BMW cuts Predicted Profits as EU tightens Pollution Laws

Let’s face it. The auto industry worldwide is taking a beating. The U.S. is, especially, is in the middle of some vicious smackdown.

But Europe, still one of the biggest markets after the U.S., is also bruised and battered.

It seems that only BMW and Daimler have conceded that there’s a problem. BMW reduced its profits expectations for 2008. Mercedes-Benz, which is suffering from falling sales in key markets, may cut production by at least 50,000 units during the rest of this year.

On the other hand, automakers like Renault, Peugeot, Fiat, and Volkswagen are telling their stock holders that there’s nothing to worry about, that earnings will rise.

But auto pundits just don’t see it that way. Perhaps it is that the European auto makers have not experienced being splashed in red ink like the Detroit Three have suffered for years.

Thus, they just don’t know when things are getting bad. Moreover, they just may be looking at the current fuel situation as well as the credit crunch through rose-colored glasses. For whatever the reason, they're going to get a rude awakening as European legislators look to make things more difficult with laws calling for less carbon dioxide emissions.

For companies like Volkswagen that made record profits in 2007, financial experts are saying that there is no way those profits are sustainable.

Or maybe the pundits are wrong and the European automakers are aware of the situation. Renault, while it did better than expected during the first six months of the year with profits of 4.1 percent which is up from 3.5 percent last year, plans more cost cutting and is reducing their sales projections. And Fiat is said to be talking to Chrysler to gain permission to use one of Chrysler’s closed plants to build the Fiat 500 city car for introduction into the U.S.

Our take? The current crop of automakers are survivors, and we suspect their execs know the current market all-too well. We think it is the pundits, free from the actual responsibility of running a car company, who are looking at the carmakers and their actions from a limited view.