DCX Reports $ 7.3 Billion Dollar 2006 Operating Profit

[Perian]

Link: http://www.autonews.com/apps/pbcs.dl.../70214002/1128

PRESS RELEASE: DaimlerChrysler Achieves $7.3 Billion Operating Profit in 2006

STUTTGART, Germany and AUBURN HILLS, Mich. -- DaimlerChrysler today published its preliminary Group and divisional results for the year 2006.

DaimlerChrysler recorded an operating profit of $7,281 million in 2006, compared with $6,843 million in 2005.

The development of the Group's operating profit was primarily impacted by the significant decline in earnings at the Chrysler Group.

This was more than offset by the substantial earnings improvement at the Mercedes Car Group and the repeated increase in earnings at the Truck Group and the Financial Services division. The contribution to earnings from the Van, Bus, Other segment was lower than in the prior year. The earnings trend was affected by special items in both years.

Unit sales and revenues

DaimlerChrysler sold a total of 4.7 million vehicles in 2006 (2005: 4.8 million), while the Group's total revenues increased by 1% to $200.1 billion. Adjusted for exchange-rate effects and changes in the consolidated Group, the increase in revenues amounted to 2%.

The workforce

As of December 31, 2006, DaimlerChrysler employed a workforce of 360,385 people worldwide (2005: 382,724). Of this total, 166,617 were employed in Germany (2005: 182,060) and 94,792 in the United States (2005: 97,480).

The implementation of the new management model is running according to plan. By the end of January 2007, approximately 2,000 employees worldwide had either signed voluntary severance agreements or had already left the Group. DaimlerChrysler has been working with the new structures since August 1, 2006. Important processes have been made faster and more efficient, allowing substantial efficiency gains. The total expenditure for the implementation of the program in the years 2006 through 2008 is likely to be in the region of $2.6 billion. Of this total, $519 million was incurred in the year 2006.

Investing to safeguard future

Worldwide, the DaimlerChrysler Group invested a total of $7.8 billion in property, plant and equipment in 2006 (2005: $8.7 billion). Capital expenditure at the Mercedes Car Group of $2.2 billion was slightly higher than in the prior year ($2.1 billion). To continue its product offensive and to make its production facilities more flexible, the Chrysler Group invested $3.8 billion in property, plant and equipment (2005: $4.1 billion). The Truck Group invested $1,197 million in 2006, mainly related to new technologies, powertrains and safety concepts (2005: $1,275 million).

During the planning period of 2007 through 2009, DaimlerChrysler will presumably invest a total of $23.1 billion in property, plant and equipment and $21.4 billion in research and development activities. This adds up to total of investment in safeguarding the future of $44.5 billion.

Mercedes Car Group

The Mercedes Car Group division, comprising the brands Mercedes-Benz, Maybach, smart, Mercedes-Benz AMG and Mercedes-Benz McLaren, sold 1,251,800 vehicles in 2006 (2005: 1,216,800).

Revenues of $72.0 billion were 9% higher than the prior year's level.

The Mercedes Car Group achieved an operating profit of $3,187 million in 2006, compared with an operating loss of $666 million in the prior year. The results of both years were significantly affected by special items. There were expenses of $1,248 million in connection with the discontinuation of production of the smart forfour in 2006, while the realignment of the smart business model in 2005 resulted in charges of $1,466 million. Charges relating to staff reductions at Mercedes-Benz Passenger Cars in the context of the CORE program decreased to $377 million in 2006 (2005: $752 million). Additional special items with effects on the results of both years are shown in the table.

Chrysler Group

Worldwide, the Chrysler Group shipped 2.7 million Chrysler, Jeep(R) and Dodge branded passenger cars, sports tourers, minivans, SUVs and light trucks to its dealerships in 2006 (2005: 2.8 million). Worldwide retail sales decreased by 5% in 2006 to 2.7 million units.

As a result of lower volumes and a weaker US dollar on average for the year, the Chrysler Group's revenues for the year of $62.2 billion were significantly lower than in 2005 ($66.1 billion).

The Chrysler Group posted an operating loss of $1,475 million in 2006, compared with an operating profit of $2,024 million in 2005.

