Mercedes inventories fall despite April sales drop

Daimler's inventory of unsold Mercedes-Benz luxury cars dropped dramatically in April, although the brand's sales posted a sharp 23 percent fall to 80,700 vehicles during the month.

"We reduced our inventories of passenger cars and heavy trucks considerably last month. At Mercedes, we reached the lowest level for an April in seven years, so we're making faster progress with our inventory reduction than we originally planned," Chief Executive Dieter Zetsche told Reuters.

Bloated inventories have been the main culprit behind a massive deterioration in Daimler's net industrial cash, which shrank from 8.8 billion euros ($11.7 billion) to 3.1 billion in the last six months of 2008.

Were it not for fresh funds from new shareholder Aabar AABAR.AD in the first quarter of this year, this cash pile would have dwindled to just 1.8 billion by the end of March.

German carmakers have been trying to cut output fast enough to keep up with sagging demand and have used a government-funded plan to cut working hours in order to reduce costs.

Last month, sales of Mercedes-Benz and Smart cars sank 24 percent to 90,900 vehicles, mainly due to a collapse in markets like Japan, the United States and even Germany, where Berlin's 2,500 euro incentive for motorists to scrap old cars and buy new ones has not assisted sales of new premium cars.

Daimler blamed the fall on a calendar effect since April had two fewer working days as a result of Easter, as well as on the gradual market by market roll-out its new Mercedes-Benz E-Class.

A bright spot remained China, where Mercedes-Benz sales rose almost 60 percent to a record 5,600 cars in April. Volume gains could increase now that the Smart brand arrived there last month.

In the first four months, the Mercedes-Benz Cars division registered a 23 percent decline in volumes to 335,800 vehicles.

Zetsche is pinning his hopes on a demand recovery on the back of the March rollout of the new E-Class saloon, the brand's most important contributor to earnings.