Daimler AG slashed its dividend to the lowest since the financial crisis and promised deeper cost cuts as Chief Executive Officer Ola Kallenius frees up cash to pay for an accelerated electrification effort in the coming year.
Kallenius, whose restructuring push has failed to gain traction in his first nine months on the job, is cutting the dividend by two thirds to 0.90 euros ($0.98) a share. Daimler will also reduce personnel costs by more than 1.4 billion euros by the end of 2022 and review non-core operations to channel more money into auto making, the German manufacturer said Tuesday.
The 50-year old CEO is under pressure to improve operations in 2020 after he issued three profit warnings since taking office last May. Daimler faces mounting vehicle recall and legal costs amid allegations of diesel-cheating. And the company has been slower than Volkswagen AG to electrify its fleet and now faces rising competition from Tesla Inc., which plans to build a factory outside Berlin.
“We are determined to materialize our technological leadership and at the same time to significantly improve profitability,” Kallenius said in a statement. “Measures to cut costs and to increase cash flows are necessary.“
Last year, Daimler’s profit was hampered by production hiccups, ballooning expenses to fix diesel vehicles, and the cost of shifting to electric cars. Now Kallenius expects the efficiency measures to unleash a turnaround starting this year, with earnings before interest and taxes forecast to grow “significantly” compared to 2019. But the CEO faces several headwinds to make that happen — from the persistent threat of higher tariffs to the coronavirus outbreak that hit its largest market China.
Daimler rose as much as 4% in early Frankfurt trading, giving the company a market value of about 47 billion euros — less than half of Tesla’s current valuation. The stock is the second-worst performer on Germany’s benchmark DAX index this year.
Job cuts are a critical component of the effort to make the manufacturer leaner. While Daimler didn’t detail any new personnel changes, the carmaker said last year it would eliminate more than 10,000 positions worldwide, using voluntary measures such as early retirement and attrition.
Alongside moves to rein in spending, Kallenius has outlined plans to introduce more than 20 new plug-in hybrid and fully-electric Mercedes cars by 2022.
Mercedes-Benz will introduce a fresh iteration of its S-Class flagship sedan this year and roll out the EQA, a compact electric SUV that will flank the slightly larger EQC and the EQV minivan. The brand plans to quadruple the share of plug-in hybrids and fully electric vehicles in its deliveries this year, the company said Tuesday.
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