Key factors affecting EBIT included the decline in unit sales and a weaker sales mix driven by North America. I will give more details later. Additionally, we faced ongoing challenges due to underutilization in production in Europe as well as exchange effects. On the positive side, we had contributions from better net pricing and favorable functional cost developments, from reduction of accrual for variable compensation, reduced headquarters spending, and lower seasonal R&D spending, but they were not enough to offset the negative EBIT impacts. Financial Services significantly impacted group EBIT, adjusted by EUR 6 million. Total adjusted items amounted to EUR 312 million, with EUR 23 million restructuring mainly driven by the implementation of a transformation program of Financial Services in North America. EUR 108 million are related to M&A activities, primarily from the spin-off. As communicated last quarter, we are assessing the future of our China operations.
As discussions are still ongoing, we had to book a negative valuation adjustment for receivables in the amount of EUR 180 million in quarter three, as already communicated via an ad hoc release last week. There are EUR 156 million booked in the Mercedes-Benz segment and EUR 24 million in the Trucks Asia segment. This is a one-time, extraordinary, and non-cash adjusted item. Revenue for the industrial business in quarter three decreased by 7% year-over-year to EUR 12.3 billion. EBIT adjusted for the industrial business declined by 12% to EUR 1.1 billion, with return on sales adjusted decreasing from 9.8% - 9.3%. Mercedes-Benz negatively impacted EBIT adjusted by EUR 253 million year-over-year, with positive contributions from Trucks North America of EUR 14 million, Trucks Asia of EUR 37 million, and Daimler Buses of EUR 71 million.
In the third quarter, Trucks North America delivered an adjusted EBIT of EUR 725 million and an adjusted return on sales of 12.1%, reflecting a stable performance compared to the same quarter last year. Another strong quarter despite ongoing challenges in the on-highway market. While total unit sales in quarter three increased by 4% year-over-year, we increased unit sales of our vocational models by 48% year-over-year. quarter three clearly underscores the success of our vocational truck strategy, making us more independent from the on-highway business and thereby more resilient. Pricing continued to contribute positively versus Q3 last year, and net price cost was positive. Product mix was negative, as we are seeing a significant shift from heavy-duty on-highway trucks to vocational medium-duty trucks.
We encountered headwinds from the exchange rate in Mexico, one of our core markets, and the decrease in interest rates adversely affected the valuation of some of our provisions. Hurricane Helene disrupted our operations, leading to closures of our Carolinas plants for a few days in September and reduced production capacity due to closures and ongoing supply chain impacts in the following weeks. Therefore, we started quarter four with a shortfall of a few thousand units. While we are working hard to mitigate this effect until year-end, it might influence our North American unit sales in the fourth quarter. We expect the product mix effect to continue in the fourth quarter, and combined with the impact from the hurricane, quarter four will likely be at the lower end of the guidance corridor when it comes to return on sales.
All in all, Daimler Trucks North America is on track to deliver another very successful year, despite the weakness in the on-highway segment. At Mercedes-Benz, EBIT adjusted decreased year-over-year from EUR 535 million- EUR 283 million, resulting in a decline in adjusted return on sales from 9.9% - 6.4%. Markets developed as expected: weak in Europe and strong in Latin America. Sales decreased year-over-year by 28%, largely due to a decline in EMEA of 41%, particularly driven by Central Europe and Germany, where sales are down by more than 50%. Latin America increased sales by 34%. In Europe, we are currently not seeing an improvement in order intake. As of today, there are no signs of a recovery.
While our immediate countermeasures, such as short-time work, have helped to keep the result on last quarter's level amid a persistently weak European market, we are not satisfied with this result. As Karin pointed out, we are working on an extensive efficiency push, which targets closing the gap to our most successful peers. This includes tackling our cost base, portfolio, and process complexity, as well as identifying additional profit pools. Regarding EBIT performance, our business in Brazil benefited from some foreign exchange tailwinds, but I would like to highlight that also operationally, Brazil is becoming accretive to the Mercedes-Benz segment. This shows that our significant restructuring efforts are paying off. Brazil clearly has the potential to sustainably generate double-digit margins, and we are on the right track to achieve that. Price cost remains neutral compared to last year.
