Daimler suffered its worst annual performance in a decade last year as it was forced to set aside billions of euros in “Dieselgate” litigation costs, compounding its struggle to fund a late move into electric vehicles.
The German carmaker on Tuesday reported a more than 60 per cent fall in earnings in 2019 as net profits at the Mercedes-Benz parent dropped to €2.7bn last year from €7.6bn in 2018, despite sales remaining at roughly the same level.
The lacklustre results prompted the company to propose slashing its annual dividend to just 90 cents per share, down from €3.25 in 2019.
In a year that was already challenging for auto manufacturers, because of a slowdown in the global car market, Daimler booked €5.4bn in legal liabilities, including more than €4bn in relation to the alleged manipulation of diesel emissions tests. Daimler continues to deny any wrongdoing.
“We are going to restore the financial health of this company,” vowed chief executive Ola Kallenius, who has overseen four profit warnings since taking over last May.
“I will work 24/7 with this management team to make that happen so that the numbers that we’re presenting today hopefully represent somewhat of a turning point,” he added.
The Stuttgart-based carmaker, which employs almost 174,000 workers in Germany, announced last year that it would axe a tenth of managers worldwide, and more than 10,000 jobs in total by the end of 2022, saving more than €1.4bn.
Mr Kallenius refused to deny reports that a further 5,000 roles could be cut.
On Tuesday, the Stuttgart-based automaker said it would offer roughly 130,000 German employees almost €1,100 each as a “one-time appreciation bonus”.
Investors, however, were left with “little room for optimism”, said Michael Muders, a portfolio manager at German institutional investor Union.
“It will be years before Daimler achieves the level of returns that shareholders can expect from a premium car manufacturer,” he added, while warning that there was “no reason to hope that [the Dieselgate] payments will settle the matter”.
As well as dealing with legacy litigation issues, and high personnel costs, Daimler is being forced to spend heavily on ramping up its production of electric vehicles and plug-in hybrids, in order to avoid fines from Brussels for breaching new emissions regulations.
The European standards, which were phased in from January 1, mandate a fleet-wide CO2 level of 95g per kilometre in the next couple of years. Daimler’s average is currently at about 137g, and battery-powered vehicles still account for just 2 per cent of its annual sales.
Meanwhile, profit margins at Mercedes-Benz cars, Daimler’s core division, have more than halved, to just 3.6 per cent, despite a 17 per cent increase in sales in China, the company’s single biggest market. Mercedes’ Vans unit made a €3bn pre-tax loss, described as “horrendous” by Mr Kallenius.
Daimler’s share price, which had fallen more than 14 per cent in the past 12 months, rose 2.5 per cent to €44.22 in early trading, as the car sector’s exposure to the effects of the coronavirus outbreak began to subside.
The company’s market valuation has been buoyed in part by persistent interest from Chinese competitors.
BAIC, which owns about 5 per cent of Daimler, is thought to be engaged in a bidding war with the German brand’s largest single shareholder, Geely, which holds a near-10 per cent stake.
On Monday, Geely announced that it intended to merge with Volvo Cars, creating the first global Chinese carmaker.