DaimlerChrysler: Overview on Current Business Trends
28 September 2000
DaimlerChrysler: Overview on Current Business Trends
* Net income and earnings per share - including one-time effects - to be
significantly higher than last year
* Operating profit, including one-time effects, to reach last year's
level; without one-time effects in the range of 7 billion euros ($6.16
billion)
* Business trends remain very positive at Mercedes-Benz Passenger Cars
and smart; earnings to exceed last year's level
* Earnings up at Commercial Vehicles despite sluggish North American
market
* Chrysler Group posts negative earnings in 3rd quarter due to difficult
market situation and new product startups; regains positive results in the 4th
quarter
* DaimlerChrysler Services expands global presence; earnings suppressed
mainly by residual value depreciation in the U.S. and increased interest rates
STUTTGART, Germany and AUBURN HILLS, Mich., Sept. 27 In
order to clarify the various estimates of DaimlerChrysler's earnings
situation, the company is providing an overview of current business trends
before the official third quarter report, to be released on October 26, 2000.
The market situation in North America will have a significant impact on
the company's results, as already indicated in the half-year report. For the
year 2000 as a whole, DaimlerChrysler forecasts operating profit -- including
non-recurring income and expenditure -- on the level of the year 1999. Net
income and earnings per share are expected to be significantly higher than
last year's figures. Adjusted for one-time items, operating profit for the
year 2000 will be in the range of 7 billion euros ($6.16 billion) (1999
adjusted: 10 billion euros/$8.8 billion).
Mercedes-Benz Passenger Cars to post record figures for sales, revenues
and earnings in 2000
Business trends at Mercedes-Benz Passenger Cars remained very positive in
the third quarter. Global sales at the division bucked the market trend,
rising 4.5 percent through August, to 676,500 units. In Germany, where the
market has shrunk by 12 percent, Mercedes-Benz boosted its market share by 13
percent. In the U.S., the division is set to sell more than 200,000 vehicles
this year for the first time. The high figures recorded in 1999 for earnings,
sales and revenues will all be surpassed. A few days ago, the 500,000th A-
Class rolled off the assembly line in Rastatt. Sales of the new C-Class are
rising at an unprecedented rate. Additional production capacity will be
created in South Africa and Brazil to meet the high demand. Sales of the M-
Class rose 30 percent in the first eight months of the year. Despite being
two-thirds of the way through its product-cycle, the E-Class remains the clear
leader in the segment. Sales of the S-Class rose 41 percent through August
and, with a market share of 50 percent, it is the dominant vehicle in the
market's premium segment.
Smart attains cult status and will top 100,000 unit sales this year
Sales of the smart rose 67 percent to 69,500 units through August. In
Germany, the smart is the number one vehicle in its segment. Although the
smart is officially sold in only nine European countries, it can already be
found on the roads of 57 countries around the world. Studies show that the
value of the brand has benefited considerably from the high recognition of the
vehicle and increased customer identification with the smart.
Commercial Vehicles: New acquisitions strengthen global position
The Commercial Vehicles division is expecting to post results in excess of
the high figures recorded in 1999 despite the difficult market situation in
North America.
The acquisition of Western Star marks another important step in
DaimlerChrysler's multi-brand strategy for trucks, and also established
DaimlerChrysler as a full-range bus supplier in North America. In addition,
the acquisition of Detroit Diesel makes DaimlerChrysler the world's leading
manufacturer of heavy-duty and mid-range on highway diesel engines. The
planned 50-50 venture with Hyundai Motors will not only give DaimlerChrysler a
foothold in Korea, one of the most important markets in Asia, but also will
open up a range of promising opportunities in other markets, such as Europe
and the U.S.
Chrysler Group defends market share despite significant launches and
intense competition
As announced at mid-year, the Chrysler Group responded vigorously to the
climate of intense competition in the North American market. Also, during
continuing changeover to new models, Chrysler Group increased discounts. This
marketing strategy enabled the Chrysler Group to keep its strong sales
position in North America, while reducing prior model inventories. Combined
with higher interest rates, higher fuel prices and the start-up costs for the
new models, these discounts and the intense competition in North America mean
the Chrysler Group will post an operating loss of roughly 600 million euros
($528 million) for the third quarter of this year. Going forward the launch
of the new models will enable the Chrysler Group to achieve a reduction in
sales and marketing costs. For the full year the Chrysler Group will post a
profit of over 2 billion euros ($1.76 billion). Volume from 2000 calendar
year launches as well as new models planned for the coming years (Jeep(R)
Cherokee and New Dodge Ram launches in 2001 alone) are expected to lead to an
improvement in earnings and competitive position.
The Chrysler Group has launched a broad range of immediate measures
designed to boost earnings. These include utilizing the full potential of the
entire supplier chain and increasing efficiency in all major processes and
functions. Every platform and product team and function has launched
immediate action plans to enhance revenue, reduce near term costs and
establish benchmark objectives.
Activity examples include:
* A streamlined process for lease management and off-lease vehicle
disposal is already in place and will quickly improve leasing volumes to
competitive norms.
* Product investment and variable cost targets have already been
recalibrated to reflect a zero-pricing environment.
* Competitive bidding has been substantially increased to ensure
benchmark investment and variable cost performance.
* Targeted market programs and vehicle packages are underway to enhance
revenue quality.
* PT Cruiser volume expansion is being examined for acceleration.
* Automotive Council activity regarding "Best Practice, Best Process,
Best Price" benchmarking is jointly underway.
* Launch timing and acceleration is under additional review in light of
the highly successful Windsor minivan launch practices.
debis strengthens its global position as a financial services company
Represented in 67 countries, including all the world's major markets,
debis Financial Services is the fourth-largest non-bank financial services
provider in the world. The company focuses on financing for leasing and sales
of DaimlerChrysler products as well as on fleet management.
In North America, the high discounts awarded on new vehicles from the
Chrysler Group and the decline in the U.S. truck market have had a negative
effect on the residual value of lease vehicles. This will have a negative
effect on North American earnings for financial service activities. The
company will implement a range of concrete measures designed to counter this
trend, including limiting the proportion of new vehicles leased with respect
to certain models, and intensified marketing activities to help boost used
vehicle sales.
Outlook
The new and innovative vehicles that DaimlerChrysler will launch in the
coming months and years will improve the company's global competitive
position. In the medium and long term, implementation of the measures
outlined above, and a more extensive exchange of components, will enable
DaimlerChrysler to achieve a further substantial improvement in its market
position. With stakes in Mitsubishi Motors and Hyundai Motor, DaimlerChrysler
has secured a unique position in the worldwide automotive industry.
DaimlerChrysler will publish the final figures for the third quarter on
October 26, 2000.
On October 9th, DaimlerChrysler will announce in a press conference its e-
business strategy and describe its plan for bundling its e-business
activities.
Dollar values are converted from euro values with the exchange rate of
1 euro=USD 0.88 based on the closing exchange rate, September 26, 2000.