BMW AG’s automotive division swung to a loss for the first time in a decade as car prices slumped and a legal provision over alleged collusion ballooned to 1.4 billion euros ($1.6 billion).
To deal with the pressures, BMW in March announced a 12 billion-euro savings plan, culling models and cutting development time. While the second half of the year should improve with sales of new 3-Series and X7 sport utility vehicles, trade tensions are on the rise again. Orders for the X7 were exceeding all expectations, Chief Executive Officer Harald Krueger said.
The company is also cooperating with Daimler AG in autonomous driving, and the two companies merged their mobility services earlier this year. Though there has been speculation about further cooperation plans, Krueger poured cold water on hopes of a cross-share holding on Tuesday.
“We’re focusing on the current projects, mobility services and autonomous driving, but any sort of cross-share holding I can definitively rule out,” Krueger said in a media call.
BMW will contest the allegations on collusion on cleaner-emission cars by the European Commission with all legal means possible, it said.
“We expect the first half-year to be slightly weaker overall,” Chief Financial Officer Nicolas Peter said, as model changeovers impact on sales and costs. “We expect the second half-year to benefit from the strong product momentum.”
Group earnings before interest and tax declined 78 percent to 589 million euros, with the result at the “light end” of expectations, Jefferies analyst Philippe Houchois said in a note. Excluding the potential fine, automotive return on sales fell to 5.6 percent compared with 9.7 percent a year ago.
BMW declined 1.3 percent to 73.03 euros at 10:57 a.m. in Frankfurt trading. The stock has gained 3.3 percent this year, compared with an 18 percent rise in the Stoxx 600 Automobiles & Parts Index.