DaimlerChrysler Reports Operating Loss for Chrysler but Gain for Mercedes

DaimlerChrysler reported a $1.9 billion operating loss in 2001 for its Chrysler division Wednesday, but said a turnaround plan had prevented even bigger losses.

The U.S.-German automaker — the world's fifth-biggest — had said it expected Chrysler operating loss to be slightly higher.

Mercedes, the company's mainstay, recorded 2001 operating profits of $2.6 billion, up 3 percent from 2000, DaimlerChrysler said in a statement.

The company said its plan to return Chrysler to profit, launched last year, went unexpectedly well. Better-than-expected costs savings and efficiency improvements offset the negative impact of declining unit sales and revenues, it said.

However, the announcement did not address investor concerns about DaimlerChrysler's reduced earnings forecast for 2002.

Analysts were looking to chief executive Juergen Schrempp to clarify the outlook at the company's annual earnings news conference later Wednesday.

On Feb. 6, the automaker warned it would fall short of its original earnings forecast this year, but didn't say where its profits would be hit or specify why.

DaimlerChrysler originally said simply that its 2002 goal of $4.7 billion to $5.6 billion in adjusted operating profit wouldn't be met until "slightly later," because the projection was based on an assumption of more favorable economic conditions.

DaimlerChrysler has been battered by the fallout of the Sept. 11 terror attacks and by brutal price-cutting on the crucial U.S. auto market. It also has incurred heavy charges to restructure Chrysler and Freightliner, its Oregon-based truck and bus maker division.

Georg Stuerzer, an analyst at HVB in Munich, said many market watchers are wondering where the problem is — and whether the Chrysler turnaround remains truly on track.

"This is the biggest riddle we have," Stuezer said. "It's something they have to explain."

Amid fears of more bad news, DaimlerChrysler shares closed down 4.25 percent Tuesday on the Frankfurt stock exchange.

Schrempp's three-year rescue plan for Chrysler calls for the U.S. unit to break even in 2002 and make a profit in 2003. To achieve those targets, the company would cut 26,000 jobs, or about one-fifth of the Chrysler work force.

Although the lowered profit prediction has raised speculation about the state of the Chrysler turnaround, Schrempp has said Chrysler's target of breaking even this year remains unchanged.

Chrysler merged with German automaker Daimler-Benz AG in November 1998.