BMW is not doing so well lately. I know; it’s tough all over. But there’s tough and then there’s a 90 percent profit plunge (to €330M). Aside from disappearing revenue, BMW shares something else with America’s domestic manufacturers: denial. Just-auto [sub] reports that Bimmer’s CEO reckons the sun will come out tomorrow. Well, the end of this year, anyway. And then everything will be alright, exactly as planned, ja?
BMW is sticking to the long-term targets set out in its so-called Number One strategy despite the current challenging economic times, the automaker said as it announced a fall in 2008’s net profit of almost 90% on Wednesday.
“2009 will be a transitional year for which we cannot yet make any reliable forecasts. Nevertheless, our long-term profitability targets for 2012 remain intact. We want to preserve the independence of the BMW group,” chairman Norbert Reithofer told the annual accounts press conference in Munich.
BMW currently assumes auto sales volumes will fall 10 to 20% this year but Reithofer expects the economy to pick up in 2010.
“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 reinforce this trend,” he said.
Ah, yes. High volume. As I pointed out yesterday, a luxury automaker chasing high volumes is a recipe for disaster. Anyway, Bimmer is not alone in facing (or not) this reality. But like they say, at least they’re independent, right? Their fate isn’t tied to anyone else. Oh wait . . .
Finance head Friedrich Eichiner said in his presentation: “We have been regularly holding talks on pooling purchasing volumes with Daimler. Both parties have identified a double-digit number of suitable components. None of these components help differentiate between the brands or are relevant from a customer perspective. Both companies – as well as our suppliers – will benefit from this in the foreseeable future.
that’s still a profit of some 500 million dollars. Or in the vicinity of Chrysler current market value. BMW are still in the black, and that has to count for something?
@Ingvar:
I agree– If they aren’t surviving on the generosity of German taxpayers alone, they’re doing alright, for all intents and purposes. Less profit is better than no profit.
Car and Driver and Edmund’s Inside Line are already hard at work to rectify this situation by writing numerous editorials reminding people that if you don’t have an undying love for everything BMW it means you either hate driving or are a mulleted trailer park hillbilly.
Too bad that BMW’s leading demographic caused the global economic crisis and now can’t afford the exclusive BMW membership dues. This is what BMW deserves for forcing hard-riding, hard-to-find run-flat tires on unknowing, pretentious people (for the purpose of full disclosure, I own an Audi).
Anyone who can stay in the black in this market is well positioned going forward. There will be lots of share to pick up from those who go under and/or pull out.
Seriously, 90% drop or no, they are still making money. Once the sacrileg CUV M’s come to market, though, that will likely change.
The more revealing story is embedded in trends in sales and quarterly profits.
Im too lazy to go look up the more detailed story, but if they lost money in Q408 whereas Q108 was when the annual profit was earned, thats worse than “we still made 300m euros in 2008.”
If they are profitable at todays level, then thats great. I do wish BMW well. Very well.
Full disclosure- I drive and prefer Audi.
I also wonder if the drop in luxury car sales has a lot to do with the resale market. I had friends who bought Bentleys, 911TT, F430, etc and the resale market for those cars is crazy. I had one friend lose over $100K trying to unload his Bentley a year after he bought it.
When the economy is strong and the funds are flowing I think buyers of luxury cars think less of losing resale value but when funds are tight it’s tough to take a $50K – $100K haircut when you try to sell it a few years later.
Not surprising or even worrisome for BMW. All makers of luxury products do poorly in times of economic crisis… And BMW is still making a profit even today.
Chasing higher volumes may not be wise, but we cannot conclude this strategy is a failure from this drop in profits…
I know TTAC posted that picture of a 2000 E39 M5 just to make me crazy.
Damn you BMW. Didn’t we almost have it all?
i have to agree
the e39 bmw, even in plain 528i format is such a wonderful looking car
see how BMW was pre Chris Bangle
even today I find these cars special while the Bangle 5 makes me vomit
back to the topic… do you think the only way out is to have BMW and Mercedes DNA share?
I blame the boring cars they’re now making. If I wanted a boring auto appliance, I’d buy a Camry. BMW is not Toyota and they seem to have forgotten that.
BMW has to return to making beautiful cars that drive well. I might have to buy a 1 Series before they fugly it up.
Andrew
Pretentiousness has nothing to do with it. Since I was a kid, I’d been reading that BMWs are the best thing since sliced bread. I bought one last year…guess what…they’re right. Most fun you can have in a car with your clothes on. I’m glad they’re still making money.
The pretentious crap makes me nuts.
Abort X1, Abort!
As I pointed out yesterday, a luxury automaker chasing high volumes is a recipe for disaster.
Perhaps. But if they don’t chase after those aspirational and near-luxury volume sales, someone else will, whether it’s another luxury automaker or another brand building up.
If BMW didn’t have the high-volume 3-Series (much less the 1-Series), would the any increased cachet and exclusivity for the brand really translate into addition 5 and 7-Series sales? Does the number of people who currently avoid a 5 and 7-Series because the 1 and 3 make BMW not exclusive enough really exceed the number of people who buy a 5 or 7 because they had a great experience with their 1 or 3?
Also remember that most car companies can’t easily reduce their labor, so once they’ve started producing high volume, they have to continue even if the high-end market gets smaller.
@TonyJZX :
the e39 bmw, even in plain 528i format is such a wonderful looking car
see how BMW was pre Chris Bangle
Chris Bangle was Chief of Design at BMW from 1992 on. The E39 debuted in 1996. So it was not Pre-Bangle. It was early Bangle.
johnthacker
Also remember that most car companies can’t easily reduce their labor, so once they’ve started producing high volume, they have to continue even if the high-end market gets smaller.
