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BMW to cut another 5,600 by end of 2008

Luxury car maker BMW AG said Wednesday it will cut another 5,600 jobs by the end of 2008, on top of 2,500 other positions that have already been eliminated.
/ Source: The Associated Press

Luxury automaker BMW AG said Wednesday it will cut another 5,600 jobs by the end of 2008, on top of 2,500 other positions that have already been eliminated, as it moves to pare expenses amid a wider cost-cutting program.

Speaking to reporters, BMW’s head of personnel, Ernst Baumann, said that the jobs being cut include 2,500 full-time and 2,500 temporary workers in Germany, along with 600 other positions abroad, primarily international sales and distribution positions.

He said that another 2,500 positions — all of them temporary — had already been eliminated, bringing the total number of cuts and planned cuts to 8,100 positions, or 7.5 percent of the company’s total work force of almost 108,000, including both permanent and temporary employees. The cuts to its permanent work force, which totals 80,000 worldwide, account for 3 percent of its staffers.

The Munich-based company did not say specifically where the 600 global job cuts would come. Within Germany, the cuts would be spread across its facilities with the exception of a plant in Leipzig.

BMW currently employs 4,700 people at its plant in Spartanburg, S.C., where it produces the X5 SUV and the Z4 Roadster. It plans to boost production there to 240,000 cars a year when it adds more SUV production at the plant but did not say if any of the cuts would be implemented there. The U.S. is the company’s biggest market, and the lower dollar gives the company an incentive to ramp up production there.

BMW’s brands include its namesake luxury cars along with the Mini and Rolls-Royce brands as well as motorcycles.

In December, BMW confirmed it would start cutting jobs after new Chief Executive Norbert Reithofer said he planned to focus on increasing the rate of return for the maker of the pricey and desirable sedans, sport utility vehicles and sports cars.

BMW said in September it would put “all cost structures to the test” and continue to standardize processes to reduce costs for each vehicle in development, production, sales and administration.

It said then that it was targeting a rise in productivity of at least 5 percent per year, and Reithofer declared that “we will focus the entire organization on the return on capital.”

Baumann said the cost of the cuts, including severance pay, benefits and other expenses, would likely be in the “three-digit million” euro range, though he did not specify how much. He did, however, confirm that the cuts would result in as much as 500 million euros ($743.7 million) in savings from 2009 and onward.

The IG Metall industrial union responded angrily to the announcement.

“A pretax profit of 3.7 billion euros ($5.5 billion) per year apparently is no longer enough for BMW,” said the union’s chief in Bavaria, Werner Neugebauer, who is a member of the automaker’s supervisory board.

“Mr. Baumann appears to think he has to play the agitator in order to be able to push up the share price by leaving the work force in a state of permanent insecurity,” he said.

Another IG Metall official, Horst Lischka, said that dismissals were ruled out for the next seven years — “we have a cast-iron agreement on securing employment; no one can get past that.”

Baumann said it was important to the company that cuts in the permament jobs “must happen on a voluntary basis.”

Shares of BMW fell 2.2 percent to 36.57 euros ($54.39) in Frankfurt trading. That is part of a wider decline by the DAX index, which was down more than 1.1 percent.

In a nod to the rising euro, which hit a record high of $1.5087 earlier in the day, Baumann warned that other cuts could be coming if the dollar continues its fall.

Baumann told reporters that the carmaker intends to increase its overall productivity globally by 5 percent, and admitted its recent spurt in car sales won’t last. But he did reiterate that the company plans to sell 1.8 million cars a year by 2012.

“The productivity gains will be bigger than sales growth in coming years,” he said.