BMW picks insider Zipse as CEO to catch up with rivals

Oliver Zipse
Updated 20 July 2019

BMW picks insider Zipse as CEO to catch up with rivals

  • German giant has lost ground to Mercedes-Benz and Tesla as tech steps up

FRANKFURT: BMW has named Oliver Zipse as its new CEO, continuing the German carmaker’s tradition of promoting production chiefs to the top job even as the auto industry expands into new areas such as technology and services.
Hailing Zipse’s “decisive” leadership style, BMW hopes the 55-year-old can help it win back its edge in electric cars and the premium market  from rival Mercedes-Benz.
But some analysts questioned whether Zipse was the right choice with new fields such as software and services like car-sharing becoming increasingly important.
“What is intriguing is the cultural bias to appoint the head of production. It works sometimes but ... being good at building cars is not a defining edge the way it was 20 years ago,” said Jefferies analyst Philippe Houchois.
Current CEO Harald Krueger, and former chiefs Norbert Reithofer, Bernd Pischetsrieder and Joachim Milberg were all former production heads.
Zipse joined BMW as a trainee in 1991 and served as head of brand and product strategies and boss of BMW’s Oxford plant in England before joining the board.
He will become chief executive on Aug. 16, taking over from Krueger who said he would not be available for a second term.
“With Oliver Zipse, a decisive strategic and analytical leader will assume the Chair of the Board of Management of BMW. He will provide fresh momentum in shaping  the future,” said Reithofer.
Zipse helped expand BMW’s efficient production network in Hungary, China and the US, in a move that delivered industry-leading profit margins.
Under Krueger, BMW was overtaken in 2016 by Mercedes-Benz as the best-selling luxury car brand.
It also had an early lead over US  rival Tesla in electric cars, but scaled back ambitions after its i3 model failed to sell large numbers.
Reithofer initially championed Krueger’s low-key consensus-seeking leadership, but pressured him to roll out electric vehicles more aggressively, forcing Krueger to skip the Paris Motor Show in 2016 to reevaluate BMW’s electric strategy.
Krueger’s reluctance to push low-margin electric vehicles led to an exodus of talented electric vehicle experts, including Christian Senger, now Volkswagen’s (VW) board member responsible for software, and Audi’s Markus Duesmann, who is seen as a future CEO of the company.
Both were poached by VW CEO Herbert Diess, a former BMW board member responsible for research who was himself passed over for BMW’s top job in 2015.
VW has since pushed a radical 80 billion euro ($90 billion) electric car mass production strategy, and a sweeping alliance with Ford.

Other skills
“A CEO needs to have an idea for how mobility will evolve in the future. This goes far beyond optimising an existing business,” said Carsten Breitfeld, chief executive of China-based ICONIQ motors, and former BMW engineer. “He needs to build teams, attract talent, and promote a culture oriented along consumer electronics and internet dynamics.”
German manufacturers have dominated the high-performance market for decades, but analysts warn shifts towards sophisticated technology and software is opening the door to new challengers.
“Tesla has a lead of three to four years in areas like software and electronics. There is a risk that the Germans can’t catch up,” UBS analyst Patrick Hummel said.
Germany’s Auto Motor und Sport car magazine, normally quick to champion German manufacturers, this week ran a cover questioning BMW’s future.
“Production expertise is important, but if you want to avoid ending up being a hardware provider for Google or Apple, you need to have the ability to move up the food chain into data and software,” a former BMW board member said.


