|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||11.60 - 11.76|
|52 Week Range||11.15 - 16.70|
|Beta (5Y Monthly)||1.59|
|PE Ratio (TTM)||4.71|
|Forward Dividend & Yield||0.91 (7.81%)|
|Ex-Dividend Date||May 22, 2019|
|1y Target Est||N/A|
If the everyday use of electric trucks seems decades away, come to Chino, California, where zero-emission battery-powered Class 8 semis silently arrive and depart daily from NFI Industries bound for the ports of Los Angeles and Long Beach. Any day now, the last of 10 heavy-duty plug-in eCascadias will join NFI operations as part of the Freightliner Electric Innovation Fleet from Daimler Trucks North America. NFI also will integrate electric Volvo VNR Class 8 day cabs as part of the Low Impact Green Heavy Transport Solutions (LIGHTS) test program.
(Bloomberg Opinion) -- On one side of the Atlantic, Tesla Inc. is capitalizing on its soaring share price by selling $2 billion in stock so it can build more electric vehicles. On the other, French manufacturer Renault SA has been forced to cut its dividend by 70% and announce a big reduction in fixed costs so it can afford to do the same.Dwindling profits and Renault’s drastic remedies were mirrored this week by its Japanese alliance partner Nissan Motor Co., as well at Daimler AG. (Renault has an engineering partnership with Daimler and owns a small stake in the German car and truck maker.) Their problems aren’t identical but all three had expanded their workforces in anticipation of demand that hasn’t materialized and now they have to tighten their belts to pay for expensive electric vehicles, for which demand remains uncertain. Renault’s shares are near their lowest level in eight years, which means the company is capitalized at barely 10 billion euros ($11 billion), a sum that includes the 43% stake Renault owns in Nissan. Needless to say, that’s a sliver of what Tesla is worth, even though the U.S. company’s annual output is still almost a rounding error for the Renault-Nissan alliance. This juxtaposition sends a crystal clear message: Carmakers that grew fat and happy producing combustion engine vehicles won’t get any help from the stock market now that they’ve decided to embrace an electric future. Instead the gasoline gang are going to fund these changes themselves and it’s going to be painful, for both employees and shareholders.Long-established automakers have decided that their salvation is to be found in alliances and partnerships, which spread the cost of developing expensive technology over a greater number of car sales. It’s why Renault tried to merge with Fiat Chrysler Automobiles NV, before Peugeot-owner PSA Group beat them to it. But in Renault’s case its links to other manufactures are amplifying its problems right now, not solving them. Relations with Nissan fell apart when former alliance boss Carlos Ghosn was arrested and remain fragile now that he’s free to settle scores. Both sides have since hired new CEOs but their shareholders aren’t yet ready to buy the story that harmony has been restored.With its own profits slumping, Nissan can’t afford to pay big dividends to Renault and the French are also earning less from the Daimler partnership. The upshot is that Renault is a bit squeezed for cash — net cash at the automotive unit dwindled to just 1.7 billion euros at the end of December (though gross liquidity, including available credit lines, was a more respectable 16 billion euros). One way Renault could free up some money would be to sell part of its Nissan stake, which might have the added benefit of helping to re-balance the alliance in Nissan’s favor, something the Japanese have long sought. The trouble is Nissan’s shares have halved in value over the last two years so selling now wouldn’t provide Renault with nearly as much as it once would. Interim CEO Clotilde Delbos all but ruled out such a move on Friday.So it’s no wonder that Renault has opted to drastically scale back its own dividend and will try to cut costs by 2 billion euros in the next three years. Delbos, who’s also the chief financial officer, didn’t go into much detail about how those savings will be delivered but the company plans to review its “industrial footprint,” which suggests plant closures are a possibility. (Alliance partner Nissan has already announced 12,500 job cuts, while Daimler is targeting at least 10,000.)Lowering costs won’t be straight forward. New Renault CEO Luca de Meo, a former Volkswagen AG executive, doesn’t start until July and French unions aren’t known for championing efforts to slash jobs. In the near term, restructuring costs will also put further pressure on Renault’s cash flow and the coronavirus could yet create unexpected problems. But unlike at Tesla, Renault doesn’t have a queue of wealthy supporters clamoring to help fund this epochal clean-vehicle transition. One way or other, employees and existing shareholders will end up paying.To