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Helmut Panke

As the chairman and chief executive officer of an operation that produces “the ultimate driving machine,” Helmut Panke heads a …

As the chairman and chief executive officer of an operation that produces “the ultimate driving machine,” Helmut Panke heads a firm with a reputation to live up to-and also one it probably never will live down.

“The yuppie image is still there,” sighs Panke, 47, recently tapped by Germany‘s Bayerische Motoren Werke AG to head BMW (US) Holding Corp., responsible for the parent’s North American operations.

For most of the go-go 19805, BMW was the sedan of choice for hotshot investment hankers, tax lawyers, and M&A brokers. But when the stock market crashed in 1987, so, too, did most predators in financial services. As the economy slipped into the doldrums, BMW’s U.S. sales took a nosedive, plunging 44.9 percent between 1986 and 1991 from a high of 96,759 units.

While BMW hasn’t returned to peak form stateside, nor does it expect to anytime soon, the company does seem to be making progress against stiff head winds. Sales here climbed 23.5 percent last year, while the broader luxury car market was essentially flat. In the period ended September 30, year-on-year growth eased slightly to 17 percent. But perhaps most important, the company outsold and outproduced archrival Mercedes-Benz for the first time last year-in the U.S. and worldwide. Although Mercedes sold 63,312 cars in the U.S. in 1992, a gain of some 8 percent over 1991, BMW’s sales jumped to 65,691 cars. Worldwide, the rough tally was BMW: 598,000 cars; Mercedes: 530,000.

Don’t underestimate the scope of competition between these two companies or the advantage it may provide to BMW Group, which chalked up total sales in 1992 of 31.2 billion deutsche marks ($19.18 billion). This is the auto world’s equivalent of David versus Goliath, Evert versus Navratilova, “tastes great” versus “less filling.” Recall, Panke says over lunch, digging into a salad of romaine and escarole, that BMW almost went bankrupt in 1959, prompting its board to consider selling out to Daimler-Benz.

Most BMW executives downplay the rivalry: After all, with stiff competition in the luxury car market-partly because of the success of the Japanese-there’s no cause for wild celebration. But Panke acknowledges that besting Mercedes provided a psychological boost to BMW employees and executives alike. It was “undreamable” just 10 years ago, he says, adding, “there’s always some kind of a market reaction to winners and losers. There is a group of potential clients” who want to associate themselves with a winner.

Edging Mercedes also vindicated BMW’s recent marketing and production strategies. Among the catalysts in BMW’s rebound was the introduction in 1991 of a revamped, entry-level 3-series, now including a base four-cylinder 318 model with an aggressive sticker price of $23,950.

The line has drawn raves from the American automotive press. Sales here zoomed 31.2 percent last year to 38,040 units.

Some industry observers maintain BMW runs the risk of compromising its prized luxury image; Panke himself reckons that if the company were to produce a $12,000 car, it would risk “changing the public’s perception.” Meanwhile, despite BMW’s success in the lower end of the luxury market, criticism lingers that it has been unable to develop an adequate array of premium products. Sales of BMW’s most expensive car, the $83,400 850Ci sport coupe, tumbled 47.7 percent last year, though sales of its top-priced 7-series jumped 21 percent.

But Panke argues the 3-series retains the look and feel of BMW’s upscale models, and that the company’s pricing policy and product mix remain on the successful side of a very fine line. “People still associate the 3-series with the 7-series,” he says. “They say, ‘This is my dream, it’s worth working hard to have a BMW.”‘

Amid sluggish conditions worldwide, BMW attaches no small significance to its success in the U.S., the company’s largest market outside Germany. “Whoever wants to have a strong global position has to succeed in the U.S.,” Panke says. “If you get pushed out, you’ll never get back in. Look at Volkswagen, Peugeot, and Fiat.”

Such reasoning culminated last year in a decision to build a production plant in Spartanburg, SC. Panke directed the project team that selected the site of BMW’s first full manufacturing facility outside Germany.

The plant, slated to come online in late 1994, will fill a variety of needs and offer-several advantages. BMW needs additional productive capacity, and the new plant is expected to turn out 60,000 cars a year by the end of 1995. The company also plans to export more than 50 percent of the cars built in Spartanburg and notes the plant will help shield it from currency fluctuations. Including productivity improvements, the overall labor cost in South Carolina should be some 30 percent less than that of plants in Germany. But Panke emphasizes that the decision to build a plant in the U.S. reflects BMW’s decision to become a true multinational company.

“In the 1990s, success depends on more than the ability to offer a successful luxury product,” he says. “You have to invest in the major markets and provide jobs to show you’re a part of society.”

BMW, founded in 1916 as an aircraft’ engine manufacturer, seems to be embarking on a youth movement in its senior management. Panke, formerly the director of corporate planning in Munich, was named in April to head the North American unit. A month before, aristocratic Eberhard von Kuenheim, 65, stepped down as board chairman after 23 years and was replaced by 45-year-old Bernd Pischetsrieder, BMW’s chief of production operations.

Panke, a nuclear physicist by training who entered the business world as a consultant with McKinsey in 1978, retains a healthy sense of scientific curiosity. He’s imaginative, yet methodical, pushing a scoop of ice cream around a dish during dessert, meticulously spooning out only the ice cream that melts. Shifting gears from present to future, he touches on subjects as diverse as marketing automobiles through a combination of interactive media and virtual reality. In such a futuristic world, Panke muses, consumers might test drive a car in the comfort of their own homes and kick television screens instead of tires. But in mid-sentence, he brings himself up short:

“Taken to an extreme,” he reflects, tongue-in-cheek, virtual reality “may mean that people don’t need a car at all.”

Things are tough enough as it is in the luxury market, with American carmakers battling back from obscurity and the Japanese willing to cut margins ever thinner in a brash battle for market share. But Panke figures BMW has an intangible benefit on its side, one that doesn’t appear on a balance sheet or in trade statistics. It’s a concept he returns to again and again, under the auspices of mystique, originality, and creativity. Once more, of course, we’re talking about image.

In a maneuver to pitch its products to the generation “right behind” the baby boomers, Panke says, BMW has taken pains to mark itself as politically correct, producing vehicles free of chlorofluorocarbons, embracing recycling, and introducing new products-among which, rumor has it, will be a roadster built in the Spartanburg plant.

“What is cool?”‘ he asks, revealing a litmus test the company uses to evaluate its products, and, perhaps, giving away his age. “We’re planning to add to the BMW myth. Image is a large part of what we sell.”

About joseph l. mccarthy