Daimler Lowers 2012 Operating Profit Projections

Ryan Joseph Ramos October 26, 2012

Because of a third quarter hampered by competition in the Chinese market as well as declining European demand, Daimler—parent company of Mercedes-Benz, among others—has now lowered its operating profit forecast for 2012, from an initial projection of 9 billion euros to just 8 billion euros.

“Due to the economic challenges, Daimler won’t match the high prior-year earnings before interest and taxes in full year 2012,” said Dr Dieter Zetsche, Daimler’s Chief Executive. He added, however, that the company will still be posting some significant earnings for the year. Zetsche has also remained hopeful that the Mercedes-Benz brand will be able to reclaim the top spot in the premium-car segment by, at the latest, the year 2020.

As Mercedes-Benz is shifting its strategy into more compact vehicles like the new A-Class, Audi and BMW are gaining some momentum in the luxury car segment. Although the Stuttgart-based automaker saw strong revenue increase because of the strong sales figures of the luxury vehicles under the Mercedes-Benz line, the overall sales for the company’s car and commercial vehicles was stagnant.

Third-quarter profit was pegged at 1.21 billion euros, which is significant in and of itself. This figure is, however, representative of an 11-percent decline over the same period last year (1.36 billion euros in Q3 2011).

The release of the lowered yearly projections was actually leaked a full day ahead of the scheduled announcement, which hastened the earnings report issued by Daimler.

Further compounding the difficulties for automotive manufacturers is the fact that used-car inventory continues to grow. That’s why dealers like and even the dealership’s own used-car departments are struggling at turning out decent profits because they have to lower price to go with the increasing supply.

On the stock front, Daimler shares were able to get an 11-percent gain since the start of 2012 although the company’s competitors have fared a bit better thanks to higher sales and higher profitability. It might also be indicative of how Daimler has been forced to lower annual profit projections in recent years even though competitors like BMW and Volkswagen have been able to make good on theirs.

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