contact the author of this story: Chris Bryant at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world threatened by trade wars. Sign up here. Germany entered 2020 with a flatlining economy and manufacturers in distress, leaving it ill prepared for continued trade uncertainty and the new coronavirus threat.Europe’s largest economy has been battered by multiple forces that have turned it from a growth engine to one of the region’s weakest performers. Expansion last year was just 0.6% and 2020 may be little better. The euro-area economy grew 1.2% in 2019, though the pace was just 0.1% in the fourth quarter.On top of global factors, Germany has had to deal with domestic issues from struggling lenders to climate-related upheaval in the car industry. More recently, politics has added to the litany of negative headlines, with the resignation of Angela Merkel’s heir-apparent as chancellor.One bright spot in has been the labor market -- in Germany and the broader euro area. Figures on Friday showed employment growth in the 19-nation bloc accelerated to 0.3% at the end of 2019.If looking for more positives, Germany avoiding contraction -- which some saw as a risk -- should silence speculation for the moment that it’s getting closer to a recession.But the bad news still dominates, and is weighing on the euro, which is at the lowest against the dollar in almost three years. Yields on 10-year German debt remain stuck well below zero.In the fourth quarter, Germany saw a sharp slowdown in consumer and government spending, a significant drop in equipment investment, and a drag from trade.What Bloomberg’s Economists Say“The business surveys that give the best read on GDP suggest the outlook for 1Q is a little brighter. We don’t expect industry to weigh on growth as much as it did in 4Q and see a modest rebound in 1Q.”\-- Jamie Rush. Read the GERMANY REACT2020 was supposed to see recovery, an outlook that’s now in question amid continued weakness in industry plus fallout from the virus outbreak in China.Business is already feeling the impact of the epidemic. Volkswagen AG was among the companies forced to shut their Chinese plants, and Daimler sees weaker Mercedes Benz sales this year.In its economic outlook this week, the European Commission singled out the coronavirus, which has killed more than 1,000 people in China, as a “key downside risk.”The Asian country is a huge market for German companies. Outside the European Union, it’s second only to the U.S. in importance, with close to 100 billion euros ($108 billion) of sales a year.Manufacturer Osram Licht AG generates about 20% revenue in China and expects a hit to its bottom line because -- as with many companies -- it had to temporarily close a number of sites.“Looking ahead, the latest soft indicators and industrial data for December do not bode well for the short-term outlook,” said Carsten Brzeski, chief German economist at ING in Frankfurt. “Also, the impact from the coronavirus on the Chinese economy is likely to delay any rebound in the manufacturing.”(Updates with euro-area GDP, employment, starting in second paragraph)\--With assistance from Manus Cranny, Nejra Cehic, Kristian Siedenburg and Harumi Ichikura.To contact the reporters on this story: Fergal O'Brien in Zurich at email@example.com;Richard Weiss in Frankfurt at firstname.lastname@example.orgTo contact the editors responsible for this story: Daniel Schaefer at email@example.com, Jana RandowFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
In the wake of the coronavirus breakout in China, OPEC has cut its oil demand growth forecast by 230,000 barrels per day (bpd) from last month's estimate. It now expects global oil demand growth at 990,000 bpd, citing the havoc the coronavirus has had over industrial activity and people movement in China as a reason for the slowdown. The impact is expected to be particularly heavy on aviation fuels as flights have been grounded across many cities in China, with the country's flights being banned from landing in airports in several countries.
Mercedes-Benz will unveil the next-generation S-Class before the end of 2020. German newspaper Handelsblatt learned the S-Class Coupe and the S-Class Cabriolet will soon fall victim to Mercedes-Benz parent company Daimler's far-reaching cost-cutting plan. Mercedes doesn't break down S-Class sales by body style, but the sedan outsells both two-doors.
South Korean car giant Hyundai Motor has increasingly relied on China to supply auto parts to its manufacturing hub at home in recent years. One of its main suppliers, Kyungshin, which has rapidly boosted capacity in China over the past two decades to capitalise on the country's lower labour costs and proximity to South Korea, has seen its operations hit hard by the epidemic.
It could be a testy day ahead. The coronavirus numbers will need to show a further easing in the rate of infection and there’s Eurozone stats in focus.
