By William Boston
BERLIN -- Daimler AG's share price fell more than 4% after the Mercedes-Benz maker said it aims to reduce labor costs by $1.1 billion by 2022 and warned that costs associated with job cuts and efforts to meet stricter emission targets would dent profits for the next two years.
The auto industry is being squeezed by the high costs of developing new electric cars, which are yet to generate big sales volumes. Consumers continue to be skeptical of electric models because of high prices, the need to charge a battery or the fear of getting stranded with a dead battery.
Premium manufacturers such as Daimler, Audi AG and BMW AG are also under pressure from a growing number of competitors, including Tesla Inc. and Volvo Cars, which are quickly catching up to their German rivals. Elon Musk, Tesla's founder and chief executive, said this week he would build a Tesla factory near Berlin.
The increased competition and high costs of cutting greenhouse-gas emissions are weighing on Daimler, which has lowered its profit forecast three times in the past year.
Daimler Chief Executive Ola Källenius told investors at an event in London on Thursday the job cuts would come mainly at the Mercedes-Benz car brand in Germany. The company plans to cut more than 1,000 executive positions.
"The cost burdens to reach the targets on carbon-dioxide emissions require far-reaching measures to increase efficiency in every area of our company," Mr. Källenius said. "This will weigh on our earnings in 2020 and 2021."
Daimler's closed down 4.4% on Thursday, at EUR51.19 ($56.35), on the Frankfurt Stock Exchange.
Mr. Källenius, who succeeded Dieter Zetsche as CEO in May, said the company had to rein in the costs of meeting stricter restrictions on emissions, which are driving a push into electric vehicles and less-polluting combustion engines.
"We have a worst-case situation now -- low volume and first generation technologies. But we will raise volumes over time," Mr. Källenius said.
With so much uncertainty about the viability of new electric cars or new business models such as ride-hailing and car-sharing, auto makers are spending heavily to dabble in a variety of ventures to figure out which technologies and businesses can make money. As a result, capital expenditure has soared and remains high with few solid returns.
"Daimler urgently needs to move away from its 'spray and pray' investment philosophy and toward a materially more focused, sharpened allocation of its funds," Arndt Ellinghorst, an automotive analyst with Evercore ISI, said in a note ahead of the investors' meeting. "Otherwise, the group will simply be unable to self-fund its premium mobility aspirations," he added.
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