DaimlerChrysler Achieves Group Operating Profit of $0.7 Billion in Second Quarter of 2003
* Improved earnings from nearly all divisions * Renewed increase in earnings for Mercedes Car Group * Significant improvement in operating profit at Commercial Vehicles division * Strong rise in earnings from Services * Chrysler Group's results impacted by difficult US market * Group operating profit from ongoing business of around $5.8 billion still targeted for full-year 2003
STUTTGART, Germany and AUBURN HILLS, Mich., July 24 /PRNewswire- In a difficult global economic environment, DaimlerChrysler (stock-exchange abbreviation: DCX) posted an operating profit of $0.7 billion for the second quarter of 2003 (Q2 2002: $1.9 billion). In a US market characterized by substantial price incentives, Chrysler Group reported a loss, while all other divisions improved their earnings, in some cases significantly. Net income totaled to $0.1 billion (Q2 2002: $1.3 billion) and earnings per share were $0.13 (Q2 2002: $1.27).
DaimlerChrysler sold 1.2 million vehicles worldwide in the second quarter (Q2 2002: 1.3 million). Second-quarter revenues of $39.5 billion were lower than in the previous year ($45.2 billion), partly as a result of the appreciation of the euro against the dollar, but also due to the lower unit sales. Adjustments for currency-translation effects led to a reduction in revenues of only 2%.
At the end of the second quarter of 2003, DaimlerChrysler employed 372,100 persons worldwide (end of Q2 2002: 374,100).
Operating profit at the divisions
The Mercedes Car Group division increased its second-quarter operating profit by 2% to $990 million, primarily through full availability of the new E-Class and the CLK coupe.
Chrysler Group posted a second-quarter operating loss of $1.1 billion (Q2 2002: operating profit of $476 million). The deterioration is due to lower shipments and increased incentives, including higher provisions for marketing costs related to dealer inventories and for guaranteed residual values.
Further progress with the implementation of efficiency-improving measures at the Commercial Vehicles division led to a significant increase in operating profit to $243 million (Q2 2002: operating loss of $8 million).
The Services division also improved its operating profit, by 47% to $384 million. This was a result of better refinancing conditions, higher margins and improved risk management.
The Other Activities segment, which mainly consists of the MTU Aero Engines business unit and holdings in Mitsubishi Motors Corporation (MMC) and European Aeronautic Defence and Space Company (EADS), achieved an operating profit of $262 million (Q2 2002: $291 million, of which $179 million related to the sale of the remaining shares in Temic). All three holdings made positive contributions to earnings.
Details on the divisions in the second quarter of 2003
Despite declining demand in nearly all major automotive markets, the Mercedes Car Group division sold 318,000 vehicles in the second quarter of this year, close to the very high level of the previous year (-3%). As a result of a higher-value model mix, revenues rose by 1% to $15.2 billion.
The Mercedes-Benz brand once again gained market share in the second quarter, strengthening further its position in the premium segment. Due to generally difficult markets, unit sales of 281,600 vehicles were 5% lower than in the previous year. The E-Class was once again very successful (+39% to 79,400 units), reaching a worldwide market share of 40% in the full-size segment. Sales of the CLK-Class climbed 43% to 23,300 units.
Unit sales of the smart brand increased by 7% to 36,400 vehicles in a very competitive market. The primary reason for this success was the brand's expanded market presence, full availability of the revised smart city-coupe and convertible, as well as an extension of the model range to include the smart roadster and roadster-coupe.
Since July the Maybach has also been available in the important US market. Incoming orders confirm DaimlerChrysler's expectations.
Chrysler Group's retail sales totaled 734,200 vehicles in the second quarter (Q2 2002: 771,100 vehicles). The main reasons for the 5% decrease were weaker demand in the United States and an extremely tough competitive environment. Vehicle ranges posting strong sales gains included the Dodge Ram Pickup (+19%) and the Jeep Liberty (+6%). Factory shipments to dealers decreased by 12% to 721,900 vehicles. At the end of the period, dealer inventories in the United States totaled 518,600 vehicles, equivalent to a 63- day supply (end of Q2 2002: 505,700 vehicles, and a 65-day supply). Both figures were near planned levels and in line with industry averages.
