Quattrings

<b>BMW falls victim to U.S. success </b>
By GUIDO REINKING, AUTOMOBILWOCHE

If there were an award for last year's most profitable premium brand, it would be an unequivocal victory for Mercedes-Benz.

After cutting Chrysler loose, profits at Daimler, Mercedes' parent, have shot upward like an untethered balloon. None of its rivals could keep up.

<b>There was a surprise in last year's results, though. Audi's profit margin topped BMW's. </b>And Audi accomplished the feat without a financial arm of its own. Parent company Volkswagen handles the brand's leasing and financing.

BMW's comparatively bad showing demonstrates just how right CEO Norbert Reithofer has been in pursuing drastic cost reductions. Anyone who continually sells more cars without making more money is heading in the wrong direction.

BMW's results can be excused only partly by rising raw material prices. In the United States, BMW has become a victim of its own success. The weak dollar most hurts the import company selling the most in the United States.

But some of BMW's problems are homegrown. The 7 series has $2,500-$5,000 dealer incentives in the United States. BMW wouldn't need to support the vehicle if it were more attractive.

The U.S.-built X5 premium SUV scores well with U.S. customers and reportedly has 60 percent local content. But its expensive engines and transmissions still come from Europe and must be paid for with a weak dollar. So it hasn't had the effect on BMW coffers that the company was seeking.

In a perverse sense, Audi should be grateful to Ralph Weyler, its departed sales and marketing chief. Contrary to his clear mandate, Weyler only halfheartedly looked after the American market.

Weyler's inattention helped put Audi far behind Mercedes and BMW in U.S. sales. But as an unintended positive result, the dollar's weakness today is barely affecting the company.

That's certainly a silver lining. In fact, it makes one wonder if the folks at Audi might be secretly hoping for Americans to buy a record number of BMWs again this year, too.

Guido Reinking is editor of Automobilwoche, a Munich-based sister publication of AutoWeek.<ul><li><a href="http://www.autoweek.com/apps/pbcs.dll/article?AID=/20080325/FREE/875337203/1528/newsletter01">http://www.autoweek.com/apps/pbcs.dll/article?AID=/20080325/FREE/875337203/1528/newsletter01</a</li></ul>

Gibber

in other parts of the world.

Misplacedyankee

Yeah no kidding!

Spoonie G

High profit margin cars are cars that are overpriced.

Here's an example:

If two different brands made a vehicle that cost the same amount of money to produce, and Brand A sold their cars for several thousand dollars more than Brand B. Brand A would be the car with the higher profit margin. Even though the cars cost the same to build, the car with the higher profit margin is the car that is priced higher. That's hardly anything to brag about from a customer perspective IMO.

Quattrings

is the case at all. Audi has a very small margin next to BMW in the states. Audi is highly selective in what vehicles it brings here - it really has to be. BMW on the other hand wil happily flood the market with their cars and if a particular model doesn't sell (insert 318ti) they've got another line that people will trip over themselves for, to pick up the slack. Audi on the other hand, has two bread and butter lines, the A4 and Q7. They are trying to add the Q5 to that list, but Q7 sales have dropped off considerably lately.

Spoonie G

Your car looks very nice.