Daimler-Benz rolls down Wall Street German giant is first on the Big Board

October 06, 1993|By New York Times News Service

NEW YORK -- Corporations issuing new stock, take note.

Daimler-Benz AG seems to have hit upon a sure-fire way to capture Wall Street's attention: Close the street in front of the New York Stock Exchange, truck in samples of your company's products -- in Daimler's case, a helicopter, a fire engine, luxury cars and an assortment of other hulking machinery -- and turn the block into a giant showroom.

That was the scene yesterday in lower Manhattan as Daimler celebrated becoming the first German company to be listed on the Big Board.

But the public relations extravaganza might appear somewhat jarring in the face of the bad news that has recently swirled around Daimler.

The high-technology conglomerate's sales and earnings are in a deep slump -- even under the kinder German accounting standards that the company was using until now.

Its flagship Mercedes-Benz division has been hit hard by the severe recession in the European auto market. And industry experts do not expect Daimler's results to improve until well into 1994.

On the surface, it is the stuff of which sell recommendations are made. But in the market, Daimler's problems have not daunted investors, whose steady buying has driven up its share price about 40 percent this year.

Daimler closed at 760 marks ($469) yesterday in Frankfurt; its low for the year is 530.50 marks ($325.46), hit in January.

On the Big Board yesterday, Daimler's American depositary receipts -- special securities that are each equivalent to a tenth of a Daimler share -- opened for trading at $45.50 and closed at $46.75.

"If anything, Daimler's earnings performance this year has been worse than expected, but the share price has just risen and risen," said the automotive analyst for a Frankfurt bank, who requested anonymity.

"Their half-year results turned out to be abominable," the analyst continued. "There is no other word for it. But investors aren't looking at 1993 or even 1994 anymore. They are looking two or three years down the road."

The company's future is certainly brighter than its present. In the first half of 1993, group net earnings fell to $104 million from $631.5 million in the 1992 period. Group sales fell to $25.8 billion from $29.8 billion. Daimler's financial services division was the only unit without operating losses.

The company also calculated its half-year earnings using American accounting principles as part of the agreement it made with the Securities and Exchange Commission to earn its listing on the New York Stock Exchange.

Using that method, which eliminates much of the secret financial maneuvering allowed by German law, Daimler lost $587.5 million in the first half of this year, compared with a profit of $597.4 million a year ago.

As bad as that sounds, a handful of German analysts recently moved Daimler onto their lists of buy recommendations mainly because of a cost-cutting drive, announced Sept. 17, that they believe will bolster profits once the auto market rebounds.

The centerpiece of that plan is reducing the 365,000-person payroll by 45,000 jobs by late 1994. Most of the job cuts will be in Germany.

"These are really tough measures, but they are what Daimler needs," said Huber Verhufen, an analyst with West Capital in Duesseldorf.

Analysts also approved of Daimler-Benz's long-awaited announce

ment last week that it will build a $300 million factory near Tuscaloosa, Ala., to produce a sport utility vehicle aimed at affluent American consumers.

Edzard Reuter, Daimler's chairman, said the move was an effort to lower its production costs, eliminate exchange rate risks and tap a lucrative market.

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