MUNICH (Thomson Financial) -- BMW will raise its car prices this year and next year, CEO Reithofer said.

He told a conference call that the price increases will start in the United States.

He also said car sales in the U.S. will be lower this year compared with last year.

Production will also be adjusted in a more flexible way as one of the measures to counter the deteriorating conditions in the U.S. market, he added.

Chief Financial Officer Michael Ganal said during the same conference call that if current foreign exchange rates persist, particularly for the dollar and the pound, then 2009 will be a "major challenge" for the company in terms of its impact on earnings.

Ganal added that "some" hedging measures have been made for the company's currency exposure in 2009 but declined to provide details.

Reithofer said BMW will reduce the number of cars it had planned to sell in the United States by 40,000 units, either by selling some of them in Europe and other markets or cutting production.

He said BMW will likely cut production of around 20,000 to 25,000 cars.

Ganal said there will be no "automatic" increases of prices in Europe but that these would depend on individual markets.

Reithofer said there are no plans for any further job cuts other than the 3,100 already planned for this year.

About one-third of the job cuts were already implemented in the first-half of the year and generated one-off costs of 107 million euros, Ganal said, adding that for the second-half these extraordinary costs are expected to be higher.

Reithofer said given the current problems in the United States and deteriorating economic conditions in Europe, the company is burying its plans to produce the X7.

Industry observers have described the X7 as a super luxury SUV that would supposedly rival the Land Rover Range Rover.

Ganal said because of difficult conditions in the U.S. used car market, the company has increased "markedly" the risk provisions for so-called off-leased cars -- leased cars that will be returned to the company and then sold by the latter subsequently -- for 2009 and 2010.

He said the increases in these risks provisions for 2009 and 2010 are not to the "bad level" booked in the second quarter of this year. The increases in the 2009 and 2010 risk provisions are only half of what was undertaken in the second quarter of this year.

BMW earlier in the day surprised the market with its profit warning, saying expenses for provisions and allowances for residual value risks and bad debts, including the 236 million euros in the first quarter, increase to a total of 695 million in the first-half.

It said the higher expenses have depressed earnings for the first-half, with net profit down 25.8 percent to 994 million euros and EBIT slashed by 35.2 percent at 1.252 billion euros.