DaimlerChrysler Achieves Group Operating Profit of USD 1.45 Billion In Third Quarter of 2003
* Chrysler Group returns to a positive operating result * Operating profit at Mercedes Car Group on a high level * Commercial Vehicles division achieves substantial increase in operating profit * Services continues strong positive earnings trend * Affirmation of Group goal: operating profit from ongoing business of around USD 5.8 billion for full year, but significant market risks remain
STUTTGART, Germany and AUBURN HILLS, Michigan, Oct. 21 -- In a very difficult market environment, DaimlerChrysler (stock-exchange abbreviation DCX) achieved an operating profit of USD 1.45 billion (Q3 2002: USD 1.8 billion) in the third quarter of 2003. Positive earnings from all of the Group's divisions contributed to this result.
As previously announced, in accordance with the requirements of US GAAP and the SEC, an impairment charge of USD 2.28 billion was recognized with effect as of September 30 on the Group's holding in EADS, although the net present value continues to be higher than the carrying value. Net income decreased, mainly due to the impairment, to USD -1.9 billion (Q3 2002: USD 0.9 billion); without this effect net income would have been
USD 0.4 billion. Earnings per share were USD -1.90 (Q3 2002: USD 0.90), without impairment USD 0.36. Operating profit and cash flow are not affected by the impairment.
Despite a challenging automobile environment, particularly in North America and Western Europe, DaimlerChrysler sold 1.1 million vehicles worldwide in the third quarter (Q3 2002: 1.1 million). Due to the appreciation of the euro against the US dollar and lower unit sales, DaimlerChrysler's total revenues of USD 40.3 billion were below the figure for the prior-year quarter (-5%). Adjusted for exchange-rate effects, there was an increase of 3%.
At the end of the third quarter of 2003, DaimlerChrysler employed 375,200 people worldwide (end of Q3 2002: 370,400).
Operating profit at the divisions
In a difficult market environment, Mercedes Car Group's operating profit of USD 924 million equaled the result of the third quarter 2002 despite expenditures for the further preparation of the second product offensive.
After a loss in the second quarter, Chrysler Group returned to positive figures, with an operating profit of USD 171 million (Q3 2002: USD 355 million). The improvement, compared with the second quarter, is primarily due to the successful implementation of further cost-reduction measures and lower increases in customer incentives than had originally been anticipated.
The Commercial Vehicles division boosted its third-quarter operating profit from USD 134 million in Q3 2002 to USD 276 million. This good result was partly based on higher unit sales, but also on the full implementation by all business units of the efficiency-improving programs that have been initiated in recent years.
The Services division increased its operating profit from USD 198 million in Q3 2002 to USD 331 million. This improvement was based on lower funding costs and higher margins.
The Other Activities segment, which mainly consists of the MTU Aero Engines business unit and the company's holdings in Mitsubishi Motors Corporation (MMC) and EADS, reported an operating loss of USD -167 million, primarily due to a loss by MMC (Q3 2002: operating profit of USD 241 million).
Details on the divisions in the third quarter of 2003
The Mercedes Car Group's third-quarter unit sales of 305,400 vehicles were only slightly lower than in 2002, a very good performance by the division under difficult market conditions. As a result of a higher-value model mix, revenues increased by 4% to USD 14.8 billion.
Unit sales of 273,900 vehicles by the Mercedes-Benz brand were slightly lower than last year (-2%). However, with its attractive model range, the Mercedes-Benz brand succeeded in increasing its market share in many markets and further improved its position in the premium segment worldwide. Significant increases in unit sales were recorded for the E-Class, CLK Coupe and CLK Convertible models.
At the Frankfurt International Motor Show, Mercedes-Benz presented the Mercedes-Benz SLR McLaren and the Vision CLS, a four-door coupe concept. The response to these vehicles was extremely positive.
The smart brand sold 31,500 units in the third quarter, 4% more than in Q3 2002. smart achieved particularly strong increases in the United Kingdom (4,200 units, +103%) and in France (2,700 units, +42%). Demand was especially high for the smart roadster and roadster-coupe. These models were launched last April, and 7,500 units were delivered in the third quarter.
smart presented its new model, the smart forfour, at the Frankfurt International Motor Show, and it had a very enthusiastic reception. This car will be available in April 2004 and will set new standards in the small-car segment, with its typical smart design features and its high levels of safety and comfort.
