Will the BMW AG Board of Director's eliminate the Motorcycle Division

[kenk]

BMWRA OTL reported in this months addition of the OTL Bonfires a paragraph titled "Tough Times". For the benefit of our members that don't receive OTL, here's the paragraph.

Some of the BMW AGs Board of Directors reportedly consider motorcycles a nuisance. Votes have been taken in the past about shutting down the motorcycle division completely. The last time this happened was in the mid-1980s. The vote, which obviously was in favor of keeping motorcycles, was extremely close, something like 5 to 4. The word going around for years was along these lines: "BMW makes more money on replacement fenders for BMW cars than it makes on motorcycles." So far it seems that BMW is in a strong position to survive the financial crisis (particularly when compared to others in the automotive industry), but if things get tough, these ideas may resurface. Some may say even a penny spent on the motorcycle division is a waste of time. Expenditures related to clubs may be considered inappropriate and a further waste of money (look out BMW Classic and International Council of Clubs). Thanks largely to the GS, motorcycles have been strong for BMW lately; lets' hope that continues."

If this report is correct, BMW motorcycles came very close to being discontinued by BMW AG. This is not new to the history of BMW motorcycles. However, corporations are in the business of making profits and if BMW motorcycles fails to make future profits for BMW AG, the BoDs slim support may disappear. Along with a worldwide recession, European motorcycle manufacturers are now required to meet EU 4 & EU 5 emission requirements by 2012, 2015. Regardless of the good that comes out of lower emissions, increased emission standards add to the cost of manufacturing motorcycles and ultimately the price to the consumer.
These are costs that reduce the profit margins. Only time will tell whether this will mark the end of BMW motorcycle production. While the future looks bright for new BMW motorcycle products, the corporate bottom line is the final determination on whether the production lines roll. After all, nobody is in business to loose money.

http://www.autobloggreen.com/2008/12/10/europe-to-introduce-euro-5-emission-standards-for-motorcycles/

[88bmwJeff]

I'm not worried, or at least I'm not worrying about it. Sometimes closing/shutting down a division can be very costly. Look at what it cost GM to shutter Oldsmobile. I'm sure it would be a lot more costly to close down all dealers that it would to keep it going, but I could be wrong.

Anyway, I'll worry about that if and when it happens.

On a side note, I do think we'll see some models disappear.

[kenk]

I'm not worried, or at least I'm not worrying about it. Sometimes closing/shutting down a division can be very costly. Look at what it cost GM to shutter Oldsmobile. I'm sure it would be a lot more costly to close down all dealers that it would to keep it going, but I could be wrong.

Anyway, I'll worry about that if and when it happens.

On a side note, I do think we'll see some models disappear.

BMW AG doesn't own the dealers. They are private businesses that succeed or fail on their own. The distribution parts chains would continue, since they are used for BMW cars.

The only real cost would be future R&D and some unique line tooling. The number of employees would simply be moved to other auto lines or retooled for a new small car auto line like the one series. The future profits of a more profitable car line would quickly offset any loses. Especially if the new product was a trend setting alternative. Like a 2010 version of the Izetta?

http://microcarmuseum.com/tour/bmwisetta250.html

[deilenberger]

I don't see it changing as long as the Quandt family is the largest shareholder in BMW. The family has shown an inclination to honor tradition over short term profit, which is one of the things that makes BMW such an unusual (and successful) company.

Since the family put their share in a trust with the intent that they couldn't be sold, I don't see the position of the Quandt's changing.

RA writes a lot of things. Some were unadulterated and undisguised fantasy and speculation.

And while BMW doesn't own the dealerships - they do have franchise agreements with them, and as the US automakers will tell you - it can be very expensive to try to terminate those franchise agreements (due to state laws protecting them.)

[Mika]

No I do not believe they will, but it makes for good Bench Racing discussion.

You raise several important points in your post.

Emissions standards are changing and there is great concern about the impact on the motorcycle industry. Of all the manufacturers competing in the European market BMW is best positioned to comply with the new standards.

It is better situated financially to do the research. Piaggio, for example, has gone out and aquired $150million in financing largely to deal with R&D and implementation costs. BMW is already absorbing the related research costs in both its automotive and motorcycle divisions.

Weight and features related to bringing motorcycles in line with the new proposed standards has been raised as an issue. It is a legitimate concern for designers and riders alike. The advantage here for the Motorrad segment is the savings in weight and size required for motorcycles has a benefit to the automotive side. They automotive world has cherry picked and taken easy ways out to reach standards with the advantage of a platform designed to carry weight and more places to hide them in a car. Increasingly they are being forced to improve and save weight in the process so that in turn the space can be used for other items and increased mileage can be off set. The development will not be cheap, but there is a synergy for it in BMW autos and motorcycles.

BMW has been aware of the various regulations for a number of years and still it has invested in the Motorrad division. This includes the purchase of Husqvarna, expansion of parts of the product line, continued long term and expanded contracts with various suppliers, R&D and investment into new products such as the G450X, HP2 Sport and the S1000RR.

They wouldn’t be the first company to throw a bunch of money at a division and then kill it off. The real threat to life of the Motorrad segment undoubtedly came during the six year re-evaluation of the company, its components and structure from top to bottom finished in 2007. The fact that the Motorrad segment survived and expanded seems to point to a large enough segment of the board being behind it.

