Daimler Sees Profit Hit by Diesel Emissions Recall Costs

On Friday, automaker Daimler, based in Germany, said that net profit was down 16% during the third quarter, as the costs of a voluntary recall that improves the diesel emissions hit earnings, at its luxury vehicle brand Mercedes-Benz.

Net profit was down ending the quarter at €2.3 billion equal to $2.7 billion even though there was an increase of 6% in sales to over €40.8 billion.

The Stuttgart-based company said earnings at its Mercedes-Benz division, which is a pillar of the earnings for the company, were affected by a €223 million charge to pay for a software update on engine control for existing vehicles that lowers diesel emission.

The company’s voluntary recall was part of efforts made by German automakers to help restore confidence in technology for diesel engines and ward off diesel engine bans in cities across Germany. Mercedes-Benz remains heavily dependent on the sale of diesel engines.

Diesel has seen damage to its reputation due to the scandal that hit Volkswagen over vehicles that were rigged illegally with software to cheat emissions tests in the U.S., and by subsequent discoveries that vehicles for other automakers showed more pollutants emitted in everyday driving than did the test results of the same vehicles.

Mercedes earnings were hit as well by expenses in the development of new technologies as well as vehicles. Daimler, as well as other automakers, is investing billions of dollars in adapting to the expected changes that are shaped by today’s digital tech in how people move from point A to point B.

The changes might include the ordering of cars as needed through apps on smartphones rather than owning one, and autonomous vehicles along with electric cars that are low-emission.

CEO at Daimler Dieter Zetsche said the company is currently preparing to adapt to restructuring that would have Mercedes-Benz with the bus and truck divisions become independent legally so they have additional entrepreneurial flexibility.

These changes continued to be discussed and will not be put into effect until they receive approval at a shareholder meeting in 2019.

Zetsche added that Daimler was operating successfully and is the premium sector’s leader with Mercedes.

The CEO added that now is the right time to look at, from the point of strength, if we are able to position the company better, to shape the auto era successfully and definitively at the top.

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