While after-sales contributes positively quarter-over-quarter, EBIT development was still heavily burdened by lower volume, resulting in underutilization and production inefficiencies. For Q4, we expect return on sales adjusted at the same level as in quarter three. Trucks Asia reported an EBIT adjusted of EUR 82 million, with a return on sales adjusted of 5.5%. Unit sales in the Truck Asia segment decreased by 15% compared to last year's Q3. This decline was primarily driven by weaker market demand in India due to the delay of anticipated infrastructure programs and the general ongoing weakness in other Asian markets that we already have seen in previous quarters. Additionally, we have not yet seen the anticipated market recovery in Indonesia. Despite the significant reduction in unit sales and negative foreign exchange effects, EBIT was supported by improved net pricing, strong after-sales performance, and favorable effects in SG&A, leading to a significantly higher profitability.
This demonstrates Trucks Asia's further improved resilience in a weak market environment. We expect to build on this once the market environment improves. For quarter four, we expect a return on sales adjusted around the midpoint of the full-year guidance. Daimler Buses continues to demonstrate strong performance, with results improving quarter-over-quarter. Return on sales adjusted stands at 11.4%, backed by an EBIT adjusted of EUR 141 million. This includes a positive impact of approximately 200 basis points from the sale and revaluation of a non-core shareholding. The underlying result reaffirms that our restructuring efforts at Daimler Buses are making a noticeable impact, elevating the bus business to a higher profitability level. Unit sales remained flat year-over-year, but we are seeing increasing contributions from the recovering coach segment, where the market has almost reached pre-COVID levels.
EBIT was positively impacted by an improved mix in Europe, with a higher share of coaches. Strong pricing, positive after-sales, and favorable material costs also supported EBIT. For Q4 and full year, we expect return on sales adjusted towards the upper end of the guidance range, which would result in a record year for Daimler Buses in terms of profitability. Let's take a look at our Financial Services business. DTFS secured new financing and leasing contracts totaling EUR 2.8 billion, reflecting a 10% decrease compared to quarter three 2023. Contract volume grew by 6% since year-end 2023, reaching EUR 30 billion, primarily driven by North America and ramp-up markets in Europe. EBIT adjusted decreased year-over-year from EUR 45 million-EUR 39 million, and return on equity adjusted decreased from 7.7% - 5.7%.
Cost risk increased compared to prior year due to the expectation of higher credit losses in America, especially due to the ongoing freight recession. Positive margin development and lower costs, in particular general administrative expenses, impacted gross profit positively, compensating the above-mentioned credit provisions. To further drive resilience, Financial Services has started to implement a transformation program in North America aimed at enhancing operational excellence and strengthening customer relationships, which impacted reported EBIT with EUR 22 million. The remaining program costs will have an additional mid-double-digit million impact until 2026. For Q4, we expect a return on equity adjusted in line with quarter one of this year. Cash generation in quarter three was impacted by working capital effects amounting to EUR 419 million. Key drivers were a decrease of payables caused by the reduction of production volume and capacity restrictions at bodybuilders in Japan. Inventories are expected to be reduced towards the year-end.
Net investments in property plant and equipment and intangible assets further weighed on cash generation, totaling EUR 521 million. Significant drivers of the net investments were our investments into new businesses, such as the battery cell manufacturing joint venture in the U.S., producing a truckified LFP cell, and our new global parts center in Germany, helping to improve spare parts availability, driving higher customer satisfaction, and supporting our push for more service revenue. As a result, quarter three recorded a cash flow before interest and taxes of the industrial business of EUR 269 million. Cash taxes amounted to EUR 380 million, resulting in a free cash flow of the industrial business of -EUR 41 million, without adjustments for M&A transactions and restructuring measures. Adjusted free cash flow of the industrial business was +EUR 73 million.
