German automakers' challenges appear to be deepening, with BMW now reviewing actions once considered "untouchable" as it works to restore profitability and reposition the brand.
First things first: CEO Milan Nedeljkovic made the pledge Thursday after the automaker reported a 35% drop in second-quarter pretax profit, underscoring the mounting pressures facing Germany's auto industry, Reuters reported.
BMW's pretax profit fell to €1.7 billion ($1.95 billion), while the operating margin in its core automotive business narrowed to 2.3% from 5.4% a year earlier, slightly ahead of the initial 2.2% forecasted by analysts.
The automaker attributed the earnings decline to a sharp drop in China sales and weaker consumer confidence tied to the conflict in the Middle East.
What they're saying: "The automotive industry is faced with rapidly escalating challenges — intense global competition, increasing regional regulatory requirements and the implications of geopolitical conflicts will shape our business model in the years ahead," said Nedeljkovic, adding, "We are taking a critical look at how we work, including revisiting core processes and structures that previously were considered untouchable."
Why it matters: BMW's efforts to improve profitability could influence future investments in products and manufacturing, making it important for dealers to monitor the changes as they plan inventory, operations and customer expectations.
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Between the lines: BMW's latest actions are part of a broader effort to restore profitability after lowering its automotive margin forecast to 1%-3% in June, down from its previous outlook of 4%-6%.
The automaker plans to reduce its global workforce by about 8,000 employees, or roughly 5% of its 150,000-person workforce.
BMW has also expanded its use of humanoid robots at its South Carolina plant to sort parts, improving manufacturing efficiency and helping reduce production costs.
Bottom line: Efforts to turn BMW around come as the company rolls out what is arguably its most significant product strategy in decades through its Neue Klasse platform, beginning with the all-new electric iX3.
The restructuring also reflects the broader pressures facing German automakers as they balance cost-cutting with major product investments, making stable vehicle availability for dealers key right now.
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