- Annual and Transition Report (foreign private issuer) (20-F)
03 Mars 2010 - 12:08PM
Edgar (US Regulatory)
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As filed with the Securities and Exchange Commission on March 3, 2010
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
Commission file number 1-12356
D
AIMLER
AG
(Exact name of Registrant as specified in its charter)
D
AIMLER
AG
(Translation of Registrant's name into English)
FEDERAL REPUBLIC OF GERMANY
(Jurisdiction of incorporation or organization)
MERCEDESSTRASSE 137, 70327 STUTTGART, GERMANY
(Address of principal executive offices)
Mr. Robert
Köthner
Daimler AG
Epplestrasse 225
70567 Stuttgart
Germany
011-49-711-17-92543
011-49-711-17-94116 (facsimile)
(Name, address, telephone and facsimile number of company contact person)
Securities
registered or to be registered pursuant to Section 12(b) of the Act.
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Title of each class
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Name of each exchange
on which registered
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Ordinary Shares, no par value
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Frankfurt Stock Exchange
New York Stock Exchange
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Guarantee of the following securities of:
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Daimler Finance North America LLC
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8.50% Notes Due January 18, 2031
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New York Stock Exchange
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Securities registered or to be registered pursuant to Section 12(g) of the Act.
NONE
(Title of Class)
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.
NONE
(Title of Class)
Indicate
the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:
Ordinary
Shares, no par value . . . . . . . . 1,024,066,951
(as
of December 31, 2009)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer" in
Rule 12b-2 of the Exchange Act.
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
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Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.
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U.S. GAAP
o
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International Financial Reporting Standards as issued by
the International Accounting Standards Board
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Other
o
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If
"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
TABLE OF CONTENTS
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Page
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PART I
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Item 1.
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Identity of Directors, Senior Management and Advisers
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2
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Item 2.
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Offer Statistics and Expected Timetable
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2
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Item 3.
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Key Information
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2
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Selected Financial Data
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2
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Risk Factors
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5
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Item 4.
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Information on the Company
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13
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Introduction
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13
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Description of Business Segments
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15
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Mercedes-Benz Cars
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15
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Daimler Trucks
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19
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Mercedes-Benz Vans
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23
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Daimler Buses
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25
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Daimler Financial Services
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27
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Supplies and Raw Materials
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29
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Government Regulation and Environmental Matters
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30
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Description of Property
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36
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Item 4A.
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Unresolved Staff Comments
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37
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Item 5.
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Operating and Financial Review and Prospects
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37
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Introduction
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37
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New Accounting Pronouncements Not Yet Adopted
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39
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Inflation
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39
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Critical Accounting Policies
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39
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Operating Results
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46
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Information about EBIT
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47
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Overview of Business Segment Revenue and
EBIT
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47
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2009 Compared With 2008
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48
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2008 Compared With 2007
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54
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Liquidity and Capital Resources
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60
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Off-Balance Sheet Arrangements
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68
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Research and Development
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70
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Item 6.
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Directors, Senior Management and Employees
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71
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Supervisory Board
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72
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Board of Management
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77
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Compensation
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79
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Employees and Labor Relations
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84
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Share Ownership
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85
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Item 7.
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Major Shareholders and Related Party Transactions
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86
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Item 8.
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Financial Information
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86
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Consolidated Financial Statements
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86
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Other Financial Information
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87
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Export Sales
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87
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Legal Proceedings
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87
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Dividend Policy
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91
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Item 9.
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The Offer and Listing
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92
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i
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Page
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Item 10.
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Additional Information
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94
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Options to Purchase Securities from Registrant or Subsidiaries
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94
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Articles of Incorporation
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94
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Material Contracts
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100
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Exchange Controls
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101
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Taxation
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101
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Documents on Display
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105
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Item 11.
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Quantitative and Qualitative Disclosures About Market Risk
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105
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Item 12.
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Description of Securities Other than Equity Securities
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105
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PART II
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Item 13.
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Defaults, Dividend Arrearages and Delinquencies
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106
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Item 14.
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Material Modifications to the Rights of Security Holders and Use of Proceeds
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106
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Item 15.
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Controls and Procedures
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106
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Item 16A.
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Audit Committee Financial Expert
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107
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Item 16B.
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Code of Ethics
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107
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Item 16C.
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Principal Accountant Fees and Services
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107
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Item 16D.
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Exemptions from the Listing Standards for Audit Committees
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108
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Item 16E.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
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108
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Item 16F.
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Change in Registrant's Certifying Accountant
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109
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Item 16G.
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Corporate Governance
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109
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PART III
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Item 17.
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Financial Statements
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112
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Item 18.
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Financial Statements
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112
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Item 19.
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Exhibits
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112
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ii
Cautionary Statement Regarding Forward-Looking Statements
This document contains forward-looking statements that reflect our current views about future events. We use the words "anticipate,"
"assume," "believe," "estimate," "expect," "intend," "may," "plan," "project," "should" and similar expressions to identify forward-looking statements. These statements are subject to many risks and
uncertainties, including:
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a lack of further improvement or a renewed deterioration of global economic conditions, in particular a renewed decline of
consumer demand and investment activity in Western Europe or the United States, or a downturn in major Asian economies;
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a continuation or worsening of the tense situation in the credit and financial markets, which could result in a renewed
increase in borrowing costs or limit our funding flexibility;
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changes in currency exchange rates or interest rates;
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our ability to continue to offer fuel-efficient and environmentally friendly products;
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a permanent shift in consumer preference towards smaller, lower margin vehicles;
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the introduction of competing, fuel-efficient products and the possible lack of acceptance of our products or
services which may limit our ability to adequately utilize our production capacities or raise prices;
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price increases in fuel, raw materials and precious metals;
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disruption of production due to shortages of materials, labor strikes, or supplier insolvencies;
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a further decline in resale prices of used vehicles;
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the effective implementation of cost-reduction and efficiency-optimization programs at all of our segments,
including the repositioning of our truck activities in the NAFTA region and in Asia;
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the business outlook of companies in which we hold an equity interest, most notably the European Aeronautic Defence and
Space Company EADS N.V. (EADS);
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changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and
safety;
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the resolution of pending governmental investigations and the outcome of pending or threatened future legal proceedings;
and
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other risks and uncertainties, some of which we describe under the heading "Risk Factors" in "Item 3. Key
Information."
If
any of these risks and uncertainties materialize, or if the assumptions underlying any of our forward-looking statements prove incorrect, then our actual results may be materially
different from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements. Any forward-looking statement speaks only as of the
date on which it is made.
References
Unless otherwise specified, in this annual report, "we," "us," "our," "Daimler," the "Daimler Group" or the "Group" refers to Daimler
AG and its consolidated subsidiaries, or any one or more of them, as the context may require.
PART I
Item 1. Identity of Directors, Senior Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected Timetable.
Not applicable.
Item 3. Key Information.
SELECTED FINANCIAL DATA
We have derived the selected financial data presented in the table below from our audited consolidated financial statements for the
years ended December 31, 2009, 2008, 2007, 2006, and 2005. We prepared the consolidated financial statements included in this report (Consolidated Financial Statements) in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Our
financial statements are denominated in euros, which is the currency of our home country, Germany.
You
should read the table together with our Consolidated Financial Statements and the notes thereto and the discussion in "Item 5. Operating and Financial Review and Prospects."
2
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2009
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2008
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2007
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2006
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2005
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(in millions, except for ordinary share amounts)
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Income Statement Data:
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Revenue
1
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€
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78,924
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€
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98,469
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€
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101,569
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€
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99,222
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€
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95,209
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Earnings before interest and taxes (EBIT)
2
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(1,513
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)
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2,730
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8,710
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4,992
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2,873
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Net profit (loss) from continuing operations
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(2,644
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)
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1,704
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4,855
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3,166
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2,253
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Net profit (loss) from discontinued operations
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(290
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(870
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617
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1,962
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Net profit (loss)
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(2,644
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)
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1,414
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3,985
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3,783
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4,215
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Profit (loss) attributable to shareholders of Daimler AG
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(2,640
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)
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1,348
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3,979
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3,744
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4,149
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Earnings (loss) per share for profit (loss) attributable to shareholders of Daimler AG
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Basic
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Net profit (loss) from continuing operations
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(2.63
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)
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1.71
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4.67
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3.06
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2.16
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Net profit (loss) from discontinued operations
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(0.30
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)
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(0.84
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)
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0.60
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1.93
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Net profit (loss)
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(2.63
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)
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1.41
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3.83
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3.66
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4.09
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Diluted
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Net profit (loss) from continuing operations
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(2.63
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1.70
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4.63
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3.04
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2.15
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Net profit (loss) from discontinued operations
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(0.30
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(0.83
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)
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0.60
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1.93
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Net profit (loss)
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(2.63
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1.40
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3.80
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3.64
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4.08
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Balance Sheet Data (end of period):
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Total assets
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€
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128,821
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€
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132,225
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€
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135,094
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€
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217,634
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€
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228,012
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Non-current liabilities
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49,456
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47,313
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47,998
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90,452
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96,823
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Current liabilities
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47,538
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52,182
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48,866
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89,836
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95,232
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Share capital
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3,045
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2,768
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2,766
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2,673
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2,647
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Equity attributable to shareholders of
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Daimler AG
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30,261
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31,222
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36,718
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36,925
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35,545
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Equity
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31,827
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32,730
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38,230
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37,346
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35,957
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2009
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2008
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2007
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2006
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2005
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Other Data:
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Weighted average number of shares outstanding
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Basic
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1,003.8
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957.7
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1,037.8
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1,022.1
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1,014.7
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Diluted
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1,003.8
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959.9
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1,047.3
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1,027.3
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1,017.7
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Dividend per share (euro)
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3
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0.60
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2.00
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1.50
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1.50
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Dividend per share (U.S. dollar)
4
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3
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0.77
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3.17
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2.00
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1.81
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-
1
-
In
May 2008, the IASB published Improvements to IFRSs (International Financial Reporting Standards). One of the changes introduced by the 2008 improvements is an amendment to
IAS 16 "Property, Plant and Equipment" regarding the presentation of the de-recognition of assets held for rental. Pursuant to this amendment, proceeds from sales of assets held for
rental that occur in the ordinary course of activities must be recognized as revenue. We have applied the revised standard since January 1, 2009 and the 2009 figures in the above table reflect
the new presentation. We also adjusted the 2008 and 2007 figures to make them comparable. Revenue and cost of sales recognized in the 2009 consolidated statements of income (loss) increased by
€2,706 million and €2,706 million, respectively, as a result of this change in presentation (2008 increases: €2,596 million and
€2,596 million, respectively; 2007 increases: €2,170 million and €2,170 million, respectively). The 2006 and 2005 figures are
unchanged since the information necessary for an adjustment was not readily available. See also Note 1 to the Consolidated Financial Statements.
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2
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EBIT
includes expenses from compounding of provisions (2009: €1,003 million; 2008: €429 million; 2007:
€444 million; 2006: €418 million; 2005: €350 million).
-
3
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Daimler
AG will not pay a dividend for the 2009 financial year. Please also refer to the discussion under the heading "Dividend Policy" in "Item 8. Financial Information."
-
4
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The
U.S. dollar dividend amounts for prior years reflect the dividend amounts in euros as approved by our stockholders at the annual general meeting for the respective year, translated
at the Deutsche Bank fixing rate for the U.S. dollar on the day following such approval.
3
Exchange Rate Information
The following table shows, for the respective periods shown, high, low, and average noon buying rates for U.S. dollar per euro in The
City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York.
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Year
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High
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Low
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(in US$ per €)
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2010
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January
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1.4536
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1.3870
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2009
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December
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1.5100
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1.4243
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November
|
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1.5085
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1.4658
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October
|
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1.5029
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1.4532
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September
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1.4795
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1.4235
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August
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1.4416
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1.4075
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Average
1
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2009
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1.3955
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2008
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1.4695
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2007
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1.3797
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2006
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|
1.2661
|
|
2005
|
|
|
|
|
|
1.2400
|
|
-
1
-
This
column shows the average of the noon buying rates on the last business day of each month during the relevant year.
On February 16, 2010, the noon buying rate for €1 was US$1.3742.
Fluctuations
in the exchange rate between the euro and the U.S. dollar affect the market price of our ordinary shares on the New York Stock Exchange and the U.S. dollar amount received
by shareholders who elect to convert cash dividends declared in euros into U.S. dollars. Please refer to "Item 5. Operating and Financial Review and Prospects," "Item 11. Quantitative
and Qualitative Disclosures About Market Risk" and Note 30 to our Consolidated Financial Statements for information on how exchange rate fluctuations affect our businesses and operations and
how we manage our exposure to those fluctuations.
4
RISK FACTORS
Many factors could affect our business, financial condition, cash flows and results of operations. We are subject to various risks
resulting from changing economic, political, social, industry, business and financial conditions. The principal risks are described below.
A lack of continued improvement in global economic conditions or a relapse into recession in any of the major
world economies could have significant adverse effects on our business and our future operating results and cash flows.
In
the aftermath of the financial crisis that began in the second half of 2008 in the United States, the world economy in 2009 experienced the worst recession since the Second World War
and the Great Depression. Despite a moderate recovery in the second half of 2009, the global economy remains fragile because of a continued tightness in the credit markets and unpredictable consumer
demand and investment activity, especially in the United States and Western Europe. If the economic recovery in those regions or in other key markets in which we operate does not continue or stagnates
or if the economies of key industrialized countries fall back into recession, our financial condition, our profitability and our cash flows would be adversely affected.
In
an environment of a highly fragile global economy, the occurrence of any events that threaten consumer and investor confidence generally (for example, international disputes,
political instability, terrorism, volatility in equity or housing markets, rising energy prices, or inefficient financial market regulations) may exacerbate any adverse effects of the global economy
on future sales, primarily in Western Europe, the United States and in some emerging markets. Since a high proportion of our costs are fixed, even small declines in sales can significantly affect our
operating results and cash flows.
In
connection with the crisis in the financial markets and its impact on the global economy, central banks and governments in the industrialized nations injected vast amounts of
additional liquidity into the economy through credit and financial market support programs and increased government spending. These steps resulted in a significant increase in the monetary base and
significantly higher fiscal deficits. Central banks appear to recognize that they must reduce the excess liquidity before one or more of the risks typically associated with excess market liquidity
materialize. Similarly, governments are aware that they must address the significantly higher public debt ratios, either by increasing revenue or through budget cuts. If public spending is reduced too
early or too quickly, however, the fragile economic recovery could be in danger. Conversely, if central banks and governments do not take timely and decisive steps to reduce excess liquidity and reign
in government spending, inflation rates may increase significantly, thereby increasing the risk of creating new pricing "bubbles" in some market sectors and hampering future commercial and consumer
spending and investment. If any of these potential developments materialize, demand for our passenger cars and commercial vehicles would likely decline, thereby negatively affecting our profitability
and cash flows. Similarly, if severe deflation were to occur in some of our key markets, our business, future operating results and cash flows would be adversely affected.
A renewed decline in consumer demand and investment activity or a prolonged economic stagnation in Western Europe, the most important market for our products,
could significantly adversely affect our businesses.
We
derive approximately half our revenue from our business in Western Europe. In 2009, the global recession had a significant negative affect on the Western European economies, resulting
in significantly reduced demand for consumer goods and capital equipment. Even though sales of passenger cars were aided by government-sponsored car-scrap incentives, these incentives
primarily benefited the compact and micro-compact car segments and had virtually no slowing effect on the sales declines in the luxury car segment. At year end 2009, the major Western European
economies began to show signs of modest improvement, although overall demand remains substantially lower compared to pre-recession levels. A relapse into recession or a prolonged
stagnation in the Western European economies or in the industries in which we operate could result in a further
5
decline
in consumer demand and investment activity. Such a decline could be exacerbated by a prolonged continuation or worsening of the tight credit markets, resulting in lower consumer and investor
confidence. In some Western European countries, for example in Germany, the economic effect of restrictions in the credit markets may be even more pronounced since small and medium sized companies,
which depend on readily available bank loans, represent a significant portion of total economic activity in those countries. If any of these risks materialize, sales of our passenger cars and
commercial vehicles in Western Europe could experience significant declines, thereby adversely affecting our profitability and cash flows.
Our
business in Western Europe could be further impacted if business conditions deteriorate due to the structural weakness of some European economies, the spillover effects of a renewed
weakness in other major economies or a further significant appreciation of the euro.
A continuation or worsening of the tightness of the credit markets in the U.S. could result in a renewed decline in demand for consumer products and capital
investment, which could affect our sales of automotive products in the U.S., and potentially other markets, as well as our profitability and cash flows.
The
United States is an important market for our products. Despite a modest recovery in the second half of 2009, the U.S. economy continues to experience tight credit markets, negatively
affecting consumer spending and capital investment. In 2010, U.S. credit markets also may be adversely affected by a rise in defaults on consumer and commercial loans. Vast fiscal stimulus packages
and a rising money supply have increased further the risk of a potential future economic downturn, potentially giving rise to a renewed decline in investment and private consumption in the U.S. Any of
these developments could negatively affect sales of our passenger cars and commercial vehicles in the U.S. market and our profitability and cash flows.
In
addition, the U.S. economy continues to require significant capital inflow from non-U.S. investors to finance the current account deficit. A renewed decline in demand for
U.S. dollar denominated investments (which could also be caused by considerable shifts of global currency reserve portfolios) could lead to a further and uncontrolled depreciation of the U.S. dollar,
which would adversely affect our currency transaction risk, thereby negatively impacting our passenger car sales into the U.S. and the profitability of our Mercedes-Benz Cars segment.
Because of the global importance of the U.S. economy and the existing interdependencies between the United States economy and other major economies throughout the world, any renewed significant
economic downturn in the United States would likely also adversely affect Western European and other world markets.
A sustained slowdown or economic downturn in Asian economies could delay our plans for expansion in Asian markets and intensify competitive
pressures.
During
2009, the major Asian economies remained relatively stable compared to the U.S. and Western European economies, primarily as a result of solid economic growth in China and India.
In China, vast fiscal stimulus packages and a rising money and credit supply have increased the risk of a potential future economic downturn. A significant decline in economic activity in these
countries or in other major Asian economies could negatively affect the future business prospects of our subsidiary Mitsubishi Fuso Truck and Bus Corporation and sales of our Mercedes-Benz
passenger cars in that region. An economic downturn in Asia, particularly in China or India, could also delay our long-term strategic expansion plans in those increasingly important
markets. Moreover, if economic conditions in Asia were to deteriorate, especially if coupled with depreciating Asian currencies, then Asian competitors with excess capacity might intensify their
efforts to export vehicles to North America and Western Europe. This would not only intensify competition for market share, but also increase further the existing pressure on margins within the
automotive industry.
Our results of operations and cash flows could be adversely affected by economic or political change in some regions.
We,
in particular our Daimler Trucks segment, our Daimler Buses segment, and our Daimler Financial Services segment, have significant operations in several Latin American countries and
in Turkey. Some of these countries may experience severe economic or political change, including currency fluctuations, social unrest or
6
instability
in the governance regime, which could adversely affect our investments as well as local demand in those and neighboring countries, thereby negatively affecting our cash flows and results
of operations.
In
addition, a substantial decline in raw material prices could have a significant adverse effect on the economic outlook of some emerging markets, for example, Russia and Brazil, whose
economic growth depends to a large degree on exports of raw materials. As a result, our capital investments and sales of our automotive products in those countries could be negatively affected.
Protectionist trade policies could negatively affect our business in several markets.
Demand
for motor vehicles could also be affected by adverse developments in the political and regulatory environment in the markets in which we operate. For example, a discord in
international trade relations and the implementation of new tariff or non-tariff trade barriers could negatively affect our global sales, production and procurement activities as well as
expansion plans in affected areas. The proliferation of bilateral free trade agreements between third party countries could negatively affect our position in those foreign markets, especially in Asia.
Overcapacity and intense competition in the automotive industry create pricing pressure and could force further
cost reductions which could negatively affect our profitability and cash flows.
Overcapacity
and intense price competition in the automotive industry could continue to force manufacturers of passenger cars and commercial vehicles, including us, to decrease
production, reduce production capacity or increase sales incentives, each of which would be costly and therefore could negatively affect our profitability and cash flows. For example, the global
economic slowdown that began towards the end of 2008 and continued into 2009 has caused a significant decline in demand for passenger cars and commercial vehicles in many geographic markets, which
further increased overcapacity and intensified price competition in the automotive industry. If the weakness of the automotive markets continues, additional capacity adjustments or pricing measures
could become necessary. In that regard, the discontinuation of the government-sponsored
car-scrap and other incentives offered in certain Western European countries in 2009 could have an overall chilling effect on those automobile markets in 2010, potentially resulting in a
significant decline in future passenger car sales. Even though in Western Europe the primary beneficiaries of those incentives were the compact and micro compact car market segments, there can be no
assurance that any decline would be limited to those product segments.
Our
ability to improve or even maintain our profitability depends, among other things, on maintaining competitive cost structures and introducing attractive and fuel efficient new
products. If we are unable to continue to provide competitive pricing, customers may elect to purchase competitors' products and our future profitability and cash flows may suffer. For example, some
U.S. vehicle manufacturers received financial support from government sources or emerged from reorganization proceedings with a lower cost base, thereby enabling these manufacturers to improve their
profitability or offer their products at lower prices.
In
addition, significant discounts and other sales incentives have become increasingly common in many automotive markets, including Western Europe, also as a consequence of the
government sponsored car-scrap bonus programs. Sales incentives in the new vehicle business also influence the price level of used vehicles, which could adversely affect the profitability
of our used vehicle sales and, indirectly, the profitability of our future new vehicle sales.
A permanent shift in consumer preference could limit our ability to sell our traditional product lines at current volume levels and affect our profitability in
general.
In
the recent past, there were indications in several geographic markets that consumer preference may have begun to shift towards smaller, more fuel efficient and environmentally
friendly vehicles. A general shift in consumer preference toward those vehicles could negatively affect our ability to sell large or medium size luxury passenger cars at current volume levels. As a
result, we may be forced to lower prices or increase sales incentives
7
on
these products. Both, lower volume sales and lower prices could have a negative effect on our future financial condition, operating results and cash flows. In addition, we may be forced to adjust
production capacity and further increase efficiency, which could result in significant additional costs, thereby negatively affecting our results of operations and cash flows. Conversely, if we are
unable to adjust permanently our production capacity and cost structures to changed business conditions, including a permanent shift of consumer preference towards smaller, lower margin vehicles, our
profitability and cash flows may be negatively impacted.
The future profitability of our Daimler Trucks segment depends in part on the successful implementation of the business optimization and realignment plans of our
subsidiaries Daimler Trucks North America and Mitsubishi Fuso Truck and Bus Corporation.
In
2008, the board of management of Daimler AG approved a plan to optimize and reposition the business operations of Daimler Trucks North America (DTNA), a wholly-owned subsidiary of the
Group. In addition, in May 2009, our board of management decided on a major realignment of our subsidiary Mitsubishi Fuso Bus and Truck Corporation (MFTBC). The future profitability and cash flows of
our Daimler Trucks segment depend in part on the successful implementation of these plans. For further information on the measures initiated at DTNA and MFTBC, please refer to the discussion under the
heading "Daimler Trucks" in "Item 4. Information on the Company."
A renewed decline of vehicle sales combined with limited credit availability could continue to jeopardize the business viability of our
dealers.
In
2009, the financial viability of our vehicle dealers and importers was significantly affected by the decline in demand for passenger cars and commercial vehicles that resulted from
the global economic downturn and the financial crisis, which resulted in higher refinancing costs and significantly reduced access to credit. A renewed decline of sales of passenger cars or commercial
vehicles or even a stagnation of sales at low post-crisis levels could further jeopardize the business viability of our dealers. Any steps we take to provide financial support to our
dealers or importers could negatively impact our cash flows and profitability.
The pressure on automotive suppliers worldwide, the increased number of suppliers in financial distress or bankruptcy, supplier insolvencies, possible
interruptions in our supply chain, or a renewed increase in commodities prices could negatively impact our profitability and cash flows.
Our
financial performance depends in part on obtaining competitive prices from suppliers and on a reliable supply chain for parts, sub-assemblies and other materials. Our
ability to achieve further price reductions from suppliers may be limited by a combination of factors, including consolidation among automotive suppliers, the limitation of the supply base for certain
components or financial difficulties at automotive suppliers induced by the global economic downturn which continued into 2009.
The
significant declines in vehicle sales as a result of the global economic downturn, exacerbated by the continuing intense competition in the automotive industry, had a significant
adverse effect on the financial position of many of our suppliers, some of which are in financial distress or are the subject of bankruptcy proceedings. In some cases, we have provided or are
providing financial assistance to suppliers in order to avoid prolonged interruption in the supply of parts or components. Providing such assistance also in the future could negatively impact our
profitability and cash flows. Many of our suppliers also supply other automotive manufacturers. If one or more major global automotive manufacturers were to experience severe financial difficulties or
relapse into financial distress, the financial condition of one or more of our suppliers could be significantly adversely affected, which in turn could result in further supplier insolvencies or the
need to provide additional support to those suppliers. A consolidation among automotive suppliers, for example, due to acquisitions or mergers, could limit our ability to negotiate competitive prices
due to reduced competition for certain components. Consistent with general industry practice, we also source select parts or components from a single supplier, which carries a risk of potential
production disruption if the supplier is unable to perform its obligations.
Prices
for raw materials that we or our suppliers use in manufacturing our products or components, such as steel, aluminum, petroleum-based products and various precious metals, declined
in 2008 and early 2009. Some
8
raw
material prices began to increase during the remainder of 2009. Continued increases for these or other raw materials, including energy, may lead to higher component and production costs that could
in turn negatively impact our future profitability and cash flows because we may not be able to pass all those costs on to our customers or require our suppliers to absorb such costs.
Risks arising from our leasing and sales financing business may adversely affect our future operating results and cash flows.
The
financial services we offer in connection with the sale of vehicles, including the financing of dealer inventories, involve several risks. These risks include higher refinancing
costs and the potential inability to recover our investments in leased vehicles or to collect our sales financing receivables. For instance, downgrades of our credit ratings could increase our
refinancing costs, potentially necessitating adjustments to the terms at which we provide credit to our leasing and sales financing customers. These adjustments could have the effect of reducing new
business and overall contract volume of our financial services business and in turn could adversely affect unit sales of our automotive businesses. In addition, our ability to recover our investments
in leased vehicles may deteriorate as a result of a decline in resale prices of used vehicles, and our ability to collect our sales financing receivables could be negatively affected by consumer or
dealer insolvencies or if the resale prices of the vehicles securing these receivables are insufficient. For example, we experienced a significant rise in credit defaults among our lease and finance
customers in 2009, which increased our cost of credit risk and negatively affected the operating result of our financial services business. If the default rate remains at a high level for a prolonged
period of time or rises further, our future operating results and cash flows could be adversely affected.
New
vehicle sales incentives indirectly lower the resale prices of used vehicles. A decline in resale prices of used vehicles in turn results in downward pressure on the fair values of
leased vehicles and negatively affects the carrying amount of vehicles on operating leases, as well as indirectly lowers the value of collateral in place securing our sales financing and finance lease
receivables.
As
a result of the global economic downturn, some of these risks have already materialized and may continue to materialize in the future, which could adversely affect our future
operating results, financial condition and cash flows.
Please
refer to "Critical Accounting Policies" in "Item 5. Operating and Financial Review and Prospects" for additional information on how we account for our leasing and sales
financing business. For additional
information about credit risk inherent in our leasing and sales financing business and a description of our risk management, please refer to Note 30 to our Consolidated Financial Statements.
Our future profitability will depend on our ability to offer competitive prices while maintaining a high level of product quality.
Product
quality significantly influences the consumer's decision to purchase passenger cars and commercial vehicles. Reductions in our product quality could severely tarnish our image as
a manufacturer, thereby negatively affecting our future sales and, as a consequence, our future operating results and cash flows.
Maintaining
the quality of our products and developing new products meeting more sophisticated customer requirements require increasingly complex technical solutions, which result in
higher research and development and other costs. Increased consumer sensitivity to pricing may limit our ability to pass higher costs on to customers and force us to continue to improve our
efficiencies and cost structures. If we are unable to improve our efficiencies and adjust our cost structures as necessary, our results of operations may be adversely affected. Our attempts to reduce
costs along the automotive value chain may also place additional cost and pricing pressure on suppliers, which can also negatively affect product quality.
Additionally,
component parts or assembly defects could require us to undertake service actions and recall campaigns, or even to develop new technical solutions requiring regulatory
certification prior to implementation. We may need to expend considerable resources for these remediation measures, resulting in higher provisions for
9
new
warranties issued and expenses in excess of already established provisions for product warranties previously issued.
Our future success depends on our ability to continue to offer attractive, fuel efficient, and environmentally friendly vehicles and to adjust to consumer
demand.
Developing
attractive and fuel efficient new vehicles, including vehicles employing new propulsion technologies such as hybrid and electric vehicles, over increasingly shorter product
development cycles is critical to the success of automobile manufacturers. For example, technical solutions that reduce fuel consumption and emissions, like the diesel hybrid technology, are costly
but necessary for a sustainable mobility. Our ability to strengthen our position within our traditional product and market segments through innovations and to develop attractive and fuel efficient new
products and services while expanding into additional market segments with those new products will play an important role in determining our future success. If we are unable to timely develop these
products and meet consumer demand, a general shift in consumer preference toward smaller, more fuel efficient and environmentally friendly vehicles could have a
negative effect on our future profitability and cash flows. Such a shift could result from, among other things, increasing fuel prices, government regulations, for example regarding the level of
carbon dioxide emissions, speed limits or higher taxes on certain types of vehicles, such as sport utility vehicles or luxury automobiles, or environmental concerns. Potential delays in bringing new
vehicles to market, the inability to achieve defined fuel efficiency or emissions targets without a decline in quality, and a lack of market acceptance of new models or temporary shortages of parts
and materials required for new vehicles could adversely affect our financial condition, results of operations and cash flows.
We are subject to legal proceedings and environmental and other government regulations.
A
negative outcome in one or more of our pending legal proceedings could materially adversely affect our future financial condition, results of operations and cash flows. Please refer to
the discussion under the heading "Legal Proceedings" in "Item 8. Financial Information" for further information.
The
automotive industry is subject to extensive governmental regulations worldwide. Laws in various jurisdictions regulate occupant safety and the environmental impact of vehicles,
including emission levels, fuel economy and noise, as well as the levels of pollutants generated by the plants that produce them. The cost of compliance with these regulations is significant, and we
expect to incur higher compliance costs in the future. New legislation may subject us to additional expense in the future, which could be significant. Noncompliance with regulations applicable to the
automotive industry could also result in significant penalties or the inability to sell noncompliant vehicles in the relevant markets.
For
example, in an effort to reduce greenhouse gases, several countries and the EU have already imposed more stringent regulations on carbon dioxide emissions or are currently in the
process of adopting such regulations. For further information on government regulation and environmental matters, please refer to the discussion under the heading "Government Regulation and
Environmental Matters" in "Item 4. Information on the Company."
Risks arising from contingent obligations could affect us adversely.
We
sometimes provide guarantees for third party liabilities, principally in connection with liabilities of our non-consolidated affiliated or related companies, guarantees
under buy-back commitments, and performance guarantees related to the contractual performance of joint ventures and consortia. These guarantees may expose us to financial risk. For
example, as a result of the guarantees and other obligations our subsidiary Daimler Financial Services AG undertook as one of the consortium members of Toll Collect, our future operating results and
cash flows may be adversely affected by penalties, damage claims and losses associated with an underperformance of the system. For further information concerning these contingent obligations, please
refer to the discussion under the heading "Off-Balance Sheet Arrangements Obligations under guarantees" in "Item 5. Operating and Financial Review and
Prospects."
10
We depend on our ability to recruit and retain highly qualified management and technical personnel.
Our
future success depends in part on our continued ability to recruit and retain highly qualified managers, engineers and other specialized personnel. Competition for employees with
requisite qualifications remains intense in our industry and the regions in which we operate. Changing demographics, primarily in Germany and other Western European countries, could exacerbate further
the competitive recruiting environment as declining birth rates and a global marketplace reduce the pool of available talent in some regions. If we are unable to hire qualified personnel in sufficient
numbers in the future, our business could be adversely affected.
We are exposed to fluctuations in currency exchange rates and interest rates.
Our
businesses, operations and reported financial results and cash flows are exposed to a variety of market risks, including the effects of changes in the exchange rates of the U.S.
dollar, the British pound, the Japanese yen, the Chinese yuan and other world currencies against the euro. In addition, in order to manage the liquidity and cash needs of our
day-to-day operations, we hold a variety of interest rate sensitive assets and liabilities. We also hold a substantial volume of interest rate sensitive assets and liabilities
in connection with our lease and sales financing business. Changes in currency exchange rates or interest rates may have substantial adverse effects on our operating results and cash flows. For more
information on how changes in exchange rates and interest rates may impact our operating results and cash flows, please refer to the discussion under the heading "Introduction" in "Item 5.
Operating and Financial Review and Prospects," the discussion about market risk in "Item 11. Qualitative and Quantitative Disclosures About Market Risk" and to Note 30 to our
Consolidated Financial Statements.
Further downgrades of our debt ratings may increase our cost of capital and could negatively affect our businesses.
In
2009, several rating agencies downgraded our long-term debt rating to BBB+ and some agencies changed the outlook from stable to negative. Further downgrades by rating
agencies may increase our
cost of capital and, as a result, could negatively affect our businesses, especially our leasing and sales financing business which is typically financed with a high proportion of debt.
For
a description of our individual credit ratings, please refer to the discussion under the heading "Liquidity and Capital Resources" in "Item 5. Operating and Financial Review
and Prospects."
We depend on the issuance of debt to manage liquidity. Our ability to issue debt instruments in the future may be adversely affected by declines in our operating
performance and the future condition of the credit markets.
To
manage the liquidity of the Group, we depend on the issuance of debt, principally in the European and U.S. capital markets. A decline in our operating performance or lower demand for
these types of debt instruments could increase our borrowing costs or otherwise limit our ability to fund operations, either of which would negatively affect our operating results and cash flows.
The
tightening of the credit markets in the latter part of 2008 and into 2009 resulted in significantly higher borrowing costs. If these difficult financing conditions were to recur, we
could be faced with higher borrowing costs and reduced funding flexibility. In particular, this could negatively affect the competitiveness and profitability of our financial services business or even
result in a limitation of the financial services we offer, thereby negatively affecting our vehicle sales.
For
a more detailed description of the impact of the turmoil in the credit markets on our borrowings please refer to the discussion under the heading "Liquidity and Capital Resources" in
"Item 5. Operating and Financial Review and Prospects."
11
The carrying value of our equity investments in companies in which we hold a non-controlling equity interest depends on the ability of those companies
to operate their businesses profitably.
We
hold non-controlling equity interests in various companies. Most notably, we hold an equity interest in the European Aeronautic Defence and Space Company EADS N.V.
(EADS) and in Tognum AG (Tognum). Any factors negatively affecting the profitability of the businesses of these companies may adversely affect our ability to recover the full amount of our equity
investments, and as a result, could require us to
record impairment charges. In addition, if we account for those investments using the equity method of accounting, such factors may also affect our proportionate share in the future operating results
of our equity investees. For more information on how EADS affected the 2007 through 2009 operating results, please refer to the discussion under the heading "Operating Results" in "Item 5.
Operating and Financial Review and Prospects." Please also refer to "Critical Accounting Policies" in "Item 5. Operating and Financial Review and Prospects" for information on our accounting
policies with regard to the impairment of equity method investments. EADS is the most significant equity investment which we include in our consolidated financial statements with a three-month lag. In
connection with recent developments in the negotiations regarding EADS's A400M military transporter program, EADS announced on February 17, 2010 that it will update the A400M provision in its
2009 consolidated financial statements. This update will require certain critical assumptions and financial assessments to be made which were not finalized when our supervisory board approved
Daimler's 2009 Consolidated Financial Statements on March 1, 2010. Any future increase in that provision would negatively affect EADS's actual 2009 results and would also negatively affect
Daimler's proportionate share in EADS's results which will be reflected in Daimler's consolidated interim financial statements for the first three months of 2010. The resolution of this matter could
have a material negative effect on Daimler's earnings in the first quarter of 2010.
We may need to make cash contributions with respect to the funding of our pension benefit plans. In addition, our total pension benefit expense may
increase.
We
have pension and, to a minor degree, other post-employment benefit obligations which are underfunded. The funded status of our off-balance sheet pension and
other post-employment benefit plans is subject to changes in actuarial and other related assumptions and to actual developments.
Even
small changes in the assumptions which affect the benefit plan valuation, such as discount rates, mortality rates and other factors, may lead to increases in the size of the
respective obligations, which would affect the reported funded status of our plans and, as a consequence, could negatively affect our total pension and other post-employment benefit
expense in subsequent years.
Actual
developments, such as unfavorable developments in the capital markets particularly with respect to equity and debt securities can result
in lower actual returns on plan assets or in a significant decrease in the market value of plan assets at year end. This in turn would affect the reported funded status of our plans. In addition, a
decrease in the rate of expected return on plan assets can result in higher pension and other post-employment benefit expense in subsequent years.
For
additional information on employee benefits accounting, please refer to the discussions under the headings "Critical Accounting Policies" and "Liquidity and Capital Resources" in
"Item 5. Operating and Financial Review and Prospects" and to Note 21 to our Consolidated Financial Statements.
12
Item 4. Information on the Company.
INTRODUCTION
Organization
The legal and commercial name of our company is Daimler AG. Daimler AG is a stock corporation organized under the laws of the Federal
Republic of Germany. Its registered office is located at Mercedesstrasse 137, 70327 Stuttgart, Germany, telephone +49-711-17-0. Daimler AG's agent for service,
exclusively for actions brought by the United States Securities and Exchange Commission pursuant to the requirements of the United States federal securities laws, is Daimler North America Corporation,
located at One Mercedes Drive, Montvale, New Jersey 07645-0350.
History
Daimler AG was incorporated under the name DaimlerChrysler AG on May 6, 1998, the year in which Daimler-Benz
Aktiengesellschaft and Chrysler Corporation combined their respective businesses, stockholder groups, managements and other constituencies. On August 3, 2007, we transferred an 80.1%
controlling interest in the Chrysler automotive activities and the related Chrysler financial services business in the NAFTA region (the Chrysler activities) to a subsidiary of the private equity firm
Cerberus Capital Management L.P. (Cerberus). We initially retained a 19.9% non-controlling equity interest in Chrysler Holding LLC, a newly established holding company for
the Chrysler activities. Following a resolution adopted at an extraordinary shareholders' meeting in October 2007, we changed the name of the company from DaimlerChrysler AG to Daimler AG.
As
a result of the transfer of a majority interest in the Chrysler activities in 2007, we reported the Chrysler activities in our consolidated statements of income (loss) as discontinued
operations, with all recorded income and expense items related to the Chrysler activities included in the line item "Net profit (loss) from discontinued operations." We do not include amounts related
to discontinued operations in our segment reporting. For further information, please refer to Notes 2 and 31 to our Consolidated Financial Statements.
In
June 2009, based on a binding term sheet signed in April 2009, we entered into a redemption agreement regarding our remaining 19.9% non-controlling equity interest in
Chrysler Holding LLC. As a result of the redemption, Daimler no longer holds an equity interest in Chrysler Holding LLC or any of its subsidiaries and all Daimler designees resigned from
the board of Chrysler Holding LLC and the boards of any of its subsidiaries. Please also refer to the discussion under the heading "Material Contracts" in "Item 10. Additional
Information." For additional information on the effect of the redemption on our Consolidated Financial Statements, please refer to "Operating Results" in "Item 5. Operating and Financial Review
and Prospects" and to Note 2 to our Consolidated Financial Statements.
