DaimlerChrysler has issued a profits warning over its financially troubled Chrysler division, saying that the American subsidiary will make an operating profit of £304.8 million for Year 2000, compared with the £3.15 billion gain in 1999.

According to the Financial Times Jurgen Schrempp, DaimlerChrysler chairman, told shareholders in a letter that Chrysler's problems were caused by high launch costs for new models and generous discounts on old ones.

The letter is understood to say: “Chrysler did not adjust its cost structure sufficiently to take into account the changed conditions in the market.”

The company has subsequently warned the situation could worsen saying next year could be “even more challenging than 2000”.