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Ailing BMW Appoints Production Chief Zipse as Next CEO

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07/18/2019 | 04:41pm EDT

By Sara Germano

BERLIN -- BMW AG said it will appoint its current head of production Oliver Zipse as its next chief executive as the struggling auto maker contends with shrinking profits, global trade fights and the intensifying race to build electric cars.

Mr. Zipse, who is 55 and a 28-year veteran of the company, will take the helm on August 16, BMW said Thursday. The announcement follows a decision two weeks ago by current chief executive Harald Krüger to step down. BMW said Thursday that it and Mr. Krüger have mutually agreed he will resign on Aug 15.

Nobert Reithofer, chairman of BMW's supervisory board, described Mr. Zipse as "a decisive strategic and analytical leader." Mr. Zipse has experience in engineering and has served as the auto maker's head of production since 2015.

The management shakeup is expected to be one of the luxury auto maker's remedies for a host of problems it faces, including a global economic slowdown, uncertainty around the U.K.'s plans to leave the European Union and the challenge to build costly electric vehicles amid stricter emissions regulations.

The Munich-based company issued a profit warning in March and said it would aim to cut up to EUR12 billion ($13.5 billion) in costs while effectively freezing hiring for 2019, in part because of the cooling global economy.

The company's auto business swung to a loss in the first quarter largely due to a charge it took to cover potential fines stemming from a European antitrust probe. The European Commission said a preliminary investigation determined that German auto makers had colluded to prevent competition in emissions technology, including BMW and rivals Daimler AG and Volkswagen AG. The companies denied the allegations and BMW has said it will contest the judgment.

The German auto makers are already facing a rough year. Last week, Daimler issued its second profit warning in a month because of higher-than-expected costs relating to a faulty airbag recall, as well as legal proceedings against the Mercedes-Benz maker's diesel vehicles.

Volkswagen and some of its management are facing fresh charges this year from U.S. and German authorities regarding the car company's involvement in a four-year-old diesel emissions scandal. The company has already paid more than $25 billion in fines, penalties and compensation to settle civil and criminal litigation related to emissions cheating.

Those challenges, along with stricter emissions regulations, are pushing auto makers into a competitive race to develop electric and self-driving vehicles. Last week, VW and Ford Motor Co. expanded an alliance to develop electric vehicles and invest in autonomous driving startup Argo AI, now valued at $7 billion.

Likewise, BMW and Daimler have agreed to cooperate on developing autonomous vehicles, as traditional auto makers contend with competition from technology giants including Alphabet Inc.'s Waymo LLC, Apple Inc., and Uber Technologies Inc.

Meanwhile, industry watchers say the move to appoint Mr. Zipse as the next chief executive is straight out of BMW's playbook. Philippe Houchois, equity analyst for Jefferies, said the auto maker has traditionally promoted its production chief to the top role. Mr. Krüger held that title before becoming CEO in 2015. But Mr. Houchois added that given BMW's recent struggles it remains to be seen if the safe bet is the best bet.

"Whether they need something evolutionary or more creative, that's a question that remains," he said.

Write to Sara Germano at sara.germano@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
ALPHABET 0.85% 1179.21 Delayed Quote.12.85%
APPLE 2.36% 206.5 Delayed Quote.30.91%
ARGO GROUP LTD 0.00% 22.5 Delayed Quote.26.76%
BAYERISCHE MOTOREN WERKE AG (PREFERENCE) 0.79% 48.32 Delayed Quote.-22.19%
BMW AG 1.26% 59.56 Delayed Quote.-15.76%
DAIMLER AG 1.76% 41.245 Delayed Quote.-10.16%
FORD MOTOR COMPANY 1.13% 8.96 Delayed Quote.15.82%
PORSCHE HOLDING 0.95% 55.1 Delayed Quote.6.70%
VOLKSWAGEN AG 1.23% 139.86 Delayed Quote.0.68%
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Financials (EUR)
Sales 2019 98 863 M
EBIT 2019 7 393 M
Net income 2019 5 198 M
Finance 2019 15 553 M
Yield 2019 5,05%
P/E ratio 2019 7,55x
P/E ratio 2020 6,20x
EV / Sales2019 0,23x
EV / Sales2020 0,22x
Capitalization 38 615 M
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Last Close Price 59,64  €
Spread / Highest target 97,9%
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Harald Krüger Chairman-Management Board
Norbert Reithofer Chairman-Supervisory Board
Nicolas Peter Chief Financial Officer
Susanne Klatten Independent Member-Supervisory Board
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