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Automakers face reality of EVs' cost — to jobs, and their bottom line

Related: We obsessively covered the Frankfurt Motor Show — here's our complete coverage FRANKFURT, Germany — European car bosses gathering for the Frankfurt auto show are beginning to address the realities of mass vehicle electrification, and its consequences for jobs and profit, their minds focused by government pledges to outlaw the combustion engine. As the latest such announcement by China added momentum to a push for zero-emissions motoring, Daimler, Volkswagen and PSA Group gave details about their electric programs that could give policymakers some pause. Planned electric Mercedes models will initially be just half as profitable as conventional alternatives, Daimler warned — forcing the group to find savings by outsourcing more component manufacturing, which may in turn threaten German jobs. "In-house production is almost irrelevant to the consumer," Daimler boss Dieter Zetsche told reporters on the eve of the Frankfurt Motor Show, in the midst of a German election campaign in which automotive jobs have loomed large. The company set a target of saving 4 billion euros ($4.8 billion) by 2025 to help fund the cost of its electric cars. "Daimler is the first company to state explicitly how much electric vehicles are going to hurt margins," said Bernstein analyst Max Warburton. "It was brave to go first — but of course it won't be the last." Volkswagen, for its part, said it was seeking new global supplier contracts to source 50 billion euros ($60 billion) of electric car content including batteries, which are not yet manufactured competitively in Europe. "A company like Volkswagen must lead, not follow," Chief Executive Matthias Mueller told reporters. VW diesel emissions-cheating exposed by U.S. regulators in 2015 triggered global public outrage, dozens more investigations into test-rigging by the wider industry and a push by some lawmakers to ban diesel and eventually all engines. TIGHTENING NOOSE Tesla shares jumped nearly 6 percent on Monday after a Chinese minister said it was a question of when, not if, Beijing bans fossil-fuel cars, tightening the noose around the combustion engine. France and Britain have promised its outright abolition by 2040. But PSA, the maker of Peugeots and Citroens, said it was concerned about the risks if consumers were left behind in the rush, and a new generation of battery cars does not sell.

Volkswagen posts quarterly profit despite drop in sales

Volkswagen returned to profit in the third quarter as surging Chinese demand for luxury cars helped offset a 1.1% drop in vehicle deliveries due to the pandemic, sending its shares as much as 3% higher on Thursday. The German automaker's return to the black comes amid spiking coronavirus cases in Europe that led governments in France and Germany to order their countries back into strict national lockdowns on Wednesday. "The coronavirus remains a central problem," Volkswagen Chief Financial Officer Frank Witter said in a conference call with reporters. "This situation now is anything but relaxed." But Witter said the group expected the economic recovery to continue and did "not anticipate any nationwide lockdowns in larger markets." Witter said the takeover of U.S. truck maker Navistar International by Volkswagen's trucking unit Traton was an important acquisition, but the "current economic climate will not make this easy." Volkswagen reiterated it expects to post a profit for the full year, saying its business "recovered noticeably" in the third quarter as sales in China of premium vehicles, including Audi and Porsche sports cars, rose 3%. The quarterly performance was also aided by a series of cost-cutting measures launched earlier this year. Volkswagen said its net liquidity rose to 24.8 billion euros from 18.7 billion at the end of the second quarter. Excluding one-time items, third-quarter operating profit was 3.2 billion euros ($3.8 billion), down from 4.8 billion euros a year earlier, but up from a second quarter loss of 1.7 billion. In a note to clients, Jefferies analyst Philippe Houchois described the results as a "solid performance with strong cash, but relatively muted in the context of the (auto) sector recovery." Last week, German rival Daimler reported a record 24% jump in Chinese demand for its Mercedes-Benz cars, boosting its margins in the third quarter. Italian-American Fiat Chrysler Automobiles and Peugeot manufacturer PSA Group both also posted solid results this week. Witter said Volkswagen could not say for sure whether it would meet EU CO2 emissions targets this year, adding "it will be a tough race." At 1030 GMT, Volkswagen shares were up 2.9% at 129.20 euros. Related Video: Earnings/Financials Audi Bentley Bugatti Lamborghini Porsche Volkswagen

Trump reportedly says he wants to wipe German cars off the U.S. map

BERLIN/FRANKFURT — A report that U.S. President Donald Trump has threatened to pursue German carmakers until there are no Mercedes-Benz rolling down New York's Fifth Avenue dented shares in the luxury car manufacturers on Thursday. An excerpt from German magazine Wirtschaftswoche's article, which cited several unnamed European and U.S. diplomats but did not include any direct quotes, could not be independently verified, while a U.S. Embassy spokesman in Berlin referred questions to Washington. The news and current affairs magazine said Trump had told French President Emmanuel Macron in April that he aimed to push German carmakers out of the United States altogether. Macron's administration in Paris declined to comment on the report. The Trump administration last week opened a so-called Section 232 trade investigation into vehicle imports, which could result in a 25 percent tariff on cars on the same "national security" grounds Washington used to impose metals duties in March. This could destroy exports by German carmakers, which control 90 percent of the U.S. premium market and are the biggest European Union exporters of cars to the United States. BMW owns Rolls-Royce, while Daimler has Mercedes-Benz, and Volkswagen controls Bentley, Bugatti, Porsche and Audi. Daimler, BMW and Audi declined comment. Porsche was not immediately available for comment. BMW shares were trading 0.5 percent lower at 0939 GMT, while Daimler and VW's shares were down 1 percent and 1.6 percent respectively, underperforming Germany's blue-chip DAX. Trump has railed against German carmakers before. And in early 2017, in an interview with German newspaper Bild, he said he would impose 35 percent tariffs on imported cars. At the time, the president called Germany a great car producer but said that the business relationship with the United States was an unfair one-way street. Germany's auto industry association VDA says its members exported 657,000 vehicles to North America last year, with total exports of vehicle components, cars, engines, as well as second-hand vehicles totaling 31.2 billion euros in 2016. Imports from the United States to Germany amounted to 7.4 billion euros, meaning a trade deficit of 23.8 billion euros the VDA's latest available figures show. However, German brands also have huge factories in the United States, where they built 804,000 cars last year, VDA said, providing jobs for U.S. workers. Berlin has reacted angrily to the U.S.