Daimler profits plunge in 2019 on ‘dieselgate’ costs

by AFP/ pic by AFP

GERMANY – Mercedes-Benz parent company Daimler on Tuesday reported plunging profits for 2019, after setting aside billions of euros to deal with potential fallout from the industry-wide “dieselgate” emissions cheating scandal.

With net profits dropping 64 percent, to 2.7 billion euros ($2.9 billion), “we cannot be satisfied with our bottom line,” chief executive Ola Kallenius said in a statement.

Profits were slashed almost 5.5 billion by charges linked to emissions cheating and defective airbags from supplier Takata, with 4.0 billion alone down to dieselgate.

As well as the dieselgate charges, massive costs for investments in new technology like battery-powered and automated cars weighed on profitability,

Given the profit slump, bosses plan to offer shareholders a dividend of just 90 euro cents, down from 3.25 euros in 2018 and well short of the 1.53 forecast by analysts.

Against the backdrop of a downward demand trend in global auto markets, Daimler was able to maintain unit sales at around the previous year’s level of 3.3 million, while boosting revenue 3.0 percent to 173 billion.

But overall it was a tough first year for Kallenius, who took over from 13-year veteran boss Dieter Zetsche in late May.

In July, Daimler reported its first quarterly loss in a decade for April-June, while last month it warned that its full-year financial results would come in below expectations.

Germany’s KBA transport authority ordered more than a million Daimler-built vehicles recalled.

The firm still contests whether “motor control functions” fingered by regulators are in fact illegal, but it agreed to pay an 870 million euro fine for selling infringing vehicles, weighing on both the cars and vans divisions.

Daimler’s vans unit was especially hard hit, reporting an operating loss of 3.1 billion euros, while the measure at the flagship cars division was slashed in half, to 3.4 billion.

Looking to counter the profit pressure, Kallenius has embarked on a massive cost-cutting programme, with 1.4 of a promised 1.6 billion euros in annual savings set to come from job cuts.

More than 10,000 posts are expected to go, out of Daimler’s 300,000 worldwide.