Corona crisis causes sharp drop in profits at daimler

Corona crisis causes sharp drop in profits at daimler

The corona virus crisis is putting even more pressure on the carmaker daimler, which has already been weak lately, and rubbing deep holes in its cash flow.

In the first quarter, the group just barely manages to avoid going into the red. However, the group expects even worse figures in the second quarter, which is already underway. To keep the money together, CEO ola kallenius continues to cut back on investments and research and development spending, but explicitly not on future topics such as electrification and digitization, as he emphasized on wednesday. "These key technologies for the future are not up for grabs," kallenius said.

Daimler had already presented the first preliminary figures last week, followed by the details on wednesday. Accordingly, the profit in the first three months of the year fell sharply. The bottom line was that shareholders were left with only 94 million euros. In the first quarter of the previous year, which had also not gone well, it had been 2.1 billion euros.

In view of the production stoppages and the lack of demand, earnings before interest and taxes adjusted for special effects are expected to be negative in the second quarter, chief financial officer harald wilhelm said in a conference call with analysts.

Daimler had only 644 in the first quarter.300 cars and commercial vehicles sold. That was 17 percent less than in the same period of the previous year. Sales declined slightly in comparison, partly because daimler was able to sell more cars from the top price categories – by six percent to 37.2 billion euros.

Kallenius had already launched a cost-cutting and efficiency program last fall that should have really taken off now. Cutting costs, eliminating jobs, streamlining the model range, cutting back on investments: this is how daimler wanted to reverse the trend after a weak 2019 and become significantly more profitable again – while the stricter eu climate requirements are creating additional pressure to get as many electric vehicles on the market as quickly as possible.

Then came corona. Daimler stopped a large part of the production in its plants, sent the employees into short-time work. Car dealers all over the world closed their shops. In the meantime, the bander are gradually starting up again, but how demand will develop is completely open.

The decisive factor will be when the pandemic will be under control worldwide, how long economic activities will remain restricted and what recovery pattern will set in afterwards, daimler stressed. "The covid 19 pandemic is having a significant impact on the global economy – and on our company," said kallenius.

Daimler had already cancelled its original forecast. The group now expects that both sales and profits at the end of the year will be below the level of the previous year. "The pressure on the business remains high," said kallenius, although there were initial signs from china of a return to normality.

Financially, daimler sees itself well positioned for the period during and after the crisis, despite the severe setbacks. Comprehensive measures had been taken to protect cash and increase flexibility". Kallenius is sticking to his savings plans, with which, among other things, he wants to get 1.4 billion euros out of the personnel alone, he said.

Individual measures, such as discussions about compensation agreements, were postponed somewhat in view of the current situation. It is also possible that further cutbacks will have to be made at a later date. "One should not be too optimistic about the future," said kallenius.

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