BMW brake recall on 1.5 million cars contributes to carmaker’s poor prospects – Daily News

By Wyatte Grantham-Philips | Associated Press Press Agency

BMW is lowering its sales and profit targets for fiscal 2024. The German luxury carmaker says the decision is partly due to heavy spending to resolve a brake recall that affects more than 1.5 million vehicles worldwide.

Munich-based BMW Group said Tuesday that the cost of repairing a faulty integrated brake system manufactured by a supplier to the company will reach a “high three-digit million (euro)” amount in the third quarter. It also expects halted deliveries of affected vehicles not yet in customers’ hands to negatively impact sales.

A spokesman for BMW Group, which also owns the Rolls-Royce and Mini brands, confirmed to The Associated Press in an email that the company first identified the issue during internal quality control. It prompted a safety recall in February, but that additional cases have since been identified “outside the scope of the original recall.”

BMW currently estimates that the problem affects around 1.53 million vehicles in five countries – including around 370,000 in China, 270,000 in the U.S., 150,000 in Germany, 70,000 in Korea and 60,000 in France.

The affected vehicles were manufactured between June 2022 and August 2024, according to BMW, and cover several models. They include selected BMW X models (excluding the X3 and X4), the 5 and 7 Series, the Rolls-Royce Spectre, the MINI Cooper and the Countryman.

Of the 1.53 million affected cars, 1.2 million are already in the hands of customers — while around 320,000 remain with BMW or in dealer stock. A third of those vehicles are affected by individual market disruptions, according to the company.

A BMW spokesman said the company had “developed diagnostic software that detects brake failure before it occurs.” If a potential brake failure is detected, it should alert the driver to visit a dealer as soon as possible for a free replacement, the spokesman added.

If a failure occurs, which BMW says is “very unlikely”, the system should also revert to “safe mode” – which ensures the brakes are working and meet legal standards but requires drivers to use more force when applying them.

German car supplier Continental AG confirmed Tuesday that it makes this integrated brake system for BMW and that the faulty component could cause the issue to rely on its stock level. In a statement, Continental also pointed to available diagnostic software that detects this potential problem “well before it occurs.”

Continental reiterated that the brake system could be replaced if such damage was detected — but added that it expected “only a small fraction” of the brake systems delivered would actually need to be replaced. The company said it had built up reserves of “mid-double-digit millions of euros” to cover warranty costs.

In addition to costs related to the brake system recall, BMW’s financial outlook update on Tuesday also cited “continued weakening demand” in China, which the company said was weighing on sales volumes as consumer sentiment remained weak despite government stimulus measures.

Citing both the costs of product recalls and falling demand in China, BMW is cutting its automotive segment’s earnings before interest and taxes in 2024, an important measure of profitability, to 6% to 7%, down from a previous range of 8% to 10%. The company now expects its annual return on capital employed to be between 11% and 13%, down from 15% to 20%.

BMW now also predicts a slight decline in deliveries worldwide in 2024 compared with the slight increase previously forecast.

Originally published: September 10, 2024 at 1:28 PM