Mercedes-Benz owner Daimler’s profits slumped by almost two-thirds in 2019 as the legal costs of the “dieselgate” scandal and heavy investments in electric technology took their toll.
The German carmaker’s net profit fell to €2.7bn (£2.3bn) for 2019, it announced on Tuesday, almost €5bn worse than the previous year’s performance. It also slashed its dividend from €3.25 per share to only 90 cents to help preserve cash to plough into electric vehicle technology.
Daimler is carrying out swingeing cuts to its global workforce as it tries to save more than €1bn in costs. In November it said it would cut at least 10,000 jobs worldwide by the end of 2022, with redundancies concentrated among management roles.
Daimler faces many similar problems to other carmakers around the world, struggling with the costs of fundamentally changing its technology to transition from the internal combustion engine to electric cars – a key concern this year as strict and potentially costly EU emissions limits come into effect.
At the same time, the “dieselgate” emissions cheating scandal has triggered a slump in sales of diesel cars, particularly profitable for premium carmakers such as Daimler and Volkswagen, the owner of Mercedes-Benz rival Audi.
Daimler booked legal costs of €5.4bn during 2019, including dieselgate costs. In September, Daimler was fined €870m by German prosecutors for failing to comply with emissions regulations, and it still faces further investigations in Germany and in the US, as well as civil lawsuits from customers.
Much of the pain for Daimler was felt in its vans division, which swung to an annual loss of €3.1bn because of legal costs. Earnings before interest and tax in the Mercedes-Benz division halved to €3.36bn.
Ola Källenius, chairman of Daimler’s management board, said the company “cannot be satisfied with our bottom line”.
He said Daimler has “substantially ramped up our investments into new technologies”, and that “measures to cut costs and to increase cash flows are necessary”.
The carmaker, which employs about 299,000 people worldwide, increased its spending on research and development by more than €500m in 2019, but has yet to launch its first mainstream electric vehicle, the Mercedes-Benz EQC electric SUV.
The company’s sales were flat for the year, at 3.35m vehicles, as its main Mercedes-Benz products recorded no growth. Revenues grew by 3% year-on-year to reach €172bn.
Adding to the uncertainty for the industry, Daimler and rivals also face an as-yet-unknown hit from the coronavirus outbreak, which has stopped production in many Chinese factories and is expected to weigh heavily on sales in the short term. Mercedes-Benz sold 707,000 cars in China last year.
Kallenius said the firm was bringing its Chinese factories back online but that the virus’s impact remained uncertain.
