BMW Group announces global strategy and layoff plan to exit the crisis

German luxury car manufacturer BMW Group has announced its new global strategy to regain investor confidence after consecutive profit warnings and a sharp decline in its shares.

BMW Group shared the company's road map out of the crisis at the company's "Capital Markets Day" event.

The Munich-based manufacturer, whose shares have lost more than 40 percent of their value since the beginning of the year, announced that it will take radical steps to reduce costs and speed up decision-making processes.

In this context, the company aims to save 1 billion euros annually by laying off 8 thousand people worldwide.

In addition, by the middle of next year, one in every five departments in the company will be closed and relevant management positions will be abolished.

Change of strategy in China

China, the world's largest automotive market, is at the center of BMW's crisis. The company, which issued its third profit warning in the last three years due to the decline in the Chinese market, is changing its strategy in this region.

BMW, whose deliveries in China decreased to 626 thousand units, decided to completely stop the sales of compact and small models in this market.

With its "Local for Local" approach, the company plans to produce more than 95 percent of the vehicles sold in China by 2030.

Development and supply processes will also be largely shifted to China. Additionally, the option of exporting models produced in China to Southeast Asian markets such as Indonesia and Thailand will also be on the table.

New financial goals

German luxury car manufacturer BMW announced its new medium and long-term financial targets within the scope of its strategy to increase operational efficiency.

The company, whose current operational profit margin (EBIT) expectation is 1 to 3 percent and its free cash flow target is 2.5 billion euros, offered new maturities to investors in order to relieve the pressure in global markets.

According to the company's current road map, the profit margin in the automotive segment is expected to increase to 3 to 5 percent by 2028. In the same period, the free cash flow, which is critical for the dividend payments of BMW's main shareholders, the Klatten and Quandt families, is aimed to reach at least 5 billion euros.

In long-term planning, BMW aims to return to the 8 to 10 percent profit margin range, which is considered strong in the industry, for 2030 and beyond. Aiming to tighten financial discipline, the automotive giant promises to increase its free cash flow to over 7 billion euros in this process.

The management emphasizes that these cautious targets will accelerate the exit from the crisis by protecting the financial structure of the company.

New models specific to the market

BMW will abandon its global single model approach and act according to market trends.

As the Spartanburg factory operates at full capacity for the US market, the global production network will be expanded for a new luxury SUV model that will be positioned above the luxury X7 model. For the European market, a fully electric compact model based on the "Neue Klasse" architecture will be produced at the Leipzig factory within two years.