From
August 4, 2007 through the date of redemption on June 3, 2009, we accounted for our non-controlling equity interest in Chrysler Holding LLC with a
three-month time lag using the equity method of accounting. During that period we included our proportionate share of the consolidated results of Chrysler Holding LLC, which we previously
reported as part of Vans, Buses, Other, in the reconciliation of total segment EBIT to Group EBIT.
Business Summary and Developments
Daimler AG is the ultimate parent company of the Daimler Group. The Group develops, manufactures, distributes and sells a wide range of
automotive products, mainly passenger cars, trucks, vans and buses. It also provides financial and other services relating to its automotive businesses.
We
offer our automotive products and related financial services primarily in Western Europe and in the NAFTA region, which consists of the United States, Canada and Mexico. We derived
approximately 46% of our 2009 revenue from sales in Western Europe and 21% from sales in the United States. With respect to Western Europe, approximately 52% of the revenue achieved in that region
resulted from sales in Germany and 48% from sales in other countries. Revenue in Asia represented approximately 16% of our total revenue in 2009.
13
For
information on significant acquisitions and dispositions of businesses during the last three years, please refer to Notes 2 and 12 to our Consolidated Financial Statements.
For a discussion of their effect on our revenue and operating results, please refer to "Operating Results" in "Item 5. Operating and Financial Review and Prospects."
Our
aggregate capital expenditures over the past three years for property, plant and equipment of our continuing businesses were €2.4 billion in 2009,
€3.6 billion in 2008 and €2.9 billion in 2007. In 2009, the United States and Germany accounted for 8.1% and 72.6%, respectively, of these capital
expenditures. Expenditures for equipment on operating leases related to our continuing businesses were €10.8 billion in 2009, €10.2 billion in 2008 and
€10.8 billion in 2007. For additional information on our capital expenditures, please refer to "Description of Business Segments" and "Description of Property" below.
Business Segments and Other Business Interests
At the beginning of 2009, we made some changes to our segment reporting. We now separately present the business activities of
Mercedes-Benz Vans and Daimler Buses which we previously reported as part of Vans, Buses, Other. We have adjusted 2008 and 2007 figures to reflect this change in segment presentation. For
further information regarding our segment reporting, please refer to the discussion under the heading "Operating Results" in "Item 5. Operating and Financial Review and Prospects" and
Note 31 to our Consolidated Financial Statements.
Following
the changes in our segment reporting, we report the following five segments:
-
-
Mercedes-Benz Cars
-
-
Daimler Trucks
-
-
Mercedes-Benz Vans
-
-
Daimler Buses
-
-
Daimler Financial Services
Our other business interests consist primarily of our equity investments in the European Aeronautic Defence and Space Company
EADS N.V. (EADS) and in Tognum AG. We now include
these and other remaining business interests, which we previously reported as part of Vans, Buses, Other, in our reconciliation from total segment EBIT to Group EBIT, together with corporate items and
eliminations of intersegment transactions. For further information, please refer to the discussion under the heading "Operating Results" in "Item 5. Operating and Financial Review and
Prospects" and to Note 31 to our Consolidated Financial Statements.
EADS.
As of December 31, 2009, one of our subsidiaries held a 22.5% equity interest in EADS. EADS is a publicly-traded company and
a global
supplier and service provider in the aerospace and defense sectors. The EADS Group includes Airbus, a manufacturer of commercial and also tanker, transport and mission aircraft, the helicopter
supplier Eurocopter, and EADS Astrium, a European space company involved in several space programs, including the Ariane program. In addition, EADS is a partner in the Eurofighter consortium and holds
an equity interest in MBDA SAS. We account for our investment in EADS with a three-month time lag using the equity method of accounting.
In
2004, 2006 and 2007, we entered into several transactions involving our EADS shares which reduced the Group's equity interest in EADS on which the Group bases its
at-equity accounting. Our share in the results of EADS in 2007 is based on an equity interest which declined from 33% at the beginning of the year to 24.9% at year-end 2007 and
our share in the results of EADS in 2008 is based on an equity interest which declined from 24.9% at the beginning of the year to 22.5% at year-end 2008. This 22.5% equity interest in EADS
is held by a
14
subsidiary
in which we hold a 67% interest and minority investors have a 33% interest. For further information on these transactions, please refer to Note 12 to our Consolidated Financial
Statements and "Operating Results" in "Item 5. Operating and Financial Review and Prospects."
Tognum.
As of December 31, 2009, we held a 28.4% equity interest in Tognum AG. Tognum is a global supplier of off-highway engines,
propulsion systems and decentralized energy systems. In 2008, we acquired shares in Tognum AG for a total amount of €702 million in cash, primarily from the Swedish investor
group EQT. We account for our investment in Tognum with a three-month time lag using the equity method of accounting.
Significant Subsidiaries
The following table shows the significant subsidiaries Daimler AG owned, directly or indirectly, as of December 31, 2009:
|
|
|
|
|
Name of Company
|
|
Percentage Owned
|
|
Mercedes-Benz Bank AG, Stuttgart, Germany, a German stock corporation
|
|
|
100.0
|
|
Daimler North America Corporation, Montvale, New Jersey, USA, a Delaware corporation
|
|
|
100.0
|
|
DCFS USA, LLC, Farmington Hills, Michigan, USA, a Delaware limited liability company
|
|
|
100.0
|
|
Daimler Trucks North America LLC, Portland, Oregon, USA, a Delaware limited liability company
|
|
|
100.0
|
|
Mercedes-Benz do Brasil Ltda., Sao Bernardo do Campo, Sao Paulo, Brazil, a Brazilian private limited company
|
|
|
100.0
|
|
Mitsubishi Fuso Truck and Bus Corporation, Kawasaki, Japan, a Japanese corporation
|
|
|
85.0
|
|
DESCRIPTION OF BUSINESS SEGMENTS
Mercedes-Benz Cars
Mercedes-Benz Cars designs, produces and sells Mercedes-Benz passenger cars, Maybach high-end
luxury sedans and smart micro compact passenger cars. In 2009, Mercedes-Benz Cars contributed approximately 51% of our revenue.
Mercedes-Benz passenger cars are world-renowned for innovative technology, highest levels of comfort, quality and safety,
and pioneering design. We offer most Mercedes-Benz passenger cars with a choice of several diesel and gasoline engines. In 2009, we began to offer the S-Class and the
ML-Class also with a gasoline hybrid engine. Under the AMG brand, we offer high performance versions of Mercedes-Benz vehicles with V8 or V12 engines in all classes, except in
the A-, B-, R-, GL- and GLK-Classes. The availability of individual models differs by geographic market. The Mercedes-Benz
passenger car product range consists of the following classes:
S-Class.
The S-Class is a line of full-size luxury sedans, which are available in short and long wheelbase
versions. In June 2009, we introduced a new generation of the S-Class sedans, including a hybrid version, the new S 400 BlueHYBRID.
The
S-Class sedans are complemented by the CL, a top-of-the-line two-door coupe, and the SL, a luxury roadster. We plan to
introduce a new generation of the CL in September 2010. Until the end of 2009, we also produced the SLR, a high performance Mercedes-Benz sports car, in cooperation with McLaren
Cars Ltd. The production of seventy-five special edition Stirling Moss vehicles marked the end of production of the SLR model family.
At
the 2009 Frankfurt Motor Show we presented an all new sports car, the Mercedes-Benz SLS AMG. We intend to launch the SLS AMG beginning in March 2010.
15
E-Class.
The E-Class is a line of luxury sedans, coupes, convertibles and station wagons. We launched all new versions of the
E-Class sedan and the E-Class station wagon in March 2009 and November 2009, respectively. We also offer the CLS, a four-door coupe based on the
E-Class.
In
May 2009, we introduced an all new E-Class coupe as part of the repositioning of the successor model of the CLK coupe as an E-Class model. Similarly, in March
2010, we intend to launch an all new version of an E-Class convertible as part of the repositioning of the successor model of the CLK convertible as an E-Class model.
C-Class.
The C-Class is a line of compact luxury sedans and station wagons. The CLC Sports Coupe and the SLK, a
two-seat roadster, complement the C-Class product family.
Until
the planned introduction of the E-Class convertible, the CLK convertible continues to be a part of the C-Class product family.
A-/B-Classes.
The A-Class is a front wheel drive compact and the B-Class is a front wheel drive
4-door Compact Sports Tourer (CST). We do not offer the A- and B-Classes in the United States.
ML-/R-/G-/GL-/GLK-Classes.
The ML-Class is a line of sport utility vehicles
with permanent all-wheel drive.
The
R-Class is a line of SUV Tourers, which is available in a short and a long wheelbase version. We plan to introduce a new generation of the R-Class in August
2010.
The
GL-Class is a line of seven seat luxury sport utility vehicles. We introduced a new generation of the GL in August 2009.
The
GLK-Class is a line of compact sport utility vehicles. In September 2009 we launched a GLK model with rear wheel drive in addition to the permanent all-wheel
drive models.
The
G-Class is a line of cross country vehicles with permanent four-wheel drive that come in a short and a long wheelbase version and as a convertible.
Under the Maybach brand, we offer a line of exclusive high-end luxury sedans with outstanding luxury, comfort, and
individuality. Maybach sedans are available in a short and a long wheelbase version, including the Maybach 57S and 62S as sportier variations.
The smart brand represents a micro compact car concept. We currently offer two models, the smart fortwo coupe and the smart fortwo
cabrio. In 2009, we introduced the smart brand in Denmark, in major metropolitan areas in China and in Sao Paulo, Brazil. We plan to introduce a new generation of the smart fortwo in the third quarter
of 2010.
Markets, Sales and Competition
Markets.
In 2009, the main markets of our Mercedes-Benz Cars segment were Germany (27% of unit sales), the remainder of Western Europe
(30% of unit sales), the United States (19% of unit sales) and Asia (13% of unit sales).
Due
to the severe global economic downturn, demand for passenger cars in 2009 experienced a decline in many of our main markets. In Western Europe (excluding Germany), new registrations
of passenger cars for all manufacturers fell 7% to 9.8 million units. In contrast, in Germany new passenger car registrations for all manufacturers increased 23% to 3.8 million units.
This increase was mainly due to higher sales in the micro and subcompact car segments induced by the car scrap incentives provided by the German government. In the United States, sales of passenger
cars decreased 21% to 10.4 million units, while in Asia, sales of passenger cars increased 18% to 20.0 million units.
16
Sales.
The following table shows the distribution of revenue and unit sales for our Mercedes-Benz Cars segment by geographic market
since
2007:
Revenue and Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
1
|
|
% change
|
|
2008
1
|
|
% change
|
|
2007
1
|
|
Revenue (€ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
|
|
|
21,613
|
|
|
-16
|
|
|
25,676
|
|
|
-11
|
|
|
28,972
|
|
|
Germany
|
|
|
10,955
|
|
|
-11
|
|
|
12,277
|
|
|
-9
|
|
|
13,492
|
|
|
Other
|
|
|
10,658
|
|
|
-20
|
|
|
13,399
|
|
|
-13
|
|
|
15,480
|
|
NAFTA region
|
|
|
7,981
|
|
|
-18
|
|
|
9,721
|
|
|
-17
|
|
|
11,655
|
|
|
United States
|
|
|
6,809
|
|
|
-21
|
|
|
8,620
|
|
|
-19
|
|
|
10,600
|
|
|
Canada and Mexico
|
|
|
1,172
|
|
|
+6
|
|
|
1,101
|
|
|
+4
|
|
|
1,055
|
|
Asia
|
|
|
7,777
|
|
|
+2
|
|
|
7,600
|
|
|
+16
|
|
|
6,575
|
|
|
China
|
|
|
4,057
|
|
|
+29
|
|
|
3,146
|
|
|
+63
|
|
|
1,935
|
|
|
Other
|
|
|
3,720
|
|
|
-16
|
|
|
4,454
|
|
|
-4
|
|
|
4,640
|
|
Other markets
|
|
|
3,947
|
|
|
-17
|
|
|
4,775
|
|
|
-9
|
|
|
5,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World
|
|
|
41,318
|
|
|
-14
|
|
|
47,772
|
|
|
-9
|
|
|
52,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
|
|
|
623,489
|
|
|
-15
|
|
|
733,233
|
|
|
-6
|
|
|
779,157
|
|
|
Germany
|
|
|
297,756
|
|
|
-10
|
|
|
332,472
|
|
|
-3
|
|
|
342,860
|
|
|
Other
|
|
|
325,733
|
|
|
-19
|
|
|
400,761
|
|
|
-8
|
|
|
436,297
|
|
NAFTA region
|
|
|
235,549
|
|
|
-17
|
|
|
282,161
|
|
|
+2
|
|
|
276,062
|
|
|
United States
|
|
|
202,955
|
|
|
-19
|
|
|
251,160
|
|
|
0
|
|
|
251,789
|
|
|
Canada and Mexico
|
|
|
32,594
|
|
|
+5
|
|
|
31,001
|
|
|
+28
|
|
|
24,273
|
|
Asia
|
|
|
138,942
|
|
|
-4
|
|
|
144,141
|
|
|
+17
|
|
|
123,356
|
|
|
China
|
|
|
67,451
|
|
|
+39
|
|
|
48,620
|
|
|
+59
|
|
|
30,615
|
|
|
Other
|
|
|
71,491
|
|
|
-25
|
|
|
95,521
|
|
|
+3
|
|
|
92,741
|
|
Other markets
|
|
|
95,925
|
|
|
-15
|
|
|
113,478
|
|
|
-1
|
|
|
114,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World
|
|
|
1,093,905
|
|
|
-14
|
|
|
1,273,013
|
|
|
-2
|
|
|
1,293,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1
-
Revenue
and unit sales for 2009, 2008 and 2007 include sales of Mitsubishi pickup trucks (L200) assembled and sold by one of our subsidiaries in South Africa
and Mitsubishi Pajero vehicles sold by that subsidiary (5,274, 8,190 and 10,066 units, respectively).
In 2009, worldwide unit sales of our Mercedes-Benz Cars segment went down 14% to 1,093,905 compared to 1,273,013 in the prior year.
Primarily due to the global economic downturn, unit sales declined in almost all of our classes. Sales of the S-Class (including Maybach) were 39% lower at 57,109 units compared to 92,869
units in 2008. Due to the availability of the new models of the E-Class sedan, coupe and station wagon (since March, May and November 2009, respectively) unit sales of the
E-Class increased 23% to 212,142 units in 2009 compared to 172,912 units in 2008. Unit sales of the C-Class family decreased 28% to 322,815 units, partially as a result of
strong price competition in that vehicle segment, but also due to the repositioning of the CLK coupe as an E-Class coupe in May 2009. Sales of the
ML-/R-/G-/GL-/GLK-Classes at 167,153 units were slightly above the prior year's level of 161,337 units. A decline in unit sales of the
ML-/R-/G-/GL-Classes was more than offset by the first time full availability of the GLK-Class. Sales of the
A-/B-Classes dropped to 215,475 units compared to 250,304 units in 2008. Overall, sales of smart vehicles reached 113,937 units, 18% below last year's sales of 138,957 units.
17
In
Germany, Mercedes-Benz Cars sold 297,756 units, a decline of 10% compared to 2008. Unit sales in Western Europe (excluding Germany) decreased 19% to 325,733 units. In the
United States, we sold 202,952 units in 2009 compared to 251,160 units in 2008. Unit sales in China went up 39% to 67,451 units, while in the rest of Asia (excluding China) sales decreased 25% to
71,491 units. The decrease outside of China was primarily due to lower unit sales in Japan (26,669 units in 2009 compared to 36,969 units in 2008). For a discussion of changes in revenue, please refer
to "Operating Results" in "Item 5. Operating and Financial Review and Prospects."
The
following table shows, by vehicle line, the number of units sold since 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Units
|
|
|
|
|
|
|
|
|
|
|
S-Class (including CL, SL and SLR) and Maybach
|
|
|
57,109
|
|
|
92,869
|
|
|
107,021
|
|
E-Class (including CLS and, since May 2009, the E-Class coupe)
|
|
|
212,142
|
|
|
172,912
|
|
|
230,878
|
|
C-Class (including CLC, CLK and SLK)
|
|
|
322,815
|
|
|
448,444
|
|
|
386,521
|
|
A-/B-Classes
|
|
|
215,475
|
|
|
250,304
|
|
|
275,413
|
|
ML-/R-/G-/GL-/GLK-Classes
|
|
|
167,153
|
|
|
161,337
|
|
|
180,217
|
|
Smart
|
|
|
113,937
|
|
|
138,957
|
|
|
103,068
|
|
Other
1
|
|
|
5,274
|
|
|
8,190
|
|
|
10,066
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,093,905
|
|
|
1,273,013
|
|
|
1,293,184
|
|
|
|
|
|
|
|
|
|
-
1
-
This
category represents Mitsubishi pickup trucks (L200) assembled and sold by one of our subsidiaries in South Africa and Mitsubishi Pajero vehicles sold by
that subsidiary.
Competition.
In Western Europe, our Mercedes-Benz passenger cars compete primarily with products of BMW (BMW, Rolls-Royce), Volkswagen
(Audi, Porsche, Bentley, VW) and, depending on the market segment, Fiat (Lancia, Alfa Romeo, Ferrari, Maserati), Ford (Volvo), General Motors (Opel, Vauxhall), PSA (Peugeot/Citroen), Renault, Tata
Motors (Jaguar, Land Rover) and Toyota (Toyota, Lexus).
In
the United States, our principal competitors of our Mercedes-Benz passenger cars include BMW (BMW, Rolls-Royce), Ford (Lincoln, Volvo), Honda (Acura), Nissan (Infiniti),
Tata Motors (Jaguar, Land Rover), Toyota (Lexus), Volkswagen (Audi, Porsche, Bentley, VW) and, depending on the market segment, Nissan, other Toyota brands and certain models produced by General
Motors (Cadillac) and Fiat (Jeep).
In
Asia, our main competitors are BMW (BMW, Rolls-Royce), Volkswagen (Audi, Porsche, Bentley, VW) and, depending on the market segment, Fiat (Lancia, Alfa Romeo, Ferrari, Maserati), Ford
(Volvo), General Motors (Opel, Vauxhall), PSA (Peugeot/Citroen), Renault, Tata Motors (Jaguar, Land Rover) and Toyota (Toyota, Lexus).
Competitors
of the Maybach are Rolls-Royce and Bentley sedans.
Principal
competitors of smart vehicles are certain models of Fiat, Ford, PSA (Peugeot/Citroen), Renault, Suzuki, Toyota (Toyota, Daihatsu), BMW (Mini) and Volkswagen (Seat, Skoda, VW).
We distribute Mercedes-Benz passenger cars through a worldwide distribution system. The sales organization differs by
geographic market depending on local needs and requirements. At the wholesale level, we distribute Mercedes-Benz passenger cars through affiliated or independent general distributors or
through wholly owned subsidiaries. In major markets worldwide, including the United States, Canada, Japan and most European markets, we operate our own wholesale subsidiaries which we call market
performance centers. In Canada, South Africa, Australia, Germany and select European metropolitan areas, we also operate our own retail outlets.
18
In
Europe and Asia we sell our Maybach sedans through Maybach centers, which are dealerships exclusively dedicated to the Maybach brand, and through select Mercedes-Benz
dealers. In the United States we distribute our Maybach line through select Mercedes-Benz dealers.
A
wide network of smart dealerships in forty-two countries provides sales and repair services for our smart vehicles. We sell the smart fortwo coupe and the smart fortwo
cabrio in the United States through Penske Automotive Group (PAG) as the official distributor.
The following table shows capital expenditures for property, plant and equipment and intangible assets and research and development
expenditures of the Mercedes-Benz Cars segment in the last three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
(€ in millions)
|
|
Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)
|
|
|
2,585
|
|
|
3,379
|
|
|
2,680
|
|
Research and development expenditures
|
|
|
2,696
|
|
|
2,994
|
|
|
2,733
|
|
|
thereof: Capitalized development costs
|
|
|
913
|
|
|
1,060
|
|
|
705
|
|
The
significant decrease in capital expenditures in 2009 resulted primarily from cost reduction initiatives in response to the global economic downturn. Despite that decrease, capital
expenditures for new products remained at a high level. The main drivers of our investment activities in 2009 were the successor models of the E-Class sedan and station wagon, the
E-Class coupe as a repositioned successor model to the CLK coupe, and new engines with higher fuel efficiency and lower carbon dioxide emissions.
Research
and development activities of Mercedes-Benz Cars in 2009 related primarily to the development of new and successor models of the
A-/B-Classes, the ML-/GL-Classes and the S-Class (sedan, SL). Another focus was the
further reduction of fuel consumption and carbon dioxide emissions through, for example, hybrid-, Bluetec-, electro- and fuel cell technologies.
Daimler Trucks
Daimler Trucks manufactures and sells trucks and specialty vehicles under the brand names Mercedes-Benz, Freightliner,
Western Star, Thomas Built Buses and Fuso. Our worldwide facilities provide us with a strong production and assembly network for commercial vehicles and core components. Daimler Trucks contributed
approximately 21% of our 2009 revenue. In 2009, we ceased production of trucks under the Sterling brand name, although our 2009 sales included 2,725 Sterling units from existing stock.
In
the fourth quarter of 2008, as part of a strategic partnership, we acquired a 10% equity interest in the Russian commercial vehicle manufacturer Kamaz OAO for US$250 million in
cash. The purchase agreement requires us to make an additional one-time payment in 2012. The amount of the payment will depend on Kamaz's interim business performance, but in any event
will not exceed US$50 million. We account for our equity interest in Kamaz with a three months time lag using the equity method of accounting. We also plan to work with Kamaz on joint projects
in several areas, including product distribution, component sharing and technology transfers. In that regard, at the end of 2009, we entered into agreements with Kamaz to establish two joint ventures
regarding the distribution and, with respect to some truck lines, the potential assembly of Mercedes-Benz and Fuso trucks and the sale of Mercedes-Benz and Setra buses in
Russia.
19
Mercedes-Benz Trucks.
Our European Mercedes-Benz truck lines consist of the Actros and the Axor in the heavy-duty
category, the Atego in the medium-duty category, and the specialty vehicles Econic and Zetros. The Unimog, a four-wheel drive vehicle for special purpose applications,
complements the line-up. In Turkey and Brazil, we manufacture heavy-duty and medium-duty trucks for the respective local and certain export markets. Overall, our
Mercedes-Benz trucks range from 6 metric tons gross vehicle weight (GVW) to 41 metric tons GVW. In 2008, we started to introduce trucks with alternative drive systems, the Axor BlueTec
Hybrid, the Econic BlueTec Hybrid and the Econic CNG Hybrid. At the end of 2010, we plan to expand our hybrid truck line with the launch of the Atego BlueTec Hybrid in the medium-duty
category.
Freightliner Trucks, Western Star Trucks, and Thomas Built Buses.
Our U.S. subsidiary Daimler Trucks North America LLC
manufactures trucks and
buses (based on truck chassis) in Classes 3 through 8 (from 9,000 lbs. GVW to 160,000 lbs. GVW) and sells them under the Freightliner, Western Star, and Thomas Built Buses brand names,
primarily in the NAFTA region. It also manufactures chassis for trucks, buses, walk-in vans and motor homes in Classes 3 through 7 (from 10,000 lbs. GVW to 33,000 lbs.
GVW). In 2009, Freightliner introduced a new version of the Coronado, a premium on-highway truck. Production of the new Coronado commenced in January 2010.
In
order to comply with the new U.S. emission regulation EPA 10 which became effective in January 2010, we began to offer truck engines based on our Heavy Duty Engine Platform featuring
our BlueTec emission reduction technology.
In
the fourth quarter of 2008, we adopted a wide-ranging plan to optimize and reposition the business operations of our subsidiary Daimler Trucks North America. Measures
provided for in the plan included the discontinuation of the Sterling Trucks brand in 2009, a further consolidation of our production network in the NAFTA region, capacity adjustments, including
closing two truck manufacturing plants in 2009 and 2010, respectively, and headcount reductions of up to 3,500 (of a total headcount of 20,205 at the end of October 2008) to be accomplished primarily
in 2009 and 2010. We achieved most of the originally targeted headcount reductions in 2009. In October 2009, management decided not to proceed with the closing of the truck manufacturing plant in
Portland, Oregon, which was originally scheduled for June 2010. In order to compensate for the discontinuation of the Sterling brand and in an effort to serve market segments that were previously
covered exclusively by Sterling vehicle offerings, Daimler Trucks North America expects to supplement the Freightliner and Western Star product lines where appropriate. For information on how the
optimization plan of Daimler Trucks North America affected EBIT of our Daimler Trucks Segment in 2008 and 2009, please refer to the discussion under the heading "Operating Results" in "Item 5.
Operating and Financial Review and Prospects" and to Note 4 to our Consolidated Financial Statements.
Mitsubishi Fuso Trucks and Buses.
Our Japanese subsidiary Mitsubishi Fuso Truck and Bus Corporation (MFTBC) offers a comprehensive
truck portfolio
and several bus lines, primarily for the Japanese and other Asian markets. The line-up includes the Canter trucks (light-duty), the Fighter trucks (medium-duty) and
the Super Great trucks (heavy-duty) and also certain bus models (Rosa and Aero). MFTBC also sells trucks in Africa, Australia, Europe, Latin America and the United States. In 2009, MFTBC
introduced a new version of the Mitsubishi Fuso Super Great truck in Japan, and in 2010 it plans to introduce a new light duty truck.
In
May 2009, we announced a plan for a realignment of MFTBC's global operations to optimize its business and address changes in the markets in which it operates. The plan calls for the
streamlining of the product portfolio, reorganizing the plant network, consolidating and strengthening the Japanese retail network, and other efficiency improvements. In that regard, we expect to
relocate and idle select production sites, reduce headcount by up to 2,300 employees by the end of 2010, and reduce the total number of dealers in MFTBC's Japanese dealer network. For information on
how this program affected EBIT of our Daimler Trucks Segment in 2009, please refer to the discussion under the heading "Operating Results" in "Item 5. Operating and Financial Review and
Prospects" and to Note 4 to our Consolidated Financial Statements.
20
Markets, Sales and Competition
Markets.
Demand for trucks in most geographic areas depends to a large degree on prevailing general economic conditions, which directly
influence
transportation needs and the availability of funds for capital investment. Our most important truck markets are Western Europe (17% of unit sales), the NAFTA region (24% of unit sales), Latin America
(14% of unit sales) and Asia (excluding Australia) (33% of unit sales).
As
a result of the global economic downturn, demand for transportation services generally decreased, leading to significantly lower truck sales in almost all of our main markets.
In
Western Europe, combined registrations for medium- and heavy-duty trucks decreased significantly from 333,232 units in 2008 to 192,280 units in 2009. In the
heavy-duty truck segment, registrations were down 45% from 268,362 units in 2008 to 148,914 units in 2009 and registrations in the medium-duty segment fell from 64,870 units in
2008 to 43,366 units in 2009.
In
Germany, combined registrations for medium- and heavy-duty trucks declined 39% from 92,903 units in 2008 to 56,987 units in 2009.
In
the NAFTA region, retail sales of all manufacturers of trucks in the medium- and heavy-duty categories (Classes 5 through 8) reached 215,899 units, 35% less
than in 2008 (332,727 units). This decrease primarily reflects the continuing decline in demand for heavy- and medium-duty trucks in the United States, where retail sales of all
manufacturers in the medium- and heavy-duty categories (Classes 5 through 8) decreased 31% from 262,050 units in 2008 to 179,828 units in 2009. Retail sales in the
medium-duty segment (Class 5 through 7) fell from 128,577 units in 2008 to 85,030 units in 2009, and retail sales for all manufacturers in the Class 8
heavy-duty truck category were down 29% from 133,473 units in 2008 to 94,798 units in 2009.
In
Latin America, sales of heavy- and medium-duty trucks reached 161,124 units, 19% less than in 2008.
In
Japan, sales of trucks and buses by all manufacturers decreased 40% to 107,662 units. This decrease was mainly the result of the continued weak economy in Japan.
Sales.
The following table shows the distribution of revenue and unit sales of our Daimler Trucks segment by geographic market since
2007:
Revenue and Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
% change
|
|
2008
|
|
% change
|
|
2007
|
|
Revenue (€ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
|
|
|
5,835
|
|
|
-40
|
|
|
9,671
|
|
|
-1
|
|
|
9,761
|
|
|
Germany
|
|
|
3,669
|
|
|
-35
|
|
|
5,665
|
|
|
+1
|
|
|
5,634
|
|
|
Other
|
|
|
2,166
|
|
|
-46
|
|
|
4,007
|
|
|
-3
|
|
|
4,127
|
|
NAFTA region
|
|
|
4,791
|
|
|
-28
|
|
|
6,656
|
|
|
-12
|
|
|
7,599
|
|
|
United States
|
|
|
3,894
|
|
|
-28
|
|
|
5,372
|
|
|
-14
|
|
|
6,241
|
|
|
Canada
|
|
|
501
|
|
|
-36
|
|
|
785
|
|
|
-5
|
|
|
823
|
|
|
Mexico
|
|
|
395
|
|
|
-21
|
|
|
500
|
|
|
-7
|
|
|
535
|
|
Latin America
|
|
|
2,080
|
|
|
-32
|
|
|
3,046
|
|
|
+25
|
|
|
2,442
|
|
|
Brazil
|
|
|
1,728
|
|
|
-21
|
|
|
2,174
|
|
|
+32
|
|
|
1,654
|
|
|
Other
|
|
|
352
|
|
|
-60
|
|
|
871
|
|
|
+11
|
|
|
788
|
|
Asia (including Australia)
|
|
|
4,224
|
|
|
-31
|
|
|
6,090
|
|
|
+14
|
|
|
5,358
|
|
|
Japan
|
|
|
2,434
|
|
|
-22
|
|
|
3,124
|
|
|
-3
|
|
|
3,215
|
|
|
Other
|
|
|
1,789
|
|
|
-40
|
|
|
2,966
|
|
|
+38
|
|
|
2,144
|
|
Other markets
|
|
|
1,431
|
|
|
-54
|
|
|
3,109
|
|
|
-6
|
|
|
3,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World
|
|
|
18,360
|
|
|
-36
|
|
|
28,572
|
|
|
0
|
|
|
28,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
% change
|
|
2008
|
|
% change
|
|
2007
|
|
Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
|
|
|
44,286
|
|
|
-49
|
|
|
86,742
|
|
|
-1
|
|
|
87,665
|
|
|
Germany
|
|
|
24,951
|
|
|
-40
|
|
|
41,597
|
|
|
+1
|
|
|
41,006
|
|
|
Other
|
|
|
19,335
|
|
|
-57
|
|
|
45,145
|
|
|
-3
|
|
|
46,659
|
|
NAFTA region
|
|
|
61,700
|
|
|
-37
|
|
|
97,313
|
|
|
-15
|
|
|
114,049
|
|
|
United States
|
|
|
52,361
|
|
|
-33
|
|
|
77,978
|
|
|
-18
|
|
|
94,649
|
|
|
Canada
|
|
|
5,806
|
|
|
-41
|
|
|
9,907
|
|
|
-8
|
|
|
10,790
|
|
|
Mexico
|
|
|
3,533
|
|
|
-63
|
|
|
9,428
|
|
|
+10
|
|
|
8,610
|
|
Latin America
|
|
|
37,069
|
|
|
-37
|
|
|
58,951
|
|
|
+11
|
|
|
53,017
|
|
|
Brazil
|
|
|
30,492
|
|
|
-12
|
|
|
34,463
|
|
|
+23
|
|
|
27,943
|
|
|
Other
|
|
|
6,577
|
|
|
-73
|
|
|
24,488
|
|
|
-2
|
|
|
25,074
|
|
Asia (including Australia)
|
|
|
92,998
|
|
|
-44
|
|
|
164,765
|
|
|
+8
|
|
|
153,162
|
|
|
Japan
|
|
|
23,102
|
|
|
-45
|
|
|
42,035
|
|
|
-22
|
|
|
53,992
|
|
|
Other
|
|
|
69,896
|
|
|
-43
|
|
|
122,730
|
|
|
+24
|
|
|
99,170
|
|
Other markets
|
|
|
23,275
|
|
|
-64
|
|
|
64,303
|
|
|
+8
|
|
|
59,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World
|
|
|
259,328
|
|
|
-45
|
|
|
472,074
|
|
|
+1
|
|
|
467,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide unit sales of our Daimler Trucks segment decreased 45% from 472,074 vehicles in 2008 to 259,328 vehicles in 2009, primarily as a result
of the global economic downturn.
Unit
sales in Western Europe declined 49% due to lower unit sales in all markets in that region, but mainly in Germany, France, the United Kingdom and Spain. In Germany, the most
important market for our Mercedes-Benz trucks, unit sales declined 40% to 24,951 units. Unit sales in Germany represented 10% and the remaining Western European market represented 7% of
our total 2009 truck sales.
In
the NAFTA region, unit sales were 37% lower at 61,700 units. This decrease mainly reflects a further decline in demand in the U.S. commercial vehicle markets due to weak economic
conditions. Unit sales in the United States were down 33% at 52,361 units, representing 20% of our total 2009 truck sales.
Unit
sales in Asia (including Australia) fell 44% from 164,765 units in 2008 to 92,998 units in 2009. Unit sales in Japan, which in 2009 consisted primarily of sales of our subsidiary
MFTBC, declined 45% to 23,102 units. This decline mainly reflects the continuing weakness of the Japanese economy and a recognizable trend of persistently lower truck demand in Japan. With 33% of our
total worldwide truck sales, Asia (excluding Australia) has become an important market for our truck business.
In
Latin America, sales decreased 37% from 58,951 units in 2008 to 37,069 units in 2009.
For
a discussion of changes in revenue, see "Operating Results" in "Item 5. Operating and Financial Review and Prospects."
Competition.
Competitors of our Daimler Trucks segment vary in each geographic region. In Western Europe, our main competitors are
Scania, MAN,
Iveco, Volvo, DAF and Renault. In the NAFTA markets, our main competitors in the Class 5 through 8 truck categories are Navistar International, Paccar (Kenworth, Peterbilt), Volvo/Mack, General
Motors and Ford. In Latin America, our main competitor is Volkswagen, and in Japan and the South East Asian markets, our main competitors (including buses) are Hino, Isuzu and Nissan Diesel.
We distribute our Daimler Trucks products through a worldwide distribution and service network.
22
In
Germany, we sell our trucks through our own wholesale network. We also own several retail outlets, and in some cases we sell trucks through independent dealers.
In
other major European markets, local Daimler subsidiaries provide wholesale services to a network of independent dealers and, in some cases, to our own retail outlets.
In
the NAFTA region, we primarily sell our products through a network of independent dealers. In Japan, MFTBC sells its vehicles mainly through its own wholesale network and its own
retail organization. In Latin America and other international markets, we sell our Daimler Trucks vehicles through independent distributors or, if we have a local production company, through the sales
organization of that company.
The table below shows capital expenditures for property, plant and equipment and intangible assets and research and development
expenditures of our Daimler Trucks segment during each of the last three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
(€ in millions)
|
|
Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)
|
|
|
1,024
|
|
|
1,442
|
|
|
1,110
|
|
Research and development expenditures
|
|
|
1,116
|
|
|
1,056
|
|
|
1,047
|
|
|
thereof: Capitalized development costs
|
|
|
368
|
|
|
326
|
|
|
283
|
|
Capital
expenditures in 2009 related primarily to new generations of our truck lines and new engines for our heavy-duty and medium-duty trucks.
Research
and development expenditures in 2009 focused on new truck generations. New low emission technologies, including BlueTec for medium- and heavy-duty applications,
complemented the 2009 research and development activities.
Mercedes-Benz Vans
Mercedes-Benz Vans designs, manufactures and sells vans under the brand names Mercedes-Benz and Freightliner.
In 2009, Mercedes-Benz Vans contributed approximately 8% of our revenue.
Worldwide, we currently offer three lines of Mercedes-Benz vans between 1.9 metric tons (t) and 7.5t gross vehicle
weight (GVW): the Vario, the Vito/Viano and the Sprinter.
In
the NAFTA region we sell the Sprinter under the Freightliner brand name and, since January 1, 2010, also under the Mercedes-Benz brand name. Until
December 31, 2009, subsidiaries of Chrysler Holding LLC sold the Sprinter in the U.S. under the Dodge and Freightliner brand names and in Canada under the Dodge brand name pursuant to a
general distributor arrangement.
Markets, Sales and Competition
Markets.
In most geographic areas, demand for vans depends to a large degree on prevailing general economic conditions, which directly
influence
transportation needs and the availability of funds for capital investment.
In
2009, our most important van markets were Germany (35% of unit sales), the remainder of Western Europe (42% of unit sales), Eastern Europe (7% of unit sales), Latin America (6% of
unit sales) and Asia (3% of unit sales).
23
In
all our main markets, demand for vans went down, primarily as a result of the global economic downturn. In Germany, new registrations of vans (mid-size and large vans) for
all manufacturers decreased 25% to 206,000 units. In Western Europe (excluding Germany), registrations in the combined mid-size and large van market segment declined 33% to 579,600 units.
In
the U.S., sales in the large van segment in which we operate decreased 36% to 160,600 units.
Sales.
The following table shows the distribution of revenue and unit sales of our Mercedes-Benz Vans segment by geographic market
since
2007:
Revenue and Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
% change
|
|
2008
|
|
% change
|
|
2007
|
|
Revenue (€ in millions)
1, 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
|
|
|
5,063
|
|
|
-31
|
|
|
7,341
|
|
|
+1
|
|
|
7,244
|
|
|
Germany
|
|
|
2,821
|
|
|
-22
|
|
|
3,622
|
|
|
+5
|
|
|
3,453
|
|
|
Other
|
|
|
2,242
|
|
|
-40
|
|
|
3,719
|
|
|
-2
|
|
|
3,791
|
|
Eastern Europe
|
|
|
340
|
|
|
-57
|
|
|
792
|
|
|
+17
|
|
|
674
|
|
NAFTA region
|
|
|
106
|
|
|
-79
|
|
|
510
|
|
|
-17
|
|
|
611
|
|
Latin America (excluding Mexico)
|
|
|
236
|
|
|
-26
|
|
|
320
|
|
|
+15
|
|
|
278
|
|
Asia
|
|
|
214
|
|
|
-9
|
|
|
235
|
|
|
+14
|
|
|
207
|
|
Other markets
|
|
|
256
|
|
|
-9
|
|
|
281
|
|
|
-14
|
|
|
327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World
|
|
|
6,215
|
|
|
-34
|
|
|
9,479
|
|
|
+2
|
|
|
9,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
% change
|
|
2008
|
|
% change
|
|
2007
|
|
Units
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
|
|
|
128,134
|
|
|
-38
|
|
|
207,137
|
|
|
+1
|
|
|
205,812
|
|
|
Germany
|
|
|
58,185
|
|
|
-21
|
|
|
74,036
|
|
|
+1
|
|
|
73,262
|
|
|
Other
|
|
|
69,949
|
|
|
-47
|
|
|
133,101
|
|
|
+1
|
|
|
132,550
|
|
Eastern Europe
|
|
|
10,980
|
|
|
-61
|
|
|
27,929
|
|
|
+17
|
|
|
23963
|
|
NAFTA region
|
|
|
2,591
|
|
|
-88
|
|
|
21,487
|
|
|
-25
|
|
|
28,476
|
|
Latin America (excluding Mexico)
|
|
|
9,453
|
|
|
-26
|
|
|
12,857
|
|
|
+13
|
|
|
11,409
|
|
Asia
|
|
|
5,260
|
|
|
-34
|
|
|
7,999
|
|
|
-4
|
|
|
8,344
|
|
Other markets
|
|
|
9,158
|
|
|
-6
|
|
|
9,789
|
|
|
-12
|
|
|
11,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World
|
|
|
165,576
|
|
|
-42
|
|
|
287,198
|
|
|
-1
|
|
|
289,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1
-
Revenue
and unit sales include sales of Sprinter vans to a subsidiary of Chrysler Holding LLC for subsequent resale to dealers under the Freightliner
and Dodge brand names.
