BMW warned that its 2019 earnings will fall “well below” last year’s level and announced a 12 billion-euro ($13.6 billion) cost savings plan to help offset the impact of trade conflicts and unprecedented spending on electric cars.
Pretax profit is expected to decline by more than 10% this year, the automaker said on Wednesday. BMW is responding by stepping up a savings program with plans to cull models, reduce development times by as much as one third and hold the workforce steady this year.
“Our industry is witnessing the rapid transformation,” Chief Financial Officer Nicolas Peter said. “A sustained high level of profitability is crucial if we are to continue driving change.” By the end of 2022, BMW expects to leverage potential efficiencies amounting to more than 12 billion Euros.
Some of that would come from ramping up digital simulations as a way to reduce development times of new vehicle models by as much as a third. “Among other savings, digital simulations and virtual validation could eliminate the need for some 2,500 expensive prototype vehicles by the year 2024,” BMW said.
BMW said it would expand group-wide efforts to increase efficiency and lower costs but ruled out forced layoffs. About 1,500 staff have taken early retirement and another 2,500 are eligible for retirement and early retirement, the company said.
The company said automotive profit margin will be in the range of 6 percent to 8 percent this year, below an 8 percent to 10 percent long term target. Last year BMW’s automotive margin was 7.2 percent.
Peter said that guidance could fall even lower if conditions worsen.