Daimler’s Net Income Rises 4% but Its Chrysler Unit Disappoints

DaimlerChrysler reported a 4% rise Thursday in its first-quarter profit as continuing losses at luxury group Mercedes and lower earnings at its U.S. arm Chrysler offset stronger performances from its financial services and van and bus groups.

Although the German-American carmaker’s profit contrasted with quarterly losses reported at General Motors Corp. and Ford Motor Co., investors sent DaimlerChrysler’s shares down $1.64, or 3%, to $56.34.

Daimler posted net income of 299 million euros ($363 million) for the January-March period, compared with 288 million euros ($350 million) a year earlier. Sales rose 17% to 37.18 billion euros ($45.1 billion).

The restructuring Mercedes Car Group, troubled by quality problems and losses from the Smart compact car business, showed an operating loss of 678 million euros ($823 million), largely because of heavy one-time charges. Mercedes’ operating results were hurt by 982 million euros in charges from the discontinuation of the four-seat Smart ForFour model, and 203 million euros from payouts for staff reduction.

Any improvement in the news from Mercedes was tempered by falling profit at U.S. arm Chrysler, whose stronger earnings from well-received new models such as the 300C had helped the company over the last several quarters.

Chrysler’s operating profit fell by half to 119 million euros ($144 million) from 252 million euros a year earlier. The company cited downward pressure on prices in the highly competitive North American market.

Chrysler Group President and Chief Executive Tom LaSorda said the division’s transition to flexible manufacturing, which allows plants to easily shift from one model to another, would help it respond better to market demands.

Chrysler’s newly flexible plant in Belvedere, Ill., has been producing the Dodge Caliber, which began arriving in dealerships this month, and soon will make the 2007 Jeep Compass and Jeep Patriot, the company said.

Analyst Stephen B. Cheetham at Sanford C. Bernstein Ltd. in London said the drop in Chrysler’s earnings marked “a disappointing performance in the cutthroat U.S. market despite continued relative sales strength.”