BMW Profits Up More Than Tenfold
Luxury cars, pronounced an endangered species two years ago, are back with a vengeance and enrich their makers. After reporting record sales, BMW follows with record profits. The Bavarian Motor Works are looking at a 2010 pre-tax profit of €4.8 billion ($6.7 billion) on sales of €60 billion ($83 billion). Not bad for a company that delivered only 1,461,166 BMWs, MINIs and a few Rolls-Royces last year.
After making their contribution to the German government, the Bavarians still keep €3.2 billion ($ 4.5 billion) after tax.
According to a BMW press release, the company’s profits rose more than tenfold from €413 million pre-tax in 2009. To celebrate the good news, BMW will pay a record dividend of €1.30 per share.
About a quarter (€1.2 billion) of those profits come from financing. Not unusual for a car company with a well-kept captive financing arm. An amazing 1,083,154 new financing and lease contracts were signed.
For this year, BMW expects even better numbers. “We are targeting record sales of more than 1.5 million vehicles in 2011 and expect to achieve new highs for all three of our brands”, said BMW CEO Norbert Reithofer.
They want to do that on an unchanged gross margin of eight to ten percent in the Automobiles segment (currently, they run at 8 percent), and produce a return on equity of at least 18 percent in the Financial Services segment.
Think about it when you sign your next BMW lease.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Proving once again that "economic recoveries" are really recoveries only for the upper quartile.
Full disclosure - I own a BMW. However, I'm not surprised they are recovering nicely, they are the Apple of auto manufacturing. Brilliantly engineered and highly functional products built with a specific end-user in mind, just like Apple the occasional slip up, but also prepared to stick to their guns. Certainly there are a large number of purchasers looking for the nothing beyond the status of the nameplate but i also know many (often unlikely) owners who really appreciate the focus on the driver's experience. The nameplate shoppers may come & go (right now to Audio I guess) but if you do fit their buyer profile it would be hard to be happy with anything else.