Daimler Collapse as Diesel Destroyed Growth

June 24, 2019 | Monday



The shares of Daimler slump as much as 5% on Monday. The dropped happened after the German automaker reduced its profit forecast for the third time in almost a year. The company explained it was saving hundreds of millions of euros to compensate a regulatory crackdown on diesel emissions.

Aside from that, there was also a warning about the group operating profit being flat this year compared with the previous expectations for a little development. It was the first warning under the new chief executive Ola Kaellenius. Also, it drove a few analysts to call for a fresh approach from the team.

"Best execution and accountability remain core areas of improvement that need to be addressed by the new government," Analyst Ellinghorst stated in a letter. Then, the Evercore ISI analyst also added, "The endless array of so-called one-time effects raises questions."

Diesel Engines Since 2015, carmakers continue to deal with a crackdown on diesel emissions. And during this time, Volkswagen, Daimler's rival, confessed about cheating U.S. pollution tests on diesel engines. "

Aside from that, hardships also fell when the industry is investing heavily in electric and self-driving vehicles, adjusting with the slow growth of China, weak markets in Europe, and the escalation in global trade tensions.

Moreover, German competitor BMW warned on profits in May, showing higher than expected investments. On the other hand, Volkswagen's return of sales in its passenger cars division would arrive at the lower end of its target.

Adding to that, Daimler refused to give any details regarding the diesel problems it currently handles. Also, he did not state the exact amount the company is setting aside.

Then on Sunday, Daimler announced a reduction in its forecasts for the return of sales for Mercedes-Benz Vans. As of now, it shows a performance between minus 2% and minus 4%. And it is under its previous forecast of 0% to 2%.


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