DaimlerChrysler Reports EUR 5.2 Billion Operating Profit in 2005
Net income of EUR 2.8 billion
(2004: EUR 2.5 billion)
Earnings per share of EUR 2.80 (2004: EUR 2.43)
Revenues up 5% to EUR 149.8 billion
Stuttgart, Germany / Auburn Hills, Michigan, USA, Februar 16, 2006
DaimlerChrysler (stock-exchange abbreviation DCX) today published its
preliminary consolidated financial statements and its divisions'
results for the year 2005.
In the past financial year, the DaimlerChrysler Group posted an
operating profit of EUR 5.2 billion, compared with EUR 5.8 billion in
Excluding charges relating to the realignment of the smart business
model (EUR 1.1 billion), there was an increase in the Group's
operating profit. The Group thus fulfilled its earnings forecast for
the full year.
At the Mercedes Car Group, the measures taken to improve efficiency as
a part of the CORE program and new products had a positive impact on
operating results during the course of the year; the turnaround in
earnings was achieved. Nonetheless, earnings for the full year were
negative due to the realignment of the smart business model and the
expenses for the personnel measures. In a difficult market environment,
the Chrysler Group achieved a higher operating profit than in 2004. The
Commercial Vehicles Division also developed positively in 2005 and
achieved record earnings. Financial Services improved its operating
profit. Other Activities' operating profit exceeded the prior
The DaimlerChrysler Group recorded net income of EUR 2.8 billion in
2005, compared with EUR 2.5 billion in the prior year. Based on the
reported net income, earnings per share amounted to EUR 2.80, compared
with EUR 2.43 in 2004.
Dr. Dieter Zetsche, Chairman of the Board of Management of
DaimlerChrysler AG, stated, "DaimlerChrysler made significant
progress in the year 2005. But our earnings are still not where we want
them to be. We intend to grow profitably and to create added value over
the long term - for the benefit of our customers, employees and
The Board of Management will propose to the Supervisory Board to
distribute a dividend of EUR 1.50 per share to the shareholders. The
proposed dividend takes account not only of the development of
operating profit and cash flow in 2005, but also of our expectations
for the coming years.
The Free cash flow of the Industrial Business increased by EUR 0.3
billion to EUR 2.1 billion. The net liquidity of Industrial Business
increased by EUR 5.1 billion to EUR 7.3 billion.
Unit sales and revenues
DaimlerChrysler sold more than 4.8 million vehicles in 2005, surpassing
the prior-year figure by 3%. The Group achieved new record unit sales
for both passenger cars and commercial vehicles. The company's total
revenues increased by 5% to EUR 149.8 billion in 2005.
As of December 31, 2005, DaimlerChrysler employed 382,724 people
worldwide (end of 2004: 384,723). Of this total, 182,060 wereemployed
in Germany (2004: 185,154) and 97,480 in the United States (2004:
New management model
On January 24, 2006, DaimlerChrysler presented a new management model
designed to improve the Group's competitiveness and promote further
profitable growth. The new model will further integrate the Group's
functions, more closely focus operational areas on their core
processes, and encourage internal collaboration. In addition, it will
reduce the redundancies of activities. This will make DaimlerChrysler
quicker, leaner, more flexible and more efficient.
With the implementation of the new management model, the company
intends to reduce its administrative expenses, which are currently
significantly higher than the industry average, by an annual EUR 1.5
billion. EUR 0.5 billion of this total will be realized by the other
efficiency programs already running, like CORE in the Mercedes Car
As a consequence of the new management model, personnel capacities will
also have to be adjusted. This will lead to a reduction of up to 20% in
the number of persons employed in administrative departments during the
years of 2006 through 2008, and 30% in management positions, totaling
up to 6,000 jobs worldwide.
The total expenditure incurred for the implementation of the program in
the years 2006 through 2008 is likely to be in the region of EUR 2
Investing to safeguard the future
The DaimlerChrysler Group invested a total of EUR 6.6 billion in
property, plant and equipment in 2005 (2004: EUR 6.4 billion). For the
Mercedes Car Group, the focus was on preparing for the production of
the new M-Class and R-Class at the US-plant in Tuscaloosa, Alabama, the
new V6 and V8 engines and the successors to the C-Class and the smart
fortwo. The main areas for the Chrysler Group were the preparation of
production facilities for new model introductions and further
improvements in plant efficiency and flexibility. The volume of
investment in the Commercial Vehicles Division was significantly higher
than in the prior year. This was primarily due to preparations for the
production startup of the new Sprinter.
