Why did Daimler slash its 2019 earnings forecast?

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Daimler Revises 2019 Earnings Forecast Downward Due to Diesel Vehicle Provisions

Daimler has reduced its 2019 earnings forecast, anticipating group earnings before interest and tax to be at the previous year's level instead of a slight increase. This revision, primarily impacting the second quarter, is attributed to an anticipated substantial rise in provisions for expenses related to ongoing governmental proceedings and measures concerning its Mercedes-Benz diesel vehicles. The company expects this increased provision to amount to a high three-digit million euro sum.
Increased Provisions for Diesel Vehicle Issues

The carmaker's decision to cut its earnings outlook stems from the need to set aside a significant sum for issues surrounding its diesel vehicles. These provisions are linked to "various ongoing governmental proceedings and measures" that are currently under investigation. The company has indicated that this financial adjustment is likely to represent a "high three-digit million euro amount," directly impacting its profitability for the current fiscal year.
Regulatory Scrutiny and Recalls

This profit warning follows recent news that Daimler is recalling approximately 60,000 Mercedes diesel cars in Germany. This action was prompted by regulators discovering software designed to manipulate emissions test results. The German transportation ministry has indicated an expansion of its investigation to include additional models, signalling intensified regulatory scrutiny on the company's diesel emissions practices across Europe and the United States.
Broader Industry Context and Previous Warnings

Daimler's current situation is part of a wider trend of investigations into diesel emissions among German automakers. The company itself issued a similar profit warning related to diesel issues in October. Furthermore, in April, EU antitrust regulators had charged BMW, Volkswagen, and Daimler with allegedly colluding to hinder the development and implementation of clean emissions technology, highlighting a challenging regulatory environment for the industry.
Impact on Mercedes-Benz Van Division

Beyond the group-level earnings forecast, Daimler also revised its outlook for the Mercedes-Benz van division. The projected return on sales for these vehicles has been reduced to a range of minus 2% to minus 4%. This marks a significant decrease from the company's earlier forecast, which anticipated a return on sales between 0% and 2%.

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Why did Daimler slash its 2019 earnings forecast?

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