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Daimler Trucks Head Bernhard Pushes to Accelerate Savings

Daimler Trucks Head Bernhard Says Unit Must Push Earnings Drive
Daimler Trucks plans to add five Saturday shifts at the plant in Woerth in July and September to meet demand. Photographer: Guenter Schiffmann/Bloomberg

July 2 (Bloomberg) -- Daimler AG’s truck business, the world’s biggest maker of the vehicles, needs to accelerate spending cuts and delivery gains to achieve this year’s earnings goal and fulfill a savings and sales-growth plan through 2014.

“We have a lot of catching up to do by the end of the year,” Wolfgang Bernhard, head of the Daimler Trucks division, said at a press briefing yesterday in Woerth, Germany.

The unit, which makes Mercedes-Benz, Freightliner, Western Star, Fuso and BharatBenz commercial vehicles, has a target this year of matching 2012’s earnings before interest and taxes. Bernhard, who took his post at the division in April, said Daimler Trucks still has work to do to reach a targeted 1.6 billion euros ($2.09 billion) increase in Ebit by the end of next year through reduced costs and increased sales.

“It’ll be an ambitious goal” to equal last year’s earnings in 2013, said Frank Biller, a Stuttgart, Germany-based analyst with LBBW. “We expect them to post a slight decline. What the company can influence always also depends on how many trucks they can sell. And the markets remain difficult.”

Five-month industrywide registrations of new heavy trucks in Europe dropped 12 percent from a year earlier to 85,220 vehicles, according to the Brussels-based ACEA industry group. Daimler Trucks’ worldwide deliveries in the period declined 3 percent to 180,119 vehicles, with western European deliveries dropping 6.5 percent, and North American demand declining 2.5 percent, the company said today. New orders rose 19 percent to 212,000 units worldwide.

Targets Postponed

Daimler, which is also the world’s third-biggest maker of luxury cars, postponed long-standing profitability targets in October for its vehicle-manufacturing units as recessions in Europe hurt sales. The Stuttgart-based company said it remained committed to reaching the goals at a later date.

“We’re not satisfied with the current state” of Daimler Trucks’ two-year efficiency program, Bernhard said. “To reach our goal, we need to improve considerably.” The majority of the earnings improvements will take effect in 2014, he said.

Daimler rose as much as 1 percent to 47.26 euros and was trading up 0.1 percent at 12:09 p.m. in Frankfurt. The stock has gained 13 percent this year, valuing the manufacturer at 50 billion euros.

Margin Shrinks

The truck division has an eventual target of generating Ebit at 8 percent of revenue. The first-quarter margin at the unit was 1.7 percent as Ebit plunged 69 percent to 116 million euros and sales dropped 5 percent to 7.02 billion euros. Ebit last year at Daimler Trucks totaled 1.71 billion euros, a decline of 8.6 percent.

About 30 percent of the earnings improvement through next year should come from increased sales as customers buy new models such as Freightliner’s Cascadia Evolution, Bernhard said. Of the remaining 70 percent, about half should come from lower material costs, with another third resulting from spending cuts in research and development, and more efficient production accounting for the rest, he said.

“We can’t say when we’ll reach the 8 percent margin,” Bernhard said. “The environment has to be right,” and “we have no visibility on how the markets will develop beyond this year.”

New Engines

The division has renewed its Mercedes-Benz heavy-duty truck line in the past 1 1/2 years, including the Actros long-haul model, Antos heavy-distribution vehicle and Arocs construction-project version. Daimler has completed investing in engines across the range that comply with tighter emission standards, dubbed Euro 6, taking effect in the European Union next year.

Bernhard was in charge of purchasing at the Mercedes-Benz car division when he swapped positions with Andreas Renschler earlier this year. Bernhard said yesterday that he sees the European truck market bottoming out and demand in North America stabilizing.

Daimler scaled back workforce cuts in North America, laying off 600 employees versus the originally planned 1,300, after sales in the region beat its forecasts, Bernhard said. Daimler Trucks plans to add five Saturday shifts at the plant in Woerth in July and September to meet demand.

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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