AP News, August 29th, 2007
DaimlerChrysler AG said Wednesday that its second-quarter profit fell 14 percent and disclosed plans to spend about $10.2 billion buying back nearly 10 percent of its shares as it moves forward without its Chrysler division.
DaimlerChrysler's profit decline excluding results from Chrysler and its finance arm _ which did better in the latest quarter than a year ago _ was a steeper 20 percent.
The automaker said it earned 1.44 billion euros ($1.91 billion) excluding the operations it sold, compared to 1.8 billion euros a year earlier.
It now expects a charge of 2.5 billion euros for the year from the sale of Chrysler group and its financing arm, less than it had previously thought.
DaimlerChrysler also said it expects vehicle sales to be in line with the 2.1 million it sold in 2006, with revenue on par with the 99 billion euros it reported last year.
The company sold the Chrysler group and North American financial services units to Cerberus Capital Management LLC earlier this month in a $7.4 billion deal that saw the private equity group take an 80.1 percent stake in Chrysler.
Including those operations, DaimlerChrysler posted an overall profit of 1.85 billion euros ($2.52 billion) for the April-June period, down 14 percent from 2.15 billion euros a year earlier. Sales fell to 23.84 billion euros ($32.52 billion) from 24.6 billion euros last year.
The Chrysler Group and the related financial services business in North America saw their profit rise by 18 percent to 406 million euros ($554.8 million) in the quarter compared with 342 million euros a year earlier.
DaimlerChrysler also said it "anticipates a charge against earnings" of 2.5 billion euros ($3.42 billion) for the year, below its initial estimates of 3 billion euros to 4 billion euros ($4.1 billion to $5.47 billion).
The company also said it would buy back shares, a move authorized by shareholders at its April 4 general meeting, in part to help "optimize the company's capital structure and make it more efficient."
DaimlerChrysler shares rose almost one percent to 63.26 euros ($86.28) Wednesday in Frankfurt.
Wednesday marked the last time that Chrysler's full earnings will be released to the public, because the company as controlled by a private equity firm will not be required to publish results.
DaimlerChrysler retains a 19.9 percent share in Chrysler, so it will continue to report some Chrysler earnings starting with its third-quarter results in October.
But the German automaker plans to list Chrysler's results in a miscellaneous category and will not separate them from other holdings, such as its 22.5 percent share in the European Aeronautic Defense and Space Co.
Casting an eye toward markets volatile in the wake of the subprime mortgage crisis in the U.S., the company said that it and Cerberus had "agreed to support the financing of the majority takeover of Chrysler by Cerberus."
Both companies subscribed $2 billion of a second lien loan for Chrysler's automotive business, to be drawn within 12 months. DaimlerChrysler's portion will be $1.5 billion. The debt will be priced at market conditions with the maturity in seven years. Within a year, DaimlerChrysler has the right to sell the loan in the credit market.
By division, the Mercedes Car Group posted a pretax profit of 1.2 billion euros ($1.64 billion) in the quarter compared with 690 million euros a year earlier, but was still dragged lower by the rising euro and other foreign exchange issues.
The truck group saw its second-quarter pretax profit rise to 601 million euros ($821.21 million) from 585 million euros a year, lifted in part by improved sales in Europe and Latin America, but hurt by lower sales in North America and Japan.
The company's shareholders will meet in Berlin on Oct. 4 to approve a name change to Daimler AG. The proposal is expected to pass, despite concerns that by not restoring the name to Daimler-Benz, the company is ignoring the work of Karl Benz, who designed and patented an internal combustion flat engine before linking his company, Benz & Cie, with Daimler in 1926.
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