Exactly. Which degrades the brand. Vicious circle, not entirely unfamiliar to Detroit’s denizens.
“Does the number of people who currently avoid a 5 and 7-Series because the 1 and 3 make BMW not exclusive enough really exceed the number of people who buy a 5 or 7 because they had a great experience with their 1 or 3?”
What about those of us who avoid the 1 and the 3 series because of aesthetic crimes committed in the 5 and the 7 series?
Agreed about the E39: just about–almost–perfect.
so-called Number One strategy
I wonder what this is.
Agreed about the E39: just about–almost–perfect.
Ditto. The 530i was Nature’s Most Nearly Perfect Car.
Hmm, yeah, E39 530i, 5 speed, sport package.
Sehr Schoen!
BMW will surely take a hit in this market. After all, since the 80’s the 3-series has been the poster child for the “conspicuous” in conspicuous consumption.
They also run the risk of having large investments in very marginal product like the X6 that barely makes sense in a world where people have more money than they know what to do with, and makes no sense whatsoever in the world we have now.
In addition, they are terrified of bringing their small cars to the US, and thus will probably end up being behind the curve if our market really does adjust in that direction.
(Disclosure: BMW owner and BMWCCA member)
The 3-series is BMW’s core. It’s what makes the brand.
For ‘mericans it may be an entry level BMW for the ones who can’t afford it but have to get the badge, but in Europe, it’s almost legendary. The 3-series is ultimately what made people want the badge in the first place.
It’s the 2nd most sought after used car of any car here in the Netherlands (and I would say this stat is representative for most countries). It is second only to the VW Golf.
On topic; BMW is making some questionnable decisions lately and I have said for a long time that Reithofer isn’t a ‘carguy’ and should be replaced…quickly.
That being said, I think this article is kind of akin to that AN news coverage of the Toyota Tundra arguably losing more residual value than the GM/Ford trucks. However, that article got bashed by TTAC (rightly so, I might add), but then I don’t really understand this TTAC article, which is basically the same thing as the AN article in many ways.
In 2007, BMW and Toyota were the most profitable auto manufacturers behind an independant, Cayenne selling finance company. Of course they are going to suffer now too, but still, if only 2, maybe 3 automakers would survive carmageddon in the end, I wouldn’t bet (much) against Toyota and BMW.
(I’m assuming that when ‘nobody’ has mony anymore, even then there will still be people with money)
The real news is that they are still making a profit in a terrible economic climate. Yes some of BMW product decisions have been questionable of late but they are still making money which is more than I can say for most auto makers.
“…an independant, Cayenne selling finance company.”
And yet, they just keep winning GT and prototype sports car races on every continent with car racing, in any sports car sanctioning body’s series you care to name, and, they remain a profitable company.
And, arguably, build the single finest all-around ‘useful’ sports car you can buy.
We Porsche fanatics may cringe at the mere mention of Cayenne and Panamera, and see them as dilutions of the brand in their own rights, but for being what’s always been the upstart company favoring small and light and winning in the global marketplace while our industry titans crumble, I tip my hat to the good Doctor Wendelin Wiedeking.
And yet, they just keep winning GT and prototype sports car races on every continent with car racing, in any sports car sanctioning body’s series you care to name, and, they remain a profitable company.
Meh…I can name 2; ALMS and FIA GT/LMS (including Le Mans). In the GT class, the F430 has just taken over the 911’s reign. In the prototype class, they haven’t been competing in LMP1 for just over a decade now, the LMP2 Spyder won Le Mans last year (Dutch team:)) and ALMS and LMS championships but really against what competition (especially in Europe)?
Otherwise they just do the Porsche Supercup, where there is bound to be a Porsche winning.
Meanwhile, they don’t do the real thing, which is F1 or even F3. Now that’s competition.
And, arguably, build the single finest all-around ‘useful’ sports car you can buy.
No arguments there.
We Porsche fanatics may cringe at the mere mention of Cayenne and Panamera, and see them as dilutions of the brand in their own rights, but for being what’s always been the upstart company favoring small and light and winning in the global marketplace while our industry titans crumble, I tip my hat to the good Doctor Wendelin Wiedeking.
Except that they aren’t really an upstart company now, but almost the biggest car manufacturer in the world.
The problem with foregoing discussion is history. BMW was not a luxury car manufacturer that branched into smaller and cheaper.
It was founded as an airplane engine manufacturer. After WWI it started making motorcycles, the sports cars. After WWII, it returned to motorcycles and even made city cars, the egg shaped Isseta. Its 50s sports car the 507 was an aesthetic triumph but a commercial disaster. The company turned around after the introduction of the 1500/1600/1800 4 cyl. sports sedans in the 60s which were ancestral to the 3 series. The 5 series debuted in the 70s followed by the 7 series.
Personally, I think that all of their current models are fat and ugly. I also dislike the German preference for punitive suspensions and heavy steering. If I ran the zoo, I would dump the electronics, shoot Chris Bangle and everyone he ever spoke to, and produce lighter more agile cars.
e39? Not with anything less than a V8, thank you.
@ ellomdian
I owned a 540 E39, and now own a 530 E39. Both manual transmissions. Both sport suspension.
I can honestly tell you that the rack and pinion steering in the six cylinder 530 makes it a much better car to drive.
Amen to all of the above on the beauty of the E39 series — I am convinced it is going to go down as one of the “all time greats” of exterior design.
The mention of the 507 brings up something that has puzzled me for a long time — because that was another stunning car. If VW could bring back the Beetle, why does not BMW bring back a modernized 507? It certainly would look better than anything they have come out with in the past half-decade [though that would not be hard].