Daimler's Second-Quarter Profit Falls 25%

Daimler's Second-Quarter Profit Falls 25%

Daimler AG cut its earnings forecast for 2008 after a 25-percent decline in its second-quarter profits. The luxury automaker also said it would "adjust" production of its Mercedes-Benz E-Class model.

The stock market wasn't pleased; Daimler shares suffered their largest decline since November 1998. They were down $6 each at noon Thursday after the automaker's earnings announcement.

Daimler reported a $2.19 billion profit in the second quarter, which included charges related to Chrysler. Daimler still owns about 19 percent of Chrysler but sold about 80 percent to Cerberus last year.

Daimler sales of trucks in the U.S., sold under the brand names of Freightliner, Sterling, and Western Star, have been soft due to high gas prices and the U.S. economic downturn. As a result, Daimler is cutting 1,500 factory jobs and eliminating a shift at Freightliner in the U.S., where it 20,000 people.

 Meantime, Mercedes' Smart car, on sale in the U.S. since January, has been a bright spot.

Globally, Mercedes, which has cut costs and jobs for the past three years, expects its small cars, which outside of the U.S. include A- and B-class models, to offset lagging sales of larger vehicle to help it achieve record sales this year.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.