Revenues for Chrysler Group were $13.6 billion (Q2 2002: $18.9 billion), reflecting the appreciation of the euro against the US dollar, lower unit sales and higher incentives. Measured in US dollars, revenues decreased by 11%.
Chrysler Group improved its productivity by 8.3%, according to the recently published Harbour and Associates Report, which analysed the productivity of automobile manufacturing plants in North America for 2002. The Chrysler Group result was the second-highest productivity improvement ever recorded by any auto manufacturer since the Harbour Report's inception. Vehicle quality also improved significantly compared with last year, as evidenced by recently published quality data for the industry.
The Commercial Vehicles division posted unit sales of 125,700 vehicles (-3%) and revenues of $8.0 billion (-6%). The second quarter saw the introduction of the new Actros and the Accelo light truck for the Brazilian market. In June, the Vans business unit launched the new Viano family of people carriers and the new Vito light delivery van. The response from the international press and from customers was very positive.
The Freightliner/Sterling/Thomas Built Buses business unit increased its second-quarter unit sales to 32,400 vehicles, despite a further weakening of demand in the United States (Q2 2002: 29,900). The Sprinter, newly launched in the US, contributed sales of 3,000 units to this result. Due to a continuing weakness in the markets of Western Europe, unit sales of 26,100 vehicles by the Mercedes-Benz Trucks business unit were 2% below the previous year's level. The Vans business unit sold 60,400 units (Q2 2002: 64,600 units). At the DaimlerChrysler Buses & Coaches business unit, sales of 6,600 vehicles indicated a stabilization of unit sales (Q2 2002: 6,300 vehicles).
The Mitsubishi Fuso Truck and Bus Corporation (MFTBC), in which DaimlerChrysler holds a 43% stake, is included in the Commercial Vehicles division's accounts at equity with a time lag of three months as of April 1, 2003.
On June 30, the Commercial Vehicles division announced that its truck business will be reorganized with effect from January 1, 2004. This move will create the right conditions to push forward our "Turning Scale into Profit" initiative.
DaimlerChrysler Services second-quarter revenues of $4.0 billion, 12% below the last year's figure, were affected by appreciation of the euro against the US dollar. Adjusted to exclude currency-translation effects, revenues were at the same level as in Q2 2002. In Germany, the DaimlerChrysler Bank continued along its successful business path, particularly in the deposit business. One year after commencing this activity, more than 120,000 customers have entrusted the DaimlerChrysler Bank with deposits of $3.7 billion.
The MTU Aero Engines business unit achieved second-quarter revenues of $538 million, close to the previous year's result, while incoming orders increased significantly to $1.1 billion. The European Aeronautic Defence and Space Company (EADS) will publish its figures for the first half of 2003 on July 28, 2003. On May 26, Mitsubishi Motors Corporation (MMC) published its figures for its last financial year, which ended on March 31, 2003.
Outlook for full-year 2003
The development of leading indicators in recent weeks has pointed towards an improvement in economic prospects. On this basis, DaimlerChrysler expects a gradual stabilization in demand for passenger cars and light trucks in the United States during the second half of the year.
In Western Europe, however, the market for passenger cars is likely to remain at a low level. DaimlerChrysler also sees no signs of a sustainable upturn in demand for medium and heavy trucks.
Mercedes Car Group expects to attain in 2003 similar high levels of the previous year in terms of unit sales, revenues and earnings, despite the continuation of difficult market conditions.
Chrysler Group has taken further steps to improve and stabilize its earnings in the second half of the year, particularly in the areas of marketing and sales, and has already implemented substantial additional cost savings. For the year as a whole, Chrysler Group is still striving to achieve a slightly positive operating profit on an ongoing basis. However, there are substantial risks due to the potential development of the competitive environment in the United States. The product offensive that began earlier this year with the launch of the all-new Chrysler Pacifica and Chrysler Crossfire continues later this year with the launch of the Dodge Durango. In addition, the Chrysler Group plans nine new vehicle introductions in 2004.
