A day after its Mercedes division helped it to forecast-beating
results, DaimlerChrysler
said on Wednesday that new products would help shield its U.S. arm
Chrysler from margin-eroding price wars.
Slugging it out with badgered U.S. rivals General Motors Corp and Ford
Motor Co while trying to fend off foreign competitors in the world's
biggest car market poses a major challenge for Chrysler, but one it
has mastered so far.
Chrysler's third-quarter operating profit gained 43 percent to 310
million euros ($374.5 million) million unit sales and revenues both up
12 percent despite the toughest market conditions in living memory. It
also maintained its operating margin, excluding one-off factors.
In a conference call with investors, group Chief Financial Officer
Bodo Uebber acknowledged Chrysler had faced slight downward pressure
on net prices in the third quarter, but added the pressure had been
worse in the first half of the year.
"Having all our new products out ... we can compete even better in the
fourth quarter" in terms of the prices Chrysler can command, he added.
Chrysler has outshone its U.S. rivals thanks to hot models like the
Chrysler 300 sedan, Jeep Grand Cherokee and minivans with stow-flat
seats.
It recently launched the "Mega Cab" version of its big Dodge Ram
pickup and the Jeep Commander with three rows of seats. Uebber said 10
new vehicles were due in 2006. These include the Dodge Caliber
mid-size car and the Dodge Nitro crossover.
Chrysler's performance and a rebound by the premium Mercedes Car Group
division helped the world's fifth-biggest carmaker report late on
Tuesday that third-quarter operating profit rose 38 percent to 1.84
billion euros, beating analysts' forecasts.
MERCEDES ON TRACK
Uebber said Mercedes was on track to reach the goal of boosting its
operating margin to 7 percent by 2007.
Mercedes was making progress with plans to reduce costs, boost
revenue, ensure quality and revamp the loss-making Smart small car
business, which Uebber reiterated was due to break even in 2007.
Long the group's cash machine, the division has been dogged this year
by the strong euro, model changeovers, spending to fix quality
problems at Mercedes-Benz and losses at Smart, which has responded by
cutting staff and its model line-up.
The quality offensive meant warranty costs would now start to decline,
Uebber said.
Mercedes' third-quarter operating profit increased 43 percent to 436
million euros as new models came onto the market and it wrung out
efficiency gains, cementing a rebound that began in the second quarter
after a rare first-quarter loss.
Slides on the company website also cited challenges "for 2005 and
ahead," including an "intensely competitive car market, especially in
the U.S.," a further rise in interest rates, high oil prices and
translation effects from foreign exchange rates.
DaimlerChrysler's foreign currency exposure for 2005 is "nearly fully"
hedged at 95 percent, Uebber said. It uses a three-year rolling plan
for hedging, and Daimler had already executed initial hedging
contracts for 2008, he said.
He thought the burden from higher raw material costs would rise
somewhat next year, but not nearly as much as in 2005 compared to
2004.
Shares in DaimlerChrysler gained as much as 3.1 percent on Wednesday
after the German-American group posted surprisingly strong
third-quarter results after the market closed on Tuesday.
The stock touched a peak of 42.07 euros before easing back to 41.88 by
1030 GMT, up 2.7 percent, ahead of a conference call with analysts and
the media at 1130 GMT.
DaimlerChrysler stock has risen more than 18 percent this year, now
narrowly outperforming the DJ Stoxx European car sector index, and
trades at around 11.9 times estimated 2006 earnings versus 10.6 times
for arch-rival BMW.
Italian carmaker Fiat beat forecasts for group third-quarter trading
profit on Wednesday, while France's Renault releases third-quarter
sales figures later in the day.
www.today.reuters.com
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