08 August 2012

BMW & PR Spin

Putting a positive spin on a negative is the way of business today. BMW is very good at it. Take the second quarter of 2012 for example. Revenue was up 7% on increased sales, but net profit was down 28%. When I see those figures a bell goes off in my head saying 'warning'! How can sales and therefore revenue be climbing, while profits tumble?

Here is where the spin comes in. BMW said increased staff costs, higher spending on research and development, and stiff competition had caused the fall in profits. The figures also suffered by comparison with record profits a year earlier. Then BMW chairman Norbert Reithofer said the BMW group is continuing to perform extremely well by having "achieved new sales volume and revenue highs as well as the second-best operating profit in the company's history."

So lets analyse the situation. BMW achieved record profits last year on record sales. This year on yet more record sales, a profit slump. Hmmm. Of course, staff cost and R & D increases. Yeah, right. Increased sales should have covered for that. The real problem is reducing margins to maintain increasing sales and retaining top spot as the number one premium brand, in BMW speak 'stiff competition'. At what price is BMW prepared to slash profit to continue at #1?

The real situation: BMW is feeling the heat particularly from Audi, which keeps development costs down through it being part of VW Group. BMW is trumpeting record sales through its PR department, but at what cost? It will be interesting to see how things pan out over the rest of the year, regarding the bottom line. Record sales should push profit up so are BMW going down the wrong road on this, masking things with a little PR spin ?

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