Mercedes' New Boss Takes a Costly Trip to the Repair Shop

By Stephen Wilmot 

When he retired in May, Daimler's long-time Chief Executive Dieter Zetsche left his successor Ola Källenius with a big repair bill.

The maker of Mercedes-Benz cars said Friday that operating profits for the year would be "significantly" lower than last year's. Less than three weeks before, it had said operating profits would be broadly flat, itself a downgrade of previous guidance.

The biggest culprit is what Germany calls the "Dieselaffäre." The first profit warning followed news that the company would recall 60,000 diesel cars in Germany. Regulators found software aimed at manipulating emissions tests in the vehicles -- seemingly the same problem that has cost Volkswagen more than EUR30 billion ($33.79 billion). Daimler initially provisioned less than EUR1 billion to address the problem, but on Friday set aside an extra EUR1.6 billion.

The company also earmarked big sums to deal with a van problem and an industry-wide airbag fault that first came to light in 2013. On top of that came warnings that sales growth is weakening and product availability is patchy.

Nonetheless, Mr. Zetsche is due to draw a Daimler company pension of more than EUR1 million a year -- a record in Germany, according to local press reports.

Write to Stephen Wilmot at [e-mail]

(END) Dow Jones Newswires

July 12, 2019 09:27 ET (13:27 GMT)

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