DaimlerChrysler Earnings Sink on Heavy Mercedes Loss

Automaker DaimlerChrysler AG (DCX) on Thursday said its first-quarter net profit fell 30 percent from a year ago as sales slid 2 percent and luxury division Mercedes posted a heavy loss.

Despite the troubling situation at Mercedes, the company's overall performance beat the consensus forecast of 12 cents a share among analysts surveyed by Thompson First Call.

First-quarter net profit at DaimlerChrysler fell 30 percent to 288 million euros ($374 million), or 28 euro cents (31 cents) per share, compared with 412 million euros, or 41 euro cents a share, in the year-ago period as Mercedes struggled with continued quality problems and launched an expensive restructuring of its Smart compact car (search) unit.

Quarterly sales for the company as a whole were down 2 percent to 31.74 billion euros ($41.16 billion) compared with 32.35 billion euros in the same period last year for the world's fifth-largest automaker.

The Mercedes Car Group posted an operating loss of 954 million euros ($1.2 billion), compared with the 639 million euros in operating profit it had the same time last year. The unit — whose profits sustained the company while U.S. division Chrysler went through difficulties in recent years — was dragged down by 512 million euros ($661 million) charges related to the restructuring of the Smart compact car business.

Unit sales of its luxury Mercedes-Benz brand (search) were 7 percent lower than the year before, with 247,000 vehicles sold.

The weakened dollar also hurt the company's results in the United States.

The Chrysler Group had an operating profit of 252 million euros ($327 million) during the quarter, compared with 303 million euros the year before, a 17 percent drop. Sales of Chrysler cars were down 3 percent from 684,751 to 666,675.

The company said the weaker U.S. dollar, slack worldwide demand for automobiles and higher prices for raw materials contributed to the decrease in profits.

In a bright spot, the company's commercial vehicles division had sales increase by 43 percent to 179,400 trucks, vans and buses.

The automaker's shares were up by nearly 1.2 percent in early afternoon trading in Frankfurt, reaching 30.84 euros ($39.85).

The company said that the demand globally for new vehicles is likely to be slower this year than in 2004. Demand for commercial vehicles such as trucks could gain in North America, but would likely be down in Europe.

"In general, we expect the highly competitive situation across the entire automotive industry to continue," the company said.