No State Aid For Embattled Daimler

The most vulnerable of Germany’s major automakers, Mercedes-Benz’s parent company Daimler, has insisted it will not need a Government bailout to survive the Coronavirus/Covid-19 shutdown crisis.

Daimler CEO, Ola Kallenius, told a German newspaper yesterday that the company had enough funding to see it through the crisis, and enough orders to pick it up again out the other side.

“Daimler currently has no need for state aid,” the Dutch Kallenius told Handelsblatt.

“Generally speaking, the industry had a very good order intake before the crisis,” he insisted.

Its US plants in Tuscaloosa, Alabama have stopped making the GLE and GLS variants and the Ladson, South Carolina plant is no longer producing the Sprinter. Its European operations are effectively shut down, though Daimler was evasive over the status of its Chinese operations long before confirming they’d closed.

Kallenius is now bullish on China’s bounce-back, having reopened its factory there.

“The vast majority of our dealerships have reopened (in China), the customers are returning.

 “Every day more people come to the car dealerships. Demand is picking up, which makes us optimistic.”

The real world has not been so cheerful for Kallenius, though, with Daimler’s share valuation tumbling from €49.98 a share at the start of the year to €26.48 today, pulling its market capitalization down to €24.61 billion.

But when the backlog of Mercedes-Benzes and smarts (though the latter is now 50 percent owned by China’s Geely) runs out, there could be problems replacing them with new stock.

The US factories were closed because of a shortage of parts and while Daimler insisted it was following the Volkswagen Group, BMW, Ford, PSA Groupe and Renault in closing its European operations, it was also driven by a shortage of parts.

Many of those suppliers, particularly those with strong links to China, have been closed for more than two months and there are fears that some of them may not have the financial resources to reopen.

“We are in permanent discussions with our suppliers and consult them,” Kallenius insisted.

“Until now there has not been a case where liquidity was an issue.”

Kallenius’s stewardship has tripped from one mini-crisis to another, largely due to the hangovers from the previous administration.

Already this year he has moved to axe 15,000 jobs and slash under-performing models like the B-Class, the X-Class pickup and the convertible and coupe versions of the S-Class flagship.

Daimler had targeted about €1.4 billion in annual staff savings by the end of 2022 in its November announcement, but the additional round of 15,000 cuts will go deeper than even that shock decision.

It also did not contest an €870 million fine from Stuttgart’s public prosecutor over its own version of the Volkswagen Group’s Dieselgate emissions cheat earlier this year.

It waived its right of appeal over the fine, levied over its use of “thermal switching” that bypassed all of its emissions scrubbers if the weather was too cold or too hot, despite claiming since 2015 that the system was perfectly legal.

“It is in the company’s best interest to end the administrative offence proceeding in a timely and comprehensive manner and thereby conclude this matter,” Daimler said, confirming it would not appeal. 

This did not clear Daimler, though, as there are ongoing investigations into its software-related emissions.

It also did not clear it of the flood of diesel-cheating lawsuits that brought the Stuttgart court system to a shuddering halt last year.

The president of the Stuttgart Regional Court confirmed that he had called for legal reinforcements to stop the Daimler diesel issues becoming a “burden for years to come”.

The court received more than 1100 lawsuits against Daimler over either its allegedly illegal diesel exhaust technology or issues with Daimler’s financial arm over credit issues.

With Daimler headquartered in Stuttgart, all actions brought against the Daimler Group must go first through the Stuttgart Regional Court.

In June 2019, Daimler was ordered by the Landshut Regional Court to take back a diesel car from a customer because its exhaust-gas manipulation meant it wasn’t delivered as certified. 

Most of the 1100 cases stem from that ruling, with diesel owners wanting Daimler to take their cars back for the purchase price before they faced driving bans in some German cities.

For its part, Daimler insisted it took customer lawsuits seriously but warned it would defend itself against “unfounded” claims.

And it has. While the Landshut court’s ruling insisted Daimler had deceived the buyer immorally because its test-bench NOx levels could not be matched in real world driving, the more senior Higher Regional Court disagreed.

The Higher Regional Court tossed out 167 lawsuits by individual owners against Daimler over the diesel cheating, while the five decisions handed down have all gone in favour of the carmaker.

It also found a surprise crisis of its own making last year when allegations arose of impropriety, unethical behavior and leaking secret Government documents by its newly signed chief political lobbyist.

A German newspaper alleged that Eckart von Klaeden, Chancellor Angela Merkel’s former Minister of State, showed confidential EU documents to Daimler executives before joining the premium carmaker.

He also came under fire for working as Daimler’s chief political lobbyist without resigning from his senior position in Ms Merkel’s Christian Democratic Union (CDU) party, effectively lobbying himself on Daimler’s behalf.