On Tuesday Daimler announced losses of 1.4 billion euros ($1.8 billion) for the first quarter of 2009, citing a decline in sales of trucks and Mercedes Benz cars.

The German carmaker also is to give up its last remaining stake in its former US unit Chrysler and said it would forego the repayment of $1.5 billion of outstanding loans to the struggling Detroit firm.

A statement released by Daimler in Stuttgart on Monday said that a deal signed with Chrysler and the US pension authorities marked a definitive separation of the German and US firms.

"Under this agreement, Daimler's remaining 19.9 per cent shareholding in Chrysler will be redeemed and Daimler will forgive repayment of loans extended to Chysler, which were already written off in the 2008 financial staements," the statement said.

Daimler had sold an 80.1 per cent stake in the US carmaker to private equity company Cerberus Capital Managment in 2007.

Under the new deal Daimler has agreed to pay $600 million in three annual installments into Chrysler's pension coffers.The agreement is expected to reduce Daimler's second-quarter earnings before interest and tax by about $700 million.

In exchange Chrysler and Cerberus have agreed to waive any claims against Daimler, including allegations that Daimler "improperly managed certain issues in the period between the signing of the agreement and the conclusion of the transaction".

Chrysler, which is currently operating under US government aid, has been given until the end of the week to come up with a viable plan to keep the aid flowing or to face bankruptcy.