Daimler Gives Up Its Forecast for 2012 image

Daimler lowered its profit target for this year, due to tougher competition in China and decreased demand in Europe which affected earnings in the third-quarter.

Daimler, Mercedes’ parent, predicts that earnings this year will fall 11% to 8 billion euro ($10.4 billion), a drop from the previous forecast of 9 billion euro. When it comes to the luxury-car sales race, Mercedes has already begun to lose ground to BMW and Audi, as it plans to overhaul the flagship S-Class sedan and invest in a new line of compact vehicles.

“In the light of the relative strength of VW and BMW, I’m simply shocked by the weakness of Daimler,” said Arndt Ellinghorst, a London-based analyst with Credit Suisse. “The management of Daimler is disappointing once more.”

In the third quarter Mercedes’ sales increased 2% to 345,400 units, slower than Audi and BMW. In an attempt to increase profit and sales, the automaker came up with the program “Fit for Leadership,” which will reduce costs for development and research, and will also cut production, material and fixed costs. Daimler has given up its goal to achieve a 10% operating margin in Mercedes and an 8% return for the truck sales.