UPDATE 2-Daimler issues profit warning on diesel woes, shares hit 5-year low

German luxury carmaker Daimler AG issued its second profit warning in four months on Friday, saying that costs from "government proceedings and measures in various regions" affecting its diesel vehicles were mainly to blame.

Daimler now expects its full-year earnings before interest and tax to be "significantly below" last year's level and also sees earnings at Mercedes-Benz Cars, its main earnings contributor, "significantly below" the prior-year level.

The company's shares fell to a five-year low on the news, dragging other European auto stocks lower. The European auto sector index fell 3.8 per cent to a two-year low.

The warning from Daimler came after economic growth in China, a major market for carmakers, slowed to its weakest quarterly pace since 2009.

Adding to concerns in the broader sector, Swedish truckmaker Volvo forecast slower demand for trucks in Europe and China next year, while French tyre maker Michelin cut its full-year market forecasts on Thursday.

RUSH RELEASE

Daimler rushed out the release of third-quarter earnings figures expected next week that it said fell well short of market expectations.

The profit warning comes amid friction between the German government and carmakers over how to avert city bans on polluting older diesel cars and an ongoing probe by U.S. authorities into emissions.

The Stuttgart-based company also reported lower unit sales from its vans division due to delivery delays; and the need to recognise costs related to a European Court of Justice ruling on vehicles using an old coolant.

Daimler said its third-quarter earnings before interest amounted to 2.49 billion euros ($2.85 billion), down 27 per cent from 3.41 billion in the year-earlier period due to a 35 per cent EBIT fall at Mercedes-Benz Cars to 1.37 billion euros.

(With inputs from agencies.)