By MELISSA EDDY, Associated Press Writer SINDELFINGEN, Germany - Once viewed as a liability, DaimlerChrysler AG's U.S. division Chrysler has taken the wheel from the automaker's former star Mercedes — limiting the damage from the luxury division's woes in a difficult fourth quarter and driving full-year earnings for 2004. The German-American automaker said Thursday that Chrysler more than doubled its fourth-quarter contribution to 386 million euros ($523 million) from 143 million euros a year ago, while earnings at Mercedes nearly evaporated to just 20 million euros ($27 million) from 784 million euros. Overall fourth-quarter net profit at DaimlerChrysler fell 63 percent to 526 million euros ($712 million) from 1.4 billion euros a year ago as Mercedes struggled with quality problems and a weak dollar that hurt its results in the key U.S. market. The results fell short of the 686 million euro ($878 million) profit forecast of analysts polled by Dow Jones Newswires. The automaker's shares were down 1.4 percent by late afternoon in Frankfurt, trading at 35.60 euros ($45.59). DaimlerChrysler's U.S.-traded shares fell 19 cents, or 0.4 percent, to $45.89 in midday trading on the New York Stock Exchange. Quarterly sales rose 7 percent to 37.7 billion euros ($51 billion) from 35.2 billion euros a year ago, boosted by the first-time inclusion of revenue from Japanese truck maker Mitsubishi Fuso. DaimlerChrysler CEO Juergen Schrempp called the Mercedes result "unacceptable" and announced a plan to cut costs and boost revenues that he said would improve the division's profit margin to 7 percent by 2007. Currently it's 3.5 percent. The plan is expected to include measures to fix problems at ultra-compact maker Smart, which is part of Mercedes. Smart loses money, though the company hasn't said how much. Mercedes head Eckhard Cordes said the company was "considering" new partnerships to boost Smart and would not rule out job cuts at Mercedes either. The dollar, which hit an all-time low against the euro in December, contributed to Mercedes' problems, as did competition from Munich-based Bayerische Motoren Werke AG and Toyota Motor Corp.'s luxury brand, Lexus. The weak dollar has decreased profit margins in the United States, Mercedes' No. 2 market. Yet Schrempp acknowledged the exchange rate was not the real problem. "One thing is quite clear: even without the exchange-rate effects, the operating profit of the Mercedes Car Group in the third and fourth quarters would have been unacceptable," he said. Ferdinand Dudenhoeffer, an auto analyst at the Gelsenkirchen Technical Institute, said he expected Mercedes to sort out its problems as early as 2006, noting that fixing troubles at Smart remain key. "Smart is still the biggest problem," Dudenhoeffer said. Along with other analysts, Dudenhoeffer believes new Mercedes models coming in the next year or two will help restore the division's luster. Still, full-year earnings for 2004 rose sharply, with net income of 2.5 billion euros ($3.3 billion), up from 448 million euros the previous year. The improvement was driven by a strong performance by the company's commercial vehicles division and by Chrysler, which has bounced back from losses in 2001 and 2003 with hot-selling new models such as the Dodge Magnum and Chrysler 300. "Clearly we have seen the beginning of the great benefits of all-new products," Chrysler president and chief executive Dieter Zetsche said. "In combination with a laser focus on cost management, we think we are well set for 2005 and the years to come." DaimlerChrysler, based in Stuttgart and Auburn Hills, Michigan, kept its dividend unchanged at 1.50 euros ($1.92) per share. At the company's shareholders meeting last April, Schrempp said he expected a "significant improvement" in 2005 and 2006 earnings on the back of new models. But the troubles at Mercedes prompted DaimlerChrysler to temper its previously optimistic profit target for 2005. The company said it now expects "slightly higher operating profit" in 2005, "after a weaker first and second quarter."