BMW abandoned its 2008 earnings forecast and cut production today after a 60% plunge in quarterly profit that underscored slowing sales in the troubled car industry.
The woes facing the world's biggest premium brand car maker followed the worst month in 25 years for the industry in the US, BMW's largest market, including big setbacks for US giants General Motors and Ford.
Car makers 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's CEO Norbert Reithofer said. 'We will, however, achieve a result that is clearly positive,' he said.
BMW fell well short of analysts' expectations for the three months to September 30, with earnings before interest and tax down 60% to €387m versus an average estimate of €574m.
Revenues fell 8.6% to €12.59 billion 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% of 2007 output.
BMW also took €342m 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.
In the US, overall car sales in October fell by 32% to their lowest ebb since February 1983. That included a 45% drop for GM and a 30% fall at Ford. BMW's sales fell by 8.5%.
On a per capita basis, GM said October was the weakest month for US car sales since the end of World War Two. Europe also suffered, with industry wide sales in Spain off 40% and down 19% 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 carmakers 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 today.
Toyota, the world's biggest selling car maker, extended a 0% financing offer it launched in October and Japanese rival Nissan Motor launched a 0% offer of its own. Honda said Japan's number two car maker would offer lower financing terms, too.
