premium German brands selling in the U.S., BMW faces an increasingly tough choice between trying to hold onto market share in the world's biggest market for premium cars and protecting profits, industry analysts say.
In recent years, BMW has pushed aggressively to sell cars in the U.S., using discounts and easy leasing terms. That trend accelerated over the past year as the U.S. market turned sour, forcing brutal price competition to draw customers into showrooms.
Auto executives and analysts warn BMW, as well as rivals Mercedes-Benz and Audi, risk losing their most valuable asset, exclusivity, by copying the hard-sell high-volume tactics U.S. car makers have used for decades. BMW now appears to be struggling to return to its previous sales strategy known as "pull"-- making customers line up to wait for cars and pay full price, attracted by the belief they are getting an exclusive product.
"Any premium auto maker that strives to push volume for its own sake, runs the risk of losing exclusivity," says Vic Doolan, the President of Volvo Cars North America until March 2005, and president of BMW of North America until July 1999. "This creates a situation where it has to push cars in the market rather than relying on the pull of the brand to generate sales."
BMW said Friday it wants to "retain its position as the world's leading premium manufacturer." In 2005, BMW eclipsed Mercedes-Benz to become the world's biggest selling premium auto maker by sales, in part as a result of its aggressive sales tactics.
But the Munich-based company said Friday that "volume growth will not be pursued at the expense of profitability. In the light of the ongoing weakness of the U.S. dollar and market, sales volumes will be reduced in the U.S.A. on a targeted basis as part of a new strategy for this region."
Rather than seeking to top the 336,000 cars BMW sold in the U.S. in 2007, sales volume figures are "likely to be lower than a year ago," the company said. On a group level, BMW has decided to "reduce production volumes and increase selling prices."
Rival auto maker Audi recently reduced its sales target in the U.S. to 95,000 units from the 100,000 in sales it previously had targeted for this year, a spokesman for the company said Friday. Daimler AG, the Stuttgart-based parent company of Mercedes-Benz last week gave a profit warning and also said it would give increased emphasis to growing volumes profitably.
BMW's bid to boost sales volumes appears to have been eroding the company's profitability for some time. While auto sales climbed to 1.5 million cars in 2007, from 1.05 million cars in 2002, operating margins for the company's auto business shrank to 6.4% at the end of 2007, from 9.2% in 2002. Currency factors, rising investments in fuel-efficient technology, the rising price of raw materials as well as slumping demand in the U.S. have contributed to eroding profits, the company said.
A sharp downturn in auto markets in recent weeks means BMW won't meet its previous profit target for 2008, the company said, warning that 2009 will also be a tough year. BMW said it expects the operating margin in its automotive division to reach "approximately 4% or higher" in 2008, down from the 6.4% in 2007.
BMW has been among the most aggressive companies in its use of discounts to sell cars in the U.S., offering an average $4,680 worth per car during June, up 62% on the same period last year. Rival Mercedes-Benz offered $4,692 worth of discounts, roughly 35% more than in June 2007. Audi, which offered $4,085 per car in June ramped up its incentives by 50% compared with June last year, figures supplied by Autodata Corp. show.
The incentives are higher than those granted by mass auto makers Ford Motor Co. and General Motors Corp., which sell cheaper cars. But they're also higher than those of rival premium makers like Lexus, which offered incentives worth $1,557 per car in June while Acura offered $1,841 worth in June.
Cheap leasing deals, another tactic for pushing more cars onto the streets, have also hurt BMW's profits. In the second quarter, BMW booked a charge of €459 million related to its leasing business, following a €236 million charge in the first quarter.

[southlight]

Thanks for the link, T!

I didn't expect we need a translation, though.



Best regards, south

[T Bone]

Originally Posted by southlight

Thanks for the link, T!

I didn't expect we need a translation, though.



Best regards, south

Us North Americans have very short attention spans

[Bobby_Light]

With a weak dollar, a price hike was inevitable in the US.

[OO---OO]

Originally Posted by T Bone

Us North Americans have very short attention spans

youre telling me! Cliffs??
(yeah, im that lazy)

[tryangles]

Originally Posted by T Bone

BMW said it would cut production and raise prices globally, especially in the U.S., as it revealed that second-quarter net profit fell 33% to €506 million ($789.4 million), down from €751 million in the year-earlier period. Revenues were down 0.9% to €14.6 billion from €14.7 billion.
Like other premium German brands selling in the U.S., BMW faces an increasingly tough choice between trying to hold onto market share in the world's biggest market for premium cars and protecting profits, industry analysts say.
In recent years, BMW has pushed aggressively to sell cars in the U.S., using discounts and easy leasing terms. That trend accelerated over the past year as the U.S. market turned sour, forcing brutal price competition to draw customers into showrooms.

Their strategy is quite simple, knowing plainly that the US economy sucks (and probably will for the next couple of years), they are obviously cutting future production and leaving what they have to sell for those that really want the brand and can afford paying MSRP.

As a consumer I think it sucks for us BMW enthusiasts. As a business man, they are doing what any other smart business would do - create demand for your product where possible.

