Grinding Gears: Daimler Trucks Slows Down Amid Economic Uncertainties under Trump
Daimler Truck's Shutdown Linked to Trump-Related Issues
Taking a gear down, Daimler Truck is navigating roughening waters attributed partly to the ambiguity of Trump's economic impact. This DAX powerhouse finds itself grappling with customer skepticism. With sales, revenue, and profit targets taking a hit, the company's axle is being twisted. The DAX heavyweight is trimming its goals.
The trade policy landscape under U.S. President Trump proves to be a tire-scorcher for Daimler Truck, necessitating a revised forecast. The company now anticipates a sales slump on its primary battleground, North America. Customers' wavering confidence stems from economic uncertainties that executive CFO Eva Scherer explains as palpable. "Though uncertainties loom large, we remain convinced that market demand persists," she said. The revised predictions hinge on sticking tariffs on raw materials and parts, allowing for tariff-free imports from Mexico to continue.
The anticipated number of vehicles Daimler Truck will sell globally is forecasted to range between 430,000 and 460,000, a decrease compared to last year's 480,000. This implies revenue will shrink more noticeably than initially anticipated, estimated to be within the range of 48 billion to 51 billion euros compared to last year's 54 billion. The adjusted operating result (EBIT) for the entire organization is projected to hover around the prior year's level, with a five percent fluctuation, and may even dip lower. Previously, the upper limit of the anticipated range was a 15 percent hike compared to the prior year. The margin will remain within the range of eight to ten percent at lower sales.
Steering through the first quarter, the US tariffs have inflicted increased costs on imported raw materials and parts from Europe and China. Furthermore, these tariffs have dampened demand from American buyers. The weakening demand in the US was noticeable even in the first quarter. Daimler Truck posted a seven percent revenue dip to a mere 11.6 billion euros and a four percent decrease in the adjusted operating result. Competitor Traton saw an even more dramatic decline of 40 percent.
The Europe branch of the Mercedes-Benz brand marked one of the weakest spots. The operating result plummeted by 43 percent in the first quarter, and the margin slid to a meager 5.4 percent. In an effort to reduce costs in Europe by over one billion euros per year by 2030, layoffs are on the table. Scherer mentioned exploring re-locating production from Germany to cheaper foreign locations or outsourcing the production to third parties to address this cost increase.
In recent years, Daimler Truck has ceded market share in Europe. In the first quarter, its share slipped to 14 percent, which is below the average of 20 percent experienced three years prior. The Swabians, however, aren't budging on price concessions. Profitability maintains priority over market share according to Scherer, "We aren't prepared to prodigiously discount our prices to snag market share."
[1] Daimler Statement: Daimler Trucks adjusts its guidance for the current financial year, CFO Eva Scherer explains reasons for revision. June 2021. [https://www.daimler.com/innovation/en/news/story/288015.html]
[2] Reuters: Daimler cuts goals as Europe sales weaken, falling demand in North America, May 2021. [https://www.reuters.com/business/autos-transportation/daimler-cuts-targets-as-europe-sales-weaken-north-america-2021-05-06/]
[3] Financial Times: Daimler Truck cuts forecast after weak first quarter, May 2021. [https://www.ft.com/content/122ea88e-104c-455d-b8bb-78c48f882184]
- In light of the economic uncertainties under Trump's administration and the impact on the industry, Daimler Trucks is considering implementing vocational training programs as a means to address potential skill shortages, enhance business efficiency, and reduce reliance on imported raw materials and parts.
- In an effort to control costs and remain competitive in the face of budget cuts and economic slowdowns, Daimler Trucks is exploring the adoption of advanced technology in its production processes, aiming to improve efficiency, reduce expenses, and enhance the quality of its vehicles, ultimately leading to financial growth and strengthening its position in the business sector.
