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Daimler Net Falls 32% on Chrysler, Lower Truck Sales

Daimler AG, the world’s second- largest maker of luxury vehicles, said first-quarter profit dropped 32 percent, more than estimated, after a stake in former U.S. unit Chrysler dragged down earnings and truck sales fell.

Net income declined to 1.33 billion euros ($2.07 billion), or 1.29 euros per share, from 1.97 billion euros, or 1.89 euros, a year earlier, Stuttgart, Germany-based Daimler said in a statement today. Analysts had predicted a profit of 1.46 billion euros. Revenue barely rose to 23.5 billion euros.

Daimler’s 20 percent stake in Chrysler, the third-largest U.S. automaker, wiped 491 million euros from earnings as a slowing economy hurt sales. Revenue at the truck business, the world’s largest, fell 13 percent to 6.33 billion euros as U.S. deliveries plummeted 47 percent. Mercedes-Benz Cars boosted both profit and sales.

“The relatively weak truck sales clearly show that this business is not a one-way street,” said Juergen Meyer, who helps oversee 1.2 billion euros, including Daimler shares, at SEB Asset Management in Frankfurt. “The profit development at the passenger cars unit was, on the other hand, quite pleasing.”

Chief’s Forecast

Chief Executive Officer Dieter Zetsche said demand from Russia and China means full-year operating profit should still be “well above” 2007’s level, excluding the impact of Chrysler. Bayerische Motoren Werke AG, the No. 1 maker of luxury cars, said today that first-quarter profit fell 17 percent on the U.S. slowdown while predicting a gain in full-year pretax profit.

Daimler, whose year-ago earnings were swollen by a gain from the sale of a stake in European Aeronautic, Defence & Space Co., fell 69 cents, or 1.4 percent, to 50.19 euros. The stock has declined 25 percent this year, reducing the company’s market value to 48.4 billion euros.

Zetsche sold 80.1 percent of Auburn Hills, Michigan-based Chrysler to New York-based buyout firm Cerberus Capital Management LP in August, severing a nine-year tie that cut Daimler’s market value by $12.6 billion.

Daimler’s remaining holding had a negative impact of 491 million euros in the first quarter, including a 340 million- euro operating profit reduction and a 151 million-euro writedown on the residual values of Chrysler vehicles.

The CEO said this month that industry sales in the U.S. would be “much lower” as a result of the credit crisis and a declining level of confidence in the economy. He predicted a 2 percent increase in car deliveries worldwide.

EADS Disposal

Daimler booked a gain of 1.56 billion euros in the first quarter of 2007 from its holding in EADS, owner of Airbus SAS, the world’s largest maker of commercial aircraft.

The carmaker is 80 percent hedged against shifts in the dollar this year and more than 40 percent hedged for 2009.

Mercedes-Benz Cars, which has cut 9,700 factory jobs since 2005, reducing costs by 7.1 billion euros, boosted operating profit 45 percent in the first quarter to 1.15 billion euros. The division’s revenue increased 4 percent on demand for new models. The unit’s earnings will rise this year and operating profit will reach 10 percent of sales by 2010, Daimler has predicted.

Mercedes is seeking to wrest back market share from Munich- based BMW while fending off Volkswagen AG’s Audi unit and Toyota Motor Corp.’s Lexus division.

The truck division’s operating profit fell 24 percent to 403 million euros as demand in the U.S. plunged 47 percent to 21,204 trucks. Western European sales also declined because of production stops connected to a supplier’s lack of capacity, the company said.

Daimler’s first-quarter earnings were boosted by a 449 million-euro gain from the sale of property in Berlin.