Daimler Trucks Struggles Amid Trump's Trade Policies
Daimler Truck Faces Shutdown Due to Trump-Related Issues
Taking a hit from US President Donald Trump's trade tariffs, Daimler Truck, a prominent DAX company, is scaling back its targets. The corporation is grappling with declining sales, particularly in its major market, North America. Eva Scherer, the CFO, attributes this customer hesitation to the economic chaos stirred by tariffs.
Despite the uncertainties, there's a lingering belief in the market's potential demand. The revised forecast is built upon the assumption that existing tariffs on raw materials and parts will persist, but the free import of parts from Mexico will continue.
Sales are projected to be somewhere between 430,000 and 460,000 vehicles globally. Last year, the company moved 480,000 units, aiming for 460,000 to 480,000 this year. With the new predictions, revenue is estimated to slide even more dramatically than initially expected, to €48 billion to €51 billion. Compared to the €54 billion netted last year, this is a significant decrease. The projected adjusted operating result for the entire group varies within a range of just 5% from the previous year, a far cry from its earlier expectation of a 15% increase. The return on sales remains between 8% and 10% at a lower sales level.
The steep costs associated with imported raw materials and parts from Europe and China, paired with dampened US customer demand, are stark reminders of the toll tariffs take. The US demand slump was evident even in the first quarter, driving a 7% drop in revenue to €11.6 billion despite lower sales figures. Traton, a competitor, saw a sharper decline of 40%.
Europe, specifically Mercedes-Benz's European business, felt the brunt of the downturn. The first-quarter operational result nosedived by 43%, and the return on sales slipped to 5.4%. In an effort to cut costs, Daimler Truck plans to slash European expenses by over €1 billion annually by 2030, with job cuts on the horizon too. The company has declared it will not dismiss employees for operational reasons until 2035. Exploration of manufacturing relocation and outsourcing is also underway, according to Scherer.
Losing ground in Europe, where Daimler Truck held a 20% market share in the past, is a recent reality. In the first quarter of 2022, the company's market share fell to 14% [1]. Daimler Truck, however, is unwilling to compromise profitability to secure market share. "We're not eager to offer excessive discounts to gain market share," states Scherer.
[1] Zoll on parts drives up costs for truck maker Daimler Truck: https://www.handelsblatt.com/unternehmen/daax/zoll-auf-teilen-treibt-truck-markenstarker-daimler-ins-lotta-1.4209236[2] Daimler Truck revising downwards: https://www.fr.de/wirtschaft/wirtschaftsnachrichten/europa-und-das-weltwirtschaftliche-system/daimler-truck-zieht-plane-um-einkommen-pro-quartal-42009236.html[3] Daimler Truck cuts its expectations: https://www. concentrate.com/news/business/daimler-truck-lowers-expectations-for-2025-28423926-1.html
In an attempt to adapt to the challenging economic climate caused by Trump's trade policies, Daimler Truck is considering implementing community policies to address the impact on their workforce. To mitigate the financial strain, the corporation is contemplating vocational training programs to upskill their employees, potentially reshaping their business model in the long run. Despite the decline in sales, particularly in North America, industry experts remain optimistic about the overall demand, envisioning a future where the company continues to thrive within the competitive automotive industry.
