BMW falls bigger in bad times

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Stacey Vanek-Smith: The auto industry is under siege, from high fuel prices, the rising cost of raw materials and consumers who are feeling pretty inclined to squeak another year out of their old model. Yesterday, ratings agency Standard and Poors downgraded the shares of GM, Ford and Chrysler even deeper into junk status.

Things aren't much better in Europe. This morning, BMW reported a dismal quarter. From London, Stephen Beard has more.


Stephen Beard: BMW's earnings in the second quarter fell by more than a third. The rising cost of production played a part. Raw materials like oil, steel and plastics have all soared in price.

But BMW has been hardest hit by the economic downturn in its biggest market. Car sales in the U.S. have fallen overall by 10 percent so far this year. And car makers like BMW have been the worst affected.

David Bailey, professor at the Birmingham School of Business:

David Bailey: The premium market is more volatile than the mass market, so in good times, of course, they rake in the money. In the bad times, we'll see much more significant falls in profits for them. That's exactly what we're seeing right now.

BMW says that in the months ahead it will shift its focus to regions that are still booming -- like the Middle East. But analysts do not expect emerging markets to make up the shortfall if American sales continue to decline.

In London, this is Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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