Daimler-Benz turns corner as sales rise: Rationalisation bears fruit in fourth quarter

DAIMLER-BENZ, Germany's largest industrial group, has turned the corner after a devastating performance in 1993.

Edzard Reuter, Daimler's chief executive, said he expected a positive operating result in 1994 thanks to drastic rationalisation and a sharp rise in sales.

'By 1995 we will once again be able to speak of an overall satisfactory trend in earnings,' he said. The group recorded a net loss of DM1.8bn (pounds 732m) last year under US accounting standards. The earnings turnaround began in the final quarter of last year, when Daimler's operating result improved by more than DM400m. The group operating loss for 1993 was DM3.3bn, with all main divisions in the red.

Daimler said the positive earnings trend was continuing, with sales in the first quarter of 1994 rising 15 per cent to DM21bn over a year earlier. The main boost came from an improvement in car sales by Mercedes-Benz, which accounts for two-thirds of group turnover. Thanks to the success of its C class model, Mercedes increased sales by 23 per cent to more than DM15bn in the first quarter - admittedly from a low level the previous year.

In Germany Mercedes recorded a 38 per cent growth in new car registrations, implying a rise in market share of more than 2 per cent. Registrations in the first quarter rose by 40 per cent in Western Europe, excluding Germany; by 34 per cent in the US and 30 per cent in Japan.

The combination of a drastic cost-cutting programme and the renewal and extension of the product range into revolutionary segments was creating the basis for substantial sales growth over the long term, Mr Reuter said.

In 1996 Mercedes will launch a small roadster sports car, and the following year its A class and a vehicle made in the US, for the sports utility market.

Daimler still faces severe problems at Deutsche Aerospace, its second-biggest division, which saw sales continue to drop during the first quarter of this year by about 10 per cent.

Daimler said it made annual savings of almost DM5bn in 1993. The German workforce was cut by 18,000 to 285,000 and similar cuts are planned this year. Because most of the restructuring charges of DM3.5bn went into 1993 results, earnings next year will be much improved, Daimler said. Against restructuring charges, it showed a one-off profit of DM1.7bn from the sale of securities.