In what it described as “a difficult global economic environment”, DaimlerChrysler posted an operating profit of €0.6 billion for the second quarter of 2003 (down almost 65% on the €1.7 billion booked in the same period of 2002) but is still hoping to achieve a group operating profit of about €5 billion for the full year.

As widely expected, in a US market described as “characterised by substantial price incentives”, the Chrysler group reported a loss, while all other divisions improved their earnings, in some cases significantly.

Net profit was down 91% to €0.1 billion (Q2 2002: €1.1 billion) and earnings per share were €0.11 (Q2 2002: €1.10).

DaimlerChrysler sold 1.2 million vehicles worldwide in the second quarter (Q2 2002: 1.3 million). Second-quarter revenues of €34.3 billion were lower than in the previous year (€39.3 billion), partly as a result of the appreciation of the euro against the dollar, but also due to the lower unit sales. Adjustments for currency-translation effects led to a reduction in revenues of only 2%.

At the end of the second quarter of 2003, DaimlerChrysler employed 372,100 persons worldwide (end of Q2 2002: 374,100).

The Mercedes car division increased its second-quarter operating profit by 2% to €861 million, primarily through full availability of the new E-Class and the CLK coupe.

Chrysler posted a second-quarter operating loss of €948 million (Q2 2002: operating profit of €414 million) due to lower shipments and increased incentives, including higher provisions for marketing costs related to dealer inventories and for guaranteed residual values.

Further progress with the implementation of efficiency-improving measures at the commercial vehicles division led to a significant increase in operating profit to €211 million (Q2 2002: operating loss of €7 million).

The services division also improved its operating profit, by 47% to €334 million. This was a result of better refinancing conditions, higher margins and improved risk management.

The other activities segment, which mainly consists of the MTU aero engines business unit and holdings in Mitsubishi Motors Corporation (MMC) and European Aeronautic Defence and Space Company (EADS), achieved an operating profit of €228 million (Q2 2002: €253 million, of which €156 million related to the sale of the remaining shares in Temic). All three holdings made positive contributions to earnings.

Despite declining demand in nearly all major markets, the Mercedes division sold 318,000 vehicles in the second quarter of this year, down 3% on the previous year. As a result of a higher-value model mix, revenues rose by 1% to €13.2 billion.

The Mercedes-Benz brand again gained market share in the second quarter but, due to generally difficult markets, unit sales of 281,600 vehicles were 5% lower than in the previous year. The E-class gained 39% to 79,400 units and CLK-class sales, reflecting the new model launch, climbed 43% to 23,300 units.

Unit sales of the smart brand increased 7% to 36,400 vehicles in a very competitive market due mainly to the brand’s expanded market presence, full availability of the revised smart city-coupe and convertible and the launch of the roadster and roadster-coupe.

“Since July the Maybach has also been available in the important US market and incoming orders confirm DaimlerChrysler’s expectations,” the company said, without providing figures.

Chrysler retail sales totaled 734,200 vehicles in the second quarter (Q2 2002: 771,100 vehicles). The main reasons for the 5% decrease were weaker demand in the United States and an extremely tough competitive environment. Vehicle ranges posting strong sales gains included the Dodge Ram Pickup (+19%) and the Jeep Liberty (+6%). Factory shipments to dealers decreased by 12% to 721,900 vehicles. At the end of the period, dealer inventories in the United States totaled 518,600 vehicles, equivalent to a 63-day supply (end of Q2 2002: 505,700 vehicles, and a 65-day supply). Both figures were near planned levels and in line with industry averages.

Chrysler revenues were €11.8 billion (Q2 2002: €16.4 billion), reflecting the appreciation of the euro against the US dollar, lower unit sales and higher incentives. Measured in US dollars, revenues decreased by 11%.

The commercial vehicles division posted unit sales of 125,700 vehicles (-3%) and revenues of €7.0 billion (-6%). The second quarter saw the introduction of the new Actros and the Accelo light truck for the Brazilian market. In June, the vans business unit launched the new Viano family of people carriers and the new Vito light delivery van.

The Freightliner/Sterling/Thomas Built Buses business unit increased its second-quarter unit sales to 32,400 vehicles, despite a further weakening of demand in the United States (Q2 2002: 29,900). The Sprinter, newly launched in the US, contributed sales of 3,000 units to this result.

Due to a continuing weakness in the markets of Western Europe, unit sales of 26,100 vehicles by the Mercedes-Benz trucks business unit were 2% below the previous year’s level. The vans business unit sold 60,400 units (Q2 2002: 64,600 units). At the DaimlerChrysler buses & coaches business unit, sales of 6,600 vehicles indicated a stabilisation of unit sales (Q2 2002: 6,300 vehicles).

DaimlerChrysler Services second-quarter revenues of €3.5 billion, 12% below the last year’s figure, were affected by appreciation of the euro against the US dollar. Adjusted to exclude currency-translation effects, revenues were at the same level as in Q2 2002.

DaimlerChrysler said the development of leading indicators in recent weeks has pointed towards an improvement in economic prospects and it expects a gradual stabilisation in demand for passenger cars and light trucks in the United States during the second half of the year.

In Western Europe, however, the market for passenger cars is likely to remain at a low level and the company also sees no signs of a sustainable upturn in demand for medium and heavy trucks.

Mercedes expects to attain in 2003 similar high levels of the previous year in terms of unit sales, revenues and earnings, despite the continuation of difficult market conditions.

Chrysler Group has taken further steps to improve and stabilise its earnings in the second half of the year, particularly in the areas of marketing and sales, and has already implemented substantial additional cost savings.

For the year as a whole, Chrysler is still striving to achieve a slightly positive operating profit on an ongoing basis but DC sees “substantial risks due to the potential development of the competitive environment in the United States”.

The commercial vehicles division expects to achieve a significant improvement in its operating profit compared with 2002. New, models and the effects of ongoing efficiency-improving activities should drive this performance.

The services division plans that the operating profit from its ongoing business for the full year will be higher than in 2002, partly due to more favourable refinancing conditions.

With the current difficult market conditions particularly in Japan and the United States, DaimlerChrysler said it “cannot expect the same contribution from MMC to its results as in the last year”.

The DaimlerChrysler group is expected to generate revenues of approximately €135 billion in full-year 2003, lower than last year (2002: €149.6 billion), primarily due to the appreciation of the euro against the US dollar but also as a result of lower unit sales.
Based on earnings projections for the divisions, DaimlerChrysler is still hoping to achieve an operating profit from its group business activities of some €5 billion.