STUTTGART/WASHINGTON - Daimler swung to a hefty loss, hit by exposure to Chrysler, and Opel and Saab braced for news of General Motors' survival plan, as European carmakers saw their fates tied closely to their U.S. peers.
As GM and Chrysler put the finishing touches to blueprints showing how they will pay back billions of dollars of government loans, Chrysler's German ex-owner Daimler said its remaining 19.9 percent stake in the Detroit-based manufacturer had driven it to a steepling fourth quarter loss.
The premium carmaker also forecast the global recession ravaging the industry would slash auto demand by about 10 percent this year, pushing down revenue and forcing it to cut its 2008 dividend.
German peer Opel awaited news from its U.S. partner as GM prepared to present the U.S. government later on Tuesday with a plan for survival expected to incorporate wide-ranging changes to its European operations.
Against a background of strident calls for more state aid from embattled manufacturers on both sides of the Atlantic offset by growing concerns about protectionism, GM and the United Auto Workers union made progress in concession talks and bondholders offered proposals to slash GM's debt.
GM was not expected to reach detailed agreements by Tuesday's deadline but talks with both key groups made progress on the final day, people briefed on the discussions said late on Monday. Options on the table for Opel and GM's Swedish unit Saab include securing ring-fenced loan guarantees from Berlin and Stockholm and spinning off the two businesses as independent entities - a scenario favored by GM Europe's labor leaders.
Saab could also be sold or closed down, analysts believe, though Swedish Industry Ministry secretary Joran Hagglund told Reuters he is confident GM will not leave Saab unprotected.
Efforts by GM to offload businesses further afield suffered a setback as China's Sichuan Auto Industry Group Co denied a media report it was interested in buying GM's Hummer unit.
In Milan, Fiat denied a news report the Italian industrial group was considering a possible 2 billion euro ($2.53 billion) rights issue. Its shares fell more than 8 percent before recovering to trade down around 6 percent at 1230 GMT (7:30 a.m. EST).
Daimler warned of a pronounced decline in all major car markets in the first half of 2009, refraining from giving a detailed outlook for the full year as some analysts said they were now expecting the company to post a loss .
The risk is very big that this year a loss will be made (by the company), said Metzler Bank analyst Juergen Pieper. The expectation that the passenger car market this year contracts by only 10 percent is too optimistic.
Morgan Stanley was also downbeat.
The question is not if Daimler loses money in 2009, but how much, it said in a research note.
As revenues continue to fall, we also expect further substantial pressure on earnings, both at group level and at the individual divisions, Daimler Chief Executive Dieter Zetsche said.
He promised more cost cutting but would not give a concrete 2009 profit forecast.
In total, we anticipate potential savings in all of our divisions and at headquarters of several billion euros this year, Zetsche told the carmaker's annual news conference.
The company proposed paying a dividend of 0.60 euros per share, down from 2.00 euros a year ago.
After falling as much as 7.4 percent, Daimler shares pared losses to trade down 4.2 percent at 22.56 euros by 1225 GMT (7:25 a.m. EST).
(Additional reporting by Victoria Klesty, Angelika Gruber, Love Liman, Gilles Castonguay; Writing by John Stonestreet)