business

BMW: Different Drivers, Same Destination

CEO Joachim Milberg's resignation is a surprise, but investors don't expect his sucessor, salesman-in-chief Helmut Panke to alter course

BMW CEO Joachim Milberg never has seemed comfortable in the limelight. Unlike his larger-than-life counterparts in the German auto industry, Volkswagen CEO Ferdinand Piëch and DaimlerChrysler's Jürgen Schrempp, Milberg always shunned the trappings of power. Still, it came as a shock when the 58-year-old former engineering professor announced on Dec. 5 that he would resign next May, a year earlier than expected, after only three years at the helm. His right-hand-man, BMW's brainy CFO, Helmut Panke, 55, is slated to take over. "Most people were surprised by the decision, but it's clear, and it removes any uncertainty," Milberg told BusinessWeek Online.

Indeed, investors took the announcements in stride. BMW stock rose slightly on the announcement, after the carmaker and its biggest shareholders, the Quandt clan, which owns 47%, stressed that the company would continue Milberg's strategy of expanding the lineup but stick with making premium cars only.

SHARED PHILOSOPHY.

  Panke's appointment also signaled continuity. More forceful and eloquent than Milberg, Panke has sold his boss's thinking to the financial community. Both believe that the premium-car market will grow faster than the car market as a whole and that high-end autos also suffer less pressure on prices in a downturn. "The two have been in complete agreement on all major things," says auto analyst Greg Melich at Morgan Stanley in London. "There's clearly no change here in strategy."

So far, that strategy has paid off handsomely. While its rivals struggle, BMW reported a 63% jump in profit for the first three quarters of 2001, to $1.1 billion, on revenues of $25 billion. Sales of the Munich-based manufacturer's sporty luxury cars, renowned for their precise handling, have risen 10% this year. Despite the recession, BMW is not losing steam: Its November vehicle sales climbed 14%, helped by the launch in Europe of the new top-end sedan, the $57,600 7 Series.

The stock has also outperformed, gaining 19% this year, compared with a 29% drop in the German blue-chip DAX index. "By backing Milberg, people made money," says analyst Christopher Will at Lehman Brothers in London. "He made the brave decisions no one else was going to make."

QUICK RECOVERY.

  Milberg's choices certainly were tough. BMW was in deep trouble in 1999 when he took the helm, following the sudden resignations of CEO Bernd Pischetsrieder and his flamboyant No. 2, Wolfgang Reitzle. BMW's British subsidiary, Rover, bought in 1994, was hemorrhaging money, and BMW itself was the object of takeover rumors. After spending a year trying to fix Rover, Milberg finally unloaded it for a ceremonial 10 British pounds. BMW's bottom line quickly recovered, however, and today, he's widely praised for the move. "He takes it all with a bit of detachment," says one BMW executive.

Milberg's reasons for leaving were as simple and unassuming as the man. A one-time machine-fitting apprentice who taught engineering at Munich Technical University before joining BMW, Milberg declared that his work was done -- he had set BMW on the right path. But he can no longer give it his all because of back trouble. He was operated last year for a slipped disk, but it still troubles him.

Milberg says he also wants to avoid the feverish succession speculation that has dogged top execs at VW and Deutsche Bank in the months prior to the retirement of their CEOs. With Milberg slated to retire in 2003 at age 60, he expected rumors to start flying next year. "I wanted to spare the company and my successor that," says Milberg.

AMERICAN STINT.

  While Panke inherits a company in far better shape than what Milberg found, he faces a slew of new challenges. BMW plans to spend $23 billion over the next six years to increase sales by 50% and expand the lineup with a host of new product lines, including a 1 Series rear-wheel-drive compact, a 6 Series coupe and convertible, plus a small SUV, the X3.

Although Panke is reluctant to discuss his game plan now, he says his priorities will also include boosting BMW's international presence. A fluent English speaker, Panke helped build the company's business in the U.S. when he headed BMW's American operations in the mid-1990s.

His range extends far beyond finance. After obtaining a doctorate in physics, he worked as a consultant at McKinsey & Co., then held a wide variety of jobs within BMW. Unlike Milberg, he relishes his new appointment. "When you see Panke talk, he enjoys it, and he's good at it. Milberg did a good job, but I don't think he really enjoyed it," Morgan Stanley's Melich says.

Small wonder that Milberg is now looking forward to playing an influential but discreet role as a member of BMW's supervisory board. There, he'll be close to the company -- but far away from the spotlight. Just where he likes it.

By Christine Tierney in Munich

Edited by Douglas Harbrecht

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