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Rise in profit sets Chrysler apart
Third quarter brings glimmer of hope to Detroit; automaker earns $374 million after car sales jump.
By Christine Tierney / The Detroit News
In stark contrast with its ailing Detroit rivals, DaimlerChrysler AG's Chrysler Group boosted its third-quarter profit 43 percent to $374 million after increasing auto sales sharply.
Chrysler's robust showing, after a deep, three-year restructuring, provides a glimmer of optimism for the domestic auto industry following huge losses announced last week by General Motors Corp. and Ford Motor Co.
"We are only as good as the products we deliver to customers," Chrysler CEO Tom LaSorda said. "This will always remain a top priority and will continue to be what sets us apart from the competition."
Despite Chrysler's profit rise, and strong gains at the Mercedes-Benz car and commercial vehicle divisions, higher tax payments undercut the Stuttgart, Germany-based automaker's overall results.
DaimlerChrysler's third-quarter net profit fell 21 percent to $910 million despite a 38 percent jump in operating profit, to $2.2 billion.
The biggest contributor to DaimlerChrysler's bottom line was its commercial vehicles division -- the world's largest heavy-truck manufacturer -- which earned $600 million in the third quarter.
The Mercedes Car Group, which includes the Maybach ultra-luxury sedan and Smart minicar business, reported a 43 percent rise in operating profit to $526 million, reflecting stronger sales and cost cuts.
For the first nine months of the year, however, Mercedes was in the red with a $610 million loss, reducing DaimlerChrysler's nine-month profit 17 percent to $5 billion.
New Mercedes chief Dieter Zetsche has outlined further cost cuts, including the elimination of 8,500 jobs in Germany, to boost Mercedes' profitability to 7 percent of sales.
The company will take a charge of roughly $1.2 billion for the job cuts in the fourth quarter.
In his previous job as CEO of Chrysler, Zetsche carried out an extensive overhaul of the U.S. automaker that entailed deep cuts and an aggressive model offensive.
In addition to Chrysler's big hit with the 300 sedan, the Dodge Ram pickup and Jeep Wrangler have been strong performers, hitting sales records in the third quarter.
"All the new product they're bringing to the market is eating up competitors," said Alan Helfman, vice president of River Oaks Chrysler Jeep, a Houston dealership.
The Auburn Hills automaker's earnings were even more remarkable, considering that its car financing operations are folded into a separate division, DaimlerChrysler's financial services arm.
Chrysler's sales rose 13 percent, to 736,200 vehicles, boosting revenues 12 percent to $15.5 billion. Despite increasing competition in the U.S. market, it has been profitable for nine consecutive quarters.
Last week, GM reported a $1.6 billion loss, its biggest quarterly loss in 13 years. GM's share of the U.S. market has dropped 1.1 percentage points, to 26.8 percent, over the past year, and it has racked up $4.1 billion in losses in North America in the first nine months of the year.
Ford, which is also having trouble in its home market, lost $284 million in the third quarter.
"The answer to why they (Chrysler) are profitable, and Ford and GM are not, is product. They've actually gained market share," said auto analyst David Healy at Burnham Securities. "There isn't a huge difference in quality or cost of production for Chrysler."
Over the past year, Chrysler has increased its share of the U.S. market to 13.6 percent from 13 percent.
But the U.S. automakers all face a difficult fourth quarter after the summer sales boom sparked by employee discount offers.
Merrill Lynch auto analyst John Casesa estimates October sales could drop to an annualized rate of 15.2 million vehicles, the weakest month since August 1998.
He forecast that Chrysler Group sales in the United States would be down 10 percent in October.
In 2006, Chrysler plans to launch 10 models, including the Dodge Caliber, which will replace the Neon compact car, and the midsize Dodge Nitro sport utility vehicle.
Chrysler's small size relative to Ford and GM previously made it the most vulnerable of the Big Three -- and it was once aptly described as the canary in the automotive mineshaft.
But its recovery from near-collapse soon after the 1998 merger with Daimler-Benz appears to vindicate DaimlerChrysler CEO Juergen Schrempp's strategy to form a strong trans-Atlantic empire with a presence in every vehicle segment.
The merger's early difficulties and DaimlerChrysler's ill-fated Asian acquisitions eroded the group's profits, leading shareholders to press for Schrempp's departure. The company said in July that he would step down at the end of 2005, after 10 years at the helm.
The company reiterated its outlook for a slight rise in operating profit for this year from 2004 levels, excluding charges taken for the money-losing Smart car division.
It also forecast a slight increase in unit sales and a "significant" increase in overall revenues.
DaimlerChrysler shares, which have risen 16 percent this year, closed down 2 cents at $49.71 Tuesday after the results were released.
DaimlerChrysler had been scheduled to issue its quarterly results today but issued them a day early, after the company's governing supervisory board approved them, to comply with German securities law.
Although overall earnings were down, DaimlerChrysler's profits in the third quarter of 2004 had been bolstered by several onetime gains, including tax-free income from the sale of its stake in South Korea's Hyundai Motor Co.
Its heavy-truck division, however, benefited from a favorable comparison with the year-earlier results.
They included expenses for recalls and quality fixes at its Mitsubishi Fuso Truck and Bus Corp. affiliate. The earnings surge also reflected strong sales in Europe, North and South America that boosted revenue 15 percent, to $12.8 billion.
