DaimlerChrysler Earnings Up, but Bid for Daewoo Raises Concerns

One analyst said the bid might dilute earnings and hurt the stock price.
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Updated from 2:25 p.m. EST

DaimlerChrysler AG

(DCX)

reported a solid earnings increase Monday, bolstered by a strong performance in its core automotive business, but the company worried some analysts by joining the bidding for Daewoo, the languishing Korean automaker.

Shares of the merged German-American company's stock gained 2 3/16, or 3.5%, to close at 65 11/16 Monday.

For the fourth quarter ended Dec. 31, the company reported net income of 1.1 billion euros, or 1.13 euros a share, on revenue of 41.4 billion euros. In the year-ago quarter, the company reported net income of 609 million euros, or 0.61 euros a share, on revenue of 34.7 billion euros.

The company at first confused some analysts and researchers at First Call/Thomson Financial by posting earnings of 61 cents a share. Analysts polled by First Call had predicted an average of $1.76 a share. But one American analyst who built his model in euros said the company beat expectations by a few euros. The company used the Federal Reserve bank's noon buying rate on Dec. 31 of $1 per 1.0070 euro as the exchange rate for its report.

Mercedes-Benz and Chrysler operating profits grew by more than 80% apiece, while the Commercial Vehicles division reported 64% growth. But operating profits fell in the company's ancillary divisions, including services, aerospace and others. That final category, where operating losses widened from 39 million euros to 68 million euros, includes AdTranz, a rail-systems business which the company said will "achieve a turnaround" this year.

Also Monday, the company filed a letter of intent to bid on Daewoo. The South Korean company nearly went bankrupt in June, but its creditors extended more time and additional loans, putting the company more than $11 million in debt.

Michael Bruynesteyn, analyst for

Prudential Securities

, said the Daewoo bid might dilute earnings and hurt the company's stock price.

"Daewoo doesn't look healthy because of its large debt," said Bruynesteyn, who rates DaimlerChrysler shares a hold and whose firm has not done underwriting for the company. "They have huge glistening factories in Europe that are hardly operating."

Competitive bidding with four other giant automakers will inevitably raise the Daewoo price, he added.

The company also said Monday that it will pay around 82,600 employees who work on Chrysler, Dodge and Jeep products around $8,100 apiece in profit-sharing. Since 1992, certain Chrysler employees have reaped an average total of $43,929 in profit-sharing, the company said.

DaimlerChrysler said that around 20,100 "professional-administrative" and management employees would receive undisclosed profit-sharing payments "based on the same formula."

A company spokeswoman said the management and professional employees' average profit-sharing payments would come to the exact same amount.