Daimler sharpens cost cutting with sales recovery on horizon

Bloomberg

Daimler AG Chief Executive Officer Ola Kallenius will widen cost cuts to shore up returns, even as the German manufacturer signalled demand for cars and trucks started to recover from the most dramatic slump in decades.
Mercedes-Benz car deliveries in China climbed to a record in the second quarter, truck orders are picking up, and global retail sales in June rose compared to the prior year, Daimler said Wednesday at its annual general meeting. Still, the company will lose money in the second quarter after the coronavirus jolted markets, and it has therefore started to implement “thousands” of efficiency measures, Kallenius said.
Kallenius, who took over Daimler’s top job in May 2019, has warned the global auto industry faces a fundamental transformation to overcome the economic fallout from the pandemic and navigate a seismic shift toward electric vehicles. While Daimler, Volkswagen AG and BMW AG have been hit hard by the virus outbreak, electric-car leader Tesla Inc. shrugged off the slump to become the world’s most valuable automaker this month.
Daimler will offer five electric models and more than 20 plug-in hybrids by year-end, Kallenius said. Talks with labour representatives over cost-cutting measures needed to finance investments are “constructive,” he said.
Daimler shares have declined 23% this year, giving the Stuttgart-based manufacturer a market capitalisation of about 41 billion euros ($46 billion), less than a fifth of Tesla’s valuation.

Kallenius faced critical questions at his first shareholder meeting since taking over the German carmaker. A string of profit warnings — several of which predated Covid-19 — have exposed misguided investments and the vulnerability of Daimler’s business, Deka Investment GmbH said ahead of the gathering.
“We look back at a lost year for Daimler,” Ingo Speich, Deka’s head of sustainability and corporate governance, said in prepared remarks. While Speich supports Kallenius’s cost-cutting and focus on cash generation, he said the CEO carries some responsibility for Daimler’s woes because he served as development chief under his predecessor, Dieter Zetsche.
Daimler shares have declined 23% this year, giving the Stuttgart-based manufacturer a market capitalisation of about 41 billion euros ($46 billion), less than a fifth of Tesla’s valuation.
Tesla sells about ten times as many electric cars as Daimler, and the German company’s Mercedes-Benz EQC model, released last year, is “too late, too expensive and too boring,” Speich said.
Deka holds about 5.4 million Daimler shares, a roughly 0.5% stake, according to data compiled by Bloomberg. Daimler’s largest investor is Chinese billionaire Li Shufu with a 9.7% holding, followed by the emirate of Kuwait with 6.8% and the automaker’s joint-venture partner in China, BAIC Motor Group, at 5%.
Daimler completed a corporate overhaul last year to give its cars, trucks and mobility-services operations more independence, but management has yet to explain how they intend to earn back the related expenses. Investors have been urging Daimler for years to consider a separate listing of the trucks division, but those calls haven’t resonated within the executive ranks yet.
Daimler’s latest restructuring plan, which Kallenius unveiled in November, foresees cutting the company’s workforce by more than 10,000 to save 1.4 billion euros in personnel spending by 2022.