-
2
-
Revenue
in 2009, 2008 and 2007 includes €0.6 billion, €0.9 billion and €0.9 billion,
respectively, from the production of a van for Volkswagen. These vans are not included in our unit sales figures.
Mainly as a result of the global economic downturn, our 2009 van sales in the major geographic markets in which we operate were down significantly
compared to the prior year. These include Western Europe (-38%), Eastern Europe (-61%), Asia (-34%), the NAFTA region (-88%), and Latin America
(excluding Mexico) (-26%). The discontinuation of a general distributor arrangement with Chrysler regarding the distribution of our vans also contributed to the decline in the NAFTA
region.
24
Competition.
In Western Europe and Eastern Europe, our principal competitors are Fiat (Fiat, Iveco), Ford, Volkswagen, Renault and PSA
(Peugeot,
Citroen). In Latin America, competitors include Fiat (Fiat, Iveco) and Renault. In the United States, competitors include Ford and General Motors (Chevrolet, GMC).
In Germany, we sell our vans through our own wholesale and retail network as well as through independent dealers.
In
other major European markets, and also in Asia, local Daimler subsidiaries provide wholesale services for vans to a network of independent dealers and, in some cases, to our own
retail outlets.
In
the United States and Canada, we previously sold vans to subsidiaries of Chrysler Holding LLC, which acted as general distributors and resold them in the U.S. under the
Freightliner and Dodge brand names and in Canada under the Dodge brand name through a network of independent Freightliner and Dodge dealers. Since January 2010, we sell vans under the Freightliner
brand through a network of independent Freightliner dealers and, in addition, Mercedes-Benz vans through our own wholesale network.
In
other international markets, including Latin America, we sell our vans through independent distributors or, if we have a local production company, through the sales organization of
that company.
The table below shows capital expenditures for property, plant and equipment and intangible assets and research and development
expenditures of our Mercedes-Benz Vans segment during each of the last three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
(€ in millions)
|
|
Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)
|
|
|
122
|
|
|
160
|
|
|
148
|
|
Research and development expenditures
|
|
|
193
|
|
|
228
|
|
|
220
|
|
|
thereof: Capitalized development costs
|
|
|
0
|
|
|
0
|
|
|
0
|
|
In
2009, capital expenditures of our Mercedes-Benz Vans segment primarily related to production capacity increases for our Sprinter vans and to the upcoming facelift of the
Vito/Viano series.
Research
and development activities focused primarily on enhancements of engines to meet future emission regulations.
Daimler Buses
Daimler Buses is a global full-line supplier in the worldwide bus market. In 2009, Daimler Buses contributed approximately
5% of our revenue.
Our product portfolio includes city buses, coaches, intercity buses, midi buses and bus chassis. We sell complete buses under the
Mercedes-Benz and Setra brands in Europe, under the Mercedes-Benz brand name in Mexico and under the Setra and Orion brand names in the United States and Canada. In addition,
Daimler Buses produces and sells worldwide a wide range of bus chassis under the brand name Mercedes-Benz.
25
Markets, Sales and Competition
Markets.
Based on units sales, our main markets for buses and bus chassis are Latin America (50% of unit sales), Western Europe (22% of
unit sales),
and the NAFTA region (12% of unit sales).
In
2009, registrations of coaches and city and intercity buses declined in all our major geographic markets. In Western Europe and Latin America, demand for coaches and city and
intercity buses fell by 7% and 16%, respectively, to 7,219 and 16,286 units, respectively.
In
the NAFTA region, retail sales for all manufacturers of coaches and city and intercity buses (excluding school buses) fell 44% from 6,997 units in 2008 to 3,899 units in 2009.
Sales.
The following table shows the distribution of revenue and unit sales of our Daimler Buses segment by geographic market since
2007:
Revenue and Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
% change
|
|
2008
|
|
% change
|
|
2007
|
|
Revenue (€ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
|
|
|
2,110
|
|
|
-8
|
|
|
2,305
|
|
|
+7
|
|
|
2,147
|
|
|
Germany
|
|
|
958
|
|
|
-4
|
|
|
994
|
|
|
+12
|
|
|
886
|
|
|
Other
|
|
|
1,152
|
|
|
-12
|
|
|
1,311
|
|
|
+4
|
|
|
1,261
|
|
NAFTA region
|
|
|
684
|
|
|
-3
|
|
|
702
|
|
|
+17
|
|
|
602
|
|
Latin America (excluding Mexico)
|
|
|
692
|
|
|
-24
|
|
|
906
|
|
|
+5
|
|
|
862
|
|
Other markets
|
|
|
752
|
|
|
-16
|
|
|
895
|
|
|
+21
|
|
|
739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World
|
|
|
4,238
|
|
|
-12
|
|
|
4,808
|
|
|
+11
|
|
|
4,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
% change
|
|
2008
|
|
% change
|
|
2007
|
|
Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
|
|
|
7,219
|
|
|
-7
|
|
|
7,766
|
|
|
+12
|
|
|
6,953
|
|
|
Germany
|
|
|
2,831
|
|
|
-9
|
|
|
3.099
|
|
|
+11
|
|
|
2,793
|
|
|
Other
|
|
|
4,388
|
|
|
-6
|
|
|
4,667
|
|
|
+12
|
|
|
4,160
|
|
NAFTA region
|
|
|
3,899
|
|
|
-44
|
|
|
6,997
|
|
|
+15
|
|
|
6,104
|
|
Latin America (excluding Mexico)
|
|
|
16,286
|
|
|
-16
|
|
|
19,467
|
|
|
-3
|
|
|
20,072
|
|
Other markets
|
|
|
5,078
|
|
|
-20
|
|
|
6,361
|
|
|
+7
|
|
|
5,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World
|
|
|
32,482
|
|
|
-20
|
|
|
40,591
|
|
|
+4
|
|
|
39,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009, sales of Mercedes-Benz and Setra buses and bus chassis in Western Europe declined 7% as a result of a weakening bus market.
The coach and intercity market segments in particular experienced a significant decline in demand as a result of the global economic downturn, while sales of city buses increased 7%.
In
Latin America demand for bus chassis decreased 16% to 16,286 units compared to the high sales volume in 2008.
Unit
sales in the U.S. and Canada increased from 940 units in 2008 to 1,163 units in 2009, primarily as a result of higher unit sales of Orion buses. In Mexico, bus unit sales decreased
55% due to a drop in demand.
Competition.
Our main competitor in the worldwide bus sector (over 8t GVW) is Volvo. In Western Europe,
other major competitors are MAN Commercial Vehicles (MAN, Neoplan), Scania and Irisbus. In South America, our major competitors are Volkswagen and Agrale, although, in addition to Volvo, Scania also
competes in that region.
26
We distribute our buses through a worldwide distribution and service network.
In
our major Western European markets (excluding Germany), we sell our buses through our own retail network and independent dealers.
In
Germany, we sell our buses through our own wholesale network, and we also own several retail outlets. In some cases we sell our buses also through independent dealers.
In
the United States and Canada, we sell Orion and Setra buses directly to customers. In Mexico we sell buses through independent Mercedes-Benz dealers.
In
other international markets, we sell our buses through independent distributors. If we have a local production company, we sell buses through the sales organization of that company.
The table below shows capital expenditures for property, plant and equipment and intangible assets and research and development
expenditures of Daimler Buses during each of the last three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
(€ in millions)
|
|
Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)
|
|
|
88
|
|
|
121
|
|
|
100
|
|
Research and development expenditures
|
|
|
212
|
|
|
178
|
|
|
143
|
|
|
thereof: Capitalized development costs
|
|
|
5
|
|
|
1
|
|
|
2
|
|
In
2009, we reduced capital expenditures compared to the prior year, mainly in order to adjust our spending to the overall decline in demand.
In
2009, research and development expenditures for Daimler Buses went up, primarily due to higher expenditures for successor products for the European markets, activities to meet new
emission regulations (Euro VI, EPA 10) and measures to reduce fuel consumption and carbon dioxide emissions (such as hybrid, fuel cell and diesel technology).
Daimler Financial Services
Our financial services activities, which contributed approximately 15% of our revenue in 2009, consist principally of financing and
leasing services supporting our Mercedes-Benz and other vehicle businesses.
The
financial services we offer consist mainly of customized financing and leasing packages for our retail and wholesale customers in the automotive sector. We also provide financing to
our dealers for vehicle inventory and property, plant and equipment purchases, and we offer insurance brokerage and fleet management services, including dealer property and casualty insurance. In
Germany, we operate a fully licensed bank, the Mercedes-Benz Bank. The Mercedes-Benz Bank offers financial services to our customers and employees in Germany. These services
include leasing and sales financing services, car savings plans, credit cards and demand deposit accounts. In addition, the Mercedes-Benz Bank operates branches in Great Britain and Spain
to refinance the local dealer portfolios. At December 31, 2009, the Mercedes-Benz Bank held deposits of €12.6 billion.
We
also hold an ownership interest in Toll Collect. In September 2002, our subsidiary Daimler Financial Services AG, Deutsche Telekom AG and Compagnie Financière et
Industrielle des Autoroutes S.A. (Cofiroute) contracted with the Federal Republic of Germany to develop, install and operate a system for electronic collection of tolls from all commercial
vehicles over 12t GVW using German highways. Toll Collect GmbH, a German limited
27
liability
company in which we and Deutsche Telekom each hold a 45% interest and Cofiroute holds the remaining 10%, is the principal builder and operator of the system. We account for our equity
interest in Toll Collect using the equity method of accounting. You can find additional information about Toll Collect under the heading "Off-Balance Sheet Arrangements" in "Item 5.
Operating and Financial Review and Prospects," under the heading "Legal Proceedings" in "Item 8. Financial Information" and in Note 27 and 28 to our Consolidated Financial Statements.
Markets, Sales and Competition
Revenue of our Daimler Financial Services segment amounted to €12.0 billion in 2009,
€12.0 billion in 2008 and €11.0 billion in 2007.
The
following table shows the distribution of revenue derived from our financial services activities by geographic market since 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
(€ in millions)
|
|
Western Europe
|
|
|
4,648
|
|
|
4,971
|
|
|
4,773
|
|
|
Germany
|
|
|
2,829
|
|
|
2,659
|
|
|
2,508
|
|
|
Other
|
|
|
1,819
|
|
|
2,312
|
|
|
2,265
|
|
NAFTA region
|
|
|
5,954
|
|
|
5,688
|
|
|
5,269
|
|
|
United States
|
|
|
5,394
|
|
|
5,197
|
|
|
4,816
|
|
|
Canada and Mexico
|
|
|
560
|
|
|
491
|
|
|
453
|
|
Other markets
|
|
|
1,394
|
|
|
1,305
|
|
|
925
|
|
|
|
|
|
|
|
|
|
|
World
|
|
|
11,996
|
|
|
11,964
|
|
|
10,967
|
|
|
|
|
|
|
|
|
|
In
2009, we generated approximately 24% of our total financial services business in Germany, 15% in other Western European countries and 50% in the NAFTA region. We discuss
period-to-period changes in revenue under the heading "Operating Results" in "Item 5. Operating and Financial Review and Prospects."
In
2009, new leasing and finance contracts processed by our Daimler Financial Services segment covered 848,142 units with a total value of €25.1 billion. In the
prior year, we processed new leasing and finance contracts covering 955,598 units with a total value of €29.5 billion. The total value of leasing and finance contracts at
December 31, 2009 was €58.3 billion compared to €63.4 billion at December 31, 2008, an 8% decrease in total contract value. Excluding
currency translation effects, our total contract value decreased 9% compared to 2008.
The
average contract balance of contracts entered into during 2009 was €29,554. The average original term of our total portfolio of leasing and finance contracts as of
December 31, 2009 was 42 months.
The
following table shows, for our financial services business at December 31, 2009, the number of units covered and the value represented by new leasing and finance contracts as
well as the number of units covered
28
and
the value represented by all our outstanding leasing and finance contracts, in each case by geographic area and in total.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units Covered by
New Contracts
|
|
Value (€ in
millions)
|
|
Units Covered by
all Contracts
|
|
Value (€ in
millions)
|
|
United States
|
|
|
196,181
|
|
|
6,607
|
|
|
603,287
|
|
|
17,708
|
|
Germany
|
|
|
316,491
|
|
|
8,126
|
|
|
748,583
|
|
|
16,137
|
|
Canada
|
|
|
24,076
|
|
|
811
|
|
|
69,945
|
|
|
2,002
|
|
Mexico
|
|
|
10,462
|
|
|
306
|
|
|
40,065
|
|
|
805
|
|
United Kingdom
|
|
|
67,304
|
|
|
1,579
|
|
|
152,057
|
|
|
2,826
|
|
France
|
|
|
31,108
|
|
|
814
|
|
|
92,548
|
|
|
1,812
|
|
Italy
|
|
|
19,478
|
|
|
450
|
|
|
75,923
|
|
|
1,517
|
|
Japan
|
|
|
17,161
|
|
|
715
|
|
|
87,759
|
|
|
2,171
|
|
Australia
|
|
|
15,357
|
|
|
506
|
|
|
54,687
|
|
|
1,624
|
|
Netherlands
|
|
|
11,193
|
|
|
442
|
|
|
42,357
|
|
|
1,053
|
|
Other Countries
|
|
|
139,331
|
|
|
4,710
|
|
|
449,637
|
|
|
10,695
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
848,142
|
|
|
25,066
|
|
|
2,416,848
|
|
|
58,350
|
|
|
|
|
|
|
|
|
|
|
|
In
the financial services area, our main competitors are leasing and finance subsidiaries of banks and financial institutions and the financial services businesses of other automobile
manufacturers to the extent they do not limit their activities to their own automobile brands.
The table below shows capital expenditures for property, plant and equipment and intangible assets, which related largely to the
acquisition of data processing equipment, and additions to equipment under operating leases of our financial services business during each of the last three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
(€ in millions)
|
|
Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)
|
|
|
21
|
|
|
61
|
|
|
53
|
|
Equipment on operating leases
|
|
|
4,506
|
|
|
5,390
|
|
|
6,093
|
|
SUPPLIES AND RAW MATERIALS
We conduct our worldwide procurement activities through a global procurement function. We aim to maximize the efficiency of our supply
chain by working with first tier suppliers, select sub-suppliers, raw material suppliers, and transportation carriers.
We
manage our current and future supplies and raw material requirements and delivery needs on an ongoing basis in close cooperation with our suppliers and sub-suppliers in
order to ensure an adequate supply of parts and components at a competitive price level. For example, in an effort to avoid possible future shortages and further limit price increases, we enter into,
or renegotiate as necessary, annual or long-term supply agreements with suppliers. We also purchase certain raw materials or commodities on the spot market and use derivative commodity
instruments, to the extent we deem appropriate, to hedge against the price volatility of some precious metals that we use in catalytic converters. We also research the possible use of alternative
materials and processes for use in catalytic converters and other components. We have established a corporate commodity risk management committee to provide enhanced control and oversight over our
commodity price exposure.
29
Prices
for most raw materials that we use in manufacturing our products, including steel, aluminum, petroleum-based products and various precious metals, declined in 2008 and in early
2009. Even though some raw material prices increased during the remainder of 2009, prices overall were lower on average compared to 2008, which reduced our material costs in 2009. If the global
economy continues to recover in 2010, we expect raw material prices to increase from their current levels.
In
2009, the intense competition in the automotive industry and significant declines in vehicle sales as a result of the global economic downturn that began in the second half of 2008
and continued widely into 2009 had a significant adverse effect on the financial position of some of our suppliers. As a result, some of our suppliers are in financial distress or are the subject of
bankruptcy proceedings. Consistent with general industry practice, we source select parts or components from a single supplier after a technical and commercial verification of the supplier's
capability to meet the projected demand. This practice carries the risk of potential production disruption if the supplier is unable to perform its obligations. In order to ensure a reliable supply
chain for parts, sub-assemblies and other materials, we provide assistance, including financial assistance, to some of our suppliers. The need for such assistance will likely continue in
2010 and may increase significantly if global economic conditions do not continue to improve. In order to manage supply risks effectively, we have implemented a comprehensive risk management system to
identify and mitigate supply risk at an early stage.
Our
financial performance also depends in part on obtaining competitive prices from suppliers. Our ability to achieve further price reductions from suppliers, however, has been limited
by a combination of factors, including consolidation among automotive suppliers, the use of a single supplier for certain components, supplier financial difficulties due to the global economic
downturn and increasing supplier insolvencies.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
The automotive industry is subject to extensive government regulation. Laws in various countries regulate the emission levels, fuel
economy, noise, and safety of vehicles, as well as the levels of pollutants generated by the plants that produce them. These regulations often impose differing standards and substantial testing and
certification requirements. The cost of complying with these varying regulations can be significant. As a result of increased environmental concerns regarding, for example, carbon dioxide emissions,
and related government regulation, we have already incurred considerable compliance costs and expect to incur significant additional costs in the future. We recognize, however, that leadership in
environmental protection and safety is an increasingly important competitive factor in the marketplace.
Vehicle Emissions
U.S. Standards.
Federal and state regulations restrict vehicle exhaust levels by imposing stringent tailpipe emission control
standards. They also
impose standards for onboard diagnostic systems to monitor the emission control system, including the onboard refueling vapor recovery systems that control refueling and evaporative emissions.
Manufacturers are responsible under these regulations for the performance of vehicle emission control systems over certain time and mileage periods. Developing compliant emission control systems and
repairing or replacing them should they fail to perform in accordance with applicable standards is costly.
Federal.
Regulations issued by the United States Environmental Protection Agency, or EPA, under the Clean Air Act apply to passenger
cars (including
sport utility vehicles) and heavy-duty vehicles we sell in the U.S. We are responsible for the emission performance of these vehicles for their full useful lives.
-
-
Tier 2 standards were phased in over model years 2004 - 2009 and established identical
requirements for passenger cars and light trucks.
-
-
Separate standards apply to heavy light-duty trucks (those in excess of 8,500 pound gross vehicle weight) and
heavy-duty commercial vehicles. The standards applicable to model years 2007 - 2010 are more stringent than those that apply to model years
2004 - 2006.
30
-
-
For all heavy-duty commercial vehicles, the EPA has promulgated even more challenging vehicle emission
regulations (EPA 10), which will apply to model years from 2011 and beyond.
California Standards.
The State of California sets its own stringent emission control standards for passenger cars and light-duty
trucks.
The
California Air Resources Board (CARB) plans to impose more stringent emission control standards, the "Low Emission Vehicle III" (LEV III) standards. The final standards for
passenger cars and light-duty trucks are expected to be completed in 2010, with the phase-in period beginning in 2014. It is anticipated that the new standards will include requirements
for an extended warranty on emission control systems, new stringent vehicle testing procedures and extremely low emission targets. If some or all of our Mercedes-Benz passenger cars or
light-duty trucks do not meet the new standards at the time of the phase-in, we may be subject to significant penalties or may be unable to sell vehicles that do not comply with the
standards. In any event, the costs of complying with the new standards will increase our vehicle costs and the extended warranty will increase our financial exposure.
California's
current LEV II program includes regulations issued by the CARB that require large volume manufacturers to earn an increasing number of zero-emission vehicle
(ZEV) credits. There is also an ongoing discussion about future requirements for zero-emission buses (ZEB). We do not expect to become a large volume manufacturer, as defined by the ZEV
mandate, before the 2016 model year. In the interim, under the ZEV mandate, we will be treated as an intermediate volume manufacturer which allows us to meet the ZEV requirement with partial zero
emission vehicles (PZEVs). Manufacturers may earn ZEV credits by selling vehicles that use various technologies (e.g. electric batteries, hydrogen fuel cells, compressed natural gas, and
gasoline/electric hybrids) to limit or eliminate emissions. By 2018, up to 50% of the vehicles we sell in California will require some level of these technologies to meet the ZEV mandate.
We
expect revisions to the ZEV program planned for 2010 to result in a more demanding program requiring passenger vehicle manufacturers to sell in the future fuel cell vehicles, battery
electric vehicles and plug-in vehicles in California. The revisions are expected to become effective with the 2015 model year.
Meeting
the California LEV standards and ZEV regulations in future years will require significant progress in the development of engine, exhaust after-treatment, and fuel control
technologies. We also expect to continue to incur significant costs in developing low or zero-emission technologies. Compliance with the ZEV regulations could force us to suspend the sale
of non-zero-emission vehicles in California or to sell zero-emission vehicles there significantly below cost. Either alternative would have a substantial adverse
effect on our profitability and cash flows.
The
federal Clean Air Act permits other states to adopt California standards as an alternative to the EPA's Tier 2 program. To date, fourteen states have adopted the California
LEV II standard including Arizona, Connecticut, Florida, Massachusetts, Maine, Maryland, New Jersey, New York, New Mexico, Oregon, Pennsylvania, Rhode Island, Vermont and Washington. All of these
states, except Washington and Pennsylvania, have adopted ZEV regulations.
European Standards.
In 2007, the Commission and the Parliament of the European Union (EU) adopted more stringent emission
standards for passenger
cars and light commercial vehicles which consist of two phases, Euro 5 and Euro 6. Euro 5 provides for lower emission levels for gasoline and diesel powered vehicles and also
extends the manufacturers' responsibility for emission performance to 160,000 kilometers. The primary focus of Euro 6 is to limit further emissions of diesel powered vehicles and bring them
down to a level equivalent to gasoline powered vehicles. The phase-in date for the Euro 5 standards was September 1, 2009, and the phase-in date for the
Euro 6 standards will be January 1, 2014.
The
EU Commission and the EU Parliament also adopted emission standards for heavy commercial vehicles for model years 2005 through 2007 (Euro IV) and model years 2008 and
thereafter (Euro V). In December 2008, the European Parliament agreed on Euro VI standards which require emission limits similar to the limits set by EPA 10 in the United States. The Euro VI standards
will apply to new heavy-duty vehicles with a reference weight
31
above
2,610 kilograms beginning on December 31, 2012 and to all heavy-duty vehicles beginning on December 31, 2013. The new standards also extend the manufacturer's
responsibility for emission performance to 700,000 kilometers.
Vehicle Fuel Economy
U.S. Standards.
The National Highway Traffic Safety Administration (NHTSA) establishes corporate average fuel economy (CAFE)
standards that require
manufacturers to meet certain fuel efficiency levels for their fleet of new passenger cars and light trucks sold in the U.S. The standards are intended to reduce U.S. dependence on foreign oil by
decreasing gasoline consumption. A manufacturer is subject to significant penalties for each model year its vehicles do not meet the standards. The CAFE standard for passenger cars is currently 27.5
miles per gallon. Up to model year 2007, the standard for light-duty trucks, including minivans and sport utility vehicles, was 22.2 miles per gallon.
In
2006, the NHTSA adopted both "Reformed" and "Unreformed" light-duty truck CAFE standards. The Reformed standard is voluntary for model years
2008 - 2010 and mandatory for model year 2011. The Reformed standard sets a separate fuel economy target for each vehicle based on the vehicle's wheelbase and track width.
The CAFE standard applicable to a manufacturer is based on the fuel economy targets of each size category of vehicles the manufacturer produces, weighted by the distribution of production volumes
across the size categories.
In
model years 2008-2010, manufacturers may elect to use Unreformed CAFE (i.e., CAFE calculated under the current rule). Manufacturers making that election must meet a
fleet-average miles per gallon standard of 22.5 miles per gallon for model year 2008, 23.1 miles per gallon for model year 2009, and 23.5 miles per gallon for model year 2010.
The
NHTSA has also adopted, for the first time, CAFE standards for medium-duty passenger vehicles, which are defined as vehicles with a gross vehicle weight of between 8,501
and 10,000 pounds. This standard will apply beginning with the 2011 model year and will be calculated under the Reformed standard.
Finally,
the NHTSA has modified the definition of light truck. As a result, some of our vehicles that are currently classified as trucks may be re-classified as passenger
cars, which would require them to meet a higher CAFE standard.
In
the final CAFE rule for model year 2011, the NHTSA sets the passenger car target to 30.2 miles per gallon and the light truck fleet target to 24.1 miles per gallon, which results in a
combined target of 27.3 miles per gallon. Starting with model year 2011, the targets of passenger cars and light trucks are mandatory based on the individual footprint value of the respective vehicle.
The footprint value is described by a designated function and is combined to a sales weighted harmonic average passenger car or light truck fleet target. A manufacturer may earn credits by exceeding
the set CAFE standards. The carry-forward period is extended to five years and the carry-back period is left at three years. Credits could be traded between the different fleets of an
original equipment manufacturer (OEM) and also between different OEMs. Credits earned before 2011 can not be transferred.
In
2007, the U.S. Energy Independence and Security Act of 2007 (EISA), which imposes even more stringent fuel economy requirements, was enacted. The new legislation requires
manufacturers to achieve a fleet-wide average of 35 miles per gallon by 2020 with no exceptions. The legislation extends the credits for automakers producing flex-fuel vehicles
through 2019 and gives the agencies the authority to use attribute-based systems when setting vehicle fuel economy standards.
Although
we strive to meet the current and proposed U.S. domestic fleet CAFE standards for both passenger cars and light-duty trucks by introducing additional technological
features, we may not have been able to fully meet the current CAFE standards and may not be able to meet future CAFE standards with
the U.S. new passenger car and light-duty truck fleets we offer in the United States and may incur fines as a result.
32
As
part of the EISA, the Department of Transportation (DOT) is required to initiate a National Academy of Science study to investigate technology, costs and other factors that influence
the fuel economy of heavy-duty commercial vehicles. The DOT commenced the study in December 2008. It is expected to be completed by March 2010. It is also expected that this study will be
used for a future rulemaking initiative by NHTSA that will likely start by the end of 2010.
In
the United States and other countries, there is also political pressure to increase fuel economy standards as a means of reducing carbon dioxide emissions. These emissions are said to
contribute to global warming, which is a matter of international concern. Although the United States withdrew from the Kyoto Protocol, it continues to consider ways to achieve reductions in fossil
energy use, including the new CAFE standards discussed above. Any of these or other measures could impose significant costs on us or limit the range of products that we are able to offer. In August
2008, in an effort to reduce greenhouse gases, the EPA released a Greenhouse Gas Advanced Notice of Proposed Rulemaking requesting manufacturers to provide information on how greenhouse gas emissions
from heavy-duty commercial vehicles could be reduced further.
California
is also attempting to limit emissions of carbon dioxide and other greenhouse gases through regulation of fuel economy standards. CARB regulations, enacted pursuant to a
California law (AB 1493), require automakers to reduce significantly greenhouse gas vehicle emissions starting with 2009 passenger car and light-duty truck models. Several other states
have adopted similar measures.
In
2008, California adopted the Global Warming Solutions Act (AB 32) which requires CARB to mandate the reduction of greenhouse gas emissions from heavy-duty
commercial vehicles. A first proposal on how to reduce such emissions was unanimously approved by the CARB board members, but some aspects remain subject to further evaluation.
A
coalition of states, cities and environmental groups brought a lawsuit seeking to establish that the EPA is authorized to regulate carbon dioxide emissions and to compel it to do so.
The U.S. Supreme Court decided that the EPA's argument that it did not have the authority to regulate greenhouse gases was unfounded. As a consequence, the President of the United States issued an
executive order (Executive Order No. 13,432) ordering the EPA to initiate a greenhouse gases rulemaking process. Following the Executive Order, the EPA and the NHTSA issued a joint proposal to
establish a new national program to regulate model years 2012 through 2016 passenger cars and light trucks. The NHTSA proposed new CAFE standards for those model years. In addition, the EPA proposed
national greenhouse gas (GHG) emission standards to be established under the Clean Air Act. Both standards would require manufacturers to achieve a fleet-wide
average of 35.5 miles per gallon (or 250 g/mi of carbon dioxide emissions) by 2016. This accelerates the standard set by EISA, which requires manufactures to achieve a fleet-wide average
of 35 miles per gallon by 2020. The EPA and the NHTSA rulemaking is expected to be finalized by April 2010. The EPA standard offers manufacturers greater flexibility than the NHTSA standard to meet
the targets by imposing less stringent standards on intermediate volume manufacturers through the 2015 model year and allowing credits for improvements in vehicle air-conditioning systems.
As a result, a manufacturer may meet EPA targets but not NHTSA targets. Not meeting CAFE targets may result in substantial fines. In addition, the EPA has the ability under the Clean Air Act to
prevent a manufacturer from selling vehicles in the U.S. if the EPA targets are not met.
Following
the U.S. Supreme Court ruling that the EPA has the authority to regulate greenhouse gases, California requested permission from the EPA to set its own state standard. For over
thirty years California has requested and always received from the EPA a waiver from the federal regulations allowing it to set state standards concerning pollution emissions. Lawsuits challenging the
right of states to regulate fuel economy were filed in state courts.
On
May 18, 2009, the President of the United States signed a memorandum of understanding with ten auto manufacturers including us. The agreement provides for the auto
manufacturers to drop all relevant lawsuits concerning fuel economy in return for California not enforcing its state GHG regulation from 2012 through 2016. On June 30, 2009, the EPA granted
California a waiver to allow the implementation of their state GHG regulation from 2009 through 2011. We were considered a large volume manufacturer in 2009 and are subject to the state
33
GHG
regulation. We anticipate that we will meet the 2009 targets. Regardless of whether or not we will meet the 2009 targets, we do not expect that civil penalties will be assessed for the 2009 model
year. In 2010 and 2011, we anticipate that we will be recognized as an intermediate volume manufacturer, and, therefore, we do not expect to be subject to the state GHG regulation in those years. If,
however, California does not recognize us as an intermediate volume manufacturer, we may not achieve the 2010 and 2011 targets, and as a result, California could subject us to fines.
European Standards.
The European Union (EU) signed and ratified the Kyoto Protocol, pursuant to which it is required to
substantially reduce carbon
dioxide emissions during years 2008 to 2012. In 1999, the EU entered into a voluntary agreement with the European automotive manufacturers association (ACEA) which establishes an emission target of
140 grams of carbon dioxide per kilometer on average for new passenger cars sold in the European Union in 2008. Based on 1995 levels, that target represents an average reduction in passenger vehicle
fuel usage of 25%.
In
December 2008, the Parliament of the EU approved a new regulation which establishes parameters for setting mandatory average carbon dioxide emission standards for a manufacturer's
fleet of new vehicles sold in the EU member states. The new regulation provides for a significant reduction of carbon dioxide emissions.
The permissible average carbon dioxide levels will be determined pursuant to a formula which is based on vehicle mass. Further factors such as the availability from the relevant manufacturer of low
emission vehicles will be taken into consideration. The new levels of permissible carbon dioxide emissions will apply beginning in 2012. The share of a manufacturer's vehicles that have to meet the
new targets will increase each year until it reaches 100% in 2015. A manufacturer who fails to comply with its specific applicable average carbon dioxide emission target will have to pay a fine for
each newly registered vehicle that exceeds the manufacturer's target emission rates. The fine is calculated based on the degree by which the target emission rate is exceeded and the total number of
vehicles sold by the respective manufacturer. We expect to incur significantly higher research and development costs in order to meet these targets.
The
EU Commission is also considering setting binding carbon dioxide emission targets for vans not registered as passenger cars (so-called "N1-vehicles"). Initial
proposals based on the main principles of the passenger car legislation have been presented by the EU Commission.
The
EU Commission has also proposed a review of labeling rules as well as a voluntary "code of good practice" on car marketing and advertising in order to raise consumer awareness.
Some
EU member states have begun to revise their car tax laws to take into account carbon dioxide emission levels. This trend is expected to continue and could negatively impact our
sales and revenue.
Other countries.
There is political pressure worldwide to reach national carbon dioxide emission reduction targets. For example,
China, Japan and
South Korea plan to establish tighter fuel economy standards in 2012 and 2015 to address climate change issues. An increasing number of countries, for example Canada, India and Mexico, also intend to
enact fuel economy regulations in the near future.
Vehicle Safety
U.S. Standards.
The NHTSA issues federal motor vehicle safety standards covering a wide range of vehicle components and systems
such as airbags,
seatbelts, brakes, windshields, tires, steering columns, displays, lights, door locks, side impact protection, and fuel systems. We are required to test new vehicles and equipment and certify their
compliance with the standards before selling them in the U.S. We are also required to recall vehicles found to have safety related defects and to repair them without charge. The cost of such recalls
can be substantial depending on the nature of the repair and the number of vehicles affected.
34
These standards add to the cost and complexity of designing and producing vehicles and equipment. In recent years, the NHTSA has mandated, among other things:
-
-
a system for collecting information relating to vehicle performance and customer complaints to assist in the early
identification of potential vehicle defects; and
-
-
enhanced requirements for frontal and side impact, including a lateral pole impact.
In
general, vehicle safety regulations in Canada are similar to those in the United States. Countries in South America and Asia have also established vehicle safety regulations. For
example, China has established extensive and complex vehicle certification procedures that became fully applicable in 2009.
European Standards.
Vehicles sold in Europe are subject to vehicle safety regulations established by the EU or by individual
countries that are
comparable to those in the U.S. Major regulatory changes in Europe are:
-
-
The EU Commission has recently proposed new requirements for enhanced (phase 2) pedestrian protection. Pedestrian
protection legislation may have a significant impact on the design of our future passenger cars;
-
-
The cooling agent currently used in vehicle air conditioning systems may not be used in all new vehicle types beginning in
2011, and will be banned in pre-existing vehicle lines beginning in 2017. Alternative cooling agents will have to be developed, which are expected to result in significantly higher costs;
-
-
The EU Commission has proposed mandating tire pressure monitoring systems in the context of fuel economy legislation;
-
-
The European Parliament adopted the General Safety Regulation mandating active safety systems, such as electronic
stability control systems, automated emergency braking systems and lane departure warning systems for heavy-duty commercial vehicles. Implementing measures are currently under development and may be
finalized within the timeframe 2010/2011.
In
addition, within the framework of the United Nations Economic Commission for Europe (UNECE), the EU may establish new vehicle safety regulations (for example, regulations regarding
head restraints).
Stationary Source Regulation
Our assembly, manufacturing and other operations in the United States must meet a substantial number of regulatory requirements under
various federal and state laws. Together these laws severely restrict airborne and waterborne emissions, discharges of pollutants, and the disposal of wastes from our facilities, as well as the
handling of hazardous materials. These requirements may require us to install additional monitoring and other pollution control equipment, which would be costly. Similar requirements apply to our
operations outside the U.S.
Other Environmental Matters
Pollution remediation is a potentially significant issue in Germany at some of our older sites, including manufacturing plants and some
of our own service outlets. These remediation issues involve ten principal sites. Our German manufacturing facilities are also subject to significant noise restrictions.
Pollution
remediation is also a potential significant issue for our non-German production companies. In general, estimates of future costs of environmental matters are
inevitably imprecise due to numerous uncertainties, including the enactment of new laws and regulations, the development and application of new technologies, the identification of new sites for which
we may have remediation responsibility and the apportionment and collectability of remediation costs among responsible parties. We establish provisions for these environmental matters when the loss is
probable and reliably estimable. It is possible that final resolution of some of these matters may require us to make expenditures in excess of established provisions, over an extended period of time
and in a range of amounts that we cannot reliably estimate. Although final resolution of any such matters could have a material effect on our consolidated operating results for the particular
reporting period in
35
which
an adjustment of the estimated provision is recorded, we believe that any resulting adjustment should not materially affect our consolidated financial position.
In
2000, the EU Commission issued a directive that requires automobile manufacturers to take back all end-of-life passenger cars (up to 9 seats) and light trucks
(up to 3.5t gross vehicle weight) sold after July 1, 2002, and, beginning on January 1, 2007, all end-of-life passenger cars including those sold before
July 1, 2002. This directive stipulates that automotive manufacturers incur all, or a significant part of, the costs of recycling these vehicles. The directive affects all
end-of-life-vehicles in the EU and imposes additional costs on automobile manufacturers which could be significant. We are committed to reducing the environmental
impact of our operations and products beyond currently applicable regulatory requirements where this is technically and financially feasible. Our policy is environmental protection in pursuit of
sustainable development. This policy is set forth in our environmental guidelines and designed to minimize further the environmental impact generally associated with the type of manufacturing
operations we conduct. We have established environmental management systems in both our plant operations and our development departments that are designed to consider the environmental impact at the
planning stage of a new manufacturing process or product. We publish environmental reports summarizing our use of resources and measures we have undertaken to minimize further the environmental impact
of our products and operations.
Design Protection
On September 14, 2004, the EU Commission proposed an amendment of the design protection directive Nr. 98/71/EC. The proposed
amendment would abolish the design protection for visible and styled automotive parts within the EU. The proposal would allow parts manufacturers independent from the original equipment manufacturers
to copy and sell throughout the EU visible and styled replacement parts such as hoods, bumpers, fenders, doors, lights and windshields. If this proposed amendment becomes effective, it may negatively
affect our future sales of visible and styled replacement parts and may increase our allocated costs per unit. To date, a blocking minority of several EU member states opposed to the amendment has
prevented the EU Commission from implementing it.
DESCRIPTION OF PROPERTY
We produce vehicles and related components at approximately sixty-five manufacturing facilities worldwide, of which
seventeen are located in Germany and sixteen in the United States. Most of the remaining facilities are in Japan, Mexico, France, Spain, Brazil, South Africa and Turkey. We also have other properties,
including office buildings, sales and service locations as well as research laboratories, development centers and test tracks. We own most of these facilities, and we believe that they are adequate to
meet our needs.
Our
property, plant and equipment includes buildings, technical equipment, and other equipment capitalized under capital lease agreements. For additional information, please refer to
Note 10 to our Consolidated Financial Statements.
We
are party to various joint ventures, assembly contracts and other arrangements that allow us to gain access to additional production capacity, utilize our plants more efficiently or
gain access to new geographic markets. For example, we have joint ventures in China for the production and distribution of Mercedes-Benz passenger cars and vans and, in January 2009, we
signed a cooperation agreement to form a joint venture in China for the production of medium- and heavy-duty trucks. This joint venture remains subject to approval by the Chinese
authorities. We also have arrangements with third parties to assemble some of our vehicles at facilities in Austria. Pursuant to an agreement with Volkswagen, we assemble a Volkswagen van at our
German plants.
In
October 2008, we entered into a contract with the Ministry for National Development and Economy of the Republic of Hungary to establish a production plant for
Mercedes-Benz passenger cars in Kecskemèt, Hungary. We estimate total expenditures for this investment to be approximately €0.8 billion. We plan to
complete construction of the plant and start production in 2013.
36
There
has been significant production overcapacity in the worldwide automotive industry for some time, which has become even more pronounced as a result of the global economic downturn.
This overcapacity threatens the continued profitability of many manufacturers. As part of our strategic planning and operations, we monitor our production capacity in relation to developing and
anticipated industry changes and market conditions. As these conditions fluctuate, we adjust our capacity by opening, closing, selling, expanding, or downsizing production facilities, or by adding or
eliminating work shifts. For example, in 2008 and 2009, we adopted wide-ranging plans to optimize and reposition the business operations of our subsidiaries Daimler Trucks North America
(DTNA) and Mitsubishi Fuso Truck and Bus Corporation (MFTBC), including the shutdown of select manufacturing plants. In response to decreasing unit sales, we also reached agreements with the works
councils of all of our manufacturing plants in Germany to reduce the number of hours worked per week (
Kurzarbeit
) during 2009 by the workers in those
plants. In the first two quarters of 2010, we plan to continue the
Kurzarbeit
regime in select German manufacturing plants and we may continue that
regime, or even expand it to include other plants, if economic conditions remain weak or deteriorate further. For more information on the plans to optimize and reposition the business operations of
DTNA and MFTBC, please refer to "Description of Business Segments Daimler Trucks" in "Item 4. Information on the Company." For more information on the temporary work hour
adjustments, please refer to "Employees and Labor Relations" in "Item 6. Directors, Senior Management and Employees."
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects.
