While this is an interesting stat cited by the BMW execs, I'm not entirely sure it's a valid basis to compare the new with the old. :dunno:Spiderm0n said:
BMW Predicts Record Profits in '02 As Forecasts See High-End Growth
BMW Predicts Record Profits in '02 As Forecasts See High-End Growth
By SCOTT MILLER
Staff Reporter of THE WALL STREET JOURNAL
MUNICH, Germany -- Bayerische Motoren Werke AG has flouted conventional wisdom with its corporate strategy of focusing exclusively on premium cars and with the redesign of its top-end model, the flagship 7-series sedan. So far, the company's executives said, taking the road less traveled is working out just fine.
Speaking at the company's annual news conference, top BMW executives said that despite concerns about the economy and general industry gloom, they believed new models such as the 7-Series and the tiny new Mini would lead BMW this year to surpass 2001's record sales and profits.
BMW executives also defended the risks they took with the new 7-series, which has taken some lumps from the usually supportive motoring press for the unusual design of its back end and for the cutting edge, computer-oriented technology behind its driver controls. But so far, BMW executives said, sales of the new car, which first hit a few markets four months ago, are running about 8% ahead of sales for the previous 7-Series during the same, early months of its life in the mid-1990s.
Since bailing out of an attempt to expand into the mass market with Rover Group in 2000, BMW has bucked conventional wisdom in the auto industry by focusing on only part of the market. Others, such as DaimlerChrysler AG, are convinced that they can only be competitive by combining luxury and mass-market brands such as its Mercedes-Benz and Chrysler units, sharing parts and development costs.
But BMW believes such a strategy would hurt the image of its luxury brand and distract management. "We believe a company can only think in one set of terms," Helmut Panke, chief financial officer and the chairman-elect said in a brief interview following the news conference. "If you are premium, you have to focus on it."
While DaimlerChrysler posted a net loss of €662 million ($584.2 million) last year, BMW saw net income surge 54% to 1.87 billion euros, although much of that gain was due to losses at Rover in 2000. Operating profit rose 60% to €3.24 billion in 2001. But excluding a €755 million loss on Rover in 2000, operating profit from ordinary activities in 2001 was up 16%. Revenue climbed 3.3% to €38.46 billion in 2001.
Mr. Panke and other BMW executives said the success was driven by a fundamental shift in consumer preferences for upmarket goods. During the next 10 years, for example, BMW expects the world-wide market for premium cars to grow by 50%. Mass-market demand, on the other hand, will grow only 25%, the company believes.
One big question hanging over BMW's strategy of focusing on luxury cars is whether it can afford to fund research and development, critical to keeping a step ahead of the competition.
But BMW's financial success last year came even during a period of heavy development and model launch costs. In addition to the new 7-Series and the Mini, BMW is also preparing a new 5-Series, a sport-utility vehicle based on the 3-Series, an all new bottom-end 1-Series, and a new Rolls Royce.
The product offensive drove BMW's capital spending up 26% last year to €3.51 billion. But BMW was able to fund the spending entirely from cash flow, which climbed 11% to €4.20 billion.
"It's almost a self-fulfilling prophecy," Mr. Panke said. "We are able to charge more as a premium maker and we are then able to channel those funds back into investment."
Investors, who applauded BMW's strategy last year, continued to be impressed by the forecast for this year. BMW's share price was up 14% to €39 for the 12 months ended Dec. 31, one of only four stocks on the Frankfurt stock exchange's DAX-30 index to finish ahead for 2001. Yesterday, the share price hit a new high of €46.70, up 80 European cents.
But some worry about how long BMW can keep up its winning ways. The company, some analysts argue, can afford to fund investment from cash flow only as long as it produces popular cars. Indeed, less-than-polite comments in the motoring press about the new 7-series underline the risks BMW faces.
By SCOTT MILLER
Staff Reporter of THE WALL STREET JOURNAL
MUNICH, Germany -- Bayerische Motoren Werke AG has flouted conventional wisdom with its corporate strategy of focusing exclusively on premium cars and with the redesign of its top-end model, the flagship 7-series sedan. So far, the company's executives said, taking the road less traveled is working out just fine.
Speaking at the company's annual news conference, top BMW executives said that despite concerns about the economy and general industry gloom, they believed new models such as the 7-Series and the tiny new Mini would lead BMW this year to surpass 2001's record sales and profits.
BMW executives also defended the risks they took with the new 7-series, which has taken some lumps from the usually supportive motoring press for the unusual design of its back end and for the cutting edge, computer-oriented technology behind its driver controls. But so far, BMW executives said, sales of the new car, which first hit a few markets four months ago, are running about 8% ahead of sales for the previous 7-Series during the same, early months of its life in the mid-1990s.
