BMW warns on profit again as restructuring costs bite
BERLIN: Premium automaker BMW reported an 11% drop in third-quarter pretax earnings yesterday, hours after warning that restructuring costs would hit results later this year and all but erase its core operating margin.
German automaker BMW announced an 11% decrease in third-quarter pretax earnings on Tuesday, just hours after issuing a warning that restructuring costs would significantly impact results and erode its core operating margin. This marked BMW's second profit warning in less than five months. The company cited restructuring expenses, including 8,000 job cuts in its home market, as the primary factor behind the earnings drop.
Despite the negative outlook, BMW's operating margin in its core automotive business for the quarter improved to 3.4%, slightly beating analysts' expectations of 3.1%. However, this represented a decline from the 5.2% margin recorded a year earlier.
BMW anticipates a narrower margin for the year, predicting it will fall between -0.5% and 0.5%. Excluding restructuring charges, the margin is expected to remain above 2%, within the company's previous forecast range. CEO Milan Nedeljkovic emphasized the need for decisive action and swift implementation of restructuring measures. He stated that the company would intensify and accelerate these structural initiatives.
Revenue for BMW fell 6% to €30.4 billion in the third quarter, primarily due to declining sales in China, the world's largest automotive market. BMW struggled to maintain competitiveness against lower-cost domestic rivals in China, where sales dropped by 22% in the first nine months of the year. This downturn in China is consistent with a broader market decline.
CEO Nedeljkovic highlighted China as a key focus for the company, stating that BMW's "Neue Klasse" revival of its model lineup will commence in China this month with the launch of the iX3. As part of CEO Nedeljkovic's strategy to return margins to a long-term target of 8% to 10%, BMW plans to tailor its vehicles more to regional markets.
This includes an expanded luxury SUV offering for the US and a new entry-level model for Europe. In China, the automaker intends to localize development and supply chains while utilizing production for export to Asia-Pacific markets.
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