Munich - Shares in the world's leading luxury carmaker BMW AG dropped by more than 11 per cent Thursday after the group reported a step fall in 2008 earnings.

Munich-based BMW said net profit plummeted by 89 per cent to 330 million euros (420 million dollars) as sales slumped around the world in the wake of the deepening global recession.

"The BMW Group has been able to make improvements at an operating level in the midst of extremely difficult economic times," BMW chief Norbert Reithofer said releasing the results.

"Cost structures have been further optimised and thanks to rigorous management of free cash flow, the BMW group is in a very solid financial position," he added.

Revenue dropped by five per cent to about 53.2 billion euros with the results underscoring the crisis that has taken hold in the global car business. The carmaker posted a fourth-quarter loss before interest and tax of 718 million euros.

BMW announcement sent reverberations across the stock market. By midday trading in Frankfurt, BMW shares were down 7 per cent to 21.40 euros.

The company's moves for big cuts in its workforce resulted in BMW being hit with a 450-million-euro charge in its accounts. Also hitting earnings were weak second-hand car prices.

BMW is proposing to slash its dividend payment from 1.06 euros per ordinary share in 2007 to 30 cents last year.