DaimlerChrysler Expects Steady Growth in Key Markets
31 March 1999
DaimlerChrysler Expects Steady Growth in Key Markets -- Record Sales and Profit Figures in the First Business Year
-- Revenues up 6 % for first two months of 1999
-- Juergen E. Schrempp: 'Integration proceeding rapidly and successfully'
-- Robert J. Eaton: 'Growth and good opportunities for DaimlerChrysler'
AUBURN HILLS, Mich. and STUTTGART, Germany, March 31 --
DaimlerChrysler expects steady growth among all of its businesses, especially
those operating within the company's two key markets of North America and
Western Europe. According to an outlook presented at the DaimlerChrysler
annual press conference in Stuttgart on March 31, the automotive brands are
expected to achieve further growth even within a stagnating or slightly
declining market environment in some parts of the world.
The company expects revenues to increase to e 137 bn in 1999 from
e 131.8 bn in 1998, based on the high demand for DaimlerChrysler products and
the upward business trend for the first months of the year. By the year 2001,
DaimlerChrysler projects an increase in revenues of more than e 20 bn to
e 153 bn, with all businesses contributing to this growth. Profitability is
also expected to increase further in the years to come.
The company reported that strict cost management in all fields of
business, and the synergies expected as a result of the merger, are a good
foundation for enhancing profitability and increasing earning power in the
future.
In the first two months of 1999, total revenues increased by 6 % to
e 20.2 bn compared to e 19.0 bn for the same period in 1998. The breakdown by
division is as follows:
Passenger Cars: Mercedes-Benz, smart: e 4.8 bn / + 12 %
Passenger Cars and Trucks: Chrysler, Plymouth,
Jeep*, Dodge e 9.2 bn / 0 % *
Commercial Vehicles: Mercedes-Benz,
Freightliner, Sterling, Setra e 3.4 bn / + 9%
DaimlerChrysler Services e 2.0 bn / + 17 %
DaimlerChrysler Aerospace e 1.0 bn / + 11 %
Other e 0.4 bn / + 4 %
* Business developments are favorable with Dollar-based increases of 4 %.
This is reduced, however, by currency changes when converting to the Euro.
Schrempp: "Integration is right on track"
DaimlerChrysler Chairman Juergen E. Schrempp emphasized that the company's
integration is proceeding rapidly and successfully. Schrempp stated,
"Integration is right on track. We achieved many goals and overcame hurdles
in areas where many other mergers have failed. We can rightly claim that the
people of DaimlerChrysler are turning the potential of this merger into
performance. We are one company."
DaimlerChrysler expects to complete most of the integration projects by
the end of 2001. The company will realize e 1.3 bn worth of synergies in
1999, as previously announced.
Schrempp noted some of the achievements of the integration process. They
include the cooperative and result-driven management style in the Board of
Management; the new global sales and marketing organization designed to
maximize the strength and reach of the products represented by the company's
brands; the clear positioning of the various DaimlerChrysler brands toward
well-defined global customer segments; and the combination of several entities
and functions such as financial services, procurement and supply, information
technology, and research and technology.
Eaton: "Growth and good opportunities for DaimlerChrysler"
In his press conference statement, Chairman Robert J. Eaton elaborated on
the company's success to date and reviewed global opportunities.
"DaimlerChrysler has started with a tremendously successful year," he said.
"Due to economic stability on both sides of the Atlantic -- particularly in
North America and Europe -- we are confident of continued success in 1999,
despite some tough challenges around the rest of the world."
"In North America, nothing we've seen so far this year has caused us to
reduce our expectations for 1999. The market there looks very strong, thanks
to many positive factors. There is little chance for a recession, inflation
is low, employment is up, consumer confidence is strong and interest rates are
low. Things are not quite as strong in Europe, but, thanks to low inflation
and economic stability in key markets, we look for moderate growth and good
opportunities for DaimlerChrysler," he added.
"While Asia continues to concern us, especially Japan, we still see good
long-term growth potential for the industry. Finally, in South America, with
the recession in Brazil and slower growth in Argentina, we expect a delay in
growth until the year 2000," Eaton said.
To enhance its global competitive edge, DaimlerChrysler plans to spend
approximately e 46 bn between 1999 and 2001 on research and development,
including third party contracts, and on investment in fixed assets. The focus
of these investments will be on product development and launches in the
automotive businesses as well as enlarging the production capacities of the
automotive and commercial aircraft units. DaimlerChrysler will introduce
34 new cars, light trucks and commercial vehicles over the next three years
and at the same time, will bring many new products from the areas of services,
aerospace, rail systems and diesel engines to market.
Record figures in 1998
DaimlerChrysler achieved record results in its first business year, 1998,
and revenues rose 12 % to e 131.8 bn. Return on net assets (RONA), the
Group's main profit performance measure, reached 11.6 % after taxes,
significantly exceeding the established 9.2 % minimum target to cover cost of
capital and increase the value of the Group. The comparable 1997 combined
figure was 10.2 %. Net operating income after taxes, the basis for the RONA
calculation, is e 6.6 bn, up 25 % from e 5.3 bn in 1997. Annual average net
assets were e 56.5 bn.
As reported in the February 25th release on DaimlerChrysler Group's
results, the company achieved an operating profit of e 8.6 bn in 1998 -- an
increase of 38 % compared to the 1997 combined figure of e 6.2 bn. Income
before income taxes (IBT) for 1998 is e 8.2 bn, 32 % above the 1997 combined
figures. Adjusted net income for 1998 is e 5.2 bn, up 29 % from the 1997
adjusted figure of e 4.1 bn in net income for the combined businesses.
