Mercedes Unit Helps Parent Double Profit July 28, 2006
DaimlerChrysler more than doubled its earnings, despite a slump at Chrysler that the automaker warned would worsen in the months ahead.
DETROIT, July 27 ? Since their 1998 merger creating the world?s fifth-largest automaker, Mercedes Benz and Chrysler have seemed to be sitting at either end of a trans-Atlantic seesaw.
When Chrysler was down, Mercedes was up. Then, a reinvigorated Chrysler helped the company stay profitable last year while it fixed problems at Mercedes.
Now, Mercedes has become the heavyweight again, as Chrysler grapples with slumping sales that it attributes to high fuel prices and intense competition in the United States. Chrysler?s profits fell 91 percent in the second quarter, to $65 million from $695 million, but DaimlerChrysler more than doubled its earnings, aided by a 6 percent increase in sales of Mercedes cars.
The automaker also said Thursday that it would need more help from Mercedes this summer, projecting the Chrysler Group would lose as much as $639 million from July through September. That would be the division?s first quarterly loss in more than three years.
But Dieter Zetsche, the chief executive of DaimlerChrysler, said Chrysler would rebound in the fourth quarter, aided by the arrival of new models like the 2007 Dodge Nitro, a midsize sport utility vehicle; the Chrysler Sebring, a midsize sedan; and the Jeep Patriot, a compact S.U.V. He insisted that Chrysler would finish the year in the black.
Adam Jonas, an analyst with Morgan Stanley, called that forecast ?difficult to achieve, in our view,? noting to clients that Chrysler would need to earn $330 million in the fourth quarter to get a full-year profit.
Because unsold inventory is piling up on dealers? lots, Chrysler said it planned to cut production and shipments of vehicles in the third quarter. In June, dealers had a 91-day supply of vehicles on hand, compared with an industry average of about 60 days.
?We think this will get us back on the right track,? said Thomas W. LaSorda, chief executive of the Chrysler Group. Chrysler said Thursday that it had extended Mr. LaSorda?s contract by five years, through 2012.
For the second quarter, DaimlerChrysler said operating income rose 11 percent from the period a year ago, reaching 1.86 billion euros ($2.4 billion), even though it sold 3 percent fewer vehicles, or 1.3 million in all.
Shares of DaimlerChrysler rose 60 cents, or 1.2 percent, to $50.12.
DaimlerChrysler, which is cutting thousands of jobs in Germany, reported overall net income of 1.8 billion euros ($2.3 billion), up from 737 million euros ($942 million) in the second quarter of 2005. Much of the net profit came from a revaluation of the company?s stake in the European Aeronautic Defense and Space Company, parent of the jet maker Airbus.
Through June, 8,300 workers had agreed to take buyouts or early retirements, Mr. Zetsche said.
Mercedes sold 325,500 vehicles in the second quarter. The brand?s operating profit jumped to 807 million euros ($1.02 billion) from 12 million euros a year earlier.
Chrysler?s sales volume dropped 9 percent, to 713,600 vehicles. At the same time, Chrysler?s average transaction price fell, as it offered consumers more incentives to buy.
In June, Chrysler had the highest incentives of any major automaker ? $3,768 for each vehicle sold, or about $1,200 more than the industry average, according to Edmunds.com. Mr. LaSorda said incentives should decline toward the end of the year.
Mr. Zetsche, who left as head of the Chrysler Group in December to take over the top spot at DaimlerChrysler?s headquarters in Stuttgart, Germany, said Chrysler was hurt more by high gasoline prices than competitors were because its lineup was more weighted toward the S.U.V.?s and other light trucks that consumers had been avoiding. Light trucks accounted for about three-quarters of the vehicles Chrysler sold in the first half of 2006 ? roughly the same percentage as 2000.
Chrysler will not report figures on its July sales until Aug. 1, but early estimates indicate that the marketing tactics have been less successful than the company hoped.
Strong Quarter at Mazada
TOKYO, Friday, July 28 (Reuters) ? The Mazda Motor Corporation reported a sharp rise in quarterly profit on Friday as exports to North America expanded.
Mazda, one-third owned the Ford Motor Company, is seeing steady sales momentum in North America and Europe. Net profit was 6.6 billion yen, or $57 billion, compared with 419 million yen a year earlier, when it booked 21 billion yen in asset impairment charges. Revenue grew 9.5 percent to 734.3 billion yen.
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- Author : arnold
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