Despite Chrysler’s Success, Daimler’s Earnings Drop 63%
Once viewed as a liability, Chrysler, the U.S. division of DaimlerChrysler, has taken the wheel from Mercedes, the automaker’s former star: Chrysler limited the damage from the luxury division’s woes in a difficult fourth quarter and drove overall 2004 earnings.
The German-American automaker said Thursday that Chrysler’s fourth-quarter contribution more than doubled, to 386 million euros ($523 million) from 143 million euros a year earlier, while earnings at Mercedes nearly evaporated to just 20 million euros ($27 million) from 784 million euros.
Overall fourth-quarter net income at DaimlerChrysler fell 63% to 526 million euros ($712 million) as Mercedes struggled with quality problems and a weak dollar that hurt its results in the United States.
The results fell short of the 686-million-euro ($878-million) profit forecast of analysts polled by Dow Jones Newswires.
DaimlerChrysler’s U.S.-traded shares rose 2 cents to close at $46.10 on the New York Stock Exchange.
Quarterly sales rose 7% to 37.7 billion euros ($51 billion), boosted by the first-time inclusion of revenue from Japanese truck maker Mitsubishi Fuso, a joint venture between DaimlerChrysler and Mitsubishi Motors Corp.
DaimlerChrysler CEO Juergen Schrempp called the Mercedes result “unacceptable” and announced a plan to cut costs and boost revenue.
The dollar, which hit an all-time low against the euro in December, contributed to Mercedes’ problems, as did competition from Munich-based BMW and Toyota Motor Corp.’s luxury brand, Lexus. The weak dollar has decreased profit margins in the United States, Mercedes’ No. 2 market.
Yet Schrempp acknowledged that the exchange rate was not the real problem. “One thing is quite clear: Even without the exchange-rate effects, the operating profit of the Mercedes Car Group in the third and fourth quarters would have been unacceptable,” he said.
Still, full-year earnings for 2004 rose sharply, with net income of 2.5 billion euros ($3.3 billion), up from 448 million euros the previous year.
The improvement was driven by a strong performance by the company’s commercial vehicles division and by Chrysler, which has bounced back from losses in 2001 and 2003 with hot-selling new models such as the 300 and 300C.