Research and development expenditures totaled EUR 5.6 billion in 2005
(2004: EUR 5.7 billion). The Mercedes Car Group's most important
projects were the successor models for the C-Class and the smart
fortwo. Research and development work at the Chrysler Group was once
again influenced by the product offensive, in particular the renewal
and expansion of the Jeep® and Dodge model lineup. The Commercial
Vehicles Division's key projects included the new generation of
trucks for Europe, the United States and Japan, and various new
During the planning period of 2006 through 2008, DaimlerChrysler
expects to invest a total of approximately EUR 19 billion on property,
plant and equipment. DaimlerChrysler also plans to invest substantial
funds in the further expansion of its business activities in China.
During the period of 2006 through 2008, DaimlerChrysler will invest EUR
15.5 billion in its research and development activities. Therefore, a
total of EUR 34.5 billion will be invested in safeguarding the future.
Mercedes Car Group
The Mercedes Car Group sold 1,216,800 vehicles in 2005 (2004:
1,226,800). The success of the new models launched in the market led to
significantly higher revenues for the Mercedes-Benz brand in the second
half of the year. As a result, unit sales in 2005 were slightly higher
than the figure recorded in 2004.
Revenues of EUR 50.0 billion slightly exceeded the prior year's
The Mercedes Car Group posted an operating loss of EUR 505 million for
2005, compared with an operating profit of EUR 1.7 billion in the prior
year. In the course of last year the turnaround in earnings was
achieved. Charges on earnings totaling EUR 1.1 billion arose in
connection with the realignment of the smart business model. Expenses
of EUR 570 million were booked in 2005 relating to the staff-reduction
program at Mercedes-Benz Passenger Cars, which was announced at the end
of September 2005. These workforce adjustments, which aim for a
reduction of 8,500 jobs at the German locations of the Mercedes Car
Group by the end of September 2006, will lead to total costs of
anticipated EUR 950 million. By the end of 2005, approximately 5,000
employees had accepted voluntary severance agreements or early
retirement. The operating result was also negatively impacted by the
continuation of measures initiated within the framework of the quality
offensive. Further charges in the operational business resulted from
less favorable currency-hedging rates than in the prior year
(particularly for the US dollar), a less favorable model mix and higher
The Mercedes-Benz brand introduced four important new models in 2005:
the successor models for the M-Class and S-Class, and the new B-Class
and R-Class sports tourers. Engine lineups were significantly upgraded
with the launch of the new-generation V6 and V8 gasoline and diesel
The Mercedes Car Group unveiled the new S-Class at the International
Motor Show (IAA) in Frankfurt in September 2005. The model was
subsequently launched in Western Europe and was met with an extremely
positive response from customers and the press.
In 2005, the Mercedes-Benz brand expanded its range of products to
include two completely new vehicles: the B-Class and the R-Class. A
total of 8,300 R-Class sports tourers were sold in the United States in
the year under review. A shorter version of the model will go on sale
in Western Europe in the spring of 2006.
The new M-Class met with a very positive response among customers and
the press. A total of 66,900 new M-Class vehicles have been sold since
the model was launched in the United States in April 2005 and in
Western Europe the following August.
The extensive measures being implemented within the framework of the
quality offensive enabled Mercedes-Benz to significantly improve the
quality of the vehicles in the year under review. Internal analyses as
well as numerous external studies have shown this to be the case. In
the 2005 J.D. Power Initial Quality Study, for example, the
Mercedes-Benz brand moved up five notches and is now once again among
the top five vehicle brands.
The Maybach high-end luxury brand expanded its range of models in 2005,
thereby further boosting the brand's appeal. Since the brand was
revived, Maybach has delivered some 1,500 vehicles around the world in
an economic environment that has been challenging also for the luxury
car sector. 300 of these automobiles were delivered in 2005.
Unit sales of the smart brand totaled 124,300 vehicles in the year
under review (2004: 152,100). As part of the restructuring program for
smart that was announced in April 2005, DaimlerChrysler discontinued
production of the smart roadster and development of the planned smart
SUV. The workforce was reduced from 1,350 to 750 employees at smart
headquarters, and there was a reduction of 125 employees at the Hambach
plant. As a result of these measures, smart succeeded in reducing fixed
costs by 26% in the year under review, thus achieving its goals for the
Worldwide, the Chrysler Group posted factory unit sales (shipments to
dealers) of 2.8 million Chrysler, Jeep® and Dodge brand passenger
cars, sports tourers, minivans, sport-utility vehicles and light trucks
in 2005, an increase of 1% compared to the prior year. Worldwide retail
and fleet sales increased by 5% to 2.8 million vehicles.
Due to higher unit sales, the Chrysler Group's revenues of EUR 50.1
billion were 1% above the prior-year level.
Although market conditions remained difficult in North America, the
Chrysler Group posted an operating profit of EUR 1.5 billion in 2005,
compared with an operating profit of EUR 1.4 billion in the prior year.
