Friday, November 8, 2013

BMW Profit Hurt by Investments

Today, technological innovation is one of the ways that many businesses use to increase their sales. In the post BMW Profit Hurt by Investments, Christine Tierney and Friedrich Geiger reveal how BMW AG has spent so much on new technologies and how this will squeeze the profit margins of this German automobile company in the present quarter through to next year as they cope with intricate Europe’s trading conditions.
The rising capital expenditures in exploring in new technologies have had significant cost implications of the company’s earnings. The interest and tax earning decreased leaving the profit margin of this company at 9% from 9.6% in the previous quarter. The results are commended by many analysts commend in response to the involvement of new technologies, but investors are upset by the weakening operation earnings of BMW that has been caused by the race towards technological supremacy.
The fact that BMW takes the risk of investing in new technologies even when this has declined profits of other top German automotive companies such as Audi and Daimler, makes this topic interesting. These competing companies have spent a lot in new technologies to increase profitability, although improving has lagged them behind. According to a national post Kyoto's economic opportunities car makers will have less work. Cars makers will adapt to technologies that are environmental friendly. This implies that there will be more investments and research as less will be spent by auto companies to dispose wastes. Extra capital used in waste dispose will be used in new researches.
BMW is also taking the path to new technologies like other businesses and with its new electric car plus other research and development projects, it spends a total capital expenditure of €4.3 billion. Although this will lower the company’s current operating profit margin to below the range of 8-10% due to the high costs in the many projects, this will significantly nourish the company’s profitability. The new models will increase sales next year.
New technologies have international implications as it uncovers intricacies and dynamics of developed countries about sustainability of their innovation capabilities. They influence techno-economic, social development and industrial growth of developing countries and then spread these innovations to developing countries through globalization to improve their economic activities.
http://online.wsj.com/news/articles/SB10001424052702304391204579179033540657304mod=WSJ_business_whatsNews


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