BMW to scale back jobs in spending cuts

BMW to scale back jobs in spending cuts

Berlin: The world’s largest luxury car maker, Bayerische Motoren Werke AG (BMW), will scale back its workforce under a plan announced three months ago to boost profit with €6 billion ($8.6 billion or Rs34,056 crore) in spending cuts.

The car maker will eliminate jobs by not replacing people who leave and through contract agreements on work-time flexibility, said Mathias Schmidt, a spokesman at Munich-based BMW. Schmidt wouldn’t confirm a report today in German magazine Der Spiegel’s online edition that 8,000 positions will be cut next year.

Chief executive officer Norbert Reithofer outlined the five-year savings programme in September after BMW’s profitability lost ground to Daimler AG’s Mercedes-Benz cars division. The automotive division aims to raise by 2012 its return on capital employed to 26% from 22% last year, and reach a return on sales of 8-10%, versus 5.9%.

“BMW is under a lot of pressure from the capital markets as well as their majority owner, the Quandt family, to become more profitable and efficient," said Gregor Claussen, an analyst at SEB in Frankfurt with a “buy" recommendation on the shares. “With this kind of move they are showing the market that they are serious and doing something about their situation."