Earnings Watch: Trade Dispute Hits Daimler Earnings, Corporate Restructure Announced

Germany-based truck and passenger vehicle manufacturer Daimler AG on July 26 reported second quarter earnings that showed a decline in both profitability and revenue.

Net profit fell to 1.73 billion Euros ($2.02 billion) in the quarter from 2.44 billion Euros a year ago, according to MarketWatch. Revenue fell to 40.76 billion Euros from 41.21 billion Euros the prior year.

MarketWatch also reported the reason for the declines was that earnings at the company’s core Mercedes-Benz Cars division came in significantly lower, due to an escalating trade dispute between the U.S. and China.

“In June, Daimler warned that Chinese retaliatory tariffs on U.S.-made vehicles would hit sales and profits of its U.S. made vehicles,” MarketWatch said.

Despite this, the company once again increased its total unit sales compared with the same quarter of the previous year. In the months of April through June, Daimler sold a total of 833,000 cars and commercial vehicles worldwide, which is 1% more than in the prior-year period 

This was primarily driven by Mercedes-Benz Vans, with a new second-quarter record of 110,900 units sold, and by Daimler Trucks. Daimler Trucks’ unit sales of 123,900 vehicles were 6% higher than in the second quarter of last year, compared to 116,400 the same time a year ago. The sales volume in the North American Free Trade Agreement region increased to 44,300 units, up from 42,300 a year earlier.

The company has forecast its total unit sales for Daimler Trucks this year will be significantly higher than in the previous year.

“This is largely due to the significant recovery of some important markets. In the NAFTA region, the division expects a significant sales increase compared with 2017 as a result of the ongoing market recovery,” Daimler said.

The news came as Daimler announced a new corporate structure in which it will set up three independent entities; Mercedes-Benz AG, Daimler Truck AG, and Daimler Mobility AG; all under the umbrella of Daimler AG.

“Under the new structure Daimler plans to give its divisions greater entrepreneurial freedom, position them even closer to their markets and customers, while empowering them to enter partnerships more easily and quickly,” Daimler said in a statement.

Once the new structure has been fully implemented, the Mercedes-Benz Cars and Vans division, under the leadership of Mercedes-Benz AG, will have around 175,000 employees worldwide.

The Daimler Trucks and Buses division, under the leadership of Daimler Truck AG, will have around 100,000 employees worldwide, according to the company.

Already legally independent, Daimler Financial Services AG will be called Daimler Mobility AG going forward. “With its around 13,000 employees, the division today already stands for mobility services within the group,” Daimler said.

The new corporate structure will be submitted for approval by shareholders at the annual general meeting of Daimler AG in 2019.

Related: Daimler Talks Truck Sales, Tariffs, and Globalism