Flush with cash after selling Chrysler, DaimlerChrysler will spend up to 7.5 billion euros (S$15.6 billion) to buy back nearly 10 per cent of its shares over the next year, the car maker said on Wednesday.

The move eclipsed its second-quarter results that met market expectations and revealed how DaimlerChrysler will return excess funds to shareholders after selling a majority stake in its struggling US arm to buyout group Cerberus Capital Management.

Chief financial officer Bodo Uebber told an analyst conference call that more shareholder rewards could follow if the group's focus on higher-margin cars, trucks and financial services continues to bear fruit.

"Based on the further development of our earnings, cash flows and net liquidity, we may decide upon further buyback programmes or dividends in the future," he said.

The shares it buys back now are to be cancelled, which has the effect of boosting earnings per share.

"This is a logical step to take in view of the high net liquidity in the industrial business as well as the good prospects for earnings and cash flows in all divisions,? the car maker said in a statement.

Mr Uebber said net liquidity of 13.9 billion euros at its industrial business was far more than needed.

Its stock reversed declines on the buyback news and rose as much as 2.7 per cent before ending up 0.9 per cent at 63.26 euros.

Daimler trades at around 12 times consensus 2008 earnings per share, according to Reuters Estimates, an 8 per cent premium to the European sector average of 11.1 and above arch-rival BMW at nearly 10 times.

The sale of an 80.1 per cent stake in Chrysler and its North American financial services business for 5.5 billion euros pushed the company - to be renamed Daimler AG in October if shareholders agree - out of the world's 10 biggest car makers.

But the move has also cut its exposure to gyrating earnings at Chrysler by breaking up a failed US$36 billion transatlantic car merger struck in 1998.

Chief executive Dieter Zetsche said the company was 'somewhat concerned' that credit market uproar could weigh on the underlying economy and slow economic growth, but said US sales of the flagship Mercedes-Benz brand should not suffer.

"Perhaps some realtors and some mortgage fund managers will buy less Mercedes and BMWs and Porsches. Overall...the assessment of our people at the front, in the marketplace in the US, is that they will meet and beat their plans," he said.