Daimler CEO Dieter Zetsche is under increasing pressure to deliver a turnaround - fast.

Daimler AG suffered through another disappointing quarter as both earnings and revenues tumbled more than analysts expected during the January to March period, putting more pressure on the company’s top executive, Chairman Dieter Zetsche, to produce a turnaround.

The German parent of the Mercedes-Benz and Smart car brands scrapped its 2013 forecast after reporting first quarter earnings before interest and taxes, or EBIT, collapsed by more than half, to 917 million euros from 2.1 billion during the same period a year ago.

“The company’s margins have collapsed,” observed one analyst during a conference call in which the company’s top executives discussed the quarterly report.

It was an observation senior management struggled to downplay during the call.

“In the first three months of this year, many markets developed worse than expected for economic reasons, especially in Western Europe. Nonetheless, we maintained our unit sales and revenue almost at the levels of the prior-year quarter and gained market share in many segments,” asserted Zetsche, who is facing mounting criticism for Daimler’s lackluster performance.

Zetsche cited the response to new products such as the Mercedes CLA and the E-Class, and at Daimler Trucks, as grounds for optimism.

“On the basis of the new products, the ongoing efficiency programs and our assumptions for future market developments, we expect earnings in the second half of this year to be higher than in the first half, due in particular to the launch of the new S-Class,” Zetsche said.

Bodo Uebber, Daimler’s chief financial officer, said the contributions from the new CLA , the refreshed version of E-Class, and the new S-Class will improve the company’s financial position, starting in the second half of 2014.

“Daimler is now in the middle of the most comprehensive growth offensive in its history. To these ends, we are investing large amounts in products, technologies and markets, which, in combination with the generally weak markets, led to a moderate start to the year 2013 in terms of earnings. But due to the stimulus from new products and the effects of the ongoing efficiency programs, we naturally intend to improve significantly in the coming quarters,” added Uebber.

Uebber cautioned analysts that they have to take into account that “European markets are weak and uncertain,” something that has most of Daimler’s competitors also have to cope with.  Ford Motor Co. reported on Wednesday that it lost $462 million in Europe during the second quarter.

(For the complete report on Ford’s Q1 earnings – including record performance in North America, Click Here.)

And Volkswagen AG – which owns Mercedes’ arch-rival Audi – also took a hammer blow from Europe’s collapsing market during the first quarter, its own profits down 38%.

(For more on VW’s earnings, Click Here.)

“We do expect positive pricing development,” added Daimler CFO Uebber. Analysts generally expressed some skepticism, however,  noting that, among other things, the new CLA could steal sales from the C-Class line.

Uebber said the company’s basic automotive platforms are well suited for the China market where the company has struggled over the past several quarters. Late last year, Daimler shook up its Chinese management team, the new regional director given a rare seat on the maker’s supervisory board.

Overall, the Daimler Group posted a first-quarter net profit of 564 million euros, compared to 1.5 billion euros during the same period a year ago.

And the situation isn’t likely to improve soon. Daimler revised its forecast for 2013, and is calling for EBIT — excluding one-time items — to fall this year rather than match 2012’s 8.1 billion euros or $10.6 billion, as previously predicted.

The position of Daimler’s chief marque, Mercedes-Benz has continued to weaken since it lost the top spot in global luxury-car sales to rival BMW in 2005 and then ceded second place to the Audi brand in 2011.

Profits at the Mercedes cars division tumbled 63% to 460 million euros as revenue slipped 6% to 14.1 billion euros. The unit’s return on sales declined to 3.3% from 8.2% a year ago. Daimler predicted the unit’s earnings will fall for the full year. In addition to combating slumping demand in Europe, Mercedes sales declined 11% in China as it restructures its business in the country.

European new car registrations are at a two-decade low as a recession stemming from the region’s sovereign-debt crisis discourages consumers from making larger purchases. Industry-wide first-quarter deliveries in the region dropped 9.7% to 3.1 million cars as demand in Germany, its biggest economy, plunged 13%.

On a positive side, European sales by Mercedes in March rose 0.8%, compared with drops of 4.5% at BMW and 15 percent at Audi.

In the first quarter of 2013, Daimler sold 501,600 cars and commercial vehicles worldwide, and was thus close to the prior-year level of 502,100.