Chrysler earnings bolster DCX

[Variance]

Chrysler earnings bolster DCX

In sharp contrast to GM, Ford, automaker reports $3.3B for 2005.

Christine Tierney and Josee Valcourt / The Detroit News

Strong earnings at DaimlerChrysler AG's Chrysler Group and higher profits in its commercial vehicles unit propelled the company's 2005 earnings to $3.33 billion, the automaker said early Thursday..

In the quarter that ended Dec. 31, the carmaker said it earned $1.15 billion -- or $1.13-a-share. Revenue was up 10 percent to $49.9 billion from the same quarter of 2004.

Officials said the yearly profit was up from $2.5 billion in 2004. Revenue rose 5 percent to $178.3 billion, meeting the firm's own forecast. Its fourth-quarter net profit nearly doubled to $1.1 million from just $526 million a year earlier.

"DaimlerChrysler made significant progress in the year 2005, but our earnings are still not where we want them to be," said Chief Executive Dieter Zetsche. "We intend to grow profitably and to created added value over the long term -- for the benefit of our customers, employees and shareholders."

In January, DaimlerChrysler said it will cut 20 percent of its worldwide administrative staff over the next three years, eliminating 6,000 jobs in a move to save about $1.2 billion a year. Most of the job cuts will be in Germany.

The company said the downsizing will cost it about $2.4 billion between 2006 and 2008. The company also is reorganizing the management of its commercial vehicles division.

Analysts estimated the Chrysler unit earned $1.7 billion to $1.8 billion in 2005. That is slightly less than its 2004 earnings of $1.9 billion, but the Auburn Hills automaker's results contrast favorably with the loss-making North American operations of its larger Detroit rivals, General Motors Corp. and Ford Motor Co.

GM lost $5.6 billion last year in North America, while Ford's pre-tax loss in the region totaled $1.6 billion. Both automakers lost ground in the U.S. market and relied on profit-eroding incentives to boost demand for their vehicles, putting enormous pressure on Chrysler to offer discounts to sustain its sales.

Chrysler is scheduled to announce profit-sharing payments to its hourly workers today. Last year, it paid out $1,500 each to factory workers after a return to profit in 2004 under CEO Dieter Zetsche. He took up his new job as DaimlerChrysler CEO on Jan. 1, succeeding Juergen Schrempp, and has headed the Mercedes Car Group since September.

Analyst David Healy at Burnham Securities forecasts Chrysler's operating profit for 2005 at $1.8 billion, out of a total operating profit for the group expected to exceed $7 billion.

Excluding nonrecurring items, "all their big segments are profitable," Healy said.

For the first nine months of the year, Chrysler contributed $1.3 billion in operating profit, while the commercial vehicles division -- the world's largest manufacturer of trucks -- weighed in with $2.1 billion.

For the first three quarters, Mercedes reported a loss of $610 million, reflecting big charges, in part to restructure its persistently unprofitable Smart minicar business.

Zetsche is under pressure to stem the losses at the Smart business. Under the restructuring plan, Smart is not expected to break even until 2007. DaimlerChrysler also has retained brokerage firm Goldman Sachs to study partnership offers for Smart to cut its manufacturing costs.

The company announced last month that a restructuring of the Mercedes luxury car business also was proceeding on track.

It said Mercedes has achieved 60 percent of the job reductions it was seeking in Germany, with 5,000 employees having agreed to retire or leaving the company by the end of 2005.

DaimlerChrysler is scrambling to boost Mercedes' profitability to the norm for luxury carmakers -- or between 6 percent and 8 percent of sales.

Because of currency swings, DaimlerChrysler's results are likely to show a bigger improvement from 2004 levels when measured in euros than when translated into dollars.

Link: http://www.detnews.com/apps/pbcs.dll/artic.../602160380/1148

[MyerShift]

I've read it and said it before, Chrysler may very well save the company is all continues to go as planned.