DaimlerChrysler Reports Drop in Profit

Continued losses at its Chrysler unit dragged down DaimlerChrysler’s bottom line in the second quarter, but the results were better than analysts expected.

Executives predicted that the auto maker would meet 2001 turnaround targets set earlier this year.

For the short term, however, the company warned that results would take a hit in the third quarter as a weak auto market undermines U.S. car sales and its fragile commercial truck unit.

DaimlerChrysler said net income fell 58% to $619 million in the second quarter from the year-earlier period. Stripped of one-time items, earnings plunged 70% to $453 million, much better than the $181 million expected by analysts polled by Reuters. Revenue fell 5% to $35.1 billion.

The Chrysler division lost $125 million, less than the $252 million to $504 million analysts predicted. Its latest results follow losses in the previous two quarters. The setback in the 2000 fourth quarter was the first quarterly loss since Stuttgart, Germany-based Daimler-Benz bought out Chrysler Corp. in 1998.

Mercedes-Benz, one of DaimlerChrysler’s main profit drivers, posted a 10% rise in operating profit on a 6% increase in sales, giving overall results a boost.

For Chrysler Group Chief Executive Dieter Zetsche, the relatively tame negative numbers were a positive sign for DaimlerChrysler’s U.S. arm: “We are on track, in some areas, overachieving on cost savings.”

The struggling division also has enjoyed new success with its Jeep Liberty sport-utility vehicle, which went into production in April. By the end of June, dealers already had ordered 60,000 units.

The PT Cruiser has maintained its popularity, with 44,400 units shipped during the second quarter.

Sales of Chrysler minivans increased 16% for the quarter.

Eroding Chrysler’s bottom line, however, are the bugaboos also plaguing its U.S. competition: high marketing costs due to aggressive incentives and a general slowing of the vehicle market.

“The only thing you can do is come up with some very interesting products,” Zetsche said. “We must concentrate on the marketing side rather than the deal of the week,” he said, referring to the continuing incentive war that is taking its toll on auto makers’ profit margins.

Based on Friday’s figures, DaimlerChrysler said its operating profit for 2001 will be within its target range of $1 billion to $1.4 billion.

DaimlerChrysler’s U.S. shares rose 97 cents to $50.15 on the New York Stock Exchange.