Our full-year free cash flow guidance remains unchanged, with cash generation expected to be heavily back-end loaded, depending on the targeted inventory reductions in the next few weeks. Consequently, industrial net liquidity decreased from EUR 7.2 billion at the end of Q2 to EUR 6.5 billion at the end of quarter three, which is approximately EUR 700 million lower, of which roughly EUR 100 million were injected into Financial Services, EUR 200 million coming from foreign exchange, and EUR 300 million have been spent on the ongoing share buyback program, where we have completed the first and started the second tranche. In total, we have spent EUR 1.1 billion on our buyback program from August 2023 until the end of September 2024. Before coming to our outlook, let me remind you that our outlook is subject especially to further macroeconomic and geopolitical developments. Our market assumptions for the rest of the year remain unchanged.
We expect a range of 280,000 units- 320,000 units for the heavy-duty truck market in North America, and for Europe, we anticipate the overall heavy-duty truck market in a range of 260,000 units- 300,000 units, with Central European markets and especially Germany being overproportionally affected. Our guidance KPIs on group and on industrial business level for 2024 remain unchanged, as every year the guidance for 2025 will be published at our annual results conference. The same applies to the current full-year 2024 guidance on segment level. No changes. This concludes our presentation, and we are now ready for your questions. Christian, over to you.
Thank you very much, Karin and Eva. Ladies and gentlemen, you may ask your questions now. The operator will identify the questioners by name, but please, as always, also introduce yourself and the organization you are representing. Two practical points.
Please ask your questions in English, and as a matter of fairness, please limit the amount of questions to a maximum of really two. Now, before we start, the operator will explain the procedure.
Thank you. Ladies and gentlemen, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please pick up the handset before making your selections. Anyone who has a question may press star followed by one at this time. Please mute the sound of the internet stream while you are asking your question on the phone. One moment, please, for the first question. The first question comes from Nicolai Kempf from Deutsche Bank. Please go ahead.
Yeah, good morning. Nikolai here from Deutsche Bank. Thank you for taking my question, and welcome, Karin, and all the best. My first question would be on Mercedes. You do say that there are not much signs of a recovery from a market perspective, but at the same time, you have stopped short-term measures in one of your plants. How should we think about that? And my second one is just given the elections we had yesterday in the U.S., and given that two-thirds of your truck production are in Mexico, how would you react in terms of any potential tariffs that would be implemented by the new administration? Thank you.
I can start with the first question. We have in Germany a lot of flexibility measures. We are constantly adjusting. We worked with takt output shift lengths, temporary workers, as well as short-time work.
And it's right that from 1st November, we're no longer in short-time work in Wörth. We are ramping up, as I mentioned, these new products, which is very positive. We will ramp up with the Actros L, the new cab, the eActros. And at this time, there is no need to stay in short-time work. So consequently, we are not there anymore.
And hello, Nikolai from my side, and thank you for your question. Let me just give a general statement on the U.S. elections. I mean, obviously, we're one of the leading truck manufacturers in the U.S. We have almost 18,000 U.S.-based employees, and we look forward to continuing to build on our past relationship with the administration towards a prosperous future.
Obviously, we have been building products in the U.S. with our brands, Freightliner, Western Star, and Thomas Built Buses, for over 80 years, and we continue to do that. When it comes to potential tariffs between the U.S. and Mexico, obviously, it's too early to speculate about the potential impact of the election results on our business. What I can say is that we have a lot of flexibility when it comes to our production footprint in the U.S. and in Mexico. We do have six production plants in the U.S. We are able to produce every truck model and bus model in the U.S. and in Mexico. So there is no single dependency on a particular product in Mexico, and we do have flexibility in the U.S. to increase hours, add additional shifts, and so on.
So we do believe that we are well positioned when it comes to the North American market as a whole and expect to continue our strong position there as a market leader.
Great. Thank you.
The next question comes from Klas Bergelind from Citi. Please go ahead.
T hank you. Hi, Karin and Eva, Klas at Citi. So my first question is on the cash flow and production levels here into year-end. It looks like a major net working capital release is needed to meet your free cash guide, Eva, and I guess this is inventory, and using perhaps December and maybe introducing stop dates. Shouldn't that weigh on the margin more here into the fourth quarter? It looks like you've done EUR 900 million of cash flow year to date. You need to go to EUR 2.7 billion-EUR 2.8 billion to get to prior level. That's EUR 1.9 billion of a release in the fourth quarter.
