FRANKFURT -- A turnaround at U.S. arm Chrysler helped DaimlerChrysler AG boost second-quarter operating profit to 2.1 billion euros ($2.53 billion), the world's fifth-biggest carmaker said on Thursday.
It upgraded its full-year outlook saying it expected "significant improvement" in operating profit excluding one-off factors even though its flagship Mercedes Car Group no longer expected to match 2003 earnings, as it had forecast in April.
Chrysler, long a problem child at the group, swung to an operating profit of 516 million euros thanks to a rejuvenated product line-up supported by a U.S. economic rebound.
The division reiterated its forecast of "considerable positive earnings" in 2004 despite generous and margin-eroding incentives that U.S. carmakers are using to entice customers.
DaimlerChrysler's group operating profit beat the second-quarter forecast of 1.87 billion euros on average from a Reuters poll of 22 analysts.
Helped by Chrysler and its market-leading commercial vehicles business, group sales rose nine percent to 37.07 billion euros in the quarter, versus a forecast for 35.13 billion.
Net profit rose more than fivefold to 554 million euros, but trailed the Reuters forecast of 820 million.
MITSUBISHI A DRAG
The company said losses at its Japanese ally Mitsubishi Motors Corp. hit its bottom line by almost 500 million euros in the quarter.
DaimlerChrysler in April pulled the plug on further financial aid to Mitsubishi, and it said new accounting treatment for its remaining 24.7 percent stake meant the holding would no longer hit operating earnings.
Daimler's flagship Mercedes Car Group reported operating profits slipped 18 percent on sluggish car sales, high costs for launching new products and amid efforts to improve quality.
The division's quarterly operating profit slipped to 703 million and it said it now expected its full-year earnings to decline rather than hold steady.
Mercedes, which this month sealed an agreement with its workforce to save 500 million euros in labor costs in Germany, hopes new models will boost profit significantly by 2006.
Earlier, its supervisory board named turnaround expert Eckhard Cordes -- a company veteran who had been head of its trucks and buses business -- to succeed outgoing Mercedes chief Juergen Hubbert as of October.
DaimlerChrysler's commercial vehicles division more than doubled second-quarter operating earnings, after rivals such as Volvo ratcheted up European market forecasts due to renewed demand in the highly cyclical industry.