Chairman of the board, BMW
Born: August 31, 1946, in Storkow, Kreis Fürstenwalde, Germany.
Education: University of Munich, BSc, 1968; MS, 1972; PhD, 1976.
Career: Swiss Institute for Nuclear Research, 1976–1978, researcher; University of Munich, 1976–1978, lecturer; McKinsey & Company, 1978–1982, consultant; Bayerische Motoren Werke (BMW), 1982–1985, head of planning and control, research and development division; 1985–1988, head of corporate planning; 1988–1990, head of corporate organization; 1990–1993, head of corporate strategy and coordination; BMW (US) Holding Corporation, 1993–1995, chief executive officer and chairman of the board; BMW AG, 1995–1996, executive director; 1996–1999, head of personnel and information technology; 1999–2002, chief financial officer; 2000–2002, head of the sales division; 2002–, chairman of the board.
Awards: Wall Street Journal Europe , Customer Value Champion of the Year, 2003; Cannes Lions International Advertising Festival, Advertiser of the Year, 2004.
Address: BMW AG, Petuelring 130, 80788 Munich, Germany; http://www.bmw.com.
■ Helmut Panke had an intense gaze and a forceful personality. He relished and encouraged debates during staff meetings, and he was admired for his penetrating questioning. He would spend hours one-on-one with a manager, working out in detail what the manager was to do, and then he would let the manager work without further interference. It was Panke's belief that working for Bayerische Motoren Werke (BMW; Bavarian Motor Works) should be fun, and he created an atmosphere in which employees could enjoy their work. Eloquent, Panke spoke flawless English.
In Germany in the 1950s young people were expected to know if they were destined for higher education or something else by the time they were 14 years old; Panke seemed to have known by age 11 when he entered Klenze Gymnasium in Munich, leaving with the equivalent of a high-school degree in 1966. He interrupted his studies at Klenze in 1964 when he received a scholarship from the American Field Service to study at the Philips Exeter Academy in Exeter, New Hampshire, where he received the equivalent of an American high-school diploma in 1965.
After leaving Klenze, Panke attended the University of Munich, receiving a bachelor of science degree in physics in 1968. He continued his studies at the University of Munich, receiving a master's degree in physics in 1972 and a doctorate in nuclear engineering in 1976. Panke then held two jobs from 1976 to 1978, one as a researcher in nuclear physics for the Swiss Institute for Nuclear Research, and the other as a lecturer in physics for the University of Munich. Panke would later hint that the attraction of free enterprise lured him to become a consultant in 1978 for McKinsey & Company, working in Düsseldorf and Munich. While working for McKinsey, Panke was assigned as a consultant to BMW.
At the time BMW was primarily a local manufacturer of niche automobiles designed for and sold to small groups of people with special demands for exceptional performance. In 1977 BMW had begun manufacturing its 6 Series coupe, which by 1982 was BMW's most successful model ever, selling 86,000 units by the time it ceased production in 1989 and broadening BMW's appeal in the United States. On January 1, 1982, Panke was hired by BMW to lead the planning and control office of the division for research and development. BMW's corporate culture, which offered the freedom to be creative, attracted Panke. Employees were responsible for their own work, and managers could make decisions without having to pass them through committees.
About 47 percent of BMW was owned by the Quandt family, which ran BMW as a family business, favoring longtime employees and stability. In the 1970s there had been an attempt to kidnap the children of the family, and as a consequence they became very secretive and remained so decades later. This secretiveness seemed to pass on to BMW's corporate leaders. Panke distinguished himself for his understanding of the complexities of BMW's engineering research and manufacturing, and in 1985 he was made leader of BMW's division for corporate planning. This would make him a key figure in BMW's expansion in the 1980s and beyond. While leading the division for corporate planning, he was instrumental in pushing the idea that BMW should build a factory in the United States. In 1988 he became the leader of organization, responsible for coordinating the activities of BMW's different divisions. In 1990 Panke became leader of group planning for BMW, taking a hand in developing BMW's long-term strategy.