(Bloomberg Opinion) -- Chinese billionaire Li Shufu is bringing his cash cow in-house. Let’s hope he doesn't milk it dry.Volvo Car AB and Hong Kong-listed Geely Automobile Holdings Ltd. have said in a statement that they’re considering merging their businesses in a combined entity that would tap capital markets through Hong Kong and Stockholm. The parent company that they share, Zhejiang Geely Holding Group Co., is run by the ambitious Mr. Li, who seems to be taking a big first step toward consolidating his sprawling holdings. Other moves, such as a spinoff, had already been signaled. In a bond prospectus dated November, Geely Automobile said that Volvo and the parent intended to merge operations into a standalone business to develop “next generation combustion engines and hybrid powertrains.” Volvo Car said this would clear the way for it to focus on developing all-electric premium vehicles.Li has spent billions buying or building stakes in the likes of Mercedes Benz-maker Daimler AG, Volvo AB and Lotus Cars Ltd. through to flying-car maker Terrafugia Inc. He was recently reported to be in the running to make an investment in Aston Martin Lagonda Global Holdings Plc. Until now, he’s kept them separate but under his holding company.Bringing the Swedish and Chinese car companies under the same umbrella makes sense at first glance. Volvo Car’s stable profits ($5.5 billion in 2019) could offset the tough terrain that Geely faces in China’s shrinking car market. The two already collaborate through a joint venture on the Lynk & Co. brand. Since the parent bought Volvo in 2010, Geely’s cars have received an upgrade after it set up the joint China-Euro Vehicle Technology AB research and development center. There’s also a case for cost sharing. Volvo is focused on the higher- and greener-end of the car spectrum. Geely hasn’t quite gotten there. That will help as China pushes forward with its electric car ambitions.The pair said in their statement that the merger would “accelerate financial and technological synergies” and create a strong global group. So, let’s talk about the finances. To build up his empire, Li has piled on leverage at the Zhejiang Geely holding company level. Net debt stood at $8.1 billion at the end of September, more than double from a year prior. It needs to service that debt while feeding and funding its ambitions. S&P Global Ratings expects the company’s leverage to increase this year as volumes and margins contract.Volvo has been a cash source for its parent. In 2019, Volvo paid out dividends of 2.9 billion kronor ($306 million), with 2.8 billion kronor of that to its parent. That was higher than the first dividends paid out in 2016. Volvo injected 1.15 billion kronor into another jointly-owned Geely brand, Polestar Group, last year. Related-party transactions with the Geely sphere of companies totaled 4.1 billion kronor in 2019. Geely has held up relative to its auto-making peers, but earnings have been shrinking as sales in the world’s largest car market deteriorate. Its ability to spend and stay ahead of the technology curve are also constrained. It shelled out $423 million on capital expenditures in the 12 months to June last year, compared to Volvo’s $1.25 billion in 2019. It’s clear who will be driving once they come together.The parent company will keep its firm grip. Through connected transactions, it holds the licenses that Geely uses to manufacture the cars in China. Because of this structure, Geely can make and sell cars there while holding 99% stakes in operating subsidiaries, despite its offshore incorporation, according to Moody’s Investors Service Inc. Li needs this merger to work. With the coronavirus potentially wreaking operational havoc, the parent company has to be in financial order. A blockbuster valuation will help fund his future ambitions in a tougher global auto industry and pay down the debt he’s built up. What better way than to create an improved asset in the new entity, give it a boost with your crown jewel, Volvo, and monetize it. A more valuable asset makes for better collateral. Li will look to maximize the efficiency of his capital.Geely, with an enterprise value of around $16 billion, trades at 7.2 times earnings before interest, tax, depreciation and amortization. It’s sitting on cash of around $2 billion and very little debt. Volvo generated $3.2 billion of Ebitda in 2019. Assuming a multiple of 2.5 times earnings, around that of other European carmakers, would value the Swedish company at around $8 billion. The valuation of the combined entity will be higher. Even two years ago, Volvo was looking for a valuation of double that on the lower end to as much as $30 billion when talk of going public alone surfaced. Wherever the valuation comes out and whatever shareholders are willing to digest, let’s hope there are indeed synergies and Geely isn’t drawing too much out of Volvo Cars. That may defeat the purpose of Li’s entire exercise.To contact the author of this story: Anjani Trivedi at firstname.lastname@example.orgTo contact the editor responsible for this story: Patrick McDowell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Cars are very important to oil producers, obviously. Not just because they drink up the stuff. They also offer a ghost-of-Christmas-future dose of foresight.Daimler AG, the epitome of luxuriously engineered combustion, just slashed its dividend by 72%. As my colleague Chris Bryant wrote here, Tuesday’s announcement capped a string of profit warnings and other setbacks. That the stock actually rose briefly on this news tells you just how desperate investors were for a strategic