In spite of its global sales increasing by 5 percent and its stock gaining 16 percent in value this year, Mercedes-Benz is initiating a €1 billion (US$1.3 billion) annual cost-cutting program in order to raise its profitability by €3 billion (US$3.9 billion), according to a Bloomberg report.
Company CEO Dieter Zetsche wants Mercedes, which is trailing BMW and Audi, to reclaim the number one spot in the premium market. He has acknowledged, though, that Mercedes-Benz sales are falling behind those of its competitors and operating profits will fall short both of initial projections and 2011’s €5.2 billion (US$6.8 billion) figure.
At the same time, sales of the S-Class have slumped by nearly 30 percent forcing the carmaker to reduce its luxury saloon production for the fourth quarter of the year.
ACEA, the European Automakers’ Association, says that 2012 new car sales in the Old Continent will mark the biggest decline for the past 19 years. According to ACEA's forecast, industry wide deliveries in 2012 will drop between 8 to 10 percent.
Analysts such as Credit Suisse’s Arnd Allinghorst, also forecast falling profits: “We remain convinced that there is a significant risk that Mercedes earnings before interest and tax (EBIT) will decline next year”, he said, adding that he expects a 2013 EBIT of 8.3 percent.
By Andrew Tsaousis