Chrysler Group's third-quarter retail sales totaled 630,400 vehicles worldwide (Q3 2002: 681,600). The decrease is primarily due to lower sales of passenger cars and minivans of the Dodge and Chrysler brands in the United States (-17%). A significant increase was recorded for the Dodge Ram pickup truck range (+7%). The new Chrysler Pacifica is gaining increasing market acceptance and the new Chrysler Crossfire, launched in June, has received a very positive reception in the United States. All in all, factory shipments to dealers decreased slightly compared with the prior-year quarter, to 629,000 vehicles (-3%).
Chrysler Group's revenues amounted to USD 14.6 billion (Q3 2002: USD 16.7 billion), reflecting the appreciation of the euro against the US dollar. Measured in US dollars, revenues remained relatively constant. Slightly lower shipments and higher incentives were offset by a better product mix.
The all-new Dodge Durango sport-utility vehicle went into production in September 2003 and will be available at the dealerships starting in November. Chrysler Group premiered the new Chrysler 300C Touring concept vehicle at the Frankfurt International Motor Show; this new model will be sold only in Europe. It will complement the all-new Chrysler 300C sedan and the Dodge Magnum sports tourer, the company's new large passenger cars which go on sale in the United States in the Spring of 2004. As a part of its product offensive in North America, the Chrysler Group will launch nine new models in 2004 and a total of 25 new vehicles during the next 36 months.
Under its new leadership, the Sales and Marketing area has taken numerous actions to increase revenues. These include more efficient and targeted application of customer incentives, new price positioning of several models, and improved cooperation with dealers and fleet operators. In addition, Chrysler Group is taking further measures designed to reduce costs.
The Commercial Vehicles division sold 123,200 units in the third quarter (+2%). Revenues of USD 8.4 billion were at the same level as in Q3 2002.
The Freightliner/Sterling/Thomas Built Buses business unit increased its unit sales to 33,400 vehicles (Q3 2002: 31,800). Due in particular to strong demand for the new Actros, unit sales by the Mercedes-Benz Trucks business unit rose by 14% to 28,800 vehicles. Third-quarter unit sales of 51,900 vehicles by the Vans business unit did not equal last year's high level (Q3 2002: 56,300). This is explained not only by the generally difficult market situation in Western Europe, but also by postponed purchases ahead of the launch of the new Vito and Viano models in September 2003. Unit sales by the DaimlerChrysler Coaches & Buses business unit increased by 31% to 7,800 vehicles.
The Mitsubishi Fuso Truck & Bus Corporation (MFTBC), in which DaimlerChrysler holds a 43% stake, is included at equity in the Commercial Vehicles division's accounts with a time lag of three months as of April 2003. Developments at MFTBC have been very positive so far this year. New exhaust-emission regulations for trucks in Japan helped MFTBC increase its unit sales in its domestic market by 51% in the first six months of its financial year, which started on April 1.
DaimlerChrysler Services posted third-quarter revenues of USD 4.0 billion, 11% lower than in Q3 2002 due to the appreciation of the euro against the US dollar. After adjusting for currency-translation effects the decrease was 4%. In Germany, DaimlerChrysler Bank again expanded its range of products in its core business of vehicle financing as well as in direct banking. The bank continued its successful activities in the deposit business, with new investment funds and new automobile savings plans applicable to all of the DaimlerChrysler Group's passenger-car models.
MTU Aero Engines reported a decrease in revenues by -12% to USD 551 million for the third quarter. Incoming orders were strong compared with the prior-year quarter at USD 654 million. The European Aeronautic Defence and Space Company (EADS) is developing well despite the difficult situation in the air-transport industry and expects to deliver some 300 Airbus aircraft in full-year 2003, as planned. Mitsubishi Motors Corporation (MMC) sold 391,300 vehicles worldwide in the months of July through September, which equaled the result of the prior-year quarter. Due to difficult market conditions, higher customer incentives and the anticipated decrease in earnings in the current financial year, MMC has taken comprehensive measures to improve its competitiveness.
Outlook for full-year 2003
Worldwide, DaimlerChrysler anticipates a gradual economic recovery during the fourth quarter. However, a sustained and significant revival of consumer spending, and particularly of investment, is not expected before the year 2004. This should then provide growth stimulus for the automotive markets.
For full-year 2003, the Mercedes Car Group anticipates revenues and operating profit at levels similar to the very good results of 2002. In view of the difficult market environment, its unit sales are likely to be slightly lower than last year, but increased market share will be achieved, particularly in the competitive classes, in some cases of a substantial magnitude.
Chrysler Group expects the US automobile market to remain affected by intense competitive pressure and high customer incentives during the rest of this year and also in 2004. The total market in 2003 is likely to reach a volume of around 16.9 million vehicles. This figure is more a reflection of increased incentives rather than stabilizing economic conditions. 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 competitive environment in the US. The launch of nine new products next year offers more positive prospects for 2004.
