Daimler’s Net Profit Slides 21%

Daimler AG’s net profit in the third quarter fell to €1.8 billion ($2 billion) from €2.2 billion in the same period last year.

CEO Dieter Zetsche blames the decline on a “very challenging” business environment marked by sliding sales and higher costs associated with regulatory costs. He predicts an improvement in the fourth quarter.

Daimler’s earnings in July-September before interest and taxes dropped 27% to €2.5 billion. Operating profit for the period was hurt by a 35% drop to €1.4 billion for Mercedes-Benz Cars. Daimler’s EBIT for the first nine months of 2018 shrank 23% to €8.5 billion ($9.6 billion).

Third-quarter revenue dipped 1% to €40.2 billion ($45.7billion). Unit sales shrank 4% to 794,700 units. Mercedes volume fell 6% to 559,500 cars and SUVs, offsetting gains for buses and heavy trucks.

Daimler faces a continuing threat from German regulators, who are pushing the country’s carmakers to retrofit their older diesels with costly emission control updates.

The company also is preparing for a regulatory order to retrofit the air-conditioning systems in 130,000 cars that use a banned R134a refrigerant. The European Union ordered carmakers beginning in 2013 to switch to a dramatically “greener” refrigerant called R1234yf. Daimler resisted, arguing that the fluid could generate dangerous fumes if ignited under unusual conditions.