DC Financial Services: Positive Outlook For 2003

BERLIN April 3, 2003; Dow Jones reported that DaimlerChrysler Services, the financial services arm of DaimlerChrysler AG , is upbeat about 2003 but warned that a repeat performance of last year's 67% operating profit growth isn't achievable.

"We are expecting a further positive development but we can't do 60%," Klaus Mangold, chief executive of DaimlerChrysler Services and a management board member of DaimlerChrysler, said late Wednesday. He declined to provide a more precise target.

DaimlerChrysler Services, which arranges leases for about 35% of the German- American company's auto sales, posted an operating profit, excluding one-time items, of EUR964 million last year, up 67% from EUR578 million in 2001.

Mangold was upbeat about the Berlin-based financial services provider's fleet management and leasing businesses.

Tight financial markets and corporate focus on protecting balance sheets has increased demand for these services - part of the general outsourcing trend. Furthermore, logistics companies are increasingly turning to leasing to improve flexibility, he said.

The company also further reduced its non-auto related leasing business last year. Assets tied up in leasing aircraft and other items fell to EUR5billion from EUR11.4 billion in 2002.

Mangold said that DaimlerChrysler's new retail bank, which started operation in July last year, is performing better than expected and has won some 320,000 customers. He said two-thirds of these are not related to the carmaker, so are new customers.

DaimlerChrysler Bank will open a new building in Stuttgart in May.

Mangold also said the weak dollar has only a limited impact on the earnings of DaimlerChrysler Services. A one-cent swing in the euro-dollar exchange rate is equivalent to about EUR8 million in operating profit - less than 1% of 2002 earnings, he said.

As long as the euro-dollar exchange rate stays "in the realm" of $1.10 to the euro than there's little reason for concern, he said.

Mangold also continued the anti-incentive rhetoric by European carmakers, echoing comments made Wednesday by Volkswagen AG chief executive Bernd Pischetrieder.

"At some point, the strategy comes to an end," said Mangold. "The further increase of incentives is certainly not the way to sell cars in the long term."

Led by General Motors Corp. (GM) and Ford Motor Co. (F), car makers in the U.S. introduced zero percent financing and other discounts after Sept. 11 in a bid to boost sales.

For some, sales surged in 2002 but the move has squeezed the profit margins of most car makers. Many European car makers have balked at matching their U.S. rivals and have ended up losing market share.

Mangold shrugged off concerns that anti-German sentiment in the U.S. stemming from the German government's opposition to the Iraq war is hurting sales.

"We have seen no evidence that our sales have been impacted by an anti-German orientation," he said.

But while the war in Iraq wasn't having a noticeable effect on car sales in general, Mangold but said it certainly wasn't helping.

"Negative news won't lead to positive purchasing sentiment," said Mangold, but noted that auto sales have proved more resilient than during the last Gulf war.