Row over monkey tests takes shine off Daimler's record profits

Frankfurt am Main (AFP) - German luxury carmaker Daimler on Thursday announced record profits for 2017 thanks to strong SUV and truck sales, but the results were overshadowed by the firm's connection to controversial diesel exhaust tests on monkeys.

Daimler said net profits soared by 24 percent last year to 10.9 billion euros ($13.5 billion), with a little help from a roughly one-billion-euro boost from sweeping US tax reforms.

"The Daimler workforce has once again succeeded in breaking the records set in the previous year," chief executive Dieter Zetsche said.

Group revenues were up seven percent to 164 billion, in line with analyst expectations, while underlying, or operating profits, climbed 14 percent to 14.7 billion euros.

The company was muted in its outlook for 2018, however, predicting that unit sales and revenues would only "slightly" increase, in step with forecasts for global demand for motor vehicles.

Operating profits for 2018 are expected to be "of the magnitude of the previous year", Daimler said, as investments in new technologies such as electric and self-driving cars begin to weigh on the bottom line.

The group, which also makes Smart cars, said unit sales climbed to a record 3.3 million vehicles last year, driven by robust demand for its Mercedes-Benz urban SUVs and E-Class models, particularly in China.

Daimler's vans and trucks meanwhile enjoyed double-digit growth, led by the North America region.

As a result of the group's strong year, Daimler said it would raise dividends to an all-time high of 3.65 euros per share compared with 3.25 euros per share for 2016.

It also promised record bonuses of up to 5,700 euros to some 130,000 employees in Germany, out of 289,000 staff worldwide.

The positive results come as Daimler is embroiled in a row over its role in tests that exposed monkeys to toxic diesel fumes in a US lab in 2015.

The experiments, revealed in a New York Times article last week, were commissioned by a now defunct research body funded by Daimler and fellow German auto giants BMW and Volkswagen.

- 'Appalled' -

The same organisation, the European Research Group on Environment and Health in the Transport Sector (EUGT), also carried out tests on human volunteers.

Daimler has said it was "appalled" by the revelations and on Wednesday suspended an employee who had sat on the board of EUGT, identified by German media as the firm's head of environmental protection, Udo Hartmann.

"Such experiments go against Daimler's values," Zetsche told reporters in a conference call, vowing the company "would do everything to shed light on the matter".

He declined to give further details, saying Daimler wanted to finish its internal investigation first.

Daimler shares lost 1.63 percent to 72.53 euros in early afternoon trading in Frankfurt, against a Dax index that was largely flat.

The controversy has brought fresh scrutiny to the powerful German car industry and the lengths automakers have gone through to hide the harmful effects of diesel engines.

The crisis first erupted in 2015 when Volkswagen admitted to installing cheating devices in millions of diesel cars to make them seem less polluting in lab tests than they were in real driving conditions.

Suspicions have since spread to other carmakers, including Daimler, and several German cities are mulling diesel bans to combat air pollution.

- Diesel sales slip -

Daimler's sales of diesel cars have slipped by "two to three percent" in Europe in the wake of the technology's fall from grace, but diesels still account for more than half of all engines sold, Zetsche said.

German carmakers -- who bet heavily on diesel as the more environmentally-friendly alternative to gasoline-powered cars -- have responded to the "dieselgate" scandal by speeding up their transition to the cleaner, greener cars of the future.

Like its rivals, Daimler is pouring money into developing electric and automated vehicles, as well as e-mobility services like car-sharing and ride-hailing through apps.

Daimler said it had increased its spending on research and development by another 15 percent in 2017 to 8.7 billion euros.

"It's about nothing less than the reinvention of individual mobility," said Zetsche.