Daimler AG trimmed its earnings outlook for 2018, blaming the rising cost of fines and litigation over the emissions from the company’s diesel engines and a sharp reduction in the earnings by Mercedes-Benz Cars for the expected decline.
“The main factor is an increase in expected expenses in connection with ongoing governmental proceedings and measures in various regions with regard to Mercedes-Benz diesel vehicles,” said as the company revised its financial guidance.
“Furthermore, against the backdrop of a recent ruling by the European Court of Justice, provisions have been recognized for the potential need to take action on certain vehicles still operating with the previously used refrigerant R134a,” the company said.
In addition, Mercedes-Benz Vans records lower unit sales due to delays in vehicle deliveries and Daimler Buses has recorded decreasing demand in some markets.
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As a result, earnings are now significantly below market expectations with earnings before interest and taxes, dropping to an estimated 2.488 billion euros, or $2.86 billion, in the third quarter, compared to earning 3.409 billion euros, or $3.93 billion, in the third quarter of 2017.
The third quarter earnings of Mercedes-Benz Cars suffered the largest decline with earning dropping from 1.372 billion euros, or $1.58 billion, in the third quarter to 2.105 billion euros, or $2.42 billion, in the same period last year.
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Daimler didn’t specify the reason for the sharp decline but a slowdown in the Chinese automotive market and rising tariffs that have cut Chinese demand for American-made sport-utility vehicles appear to have contributed to the decline.
Meanwhile Daimler Trucks, the company’s second largest source of income, boosted its earnings to 850 million euros from 614 million in the third quarter of 2017. On the other hand, Mercedes-Benz Vans lost 93 million euros, while Daimler Buses earning dropped to 30 million euros from 32 million in the third quarter of 2017.
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Daimler Financial Services also saw earnings drop to 392 million euros from 508 million euros during the third quarter of 2017, Daimler said.