The deterioration in operating results was primarily the result of negative net pricing, unfavorable product and sales market mix, and a decline in factory unit sales in the United States. These factors reflect the continuing difficult market environment in the United States during 2006 marked by an overall decline in market volume, a shift in consumer demand towards smaller, more fuel-efficient vehicles due to higher fuel prices, as well as the impact of higher interest rates. These negative factors were partially offset by the market success of the new models, most of which were launched in the second half of the year. Several of these vehicles target this shift in consumer demand, resulting in a positive contribution to earnings in the fourth quarter of the year.

In addition, the financial support provided to supplier Collins & Aikman led to a charge of $87 million in 2006, compared to $131 million in 2005. The Chrysler Group's prior-year operating profit was positively impacted by a $317 million gain on the sale of the Arizona Proving Grounds vehicle testing facility. Further special items that affected earnings in 2005 are shown in the table on page 15.

The Chrysler Group launched a total of ten attractive new models in 2006, and significantly expanded its sales outside the NAFTA region (+22% to 214,400 vehicles). Dodge launched its compact five-door car -- the Dodge Caliber, as well as its first mid-size SUV -- the Dodge Nitro, and the new Dodge Ram 3500 Chassis Cab. The new positioning of the Jeep(R) brand portfolio continued with the launch of the compact Jeep(R) Compass. Other new models launched were the Jeep(R) Grand Cherokee SRT8, the new Jeep(R) Wrangler, the four-door Jeep(R) Wrangler Unlimited and the Jeep(R) Patriot. The Chrysler brand launched the Aspen, its first full-size SUV, while the new Chrysler Sebring is intended to strengthen the Chrysler Group's competitive position in the mid-size sedan category.

The Chrysler Group also made more progress in the field of vehicle quality in 2006. Internal measurements show that the quality of the division's vehicles is better than ever before, a fact which is confirmed by external quality studies: The Chrysler brand ranked in the top ten in the 2006 J.D. Power Initial Quality Study.

All three Chrysler Group brands also made gains in the 2006 J.D. Power Vehicle Dependability Study, showing that customer perception of quality continues to improve as new vehicles replace older models in the product range.

The new manufacturing flexibility strategies have helped to improve the Chrysler Group's efficiency, allowing the division to better utilize its assets, such as the Belvidere (Illinois) Assembly Plant, where the Dodge Caliber is built with the use of highly flexible robots and free of vehicle- specific heavy tooling. Over the four years of 2002 through 2005, the Chrysler Group posted a cumulative 24% productivity improvement, with a 6% improvement in 2005, as confirmed by the 2006 Harbour Report, a recognized industry study that measures the productivity of North American automotive manufacturers.

One year after the start of production by the Global Engine Manufacturing Alliance (GEMA), the second World Engine plant opened in Dundee (Michigan) in October 2006. The two plants in Dundee are part of a five-factory global venture developed by DaimlerChrysler, Hyundai Motor and Mitsubishi Motors.

Outlook

On the basis of the divisions' planning, DaimlerChrysler expects the Group's total unit sales to increase slightly in the year 2007. DaimlerChrysler assumes that total revenues in 2007 will be at least in the magnitude of the prior year.

Based on the divisions' projections, DaimlerChrysler should achieve a significant increase in profitability in the planning period of 2007 through 2009.

[Perian]

Not something I would normally post...

Then again, this is not a normal day.

Looks like DCX can afford to unload one of their underperforming divisions...

Question is - how - and to whom?

[jon21]

Wow...good for them!

[smithrobs]

Funny how when Chrysler was making money (2002-2004) and had money in the bank, and Mercedes was in the red ink, all of these billions of dollars flowed across the Atlantic into R&D for their failed experiments in hi-technology. Now that the shoe is on the other foot, this merger of equals has turned into a pariah.

Talked about the red headed American **************************** step child.

Hmm... Superior German engineering? Sounds like superior German accounting. The barbarians raided and pillaged the store. Time to move on...

[Kennyboy]

Good for them. Hopefully this will crush the news that GM is buying a rival competitor. I wish the media would do more research into these type of headlines. If GM really brought Chrysler, then you have to take into account U.S. anti-trust regulations and filing with the S.E.C.

