Lynda Loxton
In September 1994, Munich-based BMW chairman Bernd Pischetsrieder caused a stir when he warned the luxury automaker’s South African subsidiary that it either had to shape up to international standards or BMW would pull out.
This week, a long process of painful adjustments to become more competitive, meet international standards in quality, productivity and delivery bore fruit when Pischetsrieder announced that BMW had decided that enough improvements had been made to qualify the local company as a “member of the BMW global manufacturing network”.
As a result, it has decided to invest R1- billion in South Africa over the next four years to increase capacity in the South African plant to meet increased domestic and export demand.
BMW South Africa managing director Rainer Hageman told a media briefing in Cape Town this week that the challenge had been “daunting” but that it had been tackled with
But Pischetsrieder’s good news had another caveat — the investment could be reconsidered if progress was not made in curbing the escalating levels of crime in South Africa, particularly of vehicle theft and hijackings.
BMW, which recently donated 100 new cars to the South African Police Services highway patrol in Gauteng, was, however, “optimistic that crime levels will be suitably addressed”.
The R1-billion would be invested evenly over the next four years, but mainly in 1996 to 1998 and would help increase production from the present 16 000 cars to about 25 000.
Hageman said the investment would create more jobs downstream rather than in BMW itself.
“The drive for more productivity means that productivity will go up steeply so that the additional jobs that we can have on our own plant will be limited,” he said.
“But if you look at the whole network, at our suppliers, our retail organisations, we are basically responsible for more than 20 000 people,and there will be a lot of extra
Hageman said exports were expected to pick up slowly. BMW SA had already started exporting to Australia and Pakistan and would also look to South East Asia.
“The effect of the process of building the capacity of our plant and bringing it up to world competitive standards will only effectively kick in in the fourth year and only then will we be able to move towards a different level of capacity,” he said.
It was, however, important to export as much as possible as this enables BMW to import cars and components without paying duty. This would enable it to price its cars competitively and keep pace with export companies that did not produce for the local market.
BMW has 8% of the local marketshare and Hageman said it accepted the fact that this could shrink somewhat because of the increasing competition in the domestic market.