Key facts
- BMW's pretax profit fell 35% in the second quarter.
- The automotive operating margin narrowed to 2.3% from 5.4% a year earlier.
- Sales in China dropped by 30% in the second quarter.
- BMW plans to cut around 8,000 jobs through a voluntary redundancy program.
- The company will review core processes and structures previously considered 'untouchable'.
BMW announced on Thursday it would review its working practices after a significant 35% decline in second-quarter pretax profit, a move described by new CEO Milan Nedeljkovic as "not satisfactory." The German carmaker attributed the earnings drop to a sharp decrease in sales in China and a decline in consumer confidence stemming from conflict in the Middle East.
Pretax profit fell to €1.7 billion ($1.95 billion), and the operating margin in its core automotive business narrowed to 2.3% from 5.4% in the same period last year, though this figure was slightly above the consensus forecast of 2.2%. These results come amid broader industry challenges, with competitors like Porsche and Volkswagen also announcing job cuts and operational overhauls due to subdued demand and increasing competition from Chinese manufacturers.
Nedeljkovic stated that the automotive industry faces escalating challenges, including intense global competition, evolving regional regulatory requirements, and the impact of geopolitical conflicts. In response, BMW is initiating a restructuring and cost-cutting program, which includes a voluntary severance program aimed at making the company leaner and more competitive. The company is critically examining its core processes and structures, some of which were previously considered "untouchable."
BMW reaffirmed its full-year guidance, projecting an automotive operating margin between 1% and 3%. This follows a profit warning issued in June that led to discussions with workers regarding cost reductions. A source indicated that approximately 8,000 jobs are expected to be cut through the voluntary redundancy program, though Nedeljkovic declined to confirm the exact number. The restructuring efforts will also involve streamlining operations in sales, procurement, production, and development. Additionally, BMW plans to reduce its product portfolio and review model variants in specific markets, acknowledging the diverging adoption rates of electric vehicles globally, with China leading in EV adoption while the U.S. still shows strong demand for combustion-engine vehicles.