FRANKFURT -- Daimler expects to generate an operating profit this year after second-quarter results signaled the maker of Mercedes-Benz cars weathered the unprecedented industry slump better than expected.
The company reported a quarterly operating loss of 1.68 billion euros ($1.91 billion) on Thursday.
Daimler anticipates earnings before interest and taxes and free cash flow to be positive in 2020 but lower than last year, it said on Thursday in a statement. It previously forecast that the company's deliveries, revenue and profit would decline in 2020.
“We are now seeing the first signs of a sales recovery,” CEO Ola Kallenius said.
The company said the outlook is based on an assumption that the economy will continue to rebound and there is no second wave of the coronavirus.
Kallenius said the Mercedes brand will seek to develop its high-end luxury vehicle segment as a way to hike profits.
"I see the strongest growth in the upper end of the segments where we are active," Kallenius told journalists in a call to discuss the company's quarterly results.
Daimler's figures were helped by a late-quarter recovery in demand for big-ticket vehicles such as the Mercedes GLS SUV and the S-Class Maybach luxury sedan, according to CFO Harald Wilhelm.
The company’s results are “another positive data point for the auto sector as pent-up demand continues to drive retail volumes and pricing,” Angus Tweedie, an analyst at Citigroup, said in a note.
Daimler, the world’s best-selling luxury automaker and biggest producer of heavy trucks, was struggling to get a far-reaching restructuring program off the ground when the COVID-19 pandemic hit, forcing the company to deepen cutbacks.
It has now boosted its labor-cost savings target to 2 billion euros ($2.3 billion) from 1.4 billion euros, which could put about 20,000 jobs at risk, according to people familiar with the matter.
Kallenius, 51, aims to improve efficiency across the organization after taking over the wheel from his predecessor, Dieter Zetsche, last year. But he hasn’t provided an official update on the savings goal by 2022 that he outlined in November.
The initial plan had foreseen more than 10,000 job cuts, a number that’s expected to be revised upward.
Daimler will have to eliminate more than 15,000 positions to avoid forced layoffs, personnel chief Wilfried Porth said this month. Manager Magazin on Wednesday said the reductions could affect as many as 30,000 jobs.
Talks with labor representatives are still ongoing, and the final number of job cuts will be determined by different factors including acceptance rates of voluntary buyouts and efforts to outsource some IT services.
Cutting costs is key to sustaining momentum after Daimler surprisingly generated positive free cash flow in the second quarter, aided by a swift production stop when the virus outbreak spilled over from China to Europe and North America.
Daimler said on Thursday that cost-cutting measures had helped to counter the impact of the pandemic.
Prospects for the second half of the year remain uncertain because key markets including the U.S. and U.K. have been struggling to contain the virus.
Reuters contributed to this report
