Chrysler to ship less

September 20, 2006|By Bloomberg News

NEW YORK -- DaimlerChrysler AG, the world's fifth-largest carmaker, is cutting second-half shipments 15 percent at its U.S.-based Chrysler unit because of declining sales of pickups and sport utility vehicles.

The automaker plans to ship about 705,000 Chrysler, Jeep and Dodge vehicles to U.S. dealers, compared with 829,000 for the July-December period a year earlier, the company said yesterday. Chrysler had planned to ship 840,000 cars and trucks this half.

"We were hoping that we could find our way out of this situation by continuously reducing our production, but not significantly, and increasing our sales," said DaimlerChrysler Chief Executive Officer Dieter Zetsche in a conference call. "The reality is that we fell short of those plans, and relatively significantly."

Zetsche, who led the U.S. unit for five years, said last week that the German automaker would fail to reach an earnings target because of a projected $1.5 billion third-quarter loss at Chrysler. At the same time, Zetsche is reorganizing Mercedes Car Group, boosting quality and firing 8,500 assembly-line workers to reach a profit margin goal of 7 percent by next year.

Declining demand for large Dodge pickup trucks, SUVs and minivans caused Chrysler's U.S. sales to fall 9.7 percent through August. The company is introducing 10 new vehicles this year, most of them in the final four months.

U.S. shares of DaimlerChrysler rose 11 cents to close at $49.29 yesterday on the New York Stock Exchange. They had dropped 3.6 percent this year through yesterday.

Third-quarter Chrysler retail shipments are estimated at 290,000 units, a decline of 90,000 from the previous plan. Slides prepared for Zetsche's presentation didn't give full production figures, which include vehicles sold to corporate and government fleets. Retail shipments in the third quarter of 2005 were 443,000, Chrysler said.

The cuts focus on high-margin light trucks, including SUVs, according to the slides, which showed that Chrysler's inventory of unsold vehicles should be in the low 500,000 range at the end of the year.

Zetsche took over from Juergen E. Schrempp at the start of the year. The 53-year-old executive already has announced 15,000 job cuts, including those at Mercedes; reduced a stake in the European Aeronautic, Defence & Space Co.; and eliminated an unsuccessful model at the Smart division.

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