Mercedes Expecting Rough Ride In 2005

'struggled with quality problems'?

Ouch! comments anyone?


Mercedes Expecting Rough Ride In 2005
The Associated Press


STUTTGART, Germany - The head of DaimlerChrysler AG's troubled Mercedes division has warned that market conditions will worsen this year, further burdening the luxury car unit.
In an e-mail to employees obtained Friday by The Associated Press, Mercedes chief Eckhard Cordes said that increasing competition in the premium car sector has resulted in ``enormous price pressure.''

``Because of higher raw material prices and worse foreign- exchange assumptions, these difficult market conditions will further intensify and burden our business in the current year much more severely than previously,'' Cordes said.

On Thursday, DaimlerChrysler said its fourth-quarter net profit fell 63 percent to 526 million euros ($712 million) from 1.4 billion euros a year ago as Mercedes, once its star division, struggled with quality problems and the dollar's weakness against the euro, which hurt its results in the key U.S. market.

Although once-troubled U.S. unit Chrysler more than doubled its fourth-quarter operating earnings to 386 million euros ($523 million) from 143 million euros a year ago, earnings at Mercedes almost evaporated - falling to 20 million euros ($27 million) from 784 million euros.

DaimlerChrysler CEO Juergen Schrempp called the Mercedes result unacceptable and announced a plan to cut costs and boost revenue that he said would improve the division's profit margin to 7 percent by 2007. It currently stands at 3.5 percent.

In his e-mail, Cordes urged employees to support the plan.

``We have to do everything to achieve a competitive cost position as soon as possible,'' he said, also pledging to take ``personal responsibility for bringing Mercedes' quality to the highest level again.''