GERMANY: Weak dollar means "astronomical losses" for German brands in USA
The continuing weakness of the dollar will reduce profits in 2005 for German automakers that sell cars in the US.
BMW will suffer the most this year because many of its hedge contracts expire, Automotive News Europe said, citing a report from Dresdner Kleinwort Wasserstein in Frankfurt. It estimated currency-exchange rates will cut $US967 million from BMW profits before taxes.
Arndt Ellinghorst, director of research for Dresdner Kleinwort Wasserstein, said BMW profits may still be protected by the continuing strength of its model line. BMW just introduced the X3 SUV in the US and the replacement for the 3 series, BMW's core product, arrives later this year.
BMW said it does not plan to ship fewer cars to the US.
"We think the dollar will come back," said Eckhard Wannieck, a BMW spokesman in Munich. "We have no plans for reallocation of cars."
The weak dollar also will reduce DaimlerChrysler's Mercedes car margins about $824 million this year, according to the forecast. In December, DaimlerChrysler started US production of the new Mercedes M class SUV in Vance, Alabama. It said increased US output will help offset the strong euro.
"Average hedge rates deteriorate the longer the weakness of the US dollar versus the euro persists and put increasing pressure on our results," said a Mercedes spokesperson.
The negative impact on Volkswagen margins in 2005 will be $269 million, the report predicted. Klaus Volkert, chairman of VW's general works council, told VW workers that the dollar's weakness meant European-built vehicles could only be sold in North America at astronomically high losses.
Ellinghorst said the manufacturers face a dilemma. As the dollar's weakness begins to look like a long-term situation, German automakers must consider allocating more cars to markets with better exchange rates. But they cannot anger their US dealers, he said.
"You can't just stop supplying products to them," Ellingorst said. "That would hurt the brand image in the US, which is a very important market."