|Associated Press |
DaimlerChrysler 1st-Quarter Profit Rises
By MATT MOORE 05.15.07, 1:31 PM ET
First-quarter earnings at DaimlerChrysler AG more than doubled as a strong performance by the company's Mercedes division outweighed widening losses at Chrysler, which the company agreed this week to sell.
The German-American automaker said Tuesday it earned 1.97 billion euros ($2.67 billion) in the January-March period, up from 718 million euros a year earlier and well above the 1.39 billion euros ($1.88 billion) forecast of analysts polled by Dow Jones Newswires.
Sales fell to 35.4 billion euros ($47.96 billion) from 37.4 billion euros, below the 36.63 billion euros ($49.63 billion) analysts had expected.
Chief Financial Officer Bodo Uebber said the company, freed from the approximately $17.5 billion in health care and pension liabilities associated with Chrysler, would be in much stronger financial shape.
"We clearly state today we have excess liquidity in our hands ... which is a good issue," he told analysts and reporters on a conference call. "It is something that shareholders should enjoy."
Shares of DaimlerChrysler rose 2.9 percent to close at 63.54 euros ($86.02), following on their 1.8 percent gain a day earlier as investors expressed relief that the company would soon be free of the billions in legacy costs.
The Chrysler Group - most of which is being sold to private equity firm Cerberus Capital Management LP in a $7.45 billion deal announced Monday - lost $1.98 billion before interest and taxes, compared with a profit of $857 million a year earlier. That figure included $1.2 billion in restructuring charges after the company announced a plan to cut 13,000 jobs in the U.S. and Canada and pare back production.
The quarterly results were reported for the first time using International Financial Reporting Standards, which uses EBIT rather than operating profit.
Chrysler also posted an 8 percent drop in factory shipments to 642,200 vehicles, while sales fell 18 percent to 10.2 billion euros ($13.81 billion).
DaimlerChrysler said it expected Chrysler to post a full-year pretax loss of 1.6 billion euros ($2.17 billion) for 2007, including restructuring costs of 1 billion euros ($1.35 billion).
However, the company's core Mercedes Car Group returned to profitability in the first quarter, earning 792 million euros ($1.07 billion) before interest and taxes.
That compared with a loss of 735 million euros a year earlier, when results were affected by 1.18 billion euros in charges related to the elimination of thousands of jobs at Mercedes and its Smart unit.
DaimlerChrysler's announcement that it will sell 80.1 percent of the money-losing Chrysler division to Cerberus was a stunning reversal of the $36 billion takeover by Daimler-Benz AG in 1998. The move is also a gamble for Cerberus, which has agreed to take on billions of dollars in pension and retiree health care costs at Chrysler.
Daimler will retain 19.9 percent of Chrysler and continue to work with it on drive systems, purchasing, sales and financial services outside North America.
However, it was clear DaimlerChrysler and its chief executive, Dieter Zetsche, had lost confidence that a combined Daimler and Chrysler could be a worldwide automotive leader.
Uebber said on a conference call that the company expected its 2007 pretax profit to rise to 7 billion euros ($9.5 billion), but added that the figure did not include the 3 billion to 4 billion euros ($4.1 billion to $5.4 billion) impact of selling Chrysler.
"Overall it was very important for us to structure the deal in a way that there remains no further cash risk for DaimlerChrysler," Uebber said, adding that the company's stake in the new Chrysler Holding Co. LLC would be included in its results.
Analysts said the results, and the deal, will let Daimler focus on Mercedes.
"The deal removes a lot of uncertainty and allows the company to focus on its successful Mercedes, truck and remaining financial services business," Craig Hutson, an analyst with Gimme Credit, an independent research firm on corporate bonds, wrote in a research note.
DaimlerChrysler's overall figures were helped by a gain of 1.56 billion euros ($2.11 billion) from the sale of part of its stake in European Aeronautic Defence & Space Co. NV, the parent of planemaker Airbus. DaimlerChrysler sold a 7.5 percent stake in the company.
DaimlerChrysler's other vehicle units also reported pretax gains, with its truck group earning 528 million euros ($715.4 million), up from 422 million euros a year earlier. Its van and bus group earned 1.87 billion euros ($2.53 billion) in the quarter, compared with 366 million euros a year ago.
Its financial services unit earned a pretax profit of 419 million euros ($567.7 million), down from 455 million euros.