Thank you, Martin, and welcome everyone to the media portion of our Q&A session today. Before we get started, a few housekeeping remarks. As you know by now, this call is being conducted in English, so we kindly ask that you ask your questions in English as well. Our operator will now walk you through our question procedure.
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Okay, questions are starting to come in. Thank you very much. Our operator will address each of you by name when it's your turn to ask your question. We ask that you briefly re-introduce yourself though, starting with stating your full name, your media outlet, before you proceed. Take your time. Please ask your question slowly and clearly. With that, operator, let's get it started.
The first question comes from the line of Benjamin Wagner from Frankfurter Allgemeine Zeitung. Please go ahead.
Hello, Guten Morgen. My name is Benjamin Wagner from the Frankfurter Allgemeine Zeitung. Thank you that you take my questions. Once again, about the U.S. Can you explain once again the connection between the U.S. tariffs and your customers' uncertainty? Are customers holding off on purchasing, on buying your trucks because they are unsure how imports into the U.S. will develop? I hope that I understood it right. You said that the order intake in the U.S. has stabilized. Why then do you expect declining return on sales in the U.S.? Second, two questions about Cost Down Europe. Within the Cost Down Europe program, you want to cut 5,000 jobs in Germany. How many jobs have you already cut in the year 2025? How many employees are currently on the so-called orientation platform?
Are you planning to relocate production from German plants to Eastern Europe, especially from Wörth am Rhein? Thank you very much.
Thank you for your question, Benjamin. Looking at the U.S., to explain the connection between U.S. tariffs and the customers' uncertainty, that was really of an effect that we faced a lot last year because it was kind of our customers took that wait and see approach, and the market was just very weak. I mean, we were going through the longest trade recession in recent U.S. history. Obviously, if you have an environment that's anyway weak with low freight volumes, low freight rates, and then you have tariffs on top of that significantly impacts order behavior.
It has now gotten better in recent months, as we've just also discussed during the analyst call in our presentation, because now there's not full certainty on tariffs, but there's more certainty, and then we also see the freight rates recovering. That overall helps to convince our customers to order more trucks, and that we see in the positive order momentum in quarter four, and that has also continued now at the start of quarter one. Then you asked why, despite this positive order momentum, we expect a decline in sales in the U.S. Well, overall, we don't expect a decline in sales in the U.S. in 2026. We do expect an increase as per our guidance. This is in line with the order development, obviously.
Our return on sales, this is highly impacted by tariffs. As we've discussed during the analyst call and the presentation, we have a significant higher tariff impact in 2026 because of the so-called Section 232 truck tariffs that were introduced in November 2025. We only had two months effect of this last year, and we have 12 months effect of this year. We assemble our trucks in the U.S. and in Mexico, that obviously impacts us. We have a positive effect from a higher volume in the U.S. in 2026, but the counter effect is then the tariff, and this is significant, that leads overall to a lower profitability.
Yes, hi, Benjamin. Karin here. On the Cost Down Europe topics, please understand that we do not comment how many people have left the company or exactly how many people we have on the so-called orientation platform. What I can tell you is that, we are, as we said also in the speech earlier, we did reach our targets in 2025. I think what's most important is to look at the bottom line here, in terms of the impact for the company. We have also now disclosed the target of EUR 250 million for 2026. In terms of the headcount topic, I think the big reductions we will see when we move forward some years when we're doing some of the bigger outsourcing topics.
As I said, I think more important is to focus on the bottom line. In terms of where we will put our production in the future, I think it's also a little bit premature to comment. Wörth is our by far biggest global production site for Mercedes-Benz Trucks and will remain so in the future. With that being said, of course, in all our plants across Germany, but also globally, we always look at what's the optimal way to run the system. We are conducting make or buy analysis also to see what do we do in-house and what might be better that we do that the suppliers do for us or that we buy sort of more parts from the suppliers.
The next question comes from the line of Tina Fuchs from SWR, Südwestrundfunk. Please go ahead.
Good morning. Thank you. This is Tina Fuchs from Südwestrundfunk. I would like to ask a question concerning defense. Could you give us a little bit of an insight of the new geopolitical situation results in new products that you think of, also new cooperations and new customers? Do you have more incoming demands from armies in Europe? And allow me also one remark. Being a journalist covering television, I find it rather sad and discriminatory that you do not allow us to make an interview with you and that you don't show your faces during the Q&A on a video while we are asking questions here. I don't think that is the equal opportunity for press media as well as electronic media. I'm really sad about that. Thank you.
Hi, Tina. Karin here. We take that feedback obviously with us. I just want to clarify that we have done these annual conferences completely without video historically. This time we decided to try something different, to have the presentation with video. For analysts, investors as well as media, we have stayed with this method, and I think mainly honestly because of technical reasons, and it's a little bit simpler, but definitely we'll follow up with you to see if there is a better way to do it going forward. Now moving to the defense question. I would say we started already some years ago to invest into our defense portfolio.
