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DaimlerChrysler expects operating loss for US unit

DaimlerChrysler AG, the world's fifth-largest automaker, said its US Chrysler unit probably will post an operating loss of 1 billion euros (US$1.17 billion) this quarter, mainly because incentives have reduced revenue.

Standard & Poor's, citing the "staggering" loss expected for the second quarter, changed its outlook on DaimlerChrysler's credit quality to negative, meaning the ratings company is more inclined to reduce its BBB+ rating on the Stuttgart, Germany-based company's debt.

"Chrysler is suffering from intense price competition in the North American automotive industry, to which it has recently proven to be especially vulnerable," S&P said in a report issued after DaimlerChrysler announced its forecast.

DaimlerChrysler abandoned chief executive officer Juergen Schrempp's previous goal for Chrysler to have full-year operating profit of US$2 billion.

The company said it now expects the US unit to have "slightly positive" operating profit before the cost of additional restructuring. That will limit the parent company's operating profit this year to about 5 billion euros.

The company previously expected this year's profit for the group to "slightly exceed" last year's operating profit from continuing operations. Spokesman Trevor Hale couldn't immediately provide a comparable figure for last year. Last year, DaimlerChrysler reported operating profit after certain costs of 5.8 billion euros.

Sales at the Chrysler unit fell 3 percent last month while General Motors Corp, the volume leader in the car industry, increased its US sales 4.1 percent as it outspent rivals on rebates and incentives to attract buyers.

General Motors spent an average US$3,916 per vehicle compared with US$3,511 at Chrysler, according to CNW Marketing Research.

"We will be slightly profitable, and that clearly means not a whole lot" this year, Chrysler chief executive Dieter Zetsche said in a telephone interview.

The Chrysler unit doesn't plan to fire more workers as it looks for additional cuts in material costs and more efficiency in plants, he said.
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