Daimler's chief executive Ola Kallenius suffered a grim first year in 2019 as profits tumbled at the Mercedes-Benz parent company due to billions in costs from the "dieselgate" scandal while thousands of job cuts lie ahead. "We cannot be satisfied with our bottom line," Kallenius said on Tuesday, pointing to "measures to cut costs and to increase cash flows" after net earnings slumped 64 percent to 2.7 billion euros ($2.9 billion). Top of Stuttgart-based Daimler's list of problems is dieselgate, a cash black hole that sucked in some 4.0 billion euros last year in provisions for "governmental and legal proceedings and measures". The total charges mounted to 5.5 billion euros when counting in a mass recall of vehicles fitted with faulty airbags from supplier Takata. On top of those costs, massive investments in new technology such as battery-powered and automated cars weighed on profitability. "Daimler is under more pressure than ever after the catastrophic results for 2019," NordLB bank analyst Frank Schwope commented. "It's five minutes before midnight, high time to make some changes." One bright spot for the carmaker was robust sales. Against the backdrop of softer demand in global auto markets, Daimler was able to maintain unit sales at around the previous year's level of 3.3 million vehicles, while boosting revenue 3.0 percent to 173 billion euros. Those figures are the foundation for Daimler's more positive 2020 outlook, calling for revenue "stable" at last year's level, with operating profit "significantly above" 2019's 4.3 billion euros. In July, Daimler reported its first quarterly loss in a decade for April-June, while last month it warned that its full-year results would come in below expectations. Germany's KBA transport authority has ordered more than a million Daimler-built vehicles recalled, mostly over dieselgate. The firm still contests whether "motor control functions" cited by regulators are in fact illegal. But it agreed to pay an 870-million-euro fine for selling infringing vehicles, weighing on both the cars and vans divisions. Daimler's vans unit was especially hard hit, reporting an operating loss of 3.1 billion euros, while at the flagship cars division operating profit was slashed in half, to 3.4 billion euros. With performance flagging, bosses plan to offer shareholders a dividend of just 90 euro cents, down from 3.25 euros in 2018 and well short of the 1.53 euros forecast by analysts. Just after midday in Frankfurt (1105 GMT), Daimler's shares had given up an early morning rally, trading down 0.1 percent on the day at 43 euros against a DAX blue-chip index up 0.8 percent. Like carmakers across the sector, Daimler has ambitious plans to slash carbon dioxide (CO2) emissions from its vehicles, aiming to avoid swingeing fines under tighter EU regulations that come into force this year. "It is possible" to meet the greenhouse limits, although "2020 and 2021 will be the toughest years," Kallenius said. Daimler should have pushed into battery and hybrid power sooner, he added, but now "aims for very fast growth" from two percent last year to nine percent "in 2020". Tight margins on newer models and a bleaker economic outlook mean the funds to power investment must come from cost savings, with Kallenius aiming to find "over 1.4 billion euros" from job cuts. A reduction of more than 10,000 posts from Daimler's worldwide staff of 300,000 has already been announced, mostly via non-replacement of departing employees, early retirement schemes and voluntary redundancies. Aside from the slimmer headcount, the firm will also "simplify" its model range, eliminating little-sold or low-margin cars and slashing investment where it sees little prospect of them turning profitable. "We are determined... to significantly improve profitability," said Kallenius, who took the reins at Daimler after the 13-year reign of Dieter Zetsche. — AFp