Panke and colleagues visited the United States, searching for a place to build an assembly plant. Panke drove through much of the eastern United States, visiting many towns. After much fuss and debate, he and his superiors settled on Spartan-burg, South Carolina. Fluent in English and well versed in American business practices, Panke was an obvious choice to lead BMW's U.S. expansion, and in April 1993 he took charge of BMW (US) Holding Corporation as its chief executive officer (CEO) and chairman of the board. Under Panke's leadership, the United States became BMW's largest market, and the Spartanburg factory manufactured the Z3 roadster for the United States and for export to Europe. Initially the Z3s were so badly put together that they had to be scrapped, but eventually the problems were fixed and the Z3 roadster became popular. In July 1995 Panke was appointed BMW AG's General-evollmäächtigten , a word often translated as CEO in the English-speaking press, although Panke's duties were more like those of an American chief operating officer and lacked some of the authority that a CEO would be expected to have.
In 1994 BMW had acquired the United Kingdom's ailing automobile manufacturer Rover Group from British Aerospace for $1.27 billion. BMW's chairman of the board, Bernd Pischetsrieder, hoped that Rover's line of midsized automobiles would give BMW entry into the automobile mass market; BMW had been the subject of takeover rumors, and BMW's executive committee hoped that by increasing the company's size, it would be able to remain independent. The German press dubbed Rover Group the "English patient" because it always seemed unhealthy.
On July 4, 1996, Panke was elected to the executive committee of BMW, placing him among the company's elite. There, he worked with the Quandt family's representatives, as well as other shareholder and management representatives. He had toured part of the United States with Pischetsrieder, and the two were close allies as Pischetsrieder tried to expand and reorganize BMW to become a truly global corporation. Panke's duties were to supervise human resources and information technology. He proved to be a wizard with the computers that became essential to the manufacturing of BMWs, and his sheer enthusiasm for BMW's automobiles helped make him a success with personnel.
In 1998 another English institution became part of BMW when the company purchased Volkswagen's rights to the name "Rolls-Royce," and BMW began to set up shop in West Sussex to build new Rolls-Royces. In 1999 BMW's Spartanburg factory began manufacturing BMW's first sport-utility vehicle, the X5; it had the sharp handling that BMWs were famous for, and in spite of some misgivings among industry analysts that the X5 would dilute the BMW brand by not being a luxurious coupe, it became popular. Yet 1999 was a difficult year for BMW. Having already lost $3.6 billion on Rover Group, BMWs finances continued to be dragged down by its British subsidiary. To fix Rover Group, Pischetsrieder had assigned scores of BMW's engineers, including some of the best of BMW's next generation of future leaders, to the United Kingdom, but only the Land Rover off-road vehicle sold well.
By the start of 1999 BMW's executive committee had had enough. The Quandt family exerted its control of corporate affairs, and on February 5, 1999, Pischetsrieder was fired. The executive committee then surprised just about everyone when it named committee member Joachim Milburg as the new chairman of the board. Milburg had begun as an apprentice factory laborer, worked his way up to become a college professor of engineering, and then accepted a position with BMW in 1993. BMW's second in command, Wolfgang Reitzle, quickly resigned after being passed over for the position. Milburg accepted his new position, understanding that it was an interim job because he would reach BMW's retirement age of 60 in 2003. He quickly moved to rebuild BMW's upper management and appointed Panke chief financial officer on March 18, 1999.
Panke proved to be a wizard at finances, but he could not help Rover Group, which lost another $1 billion during 1999. Although Milburg was full of ideas to make Rover Group profitable, Panke viewed the company as a lost cause. When Rover Group was finally sold, journalists believed that Panke was primarily responsible for the sale. In 2000 the Land Rover was sold to Ford Motor Company for $3 billion. The rest of Rover Group was sold on March 16, 2000, to Alchemy Partners, a group of venture capitalists, for £10. BMW quickly became the subject of takeover bids, because by dropping Rover Group its annual sales would fall by about 400,000 vehicles, thus reducing its gross sales and ability to compete in the mass market. Yet Milburg defiantly maintained that BMW would remain independent. He took on responsibilities for marketing, and to help him with this he made Panke his codirector of marketing.
