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Abu Dhabi, UAEWednesday 21 November 2018

Mercedes maker Daimler's profit slips 30 per cent

US-China trade tariffs cited, but German company also warns emissions-related vehicle certification bottlenecks would further dent Mercedes earnings

Mercedes owner Daimler has warned earnings will be further hit. AP
Mercedes owner Daimler has warned earnings will be further hit. AP

UPDATE:

Daimler unveiled a new corporate structure on Thursday, designed to give its trucks, mobility services and Mercedes-Benz car division greater scope to chase growth in an era when carmakers prepare to launch fleets of autonomous cars, Reuters reported.

The company said it would set up three legally independent entities – Mercedes-Benz, Daimler Truck and Daimler Mobility, under the umbrella of Daimler.

As part of the reorganisation, it has struck an agreement with labour representatives that includes a pledge to secure jobs and invest in German sites, it said.

Mercedes maker Daimler blamed US-China tariffs for a 30 per cent drop in second-quarter profit and predicted a further decline as new emissions-test standards hit sales.

Earnings before interest and tax fell to €2.64 billion (Dh11.36bn), weakened by Chinese price-cutting on US-made Mercedes models to offset import duties, the company said on Thursday. Revenue dipped 1 per cent to €40.8bn.

Daimler last month blamed the US-China trade tariffs when cutting full-year guidance. Rivals Fiat Chrysler and General Motors followed suit this week.

But the German luxury carmaker also cautioned that emissions-related vehicle certification bottlenecks would further dent Mercedes earnings in the current third quarter.

While an apparent easing of EU-US trade tensions boosted the shares of its German rivals on Thursday, Daimler's stock was up just 0.8 per cent at 7.18am GMT.

BMW rose 3.2 per cent and Volkswagen by 4 per cent after Brussels and Washington announced progress on a trade dispute that had threatened to add US car tariffs to those already slapped on steel and aluminium.

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The Mercedes-Benz division's profit margin narrowed to 8.4 per cent in the second quarter from a year-earlier 10 per cent, also weighed down by a supplier fire and higher spending on autonomous and electrified vehicles. Deliveries fell 1 per cent.

Daimler repeated a warning that the new Worldwide Harmonised Light Vehicle Test (WLTP) standards taking effect in September would lead to "some temporary restrictions in the availability of vehicles", as well as higher inventories of unsold cars.

As a result, third-quarter Mercedes earnings will be "significantly below" the €1.9bn recorded in the three months to June 30, the group said on Thursday.

The new standards have already caused a slowdown in sales for car makers including Volkswagen, which has rented space to store some of the 250,000 vehicles that may be caught up in testing delays.

French supplier Valeo also cut its 2018 outlook on Wednesday, largely citing WLTP disruption.