DETROIT (AP) – Fueled by a turnaround at Mercedes-Benz, DaimlerChrysler AG’s second-quarter profit more than doubled from the previous year, but the numbers would have been far better without a dramatic slump at the Chrysler Group.

Overall, the automaker on Thursday reported earnings of $2.3 billion in the April-June period, compared with $942 million in the second quarter of 2005.

Sales were little changed at $49.3 billion versus $49.1 billion in the year-earlier period.

The German-U.S. automaker also said that it expects a slight rise in revenue this year and announced Chrysler CEO Tom LaSorda’s contract has been extended through 2012.

DaimlerChrysler’s U.S. shares rose 60 cents, or 1.2 percent, to close at $50.12 on the New York Stock Exchange.

The announcement came as rival German automaker Volkswagen AG reported that its earnings more than doubled in the second quarter with help from the disposal of its Europcar rental unit and stronger car sales.

VW net profit rose to 859 million euros ($1.08 billion) from 333 million euros in the year-earlier period.

DaimlerChrysler said its second-quarter operating profit – a key gauge of underlying profitability – rose 11 percent.

But its Chrysler Group, caught with too few car models as the market shifts away from trucks, reported a 91 percent drop in profit to $65 million for the quarter from $695 million a year ago.

In a conference call, DaimlerChrysler Chairman Dieter Zetsche said the lower earnings at Chrysler were due to a 6 percent decline in sales as well as decreased per-vehicle margins.

Chrysler revenue fell 4 percent to $15.9 billion from $16.6 billion, and the company conceded that worse was to come.

While the new Dodge Charger and Caliber models showed strong sales, Zetsche said sales of the Chrysler Group’s trucks, SUVs and minivans dropped.

“As fuel prices have been increasing in the U.S., there has been a shift in demand to more fuel-efficient vehicles. As a result, the minivan, SUV and large truck vehicle segments suffered while sales in the car segment grew,” Zetsche said.

The company plans to turn its sales around later in the year by moving toward smaller, more fuel efficient vehicles, Zetsche said.

The Chrysler Group expects to introduce eight new models this year, most powered by a new fuel-efficient four-cylinder engine or more efficient six-cylinder engines, Zetsche said. The models include two Jeep versions of the Caliber, the new mid-sized Chrysler Sebring and Dodge Avenger cars, and the Jeep Liberty and Dodge Nitro crossovers.

Chrysler Group still expects to post about a $600 million loss in the third quarter, but it forecast a return to profitability in the fourth quarter and the whole of 2006.

LaSorda said the company plans to cut production of its truck-based products by 65,000 to 70,000 units this year due to growing inventory. He said the company has the cuts scheduled, but did not give specific plants.

Analysts say Chrysler likely will have to rely on incentives such as employee discounts for all to get rid of its truck and SUV inventory.

However, the new models should help Chrysler turn around quickly, said Jim Sanfilippo, senior industry analyst with Bloomfield Hills-based Automotive Marketing Consultants Inc.

“Nobody that I know of has got more four-cylinder cars … coming to market than Chrysler,” he said. “Those launches have to be seamless, on time, on budget.”

For now, though, Chrysler has little to offer people shopping for small cars or crossovers, said Tom Libby, senior director of industry analysis for J.D. Power and Associates.

While it appears Chrysler was caught flat-footed with few car options, in reality, the company will have turned around quickly when its new models launch.

“Based on the way the market is moving, the timing will be good for those products,” he said.

Mercedes, which has suffered quality problems, seems to be rebounding.

On Thursday, DaimlerChrysler said quarterly operating profit at Mercedes soared to $1.03 billion from just $15 million a year ago.

It said the improvement was due to a 7 percent jump in revenue to 13.4 billion euros ($17.1 billion) from 12.5 billion euros a year ago, and the introduction of new luxury models with higher margins, such as its new S-Class sedans.

A cost-cutting drive has also helped. More than 8,300 employees agreed in the first half to leave the company in return for compensation.

DaimlerChrysler’s truck business and financial services division also improved their results.

“In total, these increases more than offset the decrease in operating profit recorded by the Chrysler Group,” the company said.

Analysts had expected profit of about 835 million euros ($1.1 billion), according to Dow Jones Newswires.

However, the analysts polled hadn’t foreseen a one-time gain of 800 million euros ($1 billion). DaimlerChrysler said that was the result of a hedging operation related to its stake in European Aeronautic Defense and Space Co.

Amid DaimlerChrysler’s other businesses, operating profit from its truck group jumped by 34 percent to $704 million – the biggest contributor to overall earnings in the quarter. Income from financial services jumped 10 percent to $539 million.

For the full year, DaimlerChrysler forecast a “slight increase” in full-year revenue from last year’s 149.8 billion euros. It said it still expects full-year operating profit of more than $7.7 billion.

DaimlerChrysler said its board of directors had extended LaSorda’s contract as CEO through 2012. LaSorda, a 52-year-old Canadian, has been a member of DaimlerChrysler’s management board since May 2004, and became CEO of Chrysler in September 2005.

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Associated Press Writer Stephen Graham in Berlin contributed to this report.

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On the Net:

DaimlerChrysler AG: http://www.daimlerchrysler.com

AP-ES-07-27-06 1641EDT