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The automotive industry is changing: At Daimler, profits continue to collapse
The change towards electric mobility, the costs for the introduction of new technologies and the consequences of the diesel affair weigh on the Daimler group. The profit fell to a third of the previous year. 2.4 billion euros profit - that would be reason for many companies to celebrate. But not for the Daimler Group, which in its history was able to generate much higher annual profits. In 2018, the star of the German automotive industry still earned three times as much, and even then the result attributable to the shareholders had plummeted.
Daimler was still able to increase sales slightly with 172.7 billion euros - also because the core brand Mercedes-Benz closed the year with a new sales record. However, the sales figures were offset by extraordinarily high costs, which ate up a large part of the earnings.
So Daimler not only has to shoulder the investments in the start-up of electric car production and in the development of expensive future technologies. The calculation for contaminated sites from the diesel affair has also become longer and longer in the past year. CEO Ola Källenius therefore did not want to spoil the balance sheet. "While our results in 2019 reflect the continued strong demand for our attractive products, we cannot be satisfied with the profit," he said.
The drastic drop in profits also has noticeable consequences for the company's employees and shareholders: In 2020, the approximately 130,000 employees will only have a profit sharing bonus of € 597 and a one-time recognition bonus of up to € 500. In the previous year, the premium was still EUR 4,965.
Daimler sharply cuts dividend for shareholders. You will only receive 90 cents per share for the past financial year - after 3.25 euros in the previous year. The company's share [ ISIN DE0007100000 ], which has had a downward trend for years, continued to decline as a result of the group's results and is currently quoted at around 43 euros.
"Substantial special charges affected our financial results," emphasized Källenius, who had revised expectations downwards several times since taking office in May 2019. In November, he launched an austerity package that, among other things, provides for the loss of thousands of jobs and is expected to show initial effects in 2020. Daimler expects hardly any changes in sales, but a significant increase in the operating result. However, the group remains far from its long-term return targets.
The sales record in the passenger car business at Mercedes-Benz with around 2.34 million cars sold is offset by a weakening economy in the truck business. The company also has to invest billions to get its electric fleet on the road - especially to meet the stricter CO2 limits and avoid fines. With the first EQC model, problems with one component caused that not as many vehicles as planned could be delivered at the start.
The development of future technologies such as automated driving also costs billions despite partnerships with other industry giants such as BMW and Bosch. Källenius is sticking to the projects. However, the Swede has pushed particularly expensive visions like the "Robotaxi", which he believes will consume significantly more money in the foreseeable future than they can bring in, far behind on the list of priorities.
And then there are the legacy issues from the diesel affair. Last summer, Daimler set aside around 1.6 billion euros for recalls and proceedings worldwide. Just three weeks ago, the company had to admit that the bill would be even longer - by almost 1.4 billion euros. The car division and the van department are particularly affected. At Mercedes-Benz passenger cars, the operating result fell by half, the vans even accumulated a loss of 3 billion euros.
The authorities accuse Daimler of having installed an illegal shutdown device in the control of the exhaust gas cleaning system in various diesel models. The group denies this, but adheres to the recalls and has already installed software updates for hundreds of thousands of vehicles.
In addition to personnel costs, Källenius also wants to significantly reduce material costs and also cap investments, thin out the expensive model range and concentrate more on the vehicles with the highest profit margins in the individual segments. The X-Class, for example, a pick-up model that was only launched on the market in 2017 but fell short of expectations, has already been decided.
