DaimlerChrysler, still struggling to reap the rewards of its 1998 merger, will on Thursday show second-quarter profits were dented by a collapse in earnings at its US Chrysler arm, Reuters reported, noting that DC shook investors last month by warning Chrysler would post a one-billion-euro operating loss in the second quarter which would hit the group’s full-year profit goal, blaming a price war in the US.
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A Reuters poll of 30 analysts put group second-quarter operating profit at 288 million euros ($US327 million), a slide of 83% from a year ago.
But with so much already known about the second quarter, investors are hungry for further guidance on the outlook and some are braced for another watering down of full-year targets, Reuters said.
According to the news agency, DC has said Chrysler will post a slightly positive operating profit before restructuring expenses in 2003, compared with a previous goal of $2 billion. It also now expects a group operating profit of around five billion euros for the full year.
“Management’s new break-even guidance for Chrysler looks too optimistic to us, given new incentive levels,” Lehman Brothers said in a note, cited by Reuters, echoing comments from other analysts.
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By GlobalDataReuters noted that margin-eroding consumer incentives have hurt profits at General Motors and Ford, which last week posted sharply lower second quarter earnings boosted by financial services activities.
“The results from GM and Ford don’t make us feel very optimistic about Chrysler,” Adam Jonas of Morgan Stanley told Reuters, adding it was not obvious where Chrysler would cut costs further as pledged, since it has already made a good deal of progress.
Noting that DaimlerChrysler shares have fallen about 30% in the last year and lost nearly three quarters of their value since the 1998 merger of Daimler-Benz and Chrysler, Reuters said June’s profit warning fuelled questions about the strategic logic of the deal and added that analysts say deep restructuring is needed.
“We think that scenarios of another massive restructuring or in the extreme even a spin-off of Chrysler look increasingly likely,” Reuters cited Deutsche Bank as saying in a recent research note.