Just to understand how our production will trend here to sort of drive that inventory release. Thank you.
Yes, Klaus. Hello, and thank you for your question. It's obviously a very good one. From a free cash flow perspective, yes, there will be a major push in quarter four. I did the math as well myself. And a big portion of that net working capital release will come out of inventory reduction. What I can say here is that a production stop in Europe before Christmas will definitely help to reduce inventories. And the reason why we believe that from a profitability perspective and from a net sales perspective, we will still be on the level that we guided for quarter four is also because we do see a significant reduction of new vehicle stock that we currently have in our books.
So that means we can sell that off, and we have adjusted production capacities accordingly to consider that reduction of new vehicle stock. And we have now given very clear targets that we have aligned with all segments for the reduction of inventories on a monthly and even weekly basis now towards the end of December. And I have already the first free cash flow figures for October, which shows that we're going into the right direction to reach our full-year free cash flow guidance. But yes, it will be a very strong push that is required also into December.
That's because it's a significant new vehicle stock. That typically means underabsorption if you need to lower production to a lot of inventory and you don't have the short-time work there anymore. But yeah, maybe there's some magic here, Eva.
It looks like quite an effort, but yeah, I trust you.
Yeah, maybe to explain that one, Klaus. So we had already planned for the shutdown period over Christmas for a while, and this is actually one of the reasons why we're not doing short-term work in November and December because we will be closed for more than two weeks. One reason for this is also that we have our one ERP implementation starting January 1st, which is why we had originally also planned to have that shutdown period implemented, which now fits to the production capacities and the reduction of new vehicle stock that we are targeting. So we did plan that through, and it aligns with our expectations.
Okay. My second one, Eva, is just to clarify on the indication on the margins there into the fourth quarter.
Did you say Trucks North America and Mercedes-Benz at the lower end of the respective full-year guide, then the midpoint for Trucks Asia? Just so I got that right.
Yes. What I said was for North America, we will be at the end of the full-year guide, also attributable to the fact that we have to compensate these effects from Hurricane Helene that I mentioned. For Mercedes-Benz, we expect to be on a similar level as we have been in quarter three.
Okay. And then Trucks Asia, midpoint. I know there's a couple of one-offs. And obviously, you included the one-off in the second quarter. Now you're not including it. But is it 2.5%? Because that's quite a big step down quarter- on- quarter to the margin in Trucks Asia. I just want to understand if I understood that correctly.
In Trucks Asia, it's the midpoint. Yes.
I had mentioned during the part of my speech that we will have negative effects from a weaker market in India and that we also do not see yet the expected recovery in Indonesia that we have been waiting for now for a couple of quarters. And that is weighing on the results, which is why we expect the Trucks Asia return on sales adjusted to be a bit lower in quarter four than it was in quarter three on an operational basis.
Okay. Very clear. Absolutely final and quick one is on Mercedes-Benz and Price/Cost. The ASP number is quite big and up quarter- on- quarter, but you say that Price/Cost was neutral in the quarter. Could you help us with how much pure pricing is within that ASP number? It's up double-digit year-over-year. And what other drivers you have there on the mix side? Thank you very much.
Maybe I take that one. If you look quarter-over-quarter, where we were on pricing last year to this year, it's true that we have generally improved our pricing position. However, there's so many factors going into that. I mean, if you do revenue over volume, you also have the after-sales business. And then you have different mix between light duty, medium duty, heavy duty. So I would not generalize. I would just say we have a strong pricing still, and we're keeping that pricing, as I mentioned.
Thank you, Karin.
The next question comes from Miguel Borrega from BNP Paribas. Please go ahead.
Hi, good morning, everyone. A couple of questions for me. The first one just on North America. Just wondering what specifically led to such sequential margin contraction. Your previous guidance was for in line with Q1, so 12.5%.
I remember you saying no price deterioration, and your volumes are actually higher than Q2. So can you perhaps give some quantification on, for example, how mix impacted the margin? How does the margin, for example, in vocational compare to on-highway?
