Daimler Trucks Sees 2014 Gains Helping With Mid-Term Goal

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Bloomberg / February 24, 2014

Daimler, the world’s biggest commercial-vehicle manufacturer, said profit and sales growth this year will help the truck operation reach an eventual goal of an 8 percent return on sales.

The Daimler Truck division’s deliveries rose in all markets last month except Latin America, where growth was hampered by processing of Brazilian state-funded lending applications, Wolfgang Bernhard, head of the business, said today at a press conference in Stuttgart, Germany.

“We began the new year as we expected,” Bernhard said, reiterating forecasts of “significant” growth in sales and a “substantial” increase in earnings before interest and taxes this year. “I’m therefore optimistic that we will remain on course for success in 2014 and move a good step closer towards achieving our medium-term targets.”

After revising its heavy-duty line-up in the past two years to meet stricter European Union emissions rules that took effect on Dec. 31, Stuttgart-based Daimler is focusing strategy at the truck unit on increasing profitability. New models being rolled out this year include vehicles for the BharatBenz brand in India, Western Star in the U.S. and Fuso in Asia, Bernhard said.

Savings Strategy

Daimler Trucks, whose biggest nameplates are Mercedes-Benz in Europe and Freightliner in the U.S. as well as Fuso, is likely to reach a goal of improving Ebit by 1.6 billion euros ($2.2 billion) by the end of 2014 through cost savings and delivery growth, Bernhard said. The program, dubbed Trucks No. 1, generated about 500 million euros of that amount last year.

The division has a medium-term target of raising Ebit to 8 percent of sales. The return on sales narrowed last year to 5.2 percent from 5.4 percent in 2012 because of costs from warranties, cutting jobs and currency effects, especially the yen’s drop against the euro. Excluding those items, the margin in 2013 was 5.6 percent, Daimler said today.

Daimler, whose Mercedes-Benz car brand is the world’s third-biggest maker of premium vehicles, has held back from setting a new deadline for profitability targets after postponing it twice from a 2010 target date. Truck-division revenue last year rose 0.3 percent to 31.5 billion euros while Ebit fell 3.4 percent to 1.64 billion euros. Orders jumped 19 percent because of higher demand in the Americas.

Production Cuts

Advance sales of trucks in Europe have been “restrained” in recent weeks after several customers bought cheaper trucks last year before models were equipped technology to comply with the new EU emissions rules, Bernhard said. Daimler Trucks has reduced production in response, eliminating some Saturday shifts at German sites under union agreements on flexible-work arrangements, he said.

Investments at Daimler Trucks in the two years through 2015 will total 4.4 billion euros, focusing on research and development and building and equipping factories, the company said today.

“We aim to remain the spearhead of technological developments,” with annual spending at 7 percent to 8 percent of revenue, Bernhard said. “We’re investing to sustainably secure our leadership position,” he said, reiterating Daimler’s plan to sell 700,000 trucks annually by 2020.

Daimler’s truck deliveries rose 4.8 percent to 484,200 vehicles in 2013. That compares with a decline of 2 percent to 200,300 trucks at Gothenburg, Sweden-based Volvo, which ranks second to the German company in global sales.

Bernhard’s Role

Bernhard became head of the truck division in April in a job swap with Andreas Renschler, who was assigned to run production and purchasing at the Mercedes-Benz car business. Renschler left Daimler after 25 years last month and will join Volkswagen AG in 2015 as the German competitor pushes for its Scania and MAN heavy-vehicle businesses and VW commercial unit to cooperate more closely.

Industrywide registrations in Europe of commercial vehicles heavier than 16 metric tons, excluding buses and coaches, rose 8.3 percent to 238,500 vehicles last year after sales more than doubled in December, according to data of the ACEA trade group.

Daimler Trucks is predicting the European and Brazilian vehicle markets this year will decline slightly, countered by growth of as much as 10 percent in North America. That compares with Volvo’s forecasts that industrywide demand will rise 5.8 percent in North America and 13 percent in Brazil, versus a drop of 4.2 percent in Europe.