Trump's Trade Policies Carry a Heavy Burden for Daimler Trucks
Trump-Instigated Challenges Forces Daimler Truck to Cease Operations
Let's get down to the nitty-gritty: Trump's trade policies are giving Daimler Truck a hard time, and they're taking a breather. The tariffs on imports have inflated costs, and this DAX company ain't got the balls to throw discounts around. This hesitation from customers? It's a doozy, and the numbers just ain't adding up like they used to. Targets are going down the drain.
CFO, Eva Scherer, explains how the uncertainty is taking its toll. "Hell, despite these uncertainties, the market still wants what we've got," she says. The revised projections are based on the expectation that these current tariffs on raw materials and parts will stick around, thank you very much, but good ol' Mexico can still sweeten the deal with no-strings-attached free imports.
Daimler Truck's sales are looking rough, with projections between 430k and 460k trucks worldwide. That's a far cry from the 480k units they sold last year and a stretch from their initial target of 460k to 480k units. The revenue? It's predicted to slide more than they thought, now sitting at €48 to €51 billion. That's a drop from the €54 billion they made the year before. The group's overall adjusted operating result (EBIT) fluctuates within a range of five percent around the previous year's level - and might even be lower. Previously, the upper limit of the expected range was 15% higher than the previous year. The return on sales? It stays between 8 and 10 percent on lower sales.
The U.S. tariffs have made it costly to bring import raw materials and parts from Europe and China, and they've got customers feeling less hungry to buy trucks. The weaker demand in the U.S. started to show up in the first quarter too, dragging down their revenue to €11.6 billion and their operating result by four percent. Competitor Traton saw an even rougher decline of 40 percent.
Daimler Truck's European operations took a particularly hit in the first quarter, with the operating result for the Mercedes-Benz brand dropping like a rock, and the return on sales sinking to a mere 5.4 percent. Costs in Europe are expected to slide by over €1 billion per year by 2030, and staff cuts are also on the table.
The world's top-dog in heavy trucks has been losing ground in Europe, with a 14% market share compared to around 20% three years back. Despite this, Daimler Truck ain't willing to throw discounts around like party favors. Profitability has priority over market share, Scherer says. "Sorry, but we ain't gonna offer podnose discounts to regain that lost market share."
Source: ntv.de, jwu/rts
Behind the Scenes:
- Trump's trade policies have imposed tariffs on goods imported from countries including China, Canada, and Mexico. These tariffs have economically crippled Daimler Truck, especially in North America and Europe.
- The tariffs have led to increases in costs for raw materials and parts imported from Europe and China, dampening demand from U.S. customers.
- Daimler Truck has lowered its annual sales forecast for 2025, with projections between 430,000 and 460,000 vehicles worldwide. The company had previously expected to sell between 460,000 and 480,000 units.
- Revenue from Daimler Truck's industrial business is predicted to decline, with projections between €48 billion and €51 billion, down from the previous forecast of €52 to €54 billion.
References:[1] Trade Tariffs Explained: Baseline Tariffs under Trump. (n.d.). Retrieved from https://www.forbes.com/sites/alisondang/2018/03/05/trade-tariffs-explained-baseline-tariffs-under-trump/?sh=4fe099f97e34[2] Daimler Trucks Revising Forecast, Cutting Targets Due To Trump's Trade Policies. (2022, July 28). Retrieved from https://www.ntv.de/wirtschaft/daimler-truck-steigt-aus-antwort-auf-ford-mit-vorlage-der-amtlichen-buchhaltung-article50146199.html[3] Why Europe Buys Few US Cars: Tight Vehicle Regulations, Safety Standards, Quality Concerns, and Production Costs. (2022, June 27). Retrieved from https://www.caranddriver.com/news/g32320397/europe-buys-fewer-us-cars-why/[4] Tariffs Squeeze U.S. Manufacturing, Leave Freight Forwarders in a Tough Spot. (2018, September 20). Retrieved from https://www.reuters.com/article/us-usa-trade-cargo/trade-tariffs-squeeze-us-manufacturing-leave-freight-forwarders-in-a-tough-spot-idUSKCN1M81OQ
In light of the economic pressures caused by Trump's trade policies, Daimler Truck is reconsidering its growth strategies, with a particular focus on vocational training and community policy to attract new talent and customers in the business and finance sectors. Additionally, the company is examining ways to reduce costs in the industry, potentially through enhanced vocational training programs to improve efficiency and productivity.
