Mercedes disaster provides to German industrial woes

The industrial crisis in Germany deepened yesterday as Mercedes-Benz cut its full-year profit forecast for the second time in less than two months.

The company has suffered as demand for cars tumbles amid economic woes in China.

Having downgraded its outlook for profits in July, it did so for a second time yesterday, sending shares down 6.8 per cent in Frankfurt. The car giant’s full-year profits are expected to be ‘significantly below’ the £17billion it reported last year.

Chief executive Ola Kaellenius said there was ‘a tremendous amount of cautiousness’ for the company. He added: ‘How long will that go on? I don’t know, but I remain cautious for the foreseeable future on China.’

Stifel analysts said the guidance cut ‘does not come as a major surprise’ but the magnitude was a ‘negative surprise’. Mercedes is not alone in its turmoil. BMW was also forced to lower its guidance at the beginning of the month driven by muted demand in China.

Profit warning: Mercedes has suffered as demand for cars tumbles amid economic woes in China

And Volkswagen said it could close factories in the country for the first time in its 87-year history. There are fears the move could lead to as many as 30,000 jobs being axed. Germany, the continent’s largest economy and one-time industrial powerhouse, is undergoing a prolonged manufacturing downturn that has seen it dubbed ‘the sick man of Europe’.

That is partly due to China muscling on to its turf and going head to head with its car making sector.

And figures this month showed manufacturing activity in Germany is falling at the fastest rate for five months.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the downturn for German industry was ‘dragging on way longer than anyone expected’.

The car industry has also been hit by a collapse in demand for electric vehicles.

Figures from the European Automobile Manufacturers’ Association (ACEA) showed just 92,627 battery-only powered cars were registered in the European Union last month. That was down 44 per cent on August last year.

The ACEA said the slump was ‘driven by a spectacular drop’ of 69 per cent in Germany and 33 per cent in France – the region’s two biggest markets for battery electric vehicles.

‘The electric car market is now on a continual downward trajectory,’ a spokesman said.