BMW News: BMW To Streamline Variants To Increase Funds for R&D

[William Maley]

BMW has plans on streamlining its production process and cutting down on the number of variants to help get more money into R&D. According to Reuters, BMW is ramping up development on electrics, autonomous vehicles, and new powertrains to meet stricter emission standards. Nicolas Peter, BMW's finance chief said the company spent 5.16 billion euros (about $5.91 billion) or 5.5 percent of revenue on R&D in 2016.

"The next three years will be between 5.5 percent and 6 percent," said Peter.

With the increase in R&D costs, BMW is looking everywhere to cut. Unfortunately, one of the items being cut is the manual transmission option for U.S.-spec 2-Series to cut certification costs. Over in Europe, BMW has been reducing the number of 5-Series models with the option of a manual. Peter also mentioned that there will be a reduction in the number of engines on offer.

"In the 5 series we have four diesel engines on offer. I would not bet on there being four diesel engines on offer in the next generation vehicle."

Source: Reuters

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[balthazar]

BMW has plans on cutting down on the number of variants to help stem unprofitable / poorly selling models, and reduce overlap and consumer confusion.

FIFBMW

[David]

Anyone who did not see this coming is a fool. I expect MB to do the same thing. Time to cut the loses on all the pis poor selling variants.

[smk4565]

Mercedes laughs at their $5.9 billion in R&D spend.   Mercedes spends over $1 million per hour on R&D.  The other thing Mercedes does that is smart, is no manual transmissions, no more diesel in the US, and once they get the inline 6, that will share 75% of the parts with the inline 4, and they already cut out the 5.5 NA V8, the 6.3 V8, the 5.5 turbo V8 is next to go, they will only have the 4.0 V8 by next year.  They already cut down the number of engines they use.

BMW has too many configurations of cars.  No one will care if they drop a 2-series manual, or if the 5-series offers 1 diesel instead of 4.  And 0% of buyers will miss a manual 5-series, it is big luxury sedan in 2017. 

[A Horse With No Name]

3 hours ago, dfelt said:

Anyone who did not see this coming is a fool. I expect MB to do the same thing. Time to cut the loses on all the pis poor selling variants.

Nahhhhh...just add eleven crossovers and you are good...

52 minutes ago, smk4565 said:

Mercedes laughs at their $5.9 billion in R&D spend.   Mercedes spends over $1 million per hour on R&D.  The other thing Mercedes does that is smart, is no manual transmissions, no more diesel in the US, and once they get the inline 6, that will share 75% of the parts with the inline 4, and they already cut out the 5.5 NA V8, the 6.3 V8, the 5.5 turbo V8 is next to go, they will only have the 4.0 V8 by next year.  They already cut down the number of engines they use.

BMW has too many configurations of cars.  No one will care if they drop a 2-series manual, or if the 5-series offers 1 diesel instead of 4.  And 0% of buyers will miss a manual 5-series, it is big luxury sedan in 2017. 

Betting on electric is a smart move for them.

[balthazar]

59 minutes ago, smk4565 said:

Mercedes laughs at their $5.9 billion in R&D spend.   Mercedes spends over $1 million per hour on R&D.

Tesla's been here 14 years, you'd think at that rate o spendin MB would've beaten Tesla in offering luxury EVs.

Or MAYBEEEE, it's another case of 'this plastic molded headlight assembly costs $1500, yeah, that's it; $1300', and that claimed 'million' is hugely overinflated.

[smk4565]

1 hour ago, balthazar said:

Tesla's been here 14 years, you'd think at that rate o spendin MB would've beaten Tesla in offering luxury EVs.

Or MAYBEEEE, it's another case of 'this plastic molded headlight assembly costs $1500, yeah, that's it; $1300', and that claimed 'million' is hugely overinflated.

Daimler has set their R&D budget to $8.8 billion for 2017 and 2018.   Divided by 365 days is $24.11 million per day, which is over $1 million per hour.  

EV's are less than 5% of the market place, Mercedes has to sell gas cars.  They have a plan to spend $10.8 billion to produce 10 EVs by 2022.  Tesla spent $834 million on R&D last year.  Mercedes is coming for Tesla, but they also have to have the market ready for electric cars.

