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Daimler sees Q3 hit to Mercedes sales from chip shortage

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FILE PHOTO: An employee at a Mercedes-Benz dealership wearing a protective mask prepares a vehicle, amid the coronavirus disease (COVID-19) outbreak in Brussels
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By Victoria Waldersee

BERLIN (Reuters) -German luxury carmaker Daimler said on Thursday it expected significantly lower third-quarter sales at its Mercedes unit due to a global semiconductor shortage, becoming the latest in a string of automakers to take a hit to revenues.Automakers from U.S. group General Motors to India's Mahindra have slashed output and sales forecasts due to scarce chip supplies, made worse by a COVID-19 resurgence in key Asian semiconductor production hubs.

"With the plant closings at semiconductor suppliers in Malaysia and elsewhere, the challenge has now become even greater, so that our sales in the third quarter will probably be noticeably below the second quarter," Daimler CEO Ola Kaellenius told the Automobilwoche weekly in an interview.

Kaellenius did not specify how production would be affected by the shortage. The carmaker cut working hours in July at plants in Germany and Hungary because of lacking chip supply. Daimler was not immediately available for comment.

General Motors also said on Thursday chip shortages and COVID-19 restrictions were delaying production, with the company resorting to repairing and shipping unfinished vehicles to dealers.

Still, Kaellenius said he was confident Daimler was better prepared than before the pandemic for supply chain shocks. "We have made our business significantly more flexible and watertight," he said, adding customers were used to waiting for highly sought-after products.

Daimler has extended contracts on its leasing services to ease the concerns of customers waiting for their orders of new cars to arrive, the CEO said.

Daimler left its profit margin outlook for the year unchanged in July after reporting better-than-expected second quarter earnings. Like General Motors, it said at the time it was preparing unfinished vehicles as far as it could to be ready to slot in chips upon arrival.

Toyota said in September it was slashing production by 40% due to the lack of chips. Ford reported on Wednesday it was cutting pickup truck production. Renault last week extended stoppages at three Spanish plants until the end of the year.

Consultants J.D. Power and LMC Automotive also warned last week that U.S. auto retail sales were likely to have fallen sharply in August, with dealers holding just 942,000 vehicles in inventory, down from 3 million two years ago.

Kaellenius refrained from predicting an end to the shortage, pointing out that supply strains such as the lockdowns in Malaysia were impossible to foresee. "What is important is that demand for cars is there," he said. "At some point the chip problem will also be solved."

Daimler is due to report third quarter earnings on Oct. 29.

(Reporting by Riham Alkousaa and Victoria WalderseeEditing by Kirsti Knolle, Mark Potter and Douglas Busvine)

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