In this week's issue:

• New Models Drive BMW Sales
• Toshiba to Make Motors for Ford Hybrid Cars

  New Models Drive BMW Sales

BMW says it is optimistic about first-quarter earnings and expects recent model launches to fuel record 2004 profits.

After two years of investing heavily in hotly anticipated new products like the redesigned 5-series, the Munich-based luxury carmaker said last week that it expected to reap the rewards in 2004.

"We will begin to harvest the fruits of our product and market offensive this year," Chief Executive Helmut Panke said, after predicting that pre-tax profits should exceed the record 3.3 billion euros (2.2 billion pounds) posted in 2002.

Despite a weak start to the year for the automobile industry as a whole, Panke said BMW would enjoy the best March ever in terms of vehicle sales and told Reuters that he was "quite optimistic" for first-quarter earnings.

The carmaker's continued optimism comes in stark contrast to many of its competitors, who are suffering from the strong euro and slack consumer demand. Volkswagen said last week that a "lousy" first quarter would mean topping its 2003 operating profit of 2.5 billion before one-offs would be an ambitious goal.

But analysts and brokers said record earnings this year were the least BMW could promise investors. HVB auto analyst Georg Stuerzer called the target a "minimal goal". He is predicting pre-tax profit of 3.9 billion euros.

Record pre-tax profit in 2004 means only that BMW will lift earnings by slightly more than three percent from the 3.2 billion euros earned in 2003. And BMW would have matched 2002's 3.3 billion euros profit last year had it not been for an unexpected move to raise provisions by an additional 110 million euros.

The company also reiterated that vehicle sales in all three of its brands will increase in 2004, helped by a flood of new models like the Mini cabrio, the X3 compact sports utility vehicle, as well as a significant boost in shipments of its superluxury Rolls Royce Phantom.

Profits Up Despite Strong Euro

"Within the auto sector, it's the safest bet," said Heino Ruland, an equity strategist at Steubing brokerage.

With demand strong in the US, BMW's Chief Financial Officer Stefan Krause said the carmaker would consider increasing its production capacity there, if the market for premium cars continues to post substantial growth rates.

Despite a severe weakening of the dollar in 2003, BMW boosted vehicle sales in the U.S. by eight percent to 277,000 units, as the country became the largest single market for BMW for the first time in history. Krause said, however, that BMW would stop increasing its currency hedging, since he believes the greenback is already significantly undervalued.

"We do not regard strategic hedging as appropriate, with the dollar at its current value," he said.

This could prove to be extremely risky, as BMW's dependence on the US market has grown considerably. Overall BMW car sales there have quadrupled in the past 10 years.

Written by Christiaan Hetzner

  Toshiba to Make Motors for Ford Hybrids

Japanese electronics conglomerate Toshiba says it will produce motors to be used in Ford's hybrid cars, making a full-fledged entry into the automotive parts market.

Auto parts are expected to be one of the fastest-growing markets for electronics manufacturers in a few years due to growing demand for hybrid cars - which combine a battery-powered motor and a gasoline engine - as well as wider use of car navigation and other communication systems.

Toshiba said its subsidiary, Toshiba Industrial Products Manufacturing, would make up to 2,000 motors a month starting in April for Aisin AW, an auto parts maker affiliated with Toyota, the world's second-largest auto maker.

Aisin AW will assemble the motors with other equipment to make drive systems for Ford's Escape hybrid cars. Toshiba, which said last year it aimed for auto parts sales of 50 billion yen in the year ending in March 2007, also plans to start manufacturing auto parts such as exhaust gas purification units and collision avoidance systems.

Another Japanese electronics conglomerate, Hitachi, aims to double its auto parts sales to one trillion yen by the year starting in April 2010.

Toyota said last week that Ford would use some of its hybrid engine technology. Ford is the only U.S. auto maker with plans to launch a true hybrid car this year. Toyota made its name as world leader in hybrid technology in 1997 when it launched the Prius sedan, the first mass-produced hybrid vehicle.

Honda is the only other auto maker to mass-market hybrid cars.

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