Daimler's Earnings Hit Due to Regulatory Pressure Over Diesel Emissions
Daimler, which makes Mercedes-Benz luxury cars, had already warned that profits would decrease due to regulatory actions involving diesel cars and other issues.
The Daimler AG logo. Representative Image. (Photo: Reuters)
German automaker Daimler said that net profit fell 21 percent in the third quarter as the company faced backlogs registering vehicles under new emissions rules and costs rose due to regulatory pressure over diesel emissions. Daimler's net profit fell to 1.76 billion euros ($2.01 billion) from 2.24 billion euros in the year-ago quarter. Revenue fell 1 percent to 40.2 billion euros.
The company, which makes Mercedes-Benz luxury cars, had already warned that profits would decrease due to regulatory actions involving diesel cars and other issues. It now says profits for the year will be "significantly lower" than last year.
CEO Dieter Zetsche nonetheless gave an upbeat assessment for the remainder of the year, saying that "the continued high demand from our customers makes us confident for the fourth quarter."
Chief Financial Officer Bodo Uebber said the company had costs in the middle three-digit millions for dealing with "government proceedings." He said he could not provide more details due to confidentiality agreed with the authorities, with whom the company was cooperating.
The German government has been pushing automakers to reduce emissions in existing cars through software updates and trade-in premiums for existing vehicles. Meanwhile, Daimler faces investigations by German prosecutors and the US. Department of Justice into possible manipulation of diesel emissions.
Diesel emissions have been under increased scrutiny since Volkswagen was caught using software to cheat on U.S. emissions tests and paid more than 28 billion euros in fines and settlements.
Other carmakers were found to have used regulatory loopholes to turn off controls under certain circumstances, so that real-life emissions were higher than in testing. New European Union test procedures came into force Sept. 1 to make testing more closely reflect every day driving conditions. Daimler encountered backlogs getting cars approved under new emissions rules.
Earnings at the Mercedes division fell 35 percent to 1.37 billion euros amid the emissions certification backlog. The operating margin is a key measure of the division's profitability which slipped to 6.3 percent from 9.0 percent in the same quarter a year ago.
Meanwhile, while the company's truck division, whose brands include Freightliner and Western Star, saw a 38 percent increase in operating profit, to 850 million euros.
Daimler AG shares traded 1.3 percent higher at 50.65 euros in morning trading in Europe.
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