DaimlerChrysler first-quarter net income plunged to $US641 million from $US2.7 billion a year ago.
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However, net income for the first quarter of last year included one-time effects, in particular the tax-free income from the sale of shares in T-Systems ITS. Earnings per share in Q1 2003 were $0.63 (Q1 2002: $2.71, including one-time effects of $2.17).
Operating profit was $1.5 billion, an increase of $420 million, or 38%, against Q1 2002.
The operating profit of $3.4 billion for the first quarter of 2002 included high one-time income (a gain of $2.7 billion on the sale of shares in T-Systems ITS) and one-time expenses (structural expenditure of $0.3 billion at Chrysler Group and expenditure of $0.1 billion related to the economic and financial crisis in Argentina).
All divisions contributed to the improvement and, in view of the prevailing economic conditions, DaimlerChrysler’s divisions and business units posted very good results in a difficult environment, the German-US group said Thursday in a statement.
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By GlobalDataDaimlerChrysler sold one million vehicles worldwide in the first quarter of 2003, 5% fewer than in Q1 2002, due to weaker demand in major markets. First-quarter revenues decreased to $36.7 billion due to the appreciation of the euro against the US dollar (Q1 2002: $40.2 billion). Adjusted to exclude currency translation, there was an actual increase of 2%.
At the end of the first quarter of 2003, DaimlerChrysler employed 367,962 persons worldwide (Q1 2002: 372,084). The size of the workforce decreased slightly due to the sale of production facilities and the implementation of measures designed to reduce costs and improve efficiency at Chrysler Group. Due to the acquisition of dealerships, there was an increase in the number of employees in the sales organisation for Mercedes-Benz passenger cars and commercial vehicles.
Cars
The Mercedes Car Group sold 291,200 vehicles in the first quarter, similar to the high figure for Q1 2002 although markets have become even more difficult. First-quarter revenues of $13.5 billion surpassed last year’s level by 4%.
The division’s operating profit of $750 million was better than the high level of the prior year figure of $712 million because of the full availability of the new E-Class. There were offsetting effects on earnings, however, due to expenditure for the launch costs of the E-Class station wagon and the CLK convertible.
The Mercedes-Benz brand continued to strengthen its position in the premium segment worldwide. Unit sales of Mercedes-Benz passenger cars increased once again to 266,900 units (+1%). Resulting particularly from the success of the E-Class sedan, which was launched in 2002, Mercedes-Benz expanded its worldwide market share in the premium segment to around 38%.
As expected, unit sales of smart cars decreased to 24,200 units (Q1 2002: 28,400 units) in the first quarter. This was partly due to the significantly more intense competition for small cars in the European market, and partly to the fact that many customers postponed their purchases until the launch of the revised models of the smart city coupe and convertible in February.
Chrysler Group’s worldwide retail sales totaled 615,700 vehicles in the first quarter (Q1 2002: 675,800). This result was primarily related to a softening of the US market due to political and economic uncertainties. Factory shipments declined by 8% to 647,400 vehicles. At the end of the first quarter, dealer vehicle inventory levels in the United States were at 535,800 units, equivalent to a 69 day supply.
Revenues were 21% lower at $13.8 billion, mainly due to the appreciation of the euro against the US dollar and the lower shipments. Measured in US dollars, revenues decreased by 3%.
In a difficult and intensely competitive US market, operating profit rose to $166 million (Q1 2002: operating loss of $204 million). There were positive effects from cost-reduction efforts which were partially offset by lower unit sales and higher price incentives.
Commercial Vehicles
The Commercial Vehicles division increased its unit sales by 5% to 107,000 vehicles in the first quarter this year. Revenues of $6.7 billion were similar to those in the first quarter of 2002. As a result of higher unit sales and significant progress with the cost structures of all of its business units, the division achieved a strong improvement in its operating profit, to $15 million (Q1 2002: operating loss of $93 million).
Due to unexpectedly high demand for heavy trucks in the US market, the Freightliner/Sterling/Thomas Built Buses business unit sold a total of 26,500 vehicles, 15% more than in the first quarter of last year. Unit sales by the Mercedes-Benz Trucks business unit of 21,800 vehicles were slightly lower than the number sold in the prior-year quarter (-2%). The Mercedes-Benz Vans business unit had sales of 52,400 vehicles in the first quarter (Q1 2002: 48,500). First-quarter unit sales of 5,400 units by the DaimlerChrysler Buses & Coaches business unit were lower than last year’s level.
The new Actros truck began production in March and will be launched soon.
Services
The Services division generated revenues of $3.9 billion in the first quarter of this year (Q1 2002: $4.3 billion). The decrease is primarily due to currency-translation effects; adjusted to exclude these effects, actual revenues are 5% higher.
Favorable refinancing conditions and lower provisions for risks in the United States than in Q1 2002 led to a significant increase in ongoing operating results. Operating profit was $457 million. However, the figure of $2.8 billion for the prior-year quarter included a gain of $2.7 billion resulting from the sale of the Group’s remaining shares in T-Systems IST and an expense of $0.1 billion due to the economic and financial crisis in Argentina.
Outlook for full-year 2003
The economic situation remains very difficult and therefore DaimlerChrysler assumes that uncertainty among consumers and investors will continue for some time.
Against this backdrop, in full-year 2003, Mercedes Car Group expects to match last year’s strong results in terms of unit sales, revenues and earnings. Given the difficult market conditions, Chrysler Group will further intensify its efforts to realise additional cost savings. However, during the last few weeks the market environment in the US has become even more challenging. Thus it will be difficult to achieve the operating profit target of $2 billion before restructuring expenses.
The Commercial Vehicles division expects that the significant restructuring costs incurred in the past years will have a positive effect in 2003, leading to better earnings than in 2002.
In the Services division, favourable refinancing conditions, the major efforts taken in the field of cost reduction and more efficient risk controls should lead to a higher ongoing operating result than in 2002.
Mitsubishi Motors anticipates a further improvement in unit sales and earnings for the current financial year, which began on April 1. Its contribution to DaimlerChrysler’s operating profit is therefore also expected to rise.
For the full year 2003, DaimlerChrysler anticipates Group revenues of approximately $158 billion, probably lower than last year due to the appreciation of the euro against the US dollar (2002: $163.1 billion).
Although global economic conditions have continued to deteriorate, for Group earnings DaimlerChrysler maintains its target to achieve a higher ongoing operating profit than in 2002. However, a precondition for this result remains that there are no further negative effects in the markets relevant for DaimlerChrysler.
