BMW invested $457 million in its new engine plant at Hams Hall in Warwickshire, England.
Hams Hall will be the center for BMW's four-cylinder gasoline-powered engines worldwide. It will build a fuel-injection engine called Valvetronic. This economical, environmentally friendly engine will debut in 1.8-liter form in the BMW Compact 316ti that goes on sale in June. It will also be used in BMW's future small-car range, and a planned smaller version of the X5 sport-utility, code-named X3.
Hams Hall has the capacity to produce 400,000 engines annually, but only 60,000 will be made this year.
Automotive News Europe Staff Reporter Dorothee Ostle talked to Norbert Reithofer, BMW board member responsible for production worldwide, about the new plant.
Are you still happy with the location of Hams Hall?
The decision to build Hams Hall in the United Kingdom was made in 1996, when Rover and Land Rover were part of the BMW group. Engines from Hams Hall were planned to go into Rover and Land Rover products. At that time, an output of 400,000 engines a year seemed reasonable.
Now the situation has changed. In 2001, we will utilize the capacity for just 60,000 engines. But Hams Hall will be the future center of competence for all BMW four-cylinder gasoline engines. These engines are built in our Steyr, Austria, plant and will be phased out there by 2003.
Hams Hall cannot be run profitably at only 15 percent of capacity. When will you break even?
We regard Hams Hall as an important strategic investment in our future. Hams Hall will enable us to proceed with some ambitious product plans. Our main concern, for the time being, is to gain breathing space, not profitability.
We run at the utmost capacity limit at Steyr. The plant was designed for 350,000 engines, and last year the output was 620,000 units. With Hams Hall operating, we gain breathing space in Austria, which is urgently needed for the four- and six-cylinder diesel engines we produce there.
Why didn't you just expand Steyr instead of investing in Hams Hall?
Steyr is the center of competence for BMW diesel engines, and our recent investment there has focused mainly on diesel production. We have acquired a site next door to Steyr, and we can now react accordingly if diesel demand continues to increase in the future.
Although Hams Hall is in the United Kingdom, which is outside the euro zone, the currency aspect is less important in engine production. Hams Hall has more than 90 percent automation in the machining area, and more than 50 percent automation in engine assembly.
Only 10 percent of our engine parts are sourced in the United Kingdom, and wages account for only 10 percent of the operational cost.
What about your other new engine plant, the Tritec joint venture with DaimlerChrysler in Curitiba, Mexico? Following the cutbacks at DaimlerChrysler, you are also facing the problem of under-utilization of the installed capacity there.
Tritec, where the engines for our new Mini are produced, was designed for a capacity of 250,000 engines in the first step, and 400,000 engines in the second step.
In agreement with DaimlerChrysler, only the first step was carried out. Investment in the second step was stopped. So the current installed capacity is 250,000 units, 125,000 for each partner. This is the joint venture contract, which BMW regards as binding. We are informed that DaimlerChrysler wants to discuss the plant's future with us, and that is what we will do, but not in public.
Could you decide to abandon the Tritec venture and, for example, produce the Mini engines at Hams Hall to utilize the spare capacity?
No, BMW will definitely stick with the Brazil engine plant and the Mini engines, which were jointly developed with DaimlerChrysler. But what we are considering is buying a diesel engine for the Mini. We would not develop or produce such an engine ourselves. We are in negotiations with various manufacturers, among them Toyota, but we have not reached an agreement yet.