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Daimler warns on earnings
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July 26, 2000: 10:32 a.m. ET
Mercedes earnings accelerate as Chrysler profits stall
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LONDON (CNNfn) - DaimlerChrysler unveiled an 18 percent increase in second-quarter net income Wednesday, but the German-U.S. automaker warned that aggressive marketing spending to lift sales of Chrysler cars would eat into operating earnings in the months ahead.
Quarterly profit advanced to  1.7 billion ($1.6 billion), while revenue rose 17 percent to 43.7 billion. Earnings per share rose 18 percent to 1.74, beating the average forecast by analysts surveyed by First Call/Thomson Financial.
Chief Executive Juergen Schrempp said in a statement that operating income for the remainder of 2000 would fall short of last year's level, but that one-time gains, notably from the deconsolidation of the Dasa aerospace unit, would boost the bottom line. 
The expected fall in profit would reflect "intense competition" in North America, which already pulled Chrysler's second-quarter earnings down to 1.2 billion, a drop of 12 percent from last year. Schrempp said earnings would suffer from expected product launch costs and discounts on new car prices. Falling prices of used cars would also have a negative effect, because the financial services unit's earnings would be hit by lower residual values of the cars it leases to customers.
Schrempp said the Mercedes-Benz luxury passenger car unit continued on "the fast track", increasing unit sales 12 percent to 310,000 vehicles, while revenue rose 19 percent to 11.4 billion. Second-quarter operating profit jumped 22 percent to 753 million.
Daimler said Chrysler sold 851,000 vehicles in the quarter, up 2,000, while revenue rose 11 percent. A raft of new models is due in the coming months, and should boost earnings in future years, the company said.
Analyst Gavin Launder at UBS Warburg said he maintained his estimate of full-year earnings at 6.20 a share, although he predicted conditions would remain tough, pulling earnings back to 5.40 in 2001. The new models would not be enough to offset difficult market conditions in North America, said Launder, predicting that the key event in the coming six months will be the relaunch of the Chrysler minivan, expected in the third quarter.
The commercial vehicles unit boosted its revenue contribution 13 percent to 7.5 billion, with operating profit growing 19 percent to 379 million. The aerospace division also contributed strongly, posting a 30 percent increase in operating income to 245 million.
DaimlerChrysler (FDCX) stock rose 1 percent to 56.80 in Frankfurt Wednesday afternoon. 
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DaimlerChrysler
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