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Old 07-25-2003, 01:53 AM
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DC Income Drops 90 Percent

Chrysler losses hit hard in Stuttgart.
by Joseph Szczesny 7/24/2003


DaimlerChrysler AG’s net income plunged 90 percent in the second quarter as huge losses by the Chrysler Group undercut the improvement by the German-American automaker’s other operating units.

Juergen Schrempp, DaimlerChrysler chairman, told analysts Thursday the company’s other three units all improved their earnings in the second quarter. The Mercedes Group’s operating profits increased two percent; commercial vehicles went from a loss to a profit; and profits from financial services unit jumped 47 percent, Schrempp said.

“Mercedes-Benz also succeeded in increasing its market share in most markets, further strengthening its position in the premium segment,” the DaimlerChrysler chairman noted during a conference call with analysts and journalists.

The Mercedes Car Group division increased its second-quarter operating profit by two percent to $990 million, primarily through full availability of the new E-Class and the CLK coupe. Smart, however, continues to lose money and the unit probably won’t reach break-even until 2006 as it expands sales to the U.S., Mercedes Group chief Juergen Hubbert said.

Losses in Auburn Hills

The Chrysler Group, however, lost $1.2 billion as its revenues plunged an astonishing 28 percent to $13.6 billion during the second quarter, according to the company’s financial report. The company had warned last month a substantial loss was coming due to the heavy competitive pressure in the United States.

Schrempp said the “Chrysler Group is still striving to achieve a small profit for the full year,” noting the cost cutting and productivity improvements that kept the company’s fixed costs in line with those of General Motors and Ford. “But there are still substantial risks due to the competitive environment in the United States,” said the chairman.

DaimlerChrysler still hopes to reach its full-year objective, which calls for operating profits of at least $5.8 billion, Schrempp reiterated. Full-year revenues are expected to decline to $155 billion in full-year 2003 from $172.1 billion in 2002, primarily due to the appreciation of the euro against the U.S. dollar but also as a result of lower unit sales, he added.

“We have mainly a market or revenue problem,” said Schrempp. “This problem has no effect whatsoever on our great strategy. This is an extremely solid company,” he noted. Schrempp added that there are signs of an improvement in the U.S. economy in the second half of the year.

In other news

Cost-cutting and restructuring at the Commercial Vehicles division yielded an operating profit of $243 million during the second quarter, DaimlerChrysler officials said.

The DaimlerChrysler Services division also improved its operating profit, by 47 percent to $384 million. “This was a result of better refinancing conditions, higher margins and improved risk management,” the second-quarter financial report noted.

Mitsubishi, however, is no longer expected to contribute much to DaimlerChrysler’s bottom line in 2003. DaimlerChrysler owns a 38-percent stake in the Japanese automaker and is entitled to a share of the company’s profits. Mitsubishi’s finances have not been consolidated with DaimlerChrysler’s, however.

“With the current difficult market conditions particularly in Japan and the United States, DaimlerChrysler cannot expect the same contribution from MMC to its results as in the last year,” the company’s second-quarter financial report noted.


Source: http://www.thecarconnection.com/index.asp?article=6231

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