We reported earlier in the year that Chris Bangle was leaving the auto industry. Regardless of what you thought of his designs, the “Bangle Butt” and flame surfacing being two, you have to admit his timing could not have been better. BMW has, after all seen some incredible growth in the last few years. Sales have been increasing with records being broken month after month.

2009 will prove a much different one for the company. Indeed, last Wednesday BMW announced that it expected sales to be off by as much as 20%! The result of the credit turmoil in the United States and Europe led the company to report a fourth quarter loss of of US$1.3 billion. Profit was nearly US$250 million on revenues of US$22.56 billion in the fourth quarter of the previous year.

For all of 2008 the automaker posted a net profit of 330 million euros ($465.2 million) compared with 3.1 billion ($4.37 billion) in 2007. Sales fell 5% to 53 billion euros ($74.72 billion).

That is disconcerting news to be sure, but what is the long-term outlook? Has BMW made solid strategic decisions impacting its future? The answer is a little complicated. In the first place, BMW has increased SUV production significantly in the last 5 years going from 1 model, the X5 to 3, adding the X3 and recently the X6. We know they may be developing a X1, too. Adding so many heavy cars to the lineup, once dominated by sports sedans, calls into question the BMW moniker: “The Ultimate Driving Machine”.

Slogans aside, is BMW merely profiting from a fad in the automotive sector. Are SUVs here to stay, especially if gas prices skyrocket again? It would seem that BMW needs to develop some competitive “green” strategies if they hope to continue on the SUV path. On the upside, they haven’t developed a mini-van as seen at Mercedes and now VW (thank god). The other recent development is that BMW’s subsidiary Rolls-Royce is developing a new smaller sedan. That car aims to move the lineup down into Bentley Continental territory. Such a move is long-overdue. BMW’s CEO Norbert Reithofer still argues that long-term, BMW is on track to improve its lineup and sales/profitability figures for 2012. Though the stock markets can change from day to day, long-term strategies are critical to the longevity of a company, so we can feel confident that BMW has a future. They have more liquidity that other European automakers and Bernstein Research argues that they have stable investment potential.

As a final note, BMW will have to figure out how to bring down the cost of their smaller cars. No doubt BMW will always try to position themselves as “high-end”, but the buying public’s support for “over-valued” cars may have waned. People in tough economic times want an affordable car with great performance. Why should BMW provide that? One way to do this will be to bring the 1-series, which is arguably far over-priced for its segment, more downstream. One way to do this is to offer the 1 as a 4-cylinder variant with or without turbocharging. LeftLane news suggests some other alternatives here.

This entry was posted on Tuesday, March 24th, 2009 at 6:00 am and is filed under BMW. You can follow any responses to this entry through the RSS 2.0 feed. This post was read by 188 people until now. You can leave a response, or trackback from your own site.