Daimler, the maker of Mercedes cars, warns its profits will slump this year

The owner of Mercedes-Benz has warned of a major slump in profits this year after recalls, legal issues and weak demand for new cars contributed to a rough second quarter.

Daimler said Friday that it expects a second quarter loss of €1.6 billion ($1.8 billion), a dramatic decline from €2.6 billion ($2.9 billion) in the same period a year earlier.

It said full year earnings will be significantly below the €11.1 billion ($12.5 billion) profit achieved in 2018.

The German carmaker blamed its weak second quarter on higher costs related to the Takata exploding airbag recall, as well as regulatory and legal risks from the diesel emissions scandal.

In addition to those factors, Daimler said its full year performance will be affected by slow product rollouts and weak growth in automotive markets.

Shares in Daimler were trading 1.7% lower in Frankfurt following the announcement.

The profit warning underscores the challenge facing global carmakers. They need to invest huge sums in new technology at a time of weak global demand for their products.

To share the burden, automakers are forming partnerships to develop technologies including autonomous driving systems and electric vehicle platforms.

BMW and Daimler have teamed up to develop ride sharing and driverless technology. Ford and Volkswagen are expected to announce the next step in their joint effort to develop the vehicles of the future on Friday.