DaimlerChrysler Profit Slides as Mercedes Unit Has Big Loss

Automaker DaimlerChrysler on Thursday said its first-quarter net income fell 30% from a year earlier as sales slid 2% and its luxury division Mercedes posted a heavy loss.

Despite the slide in earnings, the company did better than investment analysts had forecast.

“The first quarter was characterized by intense competition among automakers,” Chief Financial Officer Bodo Uebber told analysts in a conference call. “It was a tough environment.”

The results were the latest in a mixed-bag for major automakers. On Monday, Nissan Motor Co. reported a 17% rise in profit and strong sales, and last week General Motors Corp. posted a $1.1-billion loss. Ford Motor Co. recorded a $1.2-billion profit but cut its earnings outlook.

First-quarter net income at DaimlerChrysler fell to 288 million euros ($372 million), compared with 412 million euros a year earlier, as Mercedes struggled with quality problems and launched an expensive restructuring of its Smart compact car unit.

Sales for the fifth-largest automaker were down 2% to 31.7 billion euros ($41 billion) compared with 32.4 billion euros a year earlier.

The Mercedes Car Group posted an operating loss of 954 million euros ($1.2 billion), compared with the 639 million euros in operating profit it had in the period last year. The unit was dragged down by 512 million euros in charges related to the restructuring of the Smart compact car business. Unit sales of its luxury Mercedes-Benz brand were 7% lower than last year, with 247,000 vehicles sold.

Uebber said Mercedes could turn the corner in terms of profitability this year. “We expect the turning point in profitability as soon as the second quarter of this year and further substantial improvement during the third quarter,” he said.

Operating profit at the Chrysler division, which accounted for a third of DaimlerChrysler’s revenue in the quarter, fell 17% to 252 million euros ($325 million), the seventh consecutive quarterly profit. Analysts had expected earnings of 362 million euros.

Chrysler expects to sell more cars this year, helped by new models such as the Dodge Magnum and the Jeep Commander.

DaimlerChrysler shares fell 56 cents to $39.03 on the New York Stock Exchange.