INTRODUCTION
Cautionary Statement Regarding Forward-Looking Statements
This document contains forward-looking statements that reflect our current views about future events. We use the words "anticipate,"
"assume," "believe," "estimate," "expect," "intend," "may," "plan," "project," "should" and similar expressions to identify forward-looking statements. These statements are subject to many risks and
uncertainties, including:
-
-
a lack of further improvement or a renewed deterioration of global economic conditions, in particular a renewed decline of
consumer demand and investment activity in Western Europe or the United States, or a downturn in major Asian economies;
-
-
a continuation or worsening of the tense situation in the credit and financial markets, which could result in a renewed
increase in borrowing costs or limit our funding flexibility;
-
-
changes in currency exchange rates or interest rates;
-
-
our ability to continue to offer fuel-efficient and environmentally friendly products;
-
-
a permanent shift in consumer preference towards smaller, lower margin vehicles;
-
-
the introduction of competing, fuel-efficient products and the possible lack of acceptance of our products or
services which may limit our ability to adequately utilize our production capacities or raise prices;
-
-
price increases in fuel, raw materials and precious metals;
-
-
disruption of production due to shortages of materials, labor strikes, or supplier insolvencies;
-
-
a further decline in resale prices of used vehicles;
-
-
the effective implementation of cost-reduction and efficiency-optimization programs at all of our segments,
including the repositioning of our truck activities in the NAFTA region and in Asia;
37
-
-
the business outlook of companies in which we hold an equity interest, most notably the European Aeronautic Defence and
Space Company EADS N.V. (EADS);
-
-
changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and
safety;
-
-
the resolution of pending governmental investigations and the outcome of pending or threatened future legal proceedings;
and
-
-
other risks and uncertainties, some of which we describe under the heading "Risk Factors" in "Item 3. Key
Information."
If
any of these risks and uncertainties materialize, or if the assumptions underlying any of our forward-looking statements prove incorrect, then our actual results may be materially
different from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements. Any forward-looking statement speaks only as of the
date on which it is made.
You
should read the following discussion of our critical accounting policies and our financial condition and operating results together with our Consolidated Financial Statements
included in this annual report. These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and related interpretations issued by
the International Accounting Standards Board. Please refer to Note 1 to our Consolidated Financial Statements for a description of our significant accounting policies.
On
August 3, 2007, we transferred an 80.1% controlling interest in the Chrysler automotive activities and the related Chrysler financial services business in the NAFTA region (the
Chrysler activities) to a subsidiary of Cerberus. As a result of that transaction, revenue and operating results of the Chrysler activities from January 1, 2007 to August 3, 2007 are
included in the line item "Net profit (loss) from discontinued operations" in our consolidated statements of income (loss). We do not include amounts relating to discontinued operations in our segment
reporting. Following the consummation of the transaction, we de-recognized the assets and liabilities of the Chrysler activities on August 3, 2007. For further information, please
refer to Notes 2 and 31 to our Consolidated Financial Statements.
In
June 2009, based on a binding term sheet signed in April 2009, we entered into a redemption agreement regarding our remaining 19.9% non-controlling equity interest in
Chrysler Holding LLC. As a result of the redemption, Daimler no longer holds an equity interest in Chrysler Holding LLC or any of its subsidiaries and all Daimler designees resigned from
the board of Chrysler Holding LLC and the boards of any of its subsidiaries. Please also refer to the discussion under the heading "Material Contracts" in "Item 10. Additional
Information." For additional information on the effect of the redemption on our Consolidated Financial Statements, please refer to the discussion below under the heading "Operating Results" and to
Note 2 to our Consolidated Financial Statements.
From
August 4, 2007 through the date of redemption on June 3, 2009, we accounted for our non-controlling equity interest in Chrysler Holding LLC with a
three-month time lag using the equity method of accounting. During that period we included our proportionate share of the consolidated results of Chrysler Holding LLC in the reconciliation from
total segment EBIT to Group EBIT.
If
we account for an equity investee with a time lag, IFRS requires us to consider significant transactions and events which affect the equity investee during the lag period.
As
a result of fluctuations in the exchange rate of the euro, which is the reporting currency of our Consolidated Financial Statements, in relation to several other world currencies,
including the U.S. dollar, all of our subsidiaries and equity investees that report their results in a functional currency other than the euro experienced currency translation effects. These currency
translation effects impact the year-to-year comparability of our consolidated financial statements for the periods presented in this annual report.
38
Fluctuations
in the exchange rates of the U.S. dollar, the British pound, the Japanese yen, the Chinese yuan and other world currencies against the euro also expose our international
business operations and, consequently, our reported financial results and cash flows to transaction risk. This transaction risk exposure affects primarily our Mercedes-Benz Cars segment,
which generates a significant portion of its revenue in foreign currencies and incurs manufacturing costs primarily in euros. Our Daimler Trucks segment is also subject to transaction risk, but only
to a minor degree due to its global production network. Mercedes-Benz Vans and Daimler Buses are also directly exposed to transaction risk, but only to a smaller degree compared to the
Mercedes-Benz Cars segment. In addition, we have some indirect transaction risk exposure through our equity method investments, most importantly our equity interest in EADS. In 2009, 2008
and 2007, currency effects, including effects from currency translation, operating business transactions and hedging activities, negatively affected our operating results.
Please
refer to the description under the heading "Exchange Rate Risk" in "Item 11. Quantitative and Qualitative Disclosures about Market Risks" and to Note 30 to our
Consolidated Financial Statements for additional information on our currency translation risk and transaction risk exposures.
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
Please refer to Note 1 to our Consolidated Financial Statements for a description of our significant accounting policies and new
accounting pronouncements that we had not yet adopted by December 31, 2009.
INFLATION
Inflation has not had a significant effect on our operating results in recent years.
CRITICAL ACCOUNTING POLICIES
Our reported financial position and results of operations are sensitive to the accounting methods we select and the accounting
estimates underlying the preparation of our financial statements. The following critical accounting policies, and the related judgments and other uncertainties affecting the application of those
policies, are factors you should consider in reviewing our financial statements and the discussions in this annual report. While we believe that any assumptions we use are appropriate, estimated
amounts could differ from what occurs in future periods.
Recovery of Carrying Amount of Equipment on Operating Leases
We own equipment, primarily passenger cars, trucks, vans, and buses, that we lease to customers under operating leases. At
December 31, 2009 and December 31, 2008, the total carrying value of this equipment was €18.5 billion and €18.7 billion, respectively. Of
the carrying amount of total equipment on operating leases as of December 31, 2009 and December 31, 2008, approximately 48% and 55%, respectively, are included in the assets of our
Daimler Financial Services segment, approximately 37% and 28%, respectively, are included in the segment assets of Mercedes-Benz Cars, approximately 7% and 8%, respectively, are included
in the Daimler Trucks segment assets, approximately 5% and 6%, respectively, are included in the segment assets of Mercedes-Benz Vans, and approximately 3% and 3%, respectively, are
included in the assets of Daimler Buses.
We
carry equipment on an operating lease initially at its acquisition or manufacturing cost and depreciate it over the contractual term of the lease using the straight-line
method until it reaches its estimated residual value. The estimated residual value represents our best estimate of the price we would obtain from the sale of the leased asset. We base our initial
estimate on publicly available information and also on our own projections that we derive from our historical experience regarding expected resale values for the types of equipment leased.
It
is our accounting policy to re-evaluate our estimates frequently and to consider, at least quarterly, our estimates of residual value and our ability to recover the
carrying value of our investment in equipment on operating leases. We determine the recoverable amount for an individual leased asset as the present value of the
39
amount
that we expect to derive from the lease and the ultimate sale of the leased asset. If, as a result of our evaluation, we conclude that the estimated residual value of the leased asset is lower
than our previous estimate, we adjust depreciation prospectively to compensate for the expected shortfall, assuming we can still recover our investment. If the carrying value exceeds the recoverable
amount, we record an impairment charge equal to the excess of the carrying value over the recoverable amount.
We
believe that the accounting estimate related to recoverability of the carrying value of our investment in equipment on operating leases is a critical accounting estimate
because:
-
(1)
-
the
evaluation is inherently judgmental and highly susceptible to change from period to period because it requires us to make assumptions about future
vehicle supply and demand, and what selling prices for used equipment will be at the end of the lease; and
-
(2)
-
the
impact of impairment charges or, if we determine that no impairment occurred, changes in future depreciation expense could be material to our financial
statements.
In
2008, as a result of lower than expected residual values, we recorded pre-tax impairment charges of €465 million which we allocated to the
Mercedes-Benz Cars segment.
If
economic conditions deteriorate in our primary markets, resale prices of used vehicles and, correspondingly, the residual values of our leased equipment may experience downward
pressure. If used vehicle resale prices decline, our future operating results are likely to be adversely affected by impairment charges or by increases in depreciation expense resulting from
reductions in our residual value estimates.
Aside
from the risk of collecting the monthly lease payments (credit risk), which primarily resides with our Daimler Financial Services segment, the vehicle segment that manufactured the
leased equipment carries most of the residual value risk associated with our operating leases pursuant to a risk sharing agreement between it and our Daimler Financial Services segment. The terms of
the risk sharing arrangements vary by segment and geographic region.
We
record expenses arising from changes in estimates of residual values in the line item "Cost of sales" in our statements of income (loss). The recognition of impairment charges and
increases in depreciation expense do not immediately affect our reported cash flows, although cash flows of future periods may be lower than previously anticipated due to lower proceeds from the
eventual resale of the equipment. The rate of recovery of the carrying value of our investments in equipment on operating leases depends on the timing and amount of operating lease payments we collect
from our customers and the proceeds we derive from the sale of the vehicle when the lease matures. To the extent the value of used vehicles decreases, we will realize less cash proceeds from sales of
those vehicles at the end of the lease term. In addition, inability of our customers to make their monthly lease payments could also adversely affect our liquidity and capital resources.
In
addition, our vehicle businesses account for sales of vehicles with a guaranteed minimum resale value, such as sales to certain rental car company customers, as operating leases.
These types of vehicle sales expose us to residual value risk and require that we estimate on an ongoing basis what the residual values of the vehicles will be at contract maturity and, if necessary,
record impairment charges or increase future depreciation expense.
Collectibility of Financial Services Receivables
We have sales financing and finance lease receivables, which consist primarily of retail installment sales contracts, finance lease
contracts, and revolving wholesale facilities secured by passenger cars, trucks, vans and buses. Our Daimler Financial Services segment holds all of our sales financing and finance lease receivables.
We are exposed to collectibility risk because consumers or dealers may default on these receivables or become insolvent and the resale prices of the passenger cars, trucks, vans and buses securing
these receivables may be insufficient, after selling costs, to realize the full carrying amount of the receivables. Once the collectibility risk materializes, we adjust our allowance for credit
losses.
40
Our
policy is to maintain an allowance for credit losses which represents our best estimate of the amount of losses incurred in our sales finance and finance lease receivables portfolio
as of the balance sheet date. We base our estimate on a systematic, ongoing review and evaluation of our credit risk. In performing this evaluation, we take into account our historical loss
experience, the size and composition of our portfolios, current economic events and conditions, the estimated fair value and adequacy of collateral and other pertinent factors. When we evaluate
homogeneous loan portfolios, we do that collectively, primarily taking into consideration historical loss experience, adjusted for the estimated impact of current economic events and conditions,
including fluctuations in the fair value and adequacy of collateral. We evaluate other receivables, such as wholesale receivables and loans to large commercial borrowers, for impairment individually
considering the fair value of available collateral. Increases in the allowance for credit losses reduce the net
carrying value of the balance sheet line item "Receivables from financial services" with a corresponding charge to the statement of income (loss) line item "Cost of sales."
We
believe that the accounting estimate related to the establishment of the allowance for credit losses is a critical accounting estimate because:
-
(1)
-
the
evaluation is inherently judgmental and requires the use of significant assumptions about expected customer default rates and collateral values, which
may be susceptible to significant change; and
-
(2)
-
changes
in the estimates about the allowance for credit losses could have a material effect on our financial statements.
Since
the risk associated with the collectibility of sales financing and finance lease receivables is exclusively attributable to our Daimler Financial Services segment, the following
information refers to that segment.
We
consider the allowance for credit losses to be adequate based on information currently available and several assumptions, including the following average credit loss rates for our
entire financing and leasing portfolio at December 31, 2009: 0.7% for the Mercedes-Benz Cars segment, 1.4% for the Daimler Trucks segment, 0.7% for the Mercedes-Benz
Vans segment and 0.2% for our Daimler Buses segment. However, additional provisions may be necessary if:
-
(1)
-
actual
credit losses exceed our estimates and assumptions about credit losses and collateral values; or
-
(2)
-
changes
in economic and other events and conditions adversely impact our estimates.
Future
credit losses may exceed current estimates, especially if economic conditions worsen in our primary markets. In addition, if economic conditions worsen, resale prices of used
vehicles and, correspondingly, the collateral value of our Daimler Financial Services segment's sales financing and finance lease receivables may
experience downward pressure. If these factors require a significant increase in the allowance for credit losses, it would negatively affect our Daimler Financial Services segment's and the Group's
future operating results.
We
are also exposed to residual value risk with respect to our finance lease receivables.
At
December 31, 2009, the sales financing and finance lease receivables shown in our consolidated balance sheet totaled €38.5 billion compared to
€42.4 billion at December 31, 2008.
The
allowance for credit losses associated with sales financing and finance lease receivables at December 31, 2009 amounted to €1.2 billion
(December 31, 2008: €0.9 billion). Cost of Sales in our consolidated statements of income (loss) for each of 2009, 2008 and 2007 include charges, net of reversals, of
€0.7 billion, €0.6 billion and €0.3 billion, respectively, resulting from adjustments in the allowance for credit losses. The total
expense relating to impairment losses on receivables from financial services amounted to €0.9 billion in 2009 (2008: €0.7 billion; 2007:
€0.5 billion).
The
recognition of provisions for credit losses has no immediate impact on our reported cash flows. The recoverability of our sales finance receivables and finance lease receivables
depends predominantly on collections of installment payments over the respective contract terms. Our liquidity and capital resources could be adversely affected if the default rate with respect to
monthly installment payments by our customers exceeds our estimates.
41
Decreases
in collateral values would generally impact our future cash flows only if customers default and we have to repossess the vehicles.
If
we sell receivables from our financial services business, for instance through asset backed security transactions, these transactions, in general, do not meet the criteria for
de-recognition under IFRS and remain on our balance sheet and are included in the figures reported above. Our exposure to credit risk for those "sold" receivables which continue to be on
our balance sheet is similar to the credit risk exposure inherent in those receivables from financial services which have not been "sold" and transferred.
Provisions for Product Warranties
We generally provide warranties on our products which cover a variety of manufacturing and other defects. We provide product warranties
for specific periods of time and/or usage of the product, and the warranties vary depending upon the type of product, the geographic location of its sale and other factors. The provisions for product
warranties cover, for example, our various contractual warranty programs, "goodwill" coverage, recall campaigns and buy-backs which could result from regulatory requirements. Our product warranties
are generally consistent with commercial practices within the automotive industry. We record a provision for the expected cost of warranty related claims when we sell the product to a third party,
when we initiate a new warranty program, or upon lease inception. The amount of the provisions for product warranties, which is included in the balance sheet line item "Provisions for other risks,"
with a corresponding charge included as a component of "Cost of sales" of our continuing operations in the statements of income (loss), reflects our estimate of the expected future costs of fulfilling
our obligations under the respective warranty plans. In addition, we state our provisions for product warranty at present value using a discount rate, which we determine quarterly. Our warranty
provisions affect all our vehicle businesses. At December 31, 2009 and December 31, 2008, our total accrued liabilities for product warranties were €5.5 billion
and €5.9 billion, respectively.
We
base our estimates for accrued warranty costs primarily on historical warranty claim experience. Sometimes we have to make cost estimates associated with the development of new
technical solutions which might require regulatory certification prior to the implementation of service actions or recall campaigns. Since we have to use a variety of assumptions when we develop
estimates for accrued warranty costs, our estimated warranty obligations can vary depending upon the assumptions used.
We
believe that the determination of our provisions for product warranties is a critical accounting estimate for each of our vehicle businesses because:
-
(1)
-
the
evaluation is inherently judgmental and requires, among others, the use of significant assumptions about future warranty claim rates, amounts of future
repair costs per vehicle, the impact of the lack of mileage or time limits in connection with recall campaigns, and the determination of discount rates used to state the provisions at present value;
and
-
(2)
-
our
provisions for warranty costs require adjustments from time to time when actual warranty claim experience differs from our estimates and the resulting
impact on our results of operations and financial condition could be material.
The
recording of the warranty provisions initially has no impact on our operating cash flows.
Our
operating cash flows change as we pay or settle actual warranty claims. Our liquidity and capital resources could be negatively impacted if actual warranty costs exceed our
estimates.
Pension Benefits
As more fully described in Note 21 to our Consolidated Financial Statements, we provide pension benefits to substantially all of
our employees. Most of our pension benefit plans are defined benefit plans. Since the end of 2008, the majority of the active employees are entitled to pay-related defined pension
benefits. Under these plans, employees earn benefits for each year of service. The benefits earned per year of service are based on the salary
42
level
and age of the respective employee. In contrast, our defined contribution pension plans specify the nature and amount of contributions we will make to the plans, not the amount of benefits that
will be paid to participants.
We
make contributions (cash or other assets) to our pension benefit plans from time to time to satisfy minimum funding requirements under applicable laws or otherwise to be able to pay
our obligations with respect to such benefits as they become due. These contributions are invested by the plans as described below. We actuarially determine our net pension benefit cost and
obligations using the projected unit credit method, and the amounts calculated depend on a variety of assumptions which primarily vary according to the economic conditions in the country in which the
pension plans are situated.
At
December 31, 2009, the present value of our defined pension benefit obligations exceeded the present value of plan assets on the Group level, which represents the"underfunded
status" of our plans, by €5.9 billion. For the year ended December 31, 2009, total net pension benefit cost was €0.5 billion. We estimate that our
total net pension benefit cost will increase by €0.1 billion in 2010.
We
determine our net pension benefit costs at the beginning of each calendar year based on various assumptions and data updates in actuarial models that measure pension benefit cost and
plan assets and liabilities. Actual results usually differ from our assumptions due to changing economic and other factors, resulting in actuarial gains or losses. In accordance with IFRS, we
accumulate these actuarial gains and losses, but do not immediately recognize them in our consolidated financial statements. Rather, we record the amortization of any such unrecognized cumulative
actuarial gains and losses in our financial statements in accordance with the "corridor approach." This approach requires partial amortization of actuarial gains and losses in the current year if
unrecognized gains and losses in the prior year exceeded ten percent of the
greater of (1) the defined pension benefit obligation under the relevant plan or (2) the fair value of the plan assets. If either of these tests is satisfied, the amortization amount we
recognize is equal to the resulting excess divided by the average remaining service period of active employees expected to receive benefits under the relevant plan. Prior service costs resulting from
retrospective plan amendments are immediately recognized in our consolidated statements of income (loss) if the underlying benefits are vested. If the benefits are not yet vested, prior service costs
are instead amortized on a straight-line basis over the average remaining period until the benefits become vested.
The
two most critical assumptions affecting the calculations of net pension benefit cost and defined pension benefit obligations are the discount rates and expected long-term
rate of return on plan assets. We evaluate these critical assumptions at least annually on a plan- and country-specific basis. Other assumptions, if they are part of the benefit formula,
such as retirement age, mortality rates, employee turnover rates, and long-term compensation rates, are evaluated also annually and updated to reflect actual historical experience and
future expectations.
For each year we calculate the present value of future cash outflows arising from our defined pension benefit plans using a discount
rate. We determine the discount rates for our defined pension benefit plans as of December 31 (the measurement date) of the relevant year based on market yields of high-quality
corporate bonds with terms and amounts of payments comparable to the terms and amounts of our projected pension payments. A lower discount rate increases the present value of defined benefit
obligations.
In
order to reflect decreases in yields on European corporate bonds in 2009, we decreased the discount rate for all significant German pension plans from a weighted average 5.9% as of
December 31, 2008, to 5.3% as of December 31, 2009. For all significant non-German plans, we increased the weighted-average discount rate slightly from 5.0% as of
December 31, 2008, to 5.1% as of December 31, 2009.
Pension plan assets are primarily comprised of equity and debt securities and, to a lesser extent, of real estate and alternative
investments. We determine the expected rate of return for pension assets after taking into account a variety of factors, including current asset allocations and expected future returns for various
asset
43
classes.
Each year, our investment committees survey banks and large asset portfolio managers regarding their expectations of future returns for relevant market indices.
Based
on projected asset returns and historical correlations and volatilities, we develop a target asset mix for our pension plans using "Modern Portfolio Theory." The weighted average
return expectation serves as an initial indicator of the expected rate of return on plan assets for each of the pension funds.
In
addition, we also consider long-term actual portfolio results and historical total market returns in our evaluation in order to reflect the long-term character
of the expected rate.
The
actual and expected rates of return on German and significant non-German plan assets for 2009, 2008, 2007 and 2006, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rates of Return
German Plans
|
|
Rates of Return
non-German Plans
|
|
|
|
Actual
|
|
Expected
|
|
Actual
|
|
Expected
|
|
2009
|
|
|
5.1
|
%
|
|
6.5
|
%
|
|
13.6
|
%
|
|
7.2
|
%
|
2008
|
|
|
(22.8
|
)%
|
|
6.5
|
%
|
|
(19.9
|
)%
|
|
7.3
|
%
|
2007
|
|
|
5.5
|
%
|
|
7.5
|
%
|
|
9.8
|
%
|
|
8.5
|
%
|
2006
|
|
|
9.5
|
%
|
|
7.5
|
%
|
|
15.6
|
%
|
|
8.5
|
%
|
For 2010, the expected rates of return on plan assets are 5.5% for German plans and 7.2% for significant non-German plans.
The following table shows the effect on the funded status of our pension benefit obligations of assumed changes in the actual rate of
return on plan assets and the discount rate at December 31, 2009:
|
|
|
|
|
|
|
(€ in millions)
|
|
2009 actual return on plan assets +/- 5 percentage points
|
|
|
+/-501
|
|
2009 discount rate +/- 25 basis points
|
|
|
+/-532
|
|
In
addition to the estimated increase in our total net pension benefit cost of €0.1 billion in 2010, the following table shows the effect on our 2010 net pension
benefit cost (before income tax benefits) of assumed changes in the discount rate and the expected long-term rate of return on plan assets:
|
|
|
|
|
|
|
(€ in millions)
|
|
2009 discount rate +/- 25 basis points
|
|
|
+/-33
|
|
2009 expected long-term rate of return on plan assets +/- 50 basis points
|
|
|
+/-51
|
|
This sensitivity analysis indicates that changes in the factors described above can have a significant effect on the funded status of our pension
benefit plans and on our future net profit (loss). For a discussion of our pension benefit plan funding obligations and their potential impact on our liquidity and capital resources, please refer to
"Liquidity and Capital Resources - Benefit Plan Obligations and Costs" in "Item 5. Operating and Financial Review and Prospects."
Useful lives of property, plant and equipment
We depreciate the cost of our long-lived assets using a systematic and rational allocation method over the period during
which the long-lived assets are expected to provide benefits (useful life), taking into consideration any expected salvage value. Our total depreciation for property, plant and equipment
from continuing operations in 2009 and 2008 was €2.4 billion and €2.2 billion, respectively.
44
We
believe that the determination of the useful lives of long-lived assets is a critical accounting estimate because:
-
(1)
-
the
determination of the useful life is inherently judgmental and requires us to use significant assumptions about the future use of our
long-lived assets; and
-
(2)
-
changes
in the estimates about the expected future life could have a material effect on our financial statements.
In
recent years, all of our industrial business segments were confronted with increasing worldwide competition. We are exposed to increasing competitive pressure, technological pressure
and pressure from international capital markets. In this environment, profitable production calls for platform strategies and the use of identical parts and modules. The need to improve cars and
components is also driven by differing legal requirements regarding, for example, emission regulations, fuel consumption (fleet consumptions), or safety regulations. Factors like these gradually
influence how we use our long-lived assets for our development, procurement and production over time.
In
addition, in order to improve the profitability of our businesses, we have made or initiated far-reaching changes over recent years regarding the strategy and organization
of our Group. We also modified our investment policies and redesigned our strategies regarding procurement, development and production to streamline modules and platforms as well as development and
production processes.
These
strategic decisions have changed the nature and use of our long-lived assets and may continue to do so in the future. For example, in light of these changes we
reassessed and adjusted the useful lives of long-lived assets in 2007 in order to reflect the changing business environment. Due to this change in estimate, profit before income taxes in
2007 increased by €0.9 billion.
Capitalized development costs
Under International Accounting Standard (IAS) 38, development costs incurred for products under development must be capitalized and
recognized as intangible assets if the conditions for capitalization defined in IAS 38 are met. These conditions include the commercial and technical feasibility to use the products under
development and the probability to generate future economic benefits with each of those products. Capitalized development costs include all direct costs and allocable overhead.
We
believe that the accounting of capitalized development costs requires critical accounting estimates because:
-
(1)
-
the
identification of the development projects which meet the conditions for capitalization as an intangible asset, the determination of the development
costs to be capitalized on such projects, the subsequent impairment testing and the amortization method and period over which the capitalized development costs are amortized is inherently judgmental
and requires us to use significant assumptions about the status and future use of our products under development and the associated cash flows; and
-
(2)
-
changes
in the estimates about expected future cash flows to be generated with the products under development including assumptions about the
life-cycle of the products could have a material effect on our financial statements.
We
continuously assess our development projects to identify those projects which meet the conditions of an intangible asset and determine the amounts to be capitalized as intangible
assets. This assessment is based on the nature and status of each product and estimated future cash flows to be generated from such project under development which require capitalization. If we cannot
reliably demonstrate that a project will generate probable future economic benefits to us, which means the project does not meet our minimum return requirements, we do not capitalize the development
costs for such project and expense the costs as incurred. We determine, at least annually, the recoverability of capitalized development costs for projects which have not been completed because
45
the
products to be developed are not yet available for sale. We amortize capitalized development costs for projects which have generated products that are already available for sale on a systematic
basis over the expected product life cycle (2 to 10 years).
Impairment of Cash Generating Units and Equity Method Investments
According to the requirements of IAS 36, we test the carrying amounts of the assets of our cash-generating units at
least once a year. These assets include goodwill, capitalized development costs for projects which have not yet been completed, property, plant and equipment and intangible assets with a definite
useful life. In addition, we may be required to test the assets of a cash-generating unit for impairment if there is an indication that its assets have been impaired.
Whenever
we test the respective cash-generating unit for impairment, we have to determine the recoverable amount. Impairment reviews are based on the most current projections
of future cash flows which we use to manage and control our businesses. The most significant judgments in determining recoverable amounts are the assumptions and estimates used to determine cash
inflows and outflows (for example, retail prices, sales volume and production costs) generated by the respective cash generating unit, the number of years on which the cash flow projections are based,
the terminal value and the discount rate used to calculate the present value of the recoverable amounts.
With
respect to our equity method investments, we evaluate the recoverable amounts of these investments when there is objective evidence that our investments are impaired. Examples of
such objective evidence that an investment may be impaired include, but are not necessarily limited to, significant financial difficulty of an
investee or, in the case of publicly traded equity securities of an investee, a significant or prolonged decline of the fair value of the investment, based on the quoted stock price.
When
objective evidence of a potential impairment is present, we evaluate the recoverable amount of the equity method investment by comparing the carrying amount of the investment to the
higher of the estimated fair value or value in use. We believe that the determination of the recoverable amount of our significant equity method investments is a critical accounting estimate because
the determination involves significant judgment regarding the future business prospects of these investments. We record an impairment charge on an equity method investment if the recoverable amount is
below the carrying amount of the investment. At December 31, 2009, our investments accounted for using the equity method amounted to €4.3 billion compared to
€4.2 billion at December 31, 2008. Based on the carrying amount, the most significant investments we recorded at December 31, 2009 relate to our investments in
EADS (€3.1 billion) and Tognum (€0.7 billion).
Since
the carrying amounts of our intangible assets and other assets tested for impairment within our cash generating units and our equity method investments are significant, an
impairment charge could in either case be material to our operating results in the year the impairment charge is recorded.
With
respect to our accounting policies regarding the measurement of equipment under operating lease and sales financing and finance lease receivables, please refer to the respective
accounting policies above.
OPERATING RESULTS
At the beginning of 2009, we made some changes to our segment reporting. We now separately present the business activities of
Mercedes-Benz Vans and Daimler Buses, which we previously reported as part of Vans, Buses, Other. We include our other business interests which we previously reported as part of Vans,
Buses, Other, consisting primarily of our equity investments in EADS and Tognum, in our reconciliation from total segment EBIT to Group EBIT, together with corporate items and eliminations of
intersegment transactions. We have adjusted 2008 and 2007 figures to reflect this change in segment reporting. From August 4, 2007 through June 3, 2009, the date of redemption of our
remaining non-controlling equity interest in Chrysler Holding LLC, the reconciliation from total segment EBIT to Group EBIT also included our proportionate share in the results of
Chrysler Holding and other Chrysler-related gains and losses. For further information, please refer to the discussion under the
46
heading
"Introduction" in "Item 4. Information on the Company." Following the adjustment of our segment reporting, we now report five segments: (1) Mercedes-Benz Cars,
(2) Daimler Trucks, (3) Mercedes-Benz Vans, (4) Daimler Buses and (5) Daimler Financial Services.
In
May 2008, the IASB published Improvements to IFRS which included an amendment to IAS 16 "Property, Plant and Equipment." Pursuant to this amendment, proceeds from the sale of
assets held for rental that occur in the ordinary course of activities must be recognized as revenue. We have applied the revised standard since January 1, 2009 and have adjusted the 2008 and
2007 revenue and cost of sales figures in the discussion below to make them comparable.
Information about EBIT
We measure the performance of our operating segments through a measure of segment profit (loss) which we refer to as "EBIT" in our
management and reporting system.
EBIT
comprises gross profit; selling and general administrative expenses; research and non-capitalized development costs; other operating income and expense; our share of
profit (loss) from investments accounted for using the equity method, net; and other financial income (expense), net. The segment information presented below does not include amounts relating to
discontinued operations and prior period figures of reported segments reflect the activities of continuing businesses only.
Our
consolidated EBIT is the sum of the EBITs of our segments, adjusted for reconciling items. Reconciling items include, as described above, gains and losses from our other business
interests not allocated to one of our reportable segments (primarily EADS and, through June 3, 2009, Chrysler), elimination entries made in the context of consolidation, and corporate items
which are not part of, or allocated to, any of our segments. Please also refer to Note 31 to our Consolidated Financial Statements for information on how we determine EBIT.
Overview of Business Segment Revenue and EBIT
You should read the following discussion in conjunction with Notes 1 and 31 to our Consolidated Financial Statements and the
discussions under the headings "Critical Accounting Policies" in this Item 5 and "Risk Factors" in "Item 3. Key Information."
The
following table presents revenue and EBIT for each of our five segments during the last three fiscal years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
(€ in millions)
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
Revenue
|
|
EBIT
1
|
|
Revenue
|
|
EBIT
1
|
|
Revenue
|
|
EBIT
1
|
|
Mercedes-Benz Cars
|
|
|
41,318
|
|
|
(500
|
)
|
|
47,772
|
|
|
2,117
|
|
|
52,430
|
|
|
4,753
|
|
Daimler Trucks
|
|
|
18,360
|
|
|
(1,001
|
)
|
|
28,572
|
|
|
1,607
|
|
|
28,466
|
|
|
2,121
|
|
Mercedes-Benz Vans
|
|
|
6,215
|
|
|
26
|
|
|
9,479
|
|
|
818
|
|
|
9,341
|
|
|
571
|
|
Daimler Buses
|
|
|
4,238
|
|
|
183
|
|
|
4,808
|
|
|
406
|
|
|
4,350
|
|
|
308
|
|
Daimler Financial Services
|
|
|
11,996
|
|
|
9
|
|
|
11,964
|
|
|
677
|
|
|
10,967
|
|
|
630
|
|
Total Segment revenue and EBIT
|
|
|
82,127
|
|
|
(1,283
|
)
|
|
102,595
|
|
|
5,625
|
|
|
105,554
|
|
|
8,383
|
|
Reconciliation
|
|
|
(3,203
|
)
|
|
(230
|
)
|
|
(4,126
|
)
|
|
(2,895
|
)
|
|
(3,985
|
)
|
|
327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
78,924
|
|
|
(1,513
|
)
|
|
98,469
|
|
|
2,730
|
|
|
101,569
|
|
|
8,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1
-
EBIT
includes expenses from compounding of provisions (2009: €1,003 million; 2008: €429 million; 2007:
€444 million).
The segment discussions below describe in more detail the specific factors which affected segment EBIT.
We
computed the percentages in the following discussion using exact euro amounts and numbers. Some of those percentages may, therefore, not reflect the ratio between the rounded amounts
presented below.
47
2009 Compared With 2008
Daimler Group
Group revenue decreased 20% from €98.5 billion in 2008 to €78.9 billion in 2009,
primarily as a result of lower unit sales of all our vehicle segments, partially offset by currency translation and transaction effects. You can find further details on the development of revenue of
each segment in the segment discussions below.
Cost of sales was €65.6 billion in 2009 compared to €76.9 billion in 2008, a 15%
decrease. Cost of sales developed in line with revenue. Cost savings achieved through permanent and temporary cost reductions, including personnel costs, and efficiency improvements, significantly
contributed to adjusting cost of sales in line with the drop in revenue. The gross margin, which is gross profit (revenue minus cost of sales) divided by revenue, fell from 21.9% in 2008 to 16.9% in
2009.
Selling expenses decreased from €9.2 billion to €7.6 billion in 2009, primarily as a
result of lower unit sales due to the economic downturn. Despite a number of steps taken to reduce costs and increase efficiency, selling expenses as a percentage of revenue were slightly higher than
in the prior year (9.6% in 2009 compared to 9.3% in 2008).
General administrative expenses declined 20% to €3.3 billion (2008: €4.1 billion). The
decline was primarily the result of strict cost management. As a percentage of revenue, general administrative expenses amounted to 4.2%, the same as in the prior year.
Research and non-capitalized development expenses were €2.9 billion in 2009 compared to
€3.1 billion in 2008. The reduction in these expenses partially reflects lower personnel and material expenses as a result of cost-cutting actions. Research and
non-capitalized development expenses as a percentage of revenue were 3.7% in 2009 compared to 3.1% in 2008. The Group's total research and development spending, including both capitalized
and expensed items, decreased by €0.2 billion (2009: €4.2 billion; 2008: €4.4 billion).
Other operating income was €0.7 billion compared to €1.2 billion in 2008. In 2009, other
operating income included a €0.1 billion refund of social security contributions as a result of reduced work hour arrangements at our production plants in Germany. Other
operating income in 2008 included a gain of €0.4 billion realized on the sale of our real estate properties at Potsdamer Platz.
Other
operating expense reached €0.5 billion, the same level as in the prior year. For additional information on the composition of other operating income and
expense, please refer to Note 5 to our Consolidated Financial Statements.
In 2009, our share of profit (loss) from investments accounted for using the equity method amounted to a net profit of
€0.1 billion (2008: a net loss of €1.0 billion). The year-to-year improvement mainly reflects the fact that our 2008 share was
burdened by a proportionate loss of €1.4 billion relating to Chrysler. Our proportionate share
48
in
the net results of EADS decreased from a profit share of €0.2 billion in 2008 to a profit share of €0.1 billion in 2009.
Other financial income (expense), net
Other financial expense, net, declined from €2.2 billion in 2008 to €1.3 billion in 2009.
In 2009, other financial expense included €0.3 billion of expenses related to agreements entered into in the context of the disposal of our remaining 19.9% interest in Chrysler
and charges arising from a decrease in discount rates for discounting non-current
provisions. Other financial expense in 2008 reflected charges of €1.7 billion arising from the impairment of loans extended to Chrysler entities and other Chrysler-related
assets.
Interest income (expense), net
In 2009, we had interest expense, net, of €0.8 billion compared to interest income, net, of
€0.1 billion in 2008. The main reason for the change was the fact that we maintained higher gross liquidity and increased our financing liabilities. In 2009, interest income
derived from investments was significantly lower than in 2008, while refinancing costs went up as a result of higher risk premiums on borrowings, primarily in the first half of the year. Lower
expected returns on pension plan assets also reduced the net interest result.
Income tax expense amounted to €0.3 billion in 2009 compared to €1.1 billion in 2008. We
computed income tax expense in 2009 based on a pre-tax loss of €2.3 billion and in 2008 based on pre-tax income of €2.8 billion.
The effective tax rate was -15% in 2009 and 39% in 2008.
The
negative effective tax rate in 2009 was mainly the result of impairments recognized on deferred tax assets at non-German subsidiaries and additional tax expense arising
from tax assessments and re-evaluations of tax provisions regarding prior years. The impairments and the additional tax expense offset the tax benefit resulting from our pre-tax loss.
The
effective tax rate in 2008 was approximately 9% higher than the expected tax rate. This was partially the result of impairments recognized on deferred tax assets at
non-German subsidiaries. In addition, pre-tax income in 2008 included losses related to our investments in Chrysler, not all of which were tax deductible. For further
information on income taxes, please refer to Note 8 to our Consolidated Financial Statements.
In 2009, we had a net loss from continuing operations of €2.6 billion compared to a net profit of
€1.7 billion in 2008. The change is primarily a reflection of a significant drop in EBIT (2009: €(1.5) billion; 2008: €2.7 billion).
In 2009, we had a net loss of €2.6 billion compared to net profit of €1.4 billion in
2008. These amounts include a net loss attributable to the shareholders of Daimler AG (excluding minority interests) of €2.6 billion in 2009 and a net profit of
€1.3 billion in 2008. Basic and diluted earnings per share in 2009, for losses attributable to shareholders of Daimler AG, amounted to €(2.63) and
€(2.63), respectively, compared to basic and diluted profit per share of €1.41 and €1.40, respectively, in 2008.
In 2009, we recorded Group EBIT of €(1.5) billion compared to €2.7 billion in 2008.
The
main reason for the decline was a significant drop in revenue due to markedly lower unit sales in all vehicle segments as a result of the global economic downturn. Cost savings
achieved through permanent and
49
temporary
cost reductions and efficiency improvements realized through ongoing optimization programs could only partially compensate for the drop in revenue.
EBIT
in 2009 was also negatively affected by charges related to the realignment and repositioning of the business operations of our subsidiaries Mitsubishi Fuso Truck and Bus Corporation
(€0.2 billion) and Daimler Trucks North America (€0.1 billion), expenses relating to the sale of non-automotive assets subject to finance
leases and the valuation of such assets currently available for sale (€0.1 billion), additional expenses arising from agreements entered into in the context of the disposal of
our remaining 19.9% equity interest in Chrysler (€0.3 billion), and, to a lesser degree, currency effects. In addition, lower interest rates for discounting
non-current provisions (€0.4 billion) and a significantly higher annual contribution to the German Pension Protection Association
(€0.2 billion) contributed to the drop in EBIT.
EBIT
in 2008 reflected losses and impairment charges of €3.2 billion related to our investments in Chrysler, impairment charges recognized on the reassessment of
residual values (€0.5 billion), and expenses for the repositioning of Daimler Trucks North America (€0.2 billion). Gains from the sale of our real estate
properties at Potsdamer Platz (€0.4 billion), the transfer of EADS shares (€0.1 billion), and an amendment of a defined pension benefit plan
(€0.1 billion) had a positive effect on Group EBIT in 2008.
The
table above shows the business segment contributions to Group EBIT and the reconciliation from segment EBIT to Group EBIT.
Reconciliation from total segment EBIT to Group EBIT in 2009 primarily reflects Chrysler-related expenses. As a result of agreements
entered into in 2009 among Daimler, Chrysler, Cerberus and the Pension Benefit Guaranty Corporation in the context of the disposal of our remaining 19.9% equity interest in Chrysler, we incurred total
expenses of €0.4 billion, partially offset by gains resulting from the legal transfer of Chrysler's international sales activities to Chrysler LLC and valuation
adjustments regarding Chrysler-related assets (a total of €0.1 billion). For additional information regarding our investment in Chrysler and the related transactions, please
refer to Note 2 to our Consolidated Financial Statements. In 2008, Group EBIT was impacted by losses and impairment charges of €3.2 billion related to our investments in
Chrysler. On the plus side, we recorded a gain in 2008 of €0.4 billion on the sale of our real estate properties at Potsdamer Platz.
