FRANKFURT: Luxury carmaker Daimler said it would intensify cost cuts after legal risks for diesel-related issues and the cost of replacing Takata airbags triggered $1.74 billion (€1.56 billion) loss before interest and taxes in the second quarter.
The company reduced its sales outlook for Mercedes-Benz cars and said €4.2 billion in one-off expenses hit earnings, mainly at the cars and vans divisions, contributing to an operating loss at group level, compared with a €2.6 billion profit in the second quarter last year.
“We can’t help but note that this is the lowest level of money in the bank since the depths of the financial crisis,” Bernstein Research analyst Max Warburton said. “Raising Daimler’s operating performance is not going to be a quick fix.”
Daimler pledged to cut costs in response but provided few details under new Chief Executive Ola Kaellenius, who took up the top job two months ago.
“In general, we are intensifying the group-wide performance programs and reviewing our product portfolio in order to safeguard future success,” Kaellenius said on Wednesday.
Rival Aston Martin also announced cost cuts and its shares tumbled after it lowered its outlook for operating profit on slowing demand, while peer Peugeot bucked the industry downturn with a sharp increase in first-half profit.
Daimler will provide details about potential cost cuts and its strategy on November 14 during its capital markets day.
Earlier this month, the Stuttgart-based carmaker had given an initial outline of earnings in what amounted to its fourth profit warning in 13 months, saying its 2019 group EBIT would be “significantly” lower than last year.
The Stuttgart-based carmaker said it now expects unit sales for Mercedes-Benz Cars to be at the prior-year level, revising its previous forecast of achieving a slight increase, following a sharp slowdown in demand in China.
Daimler said on Tuesday that China’s Beijing Automotive Group Co. Ltd. has bought a 5 percent stake in the company, cementing their long-standing alliance.
Unblocking supplier bottlenecks which have delayed production of Mercedes-Benz GLE and GLS models will help push sales of luxury cars in the second half of 2019, Kaellenius said.
“Daimler is blaming supplier bottlenecks and quality issues pretty much across all divisions for its poor financial performance. These are certainly not external factors outside of management’s control,” analysts at Evercore ISI said.
Daimler made a provision of €2.6 billion to cover diesel-related expenses in the first half of 2019 after German regulator KBA ordered a recall of 60,000 Mercedes-Benz GLK models, claiming the vehicles made use of illegal engine software. Daimler has appealed the KBA ruling.
The carmaker declined to break down in detail how much of the amount was allocated for recalls, updates and potential fines and litigation.
Daimler’s diesel pollution levels are being investigated by prosecutors in Stuttgart, Germany, where it is headquartered, as well as by the US Environmental Protection Agency and the California Air Resources Board.
Pressure to clean up combustion engines has come at a time when the industry has to invest heavily in electric and self-driving vehicles, and cope with slowing growth in China, weak markets in Europe and a rise in global trade tensions.
Passenger car sales slowed 3 percent during the quarter and the return on sales at Mercedes-Benz Cars swung to a negative 3 percent in the quarter, down from 8.4 percent in the year-earlier period.
Daimler vows to cut costs after one-offs bring loss
Daimler vows to cut costs after one-offs bring loss
- Company reduced its sales outlook for Mercedes-Benz cars and said €4.2 billion in one-off expenses hit earnings
- Daimler pledged to cut costs in response but provided few details
Emerging markets should depend less on external funding, says Nigeria finance minister
RIYADH: Developing economies must rely less on external financing as high global interest rates and geopolitical tensions continue to strain public finances, Nigeria’s finance minister told Al-Eqtisadiah.
Asked how Nigeria is responding to rising global interest rates and conflicts between major powers such as the US and China, Wale Edun said that current conditions require developing countries to rethink traditional financing models.
“I think what it means for countries like Nigeria, other African countries, and even other developing countries is that we have to rely less on others and more on our own resources, on our own devices,” he said on the sidelines of the AlUla Conference for Emerging Market Economies.
He added: “We have to trade more with each other, we have to cooperate and invest in each other.”
Edun emphasized the importance of mobilizing domestic resources, particularly savings, to support investment and long-term economic development.
According to Edun, rising debt servicing costs are placing an increasing burden on developing economies, limiting their ability to fund growth and social programs.
“In an environment where developing countries as a whole — what we are paying in debt service, what we are paying in terms of interest costs and repayments of our debt — is more than we are receiving in what we call overseas development assistance, and it is more than even investments by wealthy countries in our economies,” he said.
Edun added that countries in the Global South are increasingly recognizing the need for deeper regional integration.
His comments reflect growing concern among developing nations that elevated borrowing costs and global instability are reshaping development finance, accelerating a shift toward domestic resource mobilization and stronger economic ties among emerging markets.
