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Daimler 3Q profit crashes
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October 26, 2000: 12:21 p.m. ET
German-U.S. carmaker's operating profit tumbles 80% as Chrysler falters
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NEW YORK (CNNfn) - German-U.S. carmaker DaimlerChrysler AG said Thursday its third-quarter operating profit plunged 80 percent, missing some analysts' forecasts, as sales by its U.S. Chrysler unit struggled amid efforts to promote new models.
Operating profit fell to 540 million euros, or $445 million, before one-time items, from 2.6 billion euros a year earlier, as revenue rose 8 percent to 37.2 billion euros. Earnings per share came in at 0.33 euro per share, or 29 cents a diluted share.
The profit came in the middle of the range of European analysts' estimates, which were from 350 million euros to 735 million euros, but slightly below the consensus of analysts surveyed by U.S. earnings tracker First Call, which called for it to make 31 cents a share.
 The German-American automaker's core U.S. operation, the Chrysler Group, recorded a third-quarter loss of 579 million euros, just below the earlier warning from the company of a 600 million euro loss in the period, as it was forced to increase price discounts on some models and faced greater launch costs for new products. The company had also issued a warning in July when it released second quarter results.
"The intense competition for market share in North America continues to have a significant impact on the Chrysler Group's results," Jürgen Schrempp, chairman of DaimlerChrysler's board of management, said.
The sales of Chrysler Group vehicles fell 14 percent in the quarter to 623,031 from 722,384 in the same quarter a year earlier. But the strengthening of the U.S. dollar against the euro offset the decline in Chrysler sales, by increasing the value of U.S. income when converted into euros. That helped Chrysler posted third-quarter revenue of 15.2 billion euros, in line with the previous year's level.
The report is the latest sign of an increasingly bumpy ride for profits from the U.S. auto market, despite continued strong sales of new vehicles.
Earlier this month General Motors Corp. (GM: Research, Estimates) edged past lowered estimates to post record third-quarter earnings per share, although it warned that rising incentives would hit fourth quarter and 2001 results.
No. 2 automaker Ford Motor Co., hit by problems from the recall of Firestone brand tires used on its car, saw profit drop, although it beat forecasts.
DaimlerChrysler shares were up 0.1 euro to 52.60 euros in late trading in Frankfurt, after earlier swinging between 53.90 and 51.50 euros. DaimlerChrysler's (DCX: Research, Estimates) American depositary receipts (ADRs) slipped 43 cents to $43 in midday U.S. trading Thursday.
 DaimlerChrysler said it expected the unit to return to the black in the fourth quarter, predicting annual operating profit of more than 2 billion euros, compared with 5.1 billion euros in 1999.
The Mercedes-Benz luxury-car division posted the strongest growth in the third quarter, with operating profit rising 5 percent to 743 million euros as revenue grew 15 percent to 10.5 billion euros.
DaimlerChrysler said it expects the whole company to report full-year operating profit of about 7 billion euros, excluding non-recurring items, down from 10 billion euros last year, on revenue of about 160 billion euros.
Vehicle sales this year are expected to exceed 4.8 million vehicles, about the same as in 1999, the company said in a statement.
The firm took a one-time charge of 500 million euros to reflect losses as values of leased vehicles fell from the time customers leased them to when they returned them, an item known as "residual value risk." DaimlerChrysler said it would use a new leasing strategy in the future.
Addressing investors' concerns
"They've done a lot of cleanup in this quarter. It's at least good that they've cleared up their residual value risk," said Joseph Harrigan, an auto analyst at investment bank Credit Suisse First Boston, who had estimated operating profit of 585 million euros. "They are beginning to address issues which are of concern to investors."
Some analysts questioned whether the leasing costs, which could be seen as a recurring item, should have been included in operating profit instead of written off.
"The results are slightly disappointing," said Andrew Blair-Smith of Commerzbank Securities, pointing to the leasing value losses.
The company also reported a one-time gain of 3.3 billion euros from the sale of its unit DaimlerChrysler Aerospace, or DASA, to the European Aeronautic Defense and Space Co. Including the gain, DaimlerChrysler's net profit rose to about 3 billion euros from 2 billion euros a year earlier.
EADS was formed in July via the merger of DASA with France's Aérospatiale Matra and Spain's Construcciones Aeronauticas SA, or CASA.
Because of income from one-time factors, principally the sale of DASA, "net income and earnings per share will be significantly higher" in the whole of 2000 than last year's level, the company said. 
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DaimlerChrysler
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