DaimlerChrysler has lowered its operating profit forecast for full-year 2006 to be in the magnitude of EUR5bn (US$6.4 billion) based on an expected full-year operating loss of approximately EUR1.0 billion (US$1.2bn) for Chrysler Group.

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Chrysler Group had earlier announced an anticipated operating loss of up to EUR0.5 billion (US$0.6 billion) in the third quarter which is now expected to be at EUR1.2 billion (US$1.5 billion).


DaimlerChysler said that the Chrysler Group is facing a difficult market environment in the United States with excess inventory, non-competitive legacy costs for employees and retirees, continuing high fuel prices and a stronger shift in demand toward smaller vehicles.


At the same time, it said, key competitors have further increased margin and volume pressures — particularly on light trucks — by making significant price concessions. In addition, increased interest rates caused higher sales & marketing expenses, it said.


Chrysler Group will take additional production cuts in the third and fourth quarters to reduce dealer inventories and make way for its current product offensive, DC said.

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The company also said that in the third quarter, the Chrysler Group was unable to follow customer demand with its existing product portfolio, as customers shifted towards smaller vehicles.


However, in the second half of the year, the Chrysler Group said it will introduce a total of eight new vehicles, of which many are in the growing small vehicle segment.


Earnings developments at the Mercedes Car Group, the Truck Group, Financial Services and Van, Bus, Other segment are fully in line with planning, DaimlerChrysler said.