An "enormous" fall in the dollar against the mark had its most severe impact on the Dasa aerospace division and a restructuring programme costing DM1bn (pounds 440m) is likely to mean thousands of job losses.
Daimler's total losses of DM1.56bn, down from a DM462m profit, shocked analysts who had been expecting losses of about DM300m.
The figure was swelled by a one-off DM1.2bn charge at Dasa. Full-year group losses could amount to as much as DM2bn, the company hinted.
Dasa's operating loss more than tripled over a year-earlier to DM1.6bn. The company's sales are denominated in dollars, and because of the US currency's fall against the mark, Dasa was obliged under German accounting to take the charge.
The only bright star in the results was at the Mercedes-Benz car business, which increased operating profit by 44.7 per cent to DM1.5bn on sales up 3 per cent to DM35.6bn.
The group's electrical engineering and railway subsidiary, AEG, continued to lose money, reporting an operating loss of DM609m, against DM341m last time.
The company said it was working on plans for a radical solution, which some German analysts believe might require 15,000 job cuts at Dasa.