( I'll bet the Mercedes engineers are annoyed )
July 27 (Bloomberg) -- DaimlerChrysler AG, the world's second- biggest maker of luxury cars, may report higher second-quarter earnings as gains at its truck unit made up for losses at Mercedes Car Group and declining earnings at Chrysler.
DaimlerChrysler tomorrow may say net income climbed 4.9 percent to 581 million euros ($707 million) from 554 million euros a year earlier, according to the median estimate of 12 analysts surveyed by Bloomberg.
Sales at the Stuttgart, Germany-based company probably rose 1.2 percent to 37.5 billion euros, led by heavy trucks. Chief Executive Officer Juergen Schrempp, who last quarter reduced spending on the money-losing Smart car models, outperformed his counterparts at Ford Motor Co. and General Motors Corp. Ford's quarterly earnings declined and GM posted a loss.
``Profit at the truck unit is growing along with demand and we don't expect the peak until 2006, which is helping to keep earnings stable,'' said Stefan Bauknecht, a fund manager at Frankfurt-based DWS Investment GmbH, which manages $1.2 billion and holds shares of DaimlerChrysler. ``At the core of the problem at Mercedes are the Smart as well as quality concerns.''
Schrempp, 60, declined to comment. Compensation for DaimlerChrysler's
10-member management board was cut 23 percent last year to a combined 31.6 million euros, according to the company's annual report. Schrempp's pay wasn't disclosed.DaimlerChrysler's stock is down almost 50 percent since the company was formed in Daimler-Benz AG's $36 billion takeover of Chrysler in 1998. That compares with the 86 percent gain of Munich- based Bayerische Motoren Werke AG, the No. 1 maker of luxury cars.
13 `Sell' RatingsSchrempp presided over the March 31 recall of 1.3 million Mercedes-Benz cars to fix electrical and brake failures, the brand's biggest-ever mass repair program. BMW overtook Mercedes- Benz in the first quarter as the world's leading manufacturer of luxury cars. Mercedes lagged competitors including BMW and Toyota Motor Corp.'s Lexus, according to a survey of U.S. car buyers published in May by J.D. Power-LMC.
Shares of DaimlerChrysler are up 0.6 percent this year, the worst performer on the eight-member Bloomberg Europe Autos Index. The stock in Frankfurt yesterday fell 14 cents to 35.81 euros.
Of the 43 analysts covering DaimlerChrysler, 12 recommend buying the stock, 18 have a ``hold'' rating and 13 favor selling, according to data compiled by Bloomberg. The carmaker fell short of analysts' profit estimates in three of the past five quarters.
``The stock has continued to perform poorly, mostly on concern about developments at Chrysler,'' said Philippe Houchois, an analyst at JPMorgan Chase & Co. in London, who has an ``overweight'' rating on Daimiler. Chrysler's operating profit probably fell 14 percent to 445 million euros, analysts estimate.
Chrylser Discounts
In the U.S., Chrysler is offering incentives to compete with Ford and GM. Chrysler's average discount was $4,288 per vehicle in June, compared with $5,496 at Detroit-based GM, the world's biggest carmaker, and $5,083 at Ford of Dearborn, Michigan, according to CNW Marketing Research Inc., Edmunds.com and Autodata Corp.
Smart's 1.2 billion-euro overhaul, including the elimination of 700 jobs, will reduce DaimlerChrysler's 2005 earnings, executives said April 1. The brand has a target of breaking even in 2007. Mercedes aims to more than double its return on sales to 7 percent by 2007 from 3.4 percent last year.
Second-quarter earnings before interest and taxes at DaimlerChrysler's commercial-vehicle business, the world's largest maker of heavy trucks, probably rose 12 percent to 523 million euros, according to the analysts' median estimate.
DaimlerChrysler probably sold about 5.5 percent more commercial vehicles in the quarter, estimates HVB Group analyst Georg Stuerzer. Unit sales developed ``very positively,'' said company spokesman Othmar Stein, declining to be more specific.
Mercedes Loss
The carmaker's biggest division, Mercedes, probably had a loss before interest and taxes of 63 million euros, including an estimated 400 million euros spent on the Smart reorganization, compared with a year-earlier operating profit of 703 million euros, according to the analysts' estimate.
``Mercedes will have eaten into the other divisions' earnings improvements again,'' said Michael Raab, an analyst at Sal Oppenheim in Frankfurt. ``Commercial vehicles should have boosted earnings again due to continuously high truck volumes.''
DaimlerChrysler has brought out a revised Mercedes-Benz A- Class small car, is updating the M-Class sport-utility vehicle and flagship S-Class sedan this year and introducing the B-Class, a new compact car based on the A-Class chassis, and the R-Class, a so-called crossover based on the M-Class.
``They really have to fight at the moment to maintain the customer and not only because of the quality problems but because the model palette is relatively old,'' said Markus Brueck, a fund manager at Metzler Investment in Frankfurt, which oversees about 15 billion euros in assets including DaimlerChrysler shares.
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