BMW look at costs as profits nosedive

The feel good factor provided by various scrappage schemes around the world this year does not it seems extend to all manufacturers. BMW, one of the world’s leading car makers, has recently announced its withdrawal from Formula 1 motor racing stating its need to look at cost centres across the board as the reason and insisting that with profits obliterated by more than 70% YOY it was a necessary measure. The much praised scrappage scheme may have helped manufacturers of budget cars increase registrations dramatically but firms like BMW would not have had an order bank full of buyers for the models they produce. Although they can see some green shoots of recovery they are being cautious in their outlook for the remainder of 2009.

Ironically in their homeland of Germany the scrappage system has helped increase new car sales by 27% against the first 7months of 2008, although BMW group sales fell 18% in the last quarter compared to last year. Compared to many global brands facing major pressure on profits it may be premature to be overly concerned with the long term health of BMW as they still made profits of more than £100 million in the last quarter. That may be down by an eye watering 76% against the same period last year but BMW certainly has the product line up and global positioning to remain a huge player in the automotive world.

The fact that formula 1 will lose one of its star manufacturers is a pity but maybe the slot can be taken up by another up and coming car maker, anyone for Hyundai racing?

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