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MarketScreener Homepage  >  Equities  >  Xetra  >  Daimler AG    DAI   DE0007100000

DAIMLER AG

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Daimler : Warns on Profits, Aims to Cut Labor Costs

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11/14/2019 | 12:14pm EST

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.

Write to William Boston at william.boston@wsj.com

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Financials (EUR)
Sales 2019 173 B
EBIT 2019 6 895 M
Net income 2019 4 308 M
Finance 2019 11 582 M
Yield 2019 3,95%
P/E ratio 2019 12,4x
P/E ratio 2020 8,67x
EV / Sales2019 0,24x
EV / Sales2020 0,24x
Capitalization 52 481 M
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Mean consensus HOLD
Number of Analysts 29
Average target price 50,68  €
Last Close Price 49,06  €
Spread / Highest target 73,3%
Spread / Average Target 3,31%
Spread / Lowest Target -28,7%
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Managers
NameTitle
Ola Kaellenius Chairman-Management Board
Manfred Bischoff Chairman-Supervisory Board
Harald Wilhelm Chief Financial Officer
Clemens A. H. Boersig Member-Supervisory Board
Sari Maritta Baldauf Member-Supervisory Board
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