No more spending excuses for Merkel as investment bottlenecks ease

German Chancellor Angela Merkel gestures at her arrival for the government’s ‘Open Door Day’ in Berlin on Sunday Sam sit fuga. Et laut ute odi cum as elit. (Reuters)
Updated 29 min 45 sec ago

No more spending excuses for Merkel as investment bottlenecks ease

  • German leader urged to boost public investment by taking on new debt Sunducim velessunt alis plabore sernatur

BERLIN: German Chancellor Angela Merkel has fended off growing calls for more fiscal stimulus by citing the slow outflow of existing federal funds — but data suggests the money is indeed being used up as local authority bottlenecks gradually clear. With Europe’s largest economy on the brink of recession and borrowing costs at record lows, Merkel has faced pressure at home and from abroad to ditch her pledge to target balanced budgets and instead boost public investment by taking on new debt.
Merkel and her conservatives say Berlin has already earmarked billions of euros in investment for schools, nurseries and hospitals but that local authorities have spent only a fraction of this windfall.
But this excuse seems no longer valid: Figures from the Finance Ministry show that towns and municipalities are now tapping the federal government’s funds more actively, suggesting that planning and labor bottlenecks are easing.
Of €3.5 billion ($3.9 billion) earmarked in a municipal infrastructure fund for investment in schools, nurseries and hospitals (KInvFG I), local authorities have applied for nearly €3.4 billion, the data showed — roughly 96 percent of the overall amount on offer.
The fund was created in 2015 and initially meant to last until 2018. Due to the slow initial take-up, it was then extended to 2020.
Of another €3.5 billion put aside by the government in 2017 for school renovations (KInvFG II), authorities so far have tapped €2.4 billion, or 69 percent.

HIGHLIGHTS

• German towns tap into federal funds more actively.

• Improved outflow raises pressure to provide more money.

• Coalition parties at odds over debt-financed stimulus.

“As you can see, the program is running very well,” a Finance Ministry spokeswoman said, adding that the take-up had jumped by nearly €2 billion over the past 12 months.
“The figures show that there is planning progress in most federal states and that financially weak municipalities welcome the financial aid from the federal government,” she added.
The improved flow of funds is important for Germany, where heavily indebted towns and municipalities historically manage a large chunk of public spending and many citizens are annoyed by run-down local infrastructure and closed public facilities.

Austerity
Years of austerity linked to the national debt brake — a constitutional amendment introduced in the wake of the global financial crisis of 2008/09 to rein in public debt — have led to pent-up public investment needs in towns and municipalities worth a combined €138 billion, data from KfW Research shows.
“Towns and municipalities have been structurally underfunded for more than 20 years. They were forced to cut staff,” Gerd Landsberg, managing director of the German Association of Towns and Municipalities, told Reuters.
“That partly explains the initial problems with the slow take-up of federal funds — it takes time to hire new staff and get the ball rolling,” Landsberg explained.
The latest figures show, however, that authorities are overcoming those staff-related planning bottlenecks, meaning most of the money should be used up soon, he said.
Landsberg called on the government to provide more funding lines and improve the design of its programs.
“Short-term investment funds alone do not provide sufficient planning and personnel security. We must secure the financial strength of towns and municipalities in the long term.”
Like Merkel and her conservatives, Finance Minister Olaf Scholz of the jointly governing, center-left Social Democrats (SPD) has shown little appetite so far to ditch the balanced budget goal and boost investments through new debt.
Eckhardt Rehberg, the chief budget lawmaker in Merkel’s conservatives, is also sticking to the line that billions of euros still sit unused in various special-purpose funds.
“The debate about debt-financed investment programs misses the point. The problem is not a lack of money, but the sluggish outflow of funds,” Rehberg said.
Authorities must hire more staff, cut red tape and speed up planning and approval procedures, he said. “In addition, the construction sector has already reached its capacity limit, which means it can hardly cope with more demand,” Rehberg added.
Nevertheless, members of both the SPD’s own left wing and of the Greens, an increasingly strong opposition party, are pushing for a fiscal U-turn. Even the influential BDI industry lobby group, traditionally close to Merkel’s conservatives, last week called for a debt-financed fiscal stimulus package.
Cansel Kiziltepe, a lower house SPD lawmaker specializing in finance, said Merkel and the conservatives should stop blaming local authorities and rethink their insistence on incurring no new debt in their budgets, a policy goal commonly known as the “black zero.”
“Especially in times of economic weakness and in light of improved outflow of funds, it’s high time to say goodbye to the fetish of the black zero,” Kiziltepe told Reuters.