I guess, looking back, you can say it was really good timing because it was before sort of the big defense spending started to take off. We work together with many different partners. To give you one example, we work with Rheinmetall to do the armorization of our cabs on certain models. Over the last years, we've also significantly expanded our product configurations based on customer demands, so introducing more versions of the Zetros, as an example, which is one of our pure defense vehicles. We have also increased and started working much more with different partners. Maybe to give you one very recent example, because we announced it yesterday, partnership with Quantum Systems.
What we want to do together with Quantum is, first of all, explore with their software how we can run our trucks more on platooning as a first step, but as a second step, also autonomously. This obviously for safety reasons, to not have drivers in every truck, but also because of then needing less people in the armies if you can do more traveling autonomous. I think that's one example. Another example is the recent win with the French military, where we work with Arquus, where we are selling chassis, and they are upfitting to the needs of the French Ministry of the Armed Forces. Across the world in different tenders, we work with different partners.
As an example, the Canada tender, which was, I would say, our, maybe our breakthrough into the defense business. Yes, we are definitely looking to increase the number of partnerships.
We now have a question from the line of Ilona Wissenbach from Thomson Reuters. Please go ahead.
Yes, good morning. Ilona Wissenbach from Reuters. I have three questions. You were talking about a better operating performance, but I wonder where in what measure do you talk about because you expect no pickup in the margin versus last year with the guidance of 6%-8%. Then the question on in Cost Down Europe, have you taken provisions for a staff cut for compensation programs and so on on last year, and how much this year? The third question is about the Iran war. What effects do you expect, and what is the biggest risk?
Thank you, Ilona. I'll take the first one. Talking about our operational performance, what we mean there is, we expect s trong volumes, and we will convert that into return on sales, obviously. What you have to really take into account is significantly higher tariffs. I mean, this is something that we can't impact. We only can impact what we can control, and there we are improving our results through efficiency gains, for example, through Cost Down Europe, but also in North America, we are continuing to increase our efficiency and productivity, and then the tariffs, unfortunately, go against that. That's the explanation for that one. On Cost Down Europe, we have taken a provision already in quarter three last year, EUR 321 million. No, we don't expect an impact of a provision there this year.
Yes, I can comment on the Middle East conflict. As mentioned earlier, it's too early to really estimate the financial effect, so we have not taken it into our guidance or outlook for the year. Maybe to give you a little bit more color, we have, of course, some people in the region, mainly in Dubai. There we are working with crisis management to keep everyone up to date and of course, also continuously assess the safety and security situation. On the supply chain side, we have obviously worked through that very carefully. We don't see any short-term supply chain disruptions based on the situation. As I already mentioned, in terms of our sales, it's a rather small region for us relative to other ones. Also there expect limited effect.
I think the biggest risk, from a company perspective, financially is more what happens with the overall global economy. Where does the oil price go? Where does gas price go? How do interest rates develop, and what does that do for, let's say, the global economy? As I said, I think it's a little bit too early to have a clear idea about that, which is why we have also not taken it into our guidance.
Can I ask about the tariff effect again, if did I get that right that you're not able to quantify it yet in numbers because it's so uncertain how all this applying for some reductions will work?
Yeah, exactly. I mean, we disclosed it for last year. It was EUR 250 million net impact. For this year, we have this guidance range of 6%-8%, and that assumes certain tariff scenarios in that range. Of course, internally, we do have a range there that we're working with, but as it's so volatile, it doesn't make any sense to discuss it now. With that 6%-8% range, you get a feeling for where we're trending.
The next question comes from the line of Alexander Jungert from Mannheimer Morgen. Please go ahead.
Yes. Hi, good morning to everyone. This is Alexander Jungert, Mannheimer Morgen. I have two questions. The first one is again on the Cost Down Europe program. You said earlier that you are implementing the efficiency measures faster than planned. Can you explain what that means, specifically for the Mannheim site? Second question, how would you describe the current mood among the workforce in light of the cost-cutting program? Next week is also the works council election. Thank you.
Hi, Alexander. Karin here. On your questions on Cost Down Europe, I mean, I did mention some examples of where we saw quite good development during 2025, and in operations specifically, we talked about, for instance, energy saving. I think that's one that carries also for Mannheim. Otherwise, it's a little bit difficult for me to give you the exact measures that we've done in Mannheim. In terms of the mood amongst the workforce, I think this election period, obviously very important, and we follow it very closely. I think we see a little bit the same tendencies that we see in society overall. A little bit more extremists on all sides of the spectrum. Of course, we follow it very closely.
We will work with who gets elected, of course.
Thanks.
All right, ladies and gentlemen, that looks like the last question in our queue. We do have time for one last question if anybody wants to submit it. All right, it looks like there's no more questions. Thank you everyone. Ladies and gentlemen, thank you for being with us today, and thank you, Karin and Eva, for answering all the questions. Now, as always, our investor relations and communications team remain at your disposal to answer any further questions you might have. A recording of this session will be available later today on our Daimler Truck website, and we are looking forward to staying in contact with you. With that, have a great day. Stay healthy. Thank you and goodbye.