Since bailing out of an attempt to expand into the mass market with Rover Group in 2000, BMW has bucked conventional wisdom in the auto industry by focusing on only part of the market. Others, such as DaimlerChrysler AG, are convinced that they can only be competitive by combining luxury and mass-market brands such as its Mercedes-Benz and Chrysler units, sharing parts and development costs.
But BMW believes such a strategy would hurt the image of its luxury brand and distract management. "We believe a company can only think in one set of terms," Helmut Panke, chief financial officer and the chairman-elect said in a brief interview following the news conference. "If you are premium, you have to focus on it."
While DaimlerChrysler posted a net loss of €662 million ($584.2 million) last year, BMW saw net income surge 54% to 1.87 billion euros, although much of that gain was due to losses at Rover in 2000. Operating profit rose 60% to €3.24 billion in 2001. But excluding a €755 million loss on Rover in 2000, operating profit from ordinary activities in 2001 was up 16%. Revenue climbed 3.3% to €38.46 billion in 2001.
Mr. Panke and other BMW executives said the success was driven by a fundamental shift in consumer preferences for upmarket goods. During the next 10 years, for example, BMW expects the world-wide market for premium cars to grow by 50%. Mass-market demand, on the other hand, will grow only 25%, the company believes.
One big question hanging over BMW's strategy of focusing on luxury cars is whether it can afford to fund research and development, critical to keeping a step ahead of the competition.
But BMW's financial success last year came even during a period of heavy development and model launch costs. In addition to the new 7-Series and the Mini, BMW is also preparing a new 5-Series, a sport-utility vehicle based on the 3-Series, an all new bottom-end 1-Series, and a new Rolls Royce.
The product offensive drove BMW's capital spending up 26% last year to €3.51 billion. But BMW was able to fund the spending entirely from cash flow, which climbed 11% to €4.20 billion.
"It's almost a self-fulfilling prophecy," Mr. Panke said. "We are able to charge more as a premium maker and we are then able to channel those funds back into investment."
Investors, who applauded BMW's strategy last year, continued to be impressed by the forecast for this year. BMW's share price was up 14% to €39 for the 12 months ended Dec. 31, one of only four stocks on the Frankfurt stock exchange's DAX-30 index to finish ahead for 2001. Yesterday, the share price hit a new high of €46.70, up 80 European cents.
But some worry about how long BMW can keep up its winning ways. The company, some analysts argue, can afford to fund investment from cash flow only as long as it produces popular cars. Indeed, less-than-polite comments in the motoring press about the new 7-series underline the risks BMW faces.
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Re: Re: BMW Predicts Record Profits in '02 As Forecasts See High-End Growth
On the other hand, maybe the growth in BMW sales has been largely confined to other segments (e.g., the X5), and an 8% hike in sales is really something to crow about. Without more information, it's impossible to know for sure, but it certainly doesn't sound that impressive on its face.
Given the overall growth in the automotive market since the mid-90s, and in BMW's share particularly, I agree that this may be a misleading comparison. BMW has set sales record after sales record over the past couple of years; one would think that sales of the 7 would be at least 8 percent higher than they were 6 or 7 years ago regardless of the design.BS' Bimmer said:
While this is an interesting stat cited by the BMW execs, I'm not entirely sure it's a valid basis to compare the new with the old. :dunno:
On the other hand, maybe the growth in BMW sales has been largely confined to other segments (e.g., the X5), and an 8% hike in sales is really something to crow about. Without more information, it's impossible to know for sure, but it certainly doesn't sound that impressive on its face.
Shocking stance by the company's executives... I really would have expected them to give their honest opinions!Spiderm0n said:So far, the company's executives said, taking the road less traveled is working out just fine.
"BMW's executive team has released a statement on the new E65: 'It's the UGLIEST BMW ever!' "
Agree-
that's a pretty sketchy statistic to compare the current 7s sales to the old one's sales from the mid 90s. Very telling. It means that the new 7 is currently less popular than the outgoing model was just before it was phased out. Usually new models do immediately better because there is supposedly pent up demand for the new one-- but not in this case I guess. It would be interesting to compare the final sales of the e32 w/ the initial sales of the e38-- i bet the e38 immediately sold better than the outgoing e32 because it was a well-designed likable car. The e65 is a fat ugly bastard and people aren't buying it.
that's a pretty sketchy statistic to compare the current 7s sales to the old one's sales from the mid 90s. Very telling. It means that the new 7 is currently less popular than the outgoing model was just before it was phased out. Usually new models do immediately better because there is supposedly pent up demand for the new one-- but not in this case I guess. It would be interesting to compare the final sales of the e32 w/ the initial sales of the e38-- i bet the e38 immediately sold better than the outgoing e32 because it was a well-designed likable car. The e65 is a fat ugly bastard and people aren't buying it.
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