| 7:14 PM EST

Daimler Grinds Away at Fixing Its Financial Woes

The challenges pile up for Daimler’s freshman CEO.
#europe #people #Daimler

Share

Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

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.

Targeting 2022

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.

Right Message

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.

Related Topics

RELATED CONTENT

  • Designing the 2019 Ram 1500

    Ram Truck chief exterior designer Joe Dehner talks about how they’ve developed the all-new pickup. “We’ve been building trucks for over 100 years,” he says. “Best I could come up with is that this is our 15th-generation truck.”  

  • 2016 Prius: The Fourth Generation

    The little car that could still can. And this time as a car that not only gets great fuel economy, but which has ride and handling that makes it more than an econo-box (and its styling is anything but boxy).

  • Developing the Lotus Elise Series 2

    How GM, Toyota and a Couple of Gutsy Managers Made the U.S. Version of the Two-Seater a Reality