NEW YORK (April 28) — Less than a week after Detroit Diesel Corp. reported record first-quarter net income, DaimlerChrysler chairman Jurgen Schrempp said his company was debating whether to increase its 20% stake in the engine maker or sell out altogether.

The report fuels rumors that Detroit Diesel wants to buy back the shares from DaimlerChrysler. Detroit Diesel had 24.7 million shares outstanding as of March 1. DaimlerChrysler’s stake would be valued at about $120 million US.

Detroit Diesel was bought by Penske Corp. from General Motors in 1987. It went public in October 1993, selling 4.75 million shares at $20 each. It currently trades at about $25, up 19% this year.

Last week, Detroit Diesel reported net income of $12.5 million, or 51 cents a share, in the first quarter. The company earned $9.7 million, or 39 cents a share, in the same period last year.

Total revenue for the first quarter reached $592 million, up from $589 million last year.

“Demand for many of our products remains quite strong, and we are building momentum with our cost reduction initiatives,” said chairman Roger Penske. “Based upon the currently strong market conditions, particularly within on-highway, we continue to expect outstanding 1999 results.”

If the strong market continues, Penske said the company will assuredly attain its full-year earnings target of 15% above 1998 results.

Total first-quarter engine shipments were 42,400 units compared to 43,700 units last year. The company said heavy-duty diesel engine shipments remain strong, and that demand for its Series 60 engine combined with company programs to improve earnings suggests continued strength in the market this year despite weakness in such markets as mining and petroleum.

In the company’s On-Highway division, revenues increased 14% to $379 million in the first quarter compared to last year.

Detroit Diesel is expected to introduce a new 13.9-litre diesel engine later this year.