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. Last Updated: 07/27/2016

Daimler-Benz Jettisons Troubled Aircraft Firm

STUTTGART, Germany -- German industrial giant Daimler-Benz AG, revealing an expected 6 billion mark ($4.05 billion) loss for 1995, said Monday it could no longer afford to prop up its troubled Dutch aircraft unit Fokker NV.


Daimler said that after hacking off unprofitable businesses in an aggressive restructuring effort, the company was now set to return to profit this year.


"Profitability in all business sectors is the first goal of the company," Daimler Chairman Juergen Schrempp said in a statement.


"More than 80 percent of our business is running satisfactorily. In the interest of our shareholders as well we can no longer allow the other 20 percent to hurt the group."


The 1995 losses come after one-time charges of 2.3 billion marks related to Fokker, and 1.5 billion marks from the reorganization of industrial group AEG AG.


Analysts, who had seen the Fokker decision coming, said the loss was larger than expected and that Daimler seemed to be squeezing all its bad news into the 1995 financial statement.


"Daimler is financially healthy. It can absorb such a loss, but I'm not sure if the turnaround will be this year," said Peter Schmidt, analyst at Automotive Industry Data.


Daimler posted a $1.05 billion net loss in the first half of the year, mostly because of red ink at its aerospace unit, Daimler-Benz Aerospace AG (DASA).


DASA said the company may make a 1995 loss of 4 billion marks due to problems at Fokker, but that it could return to profit in 1997. It lost about 440 million marks in 1994.


Daimler, which bought Fokker only three years ago, has pumped billions of marks into the illustrious Dutch company only to see it post mounting losses.


Analysts said Fokker would likely seek protection from creditors and help from the Dutch government while it attempts to save parts of its business that can operate without Daimler's support.


Fokker's problems came to a head last August when it disclosed a record loss of 460 million guilders ($277.3 million), a loss brought on by sluggish demand, unfavorable exchange rates and maybe more importantly high production costs.


Daimler's decision to cut off support for Fokker follows three months of talks with Fokker's other major shareholder, the Dutch government, on how to save the company and thousands of jobs.


The Dutch government was also meeting Monday to decide whether to bail out the aviation group once again.


Analysts said Daimler's decision could spell the death of Fokker, which over its 76-year history has forged a leading role in aviation.


German First World War ace the Red Baron von Richthofen flew Fokker's deadly triplanes and another plane, the Fokker IV, made aviation history in 1922 by crossing the United States coast-to-coast.