The increase in operating profit reflects an increase in worldwide
factory unit sales and a EUR 240 million gain realized on the sale of
its Arizona Proving Grounds vehicle testing facility. These items were
offset by negative net pricing and charges of EUR 99 million related to
financial support provided to one supplier.
In addition to improving efficiency and product quality, another
strategic goal of the Chrysler Group is to achieve a sustained
improvement in its competitive position as a result of new model
launches. Therefore, the Chrysler Group continued its product offensive
in 2005 with award-winning products such as the Dodge Charger, the
Jeep® Commander and the new Dodge Ram Mega Cab pickup truck.
Mid-term, the Chrysler Group plans to further develop its presence in
international markets. The Dodge brand will be launched in markets
outside North America in 2006, while the product range for
international markets was already expanded in 2005.
By the year 2007, the Chrysler Group aims to close the gap with the
best competitors in the North American market in terms of vehicle
quality and productivity. In 2005, additional measures were taken to
achieve further productivity improvements and to optimize manufacturing
processes. The results of the measures that have been implemented in
recent years can be seen in the Harbour Report North America 2005 - a
highly respected report measuring the productivity of automobile
manufacturers in North America. Harbour's latest study shows that the
Chrysler Group once again reduced its overall hours per vehicle, by 4.2
(2003: 7.8) %, in 2004, and an improvement of 5-6% is expected in the
2005 report in June.
The Chrysler Group will launch 10 all-new products in 2006 - more
than in any other year in its history - including the Chrysler Aspen,
Jeep® Wrangler, Jeep® Compass, Dodge Caliber and Dodge Nitro.
Commercial Vehicles Division
The Commercial Vehicles Division posted record results in 2005, with a
16% increase to a new high of 824,900 trucks, vans and buses.
Revenues at the division rose by 17% to EUR 40.6 billion.
The Commercial Vehicles Division continued its positive development of
the prior year and increased its operating profit from EUR 1.3 billion
to EUR 2.1 billion. The increase in earnings was due primarily to the
positive development of unit sales in all business units, especially
the international market success of the products of the Trucks business
segment, as well as the efficiency improvements achieved by
implementing the "Global Excellence" program. This program is based
on four initiatives and is designed to further improve the
competitiveness of all the division's business units and was
announced by the division in June 2005. The operating profit achieved
in the year 2005 includes exceptional income of EUR 276 million from
the settlement reached with Mitsubishi Motors Corporation (MMC)
relating to charges for quality actions and recall campaigns at
Mitsubishi Fuso Truck and Bus Corporation (MFTBC).
The Trucks business segment again posted a significant increase in
sales in the year under review: Unit sales of 509,300 trucks exceeded
the prior year's figure by 25%. Unit sales at the Trucks Europe/Latin
America business unit totaled 148,000 vehicles, an increase of 8% from
the prior year and also a new record. The Trucks NAFTA business unit
posted a 20% increase in sales to 182,400 units in 2005. The FUSO
business unit sold 178,900 trucks and buses worldwide in 2005. Due to
the date of FUSO's first-time consolidation, the prior-year figure of
118,100 vehicles sold applies only to the last eight months of 2004.
The Vans business unit also set a new sales record, selling 267,200
vehicles worldwide, an increase of 2%. Worldwide sales by the Buses
business unit with the brands Mercedes-Benz, Setra and Orion rose by
10% to 36,200 buses, coaches and chassis.
At the Amsterdam Commercial Vehicle Show (RAI) in October 2005, the
Commercial Vehicles Division unveiled important new products such as
the Actros Cruiser 1860 LS concept truck and equipment for new
applications for Axor construction vehicles. It also presented BlueTec
diesel technology for the Atego and Axor truck series and a
hybrid-drive Canter light truck.
The buses segment continued its product offensive in Europe. The
unit's full-line range of products was expanded in the fall of 2005
to include the new generation of the Mercedes-Benz Travego travel
coach, the new Mercedes-Benz Citaro Low Entry urban and overland bus,
and the new Setra MultiClass 400 overland bus.
The Financial Services division once again developed very positively in
all regions in 2005. In the past financial year, the operating profit
posted by Financial Services improved by 17% to EUR 1.5 billion. The
earnings development in 2005 was mainly a result of significantly lower
charges from the involvement in Toll Collect, increased revenues
generated by attractive financial services products, the positive
development of risk costs and improved efficiency. There was a negative
impact from higher interest rates, particularly in the United States.
