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Sunday, April 18, 2010

Daimler targets sales at double industry growth rate

Daimler AG, the maker of Mercedes-Benz cars and trucks, aims to increase deliveries twice as fast as this year's worldwide auto-market growth rate as the latest models of the E-class and S-class sedans attract buyers.

“Our global sales target for the year is ambitious but realistic,” CEO Dieter Zetsche said today at the annual shareholders meeting in Berlin. The sales gain includes a projected 50 percent jump in sales of the E class, including sedan, station wagon, coupe, and convertible versions.

Carmakers' deliveries will increase 3 percent to 4 percent this year, Daimler said in February. The Stuttgart, Germany- based manufacturer is seeking to close the gap with luxury-car market leader BMW AG while fending off efforts by Volkswagen AG's Audi division to become the world's biggest high-end automaker by 2015. Zetsche didn't specify Daimler's car-sales target for this year.

Daimler is targeting earnings before interest and taxes of at least 2.3 billion euros ($3.1 billion) this year after an Ebit loss of 1.51 billion euros in 2009. The manufacturer stuck to a forecast today that revenue in 2010 will exceed last year's 78.9 billion euros but be “significantly” below the 98.5 billion euros of 2008.

The global economy is “too fragile” to allow Daimler to commit to a timeframe for raising the automaking division's Ebit as a proportion of sales to 9 percent, Zetsche said. Munich-based BMW reaffirmed a target last month of achieving an Ebit margin in carmaking of at least 8 percent by 2012.

Sales at the Mercedes-Benz Cars division, which includes the Smart minicar and Maybach luxury nameplates, rose 11 percent to 271,200 vehicles in the first quarter, the company said on April 6. Including deliveries to dealers, Mercedes-Benz brand sales jumped by almost 27 percent in the period, boosted by a surge of more than two-thirds for the top-of-the-line S-Class, Daimler said today.

Daimler rose as much as 52 cents, or 1.4 percent, to 36.52 euros, the highest intraday price since Jan. 20, and was up 1.2 percent as of 1:59 p.m. in Frankfurt trading. The stock has declined 2.1 percent this year.

The company is also the world's largest truckmaker with Freightliner vehicles in the U.S. and Fuso models in Asia. Daimler said first-quarter truck sales rose 8 percent and orders nearly doubled, even as markets remain “weak.” Bus sales increased 23 percent in the first three months of 2010, and van deliveries jumped 62 percent, Zetsche said.

Reacting to rising international tensions with Iran over the country's nuclear research, Daimler said today that it's abandoning a 30 percent stake in a diesel-engine venture with Iran Khodro Co. Daimler also withdrew an application with the German government to export three-axle trucks to Iran and will halt delivery of such vehicles indefinitely.

“The policies of the current Iranian leadership have compelled us to put our business relationship with that country on a new footing,” Zetsche told about 5,000 shareholders. “Our business activities with Iran will now be limited to meeting our existing contractual obligations and continuing our cooperation with established customers.”

Cooperation With Renault

The manufacturer, seeking to expand its line-up of small cars while holding back costs, announced plans a week ago to cooperate with the Renault-Nissan alliance on developing compact Mercedes-Benz and Smart vehicles. A new line of Smart city cars, including two- and four-seat versions, will share a platform with Renault SA's Twingo. The French partner will supply 3- and 4-cylinder gasoline and diesel engines for Mercedes-Benz cars.

The cooperation represents “a decisive strategic step” that will help Smart enhance its position as a “young” brand, Zetsche said. While the project will help Mercedes-Benz hold back the expense of introducing smaller models, the brand “will not tolerate any compromises to our claim ‘the best or nothing,'” Zetsche added.

Working with Renault and Nissan Motor Co. may not bring the benefits that Daimler is planning, Ingo Speich, a Frankfurt- based fund manager with Union Investment, said at the meeting.

“We have grave doubts that the new partnership will be a success,” Speich said. “The traces of missteps run like a red thread through Daimler's cooperation history.”

After losing ground to Munich-based BMW in reducing vehicle emissions, Daimler aims to almost double annual spending to develop batteries and fuel-saving engines, to 1 billion euros in the next two years from an average 567 million euros in the past three years, Thomas Weber, the company's development chief, said on March 3.

Electric-car projects

The German company plans to develop an electric car for China with BYD Co., the Shenzhen-based automaker backed by billionaire Warren Buffett. It's also building a factory in eastern Germany to produce lithium-ion batteries by 2012 and has taken a stake in Tesla Motors Inc., the Palo Alto, California- based manufacturer of electric sports cars.

“Daimler aims to be, and will be, a pioneer in the field of electric mobility” as the car industry phases out oil-based powering systems, Zetsche said. “When alternative drive systems go into mass production in a few years, we will be ahead of the competition.”

A net loss of 2.64 billion euros last year because of the global car-market contraction prompted Daimler to cancel its dividend for the first time since at least 1999. Daimler posted the loss, its first for a full year since 2001, even after reducing spending by 5.3 billion euros by building fewer vehicles and cutting pay in response to the recession.

Daimler reiterated that it plans to resume dividend payments after returning to profit this year.

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