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DaimlerChrysler CEO sees higher profitability

DaimlerChrysler AG chief executive Dieter Zetsche said Wednesday that the German-American automaker's profitability would continue to improve this year.
/ Source: The Associated Press

DaimlerChrysler AG chief executive Dieter Zetsche said Wednesday that the German-American automaker's profitability would continue to improve this year.

Zetsche didn't specify what this year's profit goal would be, but said a detailed outlook for 2006 would be unveiled April 27 when the company announces its results for the first quarter of 2006.

The company earned 2.8 billion euros ($3.3 billion) on revenue of 149.7 billion euros ($178.2 billion) in 2005, compared with profit of 2.5 billion euros on revenue of 142 billion euros in 2004.

"We've set ourselves challenging but realistic goals that we intend to achieve in the foreseeable future," he told some 8,000 shareholders gathered Wednsday for the annual shareholders' meeting at a Berlin convention center.

He also said that the company's management and supervisory boards will propose that shareholders get a dividend of 1.50 euros ($1.82) per share for 2005, the same amount paid for 2004.

Looking at the U.S., Zetsche said that he expected steady sales this year for its Chrysler Group as competitive pressures get tighter.

"We must further increase our efficiency and productivity," he said. He said the Chrysler group should increase productivity "by an additional 5 percent to 6 percent" this year. Zetsche said that sales are expected to match those in 2005 and will "significantly increase over the next few years."

"Our aim isn't to win over customers by offering the highest incentives. Instead, we want to attract customers by offering them great products with excellent value for their money," Zetsche said.

But Zetsche said the Mercedes Car Group, which he oversees, still needs to improve.

"I'd like to make one thing absolutely clear: We still haven't reached our goal," Zetsche said during his speech at the company's annual shareholders' meeting.

"Others might be content to be among the best. But for Mercedes-Benz there is only one objective: be number one in quality, service quality and customer satisfaction."

The group, which makes the marquee Mercedes-Benz line of cars and includes the ultracompact unit Smart, was stung last year by a 1.3 million vehicle recall, a major restructuring of Smart that has seen the ForFour and Roadster canceled, and job cuts.

Zetsche said the company must still reach its goal of a 7 percent operating margin next year. Last year, the unit posted an operating loss of 505 million euros ($610.9 million), compared with a profit of 1.7 billion euros the previous year.

Looking at job cuts, Zetsche reiterated that some 6,000 administrative positions would be cut worldwide through 2006 and beyond, with executives in Germany under collectivoffered early retirement and severance agreements.

He said that all workers who are e bargaining agreements would have those contracts honored, a signal that layoffs would not take place but that buyouts would.

"And we also realize that behind the numbers we are talking about are the lives of real people," he said. "We therefore regard it as our duty to make the necessary personnel cuts fairly."

He said that the cuts, part the company's "New Management Model," would help make the company more competitive and enhance Germany's reputation as a place to do business.

"We are convinced that the New Management Model will help us to become better and faster at transforming DaimlerChrysler's potential into compelling products," Zetsche said.

Shares of DaimlerChrysler slipped less than 1 percent to 46.88 euros ($56.75) in Frankfurt trading.