By William Boston 
 

BERLIN--German luxury car maker BMW AG on Wednesday idled automotive production at factories in Europe and South Africa and slashed its outlook for sales and profit in the coming year, as the impact of the coronavirus pandemic and efforts to contain it hit demand.

The Munich-based maker of BMW, Mini, and Rolls-Royce vehicles said its plants in Europe and Rosslyn, South Africa would close Wednesday and remain shut initially until April 19.

BMW CEO Oliver Zipse, in comments during a news conference, drew parallels between the economic situation in the wake of the virus outbreak and the 2008 financial crisis. He said BMW managed to remain profitable throughout the financial crisis and that the company would do everything to master the current crisis.

"We find ourselves in an extraordinary situation," he said. "But we are also cautiously optimistic. There is a time during the coronavirus. And there will be a time after corona."

All major auto makers this week announced plans to shut down auto production in Europe to help stem the spread of the novel coronavirus, which is hitting the region's most important manufacturing industry at a time when European economies are already weak and demand for new cars has been in decline.

In a statement outlining its 2019 earnings, BMW said it was slashing its profit outlook for 2020, saying it was cutting its pretax profit margin outlook in its automotive businesses to 2% to 4%, down from the 4.9% margin it achieved in 2019.

BMW said earnings before interest and taxes fell 26% to 7.1 billion euros ($7.86 billion) in 2019, and despite a 8% increase in sales to EUR104 billion. The company sold 2.5 million BMW, Mini, and Rolls-Royce vehicles last year, up 2.2% from a year ago.

In the face of a European investigation into allegations that BMW colluded with other auto makers to depress prices of some technology components, the Munich-based auto maker took an EUR1.4 billion charge against earnings in the first quarter of 2019, denting earnings for the full year.

Despite the worsening economic situation, BMW indicated it would not begin slashing jobs, saying it expected the number of employees this year to remain unchanged from 2019 levels.

The company gave no details about its factories pending an announcement at 0900 GMT, but as the coronavirus sweeps through Europe the company said it would adjust production to meet falling demand in global auto markets and that in the wake of the coronavirus pandemic it expected sales and earnings this year to be well below the previous year.

BMW said "demand in all important markets will significantly impaired by spreading of the virus and the efforts to contain it," and that automotive sales in 2020 would be "significantly below the level of the previous year."

Separately, the Association of European Automobile Manufacturers said new car sales in the European Union fell 7.4% in February to 957,052 vehicles. The data now excludes the United Kingdom, which has left the EU. Analysts said the decline did not yet reflect major coronavirus outbreaks in Europe and expect March sales to deteriorate significantly.

 

Write to William Boston at william.boston@wsj.com

 

(END) Dow Jones Newswires

March 18, 2020 05:16 ET (09:16 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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