The
reconciliation to Group EBIT also includes our proportionate share in EADS's net results, which amounted to €0.1 billion in 2009 compared to
€0.2 billion in 2008. The lower earnings contribution in 2009 was partially the result of negative currency effects. In 2008, we realized a gain of
€0.1 billion from the transfer of EADS shares.
In
connection with recent developments in the negotiations regarding EADS's A400M military transporter program, EADS announced on February 17, 2010 that it will update the A400M
provision in its 2009 consolidated financial statements. This update will require certain critical assumptions and financial assessments to be made which were not finalized when our supervisory board
approved Daimler's 2009 Consolidated Financial Statements on March 1, 2010. Any future increase in that provision would negatively affect EADS's actual 2009 results and would also negatively
affect Daimler's proportionate share in EADS's results which will be reflected in Daimler's consolidated interim financial statements for the first three months of 2010. The resolution of this matter
could have a material negative effect on Daimler's earnings in the first quarter of 2010.
The
reconciliation further reflects corporate expenses of €0.2 billion (2008: €0.4 billion) and eliminations of transactions within the
Group (2009: income of 0.2 billion; 2008: income of €10 million). Corporate expenses in both years include expenses arising from workforce reductions in the Group's
administrative functions and expenses incurred in connection with legal proceedings that were not attributable to our segments.
50
Segment Discussions
In 2009, both revenue and unit sales of our Mercedes-Benz Cars segment were 14% lower than in 2008. Revenue decreased from
€47.8 billion in 2008 to €41.3 billion in 2009, while total unit sales fell to 1,093,905 units compared to 1,273,013 units in 2008. The decrease in
revenue and unit sales primarily reflects the decline in demand caused by the global economic downturn. Sales of the S-Class (including Maybach) were 39% lower in 2009 compared to 2008,
and sales of our C-Class declined 28%, partially as a result of strong price competition in that segment, but also due to the repositioning of the CLK coupe as an E-Class coupe
in May 2009. Sales of the A-/B-Classes went down 14% compared to 2008, while unit sales of smart at 113,937 were 18% lower than in 2008. A 23% increase in unit sales of the
E-Class as a result of the full availability of the new models of the E-Class sedan, coupe and station wagon (since March, May and November 2009, respectively) and a 4%
increase in unit sales of the ML-/R-/G-/GL-/GLK-Classes to
167,153 vehicles due to the first time full availability (since the end of 2008) of the all new GLK-Class somewhat softened the impact of the sales declines experienced by our other
vehicle classes.
In
Germany, 2009 revenue of Mercedes-Benz Cars was 11% lower than in 2008, while unit sales declined 10%. With revenue of €11.0 billion, Germany
continues to be the most important market for our Mercedes-Benz Cars segment, representing 27% of the segment's worldwide revenue and 27% of total unit sales. In the other Western European
countries, revenue of Mercedes-Benz Cars decreased 20% from €13.4 billion in 2008 to €10.7 billion in 2009. Overall unit sales in those
countries were down 19%.
In
the United States, unit sales in 2009 were down 19% compared to 2008, while revenue declined 21% from €8.6 billion in 2008 to
€6.8 billion in 2009. Revenues in China increased significantly by 29% to €4.1 billion in 2009 as a result of solid economic growth and resulting high
demand for our passenger cars. In the rest of Asia (excluding China), revenue went down 16% compared to the prior year, reaching €3.7 billion in 2009, and unit sales declined
25%. The smaller decline in revenue was due to a more favorable model mix, especially increased demand for the new E-Class models, improved net pricing, and higher option equipment rates.
In
2009, EBIT of our Mercedes-Benz Cars segment was €(0.5) billion compared to €2.1 billion in 2008. The segment's return on sales
(calculated as EBIT divided by revenue) was (1.2)% (2008: 4.4%). The sharp drop in earnings was primarily due to significantly weaker demand for cars and the resulting drop in unit sales and a less
favorable product mix notwithstanding higher sales of the new E-Class models. The continued intense competition and pricing pressure in most of our primary sales markets and expenses
incurred for research and development work to reduce CO2 emissions of our vehicles further burdened 2009 EBIT. In addition, we incurred expenses of €0.1 billion as a result of
an agreement with McLaren Group Ltd. to change the form of our cooperation. Please refer to Note 34 to our Consolidated Financial Statements for further information. We also incurred
charges in 2009 of €0.1 billion in connection with residual-value guarantees provided to our dealers. The positive impact of cost savings achieved through permanent and
temporary cost reductions, efficiency improvements, the reassessment of product related provisions, and lower prices for raw materials and, to a smaller degree, favorable hedging rates could only
partially compensate for the significant drop in revenue.
In
2008, impairment charges of €0.5 billion related to the reassessment of residual values of leased vehicles negatively affected EBIT, while an amendment of a
defined benefit plan resulted in past service income (before income taxes) of €0.1 billion.
Revenue of our Daimler Trucks segment was €18.4 billion in 2009, a 36% decline compared to 2008. The drop in
unit sales, from 472,074 units in 2008 to 259,328 in 2009, was even more pronounced at 45%. The large decline in unit sales was mainly the result of significant sales declines in Western Europe, the
NAFTA region, the Middle East, Eastern Europe and Latin America. We also had large sales declines in Japan and Indonesia, which are key markets for our subsidiary Mitsubishi Fuso Truck and Bus
Corporation (MFTBC). The disproportionately
51
smaller
decrease in revenue was primarily due to the fact that in almost all of our main markets revenue derived from vehicle maintenance and spare parts sales was not as strongly affected by the
global economic downturn as vehicle unit sales. Currency translation effects also had a positive impact on revenue.
In
the NAFTA region, revenue went down 28% from €6.7 billion in 2008 to €4.8 billion in 2009, while total unit sales declined 37% from
97,313 to 61,700 units. The drop in unit sales mainly reflects a further decline in demand in the United States commercial vehicle markets due to weak economic conditions. Revenue generated in the
United States represents 21% of total 2009 revenue achieved by our Daimler Trucks segment. The disproportionate development of revenue and unit sales in the NAFTA region was the result of favorable
currency translation effects and the fact that revenue derived from our spare parts and vehicle maintenance business did not decline at the same rate as revenue from vehicle sales.
In
Germany, revenue of Daimler Trucks decreased 35% from €5.7 billion to €3.7 billion. Unit sales were down 40%, from 41,597 in 2008 to
24,951 units in 2009. Revenue in Western Europe (excluding Germany) decreased 46% from €4.0 billion to €2.2 billion in 2009, while unit sales fell 57%,
from 45,145 in 2008 to 19,335 units in 2009. Revenue generated in Germany and in the remaining Western European market represent 20%, and 12%, respectively, of the segment's worldwide revenue.
Sales
in Asia (including Australia and the Middle East) decreased 44% from 164,765 vehicles in 2008 to 92,998 in 2009, while revenue was down 31% at €4.2 billion
in 2009 (2008: €6.1 billion). Lower unit sales in almost all Asian markets, but mainly in the Middle East, Japan and Indonesia, led to this development. Revenue in Asia
decreased at a lower rate than unit sales, mainly due to currency translation effects. Revenue generated in Asia represents 23% of total 2009 revenue achieved by Daimler Trucks worldwide. Unit sales
in Japan, which consisted primarily of sales by MFTBC, declined 45% from 42,035 in 2008 to 23,102 units in 2009, while revenue decreased 22% from €3.1 to
€2.4 billion. The declines in unit sales and revenue generally reflect the continuing weakness of the Japanese economy and a recognizable trend of persistently lower truck
demand in Japan. The disproportionately smaller decrease in revenue was primarily the result of the appreciation of the
Japanese yen against the euro and the fact that revenues derived from our spare parts and vehicle maintenance businesses did not decline at the same rate as revenue from vehicle sales.
In
Latin America, unit sales were 37% lower in 2009 compared to 2008 (37,069 units and 58,951 units, respectively). Revenue in that region decreased 32% from
€3.0 billion in 2008 to €2.1 billion in 2009. The somewhat smaller decrease in revenue was due to a more favorable product mix.
With
EBIT of €(1.0) billion and a return on sales (calculated as EBIT divided by revenue) of (5.5)%, the results posted by the Daimler Trucks segment were significantly
below the prior year (EBIT of €1.6 billion and return on sales of 5.6%). Lower unit sales of trucks caused by a drop in global demand for transportation services had a
substantial negative effect on earnings in 2009. In addition, unfavorable shifts in market and product mix also had a negative effect on 2009 EBIT. Charges of €0.2 billion in
connection with the plan presented in May 2009 regarding a comprehensive repositioning of the business operations of MFTBC and charges of €0.1 billion (2008:
€0.2 billion) relating to actions initiated in the prior year with respect to the repositioning of Daimler Trucks North America also contributed to the drop in EBIT. Positive
effects on earnings in 2009 resulted from the adjustment of personnel expenses and further efficiency improvements.
Primarily as a result of the global economic downturn, revenue and unit sales of our Mercedes-Benz Vans segment decreased
significantly. Compared to revenue of €9.5 billion in 2008, revenue in 2009 fell 34% to €6.2 billion. Revenue in 2009 includes
€0.6 billion from the production of a van for Volkswagen (2008: €0.9 billion). Worldwide unit sales of Mercedes-Benz Vans decreased 42% from
287,198 units in 2008 to 165,576 units in 2009. The sales of the vans produced for Volkswagen are not included in the unit sales of Mercedes-Benz Vans.
52
In
Germany, revenue of Mercedes-Benz Vans decreased 22% from €3.6 billion in 2008 to €2.8 billion in 2009 while unit sales
decreased 21% from 74,036 units in 2008 to 58,185 units in 2009. Revenue in Western Europe (excluding Germany) decreased 40% from €3.7 billion in 2008 to
€2.2 billion in 2009, and unit sales in that region decreased 47%, from 133,101 units in 2008 to 69,949 units in 2009. Revenue generated in Germany and in
the remaining Western European markets represent 45% and 36%, respectively, of the segment's worldwide revenue in 2009.
In
the NAFTA region revenue dropped sharply from €0.5 billion in 2008 to €0.1 billion in 2009, a decline of 79%. Unit sales decreased at an
even higher rate of 88%, from 21,487 units in 2008 to 2,591 units in 2009. The discontinuation of a general distributor arrangement with Chrysler regarding the distribution of our vans and, to a
lesser degree, a decline in demand due to economic conditions were the primary contributors to this decline. The disproportionately smaller decline in revenue was due to improved pricing and the fact
that revenues derived from our spare parts and vehicle maintenance businesses did not decline at the same rate as revenue from vehicle sales.
In
2009, the Mercedes-Benz Vans segment recorded EBIT of €26 million compared to prior year EBIT of €0.8 billion. The segment's
return on sales (calculated as EBIT divided by revenue) was 0.4%, compared to 8.6% in 2008. Significantly lower unit sales in all geographic markets as a result of general economic conditions were
largely responsible for this development. Although Mercedes-Benz Vans implemented extensive countermeasures, these measures only partially moderated the decline in earnings.
Revenue of our Daimler Buses segment decreased 12% from €4.8 billion in 2008 to
€4.2 billion in 2009.
Worldwide
unit sales reached 32,482 units, a 20% decline compared to the high sales level in 2008 (40,591 units). The disproportionately smaller decrease in revenue was primarily the
result of a comparatively smaller decline in unit sales of complete buses in the European bus markets.
In
Western Europe, revenue decreased 8% from € 2.3 billion in 2008 to €2.1 billion in 2009. Revenue in Germany, our home
market, fell 4% to €1 billion. As a result of the weakening bus markets in Western Europe, unit sales decreased 7% to 7,219 units in 2009 (2008: unit sales of 7,766), while unit
sales in Germany declined 9% to 2,831 units in 2009. Especially unit sales of coaches were affected by weaker market conditions, while unit sales of city buses increased 7% compared to the prior year.
Revenue in Western Europe represents 50% of total 2009 revenue of Daimler Buses.
In
Latin America, revenue decreased from €0.9 billion in 2008 to €0.7 billion in 2009 after a strong revenue development in 2008, mainly
reflecting the lower market demand in that region. Sales of chassis decreased by 16% from 19,467 units in 2008 to 16,286 units in 2009.
In
the NAFTA region, revenue decreased 3% to €0.7 billion in 2009 and unit sales went down 44% from 6,997 units in 2008 to 3,899 units in 2009. Revenue in the
United States and Canada increased from €0.4 billion in 2008 to €0.5 billion in 2009, primarily as a result of higher unit sales of Orion buses, including
a significant number of hybrid models. In Mexico, revenue went down 46% due to a significant drop in unit sales from 6,057 units in 2008 to 2,736 units in 2009 as a result of general economic
conditions.
Daimler
Buses achieved EBIT of €0.2 billion, representing a return on sales (calculated as EBIT divided by revenue) of 4.3% despite the worldwide economic crisis
(2008: EBIT of €0.4 billion and return on sales of 8.4%). Earnings decreased primarily due to lower unit sales, reflecting the general market development. In addition, higher
research and development expenses and unfavourable hedging rates further burdened EBIT in 2009, partially offset by efficiency improvements.
53
In 2009, revenue of our Daimler Financial Services segment amounted to €12.0 billion, approximately the same
level as in 2008. Revenue in 2009 reflects favorable currency translation effects and a €0.1 billion increase in revenue derived from the resale of vehicles coming off lease.
Revenue
derived from activities of our Daimler Financial Services segment in the NAFTA region (including Capital Services USA) was €6.0 billion, representing 50%
of total segment revenue in 2009, which is comparable to last year's share of 48%. In Germany, Daimler Financial Services achieved revenue of €2.8 billion, or 24% of total
revenue, compared to €2.7 billion, or 22% of total revenue, in 2008. Revenue derived from financial services activities in Western Europe (excluding Germany) amounted to
€1.8 billion, or 15% of total revenue, compared to €2.3 billion, or 19% of total revenue, in 2008.
In
2009, the Daimler Financial Services segment originated new leasing and finance contracts with a total value of €25.1 billion compared to
€29.5 billion in 2008, a 15% decrease. At December 31, 2009, our Daimler Financial Services segment managed a portfolio of leasing and finance contracts of
€58.3 billion, an 8% decrease over the comparable portfolio of €63.4 billion managed at December 31, 2008. Excluding currency translation effects,
the portfolio value in 2009 was 9% lower than in the prior year. The decline in new leasing and finance contracts and the lower portfolio value primarily reflect the decrease in unit sales in all our
vehicle segments.
In
2009, Daimler Financial Services had EBIT of €9 million (2008: €0.7 billion). The negative earnings trend was primarily the result of
increased cost of credit risk. The decline in 2009 EBIT also reflects charges of €0.1 billion relating to the sale of non-automotive assets subject to finance leases
and the valuation of such assets currently available for sale. Efficiency improvements had a positive effect on EBIT in 2009.
2008 Compared With 2007
Daimler Group
Group revenue in 2008 was €98.5 billion, 3.1% lower than in the prior year (2007:
€101.6 billion). Further details on the development of revenue for each segment are provided under the segment discussions below.
Cost of sales was €76.9 billion in 2008 compared to €77.6 billion in 2007, a 0.9%
decrease. The decrease in cost of sales, which was less than the decrease in revenue, is mainly the result of lower sales of passenger cars, lower expenses due to efficiency gains and currency
translation effects. The gross margin decreased from 23.6% in 2007 to 21.9% in 2008.
Selling expenses increased from €9.0 billion in 2007 to €9.2 billion in 2008. As a
percentage of revenue, selling expenses represented 9.3% in 2008 compared to 8.8% in 2007. The increase is partially a reflection of impairments recognized on trade receivables and expenses relating
to the measures initiated in 2008 to optimize and strengthen the business operations of Daimler Trucks North America (€0.1 billion).
General administrative expenses increased 2.5% to €4.1 billion (2007: €4.0 billion). This
increase was primarily due to expenses relating to the measures initiated in 2008 to optimize and strengthen the business operations of Daimler Trucks North America
(€0.1 billion). Higher expenses for consulting and IT services were compensated by cost savings achieved through ongoing efficiency programs. As a percentage of revenue, general
administrative expenses were 4.2%, an increase of 0.2%, mainly due to lower revenue in 2008.
54
Research and non-capitalized development expenses amounted to €3.1 billion in 2008 (2007:
€3.2 billion), or 3.1% as a percentage of revenue in 2008 and 2007. The Group's total research and development spending, however, including both capitalized and expensed items,
increased considerably over last year (2008: €4.4 billion; 2007: €4.1 billion).
Other operating income increased to €1.2 billion (2007: €0.7 billion), of which
€0.4 billion relate to gains realized in 2008 on the sale of our real estate properties at Potsdamer Platz. In 2007, other operating income included a gain of
€0.1 billion from the sale of real estate.
Other
operating expense decreased to €0.5 billion (2007: €0.7 billion). We had lower expenses in connection with legal proceedings in 2008.
You
can find further details about the composition of other operating income and other operating expense in Note 5 to our Consolidated Financial Statements.
Share of profit (loss) from investments accounted for using the equity method, net
In 2008, our share of profit (loss) from investments accounted for using the equity method was a net loss of
€1.0 billion (2007: a net profit of €1.1 billion). The main reason for the sharp decline was our proportionate share in the net loss of Chrysler (2008: a
net loss of €1.4 billion; 2007: a net loss of €0.4 billion). The decrease was also partially due to the fact that 2007 included significantly higher gains
in connection with the transfer of portions of our equity interest in EADS (2008: €0.1 billion; 2007: €1.5 billion). Our proportionate share in the net
profit of EADS improved to €0.2 billion in 2008 (2007: €13 million).
Other financial income (expense), net
Other financial expense, net, increased from €0.2 billion in 2007 to €2.2 billion in
2008. A €1.7 billion portion of this increase reflects the impairment of loans and other Chrysler-related assets. In addition, the prior-year result included a gain
of €0.1 billion from the mark-to-market valuation of derivative transactions entered into in connection with the transfer of portions of our equity
interest in EADS.
Interest income (expense), net
In 2008, we had interest income, net, of €0.1 billion (2007: €0.5 billion). The decline
of the net interest result is due to higher interest expense and lower interest income caused by our lower average liquidity in the year 2008. Other factors with a negative effect in 2008 were lower
expected returns on pension plan assets and higher expenses from the compounding of our pension obligations.
Profit before income taxes in 2008 amounted to €2.8 billion compared to €9.2 billion in
2007.
Income tax expense was €1.1 billion in 2008 compared to €4.3 billion in 2007. We computed
income tax expense in 2008 based on pre-tax income of €2.8 billion and in 2007 based on pre-tax income of €9.2 billion. The
effective tax rate was 39% in 2008 and 47.1% in 2007. In general, the effective tax rate reflects the composition of our earnings.
The
effective tax rate in 2008 was approximately 9% higher than the expected tax rate. This is partially the result of impairments recognized on deferred tax assets at
non-German subsidiaries. In addition, pretax income in 2008 includes losses related to our investments in Chrysler, not all of which were tax deductible. In the prior year,
55
the
high effective tax rate (47.1%) and high income tax expense reflect a €2.2 billion impairment of deferred tax assets mostly held by Chrysler entities in prior years which
have been allocated to the Daimler Group following the transfer of a majority interest in the Chrysler activities. We recognized an impairment of these deferred tax assets when we determined that the
parameters for realizing future tax
benefits associated with those tax assets had changed as a result of the transfer of the Chrysler activities. For further information on income taxes, please refer to Note 8 to our Consolidated
Financial Statements.
Net profit from continuing operations amounted to €1.7 billion (2007: €4.9 billion). The
decrease is primarily a reflection of lower EBIT of €2.7 billion (2007: €8.7 billion) and lower income tax expense.
In 2008, we recorded a net loss of €0.3 billion from discontinued operations (2007: loss of
€0.9 billion). The loss in 2008 is primarily related to the reimbursement of costs to our Chinese joint venture, Beijing Benz-DaimlerChrysler Automotive, which were
incurred as a result of the transfer of a majority interest in the Chrysler activities in 2007. For further information, please see Note 2 to our Consolidated Financial Statements. The prior
year loss of €0.9 billion includes the operating result, net interest result and income taxes of the Chrysler activities until August 3, 2007, as well as the loss from
the deconsolidation of the Chrysler activities (€0.8 billion).
Net profit in 2008 was €1.4 billion compared to €4.0 billion in 2007. These amounts
include net profit attributable to the shareholders of Daimler AG (excluding minority interests) of €1.3 billion in 2008 and €4.0 billion in 2007,
respectively. Basic and diluted earnings per share in 2008, for profit attributable to shareholders of Daimler AG, amounted to €1.41 and €1.40, respectively, compared
to basic and diluted earnings per share of €3.83 and €3.80, respectively, in 2007.
In 2008, we recorded EBIT of €2.7 billion, a decrease of 69% compared to 2007
(€8.7 billion).
The
decrease in Group EBIT was mainly the result of losses and impairment charges totalling €3.2 billion related to our investments in Chrysler and weaker
operating results of Mercedes-Benz Cars and, to a lesser extent, Daimler Trucks. The decrease in EBIT was also partially due to the fact that 2007 EBIT included significantly higher gains
in connection with the transfer of portions of our equity interest in EADS (2008: €0.1 billion; 2007: €1.6 billion). Daimler Financial Services, the
Mercedes-Benz Vans segment and the Daimler Buses segment all achieved higher operating results than in the prior year.
The
table above shows the business segment contributions to Group EBIT and the reconciliation from segment EBIT to Group EBIT.
Reconciliation from total segment EBIT to Group EBIT in 2008 included our proportionate share in EADS's net results which had a
positive effect on 2008 Group EBIT of €0.2 billion (2007: €13 million). The year-to-year increase in EADS's results was primarily
due to the fact that EADS's 2007 results were burdened with higher expenses in connection with the Power8 restructuring program and delivery delays for the Airbus A400M. The reconciliation to 2008
Group EBIT also included a gain of €0.1 billion from the sale of EADS shares, while the reconciliation to 2007 Group EBIT included a gain of €1.6 billion
related to the transfer of portions of our equity interest in EADS. Our 19.9% share in Chrysler's net loss reduced Group EBIT by €1.4 billion in 2008. In 2007, our proportionate
share in the results of Chrysler Holding LLC was a loss of €0.4 billion. In 2008, we also recorded
56
charges
of €1.8 billion as a result of the impairment of loans and other assets relating to Chrysler. For additional information regarding our investment in Chrysler, please
refer to Note 2 to our Consolidated Financial Statements. The reconciliation to 2008 Group EBIT further included a gain of €0.4 billion from the sale of the Group's real
estate properties at Potsdamer Platz.
In
addition, the reconciliation from total segment EBIT to 2008 Group EBIT includes corporate expenses of €0.4 billion, compared to
€0.9 billion in the prior year, and eliminations of transactions within the Group (2008: income of €10 million; 2007: income of
€35 million). Corporate expenses in both years mainly related to expenses arising from workforce reductions in the Group's administrative functions (New Management Model) and
expenses incurred in connection with legal proceedings that were not attributable to the segments.
Segment Discussions
Revenue of the Mercedes-Benz Cars segment decreased 9% from €52.4 billion in 2007 to
€47.8 billion in 2008, while total unit sales went down 2% from 1,293,184 units to 1,273,013 units in 2008. The decrease in revenue primarily reflects weaker unit sales in all
classes except the C-Class and the smart which, after the overall drop-off in demand that began in the third quarter of 2008, could no longer compensate for the sales declines
in the other classes. The disproportionate development of revenue and unit sales was in part the result of a shift towards smaller vehicles in most markets. Currency effects and, to a lesser degree,
increased price competition also contributed to the decline in revenue. Unit sales of the E-Class declined 25%, in part because this model is approaching the end of its life cycle. Sales
of the S-Class (including Maybach) were 13% lower than the 2007 level, sales of the ML-/R-/G-/GL-/GLK- Classes declined 10% in
2008 compared to 2007, and sales of the A-/B- Classes went down 9%. Strong sales performance of the C-Class sedan and station wagon launched in 2007 resulted in a
16% increase in C-Class unit sales. Unit sales of smart at 138,957 were 35% higher in 2008 than in 2007 (103,068), in part due to the introduction of the new smart fortwo in the U.S.
market.
In
Germany, 2008 revenue of Mercedes-Benz Cars was 9% lower than in 2007, while unit sales declined 3%. With revenue of €12.3 billion, Germany
continues to be the most important market for this segment, representing 26% of the segment's worldwide revenue and unit sales. In the other Western European countries, revenue of
Mercedes-Benz Cars decreased 13% from €15.5 billion in 2007 to €13.4 billion in 2008. Overall unit sales in these countries were down 8%.
In
the United States, unit sales in 2008 were virtually the same as in 2007, however, revenue declined 19% from €10.6 billion in 2007 to
€8.6 billion in 2008. Revenue in Japan fell 28% to €1.3 billion in 2008, mainly due to lower unit sales, while revenue in Asia (excluding
Japan) went up 33% compared to the previous year, reaching €6.3 billion. The revenue increase in Asia (excluding Japan) developed largely in line with unit sales, which were 39%
higher in 2008 than in 2007.
In
2008, Mercedes-Benz Cars recorded EBIT of €2.1 billion, compared to EBIT of €4.8 billion in 2007. The segment's return on
sales (calculated as EBIT divided by revenue) was 4.4% (2007: 9.1%). Earnings in the first six months of 2008 showed a positive development, also reflecting higher unit sales in emerging markets. The
overall drop off in demand in the NAFTA region and major European markets beginning in the third quarter of 2008 had a significant negative effect on EBIT. The significant weakening of the world
economy in the second half of 2008 also forced us to reassess the residual values of leased vehicles which resulted in impairment charges of €465 million. In the second half of
the year, we also experienced increased price competition and a less favorable model mix. Additional factors that burdened the year-to-year development of EBIT were currency
effects and increased raw material prices. These negative effects were only partially offset by further efficiency improvements. For a description of the risk sharing arrangement between Daimler
Financial Services and our vehicle segments, please refer to "Critical Accounting Policies Recovery of Carrying Amount of Equipment on Operating Leases."
57
An
amendment of a defined benefit plan resulted in past service income (before income taxes) of €84 million in 2008.
Revenue of our Daimler Trucks segment in 2008 was virtually unchanged at €28.6 billion (2007:
€28.5 billion). Unit sales developed in line with revenue, showing a slight increase of 1% from 467,667 units in 2007 to 472,074 units in 2008. Higher unit sales in Brazil, the
Middle East and Indonesia largely compensated for lower unit sales in the NAFTA region (mainly the United States and Canada) and Japan.
In
the NAFTA region, Daimler Trucks revenue went down 12% from €7.6 billion in 2007 to €6.7 billion in 2008. Total unit sales in that region
declined 15% from 114,049 units to 97,313 units. This development mainly reflects a general decline in demand in the United States due to deteriorating market conditions. Unit sales in the United
States represent 17% of our total 2008 truck sales. The disproportionate development of revenue and unit sales in the NAFTA region was primarily the result of a favorable shift in model mix.
In
Germany, revenue of Daimler Trucks increased 1% from €5.6 billion to €5.7 billion. Unit sales went up at the same rate from 41,006 units
in 2007 to 41,597 units in 2008. Revenue in Western Europe (excluding Germany) decreased 3% from €4.1 billion in 2007 to €4.0 billion in 2008. Unit sales
in that region were also down 3%, from 46,659 units in 2007 to 45,145 units in 2008. Unit sales in Germany represented 9%, and the remaining Western European market 10%, of our total 2008 Daimler
Trucks vehicle sales.
Sales
in Asia (including Australia and the Middle East) increased 8% from 153,162 units in 2007 to 164,765 vehicles in 2008, while revenue was up 14% at
€6.1 billion in 2008 (2007: €5.4 billion). Higher unit sales in Indonesia and, to a lesser extent, the Middle East more than offset a significant decrease
in unit sales in Japan. Revenue in Asia increased at a higher rate than unit sales, mainly due to currency translation effects. Unit sales in Asia represented 35% of total 2008 Daimler Trucks sales.
Unit
sales in Japan, which consisted primarily of sales by MFTBC, declined 22% from 53,992 units in 2007 to 42,035 units in 2008, while revenue decreased 3% from
€3.2 billion to €3.1 billion. The declines in unit sales and revenue generally reflect the weakening economy in Japan. The appreciation of the Japanese
yen against the euro primarily contributed to the disproportionate development of unit sales and revenue.
In
Latin America, sales increased 11% from 53,017 units in 2007 to 58,951 units in 2008. Revenue in that region increased 25% to €3.0 billion in 2008. The increase
in unit sales and revenue resulted from strong demand, particularly in Brazil. Rising inflation and the resulting price increases in Brazil were primarily responsible for the disproportionate increase
in revenue.
In
2008, our Daimler Trucks segment achieved EBIT of €1.6 billion (2007: €2.1 billion). The segment's return on sales was 5.6%, compared
with 7.5% in the prior year. The decline in EBIT was mainly the result of lower unit sales in the NAFTA region and, to a smaller degree, Japan due to the ongoing difficult economic situation in those
markets. In addition, higher raw material prices and currency effects negatively affected EBIT in 2008. The measures initiated in 2008 to optimize and strengthen the business operations of Daimler
Trucks North America resulted in expenses of €0.2 billion. We expect to incur further expenses in connection with these measures in 2009 and 2010. Higher truck sales in Brazil
and Asia, improved product positioning and efficiency improvements positively affected EBIT.
EBIT
in 2007 included a gain on the sale of real estate properties in Japan (€0.1 billion) and adjustments to pension and healthcare plans
(€0.1 billion).
Revenue of our Mercedes-Benz Vans segment increased from €9.3 billion in 2007 to
€9.5 billion in 2008, a 1% increase. Revenue in each of 2008 and 2007 includes €0.9 billion from the production of a van for Volkswagen.
58
Worldwide
unit sales of Mercedes-Benz Vans decreased 1% from 289,073 units in 2007 to 287,198 units in 2008. The sales of the vans produced for Volkswagen are not included in
the unit sales of Mercedes-Benz Vans.
In
Germany, revenue of Mercedes-Benz Vans increased 5% from €3.5 billion in 2007 to €3.6 billion in 2008. Unit sales went up 1%
from 73,262 units in 2007 to 74,036 units in 2008. Revenue in Western Europe (excluding Germany) decreased 2% from €3.8 billion in 2007 to €3.7 billion in
2008. Unit sales in that region at 133,101 units were close to the prior year volume (2007: 132.550 units). Revenue achieved in Germany and in the remaining Western European markets represent 38%, and
39%, respectively, of the segment's total 2008 revenue.
In
the NAFTA region revenue decreased by 17% from €0.6 billion in 2007 to €0.5 billion in 2008. Unit sales also decreased by 25% from 28,476
units in 2007 to 21,487 units in 2008. The decrease in revenue was partially offset by price increases which we implemented to compensate for an unfavorable exchange rate development.
Our
Mercedes-Benz Vans segment was able to improve its operating results as a result of strong revenue over the year as a whole, although market conditions deteriorated
towards the end of the year. In 2008, Mercedes-Benz Vans had an EBIT improvement of 43% (2008: EBIT of €0.8 billion; 2007: EBIT of
€0.6 billion) and returns on sales of 8.6% and 6.1%, respectively.
Daimler Buses recorded an 11% improvement in revenue from €4.4 billion in 2007 to
€4.8 billion in 2008.
Worldwide
unit sales went up 4% from 39,049 units in 2007 to 40,591 units in 2008. The disproportionate development of revenue and unit sales was primarily the result of increased sales
of high-end buses and coaches in Western Europe.
Revenue
in Western Europe increased 7% from €2.1 billion in 2007 to €2.3 billion in 2008, while unit sales in that region increased 12% to
7,766 buses and coaches in 2008 compared to 6,953 units in 2007, mainly as a result of a higher share of complete buses. Revenue in Western Europe represented 48% of worldwide 2008 revenue achieved by
the Daimler Buses segment. Revenue in Germany, our home market, increased 12% to €1 billion and unit sales went up 11% to 3,099 units compared to 2,793 in 2007.
In
Latin America (excluding Mexico), revenue increased 5% to €0.9 billion in 2008. Sales of bus chassis in that region, however, decreased by 3% from 20,072 units
in 2007 to 19,467 units in 2008.
In
the NAFTA region, revenue showed different developments. Revenue from the sale of Orion buses and Setra coaches in North America increased from €0.3 billion in
2007 to €0.4 billion in 2008, an increase of 14%. This increase was mainly the result of higher sales of Orion buses. In Mexico, revenue increased 20% due to higher unit sales
(6,057 units in 2008 compared to 5,317 units in 2007).
Our
Daimler Buses segment was able to improve its operating results from EBIT of €0.3 billion in 2007 to €0.4 billion in 2008. Returns on
sales were 8.4% in 2008 and 7.1% in 2007, respectively.
Revenue of our Daimler Financial Services segment increased from €11.0 billion in 2007 to
€12.0 billion in 2008, a 9% improvement. This increase was primarily the result of a larger portfolio of leasing and finance contracts in 2008, partially offset by currency
translation effects.
Activities
of our Daimler Financial Services segment in the NAFTA region (including Capital Services USA) contributed €5.7 billion, or 48%, of total segment
revenue in 2008, which is in line with last year's level of 48%. Revenue generated in Germany was €2.7 billion, or 22%, of total revenue compared to
€2.5 billion, or 23%, of total revenue in 2007. Revenue derived from financial services activities in Western Europe (excluding Germany) amounted to
€2.3 billion, or 19%, of total revenue compared to €2.3 billion, or 21%, in 2007.
In
2008, the Daimler Financial Services segment originated new leasing and finance contracts with a total value of €29.5 billion compared to
€27.6 billion in 2007, a 7% increase. At December 31, 2008, our Daimler
59
Financial
Services segment managed a portfolio of leasing and finance contracts of €63.4 billion, a 7% increase over the comparable portfolio of
€59.1 billion managed at December 31, 2007. Excluding currency translation effects, the portfolio value in 2008 was 9% higher than in the prior year.
EBIT
of Daimler Financial Services was €0.7 billion, compared to €0.6 billion in 2007. The increase in EBIT was primarily the result of the
larger portfolio of leasing and finance contracts, partially offset by a significant increase in cost of risk (mainly credit risk), especially in the last quarter of 2008.
LIQUIDITY AND CAPITAL RESOURCES
Due to the financial crisis which continued into 2009, we increased our liquidity in 2009 and maintained it at a conservative high
level. We continued to have adequate access to capital markets and credit from financial institutions in 2009. We faced somewhat higher borrowing costs when we accessed the capital markets in the
early part of the year, but our borrowing costs decreased again over the course of the year. In case of a renewed negative trend in the financial markets, we could be faced with a renewed increase in
borrowing costs and lower funding flexibility. In particular, this could negatively affect the competitiveness and profitability of our financial services business or even result in a limitation of
the financial services we offer, thereby negatively affecting our vehicle sales.
We
expect the funds available from operations, external borrowings, and securitization transactions and other sources to be sufficient to satisfy our working capital needs and to service
our debt in the foreseeable future. We also believe that our liquidity and capital resources give us adequate flexibility to manage our planned capital spending programs and are appropriate to address
short-term changes in business conditions.
In
2009, our main sources of cash were operations, the capital markets and external borrowings from financial institutions. We also used increased cash deposits at the
Mercedes-Benz Bank and, to a lesser degree, the sale of finance receivables in securitization transactions as further funding sources. For further information on the sale of finance
receivables, please refer to the discussion below under the heading "Analysis of Cash Flow Statement" and to Note 23 to our Consolidated Financial Statements.
We
used the funds raised in 2009 primarily to finance our lease and sales financing business and to meet the capital expenditure requirements of our industrial businesses. We typically
finance our lease and sales financing activities with a high proportion of debt.
In
the ordinary course of our business we issue bonds and commercial paper, execute securitization transactions or borrow money from financial institutions in various currencies to cover
our funding needs. The high borrowing costs we faced at the beginning of 2009 as a result of the tight credit markets decreased over the course of the year as the markets improved.
Liquidity
refers to the liquid financial assets we have available to fund our business operations and pay for near term obligations. Liquid financial assets consist of cash and cash
equivalents as well as short-term securities, such as money market investments.
The
following table shows our liquid financial assets as of the end of each of the last three years:
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December 31,
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|
|
2009
|
|
2008
|
|
2007
|
|
|
|
(€ in billions)
|
|
Cash and cash equivalents with an original maturity of three months or less
|
|
|
9.8
|
|
|
6.9
|
|
|
15.6
|
|
Securities and other liquid assets
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|
6.3
|
|
|
1.1
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
Liquidity
|
|
|
16.1
|
|
|
8.0
|
|
|
17.1
|
|
|
|
|
|
|
|
|
|
60
In light of the financial crisis we increased our liquidity in 2009 and maintained it at a conservative high level. For a description of the factors contributing to this increase, please
refer to the discussion of the year-to-year development of our cash flows presented below. Total liquidity in 2007 was significantly higher due to payments received in the
context of the transfer of a majority interest in the Chrysler activities.
We
hold our liquidity primarily in euros and U.S. dollars. As of December 31, 2009, euro denominated liquid assets represented 69% and U.S. dollar denominated liquid assets
represented 19% of total liquid financial assets. Liquid financial assets as a whole were 12.5% of total assets compared to 6.1% at the end of 2008.
As
a result of the global operations of our lease and sales financing business and our automotive businesses, we are exposed to risks associated with fluctuations in foreign currency
exchange rates and interest rates, which may adversely affect our businesses, operations and reported financial results and cash flows. We manage these risks primarily by matching the terms and source
of the funding with our funding needs where appropriate and to a lesser degree by hedging through derivative financial instruments, primarily interest rate swaps and cross currency interest rate
swaps. For information about our market risk exposure, including risks associated with currency exchange rates and interest rates, and our related hedging activities, please refer to "Item 11.
Quantitative and Qualitative Disclosures About Market Risk" and to Note 30 to our Consolidated Financial Statements.
Analysis of Cash Flow Statement
In May 2008, the IASB published Improvements to IFRS which included an amendment to IAS 16 "Property, Plant and Equipment."
Pursuant to this amendment, proceeds from the sale of assets held for rental that occur in the ordinary course of activities must be recognized as revenue. Cash flows resulting from these sales must
be shown under cash flows from operating activities in accordance with an amendment to IAS 7 "Statement of Cash Flows." As a result of these changes, cash flows from vehicles on operating
leases of our Daimler Financial Services business are now presented in the cash flow statement in "Cash provided by (used for) operating activities" together with the cash flows from vehicles on
operating leases of our industrial business. To the same extent "Cash provided by (used for) investing activities" changed in the opposite direction due to this reclassification. In connection with
the mandatory reclassification, we also decided to reclassify changes in receivables from financial services from "Cash provided by (used for) investing activities" to "Cash provided by (used for)
operating activities." With this additional reclassification we harmonized the presentation of the entire sales financing and leasing business in our consolidated statements of cash flows within "Cash
provided by (used for) operating activities."
We
have applied these mandatory and voluntary reclassifications as of January 1, 2009 and have adjusted 2008 and 2007 cash flow figures and the related discussions below to
reflect these changes.
