Q. Now that Chrysler is no longer a part of the company, what is the situation for Daimler AG and its shares?
A. The German automaker is giving the general impression that a house guest has finally left after an extended visit.
Relieved to bid goodbye to all but 19.9 percent of money-losing Chrysler, Daimler has said it expects to return to double-digit operating margins by 2010 at the latest.
Top boss Dieter Zetsche — known in the United States as the star of Chrysler’s “Dr. Z” car commercials — said the new Daimler “starts on a very solid and healthy basis.” His companywide program of operational improvements and cost-cutting since assuming his post in mid-2005 is helping the bottom line.
Fortunately, he does not share predecessor Juergen Schrempp’s burning desire to lead the world’s largest automaker, an ambition that led to the Chrysler merger.
Not that the high-end luxury car segment is a pleasure ride either: The automaker has had to work hard to overcome quality-control problems in the building of Mercedes vehicles. It faces tough European unions and a host of aggressive luxury car competitors.
Shares of Daimler (DAI) are up 68 percent this year following a gain of 20 percent last year.
The firm has a large cash reserve, and will use some of it to buy back up to 10 percent of its stock. Many analysts predict continued dividend increases and share repurchases over the next several years.
Profits declined 14 percent in its second quarter amid the sale of Chrysler. Daimler is taking a $3.38 billion charge from transferring 80.1 percent of Chrysler to private-equity firm Cerberus Capital Management for more than $7 billion.
At the new Daimler, cars now account for just over half of revenues; trucks, vans and buses for one-third; and the lucrative financial-services unit represents the rest. The company employs about 375,000 people worldwide.
The consensus Wall Street rating of Daimler shares is between a “buy” and a “hold,” according to Thomson Financial. That consists of three “strong buys,” two “holds” and one “underperform.”
The company expects improved cash flow and a better balance sheet, thanks in part to shedding the $20 billion in Chrysler post-retirement health-care liabilities. Meanwhile, the new generation of Mercedes C-Class sedans, the company’s best-seller, should help this year’s bottom line.
Daimler earnings are expected to increase 46 percent this year and 22 percent next year, according to Thomson.
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Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney@trib une.com.