Mercedes-Benz profit falls

Mercedes-Benz profit has fallen dramatically in the third quarter of the year to €1.36 billion. Company earnings have fallen 15% to €1.11 billion before interest and taxes were taken into account.

Investment in Renault has taken a huge dip and Karmaz, the Russian truckmaker has not represented a good performance for the German luxury auto producers.

It will come as terrible reading for many executives at the company, especially as Ford reported their 10th consecutive quarterly profit of $1.65 billion.

Poor operations worldwide

The euro-zone debt crisis is a major factor into Mercedes-Benz profit falling. Banks are further unwilling to lend money with interest rates rising in order as they contend with the rise of inflation. Brazilian automotive markets as well as the Indian car industry have both been one of the worse performing areas for Mercedes-Benz. That will come as major blow as both markets have emerging and have great potential. We reported that sales of Mercedes Benz in China dipped for 3 months in a row for Mercedes-Benz earlier this year but that has recently shown a massive sign of improvement.

The costs of rejuvenating the company’s model line-up have also affected profit. This meant a higher cost in the company’s research and development program too for the upcoming line-up as well as future cars.

An increase in materials and production costs during a global economic crisis has clearly taken its toll on profits.

Operations clearly need to be improved. News of the fall in Mercedes-Benz profit comes with the company announcing that they sold a record 315,400 cars worldwide and that company revenue increased by 9% to €26.4 billion

A company statement confirmed that Western Europe has been disappointing area for the company. The statement read “In Western Europe … there is little sign of any significant growth impetus.”

Daimler held back

The news isn’t all bad, according to Daimler employee Dieter Zetsche who leads the Mercedes-Benz division. He expects the company to achieve their profit target for next year. He said “Daimler operated very successfully also in the third quarter. All the divisions are pursuing their goals very consistently and are right on track.”

But Daimler overall have been held back by the under performing Mercedes-Benz division. Can they improve? Will Mercedes-Benz profit margins increase next year? It certainly needs to as Audi and BMW are competing fiercely to secure that number one position as the world’s leading premium car manufacturer.

 

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