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Daimler to Pay $960M for Diesel Car Probe in Germany

Zacks Equity Research

Daimler AG DDAIF has been slapped a fine of $960 million (870 million euros) by German prosecutors for selling about 684,000 vehicles that did not adhere to regulations on emission of Nitrogen Oxide, one of the key ingredients in smog. The fine includes 4 million euros for “negligent violation of supervisory duties” and cough up another 866 million euros from profit.

The fine is the result of tightened scrutiny since Volkswagen’s Group diesel emission cheating scandal jolted Germany’s automotive industry four years back. Volkswagen’s former and current CEOs as well as current Chairman have been accused of market manipulation for not informing investors about the rigged engines.

The violation reportedly started in 2008, including vehicles like Vito vans, C-class sedans and GLC coupes. Per German Motor Authority, around 280,000 Mercedes Benz C-class and E-class vehicles have been fitted with software that changed the emission filtering system, making the vehicles look cleaner on roads than they were during testing.

Daimler recalled 60,000 GLK SUVs for the same issue early this year. The company has already set aside $1.8 billion to meet costs pertaining to the scandal. This is precisely the reason why the fine is not expected to impair third-quarter earnings.

For 2019, the company expects its sales volumes to be flat with last year’s levels. While Daimler expects its 2019 revenues to witness a slight year-over-year increase, it anticipates EBIT to decline from 2018 levels. The company is currently focused on cost reduction initiatives to achieve operational efficiencies and boost cash flow.

Zacks Rank & Stocks to Consider

Daimler currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Auto-Tires-Trucks sector are Lithia Motors LAD, Douglas Dynamics, Inc. PLOW and SPX Corp. SPXC. While Lithia Motors and SPX currently sport a Zacks Rank #1 (Strong Buy), Douglas Dynamics carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lithia Motors has an expected earnings growth rate of 12.8% for 2019. The company’s shares have gained 71.4% year to date.

Douglas Dynamics has an expected earnings growth rate of 11.7% for 2019. The company’s shares have risen 23.3% year to date.

SPX has an estimated earnings growth rate of 22.7% for the current year. Its shares have gained 42.8% year to date.

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Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
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