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DaimlerChrysler chief wins backing

DaimlerChrysler said Thursday its first-quarter profit fell 33 percent, but earnings nearly doubled at Chrysler and the automaker said the bulk of the overhaul costs at its U.S. division were behind it.
/ Source: The Associated Press

DaimlerChrysler said Thursday its first-quarter profit fell 33 percent, but earnings nearly doubled at Chrysler and the automaker said the bulk of the overhaul costs at its U.S. division were behind it.

Meanwhile, chief executive Juergen Schrempp won renewed backing from DaimlerChrysler’s supervisory board after troubles at Japanese partner Mitsubishi Motors Corp. set back his vision of a global auto powerhouse.

The board, responsible for appointing top managers, reaffirmed “complete support” for Schrempp and dismissed speculation over his future after the company decided last week against pumping more money Mitsubishi.

DaimlerChrysler said net earnings in January-March fell to 393 million euros ($465 million) from 588 million euros a year ago, in part due to higher taxes. It also cited restructuring costs at Chrysler and write-offs on a truck toll project in Germany.

However, operating profit — which excludes taxes and financial items — rose by 10 percent to 1.5 billion euros ($1.78 billion) from 1.4 billion euros, with commercial vehicles and Chrysler posting strong gains.

Chief financial officer Manfred Gentz said the group is “even more confident now than we were two months ago” of increasing operating earnings for the full year.

Chrysler’s operating profit rose 96 percent to 298 million euros ($353 million) on the strength of cost reductions and an improved model mix, despite including a 76 million euro ($90 million) restructuring charge for the quarter.

Gentz wouldn’t rule out further charges at Chrysler, but stressed that “most of the restructuring that is necessary” has already been done.

“We expect to end the year with considerable positive earnings” at Chrysler, he said.

Chrysler, which has struggled amid price wars with competitors General Motors Corp. and Ford Motor Co., is banking on improved demand and 25 new models coming out over the next three years, including nine this year.

Analysts said the company’s results suggested that the troubled U.S. division had turned the corner.

“I like the overall picture a lot,” said Pia Hellbach, a fund manager at Union Investment in Frankfurt. “I think we have the worst behind us at Chrysler.”

“As for the new models, I think they will be well received on the market,” she said.

Vehicle sales were up 3 percent overall and by the same percentage at Chrysler, compared to the first quarter of 2003.

The 1998 merger of Germany’s Daimler-Benz, the maker of Mercedes cars, and Chrysler Corp. has been the centerpiece of Schrempp’s global ambitions. Later, the company took a 37 percent stake in Mitsubishi.

But the Mitsubishi troubles raised questions about the future of the 59-year-old German who has been at the helm for nearly nine years, first at Daimler-Benz, then at DaimlerChrysler.

Germany’s Frankfurter Allgemeine Zeitung reported Thursday that Schrempp and two other executives offered their resignation at the board meeting last week at which the Mitsubishi decision was made — just two weeks after the board extended Schrempp’s contract until 2008.

Gentz refused to comment on the report, which cited no sources and said the offer was refused.

Later in the day, the supervisory board said it “underscores its complete support” for Schrempp and his fellow executives.

“In light of current media reports, the supervisory board felt compelled once more to reaffirm during today’s meeting that it supports the strategic direction of the company to the full extent,” the company said.

Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt, said he expected pressure on Schrempp to diminish given the supervisory board’s backing.

The company said the effect of its investment in Mitsubishi on earnings “could not be conclusively assessed” yet, but said it would be “significantly lower than if DaimlerChrysler had participated in a capital increase.”

First-quarter revenue of 32.4 billion euros ($38.3 billion) was down 3 percent from last year, largely because of the strength of the euro against the U.S. dollar, the company said. Adjusted for the currency translation, revenues increased 7 percent.

DaimlerChrysler’s services unit reported a 221 million euro ($261 million) operating profit that included a 279 million euro ($330 million) charge for Toll Collect, a joint venture to develop an automated German truck toll system with Deutsche Telekom and French firm Cofiroute that has been dogged by delays and technical problems.

DaimlerChrysler shares fell 0.5 percent to end 38.35 euros ($45.39) on the Frankfurt exchange. The company’s U.S.-listed shares were down 75 cents to $45.16 in afternoon trading on the New York Stock Exchange.

The company also said the outgoing Chrysler No. 2, Wolfgang Bernhard, will not take over the Mercedes Car Group May 1 as planned. It did not elaborate, but said current Mercedes head Juergen Hubbert will remain in charge for now.

DaimlerChrysler is based in Stuttgart, Germany and Auburn Hills, Mich.