Q1 profits down sharply at automaker Daimler

Daimler profits down 60 percent as earnings sag in slow European economy

Associated Press

FRANKFURT, Germany (AP) -- Slumping auto sales in recession-bound Europe helped send first-quarter earnings down 60 percent at Daimler AG, which warned Wednesday that earnings for all of this year would be worse than last year.

Net profit fell to 564 million euros ($732.6 million) from 1.42 billion euros in the same quarter a year ago. Revenue fell 3 percent to 26.1 billion euros. Profits fell short of the 810 million euros expected by analysts surveyed by financial information provider FactSet.

CEO Dieter Zetsche said that "many markets developed worse than expected for economic reasons, especially in Western Europe. "

European car sales have slumped as governments cut spending to deal with problems with too much debt, sending growth down and unemployment up. The economic fallout is worst in indebted countries in southern Europe. But sales have also fallen in better-off Germany, home market for Daimler's Mercedes-Benz brand.

The Stuttgart, Germany-based company said it expected the U.S. and Chinese markets to grow but warned that European car sales would continue to decline. The company said that "the German market cannot detach itself from this development and is expected to fall significantly short of the previous year's level. Daimler also said the market for trucks would fall 5 percent due to the slow economy.

High spending of 1.6 billion euros on new plants and equipment also hurt earnings for the quarter.

The company said that earnings before interest and tax for this year would come in below last year's, due to lowered market expectations and the weak first quarter performance, as well the sale of its stake in aerospace firm EADS. It said earnings would increase in 2014.

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