DaimlerChrysler reports drop in earnings

David Rising

Thursday, April 29, 2004 | 9:10 a.m.

BERLIN -- DaimlerChrysler reported a 33 percent drop in first-quarter net profit today, largely because of restructuring costs at its U.S. Chrysler division and troubles with a truck toll project in Germany.

The German-U.S. auto manufacturer reported earnings of 393 million euros ($465 million) for the first quarter of 2004, compared to 588 million euros a year ago.

But operating profit rose 10 percent to 1.5 billion euros ($1.78 billion) from 1.4 billion euros a year ago, driven by gains at Chrysler and the commercial vehicles group.

Chief financial officer Manfred Gentz reaffirmed DaimlerChrysler's target of an increase in full-year operating profit but he did not offer further details on a conference call.

"We are even more confident now than we were two months ago" of reaching that goal, Gentz said.

The earnings report came as the DaimlerChrysler board was gathering for a meeting in New York. Earlier this week, DaimlerChrysler dismissed as "nonsense" a report that chief executive Juergen Schrempp's future would be discussed at the board meeting.

In today's conference call, Gentz refused to comment on a new report in German daily Frankfurter Allgemeine that Schrempp and two other executives offered their resignation at a board meeting last week. The report, which cited no sources, said the offer was refused.

However, pressed on whether he backed Schrempp, Gentz replied: "The whole board of management is fully loyal to the chairman." Schrempp is also chairman of the management board.

In the earnings report, the Chrysler division's operating profit rose 96 percent to 298 million euros ($353 million), despite including a charge of 76 million euros ($90 million) for the quarter -- suggesting the troubled U.S. arm may be turning the corner.

Gentz said that, while he couldn't rule out further restructuring charges at Chrysler this year, "most of the restructuring that is necessary has been done over the last three years."

"We expect to end the year with considerable positive earnings" at the unit, he said.

DaimlerChrysler's services unit reported an operating profit of 221 million euros ($261 million) that included a hefty charge of 279 million euros ($330 million) for Toll Collect, a joint venture to develop an automated German truck toll system with Deutsche Telekom and French firm Cofiroute.

First-quarter revenue of 32.4 billion euros ($38.3 billion) was down 3 percent from last year, largely because of the strength of the euro against the U.S. dollar, the company said. Adjusted for the currency translation, revenues increased 7 percent.

DaimlerChrysler sold 1.1 million vehicles worldwide in the first quarter, up 3 percent over the same quarter last year. Mercedes sold 9 percent fewer vehicles, but Chrysler sales were up 3 percent and the commercial vehicles group -- the world's largest truck maker -- sold 18 percent more.

Headquartered in Stuttgart, Germany, and Auburn Hills, Mich., DaimlerChrysler is the result of the 1998 merger of Daimler-Benz and Chrysler Corp.