DaimlerChrysler Profits Plunge Prolongs Auto Woe

28 July 2003

DaimlerChrysler has reported a 90% plummet in second-quarter profits, continuing a dismal few weeks for the big auto makers.

The German-American giant posted net income of €109 million ($125.4m; £77.5m), a huge drop from the €1.1bn profits made in Q2 2002. Revenues slipped 13% to €34.3bn.

The chief headache is in the US, where its Chrysler Group unit tumbled from a €414m operating profit last year to a €948m shortfall – the latest sign that the long-running US incentives battle between the major car firms is no longer driving sales and has begun to erode the bottom line.

Moreover, Mitsubishi Motors, in which DaimlerChrysler holds a 37% stake, last week warned it will make a $674m loss for the six months to September. And there was more bad news at DC’s luxury unit Mercedes-Benz – once considered downturn-proof – where Q2 sales fell 5%.

DC’s woes follow downbeat earnings statements from the other two of America’s ‘big three’ auto groups. Ford Motor Company recently reported a Q2 loss of $525m in Europe, while General Motors’ European business fell $3m into the red. Elsewhere, there were falls in first-half operating profits at French car giant PSA Peugeot Citroën (down 16% to €1.2bn) and its compatriot Renault (down from €912m to €588m).

DaimlerChrysler, however, insists the outlook is good. “The development of leading indicators in recent weeks,” its earnings statement noted, “has pointed toward an improvement in economic prospects.”

Data sourced from: The Wall Street Journal Online; additional content by WARC staff