Tuesday February 17, 06:37 PM
German automaker Daimler warns of a tough 2009
By Lenaig Bredoux
FRANKFURT, Germany (AFP) - The German luxury automaker Daimler (Xetra: 710000 - news) warned Tuesday that 2009 would be a tough year after posting a sharp drop in 2008 sales and profit.
The automotive market environment is "extremely difficult," Daimler chairman Dieter Zetsche told a telephone news conference after the company's results were released.
"No one knows how long and with what strength" the current global crisis might persist, "but one day, we will bounce back," Zetsche stressed.
Daimler, which makes Mercedes-Benz automobiles and Smart city cars, said it expected sales to fall further this year amid a global slump in car markets.
"Demand for automobiles could decrease by another 10 percent in 2009 compared with the prior year," a Daimler statement said.
A more detailed earnings forecast would be provided "when the development of the world economy and the automotive markets can be better assessed," it added.
In 2008, the group's net profit plunged by 65 percent to 1.4 billion euros, (1.8 billion dollars), well below an analysts forecast of 2.75 billion euros.
In 2007 the group had posted a net profit of 4.0 billion euros.
In the fourth quarter of 2008, Daimler had a net loss of 1.5 billion euros, compared with a profit of 1.7 billion during the same period a year earlier.
Full-year operating profit dropped to 2.73 billion euros from 8.71 billion one year earlier, in part owing to charges of 3.2 billion euros on the group's investment in US automaker Chrysler and weaker earnings by the Mercedes-Benz car division.
Daimler had forecast an operating profit of more than 6.0 billion euros.
The group has sold most of its holding in the loss-making US car maker Chrysler but still owns a stake of 19.9 percent and booked heavy charges as it cut the value of that investment to zero.
Zetsche told the press conference that talks on selling the stake had taken place and added: "We have seen progress."
The negotiations were held with Chrysler managers and the US company's majority shareholder, the Cerberus investment fund, but Zetsche declined to provide details.
Financial director Bodo Uebber told media the holding still posed risks to earnings owing mainly to guarantees on pension payments and some of Chrysler's international activities.
Daimler sold the lion's share of its Chrysler holding in 2007 after a rocky nine-year tie-up, and Zetsche would be happy to see Chrysler form a mooted alliance with the Italian car maker Fiat (Milan: F.MI - news) .
Meanwhile, a major Daimler unit, global heavy vehicle leader Daimler Trucks, "did not achieve its prior-year earnings, primarily due to the difficult economic situation in the United States" and expenses incurred in the transfer of manufacturing activities within North America, the parent group said.
Overall Daimler sales were off by 3.5 percent at 95.9 billion euros.
It had reported last month that unit sales fell by 2.3 percent.
For 2009, sales were "likely to be lower than in 2008 in all of the vehicle divisions," the group warned.
Charges to core earnings would also be "considerable," the statement said, while Zetsche told the news conference that first quarter earnings would show a loss.
He said no decisions had been taken on possible further cooperation with German rival BMW (Xetra: 519000 - news) .
Meanwhile, Daimler planned to cut its 2008 dividend to 0.60 euros per share from 2.0 euros per share in 2007, the statement said.
Investors did not appreciate the worse-than-expected results, and Daimler shares shed 3.88 percent to 22.64 euros in late Frankfurt trading, while the DAX index (Xetra: news) of German blue-chips was off by 3.64 percent overall.
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