Press Release: DaimlerChrysler Group of Companies

Press Release: DaimlerChrysler Group of Companies
Date of Release: Sep 20, 2002
Confirms at A (low) & R-1 (low)

Kam Hon, David Schroeder /  416-593-5577 ext.2243, ext.2232 /
khon@dbrs.com

The above ratings of the DaimlerChrysler group of companies are
confirmed.  The confirmation follows today's announcement that
DaimlerChrysler AG ("DaimlerChrysler" or "the Company") will purchase a
43% stake in Mitsubishi Fuso Truck and Bus Corporation (the spun-off
commercial vehicle business of Mitsubishi Motors Corporation) for EUR760
million in early 2003.  In addition, the Company will also acquire a 50%
stake in the commercial vehicle business of Hyundai Motor Corporation
for around EUR400 million to be completed by the end of 2002.  The
Company can easily finance the acquisitions internally.  The Company's
financial position, although weaker as a result of the acquisitions, is
still respectable.  Near term, contributions from these acquisitions are
not expected to be material.  However, the acquisitions will
significantly strengthen the Company's position in the large and fast
growing commercial vehicle market in Asia.  In addition, benefits from
close collaboration in research and development, as well as savings from
shared components and utilizing common pasts could greatly add to
profitability in the medium to longer term.  

 

Improving operating performance and asset sales have strengthened the
Company's balance sheet in 2002.  The Company's industrial business was
virtually debt free at the end of June 2002.  (Cash exceeded debt by
EUR1.1 billion at June 30, 2002.)  The Company can easily fund the
purchases internally.  The balance sheet is expected to remain
respectable.  However, the Company's Chrysler and Freightliner units are
still in the midst of a major restructuring, these acquisitions have
diverted resources available to these struggling units.  Chrysler has
made good progress in its cost reduction efforts, which contributed to
the better-than-expected performance at DaimlerChrysler in the first
half of 2002.  However, market conditions in North America remain
hostile.  Despite reporting better operating results, it remains
challenging for Chrysler to hold its market share.  In addition,
persistent use of high sales incentives to support market share will
continue to pressure profit.  Moreover, conditions in the North American
commercial vehicle market remains weak, jeopardizing Freightliner's
turnaround efforts.  These negative factors will continue to impede
progress at Chrysler and Freightliner, where turnaround is critical to
the Company's effort to restore profitability, excluding non-recurring
items, to the pre-2000 levels.  Nevertheless, the ratings continue to be
supported by the Company's diversity of businesses and geographical
markets and a highly profitable Mercedes-Benz, the luxury car unit.

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Shawna Wagnell	
Typesetting Coordinator/ Press Releases Back-up	
Dominion Bond Rating Service Limited	
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