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German Top Carmakers Set For Record Profit As Value Swells By $90 Billion

February 14, 2011
4 min to read


Germany’s big three carmakers, which have added about 67 billion euros ($90 billion) in market value since the end of the 2009, are poised for 2011 profits exceeding pre-financial crisis highs amid U.S. and Chinese demand.


Bayerische Motoren Werke AG and Volkswagen AG will probably post earnings before interest and taxes for this year beating records set in 2007 and 2008, respectively, while Daimler AG’s Ebit is expected to rise to the highest level since 1999, when Chrysler was still part of the company, according to analysts, reported Bloomberg.

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Daimler Chief Executive Officer Dieter Zetsche, the first of the German auto CEOs to discuss 2011 targets when he reports fourth-quarter earnings tomorrow, said in January that growth this year will be constrained by factory limits rather than customer demand. Daimler’s Mercedes-Benz, BMW and VW all reported record deliveries last month.


“Mercedes and BMW have an order book that they’ve never had before in their history,” said Arndt Ellinghorst, a London- based Credit Suisse analyst with “outperform” ratings on all three manufacturers. “They’re looking at peak profits, and it’s hard for investors not to get excited.”


The three carmakers have a combined market value of 157 billion euros, up 75 percent from the end of 2009, buoyed by sales advances in China and the U.S., the world’s two largest auto markets. Toyota Motor Corp., the biggest automaker, was almost unchanged in the period, while Ford Motor Co. was up about 61 percent.


Daimler, the world’s second-largest luxury-car maker, is set to achieve the highest 2011 operating profit of the three, reaching 8.79 billion euros, according to the average estimate of eight analysts surveyed by Bloomberg.


BMW will probably report Ebit for this year of 5.59 billion euros, besting the 2007 record of 4.21 billion euros, according to the survey. VW’s Ebit in 2011 is expected to rise to 8.03 billion euros, surpassing the 2008 peak of 6.33 billion euros, on rising demand at its Audi luxury brand.

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The tight vehicle supply is causing delivery delays in Germany, as manufacturers shift cars to the U.S. and Chinese markets, PricewaterhouseCoopers LLP said in a study released Feb. 4. Delivery times for build-to-order cars in Germany have climbed to 12.9 weeks on average compared with a typical waiting period of eight weeks, the consulting firm said.


Audi buyers worldwide wait an average of three to four months for a car because of an order backlog, rather than the typical eight to 10 weeks, Peter Schwarzenbauer, Audi’s sales chief, said in an interview on Feb. 9.


Daimler is expected to report fourth-quarter net income tomorrow of 1.28 billion euros, according to the average estimate of seven analysts surveyed by Bloomberg. The Stuttgart, Germany-based company, also the world’s largest truckmaker, posted a loss of 348 million euros a year earlier.


Revenue in the quarter probably rose 21 percent to 25.8 billion euros, according to nine analysts.


The Munich-based manufacturer of BMW, Mini, and Rolls-Royce vehicles, which is due to report 2010 earnings on March 15, is targeting record sales of 1.4 million vehicles this year, boosted by demand for the revamped 5-Series introduced in 2010.

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“BMW is very well positioned on the product side with the ramp up of the 5-Series,” said Daniel Schwarz, an analyst with Commerzbank AG in Frankfurt. “Daimler has the potential to surprise people with a stronger sales mix,” as many investors anticipate declining demand for the aging current versions of the high-end E- and S-Class models.


New vehicles may also fuel additional demand. BMW is introducing a revamped X3 sport-utility vehicle and debuted the convertible version of its 6-Series coupe earlier this year. Mercedes overhauled the SLK hard-top roadster and is upgrading the C-Class, its best-selling model, with a new interior. Audi is introducing the next generation of the A6 sedan in March.


Investors are also looking tomorrow for comments from Daimler regarding its 15 percent stake in European Aeronautic Defence & Space Co. German politicians have been debating whether the government should buy the stake if Daimler decides to sell prior to the end of an investor agreement in 2012.


Daimler has fended off speculation over a quick sale of the holding in the owner of Airbus, which it helped establish by contributing its Dasa unit.


Daimler may also appoint the first woman to its management board as early as this week. The company is considering naming Christine Hohmann-Dennhardt, 60, to its management board to oversee legal and compliance issues, two people familiar with the situation said Feb. 9. Hohmann-Dennhardt stepped down this month from Germany’s constitutional court after 11 years.

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