Mercedes 2006 Annual Report Download - page 60

44
The Mercedes Car Group achieved an operating profit of €2,415
million in 2006, compared with an operating loss of €505 million
in the prior year.
The results of both years were significantly affected by special
items. There were expenses of €946 million in connection with
the discontinuation of production of the smart forfour in 2006,
while the realignment of the smart business model in 2005 result-
ed in charges of €1,111 million. Charges relating to staff reduc-
tions at Mercedes-Benz Passenger Cars in the context of the
CORE program decreased to €286 million in 2006 (2005: €570
million). Additional special items with positive effects on the
results of both years are shown in the table on page 43.
The substantial increase in the division’s operating profit is due
in particular to the efficiency improvements achieved in the
context of the CORE program. Other positive factors were the
higher unit sales of Mercedes-Benz passenger cars and the
improved model mix due to the launch of the new S-Class as well
as the M- and GL-Class models. A negative impact on operating
profit in 2006 resulted from currency effects.
The Chrysler Group posted an operating loss of €1,118 million
in 2006, compared with an operating profit of €1,534 million in
2005.
The deterioration in operating results was primarily the result
of negative net pricing, unfavorable product and sales market mix
and a decline in factory unit sales in the United States. These
factors reflect the continuing difficult market environment in the
United States during 2006 marked by an overall decline in
industry sales, a shift in consumer demand towards smaller, more
fuel-efficient vehicles due to higher fuel prices as well as the
impact of higher interest rates. These negative factors were par-
tially offset by the market success of the new models, most of
which were launched in the second half of the year. Several
of these vehicles target this shift in consumer demand, resulting
in a positive earnings contribution during the fourth quarter
of the year.
In addition, the financial support provided to supplier Collins &
Aikman led to a charge of €66 million in 2006, compared to
€99 million in 2005. The Chrysler Group’s prior-year operating
profit was positively impacted by a €240 million gain on the
sale of the Arizona Proving Grounds vehicle testing facility. Further
special items that affected earnings in 2005 are shown in the
table on page 43.