VW, Daimler urge Germany to boost car demand as profits plunge

VW and Daimler on Wednesday urged the German government to help boost demand for cars as the coronavirus pandemic hammered first-quarter profits and forced both carmakers to drop their outlooks for the year.

The demands came as German chancellor Angela Merkel prepares to host a summit with auto industry leaders to discuss ways of reviving one of the country's most important industries which have been crippled by the coronavirus pandemic. "We need a swift decision on buyer incentives," VW's Chief Financial Officer Frank Witter said, echoing Daimler Chief Executive Ola Kaellenius who also called for the swift introduction of broad measures to rekindle demand for cars.

"A simple incentive would be effective," Kaellenius said on a call to discuss Daimler's earnings. Car sales across the world have slumped as measures to contain the pandemic forced production lines to shut and showrooms to close, starving manufacturers of much-needed cash for investments.

Volkswagen warned it faced a difficult second quarter and that a planned dividend increase might have to be reconsidered. In February, it proposed raising the payout to 6.50 euros per ordinary share, up from 4.80 euros in 2018, and 6.56 euros per preferred share, up from 4.86 euros. "This decision is ultimately reserved for the annual general meeting and will, of course, continue to be subject to review depending on the further development of this year, whether momentum, confidence, and thus results and liquidity return," Witter said.

Global passenger car sales are expected to drop by 15%-20%, Volkswagen forecast, echoing auto supplier Robert Bosch, which also said on Wednesday it saw a fall in car production of at least 20% this year. "We are bracing ourselves for a global recession," Bosch Chief Executive Volkmar Denner said.

Earlier this month, Volkswagen said first-quarter car sales dropped by 23% from the year before, causing operating profit to tumble 81% in the three month period and forcing the car and truck manufacturer to withdraw its guidance for 2020. Bosch also said it could not give an outlook for 2020.

In February, Volkswagen had said it aimed for customer deliveries in line with 2019, revenue growth of 4%, and slightly higher passenger car deliveries. Daimler's first-quarter operating profit fell by almost 70%, and the parent company of the Mercedes-Benz luxury brand increased risk provisions for delinquencies for leased or purchased Mercedes-Benz cars to 448 million euros($486.71 million).