DaimlerChrysler has announced that its group profits have risen but revealed a collapse in profits for its luxury marque, Mercedes.

After being eclipsed by BMW in Europe and Lexus in the US, Mercedes’ operating profits fell to €20m in the fourth quarter from €784m the year before.

2004 operating profits fell 45% to €1.7bn and revenues fell 1.5% to €12.85bn.

DaimlerChrysler, which has been forced to carry out an extensive recall programme of its Mercedes cars in the last few years to fix faulty electronic systems and address customer dissatisfaction, said on Thursday it planned to improve the troubled division’s performance by more than €3bn.

DaimlerChrysler has said that it plans to improve performance by €3bn and address customer dissatisfaction after extensive recalls were made to fix electronic faults.

DaimlerChrysler has also stated that its Smart marque’s ‘significantly negative’ performance in 2004 would also be addressed.

Under the group’s new rescue programme the group said it would achieve a 7% return on sales by 2007.

Overall, group profits rose to €2.5bn from €0.4bn last year.

Chrysler returned to profit in 2004 due to the success of the 300 and 300c sedan models. An operating profit of €1.4bn was made compared to a loss of €506m the year before.