reset, Band-Aid rip notwithstanding.It is the cut to Daimler’s payouts that should have oil executives sweating.Coronavirus has made amateur virologists out of many an investor, with the emphasis heavily on “amateur.” Tuesday morning saw oil prices, and stocks, surge as the market made one of its habitual segues from rank fear to blithe optimism. The truth is that, whatever the current rate of new infections, the sector already has a chronic condition: cost-of-capital-itis.Like Daimler, oil majors are juggling the demands of investing during a downturn, planning for a sea change in their business, and keeping investors sweet with payouts. Royal Dutch Shell Plc and BP Plc now yield roughly 7%. Even mighty Exxon Mobil Corp. now yields close to 6%, the highest since the merger that spawned the combined company.Exxon’s valuation looks especially vulnerable. Its recent exploration success, a virtual guarantee of high multiples in years past, is now viewed as a call on cash shareholders would rather have. Its integrated model has offered little respite in this weak oil market, with fourth-quarter results from the chemicals business especially poor — even before coronavirus piled on in this quarter. As it stands, the company has been selling assets and taking on debt to meet payouts, and consensus forecasts imply earnings will struggle to cover dividends through this year and next.The underlying cause is a collapse in return on capital, due to a wave of heavy spending on the back of the last commodity supercycle (when China offered an unalloyed boost). Returns have not only dropped but also compressed in range between the majors.Analysts at Evercore ISI estimate Exxon’s return on capital employed dropped to just 4.4% in 2019, on par with 2016 — when average Brent crude prices were 30% lower. Looking at Exxon alongside Chevron Corp., BP and Shell, it is telling that average returns for the group in 2013 — the last full year of triple-digit oil prices — were roughly those of 2009, just after the financial crisis. This problem predates not just coronavirus but also the oil crash.This really becomes apparent when comparing energy’s share of the S&P 500 with oil prices. The chart below divides the annual real Brent oil price by energy’s weighting to provide a ratio that can be thought of like this: How many real dollars per barrel does it take to buy the sector one percentage point in the S&P 500?Hence, investors are demanding more. Compounding this is the issue Daimler also faces: transition.One of Daimler’s failures has been its relatively slow development of electric vehicles. From one angle, that seems like a reasonable approach for an incumbent: Let others make mistakes and lose money developing a new market, and then deploy one’s established brand and resources to clean up when the concept has been road-tested. In practice, financial markets are nonplussed.It has become a cliche to say Tesla Inc.’s supercharged market cap is now a multiple of stalwarts such as Daimler’s, despite the California upstart’s miniscule market share. Don’t get me wrong; I cannot justify Tesla’s valuation on its fundamentals or any reasonable projection (see this). But that is kind of the point. Many of Daimler’s problems — high costs, production delays and even legal tangles — are all familiar at Tesla too. Yet the latter has gotten a pass. It may not be right, but as the old saw goes, irrationality’s bank balance can be way bigger than yours.A few years back, when Tesla was worth a mere $30 billion, I wrote oil majors should fear the company. Not because it would necessarily conquer the world. Rather, because investors were falling over themselves to give it capital in the absence of domination (or profits), in marked contrast to their treatment of the cash-spewing titans of oil. Imagine the fallout if Exxon CEO Darren Woods took to Twitter (in fact, just pause on that idea for a second) and announced a fanciful take-private deal. I’m no prophet, but I’m pretty sure (a) the stock wouldn’t have almost tripled since and (b) he would no longer be CEO.Daimler’s predicament is another reason to be fearful. Like the majors, it must convince investors that, despite past failings, it has what it takes to make the right choices (and bets) in an energy-transportation complex undergoing profound change after a century of incumbency. Like them, it must somehow make the necessary investment using capital that has become scarcer, and therefore pricier. On Wednesday, BP’s new CEO (and Instagrammer) Bernard Looney is due to lay out his vision for navigating this new world. Without wishing to front-run his speech, it’s worth reading these comments made by Daimler boss Ola Kallenius on Tuesday:We understand that we are in transformation. Yes, the auto industry in the next years, next decade is going to change fundamentally. This company is going to change fundamentally. We are prepared to take the actions and the measures that we need to take to make sure that we come out as a winner of this transformationSwap in “energy” for “auto,” and Looney could repurpose those words effortlessly. Change is now a constant for this business, and it has the yields to show for it.(Corrects Daimler’s dividend yield.)To contact the author of this story: Liam Denning at firstname.lastname@example.orgTo contact the editor responsible for this story: Mark Gongloff at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
A passenger who was repatriated from Wuhan, China, on a U.S. flight and has been in quarantine in San Diego is the latest individual in the U.S. to test positive for the coronavirus, according to media reports.
