Daimler makes €1.28bn loss on Mercedes slump

[chiefski26]

Elizabeth Judge

Daimler, the luxury German carmaker, delivered more gloom for the beleagured car industry yesterday, with a warning of a "significant" second quarter loss after posting first quarter results that fell far short of expectations.

The group, which yesterday outlined plans to shed its disastrous 19.9 per cent in Chrysler, unveiled a first quarter net loss of €1.3 billion, compared with a profit of €1.3 billion a year ago. Analysts had expected a loss of around €950 million.

Earnings, the group expects, will not turn positive again until the second half of the year with a "renewed significant operating loss" in the second quarter.

Revenues fell by more than one fifth to €18.7 billion, with sales of its Mercedes Benz cars and vans and Daimler vans particularly hard hit.
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The dire figures were unveiled as Honda, Japan's second biggest car maker, surprised analysts with an unexpectedly good set of results. The group forecast a small profit for the year, made possible, it said, by cost cutting, a strong yen and its leading position in motorcycles.

It is also expecting to secure a strong boost from sales of its eco-friendly vehicles following the introduction of 'scrappage' schemes.

Daimler has already taken drastic measures to help it weather the recession. It recently announced plans to cut €2 billion from its personnel costs for the year, with likely compulsory redundancies.

Today though, it said, the measures had proved "far from sufficient."

Unit sales, which fell 34 per cent year-on-year in the quarter, to 332,300, will "decrease significantly" in the year as a whole, it said.

It is now banking on cost cuts and the launch of a new Mercedes-Benz E-Class model, to help shore up its future.

Carmakers everywhere have been battered by a massive downturn in demand, triggered by the worst financial crisis in generations.

The crisis has seen jobs cut, factories mothballed and some of the biggest names in the sector, including General Motors, brought to its knees.

In contrast to Daimler's woes Honda expects an operating profit of yen10 billion for the year to March 31, 2010. Analysts had feared the group was set to fall into first loss since it was founded in 1948.

Koichi Kondo, Honda's executive vice president, said the group could see a sales boost of up to 100,000 from an expected introduction of a 'scrappage' scheme under which customers are paid to trade in their old, inefficient vehicles, for greener models.

Its motorcycle division, which contributed 60 per cent of group operating profit last year, had also proved its saviour, he said. "Having the motorcycle business is a big strength for us."

Under its deal with Chrysler Daimler will pay dollars 600 million into Chrysler's pension plan over three years. It will also forgive loands that it made to the struggling US group when it sold 80.1 per cent of the group to the private equity firm, Cerberus Capital Management in 2007.

The move ends a stormy decade long alliance.