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Last Updated: Thursday, 27 April 2006, 16:52 GMT 17:52 UK
Mercedes costs hit Daimler profit
Daimler's Smart car has failed to make money since its launch
DaimlerChrysler has seen modest growth in first-quarter profits, held back by the 1.2bn euros (840m;$1.5bn) cost of reviving its Mercedes division.

Despite a 16% rise in Mercedes-Benz car sales, the division saw an operating loss of 678m euros due to the costs of revamping its loss-making Smart brand.

The news sent Daimler shares tumbling by 4% during Thursday trading.

Daimler is in the process of cutting 15,000 jobs in a bid to reduce costs and improve competitiveness.

Recovery signs

Away from the restructuring costs at its smart division, there are signs that Daimler chief executive Dieter Zetsche's reorganisation is having an effect.

The whole group sold 1.15 million cars worldwide between January and March, up 6% on the same period in 2005, and total revenues rose by 17% to 37.2bn euros.

But in the US a price war in the tough North American market hammered profits at its Chrysler division, which was more than halved despite a 4% increase in vehicle sales.

Looking forward, the group said it expected vehicle sales to remain static in 2006, at the 4.8 million units it sold last year.


SEE ALSO:
DaimlerChrysler cuts 6,000 jobs
24 Jan 06 |  Business
Rise in sales for DaimlerChrysler
08 Jan 06 |  Business
Chrysler buyers to get free fuel
17 Nov 05 |  Business
Daimler sells stake in Mitsubishi
11 Nov 05 |  Business
Chrysler hopes to follow GM deal
18 Oct 05 |  Business


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