announced its $32.8 billion transcontinental purchase of
in 1998, the car makers prepared for a host of unprecedented obstacles, from culture clashes to simple logistics. On Wednesday,
subtly acknowledged that an unexpected headache has developed for its investor relations department.
The varying preferences of securities regulators, Wall Street analysts and their European counterparts, and the research firms that aggregate research for investors have made the seemingly straightforward process of reporting quarterly earnings quite complicated. As a result, estimates of the company's quarterly numbers, followed closely by U.S. investors, vary wildly.
"In order to clarify the various estimates of DaimlerChrysler's earnings situation, the company is providing an overview of current business trends," the company wrote Wednesday in a news release bearing the dateline Stuttgart, Germany and Auburn Hills, Mich.
In the statement, DaimlerChrysler said its American unit would report a loss for the quarter because of high U.S. incentives and the costs of launching new versions of its minivan and mid-size sedans. After posting a third-quarter profit of 1 billion euros last year, the Chrysler group will report a loss of 600 million euros for the quarter this year.
For the year, DaimlerChrysler's operating profit will fall to about 7 billion euros, down from 10 billion euros in 1999 after adjusting for one-time charges.
For weeks, analysts worldwide have been lowering their estimates of the company's 2000 earnings. The German company is used to addressing an investment community that thinks in terms of full years and euros. But in the U.S., where many investors closely watch the quarterly numbers, the picture has been murky.
"Consensus is very, very wildly displaced," said Adam Jonas, analyst for
Morgan Stanley Dean Witter
. "You could argue the company has been challenged communicating to investors." He rates the stock neutral, and his firm has not done recent underwriting for DaimlerChrysler.
First Call/Thomson Financial
, a research firm that provides so-called consensus estimates, 26 analysts are on record predicting annual earnings in euros. Only six have made predictions for the quarterly numbers, which the firm requires analysts to supply in U.S. dollars. The consensus for the third quarter is $1.09 a share. The low estimate is 69 cents a share, and the high is $1.51.
Many U.S. news organizations hang their coverage of a company's earnings on whether it makes, misses or beats the numbers compiled by First Call.
"The U.S. is such a shoot from the hip, make the quarterly numbers place," said Joe Cooper, analyst for First Call.
Currency fluctuations, of course, affect the company's earnings in the traditional and expected ways. Cooper noted that the analysts whose estimates are highest placed their bets before the euro began its recent slide.
But currency conversions create additional confusion. For First Call, the analysts must make every conversion from euro to dollar using an average valuation of the euro over the duration of the quarter. But
Securities and Exchange Commission
rules require the company to use a so-called convenience rate -- the exchange rate on the last day of the quarter.
John Heiny, spokesman for the SEC, said the agency's rules apply to its forms, but that it is not to blame for the reporting difficulties. "We don't regulate press releases," he said.
Despite the announcement, the company's shares gained 60 cents, or 1%, to close at $45.60. As for this gain occurring despite the company reporting negative news, theories abound. For example, Jonas noted that the stock has an extraordinarily high short ratio of 10.79, meaning many investors have already bet that the price will fall.
Jack Ferry, a spokesman for DaimlerChrysler, said both the euro and its conversion are problematic.
"We're dealing with a currency that is getting progressively weak against the dollar," Ferry said. But "what we're trying to address are some of the reports of what the performance might be for the third quarter. We wanted to get out there and clarify what the situation was."