BMW recalls 1.5 million cars over brake issue

BMW on Tuesday announced a far-ranging recall of vehicles, as well as a delivery ban on cars that have not yet reached customers.

The manufacturer also said it was lowering its profit and sales expectations because of the issue, coupled with subdued demand in China.

What was the problem with the cars?

BMW says problems with the brake system affect more than 1.5 million cars in total and caused warranty costs in the high three-digit million range in the current quarter.

In addition to recalls, deliveries are to be suspended for 320,000 cars that have not yet been handed over to clients.

The Munich-headquartered company said this would effectively lead to negative sales figures worldwide in the second half of the year.

Parts supplier Continental, which manufactures the integrated braking system for BMW, said the function of an electronic component may be impaired. This would need to be replaced.

However, the supplier added, there was no danger of the braking performance falling below the legally required standards.

How does the news affect BMW?

The BMW stable — which also includes the Rolls Royce and Mini brands — said it now expected a slight decrease in vehicle deliveries this year compared with last, having previously predicted a small increase.

Exacerbating the impact of the recall and canceled deliveries, "the ongoing muted demand in China is affecting sales volumes. Despite stimulus measures from the government, consumer sentiment remains weak," BMW said in a statement.

The automaker also trimmed its profitability guidance, expecting margins this year of 6 to 7%, down from 8 to 10% previously.

BMW shares fell by almost 8% in the immediate aftermath of the profit warning, while shares of supplier Continental fell by 7%.

BMW last month also recalled 1.4 million vehicles in China due to faulty airbags.

rc/sms (dpa, AFP)