BMW Profits Decline 33 Percent; Warns 2009 Will Be Tough, Too
August 01, 2008
BMW reported Friday that its second-quarter profits dropped 33 percent. The automaker warned its profits for full-year 2008 won't be what it had planned and that 2009 will be another challenging year.
BMW said its financial picture is being hit by soaring raw material costs and ballooning reserves required to cover vehicles coming in off lease at lower-than-anticipated resale values.
"We assume that 2009 will be another difficult year full of challenges," Chief Executive Norbert Reithofer said Friday.
BMW follows Daimler's lead, which last week issued a similar warning. It now forecasts a pre-tax profit of at least 4 percent of sales; its previous forecast was for 6.9 percent of sales. BMW's shares dropped nearly 11 percent in early trading Friday on the news.
In response, BMW announced it will not build the X7, which had been positioned as the brand's largest SUV. It will also scale back its U.S. sales efforts, shifting as much as 40,000 vehicles to more lucrative markets abroad.
Slumping used car prices forced BMW to more than double the amount of money it puts in reserve to cover vehicles coming in off lease.
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