The Mercedes division, which includes the Smart small-car range, delivered pre-tax earnings of just €112m compared with €1.33bn a year ago "despite further efficiency improvements". Enjoying strong demand in the US, Smart sales leapt 20%. The dismal figures and outlook sent Daimler shares into a downward tailspin at first, not helped by the suspension of a share buy-back programme, but they later recovered on the grounds that they could have been even worse. Daimler said the decrease in Mercedes earnings was primarily due to the "abrupt" decline in sales in North America and Europe where consumer credit is tight or even frozen. Full-year earnings are expected to drop now to just €2.5bn But the division also took a €449m hit because of lower residual values put on leased cars and suffered from an unfavourable model mix, exchange-rate effects and higher raw material prices. Zetsche said: "We recognise that the situation is very challenging indeed.