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Solid profit ignites Daimler
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February 28, 2000: 11:24 a.m. ET
German carmaker's shares gain as 4Q earnings rise 32 percent; forecast bullish
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LONDON (CNNfn) - Germany's Daimler-Chrysler, the world's No. 3 carmaker by revenue, posted a 32 percent increase in fourth-quarter profit Monday and hinted at plans for a full or partial acquisition as the company steps up its growth strategy in its Asia and small-car businesses.
"I could imagine that we could see a transaction of one kind or another during the course of the year," DaimlerChrysler Chief Executive Juergen Schrempp said in Stuttgart, adding that he intended to reach a decision on the company's strategies regarding Asia and the small-car market this year.
Schrempp poured cold water on recent speculation that Daimler was looking to buy French carmaker PSA Peugeot Citroën or seek a broader alliance with the company, but the company told reporters it hoped to enter a bid to buy Korea's Daewoo Motors, the vehicle arm of the debt-burdened Daewoo engineering conglomerate.
The chief executive's remarks came as Daimler - created by the transatlantic tie-up of Germany's Daimler-Benz and U.S. Chrysler Corp. in 1998 - said net income for the three-month period ended Dec. 31 rose to $1.59 billion, or $1.57 per diluted share, from $1.2 billion or $1.19 cents a share a year earlier. Daimler fell short of Wall Street forecasts for earnings of $1.76 a share.
Revenue in the quarter rose 20 percent to $41.7 billion.
For the full year, DaimlerChrysler reported a 19-percent jump in net income to 5.75 billion euros ($5.6 billion). Sales rose 14 per cent to 150 billion euros, the company said, while operating profit grew 28 percent to 11 billion euros.
The company predicted that revenue would jump 11 percent to 167 billion euros by 2002 as economies in Asia and Latin America pick up steam.
The bullish forecast helped sparked a mild rally in DaimlerChrysler (FDCX) shares Monday afternoon in Frankfurt. The stock was up 2.4 percent at 67.35 euros. The shares are down 13.5 percent for the year to date, however, and have fallen more than 30 percent from their 12-month peak of 95.45 euros, achieved last April 27.
The company on Monday proposed a dividend for 1999 of 2.35 euros per share, unchanged from 1998, and said it would seek permission to buy back as much as 10 percent of its outstanding stock - a transaction that would cost nearly 7 billion euros at today's price.
Schrempp impatient
Speaking to CNN Financial News Monday, Schrempp said he was pleased with Daimler's progress on all fronts, except where the company's stock price is concerned.
"Automotive stocks aren't in fashion and that doesn't help," Schrempp said. "I think we have such a tremendous message that in time will bring the stock up. I am very impatient about the stock price."
DaimlerChrysler's capitalization of about 68 billion euros (65.5 billion) makes it the world's biggest car maker in terms of market value, ahead of $52.4 billion-rated Ford Motor Co. and $49.5 billion General Motors Corp. In addition to cars and trucks, Daimler's businesses include rail engineering, diesel engines, financial and computer services and an aerospace division that owns 38 percent of Airbus Industrie, rival to Boeing Co. for the title of the world's No. 1 plane maker.
The biggest contribution to 1999 profit came from Chrysler. The U.S. carmaker reported a 19 percent increase in full-year operating profit to 5.05 billion euros on higher unit sales and an improved product mix, the company said, citing the market success of the Jeep Grand Cherokee and Dodge Durango.
Record year for U.S.
U.S. auto sales last year set an all-time record, with brisk demand for pickups and sport/utility vehicles helping car makers boost profitability. On Friday, General Motors Corp. (GM: Research, Estimates), the world's largest automaker by sales, said it expects this year to top last year's record $4.8 billion North American automotive earnings.
In Europe, car makers face pressure to cut costs as they face increasingly intense competition and falling prices. Still, Daimler's Mercedes-Benz car division, which has most of its sales in Europe, increased unit sales 17 percent in 1999 while operating profit rocketed 36 percent to 2.7 billion euros, despite losses from the Smart compact car. By focusing on the luxury-car end of the auto market Mercedes-Benz has remained sheltered from the price wars engulfing makers of smaller cars.
Schrempp said the first two months of 2000 had shown "positive momentum". This year, he added, the company plans to bring 12 new car and truck models to the market. Daimler's car brands include Mercedes-Benz, Chrysler, Jeep, Dodge and Smart. Last year, the carmaker sold 4.86 million vehicles, most in the U.S. and Europe.
Acquisition hunt
Analysts say leading automakers - including DaimlerChrysler - are scouting out deals and alliances beyond their traditional markets.
French carmaker Renault last year took a one-third stake in Japan's Nissan Motors and is currently in negotiations to buy another Korean automaker, Samsung Motors.
While DaimlerChrysler is intent on striking similar deals, Schrempp told CNNfn that he would exercise caution before embarking on any major acquisitions.
"We will only make a move if we believe that by doing so we improve the value of the company, that in the medium term we can make higher profits and obviously have growth opportunities," he said. "We will not make any irresponsible moves just for strategic reasons."
Daimler also laid out a strategic growth blueprint that aims to raise to one-quarter the proportion of its revenue that comes from the fast-growing Asian market in the medium term. The company announced plans to invest 50 billion euros in its global operations between now and 2002.
DaimlerChrysler said its financial- and information-services division posted a doubling of operating profit to 2.04 billion euros in 1999. CEO Schrempp told reporters Monday the company will soon disclose its decision on whether to offer shares in the software unit Debis Systemhaus, sell it outright, or seek a partner company.
Separately, a report in German magazine Der Spiegel said DaimlerChrysler would co-operate with software group SAP in the online procurement joint venture unveiled Friday among DaimlerChrysler, General Motors and Ford Motor.
A spokesman said DaimlerChrysler had not yet completed talks regarding co-operation for its online venture with GM and Ford, but said SAP could not be ruled out as partner. Talks were likely to be finalized in the coming weeks, Reuters reported.
Schrempp told CNNfn he was seeking new opportunities in the burgeoning arena of business-to-consumer electronic commerce.
"There's a wide field in which DaimlerChrysler will have an impact on the motor industry," he said. "We want to be the leader of the pack but we want to do it together with the dealers." 
--from staff and wire reports
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