 The significant decline in earnings primarily
reflects the sharp drops in unit sales at Mercedes-Benz Cars, Daimler Trucks
and Mercedes-Benz Vans in the first quarter of 2009. The measures already
taken mitigated the decline in earnings, but were far from sufficient to
compensate for the effect of the decrease in Group revenue related to lower
unit sales. Increased cost of risk at Daimler Financial Services led to a
fall in that division's operating results. Earnings in the first quarter
of 2008 were positively affected by gains realized on the sale of real estate
properties at Potsdamer Platz (€449 million) and gains connected with
the transfer of EADS shares (€102 million). There was an opposing effect
from charges relating to Daimler's equity interest in Chrysler (€491
million). Special items are shown in the table on page 10. The Group posted
a net loss for the period of €1,286 million (Q1 2008: net profit of
€1,332 million); earnings per share amounted to minus €1.40 (Q1
2008: plus €1.29).
Unit sales down by 34% in the first quarter
In the first quarter of 2009, Daimler sold 332,300 cars and commercial vehicles
worldwide, which was 34% lower than in the same period of last year. The
Daimler Group's first-quarter revenue decreased significantly from €24.0
billion to €18.7 billion in 2009. Adjusted for exchange-rate effects,
revenue fell by 25%. At the end of the first quarter of 2009, Daimler employed
263,819 people worldwide (end of Q1 2008: 273,902). Of that total, 164,983
people were employed in Germany (end of Q1 2008: 166,661). The free cash
flow of the industrial business was negative and fell significantly by €2.2
billion to minus €1.1 billion. The main reason for the decrease in the
free cash flow was the development of the divisions' earnings. In addition,
the free cash flow of the prior-year period included proceeds from the sale
of real estate at Potsdamer Platz and from the transfer of EADS shares totaling
€1.4 billion. However, there were positive effects on the free cash
flow of the industrial business from the development of inventories.
Details of the divisions in the first quarter
of 2009
Due to the ongoing contraction of worldwide automobile markets and the model
changeover of the high-volume E-Class, Mercedes-Benz Cars sold 231,200 vehicles
in the first quarter of 2009 (Q1 2008: 318,300). First-quarter revenue decreased
by 27% to €9.1 billion. The division posted EBIT of minus €1,123
million in the first quarter, which was significantly below the result of
the prior-year quarter (plus €1,152 million). The decline in earnings
is mainly a result of the significant decrease in demand for automobiles
and the resulting drop in unit sales. The lifecycle-related replacement of
the E-Class also had a negative impact on sales. Earnings were additionally
reduced by an unfavorable model mix and ongoing price pressure in automobile
markets. The decline in earnings was partially offset by the timely initiation
of cost-adjusting actions such as the introduction of short-time work at
plants in Germany.
Daimler Trucks sold 65,400 vehicles worldwide in the first quarter of 2009
(Q1 2008: 107,700). The significant decrease was caused by the worldwide
recession. Revenue decreased from €6.3 billion to €4.9 billion.
Due to the significant decline in unit sales, the division recorded EBIT
of minus €142 million, which was significantly below the EBIT of plus
€403 million posted in the prior-year quarter. There was an additional
negative impact on EBIT in Q1 2009 of €45 million from the measures
initiated in 2008 for the repositioning of Daimler Trucks North America.
Positive effects resulted from cost adjustments and further efficiency
improvements.
The Trucks Europe/Latin America unit (Mercedes-Benz) sold 23,100 vehicles
in the first quarter (Q1 2008: 33,800), a decrease compared with the prior-year
quarter, as expected. Sales of 17,200 units by Trucks NAFTA (Freightliner,
Sterling, Western Star and Thomas Built Buses) were also lower than in the
prior-year period (Q1 2008: 27,500). Trucks Asia (Mitsubishi Fuso) sold 25,100
vehicles in the first quarter (Q1 2008: 46,500). The Daimler Group adjusted
its segment reporting at the beginning of 2009. The business activities of
Mercedes-Benz Vans and Daimler Buses, which were previously reported under
Vans, Buses, Other, are now presented separately. Due to a severe market
slump, Mercedes-Benz Vans' unit sales decreased to 28,800 vehicles in the
first quarter (Q1 2008: 68,600). Revenue of €1.3 billion was also well
below the figure for the prior-year period. The Mercedes-Benz Vans division
posted EBIT of minus €91 million (Q1 2008: plus €186 million).
Positive effects resulted from efficiency increases and the development of
some currencies. Despite the difficult market situation, Mercedes-Benz Vans
continued to defend its market leadership for medium-sized and large vans
in Western Europe, taking a market share of 16.7% (Q1 2008: 16.3%).
Daimler Buses sold 6,800 buses and chassis worldwide in the first quarter
of this year (Q1 2008: 9,200). As the decline in unit sales is almost solely
accounted for by lower volumes of chassis in Latin America, revenue decreased
at the much lower rate of 2% to €904 million. The division achieved
EBIT of €65 million (Q1 2008: €75 million).
At Daimler Financial Services, new business decreased by 12% compared with
the prior-year quarter to €5.9 billion. Contract volume amounted to
€62.0 billion at the end of the first quarter, which was 2% lower than
at the end of 2008. The division posted first-quarter EBIT of minus €167
million (Q1 2008: plus €168 million). The decline in earnings was primarily
due to charges resulting from further increases in risk provisions. An additional
factor is that the EBIT for the period includes losses from the sale of parts
of the non-automotive leasing portfolio. Furthermore, expansion of Mercedes-Benz
Bank's direct banking business entailed expenses, which had a negative impact
on first-quarter earnings.