The Commercial Vehicles division expects to achieve a significant improvement in its operating profit compared with 2002. New, attractive models and the effects of ongoing efficiency-improving activities should drive this performance.
The Services division plans that the operating profit from its ongoing business for the full year will be higher than in 2002, partly due to more favorable refinancing conditions.
At MTU Aero Engines, the situation in the civil aviation industry is likely to lead to lower revenues and operating profit in 2003. EADS anticipates an operating profit similar to last year's result, based on expected deliveries of 300 Airbuses.
With the current difficult market conditions particularly in Japan and the United States, DaimlerChrysler cannot expect the same contribution from MMC to its results as in the last year.
The DaimlerChrysler Group is expected to generate revenues of approximately $155 billion in full-year 2003, lower than last year (2002: $172.1 billion), primarily due to the appreciation of the euro against the US dollar but also as a result of lower unit sales.
Based on earnings projections for the divisions, DaimlerChrysler is still endeavoring to achieve an operating profit from its Group business activities of some $5.8 billion.
(For the reader's convenience, the financial information has been translated from euros into U.S. dollars at an assumed rate of euro 1 = $1.1502. The convenience translation does not mean that the euro amounts actually represent the corresponding dollar amount stated or could be converted into dollars at the assumed rate.)
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Figures for the 2nd Quarter 2003/First Half-Year 2003
U.S. dollar figures - convenience translation
All values, including the 2002 figures, are converted from euro figures
with the exchange rate of
1 euro = US-$1.1502 (based on the noon buying rate on June 30, 2003)
DaimlerChrysler Group Q2 Q2 Change YTD YTD Change
values in US $ 2003 2002 3:02 2003 2002 3:02
Revenues, in millions 39.484 45,245 -13%(1) 78,242 87,696 -11%(2)
Operating profit, in
millions 737 1,935 -62% 2,351 5,4773 -57%
Net income (loss), in
millions 125 1,274 -90% 802 4,1533 -81%
Per Share (EPS) 0.13 1.27 -90% 0.79 4.13 -81%
Employees (June 30) 372,073 374,059 -1% 372,073 374,059 -1%
Operating profit (loss)
by Divisions Q2 Q2 Change YTD YTD Change
in millions of $ 2003 2002 3:02 2003 2002 3:02
Mercedes Car Group 990 972 +2% 1.782 1,723 +3%
Chrysler Group (1,090) 476 -- (916) 261 --
Commercial Vehicles 243 (8) -- 259 (106) --
Services 384 261 +47% 866 3,200 -73%
Other Activities 262 291 -10% 383 473 -19%
Revenues by Divisions Q2 Q2 Change YTD YTD Change
in millions of $ 2003 2002 3:02 2003 2002 3:02
Mercedes Car Group 15.207 15,035 +1% 29.497 28,758 +3%
Chrysler Group 13.611 18,909 -28% 28,195 37,255 -24%
Commercial Vehicles 8.005 8,493 -6% 15,026 15,533 -3%
Services 4,035 4,581 -12% 8,185 9,102 -10%
Other Activities 652 669 -3% 1,270 1,435 -12%
Unit Sales Q2 Q2 Change YTD YTD Change
2003 2002 3:02 2003 2002 03:02
DaimlerChrysler
Group 1,162,368 1,274,078 -9% 2,205,163 2,373,082 -7%
Mercedes
Car Group 317,974 328,957 -3% 609,130 621,432 -2%
Chrysler
Group 721.901 816,008 -12% 1,369,281 1,520,853 -10%
Commercial
Vehicles 125,696 129,113 -3% 232,733 230,797 +1%
1) A 2 % decrease after adjusting for effects of currency translation.
2) On previous year's level adjusting for effects of currency translation.
3) Including positive one-time effects.