DaimlerChrysler has slashed its full-year profit forecast, blaming a dip in sales and the difficulties of a fiercely competitive US market for a €1 billion operating loss at its Chrysler unit in the second quarter.

Chrysler chief Dieter Zetsche maintains that the disappointing performance was simply a 'bump in the road', but in light of a worldwide slump in car sales the signs are ominous.

'It's obviously a setback and, for the first time in two and a half years it makes us miss the milestone and the targets,' he acknowledged in an interview with Reuters.

Chrysler has revealed its American sales have fallen three per cent, following similar problems for all the main American manufacturers.

On Tuesday (June 3rd) General Motors reported an eight per cent increase in year-on-year American sales in May, while Ford reported a small loss of 0.8 per cent.

However, both companies have slashed their production output for the third quarter, with tough times anticipated in the American automotive industry.

The number of registrations of domestic cars in the US market during May fell by eight per cent in comparison to figures for 2002.