Daimler AG’s profit margins slipped to 14 percent in the last quarter due to costly fixes to the diesel emissions systems of faulty vehicles. Earnings fell to $4.1 billion from 4.7 billion last year.
The airbag recalls and diesel upgrades for millions of vehicles cost the company $534 million, the German car maker announced ahead of the earnings report. The extra costs were sparked by the German authorities’ concern over the air pollution coming from diesel models.
Mercedes’ margins currently stand at 11.1 percent which was deemed a “very good level” by industry analysts.
The automotive industry is badly shaken by Volkswagen’s diesel scandal and a scandal surrounding a Germany-based auto-cartel that has been running for decades. There is also the competition coming from electric car makers. so, Daimler is pushing for the biggest change since the sale of Chrysler ten years ago.
Operating Profit Is Up
On Thursday, the company’s shares rose 1 percent to 69.60 on German stock market. Before the quarterly report the stock lost 2.5 percent in value.
Investors are pleased that the company has honored its promise of hiking group earnings, auto sales, and revenue for this year. From January through September, operating profit steadily climbed 19 percent to $13.2 dollars.
The major overhaul is expected while Mercedes is starting to lose momentum. The division is struggling with millions of recalls which bit deep into its earnings which now stand at $2.53 billion (a 22-percent decrease from last year’s levels.
Mercedes’ diesel troubles pose a risk for the business overall since the division heavily relies on the sale of big vehicles. Diesel, which is more fuel efficient and provides more power than other technologies, appeals to drivers the most. But in recent years amid tighter environmental regulations, diesel demand has declined.
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