The Commercial Vehicles division expects no revival of demand in its major markets before the end of the year. However, with its efficiency-improving programs and its attractive range of products, the division has laid the foundation for a continued positive earnings trend. For full-year 2003, it should achieve an operating profit from its ongoing business which is significantly higher than the prior year's result.
As a result of the positive business trend during 2003, the Services division anticipates a significant increase in operating profit from ongoing business compared with the previous year.
EADS plans to achieve in its financial year revenues and operating profit of a similar magnitude to last year, and thus maintains its targets for the full year. MMC assumes that the sales situation in Japan and the United States will remain difficult. As a result of lower unit sales and substantial increases in customer incentives (particularly in the United States), MMC revised its profit expectations for the current financial year in July 2003. Earnings will be significantly lower than in the previous year.
Due to the appreciation of the euro against the US dollar and the lower unit sales, DaimlerChrysler expects total revenues for full-year 2003 of around USD 161 billion, below the prior year's figure of USD 174.3 billion.
DaimlerChrysler still aims to achieve a Group operating profit from its ongoing businesses of about USD 5.8 billion for the year 2003. However, significant market risks remain.
DaimlerChrysler, headquartered in Stuttgart and Auburn Hills, is one of the world's largest automakers, with approximately 375,200 employees in 200 markets. Its passenger cars, truck and bus brands include Mercedes-Benz, Maybach, smart, Chrysler, Dodge, Jeep, Setra, Freightliner, Sterling, Western Star and our strategic partners Mitsubishi Motors, Fuso and Hyundai.
(For the reader's convenience, the financial information has been translated from euros into U.S. dollars at an assumed rate of euro 1 = $1.165. The convenience translation does not mean that the euro amounts actually represent the corresponding dollar amount stated or could be converted into dollars at the assumed rate.)
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Figures for the 3rd Quarter/Nine Months Ended September 30, 2003
U.S. dollar figures - convenience translation
All values, including the 2002 figures, are converted from euro figures with
the exchange rate of
1 euro = U.S.-$ 1.1650 (based on the noon buying rate on September 30, 2003)
DaimlerChrysler Group
Q3 Q3 Change YTD YTD Change
values in $ 2003 2002 03:02 2003 2002 03:02
Revenues,
in millions 40,294 42,334 - 5%(1) 119,543 131,158 - 9%(2)
Operating
profit,
in millions 1,452 1,793 - 19% 3,833 7,341 - 48%
Net income,
excluding euro
2.28 billion
EADS-impairment,
in millions(3) 354 1,166
per share,
excluding
effects of
EADS-impairment
of $ 2.26
per share 0.36 1.16
Net income,
in millions (1,926) 909 - . (1,114) 5,116 - .
per share (1.90) 0.90 - . (1.10) 5.08 - .
Employees
(Sep. 30) 375,213 370,385 + 1% 375,213 370,385 + 1%
Operating profit (loss) by Divisions
in millions Q3 Q3 Change YTD YTD Change
of $ 2003 2002 03:02 2003 2002 03:02
Mercedes
Car Group 924 923 + 0% 2,728 2,668 + 2%
Chrysler Group 171 355 - 52% (756) 620 - .
Commercial
Vehicles 276 134 + 106 % 538 27 + .
Services 331 198 + 67 % 1,208 3,439 - 65%
Other
Activities (167) 241 - . 221 720 - 69%
Revenues by Divisions
in millions Q3 Q3 Change YTD YTD Change
of $ 2003 2002 03:02 2003 2002 03:02
Mercedes
Car Group 14,844 14,283 + 4% 44,721 43,411 + 3%
Chrysler
Group 14,558 16,653 - 13% 43,115 54,387 - 21%
Commercial
Vehicles 8,355 8,315 + 0% 23,575 24,048 - 2%
Services 4,043 4,534 - 11% 12,333 13,753 - 10%
Other
Activities 676 755 - 10% 1,962 2,209 - 11%
Unit Sales
Q3 Q3 Change YTD YTD Change
2003 2002 03:02 2003 2002 03:02
DaimlerChrysler
Group 1,055,721 1,082,640 - 2% 3,260,884 3,455,722 - 6%
Mercedes
Car Group 305,443 310,927 - 2% 914,573 932,359 - 2%
Chrysler
Group 628,965 650,453 - 3% 1,998,246 2,171,306 - 8%
Commercial
Vehicles 123,241 121,260 + 2% 355,974 352,057 + 1%
1) A 3 % increase after adjusting for effects of currency translation.
2) A 1 % increase after adjusting for effects of currency translation.
3) Operating profit and cash flow are not affected by the impairment.