BMW Sticks to Engines For Formula 1

HOCKENHEIM, Germany, July 28 Reuters reported that Formula One motor racing may have become a pulse running through BMW's factories, inspiring engineers and helping to boost sales, but the group on Sunday played down the idea of expanding its activities beyond engines.

Germany's BMW can be proud of its achievements since returning to Formula One racing two years ago when it joined with the Williams team, supplying it with engines.

The team has established itself as a top competitor, on a par with the likes of McLarenMercedes and lagging only Ferrari. And it is keen for even greater success.

"We cannot sit back and relax -- we have to remain hungry," BMW Chief Executive Helmut Panke told reporters on Sunday at the German Grand Prix.

The goal for the next season is for one of the team's drivers, Juan Pablo Montoya or Ralf Schumacher, to win the championship outright, unseating Ralf's brother Michael, who currently dominates the sport with his Ferrari team.

Many shareholders are critical of the amounts of money car manufacturers pour into Formula One [FOON.UL], in some cases believed to be several hundred million euros.

In BMW's case it means supplying 100 top-performance engines per year, each with more than 5,000 parts, of which 1,000 are different.

Carmakers, however, cite the adage: "Win on Sunday, sell on Monday." They argue success in Formula One can help to boost sales as hundreds of millions of spectators across the world are affected by the sporty image of the brands seen on the screen.

"You cannot say that due to BMW's engagement we have sold this many cars, but since we started again with Formula One we have seen a response in studies and market research showing that customers and potential customers give us a higher rating on our sporty image," said Panke.

BMWWilliamsF1 motor sport director Mario Theissen emphasises the technical benefits accrued by the company.

"We made it clear from the start that it was not only about marketing but also about technology transfer," he said.

He cited engine electronics as an area where developments at Formula One has boosted other products, especially the high-performance M3 and M5 models.

Panke, as well, pointed to an intangible benefit of the Formula One engagement -- the emotion among BMW workers linked to Formula One.

"At the Formula One foundry the workers work overtime and weekends and that has an effect on others -- there is a psychological association in the group," he said.

One BMW worker explained how he has to make sure he watches television news on Sundays if he misses the Formula One race.

"It is impossible to go in on Monday and not know what has happened -- every one is talking about it," he said.

However, Panke said BMW had decided on the engine as BMW's core competence in Formula One and he played down the likelihood of spreading into other areas.

"At this point I don't see any reason to look at other alternatives," said Panke.

Theissen said BMW must decide by the end of the year whether to continue in Formula One once the current contract ends in a couple of years, but gave no hint of current thinking.

Panke also reiterated that the company was on track to improve unit sales, revenues and earnings this year from last year. It reports second-quarter results on Aug. 8.

The Bavarian company's focus on the premium segment has accounted for its success in the last couple of years despite difficult economic conditions that affect auto demand.

Panke said he expected a slow economic recovery to take place towards the end of the year in Europe.

"Europe is not deteriorating any more but the very slow and small positive indicators don't yet give a positive environment," said Panke.

"We will have to wait until the end of the year and 2003 for things to get better.