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Automakers Are Pursuing an Electric, Autonomous Future. But First: Massive Cuts

BMW has announced a $13.6 billion savings and efficiency plan that is largely intended to help it invest more in technology.

This is becoming a familiar story in an auto industry that’s going through massive transformation. Going all-electric and embracing automated driving is an expensive business, and coming out on top seems likely to be a matter not just of superior technology, but effectively-executed restructuring too.

In BMW’s case, forced redundancies are not on the menu—early retirement is the name of the game, with 1,500 workers already having taken this route and another 2,500 eligible to do the same.

“Our first highly automated vehicle will become available in 2021 and we are already now paving the way for the development of the next generation of groundbreaking technology. In the field of mobility services, we are joining forces with Daimler AG to create even greater momentum,” said BMW chair Harald Krüger. “We need to work systematically on our operational excellence in order to leverage these strategic advances and ensure our ability to use our own underlying strength to help shape the sector’s transformation going forward.”

A week ago, it was Volkswagen announcing major cuts in order to put more cash into research and development. Again, VW said it hoped to achieve most of the cuts through attrition—not that it has much of a choice, as in Germany it is forbidden from forcing redundancies in the coming several years.

And it’s not just German automakers undergoing this sort of transition. GM’s Trump-enraging plant closures and job cuts are also part of a restructuring that’s designed for adaptation to the electric, autonomous car world. Ford’s big European job cuts are also about going all-electric or hybrid in the region.

That said, new technology could also help achieve some of the manufacturers’ necessary savings. BMW said Wednesday that, by 2024, digital simulations and virtual validation may have eliminated the need for 2,500 costly prototype vehicles.

BMW’s cuts news came alongside a warning about its profitability this year—it expects its group pretax profit this year to be at least 10% down on 2018, when its operating profit was already 7.9% down. Its announcement knocked its stock by around 5%.

The German car group warned that the volatility in the air right now meant it was “difficult to provide a clear forecast,” citing factors such as the trade wars and the risk of a no-deal Brexit.