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December 31,
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2009
|
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2008
|
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2007
|
|
|
|
(€ in billions)
|
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Net cash provided by operating activities
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|
|
10,961
|
|
|
(786
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)
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7,146
|
|
|
thereof from discontinued operations
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|
|
|
|
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|
|
1,593
|
|
Net cash provided by (used for) investing activities
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|
|
(8,950
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)
|
|
(4,812
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)
|
|
26,479
|
|
|
thereof from discontinued operations
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|
|
|
|
|
|
|
|
(1,404
|
)
|
Net cash provided by (used for) financing activities
|
|
|
1,057
|
|
|
(2,915
|
)
|
|
(25,204
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)
|
|
thereof from discontinued operations
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|
|
|
|
|
|
|
|
(2,655
|
)
|
Our
cash flow statement includes the Chrysler activities only from January 1, 2007 through August 3, 2007. Accordingly, the discussion below comparing cash flow in 2008 and
2007 reflects cash flow effects arising from the Chrysler automotive activities and the related Chrysler financial services business in the NAFTA region only for that period.
61
Cash provided by operating activities
in 2009 was
€11.0 billion, €11.8 billion above the 2008 level of €(0.8) billion. The following factors primarily contributed to this
increase:
-
-
a decrease of €5.1 billion in inventories and the balance of trade receivables and trade
liabilities compared to an increase of €3.9 billion in 2008; and
-
-
a decrease of €4.9 billion in equipment on operating leases and receivables from our Financial
Services Business compared to a €2.4 billion increase in 2008, primarily due to a decline in new leasing and financing contracts as a consequence of lower unit sales of the
automotive segments; and
-
-
lower income taxes paid in 2009 (€0.4 billion) compared to 2008
(€0.9 billion);
The
positive factors described above were partially offset by:
-
-
lower earnings before interest and taxes in 2009, especially at our segments Mercedes-Benz Cars and Daimler
Trucks;
-
-
higher contributions to our pension and other post-retirement benefit funds
(€0.6 billion in 2009 compared to €0.1 billion in 2008);
-
-
a €0.5 billion increase in net interest payments in the industrial business. The main reason for
the change was the fact that we maintained higher gross liquidity and increased our financing liabilities. In 2009, interest income derived from investments was significantly lower than in 2008, while
refinancing costs went up as a result of higher risk premiums on borrowings, primarily in the first half of the year.
Cash used for investing activities
was €9.0 billion in 2009 compared to €4.8 billion in
2008. This change is mostly due to net cash outflows from the acquisition and sale of securities of €5.4 billion in 2009 compared to a net cash inflow of
€0.2 billion in 2008. This increase of net cash outflows was partially offset by lower expenditures for intangible assets and property, plant and equipment.
The
2008 figures also reflect cash outflows for the acquisition of shares in Tognum (€0.7 billion) and Kamaz (€0.2 billion), including
amounts related to separately identifiable intangible assets, and from the drawdown by a subsidiary of Chrysler Holding LLC of US$1.5 billion (€1.0 billion) of
second lien loans committed by Daimler in 2007 in connection with the transfer of a majority interest in the Chrysler activities. These outflows were largely offset by the proceeds from the sale of
real-estate properties at Potsdamer Platz and from the transfer of EADS shares, which were €1.3 billion and €0.4 billion, respectively.
Cash provided by financing activities
was €1.1 billion in 2009, compared to cash used for financing activities of
€2.9 billion in 2008. This development was primarily due to the capital contribution of €1.95 billion from Aabar Investments PJSC in March 2009 and cash
outflows in 2008 in connection with our share buy-back programs (€4.2 billion). In addition, dividend payments decreased from €2.0 billion in 2008 to
€0.7 billion in 2009. These factors were partially offset by a net cash outflow in 2009 from the net repayment of borrowings (€0.2 billion). Repayments of
borrowings more than offset an increase in customer deposits at
the Mercedes-Benz Bank (€6.6 billion). In 2008, we had a net cash inflow from borrowings of €3.2 billion.
Cash and cash equivalents
with an original maturity of three months or less increased by €2.9 billion from
€6.9 billion in 2008 to €9.8 billion in 2009.
Total liquidity
, which includes cash and cash equivalents and long-term investments and securities, increased from
€8.0 billion in 2008 to €16.1 billion in 2009. This development is in line with our intent to maintain a conservative high level of liquidity.
62
Cash used by operating activities
in 2008 was €(0.8) billion,
€7.9 billion below the 2007 level of €7.1 billion. The following factors primarily contributed to this decrease:
-
-
lower earnings before interest and taxes in 2008, especially at our Mercedes-Benz Cars segment;
-
-
an increase of €3.9 billion in inventories and the balance of trade receivables and trade
liabilities compared to an increase of €1.3 billion in 2007.
The
negative factors described above were partially offset by:
-
-
lower contributions to our pension and other post-retirement benefit funds
(€0.1 billion in 2008 compared to €0.7 billion in 2007);
-
-
lower income taxes paid in 2008 (€0.9 billion) compared to 2007
(€1.0 billion);
-
-
a €0.7 billion decrease in net interest payments in the industrial business, primarily reflecting
higher payments in 2007 due to the early redemption of long-term debt.
Cash
provided by operating activities in 2007 included €1.6 billion attributable to discontinued operations, primarily the Chrysler Financial Services business
through August 3, 2007.
Cash used for investing activities
was €4.8 billion in 2008 compared to cash provided by investing activities of
€26.5 billion in 2007. This change is mostly due to:
-
-
net cash inflows in 2007 of €22.6 billion attributable to the transfer of the Chrysler activities.
In addition to the payment received from Cerberus for its investment in Chrysler Holding LLC (€0.9 billion), cash inflows in 2007 include proceeds from the repayment of
inter-company receivables related to the refinancing of the Chrysler activities (€24.7 billion), which were partially offset by the reduction in cash and cash equivalents due to
the deconsolidation of such activities (€3.0 billion);
-
-
lower net cash inflows from the acquisition and sale of securities (2008: €0.2 billion; 2007:
€4.6 billion);
-
-
lower proceeds from the transfer of EADS shares, which in 2008 were €0.4 billion compared to
€3.6 billion in the prior year;
-
-
the drawdown by a subsidiary of Chrysler Holding LLC in 2008 of US$1.5 billion
(€1.0 billion) of second lien loans committed by Daimler in 2007 in connection with the transfer of a majority interest in the Chrysler activities; and
-
-
cash outflows in 2008 for the acquisition of shares in Tognum (€0.7 billion) and Kamaz
(€0.2 billion), including amounts related to separately identifiable intangible assets.
The
factors described above were partially offset by:
-
-
lower expenditures for property, plant and equipment, solely attributable to the inclusion in 2007 of the Chrysler
activities; and
-
-
the inclusion of proceeds from the sale of real-estate properties at Potsdamer Platz in 2008
(€1.3 billion) , while cash provided by investing activities in 2007 included proceeds from the sale of properties at Mitsubishi Fuso Truck and Bus Company
(€1.0 billion).
Cash
provided by investing activities in 2007 included a cash outflow of €1.4 billion attributable to discontinued operations.
Cash used for financing activities
was €2.9 billion in 2008, compared to cash used for financing activities of
€25.2 billion in 2007. This development was due to increased borrowings as a result of lower cash provided by operating activities and less cash provided by investing
activities. These factors were partially offset by increased
63
cash
outflows in connection with our share buy-back programs (2008: €4.2 billion; 2007: €3.5 billion) and the fact that 2007 included cash inflows in
connection with the exercise of stock options (€1.6 billion).
Cash
used for financing activities in the year 2007 included €2.7 billion of cash used for financing activities attributable to discontinued operations.
Cash and cash equivalents
with an original maturity of three months or less decreased by €8.7 billion from
€15.6 billion in 2007 compared to €6.9 billion in 2008.
Total liquidity
, which includes cash and cash equivalents and long-term investments and securities, decreased from
€17.1 billion in 2007 to €8.0 billion in 2008. Total liquidity in 2007 was significantly higher due to payments received in the context of the transfer of
a majority interest in the Chrysler activities.
Principal Sources of Funding
Our policy is to maintain a high degree of flexibility in our funding activities by using a broad variety of financial instruments.
Depending on our cash needs and market conditions, we issue bonds and commercial paper or, depending on market availability, execute securitization transactions in various currencies. In addition, we
use credit facilities in our day-to-day financial management.
In
accordance with the guidelines established by the Bank for International Settlements, we separate our corporate treasury function organizationally, physically and in its technical
systems from the administrative functions of settlement, financial accounting and controlling.
The following table presents the carrying values of our primary financing instruments, which are notes and bonds, commercial paper,
borrowings from financial institutions, and deposits from our direct banking business which we conduct through the Mercedes-Benz Bank in Germany, as of December 31, 2009 and 2008:
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December 31,
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|
2009
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2008
|
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(€ in billions)
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Notes and bonds
|
|
|
30.1
|
|
|
34.1
|
|
Commercial paper
|
|
|
0.2
|
|
|
2.3
|
|
Liabilities to financial institutions
|
|
|
13.0
|
|
|
14.6
|
|
Deposits from direct banking business
|
|
|
12.6
|
|
|
6.0
|
|
As
of December 31, 2009, the breakdown by currency of the financing liabilities presented in the table above was as follows: 45% in euros, 30% in U.S. dollars, 4% in Japanese yen,
3% in Canadian dollars and 3% in British pounds. In most cases, our subsidiaries borrow money in their functional currency. As of December 31, 2009, the aggregate borrowing rate of the
financing liabilities presented in the table above was 4.42%, and approximately 68% of these financing liabilities were at fixed rates.
In
both 2009 and 2008, we sold receivables in asset-backed security (ABS) transactions, which under IFRS are accounted for as secured borrowings. As of December 31, 2009 and
December 31, 2008, these transactions resulted in financing liabilities of €1.3 billion and €0.7 billion, respectively. These liabilities are not
included in the above table.
Our
total financing liabilities, which include liabilities from ABS transactions and finance lease transactions, amounted to €58.3 billion at December 31,
2009 compared to €58.6 billion at December 31, 2008. Of our total financing liabilities at December 31, 2009, €25.0 billion
were due within one year. Our total financing liabilities represented 45% of total equity and liabilities in 2009 and 44% in 2008.
64
We
typically finance our lease and sales financing activities with a high proportion of debt. As of December 31, 2009, the total carrying amount of equipment on operating leases
and receivables from our financial services business amounted to €57.0 billion, compared to €61.1 billion at the end of 2008.
In
the Euro-Market we have a €35 billion Euro-Medium Term Note Program, permitting Daimler AG and several of its subsidiaries to issue
notes and bonds. Of this program, €12.4 billion remained unused as of February 15, 2010.
In
Japan, Daimler AG has a JPY500 billion debt securities Shelf Registration Statement on file with the Ministry of Finance, of which JPY456.5 billion remained unused as of
February 15, 2010.
In
South Africa we have a ZAR18 billion Medium Term Note Program, permitting Mercedes-Benz South Africa (Proprietary) Limited to issue notes. Of this program,
ZAR9.8 billion remained unused as of February 15, 2010.
In
Mexico we have a MXN6 billion Short and Long-Term Revolving Bonds Program, permitting Daimler México, S.A. de C.V. to issue notes and
commercial paper. Of this program, MXN3.6 billion remained unused as of February 15, 2010.
The
weighted average interest rate payable under notes and bonds we held as of December 31, 2009, was 4.66%. The weighted average interest rate payable under the deposits from the
direct banking business as of December 31, 2009, was 3.24%.
We have a €10 billion multi-currency commercial paper program in the Euro-Market of which
€10 billion was unused as of February 15, 2010. In addition, we have US$3 billion and AUS$1 billion commercial paper programs of which US$3 billion
and AUS$1 billion, respectively, remained unused as of February 15, 2010.
The
weighted average interest rate payable under commercial paper we had outstanding as of December 31, 2009 was 6.48%.
At December 31, 2009 and December 31, 2008, we had short- and long-term credit lines available of
€21.1 billion and €22.7 billion, respectively, of which €8.0 billion and €8.5 billion, respectively, were
unused as of such dates. The weighted average interest rate payable under the lines of credit available to us as of December 31, 2009 was 5.04%. These credit lines include a syndicated
US$4.9 billion credit facility of Daimler AG. This facility will mature in December 2011. In October 2009, the Group successfully replaced a maturing €3 billion
364-day facility with a €3 billion 2-year-credit-facility with a syndicate of international banks. These facilities serve as a
back-up for commercial paper drawings and provide funds for general corporate purposes. At the end of 2009, both facilities remained unused.
Included
in the borrowings from financial institutions are loans of approximately €0.1 billion from the European Investment Bank (EIB) which contain a rating
trigger. If any two of the rating agencies Standard & Poor's Rating Services, Moody's Investor Service and Fitch Ratings assign a BBB/Baa2 rating to our senior unsecured long-term
debt, or any one of these three rating agencies assigns a rating lower than BBB/Baa2 to our senior unsecured long-term debt, or all rating agencies cease to publish any rating in respect
of our long-term senior unsecured debt, then EIB has the right to demand collateralization of its loans after consulting with us. For information about our current short-term
and long-term debt ratings, see the discussion below under the heading "Credit Ratings."
For
additional information regarding our liquidity, please refer to the discussion under the subheading "Liquidity Risk" in Note 30 to our Consolidated Financial Statements.
65
Standard & Poor's Ratings Services (S&P), Moody's Investors Service, Inc. (Moody's), Fitch Ratings Ltd. (Fitch)
and DBRS rate our commercial paper (short-term) and our senior unsecured long-term debt (long-term). Our current ratings are as follows:
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S&P
|
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Moody's
|
|
Fitch
|
|
DBRS
|
Short-term debt
|
|
|
A-2
|
|
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P-2
|
|
|
F2
|
|
R-1(low)
|
Long-term debt
|
|
|
BBB+
|
|
|
A3
|
|
|
BBB+
|
|
A (low)
|
Debt
ratings are assessments by the rating agencies of the credit risk associated with us and are based on information provided by us or other sources. Lower ratings generally result in
higher borrowing costs and reduced access to capital markets. Debt ratings are not a recommendation to buy, sell or hold securities. Ratings may be subject to revision or withdrawal by the rating
agencies at any time. As rating agencies may have different criteria in evaluating the risks associated with a company, you should evaluate each rating independently of other ratings.
S&P ratings.
On February 27, 2009, S&P revised its outlook on Daimler AG to negative from stable in light of the rapid
weakening of most
global automotive and commercial vehicle markets. On June 18, 2009, our long-term corporate credit rating was lowered to BBB+ from A- with a negative outlook. The
downgrade reflected a negative revision of S&P's financial forecast for Daimler, in light of the
weak conditions and prospects in the global automotive and truck markets, and weak reported company performance. The A-2 short-term rating was affirmed.
Moody's ratings.
On February 18, 2009, Moody's affirmed Daimler's A3 long-term and Prime-2 short-term
ratings and changed the outlook on the ratings to negative from stable. The negative outlook reflected the more severe decline of Daimler's key markets than Moody's had previously anticipated, both in
terms of magnitude and pace, which, according to Moody's, also resulted in a significant deterioration of the company's profitability and cash generation.
Fitch ratings.
On January 29, 2009, Fitch downgraded Daimler AG's long-term issuer default rating to BBB+ from A- with
a stable outlook. The short-term rating was affirmed at F2. Fitch revised its forecasts for Daimler in 2009 and 2010, expecting the company to exhibit much weaker profitability and cash
generation than previously anticipated by Fitch. According to Fitch, the stable outlook reflects the reasonable headroom within a BBB+ rating. On March 25, 2009, Fitch affirmed Daimler's rating
following a review of its publicly rated European car manufacturers; however, the outlook was revised to negative from stable. The rating action reflected Fitch's revised forecasts for European car
manufacturers and expectations for industry growth over the next two years.
DBRS ratings.
DBRS confirmed the long-term and short-term ratings of Daimler AG and its related companies at A (low) and
R-1 (low), respectively, on November 10, 2009. According to DBRS, the confirmation reflected Daimler's strong business profile based on its leading positions in premium automotive
vehicles and trucks. The trend on the ratings remained stable.
We may issue ordinary shares or bonds convertible into ordinary shares in the future as another potential source of funding. For
further information about the ability of our board of management, with the approval of our supervisory board, to issue new ordinary shares for cash and to issue convertible bonds and/or notes with
attached warrants, please refer to Note 19 to our Consolidated Financial Statements.
66
Contractual obligations and commercial commitments
The table below presents our on- and off-balance sheet contractual obligations as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period
|
|
Contractual Cash Obligations
|
|
Total
|
|
Less than
1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than
5 years
|
|
|
|
|
|
(€ in millions)
|
|
|
|
Long-Term Debt
|
|
43,559
|
|
|
11,238
|
|
|
21,653
|
|
|
8,089
|
|
|
2,579
|
|
Finance Lease Obligations
|
|
588
|
|
|
61
|
|
|
90
|
|
|
70
|
|
|
367
|
|
Operating Leases
|
|
2,372
|
|
|
304
|
|
|
524
|
|
|
427
|
|
|
1,117
|
|
Purchase and Investment Obligations
|
|
10,084
|
|
|
9,640
|
|
|
428
|
|
|
15
|
|
|
1
|
|
Other Long-Term Obligations
|
|
1,884
|
|
|
96
|
|
|
1,342
|
|
|
244
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Contractual Obligations
|
|
58,487
|
|
|
21,339
|
|
|
24,037
|
|
|
8,845
|
|
|
4,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
obligations are obligations to make payments or transfer assets under existing contracts. "Long-Term Debt" represents future principal payments that we need to
make to settle our financing liabilities with original maturities of more than one year. "Finance Lease Obligations" encompass the total minimum future lease payments for finance leases. "Operating
Leases" represent the total minimum future lease payments for operating leases. "Purchase and Investment Obligations" are obligations arising from future purchases for, among other things, production
materials or for future investments in property, plant and equipment. This line also includes our trade liabilities. The line "Other Long-Term Obligations" contains all other contractual
cash obligations that are not included in one of the other categories and does not include accrued liabilities. Therefore, the line "Other Long-Term Obligations" does not include our
provisions for income taxes and our provisions for other risks.
The
contractual cash obligations also do not reflect our pension benefit and other post-employment benefit obligations. For estimated future pension benefit payments, please
refer to Note 21 to our Consolidated Financial Statements. Also not reflected in the above table are irrevocable loan commitments primarily provided to customers and dealers by our Daimler
Financial Services segment. At December 31, 2009, irrevocable loan commitments amounted to €1.6 billion (2008: €1.5 billion).
Pension Benefit Obligations and Cost
The obligations and expenses recognized in our Consolidated Financial Statements for our employee pension benefit plans are not
necessarily indicative of our future obligations and cash funding requirements. The reason is that we normally experience actual results that differ from the assumptions used in the actuarial
determination of our defined pension benefit obligations and cost. We subsequently recognize the accumulated differences (the actuarial gains and losses) in our consolidated statements of income
(loss) through amortization over future periods when certain conditions are met. Please refer to the discussion above under the heading "Critical Accounting Policies Pension
Benefits" and to Note 21 to our Consolidated Financial Statements for further information regarding our pension benefit obligations, including the significant assumptions used.
Plan assets, which are primarily held in trusts and invested to provide for current and future pension benefits, partially offset our
defined pension benefit obligations. Plan assets consist of investments in equity securities, debt securities and other investments.
The
funded status of our defined pension benefit obligations expresses the extent to which plan assets are available to satisfy our obligations. At December 31, 2009, our pension
plans had an underfunded status of €5.9 billion compared to an underfunded status of €4.9 billion at December 31, 2008. The increase of the
67
underfunded
status of our pension benefit plans in 2009 is mainly attributable to the decrease of the discount rates assumed for all German plans in 2009. The fair value of our plan assets at
December 31, 2009, was slightly above the prior year level.
We do not expect to increase cash contributions to our pension plans substantially in the near term. For 2010, we intend to contribute
€0.3 billion in cash to our pension plans.
OFF-BALANCE SHEET ARRANGEMENTS
We utilize certain off-balance sheet arrangements in the course of our business. Our off-balance sheet
arrangements are contractual arrangements with unconsolidated parties under which we have or may have obligations arising from guarantees or irrevocable loan commitments.
Contingent obligations under guarantees
Obligations arising from guarantees primarily pertain to:
-
-
financial guarantees; and
-
-
guarantees under buy-back commitments.
Financial Guarantees
Financial guarantees principally represent guarantees that require us to make certain payments if a party other than a consolidated
subsidiary fails to meet its financial obligations. As of December 31, 2009, our maximum potential obligation resulting from financial guarantees was €1.5 billion (2008:
€1.9 billion).
In
2007, in connection with our transfer of a majority interest in the Chrysler activities, we agreed with the Pension Benefit Guaranty Corporation to guarantee amounts payable to
Chrysler pension plans up to an aggregate amount of US$1 billion (€0.7 billion at an exchange rate of €1=1.3919, the noon buying rate on
December 31, 2008) if such plans terminate prior to the fifth anniversary of the Chrysler transaction. Based on contractual arrangements entered into in June 2009, we paid US$200 million
into Chrysler's pension plans and will make further payments of US$200 million in each of
the next two years. The 2007 pension guarantee of US$1 billion vis-à-vis the PBGC has been replaced by a new guarantee in an amount of
US$200 million that will remain in place until August 2012. In addition, certain previously outstanding guarantees which the Group provided for the benefit of Chrysler continue to be
outstanding. At December 31, 2009, the aggregate amount of those guarantees was €0.3 billion. To secure the liabilities underlying these guarantees, Chrysler has paid
funds into an escrow account which may be used to satisfy the guaranteed obligations. At December 31, 2009, the balance remaining in the escrow account was €0.2 billion.
As
described in "Item 4. Information on the Company," we are a participant in the Toll Collect consortium. In this regard, we are contingently liable under the following financial
guarantees, which are subject to specific triggering events:
-
-
Guarantee of bank loans.
Daimler AG has guaranteed bank
loans to Toll Collect up to a maximum amount of €115 million, which represents 50% of the total amount of guaranteed bank loans available to Toll Collect GmbH.
-
-
Equity Maintenance Undertaking.
The consortium members
have an obligation to contribute, on a joint and several basis, additional funds to Toll Collect GmbH as may be necessary for Toll Collect GmbH to maintain a minimum equity (based on
German Commercial Code accounting principles) of 15% of total assets. This obligation will terminate on August 31, 2015, when the operating agreement expires, or earlier if the agreement is
terminated. A contribution obligation may arise if Toll Collect GmbH is subject to revenue reductions caused by underperformance, or if the Federal Republic of Germany is successful in claiming
68
lost
revenue for any period the system was not fully operational or if Toll Collect GmbH incurs penalties under the operating agreement. If such penalties, revenue reductions or other events
reduce Toll Collect GmbH's equity to a level that is below the minimum equity percentage agreed upon, the consortium members are obligated to fund Toll Collect GmbH's operations to the
extent necessary to reach the required minimum equity.
The
risks and obligations of Cofiroute, which holds a 10% interest in Toll Collect GmbH, are limited to €70 million. Daimler Financial Services AG and
Deutsche Telekom AG are jointly and severally obligated to indemnify Cofiroute for amounts exceeding this limitation.
While
our maximum potential future obligation resulting from the guarantee of the bank loan can be determined (€115 million), we cannot reasonably estimate the
amount or range of amounts of possible loss resulting from the guarantee in form of the equity maintenance undertaking with respect to Toll
Collect due to the uncertainties described above, although this amount could be material. Therefore, only our maximum potential future obligation resulting from the guarantee of the bank loan is
included in the 2009 €1.5 billion maximum potential obligation resulting from financial guarantees.
For
additional information regarding our involvement with Toll Collect and the contingent liabilities resulting from the involvement, please refer to Notes 27 and 28 to our
Consolidated Financial Statements.
We
also provide a number of other guarantees with smaller guaranteed amounts. These include guarantees in favor of third parties, to cover the obligations of certain of our customers or
independent dealers, in the event that these customer or independent dealers fail to meet their financial obligations towards the third parties. We provide these guarantees mainly in connection with
the sale of our products. In addition, we sometimes provide financial guarantees in connection with specific obligations of suppliers and other parties that provide products or services or lease
property, plant and equipment to us.
We sometimes issue guarantees to customers to support the sale of our vehicles. These guarantees have different terms and durations. In
an effort to encourage repeat purchases by our customers, we sometimes agree to repurchase used vehicles from them at predetermined values, provided the customers purchase new vehicles from us. Our
trade-in commitment is subject to various conditions, including limitations on mileage and age of the vehicle.
As
of December 31, 2009, provisions established in connection with these guarantees amounted to €0.1 billion and our maximum potential obligation was
€0.7 billion, the same amounts as in 2008. Residual value guarantees related to arrangements for which revenue recognition is precluded are reflected on our balance sheet and
are not discussed under this caption.
We
have also granted a number of other guarantees. We do not expect these other guarantees to have a material effect, individually or in the aggregate, on our consolidated financial
condition or results of operations.
For
additional information on our other guarantees and on our guarantees generally, please refer to Note 28 (Guarantees and Other Financial Commitments) to our Consolidated
Financial Statements.
Irrevocable loan commitments
We also have irrevocable loan commitments, which are primarily provided to customers and dealers by our Daimler Financial Services
segment. At December 31, 2009, irrevocable loan commitments amounted to €1.6 billion (2008: €1.5 billion).
69
RESEARCH AND DEVELOPMENT
Strategic Approach and Organization
To be competitive in our principal markets and to secure technological leadership, it is essential for us to develop innovative
products and technologies and to further shorten lead times in research and development. Innovation is an important element of our overall corporate strategy, and our corporate research and advanced
engineering function plays a significant role in meeting this strategic goal together with our operating businesses. In particular, key challenges for sustainable mobility will be the further
reduction of both, conventional fossil fuel-based fuel consumption and exhaust emissions, especially carbon dioxide. We follow a three-step strategy to meet these challenges:
first, further improvement of our vehicles with conventional combustion engine technology; second, realization of an efficiency gain through hybridization; and third, commercial development of fuel
cell propulsion and electric drive vehicles. It is a cornerstone of our corporate strategy to have a leading position in the area of alternative propulsion technologies.
In
addition to the corporate function for research and advanced engineering, we have development functions in each of our automotive businesses that are responsible for developing
production-ready vehicles.
Our
corporate function for research and advanced engineering
-
-
approaches research and development systematically and comprehensively, and formulates a technological strategy for our
Group as a whole in close cooperation with our operating business units;
-
-
performs research and advanced engineering tasks that cross divisional boundaries or require long lead times;
-
-
assists the product development teams of our operating units in applying new technologies in the design, development and
testing of new products and production processes;
-
-
works as a centralized forum for the exchange of new ideas and a think tank for the development of new technologies,
materials and concepts; and
-
-
performs internal R&D reviews to ensure the strategic alignment, quality, efficiency, and effectiveness of our programs.
This
function is closely integrated with the development function of Mercedes-Benz Cars.
On
the corporate level, we conduct our research and advanced engineering work in twelve strategic fields which are assigned to three primary technical areas:
-
-
Sustainable Mobility:
Combustion engines and powertrain;
alternative energy and propulsion systems; electric drive systems and high voltage batteries; powertrain electrics/electronics and controls; reliability and diagnosis.
-
-
Accident Free Driving:
Assistance systems and chassis;
cabin electrics/electronics; software technology.
-
-
Individualized Vehicles:
Vehicle concepts; human/machine
interaction; materials and manufacturing technology; product creation and information technology; infotainment and telematics; interrelationship between society and technology to identify
long-term trends.
Most
of the facilities of our centralized research and advanced engineering function are located in Germany, but we also maintain research centers in North America and Asia. These
include a research and technology center in Palo Alto, California, a research center for information and communication technology in Bangalore, India, and an R&D facility with focus on hybrid
powertrain systems in Redford, Michigan. In addition, we participate in the international exchange of new ideas and concepts through collaborations and joint ventures with world renowned research
institutes and through exchange programs for scientists and employees.
70
The
table below shows our research and development expenditures during each of the last three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
(€ in millions)
|
|
Research and development expenditures
|
|
|
4,181
|
|
|
4,442
|
|
|
4,148
|
|
|
thereof: Capitalized development costs
|
|
|
1,285
|
|
|
1,387
|
|
|
990
|
|
In
2009, research and non-capitalized development costs represented 3.7% of our total revenue. Research and development expenditures for the year 2007 do not include the
amount spent by the former Chrysler Group since we present all income and expense items of the Chrysler activities for the year 2007 as discontinued operations.
Item 6. Directors, Senior Management and Employees.
In accordance with the German Stock Corporation Act (
Aktiengesetz
), we have a
two-tier board structure with a supervisory board (
Aufsichtsrat
) and a board of management
(
Vorstand
). The two boards are separate and no individual may simultaneously serve as a member of both boards.
The
supervisory board supervises and advises our board of management and appoints and removes its members. Although it may not make management decisions, our supervisory board has
determined categories of transactions which require its approval. The board of management, which acts under the principle of collective responsibility, manages our business. It is authorized to
represent Daimler AG and to enter into binding agreements with third parties on its behalf.
Each
of our supervisory board and our management board has adopted rules of procedure providing for additional rules relating to its governance.
71
SUPERVISORY BOARD
As required by the German Stock Corporation Act (
Aktiengesetz
), the German
Co-determination Act (
Mitbestimmungsgesetz
) and our articles of incorporation, our supervisory board consists of twenty members. Ten members
are elected by our shareholders at the annual general meeting of shareholders and ten members are elected by our employees. Any member of our supervisory board elected by our shareholders may be
removed by a majority of the votes cast at a general meeting of shareholders. Any member of our supervisory board elected by our employees may be removed by three quarters of the votes cast by the
electoral delegates representing the employees.
The
supervisory board elects a chairman and a deputy chairman from among its members. Unless the board elects candidates for chairman and deputy chairman with at least a
two-thirds majority of votes cast, the representatives of the shareholders have the right to elect the chairman and the representatives of the employees have the right to elect the deputy
chairman.
At
least half of the total number of members of the supervisory board, in our case at least ten, must be present or participate in decision-making to constitute a quorum. Unless
otherwise provided for by law, the supervisory board passes resolutions by a simple majority of votes cast. In the event of a deadlock, passing a resolution requires another vote and, in the case of a
second deadlock, the chairman of the supervisory board casts the deciding vote. A member of the supervisory board is under a duty to disclose any material interest the member has in proposals,
arrangements or contracts between us and third parties.
Under
German corporate law, the maximum permissible term of office for members of a supervisory board is five years. If elected for the maximum permissible term, a member's term expires
at the end of the annual general shareholders' meeting following the fourth fiscal year after the year in which the supervisory board member was elected. Supervisory board members may be
re-elected and are not subject to a compulsory retirement age. The rules of procedure for our supervisory board, however, provide that future candidates under consideration for a full term
of office on our supervisory board should generally not exceed the age of 68 at the time of their election.
The
following individuals left our supervisory board in 2009:
-
-
Helmut Lense resigned from the supervisory board, effective December 31, 2009;
-
-
William A. Owens' term of office expired on April 8, 2009;
-
-
Dr. Mark Wössner's term of office expired on April 8, 2009.
Except
for Mr. Owens and Mr. Wössner, all shareholder representatives on the supervisory board whose terms expired in 2009 were re-elected to the
supervisory board on April 8, 2009 for the following terms:
-
-
Manfred Schneider and Lynton R. Wilson for the period until the end of the annual meeting that passes a resolution
on the ratification of the actions of the members of our board of management and our supervisory board for the 2010 financial year;
-
-
Bernhard Walter for the period until the end of the annual meeting that passes a resolution on the ratification of the
actions of the members of our board of management and our supervisory board for the 2013 financial year.
In
addition, at the annual general meeting held on April 8, 2009, our shareholders elected Gerard Kleisterlee and Lloyd G. Trotter as new members of our supervisory board
representing the shareholders, each for a period until the end of the annual meeting that passes a resolution on the ratification of the actions of the boards for the 2013 financial year.
Jörg
Spies was appointed by the local district court as a member of the supervisory board representing the employees, effective January 5, 2010, for a term ending
with the end of the annual general meeting in 2013.
72
The
term of office of Arnaud Lagardére will expire at the end of the annual general meeting of shareholders to be held on April 14, 2010. Our supervisory board has
proposed Dr. Paul Achleitner, a member of the board of management of Allianz SE, as a candidate for election to the supervisory board.
The
following table shows the name, age (as of March 3, 2010), principal occupation, and other information regarding each current member of our supervisory board. Employee
representatives are identified by an asterisk.
|
|
|
|
|
|
Dr. Manfred Bischoff,
|
|
Age:
|
|
67
|
|
Chairman
|
|
First elected (as a member of the supervisory board):
|
|
2006
|
|
|
Term expires:
|
|
2011
|
|
|
Principal Occupation:
|
|
Chairman of the Supervisory Board of Daimler AG
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
Fraport AG; Royal KPN N.V.; SMS GmbH (Chairman); UniCredit S.p.A.; Voith AG
|
Erich Klemm*,
|
|
Age:
|
|
55
|
|
Deputy Chairman
|
|
First elected:
|
|
1998
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Chairman of the General Works Council, Daimler AG and Daimler Group
|
Sari Baldauf
|
|
Age:
|
|
54
|
|
|
First elected:
|
|
2008
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Former Executive Vice President and General Manager of the Networks Business Group of Nokia Corporation
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
Hewlett-Packard Company; F.Secure Corporation; CapMan OYj, Fortum OYj
|
Dr. Clemens Börsig
|
|
Age:
|
|
61
|
|
|
First elected:
|
|
2007
|
|
|
Term expires:
|
|
2012
|
|
|
Principal Occupation:
|
|
Chairman of the Supervisory Board of Deutsche Bank AG
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
Linde AG; Bayer AG; Emerson Electric Co.
|
Prof. Dr. Heinrich Flegel*
|
|
Age:
|
|
61
|
|
|
First elected:
|
|
2003
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Director, Research Materials, Lightweight Design and Manufacturing, Daimler AG; Chairman of the Management Representative Committee, Daimler Group
|
73
|
|
|
|
|
Dr. rer. nat. Jürgen Hambrecht
|
|
Age:
|
|
63
|
|
|
First elected:
|
|
2008
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Chairman of the Board of Executive Directors of BASF SE
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
Deutsche Lufthansa AG
|
Jörg Hofmann*
|
|
Age:
|
|
54
|
|
|
First elected:
|
|
2008
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
District Manager Baden-Württemberg, German Metalworkers' Union
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
Robert Bosch GmbH; Heidelberger Druckmaschinen AG
|
Dr. Thomas Klebe*
|
|
Age:
|
|
61
|
|
|
First elected:
|
|
2003
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
General Counsel, German Metalworkers' Union
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
Daimler Luft- und Raumfahrt Holding AG; Thyssen Krupp Materials International GmbH
|
Gerard Kleisterlee
|
|
Age:
|
|
63
|
|
|
First elected:
|
|
2009
|
|
|
Term expires:
|
|
2014
|
|
|
Principal Occupation:
|
|
President and CEO of Royal Philips Electronics N.V.
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
De Nederlandsche Bank N.V.
|
Arnaud Lagardère
|
|
Age:
|
|
48
|
|
|
First elected:
|
|
2005
|
|
|
Term expires:
|
|
2010
|
|
|
Principal Occupation:
|
|
General Partner and CEO of Lagardère SCA
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
Hachette SA; EADS N.V.; EADS Participations B.V.; Hachette Livre (SA); Lagardère Services (SAS) (Chairman); Lagardère Active (SAS) (Chairman); Lagardère (SAS);
Lagardère Capital & Management (SAS); Arjil Commanditée Arco (SA); Lagardère Ressources (SAS); Lagardère Sports (SAS) (Chairman); SOGEADE Gérance (SAS); Lagardère Unlimited INC
(President); Lagardère Unlimited LLC
|
74
|
|
|
|
|
Jürgen Langer*
|
|
Age:
|
|
55
|
|
|
First elected:
|
|
2003
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Chairman of the Works Council of the Frankfurt/Offenbach Dealership, Daimler AG
|
Ansgar Osseforth*
|
|
Age:
|
|
63
|
|
|
First elected:
|
|
2008
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Manager, Mercedes-Benz Research and Development; Member of the Works Council, Sindelfingen Plant, Daimler AG
|
Valter Sanches*
|
|
Age:
|
|
46
|
|
|
First elected:
|
|
2007
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Secretary of International Relations of Confederação Nacional dos Metalúrgicos/CUT (National Confederation of Metalworkers Brazil)
|
Dr. rer. pol. Manfred Schneider
|
|
Age:
|
|
71
|
|
|
First elected:
|
|
1998
|
|
|
Term expires:
|
|
2011
|
|
|
Principal Occupation:
|
|
Chairman of the Supervisory Board of Bayer AG
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
RWE AG (Chairman); Linde AG (Chairman); TUI AG
|
Stefan Schwaab*
|
|
Age:
|
|
57
|
|
|
First elected:
|
|
2000
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Vice Chairman of the Works Council, Gaggenau Plant, Daimler AG; Vice Chairman of the General Works Council, Daimler AG and Daimler Group
|
Jörg Spies*
|
|
Age:
|
|
48
|
|
|
First elected:
|
|
2010
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Chairman of the Works Council, Headquarters, Daimler AG
|
Lloyd G. Trotter
|
|
Age:
|
|
64
|
|
|
First elected:
|
|
2009
|
|
|
Term expires:
|
|
2014
|
|
|
Principal Occupation:
|
|
Former Vice Chairman General Electric, President & CEO of the General Electric Group's Industrial division Managing Partner, Founder, GenNx360 Capital Partners
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
PepsiCo Inc.; Textron Inc.
|
75
|
|
|
|
|
Dr. h.c. Bernhard Walter
|
|
Age:
|
|
67
|
|
|
First elected:
|
|
1998
|
|
|
Term expires:
|
|
2014
|
|
|
Principal Occupation:
|
|
Former Spokesman of the Board of Management of Dresdner Bank AG
|
|
|
Other Supervisory Board Memberships/Directorships:
|
|
Bilfinger Berger AG (Chairman); Deutsche Telekom AG; Henkel AG & Co. KGaA
|
Uwe Werner*
|
|
Age:
|
|
57
|
|
|
First elected:
|
|
2007
|
|
|
Term expires:
|
|
2013
|
|
|
Principal Occupation:
|
|
Chairman of the Works Council, Bremen Plant, Daimler AG
|
Lynton R. Wilson
|
|
Age:
|
|
69
|
|
|
First elected:
|
|
1998
|
|
|
Term expires:
|
|
2011
|
|
|
Principal Occupation:
|
|
Chairman of the Board of CAE Inc.; Chancellor, McMaster University
|
The
supervisory board held eight meetings in 2009. It has established and maintains the following committees responsible for compensation, audit and nomination
matters:
-
-
The presidential committee (
Präsidialausschuss
) prepares
and recommends to the supervisory board for resolution the compensation structure and individual compensation packages for the members of our board of management. The presidential committee also makes
recommendations regarding the individual performance target achievement of our board of management members. In addition, the committee handles all matters unrelated to compensation that involve the
service contracts and other contractual arrangements with our board of management members. The current members of the presidential committee are Manfred Bischoff, Thomas Klebe, Erich Klemm and Manfred
Schneider. The presidential committee held four meetings in 2009.
-
-
The audit committee (
Prüfungsausschuss
) according to German
law nominates our independent auditors and our supervisory board recommends their appointment to the annual general meeting of our shareholders. After our shareholders appoint the independent
auditors, the audit committee formally engages them, determines their compensation and reviews the scope of the external audit. The audit committee also reviews our annual, half-year and
quarterly reports and financial statements, taking into account the results of any audits or reviews performed by the independent auditors. The committee also maintains procedures for dealing with
complaints regarding accounting, internal controls and auditing matters and for the confidential and anonymous submission of communications from company employees concerning questionable accounting
and auditing matters. The current members of the audit committee are Bernhard Walter, Clemens Börsig, Erich Klemm and Stefan Schwaab. The audit committee held seven meetings in 2009.
-
-
In accordance with the requirements of the German Corporate Governance Code, the nomination committee
(Nominierungsausschuss)
,
which consists exclusively of shareholder representatives of the supervisory board, recommends candidates as future shareholder
representatives of the supervisory board. The current members of the nomination committee are Manfred Bischoff, Manfred Schneider and Lynton R. Wilson. The nomination committee held one meeting in
2009.
