DaimlerChrysler is expected to nearly triple operating profit in the second quarter thanks to a turnaround at Chrysler, but analysts reportedly fear that high car inventories in the US signal a weak six months ahead.
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Reuters reported that a reinvigorated performance at long-struggling US subsidiary Chrysler should provide the biggest swing in quarterly earnings, according to analysts’ estimates.
A growing domestic economy, very low interest rates and a new range of attractive products is expected to boost operating profit to €402 million, the news agency said, noting that Chrysler posted an operating loss of nearly €1 billion euros in the second quarter of 2003, although it underwent extensive restructuring under chief executive Dieter Zetsche.
Despite the rebound at Chrysler, however, analysts reportedly warn that its outlook could deteriorate as high car stocks at US dealers force carmakers to give out more profit-eroding freebies to entice customers.
“The risk that the nascent earnings recovery falls victim to a renewed incentives escalation as inventories are cleared makes us cautious for the second half,” Sanford C Bernstein analyst Stephen Cheetham told clients on Thursday, Reuters said.
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By GlobalDataBy comparison, Daimler’s Mercedes Car Group is expected to report falling profits on lower car sales, the report added.
Reuters said Mercedes, which reached an agreement with its workforce last Friday to save €500 million in labour costs in Germany, hopes new models will provide a significant boost to profits by 2006.
Daimler’s trucks division is expected to post a rise in second-quarter earnings after rivals like Volvo ratcheted up European market forecasts due to renewed demand in this highly cyclical industry, the news agency added.
Dresdner Kleinwort Wasserstein said GM and Ford results [announced last week] did not bode well for Chrysler, according to Reuters.
“Looking into the second half and 2005, the head winds are getting tougher due to high inventories,” the bank reportedly wrote to clients in a note.
