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Daimler cuts outlook over Dieselgate costs

June 23, 2019

The German automaker says its 2019 operating profit will be the same as last year, due to a huge vehicle recall bill. Authorities have ordered the recall of 770,000 diesel cars installed with emitting-cheating software.

Mercedes logo on a building
Image: picture-alliance/dpa/S. Sachseder

Mercedes-Benz maker Daimler AG on Sunday cut its 2019 profit outlook, citing extra costs associated with the diesel emissions scandal.

Group earnings before interest and tax this year are now expected to be at last year's level, the carmaker said, against a previous estimate for a slight increase. Earnings will be affected in the second quarter.

The Stuttgart-headquartered company said in a news release that it would be hit by "a high three-digit million" charge related to ongoing German government proceedings and measures related to the Dieselgate scandal.

Read more: Racing towards the unknown, but in an electric car

The carmaker noted its Mercedes-Benz Vans division would see a loss amounting to a negative return on sales of 2% to 4% for the year. The division lost €98 million ($111.5 million) in the first quarter.

Daimler last year had to recall more than 770,000 diesel vehicles worldwide, including 280,000 in Germany, that regulators said were fitted with illegal software that masked polluting emissions during regulatory tests.

Recall program expanded

Read more: Trump delays tariff decision on European and Japanese autos for 6 months

On Saturday, German newspaper Bild reported that the carmaker had been ordered to recall a further 60,000 Mercedes-Benz GLK 220 CDI models that were made between 2012 and 2015.

The new Mercedes EQC
Daimler, like other automakers, are keen to draw a line under the Dieselgate scandal as they plan for the future of electromobilityImage: Reuters/S. Andersson

Germany's transport ministry has said it would expand its probe to the company's other models.

Daimler is scheduled to release its second-quarter earnings on July 24, the first quarterly report under new CEO Ola Kallenius, who replaced Dieter Zetsche.

Dieselgate erupted in September 2015 when Europe's biggest carmaker Volkswagen admitted to installing so-called "defeat devices" in 11 million vehicles worldwide that allowed them to cheat emissions testing.

Read more: VW reports €12 billion profit and plans 22 million electric cars in 10 years

VW has already incurred costs of €29 billion related to the scandal, much of that in the United States by way of fines, compensation and buyback schemes.

As well as the recall, Daimler is potentially also facing big fines. In February, German prosecutors said they had opened legal proceedings against the firm.

It also faces a probe by the US Justice Department, along with a consumer class-action lawsuit in the US alleging a conspiracy to deceive US regulators.

mm/amp (AFP, AP, Reuters)

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