BMW had lost many of its most promising engineers and managers in the Rover Group disaster, but neither Milburg nor Panke panicked. Panke was especially gifted at attracting promising young leaders, and BMW retained its corporate culture of allowing employees great latitude in making decisions, maintaining a creative atmosphere that attracted young talent. Regardless of his job titles, Panke was plainly second in command at BMW. His outgoing style complemented the quiet, reticent Milburg, and the two formed a good relationship.
Milburg and Panke emphasized BMW's brand name in advertising, noting the brand's reputation for building sharp-handling cars for automobile enthusiasts. They set about reorganizing BMW, putting aside aspirations to enter the mass market in favor of satisfying niche groups of customers. This involved reorganizing and in some cases retooling BMW factories to make them flexible enough to shift rapidly from manufacturing one model to another as market demands fluctuated. Further, the two men planned to expand BMW's offerings from a few models, each with several variations, to several models, each customizable to a customer's specifications. Panke would eventually push this to its limit by offering personalized automobiles. For 2000 BMW grossed $31 billion and netted $940 million.
By 2001 BMW had plans to spend $23 billion to expand its offerings, hoping to increase sales 40 percent by 2008. It opened an engine plant in Birmingham, England, to manufacture four-cylinder engines. In Oxford, England, BMW began manufacturing the Mini, a luxury small car. There was nattering in the press about a small car diluting the BMW brand name, but the Mini had all of BMW's special-handling traits. In July 2001 BMW announced its intention to build a new factory in Leipzig, which would begin manufacturing the 3 Series in 2005. The German government promised to help fund the building of the factory because it would help the economy of the former East Germany. Then the X5 off-road BMW sport-utility vehicle was launched, becoming a hit in the United States. BMW spent $350 million to upgrade its U.S. dealerships.
The introduction of the 7 Series line of high-end luxury vehicles in November 2001 was crucial to BMW's future. The 7 Series competed with and was intended to take a share of the U.S. market from Lexus and Mercedes. The iDrive computer system was introduced. It displayed data on a screen on the 5 Series and 7 Series dashboards, synthesizing data on weather conditions, radio preferences, telephone communications, and navigation, and was controlled by a knob near the gearshift. Automobile reviewers declared the iDrive a confusing mess, but Panke defended it as a valuable feature. The iDrive suffered numerous glitches, causing buyers to return their automobiles to dealers for repairs. Panke had a team of engineers rework and simplify the iDrive's software, and by 2002 it functioned well. In 2001 two-thirds of BMW owners were repeat buyers, and the company netted $2.8 billion, more than the combined nets of DaimlerChrysler and General Motors.
On December 5, 2001, Milburg announced that he would retire early in May 2002 because of an ailing back. He and the other executive committee members knew already who they wanted to be the new chairman of the board, and Panke was named Milburg's replacement almost immediately.
The 7 Series was designed by an American, Chris Bangle. It included a large trunk that some reviewers thought was too chunky, but it gave the 7 Series a muscular look, which went well with its powerful engine and road-hugging ability. The engine was part of an effort to be more efficient at BMW. Panke felt that buyers were not choosing different models of BMW because of the engine differences, and so the V-6 engine was installed in several different models. On the other hand, Panke thought that interior design mattered very much to consumers. He said that he wanted people to be able to sit blindfolded in a BMW and know by the smell and feel that they were in a BMW and no other kind of automobile. He was selling high-quality engineering and style, and the 7 Series retained the feel of a BMW while offering an up-to-date look.
On May 16, 2002, Panke became chairman of the board. Though he was often referred to in the English-speaking press as a CEO, technically he chaired the board, which at BMW carried the authority that both chairman of the board and CEO would carry in an American company. He strove to develop a corporate culture that was fun, even exciting, which was even spelled out in BMW's code of corporate behavior: "Rule 7 states that it's the responsibility of any manager to create an atmosphere of fun in the organization," said Panke ( BusinessWeek online , June 9, 2003). Flexibility was an important part of the culture. Not only would BMW factories be able to shift from manufacturing one model to another according to consumer demand, but the factories would be able to tailor individual vehicles to individual consumers with a multitude of options, some of which were developed out of the creative atmosphere Panke promoted. For example, BMW developed keys that were individualized for different drivers of the same automobile. Each individual key would automatically set the radio, driver's seat, climate control, steering wheel, and other options to the driver's preset preferences.
