BMW planning to build sporty new type of Mini

BMW is to build a new type of Mini and a smaller, cheaper Rolls-Royce (see report above) in Britain under ambitious plans set out to restore investor confidence and attract younger customers.

The German premium car-maker outlined its strategy to sell substantially more than two million vehicles a year by 2020 and increase its return on sales in the core cars division to as much as 10 per cent by 2012.

Norbert Reithofer, chief executive, said the group would create new concepts in personal mobility, including hybrids and hydrogen-fuelled cars.

“Our vision for the future is zero-emissions driving.”

The Japanese group Toyota, which made an 11 per cent return on sales in 2006, is the model for BMW in earnings and eco-friendliness.

Mr Reithofer killed off suggestions that BMW could expand by acquiring Volvo from Ford. But he said it was open to acquisitions and taking on a fourth brand – provided it met earnings and quality criteria.

He also pointed to the possibility of greater co-operation with companies such as Mercedes. He admitted that BMW’s profits, which reached four billion euros before tax last year, were increasing “at a disproportionately low level” and sales risked running out of steam in the years ahead.

“We cannot carry on as we did before ... Yesterday’s formula for success will not work in future.”

Mr Reithofer said BMW planned a strategic realignment that would see greater dividends for shareholders, and any shortfall in staff pension funds would be filled.

He also set a target of a 26 per cent return on capital employed by 2012 and a six billion euro efficiency programme.

The shake-up at the world’s leading premium car-maker has been developed in a series of executive conclaves at a Bavarian lakeside retreat.

It will see two new board members, with Stefan Krause, the youthful finance director, moving to sales and marketing, and jobs with Michael Ganal.

The Mini plant in Oxford, England, which has recently been expanded to build 220,000 cars, will raise capacity to 260,000 to meet demand from younger customers and produce a new sports activity vehicle.

BMW plans to raise car sales from the current 1.4 million a year to 1.8 million by 2012 and “significantly” more than two million by 2020.

Output at the Spartanburg plant in South Carolina will jump from 140,000 to 240,000 to benefit from the cheaper dollar.

“We are setting the BMW group on a course of sustained profitability and long-term increase in value,” Mr Reithofer told reporters, saying it would pay a substantially increased dividend this and subsequent years, and put on ice for a year any share buyback.

He said the group, of which the Quandt family owns 48 per cent, would guarantee its independence under the new plan and meet the challenge of currency burdens, rising oil prices, stricter regulation and an ageing customer base.