DaimlerChrysler to raise outlook

FRANKFURT, July 15 (Reuters) -- Automaker DaimlerChrysler will raise its profit outlook for 2002 on the back of a recovery at its U.S. Chrysler business when it reports second-quarter results on Thursday, an industry source said on Monday.

"The company is set to increase its forecast for this year," the source said, adding that this should be no surprise to investors and that there was still some uncertainty about conditions in the second half of this year. "Analysts shouldn't be surprised at this," the source said.

The source cited improving conditions, especially in the United States, where the German company's Chrysler unit aims to at least break even this year, as one of the main reasons for the improved outlook.

A spokesman for DaimlerChrysler declined to comment.

Analysts say the world's fifth-largest automaker will gain from robust second-quarter production in the U.S., driven by healthy demand and by a favorable seasonal effect which will also help rivals Ford Motor Co. (F) and General Motors Corp. (GM).

Shares in DaimlerChrysler had ended the session down 4 percent at 43.70 euros, slightly outperforming the European auto sector, while its New York-listed stock was down 2 percent at $44.00 in late trading.

The shares have fallen 4 percent since the start of the year, roughly in line with the sector. Amid global market jitters, the shares have dived some 17 percent since late May after touching a high of 55.44 euros.

In February, DaimlerChrysler warned that its profits would be more than 2.6 billion euros ($2.61 billion) for 2002, far lower than a forecast given a year earlier of 5.5 billion to 6.5 billion euros.

More recently, the group has described that as a cautious stance and hinted that Chrysler, which has been forced to lay off workers and slash costs in a bid to reverse crippling losses in the last 18 months, may beat its target of breakeven for 2002 and post a profit.

Analysts expect DaimlerChrysler to post strong second-quarter results on Thursday, helped by positive developments at Chrysler, and many had also expected the company to raise its outlook for 2002.

However, they warn the longer-term outlook looks less rosy, as increased pricing pressure coupled with fierce competition from Japanese carmakers in the U.S. may hurt as Chrysler strives to revive its flagging product lineup.

A Reuters poll of 18 analysts put average expectations for second-quarter adjusted operating profit for the German group at 1.3 billion euros, almost double last year's level of 725 million euros.