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Published: Thursday, 10/25/2007

Daimler has 3Q loss of $2.18 billion on charges related to Chrysler deal

FRANKFURT, Germany Automaker Daimler AG posted its first quarterly loss since 2003, with charges of $3.7 billion from the sale of Chrysler offsetting big gains by its Mercedes-Benz Car Group.

But the 1.53-billion euro ($2.18 billion) quarterly loss was anticipated by analysts, who were cheered by an otherwise solid performance, noting that sales were up in key U.S. and European markets.

Daimler shares rose nearly 5.4 percent to 78.30 euros ($111.42) in Frankfurt trading after the results were released.

The loss compared with a profit of 868 million euros a year earlier. Excluding the charges related to the Chrysler sale, the company said it would have posted a profit of 1.1 billion euros ($1.57 billion).

Stephen Cheetham, senior research analyst for European autos at Sanford C.

Bernstein in London, called the results stronger than expected and said that the company s earnings trajectory at Mercedes will continue strong well into 2008 due to sales momentum from the new C-class as well as continued cost reduction.

Daimler said in a statement that the entire transaction has so far cost it 2.6 billion euros ($3.7 billion) in the third quarter, slightly less than the 3 billion euros ($4.27 billion) it had anticipated.

Daimler sold 80.1 percent of Chrysler to private equity firm Cerberus Capital Management LLC for $7.4 billion, ending a nearly nine-year partnership. Daimler-Benz and Chrysler Corp. linked up in a 1998 $36 billion deal described as a marriage made in heaven by then-CEO Juergen Schrempp, but up-and-down earnings and repeated cost-cutting soured many investors on the effort to create a global auto giant.

Daimler s pretax figures, or earnings before interest and taxes, were 1.9 billion euros ($2.7 billion) in the third quarter, up 4 percent from the 1.8 billion euros it posted last year.

Daimler said it expects to post a pretax profit of at least 8.5 billion euros ($12.1 billion) for 2007.

Stuttgart-based Daimler, which changed its name from DaimlerChrysler last month, said its sales rose 6 percent in the July-September period to 25.6 billion euros ($36.43 billion) from 24.2 billion euros a year earlier with demand for its C-Class and S-Class models.

Its Mercedes-Benz Cars group, which includes the famed luxury sedans along with the tiny Smart fortwo, posted a pretax profit of 1.3 billion euros ($1.85 billion) in the quarter, up 57 percent from 850 million euros a year earlier, as sales rose by 12 percent to 14 billion euros ($19.92 billion) from 12.6 billion euros last year.

Profits were offset by a 15 percent drop in pretax profit at the Daimler Trucks unit, which fell to 480 million euros ($683 million) from 565 million euros in 2006 a sign that higher fuel prices are limiting major purchases of new trucks.

The company also said that new U.S. regulations that require cleaner engines hampered sales, as the company, and others, had to bring improved but more expensive engine technology to market to meet such regulations. That helped push sales there down by 51 percent.

The division was also hurt by the fact its two biggest markets the U.S. and Japan have their sales in dollars and yen which are then exchanged back into euros. The euro has been rising steadily against both currencies in recent months.

But Cheetham said that the negative impact of lower sales in North America was more than offset by higher sales in Europe and Latin America (up a combined 12 percent) and by cost-cutting measures.

Looking ahead, the company said it expects to sell a total of 2.1 million vehicles in 2007.

Sales fell 12 percent to 7 billion euros ($9.96 billion) from 7.96 billion euros in July-September 2006.

For the first nine months of the year, Daimler earned 2.29 billion euros ($3.26 billion), down from 3.8 billion euros a year earlier, on sales of 72.9 billion euros ($103.74 billion), up slightly from 72.2 billion euros in the first nine months of 2006.

Read more in later editions of The Blade and toledoblade.com.



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