BMW cash flow a positive, but VDL Nedcar adjustment is a reality check

Following the news that BMW is reporting a large preliminary third quarter free cash flow boost as demand continues to recover from the pandemic-induced population lockdowns of the spring;

David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view: 

“The BMW news on cash flow is pretty positive and echoes similar news from rival Daimler. As sales recover in major markets around the world, cash flows in rapidly and BMW says this is happening faster than expected.

“Companies are also highly focused on reducing cost where possible while the effects of the pandemic on economies persist and while market demand prospects are so uncertain.

“For example, BMW has decided to end Mini Countryman production at the contract assembly VDL Nedcar plant in the Netherlands, preferring to produce the next generation of the variant at one of its own factories.

“The decision is something of a reality check and illustrates a renewed focus on plant-model mix and manufacturing plant capacity utilisation levels, with the aim of reducing manufacturing unit costs in the medium-term. We can expect more such decisions from BMW and others aimed at rationalising manufacturing operations for maximum efficiency.

 

“Contract assemblers such as VDL Nedcar, Valmet and Magna will continue to be vulnerable as contracted-out activity is increasingly brought in-house where possible.”

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