Being a car enthusiast, I have thoroughly enjoyed the fun driving experience of my Chrysler PT Cruiser. I bought the car shortly after the company became Daimler-Chrysler (NYSE:DCX) and the quality of customer service has been nothing short of sliding under the covers on a cold night.
With automakers fighting for each customer like each sale will be their last, incentives have lifted revenues but effectively squeezed profit margins. Ford (NYSE:F) and GeneralMotors (NYSE:GM) have seen sales spike but have struggled to manifest a similar acceleration in profit. Daimler-Chrysler, however, reported a 7% gain in third-quarter operating profit today on only 2% revenue growth. It appears that the company's results are stronger without the negative impact of struggling Japanese partner Mitsubishi Motors.
The company's sales were impacted by a 4% decline from the year-ago quarter in Mercedes sales, which were much weaker in Europe (-13%) but actually stronger in the U.S. (+12%). The Chrysler group produced a 3% increase in sales, bolstered by success from new products such as the Chrysler 300 and 300C, Dodge Magnum, Dodge Grand Caravan, and Chrysler Town and Country. Additionally, Daimler-Chrysler's Commercial Vehicles division grew sales 36% on a 56% increase in unit sales, and its Financial Services division produced a 10% increase in contract volume.
While it appears that Mercedes is struggling a bit right now, a little history lesson would show us that it wasn't so long ago that the premium car maker was leading the way. Daimler-Chrysler has been vigorously promoting the launch of several new Mercedes models that it believes will bear fruit in the next few quarters. Check out the new C- and A-Class models, as well as the SLK-Roadster Convertible, and you'll see (at least if you're a car buff) why the company is optimistic.
Although Daimler-Chrysler makes quality vehicles with strong brand names and has invested $100 million in Sirius Satellite Radio (NASDAQ:SIRI), it still acknowledged the tough climate in a recent press release: "For the automobile business, demand in the fourth quarter seems likely to weaken." Although the company does anticipate spotty growth in certain segments, without a significant driver providing some much-needed momentum, I would avoid the shares until Mercedes regains its stride.
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Fool contributor Phil Wohl spent more than 12 years on Wall Street and loves driving his PT Cruiser. He does not own shares of any of the companies mentioned.
