BMW warns of significant profit fall in 2019, seeks $13.6 billion in cost cuts

Luke Sharrett | Bloomberg | Getty Images

An employee installs interior accessories inside a BMW X4 sports utility vehicle on the assembly line at the BMW assembly plant in Greer, South Carolina.

BMW on Wednesday said it expected group pretax profit to fall by more than 10 percent in 2019 and announced a sweeping 12 billion euro ($13.6 billion) cost savings and efficiency plan to help offset higher technology investment and currency costs.

Last week BMW said it would step up cost cutting in anticipation of a difficult year, as it reported a 7.9 percent fall in 2018 operating profit.

Group earnings before tax are expected to be significantly below 2018 levels, the Munich-based carmaker said.

“The high level of volatility makes it difficult to provide a clear forecast,” BMW said.

“Depending on how conditions develop, our guidance may be subject to additional risks; in particular, the risk of a no-deal Brexit and ongoing developments in international trade policy,” Chief Financial Officer Nicolas Peter said.

BMW said it would expand group-wide efforts to increase efficiency and lower costs.

“By the end of 2022, it expects to leverage potential efficiencies totaling more than 12 billion euros,” BMW said in a statement.

Some of that would come from ramping up digital simulations as a way to reduce development times of new vehicle models by as much as a third.

“Among other savings, digital simulations and virtual validation could eliminate the need for some 2,500 expensive prototype vehicles by the year 2024,” BMW said.

The high cost of developing electric and self-driving cars will continue to be a burden on earnings.

MW said it expects the operating margin in its automotive division to fall to between 6 and 8 percent this year, below the company’s goal of 8 to 10 percent. Last year BMW’s automotive operating margin was 7.2 percent.

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