Daimler AG (DAI), the world’s third- largest luxury-vehicle maker, said earnings at its car division will drop in 2012 as a European auto-market decline hits profit in the second half.
“The overall environment in Europe is deteriorating, with more negative developments than expected,” Chief Executive Officer Dieter Zetsche said at a press conference at Daimler headquarters in Stuttgart, Germany. “There is also significantly sharpening competition in China.” Earnings at the Mercedes-Benz Cars unit in the second six months of 2012 will be lower than in the first half, he said.
The Mercedes-Benz brand, which ranks third in luxury-car sales after Volkswagen AG (VOW)’s Audi unit overtook it last year, is shifting focus to compact models while confronting a shrinking home market. The profit-decline forecast counters Daimler’s prediction in July that the cars division would report 2012 operating profit that matched last year’s figures.
The new outlook is “evidently an acknowledgment that the incentive level is high and therefore the earnings level can’t be maintained,” said Albrecht Denninghoff, an analyst at Silvia Quandt Research in Frankfurt who has a neutral rating on the carmaker’s shares.
Daimler fell as much as 4 percent to 38.45 euros and was trading down 2.6 percent at 2:12 p.m. in Frankfurt. That pared the stock’s gain this year to 15 percent. Shares of Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury cars, fell 2.9 percent to 59.39 euros.
Earnings before interest and taxes at Mercedes-Benz Cars in 2011 totaled 5.2 billion euros ($6.74 billion). Its first-half operating profit declined 10 percent to 2.57 billion euros.
Zetsche said Mercedes-Benz Cars has already been taking efficiency measures in response to the market that are being bundled into a savings drive to be called “Fit for Leadership.” He didn’t give details. The division includes the Mercedes-Benz luxury brand and Smart city-car marque.
The European car market contracted by 8.5 percent from a year earlier in August, the ACEA regional trade group said Sept. 18. Ford Motor Co. (F), which led the delivery decline, said there was “heavy” discounting in the region last month.
Among the top three global luxury brands, Audi reported the biggest growth in Europe with an 8 percent sales gain in August, followed by a 0.5 percent increase at Mercedes-Benz. BMW’s namesake unit posted an 11 percent drop in European registrations.
Mercedes-Benz underperformed its competitors in the first half in China, with an 11 percent increase in deliveries versus jumps of 38 percent at Audi and 30 percent at Munich-based BMW.
Car-pricing pressure in China is probably hurting earnings at all three automakers, as well as at Volkswagen’s Porsche sports-car division, based on executives’ recent comments and production cutbacks, Max Warburton, an analyst at Sanford C. Bernstein Ltd., said today in a note to investors.
“The reality is that the Chinese market has slowed right down, previously great pricing is tumbling and, perhaps most worrying, mix is falling,” with decelerating sales of larger models, Warburton said.
BMW is sticking to a forecast for pretax profit and car deliveries increasing in 2012, with an automotive Ebit margin of 8 percent to 10 percent, Mathias Schmidt, a spokesman, said by phone today. Spokesmen at Wolfsburg, Germany-based Volkswagen weren’t immediately available to comment.
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