BMW Second-Quarter Net Falls 76% on Luxury Vehicle Sales Slump

BMW Second-Quarter Net Falls 76% on Luxury Vehicle Sales Slump


Aug. 4 (Bloomberg) -- Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, reported a 76 percent decline in second-quarter profit as the recession sapped demand for higher-priced sedans and sport-utility vehicles.

Net income fell to 121 million euros ($174 million) from 507 million euros a year earlier, Munich-based BMW said today in a statement. Seven analysts surveyed by Bloomberg had projected a median loss of 112 million euros. Sales dropped 11 percent to 12.97 billion euros, compared with a 12.7 billion-euro estimate.

Germany’s government-rebate program to encourage trade-ins of cars older than nine years hasn’t helped BMW as buyers using the incentive choose cheaper models made by competitors. Sales at BMW, which also makes Mini and Rolls-Royce models, fell 13 percent in June while Daimler AG’s Mercedes-Benz Cars posted 5 percent fewer deliveries and sales rose at Volkswagen AG, Europe’s biggest automaker.

“BMW remains caught up in a difficult environment,” Frank Biller, a Stuttgart-based analyst at Landesbank Baden- Wuerttemberg, said an in interview before the figures were released. “Sales are negative and higher refinancing costs as well as credit defaults are also causing problems.”

Chief Executive Officer Norbert Reithofer said May 14 that 2009 will be a “challenging” year and that it’s “much too early” to predict an end to the industry slump. BMW’s sales in Europe fell 11 percent in June to 75,466 vehicles, even as the market expanded for the first time in 14 months because of state incentives, the European Automobile Manufacturers’ Association said on July 15.

2012 Target

The German company set a target for its carmaking operations two years ago of achieving earnings before interest and taxes of 8 percent to 10 percent of revenue by 2012. Reithofer reiterated the goal in May.

Earnings this year are under threat from “strong price pressure” as competitors offer discounts to clear unsold vehicles, Chief Financial Officer Friedrich Eichiner said May 6. The pressure is likely to ease later in 2009 as production cuts reduce inventories, he said at the time.

Sales at Mercedes-Benz, which also makes the two-seat Smart car, declined to 100,300 vehicles in June, the smallest decrease at the Stuttgart, Germany-based manufacturer since September. Volkswagen group deliveries rose 6.5 percent to 609,800 cars and SUVs, including a 1.3 percent gain at its Audi luxury unit.

In the U.S., BMW’s sales in July fell 27 percent to 21,253 vehicles. Seven-month deliveries also fell 27 percent to 135,701 units.

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