German automaker BMW announced on Thursday a major corporate overhaul after second-quarter pretax profit dropped 35 percent, prompting the company to cut approximately 8,000 jobs through a voluntary redundancy program.
Pretax profit for the Munich-based group fell to €1.7 billion ($1.95 billion), while the operating margin in its core automotive business narrowed to 2.3 percent from 5.4 percent a year earlier.
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The carmaker attributed the decline to a sharp 30 percent slump in second-quarter sales in China alongside eroded consumer confidence caused by ongoing conflict in the Middle East.
Voluntary Redundancy Program Targets Administrative Roles
To regain competitiveness, the company agreed on a voluntary redundancy program with its works council to trim administrative and development roles while excluding production operations.
A person familiar with the matter indicated the severance scheme will eliminate approximately 8,000 jobs out of BMW's global workforce of 150,000 by the end of 2027.
BMW Chief Executive Milan Nedeljkovic described the quarterly performance as unacceptable while outlining broader plans to streamline operations across sales, procurement, production, and development.
"The automotive industry is faced with rapidly escalating challenges — intense global competition, increasing regional regulatory requirements and the implications of geopolitical conflicts will shape our business model in the years ahead," said Nedeljkovic.
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The CEO noted that the company will also evaluate its product portfolio and market-specific model variants to address shifting consumer adoption rates between electric vehicles and combustion engines.
"We are taking a critical look at how we work, including re-visiting core processes and structures that previously were considered untouchable," said Nedeljkovic.
Addressing staff at a workers assembly in Munich, the chief executive cautioned employees that fundamental shifts in market conditions necessitated aggressive structural reforms across the organization.
"The results are not satisfactory," said Nedeljkovic.
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Despite the profit drop, BMW reaffirmed its full-year guidance targeting an automotive operating margin between 1 percent and 3 percent, while company shares rose 1.3 percent following the announcement.
