Business Week: “BMW’s Ultimate Driving Machine Is a Tiny Little Electric Car”

Interesting | September 25th, 2010 by 6
bmw-megacity-car

Chris Reiter from BusinessWeek writes a controversial, yet fascinating article on BMW’s future electric cars. Coupled with the Megacity vehicle story, Reiter also gives us …

Chris Reiter from BusinessWeek writes a controversial, yet fascinating article on BMW’s future electric cars. Coupled with the Megacity vehicle story, Reiter also gives us some background information on BMW boss Dr. Norbert Reithofer,  a previously underrated CEO, but “one of the most respected CEOs in the industry” at the moment.

Here are some memorable quotes from the article:

“The Megacity Vehicle is a must-have for BMW,” says Reithofer at the company’s landmarked headquarters in Munich.”

“Reithofer’s challenge is to secure a place for BMW in this new world without sacrificing its status as a rarefied drive for the open road. “We don’t see threats; we see opportunities,” says Adrian van Hooydonk, an 18-year BMW veteran whom Reithofer installed as design chief last year. “That’s an indication of how this company thinks and the kind of energy that Dr. Reithofer brings to the company. ‘It is what you make of it,’ that’s what he always says.”

Business Week: BMWs Ultimate Driving Machine Is a Tiny Little Electric Car“Inside BMW, the Megacity message didn’t immediately resonate with all of BMW’s horsepower-driven managers. Their resistance is understandable: BMW is doing quite well as is, building beautiful cars that go fast.”

“Because of its size, BMW can’t allow itself any mistakes,” says Stefan Bratzel, director of the Center of Automotive at the University of Applied Sciences in Bergisch-Gladbach, Germany, and a former manager at Daimler’s Smart unit. “If the Megacity Vehicle doesn’t work, BMW will have considerably less room to maneuver.”

“In 2005, it bested archrival Daimler’s (DAI) Mercedes-Benz in sales, and the company has come roaring out of the recession, expecting to sell 1.4 million vehicles this year, just off its 2007 peak, while raising margins to 6.6 percent. With both the trendy Mini badge and Rolls-Royce’s silver lady under BMW control, the Bavarian manufacturer is on more solid footing than at any time in its 94-year history.”

Dr. Reithofer: “In the U.S., I learned to take quick decisions and not hold long speeches,” he says. “When I got back to Munich, it struck me right away how long it took to make decisions, but we’ve changed that now.”

“Reithofer was very underrated when he came in, but he’s since become one of the most respected CEOs in the industry,” says Philippe Houchois, an analyst with UBS (USB) in London. “He’s not flashy but rather an inside guy who gets the work done.”

“Since we’re BMW, we don’t want to create just any old electric car,” says design chief van Hooydonk. “We want to deliver what people so far think is impossible: the combination of joy and zero emissions.”

“Perhaps the most daring part of Reithofer’s plan for the Megacity is that he expects to make money with the car, despite the use of costly materials like lightweight aluminum and carbon fiber.”

“I would have decided to produce the Megacity Vehicle even if, contrary to our expectations, it doesn’t make money in the first generation,” says Reithofer, who hasn’t been afraid to break with traditions such as adding front-wheel drive models to the BMW brand, exiting Formula 1 auto racing, and linking with rival Mercedes to save purchasing costs. “As a leader, you can either be an entrepreneur or an administrator. I see myself as an entrepreneur.”

We highly recommend reading this article, filled with lots of information and some interesting facts on BMW’s CEO.

Thanks for the tip Tine!

  • klier

    Tine? Cute.

    Anyways, nice read. The future is looking bright.

    • KeyboardWarrior

      I am not objecting the idea of an electirc car, but to brand it under BMW is one stupid way to make short term gains while hurting the brand. Perhaps this engineer CEO should take a course on marketing.

      “Since we’re BMW, we don’t want to create just any old electric car,” says design chief van Hooydonk. “We want to deliver what people so far think is impossible: the combination of joy and zero emissions.” – this sounds to me like bull! Unless the governmetn generates electricity from wind and hydro power, you are just shifting the emissions elsewhere, not to mention the increased demand, forcing increase in prices of electricity when these mega city cars roll out.