Adjusted earnings per share (EPS) are e 5.58, up 30 %. At the Annual General
Meeting of shareholders scheduled for May 18, 1999 in Stuttgart, the
Management Board will propose paying a dividend of e 2.35 per share.
At the end of 1998, the company had 441,502 employees. The number of
employees rose by 7,764 to 233,030 in Germany and by 5,785 to 117,048 in the
United States. A total of more than 19,000 new jobs were created in 1998
alone.
Profit growth in all divisions
All divisions posted profit increases in 1998 and were able to surpass the
15.5 % RONA performance target set by DaimlerChrysler for its business units.
This minimum requirement represents the average cost of capital before taxes
and is calculated as a quotient of operating profit and net assets. Only the
losses at Adtranz resulted in a negative operating profit in the "Other"
businesses segment.
The Passenger Cars division, comprised of Mercedes-Benz and smart, was
extraordinarily successful in 1998, setting new records for both revenues and
sales.
The division's contribution to the operating profit of the DaimlerChrysler
Group rose to e 2.0 bn compared to e 1.7 bn in 1997. Bringing many new and
attractive models to market, the division's sales increased by 29 % to 922,795
units in 1998, compared to 715,055 units in 1997. RONA rose by 1.3 percentage
points to 25.1 %, for the division.
The Passenger Cars and Trucks division, made up of the Chrysler, Plymouth,
Jeep and Dodge brands, also set sales records reporting the sale of 3,093,716
units, up 7 % from the 1997 figure of 2,886,981 units. The introduction of
several all-new and redesigned products has helped the brands to expand their
market position. The operating profit of this division, e 4.2 bn in 1998, up
from e 3.4 bn in 1997, represents the largest contribution to the Group's
total operating profit. The division's RONA increased by 2.9 percentage
points to 23.8 %.
The Commercial Vehicles division, made up of the Mercedes-Benz,
Freightliner, Sterling and Setra brands, also continued its profitable growth
in 1998. Operating profit almost tripled to e 946 mill. compared to
e 342 mill. in 1997 and RONA increased by 10.6 percentage points to 17.1 %.
This strong upward trend was based in large part on the increased
profitability of the business units Trucks Europe, Powertrain and Commercial
Vehicles NAFTA. With worldwide sales of 489,680 units, compared to 417,384
units in 1997, this division also reached an all-time-high for sales.
Chrysler Financial Services achieved a record operating profit of e 652
mill. for 1998, up 11 % from e 586 mill. in 1997. Return on equity rose by
1.8 percentage points to 21.8 %. Revenues increased to e 2.9 bn compared to e
2.4 bn in 1997. Chrysler Financial Services and DaimlerChrysler Services
(debis) announced in early 1999 that they will merge.
Operating profit and revenues at DaimlerChrysler Services (debis) reached
new heights in 1998, and a record 5,300 jobs were created. Revenues increased
by 21 % to e 9.6 bn. At e 392 mill., operating profit was 59 % higher than
the e 246 mill. reported in 1997.
This was mainly a result of further growth in Financial Services and IT
Services. RONA for IT Services and Telecom Services increased by 0.1 %-point
to 17.5 % and return on equity at Financial Services was up 1.1 percentage
points to 17.4 %.
With an operating profit of e 623 mill., 1998 was the most successful year
for DaimlerChrysler Aerospace (Dasa) since its founding in 1989. Compared to
the 1997 figure of e 284 mill., operating profit has more than doubled. The
favorable performance of Dasa demonstrates its strengthened earning power
based on the success of the restructuring and optimization programs. RONA at
Dasa reached 43 %, up 6.8 percentage points. This extraordinarily high figure
is due to the relatively low net assets within the aerospace business and
therefore not directly comparable with the returns achieved in other
industrial activities of the group.
Under the segment "Other", an operating loss of e 146 mill. is shown. This
segment is made up of Adtranz, MTU/Diesel Engines, TEMIC, Potsdamer Platz,
unallocated headquarters and research costs, as well as financial holdings in
many countries. The 1998 loss marks an improvement from the 1997 operating
loss of e 225 mill.
MTU/Diesel Engines and TEMIC, the Automotive Electronics business unit,
were profitable and could increase the operating profit. Adtranz, the Rail
Systems business unit, showed significant losses and as a result is continuing
its stringent restructuring programs.
Revenues at MTU/Diesel Engines rose by 5 % to e 921 mill. and TEMIC
increased revenues by 35 % to e 754 mill. Adtranz increased revenues by 2 % to
e 3.3 bn and incoming orders increased from e 3.8 bn to e 4.2 bn.
This Press Release contains forward-looking statements based on beliefs of
DaimlerChrysler management. When used in this release, the words "anticipate,"
"believe," "estimate," "expect," "intend," "plan" and "project" are intended
to identify forward-looking statements. Such statements reflect the current
views of DaimlerChrysler with respect to future events and are subject to
risks and uncertainties. Many factors could cause the actual results to be
materially different, including, among others, changes in general economic and
business conditions, changes in currency exchange rates and interest rates,
introduction of competing products, lack of acceptance of new products or
services and changes in business strategy. Actual results may vary materially
from those projected here. DaimlerChrysler does not intend or assume any
obligation to update these forward-looking statements.
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