As long as BMW could stay in its lane of performance hydrocarbon-powered vehicles that were elegantly engineered, it could remain among the most prosperous and profitable automakers in the world and one of the paragons of German manufacturing. But the industry has gotten more demanding lately, and even confusing, and CEO Harald Krüger wasn’t able to steer the iconic company any longer. So he will be out in 2020.
And more broadly, Krüger’s departure from BMW suggests further challenges for the heads of traditional luxury automakers as they adjust to a world in which their most important rivals aren’t one another but are Tesla and maybe even some other electric-car maker that hasn’t been born yet. They’re pressed between the growing demands of the gas- and diesel-fueled car market of today and the still-evolving requirements of competing in the all-electric, driverless-vehicle world of tomorrow—the latter of which requires enormous investments in a market that won’t pay them back for several years, if ever.
Another current illustration of this dilemma was how Audi AG Bram Schot recently vacillated after experiencing blowback by performance enthusiasts to the company’s decision to discontinue production of TT, its zippy little roadster that long has been a favorite of Audi fans. The company is having to save money on projects such as eliminating the next generation of TT so that the Volkswagen AG unit has the resources to invest in EVs and AVs. So the best Schot could do was suggest that Audi might give TT aficionados an electric-powered successor that they would like almost as much.
“The BMW Group has been my professional home for more than 27 years. After more than ten years in the board of management, more than four of which as the CEO of the BMW Group, I would like to pursue new professional endeavors and leverage my diverse international experience for new projects and ventures,” said Krüger in his official statement.
Krüger tried to navigate a judicious course through the new demands on BMW, forging a once-unthinkable partnership with main rival Daimler AG, parent of the Mercedes-Benz brand, for development of technologies for the driverless realm. BMW also has begun introducing the first models in a planned fleet of EVs as it rather quickly turns over its lineup of stalwart gas- and diesel-powered sedans for the cleaner vehicles being demanded by regulators in Europe, China and California.
But the ultimate payback from investments in electric and autonomous driving depends not only on what the two carmakers do in vehicle development but also on a pick-up in the pace of consumer demand for all-electric vehicles, of which there is virtually none in diesel-dominated Europe and still very little anywhere else. BMW and other automakers also are depending on the pace of a required massive overhaul of automotive-transportation infrastructure around the world and the success of multiple governments in making it happen.
Meanwhile, early BMW all-electric offerings such as the i3 perform well enough to challenge Tesla vehicles in important metrics for owners such as torque and range, but i3 lacks the size, handling and other characteristics that have typified BMW vehicles over the last half-century and entail marketing investments that seem to require the creation of a whole new brand.
Krüger has to balance all of this while also coping with a current picture in which BMW has been faced with a slowing global economy; flattening demand in core markets including Europe, China and the United States; and a tariff-crossed trade environment that has made it difficult to plan investments even in BMW’s big plant in South Carolina. So BMW issued a profit warning in March and flagged a major cost-cutting drive and effective hiring freeze this year. There also was an accounting charge to BMW related to potential fines from an antitrust investigation in Europe.