DaimlerChrysler's annual general meeting got underway Thursday with chief executive Juergen Schrempp admitting the company faced major problems with its luxury Mercedes car and the tiny smart car which would hurt 2005 earnings. In remarks kicking off what promised to be a tense session as DaimlerChrysler's board braced for tough questions from shareholders, Schrempp promised that the company's earnings will go on the rise again in 2006 amid cost-cutting efforts and new models on the market. Schrempp began by admitting problems at the company, describing developments at the smart division as being "totally unacceptable". Regarding Mercedes, which has been hit by quality control problems and a drop in favour among the motoring public, he said the quality problems had to be dealt with comprehensively, generously and as quickly as possible. The costs of this would be high, he admitted. But they would be an "investment in our most valuable commodity, the Mercedes-Benz brand", Schrempp said. He said DaimlerChrysler's profits will show a clear upturn starting in 2006 as the company benefits from the effects of its "CORE" programme to cut costs and from the introduction of new models. But operating profits in 2005 would show only a slight rise from last year's 5.8 billion euros amid the costs for revamping smart, Schrempp cautioned. He estimated the smart revamping would cost up to 1.2 billion euros. --mor 1158 Local Time 0858 GMT
