http://www.marketwatch.com/news/story/bmw-warns-profit-leased-car-prices/story.aspx?guid={CC6E2124-4F67-4785-9324-3E772C20CB46**

Looks like this is a good time to lease a BMW now.

 

According to a Bloomberg article the other day, BMW is about 63% leased, Mercedes is about 55%.

Some of us, especially Ron has talked about this for sometime now. BMWs selling methods here, basically putting anyone in a BMW trying to get the sales crown, will backfire.

When I posted the thread looking at used 545/550 prices, I was shocked as others, the prices are very low for the car you get.

Their short term strategy will hurt them in the long run.

I do want to mention, they still had over $700 million in profit but 33% is a huge drop and this is a continuing trend of BMW reporting lower profits.

 

BMW Drops Most in Seven Years After Forecast Scrapped (Update1)

By Hellmuth Tromm and Chris Reiter

Aug. 1 (Bloomberg) -- Bayerische Motoren Werke AG, the world's largest maker of luxury cars, fell the most in seven years in Frankfurt trading after abandoning its profit forecast on falling U.S. sales, the dollar's decline and rising costs for plastics, steel and oil.

BMW fell as much as 10.8 percent. Second-quarter net income dropped to 507 million euros ($790 million) from 753 million euros a year earlier, the Munich-based company said today, missing the median estimate of 703 million euros in a Bloomberg survey. Sales declined 0.9 percent to 14.6 billion euros.

Chief Executive Officer Norbert Reithofer plans to cut production by more than 20,000 vehicles, raise prices and ship cars produced for the U.S. to other markets after sales ``deteriorated sharply over the past weeks.'' His prediction of ``another difficult year'' in 2009 comes seven days after Daimler AG lowered its forecast. Car sales in the U.S., BMW's biggest market, have fallen 10 percent this year as soaring gasoline prices and slowing economic growth hurt consumer spending.

``What's surprising is the size of the cut,'' said Georg Stuerzer, an analyst at UniCredit Markets & Investment Banking in Munich, who recommends investors buy the stock. ``Next year won't become easier due to currency risks and commodity prices.''

BMW's new earnings target puts them ``at the lower end of the industry,'' Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler, told Bloomberg Television. ``The profit warning is severe.''

Europe, Asia

BMW fell as much as 3.11 euros to 25.80 euros, its biggest drop since Sept. 14, 2001. The shares traded at 26.65 euros at 1:10 p.m., extending their decline for the year to 37 percent and valuing the carmaker at 17.3 billion euros.

The company had forecast higher earnings on eastern European and Asia sales and demand for the X6 crossover and upgrades of the X5 sport-utility vehicles and Mini cars. BMW is now scrapping its forecast for 2008 pretax profit of 3.78 billion euros, spokesman Marc Hassinger said in an interview.

The U.S. economy shrank at the end of 2007 and grew less than forecast in the second quarter this year, a government report showed yesterday, as the world's largest economy struggles with declining house prices and gasoline that has climbed to more than $4 a gallon. U.S. banks have been hit with billions of dollars in writedowns of mortgage-related securities, reducing their appetite to issue new loans and drying up funds for growth.

Tightening Lending

Pretax profit at BMW's financial services division dropped 66 percent to 64 million euros. The company said it plans to tighten lending practices at the unit.

Slumping U.S. demand has spilled over into Europe, where deliveries are expected to shrink 2.7 percent in 2008, faster than the 2 percent drop in the first half, the European Automobile Manufacturers Association has said. The situation for carmakers is exacerbated by a 65 percent jump in steel prices and a 69 percent rise in oil over the last 12 months.

In addition, the dollar's 14 percent drop against the euro over the past year is crimping U.S. earnings for BMW and other international carmakers. Nissan Motor Co., Japan's third-largest automaker, reported a steeper-than-expected 43 percent drop in first-quarter profit burdened by the weak dollar and a drop in resale value of vehicles on lease.

Reithofer said the company expects to reduce supply to the U.S. market by 40,000 vehicles, roughly 11 percent of North American sales in 2007, by shipping cars to other markets and halting production. It also plans to raise prices in the U.S.

