BMW profit drops 74% as recession saps luxury sales

Bayerische Motoren Werke AG, the world's largest maker of luxury cars, reported a 74 percent plunge in third-quarter profit as the recession sapped demand for higher-priced models.

BMW declined the most in 11 months in Frankfurt trading after net income fell to 76 million euros ($112 million) from 296 million euros a year earlier. Earnings before interest and tax dropped 86 percent to 55 million euros, below the 200 million-euro median estimate of 11 analysts in a Bloomberg poll.

Government vehicle-scrapping incentives have helped revive demand for cheaper models, such as Volkswagen AG's 17,000-euro Golf, without boosting deliveries of higher-priced cars such as BMW's 73,000-euro 7-Series sedan. The luxury manufacturer has responded to the sales drop by building fewer vehicles and reducing work hours for as much as one-quarter of its workforce.

"It's a miss," said Philippe Houchois, an analyst with UBS AG in London. "It's a surprise because I thought that there would be a base effect because they cut production early."

Munich-based BMW fell as much as 2.69 euros, or 8 percent, to 30.92 euros, the biggest intraday drop since Nov. 18, 2008. The stock was down 6.4 percent as of 12:26 p.m. local time.

Revenue fell 6.6 percent to 11.8 billion euros in the quarter, the company said today in a statement. Net income was equivalent to 12 cents a share, down from 45 cents.