SA lessons from BMW: Skills development. Need local engineers not German.

The CEO of BMW SA, Tim Abbott says the JD Power Platinum Quality Plant Award won by the Rosslyn plant is the first for any manufacturer in South Africa and the highest for any BMW plant in the world. The vehicles produced at Rosslyn are exported to the United States and South Korea. He says BMW is enjoying excellent relations with the South African government and workforce, and intends to stay in South Africa for decades to come. Abbott says his company is ahead of the game most of the time with its innovative approach and investment in its people. The CEO of BMW SA says they’re going to build market share in East and West Africa and will announce a new programme next week to support their intentions.

Tim Abbott is the CEO of BMW SA. Thanks again Tim, for joining me and having a chat with us. We appreciate it.

It’s great to be here Tim, and great to be here in South Africa. I’ve been here a year. I came from the U.K., relocated down here with my family and it’s a journey already. The year I’ve been here, I’ve learned so much about the country but we love every moment of it.

I invited you to talk to us because your plant out in Rosslyn, Pretoria has done very well – winning the JD Quality Plant of the Year Award. This is an international award right, and something to celebrate. You must be very proud of that. Tell me, what is the award all about and what do you attribute the success of your plant to?

Well, this is the first time the JD Power Platinum Award has ever been won by BMW in any plant around the world. What it mean is Plant Rosslyn for BMW produces and builds the best cars in the world across any brand (so it’s any make of car). This is a survey that’s done with many thousands of consumers who give feedback about the quality of their vehicle and Plant Rosslyn came out on top. We won the Gold Award back in 2002. We have just won the Platinum Award – first time for BMW. What we put it down to is all that people. It’s about the people at Rosslyn who give their commitment to the brand. We call it ‘a passion for perfection’. That’s our mantra. Every day, we look at cars. When I’m at the plant, we pull cars off the production line. We look at the quality. We analyse and the end result now is we’re building the best 3-Series in the world.

The customers who get our cars (and we export to America, Korea, Australia, New Zealand, and India) are getting the best built BMW’s. It’s a great accolade for us. It’s a great accolade for South Africa and it says that we can do it.

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What does this mean in terms of the market share within the BMW Group? Does it mean that you’re going to be allocated more cars to build in South Africa and that new markets might open up for you?

When I first came here, there was always the perception that South African cars weren’t terribly well built. We did a lot of homework to analyse markets like Japan and that truly wasn’t the case in point at all. What this means is that it gives confidence back to the shareholders and the senior directors of BMW in Munich so when they’re looking at the allocation of product, they will look at South Africa. Our competitors at Rosslyn are the other plants of BMW around the world, whether that’s in Munich, Germany, or the U.S. so we have to compete for our share of voice. What does it mean? It means we’ve gone from a two-shift to a three-shift pattern. It means we’re building record numbers of vehicles (of 3-Series) here. Of course, we’re supplying world demand (that’s what it’s all about), but it gives confidence in South Africa.

With the backdrop before I arrived, we had a lot of strike action. Since I’ve been here, we haven’t had one day of strike so it shows the workforce is committed. We’re working closely together. We’re working with the unions because the last thing we want is for people not to be working. We’re in good shape at the moment. We’re getting the confidence of our shareholders. They know we can build the best cars in the world and that can only mean a bright future for Rosslyn.

BMW SA overall: people have regarded it as one of the most progressive companies in South Africa. Across the board, not only in the motor manufacturing sector. What is it about BMW that cause it to be seen as that type of company?

BMW is about innovation. If you look at the I-3 and our electric cars, which we just brought to South Africa; only BMW could have done that. This was at the height of the recession that BMW decided to make an electric car. No other company did it. It’s made of carbon fibre. It’s completely renewable in terms of the process that it’s made with. What does it mean for South Africa? It allows us the framework to be innovative as well. If you look today, our project this year, called the Bio2Watt, 30 percent of our energy use at the plant is made through renewables. That’s waste coming out of Tshwane. It is basically 25,000 cattle outside of Pretoria. We use their manure and we recycle it. It goes through generators that produce power so we are 30 percent off the grid, which is fantastic.

