DaimlerChrysler plays down link

DaimlerChrysler CEO Dieter Zetsche said today he will not be forced to react to any tie-up between the Renault/Nissan alliance led by Carlos Ghosn and a major U.S. manufacturer.

Ghosn, who is chief executive of Renault SA and Nissan Motor Co. Ltd., is holding talks on bringing General Motors into the grouping, with Ford Motor Co. as another option if the GM talks fail.

"For the near term this would not be a threat to the rest of the industry," Zetsche told a Reuters automotive forum at the Paris motor show.

How well such a deal would be executed would determine in the long run whether it changed the industry landscape, he added, but said DaimlerChrysler, the world's fifth-biggest carmaker, would not be forced to react.

"I think we would continue to be on a proactive strategy and not a reactive strategy," he said.

Mounting losses at the Chrysler group forced DaimlerChrysler this month to cut its 2006 operating profit forecast by around $1.27 billion (1 billion euros) to $6.35 billion (5 billion euros).

Zetsche said the company was "turning over every rock" to find improvements at the Chrysler group, adding he could not rule out restructuring costs there, but he was not more specific.

"I am certain it is not our intention to have a huge restructuring bill," he said.

Hurt by U.S. consumers' switch to fuel-efficient cars at the expense of pickups and SUVs, the company has predicted Chrysler could lose $1.5 billion (1.2 billion euros) in the third quarter and $1.27 billion (1 billion euros) for the year, worse than thought in July.

Zetsche said the Chrysler group had to defend its strength in the light trucks business in North America while building its offering of cars, but said it would take time to establish its brand as a fuel-efficient carmaker against tough Asian competition.

He thought it prudent to assume oil prices stay at $60 per barrel and said he would be pleasantly surprised if they were lower.

Mercedes, Chery

Zetsche was upbeat about the Mercedes Car Group premium division, which he reiterated would generate a 7 percent return on sales next year - and higher margins later - after generating double-digit productivity gains this year for the first time.

"It is clear productivity gains have to continue," he said. "This is not (a case of) 2006 and that's it."

But he said this would not necessarily lead to more job cuts at the division which is eliminating 8,500 jobs already.

"Altogether it is fair to say that our employment (at Mercedes) will rather decline than grow, but at this point in time I do not expect major (headcount reduction) programs."

Zetsche played down prospects that hedge funds - which officials have said in the past held around 15 percent of the company's stock - could force the group to break up.

"My colleagues and myself do not spend any time worrying about such a scenario because we don't see any likelihood (of that happening)," he said.

Asked if DaimlerChrysler was in talks with Chinese carmaker Chery on building a subcompact car for North America and other markets, he said: "I think we have not denied that".

DaimlerChrysler has also talked to Volkswagen, French competitors and Asian companies about cooperating on the plan, which would expand its range to include its smallest cars yet.

Zetsche said that DaimlerChrysler was still deciding on which carmaker to select as a partner, although some potential allies were already out of the running.

- REUTERS