DaimlerChrylser Maps A Pathway To Profits
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05-15-2006, 09:40 PM
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DaimlerChrylser Maps A Pathway To Profits
DaimlerChrylser Maps A Pathway To Profits
May 14, 2006
Q. Although it got off to a rough start, DaimlerChrysler AG now seems to be a leader among the auto companies. What is your opinion of its stock?
A. The giant maker of motor vehicles, formed in the 1998 merger of Daimler-Benz AG and Chrysler Corp., has earned some bragging rights.
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Successes such as the Chrysler 300, improved cost efficiency in its Freightliner heavy truck business and some shrewd asset sales have improved its prospects considerably. The firm is launching 10 new Chrysler models this year.
Net income in the firm's most recent quarter rose 4 percent, to $380 million, on the strength of its financial services, van and bus groups. Following extensive restructuring, it has less debt than General Motors Corp. or Ford Motor Co. and is the only Big Three member generally holding its market share.
A redesigned "flexible" plant in Belvidere, Ill., producing the new Dodge Caliber, makes it much easier to shift from one model to another. Next in line for makeovers are plants in Sterling Heights, Mich., and Toluca, Mexico.
Shares of DaimlerChrysler (DCX) are up 6 percent this year after a gain of 6 percent last year.
Yet the company has lingering problems.
Even though Mercedes-Benz remains the world's top luxury car manufacturer, the division has stumbled with quality-control problems, costs associated with staff buyouts and losses from the Smart mini-car business. At the recent annual meeting, several shareholder groups pushed for the discontinuance of Smart, which is marketed primarily in Europe.
Financial performance has been uneven since the merger, and directors and management hold only a small percentage of shares. The Chrysler division, whose U.S. sales were down in April as Toyota Motor Corp. outsold it for the first time, is cutting production to reduce inventory.
Indicative of mixed emotions about DaimlerChrysler prospects, the consensus rating on its stock from Wall Street analysts is a "hold," according to Thomson Financial, consisting of two "strong buys," four "holds," one "underperform" and one "sell."
Q. I'm looking to invest in a technology fund, and John Hancock Technology Fund was mentioned to me. What do you think of it?
A. Management consistency, strong performance and low expenses are not its underlying traits.
New portfolio manager Thomas Norton is its second leader in 13 months. Returns during the past three years rank in the lowest 10 percent of technology funds. Its annual expense ratio of 1.90 percent exceeds the average of 1.53 percent for the category.
The $271 million John Hancock Technology Fund (NTTFX) is up 16 percent during the past 12 months and has a three-year annualized return of 8 percent.
"A lot of tech funds are better than this one, with proven track records, longer management tenures and lower expenses," said Reginald Laing, an analyst with Morningstar Inc. in Chicago. "The high expenses eliminate this fund from consideration at the outset."
Top holdings are Applied Materials, Cisco Systems, Cadence Design Systems, Texas Instruments, Hewlett-Packard, Macrovision, Oracle, EMC, Microsoft and Qualcomm. This 5 percent "load" (sales charge) fund requires a $1,000 minimum initial investment.
"Most broadly diversified funds give all the tech an investor needs in most cases," Laing said. "However, if some people do want to add a little more zip by adding more tech to their growth exposure, that's fine."
Q. I'm thinking about starting a traditional individual retirement account. If an emergency arises, will I be able to withdraw money without a penalty?
A. There are circumstances under which you can take a withdrawal from your traditional IRA before age 59½ without paying the early withdrawal penalty of 10 percent. But any amount withdrawn will be treated as ordinary income on your income tax.
For example, you can take out penalty-free withdrawals for medical expenses that exceed 7.5 percent of your income; for health insurance if you're unemployed; for higher education for yourself, a spouse, child or grandchild to cover qualified expenses; for a first-time home purchase, up to a $10,000 lifetime maximum; if you're seriously disabled and can supply a doctor's assessment of your condition; and for paying back taxes to the IRS.
You can also take IRA withdrawals for as long as 60 days tax- and penalty-free so long as you return the funds to the IRA by the end of the period.
"You have to spend the money in the same year you took the distribution, or you'll have to pay the penalty," said certified public accountant Ed Slott, editor of Ed Slott's IRA Advisor in Rockville Centre, N.Y. "It is generally a poor idea to tap your IRA since it is for retirement, and only do so in dire emergency."
Although the same exceptions apply to Roth IRAs, in some instances you must pay tax on earnings, but not original contributions. Because those rules are somewhat complex, consult IRS Publication 590 at www.irs.gov, which outlines withdrawal rules for both IRA types.
Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney@ tribune.com.
May 14, 2006
Q. Although it got off to a rough start, DaimlerChrysler AG now seems to be a leader among the auto companies. What is your opinion of its stock?
A. The giant maker of motor vehicles, formed in the 1998 merger of Daimler-Benz AG and Chrysler Corp., has earned some bragging rights.
ADVERTISEMENT
Successes such as the Chrysler 300, improved cost efficiency in its Freightliner heavy truck business and some shrewd asset sales have improved its prospects considerably. The firm is launching 10 new Chrysler models this year.
Net income in the firm's most recent quarter rose 4 percent, to $380 million, on the strength of its financial services, van and bus groups. Following extensive restructuring, it has less debt than General Motors Corp. or Ford Motor Co. and is the only Big Three member generally holding its market share.
A redesigned "flexible" plant in Belvidere, Ill., producing the new Dodge Caliber, makes it much easier to shift from one model to another. Next in line for makeovers are plants in Sterling Heights, Mich., and Toluca, Mexico.
Shares of DaimlerChrysler (DCX) are up 6 percent this year after a gain of 6 percent last year.
Yet the company has lingering problems.
Even though Mercedes-Benz remains the world's top luxury car manufacturer, the division has stumbled with quality-control problems, costs associated with staff buyouts and losses from the Smart mini-car business. At the recent annual meeting, several shareholder groups pushed for the discontinuance of Smart, which is marketed primarily in Europe.
Financial performance has been uneven since the merger, and directors and management hold only a small percentage of shares. The Chrysler division, whose U.S. sales were down in April as Toyota Motor Corp. outsold it for the first time, is cutting production to reduce inventory.
Indicative of mixed emotions about DaimlerChrysler prospects, the consensus rating on its stock from Wall Street analysts is a "hold," according to Thomson Financial, consisting of two "strong buys," four "holds," one "underperform" and one "sell."
Q. I'm looking to invest in a technology fund, and John Hancock Technology Fund was mentioned to me. What do you think of it?
A. Management consistency, strong performance and low expenses are not its underlying traits.
New portfolio manager Thomas Norton is its second leader in 13 months. Returns during the past three years rank in the lowest 10 percent of technology funds. Its annual expense ratio of 1.90 percent exceeds the average of 1.53 percent for the category.
The $271 million John Hancock Technology Fund (NTTFX) is up 16 percent during the past 12 months and has a three-year annualized return of 8 percent.
"A lot of tech funds are better than this one, with proven track records, longer management tenures and lower expenses," said Reginald Laing, an analyst with Morningstar Inc. in Chicago. "The high expenses eliminate this fund from consideration at the outset."
Top holdings are Applied Materials, Cisco Systems, Cadence Design Systems, Texas Instruments, Hewlett-Packard, Macrovision, Oracle, EMC, Microsoft and Qualcomm. This 5 percent "load" (sales charge) fund requires a $1,000 minimum initial investment.
"Most broadly diversified funds give all the tech an investor needs in most cases," Laing said. "However, if some people do want to add a little more zip by adding more tech to their growth exposure, that's fine."
Q. I'm thinking about starting a traditional individual retirement account. If an emergency arises, will I be able to withdraw money without a penalty?
A. There are circumstances under which you can take a withdrawal from your traditional IRA before age 59½ without paying the early withdrawal penalty of 10 percent. But any amount withdrawn will be treated as ordinary income on your income tax.
For example, you can take out penalty-free withdrawals for medical expenses that exceed 7.5 percent of your income; for health insurance if you're unemployed; for higher education for yourself, a spouse, child or grandchild to cover qualified expenses; for a first-time home purchase, up to a $10,000 lifetime maximum; if you're seriously disabled and can supply a doctor's assessment of your condition; and for paying back taxes to the IRS.
You can also take IRA withdrawals for as long as 60 days tax- and penalty-free so long as you return the funds to the IRA by the end of the period.
"You have to spend the money in the same year you took the distribution, or you'll have to pay the penalty," said certified public accountant Ed Slott, editor of Ed Slott's IRA Advisor in Rockville Centre, N.Y. "It is generally a poor idea to tap your IRA since it is for retirement, and only do so in dire emergency."
Although the same exceptions apply to Roth IRAs, in some instances you must pay tax on earnings, but not original contributions. Because those rules are somewhat complex, consult IRS Publication 590 at www.irs.gov, which outlines withdrawal rules for both IRA types.
Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney@ tribune.com.