DaimlerChrysler shares rise after automaker posts third-quarter profit

Wednesday, October 26th 2005, 10:46 am

By: News On 6

FRANKFURT, Germany (AP) _ DaimlerChrysler AG is on track to match sales from a year ago, the automaker said Wednesday after it posted a euro755 million (US$910 million) net profit in the third quarter and reported its Mercedes Car Group showed signs of a turnaround.

The German-American automaker also revealed in a filing with the U.S. Securities and Exchange Commission that the SEC subpoenaed information last month about the way the company calculates pension benefits for North American employees.

DaimlerChrysler said the request was connected to an investigation of accounting issues at General Motors Corp. that began in October 2004, and that Ford Motor Co. also has been subpoenaed.

The world's fifth-largest automaker said late Tuesday that its net profit fell 21 percent in the July-September period compared to euro951 million last year, but analysts said it was markedly better compared to U.S. rivals GM and Ford, which reported substantial losses last week. Its earnings were boosted last year by tax-free income from the sale of a stake in Hyundai Motor Co.

Revenues rose 9 percent to euro38.2 billion (US$46.2 billion) as worldwide unit sales rose by 9 percent to 1.2 million vehicles.

Shares in the German-American automaker rose more than 2 percent before easing back to euro41.54 (US$50.09) in Frankfurt trading. The report was supposed to be released Wednesday, but the company was required to release it early because its operating profit was higher than expected.

Chief Financial Officer Bodo Uebber said there was growing demand for the company's new B-Class sport wagon and redesigned S-Class.

``We expect that to rise,'' he said.

DaimlerChrysler said the SEC had also asked for DaimlerChrysler's communications with GM, Ford and auto supplier Delphi Corp. regarding its methods for calculating benefits.

``We have disclosed what we have in our interim report,'' Uebber said. ``We will provide the SEC with the requested information.''

Uebber said DaimlerChrysler would like to lower its health care expenditures between 25 percent and 30 percent, but has yet to start talks with the United Auto Worker's union.

Instead, Uebber said the company was waiting to see what comes about with GM's negotiations.

``We'll scrutinize General Motors' deal with the UAW and aim for similar conditions,'' he said.

The company said it expects full-year operating profits to be up slightly over last year's euro5.8 billion (US$7 billion), excluding restructuring costs for its Smart brand. It also expects vehicle sales to rise slightly.

At DaimlerChrysler's flagship Mercedes Car Group, operating profits rose 43 percent to US$526 million (euro437.7 million). Mercedes sold 6 percent more vehicles in the third quarter versus a year earlier thanks to new products like the B-Class sport wagon.

The division, troubled by quality problems, a strong euro and model changeovers, had posted an operating profit of just US$14.4 million (euro12 million) in the second quarter.

In regard to Smart, its mini-car unit, Uebber said that cost reductions there have been proceeding and denied speculation that it faced closure.

``We see good progress at Smart as the costs have been reduced,'' he said, adding that it still aims to break even by 2007. ``We'll give management the time to prove they can reach the target.''

Looking ahead, Uebber said DaimlerChrysler was 95 percent hedged against currency fluctuations for the rest of 2005, and anticipated an increase in the cost of raw materials _ such as steel _ to make its cars.

``I would expect something, not a huge higher burden than we have today, but somewhat higher but not as we had for '04 to '05,''

The U.S.-based Chrysler division reported an operating profit of US$374 million (euro311 million), up 43 percent. It was the division's ninth consecutive quarterly profit. Chrysler's revenues rose 12 percent to US$15.5 billion (euro12.9 billion) for the quarter.

With hot products like the Chrysler 300 and Mercedes M-Class sedans, DaimlerChrysler is enjoying some success in a competitive environment that is pummeling other automakers. GM, the world's largest automaker, said last week it lost US$1.6 billion (euro1.3 billion) in the third quarter, while Ford lost US$284 million (euro236 million).