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BMW has told an analysts' meeting in London today that it will reduce its workforce "by several thousand employees" as part of a plan to improve profitability in its automotive operations.

The German-owned group also intends to employ more of its people as temporary workers. It says it will start a programme of "partial retirement" and voluntary redundancy for staff this year and will not be restaffing vacancies. Skilled workers and executives would continue to be hired, it said.

The group's chief financial officer Michael Ganal said that BMW intended to improve its costs and performance by around €6 billion by 2012 and that much of this saving would come from increased efficiency and by lowering the cost of materials.

He said: "In concrete terms we expect that in this area we will be able to realise two thirds or €4 billion of the total potential. If we assume that we will reduce the cost of materials by 3 per cent per year this will translate into an annual potential of roughly €750 million. By 2012, this would result in approximately €4 billion."

Measures to reduce staff would contribute a further €500 million in cost savings and BMW says they have been agreed with the group's Works Council.

Ganal also said that BMW was actively looking to work with other automotive groups on shared components and engines to achieve economies of scale and lower costs. "The importance of cooperations in the field of drivetrains is evidenced by the fact thatr engine costs account for about 25 per cent of a vehicle's total production cost," he said. PSA already supplies engines used in BMW vehicles including the Mini.

Ganal said the group did not want to make drastic cuts to its research and development and that "technology and innovation leadership" was one of its goals. But the proportion of revenues devoted to new product development would fall from the 6.1 per cent of recent years to between 5.0 and 5.5 per cent.

BMW has confirmed that it will increase capacity at its Spartanburg plant in the US from 150,000 to 240,000 units by 2012 and to raise Mini production at Cowley in the UK to 260,000. Production in China will also rise from 30,000 to 44,000 cars a year.

Chairman Norbert Reithofer said the new plan would "ensure our business success in the future". He said: "We are laying the foundation for a turnaround in profitability."

BMW wants its automobile division to have a return on capital employed of more than 26 per cent and a return on sales of between eight and 10 per cent.

The group has been reported to be under pressure from controlling shareholder groups to produce profits more in line with those of its larger German rival, Daimler Group, which makes the Mercedes cars.