BMW will focus on managing its finances to ensure its independence during 2009, a transition year in which it said car markets will drop as much as 20 per cent and a reliable earnings outlook is impossible.
The world's largest premium carmaker said on Wednesday that after an inevitable decline in vehicle sales this year, volumes would pick up again starting in 2010, thanks in part to the planned launches of highly profitable models.
“2009 will be a transition year. This is why we have set clear priorities: liquidity, free cash flow and working capital, fixed costs and investments,” chief executive Norbert Reithofer said in remarks prepared for its annual earnings news conference.
“Our goal is to maintain the BMW group's independence.”
He reaffirmed the carmaker's profitability targets for 2012 that foresee a return on capital employed of 26 per cent and a margin of 8-10 per cent before interest and tax in the Automobiles segment.
Last week BMW shocked investors by swinging to a fourth-quarter operating loss of €718 million, marred heavily by extraordinary charges.
But its shares recovered on hopes that the carmaker was dumping every possible one-off into 2008 and setting the stage for an improvement.
Analysts also pointed out that BMW had managed the rare feat of getting through the fourth quarter without having to drain its cash reserves to fund operations.
Demand for BMW's sporty models like the Z4 roadster withered in the last months of 2008, forcing the company to reveal a decline of 4.3 per cent in group sales volumes last year - its first annual drop since 1993.
The carmaker also absorbed a €2 billion euro hit in 2008 by hiking provisions for risky leasing deals and non-performing auto loans - substantially more than Daimler's impairment charge of €465 million last year for similar problems with its sinking residuals.
BMW chief financial officer Friedrich Eichiner said the company has taken precautionary measures to reduce future losses from unexpected declines in prices for cars coming off lease.
“From our current perspective, we have sufficiently considered the foreseeable exposure,” he said, adding though that the volatility of the used car business made it impossible to completely rule out further risks this year.
“As a precautionary measure, we significantly lowered the residual values included in those lease agreements concluded last year. This reduces the residual value risks for new contracts.”
Reuters