Scandal fears overshadow strong first half for Daimler

FRANKFURT AM MAIN — The world's biggest luxury carmaker Daimler reported strong financial results for the first half on Wednesday, but the performance was shaded by scandals around diesel emissions and a suspected cartel.

"The car industry is indeed making headlines at the moment, and not good ones," Chief Executive Dieter Zetsche said during a conference call early Wednesday.

Weekly Der Spiegel reported on Friday that five German firms — BMW, Daimler, and Volkswagen with its subsidiaries Audi and Porsche — had been collaborating for decades on many aspects of car development, production, sales and logistics, disadvantaging customers and suppliers.

Most sensitive is the claim that manufacturers worked together on diesel exhaust filtration systems, a hot topic in Germany since Volkswagen admitted to cheating regulatory emissions tests on millions of cars in 2015.

The European Commission — which can fine companies up to 10 per cent of their annual revenue to punish anticompetitive behaviour — has said it is looking into the allegations.

"I know many wish for more clarity," Zetsche said on Wednesday. "But we are well-advised not to take part in speculation."

The Daimler boss' silence has been matched by the other carmakers who allegedly took part in the cartel.

On the diesel question, the chief executive would only say that "it is worth it to
fight for diesel".

The engines are prized by carmakers as a way of reaching carbon dioxide emissions targets but produce harmful nitrogen oxides in their exhaust.

Daimler was one of the worst performers on the DAX index of blue-chip German shares on Wednesday morning, losing 0.54 per cent to reach 60.73 euros ($70.7) against a market up 0.36 per cent around (10:30 GMT).

Strong financial results 

That was despite robust financial figures, including a record net profit in the second quarter Wednesday after slight growth over 2016's figure, prompting it to confirm forecasts for the full year.

Net profits for the Mercedes-Benz maker increased 0.4 per cent in the second quarter compared with same period in 2016, reaching 2.44 billion euros ($2.83 billion) — slightly short of predictions from analysts surveyed by Factset.

Revenue grew 7 per cent to reach 41.2 billion euros, while operating, or underlying profit added 15 per cent to reach 3.7 billion euros.

Across the whole first six months, revenues increased 9 per cent compared with 2016, to almost 80 billion euros, while operating profit grew 43 per cent to reach 7.8 billion.

Looking to the group's different divisions, Daimler's flagship Mercedes-Benz cars increased unit sales 9 per cent in the second quarter compared with the same period in 2016, to almost 600,000 vehicles, while revenues increased 7 per cent to 23.6 billion euros.

Operating profit at the unit — which overtook arch-rival BMW as the world's largest luxury carmaker in 2016 — grew 70 per cent to reach 2.4 billion euros.

The group also reported growth in unit sales at its trucks, vans and buses divisions in the second quarter.

But all three units reported double-digit falls in operating profit compared with the same period in 2016.

Nevertheless, Daimler remained confident of meeting its full-year forecasts of "significant" increases in both revenue and operating profits.

A recall of three million vehicles for a software update designed to reduce nitrogen oxide emissions will cost some 220 million euros, which the group plans to book in its third-quarter results.

German federal and local authorities and car manufacturers will meet on August 2 for talks on the future of the fuel in Europe's largest economy — with industry leaders hoping to avert cities from efforts to ban diesel vehicles from roads at times of high pollution.