Harald Kruger
Will the contract of the BMW boss be renewed?
(Photo: Bloomberg)
Munich, FrankfurtHarald Krüger is a man of quiet tones. Unlike the bosses of other companies, it does not press the CEO of BMW into the public eye. He prefers to work in the background, leaving the stage to others. So he fits the secret code of the Munich car manufacturer who wants to convince with performance, not with full-bodied announcements.
In this respect, the in-house exhibition “Next Gen” is a novelty for BMW and for Krüger. At the beginning of the week, the group closed its own delivery center for three days, which is now attracting more visitors than the fairy tale castle Neuschwanstein. Instead of Chinese tourist groups, journalists, influencers and starlets like Paris Hilton walked through the brand temple.
The guests marveled at new electric cars and listened to lectures on autonomous driving and the mobility of the future. “We want to show what we can do,” said Krüger about the new “communication format”, which will replace the classic auto show in the future.
It is a statement that applies above all to Krüger himself. Concentrated and combative is the 53-year-old these days. On the agenda is next to the future of the Group and his own. Krüger’s contract is due to be extended – and the company is beginning to doubt whether the Supervisory Board will grant it.
That Kruger wants to fight for his post, showed on Monday. Chancellor Angela Merkel once again invited the bosses of the carmaker to the summit in Berlin. Until shortly before midnight, the meeting dragged on. The colleagues of Daimler and Volkswagen experienced the BMW boss this time very lively.
Krüger surprised the competitors with the announcement to bring his electric cars much faster on the road. By 2021, the annual sales volume of today’s 140,000 Stromers and hybrids is to be increased to around 300,000. This is significantly more than the competitor Mercedes plans.
It is an advertisement in own thing. Krüger’s contract expires in May 2020. Theoretically, the Supervisory Board could extend the employment relationship since the beginning of June. The decision is based on information from the Handelsblatt at the next Supervisory Board meeting. The checkers will meet on July 18 and 19 at the US Spartanburg plant in South Carolina.
A symbolic place for Krüger: Here, as a young production engineer in the early 1990s, he earned his first spurs in the construction of the production facility. Today, Spartanburg is the largest BMW plant in the world and Kruger’s “second home”. Here are the 20 controllers – including the major shareholders Stefan Quandt and Susanne Klatten – decide on his future.
Officially BMW does not want to comment on the process – the sensitivity of the personality is high among all interlocutors. Krüger is regarded as open-minded and honest in the company. After 27 years in the group, the industrial engineer has a broad network.
In 2015, his predecessor, today’s Supervisory Board Chairman Norbert Reithofer, preferred him Herbert dies given that subsequently disappointed switched to VW. At that time, the dominant shareholder family Quandt / Klatten deliberately chose the younger candidate – who could run the company until 2025 with a second term.
But an extension in the company is no longer considered the most likely variant – conversely, the numbers speak. The tensions in the leadership are correspondingly large, there is “high pressure in the boiler,” as an insider reports. If Krügers contract should not be extended, moves a candidate from the Board, according to group circles.
Two board members are ready: Head of Development Klaus Fröhlich is considered as assertive as he is ambitious. But the contract of the native Westphalia expires in the coming year, then Cheerful reaches the age limit of 60 years, in which for board members at BMW is actually over. A high but not insurmountable hurdle.
The second candidate is Oliver Zipse. Like Krüger, the mechanical engineering graduate has taken a systematic career path through the group. Since 2009 he has arrived at the center of power first as head of technical planning, then as head of corporate strategy. In 2015, he took over the production department from Krüger – traditionally the last step in front of the executive chair at BMW. While Zipse stands for moderate reversal, Fröhlich would be the candidate for a scenario that feels more like a crisis.
The decision to fill the top job falls within the Presidium of the Supervisory Board: Next to Reithofer, there sits Stefan Quandt, who, together with his sister Susanne Klatten, controls around 48 percent of the shares. Manfred Schoch also has an influence: The top employee representative has been on the supervisory board for three decades. In 2009, Schoch and the then Chief Human Resources Officer Krüger guided the company cautiously through the severe sales crisis.
Now it’s about the personality Kruger – and much more. The inspectors have to ask themselves whether the flagship company of the auto industry really tackles the beginning of a change in the industry. Because beyond the brisk announcements grow within the leadership doubt the doubts whether the course is still right. Although BMW is still highly profitable and an address that attracts top personnel from all over the world.
