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Write-Off Eclipses Chrysler, Benz Gains

October 22, 2003|From Associated Press

Automaker DaimlerChrysler said Tuesday that it lost $1.92 billion in the third quarter, as a large write-off on the value of its stake in an aerospace company more than offset profit from its U.S. Chrysler arm and its Mercedes-Benz luxury car division.

But it still managed to post an operating profit, which reflects the company's core business and excludes one-time charges, for the July-September period. Its Chrysler division rebounded from a $1-billion loss in the April-June quarter.

But Tuesday's earnings report came as Standard & Poor's lowered its credit ratings a notch for DaimlerChrysler's long-term debt, citing concerns about the Chrysler division's prospects in the competitive North American market. A lower credit rating could raise the company's borrowing costs.

The world's fifth-biggest automaker said it lost $1.93 billion in the July-September period in contrast with a profit of $910 million in the same quarter a year earlier. DaimlerChrysler's overall sales for the quarter fell to $40.4 billion from $42.4 billion a year earlier.

A major factor behind the net loss was an accounting charge of $2.3 billion for the fallen value of DaimlerChrysler's 33% share in European aerospace company EADS, which includes jet maker Airbus.

The automaker's operating earnings fell 19% to $1.5 billion from $1.8 billion a year ago as the Chrysler division continued to struggle amid price wars in the key North American market.

Chrysler contributed an operating profit of $171 million. That was down from its operating profit of $356 million in the third quarter a year ago but was a major improvement from the operating loss of $1.11 billion in the second quarter.

The company stuck to its forecast that Chrysler would show a slight operating profit this year, though Chief Financial Officer Manfred Gentz warned that "we cannot promise for sure" the goal would be met in a tough market. The improvement in the second quarter came from continued cost-cutting, Gentz said.

DaimlerChrysler's U.S. shares were down $1.18 to close at $36.12 on the New York Stock Exchange.

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