German auto giant Daimler on Friday reported a €1.6 billion ($1.8 billion) second-quarter operating loss and cut its profit forecast for the rest of the year, shocking the automotive sector.
The loss compared to a €2.6 billion profit in the first quarter and was blamed on the lingering Dieselgate scandal, which saw several carmakers admit to manipulating its cars to lower their emissions during regulatory tests.
Daimler said it was setting aside another €1.6 billion to deal with recalls, government fines and lawsuits connected to the saga. A further billion euros has been earmarked to deal with problems involving Takata airbags.
Read more: Racing towards the unknown, but in an electric car
The Stuttgart-based carmaker saw losses in both the passenger car and vans divisions in the second-quarter, citing delays to new products and slower demand in several automotive markets as contributory factors.
'Significantly' lower earnings
Daimler's 2019 earnings before interest and taxes are now expected to be "significantly below" last year's, and its Mercedes-Benz passenger car division forecasts an operating profit margin of just 3 to 5%, down from 6 to 8%.
Daimler already downgraded its outlook on June 23, penciling in flat earnings for the year instead of a slight increase, again pointing to likely costs involved in addressing the emissions scandal.
Germany's transport regulator KBA has ordered the recalls of 700,000 Daimler-made vehicles globally over the illegal software, and last month added a further 60,000 cars to the list.
Daimler's shares briefly dropped by as much as 3% early in Friday's trading but later pared most of these losses.
Dieselgate erupted in September 2015 when Europe's biggest carmaker Volkswagen admitted to using so-called "defeat devices" to alter the test results affecting 11 million cars worldwide. VW has since incurred costs of €29 billion in fines, compensation and buyback schemes.
Read more: Germany to invest €58 billion in electric, autonomous cars
VW-Ford deal welcomed
Also on Friday, Volkswagen announced it was bolstering its collaboration with US rival Ford, by investing $2.6 billion in a project to build electric, self-driving vehicles.
Both companies have cited the vast costs of developing new technologies for their decision to expand their alliance on Ford's robocar unit Argo AI.
The deal also allows Ford to use VW's modular electric vehicle underpinnings to build zero-emissions cars for the European market starting in 2023.
Ford chief Jim Hackett said that the two firms "remain independent and fiercely competitive in the marketplace," but "teaming up and working with Argo AI on this important technology allows us to deliver unmatched capability, scale and geographic reach."
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Who is Daimler's CEO Dieter Zetsche?
The man with the walrus mustache
More famous for his moustache and shunning ties than nearly anything else, Dieter Zetsche has run one of Germany's biggest companies for 13-plus years. He is one of a handful of German bosses who is recognizable to the general public. Incidentally, his rein coincides nearly perfectly with that of German Chancellor Angela Merkel, though she is staying in office a bit longer.
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Who is Daimler's CEO Dieter Zetsche?
A broken marriage
Despite the fact that he joined the car company in 1976, it wasn't until he moved to Detroit to take over the helm of the Chrysler division of the combined DaimlerChrysler that the world really took notice. Though marketed as a 1998 merger, it was in reality a takeover that never took off. Zetsche ran the division from 2000-2005 before returning to Germany. Daimler later dumped the group in 2007.
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Who is Daimler's CEO Dieter Zetsche?
Ask Dr. Z
One of the stranger episodes in Zetsche's career came to life during his time in the US. It was there that he morphed from Dieter Zetsche into Dr. Z, the friendly CEO who would answer all and any questions — also as a cartoon. The American and Canadian ad campaign tanked and was quickly canceled but lives on in the minds of everyone who ever saw it. Pity is not many knew he was actually the boss.
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Who is Daimler's CEO Dieter Zetsche?
Out of the shadows
After his difficult time at Chrysler, Zetsche headed back to company headquarters in Stuttgart where he took over the position of chairman of what is now called Daimler AG on January 1, 2006. The company makes Mercedes-Benz cars, trucks and buses and today employs around 290,000 worldwide. It has long been a trendsetter of high-end cars with an strong aspirational pull.
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Who is Daimler's CEO Dieter Zetsche?
A sleek new design
In addition to his higher duties, Zetsche also ran the Mercedes car division himself. There he was able to introduce an entirely new design for the brand. These efforts were a great success and impressed buyers around the globe. As an engineer, he also gave a lot of attention to how the cars ran and improved quality and customer satisfaction. He implemented cuts to make the company sleeker.
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Who is Daimler's CEO Dieter Zetsche?
Bringing back real luxury
One thing Zetsche was not able to do was to save the high-end Maybach division. Revived in 2002, the brand was supposed to be the ultimate in driving luxury. In the end, only around 3,000 sold and the last one was made in December 2012. Today Mercedes makes its own Maybach-branded car, but it is just a beefed-up S-Class. Perhaps that was the problem all along: most Maybachs looked like an S-Class.
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Who is Daimler's CEO Dieter Zetsche?
Thinking big
Critics complain that the company is not ready for the future and came too late to the electric and autonomous driving campaign. The company was slow to invest in expensive, unproven technologies. But they did get on board with car sharing early by starting car2go in 2008. Today it claims to be the world's largest car-sharing firm with 2.5 million members. But more sharing means less buying.
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Who is Daimler's CEO Dieter Zetsche?
In trouble, sort of
After the diesel scandal broke in 2015, it seemed that Volkswagen acted alone. But as investigations widened, Daimler was also accused of installing software to fool emissions tests and have since recalled around 700,000 diesels in Europe for software updates. The bosses of the main companies were also called to Berlin to explain the situation to the government. Jail time or other punishments? No.
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Who is Daimler's CEO Dieter Zetsche?
Just a minute
Over the years the company's stock has had its ups and downs. For 2018 the company reported a 28 percent fall in net profits and cut its stock dividend. It was a disappointing result after several good years. Blaming the US-China trade dispute, the possibility of American tariffs, falling interest in diesels and a general global slowdown, the company says it is nonetheless ready for the future.
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Who is Daimler's CEO Dieter Zetsche?
Not seen the last of him
As Zetsche hands over his keys to his Swedish replacement, Ola Kaellenius, at the annual shareholder meeting, the company is facing a tough future. Yet Dr. Z's future is assured. He will get retirement pay of €4,250 ($4815) — a day — and has all but been promised the position of chairman of Daimler's supervisory board in 2021 when the position becomes free. Nice work if you can get it.
Author: Timothy Rooks
mm/msh (AFP, AP, dpa)
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