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Daimler Brands - This company will change radically:

Ola Källenius presented the Daimler balance sheet for the first time: The profit of the car group has dropped even further. But the manager is combative.

Stuttgart Daimler is in a deep crisis. The automaker's profit plummeted by almost two thirds last year to EUR 2.7 billion, and net liquidity decreased by EUR 5.3 billion. The view is poor.

The return in the core Mercedes division has more than halved from 7.8 to 3.6 per cent, with his vans Daimler even posted a loss of almost 3.1 billion euros.

And despite record sales of EUR 173 billion, the Stuttgart-based company only generated free cash flow of EUR 1.4 billion.

“The trend at Daimler is worrying. A mass manufacturer and chronic underperformer like Opel probably generated a significantly better return than Mercedes in 2019.

That is unacceptable, ”complains Jürgen Pieper. The car analyst from Bankhaus Metzler makes it clear: "The grace period for the new board of directors is coming to an end."

Pieper demands that Daimler boss Ola Källenius, who took over the management of the Dax Group from long-term boss Dieter Zetsche in May 2019, must finally deliver and massively reduce costs: "Källenius can hardly afford another profit warning."

knows that the trust and patience of the capital market are gradually exhausted and promises improvement.

"This company will change radically," Källenius announced in an interview with investors and analysts. "We will restore the financial health of the group."

The 50-year-old wants to "work around the clock" with his team to improve the results. The 2019 balance marks a "turning point", the bottom has been reached, explained Källenius.

He has taken extensive measures to reduce costs. The first positive effects should already be visible this year.

At the same time, Källenius asked for patience. Some savings plans would not be implemented overnight. "There are no quick fixes here," said the Mercedes frontman.

The Swede said he had “no illusions” that the next three years would be “tough”. Employees and shareholders are already feeling how hard the times are.

Källenius wants to save more than 1.4 billion euros in staff. Daimler is expected to cut up to 15,000 of its nearly 300,000 jobs.

"The goal is a worldwide, socially acceptable reduction in jobs, including the reduction of management positions," the group explained, without giving any concrete figures.

Källenius drastically cuts the bonus for employees. It falls from 4965 euros to only 597 euros. At the same time, Daimler pays a one-time recognition premium of 500 euros to its approximately 130,000 eligible employees in Germany.

Even if you take this one-off payment into account, the profit-sharing for employees shrinks by almost 78 per cent. The shareholders must also become more modest.

The Daimler Board of Directors now proposes to its shareholders only a dividend of EUR 0.90 per share.

The dividend at Daimler will shrink this year to the lowest level since the financial crisis more than a decade ago.

“The dividend cut is a drastic step. Daimler has to hold the money together in the company, ”states Frank Schwope.

The analyst at the Norddeutsche Landesbank recommends that the Swabians work more closely with other car groups.

The rival BMW, the major shareholder Geely or the existing cooperation partner Renault-Nissan could be considered.

Daimler considers itself strong enough, however, to be able to largely manage the transformation towards electric mobility on its own.

The Stuttgart-based company promises an “electric offensive” for 2020, including the EQA. The first fully-electric compact SUV from Mercedes is to be presented in autumn.

However, Daimler expects sales to drop slightly in 2020 and sales should be roughly as high as in the previous year. The operating result, on the other hand, will be "significantly" above the level of 2019.

In 2020, Daimler anticipates a return on sales adjusted for special effects of up to five per cent for the Mercedes-Benz Cars and Vans business unit, five per cent for trucks and buses, and a return on equity of twelve per cent for Daimler Mobility.

"What makes me sceptical, however, is that Daimler is now talking about an 'adjusted' return on sales," says analyst Schwope.

The addition "adjusted" implies that Daimler expects negative special effects again. Daimler had already spilt expenses in the diesel scandal and costs in the course of product adjustments in 2019.

Daimler boss
Ola Källenius made a catastrophic start, says Handelsblatt editor-in-chief Sven Afhüppe. Källenius must now finally show that he can make the car company future-proof.


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