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DaimlerChrysler wary about 2004

DaimlerChrysler struck a cautious note for 2004 on Thursday, saying it only expected modest profit growth this year after its struggling U.S. unit Chrysler again missed its goals in 2003.
/ Source: Reuters

DaimlerChrysler struck a cautious note for 2004 on Thursday, saying it only expected modest profit growth this year after its struggling U.S. unit Chrysler again missed its goals in 2003.

“DaimlerChrysler is striving to achieve a slight increase in operating profit in 2004 compared to the results in 2003,” Chief Executive Juergen Schrempp told a news conference.

Asked for a more concrete outlook Schrempp said it was the best he could do at such an early stage in the year given the volatile market conditions that helped drive its U.S. business to an operating loss of almost half a billion euros last year.

The world’s fifth-biggest carmaker earlier said its Chrysler division, also known for its Jeep and Dodge vehicles, made an operating loss of 506 million euros ($645 million) in 2003 after the group spent 469 million on continuing restructuring.

Even without those costs, Chrysler lost 40 million euros and missed its goal of a small profit, despite slashing costs amid fierce competition from Japanese firms which also helped knock four percent off vehicle sales at rival Ford last year.

Given the tough market conditions in the U.S, which saw Chrysler post a second-quarter loss of one billion euros last year and scrap a two-billion-euro profit target, analysts said Thursday’s numbers came as no great surprise.

“The outlook is disappointing though,” said one analyst. “Having said that Daimler have had their fingers burnt enough in the past and have become very cautious about their forecasts.”

Too wary?
Unlike U.S. rival General Motors Corp., which last month gave a surprisingly strong outlook for this year, DaimlerChrysler said it would be 2005 or 2006 before group earnings improved significantly.

The cautious outlook and lack of concrete financial goals for this year helped but pressure on DaimlerChrysler’s stock which traded 1.3 percent lower at 36.50 euros by 1328 GMT, the leading decliner on Frankfurt’s blue-chip DAX index.

Much like the overall group, which is due to launch 50 new vehicles between now and 2006, Chrysler said that it expected further cost-cutting and new models such as a roadster version of its Crossfire coupe to boost earnings from this year.

“Chrysler is again a black spot... but they are near breakeven and I think it has the potential to improve,” said Nordinvest fund manager Boris Boehm.

However, analysts said that they had hoped for a more upbeat tone at Thursday’s press conference after the company as a whole reported earlier this month a better-than-expected 5.1 billion euros operating profit last year.

They also pointed to the group’s fourth-quarter performance as another positive signal. Chrysler, for instance, actually posted a profit in the final three months of last year of 143 million euros, which was almost double the 2002 level.

Meanwhile the recovering commercial vehicles business produced a fourth-quarter operating profit of 393 million euros after a 366-million-euro loss the year before, but said merely that it saw stronger profitability in the year ahead.

That is more vague than Germany’s MAN which said earlier this month that it saw unit sales of its trucks growing over five percent in 2004.

Global strategy
Chrysler, faced with a U.S. price war, has been the main setback in a six-year global strategy which has seen Germany’s Daimler-Benz merge with Chrysler and purchase stakes in Korea’s Hyundai and Japan’s Mitsubishi Motors.

But its problems do not end in the United States. Mercedes, whose profits rose three percent last year, faces stiff competition luxury rival BMW, and DaimlerChrysler may yet have to pump more money into loss-making Mitsubishi.

Mitsubishi, in which DaimlerChrysler owns a 37 percent stake, said on Thursday it now expected an operating loss of 105 billion yen ($992.4 million) for the year to March 31, instead of the 45-billion loss forecast three months ago.

The Japanese carmaker said it would seek shareholders’ approval in April for a capital increase while DaimlerChrysler repeated that it had yet to decide what part it would play.

Juergen Schrempp, whose contract was extended to 2008 earlier this week, repeated on Thursday that he was “convinced that the track we are on is the right one.”