Daimler turnover rises but margins suffer

Daimler-Benz, Germany's largest industrial corporation, pulled clearly away from last year's record loss, thanks to greatly improved conditions in most of its markets and vigorous cost-cutting.

But the 9 per cent jump in group sales to DM73bn in the first nine months masked a total dependence on cars, and particularly Mercedes' bottom- range C class, where margins are being heavily squeezed.

'People are mistaken to equate substantial cost reductions with excellent earnings. Many of the savings are having to be passed on to clients at fiercely low prices,' noted Joachim Bernsdorff of Bank Julius Bar in Frankfurt. With Daimler's aerospace division still deeply troubled by declining sales and weak prices, and AEG struggling, all the running is being made by Mercedes, where both cars and trucks are performing well.

But the pressure on margins can be seen from the fact that unit car sales leapt 29 per cent in the first nine months, while the value of sales rose by 13 per cent. Daimler spoke yesterday of the 'particularly favourable capacity utilisation' in cars, but this referred mainly to its C class, where production is at the limit.

Most of the sales are concentrated, however, on the basic model, with the lowest margins, not the luxury S class model, which is running at near 70 per cent of capacity.

After yesterday's announcement and Daimler's forecast of annual sales of more than DM100bn, its shares closed DM4.70 up at DM750.70.