Frankfurt: Daimler and Volkswagen reinforced the gloomy outlook for Europe’s vehicle industry on Thursday, revealing weak sales of premium cars and downbeat demand outlooks that overshadowed some robust truck sales data.

Workers walk at the assembly line for the premium car Phaeton in the factory of Volkswagen. File photo.

Daimler said its weaker-than-expected quarterly operating profit suffered as premium car sales were hit by the economic downturn, while better news in the truck sector for Daimler and its peers, showed predicted slowing demand had not yet arrived.

Martin Winterkorn, chief executive of Europe’s largest car maker Volkswagen, also warned Europe’s debt crisis would weigh on demand for cars in many Western European markets, although the company expects continued growth in Eastern Europe, India, China and North and South America.

Overall demand for cars would be flat in 2011, he said.

VW predicted a big rise in revenues and operating profit this year but warned volatile interest rates and currency fluctuations as well as commodity prices would dent margins.

It posted a quarterly operating profit of €9 billion thanks to double digit sales growth rates and a boost from derivatives used in the merger with Porsche.

Truck Bright Spot

Despite the gloom, data on Thursday from industry group ACEA showed the signs of cooling demand reported by truck makers had not yet filtered through to sales.

Truck sales in the European Union rose 4.5% in September, ACEA said.

But against this background truck manufacturers are bracing themselves for lower demand ahead, in an industry closely linked to international trade and the health of the wider economy.

World number two truck maker Volvo on Tuesday said it was preparing to cut output in anticipation of lower vehicle demand in Europe next year, and warned of slowing growth in emerging regions.

Competitor Scania had earlier said it would make further production cuts if economic uncertainty led to lower orders as it posted a profit drop as expected.

Premium Sales Weak

Daimler’s sales of Mercedes-Benz Cars, which also includes the Smart brand, fell 2% in Western Europe in the third quarter, with stagnating sales in Germany, Europe’s biggest car market.

Car sales growth has been shrinking in Europe, with Germany the only major market in the region to expand in September, while the boom in China that bolstered German carmakers in recent quarters has eased to a milder pace for now.

“At the beginning of the fourth quarter of 2011, the outlook for the world economy is distinctly less favorable than just a few months ago," Daimler said in its quarterly financial report. However, it reaffirmed its full-year outlook.

“Perhaps the stock will struggle today -- but we still see Daimler as an out of favour, cheap stock with durable earnings power," wrote Bernstein analyst Max Warburton in a research note. “2012 looks like it’s going to be a tough year, but Daimler may well fare better than many fear," he added.

Daimler shares rose 1.5% to €38.44 by 02:13 pm, underperforming a 3.2% rise in the STOXX 600 European autos index. Volkswagen rose more than 6%.

France’s PSA Peugeot Citroen, beset by gloom in European showrooms, on Wednesday warned its core car making business would barely make money this year and announced 6,000 job losses to cut costs.

Its competitor Renault also reports on Thursday.

Also on Thursday, South Korea’s Hyundai Motor reported a 21% rise in third-quarter net profit but warned of rising competition and economic uncertainty.

And auto makers felt a worsening impact from floods in Thailand. Toyota Motor Corp said it would cut production in North America for one day because of the interruption of parts supplies from the country.