STUTTGART -- Daimler lowered its 2012 profit target for its flagship Mercedes-Benz Cars division, saying earnings had been hit by a deteriorating auto market in Europe and China.
"We're gearing up for a challenging environment," CEO Dieter Zetsche told reporters today in Stuttgart, where the carmaker is based.
Earnings before interest and tax (EBIT) at the luxury cars unit this year willfall short of last year's level, he said. The company had earlier said the division would be on par with the 5.2 billion euros ($6.79 billion) earned last year.
Second-half EBIT at Mercedes unit will fall below the first-half result, when it earned 2.57 billion euros, Zetsche said. This implies a shortfall of at least 60 million euros.
"The overall environment in Europe is deteriorating, with more negative developments than expected," Zetsche said. "There is also significantly sharpening competition in China."
Zetsche said Mercedes has already been taking efficiency measures that are being bundled into a savings drive to be called "Fit for Leadership." He didn't give details.
The reduced forecast is "an acknowledgment that the incentive level is high and therefore the earnings level can't be maintained," said Albrecht Denninghoff, an analyst at Silvia Quandt Research in Frankfurt.
Zetsche reaffirmed full-year forecasts for the entire group. Daimler said in July it expected group EBIT from its ongoing business this year to be around the same amount as the 9 billion euros it earned in 2011.