DaimlerChrysler (DCX) boosted global car sales 2.1 percent to 3.9 million units in 2004 as a strong showing by U.S. arm Chrysler offset a dip at flagship Mercedes Car Group (search), the world's fifth-biggest carmaker said on Sunday.

Chrysler Group sales rose 3.5 percent worldwide to 2.7 million units, paced by hot new models like the big-grilled Chrysler 300 and minivans with stow-flat seats.

The premium Mercedes division saw sales ease 0.8 percent to 1.2 million units, hurt by disruptive but rejuvenating model changeovers at Mercedes-Benz.

A 21.1 percent rise in deliveries of Smart compact cars to 139,600 units helped take up some of the slack from a 3.1 percent decline at Mercedes-Benz, which sold 1.06 million cars.

Mercedes Car Group chief Eckhard Cordes told reporters at the North American International Auto Show (search) that his division's sales would rebound this year thanks to the renewed product lineup and four new model launches.

"Our sales volume will be up" in 2005, Cordes said on the sidelines of the show, but he declined to elaborate.

He reaffirmed that operating profit at Mercedes — traditionally the group's cash cow but now facing falling margins — had declined in 2004, but was not more specific.

Cordes said plans for new Smart model launches were "on hold" while the group reviewed options for boosting profits at a business that has lost money since the urban microcar brand made its debut in 1998.

This freeze includes the ForMore SUV model that the group had seen as its entry model for the U.S. market, he said.

Cordes would not comment on whether DaimlerChrysler still expected Smart to make a profit in 2006, but said the success of a two-passenger diesel version of the tiny car in Canada fed some optimism about the brand's chances in the U.S. market.

Mercedes will also start selling Smarts in Mercedes showrooms in Europe and not just via its own dealer network.

Cordes declined to discuss in detail how Mercedes was trying to hedge against the dollar's weakness versus the euro, which he called "a factor" in pressure on earnings. The U.S. accounts for more than a fifth of Mercedes brand car sales.

He said he did not expect the dollar to strengthen to anywhere near parity with the euro in the foreseeable future, so it was focusing on cost cuts to help profits.

"We will go through...a fitness program that will make sure that we will be able to achieve an adequate profit level even with an exchange rate of one (euro) to 1.2 (dollars) or one to 1.3," he said. He declined to quantify "adequate."

Cordes said Mercedes was bent on restoring its reputation for quality after problems tarnished its cars' image. All new launches will meet its quality standards and it would repair problems at some cars already in the field, he said.

The goal is to ensure all customers get the same resale value for the cars, but he ruled out buying back any vehicles.

"Although the Chrysler Group continued to face intense competition, the division was very successful in maintaining its strong position in the United States, where its sales grew faster than the market as a whole," a company statement said.

Chrysler ended the year with a U.S. market share of 12.8 percent, up 0.3 point at a time General Motors (GM) and Ford Motor Co. (F) lost share amid fierce competition from Asian rivals.

The Mercedes Car Group was unable to hit its original goal of boosting car sales slightly. It blamed model changeovers for the Mercedes-Benz C-Class, the SLK roadster and the high-volume A-Class compact car.

Nevertheless, DaimlerChrysler said that Mercedes remained the world's best-selling premium auto brand.

New Mercedes model launches this year include the new M-Class off-roader, the S-Class top-line limousine and two new sports tourer models known as R- and B-Class cars.