Strong Asia Sales Help BMW, but Europe Is Still a Challenge

http://www.nytimes.com/2012/11/07/business/global/strong-asia-sales-help-bmw-in-third-quarter.html

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FRANKFURT — BMW said Tuesday that its profit and sales rose in the third quarter as it continued to defy the crisis gripping other European automakers, but warned that the market remained difficult and unpredictable.

Bayerische Motoren Werke and its German rivals Mercedes-Benz and Audi have suffered less than other carmakers from the worst plunge in European auto sales in 20 years. But they are beginning to feel the crisis, too. Because automobiles are Germany’s biggest export product, any slowdown would be bad news for the national economy, the largest in Europe.

“Volatility has increased and is likely to intensify further,” Friedrich Eichiner, BMW’s chief financial officer, said during a conference call with journalists Tuesday. “We are feeling the impact of the sustained economic downturn, which has resulted in competitive pressure.”

BMW, which also makes Mini and Rolls-Royce cars as well as motorcycles, said net profit rose 16 percent in the quarter, to €1.29 billion, or $1.65 billion. Sales rose 14 percent, to €18.8 billion. Shares of the company, based in Munich, were little changed in Frankfurt trading.

While BMW profit rose overall, earnings from cars alone fell because of lower prices in Europe. Pretax profit from autos fell 9.3 percent during the quarter, to €1.65 billion, BMW said. The model with the biggest sales increase was the 1 Series, which is benefiting from a redesign but is also the lowest-priced BMW.

The company’s European sales rose 2.6 percent in the quarter from a year earlier. But the industry downturn has begun to cut into BMW’s revenue in individual countries. While BMW group sales rose in Britain during the quarter, they fell steeply in Italy and Spain and also slipped in Germany and France.

The German economy as a whole is showing the strain of the euro zone’s economic travails, which have hurt sales to other European countries. New orders to German industry fell 3.3 percent in October from September, more than expected, the Federal Statistical Office said Tuesday. Despite the emergence of Asia as a major export market, European countries are still Germany’s most important trading partners.

BMW fared better in the third quarter than its rival Mercedes, whose parent company Daimler said last month that its car sales in Europe fell 4 percent in the period. But Mercedes said Tuesday that deliveries bounced back in October, rising 7.4 percent in Europe — not counting Germany — because of the new A-Class, a sporty compact. Mercedes sales in Germany rose 3 percent in October.

BMW profit was also dented by higher spending on research to improve fuel efficiency and to develop a new line of battery-powered cars, the i Series, which will be introduced next year. Such spending weighs on profit in the short term, but is necessary for BMW to meet European Union emission and fuel economy standards, said Norbert Reithofer, the BMW chief executive.

Without electric vehicles in its lineup, Mr. Reithofer said during the conference call, BMW would have to take its profitable larger cars off the market and sell nothing but small cars.

“If carmakers aren’t ready with electric vehicles in 2020,” when tougher standards take effect, Mr. Reithofer said, “it will certainly be interesting to see how they achieve the targets.”

The premium carmakers generally earn more money per car than the mass-market carmakers, and their wealthier customers have not been hit as hard by the euro zone crisis and unemployment. Last week, Ford, General Motors and Fiat all reported huge losses in Europe. Over all, car sales are down 20 percent in Europe since 2007.

<NYT_CORRECTION_BOTTOM> <p>This article has been revised to reflect the following correction:

Correction: November 6, 2012

<p>An earlier version of this article misstated the title of Friedrich Eichiner. He is chief financial officer of BMW, not chief executive.