New Diesel Charge Hits Daimler Profits -- Update
January 22 2020 - 7:05AM
Dow Jones News
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)
Copyright (c) 2020 Dow Jones & Company, Inc.
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