[balthazar]

Mercedes has always used 'funny math' with their figure releases (the artificially low .cd numbers for instance). The headlight 'cost' is another one- 'cost' vs. 'retail'- that sort of thing. Putting incentives under the dealer column and claiming artificially low factory incentives is yet another. The company does this consistently.

But the problem as I'm seeing it is : Daimler's 2016 PROFIT was $8.8B- they're not putting ANY of that into any other area except R&D?? Even your math above is 'mercedes shaky' - you say "2017 AND 2018" but you didn't divide by 730 (365 x 2). 'Funny math'.

If the claimed R&D monies went into product development, it seems to me they'd be a clear tech leader, a full decade ahead of everyone else and building the concept cars they show but never do, but they're just not. In many instances, they're reactive (car weight & EVs come to mind here).

Edited July 1, 2017 by balthazar

[David]

9 hours ago, smk4565 said:

Daimler has set their R&D budget to $8.8 billion for 2017 and 2018.   Divided by 365 days is $24.11 million per day, which is over $1 million per hour.  

EV's are less than 5% of the market place, Mercedes has to sell gas cars.  They have a plan to spend $10.8 billion to produce 10 EVs by 2022.  Tesla spent $834 million on R&D last year.  Mercedes is coming for Tesla, but they also have to have the market ready for electric cars.

Correcting your Math,

$8,800,000,000 / 770 days = $11,428,571.43 per day for the 2 year R&D budget.

$11,428,571.43 / 24hrs = $476,190.48 per hour.

$476,190.48 / 60 min = $7,936.51 per min.

Funny Math = lie

Actual Math = Truth.

Daimler does not spend over $1 million per hour on R&D.

[David]

@smk4565 Based on your info, MB spends less on R&D than GM based on their actual reporting info as they spent 8.1 Billion in 2016, 7.5 Billion in 2015, 7.4 Billion in 2014 and 7.2 Billion in 2013.

[smk4565]

1 hour ago, balthazar said:

Mercedes has always used 'funny math' with their figure releases (the artificially low .cd numbers for instance). The headlight 'cost' is another one- 'cost' vs. 'retail'- that sort of thing. Putting incentives under the dealer column and claiming artificially low factory incentives is yet another. The company does this consistently.

But the problem as I'm seeing it is : Daimler's 2016 PROFIT was $8.8B- they're not putting ANY of that into any other area except R&D?? Even your math above is 'mercedes shaky' - you say "2017 AND 2018" but you didn't divide by 730 (365 x 2). 'Funny math'.

If the claimed R&D monies went into product development, it seems to me they'd be a clear tech leader, a full decade ahead of everyone else and building the concept cars they show but never do, but they're just not. In many instances, they're reactive (car weight & EVs come to mind here).

$8.8 billion per year budget.  It was around $7 billion spent in 2016 and they are increasing R&D 22% from 2015 levels which was already higher than their competitors.  Dr. Zetche has said on tv not to expect profit increases the next few years because they are pouring money into R&D.

And the S-class has been a full decade ahead of the pack for a long time.

43 minutes ago, dfelt said:

Correcting your Math,

$8,800,000,000 / 770 days = $11,428,571.43 per day for the 2 year R&D budget.

$11,428,571.43 / 24hrs = $476,190.48 per hour.

$476,190.48 / 60 min = $7,936.51 per min.

Funny Math = lie

Actual Math = Truth.

Daimler does not spend over $1 million per hour on R&D.

Run that scenario with $17.6 billion over 770 days and see what you come up with.  Daimler has the 3rd largest R&D budget in the auto industry, trailing only VW and Toyota who are about 4 times larger and they spend nearly as much as Toyota who spends about $9 billion a year.

[surreal1272]

6 minutes ago, smk4565 said:

$8.8 billion per year budget.  It was around $7 billion spent in 2016 and they are increasing R&D 22% from 2015 levels which was already higher than their competitors.  Dr. Zetche has said on tv not to expect profit increases the next few years because they are pouring money into R&D.

And the S-class has been a full decade ahead of the pack for a long time.

Yet they are only spending about as much on R&D for those years as GM. Funny math indeed.

