BMW Issues Second Profit Warning in a Year as Restructuring and China Competition Bite

BMW has issued its second profit warning within a year, pointing to the cost of a sweeping restructuring programme that includes significant job losses, as competition from China continues to pressure Germany's car industry.

The company said its profit margin for the year could land anywhere between minus 0.5% and plus 0.5%, a striking downgrade from the start of the year, when it still believed a margin of 4% to 6% was achievable. It blamed fourth quarter costs tied to the restructuring, which includes cutting 8,000 jobs in its home market, and signalled that losses are possible.

The downgrade makes BMW the latest German carmaker to trim its outlook, after Mercedes-Benz cut its own profit forecast last week. Western manufacturers have struggled to match lower cost domestic rivals in China, a shift that has eaten into their sales there while driving a rise in Chinese exports to Europe.

Reporting its results on Wednesday, BMW said pre-tax earnings for the third quarter fell 11% to 2.1 billion euros (1.75 billion pounds). Revenue dropped 6% to 30.4 billion euros, weighed down by falling sales in China, where deliveries declined 22% over the first nine months of the year. The company said that drop was in line with the broader downturn in the Chinese market.

"Current developments in our industry call for decisiveness and swift implementation. We will therefore specifically intensify and accelerate structural measures," chief executive Milan Nedeljković said. He added that China "remains a key focus", with the group's Neue Klasse model revival beginning there this month through the launch of the iX3.

Like Volkswagen before it, BMW is absorbing painful restructuring charges as the market shifts rapidly. Because its new generation of electric vehicles is arriving quickly, the company is writing off parts of its previous vehicle and technology generations while also pricing in the cost of the redundancy programme. It plans to reduce management functions more quickly as part of the drive.

There were some brighter spots in the figures. The operating margin in BMW's core automotive business came in at 3.4%, ahead of the 3.1% analysts had forecast, though down from 5.2% a year earlier. Stripping out restructuring charges, the margin would be above 2%, within the company's previous forecast range, BMW said.

The results reflect a difficult period across Germany's car sector. Mercedes-Benz also reported lower third quarter profits, while Porsche rebounded slightly, though only after taking steep charges last year as it overhauls its model lineup and pulls back from China.