      “As a leader, you can either be an entrepreneur or an administrator. I see myself as an entrepreneur.” – some people want to be hero’s and some work as a team considering all factors. Being an entrepreneur does not mean coming out with all sorts of things for short term gains with long term damage to the BMW brand. Of course this is a quick way to fame, that’s why we have an article on you now.

      “If the Megacity Vehicle doesn’t work, BMW will have considerably less room to maneuver.” – this shows that BMW is not even sure itself whether this is going to work! If it does not work, it would just show you (rather new managers at BMW) that BMW customers and the public do not see this as fitting to the BMW brand. This is not what the brand stands for. You can have it as another brand under the BMW group but NOT as a BMW. Perhaps you should spend more on developing your core brand values that have made BMW a success throughout the past few decades instead of letting Audi slipping in your old shoes!

      “We don’t see threats; we see opportunities,” – clearly you don’t. The fact that you only admitted the fact that Audi is a threat to your no.1 title about two years ago shows that you thought BMW was too big to fall, when many could have seen this treat from years ago, especially with the launching of products like the RS4, R8 and to be more specific, taking BMW’s competitive advange (past) and come across to the public as being (perceived) as a sporty premium brand. Failure to identify the company’s threats, customer demands (dishing out cars that are rather shocking like the 2001 7 Series) and the cutting of core business opertaions (like marketing and controls to ensure good quality), including the fact that you seem to be forgetting BMW’s core values, will cause BMW’s downfall and the losing of the No.1 spot to Audi. Yes, at the rate BMW is going, it WILL NOT retain No.1 in a few years time (within 5 years).

      “The early warning helped BMW scale back production quickly, which prevented a glut of unwanted cars eating up cash and depressing prices. The company trimmed 11,000 workers from its payrolls through attrition and buyouts, and reduced hours for another 25,000, but was able to get through the crisis without layoffs. Reithofer also used the crisis to reduce purchasing expenses and lower development costs, hoping to move profit margins to at least 8 percent by 2012. “The crisis accelerated the process,” says Reithofer” – For those of you who followed the events at BMW, this CEO announced these plans shortly after taking up his position before the recession. So the cutting of workforce was part of the No.ONE strategy of the company to cut cost and boost share price so that his bonus can increase. In my view, this all flopped in his face as he announced that he would increase prices and sacrifice volume (which he then couldn’t because of the financial crisis) Raw material prices in fact increased as well for a period due to the spike in commodity prices including oil. So in my view, the crisis DID NOT accelerate any process he planned, it stopped it. Another thing to note is that it is extremely easy for management to play around with margins per car with different classifications of expenses.

      One thing I have to give credit for is this guy’s ability to signal through his speaches to the market. He has a way to phrase things so that the public see it as a positive aspect and hence the temporary increase in share price. BTW, the short term increase in share price is not how you value company performance.

      I would like to hear his explanation of the most important lead indicator of corporate success which affects revenue and is the most important number on the statement of comprehensive income – MARKET SHARE: BMW, for the past few years, after he took over as CEO and embarked on this drastic cost cutting strategy, has been continuously losing lots of market share to Audi. Clearly more and more customers are finding Audi to be more appealing than BMW.

      BMW’s previous CEO, Panke, with a finance background comes across to be a more competent person in my view.

  • bob

    Why is it “controversial”, allegedly?

  • http://www.facebook.com/profile.php?id=100000163817321 X5SoB

    Really, I see this as a three prong attack at electric vehicles. At the bottom is the electric Mini scooter, in the middle is the Megacity, most likely subbranded as an iSetta, and at the top an Eight series developed from the Vision Efficient Dynamics. I don’t see this as hurting the brand image at all, in fact, it affirms the technological prowess of BMW, as opposed to the “sausages of different sizes” approach that VanHoydoonk is currently doing.

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