Diesel emissions inquiry expands as focus turns on Daimler

Mercedes-Benz has announced it is immediately recalling nearly one million older vehicles worldwide due to a potential problem with the braking system.

A profit warning by Daimler sent tremors throughout the European car industry yesterday.

Investors reacted immediately to the owner of Mercedes-Benz cutting its profit forecast for the third time in a year. Daimler issued its alert on Sunday evening, blaming the fallout from allegations that it had manipulated diesel emissions tests. It said that it had set aside hundreds of millions of euros to cover a likely regulatory crackdown on its diesel vehicles.

Yesterday shares in Daimler fell by 3.75 per cent in Germany, while those of Volkswagen and BMW, its national rivals, fell by 1.2 per cent and 0.1 per cent, respectively. The French carmakers Renault and PSA, the owner of the Peugeot and Citroën marques, were down by a respective 1 per cent and 1.3 per cent.

Daimler is being investigated over diesel emissions in the United States and in Europe. German authorities have ordered a recall of about 60,000 Daimler vehicles suspected of using software to manipulate emissions and have expanded their inquiry to cover more Mercedes models.

Daimler, based in Stuttgart, employs nearly 290,000 people worldwide and produces 3.3 million cars a year, mostly Mercedes-Benz models. Last year it had revenues of €164 billion on which it made net profits of €10 billion. Listed in Frankfurt, it has a market value of €51 billion.

The company said that there would be an “increase in expected expenses in connection with various ongoing governmental proceedings and measures with regard to Mercedes-Benz diesel vehicles”. The new provisions would hit Daimler’s earnings in the second quarter by a “high three-digit-million” sum. Daimler also will take a hit to its annual operating profit, which it said would be flat this year at about €11.1 billion. Analysts had forecast a slight increase.

This year is the first under Ola Källenius, 50, Daimler’s chief executive, who took over last September from Dieter Zetsche, 66. The news led some analysts to call for a fresh approach from Daimler’s leadership.

“The endless array of so-called one-time effects [on Daimler] raises questions regarding process, management information systems and ultimately accountability of management,” Arndt Ellinghorst, an analyst at Evercore ISI, said.

The motor industry has been grappling with scrutiny on diesel emissions since 2015, when Volkswagen admitted cheating tests in the US. In April, European regulators charged BMW, Volkswagen and Daimler with colluding to block the rollout of clean emissions technology. The sector has been under further pressure to invest in electric and self-driving vehicles while coping with slowing economic growth in China, weak markets in Europe and global trade tensions.