BMW cuts profit outlook for second time this year over restructuring that includes 8,000 job cuts
German carmaker BMW has issued its second profit warning within a year, citing fourth-quarter restructuring costs that include 8,000 job cuts in Germany. The company is under pressure from Chinese competition.
German automaker BMW announced on Wednesday, 4 November, that it is lowering its profit forecast for the second time this year. The company blamed the costs of a restructuring programme that includes 8,000 job cuts in its home market, Germany, and pointed to continuing competition from Chinese manufacturers. The move matters for the wider German car sector, where other major producers have also been reporting pressure.
Forecast sharply lowered
BMW now expects its automotive profit margin this year to land between -0.5% and 0.5%, which signals a possible loss. At the start of the year, the group still thought a margin of 4–6% was achievable. Third-quarter pre-tax earnings fell 11% to €2.1bn, while revenue dropped 6% to €30.4bn, hurt by weaker sales in China.
In China, BMW's sales fell 22% in the first nine months of the year. The company said this matched the broader downturn in that market. Western carmakers have struggled to keep up with cheaper local rivals there, leading to lower sales in China and a rise in exports to Europe.
Where the costs come from
BMW said the rapid rollout of its new generation of electric vehicles means it is writing off parts of earlier vehicle and technology generations, and it is also accounting for the cost of the redundancy programme. It plans to cut management functions more quickly. The operating margin in its core automotive business narrowed to 3.4% from 5.2% a year earlier, though that beat analysts' forecast of 3.1%. Excluding restructuring charges, the margin would have been above 2%.
Chief executive Milan Nedeljković said current developments in the industry demand decisiveness and swift implementation, so the company will intensify and accelerate structural measures. He added that China remains a key focus, with the Neue Klasse renewal of the model range starting there this month with the launch of the iX3.
Mercedes-Benz cut its profit outlook last week, and Volkswagen has also faced painful restructuring costs. Porsche rebounded slightly in the third quarter, but only after steep charges last year.
