Daimler Expects to Meet Profit Target
DaimlerChrysler said Friday that it expects to post an operating profit of about $1.08 billion for 2001, sharply below the previous year but enough to reassure investors that a costly turnaround plan for its ailing Chrysler unit is on track.
The world’s No. 5 car maker had said it expected an operating profit--which excludes interest and taxes--of $1.08 billion to $1.53billion. Its operating profit for 2000 was $4.6 billion.
But Chief Executive Juergen Schrempp said last month that profit would be at the lower end of the range because of the slowing world economy and the economic shock of the Sept. 11 terrorist attacks.
On Friday, the company said its U.S. unit Chrysler “significantly exceeded” cost-cutting goals set last year and was on course to meet its earnings target for 2001.
The announcement sent shares of DaimlerChrysler up $1.22, or 2.8%, to $45.62 on the New York Stock Exchange.
“It’s a good interim report,” said Albrecht Denninghoff, an analyst at Bayerische Hypo-Vereinsbank in Munich, Germany. “The U.S. market will weaken further next year, but they’ve done a good job on cutting back inventory and production.”
Schrempp launched a $3.9-billion, three-year rescue plan in February aimed at slashing costs and reviving the appeal of Chrysler’s vehicles to return it to profit by 2003. The plan calls for about 35,000 job cuts at Chrysler and Japan’s Mitsubishi Motors Corp., which is 37.3% owned by DaimlerChrysler.
According to preliminary sales figures, DaimlerChrysler’s revenue was about $135 billion last year, down 7% from $145.8 million in 2000.
Unit vehicle sales were down 6% to 4.45 million, despite record sales of its Mercedes-Benz and Smart cars.
Chrysler shipped just under 2.74 million vehicles in 2001, down 10% from 2000. Revenue is expected to be down 9.4% to $55.8 billion, the company said.
To revive flagging U.S. sales in the wake of the attacks, auto makers including Chrysler, General Motors Corp. and Ford Motor Co. began offering no-interest financing--a costly measure that could erode earnings.
“The great unknown for 2002 is how long this will continue,” Denninghoff said. “Complete faith in the management will only be restored when Chrysler really is back in profit.”
DaimlerChrysler also reaffirmed its expectation that Mitsubishi will break even in the financial year ending in March. It said revenue was almost unchanged last year from 2000 at about $11.6 billion.
