BMW Drives Germany

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BMW's critics say its product-line expansion hasn't solved all its growth challenges or given it much protection from the increasingly competitive luxury segment. Helmut Becker, an auto consultant and formerly BMW's chief economist, says the idea behind the failed Rover deal--to turn the firm into a two-brand company, one for the mass market and one a premium brand--was a smart one, since it would have enabled BMW to spread the huge cost of new-car development over a far bigger group. "BMW's main weakness is that life is getting ever narrower in the premium segment, and it needs volume growth. I'm not sure where it can get it from," Becker says. But other analysts such as Cardiff's Rhys reckon that BMW can continue to forge ahead because of the skillful management of its brand name and underlying business. "They need to have the best cost base possible and make a product consumers want," Rhys says, "but BMW will be fine for another decade."

Reithofer pooh-poohs the pessimists. "Size and success have got nothing to do with one another," he says. BMW's rapid sales expansion in the past few years provides some economies of scale, he says. He points out that the firm is also pooling its resources with other manufacturers, developing engines for the Mini together with Peugeot and hybrid-engine components together with Mercedes. Looking around the world, he makes a sharp distinction. Toyota, the world's biggest and most profitable car company, "is strongly process driven," he says. BMW, by contrast, "is more product driven--and I wouldn't want to bet on who will be more successful in 10 years." That's bravado, of course, but in itself such self-confidence is a sign that a new, more flexible Germany is bouncing back. HIGH PERFORMANCE With steady increases in production and profits fueling its stock surge, BMW has become the leading premium car brand [This article contains a chart. Please see hardcopy of magazine.]