Germany’s powerhouse car firms feel the pain

BMW’s second-quarter earnings fell by a fifth, hit by exchange rate moves and investments in manufacturing electric and hybrid cars to help meet stricter emissions limits.

Germany’s powerhouse car firms feel the pain

By Edward Taylor and John Revill

BMW’s second-quarter earnings fell by a fifth, hit by exchange rate moves and investments in manufacturing electric and hybrid cars to help meet stricter emissions limits.

However, the German carmaker stuck to its full-year forecasts, avoiding the profit warnings that have beset the industry and helping to push its shares slightly higher.

Separately, Siemens shares fell after it said worsening demand for car parts was hurting profits.

Carmakers are having to make huge investments in cleaner and self-driving technologies just as demand in China, the world’s biggest car market, is falling and a trade war between Washington and Beijing is curbing global economic growth.

BMW’s German rival Daimler and industry supplier Continental have both recently issued profit warnings, although Fiat Chrysler and Volkswagen stuck to their 2019 forecasts.

BMW said earnings fell to €2.2bn in the second quarter, hit by the cost of trying to meet stricter emissions rules due in 2021. Investments jumped as the company opened a factory in Mexico and retooled its plants.

The Munich-based firm said the operating margin at its automotive division fell to 6.5% from 8.6% a year earlier, despite a 1.5% rise in vehicle sales over the same period.

Analysts said the margin at this stage compared favourably with Mercedes-Benz’s 3.6% and Audi’s 8%.

Meanwhile, Siemens said deteriorating demand from car and machine building firms hit its third-quarter profit, becoming the latest industrial company to warn about a weaker environment hitting its business. The company’s flagship factory automation unit saw orders and revenue fall as customers in Europe and the Americas held back on investments as economies slowed.

Profit margins also shrank as Siemens sold less of its more profitable short-cycle products such as industrial controllers and drives, dragging down the company’s net profit by 6%.

Chief executive Joe Kaeser said the trains to turbines maker had seen conditions become much weaker in its key markets but the company nonetheless confirmed its full-year guidance.

Shares in Siemens fell 4.25% in the session and are down 18% in the past year.

- Reuters. Additional reporting Irish Examiner

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