Daimler cost-cutting and future-proofing exercise will impact truck and van business

Company says that mobility and goods transport are key to the company’s future but cost-cutting exercises will impact across the business as it aims for greener transport solutions

Ola Källenius, Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG at the Capital Market Day 2019 in London [Credit: Daimler]

Daimler today presented a new sustainable business strategy at its Capital Market Day. With a clear commitment to CO2-neutral mobility, the company is setting its course for a successful future. "We are positioning the company for the transformation with a clear strategy for the future. The expenditure needed to achieve the CO2 targets require comprehensive measures to increase efficiency in all areas of our company. This also includes streamlining our processes and structures," said Ola Källenius, Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG. "This will have a negative impact on our earnings in 2020 and 2021. To remain successful in the future, we must therefore act now and significantly increase our financial strength."

Daimler has noted that vans and heavy trucks are going to be key for future growth but is looking at cost cutting exercises as it looks to reshape production for more electric vehicles.

Daimler has announced cost cutting across its Vans and Truck & Buses divisions totalling €650 million, with much of this burden to all on personnel costs.

Daimler Vans

Mercedes-Benz says it Vans division is a growth sector, driven by increasing urbanisation and digitisation of the retail business. In order to increase Mercedes-Benz Vans' competitiveness, material costs are to be reduced as well as personnel costs by €100 million.

On this basis, the division Mercedes-Benz Cars & Vans expects to achieve a return on sales from operating activities of at least 4% in the year 2020 (before possible import tariffs) and at least 6% in 2022 (before possible import tariffs).

Daimler Trucks & Buses

In the short to medium term, Daimler Trucks said it expects demand to decrease in its core markets in Europe and the United States. This normalisation has already begun and is expected to continue until 2021.

In the Daimler Trucks & Buses division, investment and cost pressure will continue in the coming years. Investment in new technologies is needed, also in the CO2 neutrality of the fleet through electric drive and in the automation and connectivity of trucks and buses.

In terms of market share and profitability, the Daimler Buses and Daimler Trucks North America business units, which together account for 55% of revenue, are among the best in the industry, according to Daimler.

However, the profitability of Mercedes-Benz Trucks in Europe and Latin America– together accounting for 30% of global revenue – is currently unsatisfactory according to Daimler. Mercedes-Benz Trucks Europe has therefore started to reduce variable costs by €250 million as well as personnel costs by €300 million by the end of 2022. In addition, the sales organization is to be restructured.

In Brazil, the number of platforms will be significantly reduced in order to return to profitability. In Japan, the company hopes sales and the after-sales organization will be set up more efficiently.

The market for heavy trucks, on which Daimler Trucks is increasingly focusing, offers good global growth and earnings prospects. In the long term, the truck manufacturer sees considerable business potential in highly automated trucks that travel between logistics hubs on highways. On this basis, the division Daimler Trucks & Buses anticipates a return on sales from operating activities of at least 5% in 2020 and at least 7% in 2022.

Daimler Mobility

Daimler Mobility will continue to support vehicle sales. In addition, the fleet-management business is to be further expanded. Through investments in urban mobility services, Daimler says that customers are to be offered flexible and attractive solutions for the mobility of the future. The aim is to grow profitably in the division, to increase the value of the company and to pay a dividend to the parent company. On this basis, the division Daimler Mobility expects a return on equity of more than 12% in 2020 and of 14% in 2022.

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