 

And the S Class most certainly has not been a full decade ahead of the pack. That's just MB fanboy talk.

 

I would also like to add that they should not expect a profit increase when they are focusing so much on lower end models like the upcoming A Class. It has not squat to do with R&D.

[balthazar]

smk- you're confused.

Daimler made $9.4B profit in 2016. (http://money.cnn.com/quote/quote.html?symb=DDAIF)
They paid out 4.8% in stock dividends in 2016 on 1.07 billion shares.

How are they paying for this single cost?? Dividends are paid out of profits, they are calculated out of profits, they are not fixed operating costs. How does Daimler pay a dividend if practically 100% of the profit goes into one department (R&D)?

 

Edited July 1, 2017 by balthazar

[smk4565]

4 hours ago, balthazar said:

smk- you're confused.

Daimler made $9.4B profit in 2016. (http://money.cnn.com/quote/quote.html?symb=DDAIF)
They paid out 4.8% in stock dividends in 2016 on 1.07 billion shares.

How are they paying for this single cost?? Dividends are paid out of profits, they are calculated out of profits, they are not fixed operating costs. How does Daimler pay a dividend if practically 100% of the profit goes into one department (R&D)?

 

I never said anything about Daimler's profit.  If they made $9 billion profit last year that is AFTER they paid R&D, just like it is after they paid labor cost materials, etc.   In fact their thinking is that since they have made record profits the past 4 years they can sacrifice some and spend more on R&D and spend 500 million euro on a battery factory and more on factory upgrades etc.  They are cash rich right now due to their huge sales volume.

[balthazar]

All right, I can see that. The way you worded it sounded like it was not the case.

Perhaps I was confused.

[David]

So here is the most recent report I could find on Daimler.com web site for R&D details. This is from 2011 to 2015. @balthazar @smk4565 Daimler R&D budget amount as you state SMK is NOT for just the auto's being the cars and suv/cuv's. But is the cars, trucks, vans, buses.

http://ar2015.daimler.com/management-report/sustainability/research-and-development-

Just found their 2016 report

http://annualreport2016.daimler.com/management-report/sustainability-and-integrity/research-and-development

So in this case, cars / cuv's / suv's for 2016 only got 5.6 Billion of the 7.5 Billion in R&D as the rest went to trucks, buses.

So in taking this into account, 74.6% of the over all R&D budget went to the cars/cuvs/suvs.

So if they are truly budgeting 8.8 billion for Daimler R&D and pretty much 75% goes to the auto line, we are really only looking at 6.6 Billions dollars being spent for the year.

$6.6 Billion divided by 365 = $18,082,191.78 per day

$18,082,191.78 divided by 24 hrs = $753,424.66 per hour.

GM May 2017 Shareholder Engagement is very interesting:

http://www.gm.com/content/dam/gm/events/docs/5257024-671022-Presentation

I find nothing that says R&D but I do find Capital Expenditure of 9.4 billion. Anyone know for sure what GM 2017 R&D is slated to be? 8.1 billion for 2016 would put their R&D ahead of Daimler. 

 

[David]

Based on this GM Consolidated Financial Statement report, GM's final numbers in 2016 was $9.4 Billion spent on Capital Investment AKA R&D worldwide with $6.127 Billion of it spent in the US.

http://www.gm.com/content/dam/gm/en_us/english/Group4/InvestorsPDFDocuments/10-K.pdf

 

[smk4565]

Capital Expenditure is different than R&D though.  Even look at Mercedes car division spending 5.67 billion Euros last year, that is over $6 billion on just the Mercedes line.  No car brand has that sort of budget to work with.  If Cadillac got 1/5th of GM's budget (5 brands with Opel last year, I'll ignore Holden) that is like $1.8 billion.  Take VW's $13 billion R&D budget and divide up between all the brands they have, and how much do each one get?

[balthazar]

3 hours ago, smk4565 said:

No car brand has that sort of budget to work with.  If Cadillac got 1/5th of GM's budget (5 brands with Opel last year, I'll ignore Holden) that is like $1.8 billion.

Daimler & General Motors both took in $166B in revenue and posted profits of $9.4B last year.

