Trump's Tariffs Hamper Daimler Trucks: A Rough Ride Ahead
Daimler Truck experiences a shutdown due to Trump-related issues.
Let's get down to brass tacks: Daimler Truck, a key player in the automotive industry, is grappling with some rough waters due to U.S. President Donald Trump's trade policy. And things ain't looking too peachy.
The folks at Daimler Truck are nervous as cats because of uncertainty surrounding economic impacts, according to their CFO, Eva Scherer. Despite the uncertainties, they're still optimistic about the market demand being there. They're tweaking their revenue targets based on the presumption that the current tariffs on raw materials and parts will persist, but imports from Mexico will remain duty-free.
That being said, their new sales forecast ranges between 430,000 to 460,000 vehicles worldwide. Last year, they moved 480k vehicles. revenue is expected to take a nosedive to a range between 48 billion to 51 billion euros. Last year, they raked in 54 billion euros. The adjusted operating result (EBIT) of the entire group is projected to oscillate within a 5% range around the previous year's level, or potentially even dip lower. Previously, the upper limit of the expected range was 15%. The return on sales will stay between 8-10%.
Tariffs are causing a double whammy for Daimler Truck. They're jacking up costs for imported raw materials and parts from Europe and China, and they're also sapping demand from American customers. In fact, weaker demand in the US was present as early as the first quarter. Q1 revenue dropped by 7% to 11.6 billion euros, and adjusted operating profit dove by 4%. Their competitor, Traton, took an even bigger hit, seeing a 40% drop in earnings.
The Europe branch of Mercedes-Benz underperformed in Q1, with adjusted operating profit plummeting by 43% and return on sales dipping to 5.4%. Costs in Europe are expected to tumble by more than one billion euros per year by 2030, with job cuts also on the horizon. About 28,000 employees will feel the pinch, but there'll be no layoffs due to operational reasons until 2035. However, talks are brewing about moving production from Germany to cheaper locations abroad or outsourcing it to third parties, as per Scherer.
Daimler Truck has been losing market share in Europe recently. In the first quarter, they accounted for just 14%, compared to around 20% three years ago. Even so, they're not budging on discounts. Profitability still takes priority over market share, Scherer stated emphatically. "We're not going to hand out excessive discounts to buy market share."
Sources: ntv.de, jwu/rts
Digging Deeper:
- Economic Uncertainties: Daimler Truck is wrestling with economic uncertainties, particularly in the US, leading to revised sales forecasts.
- Market Normalization: The market normalization process is affecting the industry, with Daimler Truck experiencing a year-over-year decline in revenue and unit sales.
- Geopolitical Factors: Daimler Truck's outlook is influenced by geopolitical developments, which can impact the global economy and, consequently, the company's performance.
While Trump's trade policies aren't explicitly linked to Daimler Truck's decline in the available search results, geopolitical and economic factors are contributing to the company's current situation. It's likely that Trump's trade policies are part of broader geopolitical tensions, but specific impacts are not detailed in the available information.
- As a measure to counteract the economic uncertainties, Daimler Truck is considering expanding their community policy to include vocational training programs for workers within the manufacturing industry, aiming to foster a skilled and adaptable labor force.
- To offset the financial impact of tariffs on raw materials, Daimler Truck is exploring partnerships with local businesses or finance institutions for vocational training programs focused on enhancing the efficiency and innovation in manufacturing processes, ultimately reducing costs and boosting competitiveness.
