DaimlerChrysler will have sorted out earnings problems at its flagship Mercedes Car Group by the end of 2005, DaimlerChrysler Chief Executive Juergen Schrempp told an in-house magazine, according to Reuters.

"As far as profitability goes, we have to act and we have to improve," Schrempp reportedly said of Mercedes, whose earnings and margins have slumped amid flat markets, currency headwinds and steep spending to fix quality problems that have marred its image.

"We know what we have to do. We have analysed the causes of the problems, have measures and solutions ready, and are working flat out to implement them," he told the Headlines newsletter cited by Reuters.

"I am not promising too much when I tell you we will get a grip on the challenges within a year and not be satisfied until we have hit our targets in all business areas."

Analysts who attended a Mercedes briefing last week told Reuters new division head Eckhard Cordes told them 2005 would be a tough year but that the second half should be better than the first and that Mercedes results should improve in 2006.

Mercedes will roll out its new M-class off roader, S-class full-size luxury car and B-class car - a roomier version of the A-class compact - in 2005. The GST crossover sports wagon starts in the US market in late 2005 and in Europe in 2006, the news agency noted.

Schrempp reportedly said DaimlerChrysler would doing "everything necessary to become number one again" to resolve quality issues at Mercedes. Cars rolling off assembly lines now met Mercedes standards, and it was addressing cars it had already sold.

According to Reuters, he also reiterated that the loss-making Smart range of compact cars would stay part of the group even though Daimler's outgoing finance chief had raised questions about this.

"The cost base is already good but we have to improve sales. There is a lot we can still achieve here, above all strengthening our sales network. We have experience finding operating solutions to operating problems.

"This brand will still have a firm place with us," he said in the interview, which Reuters said the company distributed on Thursday.