I also believe some models will go the way of the buffalo. Like the buffalo they will be threatened but not go extinct. The R model is the one that is most frequently discussed. I take BMW word that they will keep it as part of their product line up. The next variant of the venerable boxer may have some fun features such as the heads from the HP 2 Sport, for example.

The Motorrad Segment has been under internal attack in the past for financial reasons. I suspect it will be again in the future. I don’t see it going away for the reasons you or the OTL suggested. There are more interesting and serious questions that we could better ask.

What will propel our motorcycles in the future?
Every emission standard you are concerned about could be met today by an electric or hydrogen powered motorcycle. Where is the infrastructure to feed the future motorcycle?

Are motorcycles a viable part of the transportation picture for any company to justify building them?
While the small bike, moped and scooter segment have been booming in sales the big bike market (defined in the US as bigger than 650cc and in Europe as bigger than 500cc) sales have been languishing by comparison. One key number from the US market is the aging of riders in this decade from 41 to 47 years. (Europe has undergone a similar graying of big bike riders but I don’t have the numbers handy) If the industry can not find a way to convert the small bike rider into a long term customer or attract new non riders to their bikes, aging will provide the long term demise of the industry rather than emission standards.

Could BMW Motorrad be sold?
I don’t see BMW shutting down the motorcycle segment. However; I could see the possibility of selling the segment off. For a few beers I can tell you the plan we came up with.
:evil

[Rod Sheridan]

Mika, PM me your mailing address and I'll send the beer money.......Once you've consumed the beer, post your thoughts...........Rod.

[MrGrocer]

BMW motorcycle history is very clear on the fact that the lights almost went out in the 80's. Remember, back then the Japanese almost exterminated all motorcycle brands except Honda, Yamaha and Kawasaki...

Think about it... a ketchup and mustard K1 or a Honda Interceptor, K75 or wing wing. The Notorious Gummicow or the fleet and nimble kz1000. Well no wonder, they were going to close it. Some of those bikes were criminally bad.

Well, things have changed. BMW is an exotic, premium brand and sells a wide variety of bikes and that variety widens every day. Not to mention that they've sold over a quarter million GS's.... that's more than 250,000. Wow! No corporate citizen is going to scoff at those numbers.

BMW AG is very different from your typical manufacturer; closely held and German. That means, like several posters have said before, they would stubbornly cling to a tradition as long as they keep 2500 or so Berliners working and they turn some kind of profit.

Any manufacturer is in danger of getting shuttered on any day. I'd have to say BMW Motorrad would be low on my list of probables.

[kenk]

What will propel our motorcycles in the future?
Every emission standard you are concerned about could be met today by an electric or hydrogen powered motorcycle. Where is the infrastructure to feed the future motorcycle?




Good well thought out response Mika. I'm not sure I want the Germans building another hydrogen powered vehicle. Imagine this happening at a stop sign.

http://www.youtube.com/watch?v=F54rqDh2mWA

[osbornk]

Many BMW car owners are also BMW motorcycle owners. If they abandoned the motorcycle end, I think they would have a dramatic drop in auto sales. I would not purchase a brand if they abandoned me with another one of their products.

[Mika]

Good well thought out response Mika. I'm not sure I want the Germans building another hydrogen powered vehicle. Imagine this happening at a stop sign.

http://www.youtube.com/watch?v=F54rqDh2mWA

:rofl

That has been in the back of my mind when I have thought about hydrogen and motorcycles put together and I am certain BMW has pondered it also. They have been committed to hydrogen cars for most of this decade using the 7 Series as their flag ship. During that time a great deal of effort has gone into metallurgy research by many. The obstacle has been the weight and size of the tank required to give the expected range in comparison to the current car along with the safety factor. MIT’s technology magazine, late last year, discussed some promising developments that seemed to promise an acceptable resolution for cars.

I hope it is applicable to bikes. I have followed the development of various electric bikes but for all their promise they don’t have the same visceral appeal of an internal combustion engine has to this old gear-head.

[aaaaaa]

Many BMW car owners are also BMW motorcycle owners. If they abandoned the motorcycle end, I think they would have a dramatic drop in auto sales. I would not purchase a brand if they abandoned me with another one of their products.

I'd keep my BMW cars regardless. Most auto customers don't even know that BMW makes motorcycles LOL.

[lkchris]

Hard to think BMW could stand the bad publicity inherent in handing the German police motorcycle business to the Japanese.

Somehow I think most Germans don't want to ride in Oriental taxis and most don't want to see Oriental cars as police cars in their country, either.

Future BMW performance cars may be turbocharged fours rather than V8s, but performance will always have a market and the motorcycle division provides lots of performance "cachet" to the BMW brand. The motorcycle division can simultaneously provide an "economical transportation" cachet as well.

BMW simply isn't going to hand the Germans this blow to their psyche.

[Mika]

Hard to think BMW could stand the bad publicity inherent in handing the German police motorcycle business to the Japanese.

[snip]

BMW simply isn't going to hand the Germans this blow to their psyche.

So how do you think the German psyche is doing with Polezi in Berlin (http://www.blogdolcevita.com/post/978/moto-guzzi-to-supply-35-norge-850-to-berlin-police)riding those Italian Moto Guzzis?

:ha

[Sit]

New models still coming out, more models with more options, recent purchase of Husqvarna, 08 sales up a bit over 07 sales, new super bike coming out, getting back into racing,

Don't see Motorrad being shut down.