Hello, Miguel. Thank you for your questions. Yes, I can explain that. So mix is really the major factor here. As I mentioned, we really still have a freight recession going on in the U.S., which means a reduction of the heavy-duty on-highway business where we sell our Cascadia product. And when we look at vocational and medium-duty, which has really compensated that weak on-highway business, we do have a different margin profile there currently this year because our Western Star vocational product is still in the ramp-up phase. So we're still optimizing the costing structure.
And another factor is also that with vocational trucks, you really see a very attractive lifecycle profitability over the lifetime of the truck. So obviously, when you sell them, there is an initial margin, but then over the years to come, that is where you really get service and spare parts revenues in, which are very attractive and that we will see in the future. And then the other part is obviously medium-duty, which comes with a lower margin profile than the heavy-duty product. And also with heavy-duty, we have a much higher portion of captive engines. So our heavy-duty engine platform that we produce in Detroit, where currently the rate of captive engines in our vocational product range is still lower than on the heavy-duty on-highway side. And that is the reason for that reduction in margins due to mix.
The next question comes from Shaqeal Kirunda from Morgan Stanley. Please go ahead.
Hi, Shaqeal Kirunda from Morgan Stanley. Thanks for taking my question. Could you tell us a bit more about the China operations? Is this all sort of caused by the weakness? Sorry, is all the weakness caused by the strength in the LNG market? And should we expect more adjustments going forward? And will these mainly impact Mercedes-Benz?
Yeah, as mentioned in the speech, we are currently assessing how to set up our company for the future. I think we have a good advantage that we have a localized Actros that we launched one year ago. Of course, we have seen maybe two major factors that we had not foreseen in our business plan. The one is the total market, which retracted more than we had expected.
I mean, it's more or less half of what it was a few years ago. And at the same time, we have seen that the gas trucks, LNG and CNG, are growing a lot in volume thanks to low gas prices in China. And we have a diesel truck, so that obviously poses some challenges. But we are assessing our setup, and as mentioned, also in Q2. I mean, that's one of the priorities for both me and Eva.
Thank you. And then a follow-up on the Trucks North America margins. How significant is the margin difference between medium duty and heavy duty? Because some of your peers have made comments that it's not really something which significantly impacts the margin. So could you share some detail there, please?
Hello, Shaqeal.
I mean, we're not disclosing it on a quantitative manner, but what I can say is that it is quite different there. Also because we have significantly less captive engines in there. With heavy-duty, with our on-highway product, the Cascadia, we have more than 90% of captive engines in all of our heavy-duty on-highway sales. And that really is significantly lower on the medium-duty side. So you already missed that margin portion from the captive engine. So yes, that is sizable.
Thank you very much.
The next question comes from Frank Biller from LBBW. Please go ahead.
Yes, hello. Thanks for taking my question. Hello, Karin. Hello, Eva. The one question is on Daimler Buses. You talked about a one-off item here, increasing the margin here. So maybe you can tell us what was the magnitude of the underlying margin here for the Daimler Buses?
And how should we think in the future margins here? Are we still in this 6.5%-8.5% range, which is much higher than in former times? The other question is on the tax rate here in quarter three. We had 34% in my calculation, much higher than second quarter and also last year. So what are you expecting for the full year? And what was the reason for this high tax rate?
Thank you, Frank, for your question. Let me start with the bus business. As I mentioned during the speech, it was a 200 basis points impact from the proportion of a sale of that non-core shareholding and the re-evaluation of the remaining shares that we still hold. I can say it's for a non-core activity. It's an investment that we've had for a while. But that being said, I mean, we were at 11.4%.
If you deduct 200 basis points, we're still at 9.4%, which is above the full-year guidance range for the bus business. And as I said, we expect our return on sales adjusted for Q4 and the full year towards the upper end of the guidance range. So that means that we are moving to a different and higher profitability level for the bus business. And I do believe that this is a sustainable one.
Very good. The tax rate?
And on the tax rate, we do have an impact of the valuation adjustment on the China receivable. And that has an effect of about five percentage points this quarter, which will then obviously, on a full-year basis, you will see that going down.
Okay, thank you.
Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone.
The next question comes from Jonathan Day from HSBC. Please go ahead.
