Editorial: BMW’s Ultimate Gamble

gambling 750x500 Editorial: BMWs Ultimate Gamble

Number ONE Strategy In the midst of a huge economic downturn, when car manufacturers are stumbling with product liability issues or just trying to stay …

Number ONE Strategy

In the midst of a huge economic downturn, when car manufacturers are stumbling with product liability issues or just trying to stay solvent (or recover from bankruptcy), BMW is announcing and delivering new product at an astounding rate. Is there something in the beer that allows this small (less than 2 million unit) manufacturer to outperform the likes of Toyota and GM when it comes to delivering new product?

Well maybe not the beer – as good as it is – but rather it’s the engineering. BMW set out to revolutionize their production processes in 2007 with the announcement of their Number ONE strategy. BMW is now showing the early fruits of that strategy.

The public pronouncements of the Number ONE strategy have emphasized the expected results and personnel moves needed to obtain them, but the bulk of the strategy has been left unspoken by analysts and the press.

gambling 655x419 Editorial: BMWs Ultimate Gamble

The Number ONE strategy will be achieved in carefully taken steps, with plenty of feedback along the way. But some of those steps are becoming apparent as BMW brings its new product to the public.

Uncommon Commonality

Platform sharing isn’t a new concept, but it’s one that is often reviled by enthusiasts. Memories of GM’s lookalike, badge engineered, A-bodies, are the first thing that comes to mind. Rather BMW is using a common platform ‘matrix’ to its advantage.

Think of the common platform as encompassing something other than a chassis and body panels. In the case of BMW it involves software, electronics, geometries, and some common hardware.

Most notably the common components include engines and transmissions. For example the N55B30 can be found across the lineup from the 740i to the 135i. Transmissions are shared in adjacent segment models as are a lot of the available electronic bells and whistles.

In fact BMW has named these common platform matrices. The L6 platform encompasses the F01 7 series, the F10 5 series, and the soon to be produced 6 series. The L4 platform handles the X5 and X6 SAVs. The L2 platform is the underpinning for the 1er, 3er, X3, and X1. The follow on L7 platform for the 1er, 3er, and others (including Mini and possibly more models) has the flexible firewall location geometry that will allow it to accommodate FWD, RWD, or AWD models.

Within the platform offerings, components such as suspensions, seats and electronics are common. But what is not are wheelbases, widths, and heights. That is the beauty of BMW’s approach. The geometry for suspension components is set and the chassis/body are built around those ‘hard’ points.

Stamping Out Similarities

The key to pulling off a common platform strategy is uncommon styling of models utilizing the same components. Styling is a BMW virtue and it can be seen in the diverse products that share common foundations.

But this is a difficult task for a company that doesn’t sell a half a million Camrys and over one million Corrolas a year. When a production run for all variants of the 6 series may amount to fewer than one hundred thousand vehicles a year the opportunity costs of producing them weighs heavily. If BMW is to avoid the ‘same sausage in different lengths’ criticism they have to be able to produce radically different body panels for the platform’s variants.

To do that they need to have state of the art stamping processes in place. They have to be able to change out body stamping dies quickly and be able to do so as demand dictates. That calls for tight control of the tool and die making needed to build bodies and BMW has been working quietly to bring those processes in house.

The stamping operations at Leipzig and Regensburg have been expanded and some contracts to external stamping suppliers have been allowed to expire. As an example of the state of the art stamping processes BMW is utilizing, look at their use of Schuler pressing equipment.

By utilizing equipment with the flexibility to stamp small numbers of body panels on demand, BMW can utilize the enormous talents of their styling department to keep these common platform models from being too common.

Bore and Stroke

In addition to common platforms another means of reigning in costs is to adopt a common engine architecture. BMW recently announced that they are standardizing on a 500cc per cylinder displacement limit for their engines. In reality that is probably a common bore and stroke measurement across gasoline engines (and possibly a separate set of bore and stroke numbers across its diesel engine lineup).

BMW has favored ‘undersquare’ engines as of late. An undersquare engine will provide better low end torque all other parameters being held equal. And it is torque that makes an engine livable in the real world.

The cost savings start adding up when you consider that there will be common pistons, rods, rings, bearings, and the like. Those parts are shared across the 3 cylinder offerings in the entry level cars up to and including the 12 cylinder monsters that go into the Rolls Royce Ghosts.

One nagging suspicion lurks in the background at this juncture though. And that is a whispered question as to whether BMW believes that we’ve hit the practical limits of extracting efficiency from the internal combustion engine. That would lead to a heavy shift of R&D resources towards alternative powertrains.

Strategic Suppliers

BMW was recently named as one of the preferred partners for suppliers. That makes sense for BMW’s Number ONE strategy. There are certain suppliers that BMW needs to have a strategic relationship with. In particular, high cost components, that BMW does not have an advantage in manufacturing, come from strategic suppliers like Bosch and ZF.

Forming close ties with key suppliers gives BMW engineering an opportunity to adopt state of the art technology sooner in the cycle than manufacturers that have weaker ties to the supplier. Sharing engineering and not constantly harping about extracting the last penny in costs pay dividends.

Pros and Cons

In the end the Number ONE strategy is intended to propel BMW into becoming a two million unit a year manufacturer with increased profitability for each of those units. That will hopefully ensure BMW’s survival as an independent company.

The risks to the strategy is that consumers will shop down a series, for example buying a 5er instead of a 7er – or a 1er instead of 3er. If the common platform cannibalizes sales from their siblings, or that the premium pricing of its subcompact offerings cannot be maintained, there will be trouble. If those problems occur the Number ONE strategy will need to be revisited.

Regardless BMW has stolen a march on its competitors and is placing a plethora of product squarely in the sweet spot of the premium portfolio.

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