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Daimler Dives Into the Red, Again

Q2 loss lessens, but near-term profits likely elusive.

by on Jul.29, 2009

A turnaround at Daimler AG will likely depend on getting a lot of these 2010 Mercedes-Benz E-Class sedans and coupes into customer hands ASAP.

A turnaround at Daimler AG will likely depend on getting a lot of these 2010 Mercedes-Benz E-Class sedans and coupes into customer hands ASAP.

Daimler AG continued to see its losses mount, during the second quarter of 2009, but reported a stronger financial position as its earnings from continuing operations improved.

Daimler lost $560 million in the second quarter compared to the nearly $2 billion loss in first three months of the year.  Still, that was a far cry from the substantial profit the company posted a year ago.  And Dieter Zetsche, Chairman of the Board of Management of Daimler AG, warned that the German automaker may not return to profitability this year because of the severe global recession.

The improvement is likely to be gradual at best and rests on scoring a solid, global hit with the new E-Class, Zetsche said.  The automaker has completely redesigned its mid-line sedan, for the upcoming year, and added a coupe to the E-Class line-up, as well.

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Meanwhile sales of trucks, busses and vans also continue at low ebb because of the broad economic downturn around the world.

Overall, Daimler posted a net loss of $1.4 billion compared to net income of $1.95 billion in the same period a year ago. Daimler reports in Euros but the loses have been translated into dollars, with an exchange rate set at $1.40 to the Euro.

“Above all, at Mercedes-Benz Cars, but also at Mercedes-Benz Vans and Daimler Financial Services, we succeeded in improving earnings in the second quarter compared with the first quarter of 2009. This demonstrates that we are on the right track and that the measures we have taken are having positive effects,” Zetsche said.  However, he acknowledged that, “a comparison with the very good second quarter of last year shows that there is still a lot of work to be done.”

The earnings decline in the second quarter of 2009 compared with the same period last year reflected lower unit sales virtually across the board: by Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans and Daimler Buses.  In the second quarter of 2009, Daimler sold 391,500 cars and commercial vehicles worldwide, 31 percent fewer than in the same period of last year. Truck sales alone dropped 56 percent during the second quarter and show little sign of recover.

Due to the significant increase in corporate insolvencies in Germany, Daimler’s contributions to the German Pension Protection Association climbed to $294 million.

The fall in earnings was mitigated by the measures taken by Daimler to reduce costs and improve efficiency following the onset of the global economic crisis.

Daimler also said the positive cash flow came to $1.96 billion in the second quarter of 2009, and was boosted by the progress  made with the reduction of working capital.  The industrial group’s ready liquidity also increased to $5.2 billion

At the end of the second quarter, Daimler Financial Services’ contract volume amounted to Euro 60.3 billion, close to the level of a year earlier but 5 percent lower than at December 3. Daimler Financial Services income, however, fell by more than half during the second quarter, according to the financial information released by the company.

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