DaimlerChrysler's Profit Drops

DaimlerChrysler(DCX - Cramer's Take - Stockpickr) reported a drop in second-quarter profit, citing the weak global economy and a huge operating loss at its Chrysler Group.

Looking to the rest of the year, DaimlerChrysler said it sees a gradual evening-out in demand for passenger cars and light trucks in the U.S., but expects Western Europe's passenger car market to stay at low levels. Also during the year, Chrysler Group is expecting to see an operating profit.

In the quarter ended June 30, the company earned $125 million, or 13 cents a share, compared with $1.27 billion, or $1.27 a share, a year ago. Analysts were looking for earnings of 7 cents a share. Total revenue was $39.5 billion, down from $45.2 billion last year.

The company said it sold 1.2 million vehicles worldwide during the quarter, compared with 1.3 million in the prior-year quarter.

Operating profit at DaimlerChrysler was $700 million, compared with $1.9 billion in the second quarter last year. The company said its Chrysler Group was the only unit to report a loss, and cited "substantial" price incentives in the U.S. market. Meanwhile, all of the company's other divisions had improvements in earnings.

Chrysler Group's operating loss was $1.1 billion, compared with earnings of $476 million a year ago. The company cited weak shipments and "higher provisions for marketing costs related to dealer inventories and for guaranteed residual values." The unit's sales were $13.6 billion, down from $18.9 billion last year, reflecting the appreciation of the euro against the U.S. dollar, the company said. Sales fell 11% when calculated in U.S. dollars.

DaimlerChrysler's services unit posted a 47% jump in operating profit to $384 million, thanks to better refinancing conditions, higher margins and improved risk management. Revenue was $4 billion, a decline of 12%, however.

DaimlerChrysler said it expects operating profit from its group business activities of $5.8 billion for the full year. Revenue is predicted to be about $155 billion, below last year's $172.1 billion, mainly due to the appreciation of the euro against the U.S. dollar and lower unit sales, the company said.

Shares of the company were up 0.7% at $34.70 early Thursday.