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BMW CEO talks up model offensive as downturn crimps profits

Harald Krueger defends his cautious approach to electric cars; sees business improving in second half of the year

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Mr Krueger has pledged to retake the premium car sales crown from Mercedes by 2020 after losing the top spot in 2016.

Munich

BMW AG's chief executive officer defended his track record at the company's annual meeting, highlighting its luxury lead in the US and growing sales through a Chinese downturn, as the carmaker battles to reverse falling margins.

BMW is struggling alongside many other carmakers with a downturn in demand and record spending after years of growth. After a profit warning last year, the world's second biggest luxury carmaker had a tough start to the year, reducing momentum from an unprecedented model offensive to a whimper. That and BMW squandering an early lead in electric cars is putting pressure on Harald Krueger to prove his strategy.

"I am certain that we can continue our successful development - especially now that our model offensive is bearing fruit," Mr Krueger said in prepared remarks to shareholders at the company's annual meeting. "Your company remains strong, through both calm and stormy times."

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The company, planning 21 new or updated models this year, reported its first loss in a decade in the main automotive division in the three months through March, after booking a 1.4 billion euro (S$2.15 billion) provision for potential European Union fines over collusion. Even excluding this charge, the unit's return on sales dropped to the lowest point in 10 years.

Mr Krueger has pledged to retake the premium car sales crown from Mercedes by 2020 after losing the top spot in 2016. In the year through April, Mercedes led BMW on global deliveries by a margin of 52,340 cars, with BMW sales gaining 0.8 per cent and its rival falling 5.6 per cent. The Stuttgart-based rival also remained ahead in China.

BMW moved early in electric cars among major carmakers with the electric i3 in 2013 but paused putting more battery-only cars on the road after sluggish sales until this year, when it'll unveil an electric Mini. Meanwhile, Jaguar, Mercedes and Audi have started sales of a fresh generation of battery-powered sport utility vehicles.

While Volkswagen AG, Mercedes-Benz maker Daimler AG and Audi are investing in electric cars "at full speed, BMW is travelling in Munich with the handbrake on", Union Investment fund manager Janne Werning said in prepared remarks.

BMW plans 12 electric cars by 2025. Mr Krueger defended his cautious approach on Thursday, saying no one knew how fast electric cars would take over or which technology was set to win out. BMW's stance contrasts with Volkswagen's 30 billion euro electric onslaught for 70 models by 2028, with BMW producing hybrid and battery cars on the same production lines as combustion vehicles because it lacks VW's economies of scale.

"I do not believe it would be wise, from a business perspective, to put all our eggs in one basket," Mr Krueger said, highlighting plug-in hybrid vehicles and fuel-cell cars as alternatives.

Mr Krueger announced a 12 billion euro savings programme in March by culling models and reducing drivetrain options. For the second half of the year, BMW expects business to improve thanks to models like the revamped 3-Series sedan and the new full-size X7 sport utility vehicle.

There's been little let-up in the pressure that's been intensifying due to the US-China trade spat dragging on the global economy, and unprecedented spending demands for the transformation to electric cars. President Donald Trump is poised to delay a decision on tariffs on cars imported from the EU by up to six months, people familiar with the matter said on Wednesday.

Though investors have voiced criticisms, there's little risk of a revolt. Quandt family members Susanne Klatten and her brother Stefan Quandt own 45 per cent of the company's shares. BLOOMBERG