Falling sales will cost BMW board members 40 per cent of their bonuses, with the rest of the group's 100,000 staff also facing pay cuts, it was revealed yesterday. The German car giant's annual results showed it sold 58,000 fewer vehicles in 2008 and its net profit of €330m (£310m) was nearly 90 per cent lower than in 2007.

Some 7,500 jobs have already been shed by BMW worldwide, including 850 at its Mini plant in Cowley, Oxfordshire, and another 4,000 staff have taken voluntary redundancy.

In addition, falling sales will now take a chunk out of staff salaries at all levels. BMW's board members, who receive more than 70 per cent of their pay as an annual performance-related bonus, will see a 40 per cent cut in the lump sum paid this spring. Senior executives will lose 30 per cent compared with last year, while the rest of company's workforce are facing a 10 per cent drop in their salaries.

Norbert Reithofer, the chief executive, will be paid his €600,000 basic salary as usual, but his overall package will drop by €1.65m to €2.3m.

Dr Reithofer said yesterday: "A profit-sharing programme for our board members, executives and all employees is an important element of our compensation system. We apply this system in good times as well as in challenging times. I am convinced that our employees understand the difficulty of the current situation and are willing to accept this hardship."

The reduction in the workforce is expected to save BMW €500m a year. Shareholders will also feel the pinch, with the company's dividend cut from €1.06 to €0.30. Although the economic crisis, which has caused a collapse in car sales across the world, makes reliable predictions tricky, BMW is now expecting the overall new vehicle market to contract by between 10 and 20 per cent this year, with recovery starting only in 2010. It expects next year's launch of new, high-margin BMW models to improve its figures.

Dr Reithofer added: "2009 will be a transition year. This is why we have set clear priorities: liquidity, free cash-flow and working capital, fixed costs, investments. In other words, we are tightening our belts – just like any good businessman."

BMW's profitability targets for 2012 – a 26 per cent return on capital and an 8 to 10 per cent earnings margin – remain in place, but its sales are likely to fall short of the 1.8 million goal.

Dr Reithofer was keen to stress BMW's determination to remain independent, putting paid to rumours of a potential tie-up with Daimler or PSA Peugeot Citroλn. BMW's solvency for 2009 is assured. It needs only about €11bn – of which a third has already been raised from bond issues.

It expects next year's launch of new, high-margin BMW models to improve its figures.

Porsche SE, the maker of the 911 sports car, turned to new lenders to refinance 10 billion euros ($13.5 billion) of loans to buy Volkswagen AG stock, a sign the economic slump is curbing banks’ ability to extend credit.

Former lenders Merrill Lynch & Co. and ABN Amro Bank NV dropped out of the new transaction, the Stuttgart, Germany-based company said in a statement today. Porsche may add 2.5 billion euros to the facility in coming weeks, after banks needed “extra time” to consider the deal.

Porsche obtained the facility as new loans to European companies slumped to $42.7 billion this year, an 84 percent drop from the same period in 2008, according to data compiled by Bloomberg. Lenders are hoarding cash after racking up $1.2 trillion of losses and writedowns since the credit crisis started in 2007.

“Porsche’s struggle to refinance its credit line is tangible evidence that in the loan market banks are not as willing to take further exposure,” said Andrea Cicione, a London-based credit strategist at BNP Paribas SA. “Particularly to companies in the most distressed sectors such as autos.”

Although most of the news of late tends to focus on GM and Chrysler, these Detroit-based carmakers are not the only companies trying to gain vital government support in order to stay propped up in the current economic climate. While there's no doubt the global financial crisis has affected the U.S. more than it has Europe, Britain’s Jaguar and Land Rover are also seeking government loans to help them remain viable.

However, unlike their U.S. counterparts, the talks between Jaguar and Land Rover and the British government are winding down, with no bailout deal in sight yet. Although the loans are fairly small compared to those dished out to Detroit, at the end of the day Jaguar and Land Rover was still hoping to win a hefty $265 million.

While the British government was willing to part with the money to help Jaguar and Land Rover maintain their British operations, the companies’ Indian owner Tata stated that the government's demands were too onerous to consider taking the loan, reports the Associated Press.

Reportedly, these demands included giving the British government first choice in who would be the company's chairman, as well as other rights that may interfere with how Tata wishes to run the company. In justifying their demands, the British government stated that it was willing to help Jaguar and Land Rover, but that certain terms had to be adhered to in order to protect taxpayers' money.

It’s now expected that Tata will turn down this deal and possibly seek financial support elsewhere.

