Boo! Off-Lease Cars Come Back to Haunt Daimler

(MoneyWatch)  Just in time for Halloween, Daimler reports it's being haunted by ghosts, from past leases.

On Oct. 23, Daimler said it took a charge of 449 million euros, to reassess residual values on vehicles returning from leases. The company took an additional 248 million-euro charge for restructuring and for residual values at its former partner, Chrysler. Daimler still owns just under 20 percent of Chrysler. Depending on the exchange rate, that's the equivalent of about $897.6 million total.

To put that in context, that's a lot more than the company earned in the quarter. Overall, Daimler reported net income of 213 million euros ($274.3 million), versus a net loss of about 1.5 billion euros ($2 billion) in the year-ago quarter.

With the credit crisis, falling luxury-brand sales, and the economic impact on wealthy shoppers, the resale value has fallen for many used luxury cars. So-called residual values have also fallen for pickups and SUVs from Chrysler and other Detroit 3 brands, as people either postpone their purchases, or switch to more fuel-efficient cars.

That means the used cars and trucks aren't worth as much as expected, when they come back from leases. If the resale value falls too far, money that was reserved ahead of time to cover possible losses might not be enough, and that generates an unexpected loss -- like this one.

Worldwide, passenger-car sales in the third quarter for the Mercedes-Benz brand fell 6 percent from the year-ago quarter, to 315,796. Sales have turned down more sharply in the United States. In July, U.S. sales were up 11.6 percent from the year-ago month. But in August, sales were down 11.8 percent; in September, down 16.4 percent, according to AutoData.

Mercedes-Benz said it expects sales to increase when it introduces the GLK small SUV late this year in the U.S. market, but that will be offset by falling sales for the E-Class, which is in its last year of the present product generation.