FRANKFURT -- A day after its Mercedes division helped it to forecast-beating results, DaimlerChrysler said on Wednesday that new products would help shield its U.S. arm the Chrysler group from margin-eroding price wars.
Slugging it out with badgered U.S. rivals General Motors and Ford Motor Co. while trying to fend off foreign competitors in the world's biggest car market poses a major challenge for the Chrysler group, but one it has mastered so far.
The Chrysler group's third-quarter operating profit gained 43 percent to $374 million, or 310 million euros, on unit sales and revenues both up 12 percent despite the toughest market conditions in living memory. It also maintained its operating margin, excluding one-off factors.
In a conference call with investors, group CFO Bodo Uebber acknowledged Chrysler had faced slight downward pressure on net prices in the third quarter, but added the pressure had been worse in the first half of the year.
"Having all our new products out ... we can compete even better in the fourth quarter" in terms of the prices Chrysler can command, he added.
The Chrysler group has outshone its U.S. rivals thanks to hot models such as the Chrysler 300 sedan, Jeep Grand Cherokee and minivans with stow-flat seats.
It recently launched the "Mega Cab" version of its big Dodge Ram pickup and the Jeep Commander with three rows of seats. Uebber said 10 new vehicles were due in 2006. These include the Dodge Caliber mid-size car and the Dodge Nitro crossover.
Chrysler's performance and a rebound by the premium Mercedes Car Group division helped the world's fifth-biggest carmaker report late on Tuesday that third-quarter operating profit rose 38 percent to 1.84 billion euros, beating analysts' forecasts.
MERCEDES ON TRACK
Uebber said Mercedes was on track to reach the goal of boosting its operating margin to 7 percent by 2007.
Mercedes was making progress with plans to reduce costs, boost revenue, ensure quality and revamp the loss-making Smart small car business, which Uebber reiterated was due to break even in 2007.
Long the group's cash machine, the division has been dogged this year by the strong euro, model changeovers, spending to fix quality problems at Mercedes-Benz and losses at Smart, which has responded by cutting staff and its model line-up.
The quality offensive meant warranty costs would now start to decline, Uebber said.
Mercedes' third-quarter operating profit increased 43 percent to 436 million euros as new models came onto the market and it wrung out efficiency gains, cementing a rebound that began in the second quarter after a rare first-quarter loss.
Slides on the company website also cited challenges "for 2005 and ahead", including an "intensely competitive car market, especially in the U.S.," a further rise in interest rates, high oil prices and translation effects from foreign exchange rates.
DaimlerChrysler's foreign currency exposure for 2005 is "nearly fully" hedged at 95 percent, Uebber said. It uses a three-year rolling plan for hedging, and Daimler had already executed initial hedging contracts for 2008, he said.
He thought the burden from higher raw material costs would rise somewhat next year, but not nearly as much as in 2005 compared to 2004.