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Business

Daimler Cuts Earnings Forecast in Face of Recession Fears

Tough times ahead: For the second time in only three months German car giant Daimler reduced its expected profit for the next quarter. The expected annual profit drops from almost 8 down to 6 billion euros.

Mercedes brand (star) being polised

Is the star of the German car industry to sink as recession hits?

German carmaker Daimler AG became the first of the country's key auto groups to report its third-quarter results, reducing its earnings forecast again in face of deepening economic gloom.

The manufacturer of luxury Mercedes-Benz vehicles said it now expected to post operating profit in 2008 "of more than 6 billion euros" ($7.67 billion).

High energy prices and economic downturn

Several Mercedes cars parked in line.

Will discounts help to encourage sales?

Daimler chief Dieter Zetsche had three months previously reduced the group's 2008 earnings to about 7.0 billion euros from 7.7 billion euros, amid concerns that high energy prices and the prospects of an economic downturn will keep car buyers away from showrooms.

The group's third-quarter net earnings were 213 million euros, compared with a 1.53-billion-euro loss a year earlier, the company said. The weak state of the auto business has resulted in analysts expecting the German car sector to begin offering discounts to try to encourage sales.

Government aid for the troubled sector?

Germany car industry leaders have also launched a campaign for government aid to help the key export sector to limp through the current financial crisis.

Stuttgart-based Daimler confirmed last month that it was in talks to finally sever links with troubled US carmaker Chrysler, selling off its remaining 19.9-percent stake to the US equity group Cerberus Capital Management LP.

This comes just over a year after Cerberus bought an 80.1-percent stake in Chrysler from Daimler, as the German carmaker moved to end its nine-year troubled relationship with the US vehicle group.

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