Daimler, the parent company of Mercedes=Benz, announced the financial downgrade on Sunday — slashing its 2019 profit expectations by hundreds of millions of euros in the latest fallout from the diesel emissions scandal that has rocked the German auto industry, according to WTVR News.
The warning that profits for 2019 would be flat, compared with expectations of a slight increase, was the first under the company’s new CEO, Ola Kaellenius and led some analysts to call for a fresh approach from his team. “Best execution and accountability remain core areas of improvement that need to be addressed by the new management,” Evercore ISI analyst Arndt Ellinghorst said in a research note, reports Reuters.
According to Daimler, its second-quarter profits would take a “high three-digit-million” hit, citing “various ongoing governmental proceedings and measures” related to Mercedes-Benz diesel vehicles. However, the warning announced on Sunday came after the news that Daimler must recall 60,000 Mercedes diesel cars in Germany after regulators found they were fitted with software aimed at distorting emissions tests.
Analysts are suggesting the hit would range between 600 to 800 million euros ($683 million and $911 million) with two-thirds being vans and one-third being Mercedes cars.
The investigation is not over yet. The Transport Ministry said it was expanding its investigation to more models. The scrutiny started with the 2015 admission by another German automaker — Volkswagen — that it had rigged millions of diesel engines to cheat on emissions tests.
In April, the European Commission said Volkswagen, BMW and Daimler broke antitrust rules by acting together to delay the introduction of two emissions cleaning systems between 2006 and 2014, reports Forbes.
Investment researcher Evercore ISI said Daimler’s general dilemma was likely to be shared by other big automakers. “These warnings are terrible for auto valuations across the board. They come at a time when the industry is facing its largest emission challenge in history.”
