Bayerische Motoren Werke Aktiengesellschaft (ETR:BMW) said it is preparing a broad transformation program focused on streamlining processes, increasing the use of artificial intelligence and offering voluntary severance packages for indirect employees, while maintaining its production footprint in key regions.
During the company’s earnings-call question-and-answer session, Board Member for Production Milan Nedeljkovi? declined to confirm reported figures for planned job reductions. He said the initiative should not be viewed as a simple headcount-cutting program, but as part of a wider reorganization of the company’s processes, product development, procurement, sales and production operations.
Transformation Program and Severance Plan
Nedeljkovi? said BMW sees potential to simplify internal structures, redesign processes and use digital tools to improve decision-making. The company intends to examine areas including purchasing, product design, development, technology and its own manufacturing operations.
The company plans to launch a voluntary severance program for indirect functions within BMW AG. Employees in eligible roles will receive information on the value of a potential severance offer, although certain key functions will be excluded. Nedeljkovi? said the program is designed to provide flexibility, including opportunities for employees to move into other roles within the company when necessary.
Chief Financial Officer Walter Mertl said BMW’s annual guidance includes a 1.25 percentage-point impact related to severance programs. The company’s guidance calls for an EBIT margin of 1% to 3%, he said.
BMW expects the analysis and implementation of the transformation to proceed over the next 12 to 18 months. Nedeljkovi? said the company is already working through individual processes and expects the transformation program to be implemented by the end of next year.
AI will be used to help employees handle broader responsibilities and reduce the need for work to be divided among highly specialized departments, according to Nedeljkovi?. He said AI agents and support tools can give employees greater access to information, enabling smaller teams to take on more comprehensive tasks and make decisions more quickly.
BMW will also use external experts and consultants for benchmarking and to learn from practices in other industries, he said.
China Remains a Focus
Management addressed continuing pressure in China, where Nedeljkovi? said the company experienced a downturn in the second quarter amid broader weakness in the internal-combustion-engine market. He cited a 39% decline in June compared with the prior-year month, describing it as a significant impact.
BMW has revised product content, increased vehicle value and adjusted its dealer network in China over the past two years, Nedeljkovi? said. He said the company has found a more stable baseline in recent months and expects the Neue Klasse vehicle program to provide an opportunity to strengthen its position in the market.
The Neue Klasse ramp-up in China is expected to begin at the end of the year. Management said customer, dealer and media feedback on the iX3 and its long-wheelbase version has been highly positive, but declined to provide sales forecasts or disclose pricing ahead of the start of sales.
On pricing in China, Mertl said BMW had broadened and revised its product offering over the past 18 months. While list prices were reduced, transaction prices were maintained as dealer discounts narrowed, he said. BMW remains at the transaction-price level of the first quarter of the previous year, according to Mertl.
“Prices and profit have to be in balance,” Mertl said, noting that the company’s independent dealers also need to remain profitable for the business model to function.
Regional Production and Sales Strategy
BMW said its “local for local” approach will involve greater use of local dealer and production capabilities in China. Nedeljkovi? said the company intends to remain in Europe and further develop its footprint there rather than supplying other regions from European production.
In North America, he said BMW has a strong manufacturing, dealer and supplier footprint and does not plan changes to that regional footprint. The company has expanded its U.S. operations with a high-voltage battery assembly site tied to its next X-model generation, he said.
Mertl said BMW has already adjusted its production structure in China in response to market conditions, both last year and again this year. He said cost structures in China differ fundamentally from those elsewhere and that the company can make further changes step by step.
BMW said it is growing in Europe by more than 7% and in the Americas by more than 9%. Mertl said those results demonstrate the company’s competitiveness even as Chinese competitors expand their presence in Europe.
Nedeljkovi? said BMW does not currently see a direct impact on its own sales from the growing presence of Chinese competitors in Europe, though it is monitoring the development. The company plans to roll out 40 new models during the next two years and said its German plants have flexible shift and working-time arrangements that can respond to changing demand.
Product Portfolio and Direct Sales
BMW does not plan broad cuts to its product portfolio or to reduce customer individualization options, Nedeljkovi? said. However, the company will reassess the profitability of individual derivatives, drivetrain variants and product configurations in specific markets.
He stressed that this review does not mean BMW intends to eliminate entire drivetrain categories such as battery-electric vehicles or internal-combustion-engine models. Rather, it will consider whether certain configurations are appropriate for particular countries, sales regions or markets.
BMW also plans to gradually expand a direct-sales model to the BMW brand in Europe after using the approach for MINI. Nedeljkovi? described the MINI direct-sales program as successful and said direct sales represent one of the more significant changes to BMW’s business activities.
Mertl added that currency effects extend beyond the U.S. dollar and include the South Korean won, Japanese yen and Chinese yuan. He noted that BMW fully consolidates its Chinese joint venture, making yuan movements relevant to both profit-and-loss reporting and the balance sheet.
About Bayerische Motoren Werke Aktiengesellschaft (ETR:BMW)
Bayerische Motoren Werke Aktiengesellschaft, together with its subsidiaries, engages in the development, manufacture, and sale of automobiles and motorcycles, and spare parts and accessories worldwide. It operates through Automotive, Motorcycles, and Financial Services segments. The Automotive segment engages in the development, manufacture, assembling, and sale of automobiles, spare parts, accessories, and mobility services under the BMW, MINI, and Rolls-Royce brands. The Motorcycles segment develops, manufactures, assembles, and sells motorcycles and scooters under the BMW Motorrad brand, as well as spare parts and accessories.
