GERMANY: Struggling Chrysler will keep DaimlerChrysler 2004 profit growth "modest"
DaimlerChrysler expects only modest profit growth this year after its struggling US unit Chrysler again missed its goals in 2003, Reuters reported.
"DaimlerChrysler is striving to achieve a slight increase in operating profit in 2004 compared to the results in 2003," the carmaker reportedly said in a statement, adding that it would not see a major improvement due to new models before 2005 - the group plans 50 new vehicles between now and 2006.
According to the report, the world's fifth-biggest carmaker said its Chrysler division, which includes the Jeep and Dodge brands, made an operating loss of €506 million ($US644.9 million) in 2003 after the group spent €469 million on continuing restructuring.
Stripping out restructuring costs, Chrysler still lost €40 million euros, although the unit expects new products and further cost-cutting to boost earnings from this year, Reuters said.
"Chrysler is again a black spot... but they are near breakeven and I think it has the potential to improve," Nordinvest fund manager Boris Boehm told the news agency, adding: "It was not on the cards that they would be in the black so this is no big disappointment."
Reuters noted that, despite slashing costs, fierce price competition in the US forced Chrysler to scrap a €2 billion 2003 operating profit goal last year following a second-quarter loss of almost €1 billion.
Investors had also already resigned themselves to the fact that the US division would not meet a new goal to make a small profit last year after the group as a whole earlier this month posted 2003 profits excluding one-off items of €5.1 billion.
"The numbers are not a great surprise but the outlook is disappointing," a Frankfurt-based analyst told Reuters, adding: "Having said that, Daimler have had their fingers burnt enough in the past and have become very cautious about their forecasts."
Profits at Mercedes-Benz, DaimlerChrysler's main source of income in recent years, reportedly rose 3% to €3.126 billion, while its recovering trucks business posted operating profit of €855 million after a loss of €300 million in 2002.
Reuters said that Chrysler, facing a US price war and fierce competition from Japanese rivals, has been the main setback in a six-year global strategy which has seen Daimler-Benz merge with Chrysler and purchase stakes in Hyundai and Mitsubishi Motors.
Mercedes is also facing stiff competition in the luxury segment from BMW and DaimlerChrysler may yet have to pump more money into loss-making Mitsubishi, the report noted, adding that DC this week extended chief executive Juergen Schrempp's contract to 2008, giving him four more years to salvage his dream of creating a global carmaker.
Reuters also noted that Mitsubishi, 37% owned by DaimlerChrysler, said on Thursday it now expected an operating loss of 105 billion yen ($US992.4 million) for the year to March 31, instead of the Y45-billion loss forecast three months ago and would seek shareholders' approval in April for a capital increase.
DaimlerChrysler also said on Thursday that it had made a €100 million provision in 2003 for possible losses following the failure of Germany's new road toll system and warned that its exposure could be higher, the report added.