BMW, Citing Sales and Cost Challenges, Lowers Guidance

BMW AG has reduced its profit forecast for 2018, citing regulatory issues, warranty costs, spending on future mobility and the impact of uncertain trade conflicts.

BMW, which had expected its automotive operations to deliver a pretax earning margin of 8%-10%, now says the segment’s EBIT margin will be “at least” 7%. Pretax profit for the entire group, previously expected to be flat, will show a “moderate” decrease.

The company notes earnings will be hurt by an upswing in unfavorable exchange rates of about €500 million-€800 million, plus the need to invest about €1 billion in future mobility technologies.

BMW now expects its automotive business will deliver revenue slightly below last year’s €88.6 billion ($104.3 billion). Prior guidance anticipated flat or slightly greater revenue.

Sales in Europe are being disrupted in the second half of the year by the shift to Europe’s new WLTP (world harmonized light vehicle test procedure), which continues to disrupt supplies in the region, according to the company.

Spending on warranty issues also is “significantly” greater this year. Among BMW’s problems: highly publicized vehicle fires in South Korea that have prompted a recall, government probe and multiple lawsuits.