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February 11, 2020 04:14 AM

Daimler cuts dividend to free up cash for EV shift

Staff and wire reports
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    The EQA electric crossover, which is based on the GLA, will be launched in the autumn, joining the larger EQC in Mercedes' expanding lineup of battery-powered cars.

    STUTTGART -- Daimler on Tuesday slashed its dividend as the company tries to cut costs and conserve cash to pay for an expensive shift to electric cars.

    The maker of Mercedes-Benz cars will propose a dividend of 0.90 euros ($0.98) a share at its annual meeting on April 1, the company said in an earnings release on Tuesday. The dividend payout will amount to 1.0 billion euros compared with 3.5 billion in 2018 when the company paid out 3.25 euros a share.

    Daimler's 2019 earnings more than halved, weighed down by restructuring and legal charges.

    Net profit fell to 2.7 billion euros, down from 7.6 billion euros in the year earlier, despite record deliveries of 2.39 million Mercedes cars that saw the brand retain its title as the world's top-selling premium automaker.

    Earnings before interest and taxes (EBIT) dropped to 4.3 billion euros from 11.1 billion in 2018.

    The dividend cut underscores Daimler's push to keep costs in check after ballooning regulatory expenses to fix diesel vehicles, production hiccups and poor efficiency squeezed overall returns in 2019.

    Daimler said it had booked charges of 4.2 billion euros related to diesel probes and legal proceedings, as well as 828 million euros in restructuring expenses in its vans division, after Mercedes scrapped its X-class pickup.

    Mercedes-Benz Vans’ unit posted a 3.09 million euros loss last year compared with a 312 million profit in 2018. The division’s EBIT was hit by a reassessment of expenses for ongoing governmental and legal proceedings and measures relating to diesel vehicles as well as expenses for a recall of Takata airbags, Daimler said.

    CEO Ola Kallenius said restructuring at the vans division would deliver results this year but cautioned that Daimler's passenger car operations face a tough could of years.

    "We are going to restore the financial health of this company and take the measures we have to take to get back on track," Kallenius said. "Yes, it will take some time on some of the issues. There are no quick fixes."

    Kallenius, 50, Daimler 's former head of research and development chief, took over as CEO last May. He is tasked with safeguarding Daimler's success as the industry undergoes sweeping changes including tougher environmental rules and a costly shift to electric power.

    Daimler said it would seek to cut administrative and personnel costs by more than 1.4 billion euros by the end of 2022 to help offset expenses from legal proceedings and investments in new technologies.

    The company said it aims to keep property, plants and equipment and r&d spending at roughly the same level as last year.

    Daimler said last year it would eliminate more than 10,000 positions worldwide, using voluntary measures such as early retirement and attrition. The German business paper Handelsblatt reported on Sunday that Daimler plans to increase the employee reduction count and cut up to 15,000 jobs.

    New S class, electric crossover

    Daimler will introduce the seventh generation of its flagship S-class sedan this year. The convertible and coupe versions of the S class will be dropped because of slow sales, Handelsblatt said.

    The automaker will also launch the EQA, an entry-level, full-electric crossover, in the autumn. Mercedes-Benz Vans is expanding its product portfolio to include the full-electric EQV van.

    More Mercedes cars and SUVs will get plug-in hybrid drivetrain options and 48-volt technology to improve fuel efficiency and help reduce CO2 emissions, Daimler said.

    Earnings before interest and taxes this year are forecast to grow "significantly" compared to 2019, Daimler said Tuesday. "Our goal is to ensure solid net liquidity to protect the necessary investments, and at the same time to pay attractive dividends," Chief Financial Officer Harald Wilhelm said.

    Daimler's profit warning last month -- its third in less than a year -- fueled concerns among investors that the automaker will not be able to turn the corner anytime soon. Daimler is also grappling with a softening global economy, the unresolved U.S.-China trade spat and Brexit.

    Mercedes-Benz Cars, which predicts a return on sales of 4 percent to 5 percent this year, risks steep fines if it fails to meet stricter car-emissions limits that take effect in Europe this year.

    Reuters and Bloomberg contributed to this report

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