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12-24-2007, 10:30 AM | #1 |
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BMW to cut 8k jobs
The U.S. economy is slowing; and the W. European economies are also slowing. BMW is also getting more cost conscious: Der Spiegel came out w/ the news that that BMW AG plans to cut 8k jobs next year (albeit mainly temps).
http://www.reuters.com/article/tnBas...58453920071224 I suspect BMW wants to get ahead of the pressures on margins given the foregoing scenario - R&D is another area where the pencils can be sharpened. Hey, BMW: it's hard to ask a premium price w/ a new product when the economic backdrop is getting tougher - globally (barring some searing growth in EM). I wonder if BMW is holding back because of nerves about this critical equation:
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12-25-2007, 06:46 PM | #3 |
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Well said - I predict M3's sitting/rusting on dealer lots in 3 or 4 months time.
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12-25-2007, 09:22 PM | #4 | |
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...and as far as M's sitting on lots rusting...well...again you are freakin' clueless.
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12-25-2007, 09:28 PM | #5 | |
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Better yet...shut the f**K up about the cost and go buy something you can afford and then get on THAT board. SS
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12-25-2007, 09:31 PM | #6 |
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I don't think M3's - especially in their release stage - with all that pent-up demand will sit idle. But, if I were a BMW 'beancounter' I'd consider carefully the total profits over the life of this car, ie, hit the 100k / unit target to ensure maximum bang for the R&D buck (part of which they saved by cutting 2 cylinders off of the V10 ...)
Accordingly, why try to be too greedy at the launch? I frankly blanched at the R&T test estimate (not unreasonable in my view) of ~ $70k, including GG tax. BMW NA will likely have no problems selling them even at high 60s - low 70s. But with a 5-6 year product life-cycle, and a EUR/USD rate that has become too elevated, be smart BMW: and price for the product run and fair value of the EUR/USD.
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12-25-2007, 09:37 PM | #7 | ||
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My premise is that the macro back-drop will, at the margin have an impact on the demand for cars like this. Maybe not in the early release period but over the next 12-18m. BMW sees the slowing and acted ahead of time to cut jobs, ie cost. Sounds a lot like Micro 101 to me (marginal cost to price) with some Macro thrown in for good measure. Also, in my world a cut of -8% to a company's workforce is meaningful, as labor is the largest cost for an auto manufacturer. Here's some current 'Street research on the macro/micro issues (below); and this time Euro manufacturers have a HIGH EUR/USD to challenge their profitability (back in '01 slow the EUR/USD was 1.1 - 1.2 - it's 0.70 today, a whopping -36% to over -40% depreciation, which has an enormous impact on European exporters' profitability. Quote:
Source: Bloomberg, SCB And last time I was at "school" (or university as I prefer to call it) a marketing case couldn't be better exemplified as phucked up as this one. I have read the views of many people on m3post who are frustrated aficionados with regard to this launch/pricing: not a good way to launch a product. Last point: I do this sh*t for a living - no need to go back to school. For what it's worth, I expect the line below to trend up in 08 as the global economy slows -which will make it easier for BMW to keep prices down in the U.S. USD/EUR, 2001 - 07 & US recessions Source: FactSet
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Just thinking of something not so witty ///M3 E92 '09 Jerez Black | 6MT | Ext Fox Red | Tech | Prem | 19s |Heated Seats | iPod |Smartphone | Euro Deliv June 09 Sold: 540iT / 530i / 323i Last edited by Voltigeur; 12-25-2007 at 11:36 PM.. Reason: addendum |
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12-27-2007, 01:25 AM | #8 |
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So let the rest of the world pay a premium price since the US market will account for roughly 25% of M3 sales at 5% of the profit average of sales in other countries. With that being the case if I were the US sales manager for BMW USA who needed to forecast 2008 sales I would just slash production estimates and allocations by 50% keeping a higher profit margin on lower sales volume effectively decreasing my cost of sales.
As opposed to your scenario where you propose BMW should lower the cost to the US consumer because our dollar is weak meaning when it gets converted back into EUR they lose even MORE profit. In a simple business model why do you think BMW would do this? I am being serious with this question. I did some currency conversions off of a few of BMW's highest selling M markets and the rough estimates for base pricing in the US IF BMW kept it consistent with the rest of the world converts to an average of $93K. If you are saying that the "premium" BMW owner will most likely be unwilling to pay this cost for the M then I would disagree. But there are not nearly as many "premium" BMW owners as their are standard BMW owners. And I would agree with you that the standard BMW owner who may have been considering upgrading to an M would not with a price of $93K staring at them. BMW may not sell as many at that price but they CAN sell less at that price and make more profit at a lower cost of sales which translates to higher earnings on sales which translates to INCREASED share holder equity which means job security for the CEO. And the sole purpose for existence of any CEO in a publicly traded company is to do one thing and one thing only. INCREASE SHAREHOLDER EQUITY AND RETURN. So your original argument is based on IF BMW were to maintain 50,000 unit sales in the US then I agree with you that they would need to lower the cost. However, they cannot lower the cost because they will lose a ton of profit. Not to mention how disjointed the rest of the planet will be that we Americans are getting the same car they shelled out a pretty penny for at 25% less cost. The price will be higher than what most people on this board want and BMW will make less of them.
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Last edited by Sick Speed; 12-27-2007 at 02:24 AM.. |
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12-27-2007, 01:26 PM | #9 | ||||||
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I expect that BMW may be thinking of allocating less of the e92 due to the oft-cited price asymmetries of this car's (likely) US selling price vis-a-vis other major markets. Indeed, in relation to the CEO's / mgmt objective, that would be a good strategy given the dollar. Quote:
As far as US pricing goes: the issue is, will this be a good macro back-drop to extract the highest ASP arising from BMW NA's pricing model? (there has to be a cost + variable margin range, so how high to make that intitial margin?) Quote:
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One thing that will likely be a tailwind for BMW AG (not talking about NA here) is that the EUR/USD is likely to come down in '08. If you want to discuss why then we can PM. These kinds of questions are critical to how I do my work.
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Just thinking of something not so witty ///M3 E92 '09 Jerez Black | 6MT | Ext Fox Red | Tech | Prem | 19s |Heated Seats | iPod |Smartphone | Euro Deliv June 09 Sold: 540iT / 530i / 323i Last edited by Voltigeur; 12-27-2007 at 01:42 PM.. Reason: erratum |
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