Bloomberg News

BMW CFO Confident for 2012 as Europe Takes Steps to Quell Crisis

November 17, 2011

Nov. 16 (Bloomberg) -- Bayerische Motoren Werke AG, the world’s largest maker of luxury vehicles, is upbeat for next year as Europe takes steps to deal with the debt crisis and the U.S. continues to recover from the 2009 recession.

“We’re confident for 2012,” Friedrich Eichiner, chief financial officer of the Munich-based automaker, said late yesterday in Barcelona. Europe has made “positive” moves toward debt reduction, he said.

“What we need now is a clear sign that the countries are serious about getting their finances in order,” Eichiner said at a presentation of the sixth generation of the best-selling 3- Series sedan. He predicted “double-digit” percentage sales growth next year in the U.S., which will probably overtake Germany as the carmaker’s biggest market in the near future.

The European debt crisis has toppled four elected governments. Lucas Papademos has taken charge in Greece and Mario Monti has been designated Italian prime minister after their predecessors lost political support.

The new 3-Series will cost 7 percent to 9 percent less to manufacture because it shares components with other models, according to Eichiner. That could boost profit margins for the carmaker, which targets earnings before interest and taxes at 8 percent to 10 percent of sales in 2012 and beyond.

The operating profit margin at BMW’s automotive unit declined to 11.9 percent in the third quarter from a record 14.4 percent in the second on spending on new models including the 3- Series.

High-End Slowdown

Growth has slowed for high-end carmakers from the record pace in the first half as Europe’s debt crisis unsettles consumers. Daimler AG, maker of Mercedes-Benz cars, reported its first earnings drop in two years, burdened by expenses for new models, while BMW has predicted weaker profit margins in the final three months of 2011.

BMW is planning for slower economic growth next year and at the same time is prepared for a potential recession. Frank-Peter Arndt, the manufacturer’s production chief, said last month that the company is ready to cut output by 20 percent to 30 percent if necessary. The company has also said it would respond to a crisis by tapping central bank reserves through its banking unit.

“We are remaining watchful and can react flexibly,” Eichiner said yesterday.

Volatility has become a normal part of business planning, with choppy markets likely to persist until at least 2015, Chief Executive Officer Norbert Reithofer said Nov. 3.

Rent a Car

To reduce its dependence on car demand, BMW is expanding in transport services. The company plans a corporate car-sharing offering, which will allow companies to provide per-minute car rentals to staff for business and private use. Personal trips would be charged to the employee, offsetting the company’s cost for the car.

The service, which will be available at first in Europe, is being tested in France, Germany and the U.K., the program’s chief Christian Steiner said at the Barcelona event. It will be expanded in mid-2012. The service, which adds 15 percent to normal corporate lease rates, comes after BMW paid about 700 million euros ($942 million) to buy ING Groep NV’s car-lease business to become the fifth-largest fleet management company in Europe.

BMW also has a venture, called DriveNow, to provide private car-sharing services in Germany.

-- Editors: Thomas Mulier, Jerrold Colten

To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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