News of July 25, 2001
DaimlerChrysler Profit Improvement in the Second Quarter in Line With Plan
STUTTGART, Germany and AUBURN HILLS, Mich. – After a loss in the first quarter, DaimlerChrysler again achieved a positive result in the second quarter of 2001. This is primarily a result of the substantial reduction of losses at Chrysler Group, which fulfilled all of the milestones set for the first half of 2001.
The Group's Operating Profit, including a one-time effect of $0.2 billion as a result of the gain in the sale of 60% of the shares in TEMIC, the automotive electronics subsidiary, was $0.8 billion (Q2 2000: $2.2 billion). Net Income, including one-time effects, was $0.6 billion (Q2 2000: $1.5 billion) and Earnings Per Share were $0.62 (Q2 2000: $1.47). Excluding one-time effects, Net Income was $0.5 billion (Q2 2000: $1.5 billion) or $0.45 (Q2 2000: $1.47) per share.
1.3 million vehicles sold worldwide
DaimlerChrysler sold 1.3 million vehicles worldwide in the second quarter of 2001 (Q2 2000: 1.3 million). While Mercedes-Benz Passenger Cars & smart achieved a 6% increase in unit sales, Chrysler Group reported a 4% decline in shipments to dealers due to market conditions in North America. As a result of the fall in demand for heavy trucks in North America, the Commercial Vehicles division also reported a decline in unit sales of 12%.
As expected, the overall Group Revenues fell in the second quarter by 5% to $35.1 billion. This is due to the fact that the prior year's figures included the Revenues of Dasa, debis Systemhaus and Automotive Electronics (TEMIC). From May 2001, Adtranz was also deconsolidated. Adjusted for these changes in the consolidated Group, Revenues were 3% higher than in the previous year.
In the first half of 2001, Group Revenues of $65.2 billion were 9% lower than in the first six months of 2000. Adjusted for changes in the consolidated group, Revenues decreased by 3%. Operating Profit, adjusted for one-time effects, was $0.1 billion (1st half of 2000: $4.3 billion). There was adjusted Net Income of $0.1 billion (H1 2000: $2.9 billion) and adjusted Earnings Per Share of $0.14 (H1 2000: $2.91).
Improved Commercial Vehicles position in Asia
In the period under review, DaimlerChrysler significantly improved its strategic position in the Commercial Vehicles business in Asia. Through the acquisition of Volvo's 3.3% equity interest in Mitsubishi Motors (MMC), including all rights and product development work from the previous cooperation between MMC and Volvo in the area of commercial vehicles, DaimlerChrysler has substantially strengthened its competitive position. The transaction was completed in June 2001.
At the end of June, DaimlerChrysler announced a joint venture with Hyundai Motor in South Korea to produce Mercedes-Benz diesel engines for commercial vehicles. This is the first cooperation with Hyundai Motor in the field of commercial vehicles.
Mercedes-Benz Passenger Cars & smart with increased Unit Sales, Revenues and Operating Profit
The Mercedes-Benz Passenger Cars & smart division continued its growth course in the second quarter, despite the generally softening automobile market. Unit sales increased by 6% to 328,800 vehicles, while revenues were up 10% to $10.6 billion and Operating Profit, excluding one-time effects, rose by 10% to $703 million.
Worldwide, 295,100 Mercedes-Benz cars were sold, 7% more than in the second quarter of 2000. Due to the high demand for the division's cars, particularly for the C-Class sedans, sport coupes and station wagons, Mercedes-Benz unit sales in Western Europe increased by 11% to 197,800 vehicles. In the contracting German market, a growth rate of 7% to 109,000 vehicles was particularly impressive. This resulted in Mercedes-Benz's market share rising to 12%. In the U.S. and Japan, Mercedes-Benz did not quite equal the high sales levels of the prior year. But, due to the availability of all C-Class variants, growth is expected for those markets in the second half of the year.
There were unit sales of 33,700 smart cars, which was slightly more than the very high figure in the previous year.
Chrysler Group's turnaround proceeds according to plan
As a result of cost savings achieved by the turnaround plan and the increase in Unit Sales over the first quarter, Chrysler Group's Operating Loss excluding one-time effects of -$0.1 billion was a significant improvement over the previous quarter (-$1.2 billion).