My aim while I’m here in the job, is to try to get to 100 percent renewables and we’ll work closely with the city to make that happen. Again, only BMW would have made that bold step. We’ve gone in partnership with a local firm. He’s building up the workforce. He has about 40 people working for him now. It just means that BMW does things differently. We don’t have to rely on Eskom for our power, which is probably quite good news with the loadshedding we’ve had recently. Again, it shows innovation and it shows what we can do here.

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For the type of country and economy that we are, we are always looking for lessons to be learned in the broader sense of the world. What is it, from BMW’s point of view that South Africa can learn from BMW?

What BMW around the world look at, is skills development. That’s what makes us stand out as an engineering company and an innovative company. What BMW would look to for South Africa, is skills development. Everything we do in terms of our programs: local schools Rosslyn – we’re putting a lot of infrastructure in there. We’re giving them laptops. We’re spending our own time with the children to develop those kids to be the next generation of BMW engineers, working the IT hub, or working in the sales organisation. We have to do more of it though and I think tone of the issues with South Africa that I’ve seen over the last 12 months, is a skills shortage. BMW have to play their part, though. We’re beginning to do that and we’ll do more of it over the coming years. Something BWW is very keen on is developing local talent.

We don’t want to be bringing engineers in from Germany. We want Africans to be coming through, to be the next generation of BMW SA.

For a multinational company such as BMW, what do you look for when you make an investment in the country? In this instance, you are in South Africa. What are the elements about the South African system that attracted you to come to South Africa, stay in South Africa and going forward, that you expect us to retain/improve on?

Well, the BMW plant here at Rosslyn is the oldest plant outside of Germany. Forty-two years ago, we came here – way before Apartheid. Why did we come to South Africa?  Well, there’s a very stable workforce – no question about that – and a very loyal workforce. That really helps. Also, Government has given us a framework to work within, and it’s called the APDP program that helps support us in terms of the production we do here. The great news is that last week, the Minister of the DTI (Minister Davis) confirmed the continuity of that program through to 2020, which means it’s supporting the auto industry and that means jobs. If you look at Rosslyn then today, we have 3500 people in the BMW family. We have 25,000 people in the BMW network.

We have 42,000 people in the supply chain so those are all people and families who are relying on BMW but that could only happen with a framework where Government recognises that the auto industry is important. If you look at lessons learned…look at Australia. They had a similar program. They’ve pulled out of that program. By next year, every manufacturer will have pulled out of Australia so it’s a non-automotive country. South Africa mustn’t follow that route because there are far too many people relying on this industry. It’s one of the biggest exporters into Europe. It’s part of the AGOA program [as you know] to the States, Fifty percent of the cars we sell are exported to the States because we’re in a great framework. We have a great workforce, great commitment, a supportive Government, a framework around that, and so we intend to be here for another 42 years I assure you, or even longer.

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South Africa: very much part of Africa. Africa: the growth market for the world. Everybody wants to be on the continent now. Any plans to take some of the product that’s being manufactured here into the continent, or are you thinking of establishing production facilities elsewhere on the continent?

Look, we’re just beginning to look at Africa as a whole and the first step would be Sub-Sahara. If you look at that and you look at Nigeria as an example – a complicated country -, it’s trying to compete with South Africa with its own manufacturing program. Many countries are beginning to look from a componentry perspective. Can we build cars in Nigeria? There are 140-million people in Lagos so the opportunity is huge but obviously, complex – the legal framework and taxation – so you have to step very carefully. Our journey starts in 2016. We will take on the Sub-Sahara region, which will come on to South Africa. We’ll look at countries like Kenya, Nigeria, and the Ivory Coast as our first stepping stones but you have to take each step at a time. Why are we going now?

It’s mainly because there’s a framework now around the financial houses so many of the banks such as Nedbank, Wesbank, Standard Bank, and Absa are all now getting operations in these countries. To be honest, you can’t buy cars without finance. Eighty percent of people finance vehicles. Unless you have that framework in place, you’ll not be able to get a foothold. They are now establishing themselves. BMW will look to have a joint venture – probably Nigeria next year as well – and that allows us to sell product into those markets.

