Feb. 17 (Bloomberg) -- Daimler AG, the world’s second- biggest maker of luxury cars, reported its first quarterly loss since 2007 on declining sales and costs from Chrysler LLC and said the recession will burden earnings further this year.

The fourth-quarter loss was 1.53 billion euros ($1.93 billion) compared with year-earlier net income of 1.7 billion euros, Stuttgart, Germany-based Daimler said in a statement today. Analysts had predicted a 227 million-euro deficit.

Daimler suffered as the European economy contracted the most in 13 years in the quarter, helping to push revenue down 12 percent to 23.2 billion euros. Car sales in Europe plunged 27 percent to the lowest in two decades last month and contracted 37 percent in the U.S., a key market for the company’s Mercedes-Benz luxury division, to a 28-year low.

Sales will fall this year and the recession will impose “further substantial burdens” on earnings, Daimler said. The company said it will cut production to reduce a glut of unsold cars and won’t increase pay for about 140,000 non- contract employees, saving about 1.4 million euros a month. Top-tier managers will also forego a pay increase and an employee-share program has been suspended.

Daimler fell as much as 7.4 percent to 21.82 euros and was trading down 1.1 percent at 23.30 euros as of 11:11 a.m. in Frankfurt. The stock has fallen 13 percent this year, valuing the carmaker 22.5 billion euros.

‘More Detail’

“We need to see more detail on a cost-cutting plan,” said Stephen Pope, global chief strategist at Cantor Fitzgerald in London. “The markets don’t like the lack of detail.”

The loss was Daimler’s first since the third quarter of 2007, when earnings were wiped out by 2.6 billion euros in costs from the sale of 80.1 percent of Chrysler LLC. The U.S. carmaker burdened fourth-quarter earnings by 2.01 billion euros, including a charge of 1.67 billion euros to write off the value of loans and other assets.

Daimler had already reduced hours for about 36,000 assembly-line workers at its German factories for the first quarter. Last year, it slashed production by 45,000 cars and sport-utility vehicles, or 3.5 percent of its 2007 total of 1.3 million units. The company’s auto-making operations burned 3.9 billion of cash in 2008, mainly due to an abrupt fall in Mercedes car sales in the fourth quarter.

Peugeot, Renault Losses

The carmaker is the first in Germany to report detailed figures for the end of 2008. Turin, Italy-based Fiat SpA said Jan. 22 that fourth-quarter profit fell 71 percent to 163 million euros. Paris-based PSA Peugeot Citroen, France’s biggest carmaker, reported a second-half loss of 1.08 billion euros and rival Renault SA revealed a 982 million-euro loss a week ago.

Wolfsburg, Germany-based Volkswagen AG, Europe’s biggest carmaker, will publish results on March 11 and Munich-based Bayerische Motoren Werke AG reports on March 18. BMW said on Feb. 6 that it will publish “clearly positive” 2008 earnings.

Daimler’s Mercedes-Benz Cars division reported a fourth- quarter loss of 359 million euros compared with profit of 1.43 billion a year earlier. The unit, which also makes Maybach ultra-luxury vehicles and Smart minicars, was burdened by a 22 percent drop in sales and revenue as it recorded the first loss since the first quarter of 2006.

Profit at the trucks division fell 83 percent to 86 million euros as freight companies halted purchases because of the economic slowdown. Daimler, which owns the Freightliner and Fuso truck brands, is cutting 3,500 jobs, closing two North American factories and eliminating the Sterling brand as part of a plan to save $900 million a year by 2011. The restructuring led to a charge of 233 million euros.

To contact the reporter on this story: Chris Reiter in Stuttgart, Germany, via creiter2@bloomberg.net.

Last Updated: February 17, 2009 05:21 EST