All BMWs sold at the high end of their classes in 2002, with the sporty 3 Series starting at $28,495, the medium-sized 5 Series at $38,205, and the luxury 7 Series at $69,195, and with all usually selling for much more because of numerous options added by purchasers, giving BMW the highest profit margins in the industry. Panke rejected the idea that to survive BMW had to penetrate the mass market. Instead, he emphasized qualities that set BMWs apart from other automobiles to attract people willing to pay more for a vehicle that could be customized to suit them in just a few weeks. A somewhat awkward consequence of the drive for flexibility was that BMW had over three hundred different time schedules for employees, varying with the factory and the model being manufactured.
Panke and BMW reached an agreement with Toyota Motor Corporation to jointly manufacture diesel engines, even as BMW overtook Toyota's Lexus in sales in the United States. While the automobile-manufacturing industry as a whole was in a slump, BMW's worldwide sales grew 17 percent, reaching 1.05 million vehicles. BMW was ranked 81st on the Forbes list of the world's top 500 companies. In a tough market, Panke warned, "We have to remain hungry and to keep up our desire to outperform others" ( Forbes.com , July 22, 2002).
Few people could have been happier in their jobs than Panke was in his. The pleasure he took in his work was evident to insiders and observers alike. In 2003 BMW finished building a new factory in Britain for Rolls-Royce Motor Cars and began producing Phantoms, which sold for $320,000. The Phantom featured a 12-cylinder engine designed and built by BMW. A new version of the 5 Series was introduced, with longer bodies and an upgraded iDrive system. Safety features included standard side-door air bags. The 6 Series and the X3 Baby sport-utility vehicle were introduced in 2003. Panke took to calling customers "investors," probably to emphasize the high resale value that BMWs typically carried. The worldwide decline in automobile manufacturing affected BMW, however, and even though BMW upped its manufacturing total to 1.1 million vehicles, most of the increase in sales came from its small-car series. Its gross for the year declined 2.1 percent, and its net declined 3.6 percent, although at $2.3 billion the net was enviable.
In May 2004 BMW opened a factory in Shenyang, Liaoning province, China. The factory was owned jointly with Brilliance China Automotive Holdings and produced 3 Series and 5 Series automobiles. Panke hoped the Chinese factory would do for BMW in China what the factory in Spartanburg had done for BMW in the United States. On June 7, 2004, Panke was named the leading foreign "star manager" by BusinessWeek , and on June 26, 2004, he was named Advertiser of the Year at the Cannes Lions International Advertising Festival. He had big plans, including the launch of a new luxury 6 Series coupe and the launch of the 1 Series, a small BMW for young customers who would one-day be able to buy bigger BMWs. "When people work in a fun atmosphere it's very motivating. I love my job," Panke told an interviewer in 2003 ( BusinessWeek online , June 9, 2003). He had created a culture in which people throughout the corporate ranks could send questions all the way to the top, in which debate and new ideas were encouraged. Panke dealt with the tough questions that arose, but he insisted that "My biggest challenge is saying 'no' to projects that are exciting but don't fit BMW's strategy" ( BusinessWeek , June 7, 2004). His strategy was to make sure every BMW fit the brand's image.
See also entry on Bayerische Motoren Werke in International Directory of Company Histories .
Edmondson, Gail, "BMW's Shifting Strategy," BusinessWeek online , June 9, 2003, http://www.aol.businessweek.com/bwdaily/dnflash/jun2003/nf2003069_6720_db053.htm .
Holloway, Nigel, "The Best-Driven Brand," Forbes.com , July 22, 2002, http://www.forbes.com/global/2002/0722/024.html .
"Performance Driver: Helmut Panke Chief Executive, Bavarian Motor Works, Germany," BusinessWeek , June 7, 2004, p. 40.
Tierney, Christine, Joann Muller, Katharine A. Schmidt, and Heidi Dawley, "BMW: Speeding into a Tight Turn: Will Its Expanding Line Survive this Economic Skid?" BusinessWeek online , October 29, 2001, http://www.adinfo.businessweek.com/magazine/content/01_44/b3755140.htm .
—Kirk H. Beetz
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