BMW’s $5.5 Billion Cost Cutting Plan

BMW CEO Norbert Reithofer has declared a $5.5 billion war on rising costs. This is the solution to prevent lower profit margins. To keep the profit margin to an acceptable 8%-10%, BMW needs to save $4 billion to $5.4 billion in costs. The BMW reported a margin in 2013 is 9.4%.

The MINI brand will be one of the major targets of the cost cutting plus the new 1 series development, and they plan 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.

Source: TheDetroitBureau