Does that mean that the product that you’re going to be selling into the Sub-Saharan market will be manufactured here, or are you going to go and manufacture them?

Well, what I can say is that on Monday the 16th, we’ll have a big announcement about the plant in Rosslyn (about the future). What I have to say here at this point here, is that we always try to match local demand to supply. If you look at the marketplace in South Africa and also Sub-Sahara, the market is changing. It is becoming less relevant to have a ‘sedan-type’ market. It’s more SUV so more of a 4WD, off-road type vehicles. We’re looking at that in terms of what we need to supply to Sub-Sahara but that announcement will be made on Monday.

Okay. I get a hint of what’s likely to happen so you’re not downsizing.

No, we’re not. We’re looking at demand. We’re looking at where we need to build the cars for our customers of the future and we are looking very much now at Africa as a whole, rather than South Africa and Sub-Sahara separately.

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When you look at South Africa at the moment – politically and economically speaking – what is your sense of things? What do you make of South Africa now and are there areas we should be paying attention to?

Look, when I came to South Africa at the beginning of the year, I obviously saw the Opening of Parliament, the Statement at the beginning of the year, and the chaos in Cape Town. I was thinking ‘I’m not sure what I’ve come to here’. I’ve come from a country where democracy grew up over a number of years and there’s a lot of storming and forming that goes on along the way, but the great news is people have a share of voice here and people are allowed to say what they feel, and that’s been done without any violence. What I see is robust discussion. I see a lot of shifting of power going forward. I see the bi-elections next year being very important in terms of what happens.

You mean the municipal elections.

Yes. I think that would probably give us a very good guideline in terms of what will come the year after, and I think that will then give us the stability going forward. What I see is a very good framework. I see good debate. I see there is changing of power. Let’s be honest. The ANC is not as powerful as it was two or three years ago but that isn’t a bad thing. It’s good to have what I call other political parties coming through and having their share of voice. What do we want going forward? Stability. We want to have strategic goals and South Africa needs that. We’re a great country but we need to have a vision and we have to be clever.

In terms of the economy, the growth rate is very low at the moment. Is it concerning to you? When you look at the policies that we are pursuing at the moment and the broader environment that we are operating in, what’s your view?

With GDP at one-point-three percent it’s flat, in effect. At local level, if you look at the auto industry, the auto industry has suffered this year so our local demand has dropped. With that, comes opportunities because obviously, the exchange rates change – the Rand vs the Dollar, the Euro, the Pound… There are opportunities to export so if you look at exportation out of South Africa, it’s very strong at the moment. What I have seen is that I didn’t realise the reliance in South Africa, on raw materials into China. Of course, when China had a hiccup this year, it affected a lot of markets such as Australia and South Africa (to name two) and that then, affects on into business here in South Africa. They’ll get through that. China will work through that in the coming months and South Africa will pick up again. We are optimistic for next year.

Again, it’s about the product you have to offer to the marketplace as well. We’re bringing new cars. The new X-1 comes next year so we have some exciting product to bring to the market. Yes, we’re optimistic. We’re not looking to downsize at all. As I said, the plant will grow. We’re looking for that to be stable for the next 42 years. Rosslyn has been very kind to BMW so overall, we’re in good shape. We know there are going to be hiccups with Eskom or water shortages on the way, but the great thing about Africa is the resilience of the people and the resilience of the companies. They find a way around it. If you had Eskom loadshedding in Germany, people simply wouldn’t leave their houses. They would just say ‘sorry, we’re going on strike’. In South Africa, people get around it. We have ‘loadshedding-wide Wednesdays’. We find a way around it and that’s what I love about the country. We find solutions to problems. We don’t allow them to stop what we’re doing.

Looking forward to the announcement on the 16th. Much appreciated, Tim Abbott. Thanks for making time to be with us.

Thank you very much.

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