Daimler AG (DMLRY) shares traded l ower in Frankfurt Friday after the luxury carmaker issued its second profit warning in as many months as it joins domestic rival BMW AG (BMWYY) in seeing significant headwinds in 2019.
Daimler said it sees second quarter profits of around €1.6 billion for the three months ending in June, a near 40% plunge from the same period last year, and expects full year earnings to be "significantly" below the previous year's levels. Late last month, Daimler said the increased cost of meeting European and global emissions standards would hit its full-year profits after it was forced to recall 60,000 diesel-powered Mercedes vehicles after German regulators found them to be fitted with software that could distort emissions tests.
"New information lead to a revised risk assessment with regard to provisions for an extended recall in Europe and Rest of World in connection with Takata airbags. Provisions had to be increased by around €1 billion," Daimler said in a statement. "In addition, EBIT was impacted by a reassessment made today in connection with ongoing governmental and court proceedings and measures relating to Mercedes-Benz Diesel vehicles in various regions, which lead to an increase in expected expenses by around €1.6 billion."
Daimler shares were marked 0.4% lower in the opening hours of trading in Frankfurt to change hands at €46.45 each. Volkswagen AG (VLKAY) was also dragged lower from the Daimler warning, but rebounded with a 1.26% gain to €154.40 by mid-morning trade while BMW edged 0.7% higher to €65.70 each.
BMW said earlier this spring that it would see a "significant decline" in 2019 profits and unveiled a $13.6 billion cost-cutting program, citing international trade conflicts, rising manufacturing costs and new emissions regulations.
"Our industry is witnessing rapid transformation. In this environment, a sustained high level of profitability is crucial if we are to continue driving change," BMW board member Nicolas Peter said at the time. "In view of the numerous additional factors negatively impacting earnings, we began to introduce countermeasures at an early stage and have taken a number of far-reaching decisions."
The region-wide Stoxx 600 Automobiles and Parts index was marked 1.1% higher at 485.32 points but has fallen nearly 12% since mid-April amid ongoing concerns over potential tariffs on European cars sold in the United States.
Trump has repeatedly threatened to apply tariffs on European-made cars sold in the United States, but postponed a decision to use section 232 of the Trade Expansion Act as a pretext to apply the 20% levy until later in the fall.
The EU exported around 1.155 million cars to the U.S. market last year, according to the European Automobile Manufacturing Association, with total value of just over €37.3 billion ($41.8 billion). The U.S, in contrast, moved only 267,653 cars in the other direction, a value of just €5.5 billion but still nearly 20% of the sector's entire international export base.