The Outlook for Daimler Chrysler
Thursday, February 16, 2006PAUL KANGAS: A strong earnings showing today from German automaker Daimler Chrysler, with profits accelerating in the final quarter of last year. Its U.S. division, Chrysler, was the engine driving those profits on strong sales of new products. But as Diane Eastabrook reports, both Chrysler and its parent company face big challenges this year.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: As the new chairman and CEO of Daimler Chrysler, Dieter Zetsche faces challenges on both sides of the Atlantic. He must get German-based Mercedes Benz back on a profitable track and make sure U.S. based Chrysler continues to make money. Daimler Chrysler performed extremely well in the fourth quarter of last year. Net profits nearly doubled to $0.95 a share from $0.52 a share in the same quarter a year earlier. The company credits Mercedes commercial vehicles, Chrysler and its financial services unit for the strong performance. But Zetsche admits the struggling Mercedes luxury brand continues to be a work in progress.
DIETER ZETSCHE, CHAIRMAN & CEO, DAIMLERCHRYSLER: Mercedes has its special set of efficiency challenges. We are working successfully. There are talks reducing and closing those gaps toward the benchmark. Our quality development is very encouraging.
EASTABROOK: Recently Chrysler has been the jewel in Daimler Chrysler`s crown. Last year Chrysler was the only U.S. auto company to improve its market share. The division scored home runs with products like the 300 sedan. More recently, new rollouts like the Dodge Challenger have been getting good reviews. But Chrysler`s president and CEO admits this will be a tougher year for his division. Tom Lasorda predicts competition will heat up, market share will be flat and costs will increase.
TOM LASORDA, PRESIDENT & CEO, CHRYSLER GROUP: Raw material, especially oil prices, are going up. So it`s oil-based products. We see steel still staying fairly high.
EASTABROOK: Analysts say Chrysler is in much better financial and competitive shape than Ford and General Motors, but they also think Chrysler needs to cut costs especially in health care.
JOHN NOVAK, AUTO ANALYST, MORNINGSTAR: They made some progress last year on white collar worker health care costs, but they`re looking for a deal similar to the deal that Ford and GM got earlier in 2005.
EASTABROOK: Novak says Daimler Chrysler also needs to elevate its U.S. brand more on the international market. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.
