Industry News
Dieter Zetsche tells DaimlerChrysler AGM profits will rise
12th April 2006
DaimlerChrysler expects an improvement in profitability in fiscal year 2006, with continuing increases in operating profit in following years, says Dr. Dieter Zetsche, Chairman of the Board of Management in his speech to shareholders at today’s AGM in Berlin. A detailed earnings forecast for the full year will be presented to coincide with the publication of the company's financial results for the first quarter on April 27, 2006.
The Board of Management initiated the New Management Model at the end of January, presented as a key factor in increasing efficiency. As a result of the implementation of the New Management Model, some 6,000 administrative positions will be cut worldwide. Executives in Germany will be offered severance agreements and early retirement. All of the steps taken regarding employees covered by collective bargaining agreements will be based on the "Safeguarding the Future 2012" agreement that was signed in July 2004.
Zetsche is confident that thanks to current measures to boost productivity and efficiency, the Mercedes Car Group will achieve the planned 7 percent return on sales in 2007. In terms of results, the division achieved the turnaround in the second quarter of 2005. Altogether, the Mercedes Car Group plans to cut 8,500 jobs by the end of September. To date, around 7,800 employees have taken advantage of voluntary severance agreements and early retirement packages.
This year ten new Chrysler Group products will be introduced -- more than ever before in a single calendar year.
In fiscal year 2005, the Commercial Vehicles division launched a new programme in order to translate its size and market position into economies of scale and to substantially increase its profitability.
In January 2006, a new distribution of business operations was confirmed as part of the New Management Model. The division now known as the Truck Group will focus on the truck business. The Vans unit will report to the head of the Mercedes Car Group, and the Bus unit will report to the head of the Truck Group. These measures will help the division come much closer to its goal of posting profits that better reflect its position as Number 1 in terms of sales.
At the Group level, DaimlerChrysler also continued to focus on its automotive core business. As already announced in early April, the company has decided to reduce its 30 percent share in EADS, the European Aeronautic Defence and Space Company, to 22.5 percent. Dieter Zetsche said DaimlerChryslers intended to remain a major shareholder with a stake of at least 15 percent.
As reported earlier this year, DaimlerChrysler’s fiscal 2005 operating profit was €5.2 billion. Excluding the €1.1 billion charges due to restructuring of the business model at smart, the operating profit would have been higher than the previous year's figure of €5.8 billion. Consolidated revenues increased by 5 percent to approximately €150 billion, and the Group's net income also topped the previous year's figure, increasing from €2.5 to €2.8 billion.
However, "we are not satisfied with last year's results level," declares Zetsche. The return on net assets failed to cover the company's capital costs. And DaimlerChrysler is still far from its target of achieving a return on net assets (RoNA) of 10 percent.
DaimlerChrysler is proposing to pay a dividend of €1.50 per share for fiscal year 2005, as it did the previous year. This corresponds to a total dividend sum of €1.5 billion.
- Steven Landry, the CEO of DaimlerChrysler Canada, the country’s second-biggest vehicle manufacturer after GM, expressed concern yesterday over the Canadian government’s negotiations with South Korea on a free trade agreement, saying that federal trade negotiators were ignoring the automotive industry’s concerns and racing to a deal with Korea that could eventually lead to "repercussions" for Canada’s automotive sector.
(Toronto Star, 12 April)
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