BMW eyes German bailout fund

News | November 8th, 2008 by 3

With all the recent news about BMW’s financial problems, slower sales, concepts cancellations and workforce layoffs, I thought it would be interesting to touch this …

With all the recent news about BMW’s financial problems, slower sales, concepts cancellations and workforce layoffs, I thought it would be interesting to touch this subject one more time. Financial Times posted a few days ago an article on BMW’s problems and the solutions they’re seeking.

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BMW became the first European carmaker publicly to consider tapping Germany’s government- backed banking rescue scheme on Tuesday and said it might also seek US assistance.

Friedrich Eichiner, BMW’s interim chief financial officer, said the German premium carmaker had not made a final decision on whether its German finance operations should join the credit guarantee plan.

“However, we are following that very closely as we want to avoid competitive disadvantages,” Mr Eichiner said.

Carmakers in France and Germany are in principle eligible to tap the two governments’ banking rescue plans, according to government officials. Until now, no European carmaker has expressed a need to use the European rescue schemes.

However, BMW is in a more difficult situation than most of its rivals. It has been hit particularly hard by falling residual values of leased cars – a legacy of its aggressive leasing policy in the past.

In the third quarter, it posted another €342m ($445m) in charges for possible loan losses and falling residual values, as a crisis initially limited to the US spilled over to Europe.

Mr Eichiner said used car values in Europe “significantly worsened in the third quarter – mainly in the UK but also in Germany”.

BMW’s finance arm also suffers from higher refinancing costs in the wake of the financial crisis.

As a result, the company’s finance division posted a loss in the third quarter. For the first nine months, charges in its leasing business total more than €1bn.

Continued

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