By William Boston
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 12, 2020).
BERLIN -- An unexpectedly sharp fall in profit prompted Daimler
AG to cut its shareholder dividend by a third as the luxury car
maker battles slumping demand, the escalating cost of a fundamental
shift to electric vehicles and charges related to
The maker of Mercedes-Benz said Tuesday that it swung to a loss
of EUR11 million ($12 million) in the three months to December,
warning it would sell fewer cars this year.
The results were well below analysts' estimates and contributed
to a 67% decline in full-year net profit to EUR2.4 billion.
Daimler said it would propose to shareholders to slash the
annual dividend, to be approved at a meeting in May, to EUR0.90 a
share from EUR3.25 a year ago, cutting the size of its payout to
EUR1 billion, a third of what it returned to shareholders last
year. The company said lower profit would also affect executive
"We cannot be satisfied with our bottom line," Chief Executive
Ola Källenius said. "We have a cost problem. Maybe we were too
optimistic on what the revenue side could yield in the past," he
With demand for cars falling world-wide, auto makers more
broadly are cutting prices, making it hard to offset the rising
costs of building electric cars with a vast array of digital
Tough emissions standards in Europe and China are the big driver
behind the push to develop electric vehicles. The European
Commission requires auto makers to significantly reduce greenhouse
gas emissions this year or face billions of euros in fines. To meet
the targets, Mr. Källenius said, Daimler is launching an array of
battery electric vehicles this year and doubling the number of
hybrid models it produces.
But even that might not be enough, posing another risk to future
"If you make large luxury cars, the road to compliance is
longer," Mr. Källenius said. "It is possible that we will become
compliant in 2020-21, but it's not certain."
It is also unclear whether Daimler's efforts will result in
enough electric vehicle sales. Demand for plug-in electric cars in
Europe remains weak, accounting for around 4% of new car sales last
year, according to the European Automobile Manufacturers'
Analysts said that Daimler was still struggling to settle
investigations in the U.S., Europe, and other jurisdictions into
allegations Germany's flagship luxury car maker manipulated its
diesel emissions to meet requirements. Daimler denies wrongdoing.
Analysts at Tuesday's news conference urged Mr. Källenius to settle
the cases and move on.
"If it had been an easy thing to resolve and move on we wouldn't
have spent four years negotiating with authorities," Mr. Källenius
responded. "We are trying to get this to a good resolution as soon
as we can."
The company has taken charges against potential fines and legal
costs and agreed to pay a fine of EUR870 million last year to
German authorities after the German regulator ruled that the
company had used illegal software to manipulate diesel emissions in
some 2018 and 2019 models.
Daimler, which also makes trucks, vans and buses, and operates a
range of car-sharing, ride-hailing and other new mobility services,
sold 30% of its Mercedes-Benz cars in China last year and produces
some vehicles there as part of a joint venture with a local auto
Mr. Källenius said that it was still too early to gauge the
economic impact from the coronavirus outbreak in China for 2020
earnings, but said Daimler was returning to normal in the
A native Swede, Mr. Källenius took over at Daimler in May. But
so far, the new CEO has had little opportunity to make his own
mark, and instead has been forced to perform damage control from
diesel litigation he inherited and the fallout from what analysts
have called years of unfocused investment.
Daimler has already said it was negotiating with labor
representatives about cutting around 10,000 from its global
workforce of 298,655 people at the end of last year.
But despite the haircut for shareholders, Daimler said it would
pay bonuses to nonmanagerial employees of up to EUR1,097 as part of
a profit-sharing program the company launched in 1997. The bonus
paid to about 130,000 employees in Germany totals around EUR143
million. Last year, Daimler paid employees a bonus of nearly
Daimler's overall unit sales came to a standstill last year, the
company said Tuesday. The Mercedes-Benz car division sold 2.4
million vehicles, unchanged from the year before, while Daimler
Trucks sales tumbled 6%. Overall, Daimler's revenue rose 3% to
Mercedes-Benz Cars reported a 53% decline in earnings before
interest and taxes to EUR3.4 billion in 2019, while Daimler Trucks
earnings slid 11% to EUR2.5 billion, and Mercedes-Benz Vans
reported an EBIT loss of EUR3 billion.
Daimler's woes reflect those afflicting the broader automotive
industry. As the global economy has been weakened by trade
disputes, political upheaval and the spread of coronavirus in
China, demand for new luxury vehicles is also softening.
Daimler said that its new Daimler Mobility division reported
earnings before interest and taxes of EUR2.1 billion last year, up
55% from the year before and a 15% return on sales. But the
mobility unit also includes the company's bank, with its profitable
leasing business. It isn't clear if the ride-hailing and
ride-sharing businesses were profitable.
Write to William Boston at email@example.com
(END) Dow Jones Newswires
February 12, 2020 02:47 ET (07:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Historical Stock Chart
From Aug 2020 to Sep 2020
Historical Stock Chart
From Sep 2019 to Sep 2020