If you think America’s Big Three are finding market conditions tough, Europe’s finest are sagging on the ropes, too. This week BMW announced it was axing the radical CS four-door coupe – this, after its recent cancellation of the X7 – while Mercedes recorded a 25% drop in North American sales this month.
It’s not looking good for BMW is it…
No indeed. In the last quarter, BMW’s profit after tax plummeted by 62.9% to €298m, compared to a healthy €803m for the same period in 2007, and the company faces a €1.3bn tax burden for the first three-quarters of 2008. On top of the news of the CS’s demise, BMW boss Norbert Reithofer yesterday announced that in addition to the recent reduction of 25,000 units, the company would reign in production by another 40,000 before the end of the year. The CS will be canned, according to Reithofer, 'because the vehicle does not meet the internal requirements for rates of return', even though it was to be twinned with the new 7-series.
The financial crisis will not, however, mothball the research and development alliance BMW has forged with Mercedes to produce engines both companies need to battle the Volkswagen Group, as well as collaborate on advanced hybrid technology, dual-clutch and automatic transmissions and driver assistance systems. Nor will it pour cold water on Munich’s vaunted Project I, it far-seeing programme to tackle sustainable urban transport with a range of lightweight two and four-wheeled vehicles that draw heavily from its motorbike experience.
Is anyone in decent shape…?
Within the last fortnight, PSA Peugeot Citroën, Renault and Fiat have all downgraded their 2008 earnings forecast, as European and global sales continue to stagnate and decline. The one beacon in the darkness, however, is the Volkswagen Group. Despite this pervasive pessimism, it defied the market this week and stuck by its optimistic forecast for 2009 – in the same quarter where Mercedes and BMW suffered, Europe’s biggest carmaker posted an 11% sales hike to a robust €28.9bn on the back of a 27% rise in its third-quarter net profit.
But the champagne won't be popping for long – poor sales of Seat in Europe and Bentley in America will make 2009 ‘a very tough year indeed’ according to VW's chief financial man Hans Dieter Pötsch.
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