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As BMW Is Put to the Test, Its Plans Are Years Ahead
In 1987, a recent engineering graduate named Norbert Reithofer wrote a treatise that in retrospect reads like a manifesto for the German economy. The only way manufacturers in a high-cost country with few natural resources could survive, he argued, was by becoming the most flexible and efficient in the world.

Led by Norbert Reithofer, BMW reported another rise in profit this month despite the worst downturn the European car industry has experienced in decades.

Mr. Reithofer, now 56 and chief executive of the automaker BMW, has since put that principle to work with a vengeance, delivering consistent profit through two crises and becoming something of an icon of the revival of German industry.

Though continuing to build roughly 60 percent of its vehicles in high-cost Germany, BMW reported another rise in quarterly profits this month despite the worst downturn the European car industry has had in decades.

As the auto crisis shows signs of spreading to the premium market, though, Mr. Reithofer faces a test of his management skills that will have implications for the whole nation. Cars are Germany’s largest export product. But the losses that companies like Fiat, Ford and General Motors have been piling up in the region raise fundamental doubts about the future of automobile manufacturing in Western Europe.

Moreover, deep changes are under way that threaten to reshuffle the pecking order among carmakers, or even create openings for upstarts.

The price of fuel, already close to the equivalent of $8 a gallon for premium gasoline in Germany, is only likely to rise in coming decades, forcing automakers to think about other means of propulsion. Governments are tightening fuel economy and emissions standards to the point where it will be difficult to manufacture the big luxury cars that have the highest profit margins.

And young people are increasingly apathetic about cars, which must compete with mobile phones and video games for their attention and money. BMW’s third-quarter earnings, along with recent reports by rivals Mercedes-Benz and Audi, show that the high-end carmakers are beginning to feel the effects of the crisis. While BMW managed to eke out a sales increase in Europe during the third quarter, it reported marked declines in troubled countries like Spain, where BMW sales have fallen by half since 2007.

“The next two years will be a real challenge, there is no glossing that over,” Mr. Reithofer said during an interview at BMW’s headquarters in Munich, a high-rise building shaped like four cylinders that, from the upper stories, has a clear view of the Bavarian Alps.

The ebullient Mr. Reithofer, whose default facial expression is a self-assured smile, betrayed no hint of anxiety, though. Instead, he told a story about the three years, from 1997 to 2000, that he spent overseeing BMW’s factory in Spartanburg, S.C.

Soon after arriving, Mr. Reithofer recalled, he presented managers there with a list of problems. They corrected him. “Norbert,” they said, according to Mr. Reithofer, “here in the United States we don’t have problems. We have challenges. And every challenge is an opportunity.”

To continue reading this article, please visit The New York Times.
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