How Economy Affects Automakers

German automaker, BMW, has the distinction of a wonderful reputation. It is said by many owners or those who have sampled driving a BMW that the answer to this stunning reputation is in the drive of the BMW. Drivers unequivocally say that they feel "at one" with the car. BMW technicians have captured the concept of "engineering a vehicle for pleasure!"

Despite BMW's X6 selling out its first year of production, BMW has joined other automakers in seeing declining sales. They are seeking to cut costs as the price for raw materials soars. In June, 2008, BMW raised their manufactured suggested retails prices for vehicles bound for the United States.

BMW Chief Executive Officer, Norbert Reithofer has said that the changing American economy forces the company to make further policy shifts. BMW will implement additional price hikes for 2008 and 2009. This includes canceling development of the large X7 SUV.

Future Predictions

Automakers around the world have been affected by rising costs and reduced sales: however, European brands have been hit by the declining value of the dollar against the euro. BMW's Chief Financial Officer and Head of Marketing, Michael Ganal has stated that if the state of current foreign exchange rates persist "2009 will be a major challenge."

BMW CEO Reithhofer has stated also that they will cut production of vehicles sold in the United States by up to 40,000 units or move them to other markets. Over the latter part of 2008, the price increases will only apply to units sold in the United States. The price increases could also move to Europe later, depending upon each nation's individual market.

Three factors hang in the balance. Despite the decent performance of some high-end SUV's, rising gas prices and the shift toward smaller vehicles, BMW plans to cancel units still in the developmental stage. However, despite all the support of BMW's products, they will have to cut back to stay solvent.

Written by Sandra Pianin