BMW posted relatively poor earnings. Given the state of the global car industry, that is no surprise. Vehicle sales across all car companies in the U.S. dropped 32% last month.
But the German car firm operates at the high end of the market. People who buy its cars should not have trouble getting money. With some models running over $100,000, a lot of BMW customers are simply rich.
In the last quarter, BMW's profit fell 63%. According to Bloomberg, "The maker of BMW, Mini and Rolls-Royce cars predicted in August that it would break a vehicle-sales record." Now it has abandoned that hope and admits 2008 unit sales will be down.
The news is more evidence that around the world the upper-middle classes and the rich are being hit by the credit crisis just as much as those further down the economic ladder. When the rich get poor, what happens to those just hanging on financially? The answer is that they perish, at least in an economic sense.
In some ways, BMW's news is worse than the news that General Motor's (NYSE:GM) domestic unit sales fell 45% in October. The GM news was expected. BMW, on the other hand, was supposed to dodge the downturn. It said that it would just three months ago. The car industry is going to hell that fast.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
11-04-2008 @ 2:05PM
beanspants said...
Though BMW does sell $100k cars, a large percentage of their sales are leases and sales of the ~$30k models, which while not cheap by any means, are not really high end cars, and were probably bought or leased with home equity and housing gain dollars. the housing crisis and disappearance of HELOC money is probably the major reason BMW is down, and the other luxury manufacturers will soon follow.