Hi, good morning. Yes, it's Jonathan from HSBC. Just a couple of questions. I was wondering if you could, first of all, talk a little bit about the transformation program that you mentioned for Financial Services, in particular in North America, and just give us an overview of some of the issues you've had there. And then I'll come on to the second one. Thanks.
Hello, Jonathan. Yes, I can mention that. So what you have to understand is that at the time of the spin-off, when we built up Financial Services, we only had about six months to set up Financial Services for Daimler Truck. And it was more of a lift and shift from the old Daimler AG. And now we have really been working extensively on optimizing that structure.
We've had various locations in the United States, which we are now consolidating into one location. And we are also setting up a shared service structure, which will reduce costs going forward. So we really try to be as efficient as possible, which is why we have introduced these measures to become more competitive for Financial Services in North America, which is our biggest market.
Okay. So it's more about that than it is about credit losses or anything on the credit side?
No, that transformation program has nothing to do with the credit side. And that credit side and the increase of credit provisioning, that is really due to the freight recession and the current difficult market environment in the United States.
Okay. Thanks. And then the second question was on the EV side and the infrastructure point.
Just wondering if you could expand a little bit on how you see that infrastructure becoming effective. In particular, is there any way that anyone can earn a sensible return on infrastructure for electric vehicles?
Yes, I take that one. Well, I think the challenge is long-term, it could be a good business, but it's a little bit chicken and egg that customers are not buying electric trucks if they are not sure that they can charge the electric truck. Companies don't invest in the infrastructure unless there are electric trucks running on the road that ensure that they have a very good utilization of that infrastructure. I think this is one of the reasons why we founded Milence in Europe and also started in the U.S. to look at investing in infrastructure. The idea was to kickstart the market.
It's now really good to see our joint venture Milence really starting to build electric infrastructure. But as I mentioned, it's not enough with that company. We need many more initiatives. What's positive is that there is an AFIR legislation in Europe, which gives countries the guidance on how much heavy-duty infrastructure they have to build, both for electric and hydrogen. We just don't see enough initiative happening yet to have those charge points in place. Maybe to not be too negative, I think one positive thing is with the eActros 600 and a range of 500 km, we do see that many of our customers can transition to eMobility without needing to rely on public infrastructure. So they are installing depot charging. And that's actually enough to transition to e-mobility because many of the long-haul trips in Europe, more than 1/2 of them are actually shorter than 500 km.
But that doesn't take away anything from the fact that I do still see infrastructure as the biggest challenge for really growing the sales of electric trucks and thus also shifting the transport system into more sustainable ways.
Great. Thank you very much.
The next question comes from Michael Aspinall from Jefferies. Please go ahead.
Thanks. Good morning, Karin and Eva. Two for me. One on the U.S. I'm just interested in your thoughts around the impact of the political change in underlying freight markets. I noticed a lot of your listed customers' share prices at least were up 10%-15% yesterday. So interested in what you think that the political change might mean for freight economics in the U.S. And then also just your thoughts around the EPA regulations post the election. And the second one on autonomous.
I noticed Torc achieved advanced validation of the product in the U.S. in the last few days. Can you just give us a few high-level thoughts on progress we should expect to see from here on the autonomous front?
Maybe I can start, and then Eva, you fill in if I forget something. I mean, on the U.S., for sure, we follow the election as everyone. I think we will collaborate with this administration as we have with the previous ones. And I'm convinced that it will work very well. What was the second question? Oh, the EPA. On EPA, I don't expect any changes in that legislation. Let's see. I mean, it's been consistent over many years. So I think that will stay in place. And then finally, on autonomous, as you mentioned, we have made very positive progress with autonomous.
We had our so-called 0.1 release just a few weeks ago where we were successfully driving with production-ready hardware software on a closed course with the driver out. And it was a very, very big milestone for the team. And we then get some more confidence that we are on the right path with Torc and with our path to hub-to-hub level for autonomous driving.
Okay. Great. Thank you.
So ladies and gentlemen, that was the last question. Thank you very much for the time and for being with us today. Thank you very much, Karin and Eva, for answering the questions. Now, as always, IR remains at your disposal for answering any further questions you might have. We're looking forward to staying in touch with you. Have a great day and stay healthy. Before we start the press call, we will do roughly 10 minutes break.
