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DaimlerChrysler profit drops 21 percent

DaimlerChrysler AG on Tuesday reported a $910 million profit for the third quarter, buoyed by sales of new products at its Mercedes and Chrysler divisions.
/ Source: The Associated Press

DaimlerChrysler AG on Tuesday reported a $910 million profit for the third quarter, buoyed by sales of new products at its Mercedes and Chrysler divisions. The results were in sharp contrast to U.S. rivals General Motors Corp. and Ford Motor Co., which reported substantial losses last week.

DaimlerChrysler, based in Stuttgart, Germany, and Auburn Hills, said net profit was down 21 percent in the July-September period compared to $1.1 billion last year. The automaker’s earnings were boosted last year by tax-free income from the sale of a stake in Hyundai Motor Co.

DaimlerChrysler said its pretax operating profit for the quarter was $2.2 billion, up 38 percent from the year before. Revenues rose 9 percent to $46 billion from $42.1 billion as worldwide sales rose 9 percent to 1.2 million vehicles.

DaimlerChrysler’s earnings per share amounted to 89 cents, compared to $1.13 in the third quarter of 2004. Wall Street analysts surveyed by Thomson Financial had predicted earnings of 98 cents per share.

DaimlerChrysler said it expects full-year operating profits to be up slightly over last year’s $7 billion, excluding restructuring costs for its Smart brand. It also expects vehicle sales to be up slightly.

DaimlerChrysler posted its earnings a day earlier than expected without explanation.

With hot products like the Chrysler 300 and Mercedes M-Class sedans, DaimlerChrysler is enjoying some success in a competitive environment that is pummeling other automakers. GM, the world’s largest automaker, said last week it lost $1.6 billion in the third quarter, while Ford lost $284 million.

Erich Merkle, a senior auto analyst with the consulting company IRN Inc., said GM has buzz-worthy products like the Pontiac Solstice roadster, but they’re not being produced in high volumes. Chrysler Group is making cars like the Dodge Charger that are attractive and high-volume, Merkle said.

“What they’re doing right is coming out with good products that the market wants,” Merkle said. “GM and Ford are selling on price. They’re not selling on emotion.”

Chrysler reported an operating profit of $374 million, up 43 percent from $262 million last year. It was the division’s ninth consecutive quarterly profit. Chrysler’s revenues rose 12 percent to $15.5 billion for the quarter.

“Despite rising fuel prices, devastating weather events and a difficult market environment, Chrysler Group products continued to deliver quarterly gains in market share, retail sales and shipments,” Chrysler Group President and CEO Tom LaSorda said.

Chrysler’s worldwide retail sales rose 13 percent to 736,000 vehicles. DaimlerChrysler said this summer’s employee-discount incentive program in the United States and Canada gave sales a jolt, although earnings were partially offset by losses in net pricing.

Merrill Lynch analyst John Casesa said Chrysler’s U.S. sales were surprisingly strong in September but will likely fall in October as payback for the employee discounts, which pulled ahead demand.

Casesa said Chrysler’s U.S. sales likely will be down around 10 percent this month, and GM and Ford will see even larger declines. Casesa predicted October’s sales rate will be the lowest in seven years and sales won’t pick up again until December. Automakers report October sales on Nov. 1.

DaimlerChrysler’s flagship Mercedes Car Group showed signs of a turnaround. The division has been troubled by quality problems, a strong euro and model changeovers and posted a scant operating profit of $14.4 million in the second quarter.

For the third quarter, Mercedes’ operating profits were up 43 percent to $526 million, up from $367 million in 2004. Mercedes sold 6 percent more vehicles in the third quarter versus a year earlier thanks to new products like the B-Class sport wagon, DaimlerChrysler said.

DaimlerChrysler said its plan to offer voluntary severance packages to 8,500 Mercedes employees in Germany over the next 12 months will cost $1.1 billion. Most of that charge will be taken in the fourth quarter, the company said.

DaimlerChrysler’s commercial vehicles division reported a 15 percent increase in revenues to $12.8 billion, while its financial services division reported profits of $492 million, down slightly from $497 million in the year-ago period. DaimlerChrysler said gains were offset by higher interest rates, especially in the United States.