Daimler Boss Says Cost Cuts Unavoidable After Earnings Drop --Update
April 26 2019 - 4:19AM
Dow Jones News
--Daimler's 1Q earnings dropped 15% on lower Mercedes-Benz sales
and higher raw-material prices at its trucks unit
--Short-term cost-cutting measures will be unavoidable to meet
2019 targets
--The company backs its full-year targets, forecasting slight
earnings and revenue growth
By Max Bernhard
German luxury-car maker Daimler AG (DAI.XE) on Friday reported a
drop in first-quarter earnings on lower sales of its Mercedes-Benz
cars, prompting its chief executive to warn that cost cuts will be
unavoidable to achieve full-year targets.
Daimler said it sold 773,800 of its passenger cars and
commercial vehicles during the first three months of the year, 4%
less than a year ago. Earnings before interest and taxes fell 15%
to 2.80 billion euros ($3.12 billion) from EUR3.3 billion.
Chief Executive Dieter Zetsche, who is set to leave in May, said
the company now has to work hard if it still wants to meet its 2019
targets.
"In view of the major changes taking place in the automotive
industry and in individual mobility, there is no way around
short-term cost-cutting measures and long-term strategic
decisions," he said.
Incoming CEO Ola Kallenius plans to slash up to EUR6 billion in
costs at its Mercedes-Benz passenger car division and EUR2 billion
in savings at Daimler Trucks over the next three years after taking
up his position next month, German business publication Manager
Magazin reported last week. The savings program would also include
up to 10,000 job cuts, the report said.
Auto makers have been struggling with a slowdown in China, the
world's most important market for cars, as well as rising trade
tensions, stricter emissions legislation and the high costs of
developing electric and self-driving vehicles.
Earnings at Daimler's core passenger-car unit were hit by lower
sales and changes in the sales structure, while earnings at the
truck division were weighed down by higher raw-material prices and
supply-chain bottlenecks, Daimler said.
Its Mercedes-Benz Vans and Daimler Buses division both swung to
a loss, in part due to higher upfront investments into new
technologies for vans and delivery delays for its buses.
Daimler benefited from a significant earnings increase at its
financial services unit and the merger of its ride-hailing and car
sharing businesses with those of BMW AG (BMW.XE), which added
EUR718 million to earnings. But those gains couldn't offset the
overall earnings slump.
Industrial free cash flow swung to negative EUR2.0 billion, from
positive EUR1.8 billion a year ago, while revenue edged lower to
EUR39.70 billion, from EUR39.79 billion. Net profit fell to EUR2.10
billion in the period from EUR2.27 billion a year earlier.
Daimler confirmed its 2019 guidance, expecting slight growth in
unit sales, revenue and earnings.
Write to Max Bernhard at max.bernhard@dowjones.com;
@mxbernhard
(END) Dow Jones Newswires
April 26, 2019 04:04 ET (08:04 GMT)
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