Once again DaimlerChrysler has capitalized on the public's short attention span, and managed to report an actual loss as "profit".
But how can this be? Aren't the headlines proclaiming a $111 million profit for the first quarter of 2002? Well, I suppose that depends on how you define profit. To the common folk, profit is the amount remaining after you pay your bills.
However, when you're a CEO overdue for some good publicity, and the troops are starting to get angry; you can announce just about any number you wish as profit. Later, you can mention "restructuring costs" and "one-time-charges", confident in the knowledge that almost no one will print such boring details.
What are these one-time-charges? Taxes, severance payments, costs involved with closing plants, etc. What is the net effect? The $111 million profit becomes a $163 million loss.
Let us also remember that the first quarter of 2002 was an especially strong period for auto sales, as a result of post 9-11 rebates and financing. In the first quarter of 2002, the Chrysler group also sold millions of dollars in assets, and took on several hundred million dollars in debt as the result of new bond issues.
Dieter Zetsche says the Chrysler Group could remain profitable for all of 2002, "if" the US auto market continues to improve. This would seem to contradict the statement made by his boss, Jurgen Schrempp, just two weeks earlier. Mr. Schrempp told the shareholders gathered in Stuttgart to "expect losses in other quarters". Let's hope he was lying then too.
None of this short-lived good news will stop the billions of dollars cut from product development, prevent ill-advised platform sharing with Mitsubishi, stop the labor problems in Germany, or end Freightliner's losses ($74 million this quarter). It won't have any significant effect on the stock price (down $.94 after the profit announcement). Most of all, it only proves that Zetsche has been able to cut costs. From this point on, it's all about increasing revenues.
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