Launching new models ate into BMW's finances

BMW said pre-tax profits for the three months to March dipped to 812m euros (�553.7m, $1.05bn) from 851m euros for the same period in 2004.

The Munich-based company added that the launch cost of its new 3-series cars had also eaten into its profits.

But, BMW said it had made a good start to the year with unit sales up and 2005 earnings set to match 2004's levels.

"We made a successful start to 2005 despite difficult market conditions," the company said in a statement.

"Earnings were adversely affected by external factors, such as significantly higher raw material prices, currency factors and increased competitive pressure.

"However, sales volume growth and continuous efficiency improvement measures enabled us to largely compensate for these effects."

Currency worries

The carmaker also said that while car sales had risen 8.2% to 292,207 vehicles - a record for first-quarter sales - currency problems and the phasing out of the old 3-series had hit profits.

Finance chief Stefan Krause told reporters that 3-series sales sank 29% during the first quarter, as buyers waited for the launch of the new model.

Mr Krause also warned that the firm's finances would continue to be hit by the expiry of currency hedging contracts.

Hedging allows companies to fix the price of a currency months in advance.

The US is the group's biggest market, making up nearly a quarter of its sales, but BMW has so far protected itself from the weaker dollar by hedging its currency risk.

However, it is unlikely to renew these contracts at current unfavourable dollar levels.

In March, Mr Krause warned that the decision not to renew these contracts would mean a "far more negative" impact on BMW's earnings than the "low-triple-digit-million euro" currency hit it suffered last year.