This news of robust headlines is only trying to get more subscriptions to their magzines.

[mike's 01ws6]

Originally Posted by Kennyboy

Good for them. Hopefully this will crush the news that GM is buying a rival competitor. I wish the media would do more research into these type of headlines. If GM really brought Chrysler, then you have to take into account U.S. anti-trust regulations and filing with the S.E.C.

This news of robust headlines is only trying to get more subscriptions to their magzines.

If the govt. can turn their heads to the crap they let japan get away with they can extend the same courtesy to an american manufacturer.

[Motownr]

I don't think a GM/CG linkup would have any problems getting approved in NA. Regulators look at things like pricing power and the ability to impede competition. In the free for all that is NA, those risks don't exist.

If anything, these kinds of results prove the value of the DCX strategy; when one side is down, the other carries the financial load. Imagine the kind of earnings they'd have if they ever got both sides to synch!

[tgagneguam]

Interesting numbers. I knew DCX was closing in on GM in sales and revenue, though I think the $200.1 billion figure puts it ahead of GM for 2006. The profits were higher than I anticipated, too.

[Al465]

Originally Posted by Kennyboy

Good for them. Hopefully this will crush the news that GM is buying a rival competitor. I wish the media would do more research into these type of headlines. If GM really brought Chrysler, then you have to take into account U.S. anti-trust regulations and filing with the S.E.C.

This news of robust headlines is only trying to get more subscriptions to their magzines.

Anti-trust? GM only had to worry about that when they had 50% of the US market.

[LAMRONH]

Originally Posted by smithrobs

Funny how when Chrysler was making money (2002-2004) and had money in the bank, and Mercedes was in the red ink, all of these billions of dollars flowed across the Atlantic into R&D for their failed experiments in hi-technology. Now that the shoe is on the other foot, this merger of equals has turned into a pariah.

Talked about the red headed American **************************** step child.

Hmm... Superior German engineering? Sounds like superior German accounting. The barbarians raided and pillaged the store. Time to move on...

I'm hoping that after they unload the company that so recently saved their arses, MB will hydroplane in another pond of red ink.
And who will be there for Mercedes before the next teardrop falls? Freddy Fender?

[redimpss5]

WOW..is that enough??

[Havasavana]

When a company (Daimler) owns another company (Chrysler), the games that can be played are limitless. Money moved around, charges made to the child company benefiting the parent, or vice versa, can skew the results as desired.

What I haven't seen, maybe because it hasn't been written much or I've just missed it, is how REALLY BAD LaSorda must be to take the wonderfully operating enterprise left to him by the GREAT Dr. Z. and run it into the ground within just a few months. Somehow LaSorda is supposed to have brought great new products to market within that period that Dr. Z. had apparently seen no need for. And it's LaSorda's fault that he didn't do it. Therefore trash the whole thing, wreck people's lives, etc. and blame it on Chrysler instead of Z. taking the hit he deserves. Good luck Daimler.

[88Fiero]

Originally Posted by smithrobs

Funny how when Chrysler was making money (2002-2004) and had money in the bank, and Mercedes was in the red ink, all of these billions of dollars flowed across the Atlantic into R&D for their failed experiments in hi-technology. Now that the shoe is on the other foot, this merger of equals has turned into a pariah.

Talked about the red headed American **************************** step child.

Hmm... Superior German engineering? Sounds like superior German accounting. The barbarians raided and pillaged the store. Time to move on...

How true!

[HEVguy]

All this DCX stuff is getting so political recently. Chrysler is supposedly turning things around in 2007, but Daimler still wants to unload them?!?

[HEVguy]

Originally Posted by smithrobs

Funny how when Chrysler was making money (2002-2004) and had money in the bank, and Mercedes was in the red ink, all of these billions of dollars flowed across the Atlantic into R&D for their failed experiments in hi-technology. Now that the shoe is on the other foot, this merger of equals has turned into a pariah.

Talked about the red headed American **************************** step child.

Hmm... Superior German engineering? Sounds like superior German accounting. The barbarians raided and pillaged the store. Time to move on...

Yup, they raped one of the big three, and only Kerkorian tried to do something about it! He didn't help GM much, but at least he tried to help Chrysler.