Tags: Daimler | CEO | Rising | Emerging | Market | Risks

Daimler CEO Warns of Rising Emerging Market Risks

Tuesday, 21 June 2011 03:07 PM

Germany's Daimler warned of increasing economic risks in emerging markets such as China that could cause the auto industry's growth engine to sputter.

"There are some clouds on the blue sky," Dieter Zetsche told journalists in New York on Tuesday.

Emerging markets have generated almost three-quarters of world growth over the past two years, but there is growing concern that inflation in China — the world's No. 2 economy — could prompt a slowdown in emerging markets across the board.

China's consumer inflation hit a 34-month high of 5.5 percent in the year to May. Analysts forecast it would peak in June or July before easing.

Overall, the outlook for the auto industry is good, Zetsche said, adding he expects the sector to grow by "five, six, plus percent" every year.

"But we have to be a little bit more cautious that adverse effects, such as the fight against inflation in China, might have more impact on global GDP development."

Premium and mass-market carmakers have looked to fast-growing markets like China to make up for sluggish sales growth in more mature markets.

But China's car market — the world's biggest ahead of the United States — is expected to cool this year, partly due to rising fuel prices and tighter rules on car registrations after sales there surged by a third to a record in 2010.

Daimler, which makes Mercedes-Benz and Smart cars, sold 82 percent more cars in China in the first three months of 2011 than in the year-earlier period.

But that growth rate slowed to 43 percent in May, dragging monthly group sales growth to a single-digit percentage from more than 10 percent over the first four months of the year.

But Zetsche said Daimler's business was diverse enough — with operations in North America and Europe as well as emerging markets selling cars, trucks, vans and buses — to balance volatility in emerging markets.

In addition, the overall development has been better this year than the company had expected, Zetsche said.

His comments come as Daimler unveils its revamped flagship truck Actros. It hopes this will improve profitability at its trucks business, which generated 45 percent of group revenue in the first quarter, to take on top rival Volvo

"We are investing a total of more than 2 billion euros ($2.87 billion) in development and production of the new Mercedes-Benz Actros," Daimler Trucks chief Andreas Renschler told Reuters in an interview.

The division sells Mercedes-Benz trucks in Europe and Latin America, Freightliner and Western Star trucks in North America and Fuso trucks in Asia.

Daimler also said on Tuesday that it aims for the sales volume of Mercedes-Benz branded trucks to rise 20 percent this year from 135,000 units in 2010.

Last quarter, Daimler's truck margins lagged peers such as Volvo and Scania with a return on sales of 6.6 percent, partly due to the impact of an earthquake and tsunami, and subsequent nuclear crisis in Japan.

Daimler is cutting production costs by using the same engines in the new Actros truck as in vehicles made by U.S. unit Freightliner and Japan's Fuso.

Renschler said there was still synergy potential in using the same transmissions and axles across units.

Daimler shares closed up 2.1 percent at 48.56 euros, underperforming a 2.23 percent rise in the European automakers index.

© 2018 Thomson/Reuters. All rights reserved.

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Germany's Daimlerwarned of increasing economic risks in emerging markets such as China that could cause the auto industry's growth engine to sputter. There are some clouds on the blue sky, Dieter Zetsche told journalists in New York on Tuesday.Emerging markets have...
Tuesday, 21 June 2011 03:07 PM
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