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BMW’s profit warning sends shockwaves through the US auto industry

US auto stocks slipped into the red zone on Wednesday after Germany-based rival BMW said that it expects its profits to decline considerably in 2019. Both Ford (F) and Fiat Chrysler Automobiles (FCAU) were down 1.8%, while General Motors (GM) saw the biggest decline of 3% during intra-day trading.

The decline in the auto industry weighed on the S&P 500 index, sending it down 0.26%.

Photo by Andras Vas on Unsplash

At the Frankfurt Stock Exchange, shares of BMW shed 5% of its value, while domestic rival Volkswagen slipped 2.3%.

BMW said its profits in 2019 would be limited by the higher expenses required to meet the stricter emission regulations. Separately, investments required to develop electric and autonomous vehicles, currency fluctuations and trade tensions are expected to send pre-tax profits 10% below last year’s figure.

The announcement is of great significance, given BMW is one of the better-off auto companies, thanks to a popular line up of car models. If BMW is showing signs of weakness, the health of rival firms could be questionable.

READ: KANDI TECHNOLOGIES ADDS TO AMERICA’S EV LINEUP

BMW, meanwhile, announced a $14-billion cost saving program to offset some of the impacts of the trade tensions and investments required for self-drive vehicles.

Chief Financial Officer Nicolas Peter said job cuts are not in the cards at the moment, though higher natural attrition would increase efficiency of the company.

 

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