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BMW first quarter profit falls 78 percent, hit by 1.4 billion euros legal provision, expenses

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BMW first quarter profit falls 78 percent, hit by 1.4 billion euros legal provision, expenses
FILE PHOTO: A BMW logo is displayed at the 89th Geneva International Motor Show in Geneva, Switzerland March 5, 2019. REUTERS/Denis Balibouse   -   Copyright  Denis Balibouse(Reuters)
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FRANKFURT (Reuters) – BMW’s first-quarter operating profit fell 78 percent to 589 million euros (503 million pounds), despite higher deliveries of luxury vehicles, as the carmaker took a hit from higher investment spending and a 1.4 billion euro legal provision.

Last month, the European Commission told German carmakers they face hefty fines for alleged collusion in the area of emissions filtering technology.

BMW’s first-quarter earnings before interest and taxes were below the 666 million euros forecast in an analyst poll, weighed down by a 36 percent jump in spending on property, plants and equipment to convert its factories to build electric cars.

To counter rising costs, BMW said it will cut the available engine and gearbox combinations by 50 percent and seek efficiency savings of more than 12 billion euros by the end of 2022.

BMW said on Tuesday its automotive division delivered an operating loss in the quarter.

Excluding the impact of the legal provision to cover a potential anti-trust fine, BMW’s automotive division delivered an operating margin of 5.6 percent in the first quarter, the carmaker said.

By contrast the return on sales at Mercedes-Benz passenger cars fell to 6.1 percent, down from 9 percent a year earlier and rival Volkswagen said the return on sales for its passenger cars business will be at the lower end of its 6.5 percent to 7.5 percent margin target this year.

BMW said it will contest the European Commission’s allegations that its participation in industry working groups amounted to anti-competitive behaviour.

“The participating engineers from the manufacturers’ development departments were concerned with improving exhaust gas treatment technologies. Unlike cartel agreements, the whole industry was aware of these discussions,” the carmaker said.

BMW did not make secret agreements to the detriment of suppliers or its customers, the carmaker added.

(Reporting by Edward Taylor; Editing by Thomas Seythal and Louise Heavens)

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