BMW’s treasurer talks regulation, risk and relationship banks

By:
Duncan Kerr
Published on:

Norbert Mayer has seen much in his three decades at BMW. In an interview with Euromoney, the group treasurer of the German industrial group discusses the impact of regulation, managing risk and balancing banking relationships.

It’s not just German engineering that can last a long time – it’s also the people behind it.

This year marks an anniversary for Norbert Mayer, the senior vice-president of finance and group treasurer of BMW. Mayer celebrates 30 years at the company, three decades in which the Munich-based car, motorbike and engine manufacturer has changed irrevocably.

From a German automotive company in the late 1970s with one brand and most of its production operations in Germany, BMW has grown into an international industrial and financial services company with three premium brands (BMW, Mini and Rolls-Royce), production plants in markets including the US, China, India and Russia, and a large and lucrative customer financing or lending business.

Such a transformation, which accelerated after two group strategy “re-alignments” to increase profits and maintain market leadership in 2000 and 2007, has in turn transformed BMW’s financial profile and performance.

For the full year 2012 – the most successful year in the near 100-year history of the company – BMW Group reported record sales for its three car brands, driving net profits of €5.1 billion (compared with €1.95 billion in 2003) and on the back of record annual revenues of €76.8 billion.

Strikingly, some €42 billion of those revenues came from Asia, the Americas and other markets, with €14.5 billion from China alone – beating Germany for the first time.

Norbert Mayer, group treasurer of BMW
Mayer, a former banker who joined BMW in 1984, has not only seen this transformation but has played an important part in it since the late 1990s.

After being appointed president of BMW US Capital LLC in 1997, overseeing risk management for BMW Group’s Americas operations, Mayer became director of corporate finance, responsible globally for BMW’s capital markets activities across debt and equity financing, structured finance, and for overall risk management of currencies, rates and commodities.

In 2010 he was appointed group treasurer, overseeing corporate finance, asset management and pensions, investor relations and the group’s global treasury centres.

To say that Mayer has a few responsibilities to jonglieren would be an understatement, but with a team under him in Munich – and regional treasury teams in the US, UK and Singapore – there is ample support to help him manage and mitigate risk in all its various forms.

One area in particular in which he needs all the support he can get is in understanding the impact the onslaught of new regulations are having or will have on the financial system, and particularly the banking sector. Such regulatory creep has never been seen before.

“Even today we don’t know precisely how new regulation is impacting the banking sector and particularly in driving new business plans and business models,” he tells Euromoney. “We see what is happening but we do not know what the final outcome will be.

“This is a challenge for the treasurer because this is impacting the shape of the financial system. We will have to wait and see how this develops, and whether this could have an impact on the provision of banking products, on pricing and ultimately on the behaviour of our [banking] partners.”

An equal challenge, according to Mayer, is preparing the company for specific and pressing pieces of European Union regulation that will directly affect it, such as European Market Infrastructure Regulation, which requires new standards in the reporting of derivative transactions, and the Single Euro Payments Area (Sepa).

However, while Mayer says BMW is well prepared and has been for some time, it’s not just BMW that Mayer has to worry about.

“We took this challenge [Sepa] on at a very early stage and through our efforts the company and its systems are fully prepared,” he says. “However, our suppliers may not all be ready and that is of some concern to us. We are looking into the subject and so far we do not have an immediate indication that this might turn out to be a major problem.”

Away from the hefty challenge of regulation, risk management is one of any treasurers’ core responsibilities and, for Mayer, BMW’s global expansion in growth markets has in turn brought about an increase in certain risks for the company.

“While we are not growing so much in the euro currency area, we are pursuing growth opportunities in the US, the Americas and in Asia Pacific,” says Mayer. He adds that, as a result of this, there is increased risk around cross-border financing, market volatility and, last but not least, foreign-exchange or currency risk.

Combined with liquidity, interest rate and commodity price risk, currency risk is one of the main financial challenges any global company will face, and for BMW it was a risk that had cost it dearly. In recent years, however, BMW has reduced the negative effects of currency fluctuations by “natural” and financial market hedging.