BMW Gears Up For Sales Boost In Small-Car Segment

"The first car based on this new architecture will be one of our current Mini ... hatchbacks, followed by a smaller BMW," Chief Executive Norbert Reithofer said Thursday during an analyst presentation.

He declined to elaborate further "because then Mr Winterkorn knows it as well," referring to Volkswagen AG (VOW.XE) Chief Executive Martin Winterkorn.

The Munich-based firm sold 1.29 million BMW, Mini and Rolls-Royce branded vehicles in 2009, with small and compact cars accounting for around 400,000 vehicles.

On Wednesday, BMW said it aims to ramp up sales in the growing small-car segment, both for its compact Mini brand as well as its core BMW marque, with annual growth rates in this segment anticipated to be between 4% and 6%.

"There will be front-wheel drive BMWs in the smaller vehicle classes in the future," Reithofer confirmed, noting that BMW wants to "grow profitably in this segment" despite fierce price pressure.

The world's largest premium automaker by sales plans to sell 1.6 million vehicles in 2012 and targets an auto sector return on sales of between 8% and 10% in 2012 and a return on capital employed of more than 26%.

Chief Financial Officer Friedrich Eichiner sought to ally fears that a larger portion of small cars would eat into BMW's profitability, as these vehicles usually have thinner profit margins than large, souped-up cars. Eichiner said BMW "expects to maintain" the profitability level beyond 2012.

Reithofer pledged that BMW won't launch its best-selling 3-Series or any larger model with front-wheel drive, adding that the next generation of the compact 1-Series to be launched next year will also have rear-wheel drive.

The world's three largest luxury car makers are plotting stronger inroads into the compact-car segment amid a broader trend among consumers towards smaller and fuel-efficient vehicles.

German peer Daimler AG (DAI) is in talks about an alliance in this segment with other automakers, including Renault SA (RNO.FR), in order to reap cost synergies and improve profitability. The maker of Mercedes-Benz cars is also building a new plant in Hungary to improve the cost structure of the next generation of its compact A- and B-Class models.

Audi AG (NSU.XE) is launching its new A1 model, a small car below the current A3 hatchback, to tap the small car segment for further growth. Audi benefits from economies of scale from its parent Volkswagen, Europe's largest automaker by sales.

Company Web site: www.bmw.com

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