BMW Opens New Plant in Leipzig

Press Release

In a special ceremony German Chancellor Gerhard Schröder and the Chairman of the Board of Management of BMW AG, Helmut Panke, are opening the new BMW Leipzig plant last week in the presence of the Prime Ministers of Saxony, Saxony-Anhalt, and Bavaria, as well as the Lord Mayor of the City of Leipzig.

 

Pursuing a consistent product and market initiative, the BMW Group has significantly expanded its product range in recent years to now no less than 10 model series. In the process customer deliveries have increased to more than 1.2 million units in the year 2004, with a further increase to 1.4 million units planned by 2008. The new BMW Leipzig plant provides the capacities required for this purpose: The plant is conceived for production in the medium term of 650 cars a day, creating 5,500 jobs on the plant premises at full capacity.

In the official opening ceremony Helmut Panke, Chairman of the Board of Management of BMW AG, highlighted the significance of Germany for the automotive industry: "Given all of the quality conditions we enjoy in Germany, we remain in a position to build top products of the highest level in our industry. This calls for good training, the right infrastructure, quality and motivation of employees, quality in the supplier industry, a strong heritage, and good, constructive cooperation with employee representatives at plant level."

The BMW Group has invested a total of Euro 1.3 billion in the new Leipzig plant. This initial investment was supported by the European Commission granting regional assistance of Euro 360 million.

In addition to its involvement in Leipzig, the BMW Group has invested another Euro 5.4 billion in its worldwide production network since 2001, the year in which the decision was taken in favour of Leipzig. Approximately Euro 4.0 billion thereof has gone into the expansion and ongoing development of the Group's existing plants in Germany.

Panke: "Although today we are focusing on our new plant in Leipzig with an investment of approximately Euro 1.3 billion, one must not forget that since 2001 we have additionally invested three times this amount at other BMW Group locations in Germany."

A significant reason for the choice of this location was the high degree of flexibility achieved for efficient operation of the plant. "Together with the representatives of our associates, we have developed the BMW Formula for Work. Using innovative working time concepts, we are able to achieve maximum flexibility and, accordingly, full capacity at the plant, thus at least in part setting off the higher cost of production in Germany", stated Panke.

Appyling BMW's Formula for Work and the collective wage agreement in the region, production times at the plant may be varied from 60 to 140 hours a week. Panke: "This concept shows that intelligent planning and goodwill on the part of all parties involved still allows successful business operations in Germany even today."

In July 2001 the Leipzig/Halle Region was chosen as the site of BMW's new plant among more than 250 options from all over Europe. The decision taken in favour of Leipzig was based in particular on the fulfilment of the following criteria:

1. Economic operation and flexibility
2. Ideal qualities and location of the future plant premises
3. Availability of qualified and well-trained specialist employees
4. Utilisation of existing structures in terms of plants, suppliers and logistics already in place
5. Infrastructure for transport, supply and waste management
6. Connection to the BMW Group's sales and distribution network
7. Quick and smooth implementation process

The Leipzig/Halle Region proved to be the best candidate in fulfilling the sum total of these criteria. Proximity to the BMW Group's car production plants in Bavaria and the high density of first-class suppliers in southern and central Germany were essential factors in favour of the location. Another strong point speaking for the Leipzig/Halle Region was the large number of highly qualified people.

BMW Leipzig plant is part of the BMW Group's production network with a total of 22 production facilities the world over. Accounting for 80,000 out of 106,000 associates worldwide, Germany remains the centre of BMW production. International facilities in South Africa, the USA and China serve in particular to develop more distant sales markets the world over. And reflecting the tradition of MINI and Rolls-Royce, production of these vehicles is in Great Britain.

 

Opening of the BMW Plant Leipzig: Statement by Dr. Helmut Panke Chairman of the Board of Management of BMW AG

 

Press Conference Leipzig, 13 May 2005

Ladies and Gentlemen,

Welcome to our new plant in Leipzig!

Nowadays it may be a bit unusual for a German company to open a new automobile plant. And it may be even more unusual for a German manufacturer to do this here in Germany.

This is why I want to focus my comments on two issues:

1. Why did the BMW Group build a new plant?
and
2. Why did the BMW Group build a new plant here in Leipzig?

Let me begin by addressing my first point right away:

The obvious answer to the question about the need for this new plant is: The BMW Group is building a new plant because it needs new production capacity to meet growing international demand for BMW brand automobiles

That does sound short and plausible, for sure, but the new plant in Leipzig is not just a new plant but also the cornerstone of a long-term corporate strategy.

The BMW Group started a product and market initiative with the interim goal of considerably increasing the company's retail by 2008 to 1.4 million automobiles. We announced this goal in 2003.

In order to achieve this goal, the BMW Group has to make immediate and long-term plans.

Just to give you an idea of what scale we're thinking on when we do this:

No manufacturer can develop an automobile over night. And no manufacturer produces automobiles that will be on the market for just a short time. As a rule, series development of a new vehicle alone takes about 30 months. Ultimately, an automobile will be for sale on the market for about seven years. And even after that, people will keep encountering it on the street for years.

The picture is similar with production structures and processes: Companies have to plan far in advance where and how many automobiles they want to produce. Naturally it's possible for a company to design its structures to be extremely flexible, but unfortunately, companies cannot just double production capacity from one day to the next.

