By 1825 GMT DaimlerChrysler shares were down 4.3% at 28.17 euros (�18.49), dragging down Germany's Dax index of leading shares.

Although DaimlerChrysler has repeatedly said that the turnaround at its US Chrysler unit is ahead of schedule, it also warned on Tuesday that the car market will remain fiercely competitive in 2003.

Developments in the fourth quarter seem to have been much weaker than last year ... I suspect that Chrysler did not do so well in the fourth quarter Juergen Pieper Bankhaus Metzler

The car maker reported fourth quarter sales of 37bn euros, down from 39.9bn euros a year ago.

Profit excluding interest, tax and one-off effects such as restructuring costs, doubled to 1.17bn from 564m euros.

But fourth quarter profits were lower than the 1.7bn euros made in the third-quarter.

Falling demand

Analysts said this may suggest the car maker is feeling the effects of offering cheap credit to lure reluctant car buyers into its US showrooms and falling demand for luxury cars in Europe.

Since the 1998 merger between German industrial powerhouse Daimler Benz and Chrysler, at the time the most profitable car maker in the US, shares have lost more than two thirds of their value.

Two years ago, the Chrysler unit, which accounted for roughly half the company profits in 1999, dragged the entire group into a loss.

Chrysler has since been on a three-year restructuring drive, which included thousands of job cuts and delaying the launch of new models.

Although DaimlerChrysler did not give a divisional breakdown on Tuesday, analysts believed Chrysler's recovery may have waned.

"Developments in the fourth quarter seem to have been much weaker than last year ... I suspect that Chrysler did not do so well in the fourth quarter," said Juergen Pieper of Bankhaus Metzler.

New models

In order to boost sales, Chrysler said it will launch 21 new or redesigned models in the next three years, including the Pacifica tall station-wagon and the Crossfire sports coupe.

Luxury car makers have been hit hard by the global economic slowdown.

Chrysler earlier reported a 12% sales drop in its January car sales, which was weaker than its main competitors General Motors and Ford Motor.

Investors are increasingly worried about the effect of flattening consumer demand on DaimlerChrysler's luxury Mercedes division, which had been its main growth driver in the last two years.