Daimler warned that 2019 profits would be hit by up to €1.5bn in litigation costs related to the diesel emissions scandal, the latest blow to the struggling carmaker’s efforts to fund its electric shift.
On Wednesday, the German group said it expected a 50 per cent drop to €5.6bn in earnings before tax and interest, excluding legal expenses, the biggest slide since the height of the global financial crisis.
Losses at the Mercedes-Benz Vans division had ballooned to €2.4bn, the company said, adding that it had booked a €300m impairment charge on its ill-fated car-sharing joint venture with BMW.
The downbeat results will add to pressure on Berlin to safeguard jobs in Germany’s struggling car industry. Last year more than 50,000 lay-offs were announced by the country’s manufacturers and suppliers, while a state-sanctioned report has said a further 400,000 roles are at risk if carmakers fail to maintain their competitive advantage.
Daimler’s profit warning, which sent its shares down almost 2 per cent, is the company’s fourth since Ola Kallenius took over as chief executive last May.
“The new management proves the golden rule that one profit warning never comes alone,” said Arndt Ellinghorst, an analyst at Evercore ISI, who criticised the lack of new blood in the carmaker’s top ranks.
“Daimler’s near-term cash generation will largely fund potential legal costs”, he added. “On top of that, Daimler needs to fund its restructuring, potential CO2 fines and the transformation into electrified powertrains.”
Daimler is facing a succession of legal claims related to the alleged manipulation of diesel emissions levels in the US, Canada and Germany.
It agreed in September to pay an €870m fine issued by Stuttgart prosecutors but is challenging the German Federal Motor Transport Authority’s justification for recalling affected cars.
More than 200 institutional investors filed a claim in Germany this month seeking €900m in damages for failing to disclose the use of emissions cheat devices, news of which led to a fall in Daimler’s share price.
The Stuttgart-based group’s lacklustre results come as it undergoes a radical restructuring to prepare for stricter EU emissions regulations. If Daimler, which has enjoyed soaring sales of gas-guzzling sport utility vehicles in recent years, fails to achieve a fleet-wide target it could face more than €1bn in fines from Brussels.
The carmaker’s problems have been compounded by a slowdown in the global car industry, particularly China, by far its largest market.
Last year it said it would axe more than 10,000 jobs worldwide in an effort to save more than $1bn in personnel costs.
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