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Automotive Intelligence News

News of  April 25, 2001


 


DaimlerChrysler Services to Boost Profitability

  • Focus on automotive financial services
  • DaimlerChrysler Bank to generate business in new markets
  • Publication of Annual Report 2000

Berlin  - The year 2000 saw DaimlerChrysler Services, formerly debis, record a 36 percent rise in revenues to EUR 17.5 billion as well as a 27 percent increase in its portfolio volume to EUR 126 billion. Following this powerful surge, however, growth in both revenues and contract volume is set to slow down. The top priority at the company now is to consolidate with the aim of improving profitability. "It is our foremost priority to boost profitability," says Dr. Klaus Mangold, Chairman of the Board of Management of DaimlerChrysler Services AG.

Operating profit influenced by one-time effects

In 2000, DaimlerChrysler Services posted an operating profit of EUR 2.5 billion, an increase of 21 percent on the previous year. This included one-time income of EUR 2.3 billion, which resulted from the equity participation of Deutsche Telekom in debis Systemhaus. "Our investment in debis Systemhaus has turned out to be extremely profitable for the shareholders of DaimlerChrysler," says Dr. Mangold. "We're very proud to have been able to make such a major contribution to increasing the corporate value of DaimlerChrysler."

After adjustment for these one-time effects, however, the figure for operating profit was EUR 0.6 billion, down 38 percent from the EUR 1 billion recorded for the previous year. Due to a fall in prices on the pre-owned vehicle market, particularly in the U.S., DaimlerChrysler Services made a one-time valuation adjustment of EUR 0.5 billion on its stock of leasing vehicles. The second half of the year in particular saw mounting refinancing costs and an increasingly harsh climate of competition in the financial services market, which resulted in growing pressure on margins and a substantial drop in earnings in North America.

New measures implemented

This difficult market situation is set to continue throughout this year. In order to minimize the associated risks, DaimlerChrysler Services has implemented a comprehensive range of measures. In the company's North American operations, for example, moves are being made to achieve a more balanced position on penetration rates — the proportion of financed and leased vehicles with respect to total sales — which, as a result of the difficult market climate, have grown too high for some models. And in an attempt to counteract the fall in prices for pre-owned vehicles, the company has also launched a range of intensive marketing measures. In addition, DaimlerChrysler Services has increased its use of IT systems so as to be able to keep track of residual-value developments.

Focus on vehicle-related financial services

Following a strategic realignment, DaimlerChrysler Services will concentrate on providing financial services as well as new and pioneering mobility and telematics services along the entire automotive value chain. This will happen in close collaboration with the sales and marketing teams from the vehicles divisions at DaimlerChrysler. The benefit of such intensive cooperation is that it will allow DaimlerChrysler Services to develop a particularly close relationship to both dealers and customers. Financing and leasing offers are playing an increasingly important role in today's automobile market. This is because customers increasingly look upon such services as an integral part of the product when they purchase an automobile. "We're the most important financing partner for all of the vehicle brands manufactured by DaimlerChrysler," says Dr. Mangold. Thanks to what is an exceptional degree of international presence for a financial services company, DaimlerChrysler Services will be able to make this partnership a success across all the major markets of the world.

With the decision to establish the DaimlerChrysler Bank, DaimlerChrysler Services will extend far beyond the traditional leasing and financing business for cars and will thus generate business in new markets. The DaimlerChrysler Bank will offer customers premium financial products such as for example special savings plans, DaimlerChrysler investment funds, insurance and its own DaimlerChrysler card.

Key figures for 2000

For DaimlerChrysler Services, the year 2000 was marked by exceptionally strong growth in both revenues and portfolio volume. At the same time, profits were higher than in the previous year, although this was also the result of one-time effects. The DaimlerChrysler Services Annual Report 2000, which has now been published, presents the most important figures for the past year:

In 2000, DaimlerChrysler Services boosted revenues to a total of EUR 17.5 billion. This 36 percent increase was largely the result of a powerful surge in the volume of leasing business. Revenues from business activities outside of Germany showed particularly strong growth, rising by more than 50 percent to over EUR 13 billion. As such, these now account for more than 75 percent of total company revenues.

DaimlerChrysler Services posted an operating profit of EUR 2.5 billion. Boosted by one-time income from the deconsolidation of debis Systemhaus — and despite a one-time EUR 0.5 billion valuation adjustment to the company's leasing assets — this figure was up by the substantial margin of 21 percent on the already high figure of EUR 2.0 billion recorded for the previous year. After adjustment for these one-time effects, however, operating profit for the year 2000 fell to EUR 0.6 billion from the previous year’s figure of EUR 1 billion. Chiefly responsible for the drop here were the pressure on margins generated by rising interest rates along with an increasingly harsh climate of competition in the financial services market.

The year 2000 saw DaimlerChrysler Services boost its contract volume to a total of EUR 126.3 billion, an increase of 27 percent on the previous year. Of this volume, EUR 100.7 billion is held in the NAFTA region, EUR 10.4 billion in Europe (excluding Germany) and EUR 10.6 billion in Germany. Over the same period, the volume of new business rose by 12 percent to EUR 56.8 billion.

DaimlerChrysler Services has a workforce of nearly 10,000 employees worldwide. Taking account of the deconsolidation of debis Systemhaus, workforce numbers rose by six percent. Moreover, for the first time ever, more than 75 percent of the company’s employees now work outside of Germany. Some 2,300 DaimlerChrysler Services employees work in Germany, 4,800 in the U.S. and 2,500 at other locations around the world.

(April 23, 2001)

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