REPORT: BMW warns employees of looming pay cuts
With 58,000 fewer new vehicles sold in 2008 and a net profit nearly 90 percent lower than it was in 2007, The Independent is reporting that BMW is cutting its board member bonuses by 40 percent. In addition, the balance of its 100,000 employees are facing pay cuts. The sales slowdown will also take a bite out of salaries at all levels, as chief executive officer Dr. Norbert Reithofer, explains:
A profit-sharing program for our board members, executives and all employees is an important element of our compensation system. We apply this system in good times as well as in challenging times. I am convinced that our employees understand the difficulty of the current situation and are willing to accept this hardship.Although sales and profits have taken a beating (and BMW is clearly not alone), Reithofer is quick to reiterate that BMW is solvent and determined to remain independent... regardless of any rumors.
[Source: The Independent]
Reader Comments (Page 1 of 1)
ihiohohiohoho 4:42PM (3/19/2009)
58,000 fewer vehicles results in a 90% profit loss? I'd like to look at their books please. I thought BMW did better.
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Jung 4:57PM (3/19/2009)
Heavy fixed cost (100000 people) will do that when 58000 fewer car means putting the company close to a break even point.
Ligor 5:05PM (3/19/2009)
well, price of raw material has climbed the last few years and this last year BMW actually had incentives on most cars they sold
so combined those two and the fact that companies make an average profit of ~ $1300/car and you can see why the huge loss
zamafir 6:00PM (3/19/2009)
Lots of that 89% profit decline were instances of one time loss, though the number shouldn't come as a surprise either way, with no one to distribute development costs with, BMW has a harder time being as profitable as say Audi or Porsche, and will continue to see this trend into the future as long as they insist on building several useless bespoke cars like the X6. When Audi builds the Q5, they share the development costs with Porsche (new Cayenne). It's why most European car company CEOs recognize there will be a reckoning and consolidation of brands and those who are not engaging in heavy platform sharing, and are 47% dependent upon the stock holdings of a single family, are going to have the hardest time of any of the luxury car makers surviving. Add to that Audi’s record numbers, sales, and profits world wide, and it looks like BMW is set up for the fight of their lives. Or are already fighting, they laid off thousands of workers last year while Audi gave out thousands in bonuses to every worker. Basically, the GM model of unlimited expansion is just as difficult for a smaller company to sustain, cars like the new M3 have been made softer in an effort to capitalize on volume sales, meanwhile companies like Audi, already behind BMW in terms of absolute models sold, and well ahead in terms of profit per car, are continuing to move upwards from their less tenuous and thinly spread positions.
superman211 12:52AM (3/20/2009)
Well it happens.
MajorGeek 4:48PM (3/19/2009)
They should weld the doors shut and go on strike, that'll teach em!
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tuna 5:04PM (3/19/2009)
Better pay cuts than layoffs. This is the management style that works as opposed to the big 3 or just American business management style in general. When things pick up again, you'll have to take time hire new people, time to train them up and time to reach full efficiency. Too much focus on what's immediately at hand rather than the big picture. Not to mention executive pay and bonuses that don't reflect performance.
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jim 6:05PM (3/19/2009)
At one time layoffs in the US economy would usually be temporary. A few months of unemployment till the economy picked up and you'd get hired back. Have you ever noticed the do you expect to be re-hired question on the unemployment app?
Today, more than likely, a layoff means you'll never get that job back. The company is either eliminating that line of business, sending it off shore, or when it does comeback they want a different skill set. All and all, many companies would not want to offer their employees of reducing pay or reducing head count.
zamafir 6:09PM (3/19/2009)
"Better pay cuts than layoffs"
You mean in 09? They already engaged in thousands of layoffs last year, it's not helping.
http://www.nytimes.com/2008/02/28/business/worldbusiness/28bmw.html
tuna 6:22PM (3/19/2009)
"You mean in 09?"
No, I was talking about 60 years ago. I am coming from the past to post in the future.
zamafir 8:09PM (3/19/2009)
By neglecting to mention the thousands who recently lost their jobs, it sounded as though you weren't aware of the recent culling, hence the 09 comment. Though I'm sure you're already aware of all those lay offs last year. So yeah... I guess it's good another 5000+ people didn't get the ax again.
FamilyGuy 7:12PM (3/19/2009)
For a second I thought it said "BMW warns customers of looming price cuts".
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Hamhock 9:03PM (3/19/2009)
Right?...Isn't the dollar WAY stronger than about a year ago?
Joce03 7:17PM (3/19/2009)
Board members loose 40% of their BONUSES while other workers get cuts to their PAY. That makes little sense to me.
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jhjacobson43 8:53PM (3/19/2009)
How likely would this bolt from the blue scenario to play with U.S. mfgrs? "Oh, BTW, we're cutting your pay." Can you imagine what would happen if the CEO of any big three openly made that statement to the rank and file. There would be blood in the streets.
Yes, I know U.S. union members have given up pay, but only after lots of give and take meetings with the union. I am not knowledgeable of European Union contracts and what the manufactures are allowed, but this seems to highlight the difference in the relationship between unions in the U.S. and Europe, and management.
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Len_A 5:36AM (3/20/2009)
If you don't know, then perhaps you don't want to comment. The European auto union, IG METTAL, is as militant as they come. If they're compliant now, in the least, it's because they've taken a beating long before the UAW or CAW. IG Mettal's beating came eight to ten years ago when they were told to give up on some pay issues or face work moving to Eastern Europe. and this threat came after Mercedes opened the Alabama plant and BMW opened up the South Carolina plant. Plus, if you go back and read the article, the reduction is coming from reduced profit sharing, not negotiated wages.
Shakti 4:47AM (3/20/2009)
Who did the math here? Board members get their profit sharing bonus reduced by only 40% even though the profit fell 90%?
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