Here's How Daimler (DDAIF) is Battling Coronavirus Crisis
Daimler AG DDAIF is set to implement aggressive cost-containment measures to boost the company’s cash position due to the expected second-quarter decline in sales. Despite some signs of recovery in demand for luxury cars of late, the company still expects to post an operating loss, and a negative free cash flow in the industrial business amid the coronavirus crisis.
The company, which issued its restructuring plan last November, enforced a variety of measures, including substantial staffing-level adjustments with Daimler executives facing bigger reductions than rank-and-file workers, in a bid to minimize costs during this period of reduced business. The firm plans to slash its workforce by more than 10,000 to reduce personnel spending by 1.4 billion euros ($1.6 billion) by 2022. Another 10,000 jobs could be axed through 2025.
Notably, revenues of Daimler's Mercedes-Benz brand revenue fell nearly 19% to about 870,000 cars in the first half of 2020. While the company has recorded the highest second-quarter sales in China so far, the market losses which have piled up in recent months on the rising coronavirus-related uncertainties, would not be recovered by the end of the year, requiring further cost cuts.
Furthermore, Mercedes-Benz recently arrived at a mutual agreement to temporarily put on hold its partnership with BMW AG BAMXF to develop the next-generation automated driving technology. The partnership, announced last July, was aimed at developing driver assistance systems, fully-automated driving on highways, and automated parking, with the first cars fitted with the technology scheduled for a 2024 launch. Nevertheless, the companies announced an indefinite suspension of the alliance, citing inflated costs and unfavorable economic circumstances. The two firms also noted that this deal might be resumed at a later date.
Daimler aims to offer five electric models and more than 20 plug-in hybrids by the end 2020. Its Mercedes-Benz brand will reveal the compact EQA electric car later this year. The company is also designing a new version of the flagship Mercedes-Benz S-Class sedan, which will be launched with the redesigned EQS next year that promises a battery range of more than 700 kilometers.
Zacks Rank and Stocks to Consider
Daimler currently carries a Zacks Rank #3 (Hold). Shares of the company have depreciated 22.2%, year to date, compared with the industry’s decline of 11.6%.
Some better-ranked stocks are NIU Technologies NIU and LCI Industries LCII, both carrying a Zack Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Shares of Niu have gained 168.8%, year to date, as against the industry’s decline of 11.9%.
Shares of LCI Industries have rallied 3%, year to date, as against the industry’s decline of 11.8%.
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Daimler AG (DDAIF) : Free Stock Analysis Report
Bayerische Motoren Werke AG (BAMXF) : Free Stock Analysis Report
LCI Industries (LCII) : Free Stock Analysis Report
NIU TECHADR (NIU) : Free Stock Analysis Report
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