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BMW abandons 2008 profit target

BMW warned that it could no longer give an earnings outlook for 2008 beyond expecting a profit after quarterly results at the world's largest premium carmaker fell far short of expectations.

With group sales set to fall again sharply in October in tough markets, it chopped planned production by at least another 40,000 units on top of the 25,000 vehicles it had earlier scrapped. The total cuts represent 5% of 2007 output.

Earnings before interest and tax (EBIT) fell 60% in the three months to end-September to €387 million ($498.4 million), badly missing the average estimate of €574 million from a Reuters poll of 17 analysts.

Results at its core Automobile division collapsed, with EBIT plunging 82% and shaving off just over 470 basis points from its margin, leaving the business with an operating return on sales of not even 1.3%.

“Difficult business conditions and the volatile climate on the market mean that it is as good as impossible from today's perspective to make a reliable prediction of the earnings outcome for 2008,” Chief Executive Norbert Reithofer said in a statement.

“We will, however, achieve a result that is clearly positive,” he added.

Although it raised risk provisions for bad loans and sharper than expected declines in the price of vehicles coming off lease in the third quarter by a further €342 million, it would not rule out another increase before the end of the year.

In the first nine months, these provisions reduced earnings by €1.04 billion. BMW also booked a charge during that period of €258 million in total.

Industrial operations burned cash in the nine months to the end of September, but borrowing helped boost its cash to €3.41 billion. (Reuters)