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BMW responds to coronavirus

BMW responds to coronavirus

Promise of all-electric BMW 7 Series for 2023.

BMW has confirmed that it's working on an all-electric 7 Series luxury car, which will most likely be launched in 2023. The Munich firm is also promising huge investments in future technology, in spite of the impact of the coronavirus pandemic.

Speaking in Munich today, BMW's chairperson Olivier Zipse said: "Solidarity and responsible action are called for. In our society it is the duty of the strong to protect the weak. The BMW Group therefore fully supports the measures aimed at containing the spread of coronavirus." The BMW Group is responding to the foreseeable development in demand on the global automobile markets by adjusting production volumes at an early stage and will make full use of the broad range of instruments available to it to maximise flexibility."

BMW staff to be paid at least 93 per cent salary during crisis

Manfred Schch, BMW's General Works Council chairperson, backed that up by saying that BMW's employees would be paid even if they're not able to come to the factory. "In times of crisis, as we are experiencing right now, the General Works Council seeks to provide a clear sense of direction for associates. Our top priority is to protect their health, and safeguard their jobs and incomes. The General Works Council has agreed three important tools to make this possible: flexible BMW working time accounts, the option of working from home, and the latest company regulation on short-time work. This stipulates that the net income of a pay-scale employee at BMW must amount to at least 93 per cent of their usual sum. I am convinced that these three tools will allow us to navigate our staff safely through the corona crisis" he said.

Zipse then revealed that, even with the pandemic disruption, BMW is still planning massive investments in new vehicle technology: "We take our responsibility seriously, both when it comes to ensuring the protection and health of our employees and to achieving the best possible balance in terms of profitability. One thing is certain: coronavirus is here now, but there will also be a time after coronavirus. The approach we are taking clearly reflects the BMW Group's ability to react quickly and flexibly."

€30 billion R&D investment by 2025

"New technologies are key to the future of mobility. Up to 2025, we intend to invest more than €30 billion in research and development to underscore our position as an innovation leader. This also expresses our confidence for the future business development," said Zipse. "The ability to integrate diverse technologies to form a complete system is vitally important. Those companies capable of developing and combining hardware and software in equal measure will shape the future of the automobile. In this respect, we are quite clearly in the fast lane."

Much of that investment cash was freed up in a cost-saving drive last year, which meant many employee redundancies during 2019. BMW is now reporting that it improved its financial performance quarter-by-quarter through the 2019 financial year, and that total revenues exceeded €100 billion for the first time. The cost-savings drive will continue, though, with Nicolas Peter, BMW's board member for finance, saying: "We have set ourselves clear targets for 2020. High priority will be given to profitability and free cash flow in our management of the business going forward. All measures and initiatives implemented in conjunction with the Performance-Next plan are taking us in the right direction. With regard to free cash flow, we are specifically concentrating on capital expenditure and consistent management of working capital. We are already making measurable progress, which will continue to have a noticeably positive impact on earnings - whether in terms of sales, the cost of materials or indirect purchasing." The Performance-Next plan is expected to generate around €12-billion in savings by the end of 2022.

Aside from coronavirus worries, BMW says that it's now in a good position to start pivoting itself away from just being a traditional car maker, and into spheres such as electric car and battery design, and software and connected services provision.

The company is also concentrating on reducing the CO2 emissions of the cars it build, and a key cornerstone of that task is the introduction of five all-electric cars by the end of next year. The BMW i3 and Mini Cooper S E are already on sale, and they will be joined by the iX3 electric SUV, a production version of the just-revealed i4 four-door coupe, and the still-secret i-NEXT electric SUV.

All-electric version of the 7 Series

By 2023 those will have been joined by the all-electric variant of the next-generation 7 Series (which will still be available with conventional diesel, petrol, and plug-in hybrid powertrains). By then, BMW plans to have some 25 electrified vehicles available - roughly a 50:50 mix of plug-in hybrid and fully-electric cars. By 2025, the Munich carmaker predicts that the global demand for electric cars will be growing by 30 per cent per annum.

BMW is already ramping up its R&D spend to develop these new vehicles - the company spent €5.9 billion on research and development last year, with another €5.60 billion spent on capital products including modernising its factories for the next generation of cars.

Overall, BMW's net profits for 2019 fell by 28 per cent to €5.0 billion, and that includes a provision of €1.4 billion in EU anti-trust fines made early last year. Across all three brands - BMW, MINI, and Rolls-Royce - vehicle deliveries grew to 2,538,000 cars - 2.1 million of those with BMW badges.

BMW's sales were up in both the US and China, but down a little in Europe, although motorbike sales from its Motorrad division rose by 5.8 per cent, globally. Total MINI sales were down a little, by 4.6 per cent, but Rolls-Royce recorded the best-ever year in its 116-year history with sales up by 21 per cent to 5,100 cars. Doubtless the new Cullinan SUV played a major part in all that.

As for what comes next, BMW says that its workforce is expected to stay at the same levels as last year - just under 134,000 worldwide - but that beyond that, the rest of this year is in the lap of the gods. "The current uncertainty regarding the further global spread and the effects of coronavirus makes it difficult to provide an accurate forecast of the BMW Group's business performance for the financial year 2020. Based on the latest developments, the BMW Group expects the spread of coronavirus and the required containment measures to have a negative impact on delivery volumes in all major markets over the year 2020 as a whole" said a spokesperson.

Published on March 18, 2020
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