Daimler eyes profit after weathering worst of crisis
FRANKFURT: Daimler AG came through the worst of the coronavirus crisis better than feared and sees enough signs of recovery in auto demand to forecast a profit this year.
After Tesla Inc managed to stay profitable even in the midst of a global pandemic, the Mercedes-Benz maker showed traditional carmakers could weather the storm as well.
“Daimler anticipates earnings before interest and taxes and free cash flow to be positive in 2020, albeit lower than the previous year,’’ the Stuttgart, Germanybased manufacturer said yesterday.
The outlook is based on an assumption that the economy continues to rebound and there’s no second wave of the coronavirus.
Some of its mass-market peers haven’t fared as well.
Ford Motor Co forecast a secondquarter operating loss of more than $5 billion. Fiat Chrysler Automobiles NV withdrew its guidance in May after a worse-than-expected first-quarter loss, saying it might raise more money. Nissan Motor Co reported its first loss in a decade because of the virus.
With showrooms and factories shut by lockdowns, Daimler suffered an operating loss of €1.68 billion ($1.95 billion) in the second quarter, confirming preliminary figures.
For the full year, the company expects profit in a low, single-digit billion-euro range, compared with 2019’s €4.3 billion.
Special items in the second half will be on the same magnitude as the first six months, when the company booked slightly less than €1 billion for measures including ceasing production at its former Smart factory in France.
The damage from the unprecedented market slump was kept in check thanks to a swift production halt when markets tanked and a recovery fueled by demand for big-ticket vehicles like the Mercedes GLS sport utilirty vehicles and the S-Class Maybach luxury sedan.
“The company’s results are another positive data-point for the auto sector as pent-up demand continues to drive retail volumes and pricing,” Angus Tweedie, an analyst at Citigroup, said in a note.
Daimler shares rose as much as 6.7% and were up 5.4% at 12.15 p.m. in Frankfurt, paring the decline for the year to 16%.
The focus for Daimler shifts to deeper restructuring that already started before the pandemic upended the global economy.
The company has boosted its labourcost savings target to €2 billion from €1.4 billion, which could put roughly 20,000 jobs at risk, according to people familiar with the matter.
Chief executive Ola Kallenius renewed his pledge to boost efficiency across the organisation, targeting everything from fixed costs to labour expenses.
The 51-year-old Swede has vowed to make the sprawling manufacturing network more efficient.
“Restructuring efforts will go beyond what the company mapped out in November last year and will stretch through 2025 instead of the previous plan that ran until 2022,’’ Kallenius said, adding that it “is too early to provide concrete goals as talks with labour unions aren’t finalised.’’
The world’s biggest luxury-car maker and heavy-truck producer plans to provide an update on its strategy to lower its break-even point later this year.
The initial plan had foreseen more than 10,000 job cuts, but Daimler personnel chief Wilfried Porth said this month the company would now have to eliminate more than 15,000 positions to avoid forced lay-offs.
Manager Magazin on Wednesday reported that the reductions could affect as many as 30,000 jobs.