[O-cha]

Quit bitching about the M changes for fucks sake. Turbocharging is the future of all cars whether you like it or not. for performance and fuel efficiency. Only reason the current generation of NA engines were released was because they were in development over 5 years ago. They (and many others) have known for a LONG time that this would be the future.

[epbrown]

Originally Posted by T Bone

BMW is in danger of losing enthusiasts like me if they are going to focus on fast trucks for soccer moms and a diluted ///M badge.

Enthusiasts have killed more car companies than Father Time. Businesses don't need enthusiasts to survive - they need paying customers. Porsche teetered on the brink of bankruptcy catering to enthusiasts - it's the soccer moms that made them solvent.

This could be good for BMW in a couple of ways. With the leases gone, people looking for a cheap in to the BMW brand will now buy used, improving the residual values that were killing the lease market in the first place. Second, with cars selling at MSRP, they'll actually make money on the cars they do sell.

[rzm3]

Thanks for sharing T, and your voice is well heard. Yes M may be at risk for losing hardcore enthusiasts like you, but we are not the bread and butter of the company -- people (including soccer moms) who want luxury and sporty cars/trucks are. Without them, there would be no M.

[T Bone]

Originally Posted by epbrown

Enthusiasts have killed more car companies than Father Time. Businesses don't need enthusiasts to survive - they need paying customers. Porsche teetered on the brink of bankruptcy catering to enthusiasts - it's the soccer moms that made them solvent.

This could be good for BMW in a couple of ways. With the leases gone, people looking for a cheap in to the BMW brand will now buy used, improving the residual values that were killing the lease market in the first place. Second, with cars selling at MSRP, they'll actually make money on the cars they do sell.

Originally Posted by rldzhao

Thanks for sharing T, and your voice is well heard. Yes M may be at risk for losing hardcore enthusiasts like you, but we are not the bread and butter of the company -- people (including soccer moms) who want luxury and sporty cars/trucks are. Without them, there would be no M.

Originally Posted by O-cha

Quit bitching about the M changes for fucks sake. Turbocharging is the future of all cars whether you like it or not. for performance and fuel efficiency. Only reason the current generation of NA engines were released was because they were in development over 5 years ago. They (and many others) have known for a LONG time that this would be the future.

If BMW fails to capture the imagination by technical leadership (like ///M) the master brand BMW will suffer.

Companies would kill for an enthusiast customer base like ///M.

If BMW doesn't keep this segment, they will be LOST like MB for the past decade. MB is now coming back hard. They completely diluted AMG with all the silly shit BMW is doing now. They had to create a "Black" series.....

Porsche is a joke. Stupid 5000 pound truck, Aircraft Carrier size Panamera and a car that evolved from a people's car commissioned by Hitler.

[rzm3]

Originally Posted by T Bone

If BMW fails to capture the imagination by technical leadership (like ///M) the master brand BMW will suffer.

Companies would kill for an enthusiast customer base like ///M.

If BMW doesn't keep this segment, they will be LOST like MB for the past decade. MB is now coming back hard. They completely diluted AMG with all the silly shit BMW is doing now. They had to create a "Black" series.....

Porsche is a joke. Stupid 5000 pound truck, Aircraft Carrier size Panamera and a car that evolved from a people's car commissioned by Hitler.

with all due respect, if you think the most profitable car company in the world is a joke... i will have nothing further to say to you as it will be a waste of time

[T Bone]

Originally Posted by rldzhao

with all due respect, if you think the most profitable car company in the world is a joke... i will have nothing further to say to you as it will be a waste of time

There is a distinction and I didn't mean to include you in my post with the other 2 people and I do understand your point.

How does a car company get to be profitable?

Sell at high margin and more importantly cut back on R&D....neither is good for a car enthusiast.

As an investor Porsche is great. As a car junkie, they have sat on their 911 laurels for decades.

This is the unfortunate path BMW is on....sell cars / trucks for stupid $$$ and but back R&D.

[epbrown]

Originally Posted by T Bone

Sell at high margin and more importantly cut back on R&D....neither is good for a car enthusiast.

Using your logic, what's best for enthusiasts is to spend tons on R&D and sell at low margin. It's the exact sort of thinking that led to Lamborghini being bought by Audi, Ferrari by Fiat, Aston Martin owned by Ford, etc. It's not just an unworkable business plan, it's a proven unworkable business plan.

The next time you're on the road, take a look at the people you're sharing it with. If you want to sell more cars, which group should you pursue?

[T Bone]

Originally Posted by epbrown

Using your logic, what's best for enthusiasts is to spend tons on R&D and sell at low margin. It's the exact sort of thinking that led to Lamborghini being bought by Audi, Ferrari by Fiat, Aston Martin owned by Ford, etc. It's not just an unworkable business plan, it's a proven unworkable business plan.

The next time you're on the road, take a look at the people you're sharing it with. If you want to sell more cars, which group should you pursue?

Let me state this in a different way....

As a business person / investor, lower CAPEX and OPEX would be great if the top line number doesn't suffer....this is where BMW is going

As a car nut, I don't give a hoot about profitability....so long as they make enough to fund R&D, then I am very happy......

