Chrysler losses hurt parent company’s earnings
FRANKFURT, Germany (AP) – Earnings at German-U.S. automaker DaimlerChrysler plunged 90 percent in the second quarter due to losses at the company’s Chrysler division, the company said Thursday. But the result still beat stock market expectations, and the company unveiled a surprise profit at its battered commercial vehicles division.
Net earnings for the entire company fell to euro109 million ($125 million) in the quarter that ended June 30, down from euro1.11 billion in the same period a year ago, DaimlerChrysler said.
That was still better than a profit of euro65 million ($74 million) expected by 12 analysts surveyed by Dow Jones Newswires.
Chrysler lost euro948 million ($1.090 billion) in the quarter – a bitter setback following the division’s return to profitability through rigorous cost-cutting launched in 2001. The division earned euro414 million in the second quarter a year ago.
But the loss at Chrysler was slightly smaller than the euro1 billion ($1.1 billion) the company predicted in a profit warning in June.
Stock traders had already factored in that loss weeks ago due to the company’s early warning. The company’s shares jumped after Thursday’s announcement, trading up 3.35 percent at euro31.18 ($35.54).
Analyst Georg Stuerzer at HVB Group in Munich said the unexpected profit at commercial vehicles shouldn’t overshadow long-term concerns about turnarounds at Chrysler and Mitsubishi, in which DaimlerChrysler has a 37 percent stake. The Japanese automaker issued a profit warning Thursday saying it would make only a quarter of its previous target of 40 billion yen ($337 million) in the year ending in March 2004.
“I don’t think this was a trigger for a 3 percent appreciation in the stock,” Stuerzer said. “Two pillars of the restructuring program are showing losses once again.”
The Chrysler losses were attributed to the incentive wars with competitors GM and Ford. Carmakers in the United States have offered costly come-ons such as interest-free loans or rebates amounting to several thousand dollars per vehicle.
The company restated its goal for Chrysler of a slight operating profit for the year, but added that there were “substantial risks” to that target due to the slack U.S. auto market.
The commercial vehicles division, like Chrysler a turnaround patient, showed operating earnings of euro211 million ($243 million) compared to a loss of euro7 million a year ago. The division includes Freightliner, a maker of trucks, buses and fire engines based in Portland, Ore., and the Mercedes-Benz truck division in Europe.
Once again, the company’s earnings were propped up by luxury car division Mercedes-Benz, which increased operating profit by 2 percent to euro861 million ($990 million).
DaimlerChrysler’s overall sales fell 13 percent to euro34.3 billion ($39.5 billion) from euro39.3 billion in the year-ago period, a drop the company blamed partly on the weaker U.S. dollar.
The company, which has headquarters in Stuttgart, Germany, and Auburn Hills, Mich., is the result of the 1998 merger of Daimler-Benz and Chrysler Corp.
AP-ES-07-24-03 0941EDT