Norbert Reithofer's office atop BMW's 99.5 metre-high, engine-like tower - dubbed the "four cylinders" - offers a bird's-eye view of a peculiar, bowl-shaped building. It houses BMW's lavishly rebuilt company museum, and serves as a reminder of the challenges the BMW boss has faced in trying to transform the company's culture since he took the top job in 2006.

When Mr Reithofer's management team ruled that company employees should pay a €12 entrance fee for the museum when it reopened earlier this year, a minor uproar among staff ensued. After vociferous protest by the company's works council, Mr Reithofer reversed the decision.

The 52-year-old manager of the world's biggest luxury carmaker has bigger things on his plate than museum fees. Yet the incident illustrates the kind of challenges he faces as he seeks to modernise the culture of the cosily managed 92-year-old company to keep up with the changing realities of an increasingly grim global market.

"The biggest enemy of BMW is its years of success," Mr Reithofer says. "It is very difficult to change a culture where people were saying, 'We have a pre-tax earnings margin of 7.5 per cent and a profit of €4.2bn - so why do we have to change?'"

BMW's controlling shareholders, the billionaire Quandt family, have entrusted Mr Reithofer with the task of increasing the carmaker's efficiency. He faces two key challenges. While, BMW, is reporting record sales, it is lagging behind its competitors such as Daimler and Audi on profitability. Also, rising petrol prices and increasingly demanding environmental legislation means the carmaker needs to make its fleet more fuel-efficient.

While the carmaker's sales volumes have so far been robust, they are set to fall as the economic downturn means that demand for premium cars is declining. These problems will be particularly compounded in the US where BMW has has had to take charges on its earnings. This is a result of losses on leased vehicles, where the resale value of larger cars is collapsing. To keep the company on track, Mr Reithofer needs to accelerate changes in Munich. So keenly does he feel this, that the phrase "a sense of urgency" has become his personal motto.

For a man with such a giant task, Mr Reithofer is remarkably calm, laughing and making off-record quips about some of BMW's competitors. Such confident and relaxed exchanges with the media are a marked change from his previous stance which was much more subdued. The difference reflects the fact that he has relaxed into his role after a trying first two years at the helm.

At the end of 2007, after a year of record earnings, he had the tough task of announcing a big cost-cutting programme to staff in Munich. The plan, which set out €6bn in gross savings by 2012 and the loss of 8,100 jobs, brought him into the public firing line in Germany and was only grudgingly accepted by BMW's powerful works council.

But the plan was not deemed radical enough by some investors, and the company's share price initially slumped after it was announced. Some analysts declared themselves unimpressed with Mr Reithofer's maiden appearance on an investor road show in February. "I think he's doing a good job internally, but like any other CEO he can't walk on water," says Arndt Ellinghorst, head of European automotive research with Credit Suisse.

Mr Reithofer is no novice, nor - contrary to popular perceptions - were the job cuts the first at BMW. When BMW's boss headed the company's flagship Munich plant in the early 1990s, he had to trim the workforce from 16,000 to 10,000 in just three years. "Just like today, we were hit by a weak dollar, a slump in the US market, and an industry crisis," he recalls.

An engineer who is known for being a hands-on decision-maker rather than a showman, Mr Reithofer had to fight against some misconceptions. He says that, even though his strategy was about much more than just a mere cost-cutting programme, this was the only thing employees talked about.

"That irritated me extremely," he says.

Another big strategic shift on his watch was the acceleration of BMW's comprehensive fuel-efficiency programme, called EfficientDynamics. This too marked a sea-change in a company whose engineers were used to building the powerful, gas-guzzling cars its customers demanded. "There was a strong bloc in our company that asked 'Why do we need efficient dynamics? Dynamics is more than enough,'" he now recalls. "That was a change in mindset we had to bring about."

Mr Reithofer also filled gaps in BMW's vehicle portfolio that would have left the company void of growth in years to come, and stepped up co-operation plans with other carmakers.

In some ways Mr Reithofer's challenges resemble the uphill task of another manager whose office is just a few miles away in Munich: Peter Löscher, Siemens' new chief executive. Both men are shaking up companies with strong products and great engineers but had become complacent on costs, profitability and marketing.

Yet while Mr Löscher is a newcomer to his industry, Mr Reithofer is a company man to the core, who spent his entire career in business at BMW. In BMW tradition, the luxury carmaker chose its chief executive from within - Mr Reithofer has spent his entire career at the company having worked as an engineer and a production manager.

As Mr Reithofer seeks to steer BMW through a period of turbulence, he can count on the backing of the Quandt family. Unlike Dieter Zetsche, chief executive of BMW's archrival Daimler, who must worry about activist investors and potential takeover challenges, Mr Reithofer can rely on the patience of a long-term shareholder. "Thanks to that, we can allow ourselves more long-term thinking," he says. But we are always committed to all our shareholders," he adds.

To tackle the slowdown in the US markets BMW has cut production there and may also do so in Europe. Working in the company's favour is the much admired, flexible and efficient production system created by Mr Reithofer in the years before he became chief executive. "In the light of what has happened in recent weeks one can see better that many steps we had taken were necessary," he says.

The market turmoil might actually help Mr Reithofer put the company on a more competitive footing, by making the workforce more understanding of the changes he needs to implement. He was heartened by employee reaction to a speech he made at the company's plant at the end of last year. Then he explained job cuts in the context of external pressures:a weak dollar, higher raw material costs and the looming mortgage crisis. This time, rather than lashing out at him, the employees applauded. "The strength of BMW's culture is that the employees close ranks in times of crisis," Mr Reithofer says.