Daimler Earnings Hit as Diesel Scandal Lingers -- Update

By William Boston Features Dow Jones Newswires

Daimler AG on Friday reported a sharp fall in quarterly profit, as its flagship premium car brand Mercedes-Benz was hammered by airbag-related recalls and the cost of fixing emissions controls on diesel vehicles.

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The downbeat results from Daimler, the first of Germany's big auto makers to report this earnings season, could signal more bad news to come from the industry as the fallout from the diesel emissions-cheating scandal that began with Volkswagen AG in 2015 continues to spread throughout the auto industry.

Daimler said net income fell 17% to EUR2.27 billion ($2.69 billion) in the three months to Sept. 30 from EUR2.73 billion in the prior-year period, slammed by costs related to the diesel fix and currency fluctuations.

Earnings before interest and taxes, the measure most closely watched by investors, fell to EUR3.46 billion from EUR4.04 billion a year ago, pulled lower by a 22% drop at Mercedes and despite a strong rise in truck earnings.

Daimler's total revenue from its businesses, which include Mercedes-Benz, Daimler Trucks and a growing stable of car-sharing and ride-hailing operations, rose 6% to EUR40.8 billion.

For the period, Daimler took charges of EUR230 million stemming from recalls connected to airbag issues and EUR223 million to fix or swap tainted diesel vehicles.

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Earnings were also hit by costs from the launches of Mercedes' new flagship S-Class, X-Class light-utility vehicles and the company's first electric heavy truck.

Research and development spending on new vehicles and products, part of the company's push to build electric cars, digital services, and develop self-driving vehicle technology, rose in the quarter to EUR2.3 billion from EUR1.9 billion.

The biggest impact on earnings, however, was from mounting costs related to the industry's diesel emissions woes.

"Around 60% of the vehicles affected in Germany have been updated," Chief Finance Officer Bodo Uebber told reporters on a conference call.

In the face of threats to ban diesel vehicles from cities to reduce pollution, Daimler and other auto makers recalled millions of diesel vehicles to tweak software to improve emissions controls.

For older vehicles that couldn't be fixed through the software update, auto makers are offering up to EUR10,000 in discounts for owners who trade in an old model to purchase a new car, regardless if the new vehicle is diesel, gasoline or electric.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

October 20, 2017 04:15 ET (08:15 GMT)