BMW recalls 1.5 million vehicles, revises profit outlook

By Timo Kirez

GENEVA (AA) - Munich-based automaker BMW announced a global recall of 1.5 million vehicles and revised its profit forecast for the current year, according to a press release Tuesday.

The recall is due to necessary "technical measures" related to the Integrated Braking System (IBS), which has prompted BMW to adjust its annual profit expectations.

The company indicated that the Group’s result before taxes is expected to decrease significantly, a shift from the previously anticipated slight decrease. BMW will provide detailed quarterly results and the revised forecast in its Quarterly Statement to September 30, 2024, set for release on November 6, 2024.

The updated forecast predicts the EBIT margin for 2024 will fall between 6% and 7%, down from the earlier estimate of 8% to 10%. Similarly, the return on capital employed (RoCE) is now projected to be between 11% and 13%, compared to the previous range of 15% to 20%.

BMW's difficulties follow those of Volkswagen AG, another major German car manufacturer. On Sept. 2, Volkswagen’s Board of Management announced significant restructuring plans, including revoking a long-standing employment guarantee and implementing mass redundancies within the core business. The company is grappling with high costs and lower returns compared to its subsidiaries such as Škoda, Seat, and Audi.

Volkswagen has introduced a savings program aimed at improving earnings by €10 billion ($11.03 billion) by 2026. This program includes reducing personnel costs in administration by 20%. The company had previously relied on partial retirement and severance payments to manage its workforce, setting aside €900 million ($993 million) for severance packages.

The announcement has been met with strong opposition from Volkswagen's labor union and works council. The union has condemned the plans as a threat to jobs, locations, and collective agreements. Thorsten Groger, district leader of the IG-Metall trade union, criticized the measures as "irresponsible" and a severe shake-up for Volkswagen’s operations.

Volkswagen has never closed a production plant in Germany since its founding in 1949. The Group currently operates eleven production plants in Germany, including six for vehicle assembly and five for components, employing around 120,000 people in the country.