Mercedes owner Daimler slumps on diesel costs

Mercedes owner Daimler slumps on diesel costs
Picture: Sean Gallup

Daimler shares fell as much as 5% after the German automaker cut its profit forecast for the third time in 12 months, saying it was setting aside hundreds of millions of euros to cover a regulatory crackdown on diesel emissions.

The warning — that group operating profit would be flat this year, compared with previous expectations for a slight increase — was the first under new chief executive, Ola Kaellenius, and led some analysts to call for a fresh approach from his team.

“Best execution and accountability remain core areas of improvement that need to be addressed by the new management,” Evercore ISI analyst, Arndt Ellinghorst, said.

“The endless array of so-called one-time effects raises questions regarding process, management information systems, and, ultimately, accountability of management.”

Carmakers have been grappling with a crackdown on diesel emissions since 2015, when German rival, Volkswagen, admitted to cheating US pollution tests on diesel engines.

The industry is also having to invest heavily in electric and self-driving vehicles, cope with slowing growth in China, weak markets in Europe, and a rise in global trade tensions.

In May, German competitor, BMW, warned on profits, citing higher-than-expected investments, while Volkswagen said the return on sales at its passenger-cars division would come in at the lower end of its target.

Mercedes owner Daimler slumps on diesel costs

Daimler declined to give details on its diesel problems, and did not say how much money it was setting aside. 

It cited “various ongoing governmental proceedings and measures” related to Mercedes-Benz diesel vehicles, and said provisions were likely to reach “a high three-digit, million-euro amount.”

However, the profit warning followed news that Daimler must recall 60,000 Mercedes diesel cars in Germany, after regulators found they were fitted with software aimed at distorting emissions tests.

The transport ministry said it was expanding its investigation to more models.

Stuttgart-based Daimler is being investigated over diesel emissions in Europe and the US. It issued a similar profit warning on diesel issues in October.

In April, EU competition regulators charged BMW, Volkswagen, and Daimler with colluding to block the rollout of clean emissions technology.

While Daimler was a whistleblower in that case and said, at the time, it expected to avoid fines, BMW booked a provision of more than €1bn.

Reuters

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