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Search for Profitability Leads to BMW Job Cuts

December 21, 2007

FRANKFURT, GERMANY — German car maker BMW announced a plan to shed thousands of jobs in its German workforce to boost profitability, following in the tracks of Daimler and Volkswagen.

In the coming months, "several thousand jobs" will disappear, a company spokesman said.

He gave no specific target figure, but the news magazine Der Spiegel suggested on its Internet site that 8,000 jobs would disappear in 2008, about seven percent of BMW's salaried staff.

In the past few years, big German auto manufacturers Daimler and Volkswagen, and Peugeot-Citroen in France, have laid out broad plans to restructure plants in western Europe, a slumping market.

Emerging economies meanwhile offer cheaper labor and much stronger growth prospects.

BMW had not followed the trend, but after slipping in profitability against its rivals it is now trying to catch up.

Job cuts are to focus on German sites and blue-collar posts, but should not involve outright redundancies, the spokesman said.

BMW will not renew part-time contracts, "probably" the "main" target of the measures unveiled on Friday.

But thousands of full-time posts will also disappear, either workers who accept incentives to leave or owing to "natural fluctuations" such as retiring workers who are not replaced. "We need engineers and skilled workers," the spokesman told AFP. "But we cannot increase productivity" in the workshops, he added.

The target is clear: "BMW wants to increase profitability" by cutting production costs, the spokesman said.

Efforts that focused on development costs of new models did not suffice, he added.

A spokesman for the labor union IG Metall told AFP: "We are surprised by the number and by the timing of the announcement, but we knew there would be job cuts at BMW."

No labor protest was foreseen, he added.

In September, BMW boss Norbert Reithofer announced a five-year strategic plan dubbed "Number One" to resolve a fundamental problem at the company.

In the past few years, BMW has regularly increased its sales, gaining on its direct rival, Mercedes-Benz, while seeing profit margins slip steadily.

In Germany, competition is fierce in the high-end market between Daimler (Mercedes-Benz), BMW and Volkswagen's Audi brand.

BMW lags behind Daimler, aiming for a 10-percent profit margin by 2012, while Daimler hopes to reach the same target two years earlier.

Audi is also turning in increased sales, and expects to attain a profit margin of eight percent in the next two or three years.

In September, Reithofer had suggested several ways of meeting the challenges facing his company, either by a large acquisition, a restructuring of personnel or a complete reorganization of the car maker.

In the end, it chose to make broad job cuts, following the example set by competitors.

BMW is expected to provide details on the jobs plan in January or February.

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