BMW Will Step Up Cost Cutting as Earnings Sag

BMW AG hopes to lower its costs by €12 billion ($13.6 billion) between now and the end of 2022 after reporting its net profit fell 17% to €7.2 billion ($8.2 billion) in 2018.

The company warns that pretax profits this year will fall “well below” its 2018 results. Threats include exchange rates, rising materials costs, warranty charges and the cost of developing electric powertrains, connectivity features and autonomous driving technologies.

To compensate, the company says it will drop some models, reduce employment levels through attrition and slash the number of drivetrain variants it offers by nearly 50% by 2021.

BMW notes that last year’s financial results compare with a one-time gain of about €1 billion in 2017 from a reduction in U.S. corporate taxes. The company’s vehicle deliveries in 2018 advanced 1% to a record 2.49 million units, including a 2% gain for its BMW brand models to 2.13 million.

Group revenue slipped 1% to €98.3 billion ($111.6 billion) last year. Revenue from automotive operations was flat at €85.8 billion ($97.3 billion), but operating earnings plunged 22% to €6.2 billion ($7 billion).

BMW predicts a modest gain in passenger vehicle sales this year as markets improve in the second half. The company cautions that its forecast assumes no new disruptions in global trade or economics.