Defending records

Make-or-break year for BMW boss

BMW
Sharp dresser angling for a contract extension. Source: DPA

For all his strengths, BMW Chief Executive Harald Krüger, 52, has failed to emerge from the shadow of his predecessor Norbert Reithofer, known as the man who managed to overtake arch rival Mercedes-Benz and turn BMW into the world’s No. 1 premium automaker.

On Mr. Krüger’s watch, which started in May 2015, BMW lost that title back to Mercedes and fell even further behind in 2017. To be sure, that’s not necessarily Mr. Krüger’s fault because Mercedes corrected mistakes it had made in the past, and because its cyclical launch of new cars came before BMW’s.

But he’s got to reclaim the crown, or at least draw almost level with Mercedes, this year, insiders at BMW say. The supervisory board will measure his performance by the success of the company’s biggest new model rollout in its history, set for this year. The board, steered by the Quandt/Klatten family which owns almost half the company, will decide by the 2019 annual shareholders’ meeting whether to extend his contract, which expires in 2020.

Many senior managers at BMW said Mr. Krüger has found his footing and is doing better now than at the start of his tenure. In the three years since he was chosen over Herbert Diess, now head of the VW brand, at the recommendation of his mentor Mr. Reithofer, things haven’t exactly gone according to plan.

In 2017, US President Donald Trump pilloried Mr. Krüger for BMW’s planned new factory in Mexico.

His first big appearance as BMW chief at the IAA auto show in Frankfurt in September 2015 ended traumatically when he collapsed on stage due to exhaustion. Then the diesel crisis engulfed the auto sector, Tesla begun shaking up the market for electric cars, and Mercedes overtook BMW and proceeded to disclose alleged collusion among German carmakers to cartel authorities.

As if that weren’t enough, US President Donald Trump pilloried Mr. Krüger for BMW’s planned new factory in Mexico, and the company’s British brands Mini and Rolls-Royce have been hit by uncertainty over the impact of Brexit. Not to mention digital change, the shift towards electric cars and self-driving which all spell upheaval for the entire auto industry.

BMW, the smallest of the big German automakers, can’t afford to make mistakes in the upcoming battle with technology giants in Silicon Valley and China. Mr. Krüger is responding by forging alliances with top firms in the tech sector, such as Intel. His ambitious aim is to have BMW set the industry standards for autonomous driving, and he’s ordered massive investments in research and development to make that happen.

Yet the CEO of Mercedes-maker Daimler, Dieter Zetsche, remains the face of German automaking, and that’s unlikely to change. Mr. Krüger looks stiffer and more defensive in his public appearances than the Mercedes boss, who these days usually walks around in jeans and sneakers, Silicon-valley style. Mr. Krüger, 12 years his junior, looks old-school by contrast, with his sharply-pressed suits and neat hair.

In the last three years, Mr. Krüger has exchanged virtually the entire management board.

“We remain a highly flexible, forward-looking company,” he told a recent presentation, softly-spoken as ever. He’s no crowd-pleaser like Tesla CEO Elon Musk, and there’s none of the Bavarian bravado of Mr. Reithofer. Some at BMW would prefer a tad more charisma from their leader. If the launch of 40 all-new and revamped vehicles goes well, it could nudge him into the limelight.

On the plus side, many in the company appreciate his virtues as a team player and listener. And having spent 25 years at BMW, he’s got a vast network of contacts at the automaker and a deep grasp of its workings. He’s served BMW in the US and Britain, has been chief of strategic product planning, of personnel and of production.

In the last three years Mr. Krüger has also replaced virtually the entire management board, assembling a team of confidants that is working smoothly. That’s what the Quandt family wants; in its 60 years in control of BMW, it’s always placed more emphasis on collective responsibility than the cult of personality. To that end, BMW has a strict age limit of 60 for its CEOs. Mr. Krüger wouldn’t reach that until 2025.

His recent presentations to the supervisory board have been flawless. “With every new management board member he recruits, he’s strengthening his position,” said one source close to the supervisory board where he can rely on backing from labor representatives.

But he needs to make a sizeable dent in Mercedes’ sales lead this year. It could work: BMW is renewing its bestsellers, the 5 Series and X3 compact SUV, and it’s launching a new crossover SUV, the X2, in March. In the luxury segment, it’s presenting the long-planned X7 and the Concept 8 Series coupe.

Unless Germany’s buoyant economy suffers an unexpected downturn, BMW will exceed €100 billion in sales for the first time this year, which would well and truly put it the Champions League of industrial companies.

It would be kudos for Mr. Krüger. But ever since the 2015 auto show, he’s learned how quickly fortunes can turn in both directions. A year ago, he would scarcely have expected Donald Trump of all people to hand him more than €1 billion in tax relief, a welcome side-effect of the US tax revamp.

Markus Fasse and Martin Murphy are auto industry correspondents for Handelsblatt. David Crossland adapted this story into English for Handelsblatt Global. To contact authors: murphy@handelsblatt.comfasse@handelsblatt.com

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