German premium carmaker Daimler said it might cut its 2013 profit expectations this month, sparking sharp criticism from shareholders gathering for Wednesday's annual meeting, as Europe's car market shrank at an alarming rate.
Daimler has fallen far behind German rivals BMW and Audi due to deep-seated problems in China, and the latest profit warning is another dent in the credibility of Chief Executive Dieter Zetsche, whose contract extension in February nearly ended in a boardroom coup.
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"Not much tailwind is anticipated from the markets in the coming months. For Europe in particular, there are no signs of a trend reversal," Zetsche said, adding Daimler would reassess whether its previous assumptions for 2013 were still valid when it reports first-quarter results on April 24.
Credit Suisse said it had not in any case trusted the CEO's previous guidance of flat adjusted operating profit of roughly 8.1 billion euros, and said even its conservative estimate of an unadjusted 7.9 billion might be at risk.
"This means that management will need to update FY13 guidance that they provided on 7th Feb, i.e. guidance lasted some nine weeks," the bank said in a research note on Wednesday.
Investors hauled Zetsche over the coals for presiding over a dismal stock price development since he took over as CEO in January 2006. Since then Daimler stock is broadly flat at about 40 euros, while Volkswagen has tripled in value and BMW stock is up 80 percent.
"We shareholders are looking back at a lost decade. Not Daimler, but rather BMW and Audi are the benchmarks in the premium segment today, since Stuttgart rested too long on the laurels of the past," said Ingo Speich, portfolio manager at Union Investment.
He called on the supervisory board to support management efforts to swiftly implement cost cuts, after labor leaders on the board forced Daimler to move Mercedes production boss Wolfgang Bernhard to its trucks division as the price for supporting the extension of Zetsche's contract.
"A bitter power struggle rages behind the curtains," Speich said, demanding labour ceases to cause uproar in the boardroom and instead support a much-needed change in corporate culture.
Daimler's profit warning echoes Tuesday's bearish comments from Italy's Fiat , a mass-market maker that also owns the upscale Alfa Romeo, Maserati and Ferrari brands.
Fiat Chief Executive Sergio Marchionne said the company's losses in Europe could be worse than expected this year, after estimates that the western European market shrunk by roughly 10 percent in the first quarter.
Car sales data from the first three months showed that Daimler's flagship Mercedes-Benz brand continues to lag BMW and Audi, with volumes shrinking in Europe and China.
Analysts have repeatedly questioned whether Mercedes can achieve its goal of overtaking its two German rivals to become the world's largest luxury carmaker by 2020 so long as its sales growth in China continues to undershoot theirs.
In February Daimler had forecast second-half group results would improve on the first six months, citing momentum from new model launches like the key S-Class launch and a package of cost-cutting measures.
(Additional reporting by Christiaan Hetzner and Andreas Cremer; Editing by Will Waterman)