Mercedes Looks Forward to Reduced Profit, Quality Issues, Larger US Work Force

FRANKFURT, Jan 12, 2005; Reuters reported that a weak dollar and the tackling of quality problems will eat into profits at DaimlerChrysler's Mercedes unit this year, Mercedes head Eckhard Cordes told German newspaper Financial Times Deutschland.

"We will do what is necessary to remove the quality problem. And that will also have an influence on the 2005 profit," Cordes was quoted as saying in Wednesday's edition.

The paper noted that the effects of a 500-million-euro cost cutting programme would not be fully seen this year.

To help counter the weakness of the dollar against the euro Mercedes plans to raise output at a site in Tuscaloosa in the United States and will double the number of employees at the site to 4,000 by 2006, the paper said.

Cordes said that he saw no more sense in hedging currency exposure at such high exchange rates, despite admitting that "the dollar is a problem for us."

To improve quality the company would replace defective parts even if the warranty had expired. "We want to make Mercedes number one in quality -- better than BMW, Audi or Lexus," Cordes said.

Daimler had warned in October that its quality drive would hurt earnings in 2004 and 2005, and to a lesser extent in 2006.