Incidentally, Jaguar and Land Rover have already received assistance from the British government. The companies have already received significant help with its hybrid and electric technology research from Britain's Technology Strategy Board. No solid projects have emerged from that funding, though the companies are working on both diesel-hybrid technology that is thought to be aimed primarily at Land Rover’s lineup, and a luxury sedan implementation for Jaguar.

BMW may be topping the luxury sales charts here in the U.S. but over in Germany things aren’t so peachy and the automaker is resorting to some drastic actions to help boost its sales. At a number of its German factory parking lots, the automaker has attached more than 7,000 cards requesting employees who don’t already own a BMW to consider buying one.

As odd as it sounds, the information was confirmed to Bloomberg by BMW spokesman Alexander Bilgeri. The effort is the first of its kind in a three-decade marketing program to employees and is designed to raise awareness among the factory workers that they too are an important part of the company. Bilgeri was quick to point out that no one would be losing their job because they didn’t drive a BMW.

“What’s wrong here? You like working with us. You appreciate your job and income. But you drive a vehicle from a competitor,” read the cards signed by Ian Robertson, the company’s sales chief, Harald Krueger, BMW’s head of personnel, and Manfred Schoch, its top union representative.

Government incentives and vehicle scrapping schemes in Germany haven’t helped luxury automakers like BMW and Mercedes Benz as they have pushed towards cheaper models made by other brands. Sales for the BMW Group, which includes BMW, Mini and Rolls-Royce, are down 21% for the first five months of the year, totalling roughly 488,000 vehicles.

Brilliance China Automotive Holdings Ltd., the Chinese partner of Bayerische Motoren Werke AG, fell the most in almost a month after Xinhua news agency said that the central government had no immediate plans to buy BMW vehicles.

The automaker dropped as much as 8 percent in Hong Kong trading, the most since May 22. It was down 5.4 percent at HK$1.06 as of 11:23 a.m. The company jumped 44 percent in the previous five days after China National Radio said that the government was set to begin buying locally made BMW cars.

BMW and Daimler AG’s Mercedes-Benz vehicles have been added to an officially approved list of models that can be bought by government agencies, state-run Xinhua said, citing the Procurement Center of the Central People’s Government. Still, that doesn’t necessarily mean purchases will be made, it added.

The government plans to cut official expenses on vehicles by 15 percent this year from the average for the past three years, the procurement agency said in a June 15 statement. The central government will only buy new cars to replace heavy- polluting vehicles, it added.

Porsche Automobil Holding SE, the company that owns Porsche AG and has sought a controlling interest in Volkswagen AG, will not be on the list of government loans in Germany this year according to the latest reports. Porsche is already actively seeking help from outside sources, however.

Porsche had sought a $2.45 billion loan from Germany's state bank KFW, but the bank rejected the loan on Tuesday, reports Reuters.

Earlier this week Porsche rejected an offer from Volkswagen in favor of a deal still under discussion with Qatar's state-owned Qatar Investment Authority. The end goal, whatever the source of funds, is to find a way to service the roughly $12.5 billion debt the company holds.

The takeover attempt on VW was made to get access to cash, but when Porsche's share stalled out at just over 50%, that access was still out of reach, so alternate routes were explored.

Porsche's dramatic saga with Volkswagen has been well-documented - too well, really - and so while this latest development lacks the excitement of an espionage scandal, it's potentially more important in the long term. Since Porsche now knows it has no safety net, the fight for integration with VW is one of survival as much as expansion.

With the deal between Koenigsegg Group and General Motors over the sale of Saab coming to an end this week, the struggling Swedish automaker is essentially back on the selling floor but already there are a number of parties showing interest.

Earlier this week reports coming out of Sweden claimed China’s Beijing Automotive (BAIC) and Wyoming-based merchant bank Merbanco were both interested in acquiring Saab. Now, Dutch sports car manufacturer Spyker has confirmed that it is in talks with GM about buying Saab.

The information was revealed by a spokesman for Spyker, but no other details were divulged.

Interestingly, Spyker is not unlike one of the former buyers for Saab, Koenigsegg, which also manufactures a low number of expensive sports car models. Koenigsegg was reportedly planning to use Saab’s production facilities for its own upcoming Quant electric supercar, and such a strategy could be what’s motivating Spyker.

However, Spyker hasn’t turned a profit since the brand was rejuvenated back in 2000 and it still relies on financing to support itself, so the chances of a Saab acquisition in this economic climate appears to be quite slim.

