Thu, Nov 29, 2018 - Page 10 News List

BMW bets on free trade, hikes US investment

Bloomberg

A BMW AG Vision iNEXT electric car on Tuesday drives autonomously into an unveiling event ahead of the Los Angeles Auto Show.

Photo: AFP

BMW AG is to keep spreading the gospel of free trade and back its rhetoric up by investing more in its massive US plant, all as the administration of US President Donald Trump mulls higher tariffs on imported vehicles.

The German automaker is showing off two sport utility vehicles (SUVs) at the Los Angeles Auto Show this week: a refreshed X5 crossover and a new three-row model, the X7, that is BMW’s biggest SUV ever.

Both are to be made at the the company’s factory in South Carolina, BMW CEO Harald Krueger said in a Bloomberg Television interview.

“Our strategy is quite clear: We are producing the products in the main markets, and the main market for the X7 is the US,” he said. “Our business model is based on free trade across the globe, which definitely helps in creating wealth.”

Krueger is trying to navigate trade disputes waged by Trump and the possibility of a chaotic Brexit, all of which has hampered supply chains for a company that depends on the free flow of goods across borders.

BMW’s return on sales from automaking almost halved in the third quarter, and the company cited effects from tariffs as well as pricing pressure.

Higher vehicle levies would take a 300 million euro (US$338.5 million) bite out of this year’s earnings, BMW chief financial officer Nicolas Peter said earlier this month.

BMW’s plant in Spartanburg, South Carolina, is its largest worldwide, employing almost 10,000 people. The factory could end up functioning as a shield for the German automaker against Trump’s broadsides at foreign car companies he has criticized for importing vehicles into the US.

The Spartanburg facility last year exported almost 70 percent of its production, Krueger said.

It makes the X3, X4, X5 and X6 SUVs, and is slated to add the X7 model next month.

Krueger later told reporters that the facility would be at full capacity next year, when he expects record output of more than 400,000 vehicles and the addition of about 500 more workers.

BMW is considering building engine and transmission plants in the US, he added, without providing any details.

In the interview, Krueger said he was increasing output in China because of stronger demand for models like the X3, not because of the trade dispute between the US and China.

Rising trade tensions “will not hurt Spartanburg as long as we see good demand on the SUV side,” he said.

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