BMW ///M was somewhere between the 2 extremes....now they are siding on boilerplate cars and minimizing OPEX (R&D)....this is bad for the car nut.


**EDIT** Recall MB's added emphasis on "profitability" a decade ago? They decided to forgo quality to increase profitabilty.....and the decade of crap that was the result?? MB is just coming back now. BMW is intent on fresh new mistakes.

[rzm3]

Originally Posted by T Bone

There is a distinction and I didn't mean to include you in my post with the other 2 people and I do understand your point.

How does a car company get to be profitable?

Sell at high margin and more importantly cut back on R&D....neither is good for a car enthusiast.

As an investor Porsche is great. As a car junkie, they have sat on their 911 laurels for decades.

This is the unfortunate path BMW is on....sell cars / trucks for stupid $$$ and but back R&D.

i am no porsche fan, but let the facts speak for themselves.

[T Bone]

Originally Posted by rldzhao

i am no porsche fan, but let the facts speak for themselves.

I am not sure if we are in disagreement but I will put out the economies of scale are much different for Porsche vs. BMW. BMW is 7-8X the size of Porsche by revenue so the R&D % will appear big for Porsche.

• No one is doubting Porsche is profitable....(Toyota taught them how in the early 1990s). But their products are completely unappealing to me.
• BMW wants to be more profitable. And all indications they want to do this in 2 ways..... 1 - give up marketshare in the US and sell for more margin by raising prices and eliminating low payment leases where they assume big risks for residual values and 2 - reduce OPEX / R&D. This is where I take issue..... Loss of focus on true ///M cars to focus on trucks for soccer moms.

Again, I am speaking as a car nut and not an investor......perhaps BMW needs to listen to car nuts who are customers more.....or they will lose us.

[rzm3]

alright T Bone, we all understand what you are talking about -- that M is losing its focus, or being diluted into non-hardcore sports cars.

and my point has been that

1) M is just a small fraction of BMW (the BMW brand (including M) sold 1.3 million cars last year vs. M sold 0.3 million cars in 30 years), so even if they lose 'us', there will still be many others who just want a luxury sporty car (of course this will somewhat affect the brand perception etc, but i'd say 9/10 buyers wouldn't care if you told them that M GmbH is making super trucks for soccer moms).

2) let's wait and see what M GmbH comes up with and then make judgements.

[epbrown]

^WHS. I get what you're saying, too, T-bone, but your comments above are a perfect example of why car companies shouldn't listen to enthusiasts. They don't give a damn if the company goes under, and they're a tiny fraction of the car buying public.

[T Bone]

Originally Posted by epbrown

^WHS. I get what you're saying, too, T-bone, but your comments above are a perfect example of why car companies shouldn't listen to enthusiasts. They don't give a damn if the company goes under, and they're a tiny fraction of the car buying public.

Originally Posted by rldzhao

alright T Bone, we all understand what you are talking about -- that M is losing its focus, or being diluted into non-hardcore sports cars.

and my point has been that

1) M is just a small fraction of BMW (the BMW brand (including M) sold 1.3 million cars last year vs. M sold 0.3 million cars in 30 years), so even if they lose 'us', there will still be many others who just want a luxury sporty car (of course this will somewhat affect the brand perception etc, but i'd say 9/10 buyers wouldn't care if you told them that M GmbH is making super trucks for soccer moms).

2) let's wait and see what M GmbH comes up with and then make judgements.

OK guys, I took my meds and I am a bit calmer now.

BMW's original goal for the new M3 was 100,000 / year, 25% of the history of M cars in one year.

I am just disappointed and I will wait to test drive the new ///Ms before I make a decision.

As I commented months ago, if they use KER technologies, I would be very happy.

[southlight]

Originally Posted by T Bone

BMW's original goal for the new M3 was 100,000 / year, 25% of the history of M cars in one year.

No, it's 100,000 for a complete life cycle (6 years). IIRC that target means less than 10% more than the E46 M3.


Best regards, south

[footie]

Originally Posted by T Bone

As I commented months ago, if they use KER technologies, I would be very happy.

I'm not 100% sure but I believe KER is developed in assocation with Torotrak, a British gearbox manufacturer who has developed a new IVT gearbox that I know BMW are interested in.

KER is a Torotrak development to be introduced in F1 either 2009 or 2010. I doubt we will see such a system in the mainstream before 2015, but you never know, things to aid economy are at the forefront of all manufacturers minds.

[T Bone]

Originally Posted by footie

I'm not 100% sure but I believe KER is developed in assocation with Torotrak, a British gearbox manufacturer who has developed a new IVT gearbox that I know BMW are interested in.

KER is a Torotrak development to be introduced in F1 either 2009 or 2010. I doubt we will see such a system in the mainstream before 2015, but you never know, things to aid economy are at the forefront of all manufacturers minds.

Screw economy.

I was thinking more of using KER to mask turbo lag.....that wouldn't be too bad.

If they have torque up top and a 8000 rpm redline, this would be OK....the N54 is so winded in high rpm.