German luxury vehicle manufacturer BMW was to invest R2,2-billion in upgrading its Rosslyn plant and supplier base, BMW South Africa MD Bodo Donauer announced in Johannesburg on Monday.

The three-year investment programme, which kicked off this year, would enable maximum plant capacity to increase from 60 000 units a year to 87 000 units, while securing production in South Africa for the future by placing the plant on par with other BMW plants globally, he noted.

Two-thirds of the investment would enable the introduction of the newest BMW vehicle and production technology at the plant, while the rest of the funds would be diverted to the group's local supplier network.

BMW's long-awaited announcement followed the signing of a letter of commitment by the Department of Trade and Industry (DTI) that it would honour the investment under the new support scheme for the local motor industry, the Automotive Production and Development Programme (APDP).

The APDP would, in a step-by-step fashion, replace the current support programme for the automotive industry, the Motor Industry Development Programme (MIDP), from this year to 2012.

One incentive under the APDP, which was suppose to have been introduced in June this year already, was an automotive investment allowance, in the form of a direct grant, to support investment in new plant and machinery.

This was to replace the MIDP's production asset allowance, and would amount to around 20% of the project value over a three-year period.

Trade and Industry Minister Rob Davies said on Monday work on the APDP was “proceeding energetically”, but that he was not able to make an announcement on the detail just yet.

“We are working on the sub-programmes; we will soon share it with industry.”

Davies said DTI was prepared to provide guarantees – similar to what had been provided to BMW SA – to any other vehicle manufacturer which would want to invest in production capacity in the country.

Donauer stressed that it was important for the open issues with regard to the APDP to be resolved quickly.

“We have experienced that government is certainly willing to support the entire automotive industry, but this willingness seems to be overshadowed by the many hurdles encountered in creating a programme that fits all stakeholders.

“Its high time that all of these stakeholders: the OEMs [original equipment manufacturers, or vehicle manufacturers], the suppliers and government, get beyond these hurdles quickly, in an unified effort, so that the automotive industry can concentrate on its core business. And by doing so, and maintaining and growing our operations, fulfil the most important prerequisite to support government's call to sustain and create decent jobs in the process.”

ONE QUARTER OF 3-SERIES PRODUCTION

The BMW plant had, to date, produced 560 000 3-series models, with 385 000 of these exported to countries such as Japan, the US, Australia, and Canada.

“This year, our plant will be responsible for 25% of global 3-series production,” said Donauer.

BMW SA said it was not yet in a position to confirm or deny whether the R2,2-billion investment was to gear up the Rosslyn plant for the production of the new 3-series.

However, models normally have a seven-year run, with production of the current 3-series having started in 2005. The newly-announced three-year investment programme would bring the timeline to 2012, seven years on.

The plant had already produced four generations of 3-series models.

With 56 local first-tier suppliers, Rosslyn currently produced the BMW 3-series in both left- and right-hand drive derivatives.

Almost 75% of this year's production volume of 47 000 units would be exported, said Donauer.

BMW South Africa indirectly employed 42 000 people, inclusive of those in its supplier network.

Donauer said BMW SA's investment programme would not create any new jobs, but added that the company had not retrenched any of its permanent staff since the industry had seen a rapid decline in sales since last year, as economic conditions had worsened.

He added that 1 100 members of the BMW workforce were in the process of receiving training since early September, providing them with a Manufacturing, Engineering and Related Services Sector Education and Training Authority accredited qualification.

The Rosslyn plant became the BMW group's first manufacturing facility outside of Germany, in 1975.

The company was also the first South African car maker to begin an export programme in 1994, ahead of the announcement of the MIDP.

This was followed, five years later, by a decision to move Rosslyn to a two-shift production model, focused on manufacturing almost three-quarters of its volume for export markets.

That decision had led to production volumes at Rosslyn increasing by some 220% and export volume by 400%.

TOUGH MARKET

Sales had been tough for the company this year, similar to what other vehicle manufacturers had been experiencing.

The local premium segment was currently trading 18% below 2008 levels, while the
local vehicle market was facing its biggest decline in 15 years.

The BMW group had never shied away from making decisions for the future in spite of the current tough conditions the motor industry was facing, explained Donauer.

“By making an announcement of this magnitude during the worst known crisis the automotive industry has faced in recent times, we not only send a positive message to our staff about the long-term sustainability of BMW South Africa, but also a positive message about the future of South Africa as a whole."

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