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BMW Group abandons profit forecast

BMW Group will miss its 2008 targets this year after it revealed a 43.5% drop in quarterly pre-tax profit to €602 million (£477m) due to worsening market conditions.

The drop shocked analysts which were predicting pre-tax profits of €1.04 billion (£823m). BMW now forecast a 2008 pre-tax profit margin of four per cent, after previously expecting earnings before tax to exceed last year's adjusted level of €3.78bn (£3bn).

BMW said: "Business conditions for the automobile industry deteriorated sharply again in the second quarter due to further ongoing steep rises in oil and raw material prices, the weakness of the US dollar, the impact of the international financial crisis and a weaker US economy.”

Chief Executive Norbert Reithofer said 2009 was shaping up to be a “difficult year full of challenges”.

He said: "We will use the strong headwinds as an opportunity for change and continue the process of renovating and optimising our business.

“We must and we will intensify our efforts on both the cost and revenues side even further.”

In order to battle the downturn in expected profits, BMW will be reducing production volumes and models that were intended for the US will now be sent to countries with higher margins.

The BMW Group is aiming for 2010, as an intermediate target, to achieve return on sales of at least 6% and in the automobiles segment.

Despite the gloomy outlook, BMW Group registered sales volume growth for all three brands from April to June.

The total number of BMW, Mini and Rolls-Royce brand vehicles delivered to customers increased by 4% to 413,087 units. Sales of BMW brand cars went up by 2.3% to 344,019 units. The Mini brand also recorded strong growth with the second-quarter sales volume up by 13.5% to 68,756 units. Rolls-Royce Motor Cars recorded an extremely high growth rate, with 312 units sold in the quarter, a 72.4% increase.

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