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Shares of car parts maker Grammer plunged more than 18% on Thursday after it warned that its 2005 earnings would be lower than the previous year because of rising costs of oil-based products, Reuters reported.

Shares of the German company were down nearly 16% at €18.46 early in the day, having fallen to as low as €17.88 earlier, while the small-cap SDAX index was down about 1%.

Nearly 111,000 shares of Grammer had changed hands by early morning, nearly six times its 90-day average trading volume of around 22,600 shares, Reuters said.

The news agency noted that Grammer had previously expected flat earnings before interest and tax (EBIT) at around €40 million ($US48.88 million) in 2005, and had reiterated its earnings forecast as recently as August.

“The combination of unusual factors in the current market environment means Grammer will not be able to achieve the earnings projected for the year 2005,” Grammer said in a statement cited by Reuters, adding that it had started to cut costs to minimise the impact.

It reportedly said costs to launch new products in its automotive division had exceeded projections. In addition, sales were not developing well in its seating systems division.

Reuters noted that Grammer makes seats and seating elements for car makers including Volkswagen and BMW  and its operating profit rose by nearly a third to about €40 million euros in 2004.