Third quarter brings glimmer of hope to Detroit; automaker earns $374 million after car sales jump.
By Christine Tierney / The Detroit News
In stark contrast with its ailing Detroit rivals, DaimlerChrysler AG's Chrysler Group boosted its third-quarter profit 43 percent to $374 million after increasing auto sales sharply.
Chrysler's robust showing, after a deep, three-year restructuring, provides a glimmer of optimism for the domestic auto industry following huge losses announced last week by General Motors Corp. and Ford Motor Co.
"We are only as good as the products we deliver to customers," Chrysler CEO Tom LaSorda said. "This will always remain a top priority and will continue to be what sets us apart from the competition."
Despite Chrysler's profit rise, and strong gains at the Mercedes-Benz car and commercial vehicle divisions, higher tax payments undercut the Stuttgart, Germany-based automaker's overall results.
DaimlerChrysler's third-quarter net profit fell 21 percent to $910 million despite a 38 percent jump in operating profit, to $2.2 billion.
The biggest contributor to DaimlerChrysler's bottom line was its commercial vehicles division -- the world's largest heavy-truck manufacturer -- which earned $600 million in the third quarter.
The Mercedes Car Group, which includes the Maybach ultra-luxury sedan and Smart minicar business, reported a 43 percent rise in operating profit to $526 million, reflecting stronger sales and cost cuts.
For the first nine months of the year, however, Mercedes was in the red with a $610 million loss, reducing DaimlerChrysler's nine-month profit 17 percent to $5 billion.
New Mercedes chief Dieter Zetsche has outlined further cost cuts, including the elimination of 8,500 jobs in Germany, to boost Mercedes' profitability to 7 percent of sales.
The company will take a charge of roughly $1.2 billion for the job cuts in the fourth quarter.
In his previous job as CEO of Chrysler, Zetsche carried out an extensive overhaul of the U.S. automaker that entailed deep cuts and an aggressive model offensive.
In addition to Chrysler's big hit with the 300 sedan, the Dodge Ram pickup and Jeep Wrangler have been strong performers, hitting sales records in the third quarter.
"All the new product they're bringing to the market is eating up competitors," said Alan Helfman, vice president of River Oaks Chrysler Jeep, a Houston dealership.
The Auburn Hills automaker's earnings were even more remarkable, considering that its car financing operations are folded into a separate division, DaimlerChrysler's financial services arm.
Chrysler's sales rose 13 percent, to 736,200 vehicles, boosting revenues 12 percent to $15.5 billion. Despite increasing competition in the U.S. market, it has been profitable for nine consecutive quarters.
Last week, GM reported a $1.6 billion loss, its biggest quarterly loss in 13 years. GM's share of the U.S. market has dropped 1.1 percentage points, to 26.8 percent, over the past year, and it has racked up $4.1 billion in losses in North America in the first nine months of the year.
Ford, which is also having trouble in its home market, lost $284 million in the third quarter.
"The answer to why they (Chrysler) are profitable, and Ford and GM are not, is product. They've actually gained market share," said auto analyst David Healy at Burnham Securities. "There isn't a huge difference in quality or cost of production for Chrysler."
Over the past year, Chrysler has increased its share of the U.S. market to 13.6 percent from 13 percent.
But the U.S. automakers all face a difficult fourth quarter after the summer sales boom sparked by employee discount offers.
Merrill Lynch auto analyst John Casesa estimates October sales could drop to an annualized rate of 15.2 million vehicles, the weakest month since August 1998.
He forecast that Chrysler Group sales in the United States would be down 10 percent in October.
In 2006, Chrysler plans to launch 10 models, including the Dodge Caliber, which will replace the Neon compact car, and the midsize Dodge Nitro sport utility vehicle.
Chrysler's small size relative to Ford and GM previously made it the most vulnerable of the Big Three -- and it was once aptly described as the canary in the automotive mineshaft.
But its recovery from near-collapse soon after the 1998 merger with Daimler-Benz appears to vindicate DaimlerChrysler CEO Juergen Schrempp's strategy to form a strong trans-Atlantic empire with a presence in every vehicle segment.
The merger's early difficulties and DaimlerChrysler's ill-fated Asian acquisitions eroded the group's profits, leading shareholders to press for Schrempp's departure. The company said in July that he would step down at the end of 2005, after 10 years at the helm.
The company reiterated its outlook for a slight rise in operating profit for this year from 2004 levels, excluding charges taken for the money-losing Smart car division.
It also forecast a slight increase in unit sales and a "significant" increase in overall revenues.
DaimlerChrysler shares, which have risen 16 percent this year, closed down 2 cents at $49.71 Tuesday after the results were released.
DaimlerChrysler had been scheduled to issue its quarterly results today but issued them a day early, after the company's governing supervisory board approved them, to comply with German securities law.
Although overall earnings were down, DaimlerChrysler's profits in the third quarter of 2004 had been bolstered by several onetime gains, including tax-free income from the sale of its stake in South Korea's Hyundai Motor Co.
Its heavy-truck division, however, benefited from a favorable comparison with the year-earlier results.
They included expenses for recalls and quality fixes at its Mitsubishi Fuso Truck and Bus Corp. affiliate. The earnings surge also reflected strong sales in Europe, North and South America that boosted revenue 15 percent, to $12.8 billion.
