BMW is embarking on a significant cost-cutting initiative, with negotiations underway to reduce its global workforce by up to 5%, or approximately 7,700 positions, by the end of 2026. These reductions will primarily occur through natural attrition and a voluntary redundancy program targeting administrative and development roles, rather than compulsory redundancies. This program, described as the largest voluntary redundancy effort in BMW's history, is expected to cost hundreds of millions of euros but aims to generate annual savings of around €1 billion from 2028.
The move comes as BMW issued its third profit warning in three years, revising its 2026 EBIT margin forecast for its automotive division from 4-6% down to 1-3%. The company also dramatically cut its return on capital employed target for the segment to 1-5% from an earlier 6-10% and anticipates free cash flow in the automotive business to more than halve to over €2.5 billion. Pretax profit is now expected to decline "significantly" year-on-year, a stark revision from the previous "moderate" drop.
The profit warning triggered negative reactions from rating agencies and analysts. Moody's revised its outlook on BMW's A2 long-term rating from stable to negative, citing deteriorating profitability and an uncertain recovery. Analysts at UBS and Goldman Sachs cut their price targets, while JPMorgan described the warning as a "wake-up call" for the European auto industry. Despite the challenging outlook, BMW is committed to its shareholder return policy, maintaining a dividend payout ratio of 30-40% of net profit and continuing its share buyback program.
Amidst these financial challenges, BMW is banking on its "Neue Klasse" electric vehicle platform to drive future growth. The company has pulled forward the order date for the new i3 "First Edition," which starts at €75,340, with production set to begin in August at its Munich plant. The iX3, another Neue Klasse model, has already garnered 50,000 pre-orders globally since its European launch. The company reported a 5.4% sales increase in Europe and a 3.9% rise in the US in the first half of 2026, despite a 4.2% overall decline in global deliveries to 1.15 million vehicles. Full-electric vehicle sales were up 5.2% in Q2, with an 38% increase in Europe, largely driven by the iX3.
