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Daimler Issues Third Profit Warning For 2019 Due To Pressure Of The Diesel Scandal

Daimler Issues Third Profit Warning For 2019 Due To Pressure Of The Diesel Scandal
A third profit warning for 2019 was issued on Wednesday by the German luxury car maker Daimler as the company struggles with the costs it is having to incur because of the diesel emission scandal that has resulted in record fines and litigation across the world, along with the huge investments that the company has had to make in the development of electric cars. The company also has been plagued with production issues. The company identified all these issues to be impacting its earnings. 
The earnings before interest and tax for the company for 2019 is now expected to come down to about 5.6 billion euros or $6.2 billion compared to 11.1 billion euros that the company had earned in the previous year, Daimler said.
The company added that after conducting a preliminary assessment, it has come to the conclusion that the company will be hit by between 1.1 and 1.5 billion euros as expenses toward the ongoing governmental and court proceedings linked to the diesel emission cheating scandal. This has impacted its core Mercedes-Benz Cars unit. Daimler is yet to include the impact cost on the Mercedes-Benz Cars unit due to the scandal in its preliminary figure.
Following the profit warning, shares of the company dropped initially but later recovered to move in the green. 
The return on sales at the Mercedes-Benz Cars unit of the company for 2018 was 7.8 per cent. But the company now expects the figure to drop down to 4 per cent for this lucrative unit in 2019, Daimler said. The company added that the figure for the vans unit of the company will drop to about minus 15.9 per cent from plus 2.3 per cent while it would be about positive 6.1 per cent for its trucks unit compared to positive 7.2 per cent achieved the year before. 
The company added that its preliminary figure also includes one off costs of 300 million euros for the realignment of Daimler’s Your Now mobility services as well as another 300 million euros for a review of its vans product portfolio.
The annual figures for 2019 are to be released on February 11 by Daimler’s new Chief Executive Ola Kaellenius.
However the weak earnings of the company do not match up with the car sales of Daimler. 2019 was the ninth consecutive year that the company reported record sales for its Mercedes-Benz passenger cars with a total of 2.34 million units sold globally. That has potentially pitted the company to retain its position as the highest selling premium car brand.
The largest German auto company had earlier issued a warning for its earnings for 2019 in October last year and had said at that time it could incur additional expenditures because of the legal proceedings related to diesel emissions scandal.

Christopher J. Mitchell

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