DETROIT - Incentives on DaimlerChrysler vehicles in North America ballooned to an average of $1,537 during the third quarter of 1999, but the company still posted higher profits and record revenue for Chrysler, Dodge, Jeep and Plymouth vehicles.
Continued prosperity drove up demand for luxury vehicles, pushing Mercedes-Benz sales to a record.
Net income for the corporation in the third quarter was $1.61 billion, up 14 percent from 1998. Third-quarter revenue of $38.56 billion was 15 percent ahead of last year.
Although the incentives dropped below $1,500 before the third quarter ended, the high-water mark of $1,537 was well above the average of $1,470 for the s ame period a year ago. DaimlerChrysler expects to slash the average incentive by $175 to $200 for the fourth quarter, said DaimlerChrysler Chairman Robert Eaton.
'The incentives that we do have are within budget,' Eaton said in an interview last week. 'We obviously are continuing to work hard on costs to continue to improve our results.'
Chrysler, Dodge, Jeep and Plymouth vehicles accounted for the majority of the company's profits in the third quarter. Pre-tax operating income for the group during the third quarter was $1.09 billion, up 11 percent from the same period a year ago. Mercedes and Smart passenger cars brought in $754 million in operating profit, up 40 percent from last year.
ALL NOT ROSY AT D/C
Not all the news was rosy.
DaimlerChrysler's Smart brand operation is expected to lose $426 million to $533 million this year, Eaton said. Also, Hurricane Floyd, which struck the Southeast in Sept ember, disrupted production at some key suppliers, caused a production loss of 25,000 vehicles, Eaton said. He said the company expects to make up the loss in the fourth quarter.
Sales of Chrysler, Dodge and Plymouth minivans, lo ng a profit center for the company, were flat in the third quarter compared with a year ago.
'But clearly, we expect to pick up sales as well as penetration with the new vehicle coming this summer,' Eaton said.
DaimlerChrysler has been criticized for poor financial disclosures after the merger in November 1998. 'We have returned to giving out all the information we gave out prior to the merger, such as production forecasts updated on a monthly basis,' Eaton said.
DaimlerChrysler production analysts have revised their estimate again, Eaton said. In January, DaimlerChrysler had estimated the North American automotive industry would produce 15.2 million light-, medium- and heavy- duty vehicles in 1999. In June, the number was boosted to 16.4 million.
Eaton said last week DaimlerChrysler analysts now estimate that 1999 North American production will be about 17.2 million lights, mediums and heavies.
Medium- and heavy-duty vehicles account for about 300,000 vehicles per year.