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Merc troubles hit Daimler

Stuttgart - German-American carmaker DaimlerChrysler said on Thursday it is to launch a program aimed at achieving a €3bn improvement in the performance of its troubled Mercedes-Benz car unit.

The goal of the program, dubbed CORE, is a return on sales of 7% by 2007, the company said.

AP reports DaimlerChrysler earnings tumble amid troubles at Mercedes-Benz.

DaimlerChrysler said on Thursday that its earnings fell 63% in the fourth quarter, with profits from luxury division Mercedes nearly evaporating.

Net profit for the October-December period came to €526m, down from €1.4bn in the fourth quarter of 2003.

Sales rose 7% to €37.7bn from €35.2bn a year ago.

The company's profits from Mercedes, hit by quality problems and the weak dollar, plummeted to just €20m from €784m in the fourth quarter of 2003.

Fourth-quarter sales at Mercedes fell 2% to €12.8bn, from €13bn a year earlier.

The weak dollar hurts Mercedes by making its products more expensive compared with those of foreign competitors.

At home, it faces increased competition from Munich-based BMW, which has launched several new models.

Analysts say Mercedes' fortunes may improve as it comes out with new products over the next year or two.

For DaimlerChrysler as a whole, earnings per share dropped for the fourth quarter of 2004, to €52c, from 1.39c in the same period of the previous year.

Overall earnings for 2004, however, rose significantly, with net income of €2.5bn, up from €448m the previous year.

Strong sales from the company's Chrysler division - driven by hot-selling new models such as the 300 and 300C - were credited with driving profits in 2004, a turnaround from previous years when the company relied heavily on Mercedes to bail out the then-ailing US division.

DaimlerChrysler's US division, Chrysler, meanwhile announced that it will get profit-sharing cheques worth an average $1 500 as their portion of the 2004 earnings.

The cheques, the biggest in five years for 68 000 hourly and administrative Chrysler employees, are fatter than the $600 profit-sharing payouts that Ford workers will get, or the $195 at General Motors. - Dow Jones Newswires/AP

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