BMW chief says crisis prevents 2009 outlook

BMW chief says crisis prevents 2009 outlook


Date:
3/18/2009 4:01:00 PM









German
luxury car maker BMW said Wednesday the current economic crisis
prevented it from giving a detailed 2009 outlook but insisted that its
medium-term targets were achievable."2009 will be a year of
transition, for which no reliable forecast is possible at present," BMW
boss Norbert Reithofer told the group's annual press conference in
southern Munich.BMW expected sales for the automobile sector as
a whole to fall between 10-20 percent this year but forecast that
markets would pick up again in 2010.In the meantime, "we will
tighten our belts," said Reithofer, a decision that has already led to
the elimination of 7,500 jobs at the company and meant a substantial
2008 pay cut for himself and others.BMW's annual net profit lost
89.5 percent to reach 330 million euros (430 million dollars), while
sales slipped by four percent to 1.4 million vehicles.Reithofer took a pay cut of more than one third as a result."The
sharp drop in 2008 earnings has financial consequences: a member of the
BMW board must renounce around 40 percent of his annual salary," he
told media.According to the group's annual report, Reithofer's pay fell by 39.5 percent to 2.3 million euros.Executive
pay is a controversial issue in Germany, and draft legislation that
would tighten the framework on salaries was approved by the government
last week.Workers would also see their salaries cut however, with those covered by a collective wage agreement reduced by 10 percent.Meanwhile,
German rival Daimler has also declined to give a detailed outlook for
2009, saying only that sales would fall from the level posted last year.Profits
at both automakers plummeted in 2008, especially in the last quarter
after US investment bank Lehman Brothers went bankrupt, plunging
financial markets into fresh turmoil.BMW nonetheless reiterated
2012 profit targets that were first outlined in late 2007 as part of a
group strategy dubbed "Number One."The plan's main goal is a
return on sales of between eight to 10 percent, but the BMW boss said
Wednesday he now expected the unit sales target of 1.8 million vehicles
set "before the crisis" to be at least 100,000 cars fewer.He stressed that it was very hard at present to give firm forecasts.In
afternoon Frankfurt trading, BMW shares fell by 2.43 percent to 22.29
euros while the DAX index of German blue-chips was essentially
unchanged overall.To meet its return on sales goal, BMW planned
to exceed an initial reduction of four billion euros in material costs,
part of a wide-ranging cost-cutting target of six billion euros.Cutbacks on personnel costs are expected to generate up to 500 million euros in savings each year from 2009.Reithofer
said he wanted to "preserve the BMW group's independence," nipping
rumours of a tie-up with either Daimler or the French group PSA Peugeot
Citroen in the bud.BMW did not seek any cross shareholdings, finance director Friedrich Eichiner added.But
BMW and Daimler cooperate already in the purchase of materials and
parts, and "we will extend this cooperation and progressively buy more
and more parts and components together," Reithofer said.BMW also works with PSA to make motors for Mini models.