DaimlerChrysler Earnings Tumble

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DaimlerChrysler Earnings Tumble October 26, 2000

By HANS GREIMEL

AP Business Writer

FRANKFURT, Germany (AP) via NewsEdge Corporation - Automaker DaimlerChrysler AG's adjusted earnings tumbled 78 percent in the third quarter, reflecting big losses at its U.S.-based Chrysler division which is juggling tougher competition with the costs of launching a new fleet of vehicles.

The world's fifth biggest automaker said Thursday that net income adjusted for one-time charges and gains dropped to 327 million euros ($289.4 million), for the July-September period from 1.5 billion euros in the same period a year ago.

Results were dragged down by an operating loss at Chrysler, the North American unit that Daimler bought in 1998. Chrysler lost 579 million euro ($512 million) in the third quarter, compared to a 1.16 billion euro profit in 1999.

``Daimler bought Chrysler at the peak of the cycle and now it's at the bottom of the cycle and it's turned from profits to losses,'' said Christopher Will, an auto analyst with Lehman Brothers in London. ``That's no surprise, but what is still surprising is that they bought at the top of cycle. That's the story in a nutshell.''

DaimlerChrysler had prepared markets for the disappointment, announcing last month it would fall about $500 million short because Chrysler enticed car buyers with boosted discounts on older cars and minivans to clear them off showroom floors and make room for new vehicles.

In Thursday's report, DaimlerChrysler also said it took a $400 million charge for losses on leased vehicles in the United States. Used-car prices have been falling as rebates on new models increased and supply grew, pushing the value of cars and SUVs leased two or three years ago well below projections.

Overall earnings at the Stuttgart-based automaker were buoyed by growth in profits from Mercedes-Benz and other units, which counterbalanced the Chrysler division.

Revenues for the quarter rose 3 percent, to 37.2 billion euros ($32.8 billion) from 36.2 billion euros a year ago. That included flat sales at the Chrysler group of 15.2 billion ($13.4 billion).

Investors flinched at the news. After being up as much as 1.5 percent earlier in the day, DaimlerChrysler shares gave up the gains immediately after the report to trade unchanged at 52.60 euros ($43.65) in Frankfurt before rebounding again.

The company's shares have steadily sunk this year and are trading about 33 percent below their January high of 79.97 euros.

The Mercedes-Benz and Smart car division was the only part of the company reporting improved results. It increased earnings 5 percent, to 743 million euros ($657 million) from 708 million euros thanks to a 15 percent increase in sales of Mercedes luxury cars in the United States and Europe and improved sales of the Smart minicar.

Profits in DaimlerChrysler's commercial vehicle division totaled 290 million euros ($256 million), down 4 percent from last year's results of 303 million euros. Revenues were down 1 percent.

Chrysler sells over 600,000 minivans a year, and has to make tooling changes at three factories to build the new models. New minivans hit the market this fall. Next year, Chrysler begins building an all-new Jeep Cherokee at a new factory in Toledo, as well as new versions of its Dodge Ram pickups.

To move its old minivan models, Chrysler had to increase rebates and other incentives, and it had to add incentives on other vehicles to keep sales up.

``After four or five years of the normal car's life cycle, the same old cars start to look pretty unattractive,'' said Juergen Pieper, an auto analyst with Metzler Bank in Frankfurt. ``But even if they have some new products to offer, the pricing and competition situation is not expected to improve until possibly the first quarter of 2002.''

For the first nine months of the year, DaimlerChrysler had adjusted net income of 3.77 billion euros ($3.33 billion), down 19 percent from 4.6 billion euros in the same period last year. Revenue rose 12 percent to 121.9 billion euros from 108.5 billion euros.

The company said it expected its fourth quarter results to improve with Chrysler turning a profit as its new minivans and mid-size cars hit dealerships.

The automaker stuck by its projected earnings of 7 billion euros ($5.81 billion) for all of 2000. That's still down from last year's earnings of 10 billion euros.

The results follow Ford Motor Co.'s report last week that its profits fell 7 percent because of a tire recall, and General Motors Corp.'s release earlier this month that is earnings decreased 5.5 percent because of losses in Europe.

http://www.individual.com/story.shtml?story=h1026134.501

-- Martin Thompson (mthom1927@aol.com), October 26, 2000

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Saturday, October 28, 2000

DaimlerChrysler to Idle 7 Plants

By JUSTIN HYDE, AP Auto Writer

DETROIT--In another sign of the pressures facing the Chrysler arm of DaimlerChrysler AG, the company said Friday it would idle seven factories in the United States and Canada for one week starting Monday to cut vehicle inventories.

The move comes as sales of Chrysler, Dodge and Jeep vehicles have been erratic in recent months, with several models posting large declines. About 20,000 workers will be idled, but will receive 95 percent of their regular pay under union contracts. The plants include a truck factory in Warren, Mich.; St. Louis Assembly North in Fenton, Mo.; and the Jeep Wrangler plant in Toledo, Ohio. Plants also will close in Newark, N.J., and Belvidere, Ill., along with operations in Bramalea and Windsor, Ontario. DaimlerChrysler spokesman Trevor Hale said the announcement was not related to the poor third-quarter financial results DaimlerChrysler reported Thursday, but rather was a move to cut the number of unsold vehicles. "We worked a lot of overtime in the past year, and production now is catching up with demand," he said. Hale said he did not have an estimate for how much production would be cut or by how much inventories would decline. The move will affect production of Dodge Ram and Dakota pickups, Dodge Ram vans, the Dodge Durango and Jeep Wrangler sport utility vehicles, the Neon subcompact and the company's large LH sedans -the Dodge Intrepid and the Chrysler Concorde, LHS and 300M.

While U.S. auto sales for the year through September were up 5 percent, DaimlerChrysler's car sales excluding Mercedes-Benz were down 11 percent, while its truck sales are flat. At the beginning of October, it had a 71 day supply of cars, according to Ward's Automotive Reports. The industry standard is 60 days. Ward's said the company had a 63 -day supply of trucks, but that figure includes the popular Chrysler PT Cruiser, which is in short supply; Chrysler had a 97 day supply of Dakota pickups and an 82 day supply of Ram trucks.

DaimlerChrysler is not the only automaker that has had to take steps to keep its inventories in check. General Motors Corp. is offering zero-interest, five-year loans to reduce its stock of 2000 model year vehicles, while Ford Motor Co. is offering cash rebates and cheap loans on 2001 model year vehicles.

http://www.latimes.com/wires/wbusiness/20001028/tCB00V0837.html

-- Martin Thompson (mthom1927@aol.com), October 28, 2000.


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