Margin Goals

BMW expects a return on sales of at least 4 percent this year and an operating profit margin, or sales as a percentage of profit before interest and taxes, of 4 percent or higher in the automobile division, the company said in a statement. The company's pretax profit margin was 6.9 percent in 2007.

The new target implies pretax profit of at least 3.1 billion euros, or 18 percent below the previous forecast, Adam Jonas, a London-based analyst with Morgan Stanley said in a note.

``BMW remains a healthy company that is going through a difficult time,'' said Jonas, who has an ``overweight'' rating on the stock. He said losses for BMW in the coming quarters couldn't be rule out.

``Rising oil and raw material prices, the weakness of the U.S. dollar, the impact of the international financial crisis and a weaker U.S. economy have made business conditions significantly more difficult,'' the company said.

3-Series, Mini

BMW has added almost 14.5 billion euros to annual revenues since 2003 by introducing new versions of mainstays like the 3- Series sedan, expanding its lineup of SUVs and adding the 1- series compact. With fuel prices soaring, consumers are opting for smaller, less profitable cars, prompting BMW to cancel plans to build the X7 SUV, Reithofer said. Sales of BMW's Mini brand rose 13.5 percent in the second quarter, while the main BMW brand edged up 2.3 percent.

BMW more than doubled risk provisions to account for bad debt and lower resale values of leased vehicles to 695 million euros in the second quarter from 236 million euros. Expenses for job cuts amounted to 107 million euros in the first six months.

European used car markets are beginning to show similar signs of weakness as the U.S., Chief Financial Officer Michael Ganal said on a conference call with journalists. He said the company would take additional provisions if markets continue to sink.

CEO Reithofer has a program in place to cut spending by 6 billion euros, including the elimination of 8,100 jobs, to help increase its return on sales in automaking to 8 percent and 10 percent by 2012 from 6 percent in 2007. BMW said it has cut about 4,000 temporary jobs and 1,500 permanent staff since September 2007. BMW expects higher expenses for job cuts in the second half.

 

BMW Tries to Reduce Leases From 60% of Its U.S. Sales (Update3)

By Mike Ramsey

July 30 (Bloomberg) -- Bayerische Motoren Werke AG, the world's largest maker of luxury vehicles, is increasing incentives to purchase cars as a way to reduce reliance on leases that make up 60 percent of its U.S. sales.

The automaker several weeks ago began offering buyers 0.9 percent loans of as long as five years, said Jan Ehlen, a spokesman for its U.S. unit in Woodcliff Lake, New Jersey. BMW also raised its lease prices an average of 3 percent on May 1.

``We are offering a broader variety of purchasing options,'' Ehlen said today in an interview. ``One of the intentions is to have a more balanced relation between financing and leasing,'' he said, adding that Munich-based BMW doesn't have a target figure.

BMW's changes reflect the effect of rising lease costs on luxury-vehicle sellers. The company's push began after it booked first-quarter costs of 236 million euros ($373 million) because of bad debts and lower values of vehicles in the U.S. when leases end. Other automakers and some banks are dropping or reducing leases, and Ford Motor Co. last week took a $2.1 billion pretax writedown on the value of such contracts for its trucks.

Group 1 Automotive Inc. Chief Executive Officer Earl Hesterberg said yesterday in an interview that BMW's incentive program was designed to wean customers from leasing and that he expected other makers of luxury vehicles to take similar action. Group 1, the fourth-largest U.S. auto retailer, owned 11 BMW franchises at the end of 2007.

Charles Oglesby, CEO of retailer Asbury Automotive Group Inc., told analysts on a call today that the pullback on leasing ``will have some impact on the luxury side of the business.''

Higher Lease Percentages

Makers of luxury vehicles typically get a higher percentage of sales from leases. About 20 percent of U.S. new-vehicle sales were leases this year through July 20, according to J.D. Power & Associates. The market-research firm's Power Information Network said such contracts were 55 percent of sales at Daimler AG's Mercedes-Benz, 43 percent at Toyota Motor Corp.'s Lexus and 42 percent at General Motors Corp.'s Cadillac.

