Daimler Back On Track

Chairman Juergen Schrempp hailed the sales increase as evidence that his plans for streamlining the company and targeting shareholder value where paying off.

This development confirms the course of focusing on a growth strategy and stronger earnings, Schrempp said in a statement.

Analysts agreed, saying that tough measures that Daimler has undertaken to make itself more competitive are paying off and that profits in the second half of this year will easily exceed the first halfs DM827 million operating profit.

These figures are quite positive, said Lothar Lubinetski, analyst at Enskilda Corporate. They show Daimler is finally on the right track.

 

Daimlers share price, which has steadily climbed since July, reacted little to the figures, slipping 14 pfennigs to DM92.55 in mid-day trade.

Sales at Mercedes-Benz, which for years has been Daimlers cash cow, climbed eight per cent to almost DM57 billion in the first nine months of the year.

Daimler said demand for Mercedes models such as the E-class and the new SLK roadster sports car were behind stronger car business, but warned that the companys truck division still faces an uphill battle selling heavy trucks in a tough market.

The companys aircraft unit, Daimler-Benz Aerospace (DASA), reported smaller sales at DM8.28 billion than it did a year ago, but Daimler said figuring turnover on an adjusted basis that is accounting for restructuring at DASA sales climbed 18 per cent.

DASA has been Daimlers Achilles heel, producing most of last years red ink and fighting a tough battle through its involvement in the Airbus consortium against market leader Seattle-based Boeing Corp.

News on the commercial orders side has been good for DASA of late, said John Lawson, analyst at Salomon Brothers in London.

The groups information and financial services unit Debis reported sales increased to DM9.76 billion from 8.57 billion.

The figures marked the latest chapter in Daimlers recovery after reporting a DM5.7 billion loss in 1995 the largest loss ever reported by a German company.

But slashing unprofitable businesses and other streamlining measures helped Daimler return to profit in the first half of this year.

Although the company has already cut off several unprofitable units, it is currently considering a massive restructuring aimed at further increasing profitability and hopes to finalise such plans at a supervisory board meeting on January 23.

Although investors have welcomed the restructuring plans, the company overhaul has reportedly led to strife within Daimler.

Sources at Daimler have said Mercedes chief Helmut Werner is resisting plans to closely integrate his unit into the Daimlers corporate structure and, according to some reports, has even threatened to resign.