Daimler Cuts Output in Brazil

Daimler AG’s (DDAIF)’s Mercedes-Benz division has decided to cut bus and truck output in Brazil on the back of poor demand for the same in the country. The production cut will put 1,500 workers in Sao Bernardo do Campo plant off assembly lines for 5 months. However, those workers will receive training assignments in that period and will continue to be paid under the permanent contracts.

Daimler is the second biggest manufacturer of buses and trucks in Brazil, controlling 25.5% of the market. It employs 14,000 workers in the country.

In Brazil, truck and bus sales plunged 28% in the first two weeks of May from the year-ago level. Apart from Daimler, Volvo AB (VOLVY) planned to halt production in order to cope with lower sales in the country.

Daimler, a Zacks #3 Rank (Hold) stock, posted a 20% increase in profits to €1.42 billion ($1.85 billion) in the first quarter of 2012 compared with €1,180 million in the year-ago quarter. Earnings per share rose to €1.25 ($1.64) from €0.99 in the first quarter of 2011. The increase in earnings was attributable to higher sales at Mercedes-Benz Cars and Daimler Trucks divisions.

Revenues in the quarter went up 9% to €27.0 billion ($35.4 billion). Excluding exchange-rate effects, revenues grew 7%. The company’s unit sales escalated 9% to 502,100 vehicles globally.

Sales in the Mercedes-Benz Cars division rose 9% to 338,300 units and Daimler Trucks increased 21% to 107,700 units. However, sales at Mercedes-Benz Vans fell 5% to 51,200 units due to weaknesses in Europe and Daimler Buses dipped 36% to 4,900 units due to weak demand for bus chassis in Latin America. For 2012, Daimler expects global unit sales to be higher than 2.1 million vehicles sold in 2011.