Massive bleeding at its U.S.-based
auto unit left automaker DaimlerChrysler AG with a loss for the
last three months of 2000, its first quarterly deficit since
Chrysler Corp. was acquired by Daimler-Benz in 1998.
DaimlerChrysler also warned that its overall revenue and
operating profit would tumble this year.
The world's fifth biggest automaker reported on Monday it lost
287 million euros ($269 million) for the October-December period in
contrast to a profit of 1.6 billion euros a year ago.
The latest results included a loss at the troubled U.S. division
of 1.4 billion euros ($1.3 billion), more than double the $512
million loss for the third quarter.
"The situation in the United States has deteriorated
dramatically," said chief executive Juergen Schrempp, who has come
under pressure from shareholder lawsuits and calls to resign
because of the company's sagging bottom line.
"In addition, there were internal problems, which we now have
to resolve. There is no hiding the fact," Schrempp said.
While acknowledging that past management mistakes contributed to
the setbacks, Schrempp remained upbeat about his ability to turn
things around, adding, "In the last few months, we have proved we
can handle the situation."
DaimlerChrysler said it expects the Chrysler unit will return to
profitability by 2002.
Its largest shareholder, Deutsche Bank AG, said it is confident
in the carmaker's leadership and new strategy, calling it
"plausible, concrete and convincing."
Meanwhile, DaimlerChrysler also announced Monday that its 34
percent-owned Mitsubishi Motors Corp. would slash 9,500 jobs as it
reduces production capacity.
But investors pushed DaimlerChrysler's stock price down nearly
one percent to 52.10 euros ($47.77) in afternoon Frankfurt trading
as they digested the barrage of financial forecasts and lengthy
restructuring plans.
DaimlerChrysler said a restructuring plan, which includes a
detailed timeline for improvements and targets for operating
profits as well as greater parts sharing between Mercedes-Benz,
Chrysler and Mitsubishi, should generate 7.2 billion euros in extra
revenue and savings through 2003 — and bring the Chrysler arm back
into the black.
In the meantime, the restructuring plan is expected to help
plunge the troubled U.S. unit into even deeper losses.
Analysts largely expected 2001 to be bleak for DaimlerChrysler,
but the forecasts released Monday were even worse than expected
said Georg Stuerzer, an auto analyst with Bayerische
Hypo-Vereinsbank.
"2001 should be the lowpoint of earnings for the foreseeable
future," Stuerzer said.
After booking a restructuring charge of 4 billion euros ($3.9
billion) for the restructuring plan, DaimlerChrysler said Chrysler
would post an operating loss between 2.2 billion euros and 2.6
billion euros ($2 billion and $2.5 billion) this year.
Last year, operating profits at Chrysler dropped 90 percent to
501 million euros ($470 million), from 5.1 billion euros in 1999 as
the company was buffeted by a slowing U.S. auto market and
increased competition.
The Stuttgart-based parent company expects its overall operating
profit will tumble by as much as 76 percent this year, hobbled by
the losses at the Chrysler division.
It also warned that revenues would fall 13 percent to 140
billion euros ($130 billion) this year, from 162.4 billion euros
($152.4 billion) in 2000.
DaimlerChrysler is setting goals to cut staff, cut costs and
improve revenues through 2003. Chrysler should break even in 2002
and report a 2 billion euro ($2 billion) operating profit by 2003,
the company predicted.
"Their targets are a little more aggressive than we expected,"
said Lars Ziehn, an analyst at Deutsche Bank in Frankfurt. "If
they convince us that they can reach them, then there's some upside
in the share price. If they fail, the stock could fall further."
In 2000, DaimlerChrysler earnings excluding gains fell 44
percent to 3.5 billion euros ($3.3 billion), or 3.47 euros per
share ($3.26 per share).
Mounting losses at Chrysler ate away at record profits achieved
in the first two quarters.
Analysts say the decline at Chrysler stemmed from producing
old-version minivans right up until the new models went on sale
last summer, forcing it to sell huge numbers of the older models at
deep discount.
Chrysler also underestimated demand for its popular retro-style
PT Cruiser and failed to cash in on the hot-selling cars by getting
enough of them to market.
Under the plan detailed Monday by Chrysler chief executive
Dieter Zetsche, the Chrysler unit will renew two-thirds of its
models through 2003, including the new Jeep Liberty and the Dodge
Ram, both due to launch this year.
Chrysler will also cooperate more closely with Mercedes-Benz and
Japan's Mitsubishi.
Zetsche said Chrysler will share car platforms with Mitsubishi
for certain small- and medium-sized models, and will tap such
Mercedes components as steering columns, seat frames and axles for
its large cars.
The number of platforms — vehicle undercarriages — used by
Chrysler and Mitsubishi will be cut to as low as 13 from 29 at
present.
Cooperation between the brands will be overseen by a new
Executive Automotive Committee to be headed by Schrempp and
management board member Juergen Hubbert, responsible for
Mercedes-Benz Passenger Cars and Smart.
In addition to the 9,500 Mitsubishi job cuts, DaimlerChrysler
said Mitsubishi would reduce production capacity by 20 percent and
ask suppliers to cut prices by 15 percent by 2003.
Those job cuts follow an announcement last month that
DaimlerChrysler would lay off 26,000 workers at Chrysler over the
next three years, close six Chrysler plants and ask the unit's
suppliers for similar price cuts.
