Booming car sales transform Daimler: Warning that 18,000 more jobs will be shed to cut costs further despite profit turnaround

BOOMING car sales and drastic cost-cutting helped Daimler Benz, Germany's biggest industrial group, to stage a turnaround in the first half with net income of DM369m ( pounds 152.4m) compared with a loss of DM949m, writes Mary Fagan.

Daimler, which has cut more than 26,000 jobs in the past year, said 18,000 more would go by the end of 1995.

It warned that, although the outlook for the year was bright, tight cost control and restructuring must continue.

Gerhard Leiner, finance director, said: 'We have taken a deep breath and are now sprinting forward. We have achieved a turnaround.'

The results showed that crises such as the group had experienced need not spell disaster if it could read the mood of the times and take appropriate steps.

Group sales for the six months grew 13 per cent to DM49bn and are expected to reach DM100bn by the year-end.

Sales at Mercedes-Benz, Daimler's vehicle manufacturing subsidiary, increased about 20 per cent to DM34.7bn. Sales of passenger cars rose 23 per cent and commercial vehicles 14 per cent.

The group said conditions in the commercial vehicle business were still tough, and that the profitability of the business remained unsatisfactory.

Edzard Reuter, Daimler-Benz chairman, said the car factories were operating at full capacity. Unit sales in the first half of the year rose 40 per cent to almost 300,000 and should reach 585,000 by year-end.

The company is working on new models, including a small car and a car designed for use in cities, and expects to increase production capacity to a million vehicles by the end of the decade.

Debis, the information technology and mobile telecommunications arm, also performed well.

However, Dasa, the aerospace division, saw sales fall to DM7.18bn from DM7.62bn a year earlier.

Mr Reuter said the weak dollar had hurt earnings from car sales and commercial aircraft. The exchange rate problem was one of the main reasons for caution about the results for the year.

Mr Reuter also said that partnerships and alliances were vital for the future competitiveness of European companies.

The need for co-operation in Europe was underlined by the dollars 10bn merger of Lockheed and and Martin Marrietta of the US earlier this week.