Daimler (XTER:DAI, Financial), a global luxury automotive and truck manufacturer based in Germany, was the largest contributor for the quarter. Considering the operating environment, we were happy with the company's second-quarter earnings results, specifically in Mercedes-Benz cars and vans. However, year to date, Mercedes-Benz cars' and vans' volumes are down 22% and 29%, respectively, but we appreciate that revenue in the segment is only down 14.8%. We think this reflects significant product mix benefits within both markets as well as resilient pricing dynamics. China also contributed to Daimler's solid performance, delivering 17% year-over-year growth, even though the overall Chinese auto market was down 4%. Free cash flow was also significantly stronger than had been expected, which we attribute to management's stringent focus on this metric. As a result, the company ended the second quarter with a strong net financial position. Daimler also provided earnings guidance that was better than had been expected. We believe these results reflect well on the new management team. During the quarter, Daimler announced that it reached an agreement in principle with various U.S. authorities to settle civil and environmental claims regarding emissions control systems on about 250,000 diesel passenger cars and vans in the U.S. The company also reached an agreement with the plaintiffs' counsel to settle the ongoing class action lawsuit. Importantly, the costs associated with the settlements are covered by existing provisions and removes a material area of uncertainty for Daimler.
From David Herro (Trades, Portfolio)'s Oakmark International Fund third-quarter 2020 commentary.
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