bmw

BMW builds terrific cars and crossovers, but even Germany's finest is struggling to tread water in a brutal automotive climate. Lagging demand has forced BMW to cut 26,000 workers for the months of February and March and BMW's factories in Dingolfing and Regensburg will be effected by the eliminations, which will cut 38,000 units. BMW is also reducing hours at Berlin and Landshut to better align output with demand. The reduced production hours and labor cuts won't result in any permanent layoffs, though a prolonged sales slump could lead management at the Bavarian Motor Werks to take more drastic action. The shrinking vehicle market is also hurting BMW's stock price, which is down 49% over the past 12 months.

The world's largest luxury automaker may also be looking for loan guarantees from the German government. Reuters is reporting that BMW is looking to follow Volkswagen in securing its debt to help weather the auto sales tsunami. Volkswagen, which is reducing hours for 86,000 of its workers, requested financial support in December. Something tells us the German government won't ask BMW brass to take any tongue lashings in order to be considered for loans.

Jan. 20 (Bloomberg) -- Volkswagen AG and Bayerische Motoren Werke AG are reducing hours for a total 86,000 workers to rein in production as the global recession deflates demand for vehicles.

BMW, the world’s largest manufacturer of luxury cars, will drop shifts for 26,000 employees in February and March, trimming its automaking by 10 percent, while Volkswagen, Europe’s largest carmaker, will shut five German factories from Feb. 23 to Feb. 27, affecting two-thirds of its 92,000-strong German workforce.

The cutbacks are in response to the worst car markets in almost two decades. Deliveries in Germany fell 2 percent in 2008 to less than at any time since the country’s reunification in 1990, while the U.S. car market contracted 18 percent to a 16- year low. Daimler AG’s Mercedes-Benz unit has put its main German factories on shorter working hours in the first quarter.

“Conditions remain challenging on the international automotive markets,” Munich-based BMW said today in a statement. “This trend also has an impact on the BMW Group.”

BMW will cut output at German assembly plants in Dingolfing, its largest, and Regensburg in February and March, reducing production of BMW’s 3-Series to 7-Series model range by 38,000 cars, Marc Hassinger, a spokesman, said in a phone interview.

Volkswagen Plants Affected

Volkswagen’s closings will affect the factory at its headquarters in Wolfsburg as well as plants in Emden, Hanover, Zwickau and Dresden, trimming output of Golf, Passat, and Phaeton models, Fred Baerbock, a spokesman said in a phone interview. He declined to say how much production would be cut by the move.

“The current market situation naturally has an impact on our coworkers,” Bernd Osterloh, Volkswagen’s works-council head, said in a statement. He said accounts of overtime hours were largely empty.

BMW fell 55 cents, or 2.9 percent, to 18.54 euros in Frankfurt trading. The stock has dropped 49 percent in 12 months, valuing the company at 11.8 billion euros ($15.3 billion). Volkswagen fell 3.10 euros, or 1.3 percent, to 236.90 euros, valuing the company, which is majority owned by Porsche SE, at 73.8 billion euros.

In addition to eliminating shifts at the two assembly plants, BMW will also reduce hours at component factories in Berlin and Landshut, Germany. BMW said it doesn’t plan to shorten hours at assembly plants in Munich and Leipzig. BMW sold 352,000 cars and sport-utility vehicles in the first quarter of 2008, and 1.44 million for the full year.

The shorter working hours allow them to reduce labor costs and production levels temporarily without mass firings, BMW said.

“The highly qualified employees we are able to retain today will give us a decisive competitive edge in the future,” Harald Krueger, BMW’s personnel chief, said in the statement.

Volkswagen said production at component plants, including a motor factory in Chemnitz, won’t be suspended. Research and development will also spared the halt, the company said.