BMW's Labor Practices Are Cutting-Edge, Too

Germany is renowned for its rigid labor laws. But consider this curious contradiction: Munich-based Baverische Motoren Werke (BMW) operates some of the most flexible and productive factories in the global auto industry right in its own backyard. Booming demand? No problem. BMW ramps up assembly lines to 110 hours per week, with negligible overtime costs. When sales slide, production managers can dial back weekly operating hours to 78, but they don't fire employees. A new plant in Leipzig will be even more flexible, swinging from 60 hours a week to 140 when demand booms. "That's the secret of BMW Group's success," says CFO Stefan Krause. "Our [machines] sweat more than other people's because they work longer hours."

BMW pioneered innovative labor practices in Germany, introducing Saturday shifts back in 1985. The goal is to boost productivity by matching output with demand. That means making sure capital-intensive press and paint shops run practically around the clock. In addition, highly skilled assembly workers have to be available to work longer workweeks without costing a fortune. "They are ahead of the pack," says Christoph Stürmer, senior analyst at Global Insight Automotive in Frankfurt.

How does it work? When workers exceed the union-agreed 35-hour work week, they bank the extra hours in an account. When demand drops, they can withdraw from the account and take days off. As long as the work-time model respects compensation levels dictated in union pay contracts, BMW and its worker representatives are free to forge innovative schedules. The basic model: A four-day week at 9 hours a day with three days off. That gives most workers long weekends in exchange for working some Saturdays. At first, workers balked. But now they love the system. "Bavarians aren't dumb. They realized they would win more free time if they collaborated to boost productivity," says Rudolf Braun, a Meister in vehicle assembly at BMW's Dingolfing plant. Thanks to the flexible shifts, BMW's plants operate near full capacity, avoiding loss-making periods when capacity use plunges.

BMW also can juggle model lines from plant to plant. All of its factories can produce at least two different models. When demand on the 3 Series surged last year, BMW bumped up production at the Dingolfing plant, which was built chiefly to make the 5 Series and the 7 Series, but also can make the highly profitable 3 Series. By stretching production at the Munich and Regensburg plants, as well as adding capacity at Dingolfing for 70,000 vehicles, BMW cranked out an extra 160,000 autos. "That's an entire car plant," says Norbert Reithofer, BMW board member in charge of production. And if one factory in Bavaria is slack while another is straining, the company simply reroutes its workers to the factory under stress. Every day, more than 300 buses shuttle 15,500 employees to and from Dingolfing.

But the ultimate manufacturing acrobatic act at BMW is build-to-order. Some 80% of European BMW buyers custom-design their own cars, choosing everything from special engine configurations to headlights with sensors that track the bend in the road. And BMW offers customers the chance to change every detail on the car until five days before production. For each vehicle, the total number of possible variations is 10 to the power of 17 -- yes, that's 10 with 17 zeros after it. Most of those finicky last-minute changes are costly upgrades to bigger engines or more luxurious interiors, says Reithofer. Even with these demands, BMW's software can handle up to 120,000 customers a month who change their mind about what they want. You can be sure the Dingolfing dream team is already thinking about how to double that number.

By Gail Edmondson in Dingolfing

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