Mercedes-Benz Cars Cuts 2012 Profit Outlook

Daimler AG predicts that operating income at its Mercedes-Benz Cars subsidiary will decline this year because of worsening prospects in the European market.

In July the company forecast that passenger-car earnings before interest and taxes would match last year's €5.2 billion ($6.7 billion) profit.

But CEO Dieter Zetsche tells reporters that between Europe and "significantly sharpening competition" in China, the car unit's EBIT in the second half of 2012 will be smaller than in the first half, when profit fell 10% year over year to €2.6 billion ($3.3 billion).

Zetsche says Mercedes-Benz Cars is taking unspecified cost-cutting measures under a new program called "Fit for Leadership."

German luxury car brands, which had largely avoided the sales declines that have affected mass-market automakers in Europe, are now coming under pressure. Volkswagen AG's Porsche unit told Reuters earlier this week it will trim product investment, reduce production and delay at least one new model because of slower-than-expected sales growth.