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Daimler profit plunges
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February 7, 2001: 12:29 p.m. ET
Automaker will maintain dividend despite plunging profit, cash reserves
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NEW YORK (CNN) - DaimlerChrysler said on Wednesday its full-year operating profit sank 49 percent amid huge losses at its Chrysler division in the United States.
The Stuttgart, Germany-based automaker, won't release a complete set of financial results until Feb. 26, when it is set to detail turnaround plans for Chrysler. But it said Wednesday that adjusted preliminary operating profit tumbled to  5.2 billion, 3.47 a share, for the year. That equals $4.8 billion, or $3.26 a share. While that's generally in line with analysts' expectations, it's off of the 10.3 billion, or $10.4 billion, it earned in 1999, based on the year ago exchange rates.
The company did not release quarterly earnings information or details for its different division's results, nor did it give an outlook for this year or information on the size of restructuring charges that could hit 3 billion.
 DaimlerChrysler has been hit by concerns about its financial health. Chrysler plans to axe 26,000 jobs, or 20 percent of its work force, and idle six plants as it battles in the very competitive U.S. market.
Chrysler, the third-largest North American automaker, made a $512 million loss in its operations in the third quarter last year, and told investors in a letter that it lost about $1.25 billion in the fourth quarter.
"There's no surprise in the numbers coming so close to the profit warnings," Gregory Melich, an analyst at Morgan Stanley Dean Witter, told CNN.com. "The story here is the company's insistence it can pay a dividend."
Chrysler's sprung a cash leak
Melich explained that the company had burned through its cash reserves due to losses at Chrysler. He expects Daimler to have 2001 net borrowings of about $3 billion making it impossible to maintain the dividend, he said.
Daimler officials told analysts last month that its industrial cash reserves hit zero at the end of last year, although they insisted their overall reserves and borrowing capacity meant that the company did not face any liquidity crisis.
Daimler said it would pay a dividend of 2.35 a share, unchanged from the year earlier. That means the company will fork out 2.4 billion in dividend payments and "burn" through another 2 billion in cash keeping Chrysler on the road in 2001, Melich said. He doesn't expect Chrysler to return to profit before the fourth-quarter of 2001.
Other analysts said Tuesday's report added little to investors' understanding of how things are going at DaimlerChrysler, such as how sales and profitability look in the current quarter or how large a charge it will take in relation to a large job cut and plant closing plan announced for Chrysler last month.
"We're not too interested in 2000. The information is in the market," said Michael Dean, analyst for Merrill Lynch in London. "What we're looking to is 2001, about which we're very negative."
 Shares of DaimlerChrysler gained half a euro to 52.60 in Frankfurt trading Wednesday. DaimlerChrysler (DCX: Research, Estimates) U.S. shares gained 74 cents to $48.97 in midday trading in New York. Melich recommends his clients avoid buying the stock at its current price and has a fair value rating on the stock of 40. The shares recently touched a four-year low of around 43.30.
The company has blamed its difficulties on the high cost of launching new vehicles and extra incentives to tempt buyers in the softening U.S. market.
Sales rose 8 percent to 162.4 billion last year, or $152.4 billion, from 150 billion, or $151 billion, a year earlier. DaimlerChrysler is the world's third-largest vehicle maker in terms of revenue.
One-time items, which were excluded from the operating profit figure, amounted to 4.6 billion. Net earnings rose 37 percent to 7.9 billion – but that included revenue from the sale of businesses such as its joint venture on information technology services with Deutsche Telekom.
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Net income excluding one-off gains fell 44 percent to 3.5 billion, or 3.47 a share, from 6.23 billion, or 6.21 a share, the company said.
Dieter Zetsche, the Daimler executive put in the top job at Chrysler in November, plans to provide further details about the U.S. restructuring plans with the full earnings announcement on February 26.
"We decided to come out early because the board confirmed the details yesterday and we wanted to inform the market on a timely basis," Thomas Froehlich, a DaimlerChrysler spokesman in Stuttgart, told CNN.com.
Wednesday's earnings come shortly after DaimlerChrysler Chief Executive Juergen Schrempp visited the company's second-largest shareholder, the Emir of Kuwait. The country owns 7 percent of DaimlerChrysler.
The firm's largest shareholder, Deutsche Bank, recently reiterated its support for Schrempp, the architect of the Chrysler acquisition, but made clear its intention to dispose of its 12 percent holding within a couple of years.
The largest U.S. shareholder, financier Kirk Kerkorian, is far less satisfied, having filed an $8 billion shareholder suit charging Schrempp deceived him and Chrysler management when he portrayed the acquisition of the U.S. automaker as a merger of equals rather than a takeover. 
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