[David]

6 hours ago, smk4565 said:

Capital Expenditure is different than R&D though.  Even look at Mercedes car division spending 5.67 billion Euros last year, that is over $6 billion on just the Mercedes line.  No car brand has that sort of budget to work with.  If Cadillac got 1/5th of GM's budget (5 brands with Opel last year, I'll ignore Holden) that is like $1.8 billion.  Take VW's $13 billion R&D budget and divide up between all the brands they have, and how much do each one get?

Call it R&D or Capital Investment, same thing, investing in the company for products.

GM has a far more diverse auto / truck portfolio than Daimler. Daimler choose to do cars, few SUV's/CUV's, commercial trucks and buses. Based on the numbers, both are investing heavily in their chooses product lines.

You can move the goal line all you want and try to play with the grey fiscal numbers on how they are investing but the honest truth is they are only doing a fraction of what you think they are doing.

We all agree, MB has more luxury products than Cadillac, but GM has a far more diverse product line of residential trucks and low/middle end cars and cuv's.

Where is MB pickup trucks, they are screwed as they can only build and sell heavily discounted 100K+ luxury cars. They clearly cannot seem to figure out how to build a real truck for home owners in a large diverse selection of Standard cab, king cab, crew cab with a diverse engine set and options.

Clearly MB is not a complete auto company since they have no trucks.

[smk4565]

16 hours ago, balthazar said:

Daimler & General Motors both took in $166B in revenue and posted profits of $9.4B last year.

And Daimler sold 2 million cars and a few hundred thousand tucks and busses, compared to 9 million cars at GM?  

[smk4565]

14 hours ago, dfelt said:

Call it R&D or Capital Investment, same thing, investing in the company for products.

GM has a far more diverse auto / truck portfolio than Daimler. Daimler choose to do cars, few SUV's/CUV's, commercial trucks and buses. Based on the numbers, both are investing heavily in their chooses product lines.

You can move the goal line all you want and try to play with the grey fiscal numbers on how they are investing but the honest truth is they are only doing a fraction of what you think they are doing.

We all agree, MB has more luxury products than Cadillac, but GM has a far more diverse product line of residential trucks and low/middle end cars and cuv's.

Where is MB pickup trucks, they are screwed as they can only build and sell heavily discounted 100K+ luxury cars. They clearly cannot seem to figure out how to build a real truck for home owners in a large diverse selection of Standard cab, king cab, crew cab with a diverse engine set and options.

Clearly MB is not a complete auto company since they have no trucks.

Capital Investment is building a new factory, it has nothing to do with research and development.  If GM says we are going to spend $100k per Cadillac dealership to make them nicer, that doesn't come off the R&D budget, it comes from capital investment.   Because real estate is capital.

I would argue Daimler has a broader range of product than GM.  That could be bad thing for Daimler as they are all over the place, so that drives up R&D cost since they have so many model lines, but not he flip side, if all those lines are profitable, it should off set that. 

Daimler makes all these products (including 37% of class 8 trucks sold in USA):

These busses too:

These vans:

And all these cars/suvs

 

Edited July 2, 2017 by smk4565

[balthazar]

32 minutes ago, smk4565 said:

And Daimler sold 2 million cars and a few hundred thousand tucks and busses, compared to 9 million cars at GM?  

The point was that GM & DAI have the same monies to work with and are equally profitable.

Oh, and Daimler sold 3 million vehicles in 2016. Guess I had better add (again); that Daimler is every bit a mainstream brand.

 

[A Horse With No Name]

21 hours ago, smk4565 said:

Capital Investment is building a new factory, it has nothing to do with research and development.  If GM says we are going to spend $100k per Cadillac dealership to make them nicer, that doesn't come off the R&D budget, it comes from capital investment.   Because real estate is capital.

I would argue Daimler has a broader range of product than GM.  That could be bad thing for Daimler as they are all over the place, so that drives up R&D cost since they have so many model lines, but not he flip side, if all those lines are profitable, it should off set that. 

Daimler makes all these products (including 37% of class 8 trucks sold in USA):

These busses too:

These vans:

And all these cars/suvs

 

Very impressive portfolio!