Daimler Outlook Disappoints Analysts Despite Planned Cost Cuts; Shares Fall
November 14 2019 - 5:54AM
Dow Jones News
By Max Bernhard
Daimler AG (DAI.XE) plans to cut jobs and save more than one
billion euros ($1.10 billion) in personnel costs over the next
three years but the luxury car maker's profitability outlook
disappointed analysts, nevertheless.
Daimler shares traded lower after the news, down about 3.0% at
EUR51.95 at 1005 GMT.
The German company said Thursday it plans to save more than EUR1
billion in personnel costs at its core Mercedes Benz Cars &
Vans divisions. It will also cap investments in property, plant and
equipment and in research and development at the 2019 level. It is
targeting a reduction of those expenses in the medium term at the
businesses, it said.
Mercedes-Benz Cars & Vans now expects an operating return on
sales of at least 4% in 2020 and at least 6% in 2022, excluding
possible import tariffs. Citi analysts had expected a margin of 6%
next year.
"Expectations have come down in recent weeks; however, this
still appears to be below the low end," the bank's analysts
said.
Frank Schwope, an analyst at NordLB, said Daimler's outlook for
next year appears weak.
"Against the backdrop of recurring crises and weaknesses in the
industry, the group is likely to abandon its average target margin
of above 8% in the passenger car sector," he said.
Chief Executive Ola Kallenius said efforts to cut vehicle
emissions would hit the car maker's earnings in 2020 and 2021.
"To remain successful in the future, we must therefore act now
and significantly increase our financial strength," he said.
Traditional manufacturers have been struggling with a slump in
demand, coinciding with high upfront costs to make their vehicles
compliant with emissions regulation and large investments into
future technologies.
At the same time, the companies are trying to fend off
competition from newcomers, such as Tesla Inc (TSLA). The U.S.
electric car maker said this week it would build a factory in
Daimler's home turf, Germany.
Write to Max Bernhard at max.bernhard@dowjones.com;
@mxbernhard
(END) Dow Jones Newswires
November 14, 2019 05:39 ET (10:39 GMT)
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