German automakers Volkswagen and Daimler have launched a study to push for more "sustainable" lithium mining in Chile, according to lobbyist filings reviewed by Reuters, a sign of growing supply chain concerns ahead of an expected electric vehicle boom. Chile's Atacama salt flat is by far the biggest source of supply of the ultralight battery metal in South America's so-called "lithium triangle." The region, whose fragile ecosystem relies on a limited water supply, is home to the globe's top two producers, U.S.-based Albemarle Corp and Chile's SQM .
German automaker Daimler AG (OTC: DDAIF), the parent company of Daimler Trucks, reported modestly higher sales and earnings for 2019 but said U.S. Class 8 truck orders fell 51% compared with a year earlier. Overall truck sales fell 6% to 488,500 compared with 517,300 a year earlier. Earnings before interest and taxes (EBIT) fell 11%, and return on sales was 6.1%, down 7.2%.
Mercedes-Benz parent company Daimler AG confirmed in its full-year 2019 financial results that the automaker will launch both the new flagship S-Class sedan and its new, all-electric EQA crossover before the end of 2020.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Ola Kallenius got off to a shaky start at the helm of Daimler AG, presiding over three profit warnings since last May as legal costs, tariff threats and swollen development spending marred his coronation after he took over from longtime boss Dieter Zetsche.The new chief executive officer sought to draw a line under the turbulent period at the German luxury-car maker on Tuesday when he tempered a drastic cut in the dividend with the promise of a brighter year ahead.The 50-year-old executive vowed to deliver “significantly” higher profit by squeezing out costs and capping investments, while committing to a more decisive push into electric cars. Daimler will also review non-core operations to channel more money into automaking.“This company is going to change fundamentally,” Kallenius told investors near Daimler’s home base in Stuttgart, Germany. While it won’t be easy, “we will work 24/7 to make this happen, to make this somewhat of a turning point.”Investors drove the shares up as much as 4% on the earnings optimism before retreating as the session wore on. The stock was down 0.4% to 42.88 euros at 2:12 p.m. in Frankfurt.“The tone from CEO Kallenius was uncompromising, suggesting a united and concerted effort to turn Daimler around,” Redburn analyst Timm Schulze-Melander said in a note. “However, a quick top-down glance suggests things may be far from straightforward.”Nine months into the job, the Swedish executive has struggled to make headway on a planned restructuring push. Earnings before interest and taxes slumped by 61% in 2019, hampered by production hiccups and ballooning expenses to fix diesel vehicles.The problems aren’t going away. Fresh allegations of diesel-cheating, years after the scandal broke at competitor Volkswagen AG, have burdened Daimler with mounting recall and legal costs. And the company, which was slower than VW to electrify its fleet, now faces rising competition from Tesla Inc., which plans to build a factory outside Berlin.With a market value of about 46 billion euros ($50 billion), Daimler is worth less than half of the much-smaller Tesla, and is the worst performer on Germany’s benchmark DAX index this year.Still, there is cause for optimism, according to Harald Hendrikse, an analyst with Morgan Stanley. Daimler should see a trough in profit margins this year, and he’s confident free cash flow bottomed in 2019 given the newfound investment discipline and the two-thirds drop in the dividend, which brought the payout to its lowest point since 2010, when it was eliminated in the wake of the the global financial crisis.