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from a report in the "Car Connection";

"Mercedes-Benz Car Group posted a whopping $1.2-billion operating loss for the first quarter, but the company's chief financial officer said the group's financial performance would swiftly improve this year. The loss was the latest in a series of blows to the Mercedes-Benz mystique, which has also been hurt by quality problems that DaimlerChrysler is still trying to fix.

DaimlerChrysler's losses at Mercedes-Benz, most of which were hung on the struggling Smart division, were offset by profits from the Chrysler Group and steadily improving performances of the company's financial services and commercial vehicle units.

The Chrysler Group's operating profit, however, also dropped 17 percent in the first quarter to $327 million from $393 million. The drop reflected the declining value of the U.S. dollar versus the euro and a drop in factory unit sales, said Bodo Uebber, DaimlerChrysler's chief financial officer. The drop was smaller than the sharp decline in profits at Ford Motor Co., where net income dropped 38 percent, and smaller than the $1.1 billion loss posted by General Motors Corp. for the first quarter.

Continuous improvement

Dieter Zetsche, Chrysler group chief executive officer, noted the group's overall performance continued to improve. "We made steady progress in the face of tough market conditions," Zetsche said. In addition, in another sign of strength, Chrysler dealers have invested more than $2 billion in new buildings in the past 24 months. "Global sales increases, variable cost reductions and fixed cost containment continue to contribute to Chrysler Group's success," he added.

The Chrysler Group increased its first-quarter retail sales by five percent to thanks to higher sales of minivans and the Dodge Durango sport-utility vehicle. However, factory shipments dropped by three percent to 666,700 vehicles as retail sales came from existing stocks. Overall, the slight decrease in unit sales and the appreciation of the euro as well as changes in mix reduced the Chrysler Group's revenues by seven percent to $13.9 billion.

Uebber also noted production of the new Dodge Charger sedan started at the end of the first quarter of 2005 and it will go on sale soon. Three other models, the new Viper Coupe sports car, the Dodge Ram Mega Cab, and the Jeep Commander (with three rows of seats), will all go on sale later this year.

Benz' big loss

Meanwhile, the Mercedes-Benz car group reported a first-quarter operating loss of $1.237 billion, compared with an operating profit of $829 million in same quarter a year ago. The loss included a write-off of more than $1 billion from the restructuring of Smart, Uebber said. Increased prices for raw materials also hurt, he said. In addition, Mercedes-Benz' first-quarter unit sales worldwide dropped seven percent, while revenues declined 11 percent to $13.5 billion, Uebber said.

The sales decline, he explained, was due to model changeovers, which included the introduction of the new 2006 M-Class and R-Class at the company's plant in Alabama. The official ceremony, marking the launch of the new vehicles, is set for next week. Uebber said the introduction of the new vehicles will enable Mercedes-Benz to post much better results in both the second and third quarters, he said. "The M-Class has made an excellent start following its launch at the beginning of April in the United States, the major market for this vehicle. And customers are already keenly anticipating the launch of the new M-Class in Western Europe in three months' time," he said.

Mercedes-Benz also is continuing to sink money into the quality offensive it launched last year and is gearing up a new program to reduced fixed costs by as much $3 billion.

The problems at Smart, which specializes in building and selling small, urban-oriented cars, hurt DaimlerChrysler's net income in the first quarter. Net income dropped to $374 million, or 36 cents per share, compared with $534 million, or 53 cents per share, for the same period of last year. The exceptional impact from Smart reduced net income by $664 million, Uebber said.

The Commercial Vehicles Group increased its first-quarter unit sales by 43 percent to 179,400 vehicles and revenues rose by 29 percent to $11 billion. The operating profit from Commercial Vehicles more than doubled to $926 million from $348 million. Uebber said strong truck sales are expected to continue in the North America, Europe, and Latin America.

DaimlerChrysler Financial Services also improved its operating profit during the first quarter, earning $425 million, compared with $287 million in the same period a year ago. Financial Services' new business increased by 13 percent to $15.6 billion over a year ago."
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