According to latest reports, BMW CEO Norbert Reithofer is declaring war on costs: a nearly $5.5 billion war.The rising costs and lower profit margins are the reason behind the plan.
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%.
MINI brand is pointed out as one of the “bloated areas”, along with with the development of the 1 Series. 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.
McKinsey & Co. was brought in to develop a plan that would run through 2020 to get those savings, Automotive News reported.
Arndt Ellinghorst, ISI Group’s head of automotive research says he expects BMW’s research and development as well as its capital outlays to peak this year, then decline until 2016.