Two giants of the German automotive industry caused a shock on Tuesday: the car manufacturer famous for its solid financial planning BMW cuts its annual forecast in an unusual step. Its shares fell in step with those of the auto supplier Continental which BMW holds largely responsible for the profit warning.
The reason for the double shock is a dispute between BMW and Conti that has been simmering for months over problems with an integrated braking system from the supplier called MK C2, which is only used by BMW. Manager magazin had already reported exclusively on the problems in March
. In affected cars, the braking system can in individual cases fall back to an emergency level and can only be braked with increased effort. At that time, BMW had stopped all new orders from the supplier from Hanover.
Since then, despite all the negotiations, the dispute has escalated dramatically. Of the 1.5 million potentially affected cars, around 1.2 million have been delivered, BMW said. Using diagnostic software that is now installed remotely, the error can be discovered and you can be called to the workshop. A delivery stop has now been imposed on a further 320,000 completed cars.
BMW estimated the additional costs of the measures in the current third quarter alone to be in the high three-digit million range. “We are examining all options and are in discussions with Continental about compensation,” said a BMW spokesman, without wanting to commit to a timetable or amounts.
The negotiations have been deadlocked for months and the outcome is completely unclear. “We don’t know how BMW calculates,” commented a Conti spokesman. “We have made provisions in the mid double-digit million range and think that is enough.”
In any case, the economic consequences are significant for both companies. According to people close to BMW, significant parts of the forecast correction were due to the brake problems. The rest is due to continued weakness in demand China back. “Despite the government’s support measures, purchasing reluctance continues,” said the company. In addition to BMW, it also affects all other German manufacturers for whom China has long been the most important individual market.
Overall, BMW now expects a slight decline in sales for 2024. So far, the management around CEO Oliver Zipse (60) had assumed a slight increase compared to the 2.55 million cars sold in 2023.
When it comes to profits, management is also correcting its forecast downwards. “The consolidated profit before taxes will now decline significantly,” said BMW. The important operating margin (EBIT) in the automotive business is likely to be significantly lower at 6 to 7 percent than the previously announced 8 to 10 percent. Investors reacted accordingly with shock. BMW shares fell in the wake of the news and were temporarily down more than 8 percent. Continental shares also fell by almost 10 percent.
Overall, the return on capital employed (Roce) will only be 11 to 13 percent; Management had previously expected 15 to 20 percent. BMW estimates the free cash flow from the automotive business to be around 2 billion euros lower than before at just over 4 billion euros. Analysts and investors pay close attention to this key figure because it provides information about the current financial strength and thus also about possible dividend payments and share buybacks.