Daimler Grinds Away at Fixing Its Financial Woes
Last month Daimler learned that its Mercedes-Benz marque has a brand value of $65 billion, making it the best in all autodom.
Right now CEO Ola Kallenius is probably wishing there was a way to convert all that value into cash, especially since the company’s share price gives it a market capitalization of only $50 billion. Tesla’s market cap is $139 billion.
In the Crosshairs
Ola Kallenius (Image: Daimler)
Daimler has been in a nosedive since Kallenius took over as CEO nine months ago. The company has issued three profit warnings within the past eight months. Earlier today Kallenius had more bad news for investors: Their dividend has been cut by two-thirds to a 10-year low.
Daimler is struggling to contain costs, pay for diesel emission problems, deal with production snags and crank up its electrification program.
These aren’t problems that Kallenius caused. All were festering when his predecessor, Dieter Zetsche was finishing up his final year as CEO. Awkwardly, Zetsche is set to return to Daimler next year as supervisory board chairman.
Daimler’s fortunes faded last year. Unit sales at Mercedes stalled, and the brand’s revenue advanced only 1%. Daimler’s overall pretax earnings and net earnings plummeted more than 60% (to $4.7 billion and $3 billion, respectively).
The short-term outlook isn’t pretty. Kallenius faces $2.2 billion in restructuring costs by the end of 2022. That will be partly offset by an expected $1.5 billion drop in labor costs as the company sheds more than 10,000 jobs worldwide over the same period.
In Europe, Daimler’s cars are not likely to meet significantly tougher carbon dioxide limits that take effect in Europe this year. Missing pollution targets will open the company to very large regulatory fines.
A bevy of electric models would help ease regulatory pressures, but the company doesn’t yet have much to offer. Kallenius vows to add 20 hybrid or all-electric Mercedes models by 2022.
Daimler’s problems won’t go away soon. But many analysts like Kallenius’ relentless dedication to cost cutting, streamlining and efficiency efforts spanning everything from management to manufacturing.
It won’t be easy for the company to pull off the magnitude of change Kallenius says will be required to get back on track. He’s in good company on that point, since pretty much all other carmakers are grappling with the same challenge.
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