Daimler hurt by production delays at Mercedes, China slowdown

Monday, 29 April 2019 00:00 - - {{hitsCtrl.values.hits}}

FRANKFURT, REUTERS: Daimler’s first-quarter operating profit fell 16%on Friday as a 718 million euro ($800 million) one-off gain failed to offset raw material costs, technology investments and production delays at three Mercedes-Benz factories.

Sales of Mercedes-Benz cars fell 7%in the first quarter in part due to manufacturing bottlenecks for the A-Class compact car in Aguascalientes, Mexico, the Mercedes-Benz Van in Charleston, South Carolina, and the Mercedes-Benz GLE sports utility vehicle in Tuscaloosa, Alabama.

Mercedes-Benz sales in China, the world’s largest car market, fell 3%and plans to make a Mercedes-Benz pickup truck in Argentina have been abandoned after a management review, the carmaker said.

“We cannot and will not be satisfied with this, as expected, moderate start to the year. We now have to work hard to achieve our targets for 2019,” Chief Executive Dieter Zetsche said in a statement to accompany his final quarterly results as boss.

Daimler blamed new suppliers for problems launching a sports utility vehicle platform, causing production delays for a new high-margin GLE model and the return on sales at Mercedes-Benz cars to fall to 6.1 percent, down from 9%a year earlier. “Daimler is blaming supplier bottlenecks and quality issues pretty much across all divisions for its poor financial performance. To be clear: it’s management’s job to manage its supply chain and relationships with partners,” Evercore ISI analyst Arndt Ellinghorst said in a note on Friday.

Earnings before interest and tax (EBIT) fell to 2.80 billion euros, below the 2.89 billion expected by analysts despite a 718 million euros valuation boost from the merger of the mobility services divisions of Daimler and BMW.