Thank you and goodbye.
Good morning, everyone. Welcome to this conference call on our third quarter results of 2024. I would like to welcome our CEO, Karin Rådström, and our CFO, Eva Scherer, in this call. This morning, we published our press release and the quarter three presentation on our website. I assume that most of you have followed today's presentation on the end of this conference call just prior to this media Q&A. Let me just mention a few housekeeping notes. This call is conducted in English, so please be so kind and ask your questions in English as well. And the operator will explain this procedure for registering your questions again in a moment. So we will now begin with the Q&A session. I will address the journalists by name. Please be so kind to also introduce yourselves. State your media outlet at the beginning.
Take your time for your questions, and please ask them slowly and clearly. Anyone who wishes to ask a question may press star followed by one. If you wish to remove yourself from the question queue, you may press star followed by two. And please press the star key followed by zero for operator assistance. And one moment for the first question, please. The operator again will now explain the exact procedures. Thank you very much.
Thank you, sir. If you wish to ask a question, please press star followed by one on your telephone keypad. Press star and two on your keypad if you wish to withdraw your question. One moment, please. We are now registering your questions.
So first one to ask is Joachim Herr from Börsen-Zeitung. Go ahead, Joachim.
Yes, thank you. Good morning. Two questions, please.
The first one on the short-time work in Germany, in Wörth. If I got you right, you don't rule out to return to such a measure because there is still no recovery in the European truck market, and the second one on the joint venture in China. Maybe I missed your answer during the analyst call, but do you expect further burns and value adjustments there? Thank you.
Thank you, Joachim. I take the first one, and I leave the second one to Eva. Yes, so what I mentioned was we are for the moment not on short-time work. We are working with different flexibility measures, as we always do, being in a cyclical, which includes adjusting takt time, shift times, adjusting with temporary workers, and in the rare case, also short-time work.
The reason why we are not doing short-term work is the ramping up of new products, mainly the Actros L and the eActros 600. As Eva also mentioned in the call, we are having a longer Christmas break. This relates mainly to the implementation of a new enterprise resource system, which we need to have in place to be able to run our production. I don't rule out that we might be in short-term work sometime during next year. It will all depend on how the demand develops.
Hello, Joachim. I'm going to answer your question on China. So as you're probably aware, based on our disclosure, we did impair the full book value of our Chinese joint venture in quarter two, amounting to EUR 120 million. And then in quarter three now, we booked valuation adjustments on our receivables, amounting to EUR 180 million.
Obviously, this is based on the ongoing weak market development in China and also the ongoing discussions with our joint venture partner, Foton, regarding the future of our business and our operations there, so obviously, further impacts cannot be fully assessed before these discussions have been concluded, and we have come to a decision. But obviously, when it comes to balance sheet risks, you can see here that high amounts have already been corrected in the balance sheet, but when it comes to the future outlook, it really depends on how we will set up our operations there and what that will require, and we will, of course, update you once there is a decision.
Okay. Next one is Ilona Wissenbach from Thomson Reuters. Go ahead, Ilona.
Good morning, Mrs. Rådström.
You mentioned in the call that all short-term flexibility measures regarding job-wise in Germany are not enough, and you launched a major push to strengthen competitiveness, where you want to clarify later the details, but can you shed some more light on what is envisaged there? Is it a savings program, or is it more related to get more revenue? And then did I get that right that in the third quarter, there was a drop in Germany of sales of more than 50%, which is a lot, and with this background, we have headlines now that our government broke up with a weak German market, weak economy. What do you make out of this? What does that mean for the business?
Yes. I think, as I mentioned, it's a good time to look at the Mercedes-Benz trucks business.
I think there is a number of reasons to do it now. I mean, we're now three years into independence. And as Eva mentioned in the example of Financial Services, we worked very hard just to be up and running when we separated. So I think now, three years into this new setup, it makes a lot of sense to evaluate if we are set up in the right way and possibly make some small adjustments. Of course, as I also mentioned, I think we have done a good journey with Mercedes-Benz Trucks when it comes to becoming more robust and resilient. And I think we showed last year that we can perform when the market is strong. However, what we see this year is that when we are in a weaker market, we fall down a little bit more than what we would like to.
