By William Boston 

BERLIN -- Mercedes-Benz owner Daimler AG Wednesday reported a near 50% drop in earnings last year and warned that it would take up to EUR1.5 billion ($1.7 billion) in additional charges, further impairing profits, in the wake of investigations into allegations that it cheated on diesel emissions.

Daimler shares fell slightly on the news and were down about 1% in morning trading on the Frankfurt Stock Exchange.

The earnings report is a fresh blow for the company, which is struggling to boost profits, faces criminal investigations in the U.S. and Europe, and is shouldering high investment costs in electric vehicles to meet Europe's timeline for cutting CO2 emissions by the end of this year.

The announcement comes a day after German prosecutors raided facilities of rival auto maker, Japan's Mitsubishi Motors Corp., after the country's motor vehicle authority alleged that some Mitsubishi brand models built after 2014 contained illegal software that manipulate emissions on diesel-powered vehicles.

In a preliminary report to financial markets on its 2019 earnings, Daimler said earnings before interest and taxes fell to EUR5.6 billion in 2019 from EUR11.1 billion the year before.

"Not included therein are anticipated additional expenses for ongoing governmental and court proceedings and measures relating to Mercedes-Benz diesel vehicles," the company said in the statement.

Daimler said it would accrue additional charges of EUR1.1 billion to EUR1.5 billion after already taking charges of EUR1.6 billion last year in connection with the diesel investigations. The company declined to comment on ongoing investigations.

Daimler said the charges would mainly affect its Mercedes-Benz Cars and Mercedes-Benz Vans divisions. Earnings at the car division fell to EUR3.7 billion from EUR7.2 billion and its return on sales was halved to 4%. The vans division swung to a EUR2.4 billion loss before earnings and taxes.

The earnings figures are preliminary and unaudited. Daimler is due to report its 2019 full-year and fourth-quarter financial statement on February 11.

The news from Daimler and Mitsubishi shows that the auto industry's diesel emissions-cheating scandal continues to widen more than four years after Volkswagen AG admitted to rigging millions of diesel engines with so-called defeat devices, costing VW more than $30 billion in fees, penalties and fines.

The illegal engine-control software enables a car to pass routine treadmill emissions tests but emit many times the accepted levels of toxic tailpipe emissions during normal driving.

Mitsubishi sold just 148,248 vehicles in Europe last year, but Daimler is a major player, selling 1.02 million Mercedes-Benz and Smart passenger cars in Europe last year, achieving 6.4% market share.

Daimler and its rivals in the once lucrative premium car industry, BMW AG and Audi AG, have been struggling to maintain lofty profit margins in the face of heightened competition, huge investments in electric vehicles and self-driving car technology, and legal woes from the diesel scandal and other issues.

While not affected by the diesel scandal, BMW has had to take charges against earnings in connection with a European antitrust investigation. The EU alleges that BMW and other car makers colluded on pricing for emissions technology.

BMW also said in December that the U.S. Securities and Exchange Commission is investigating its business practices on suspicion the company falsified sales data to boost its performance numbers in the U.S.

BMW has otherwise declined to comment on the matter. The SEC hasn't responded to requests for comment.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

January 22, 2020 06:50 ET (11:50 GMT)

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