(Bloomberg Opinion) -- Norbert Reithofer chose a good moment to step down as BMW’s chief executive (he’s now the supervisory board chairman, a less high-profile role).
When Reithofer made way for Harald Krueger in May 2015, the U.S. Environmental Protection Agency hadn’t yet publicly accused Volkswagen AG of cheating on diesel emissions, which would imperil an entire technology. That same year Donald Trump announced his candidacy for the White House, setting him on a path that would ignite a global trade war, with German automakers a favorite whipping boy.
And in 2015, David Cameron won a parliamentary majority, meaning he had to deliver on a promise to hold a referendum on the U.K.’s membership of the European Union – a matter of utmost importance for BMW, which builds Minis in the U.K. Plus BMW was still earning bumper profits thanks to China’s insatiable appetite for premium vehicles.
Four years later, Krueger’s time as BMW chief hangs in the balance. My Bloomberg colleagues Elisabeth Behrmann and Oliver Sachgau reported late Tuesday that some supervisory board members are questioning whether he’s the right person to lead the company.
There’s no doubt that BMW’s profits have deteriorated under Krueger and the share price has performed abysmally. His cautious leadership style also appears to have unsettled some people at the company. There’s a healthy debate to be had, though, about whether anyone else would do much better in his situation. I’m inclined to think the answer is no.
What qualities should we seek in a carmaker’s CEO anyway? Carlos Ghosn’s fall from grace at Renault-Nissan suggests an autocratic leadership style is a dangerous thing. At Volkswagen AG, the forceful Herbert Diess (who was passed over for the top job at BMW) has made some bold moves, including an all-in bet on electric vehicles. Yet his pugnacious approach has riled the trade unions and he’s failed to get some of the basics right: The new Golf launch was delayed and VW was slow to get vehicles certified in time, something the more sedate Krueger accomplished at BMW without any trouble.
How about a visionary? For a while, Elon Musk’s whirlwind approach made German automakers look flatfooted. With Tesla Inc.’s sales and share price cratering, the “shouldn’t we be more like Elon?” brigade has gone quiet though. At Ford Motor Co., Jim Hackett’s Silicon Valley buzzwords have jarred when profits are declining, and he’s now busy cutting jobs.
I wonder then whether Krueger’s pragmatic, cautious style isn’t actually a good thing at a time of unprecedented technological and regulatory upheaval in the industry. At BMW’s shareholder meeting last week, Krueger told investors that putting all the company’s “eggs in one basket” on electric vehicles was the wrong approach. It is instead pursuing a mixture of electric, hybrid and fuel cell cars.
To critics this doubtless sounds like a lack of conviction, and it reinforces their fear that BMW has surrendered an early lead in electric vehicles to Mercedes and Audi. People also complain that BMW isn’t making enough money. Under Krueger, the autos unit has fallen short of its 8-10 percent operating margin target, something it achieved with uncanny regularity under Reithofer. But building electric cars is typically a loss-making exercise (BMW lost plenty with the i3). The critics can’t have it both ways.
It’s hardly Krueger’s fault that BMW was forced to book a 1.4 billion euro ($1.6 billion) provision for possible antitrust violations. Nor can he do anything about the European Commission’s stringent carbon dioxide emission targets, which are forcing automakers to spend heavily to avoid big fines. While BMW’s vehicles do seem a little uninspiring alongside Mercedes’s lineup, that’s a design problem partly inherited from the Reithofer era.
He’ll never be Mr Charisma but Krueger’s made some sensible moves, including a car-sharing and ride-hailing joint venture with Daimler AG, known as “Your-Now.” That might be worth almost 6 billion euros, according to analysts at Barclays, yet because it’s made in Germany, not Silicon Valley, investors seem unexcited. In China, BMW plans to increase its stake in its local joint venture to 75 percent.
In hindsight, Krueger’s biggest “mistake” was fainting on stage at the Frankfurt auto show in front of hundreds of journalists just weeks after taking the job in 2015. The question of “is he up to it?” seems to have dogged him ever since. Afterwards, Krueger reflected that “managers are only human too” and promised to make sure he had “enough of a balance between work and my personal life.”
I thought of those remarks when Sergio Marchionne, the boss of Fiat Chrysler Automobiles NV, passed away last year. The workaholic, detail-obsessed iconoclast was perhaps the most accomplished car executive of his generation. Marchionne won admirers because, despite Fiat’s problems, he seemed to have answers. That’s not to say they were all the right ones, especially when looking at the longer term: The company has had to row back on his decision to not bother much with electric vehicles. But at a time when the industry was hellbent on value-destructive spending, the Italian plotted a relatively effective course through the carnage.
BMW is a far stronger company than Fiat, and this year’s anticipated 7.5 billion euros of operating profit can hardly be described as a crisis. To save a job that pays more than 5 million euros a year, Krueger will have to try harder to convince people that he too has an answer to the industry’s epochal challenges of electrification, driverless cars and plateauing car ownership. Even if the truth is that nobody does.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.
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