On the other hand, the smallest German carmaker with a world market share of three percent is a niche player who will not be able to determine the rules in digitization and electromobility. Volkswagen and Toyota sell three times more cars that Google-Sister Waymo and the taxi service Over access almost unlimited resources to capital and technology. BMW has to live on car sales. An arduous business in times of escalating trade conflicts and growing climate conditions.
Group-wide hiring freeze
One thing is for sure: the time of the records is over. A circumstance that Kruger’s critics use. Here’s the paragraph: Despite the “biggest model offensive in the company’s history,” sales are stagnating. Although the rivals fight Mercedes and Audi with declining numbers, but the declared goal of being number one in the premium business again with the BMW brand in 2020 is still a long way off. Krüger puts off the expectations for the future: “In the second half of the year, we expect tailwind,” promises the BMW boss. His hope is new SUVs like the giant X7.
Even the return is no longer where it should be. Within nine months, the company shocked the markets with two profit warnings. First, the trade policy of US President Donald Trump spoiled the balance sheet, then the imminent antitrust fine of the European Commission for probably illegal collusion in the matter of exhaust.
But the crisis goes deeper. In the core business, the margin is under pressure: even without the provisions for the EU antitrust case, the operating return in the auto business was 5.6 percent in the first quarter – well below the self-imposed target of at least eight percent.
Now you save a lot, By 2022 to save twelve billion euros. The construction of a new plant in Hungary announced in 2018 was postponed indefinitely in mid-May. At the beginning of June, for the first time in years, the Executive Board imposed a hiring deadline across the Group – which can only be exceptionally bypassed in the case of “shortages”. On Thursday evening, the company responded to the Handelsblatt information. There is currently no hiring freeze, a spokesman said on request of the dpa.
Sales problems, profit slump, austerity programs – for many BMW employees this is unfamiliar sound. The shock waves go through a company whose self-image is similar to that of the neighboring FC Bayern Munich – with a slight tendency to arrogance. But while the footballers continue to play ahead, BMW falls behind.
And the partnership of the two most famous Bavarian brands went completely wrong. In March, marketing director Pieter Nota announced the rival Audi as the main sponsor and shareholder. But shortly before the conclusion of the more than 800 million euro package Kruger’s men lost their courage and wanted to renegotiate the expensive deal in the final meters.
Furiously, Bayern boss Uli Hoeneß explained that “due to lack of trust, he is breaking off talks about a possible sponsorship partnership”. Old and new partner of Bayern remains the competitor Audi. Kruger’s old adversary, Herbert Diess, meanwhile, has relished the supervisory board of the record champion with relish.
Dart course in electromobility
If the botched FC Bayern entry rather than a posse in the memory, other developments are more serious. In the important field of electromobility, BMW drives a course of rolling. In 2013, Kruger’s predecessor Norbert Reithofer launched the “i3”, the first German manufacturer to launch a power car in the mass market.
But after the slow start Krüger capped after taking office in 2015, the high investment, new electric cars were once pushed on the back burner. “BMW was ahead, now they are suspended,” says a competitor, who himself had worked for the group for a long time.
At first, the bill came up. Also thanks to the re-evaporated development budget profits increased in the years 2015 to 2017 – but now the lead over the competition is gone. Meanwhile, Jaguar, Audi and Mercedes have their electric SUVs on the market, BMW needs with the “iX3” still at least a year.
Really painful is the comparison with Tesla, With the “Model 3”, the newcomer from California has a compact power sedan in the market, which fully targets the BMW clientele. But the Munich are also time here – an “anti-Tesla” is missing in the program: The “i4” is just like the “iNext” in 2021 in series.
The shareholders, who have been annoyed by the weak share price for months, are becoming impatient, “I now expect an electric offensive that sweeps Tesla off the table,” shareholder protector Daniela Bergdolt had demanded at the Annual General Meeting in May. Only approaches can be seen on the “Next Gen”: With the “BMW Vision M Next”, the brand presents the concept of a sleek electric car, but whether and when the car is built remains open.
Krüger has been avoiding direct statements about his future for weeks – for good reason. More than other supervisory boards, the BMW inspectors are very sensitive when they feel pressured in personnel matters.
The group still remembers the fate of Helmut Panke. “I like to be a captain,” the former CEO had answered in the summer of 2006 to the question of whether he is entitled in view of good numbers to a contract extension. The supervisory board was unduly pressured and responded. Two months later, the new CEO Norbert Reithofer was named.
More: The yield of the Bavarian automaker is falling. For the first time in ten years there was even a profit warning. BMW needs a course correction.
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