BMW re-allocating cars bound for Europe to U.S., Asia

Oct 18, 2012, 8:45am ET

A weak European market has BMW sending cars that would have gone to Europe to the U.S. and Asia.

Europeans are staying away from new car dealerships, so BMW has decided to re-allocate production of "tens of thousands" of new models from Europe to the United States and Asia.

The cars being sent abroad haven't actually been assembled yet, so they'll be built to local market specifications. But, like other complex manufacturing operations, automakers have a certain number of vehicles they intend to build in a given day, week or month. As a result, it is easier and likely more profitable for BMW to change the final delivery destination of new cars than to cancel them entirely, especially given the power of unions in Europe, where BMW builds most of its cars.

The decision underlines the continued difficulties manufacturers are facing in debt-riddled and austerity-marked Europe, where consumer confidence and spending continue to decline. By comparison, North America and Asia remain solid, if not as robust as in years past.

"The slowdown in China is part of what's happening in Europe," BMW sales chief Ian Robertson told Bloomberg.

Globally, September was the automaker's best such month with more than 146,000 new cars delivered. The automaker continues to see strength in its home market of Germany, but sales have slid elsewhere in Europe - primarily in the smaller but still substantial markets of France, Italy and Spain.

In the United States, BMW is likely to concede the luxury market sales title to Mercedes-Benz this year. Sales are up a modest 5 percent this year but they were essentially flat last month. In addition, the automaker has been accused of offering hefty spiffs to its dealers to help boost sales numbers by taking delivery of new products themselves. In addition, the automaker is wooing current BMW drivers with special payment-skipping deals.