Restructuring charges mostly to blame for poor 1st quarter
May 16, 2007
The Chrysler Group, which announced its sale to Cerberus Capital Management on Monday, reported growing first-quarter losses because of restructuring charges.
The Auburn Hills-based group expects to run at a nearly break-even level over the rest of the year. For the first three months of the year, the Chrysler Group posted a loss of nearly $2 billion.
The loss was inflated by $1.2 billion in restructuring charges, DaimlerChrysler AG said in a statement.
The U.S. unit is undergoing a turnaround plan that includes eliminating 13,000 jobs. It lost $1.5 billion on an operating basis last year, a figure restated to $680 million because of a change in accounting procedures.
Private equity firm Cerberus is paying $7.4 billion to acquire an 80.1% stake in Chrysler while DaimlerChrysler, which will be renamed Daimler AG, will keep the rest.
A year ago, the Chrysler Group made $857 million in earnings before interest and taxes during the first quarter.
That first quarter was helped by changes to the unit's health care program offered to employees and retirees that saved $522 million.
DaimlerChrysler expects Chrysler to lose $2.1 billion in 2007, including $1.3 billion in charges for the recovery plan unveiled in February, the company said Tuesday.
Overall, DaimlerChrysler AG earned $2.7 billion in the first quarter compared with $1.6 billion in the first quarter of 2006.
Most of the income -- $2 billion -- was because DaimlerChrysler sold a stake in EADS, the company that makes Airbus.
Daimler's Mercedes Car unit earned $1 billion compared with a $983-million loss in last year's first three months.
Shares of DaimlerChrysler started trading in New York above $86, and ended at $84.80, up 68 cents, or 0.8%, from Monday's close.
The shares have gained $5.78, or 7.3%, since Thursday.