General Motors announced Friday that it would wind down Saab operations after talks to sell the company collapsed.

In a statement, G.M. said that after the withdrawal of Koenigsegg Group last month, G.M. had been in discussions with Spyker Cars about its interest in acquiring Saab.

But during the talks certain issues arose that both parties believe could not be resolved, leading to a decision to end the discussions. G.M. said. As a result, G.M. will start an orderly wind-down of Saab operations.

After numerous reports out of both Gothenburg, Sweden, and Dearborn, Michigan, Ford Motor Company confirmed that it has reached conclusive sale terms for its Volvo luxury car unit with Zhejiang Geely Holding Group Company Limited.

Ford and Geely say they hope for a “definitive sale agreement” to be signed in the first quarter of 2010. The automakers say that all internal hurdles have been tackled and that the deal awaits only final documentation, financing details and government approvals. Analysts say that few challenges remain.

Ford says that it will continue to work with Volvo on certain levels even after the sale, although the automaker did not elaborate on its plans. Ford will not continue to hold any share in Volvo after the sale.

Volvo is the last remaining brand in Ford’s ill-fated Premier Automotive Group portfolio, which once included Jaguar, Aston Martin and Land Rover. The automaker says it is now concentrating on just its three core brands, Ford, Lincoln and Mercury, although the future of the latter is also in doubt.

The sale of Volvo marks a turning point for Ford, Sweden and China. It officially concludes Ford’s expansion efforts under former leader Jacques Nasser, it sends Sweden’s already crumbling auto industry into further disarray and it means that substantial first rate safety, engineering and assembly technology will now be directly available to a Chinese automaker for the first time.

GM still listening to offers for Saab

General Motors Co. is pressing ahead with plans to close Saab, though it will continue to hear bids for the Swedish car brand, representatives said.

GM had previously said it was giving interested buyers until today to make offers for Saab. Then the company decided this month that it would wind down the brand. GM declined to comment on reports it had extended the deadline for offers to Jan. 7.

Saab spokeswoman Gunilla Gustavs said Dec. 31 is "no longer a magical date" for a determination of Saab's fate and GM spokesman Tom Wilkinson said the company would evaluate new proposals for Saab, even as the shut-down began.

After months of intense negotiations with various parties, General Motors has finally reached a binding agreement to sell Saab to Dutch supercar manufacturer Spyker. The deal, which would save nearly 10,000 direct and related jobs in Sweden and abroad, awaits only regulatory issues in Europe and the United States, as well as confirmation of a loan from the European Investment Bank.

Early reports suggest that the deal is worth $74 million in cash and $326 million in preferred stocks from the new Saab Spyker Automobiles that Spyker intends to form. GM says it expects to complete the sale in mid-February.

“Today’s announcement is great news for Saab employees, dealers and suppliers, great news for millions of Saab customers and fans worldwide, and great news for GM,” said John Smith, GM vice president for corporate planning and alliances, said in a statement. “General Motors, Spyker Cars, and the Swedish government worked very hard and creatively for a deal that would secure a sustainable future for this unique and iconic brand, and we’re all happy for the positive outcome.”

In an ever-consolidating auto industry, Spyker’s decision to purchase Saab is considered a major gamble by many.

“Marginal players will continue to be marginalized,” Fiat CEO Sergio Marchionne told reporters at a separate event in Stockholm.

Marchionne has long been a proponent of creating fewer brands controlled by a handful of dominant players, a business plan he has continued to execute with moves like Fiat’s acquisition of Chrysler last year.

Spyker itself was a late entrant into the bidding for Saab; the automaker’s CEO’s interest in the brand only became public after Koenigsegg’s failed bid late last year. GM and Spyker were initially unable to reach an agreement, prompting the Detroit automaker to begin winding down Saab’s operations. Yet Spyker CEO Victor Muller was persistent in his efforts and finally reached terms of agreement that worked for GM – and terms that defied doubt cast by new GM CEO Ed Whitacre Jr.

“Throughout the negotiations, GM has always had the hope to find a solution for Saab that would avoid a wind down of the brand,” said Nick Reilly, president, GM Europe, in a release. “We’ve worked with many parties over the past year, including governments and investors, and I’m very pleased that we could come to such a good conclusion, one that preserves jobs in Sweden and elsewhere. GM will continue to support Saab and Spyker on their way forward.”

It’s expected that more news on Spyker’s business plan for Saab will emerge in the coming weeks prior to the sale’s closure in mid-February.