In this context, keep in mind that it takes just under four years from decision to completion to build a new plant like this one here in Leipzig and that large investments are linked to it. And keep in mind above all else on what time scale this kind of plant has been planned. We're talking about decades.

Our clear commitment is this: The new BMW Plant here in Leipzig is playing an important role in our long-term product and market initiative. We do not make decisions of this great importance with just short-term considerations in mind. Once we've decided on Leipzig, as in this case, then we do it deliberately - and we also see this commitment as our obligation.

Ultimately the BMW Group has its roots in Germany. Around three quarters of our associates work here, and more than half of our purchase volume comes from Germany. If you add together centrally purchased production materials, equipment, and services, then the BMW Group spends all in all euro 15 billion for goods and services in Germany every year. This is far greater than the revenues we make in Germany.

Ladies and Gentlemen,

Now to the second question: Why did the BMW Group build this plant here in Leipzig?

Altogether we had around 250 excellent applications from all over Europe - including applications from other States in Germany as well. It wasn't easy to make the final decision.

The most important criteria for selecting the site were:

1. Profitability and flexibility.
2. Ideal condition and location of the future plant site.
3. The availability of qualified technical personnel.
4. The use of existing structure with respect to existing plants, suppliers and logistics.
5. The infrastructure for traffic, utilities, and waste disposal.
6. The proximity to our sales network and our customers.
7. The process of realizing the project.

Leipzig did not have the highest score in all these seven categories, but it had the highest score overall. One strong argument in particular was the proximity to the BMW Group's automobile plants in Bavaria that the Leipzig/Halle region offers. This was closely linked to the high density of first-class suppliers in southern and central Germany. And the large, highly qualified workforce also spoke in favor of building here in Germany.

There are few places to do business in the world that can offer us these advantages in this combination.

I would also like to say quite pointedly: Germany still has the prerequisites to be successful in global competition.

We have to work - and work hard - to make sure that it stays this way, to make sure that this position is further strengthened. Because it is indisputable that, compared to other locations internationally, doing business in Germany entails high costs and , among other challenges, over-regulation.

We also get the impression, from time to time, that important sectors of industry such as the automotive industry and the industrial base in Germany as a whole are being harmed for short-sighted and populist reasons in public debates as a result of careless, non-factual and sometimes incomprehensible motives.

I believe it would be far more appropriate to return to down-to-earth, straightforward discussions instead of becoming involved in such ideological debates. Together, we must work hard to not only protect and maintain, but rather to further enhance and strengthen, the international competitive edge of the automotive industry as such and of German industry as a whole.

With this in mind, we believe that Germany requires maximum flexibility in terms of job and working conditions, flexibility of the kind crucial to success particularly in our industry.

We see a very good example right here in Leipzig: The critical issue that led us to decide in favor of this site was the fact that labor representatives and management were able to work together constructively to agree on the "BMW Formula for Work."

Depending on production volume and customer demand, this formula permits a weekly operation of the plant from 60 to 140 hours. Various synchronized working time models de-link the individual working time of associates from the machine runtime of the plant. This way we can increase the use of installed capacities by up to 40 percent. This in turn facilitates a great deal of flexibility for us and makes a significant contribution to our achieving a competitive productivity level despite Leipzig's existing site disadvantages.

The fact that we are opening this plant here today in Leipzig is also a clear signal that a great deal can be achieved right here in Germany when there is enough flexibility.

Yes, the BMW Group has also received funding for this plant in Leipzig. This shows that even the European Union understands the importance of balancing out existing disadvantages in Germany as a part of developing a well-balanced economic structure in the E.U.

Seldom has such funding been better invested. Here in Leipzig we have not set up an assembly plant but a complete production plant with all core technologies for automobile production. The starting investment we have made in this Leipzig plant is euro 1.3 billion. That's not all, however: With each new model line, more investments will follow that, added over the lifetime of the plant, they will be far greater than this initial investment.

Beyond this, we have been expanding and updating our existing production network parallel to the construction of the new plant. Thus, since 2001 - the year we decided to build in Leipzig - we have invested euro 4 billion into expanding our existing plants in Germany. Mind you: This does not yet include our investment here in Leipzig. And this does not even include our investments in foreign plants.

Ladies and Gentlemen,

When we opened our plant in Dingolfing in 1973, many people thought that would be the last automobile plant to be built in Europe. Then in 1986 we added the Regensburg plant to a similar public reaction. Then in 1994 when we opened a plant in Spartanburg in the United States, many people thought this confirmed their suspicions that the upper limit had been reached for production in Europe and that further growth was only possible abroad.

Here I must add: Since the startup of our plant in Spartanburg, we have increased our U.S. retail figures by more than five times over. The increase in retail numbers in the United States refers above all to BMW models built in Germany, such as the 5 Series and the 7 Series. This confirms: Our strong position abroad safeguards, and through additional demand creates, jobs at home.

Our development did not stop with Spartanburg.

Here in Leipzig, the BMW Group is opening another complete production facility today, demonstrating our commitment to a long-term partnership. When at full capacity, we will have 5,500 new jobs here on this plant site - and beyond this, are generating more employment in the surrounding area.

And with this we have disproved those who have looked with skepticism at our industry time and time again. The automobile industry still has a future - with a great deal of flexibility, even here in Germany.

Thank you very much for your attention.