M&A

Using IFRS, Daimler Pins Loss on Chrysler

Meanwhile, Chrysler plans to report in U.S. GAAP.
Marie LeoneFebruary 17, 2009

German-based Daimler AG blamed a good deal of its $1.9 billion fourth-quarter loss on expenses related to its $4 billion investment in Chrysler and on the lower earnings of its Mercedes-Benz Car division. The end-of-year drop was the first loss for the automaker since the third quarter of 2007.

Daimler sold most of its interest in Chrysler in late 2007. Today, the now private Chrysler LLC and General Motors are expected to present the U.S. government with restructuring plans that, if approved, would enable the two failing carmakers to receive billions of dollars in government loans. 

Meanwhile, in Stuttgart, Daimler reported its preliminary fourth-quarter and year-end numbers in a webcast. On the year, Daimler’s profits were down 65 percent from 2007, with net profits for 2008 sinking to $1.8 billion. Revenue was down 12 percent in the fourth quarter and 4 percent year over year, coming in at $29 billion and $120.6 billion, respectively.

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The Chrysler investment cut Daimlier’s 2008 earnings before interest and tax by nearly $1.75 billion. Further, impairment of loans and other Chrysler-related assets led to charges of $2.3 billion.

But Daimler and Chrysler are reporting, as they have done in the past, that Daimler’s results are calculated using international financial reporting standards rather than U.S. generally accepted accounting principles, according to a report in the Detroit Free Press. Thus, the financial results are “not indicative” of the financials that Chrysler is expected to report using U.S. GAAP, the company reportedly said.

This isn’t the first time the dual accounting system has affected the financial reporting of these two carmakers. In April, Daimler reported that net income sunk by $6.8 billion, most of which was a result of losses incurred during the final five months of 2007, as reported under IFRS.

At the time, Daimler said that by using the international standards, it wiped out two-thirds of the value of Chrysler on its balance sheet. It also added that the IFRS reported numbers were again, “not indicative” of what Chrysler would report under U.S. GAAP.