Bloomberg News

BMW to Set Up Brazil Plant to Sustain Record Global Deliveries

December 20, 2011

Dec. 16 (Bloomberg) -- Bayerische Motoren Werke AG, the world’s largest maker of luxury vehicles, will set up a factory in Brazil to help sustain global sales growth following record deliveries in 2011.

BMW is deciding on a site for the plant, which will contribute to the company’s push to increase sales to 2 million cars by 2020 from 1.6 million this year, Chief Executive Officer Norbert Reithofer told reporters at a briefing near the carmaker’s Munich headquarters.

The manufacturer, which will introduce a new version of its best-selling 3-Series sedan in February, anticipates that sales will grow in the U.S., China and Europe next year, unless the global economy falters, he said.

“We are better prepared for a potential crisis” than during the 2009 recession because of lower production costs and a better financial cushion, Reithofer said at the briefing yesterday. He reiterated that profit in 2011 will “rise significantly” to a record and that automotive earnings before interest and taxes will amount to at least 10 percent of sales.

BMW has been considering building a factory in Brazil for months as it seeks to balance growth and avoid over-reliance on a single market. The maker of BMW, Mini and Rolls-Royce vehicles aims to defend its worldwide luxury-car lead from Volkswagen AG’s Audi and Daimler AG’s Mercedes-Benz, which have both vowed to take the top spot.

Car Glut

The expansion comes amid a growing car glut in Europe as most automakers continue churning vehicles in the face of slumping sales and growing concern that the sovereign-debt crisis is causing an economic slowdown. Overcapacity in the region may surge 41 percent to 2.92 million vehicles next year, according to forecasts from research group IHS Automotive.

Reithofer said he’s expecting “slight” growth in Europe next year, fueled by demand in the region’s north. The company is “optimistic” about sales in the U.S. and foresees growth in China in the first half of next year, he said. The euro is unlikely to break up because of the sovereign-debt crisis, the CEO said.

BMW is keeping its factories’ Christmas breaks as short as possible to meet demand, shutting most plants only for the week between Christmas and New Year’s Day. At the same time, the company is on standby to lower production in case demand falls. Frank-Peter Arndt, BMW’s production chief, said in October that the carmaker can reduce output by 20 percent to 30 percent if necessary.

BMW won’t give up the Rolls-Royce brand, Reithofer said. Daimler said last month that it will shut down the super-luxury Maybach division to end almost a decade of losses.

--Editors: Tom Lavell, Jerrold Colten

To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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