Contract volume rose by 15% to EUR 117.7 billion; when adjusted for
exchange-rate effects, contract volume increased by 3%. At the end of
the year, Financial Services' global portfolio comprised 6.4 million
leased and financed vehicles. New business totaled EUR 48.2 billion
(2004: EUR 50.9 billion) in an extremely competitive market environment
As part of an organizational restructuring program, Financial Services
combined all of its financial services activities in North and South
America into the "Americas" region. Contract volume in this region
increased by 18% to EUR 85.9 billion, accounting for 73% of the total
portfolio; when adjusted for exchange-rate effects, the increase was
1%. The Europe, Africa, Asia/Pacific region also developed positively
in 2005. At EUR 31.8 billion, contract volume was up 8% from the prior
In Germany, DaimlerChrysler Bank provided attractive products that once
again led to an increase in leased and financed vehicles' share of
the total number of Group-brand vehicles sold. The bank managed a
contract volume of EUR 15.2 billion at the end of the year under review
(2004: EUR 14.5 billion), serving some 987,000 customers, or 7% more
than in 2004.
In November 2005, the division became the first financial services
company to offer passenger-car and truck financing, as well as
insurance, in China.
The toll collect system for trucks above twelve metric tons gross
vehicle weight works reliably.
On November 17, 2005, DaimlerChrysler sold its entire stake in
Mitsubishi Motors Corporation (MMC).
As part of the strategy of focusing even more closely on core business
operations, DaimlerChrysler reached an agreement in December 2005 with
EQT, a Swedish financial investor, on the sale of both MTU
Friedrichshafen GmbH and the off-highway activities of Detroit Diesel
Corporation (DDC). The transfer of ownership is likely to take place in
the first quarter of 2006.
European Aeronautic Defence and Space Company (EADS) continued growing
in 2005, and expects both revenues and earnings to surpass its
prior-year figures once again. The company will publish its results for
the 2005 financial year on March 8, 2006.
The Other Activities segment increased its operating profit by EUR 135
million to EUR 591 million in 2005.
On the basis of the divisions' planning, DaimlerChrysler expects the
Group's unit sales in 2006 to be in the range of the prior-year.
Adjusted for exchange-rate effects, revenues in 2006 will most likely
increase slightly. In the following years, DaimlerChrysler expects
revenues to increase significantly in line with rising unit sales. In
regional terms, the main source of growth will be the dynamic markets
In January 2006, DaimlerChrysler announced its new management model. By
implementing this program, DaimlerChrysler intends to generally improve
the Group's competitiveness and create the right conditions for
further profitable growth.
The implementation of these measures in the years 2006 through 2008
will involve investment and expenses. These expenses will be calculated
and their allocation to the various years will be identified in the
next months. The Group will therefore issue a more detailed earnings
forecast for the year 2006 at a later point of time. DaimlerChrysler
anticipates an improvement in profitability in 2006, with continuous
increases in operating profit during the following years.
The driving force of this positive earnings trend is on the one hand
the product offensive with more than 50 new vehicles in the period of
2005 through 2008. On the other hand, an important contribution will
come from the ongoing efficiency-improving programs which are being
pushed steadily forward.
A fundamental condition for the targeted increase in earnings is a
generally stable economic and political situation and the moderate
increase in the worldwide demand for automobiles expected for the years
of 2006 through 2008. Opportunities and risks may arise from the
development of currency exchange rates, interest rates and raw-material
These figures are preliminary and have neither been approved yet by the
Supervisory Board nor audited by the external auditor.
This document contains forward-looking statements that reflect
management's current views with respect to future events. The words
,,anticipate," ,,assume," ,,believe," ,,estimate,"
,,expect," ,,intend," ,,may," ,,plan," ,,project" and
,,should" and similar expressions identify forward-looking
statements. Such statements are subject to risks and uncertainties,
including, but not limited to: an economic downturn in Europe or North
America; changes in currency exchange rates, interest rates and in raw
material prices; introduction of competing products; increased sales
incentives; the effective implementation of our New Management Model,
and the CORE program, including the new business model for smart, at
the Mercedes Car Group; renewed pressure to reduce costs in light of
restructuring plans announced by our major competitors in NAFTA; supply
interruptions of production materials, resulting from shortages, labor
strikes or supplier insolvencies; the resolution of pending
governmental investigations; and decline in resale prices of used
vehicles. If any of these or other risks and uncertainties occur (some
of which are described under the heading "Risk Report" in
DaimlerChrysler's most recent Annual Report and under the heading "Risk
Factors" in DaimlerChrysler's most recent Annual Report on Form 20-F
filed with the Securities and Exchange Commission), or if the
assumptions underlying any of these statements prove incorrect, then
actual results may be materially different from those expressed or
implied by such statements. We do not intend or assume any obligation
to update any forward-looking statement, which speaks only as of the
date on which it is made.