BMW Overhauls Management and Cuts 8,000 Jobs to Fund AI Strategy After Profit Warnings
BMW is cutting 20% of its divisions and management roles and eliminating roughly 8,000 jobs by the end of 2027 to rebuild profit margins and recover from a series of profit warnings that pushed its stock to levels not seen in over six years. The restructuring plan, unveiled at a Capital Market Day in Munich, shifts routine corporate decision-making to algorithmic systems and agentic artificial intelligence.
The German automaker’s automotive division saw its operating margin drop to 2.3% in the second quarter, squeezed by a price war in China, steep investments in vehicle electrification, and international trade tensions. To reverse this slide, CEO Milan Nedeljković outlined a strategy focused on cutting bureaucratic layers, lowering costs, and pushing sales of higher-margin vehicles.
BMW Targets Margin Recovery by the Next Decade
BMW expects its automotive Ebit margin to land between 1% and 3% for 2026, climbing to 3% to 5% by 2028 before returning to an 8% to 10% range at the start of the next decade. Free cash flow for the automotive division is projected to exceed 7 billion euros at the start of the next decade, compared to over 5 billion euros expected in 2028 and 2.5 billion euros in 2026.
Financial analysts hold mixed views on the roadmap. Michael Dean, senior automotive analyst at Bloomberg Intelligence, called the mid-term goals “deludent” and noted that the timeline to reach the 8% to 10% margin has been postponed. Conversely, Bernstein analysts maintained an “outperform” rating on the stock with a target price of 82 euros, pointing to the potential of upcoming high-margin models like the X7 SUV, updated M-series sports cars, and a broader role for Alpina. Citigroup analysts remained more cautious with a neutral rating, warning that cost-cutting measures might not reach their goals given that the sector is undergoing a radical transformation.
BMW Cuts Roles and Invests in Agentic AI
The workforce reduction targets administrative and development roles while exempting factory production workers, with the 8,000 voluntary departures representing just over 5% of BMW’s total workforce. Alongside these staff cuts, BMW will eliminate more than 100 executive positions, including a fifth of its 65 senior vice presidents.
Chief Financial Officer Walter Mertl described agentic AI as a decisive turning point for the company. BMW plans to invest roughly 200 million euros in artificial intelligence programs between 2026 and 2027, expecting to generate about 1.2 billion euros in value by 2028. The technology will handle tasks from technical requirement definitions to testing and final validation, cutting processing times by over 90% in already digitized workflows.
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