“Management is improving the decision-making,” Hendrikse said. “Daimler metrics should improve from here.”While Kallenius expects the efficiency measures to unleash a turnaround, the CEO faces outside obstacles to contend with as well -- everything from the persistent threat of higher tariffs to the coronavirus outbreak in its largest market, China.The profit rebound will be slowed by restructuring costs totaling about 2 billion euros through 2022, according to Chief Financial Officer Harald Wilhelm. And luxury unit Mercedes-Benz has a challenge meeting stricter European Union emission tests that come with the threat of hefty fines, Kallenius said.Mercedes-Benz average fleet emission stood at 137 grams last year, much higher than the 95-gram limit stipulated under European rules that start taking effect this year.“I cannot guarantee” that Mercedes-Benz will comply with EU emission rules, “but we should be within striking distance,” Kallenius said.Job cuts are a critical component of Kallenius’s effort to make the manufacturer leaner. While Daimler didn’t detail any new personnel changes, the carmaker said last year it would eliminate more than 10,000 positions worldwide, using voluntary measures such as early retirement and attrition. On Tuesday, Kallenius said the savings on labor will top 1.4 billion euros ($1.5 billion) by 2022.What Bloomberg Intelligence says:“Despite the dividend cut being worse than expected, we think the magnitude makes sense, given the need to fund an accelerated and costly transition to EVs. Management faces a multitude of headwinds in 2020, so a renewed focus on cost cutting and cash conversion looks prudent to us”\-- Michael Dean, BI automotive analystHe also said that while the heavy-trucks division remains a core business, a new group structure introduced last year keeps Daimler’s options open should the management board change its mind in the future about deeper structural changes within its organization.Alongside moves to rein in spending, Kallenius has outlined plans to introduce more than 20 new plug-in hybrid and fully-electric Mercedes cars by 2022.Mercedes-Benz will unveil a fresh iteration of its S-Class flagship sedan this year and roll out the EQA, a compact electric SUV that will flank the slightly larger EQC and the EQV minivan. The brand plans to quadruple the share of plug-in hybrids and fully electric vehicles in its deliveries this year, the company said.Kallenius also confirmed Daimler will cull the slow-selling Mercedes X-Class pickup truck.It’s a big list, and for many investors, the case is the CEO’s to prove.“Self-help measures are only expected to slowly improve profitability,” said Marc-Rene Tonn, an analyst with Warburg Research. “We would like to see some evidence that the targeted improvements will ultimately be sufficient to lift earnings before granting early praise for the measures.”(Updates with writethrough of top of story; analysts comments from sixth paragraph)\--With assistance from Lukas Strobl.To contact the reporter on this story: Christoph Rauwald in Frankfurt at firstname.lastname@example.orgTo contact the editors responsible for this story: Anthony Palazzo at email@example.com, Daniel SchaeferFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Daimler, maker of Mercedes-Benz cars, saw profit slump in 2019 and turned in a loss for the fourth quarter, underlining the pressures on the auto industry from economic headwinds and the need to invest in electric cars to meet tougher European Union limits on greenhouse gases. The company also saw deductions to earnings from regulatory troubles regarding the emissions of its diesel cars. Net profit for the full year fell to 2.71 billion euros ($2.94 billion) from 7.58 billion euros.
Daimler reported its worst annual performance in a decade as it was hit by the cost of developing electric cars and the continuing diesel emissions scandal.
