Daimler zeroes in on costs, diesel risk after earnings beat forecasts
MUNICH: Daimler AG said it will intensify efforts to cut costs to manage the industry’s shift to electric vehicles after third-quarter earnings exceeded forecasts, despite weaker profitability from the Mercedes-benz cars unit.
The world’s biggest luxury-car maker – reeling from two profit warnings this year partly related to diesel-emissions investigations – also said provisions already made to cover the probes might not suffice and could drag on profitability, according to a statement yesterday.
Chief executive officer Ola Kallenius, who took charge in May, is preparing to unveil a plan to reduce costs and boost profitability on Nov 14 in London. While strong vehicle sales helped this quarter, costs must fall “significantly” while strengthening cash flow, he said.
The third-quarter delivery gains suggest that the company has worked through supplier issues, which especially hit production of high-margin SUVS earlier this year.
Mercedes also defied a historic market slump in China, its biggest market. Still, the unit’s profit margin narrowed to 6% from 6.3% a year ago. In addition to internal issues, Daimler is grappling with a softening global economy, the unresolved Us-china trade spat and continued Brexit uncertainties. Consumer demand for new electric models, like the EQC, is another black box as it invests heavily to meet challenging new emissions rules.
While Daimler has teamed up with arch rival BMW AG on mobility services and autonomous-driving technology to share costs, deeper partnerships may be needed to stem unprecedented expenses to keep up with changing consumer tastes and tighter environmental regulations.
Daimler shares have fallen 27% over the past two years, valuing the German auto icon roughly the same as ride-sharing start-up Uber Technologies Inc.
The Mercedes maker’s shares have climbed 9.8% this year, compared with a 14% gain in the Euro Stoxx Autos and Parts Index.
The automaker stuck to its outlook for 2019 group Ebit to be “signifcantly below” last year’s level.
Daimler reduced its margin guidance for the trucks unit to a range of 6% to 8% from the previous 7% to 9%, and said the division’s revenue would be flat.