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Daimler Earnings Improve

Teutonic maker hopes to challenge luxury rival BMW.

by on Apr.27, 2012

Mercedes' CSC concept debuted in Beijing this week.

Preliminary signs suggest Daimler AG is gaining traction from the ongoing product blitz launched by its flagship Mercedes-Benz brand, the German manufacturer reporting a 20% increase in net income for the first quarter, earning jumping to more than or 1.4 billion euros ($1.8 billion), or 1.25 euros per share as sale increased 9%.

But the maker repeated a cautionary note sounded by Dieter Zetsche, Daimler’s Chairman of the Board of Management who has referred to 2012 as a transition year for the maker which is struggling to regain its lead as the world’s largest luxury automaker.

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“We have started the year with a strong first quarter. Despite higher investment in future growth and a challenging market environment, we succeeded in surpassing the very good prior-year results in terms of unit sales, revenue, EBIT and net profit,” noted Zetsche.

Zetsche said the improvement in earnings reflected the ongoing sales growth at Mercedes-Benz Cars and Daimler Trucks, which overcame negative impact on earnings created by the expansion of the product portfolio, including the current product offensive at Daimler Trucks.

“We are on schedule to meet our targets for this year as well as our medium-term targets,” he added. Overall, Daimler expects to sell more than 2.1 million vehicles this year.

Overall, in the first quarter of 2012, the Daimler Group sold a total of 502,100 cars and commercial vehicles worldwide, surpassing the prior-year number by 9%.

The Mercedes-Benz itself also set a new record for unit sales in the first quarter of 2012. Total sales by the car division increased 9% to 338,300 units.

But earnings before interest and taxes dropped slightly to 1.25 billion euros from 1.28 billion euros during the same period a year ago.

Growth in unit sales, in Europe and the United State, could not offset the temporarily weaker pricing in China.  As has been widely reported on and elsewhere, increasing competition led Mercedes to cut prices on some S-Class models by as much as 25% during recent months.

However, Mercedes-Benz expects its unit sales in each of the remaining quarters of 2012 to be higher than in the respective prior-year period. The maker is particularly optimistic about the C-Class segment. At the end of March, it also launched the newest generation of its high-profile SL line. And it anticipates further growth for its SUVs, primarily due to the full availability of the recently-updated M-Class and, as of September 2012, the redesigned GL-Class.

In all, Mercedes plans to introduce 10 all-new or completely redesigned models.  That includes a much sportier version of the A-Class unveiled at the recent Geneva Motor Show, as well as the compact CLA, a smaller-version of the popular Mercedes “coupe-like sedan.” A concept version, called CSC, was introduced at the Beijing Motor Show this week.

Meanwhile, Daimler is moving ahead with its fast-expanding partnership with the Renault-Nissan Alliance.  The German maker will launch a replacement for its slow-selling Smart fortwo in 2014 based on a Renault design.  In turn, Mercedes’ new MFA small car platform will be used for several models coming from Nissan’s Infiniti brand.

Demands on Daimler’s cash flow were higher during the first quarter due to investment in property, plant and equipment and intangible assets as well as capital contributions in connection with the transfer of the Bergen business to Engine Holding and the joint venture between Daimler Trucks and Foton in China.

Compared with December 31, 2011, the net liquidity of the industrial business dropped by 1.9 billion euros to 10.1 billion euros due to the negative free cash flow, the company reported.

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