Daimler Truck Slashes Forecast Amid Trump-Led Uncertainty
Daimler Truck Halts Operations Due to Trump-Related Issues
In the wake of US President Donald Trump's trade policies, Daimler Truck, a DAX company, is feeling the heat. The truck manufacturer is scaling back its expectations due to customer hesitation and the looming costs caused by Zoll tariffs on parts.
The once brimming North American market is now proving challenging, with customers taking a step back due to the economic unpredictability that Trump's policies have brought about. Eva Scherer, the CFO, recognised this economic impact, stating, "We anticipate that despite uncertainties, market demand is still present."
The new estimate comes on the premise that current tariffs on raw materials and parts will persist, allowing for duty-free imports from Mexico. Sales are now projected to range from 430,000 to 460,000 vehicles worldwide. This is a significant drop compared to the 480,000 units traded last year, and the company's previous target range of 460,000 to 480,000 units.
As a result of these changes, the company expects a steeper than anticipated decline in revenue, with figures projected to be between 48 billion to 51 billion euros. Last year's revenue stood tall at 54 billion euros. The adjusted operating result for the entire group is expected to fluctuate within a range of 5% around the previous year's level—possibly even dipping lower. Initially, the upper limit of the expectation range was 15% higher than the previous year. The margin will still hold steady between 8-10%.
The US tariffs impose increased costs on imported raw materials and parts from Europe and China, and they also curb demand from US customers. This weaker demand in the US was already visible during the first quarter, leading to a dip in Daimler Truck's revenue by 7% to 11.6 billion euros and a 4% drop in the adjusted operating result. Competitor Traton's operating result plummeted by a steep 40%.
Europe's Mercedes-Benz brand experienced particularly weak performance during the first quarter, with the operating result plummeting by 43% and the margin sliding to 5.4%. To offset these costs, Daimler Truck aims to slash expenses in Europe by more than one billion euros per year by 2030, which may involve job cuts. Negotiations with the works council regarding these changes are currently underway.
However, the company has asserted that this transformation will not lead to operational dismissals before 2035. It's currently exploring possible options such as moving production from Germany to cheaper overseas locations or outsourcing production to third parties. Daimler Truck's reluctance to compromise on prices suggests that profitability remains their top priority.
In recent years, Daimler Truck has seen a decline in its market share in Europe—falling to 14% in 2021 compared to around 20% three years ago. Despite this, the company shows no signs of offering steep discounts to regain market share.
[Information from enrichment data: Daimler Truck’s reduced forecast indicates the obstacles posed by uncertain demand due to US trade policies and wider economic and geopolitical factors influencing the North American market. The company expects reduced unit sales in North America and revised revenue expectations for the Industrial Business from €52-54 billion to €48-51 billion.]
In light of the uncertain demand caused by US trade policies, Daimler Truck is contemplating a community policy aimed at reducing costs and maintaining profitability within the Industrial Business. With the revised sales forecast for 430,000 to 460,000 vehicles, the company anticipates finance and revenue fluctuations, targeting a margin of 8-10%. As part of this strategy, vocational training programs may help adapt the workforce to the changing business landscape, ensuring continued success despite the industry challenges posed by Trump-led policies.
