The latest reversal in Daimler's results cut its full-year earnings by two-thirds, to 1.4 billion euros, or $1.7 billion, from 2007 levels.

Expenses related to Daimler's 19.9 percent holding in Chrysler wiped 2 billion euros, or $2.4 billion, from the Stuttgart, Germany-based automaker's earnings.

Daimler's Mercedes-Benz car division, which includes the Smart and Maybach brands, lost 359 million euros, or $460 million, on lower sales and charges linked to the declining residual values of leased cars.

Leading global automakers, including Toyota Motor Corp. and Nissan Motor Co., have reported losses for the October-to-December quarter, when global demand for vehicles fell steeply.

Daimler Chief Executive Dieter Zetsche said the first quarter -- and perhaps 2009 as a whole -- would be very difficult, although he said there was a chance that demand could begin to recover late in the year.

'But we're prepared for the worst' in our planning, Zetsche said on a call with analysts and reporters. In its forecast, Daimler predicted lower full-year sales for Mercedes.

The global slowdown led to a deterioration of the automaker's commercial vehicles businesses.

According to Bloomberg News, Zetsche told reporters that he anticipated progress in talks with Cerberus Capital Management LP, Chrysler's majority owner, regarding the disposal of its stake, valued at zero on Daimler's books.

A proposed linkup between Chrysler and Italy's Fiat SpA should facilitate the process, Zetsche said.