FRANKFURT -- Costs linked to recalls and quality problems at DaimlerChrysler's Japanese truck and bus unit will hit third-quarter operating profits by some 400 million euros ($493 million), the company said Friday.
But good earnings at other businesses in DaimlerChrysler's commercial vehicles division would more than offset this, it said, insisting the division's 2004 operating profit was still set to rise despite the worries at its Mitsubishi Fuso unit.
Mitsubishi Motors Corp. spun off Fuso as a separate company in January 2003 and the unlisted truckmaker is now owned 65 percent by DaimlerChrysler and 20 percent by Mitsubishi.
It has been beset by previous Fuso management's cover-up of safety problems that has damaged consumer trust and forced a major overhaul to set the business straight.
"The extraordinary impact on the operating profit of the commercial vehicles division of around 400 million euros in the third quarter of 2004 can be more than compensated for by the very positive trend in the results of the other business units within the commercial vehicles division," DaimlerChrysler said in a statement.
"DaimlerChrysler therefore continues to expect that the operating profit of the commercial vehicles division for the year 2004 will clearly exceed last year's results despite the extraordinary earnings impact."
DaimlerChrsyler had said last month that its truck business continued to boom amid burgeoning demand in both North America and Europe so that the division should generate a "substantial increase" in 2004 operating profit.
NO FURTHER SIGNIFICANT IMPACT
A spokesman for the commercial vehicles division said the costs to be booked in the third quarter -- which follow a 70 million euro ($87 million) charge in the second quarter -- all but brought the financial impact of Fuso's woes to an end, from today's perspective.
While the 400-million figure remains preliminary, "We expect that's it. To be concrete, no further significant impact," he said.
Analyst Michael Raab at Bank Sal. Oppenheim said the 400 million figure had at least cleared the air for what had been an issue hanging over the company.
"It was 170 (million euros) worse than I expected, but it doesn't change the overall story for DaimlerChrysler," he said. "We're just talking about a difference of magnitude here. It is not insubstantial, but it does not change the business case."
He noted that the truck business was having a strong year given encouraging order inflow on both sides of the Atlantic.
"It does not alter in any respect the trends the division is going to be subject to for their bottom line this year," said Raab, who rates DaimlerChrysler stock "neutral."