Summary: DaimlerChrysler has reported a Q3 loss of $1.5 billion at its Chrysler division. The company says it is working on a plan to return the division to profitability -- a plan that might, for the first time, consider the spin-off or outright sale of Chrysler. Chrysler cites dismal sales of SUVs and pickups, which are disproportionately represented in its product line, and deep discounting as reasons for the loss. (Light trucks offer high profit margins when sales are good, but consumers have balked because of rising gasoline prices.) Last week, the company announced it is attempting to cut manufacturing and marketing costs by $1,000 per car (Project Refocus). DaimlerChrysler's other car-making unit, Mercedes, enjoyed a more-than-doubling of operating profit to $1.3 billion in Q3, but Chrysler's losses have dragged down overall company earnings by 37%. Meanwhile, GM earned $529 million in the quarter and posted record revenue of $48.8 billion. This compares nicely to last year, when it lost over $1 billion in the same quarter and eventually lost $10.6 billion on the year. These results represent earnings of $0.93/share versus Street expectations of $0.49, but the stock price fell anyway over concerns the company is burning cash too fast. GM has dramatically cut costs, in part through buyouts of nearly 1/3 of its hourly workers, in an attempt to fend off the demands of Kirk Kerkorian, the company's largest shareholder, who insisted over the objections of management that the company explore an alliance with Nissan and Renault.
Related links: DaimlerChrysler Q3 2006 Earnings Call Transcript • Chrysler's Date With a German Efficiency Expert • DaimlerChrysler's New Marketing Strategy: The Beginning of the End for Car Dealerships? • Chrysler Forecasts 1% Market Share Gain • Chrysler's Attempt to Lower Inventory Hits Roadblock • Jerry Flint Believes Detroit's Luck Has Run Out • With the GM Merger a No Go, What Kerkorian's Next Move? • Despite a Great Year, GM is Still Trailing Japanese Counterparts Like Toyota • Message to GM Investors: Whoa!
Potentially impacted stocks and ETFs: General Motors Corp. (GM), DaimlerChrysler AG (DCX) • iMSCI Germany Index Fund (EWG), WisdomTree Dividend Top 100 (DTN), PowerShares FTSE RAFI US 1000 (PRF), Rydex S&P 500 Pure Value (RPV)
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