Report: Chrysler To Lose $1.25B

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Report: Chrysler To Lose $1.25B The Associated Press Sunday, Dec. 17, 2000; 6:10 p.m. EST

FRANKFURT, Germany –– DaimlerChrysler's struggling Chrysler division will lose $1.25 billion in the fourth quarter, according to a newspaper report.

That loss would be more than twice the $512 million the U.S. division lost in the third quarter.

The poor figures sparked a management shake-up that put German executive Dieter Zetsche in place of American James P. Holden at the top of Chrysler to turn things around, among other management changes.

The Frankfurt Allgemeine Zeitung, citing sources in Frankfurt financial circles, reported in an advance copy of a Monday article that DaimlerChrysler chairman Juergen Schrempp will send a letter Monday to all company shareholders warning of the loss.

DaimlerChrysler spokesman Jack Ferry said Sunday the company would neither confirm nor deny the report.

"We can't comment on rumor and speculation," Ferry said.

But, Ferry confirmed that a "very comprehensive letter on the company situation," would be sent to shareholders Monday morning.

The letter will be made public, but Ferry declined to provide details about the letter's content.

Analysts had previously warned Chrysler's fourth quarter loss would be worse than the quarter before.

The newspaper said Chrysler's operating profit for 2000 would be $445 million, compared to $4.6 billion from the year before.

Schrempp will also warn that 2001 will be a weak year for the German-American company, the Frankfurter Allgemeine said.

DaimlerChrysler shares had slumped to lows before the third-quarter losses were announced, and have since fallen even further.

Shareholder groups have attacked the company and some Germans have demanded Schrempp's resignation. U.S. investors have filed a wave of lawsuits, including an $8 billion claim filed by U.S. investor Kirk Kerkorian, DaimlerChrysler's third-biggest shareholder.

Kerkorian claims Schrempp defrauded shareholders by depicting the 1998 union as a merger of equals instead of a full-blown German buyout

http://www.washingtonpost.com/wp-srv/aponline/20001217/aponline181037_000.htm

-- Martin Thompson (mthom1927@aol.com), December 17, 2000

Answers

New Warning Looms Over DaimlerChrysler By Madeline Chambers Dec 18 7:24am ET

FRANKFURT, Germany (Reuters) - German automaker DaimlerChrysler looked set to deliver shareholders another blow on Monday, as it indicated it would warn investors of mounting losses at U.S. unit Chrysler.

DaimlerChrysler shares were down 2.21 percent at 46.99 euros at about 1145 GMT on worries about the announcement, ignoring a broad recovery on the main DAX index. A Daimler spokesman declined to comment on a report in the Frankfurter Allgemeine Zeitung saying the company would warn investors in a letter that full-year group operating profit would be slashed in half to 5.5 billion euros ($4.87 billion).

The challenge in 2001 would be even tougher, the paper said.

The spokesman confirmed, however, that the company would publish a letter to shareholders and some financial data early on Monday afternoon.

``We are not commenting on figures now, since we will release some data early this afternoon,'' he said.

Automakers on both sides of the Atlantic are grappling with overcapacity and sagging demand.

General Motors last week announced job cuts in Britain and Ford Motor Co plans similar measures to rein in losses in Europe, the Financial Times reported on Monday.

The Frankfurter Allgemeine Zeitung also said Chrysler's fourth quarter loss would accelerate to $1.25 billion from $512 million in the third quarter, resulting in full-year operating profit of 500 million euros ($442.5 million) from 5.2 billion euros in 1999.

An earnings warning would come as the German automaker struggles to restore the once mighty Chrysler to profitability. Few analysts now expect the troubled unit to return to profitability in 2001.

Some traders said a lot of negative news was already priced in, but other investors said they wouldn't be taking any risks as the road ahead was still long.

``I'm still not buying,'' said Frank Gaensch, a fund manager at Commerz International Capital Management.

``I still see some downside... and it's going to be impossible for (Chrysler) to be profitable before 2002,''

News of Chrysler's troubles, caused mainly by fierce competition in a tight U.S. market, sent DaimlerChrysler's stock spiraling to a four- year low of 44.01 euros on November 30. Last month, Chairman Juergen Schrempp, whose own position could be at stake, fired James Holden as head of Chrysler and replaced him with stalwart, Dieter Zetsche.

Investor frustration was highlighted by major shareholder Kirk Kerkorian's attempt to sue the company for $9 billion. He alleges Schrempp misled shareholders during the 1998 merger.

WHEN WILL THE MISERY END?

``As expected, the situation looks as if it's worse than previously anticipated... the question is how long it will all go on,'' said Pia Christina Schulze at Merck Finck & Co., who has the share on ``underperform.'' She said she expected the stock to trade in a range of 40-50 euros in the short-term.

On Friday, Chrysler said it would idle three U.S. plants and part of a fourth in early January in an effort to cut bloated inventories. It has been forced to raise incentives in a bid to shift piling stocks, squeezing already tight profit margins.

``Today's information will give us an idea of the operating basis of Chrysler and I expect a very pessimistic outlook for 2001, but it won't give us an insight into Zetsche's restructuring measures or how much they'll cost -- we'll have to wait until February for that,'' said Jim Collins, an analyst at UBS Warburg who has DaimlerChrysler on ``reduce'' with a 12-month target price of 40 euros.

Zetsche is under pressure to cut incentives, but analysts argue it will be difficult to do that if Chrysler's U.S. rivals such as General Motors raise incentives to grab market share. ($1-1.130 Euro) http://www.siliconinvestor.com/headlines/financial/20001218/262168.htm l

-- Martin Thompson (mthom1927@aol.com), December 18, 2000.


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