BMW has been finding new ways to create a strategy into making better vehicles and exploring new ways of giving the consumers exactly what they need and want. BMW’s group cheif Norbert Reithofer is said to be announcing their brilliant plans this week explain to us their alliances with their part suppliers.
The group is also planning to boost its production capacity in the US and use more locally-produced parts there. BMW’s share price has been slipping in recent months, so investors want it to find economies of scale and cut costs. This would compensate for ballooning research and development (R&D) budgets, caused by its efforts to cut emissions. BMW is confident of being able to cut average emissions by 25% by the end of 2008, in line with a voluntary industry agreement struck in 1998. “We will make a big step in 2008,” said Mr Reithofer, who is chairman of the BMW Group management board.
During the last five years, BMW has clocked up annual R&D costs of about $3,200 per car, which is higher than what was spent by Mercedes and Audi. Much of the money has gone into the carmaker’s Efficient Dynamics programme aimed at making engines more efficient, improve aerodynamics, reduce weight and capture energy during braking. The programme has “reduced emissions by 19% across the (BMW Group’s) range of cars”, according to Lehman Brothers economist John Llewellyn, who this month published a report: The Business of Climate Change II. In addition to making BMWs, the car maker manufactures Rolls-Royce and Mini in the UK.
BMW is already working with arch-rival Mercedes to develop a petrol-electric hybrid engine for its executive saloons, namely the 7-series and the S-class. It is also working with both General Motors and Mercedes’ parent company Daimler to develop a different hybrid solution for other models. BMW has also worked with French mass-market manufacturer PSA Peugeot Citroen to develop a four-cylinder engine, in a partnership that has delivered economies of scale to BMW.
Looking ahead, BMW will explore tactical co-operation alliances with parts-makers and other suppliers. “It is part of our strategic process,” Mr Reithofer said. “We have to make our production more efficient. The question is, do you have to do it yourself or is the supplier a better place to do it?”
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