Berlin - German automotive group Daimler, which is struggling with a slump in sales of its Mercedes-Benz cars and trucks, warned shareholders Wednesday that it might face a writedown if Chrysler, its former US subsidiary, were to go bankrupt.

Chief executive Dieter Zetsche also told shareholders at a meeting in Berlin that he could not rule out lay-offs as Daimler AG faced off a "once-in-a-century" crisis that would not spare any of its car-industry competitors.

"In our view, automobile markets will not pass through the worst of the recession until the second half of 2009 at the earliest," he said. Daimler anticipated "a significant loss for the first quarter."

The group will publish its first-quarter financial results for the first quarter on April 28.

Chief financial officer Bodo Uebber said that if Chrysler, which is still 20-per-cent owned by Daimler, were to file for insolvency, the German company's 2009 results would take a hit.

Last year Chrysler's troubles cut a 3-billion-euro hole in Daimler's accounts. Daimler is in an uncomfortable clinch with Cerberus Capital, the majority owner of Chrysler since 2007.

Uebber said that the Chrysler shares were already valued at nil in Daimler's books but the Chrysler pension fund would be able to call a 1-billion-dollar guarantee given by Daimler if the US company failed.

Daimler's own business has taken a heavy hit from the recession. World sales of Mercedes-Benz cars fell 23 per cent in annual terms in the first quarter and sales of the brand's trucks were off 39 per cent.

Daimler has said it aims to retain its 141,000-strong workforce, while cutting costs by imposing furloughs.

So far nearly 68,000 blue-collar workers are receiving German state benefits to compensate for cuts in factory hours. Uebber said layoffs would only be a last resort if the recession refused to ease.

Some 73,000 white-collar employees are now being asked to take pay cuts, ranging up to 14 per cent, and to reduce their work week up to five hours.

Zetsche, who admitted he had reacted too late last year to the impending crisis, defended continued spending to develop "green technology" including electric motors and lighter materials.

"Although the crisis is forcing us to cut costs wherever we can, we will not jeopardize our future by reducing essential investment," he said.

Daimler, which has Abu Dhabi's sovereign wealth fund as its key shareholder, owning about 9 per cent of the stock after a capital infusion, said Wednesday it was also eliminating one of its highly-paid board members and his office.

At the board level, there will be no replacement for the chief strategy officer, Ruediger Grube, after he leaves next month to become chief executive of German railways company Deutsche Bahn.

Supervisory board chief Manfred Bischoff said Grube's tasks would be redistributed to Daimler chief executive Dieter Zetsche and the other four remaining members of the management board.

As shareholders arrived for the annual general meeting in the German capital, labour activists demonstrated outside against the pay cuts. One placard declared, "It's your crisis. We won't pay for it."

The activists wore cardboard face-masks to make them look like Zetsche, whose balding, mustachioed visage has been a feature of Mercedes-Benz advertisements in the United States and other markets.

Inside the meeting, supervisory board chairman Manfred Bischoff defended the company's pay scale for board members, saying it was keyed to business success.

"Outstanding executives are scarce and might get lured away by other people," he said, referring to worldwide outrage at high levels of executive pay.

He said the six-member board earned 16.6 million euros last year, down from 30.2 million in 2007 after annual bonuses at Daimler were sharply trimmed after group earnings slumped by two thirds. Zetsche's pay of 5.04 million euros was halved from 10.2 million in 2007.