Automaker DaimlerChrysler AG lowered its 2006 operating profit forecast Friday, saying its Chrysler Group now expects a $1.52 billion loss in the third quarter — more than double the amount anticipated.
The German-American automaker said the Chrysler Group will make additional production cuts in the third and fourth quarters to reduce dealer inventories. As gas prices have risen, Chrysler and its U.S. rivals Ford and General Motors have been hit hard by a growing consumer preference for more fuel-efficient models from Asian automakers.
The Stuttgart-based company lowered its operating profit forecast for 2006 to an approximate 5 billion euros ($6.34 billion), based on an expected full-year loss for the Chrysler Group of 1 billion euros ($1.27 billion).
The news sent DaimlerChrysler shares tumbling 7.7 percent to 38.30 euros ($48.55) in Frankfurt trading.
Chrysler had previously said it anticipated an operating loss of up to 500 million euros ($633.75 million) in the third quarter.
“The Chrysler Group is facing a difficult market environment in the United States with excess inventory, noncompetitive legacy costs for employees and retirees, continuing high fuel prices and a stronger shift in demand toward smaller vehicles,” DaimlerChrysler said in a statement.
The news came the same day Ford Motor Co. said it was cutting more than 10,000 additional salaried jobs, offering buyouts to all of its 75,000 U.S. hourly workers and shutting down two more plants in a plan to end financial losses and make itself smaller and more competitive.
Ford has acknowledged a need for drastic changes in its product lineup. Like other U.S. automakers, its bottom line is heavily dependent on high-margin trucks and large SUVs, but recently consumer preferences have shifted toward more fuel-efficient vehicles. Ford says the speed of that shift caught it by surprise.
“The simple fact is that the business model that served us in North America for decades no longer works,” Mark Fields, Ford’s president of the Americas, said during a morning teleconference.
Ford’s method of slashing its work force is similar to cuts made earlier this year by larger rival General Motors Corp. At GM, 34,410 hourly workers have accepted buyouts or early retirement offers this year.
DaimlerChrysler said its Chrysler Group will make additional production cuts in the third and fourth quarters to reduce dealer inventories and make way for its “current product offensive.”
“In order to improve the earnings situation of the Chrysler Group as quickly, comprehensively and sustainably as possible, measures to increase sales and cut costs in the short term are being examined at all stages of the value chain, in addition to structural changes being reviewed as well,” the Stuttgart-based company said.
DaimlerChrysler said the Chrysler Group “strives” to make an operating profit in the fourth quarter.
It said while customers in the third quarter shifted toward smaller vehicles and the company was unable to follow the demand, it is introducing eight new vehicles in the second half of the year. Those include several in the smaller vehicle class, the company said.
It added that the earnings for the Mercedes Car Group, the Truck Group, Financial Services and Van, Bus, and the company’s other segment are fully in line with planning.
But, it warned that the updated forecast does not yet include potential effects from the company’s 22.5 percent stake in European Aeronautic Defence and Space Co. EADS has indicated that its review of the Airbus program could lead to a reduction of earnings in its half-year report.