So I think it makes a lot of sense to look at the overall setup of the business. We will and are looking at everything, both on the revenue side, to see how we can drive more service business, what can we do. I think we have some great products in pipeline with the Actros L and the eActros 600, as mentioned, as some of the highlights, but also some others. And then we look at the cost side on everything. I would say it's material cost. Can we work smarter, better? Can we find better synergies between platforms globally, both medium duty, heavy duty? It's also looking at our setup, footprint, shared services. What do we do in shared services? What do we do ourselves? IT, which I think you know, has been a challenge to separate everything with the separation.
How do we optimize that now going into the future, etc.? So I would say we are looking at more or less all parts of the business.
Yes. And maybe I answer the question regarding the situation overall in Germany. And obviously, the statement that you quoted is correct, that our sales volumes have declined by about 50%. When we look year-over-year at our unit sales, they declined by 5,000 units, which obviously is a lot. And you have to consider here as well that our market share in Germany is about double than the average market share that we have in the EU 30 market. So we're overproportionally affected from that negative market development in Germany. And we have been waiting for an economic recovery in Germany for a while now. And we obviously hope that we will see it soon.
But as we already both stated, as of today, unfortunately, there are no signs of an improving situation. Regarding the current political situation in Germany, we can just say that following the decisions that we heard about from yesterday, we are trusting that the necessary impulses will be set quickly because we're obviously very interested that we secure growth, investments, and employment in Germany.
Okay. Thank you. We go on. And in line is Matthias Schmidt from Stuttgarter Zeitung, Stuttgarter Nachrichten. Go ahead, Matthias.
Hello. Good morning. I would like to ask regarding the break over Christmas. How long will it be and who will be affected? Is it just the production plants or also the offices in Leinfelden?
Yes. Everybody will be affected.
So it also includes our headquarters in Leinfelden-Echterdingen, because, of course, we want to also get a positive impact there out of the release of overtime and vacation accruals to our results. And so we are doing that across the sites. And I think, as I mentioned before, we're starting on the 18th of December.
Okay. Next one is Adrian Hartschuh from Die Rheinpfalz. Go ahead, Adrian.
Yeah. Hello, everybody. Can you hear me?
We can.
Okay. Once again, about the political situation in Germany, there will probably be new elections. Is this good news for the economy?
I would say let's see how it goes and let's see what happens. We see a lot of volatility and uncertainty right now. I think on a short-term basis, that is not going to help because we would all want to have clarity and stability.
So we will monitor it closely, and hopefully, we will know more soon.
Okay. Thank you. Short second question. What impact will Donald Trump's presidency have on Daimler Truck?
I can take that one. I mean, it's a little bit early to say. I would say the day after he was elected. So we will follow this, of course, very closely. And we continue to have a constructive dialogue with whatever administration is in place. Yeah, I think that's all I can say at the moment.
Thank you.
Okay. Next one is Alexander Jungert, Mannheimer Morgen. Go ahead.
Yes. Hi. And hello to everyone. Thank you for having my two questions. The first one is you just said that you are planning more cutting measures. What could this mean for German sites like Mannheim? And the second question is also about the U.S. elections and Trump.
The Mannheim plant produces many components for the U.S. market. Do you think this business will become more difficult because of Trump? Thank you.
Hi, Alexander. As I said, we are looking at everything, and we will turn every stone. We want to build a company which is even stronger in the future. But I think it's too early to talk about concrete and exact measures. I think we need to, first of all, decide what we want to do, then, of course, align with our works council representatives if there should be anything which concerns them. And after that, we can become more specific. As on the U.S. election, as I said, I think regardless of administration, it's important to have a strong American economy with predictability and stability.
So from what I know today, I don't expect that there would be any big changes from this change in administration that would affect Mannheim specifically.
Thank you.
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So it looks like there's no one in the line again. So we would be now at the end of today's conference call. Thank you very much for your interest and your participation. If you have any further questions, always please feel free to contact the Daimler Truck communications team. I wish you all a wonderful day. Thank you very much. Until next time. Bye-bye.