July 18, 2019 / 10:18 AM / 4 months ago

BMW to pick new CEO, Zipse emerges as favourite

FRANKFURT, July 18 (Reuters) - BMW is set to name Oliver Zipse as its new chief executive, picking the manufacturing expert to help the German automaker make the shift to electric and self-driving cars and tackle new competition from technology giants.

The company's supervisory board will discuss new leadership at BMW's U.S. plant in Spartanburg, South Carolina, later on Thursday, after 53-year-old Harald Krueger said he would not be available for a second term as CEO.

Zipse, 55, is now the front runner, with 59-year-old board member for research Klaus Froehlich also a contender, company sources told Reuters.

A fluent English speaker who joined BMW as a trainee in 1991, Zipse has risen through the ranks, holding posts including head of brand and product strategies before becoming board member for production.

Zipse has emerged as favourite because BMW's efficient production network, which he expanded in Hungary, China and the United States, has helped the company deliver industry-leading profit margins despite its relatively small scale.

But experts say auto industry leaders also need other skills for the new era of software-driven electric and autonomous cars.

"A CEO needs to have an idea for how mobility will evolve in future. This goes far beyond optimising an existing business," said Carsten Breitfeld, chief executive of China-based ICONIQ motors, himself a former BMW engineer.

"He needs to be able to build teams, to attract key talent, and to promote a culture which is increasingly oriented along consumer electronics and internet dynamics."

Being able to cope with shorter product cycles and new technologies, and a willingness to take bold decisions, are among the qualities needed, Breitfeld said.

BMW, Audi and Mercedes-Benz have dominated the market for high-performance limousines for decades, but analysts warn a shift towards more sophisticated technology and software is opening the door to new challengers.

"Tesla has a lead of three to four years in areas like software and electronics. The millennials are much more focused on these things. There is a risk that the Germans can't catch up," UBS analyst Patrick Hummel said.

BMW had an early lead in premium electric vehicles but throttled back its ambitions after the i3, an expensive city car, failed to sell in large numbers, leading Tesla to overtake BMW in electric car sales.

Krueger's reluctance to push low-margin electric vehicles led to an exodus of talented engineers, including junior managers like Christian Senger, now Volkswagen's board member responsible for software, and Markus Duesmann, who is seen as a future Audi CEO.

Duesmann and Senger were poached by Volkswagen (VW) CEO Herbert Diess, himself a former BMW board member responsible for research who defected in 2015 to implement a bold 80 billion euros electric car strategy at VW.

Zipse, who prefers suits and ties to open shirts and sneakers, will need to ramp up BMW's software expertise as new players like Amazon and Google muscle into the mobility sector.

"Production expertise is important, but if you want to avoid ending up being a hardware provider for Google or Apple, you need to have the ability to move up the food chain into data and software," a former BMW board member said, declining to be identified. (Reporting by Edward Taylor; Additional reporting by Paul Lienert, Ben Klayman and Jan Schwartz; Editing by Mark Potter)

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