European decline hits Daimler

Fri, Sep 21, 2012, 01:00

DAIMLER, THE WORLD’S third largest luxury vehicle-maker, said earnings at its car division would drop this year as a European car market decline hits profit in the second half.

“The overall environment in Europe is deteriorating, with more negative developments than expected,” said chief executive Dieter Zetsche. “There is also significantly sharpening competition in China.”

Earnings at the Mercedes-Benz cars unit in the second six months of 2012 will be lower than in the first half. Daimler forecast in July that the cars division would report 2012 operating profit “in the magnitude of the prior year”.

Mr Zetsche said yesterday the unit has already been taking efficiency measures that are being bundled into a savings drive.

Earnings before interest and taxes at Mercedes-Benz cars in 2011 totalled €5.2 billion. Its first-half operating profit declined 10 per cent to €2.57 billion. The division includes the Mercedes-Benz luxury brand and Smart small-car marque.

The reduced forecast is “evidently an acknowledgment that the incentive level is high and therefore the earnings level can’t be maintained”, said Albrecht Denninghoff, an analyst at Silvia Quandt Research in Frankfurt.

Daimler fell as much as 4 per cent to €38.45 and was trading down 2.4 per cent at lunchtime yesterday in Frankfurt. That pared the stock’s gain this year to 15 per cent.

Shares of BMW, the biggest maker of luxury cars, fell 2.2 per cent to €59.82. – (Bloomberg)