BMW abandoned its 2008 earnings forecast and cut production on Tuesday after a 60-percent plunge in quarterly profit that underscored slowing sales in the troubled autos industry. The woes facing the world's biggest premium brand automaker followed the worst month in 25 years for the industry in the United States, BMW's largest market, including big setbacks for US giants General Motors and Ford.
Automakers are doing what they can to cut output and many are gearing up for a price war as they try to reduce excess inventories before year-end. "Difficult business conditions and the volatile climate on the market mean that it is as good as impossible from today's perspective to make a reliable prediction of the earnings outcome for 2008," BMW Chief Executive Norbert Reithofer said.
"We will, however, achieve a result that is clearly positive," he said. BMW had previous forecast a group pretax margin of at least 4 percent this year. BMW fell well short of analysts' expectations for the three months to September 30, with earnings before interest and tax (EBIT) down 60 percent to 387 million euros ($498.4 million) versus an average estimate of 574 million from a Reuters poll of 17 analysts.
Revenues fell 8.6 percent to 12.59 billion euros and BMW said it would chop production by at least 40,000 cars, adding to an earlier cut of 25,000. The cuts represent 5 percent of 2007 output. BMW also took 342 million euros in risk provisions for bad loans and bigger-than-expected declines in the value of vehicles coming off lease in the third quarter and said it could not rule out more this year.
Overall US auto sales in October fell by 32 percent to their lowest ebb since February 1983. That included a 45 percent drop for GM and a 30 percent fall at Ford. BMW's sales fell by 8.5 percent.On a per capita basis, GM said October was the weakest month for US auto sales since the end of World War Two.
Europe also suffered, with industry wide sales in Spain off 40 percent and down 19 percent in Italy.Like BMW, Ford said it was eyeing production cuts, noting it could reduce output in coming weeks by cutting overtime and suspending work at some plants.
An aggressive round of discounting also looms this month and next as automakers prepare to clear 2008 model vehicles using cut-rate financing and other incentives. GM said it would roll out a "Red Tag" sale with lower prices and cash-back offers starting on Tuesday. Toyota Corp, the world's biggest selling automaker, extended a zero-percent financing offer it launched in October and Japanese rival Nissan Motor launched a zero-percent offer of its own.
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