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BMW expects sales to fall up to 20% in 2009

March 19, 2009|TIMES WIRE REPORTS

FRANKFURT — German carmaker BMW said Wednesday that it was facing a "transitional year" and that it expected sales volume to decrease as much as 20% in 2009 because of the economic crisis.

The Munich based-company said that although it couldn't make a reliable forecast at this point, the current assumption was that the number of vehicles sold would fall 10% to 20%.

BMW, the world's biggest maker of luxury cars, also said it would expand joint parts purchases with rival Daimler as the recession pushes the companies to reduce spending.

More "major cooperation" with competitors is possible as a way of scaling back costs, Chief Executive Norbert Reithofer said.

Joint purchases with Daimler's Mercedes-Benz car unit have generated savings for BMW of as much as 15%, said Herbert Diess, the carmaker's purchasing chief. BMW is also taking steps to cut production by 40,000 vehicles in the coming two months, bringing the total reduction this year to 78,000.

"These guys need to do significantly more than just buying a couple of parts with Mercedes," said Arndt Ellinghorst, a London-based analyst with Credit Suisse who has an "outperform" recommendation on BMW shares. "We need major technological cooperation, a lot more than just joint purchasing."

Reithofer said the company was taking these actions "to maintain the BMW group's independence."

Last week, the company reported a fourth-quarter loss of 962 million euros ($1.36 billion), compared with a profit of 173 million euros ($244 million) a year earlier. The results for the final three months of 2008 were dragged lower by one-time risk-provision charges. Sales fell 18% to 13 billion euros ($18.33 billion) from 16 billion euros ($22.56 billion).

For all of 2008 the automaker posted a net profit of 330 million euros ($465.2 million) compared with 3.1 billion ($4.37 billion) in 2007. Sales fell 5% to 53 billion euros ($74.72 billion).

"We prepared ourselves early on and swiftly for severe business conditions, for example by taking immediate steps to bring production volumes in line with lower demand," Reithofer said in the company's report Wednesday.

"Nevertheless, our long-term profitability targets for 2012 remain intact," he said.

Bernstein Research analyst Max Warburton wrote in a recent note to clients that BMW had the best liquidity in among German car firms and was "the safest place in European autos" in terms of an investment.

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