Frankfurt  - German car giant Daimler AG unveiled a tough cost-cutting program Tuesday after the group plunged into the red in the first three months of the year amid the global auto industry crisis.

With car sales falling dramatically, the maker of luxury Mercedes Benz vehicles said Tuesday it posted a 1.3-billion-euro (1.7-billion- dollar) loss in the first quarter, after clocking up a 1.3-billion euro profit in the same period of 2008.

The first-quarter red ink comes atop the 1.5 billion euros which Daimler had lost in the fourth quarter of 2008 with the group warning it faced the prospects of a loss in the second quarter.

The world's second biggest premium vehicle maker said revenue slumped by 24 per cent to 18.7 billion euros and worldwide sales of cars and trucks tumbled by 34 per cent to 332,300 as the global economic downturn hit the auto sector.

As a result, the company announced that thousands of the company's workers now faced a wage cut as part of the group's efforts to save 2 billion euros in personnel costs.

Announcing the cuts, Daimler personnel director Wilfried Porth acknowledged that this could prove painful for many workers.

But he said: "Considering the current economic situation there is no alternative to the measures in the package."

The release of Daimler's latest results sent the group's shares tumbling by more than 5 per cent in Frankfurt trading to 25.97 euros, with the group saying it did not expect any signs of a turnaround in its business until the second half of the year.

Stuttgart-based Daimler's Mercedes-Benz Cars division, which also includes the company's compact Smart posted a first-quarter loss of 1.12 billion euros in the wake of a 27-per-cent drop in sales.

Likewise, Daimler's truck operations reported a 142 million loss in the first months of the year after sales dropped 22 per cent. Daimler is also the world's biggest truck maker.

The new grim set of results from Daimler also came against the background of evidence of the mounting pressures on global carmakers with leading US auto group General Motors announcing another dramatic cut in its operations.

On Monday, Volkswagen AG's luxury offshoot Audi reported a 29-per- cent fall in earnings after a 19-per-cent drop in revenue.

Meanwhile, the German Government is holding talks with possible investors in attempt to secure the future of GM's struggling German offshoot, Opel.

The announcement of Daimler's first-quarter loss came just one day after Daimler said it was divesting itself of its stake in GM's ailing US auto rival Chrysler at a cost of about 700 million dollars.

Daimler said Monday it had forged an agreement with Chrysler's owner, the US private equity group Cerberus Capital Management and the US Pension Benefit Guaranty Corp, to pull out of its 19.9-per- cent stake in the North American carmaker.

The move comes about two years after Daimler sold an 80.1-per cent stake in Chrysler to Cerberus, which brought to an end the German group's troubled decade-long merger with the embattled Michigan-based carmaker.

Already shored up by government aid, Chrysler is attempting to find a way out of its present crisis by forging an alliance with Italian carmaker Fiat.