Daimler Reports Drastic Cut in Full-Year Earnings

Alan Penny

22 January 2020

3 min read

Daimler reports

  • Daimler earnings released on Wednesday
  • Results were disappointing and did not meet expectation
  • Figures represent bigger picture of global trade

Daimler AG, the maker of the iconic Mercedes-Benz brand, released an earnings statement on Wednesday that was less than impressive. This is crucial to pay attention to, because it not only represents the second-largest purchase by most consumers in the form of automobiles, but it also features a major export from Germany.

This gives us an idea as to how both European and global trade may be going forward.

The announcement particulars

The statement disappointed across the board, with Mercedes-Benz having seen its operating earnings fall by half in 2019. This shows that the luxury brand earned lower profits in what has been a tough global auto market in general. It also stated that the company would see more expenses due to regulatory and legal issues with diesel cars in the European Union.

the luxury brand earned lower profits in what has been a tough global auto market in general

Operating earnings fell to €5.6 billion for all of 2019, which came down drastically from €11.1 billion in 2018. This is a negative sign, to say the least, and it might have macroeconomic repercussions as well.

Furthermore, the company suggested it would be hit with at least €1.1 billion in additional charges for regulatory and legal issues related to its diesel models. These costs were not included in the operating earnings figures, so they are expensed into the future.

Daimler is under investigation from government authorities in the United States as well as Germany over omissions issues with diesel cars. It has declined to comment on the state of those probes. The company also faces a civil consumer class-action lawsuit in the United States.

Profit at the Mercedes-Benz cars division fell to €3.7 billion from €7.2 billion during the previous year. Return on sales, which is the major measure of how profitable the company’s cars are, fell to 7.2%, which is less than the 7.8% reported previously.

The fallout from the report

The fallout from this was that Daimler shares fell by 1.3% in afternoon trading on the German exchange. This only exacerbates some of the larger concerns about global growth as automakers continue to face adversity from slowing sales in crucial markets, most notably China the world’s largest car market.

Simultaneously, most companies are under massive amounts of pressure to invest in electric cars to meet regulatory demands in the EU and China, even though EV sales represent a single-digit share of those markets.

Going forward, car manufacturers are going to be under continued strain, as the consumer still has to worry about being over-levered in several different areas of their lives. The automaker will be looked at as a sign of larger purchases by the overall global consumer, and therefore the global economy.

While Mercedes-Benz is obviously a higher-end product, it should be noted that Daimler also owns several other companies. Perhaps one of the most iconic is Freightliner, being one of the largest semi-truck brands in the United States. Sales there also fell, which could show a bit of sluggish behavior in the US.

Written By
Alan Penny

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