NEW YORK -- The weak U.S. dollar won't force BMW AG to raise prices or shift production from Europe to its South Carolina plant, says CFO Stefan Krause.
The automaker can't raise prices because of the competitive U.S. environment, Krause says.
A decade ago, the Germans were the dominant players in the luxury market, and the dollar/Deutsche mark relationship affected all players.
"Today the premium segment in the United States is local Americans and Japanese competitors, and they are not exposed to the dollar/euro relationship," he says. "We, as one German manufacturer, cannot price ourselves out of the market."
The euro reached a record high against the dollar on Nov. 8, trading at $1.2962. When the euro was introduced in 1999, it was an even trade with the dollar.
BMW, which predicts record unit sales, revenues and profits in 2004, continues to protect earnings with hedging, Krause says. That is coupled with "internal efficiencies to compensate for profit impact that the currency has," he says.
A long-term solution may be to produce more in the United States. But BMW is far from a decision on whether to add a product to the plant in Spartanburg, S.C., Krause says.
He says a decision is likely to hinge on approval of a product with high U.S. sales potential: "Just to move cars to be assembled in the United States does not generate enough local value that would be meaningful from an exchange-rate perspective.
"On top of this, we never make production decisions based on exchange rates, because exchange rates change."
The 10-year-old Spartanburg factory "would always be considered when we do a new car," Krause says. "It will make sense if we know we can have the local supplier base. That is the key to bringing new production to the United States."
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