Tuesday, May 15, 2007

Freed from Chrysler, Daimler could boost payouts (Reuters)

By Michael Shields

FRANKFURT (Reuters) - DaimlerChrysler may give shareholders excess cash freed up by its sale of Chrysler, the automaker said on Tuesday after one-off gains and a profit rebound at Mercedes helped first-quarter profit rise 73 percent.

Earnings before interest and tax (EBIT) at the world's fifth-biggest carmaker advanced to 2.04 billion euros ($2.76 billion), it said, handily beating market expectations even as ailing Chrysler Group lost nearly 1.5 billion euros.

Chrysler, the U.S. arm it is selling, is set to lose more than $2 billion this year after restructuring charges, it added.

"We clearly state today we have excess liquidity in our hands, also for the shareholder, which is a good issue. It is something that shareholders should enjoy," Chief Financial Officer Bodo Uebber told a results conference call.

Unburdened of the $17.5 billion in unfunded staff healthcare obligations on Chrysler's books at the end of last year, the German group to be called Daimler AG will propose by February at the latest how to share the wealth with investors, he said.

He declined to be more specific.

In its first detailed outlook for the year, the group forecast 2007 EBIT would rise to 7 billion euros excluding the impact from selling Chrysler, a deal that breaks up a failed transatlantic car merger struck in 1998.

The results drove home just why DaimlerChrysler announced on Monday it was in effect paying private equity group Cerberus Capital Management to take Chrysler off its hands after nine years of roller-coaster results at its North American arm.

Chrysler is keeping the healthcare liabilities and faces tough negotiations with the U.S. United Auto Workers union on cost cuts. The current UAW contract expires in September.


Chrysler Group's loss in the quarter was twice as bad as expected and included restructuring costs of 914 million.

Chrysler, which is in the process of cutting 13,000 jobs, expects a 2007 EBIT loss of 1.6 billion euros even though its car sales will rise, especially outside North America, it said.

Mercedes Car Group -- which includes the premium Mercedes-Benz, luxury Maybach and Smart minicar brands -- swung to a better-than-expected quarterly EBIT of 792 million euros.

Mercedes reiterated its forecast of generating an operating margin of at least 7 percent this year, up from just 6.6 percent in the quarter, which Mercedes had signaled would be weak.

DaimlerChrysler stock, which has outperformed the German blue-chip index by nearly a fifth this year, rose as much as 4.4 percent and was up 2.4 percent at 63.20 euros by 1505 GMT while the DAX index <.GDAXI> rose 0.4 percent.

"It's difficult today, a day after the Cerberus news, for the first-quarter numbers to have any effect," said Heinz-Gerd Sonnenschein, equity markets strategist at Germany's Postbank.

Overall, group net profit rose 152 percent to 1.97 billion euros, helped by a gain from selling shares in aerospace group


It reported under IFRS accounting rules for the first time.

Boosted by a global boom in freight transport by road that is poised to fall off sharply in the United States this year, its market-leading truck group had operating profit of 528 million euros, up by a quarter and ahead of market expectations.

The group said the forecast for 7 billion euros in 2007 EBIT included a gain of 1.6 billion from selling EADS shares.

It will also book charges of 1.0 billion for reorganizing Chrysler and 600 million for cutting white-collar jobs.

-- Additional reporting by Peter Starck

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