BMW's Prognostication for '09 & On...

[motordavid]

From Thursday's WSJ:

MUNICH -- BMW AG Wednesday stuck to its profitability targets for 2012, but said it couldn't make a reliable forecast for this year as it expects global auto markets to remain distressed.
Norbert Reithofer




"2009 will be a transitional year for which we cannot make any reliable forecast," BMW Chief Executive Norbert Reithofer said in a statement, adding that he wanted to "preserve the independence" of the company.
BMW doesn't expect to match the 2008 sales level this year. Mr. Reithofer said global auto markets are likely to shrink by between 10% and 20% this year, with the economy starting to pick up next year.

By 2012, BMW, the world's biggest luxury-car maker by sales, targets a return on capital employed of 26% and return on sales in its auto segment between 8% and 10% based on earnings before interest and taxes, or Ebit.

Until now, BMW had aimed to sell 1.8 million cars in 2012. Mr. Reithofer said the company doesn't expect to reach that target, noting that sales in 2012 are expected to come in "at least 100,000 units" below the initial forecast.

"At that point we will also gain additional momentum from our renewed product range. The ramp-up of our highest-volume models between 2010 and 2012 will enforce this trend," he said.

BMW said it couldn't make a reliable forecast for this year, but it doesn't expect to match 2008 sales.




Last week, the Munich-based company posted a fourth-quarter loss before interest and taxes of €718 million ($934.4 million), compared with a year-earlier profit of €1.31 billion. The fourth-quarter earnings were weighed down by charges of €1.13 billion, made up of €931 million related to risk provisions and €197 million tied to job reductions.

Along with almost all other auto makers, BMW is suffering from a steep decline in demand for cars amid the economic downturn, which accelerated toward the end of last year. BMW was particularly hard hit by the sharp downturn in the U.S., its largest single market.

The company has initiated a far-reaching program, dubbed Number One, aimed at streamlining costs and restoring profitability. BMW confirmed that it plans to exceed the initial target of €4 billion of material-cost reductions by 2012 as part of a wider cost-cutting target of €6 billion. Lower expenses in materials, production and development are expected to account for two-thirds of the planned overall cost reduction. Cutbacks on personnel costs are expected to yield savings of as much as €500 million each year from 2009.

BMW issued two profit warnings last year and it announced plans to slash production to adjust to shrinking demand and avoid inventory buildup.
Chief Financial Officer Friedrich Eichiner said BMW cut production by 96,000 cars in the fourth quarter. In the U.S., "the average residual value loss per vehicle declined slightly" in the first two months of the year, he said.

"The situation on this market should stabilize and eventually improve over the medium-term," Mr. Eichiner said. He noted, however, that "we cannot completely rule out further residual value risks in 2009."

BMW's global sales in 2008 were down 4.3% from 2007 at 1.44 million cars, though its core BMW brand remained the world's best-selling premium brand even as sales fell 5.8% to 1.2 million vehicles.