Surprising profit growth at Mercedes pulls Daimler

Daimler's Mercedes Benz cars unit is returning to its role as the company's cash cow.

The luxury carmaker this year might earn twice as much as it previously forecast from the division after lively demand for the limousines in the first three months bolstered its confidence in a recovering market.

Earnings before interest and tax from ongoing business in the Mercedes division will reach 2.5 billion euros ($3.5 billion) to 3 billion euros in 2010, the company said on Monday.

Daimler previously had forecast an EBIT of more than 1.5 billion euros for this year for the division, the company's largest by sales.

"The EBIT in the first quarter was supported by very solid results at Mercedes-Benz Cars in consequence of strong sales, model mix and pricing as well as a favorable overall cost position during the first quarter," it said.

The announcement after markets were closed in Frankfurt came as a surprise as the company had been slated to release results not before April 27.

Mercedes had been losing out both to larger rival BMW and its fleet of more fuel-efficient cars, as well as to premium carmaker Audi, whose high profitability is due in part to sharing costs with parent Volkswagen.

But sales of Mercedes Benz cars in the first three months of the year pointed to an improvement, rising more than 10 percent every month compared to the previous year.