Automakers, banks and finance companies are seeing declining values when vehicles, particularly large pickup trucks and sport- utility vehicles, are returned when leases end. Manheim Consulting, a provider of data on used cars and trucks, said on July 8 that the value of U.S. used vehicles fell 6.2 percent in June, the eighth straight month of decline.

Banks, struggling with losses from the sub-prime mortgage crisis, also are charging higher interest rates for leases because they are riskier than auto purchase loans.

Chrysler, GMAC

Chrysler LLC said on July 25 that its finance arm will stop offering vehicle leases Aug. 1. JPMorgan Chase & Co. said yesterday that it no longer will provide leases on Chrysler vehicles starting the same day.

GMAC LLC, 49 percent owned by GM, will stop offering leases with incentives in Canada on Aug. 1, while continuing them in the U.S. GMAC spokeswoman Gina Proia said the auto-finance unit hasn't announced any changes in U.S. programs for leases with incentives.

Ford told some U.S. dealers this week that it will boost prices on leases for large pickups and SUVs.

Toyota's Lexus hasn't changed its position on leasing and has no effort similar to BMW's, spokesman Greg Thome said.

Daimler's lending unit, Daimler Financial, hasn't altered its stance on leasing in the U.S., spokesman Jack Ferry said. Of Mercedes-Benz sales the unit handles, three-quarters are leases.

Volkswagen AG's VW Credit hasn't pulled back on leasing for its Audi luxury brand, Audi spokesman Christian Bokich said.

 

whats the percent of lexus leased?

 

I even underlined it for you. 43%

 

I am still just flabbergasted by how fast this is taking the auto industry by the throat. Of all the luxury brands, it comes as no surprise to any of us that bimmer is going to be in for some big changes. Doug leased that M5 at the right time. I expect this will have the least impact on Lexus but I don't say they won't get away unscathed. And probably Lexus is more vulnerable in the decline of home equity funding sales than someone like Mercedes. Impressive change in the auto landscape may be going on right in front of us.

 

wow, this crazy. I knew those lease residuals in BMW were ridiculous.

 

Unlike the competition, Lexus didn't lease their cars out cheap to boost sales, it's been frequently commented by many here that Lexus leases don't make sense, so I think this will hurt them a lot less, since they are collecting "enough" money from their leasees compared to the competition, & their % of sales that are leases is lower to begin with.

 

It makes sense. BMW doesn't have a good rep for their cars beyond their warranty. I don't know if I will get another down the road. I do like German cars though. I think it depends what my mindset is like. I might go and get the NSX by that time or an 94 Supra.

 

I own two of my (Lexus) cars but I like to turn over my third car every two years. Leasing was a perfect way of doing this but now it is going to make less sense financially which is a bummer

 

How do you tell when an auto company is lying? Either their lips are moving or they issue a press release. Does anyone else remember this nonsense that the luxury makers have for years been spooning out about their immunity from economic downturns because all their sales are people who walk in and buy with a big wad of sweaty cash? Now, thanks to 1Sick we have the articles posted about the luxury makers leasing anywhere from 40 to 60% of their cars. And before anyone brings up the goodness of leasing for business purposes, I don't buy it. There have just been a lot of people getting into cars that they couldn't afford, whether they be BMW or Lexus, because of leases. And, like any good bubble or ponzi scheme, as long as things kept growing, it just spread. Now, it is coming home to roost (not a direct or indirect animal husbandry reference). In March of this year everyone, not meant to be a reference to anyone here but the talking heads and others in the economic media, how we had bottomed in the economy. The unraveling of this auto lease industry makes me think we aren't close. I could wonder what would be next but I have a sneaky suspicion it will be consumer credit as in credit cards and zero percent financing on that big screen or couch. Wonder how long the bimmer included service will last?

 

On the 335i:
"As a driver’s car, then, this is yet another winner. But I still wouldn’t buy one.

You need to think of it as a painting by the world’s greatest artist. Yes, the brush strokes are magnificent. Yes, the texture is superb. Yes, the perspective is world class and the detailing is better than you’d get from Leonardo.

But what he’s actually painted in this case is big dog turd."


-out good ole friend clarkson.