The other business activities - in particular the equity holdings in Chrysler,
EADS and Tognum, which were previously allocated to Vans, Buses, Other -
have been included in "Reconciliation" since the beginning of 2009. In the
first quarter of 2009, Daimler's share in the net profit of EADS amounted
to €83 million (Q1 2008: €22 million). The equity-method inclusion
of the 19.9% equity interest in Chrysler did not lead to any further charges
on earnings. In connection with the legal transfer of Chrysler's international
sales activities to Chrysler LLC and due to the valuation of Chrysler-related
assets, the Group recorded a total gain of €40 million in the first
quarter of 2009.
Outlook
Based on the divisions' planning, Daimler expects its total unit sales to
decrease significantly in the year 2009 (2008: 2.1 million vehicles).
Mercedes-Benz Cars has an up-to-date and competitive product range. Sales
impetus will be provided by the GLK, a compact SUV that has been available
since the end of 2008, and the new E-Class sedan, which was launched in March
2009. The station-wagon version of the E-Class will follow this autumn. The
new E-Class coupe will also be launched this year, followed by the convertible.
The division intends to further enhance the attractiveness of its product
range with new generations of the S-Class and the GL. With the S 400 HYBRID
and additional BlueEFFICIENCY models, the entire model range will be supplemented
with particularly environmentally friendly and fuel-efficient drive systems.
For the smart fortwo, new sales potential will be utilized this year with
launches in the growth markets of China and Brazil. However, Mercedes-Benz
Cars will not be able to avoid the expected weakness of major sales markets
and in particular of its main market segments. Overall, unit sales in 2009
will therefore be lower than in the prior year. Lower volumes are anticipated
above all in the markets of the United States, Western Europe and Japan,
which have been particularly hard hit by the economic and financial crisis.
Unit sales should be partially stabilized by growth in the emerging markets,
however.
Mercedes-Benz Cars assumes it will at least maintain its market shares and
that the bottom of the EBIT curve was reached in the first quarter. Due in
particular to the cost-reducing measures and the launch of the new E-Class
in Europe and the US launch planned for June 2009, there should be a gradual
improvement in profitability over the next three quarters and positive earnings
in the second half of the year. As a result of the global economic crisis,
Daimler Trucks assumes that unit sales will fall significantly in all its
major markets in full-year 2009. The division expects to maintain its shares
of core markets, however. The full impact of the significant drop in demand
in all markets since the beginning of this year will be felt as of the second
quarter. Further burdens on earnings are therefore anticipated, especially
in the second quarter. The repositioning of Daimler Trucks North America
Expenses will give rise to expenses of €150 million, of which €45
million was already recognized in the first quarter. Due to stagnating demand
and the ongoing recession in major economies, Mercedes-Benz Vans does not
expect an improvement in unit sales in the coming months. In line with the
significant fall in demand in all markets, further burdens on earnings are
anticipated, particularly in the second quarter.
Daimler Buses anticipates lower unit sales in 2009 than in the record year
2008. Nonetheless, the unit expects to achieve positive earnings, though
substantially lower than in 2008. Daimler Financial Services anticipates
rising credit defaults and higher refinancing expenses in full-year 2009.
The lowest point for earnings should have been reached in the first quarter,
however. Contract volume is expected to decrease compared with 2008. The
Daimler Group's total revenue is likely to decrease significantly in full-year
2009 (2008: €95.9 billion).
In order to alleviate the impact of the significant decline in unit sales
and revenue caused by the global financial and economic crisis, at short
notice Daimler has initiated measures designed to adjust costs and avoid
expenditure across all divisions and at the Group's headquarters. As well
as actions to reduce labor costs, this includes the reduction of fixed costs
and administrative expenses and further streamlining of the Group's
organizational structures. In addition, projects are being postponed if they
are not directly relevant to competitiveness. The measures initiated supplement
the existing efficiency-enhancing programs and will be implemented at the
Group in the coming months. As a result, Daimler expects to achieve cost
reductions or to avoid cost increases in a total amount of €4 billion.
Based on these measures, which will have their full impact in the second
half of the year, and due to the launch of the new E-Class, the Daimler Group
anticipates a gradual improvement in operating profitability as the year
progresses. Earnings in the second quarter are expected to be significantly
negative once again, however.
The special items shown in
the following table affected EBIT in the first quarters of 2009 and 2008:
About Daimler
Daimler AG, Stuttgart, with its businesses
Mercedes-Benz Cars, Daimler Trucks, Daimler Financial Services, Mercedes-Benz
Vans and Daimler Buses, is a globally leading producer of premium passenger
cars and the global market leader of heavy- and medium-duty trucks as well
as buses. The Daimler Financial Services division has a broad offering of
financial services, including vehicle financing, leasing, insurance and fleet
management. Daimler sells its products in nearly all the countries of the
world and has production facilities on five continents. The company's founders,
Gottlieb Daimler and Carl Benz, continued to make automotive history following
their invention of the automobile in 1886. As an automotive pioneer, Daimler
and its employees willingly accept an obligation to act responsibly towards
society and the environment and to shape the future of safe and sustainable
mobility with groundbreaking technologies and high-quality products. The
current brand portfolio includes the world's most valuable automobile brand,
Mercedes-Benz, as well as smart, AMG, Maybach, Freightliner, Western Star,
Mitsubishi Fuso, Setra, Orion and Thomas Built Buses. The company is listed
on the stock exchanges in Frankfurt, New York and Stuttgart (stock exchange
abbreviation DAI). In 2008, the Group sold 2.1 million vehicles and employed
a workforce of over 270,000 people; revenue totaled €95.9 billion and
EBIT amounted to €2.7 billion. Daimler is an automotive Group with a
commitment to excellence, and aims to achieve sustainable growth and
industry-leading profitability. |
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