BMW picks ‘decisive’ Zipse as CEO to catch up with rivals

FRANKFURT (Reuters) – BMW (BMWG.DE) named Oliver Zipse as its new chief executive late on Thursday, praising his “decisive” qualities after the carmaker lost its edge in electric cars and ceded the premium sales crown to Mercedes under his consensus-seeking predecessor.

Zipse, 55, joined BMW as a trainee in 1991 and served as head of brand and product strategies and boss of BMW’s Oxford plant before becoming board member for production.

BMW (BMWG.DE) said he will become chief executive on Aug. 16, picking the manufacturing expert to help the German automaker shift to electric and self-driving cars and tackle new competition from technology giants.

Shares in BMW were up 0.7% in early Frankfurt trade.

“With Oliver Zipse, a decisive strategic and analytical leader will assume the Chair of the Board of Management of BMW AG. He will provide the BMW Group with fresh momentum in shaping the mobility of the future,” said Nobert Reithofer, chairman of BMW’s supervisory board.

Under current CEO Harald Krueger’s leadership BMW was overtaken by Mercedes-Benz (DAIGn.DE) as the best-selling luxury car brand in 2016 and ceded ground to start-up rival Tesla (TSLA.O) in premium electric cars.

BMW had an early lead in premium electric vehicles but throttled back its ambitions after the i3, an expensive city car, failed to sell in large numbers, allowing Tesla to overtake BMW in electric car sales.

BMW Chairman Reithofer initially championed Krueger’s low-key consensus-seeking leadership but pressured him to roll out electric vehicles more aggressively, forcing Krueger to skip the Paris Motor Show in 2016 to reevaluate BMW’s electric strategy.

Krueger’s reluctance to push low-margin electric vehicles led to an exodus of talented electric vehicle experts, including Christian Senger, now Volkswagen’s (VOWG_p.DE) board member responsible for software, and Markus Duesmann, who is seen as a future Audi CEO.

Duesmann and Senger were poached by Volkswagen (VW) CEO Herbert Diess, a former BMW board member responsible for research who was himself passed over for BMW’s top job in 2015 in part because his sometimes impatient leadership style was seen to be too autocratic for BMW, company insiders said.

At VW, Diess has since pushed through a radical 80 billion euro ($90 billion) electric car mass production strategy and a sweeping alliance with Ford (F.N).

BMW’s supervisory board discussed succession at its U.S. plant in Spartanburg, South Carolina, after Krueger said he would not be available for a second term, pre-empting a decision about whether he would have his contract extended.

Krueger, 53, will resign as CEO and will leave the management board by mutual agreement on Aug. 15, BMW said.

OTHER SKILLS

Zipse emerged as favorite because BMW’s efficient production network, which he expanded in Hungary, China and the United States, helping the company deliver industry-leading profit margins despite its relatively small scale.

But experts say auto industry leaders also need other skills for the new era of software-driven electric and autonomous cars.

“A CEO needs to have an idea for how mobility will evolve in the future. This goes far beyond optimizing an existing business,” said Carsten Breitfeld, chief executive of China-based ICONIQ motors, himself a former BMW engineer.

“He needs to be able to build teams, to attract key talent, and to promote a culture which is increasingly oriented along consumer electronics and internet dynamics.”

Being able to cope with shorter product cycles and new technologies, and a willingness to take bold decisions are among the qualities needed, Breitfeld said.

BMW, Audi (NSUG.DE) and Mercedes-Benz have dominated the market for high-performance sedans for decades, but analysts warn a shift toward more sophisticated technology and software is opening the door to new challengers.

“Tesla has a lead of three to four years in areas like software and electronics. The millennials are much more focused on these things. There is a risk that the Germans can’t catch up,” UBS analyst Patrick Hummel said.

Zipse, who prefers suits and ties to open shirts and sneakers, will need to ramp up BMW’s software expertise as new players like Amazon (AMZN.O) and Google (GOOGL.O) muscle into the sector.

“Production expertise is important, but if you want to avoid ending up being a hardware provider for Google or Apple, you need to have the ability to move up the food chain into data and software,” a former BMW board member said, declining to be identified.