Sunday , July 21 2019

BMW warns of profit slump in 2019, sets $14bn savings plan


BMW AG warned earnings will fall “well below” last year’s level, and embarked on a 12 billion-euro ($14 billion) efficiency drive to offset impact of trade conflicts and unprecedented spending on electric cars.
The shares fell the most since September after the German luxury carmaker said on Wednesday that pretax profit is expected to decline by more than 10 percent this year. BMW is responding by stepping up a savings program with plans to cull models, reduce development times by as much as one third and hold the workforce steady this year.
BMW’s weak outlook is a “troublesome” sign for the sector after the carmaker looked better-placed than competitors with a number of strong new models and the luxury-car market in China holding up, Bernstein analyst Max Warburton wrote in a note. “This warning will inevitably increase worries about weaker names in the sector.”
BMW already flagged a challenging year ahead last week, saying great efforts will be necessary to push through the costly shift to electric and self-driving cars as markets fall and trade concerns mount. The automotive profit margin will be in the range of 6 percent to 8 percent this year, below an 8 percent to 10 percent long-term target.
Chief Financial Officer Nicolas Peter added that guidance could fall even lower if conditions worsen.
“Our industry is witnessing rapid transformation,” Peter said. “A sustained high level of profitability is crucial if we are to continue driving change.”
BMW is particularly hard-hit by trade concerns, with earnings suffering from extra tariffs on vehicles made in Spartanburg, South Carolina, and shipped to China.

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