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November 23, 2005

GERMANY: Magazine tips record Mercedes operating profit in 2007

DaimlerChrysler's premium Mercedes Car Group division expects to generate a record operating profit of over EUR4.1bn ($4.82bn) in 2007 and a margin of 7.3%, a magazine reported, according to Reuters.

DaimlerChrysler’s premium Mercedes Car Group division expects to generate a record operating profit of over EUR4.1bn ($4.82bn) in 2007 and a margin of 7.3%, a magazine reported, according to Reuters.

The news agency said the reported numbers were in line with the division’s stated goal of an operating margin of over 7% by 2007, more than double that of 2004. DaimlerChrysler reportedly declined to comment.

According to Reuters, Capital magazine, citing updated internal planning documents reviewed by the car maker’s top management, said the division’s unit sales were set to climb to 1.43m cars by then from 1.22m last year.

Capital released a summary of the report on Wednesday, a day ahead of the magazine’s publication.

The Mercedes-Benz brand would have a 2007 margin of 7.6% while the Smart small car business would eke out an operating profit of EUR10m after having lost EUR6bn from its May 1995 start through to the end of 2006. Smart was earmarked to post an operating loss of EUR1.66bn this year and EUR365m in 2006, the magazine said, according to Reuters.

It reportedly said the latest forecasts deviate from a three-year plan approved in December 2004 in that Mercedes-Benz would sell 10% fewer cars in 2006 and 2007 given scaled-back forecasts, primarily for C-Class and E-Class model sales.

The new estimates assume an increase in the euro-dollar exchange rate to $1.35 from $1.20, which would hit operating profit in 2006 by EUR550m and in 2007 by EUR740m. Higher raw materials costs would hit results by 400m a year, Capital added, according to Reuters.

The forecasts are also based on the assumption that the division will cut 2,500 jobs, Capital reported.

Reuters noted that the magazine said Mercedes division head and designated group chief executive Dieter Zetsche has since announced plans to eliminate 8,500 Mercedes-Benz jobs, but this was not included in the numbers because it was unclear just how many staff would sign up for voluntary redundancy packages.

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