Osnabrueck

For a litany of reasons. Even so, if half of BMW's manufacturing was done in the United States it wouldn't alleviate the bind the low US dollar puts them in. There's little BMW or any other German Brand can do as a countermeasure against the current situation aside from being shrewd and hedging their bets so they won't be stuck between a rock and a hard place if the worst-case scenario comes to pass.

Of course, if I'm wrong Boz will correct me. Won't he? (Hint hint...)

Curb Zone

 

Mr. Mercedes

As the US Dollar slowwwwly concedes its long held dominance as the preferred currency of trade, pain is going to be felt everywhere. In the long term, currency hedging can only delay this pain. Other avenues will have to be explored.

That said, I don't think the German car manufacturers are going to adopt strategies inciting a widespread shift of production to the US. Reasons for not shifting most of the production to the US:
* Costs
* Possible decline in prestige (it would not longer be predominantly a foreign product)
* Possible quality debacles. MB in particular is only now learning how to build cars properly again in Germany. Imagine trying to get Alabama to assemble a new S.
* In the longer term other emerging markets will likely more than make up for the decline in profitability in the US. Gradual investment into these markets, particularly China, is more likely.

Deutsch

U.S mkt will loose share in the majority of premium brand sales, I can promise you. I think the Japenes pay a good bit more than we do. I think things will change in the future, I hope.

Bozzor

One thing to bera in mind is that whatever the Germans do in terms of hedging or US asembly plants, it won't impact the fact that consumers will have less money to spend on german luxury marques simply because the costs of other goods and commodities has gone up. If essentials such as fuel, food and other consumables have gone up, then consumers are less inclined to spend money on luxury items i.e. German cars. Of course, for the very well off this is not an issue, but for many peopel an E class at USD 55 K is a borderline decision to do with leasing costs etc. They are the ones hurt and they are the ones the Germans are worried about.

Osnabrueck

But the luxury playing field isn't even is it Boz?

We've got American and Japanese luxury brands in the fray, and they've got leverage against brands pinned down by the Euro.

Right?

Imhotep Evil

The only things I can come up with is a combination between hedging, boosting US manufacturing, increasing productivity/eficiency.

Osnabrueck

Let's not forget that the volatility of the currency excange weighs into this. The dollar has swung wildly over the past few years and nothing's to say that it won't swing back to Euro parity within a few years.

I think it's hard to base a long-term business plan on currency speculation.

Bozzor

Pretty correct Osna: to some degree, all cars are luxury items (for many people, though not all) which can be affected by falling discretionary incomes, but the ones that are more expensive and luxurious (i.e. those that offer relatively little utility) would most likely be hit by a change in people's circumstances. At the least, the more expensive the Europeans, the harder people will look to see if that extra money is worth it.

Matt530i

For 2007, BMW has decreased the difference between invoice and MSRP in the US, at least on the 5-series, which is the only '07 model with pricing announced.

For model year '06, MSRP was roughly 9.4% higher than invoice and it's around 8.2% higher for model year '07. Since a lot of people try to negotiate off of the invoice price, I think this is an attempt by BMW to increase the actual transaction price of the cars they sell. If they are able to increase the transaction price by 1.2% in the US, that's bound to make up for part of the US-euro exchange rate.

Osnabrueck

Interesting. Raising invoice is a transparent way of raising the bottom line without it entering the public conscious. People will be apt to say "geez, those BMW dealers are tightwads," but that's much less damaging than rasing MSRP.

Curb Zone