Kevin O'Toole/LONDON
DAIMLER-BENZ Aerospace (DASA) racked up massive losses in the first half of the year as the weakness of the US dollar against the deutsche mark ravaged its civil-aircraft sales.
The German group posted a loss of DM1.6 billion ($1 billion) for the period, and analysts warn of further turbulence to come as DASA attempts to stem its exchange-rate losses and reconfigure the business.
The result includes a provision of DM1.2 billion, to cover losses on future aircraft deliveries if the dollar fails to revive, but fears remain within the financial community that such fire fighting may still leave the group open to the vagaries of further exchange fluctuations.
The dramatic devaluation of the dollar, which has fallen by 14% against the deutsche mark over the past year, has translated directly into a similar drop in the value of sales from DASA's aircraft division, despite an apparent increase in unit production.
Earlier this year, the twin effects of rising costs and weakening markets had left DASA's Fokker subsidiary with losses equivalent to around DM580 million. DASA is now in negotiations with the Dutch Government over a rescue plan for Fokker, which could involve the injection of up to DM1.8 billion in new funds.
Daimler-Benz chairman Jurgen Schrempp confirms that the management is "reviewing the group portfolio" in the light of the currency losses.
He says that DASA will put aside at least another DM1 billion in the second half of the year to cover the costs of its Dolores (Dollar Low Rescue) plan, designed to limit exposure to currency fluctuations. Details of the plan have yet to be released, but are expected to involve another round of redundancies, and the transfer of some production to low-cost countries.
Doubts remain whether the announced expenditure will be sufficient to stabilise the group, however. "One wonders whether it will be enough. I'm not sure that it is," says Chris Avery, aerospace analyst at Banque Paribas. "We just don't know how much it could cost," says another analyst.
Analysts point to parallels with the crisis in British Aerospace's much-smaller commercial-aircraft division two years ago, which forced the group to put aside more than $1.5 billion and begin a programme of swinging job cuts and plant closure.
Source: Flight International