But there was a negative impact from continuing high U.S. industry marketing costs and a decline in unit sales compared with the previous year. Second-quarter shipments to dealers fell by 4% compared with the previous year to 821,000 vehicles. Revenues of $15.5 billion were 1% higher than in the year before. Measured on a US dollar basis Revenues declined by 5%.
After declines in April and May, Chrysler Group in June recorded a 1% increase over the June 2000 figure in retail sales in the U.S. Sales of the successful Chrysler PT Cruiser were still high, withshipments of 44,400 vehicles in the second quarter, and there was a strong 16% increase in unit sales of minivans. In April, Chrysler Group started production of the new Jeep Liberty in the newly constructed assembly plant in Toledo, Ohio. By the end of June, dealers had already ordered 60,000 units, which is an even better sales start than with the Chrysler PT Cruiser.
Performance of Commercial Vehicles impacted by situation in North America
The Commercial Vehicles division reported a 12% decline in unit sales to 127,900 vehicles in the second quarter. Revenues of $6.2 billion were 5% below the previous year's figure. After a loss in the first quarter, Operating Profit, excluding one-time effects, of $108 million, was positive again (Q2 2000: $344 million), but still affected by the difficult situation in North America.
At Freightliner, the new management is accelerating and expanding the company's turnaround plan. This restructuring plan will be presented this fall.
At Freightliner, Sterling and Thomas Built Buses Unit Sales fell by 35% to 28,500 vehicles as a result of the decrease in the market for heavy trucks in North America.
Due to reduced market demand in Europe and the collapse of the markets in Turkey and Argentina, unit sales of 26,100 Mercedes-Benz trucks did not equal the previous year's figure (-14%). The difficult market situation in Turkey was also the reason why sales of Mercedes-Benz and Setra buses declined by 4% to 7,200 units.
The Mercedes-Benz Vans unit continued its positive business trend, with unit sales increasing by 2% to 62,700 vehicles.
Refocus for Services
DaimlerChrysler Services generated second-quarter revenues of $3.7 billion; excluding IT Services, revenues were 14% higher than in the year before. As a result of the fall in demand for both heavy trucks and used- vehicle prices in North America, Operating Profit of $86 million was lower than in the year before. Contract volume rose to $119.8 billion (end of Q2 2000: $100.6 billion), of which $11 billion resulted from exchange-rate movements.
In February 2001, DaimlerChrysler Services initiated a project to refocus the division and to increase its profitability. One of the ways in which this will be done is by further improving the cooperation between Financial Services and the vehicle divisions' sales departments.
Mitsubishi Motors Corporation
As had been expected, in the first quarter of the company's financial year, which began on April 1, 2001, unit sales by Mitsubishi vehicles declined significantly. As part of the turnaround plan, the new management has implemented cost-cutting measures as well as a new organizational and management structure. Breakeven is anticipated in the current financial year.
MTU Aero Engines increased its revenues by 28% to $638 million. It reported particularly strong increases in the sale and maintenance of engines for civil aircraft and of gas turbines.
The European Aeronautic Defence and Space Company (EADS), in which DaimlerChrysler has a stake of 33%, had an order backlog of about $144 billion at the end of the second quarter. These orders ensure employment for the next six years.
Outlook for full-year 2001
Based on the developments expected for the international automotive markets and on current exchange rates, DaimlerChrysler assumes that Operating Profit, adjusted for one-time effects, for full-year 2001 will be within the announced range of $1.0-1.4 billion.
Mercedes-Benz Passenger Cars & smart will again exceed the previous year's high figures for unit sales, revenues and earnings, due to an extremely attractive product range, which will be upgraded again in the fall with the new SL roadster and the revised M-Class.
Weaker demand for automobiles in the U.S. will lead to a distinct decline in unit sales by Chrysler Group. The continuation of difficult market conditions remains a major challenge.
There will be a decline in unit sales and revenues for the Commercial Vehicles division as a result of the market slump in North America and the market downturn in Western Europe. Operating Profit will decrease significantly because of the situation in North America. This fall the division will further expand its attractive product range with the Vaneo compact van and the new Mercedes-Benz Axor range of trucks.
The Services division is expected to generate revenues at a similar level to last year. Operating profit, excluding one-time effects, will probably be lower than the level achieved in 2000.
(July 20, 2001)