(Bloomberg Opinion) -- Ola Kallenius’s first nine months as Daimler AG boss have been a real shocker. A string of profit warnings, production delays and mounting diesel-related legal troubles have pushed the share price ever lower. The company’s cost base is too high and hence margins at the Mercedes-Benz car and van units are too low. The van unit lost a staggering 3.1 billion euros ($3.4 billion) last year, primarily related to diesel issues.After already announcing thousands of job cuts, Kallenius dished out some pain to shareholders too on Tuesday, slashing the dividend by more than 70%. An unpopular move, no doubt, but one that’s necessary to preserve cash for electric vehicle investments and remaining diesel-related legal liabilities.Daimler expects operating profit and free cash flow to increase “significantly” in 2020, although previous disappointments will make investors wary.And there’s another issue hanging over Kallenius. Daimler’s former chief executive officer, Dieter Zetsche, is due to return to the company in 2021 to take up the role of supervisory board chairman. Several German shareholders are strongly opposed to that happening — and you can see why they’d have misgivings. Kallenius has had a rocky start but he deserves a shot at rebuilding Daimler’s reputation with the capital markets. He’s refreshingly frank about the carmaker’s problems, and he sounds determined to fix them. It will be awkward having his mentor come back to mark his homework. The current chairman, Manfred Bischoff, 77, is stepping down next year and he’s said Zetsche will succeed him, as long as investors approve. Under Germany’s dual board system, supervisory boards are tasked with hiring and firing managers, setting their pay and scrutinizing their decisions.It’s pretty common in Germany for a former CEO to return as chairman after a mandatory two-year cooling off period, but rarely will one have done so after such a sharp deterioration in performance and with damaging legal questions hanging over the company.Known in the U.S. as “Dr. Z,” and for his trademark mustache, Zetsche unwound a disastrous merger with Chrysler, overhauled the fusty image of Mercedes cars and helped make the company a force in China. This is all to his credit and his deep experience would doubtless be of value to the board.Yet much of what’s gone wrong lately at Daimler dates back to Zetsche’s tenure. The company was too slow to invest in electric vehicles and too quick to dismiss diesel emission manipulation claims (U.S. and German regulators appear to think otherwise). The company’s European car fleet is a long way from satisfying the continent’s new limits on carbon dioxide emissions; Mercedes could be hit with fines if its electric vehicle plans don’t go smoothly.Perhaps too enamored by growth, Zetsche also failed to tackle the company’s German cost base, and he didn’t do enough to help investors fully appreciate the value of Daimler’s assets. Today the world’s largest luxury car and heavy trucks maker is worth barely one-third as much as Tesla Inc. (Daimler was once a Tesla shareholder but sold its remaining 4% stake in 2014).Union Investment and DekaBank are among German shareholders that have called on Daimler and Zetsche to rethink his return. Kallenius could do without the distracting debate. To contact the author of this story: Chris Bryant at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Daimler reported its biggest drop in annual profit in a decade on Tuesday, a 64% fall reflecting more than 5 billion euros in charges as well as investment as Mercedes-Benz pushes into electric and hybrid vehicles. Mercedes saw record sales to retain its title as the world's top-selling premium automaker but net profit fell to 2.7 billion euros from 7.6 billion hurt by 4.2 billion euros in charges related to diesel-related probes and legal proceedings. To offset its extra costs Daimler is restructuring, scrapping its Mercedes-Benz X-Class pick-up truck and downsizing its mobility services unit last year, meaning further charges of 828 million and 405 million euros, respectively.
The German car maker posted a net loss of 11.0 million euros ($12.0 million) for the period compared with net profit of EUR1.64 billion a year ago, surprising analysts, who had expected net profit of EUR776.7 million, according to a consensus estimate provided by FactSet.
Daimler suffered its worst annual performance in a decade last year as it was forced to set aside billions of euros in “Dieselgate” litigation costs, compounding its struggle to fund a late move into electric vehicles. The German carmaker on Tuesday reported a more than 60 per cent fall in earnings in 2019 as net profits at the Mercedes-Benz parent dropped to €2.7bn last year from €7.6bn in 2018, despite sales remaining at roughly the same level. In a year that was already challenging for auto manufacturers, because of a slowdown in the global car market, Daimler booked €5.4bn in legal liabilities, including more than €4bn in relation to the alleged manipulation of diesel emissions tests.
Daimler has slashed its dividend. The shareholder payout falls to just under one euro, down from more than three times that level previously. Daimler made the cut after its annual earnings more than halved. Net profit for 2019 dropped to 2.7 billion euros, or about 2.9 billion dollars. That was down from 7.6 billion euros a year earlier. The fall comes despite record deliveries of Mercedes cars. Daimler's flagship brand retained its title as the world's top-selling premium auto. But the German giant booked over four billion euros in charges related to diesel probes and legal proceedings. And another billion or so in assorted restructuring expenses. Like all automakers it also faces big costs developing electric and driverless vehicles. In response the Stuttgart-based firm is trying to cut administrative and personnel costs. It's targeting 1.4 billion euros in savings by the end of 2022.