BMW in good shape as Panke steps down

Helmut Panke on Wednesday bid a successful farewell to BMW as he presented a forecast-beating set of results, his last as the German luxury carmaker’s chief executive.

Mr Panke has been forced to retire at the end of this month, nearly a year before his contract was due to end, as he will turn 60 and BMW has an unwritten rule banning senior managers from being older.

Second-quarter results substantially ahead of market expectations could reignite the debate over whether having such an age limit for executives is positive. It follows the similar forced resignation of Lord Browne at oil company BP. Both BMW and BP are renowned as two of the most successful European companies led by two highly respected executives.

Other business leaders – such as Deutsche Post’s Klaus Zumwinkel – have criticised enforced retirement ages as weakening a company’s management while both Mr Panke and Lord Browne have called on society as a whole to debate the need for such limits as life expectancies increase and demographics mean there are more older people.

Mr Panke on Wednesday deflected all questions about his feelings and future, stressing the strong nature of the results. “I have had more than 24 years of happiness and fun with BMW and more than 10 good years in senior management. But I want to concentrate today on the very strong first half,” he added.

Pre-tax profits, in the second quarter rose 33 per cent to €1.23bn ($1.57bn), in part due to changes in the value of the exchangeable bond it holds in aerospace group Rolls-Royce. But analysts and investors were most heartened by the 16 per cent leap in pre-tax profits in its automobile division to €947m, far exceeding a 3 per cent rise in production to 355,000 vehicles and 8.5 per cent increase in sales to €13.2bn.

“BMW is stronger than ever before. 2006 will be the best year in our history,” said Mr Panke, reiterating the full-year target of record profits of €4bn.

Norbert Reithofer, BMW’s current head of production, takes over from Mr Panke on September 1 and analysts are expecting few changes in strategy apart from a renewed focus on expanding in the US, possibly through new production facilities. Mr Panke underlined that with its three strong brands – BMW, Mini and Rolls-Royce – the group was well positioned and had little need for acquisitions or bold changes in direction.

“BMW is a company in rude health. It is fundamentally a very good story and very well managed,” said Stephen Cheetham, analyst at Sanford Bernstein.

BMW has suffered heavily in previous years from the falling dollar but Stefan Krause, chief financial officer, pointed to a reduction in the impact from currencies as the main reason why profitability had increased so sharply. Strong sales of its 3-series saloon car also helped.

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