Daimler lowers earnings forecast over recalls related to diesel emissions

Image: Mercedes Benz GLK 220 CDI 4Matic: Urban Design

Image: Mercedes Benz GLK 220 CDI 4Matic: Urban Design

Guest post by FreightWaves’ Todd Maiden

Daimler AG (OTCPK: DDAIF) announced a “high-three digit million” hit to second quarter 2019 earnings related to ongoing expenses to remedy its diesel emissions woes surrounding its Mercedes-Benz diesel vehicles.

Daimler warned, “Increase of provisions for various ongoing governmental proceedings and measures relating to Diesel vehicles by a high three digit million amount will affect Daimler’s second quarter 2019 earnings and be taken into account in the Group EBIT.”

Additionally, the Stuttgart, Germany-based company said that return on sales for Mercedes-Benz vans is now expected to decline in the 2 percent to 4 percent range. Total earnings before interest and taxes, or operating income, is expected to be flat compared to 2018’s $11.1 billion of EBIT, which was down approximately 17 percent year-over-year.

On June 22, 2019 Germany’s transportation ministry announced that 60,000 Mercedes-Benz vehicles in Germany would need to be recalled after tests revealed that they are equipped with software that can manipulate emissions tests.

The vehicles in question are GLK 220 models produced between 2012 and 2015.

Daimler confirmed the latest recall and will continue to cooperate with regulators, but will appeal the latest finding, as it believes that its emissions systems are legal according to Reuters.

The latest recall adds to the roughly three million Daimler vehicles already recalled since the company’s 2017 emissions concerns surfaced.

In 2018, Daimler Trucks, also the maker of Freightliner and Western Star trucks, was forced to suspend deliveries of truck engines used in non-European markets like the Middle East and Africa over issues surrounding its on-board diagnostic system which controls the addition of an additive, AdBlue, which is used to neutralize emissions of nitrogen oxide.

In May 2019, Daimler Trucks announced that it plans to develop a global group aimed at putting highly automated commercial trucks in use on U.S. highways within the next decade. The group is focused on Level 4 autonomous vehicles, performing all driving tasks but still requiring a driver in the cab of the truck.

Daimler stock traded off more than 4 percent on the Frankfurt Stock Exchange on the news.