BMW Faces Headwinds in Wake of Coronavirus
March 12 2020 - 2:11PM
Dow Jones News
By William Boston
BERLIN--Charges linked to an antitrust probe sent profits down
29% at Bayerische Motoren Werke AG, but the luxury car maker could
face even greater headwinds this year as already weak global demand
crashes in the wake of the coronavirus pandemic.
The Munich-based maker of the BMW, Mini and Rolls-Royce brands
is making big upfront investments to build electric cars to fulfill
tighter emissions regulations. However, those investments are
becoming more difficult to finance, as the global economy teeters
on the edge of recession and the coronavirus continues to
spread.
BMW said Thursday that sales last year had risen nearly 8% to
104 billion euros ($117.6 billion) and net profit had fallen to
EUR5 billion from EUR7 billion a year before.
BMW is in the crosshairs of a European antitrust investigation,
which forced the company to take a EUR1.4 billion charge against
earnings earlier in the year in lieu of potential fines and legal
fees. BMW said it would contest the European Union's allegations
with all legal means at its disposal.
Aftertax profit in the three months to the end of December was
EUR1.4 billion, up from EUR1.32 billion. But the higher earnings
and revenue at the end of the year did not offset losses in
previous quarters.
Now, investors are wondering whether that late momentum can be
maintained in the face of the upheaval caused by the
coronavirus.
The carmaker said nothing about the impact of the sharp decline
in auto markets worldwide since the beginning of the year as the
coronavirus spread from China to Europe and the U.S.
The company is expected to provide some outlook for the new year
at a news conference on March 18. But the conditions under which
last year's business operated bears little resemblance to the
situation global auto makers face in the wake of the coronavirus,
which has sent global stock markets reeling.
"BMW's outlook next week is likely to be very cautious because
no one can venture a guess as to the expansion or extent of the
crisis," said Frank Schwope, an auto analyst at Nord/LB.
Investors watching the global economy meltdown over the past
weeks are eager to get some guidance from auto makers, but most
manufacturers are still hoping to recoup a large chunk of the sales
lost later this year.
Volkswagen said Thursday that business was resuming in China
after weeks of plant shutdowns and that it hopes factories will be
back to normal operations by the middle of the year.
For now, however, auto makers are taking a huge hit in
China.
New car sales in the country, which accounted for 27% of the 2.5
million cars BMW sold last year, plunged 79% in February.
Germany, France, Italy, Spain and the UK, the five markets
accounting for around 80% of total sales in Europe, all posted
sharp declines in new car sales in February and a steep fall in
auto production. In Germany alone, the biggest auto market in
Europe by sales, auto production is down 10% so far this year and
new car sales are down 9%, according to the German Association of
the Automotive Industry.
The U.S. market remains the only leg still standing. Last month
preliminary data showed U.S. light vehicle sales rose nearly 6% to
1.3 million vehicles, though analysts predict the U.S. market could
decline 1.5% to around 13.5 million vehicles this year.
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
March 12, 2020 13:56 ET (17:56 GMT)
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