As
required by the German Co-determination Act, we also have a mediation committee
(Vermittlungsausschuss)
. The committee was
not required to take action in 2009. The charge of the mediation committee is to resolve any impasse among the members of the supervisory board in the event the supervisory
76
board
is unable to achieve the two-thirds supermajority vote of its members required to appoint or dismiss a member of the board of management. The current members of the mediation
committee are Manfred Bischoff, Thomas Klebe, Erich Klemm and Manfred Schneider.
The
business address of the members of our supervisory board is the same as our business address, which is Mercedesstrasse 137/1, 70327 Stuttgart, Germany.
BOARD OF MANAGEMENT
Our articles of incorporation require our board of management to have at least two members. Our supervisory board determines the size
of the board of management and appoints its members
and deputy members, all of whom have the same rights and duties. Our board of management currently has six members.
Although
the German Stock Corporation Act permits five year terms for members of the board of management, our supervisory board decided to limit, as a general rule, appointments and
reappointments of members of the board of management to a period of three years. Once a member of our board of management has reached age 60, the supervisory board may reappoint that member only in
one-year increments, except in special circumstances. The supervisory board may remove a member of the board of management prior to the expiration of his term if he commits a serious
breach of duty, if the member is incapable of carrying out his duties or if there is a vote of no confidence by a majority of the votes cast at a general meeting of shareholders.
A
member of the board of management is under a duty to disclose any material interest the member has in proposals, arrangements or contracts between us and third parties. Significant
transactions between a member of the board of management and us or one of our subsidiaries require the approval of the supervisory board.
The
table below shows the name, age (as of March 3, 2010), and other information regarding each current member of our board of management. The table also reflects the following
changes that occurred in 2009 and 2010:
-
-
The term of office of Dr. phil. Rüdiger Grube, who was responsible for Corporate Development, ended
on April 30, 2009.
-
-
The term of office of Günther Fleig, who was responsible for Human Resources & Labor Relations
Director, ended on April 8, 2009.
-
-
Wilfried Porth became a member of the board of management, effective April 8, 2009. Wilfried Porth succeeded
Günther Fleig as the member of the board of management responsible for Human Resources & Labor Relations Director.
-
-
On December 16, 2009, our supervisory board extended the term of office of Andreas Renschler, who is responsible
for Daimler Trucks, until September 2013.
-
-
On February 17, 2010, our supervisory board extended the terms of office of Dr. Dieter Zetsche, chairman of
the board of management of Daimler AG and head of Mercedes-Benz Cars, and Dr. Thomas Weber, who is responsible for group research and Mercedes-Benz Cars development, for three
years, effective as of January 1, 2011. In addition, our supervisory board appointed Dr. Wolfgang Bernhard as a member of our board of management for a term of three years, effective
February 18, 2010. Mr. Bernhard is responsible for production and procurement Mercedes-Benz Cars and the business unit Mercedes-Benz Vans.
77
|
|
|
|
|
|
Dr.-Ing. Dieter Zetsche
|
|
Age:
|
|
56
|
|
|
First appointed:
|
|
1998
|
|
|
Term expires:
|
|
December 2013
|
|
|
Responsible for:
|
|
Chairman of the Board of Management Daimler AG and Head of Mercedes-Benz Cars
|
|
|
Prior Position:
|
|
Member of the Board of Management responsible for Chrysler Group
|
Dr. rer. pol. Wolfgang
|
|
Age:
|
|
49
|
|
Bernhard
|
|
First appointed:
|
|
2000 until 2004
|
|
|
Term expires:
|
|
February 2013
|
|
|
Responsible for:
|
|
Production and Procurement Mercedes-Benz Cars; Mercedes-Benz Vans
|
|
|
Prior Position:
|
|
Executive Vice President of Mercedes-Benz Vans
|
Wilfried Porth
|
|
Age:
|
|
51
|
|
|
First appointed:
|
|
2009
|
|
|
Term expires:
|
|
April 2012
|
|
|
Responsible for:
|
|
Human Resources & Labor Relations Director
|
|
|
Prior Position:
|
|
Executive Vice President of Mercedes-Benz Vans; Executive Vice President, CEO Mitsubishi Fuso Truck & Bus Corporation (MFTBC) Japan
|
Andreas Renschler
|
|
Age:
|
|
51
|
|
|
First appointed:
|
|
2004
|
|
|
Term expires:
|
|
September 2013
|
|
|
Responsible for:
|
|
Daimler Trucks
|
|
|
Prior Position:
|
|
Executive Vice President of smart business
|
Bodo Uebber
|
|
Age:
|
|
50
|
|
|
First appointed:
|
|
2003
|
|
|
Term expires:
|
|
December 2011
|
|
|
Responsible for:
|
|
Finance & Controlling / Daimler Financial Services
|
|
|
Prior Position:
|
|
Deputy Member of the Board of Management responsible for Financial Services
|
Dr.-Ing. Thomas Weber
|
|
Age:
|
|
55
|
|
|
First appointed:
|
|
2003
|
|
|
Term expires:
|
|
December 2013
|
|
|
Responsible for:
|
|
Group Research & Mercedes-Benz Cars Development
|
|
|
Prior Positions:
|
|
Deputy Member of the Board of Management responsible for Research & Technology
|
78
COMPENSATION
Supervisory Board
The compensation we pay to our supervisory board members is established in our articles of incorporation. Each member of our
supervisory board receives €100,000 annually for serving on the board plus reimbursement of expenses. The chairman of our supervisory board receives three times that amount. We pay
twice that amount to the deputy chairman of the supervisory board and the chairman of the audit committee, 1.5 times that amount to the chairmen of other supervisory board committees and for members
of the audit committee, and 1.3 times that amount to members of all other supervisory board committees. If a member of the supervisory board occupies more than one of these positions, we only pay the
compensation payable for the highest paying function held by that member. We only compensate a member for service on a committee if the relevant committee has held at least one meeting in the relevant
fiscal year to discharge its duties. All members of the supervisory board receive a flat fee of €1,100 for each meeting of the supervisory board and each committee meeting they attend.
Supervisory board members receive no benefits upon termination of their service.
In
light of the measures taken to reduce labor costs at Daimler AG, our supervisory board unanimously resolved that each member of the board would waive 10% of his or her respective
individual compensation, including meeting fees, during the period from May 1, 2009, through June 30, 2010.
The
following table sets forth the compensation we paid members of our supervisory board for services to Daimler in all capacities (other than compensation paid to employee
representatives on the supervisory board in their capacity as Daimler employees) for the year ended December 31, 2009, as disclosed in accordance with the German Corporate Governance Code.
|
|
|
|
|
|
|
Name
|
|
Compensated Function(s)
|
|
Compensation
(in €)
|
|
Dr. Manfred Bischoff
|
|
Chairman of the Supervisory Board, the Presidential Committee and the Nomination Committee
|
|
|
293,613
|
|
Erich Klemm
1
|
|
Deputy Chairman of the Supervisory Board, the Presidential Committee and the Audit Committee
|
|
|
206,595
|
|
Sari Baldauf
|
|
Member of the Supervisory Board
|
|
|
101,758
|
|
Dr. Clemens Börsig
|
|
Member of the Supervisory Board and the Audit Committee
|
|
|
153,572
|
|
Prof. Dr. Heinrich Flegel
|
|
Member of the Supervisory Board
|
|
|
101,758
|
|
Dr. Jürgen Hambrecht
|
|
Member of the Supervisory Board
|
|
|
100,658
|
|
Jörg Hofmann
1
|
|
Member of the Supervisory Board
|
|
|
100,658
|
|
Dr. Thomas Klebe
1,3
|
|
Member of the Supervisory Board and the Presidential Committee
|
|
|
133,924
|
|
Gerard Kleisterlee
|
|
Member of the Supervisory Board (since April 8, 2009)
|
|
|
70,782
|
|
Arnaud Lagardère
|
|
Member of the Supervisory Board
|
|
|
96,478
|
|
Jürgen Langer
1
|
|
Member of the Supervisory Board
|
|
|
101,758
|
|
Helmut Lense
1
|
|
Member of the Supervisory Board (until December 31, 2009)
|
|
|
101,758
|
|
Ansgar Osseforth
4
|
|
Member of the Supervisory Board
|
|
|
101,758
|
|
William A. Owens
|
|
Member of the Supervisory Board (until April 8, 2009)
|
|
|
31,249
|
|
Valter Sanches
2
|
|
Member of the Supervisory Board
|
|
|
101,758
|
|
79
|
|
|
|
|
|
|
Name
|
|
Compensated Function(s)
|
|
Compensation
(in €)
|
|
Dr. Manfred Schneider
|
|
Member of the Supervisory Board, the Presidential Committee and the Nomination Committee
|
|
|
133,924
|
|
Stefan Schwaab
1
|
|
Member of the Supervisory Board and the Audit Committee
|
|
|
155,772
|
|
Lloyd G. Trotter
|
|
Member of the Supervisory Board (since April 9, 2009)
|
|
|
70,782
|
|
Dr. h.c. Bernhard Walter
|
|
Member of the Supervisory Board and Chairman of the Audit Committee
|
|
|
202,415
|
|
Uwe Werner
1
|
|
Member of the Supervisory Board; Chairman of the Works Council, Bremen Plant, Daimler AG
|
|
|
101,758
|
|
Lynton R. Wilson
5
|
|
Member of the Supervisory Board and the Nomination Committee
|
|
|
130,844
|
|
Dr. Mark Wössner
|
|
Member of the Supervisory Board (until April 8, 2009)
|
|
|
31,249
|
|
-
1
-
These
employee representatives have stated that their board compensation will be transferred to the Hans-Böckler Foundation in accordance with the guidelines
of the German Trade Union Federation. The Hans-Böckler Foundation is a German not-for-profit organization of the German Trade Union Federation.
-
2
-
Mr. Sanches
has directed that his board compensation shall be paid to the Hans-Böckler Foundation.
-
3
-
Dr. Klebe
further received compensation and meeting fees of €13,700 for his board services at Daimler Luft- und Raumfahrt Holding AG. These
compensation and fees will also be transferred to the Hans-Böckler Foundation.
-
4
-
Mr. Osseforth
has directed that a portion of his board compensation shall be paid to a foundation called
Treuhandstiftung
Erwachsenenbildung
.
-
5
-
Mr. Wilson
also received €788 for his board services at Mercedes-Benz Canada Inc.
Board of Management
We have entered into service agreements with members of our board of management. Pursuant to the compensation structure adopted by the
supervisory board, the 2009 compensation consisted of the following three principal elements:
-
-
Base Salary
Base salaries are established based on
the responsibilities of the respective member of the board of management. Base salaries as well as total compensation are reviewed annually.
-
-
Annual Bonus
The annual bonus is a variable cash
compensation component, 50% of which is determined by the degree to which Daimler's targeted EBIT for the most recent financial year is achieved and 50% of which is determined by comparing the actual
EBIT for that year with the prior year's EBIT. Bonuses are expressed as a percentage of base salary and may be adjusted, upward or downward, based on total shareholder return, and individual
performance. In this regard, the supervisory board also established individual targets for the members of the board of management in order to fully implement and enforce all compliance policies and
guidelines of the company and to ensure all necessary measures to establish a sustainable compliance environment. The achievement of compliance targets cannot increase the annual bonus,
i.e., even if targets are overachieved, the effect on compensation is neutral. If compliance targets are not accomplished, however, annual bonuses will be reduced as determined by the
supervisory board.
-
-
Performance Phantom Share Plan (PPSP)
Under the PPSP,
we award phantom shares to members of our board of management and other executives. Three years after an award grant to a plan participant, the actual number of phantom shares to be credited to that
participant is calculated based on the achievement of corporate performance goals. These performance goals are based on Daimler's actual return on net
80
assets
and return on sales, the latter compared to a peer group of other vehicle manufacturers (BMW, Ford, General Motors, Honda, Toyota, Volvo and Volkswagen). Once we have calculated the number of
phantom shares earned by the participant based on the plan conditions that were previously defined at the grant date, he or she must hold the phantom shares for one additional year after which the
participant receives a cash payment equal to the product of the number of phantom shares and the average of the Daimler share price over a specified period; the share price for the payout of the PPSP
2009 cannot exceed 2.5 times the share price on the grant date. A dividend equivalent tracking the per share dividend paid to our shareholders is paid during the four-year holding period.
We require members of our board of management to use half of the net payout under our PPSP to purchase Daimler ordinary shares until the requirements of our share ownership guidelines described below
are satisfied.
The
presidential committee of our supervisory board has established stock ownership guidelines for the board of management. These guidelines require a portion of the personal assets of
members of our board of management to consist of Daimler shares throughout the period of their board membership.
The
compensation paid by Group companies to the members of our board of management consists of compensation paid in cash, the grant value of long term incentive components and benefits
in kind. The latter consist mainly of the provision of company cars and payment of expenses for security precautions.
The
following table shows the base salary and the variable compensation of the members of the board of management for the year 2009. The presentation in the table below complies with
German Accounting Standard DRS 17. In line with DRS 17, we present the long-term share-based compensation
based on the value of the phantom shares at the time they were granted in February 2009. The number of phantom shares allocated to a particular board of management member may change by the time of the
payout in 2013. Whether and to what extent there is a payout depends on whether internal and external performance targets during the relevant period are achieved.
In
light of the measures taken to reduce labor costs at Daimler AG, the members of our board of management proposed to waive 15% of their base compensation during the period from
May 1, 2009 through June 30, 2010. The proposal was approved by the presidential committee of our supervisory board.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term variable
compensation (PPSP)
|
|
|
|
(in thousands of euro, except for Number of PPSPs)
|
|
Base
Salary
|
|
Waived compensation
|
|
Short-term
variable
compensation
(Annual bonus)
|
|
Number
|
|
Value when
PPSPs granted
(at a share
price of €18.82)
|
|
Total
|
|
Dr. Dieter Zetsche
|
|
|
1,530
|
|
|
-153
|
|
|
689
|
|
|
114,967
|
|
|
2,164
|
|
|
4,230
|
|
Wilfried Porth
1
|
|
|
382
|
|
|
-53
|
|
|
172
|
|
|
|
|
|
|
|
|
501
|
|
Andreas Renschler
|
|
|
575
|
|
|
-58
|
|
|
305
|
|
|
51,317
|
|
|
966
|
|
|
1,788
|
|
Bodo Uebber
2
|
|
|
660
|
|
|
-66
|
|
|
297
|
|
|
54,975
|
|
|
930
|
|
|
1,821
|
|
Dr. Thomas Weber
|
|
|
545
|
|
|
-55
|
|
|
245
|
|
|
48,809
|
|
|
919
|
|
|
1,654
|
|
Günther Fleig
3
|
|
|
148
|
|
|
|
|
|
45
|
|
|
|
|
|
216
|
|
|
409
|
|
Dr. Rüdiger Grube
4
|
|
|
187
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,027
|
|
|
-385
|
|
|
1,809
|
|
|
270,068
|
|
|
5,195
|
|
|
10,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1
-
Wilfried
Porth became a member of the board of management, effective April 8, 2009.
-
2
-
The
PPSP-value reflects the deduction of compensation in the amount of €104,500 received in his capacity as a member of the board of directors of an equity
investee.
-
3
-
The
term of office of Günther Fleig ended on April 8, 2009. The PPSP-value corresponds to the payout terms in the year of his withdrawal.
-
4
-
The
term of office of Dr. phil. Rüdiger Grube ended on April 30, 2009. The PPSP-value corresponds to the payout terms in the year of his
withdrawal. The PPSP value also reflects the deduction of compensation in the amount of €108,000 received in his capacity as a member of the board of directors of an equity investee.
81
The costs to us in 2009 of taxable non-cash benefits granted to members of the board of management, primarily the provision of company
cars and expenses for security measures, are as set forth in the table below:
|
|
|
|
|
(in thousands of euro)
|
|
Taxable
non-cash benefits
|
|
Dr. Dieter Zetsche
|
|
|
112
|
|
Wilfried Porth
1
|
|
|
346
|
|
Andreas Renschler
|
|
|
251
|
|
Bodo Uebber
|
|
|
114
|
|
Dr. Thomas Weber
2
|
|
|
252
|
|
Günther Fleig
3
|
|
|
42
|
|
Dr. Rüdiger Grube
4
|
|
|
71
|
|
|
|
|
|
Total
|
|
|
1,188
|
|
|
|
|
|
-
1
-
Wilfried
Porth became a member of the board of management, effective April 8, 2009. The taxable non-cash benefits of Mr. Porth reflect the deduction of
compensation in the amount of €3,000 received in his capacity as a member of the board of directors of a wholly owned subsidiary.
-
2
-
Including
an anniversary bonus of €45,500.
-
3
-
The
term of office of Günther Fleig ended on April 8, 2009.
-
4
-
The
term of office of Dr. phil. Rüdiger Grube ended on April 30, 2009. The taxable non-cash benefits of Mr. Grube reflect the deduction
of compensation in the amount of €30,400 received in his capacity as a member of the board of directors of an equity investee.
Retirement Provisions.
Until the end of 2005, our German board of management members had pension agreements which included a commitment
to an annual
retirement pension, calculated contingent on the years of service as a percentage of the member's base salary (70% for Dieter Zetsche, 69% for Günther Fleig, 60% for
Rüdiger Grube and Thomas Weber, and 50% for Andreas Renschler and Bodo Uebber, and 35% for Wilfried Porth). Those pension rights remain, but have been frozen at that level. Retirement
pensions start at request if the term of service ends at or after the age of 60, or are paid as disability pensions if the term of service ends before age 60 due to disability. The agreements provide
for a 3.5% annual increase in benefits, except that Wilfried Porth's benefits will increase in accordance with applicable law. Similar to retirement pensions payable under arrangements with our German
workforce, a provision for widows and orphans is included.
Effective
January 1, 2006, for service in 2006 and beyond, we substituted the pension agreements with a defined-contribution pension system similar to the one existing for senior
management below the board of management level. Under this pension system, each board of management member is credited with a capital component each year. This capital component comprises an amount
equal to 15% of the sum of the board of management member's fixed base salary and the annual bonus that was actually achieved, multiplied by an age factor equivalent to a certain rate of return, at
present 6% (Wilfried Porth: 5%). This pension benefit is payable at the age of 60 at the earliest.
82
The
following table sets forth the 2009 service costs of the pension plans for our board of management:
|
|
|
|
|
(in thousands of euro)
|
|
Service costs in connection
with pension plans
1
|
|
Dr. Dieter Zetsche
|
|
|
629
|
|
Wilfried Porth
2
|
|
|
88
|
|
Andreas Renschler
|
|
|
215
|
|
Bodo Uebber
|
|
|
362
|
|
Dr. Thomas Weber
|
|
|
240
|
|
Günther Fleig
3
|
|
|
|
|
Dr. Rüdiger Grube
4
|
|
|
126
|
|
|
|
|
|
Total
|
|
|
1,660
|
|
|
|
|
|
-
1
-
Service
costs represent the increase in 2009 of the present value of the defined pension benefit obligation resulting from service of the respective member of the board of management in
2009. Service costs do not include interest costs, i.e., the increase in 2009 of the present value of the defined pension benefit obligation arising from the fact that the benefit obligation
with respect to the respective board member is one year closer to settlement.
-
2
-
Wilfried
Porth became a member of the board of management, effective April 8, 2009.
-
3
-
The
term of office of Günther Fleig ended on April 8, 2009.
-
4
-
The
term of office of Dr. phil. Rüdiger Grube ended on April 30, 2009.
The
overall accrual at December 31, 2009 to provide pension, retirement and similar benefits to the board of management was €5.2 million lower than at
December 31, 2008 due to changes in the composition of our board of management.
Benefits to board of management members upon termination of their services.
No severance payments are established for board of management members in case of early termination of their service contracts. If a
service contract with a member of the board of management, which in general is only concluded for a period of 3 years, is terminated early by mutual consent, we have a commitment under the
service contract to pay the base salary and to provide a company car until the end of the original service period. With respect to short-term performance-based compensation, the member is
only entitled to a pro-rata payment for the respective fiscal year until the day when the board of management member leaves the company. Whether the member is entitled to receive any
payment with respect to performance-related compensation components with a long-term incentive effect depends on the exercise conditions specified in the respective long-term
incentive plan.
If
the service contract of any of the current board of management members expires and is not extended, in general the member will be entitled to receive pension payments and a company
car for the period beginning after the end of the service period.
For
further information regarding compensation of our supervisory board and our board of management, please refer to Note 35 to our Consolidated Financial Statements. For further
information regarding stock based compensation and incentives, please refer to Notes 1 and 20 to our Consolidated Financial Statements.
83
EMPLOYEES AND LABOR RELATIONS
At December 31, 2009, we employed a workforce of 256,407 people worldwide, 6% less than in the prior year. The reduction was
primarily the result of the repositioning of the Group's truck business in North America, the expiration of temporary employment arrangements that were not renewed or replaced, and employees who left
the Group pursuant to early retirement agreements entered into in prior years. The following table shows the number of employees at December 31, 2009, 2008, and 2007, adjusted to reflect
changes in segment composition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees at December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
Total
|
|
Germany
|
|
U.S.
|
|
Total
|
|
Germany
|
|
U.S.
|
|
Total
|
|
Germany
|
|
U.S.
|
|
Daimler Group
|
|
|
256,407
|
|
|
162,565
|
|
|
17,697
|
|
|
273,216
|
|
|
167,753
|
|
|
22,476
|
|
|
272,382
|
|
|
166,679
|
|
|
24,053
|
|
thereof:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercedes-Benz Cars
|
|
|
93,572
|
|
|
83,156
|
|
|
2,992
|
|
|
97,303
|
|
|
85,046
|
|
|
3,782
|
|
|
97,526
|
|
|
85,322
|
|
|
3,869
|
|
Daimler Trucks
|
|
|
70,699
|
|
|
28,582
|
|
|
11,026
|
|
|
79,415
|
|
|
30,060
|
|
|
15,004
|
|
|
80,067
|
|
|
28,975
|
|
|
16,667
|
|
Mercedes-Benz Vans
|
|
|
15,226
|
|
|
10,202
|
|
|
72
|
|
|
16,775
|
|
|
11,088
|
|
|
111
|
|
|
17,524
|
|
|
11,226
|
|
|
154
|
|
Daimler Buses
|
|
|
17,188
|
|
|
8,420
|
|
|
739
|
|
|
18,110
|
|
|
8,374
|
|
|
734
|
|
|
17,286
|
|
|
8,032
|
|
|
662
|
|
Daimler Financial Services.
|
|
|
6,800
|
|
|
2,404
|
|
|
1,047
|
|
|
7,116
|
|
|
2,451
|
|
|
1,121
|
|
|
6,743
|
|
|
2,410
|
|
|
1,088
|
|
Sales organization for automotive business
|
|
|
47,625
|
|
|
24,980
|
|
|
1,783
|
|
|
49,127
|
|
|
25,865
|
|
|
1,690
|
|
|
48,078
|
|
|
25,940
|
|
|
1,613
|
|
The
table above also includes temporary employees. On average, we had approximately 4,400 temporary employees in 2009 (9,300 in 2008).
Almost
all our employees in Germany who are members of labor unions belong to the German metalworkers' union (
Industriegewerkschaft
Metall
). We do not operate any of our facilities in Germany on a "closed shop" basis. In Germany, the regional association of companies within a particular industry and the
unions covering that industry negotiate collective bargaining agreements for blue collar workers and for white collar employees below senior management level. We are a member of the associations of
employers in the regions in which we operate. Even though the collective bargaining agreement is legally binding only for members of the negotiating parties, i.e., the member companies of the
employers' associations and the employees who are union members, we extend the applicability of the agreement to all employees below senior management level by including a pertinent clause in our
employment contracts.
In
November 2008, the regional associations of employers and the German metalworkers' union concluded a collective bargaining agreement covering the period from November 1, 2008
through April 30, 2010. The agreement provides for a lump sum payment of €510 to each covered employee for the first three months of the contract period. A 2.1% increase in base
salary became effective on February 1, 2009. The effectiveness of another 2.1% increase in base salary that was originally scheduled for May 1, 2009 was postponed until October 1,
2009 pursuant to an agreement with the works council and in accordance with the
applicable collective bargaining agreement. An additional base salary increase of 0.4% for the four-month period from January to April 2010 will be used to fund the existing early
retirement program in lieu of a cash payout.
In
response to decreasing unit sales, we reached agreements with the works councils of all manufacturing plants in Germany to reduce the number of hours worked per week
(
Kurzarbeit
) during 2009 by the workers in those plants. The agreements have the effect of reducing the wages we pay to the workers in the affected
plants. The employees were partially compensated for the reduction in wages by the German employment agency (
Agentur für Arbeit
).
In
the first two quarters of 2010, we plan to continue the
Kurzarbeit
regime in select German manufacturing plants, and we may continue
that regime, or even expand it to include other plants, if economic conditions remain weak or deteriorate further.
84
Pursuant
to an agreement with the works councils, all employees not subject to the shorter work hour regime are subject to an 8.75% reduction of hours worked from May 1, 2009
through June 30, 2010. During that period, the compensation payable to employees affected by the reduction is being reduced by the same percentage. In addition, during the period from
May 1, 2009 through June 30, 2010, the base salaries of senior management employees are being reduced by 5% to 10%, depending on their level of management.
Beginning
in the first quarter of 2010, Daimler Trucks North America LLC plans to negotiate new collective bargaining agreements at its major facilities in the U.S. and Mexico. In
general, the agreements have a duration of three years and include specific provisions regarding wages, fringe benefits, and working conditions. Negotiations in the U.S.-based production facilities
will focus on overall labor cost and production efficiency. As a result of decreased unit sales in 2009, Daimler Trucks North America LLC significantly reduced employment levels of union
employees at its production facilities through involuntary workforce reductions. In addition, work schedules were adjusted through periodic one-week production shut downs. For information
on the repositioning of the business operations of Daimler Trucks North America and specific measures initiated in this regard, please refer to the discussion under the heading "Daimler Trucks" in
"Item 4. Information on the Company."
SHARE OWNERSHIP
As of December 31, 2009, the current members of our supervisory board and our board of management, as a group, owned 157,230 of
Daimler AG ordinary shares (0.02% of shares outstanding at that date) and had the right to acquire 1,667,000 ordinary shares pursuant to options granted under the plans described below.
In
2000, we instituted a shareholder approved stock option plan covering employees of management levels 3 and above and the members of our board of management. We granted options
under this plan in 2000, 2001, 2002, 2003 and 2004. For a description of that stock option plan and further details, such as the exercise prices of the various tranches, please refer to Note 20
to our Consolidated Financial Statements.
As
part of our value-based management approach, we support employee stock ownership. We generally offer employees of Daimler AG and of our subsidiaries in Germany, Austria, France,
Italy, the Netherlands, Portugal, Spain, Switzerland and the United Kingdom the opportunity to purchase Daimler AG ordinary shares. In 2008, for example, each eligible employee in Germany had the
right to acquire up to 90 shares with a maximum aggregate discount of €135 plus three bonus shares. In total, employees in Germany acquired approximately 1,428,000 shares in 2008. The
programs established for employees in other European countries are comparable to the German program, except for changes resulting from different national legal requirements. In response to the
worldwide economic downturn, we temporarily suspended these employer sponsored employee stock ownership programs in 2009, except in the United Kingdom where legal obligations prohibited us from doing
so. In the United Kingdom, employees acquired a total of approximately 4,700 shares in 2009.
85
Item 7. Major Shareholders and Related Party Transactions.
MAJOR SHAREHOLDERS
Our capital stock consists of ordinary shares without par value
(
Stückaktien
). Our ordinary shares are issued in registered form. Under our articles of incorporation
(
Satzung
), each ordinary share represents one vote. Major shareholders do not have different voting rights.
In
March 2009, Daimler AG increased its share capital by issuing 96.4 million new ordinary shares to Semare Beteiligungsverwaltungsgesellschaft mbH, an indirect subsidiary of
Aabar Investments PJSC (Aabar) of Abu Dhabi. On April 1, 2009, Aabar and some of its affiliates notified the U.S. Securities and Exchange Commission on Schedule 13G under the Securities
Exchange Act of 1934 that they beneficially own 96,408,000 Daimler AG ordinary shares, representing 9.4% of outstanding Daimler AG ordinary shares.
On
February 16, 2009, the Kuwait Investment Authority informed us that, as of December 31, 2008, they held 73,169,320 shares. Based on the number of Daimler AG's ordinary
shares outstanding as of December 31, 2009, that holding would have represented 7.1% of our outstanding ordinary shares.
Under
the German Securities Trading Act (
Wertpapierhandelsgesetz
), shareholders of a listed German company and holders of certain
financial instruments must notify the company of the level of their holding whenever it reaches, exceeds, or falls below specified thresholds. For additional information regarding these reporting
obligations, please refer to the discussion under the heading "Articles of Incorporation Disclosure of Shareholdings" in "Item 10. Additional Information."
BlackRock
informed us that as at December 1, 2009, BlackRock, Inc., the ultimate parent entity of the BlackRock group, indirectly held, through various subsidiaries, a
total of 3.9% or 41,372,761 of Daimler AG's shares. Based on the number of Daimler AG ordinary shares outstanding as of December 31, 2009, the holding of BlackRock, Inc. would have
represented 4% of our outstanding ordinary shares.
Capital
Research and Management Company, which previously informed us that it held 30,688,637 of Daimler AG's ordinary shares, notified us that, as of November 4, 2009, its
holdings fell below the 3% threshold.
As
of December 31, 2009, Daimler AG held 37,116,831 shares, representing 3.6% of its outstanding ordinary shares, in treasury. We acquired these shares in 2008 in connection with
a share buy-back program. For further information regarding that share buy-back program please refer to the discussion in "Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers" and to Note 19 to our Consolidated Financial Statements. We plan to use a portion of the shares held in treasury to satisfy our obligations to former AEG minority shareholders
following a recent court decision. For further information, please refer to the discussion under the heading "Legal Proceedings" in "Other Financial Information" in "Item 8. Financial
Information."
As
of December 31, 2009, Daimler AG had approximately 1.2 million stockholders. Approximately 155,000 were U.S. holders, of which approximately 55,000 were record holders.
Based on our share register, U.S. holders held approximately 17% of Daimler AG's ordinary shares as of that date.
RELATED PARTY TRANSACTIONS
For a description of our related party transactions, please refer to Note 34 to our Consolidated Financial Statements.
Item 8. Financial Information.
CONSOLIDATED FINANCIAL STATEMENTS
Please refer to "Item 18. Financial Statements" and to pages F-1 through F-98 of this annual
report.
86
OTHER FINANCIAL INFORMATION
Export Sales
In 2009, we exported approximately 605,500 or 67% of all passenger cars, trucks, buses, and vans we produced in Germany and
approximately 63,100 or 40% of all passenger cars and trucks we produced in the United States.
Legal Proceedings
Various legal proceedings, claims and governmental investigations are pending against the Group on a wide range of topics, including
vehicle safety, emissions and fuel economy; financial services; dealer, supplier and other contractual relationships; intellectual property rights; product warranties; environmental matters; and
shareholder matters. We believe that such proceedings in the main constitute ordinary routine litigation incidental to our business. For information on regulatory and administrative proceedings please
also refer to the discussion under the heading "Government Regulation and Environmental Matters" in "Item 4. Information on the Company".
As
successor to Daimler-Benz AG, Daimler AG is a party to a valuation proceeding (
Spruchverfahren
) relating to a subordination
and profit transfer agreement that existed between Daimler-Benz AG and the former AEG AG. In 1988, former AEG shareholders filed a petition with the Frankfurt Regional Court
(
Landgericht Frankfurt am Main
) claiming that the consideration stipulated in the agreement for the benefit of AEG minority shareholders, namely an
exchange ratio of one Daimler-Benz share for every five AEG shares and compensation payments for lost dividends equal to 20% of any dividends paid on Daimler-Benz shares, was
inadequate. In 1994, a court-appointed expert concluded in his report that the consideration and compensation set at the time were adequate. Following a decision by the Federal Constitutional Court
(
Bundesverfassungsgericht
) in an unrelated case, the Frankfurt Regional Court instructed the expert in 2000 to employ a market value approach in his
valuation analysis rather than the capitalized earnings value approach previously used. In 2004 the court also instructed the expert to take into account additional findings of the Federal Supreme
Court (
Bundesgerichtshof
) elaborating further on the valuation issue addressed by the Federal Constitutional Court. In September 2007, the Frankfurt
Regional Court ruled that the market value approach must be applied and that, as a result, the exchange ratio should have been one Daimler-Benz share for every 2.9 AEG shares and the
compensation payments for lost dividends should have been equal to 34.5% of any dividends paid on Daimler-Benz shares. We appealed the decision of the Frankfurt Regional Court to the
Higher Regional Court (
Oberlandesgericht
) Frankfurt am Main. The appeal was finally dismissed in November 2009. Following this decision, Daimler AG will
have to deliver up to 4.3 million additional Daimler shares to former AEG minority shareholders and make dividend compensation payments, including on any additional Daimler shares delivered, up
to a maximum total amount of approx. €150 million. We intend to use a portion of the ordinary shares we hold in treasury to satisfy these obligations. Please also refer to
Note 19 to our Consolidated Financial Statements.
In
1999, former shareholders of Daimler-Benz AG instituted a valuation proceeding (
Spruchverfahren
) against Daimler AG at the
Stuttgart Regional Court (
Landgericht Stuttgart
). The proceeding relates to the merger of Daimler-Benz AG and Daimler AG in connection with
the business combination of Daimler-Benz AG and Chrysler Corporation in 1998. In the course of the merger, 1.8% of the total outstanding Daimler-Benz AG ordinary shares were
involuntarily exchanged for DaimlerChrysler (now Daimler) shares. In their complaint, the shareholders claim that the ratio used for the involuntary exchange did not represent the actual value of
Daimler-Benz ordinary shares at the time. An expert commissioned by the court presented his opinion in December 2005, in which he presented various valuation alternatives. These
alternatives range from confirming the appropriateness of the original exchange ratio used to considerable additional payments to be made to those former Daimler-Benz shareholders whose
shares were involuntarily exchanged. In August 2006, the Stuttgart Regional Court ruled that Daimler must make an additional cash payment of €22.15 per share (approximately
€328 million in the aggregate). Under German law, interest would have to be added to any such additional payment at the statutory annual rate. We continue to believe that the
exchange ratio used by Daimler-Benz AG at the time of the involuntary exchange was appropriate and we appealed the decision of the Stuttgart Regional Court in September
87
2006.
The Higher Regional Court in Stuttgart (
Oberlandesgericht Stuttgart
) held evidentiary hearings in October 2008 and received additional written
testimony in September 2009. A decision by the Higher Regional Court is expected in the first quarter of 2010.
Various
legal proceedings are pending against us alleging defects in different vehicle models. Some of these proceedings are filed as class action lawsuits that seek repair or
replacement of the vehicles or compensation for their alleged reduction in value, while others seek recovery for damage to property, personal injuries or wrongful death. Adverse decisions in one or
more of these proceedings could require us to pay substantial compensatory and punitive damages, or undertake service actions, recall campaigns or other costly actions.
Purported
class action lawsuits alleging violations of antitrust law were instituted against Daimler's North American subsidiaries Mercedes-Benz USA, LLC, and
Mercedes-Benz Canada, Inc., as well as other motor vehicle manufacturers, their operating subsidiaries, the National Automobile Dealers Association and the Canadian Automobile
Dealers Association. Some complaints were filed in federal courts in various states and others were filed in state courts. Most of the actions against Mercedes-Benz Canada were dismissed
on jurisdictional grounds. The complaints allege that the defendants conspired to prevent the sale to U.S. consumers of vehicles sold by dealers in Canada in order to maintain new car prices at
artificially high levels in the U.S. They seek injunctive relief and treble damages on behalf of everyone who bought or leased a new vehicle in the U.S. since January 1, 2001. The federal court
actions have been consolidated in the U.S. District Court for the District of Maine for purposes of pretrial proceedings and the state cases filed in California have been consolidated in the
California Superior Court in San Francisco County. The federal court action has been voluntarily dismissed against Mercedes-Benz USA. The California actions have also been voluntarily
dismissed against Mercedes-Benz USA. We do not believe that we have engaged in any unlawful conduct and will continue to defend ourselves vigorously in the remaining state court actions to
the extent that they are pursued against Mercedes-Benz USA.
A
purported class action lawsuit in the Superior Court of Ontario, Canada, alleging violation of Canadian antitrust laws is pending against Daimler's North American subsidiaries
Mercedes-Benz Canada and Mercedes-Benz USA along with other vehicle manufacturers. The complaint alleges that since 2005 the companies conspired with agencies of the Canadian
government to prevent or lessen competition in the importation of U.S. versions of their respective brand vehicles into Canada by artificially requiring modifications to U.S. vehicles to be brought up
to Canadian vehicle safety standards. They seek Canadian $250 million in compensatory damages and Canadian $25 million in punitive damages. We do not believe that we have engaged in any
unlawful conduct and will defend ourselves vigorously.
The
Federal Republic of Germany initiated arbitration proceedings against Daimler Financial Services AG, Deutsche Telekom AG and Toll Collect GbR and submitted its statement of claims in
August 2005. It seeks damages, contractual penalties and the transfer of intellectual property rights to Toll Collect GmbH. In particular, the Federal Republic of Germany is claiming lost
revenue of €3.33 billion for the period September 1, 2003, through December 31, 2004 plus interest (€1.1 billion through May 18, 2009
plus 5% per annum over the respective base rate since then), and contractual penalties of approximately €1.65 billion through July 31, 2005 plus interest
(€107 million through July 31, 2005 plus 5% per annum over the respective base rate since then) plus refinancing costs of €56 million. Since some
of the contractual penalties, among other things, are dependent on time and further claims for contractual penalties have been asserted by the Federal Republic of Germany, the amount claimed as
contractual penalties may increase. Defendants submitted their response to the statement of claims on June 30, 2006. The Federal Republic of Germany delivered its reply to the arbitrators on
February 15, 2007, and defendants delivered their rebuttal on October 1, 2007. The arbitrators held the first hearing on June 16 and 17, 2008. Additional briefs from the claimant
and the defendants were filed in May 2009. Following a motion by defendants to disqualify the arbitrator nominated by the claimant, the arbitration panel canceled a hearing scheduled for October 2009.
We do not expect the hearing to be rescheduled before the motion to disqualify has been finally resolved. We believe the claims are without merit and will continue to defend ourselves vigorously.
In
connection with the settlement in May 2007 of previously reported litigation brought by MAN against Freightliner Ltd., certain of its subsidiaries and affiliates, and Daimler
North America Corporation in London and
88
Oregon,
and a related order of the Oregon Circuit Court vacating a punitive damage award, the State of Oregon, which was not a party to the original litigation, appealed the order vacating the
punitive damage award to the Court of Appeals of the State of Oregon alleging that, pursuant to Oregon law, it was a judgment creditor with respect to 60% of any punitive damage award. In a decision
dated February 20, 2008, the Court of Appeals accepted that the State of Oregon has standing to pursue the appeal. That decision was appealed to the Oregon Supreme Court. The State of Oregon
also separately filed a lawsuit in the Circuit Court for the State of Oregon for the County of Marion against, inter alia, Freightliner LLC, Freightliner Ltd., Daimler North America
Corporation and Daimler AG seeking a declaratory judgment that the settlement and the judgment vacating the punitive damage award were not binding on the State and that the State was a judgment
creditor in the amount of US$210 million. In March 2009, the case was settled with a commitment by Daimler Trucks North America LLC (formerly known as Freightliner LLC) to
contribute US$150,000 to the Oregon Crime Victims Assistance Fund. Following the settlement, both the appeal and the declaratory judgment action were voluntarily dismissed.
