Chrysler's new Pacifica model should boost sales

But the German-US car maker warned that political and economic turmoil could affect its business.

"DaimlerChrysler plans to achieve higher earnings this year than in 2002," the firm said.

"However, a precondition for this anticipated increase is that conditions remain stable in the most important markets."

After making a mammoth 2.1bn euros (�1.4bn) loss in 2001, Chrysler made an operating profit of 1.32bn euros last year.

This result was achieved in a very challenging environment Juergen Schrempp, chief executive, DaimlerChrysler

On Wednesday, the car giant said it expected Chrysler to make a 2bn euros operating profit this year.

But the company said profits, revenues and car sales at its Mercedes luxury car unit would be flat.

In the past, Mercedes had been an important factor driving DaimlerChrysler's results.

The US-German car maker added that profits at its truck unit this year would be boosted by cost cuts.

High incentives

DaimlerChrysler chief executive Juergen Schrempp said Chrysler had made "outstanding progress" in improving efficiency.

"This result was achieved in a very challenging environment, as the US market is still dominated by very high incentives," he said at the firm's annual press conference, referring to 0% financing used by US competitors General Motors and Ford to increase sales.

DaimlerChrysler said on Wednesday it aimed at overall sales of 151bn euros this year, up about 1% from 2002, and slightly above the goal it set two years ago.

By 2005, the automotive giant aims at lifting sales to 163bn, with the biggest gains to be made in Asia.

"This is quite a clear statement given the current danger for giving outlooks and it is more than many investors had expected," said Georg Stuerzer, an analyst at HVB.

On Wednesday, Europe's biggest carmaker Volkswagen reported a 10% drop in 2002 earnings but did not give an outlook for this year.

Earlier this month, DaimlerChrysler announced it had quadrupled its full-year operating profits for 2002 to 5.8bn.

Turnaround at Chrysler

DaimlerChrysler is two years into its three-year turnaround plan at its Chrysler unit.

The overhaul included massive job losses at Chrysler, price cuts and greater synergies with the group's Mercedes unit and its Japanese partner Mitsubishi Motors.

Chrysler is now depending on new models, such as its tall Pacifica station wagon and the Crossfire sports coupe, to boost sales.

The global economic slowdown and weakened consumer confidence have stalled demand for cars in the US and western Europe.

Fierce competition has forced carmakers to slash prices, which has eaten into revenues and profits.

DaimlerChrysler shares were trading at 27.79 euros at 1120 GMT, up 0.2%.

DaimlerChrysler shares have lost some 11% this year, a fall in line with stock in other automotive companies.

But the stock has lost about two thirds of its value since the firm was formed through a 1998 merger between Germany's Daimler-Benz and US-based Chrysler.