Recession in the Rearview Mirror, BMW Is Back in the Fast Lane

BMW (BAMXY.PK) profits illustrate that luxury brands are often the last in and first out of a recession.
"The evident market recovery since the beginning of the year continued to gain pace during the second quarter 2010. We performed exceedingly well on the international markets with a range of new and attractive models," the company said last week in its earnings announcement. China was one of those markets where BMW performed "exceedingly well," with second-quarter sales nearly double the year-ago quarter.
BMW net income in the second quarter increased almost seven-fold, to about $1.1 billion. For the first half, BMW earnings were about $1.5 billion, versus a loss of about $41 million in the year-ago period.
To produce that turnaround, BMW sold only 12.5 percent more vehicles worldwide in the second quarter, at 380,412. That includes the BMW Group's BMW, Mini and Rolls-Royce brands. For the first half, unit sales were up 13.1 percent to 696,026.
Besides the volume increase, BMW also boosted its earnings by cost-cutting, but nothing like as drastic as the restructuring Chrysler, Ford (F) and General Motors have endured since 2008. From BMW's perspective, that sort of trauma has been something that happens to someone else.
True, softer demand forced BMW to concede in late 2008 that it was no longer going to set yet another worldwide sales record. Sales fell another 10 percent or so in 2009, but now BWM seems to be right back in the fast lane.
Big U.S. auto dealer groups like Penske Automotive Group (PAG) also had a complaint about BMW in the second quarter: they couldn't get enough cars. It's going to be a while before other dealers share that particular complaint.
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Photo: BMW