Tail wagging the dog

28 October 2004 By Marianne Brun-Rovet

The carmaker used to comprise a German powerhouse and an American dog. Now, things are swinging the other way. The improvements at Chrysler are welcome especially after Daimler s Asian nightmare. But turning round Mercedes is the key to recovery.

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DaimlerChrysler reported a 7% increase in thirdquarter operating profit as gains at its US unit Chrysler and its financial services division offset weaker earnings at the Mercedes car group. But the world's fifthlargest carmaker warned global car demand in the fourth quarter would weaken.

Daimler reported an operating profit of E1.3bn compared with E1.2bn in the same period last year, on revenues of E35bn. Sales at its luxury car division Mercedes fell 5% yearon yearwhile operating profit fell 62% to E304m because of weakening demand in Europe, especially Germany. Chrysler sales also fell but the US division's profits jumped 48% to E217m.

Daimler said it expected a significant improvement in operating profit for the full year, despite expecting demand for passenger cars to weaken in the fourth quarter, especially in Western Europe. It also expects fullyear operating profits at its Mercedes division will be substantially lower than in 2003 because of a changed model mix, higher marketing expenditure, exchangerate effects and increased expenditure on new products.

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