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Daimler to Pay Fine of $2.2B for Emission-Cheating Software
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Daimler AG recently announced its plans to pay $2.2 billion, in order to settle claims over an emission-cheating software in the company’s diesel vehicles in the United States.
Notably, there are two parts to the settlement. The first part involves the payment of $1.5 billion to resolve the civil and environmental claims related to emission-control systems of the firm’s 250,000 diesel passenger cars and vans in the United States. The other part involves the payment of $700 million to settle class-action litigation brought by consumers. In addition, Daimler estimates additional expenditures to satisfy the settlement requirements and expects these costs to hurt its operation over the next three years.
The U.S. authorities involved are the Department of Justice, Customs and Border Protection, and authorities in California, where the initial complaints were filed. Daimler has been accused of covering the illicit use of diesel engines to circumvent emission checks. Reportedly, the company has made sufficient provisions for the cost of the U.S. settlements. In the coming weeks, authorities will file consent decrees with a U.S. district court for final approval.
Meanwhile, Daimler recently rolled out aggressive cost-containment measures to boost the company’s cash position due to the expected sale decline in the second quarter. Despite some signs of recovery in demand for luxury cars, of late, the company still expects to post an operating loss and witness a negative free cash flow in the industrial business amid the coronavirus crisis.
The company, which issued its restructuring plan last November, has 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 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, are unlikely to be recovered by the end of this year, requiring further cost cuts.
Zacks Rank & Stocks to Consider
Daimler currently carries a Zacks Rank #3 (Hold). Shares of the company have depreciated 8.7%, year to date, compared with the industry’s decline of 6.6%.
Shares of Sonic Automotive have gained 42.4%, year to date, compared with the industry’s rise of 16.1%.
Shares of AutoNation have appreciated 17.3%, year to date, compared with the industry’s rally of 16.1%.
Shares of LCI Industries have been up 18.5%, year to date, as against the industry’s decline of 0.1%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Daimler to Pay Fine of $2.2B for Emission-Cheating Software
Daimler AG recently announced its plans to pay $2.2 billion, in order to settle claims over an emission-cheating software in the company’s diesel vehicles in the United States.
Notably, there are two parts to the settlement. The first part involves the payment of $1.5 billion to resolve the civil and environmental claims related to emission-control systems of the firm’s 250,000 diesel passenger cars and vans in the United States. The other part involves the payment of $700 million to settle class-action litigation brought by consumers. In addition, Daimler estimates additional expenditures to satisfy the settlement requirements and expects these costs to hurt its operation over the next three years.
The U.S. authorities involved are the Department of Justice, Customs and Border Protection, and authorities in California, where the initial complaints were filed. Daimler has been accused of covering the illicit use of diesel engines to circumvent emission checks. Reportedly, the company has made sufficient provisions for the cost of the U.S. settlements. In the coming weeks, authorities will file consent decrees with a U.S. district court for final approval.
Meanwhile, Daimler recently rolled out aggressive cost-containment measures to boost the company’s cash position due to the expected sale decline in the second quarter. Despite some signs of recovery in demand for luxury cars, of late, the company still expects to post an operating loss and witness a negative free cash flow in the industrial business amid the coronavirus crisis.
The company, which issued its restructuring plan last November, has 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 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, are unlikely to be recovered by the end of this year, requiring further cost cuts.
Zacks Rank & Stocks to Consider
Daimler currently carries a Zacks Rank #3 (Hold). Shares of the company have depreciated 8.7%, year to date, compared with the industry’s decline of 6.6%.
Some better-ranked stocks in the auto sector include Sonic Automotive Inc. (SAH - Free Report) , AutoNation, Inc. (AN - Free Report) and LCI Industries (LCII - Free Report) , each sporting a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Sonic Automotive have gained 42.4%, year to date, compared with the industry’s rise of 16.1%.
Shares of AutoNation have appreciated 17.3%, year to date, compared with the industry’s rally of 16.1%.
Shares of LCI Industries have been up 18.5%, year to date, as against the industry’s decline of 0.1%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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