In
February 2005, two putative class actions were brought against Detroit Diesel Corporation (DDC), one of our affiliates, and its distributors (including two DDC subsidiaries) in the
United States District Court for the Eastern District of Pennsylvania. The cases arose from the decisions of certain truck manufacturers (International, Volvo and Paccar) to stop offering DDC engines
in their trucks and the alleged resulting decision of DDC not to renew the dealer agreements of those International, Volvo and Paccar dealers who were no longer able to offer DDC engines in the trucks
they sold. Plaintiffs in the first action sought to represent a class of former Detroit Diesel dealers whose DDC dealer agreements were allegedly terminated or not renewed. Plaintiffs in the second
action sought to represent a class of Detroit Diesel dealers whose dealer agreements were allegedly initially replaced with truck maintenance agreements and then subsequently terminated or not
renewed. Plaintiffs in both actions alleged that DDC and its distributors entered into group boycott and price-fixing conspiracies to restrict the plaintiffs' ability to perform warranty repairs on
DDC engines and to charge increased prices to plaintiffs for replacement parts for DDC engines. Plaintiffs in both cases sought unspecified treble damages, declaratory relief and attorneys' fees. In
November of 2005, both cases were transferred to the United States District Court for the Eastern District of Michigan. In late 2006, plaintiffs sought and received approval for partial settlement
with six of the defendant distributors. Under the terms of the partial settlement, the six settling distributors established a US$1 million settlement fund and agreed to cooperate with the
plaintiffs in providing information requested in both actions. The cases remained pending against DDC and the non-settling distributors. In April 2007, plaintiffs moved the court to
certify a class comprising all remaining former DDC dealers that had their dealer status terminated, non-renewed or modified after February 1, 2001. In July 2009, the court approved
a settlement of both cases with respect to the remaining defendants, including DDC. DDC paid US$2,750,000 as part of that settlement.
Former
employees who retired from Detroit Diesel Corporation between 1993 and 2004 filed a class action complaint against the company in October 2005 in the U.S. District Court for the
Eastern District of Michigan. The complaint alleges that the company is obligated to provide lifetime retiree health care benefits at no cost to class members, and that the company's notification to
have them contribute toward the cost of their healthcare insurance beginning in 2006 (to the extent such cost exceeds a limit previously negotiated with the International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America (UAW)) is invalid. The court granted a preliminary injunction in December 2005 that prohibits the company from requiring such contributions
while the lawsuit is pending. The U.S. Court of Appeals for the Sixth Circuit upheld the injunction in January 2007. Cross motions for summary judgment were filed and oral argument was held in May
2008 in the United States District Court. On February 10, 2009, the District Court granted the Plaintiff's motion for summary judgment and denied Detroit Diesel Corporation's motion for summary
judgment. Detroit Diesel Corporation has appealed the decision to the U.S. Court of Appeals for the Sixth Circuit and will continue to defend itself vigorously.
Several
lawsuits, including putative class action lawsuits, were filed in 2002 against a large number of companies from a wide variety of industries and different countries asserting
claims relating to the practice of apartheid in South Africa. One of the putative class action lawsuits named Daimler AG as a defendant. The
89
lawsuits
were consolidated in the United States District Court for the Southern District of New York for pretrial purposes. On November 29, 2004, the Court granted a motion to dismiss filed by
a group of defendants, including Daimler. Upon plaintiffs' appeal, the Court of Appeals for the Second Circuit partly vacated the District Court's decision on October 12, 2007, and remanded the
case back to the District Court for further
proceedings. In January 2008, the defendant group filed a petition for a writ of certiorari with the Supreme Court of the United States. The Supreme Court lacked a quorum to hear the case and, by
operation of the rules, affirmed the Court of Appeals as if by an equally divided court. In November 2008, plaintiffs filed two amended purported class action complaints with the District Court
against a smaller number of companies. Both amended complaints name Daimler AG as a defendant. In December 2008, a group of defendants, including Daimler AG, again filed a motion to dismiss the
amended complaints. In April 2009, the District Court granted in part and denied in part the defendants' motions to dismiss the amended complaints. The defendants, including Daimler, applied for and
were granted by the Second Circuit emergency appellate review of the parts of the District Court's order denying the motions to dismiss. The matter is currently pending under stay in the Second
Circuit.
In
2008, Daimler AG was sued in Hong Kong by an individual claiming lost profits from an injunction that Daimler-Benz AG had applied for in 1994 against the plaintiff in Hong
Kong. Daimler withdrew its application 17 days later following an agreement with the plaintiff that he would not claim damages against Daimler in connection with the application. We believe the
claim is without merit and will defend ourselves vigorously.
As
previously reported, the U.S. Securities and Exchange Commission ("SEC") and the U.S. Department of Justice ("DOJ") are conducting an investigation into possible violations of law by
Daimler including the anti-bribery, record-keeping and internal control provisions of the U.S. Foreign Corrupt Practices Act (FCPA). We have voluntarily shared with the DOJ and the SEC
information from our own internal investigation of certain accounts, transactions and payments, primarily relating to transactions involving government entities, and have provided the agencies with
information pursuant to outstanding subpoenas and other requests. We have also had communications with and provided documents to the offices of German public prosecutors regarding the matters that
have been under investigation by the DOJ and SEC. We have completed our internal investigation and have determined that in a number of jurisdictions, primarily in Africa, Asia and Eastern Europe,
improper payments were made which raise concerns under the FCPA, under German law, and under the laws of other jurisdictions. We have taken various actions designed to address and resolve the issues
identified in the course of our investigation to safeguard against the recurrence of improper conduct. These include establishing a company-wide compliance organization, evaluating and
revising our governance policies and internal control procedures, and taking personnel actions. We have been in discussions with the DOJ and SEC regarding consensually resolving the agencies'
investigations. There can be no assurance about whether and when settlements with the DOJ or SEC will become final and effective.
In
March 2006, the Stuttgart Regional Court (
Landgericht Stuttgart
) approved a model case pursuant to German law
(
Kapitalanleger-Musterverfahrensgesetz
) in connection with a lawsuit filed by shareholders of Daimler who claim damages based on the alleged unduly
delayed ad hoc disclosure by Daimler in July 2005 that Professor Jürgen Schrempp would leave the company at the end of 2005. In February 2007, the Stuttgart Court of Appeals
(
Oberlandesgericht Stuttgart
) ruled that the disclosure was timely and rejected the claim. Plaintiffs filed a complaint to the German Supreme Court
(
Bundesgerichtshof
). In February 2008, the German Supreme Court granted the appeal and remitted the case to a different panel of the Stuttgart Court of
Appeals. After hearing additional witness testimony, the panel ruled in April 2009 that plaintiffs were not entitled to damages. Plaintiffs have again lodged an appeal with the German Supreme Court
where the case is now pending.
In
April 2008, the French stock exchange supervisory authority, Autorité des Marchés Financiers (AMF), commenced insider trading investigations against
Daimler AG and several other companies and individuals in connection with sales of shares in European Aeronautic Defence and Space Company EADS N.V. (EADS). The AMF issued a statement of
charges against Daimler AG alleging that Daimler AG made use of inside information in connection with the divestiture of a 7.5% stake in EADS in April 2006. We filed a response with the AMF in
September 2008. Oral hearings took place in January, February and November 2009. Following the hearing in November 2009, which took place before the "Commission des Sanctions" of the AMF, the
Commission rendered
90
a
final decision in December 2009, stating that it could not find any unlawful behavior on the part of Daimler in connection with its divestiture in April 2006 of a 7.5% stake in EADS.
On
Aug. 17, 2009, the Official Committee of Unsecured Creditors of Old CarCo LLC (formerly Chrysler LLC) filed a lawsuit with the United States Bankruptcy Court,
Southern District of New York, against Daimler AG, Daimler North America Corporation and certain (former) board members of Chrysler LLC. The Committee claims unspecified damages based on
theories of constructive and intentional fraudulent transfer, breach of fiduciary duty, and other legal theories, alleging that the consideration received in certain transactions effected in
connection with the investment by Cerberus in Chrysler LLC was not fair consideration. We consider these claims and allegations to be without merit and will defend ourselves vigorously.
Litigation
is subject to many uncertainties and Daimler cannot predict the outcome of individual matters with assurance. We establish a provision in connection with pending or threatened
litigation if a loss is probable and can be reasonably estimated. Since these provisions, which are reflected in our Consolidated Financial Statements, represent estimates, it is reasonably possible
that the resolution of some of these matters could require us to make payments in excess of the amounts accrued in an amount or range of amounts that could not be reasonably estimated at
December 31, 2009. It is also reasonably possible that the resolution of some of the matters for which provisions could not be made may require us to make payments in an amount or range of
amounts that could not be reasonably estimated at December 31, 2009. Although the final resolution of any such matters could have a material effect on the Group's consolidated operating results
and cash flows for a particular reporting period, we believe that it should not materially affect our consolidated financial position.
The
U.S. Internal Revenue Service (IRS) has challenged the tax treatment of certain Leveraged Leases known as Lease in, Lease out (LiLo) and Sale in, Lease out (SiLo) transactions
entered into by various companies including Daimler. In early August 2008, the IRS announced a Global Settlement Initiative for these types of transactions and after careful consideration the Daimler
AG board of management decided to accept the offer of the IRS. We prepaid US$0.6 billion towards the total liability in September 2009. Based on the methodology outlined in the initiative, we
believe that the established accrual will be adequate to cover the remaining anticipated tax liability of approximately less than US$0.2 billion. We expect to pay the remaining liability in the
first half of 2010.
Dividend Policy
We generally pay dividends each year and expect to continue to do so in the future, although the payment of future dividends will
depend on our earnings, our financial condition, our cash needs, our future earnings prospects and other factors. As a result, we may not pay dividends in the future or may not pay them at rates we
have paid in previous years. Because of the development of our earnings in 2009, our board of management and our supervisory board decided that Daimler AG will not pay a dividend for the 2009
financial year. For additional information on dividends and exchange rates please refer to "Item 3. Key Information" and "Item 10. Additional Information."
Significant Changes
Except as described elsewhere in this annual report, no significant change has occurred since the date of our Consolidated Financial
Statements included in this annual report.
91
Item 9. The Offer and Listing
Trading Markets
The principal trading markets for our ordinary shares are the Frankfurt Stock Exchange and the New York Stock Exchange. Our ordinary
shares are also listed on the Stuttgart Stock Exchange. Our ordinary shares trade under the symbol "DAI".
Daimler
AG is included in the
Deutsche Aktienindex
(DAX), a continuously updated, capital weighted performance index of the 30 largest
German companies. The DAX is the leading index of trading on the Frankfurt Stock Exchange. As of December 31, 2009, our ordinary shares represented approximately 5.98% of the DAX. Our shares
also represented 1.29% of the Dow Jones STOXX 50®, which covers stocks from 10 European countries, and 2.05% of the Dow Jones EURO STOXX 50®, which covers stocks from
the equity markets of those member states of the European Union that adopted the euro as their common legal currency. The transfer agents for our ordinary shares are Registrar Services GmbH, a
subsidiary of Deutsche Bank AG, in Germany and The Bank of New York Mellon in the United States.
Trading on the Frankfurt Stock Exchange
Our ordinary shares trade on the floor of the Frankfurt Stock Exchange, the most significant of the German stock exchanges, and also on
Xetra, which stands for Exchange Electronic Trading. Xetra is an integrated electronic exchange system which is an integral part of the Frankfurt Stock Exchange. In 2009, Xetra accounted for
approximately 99.1% of the trading volume of our ordinary shares on the Frankfurt Stock Exchange. The table below shows, for the periods indicated, the Xetra high and low closing sales prices for our
ordinary shares.
|
|
|
|
|
|
|
|
|
|
|
Price Per Daimler
Ordinary Share
|
|
|
|
High
|
|
Low
|
|
|
|
(€)
|
|
(€)
|
|
Annual highs and lows
|
|
|
|
|
|
|
|
2005
|
|
|
45.65
|
|
|
30.20
|
|
2006
|
|
|
50.09
|
|
|
37.01
|
|
2007
|
|
|
77.76
|
|
|
46.30
|
|
2008
|
|
|
64.68
|
|
|
19.35
|
|
2009
|
|
|
37.65
|
|
|
17.44
|
|
Quarterly highs and lows
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
64.68
|
|
|
48.24
|
|
|
Second Quarter
|
|
|
55.34
|
|
|
39.28
|
|
|
Third Quarter
|
|
|
43.37
|
|
|
35.40
|
|
|
Fourth Quarter
|
|
|
32.38
|
|
|
19.35
|
|
2009
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
27.75
|
|
|
17.44
|
|
|
Second Quarter
|
|
|
28.16
|
|
|
19.28
|
|
|
Third Quarter
|
|
|
34.41
|
|
|
23.65
|
|
|
Fourth Quarter
|
|
|
37.65
|
|
|
31.58
|
|
92
|
|
|
|
|
|
|
|
|
|
|
Price Per Daimler
Ordinary Share
|
|
|
|
High
|
|
Low
|
|
|
|
(€)
|
|
(€)
|
|
Monthly highs and lows
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
August
|
|
|
33.83
|
|
|
30.86
|
|
|
September
|
|
|
34.41
|
|
|
30.15
|
|
|
October
|
|
|
37.62
|
|
|
32.65
|
|
|
November
|
|
|
35.98
|
|
|
31.58
|
|
|
December
|
|
|
37.65
|
|
|
34.86
|
|
2010
|
|
|
|
|
|
|
|
|
January
|
|
|
37.55
|
|
|
32.32
|
|
|
February (through February 16, 2010)
|
|
|
34.34
|
|
|
32.01
|
|
On
February 16, 2010, the closing sales price for our ordinary shares on Xetra was €32.62. This price was equivalent to US$44.83 per ordinary share, translated at
the noon buying rate for euros on that date. For additional information regarding rates of exchange between the U.S. dollar and the euro, please refer to "Exchange Rate Information" in "Item 3.
Key Information." Based on turnover statistics supplied by the Frankfurt Stock Exchange, the average daily volume of our ordinary shares traded on the exchange (including Xetra) in 2009 was
7.1 million. As of December 31, 2009, the market capitalization of our company on the Frankfurt Stock Exchange was €38.1 billion.
Trading on the New York Stock Exchange
The following table shows, for the periods indicated, the high and low closing sales prices per ordinary share as reported on the New
York Stock Exchange Composite Tape.
|
|
|
|
|
|
|
|
|
|
|
Price Per Daimler
Ordinary Share
|
|
|
|
High
|
|
Low
|
|
|
|
(US$)
|
|
(US$)
|
|
Price Per Daimler Ordinary Share
|
|
|
|
|
|
|
|
2005
|
|
|
54.83
|
|
|
39.03
|
|
2006
|
|
|
61.97
|
|
|
46.56
|
|
2007
|
|
|
111.60
|
|
|
60.06
|
|
2008
|
|
|
94.75
|
|
|
24.45
|
|
2009
|
|
|
55.95
|
|
|
21.58
|
|
Quarterly highs and lows
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
94.75
|
|
|
73.64
|
|
|
Second Quarter
|
|
|
86.10
|
|
|
61.67
|
|
|
Third Quarter
|
|
|
66.64
|
|
|
50.50
|
|
|
Fourth Quarter
|
|
|
46.11
|
|
|
24.45
|
|
2009
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
39.11
|
|
|
21.58
|
|
|
Second Quarter
|
|
|
40.03
|
|
|
26.08
|
|
|
Third Quarter
|
|
|
50.58
|
|
|
33.05
|
|
|
Fourth Quarter
|
|
|
55.95
|
|
|
46.91
|
|
93
|
|
|
|
|
|
|
|
|
|
|
Price Per Daimler
Ordinary Share
|
|
|
|
High
|
|
Low
|
|
|
|
(US$)
|
|
(US$)
|
|
Monthly highs and lows
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
August
|
|
|
48.84
|
|
|
43.60
|
|
|
September
|
|
|
50.58
|
|
|
42.70
|
|
|
October
|
|
|
55.95
|
|
|
47.83
|
|
|
November
|
|
|
53.93
|
|
|
46.91
|
|
|
December
|
|
|
54.13
|
|
|
51.57
|
|
2010
|
|
|
|
|
|
|
|
|
January
|
|
|
54.11
|
|
|
45.54
|
|
|
February (through February 16, 2010)
|
|
|
47.93
|
|
|
44.48
|
|
On
February 16, 2010, the closing sales price for our ordinary shares on the New York Stock Exchange as reported on the NYSE Composite Tape was US$45.12.
Item 10. Additional Information.
OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
In connection with the transfer of most of our aerospace activities to EADS in July 2000, Dornier GmbH became an indirect
subsidiary of EADS. The remaining Dornier minority shareholders have the right, exercisable at any time, to exchange all or any portion of their shares in Dornier for cash, for Daimler AG ordinary
shares, or for shares in our subsidiary Daimler Luft- und Raumfahrt Holding Aktiengesellschaft (DLRH) which holds a minority interest in DADC Luft- und Raumfahrt Beteiligungs
AG, the holding company of Dornier GmbH. Those Dornier shareholders who previously exchanged some of their Dornier shares for DLRH shares retain the right to exchange these DLRH shares for cash
or for Daimler AG ordinary shares and some of them have already partially exercised that right.
For
information on shares and options held by members of our supervisory board, our board of management, and our other senior executives, please refer to the discussion under the heading
"Share Ownership" in "Item 6. Directors, Senior Management and Employees."
ARTICLES OF INCORPORATION
Organization and Register
Daimler AG is a stock corporation organized in the Federal Republic of Germany under the German Stock Corporation Act
(
Aktiengesetz
). It is registered in the Commercial Register (
Handelsregister
) maintained by the local
court in Stuttgart, Germany, under the entry number "HRB 19360."
Corporate Governance
Daimler AG has three separate governing bodies: the general meeting of shareholders, the supervisory board and the board of management.
Their roles are defined by German law and by the corporation's articles of incorporation (
Satzung
), and may be described generally as follows:
The
Annual General Meeting of Shareholders
which must be held within the first eight months of each fiscal year ratifies the actions of
the corporation's supervisory board and board of management, and resolves upon the amount of the annual dividend, the appointment of an independent auditor, and certain significant corporate
transactions. The general meeting also elects the shareholder representatives of our supervisory board.
94
The
Supervisory Board
consists of twenty members. Ten members are elected by our shareholders and ten members are elected by our employees
as required by the German Co-determination Act (
Mitbestimmungsgesetz
). The supervisory board supervises and advises our board of management
and appoints and removes its members. Although it may not make management decisions, our supervisory board has determined specified matters which require its approval.
The
Board of Management
which acts under the principle of collective responsibility manages our business. It is authorized to represent
Daimler AG and to enter into binding agreements with third parties on its behalf. The board of management submits regular reports to the supervisory board about the corporation's operations, business
strategies and financial condition and informs the supervisory board and its chairman of other important matters affecting its performance and profitability. It also prepares special reports upon
request. A person may not serve on the board of management and the supervisory board at the same time.
Several
of our specific corporate governance provisions are summarized below.
Business Purposes
As stated in Section 2 of our articles of incorporation, our business purpose is to engage, directly or indirectly, in business
in the fields of development, production and sale of products and rendering of services, especially in the following lines of business:
-
-
land vehicles;
-
-
watercraft, aircraft, spacecraft and other products in the fields of road transport, aerospace and marine technology;
-
-
engines and other propulsion systems;
-
-
electronic devices, machinery and systems;
-
-
communication and information technology;
-
-
financial services of all kinds, insurance brokerage; and
-
-
management and development of real property.
Our
articles authorize us to take all actions that serve the attainment of our business purposes, except that Daimler AG is not permitted to carry out directly financial services
transactions or banking and real property transactions that require a government license.
Directors
Under German law, our supervisory board members and board of management members owe duties of loyalty and care to our company. They
must exercise the standard of care of a prudent and diligent businessman and bear the burden of proving they did so if their actions are contested. Both boards must consider the interests of the
company, including the interests of its shareholders and employees and, to some extent, the common interest. Those who violate their duties may be held jointly and severally liable for any resulting
damages. Board members are not liable to our company if they acted pursuant to a lawful resolution of the shareholders' meeting. A board member is not liable for breach of duty for a business decision
that he or she reasonably believes is based on appropriate information and is in the company's interest. Supervisory board and board of management members are not obligated to own shares of the
corporation to qualify for board membership. We have, however, established stock ownership guidelines for members of our board of management which require that a portion of their personal assets
consist of Daimler shares. Although German law permits us to make loans to members of our supervisory board and board of management if approved by the supervisory board, the U.S. Sarbanes-Oxley Act of
2002 (also applicable to foreign private issuers like us) prohibits almost all such loans. German law stipulates that our supervisory board and board of management members may not vote on a matter
that concerns ratification of his or her own acts or discharges the board member from liability or enforcement of a claim against the board
95
member
by our company. The shareholder representatives of our supervisory board may be elected for varying terms of office. For further information about our supervisory board and board of management,
including compensation and term of office, please refer to "Item 6. Directors, Senior Management and Employees."
Ordinary Shares
Our capital stock consists solely of one class of ordinary shares without par value
(
Stückaktien
), which we issue in registered form. Record holders of our ordinary shares are registered in our share register
(
Aktienregister
). Registrar Services GmbH, a subsidiary of Deutsche Bank AG, acts as our transfer agent and registrar in Germany and various
other countries and administers our share register on our behalf. Our transfer agent and registrar in the United States is The Bank of New York Mellon.
The
following is a summary of significant provisions under German law and our articles of incorporation relating to our ordinary shares:
Capital Increases.
In accordance with approved or conditional capital passed upon by our shareholders, we may increase our share capital
in
consideration of cash or non-cash contributions. Approved capital provides our board of management with the flexibility to issue new shares during a period of up to five years, generally
to preserve liquidity. Conditional capital allows the issuance of new shares for specified purposes, including subscription rights (e.g. from stock option plans) for employees and members of
the board of management, mergers, and upon conversion of option bonds and convertible bonds. A resolution authorizing approved or conditional capital requires the votes of a 75% majority of the issued
shares present at the shareholders' meeting at which the resolution is proposed. Our articles of incorporation do not provide for a larger capital majority or additional requirements that are more
stringent than the law requires.
Redemption.
Our share capital may be reduced by a specific resolution adopted by our shareholders. Our share capital may also be
reduced by retiring
and canceling shares purchased in a share buy-back program if the authorization by the shareholders contemplates such cancellation.
Preemptive Rights.
Our articles of incorporation provide that the preemptive right (
Bezugsrecht
) of
shareholders to subscribe for the issue of additional shares under existing approved or conditional capital in proportion to their shareholdings in the existing capital may be excluded under certain
circumstances.
Liquidation.
If Daimler AG were to be liquidated, any liquidation proceeds remaining after all of its liabilities are paid would be
distributed to
its shareholders in proportion to their shareholdings.
No Limitation on Foreign or Substantial Ownership.
Neither German law nor our articles of incorporation limit the rights of persons who
are not
citizens or residents of Germany, or who hold a substantial number of our shares, with respect to holding or voting our ordinary shares.
Dividends
We declare and pay a dividend on our ordinary shares for a financial year if the unappropriated profits of Daimler AG for the relevant
year are sufficient to pay a dividend, our board of management and our supervisory boards propose a dividend, and the annual general meeting of our shareholders approves the declaration and payment of
a dividend. Our supervisory board approves the unconsolidated financial statements (prepared in accordance with German GAAP) of the Group's parent company, Daimler AG, proposed by our board of
management for each financial year and both boards recommend a resolution on the allocation of all unappropriated profits, including any amount of net profits to be distributed as a dividend to our
shareholders, for approval at the meeting. All shareholders holding shares on the date of the annual general meeting approving the dividend are entitled to receive the declared dividend, unless the
shares they hold were newly issued in the year of, but prior to the date of, the annual general meeting and such shares are only entitled to dividends beginning with the financial year in which the
new shares were issued. We pay dividends to shareholders in proportion to their percentage ownership of our outstanding share capital. A shareholder's right to claim a dividend expires four
96
years
from the end of the year in which the shareholders' meeting adopted the resolution on the dividend and the dividend has become due for payment.
Our
articles of incorporation, in accordance with the German Stock Corporation Act (
Aktiengesetz
), authorize our board of management, with
the approval of our supervisory board, to make an interim payment to shareholders with respect to the unappropriated profit of the prior financial year, if a preliminary closing of the financial
statements for that year shows a profit. The interim payment may not exceed 50% of the amount of the foreseeable unappropriated profit remaining after deducting any amounts required to be transferred
to retained earnings. Furthermore, the interim payment may not exceed 50% of the previous fiscal year's unappropriated profit.
Our
articles of incorporation provide for issuing new shares from approved and conditional capital previously authorized by the shareholders. With respect to the existing conditional
capital, our articles further provide that such new shares may be entitled to the entire per ordinary share annual dividend for the year in which they are issued.
Shareholders
registered in our share register with addresses in the United States may elect to receive dividends in either euros or U.S. dollars. Unless instructed otherwise, our U.S.
transfer agent will convert all cash dividends and other cash distributions it receives with respect to our ordinary shares registered in the U.S. into U.S. dollars before payment to the shareholder.
The U.S. transfer agent will reduce the amount distributed by any amounts we or the U.S. transfer agent are required to withhold on account of taxes or other governmental charges.
Voting Rights
Each of our ordinary shares represents one vote. German law does not permit cumulative voting. Our articles of incorporation provide
that resolutions are passed at shareholder meetings by a simple majority of votes cast, unless a higher vote is required by law. German law requires that any resolution imposing additional obligations
on shareholders requires the consent of all affected shareholders in order to be effective. German law further requires that the following matters, among others, be approved by the affirmative vote of
75% of the issued shares present at the shareholders' meeting at which the matter is proposed:
-
-
changing the objects and purposes provision in the articles of incorporation;
-
-
authorizing approved and conditional capital;
-
-
excluding preemptive rights of shareholders to subscribe for new shares;
-
-
dissolving our company;
-
-
merging into, or consolidating with, another stock corporation;
-
-
transferring all or virtually all of our assets; and
-
-
changing our corporate form.
Shareholder Meetings
Our board of management, our supervisory board, or shareholders owning in the aggregate at least 5% of our outstanding shares may call
a meeting of shareholders. The supervisory board must convene a general shareholders' meeting if this is deemed necessary for the well-being of Daimler AG. There is no minimum quorum
requirement for shareholder meetings. At the annual general meeting we present the Daimler AG financial statements, the consolidated financial statements of the Group, the management reports for
Daimler AG and the Group and the report of the supervisory board. We further ask our shareholders to ratify the actions of the members of our board of management and our supervisory board during the
prior year and to approve the allocation of unappropriated profit (determined in accordance with German GAAP) of the Group's parent company, Daimler AG, and to appoint the independent auditor proposed
by the supervisory board on recommendation of the
97
audit
committee. Our shareholders also elect their representatives to our supervisory board at the general meeting for terms of up to five years.
Amendments
to our articles of incorporation, resolutions regarding approved or conditional capital, the authorization of the company to buy back its own shares and other items for the
agenda may be proposed either by our supervisory board and board of management, or by a shareholder or group of shareholders holding a minimum of either 5% of the issued shares or shares representing
at least €500,000 of the company's share capital.
If
a shareholder wants to participate and vote at any of our shareholders' meetings, the shareholder must be registered in the share register on the meeting date and must also have
notified us no later than four calendar days before the meeting date (not counting the day of the meeting and the day of receipt of the notice) that he or she wishes to attend the meeting. Instead of
voting in person at the meeting, shareholders may vote their shares by proxy after having conferred a power of attorney in advance of the meeting either by signing and returning the proxy card mailed
to them or via the internet or electronic mail as specified by the company. We mail or e-mail a meeting notice to our shareholders, which includes a proxy card and an agenda describing the
items to be voted on at the meeting. As a foreign private issuer, we are not required to file a proxy statement under U.S. securities law. The proxy voting process for our shareholders in North
America is substantially similar to the process utilized by publicly held companies incorporated in the United States. Unless a shorter period is permissible by law, the general shareholders' meeting
must be convened at least 30 days before the day by which shareholders must register for the meeting and we must announce the meeting, stating the agenda, in the electronic Federal Gazette
(elektronischer Bundesanzeiger)
and provide for Europe-wide distribution of the announcement.
Change in Control
Our articles do not contain any specific provisions that would have an effect of delaying, deferring or preventing a change in control
or that would only apply in the context of a merger, acquisition or corporate restructuring involving us or any of our subsidiaries. The German Takeover Act (
Wertpapiererwerbs-
und Übernahmegesetz
) requires, among other things, that a bidder seeking control of a company with its corporate seat in Germany and traded on a stock exchange
in the European Economic Area must publish advance notice of a tender offer; submit a draft offer statement to the German Federal Financial Supervisory Authority (
Bundesanstalt
für Finanzdienstleistungsaufsicht
) for review; and obtain certification from a qualified financial institution that adequate financing is in place to complete
the offer. Once a shareholder has acquired shares representing 30% of the voting power, it must make an offer for all remaining shares of the target. The German Takeover Act requires the board of
management of the target to refrain from taking any measures that may frustrate the success of the takeover offer. However, the target board of management is permitted to take any action which a
prudent and diligent management of a company that is not the target of a takeover bid would also take. Moreover, the target board of management may search for other bidders and, with the prior
approval of the supervisory board, may take other defensive measures, provided that both boards act within their general authority under the German Stock Corporation Act
(
Aktiengesetz
). The board of management may also adopt specific defensive measures if the supervisory board has approved such measures and if the
measures were specifically authorized by the shareholders no later than 18 months in advance of a takeover bid by resolution of 75% of the votes cast. The Takeover Act also provides that a
company's articles of incorporation may be amended to replace the above rules on prohibiting the frustration of tender offers with more restrictive rules. Our articles do not contain any more
restrictive rules.
Disclosure of Shareholdings
Our articles do not require shareholders to disclose their shareholdings. The German Securities Trading Act
(
Wertpapierhandelsgesetz
), however, requires holders of voting securities of a corporation whose shares are listed on a stock exchange to notify the
corporation of the number of shares they hold if the voting rights reach, exceed or fall below specified thresholds. These thresholds are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of the
corporation's voting rights. Upon reaching or crossing these thresholds, holders must promptly, and within no
98
more
than four trading days, notify the issuer and concurrently the German Federal Financial Supervisory Authority.
In
addition, with respect to derivative instruments, under German law, anyone who directly or indirectly holds financial instruments that grant the holder the right to unilaterally
acquire, under a legally binding agreement, previously issued voting shares of an issuer must promptly upon obtaining, exceeding, or no longer holding
5%, 10%, 15%, 20%, 25%, 30%, 50% or 75%, and within no more than four trading days, provide notice thereof to the issuer and to the German Federal Financial Supervisory Authority. Since March 2009,
voting rights from shares and voting rights obtainable through financial instruments are aggregated for determining whether a disclosure obligation exists. In instances where a disclosure with respect
to voting rights is or has been made, an additional disclosure regarding financial instruments will not be necessary unless the aggregate amount of voting rights from or relating to all securities
meets, exceeds or falls below any of the above thresholds.
A
German issuer must publish promptly any such notice it receives, but in any event no later than three trading days after receiving the notice. The notice must be published through an
electronically operated information dissemination system, a news agency, a news provider, a print medium, and a website for the financial markets (jointly known as a media bundle). In that regard, at
least one of those media must allow an active dissemination throughout Europe. In addition, the issuer must promptly, though not prior to publication, transmit a copy of the notice to the company
register (
Unternehmensregister
). At the same time, the issuer must notify the German Federal Financial Supervisory Authority of the publication.
The
German Securities Trading Act also contains various provisions designed to ensure that shareholdings in listed companies are attributed to the person who actually controls the voting
rights associated with such shares.
Failure
by a shareholder to give a required notice results, for the duration of the failure, in the loss of the voting rights from the shares that belong to such shareholder or from
shares whose voting rights are attributable to it. Dividend rights are not affected if the failure to give notice was not willful and such failure has been remedied on or before the date of the annual
meeting at which the dividend is approved. In certain cases involving a willful or grossly negligent breach of the notification obligations, the loss of rights will continue for an additional six
months. In addition, a fine may be imposed for failure to comply with the notice requirement.
Once
a party's voting rights from shares in a German issuer meet or exceed the 10% threshold or a higher threshold, such party must notify the issuer, within twenty trading days, of its
intentions with respect to the acquisition of the voting rights, identify the source of the funds used to make the acquisition and, in the process, make other required disclosures.
Basis of Potential Claims
Claims against members of our supervisory board or board of management may be asserted on behalf of Daimler AG if the shareholders'
meeting so resolves by simple majority. The claim must be brought within six months from the day of the annual meeting of shareholders at which the resolution was passed.
Admission
of an action against the supervisory board and board of management members on behalf of the company may be claimed by shareholders holding in the aggregate at least 1% of the
issued shares or shares representing at least €100,000 of our capital stock. The competent court will allow the action to proceed if (i) the shareholders acquired their shares
before any information was published from which they could have become aware of the alleged breach of duty or damage; (ii) the company failed to file a suit itself within a reasonable
period of time after being asked to do so by the shareholders; (iii) facts exist that justify the suspicion that the company has suffered damage by dishonesty or gross breach of the law or the
articles; and (iv) there are no overriding interests of the company against the assertion of such damage claim.
German Corporate Governance Code Declaration
We, like other publicly traded companies in Germany, are subject to the German Corporate Governance Code that recommends specific
governance practices. The German Stock Corporation Act (
Aktiengesetz
) requires a
99
company's
supervisory board and board of management to declare annually if the Code's recommendations have been and are being met or, if not, which recommendations have not or are not being applied
and why not. Shareholders must be given permanent access to such declaration. Our supervisory board and board of management issued a statement declaring that we have complied, do comply and
intend to comply in the future with the recommendations of the Corporate Governance Code, subject to the exceptions and for the reasons identified in the
declaration. We have filed an English translation of the declaration as an exhibit to this annual report and also made it available on our website at
http://www.daimler.com/dccom/0-5-58949-1-58937-1-0-0-0-0-0-8-7145-0-0-0-0-0-0-0.html
.
MATERIAL CONTRACTS
In May 2007, DaimlerChrysler AG, DaimlerChrysler North America Finance Corporation, DaimlerChrysler Holding Corporation and a
subsidiary of the private-equity firm Cerberus Capital Management L.P. (Cerberus) entered into a Contribution Agreement pursuant to which a majority interest in the Chrysler Group and the
related Chrysler financial services business in the NAFTA region (the Chrysler activities) was acquired by a subsidiary of Cerberus. The agreement provided for Cerberus to make a capital contribution
of €5.2 billion (US$7.2 billion) in return for an 80.1% equity interest in Chrysler Holding LLC, a newly established holding company for the Chrysler activities.
We retained a 19.9% non-controlling equity interest in Chrysler Holding LLC. The transaction closed on August 3, 2007.
In
connection with the Cerberus transaction, our subsidiary DaimlerChrysler North America Finance Corporation agreed pursuant to the Second Lien Term Loan Agreement, dated as of
August 3, 2007, among Carco Intermediate Holdco II, LLC, Chrysler LLC, the several banks and other financial institutions or entities from time to time party thereto, JP Morgan
Chase Bank, N.A., as administrative agent and the other agents party thereto, to provide a second lien loan of up to US$1.5 billion. This loan was drawn in 2008.
In
June 2009, based on a binding term sheet signed in April 2009, we entered into a redemption agreement regarding our remaining 19.9% non-controlling equity interest in
Chrysler Holding LLC. As a result of the redemption, Daimler no longer holds any equity interest in Chrysler Holding LLC or its subsidiaries and all our representatives resigned from the
boards of Chrysler Holding LLC and its subsidiaries. The binding term sheet also provided for a settlement agreement, which was signed later in June 2009, covering among others things the
forgiveness of the Group's receivables, including accrued interest, in connection with a subordinated loan and the above-mentioned second lien loan and the release of certain claims previously made by
Cerberus against Daimler. In addition, pursuant to the settlement agreement, Daimler's US$1 billion guarantee of Chrysler pension plans, provided to the U.S. Pension Benefit Guaranty
Corporation in 2007 in connection with the Cerberus transaction, was cancelled, and Daimler paid US$200 million into the Chrysler pension plans in June 2009, agreed to make further payments of
US$200 million in each of 2010 and 2011 and provided a replacement guarantee of US$200 million which will remain in place until August 2012. The nominal amounts of the forgiven
receivables, which were fully impaired at December 31, 2008, were US$0.4 billion and US$1.5 billion, respectively. However, the forgiveness of the US$1.5 billion second
lien loan by Daimler was subject to the condition that the official committee of unsecured creditors of Chrysler, formed as part of Chrysler's bankruptcy proceedings, would not commence litigation
against Daimler. In the third quarter of 2009, the committee filed a complaint with the bankruptcy court which is primarily related to transactions undertaken in connection with the acquisition by
Cerberus of its majority interest in Chrysler in 2007. As a consequence, the forgiveness of the US$1.5 billion second lien loan did not become effective.
For
additional information on the Chrysler transactions, please refer to Note 2 to our Consolidated Financial Statements and the discussions under "Introduction" in
"Item 4. Information on the Company" and "Operating Results" in "Item 5. Operating and Financial Review and Prospects." For additional information on the lawsuit brought by the Official
Committee of Unsecured Creditors of Old CarCo LLC (formerly known as Chrysler LLC), please refer to the discussion under the heading "Legal Proceedings" in "Item 8. Financial
Information" and to Note 27 to our Consolidated Financial Statements.
100
In
March 2009, Daimler AG, Aabar Investments PJSC of Abu Dhabi and Semare Beteiligungsverwaltungs GmbH, an indirect wholly-owned subsidiary of Aabar, entered into an Investment
Agreement pursuant to which Semare agreed to subscribe to 96,408,000 newly issued ordinary shares, no par value, of Daimler AG at an issue price of €20.27 per share or
€1,954,190,160 in the aggregate. Following the closing of the transaction on March 24, 2009, Aabar reported that it and some of its affiliates beneficially held 9.4% of the
outstanding ordinary shares of
Daimler AG. Please also refer to the discussion under the heading "Major Shareholders" under "Item 7. Major Shareholders and Related Party Transactions."
Concurrently
with Aabar's investment in Daimler AG, Daimler AG and International Petroleum Investment Company (IPIC), an entity owned by the Government of the Emirate of Abu Dhabi which
in turn controls the majority of the board of directors of Aabar, identified areas of future strategic cooperation, including projects relating to electric automobiles with a particular focus on
projects aiming at the reduction of CO2 emissions, projects with respect to the development and/or production of innovative compound materials to be used in automobiles, and possible joint investment
proposals relating to each. In addition, IPIC and Abu Dhabi acknowledged the special importance of Daimler's willingness to support corporate and social responsibility projects in Abu Dhabi.
EXCHANGE CONTROLS
The euro is a fully convertible currency. There are currently no legal restrictions in Germany on international capital movements and
foreign exchange transactions (except in limited embargo circumstances) that would prevent us from transferring capital, paying dividends or making other payments to our shareholders who are
non-residents of Germany. There are, however, limited reporting requirements regarding transactions involving cross border monetary transfers.
TAXATION
In this section we discuss the material United States federal income and German tax consequences to you if
you:
-
-
are a beneficial owner of Daimler ordinary shares;
-
-
are holding such ordinary shares as a capital asset;
-
-
are a resident of the United States for purposes of the United States Germany income tax treaty (the
"Income Tax Treaty"), which generally includes: an individual U.S. resident and a corporation (or other entity treated as a corporation for United States federal income tax purposes) that is created
or organized under the laws of the United States, any state thereof or the District of Columbia;
-
-
are not holding any of our ordinary shares as part of the business property of your permanent establishment in Germany or,
if you are an individual, as part of your fixed base in Germany that you use to perform independent personal services; and
-
-
are not subject to the limitation on benefits restrictions in the Income Tax Treaty, if you are not an individual.
We
have based our discussion on existing United States federal income and German tax law, including legislation, regulations, administrative rulings and court decisions, as in effect on
the date of this annual report. These tax laws are subject to change, possibly with retroactive effect. Our discussion does not address all aspects of United States federal income and German taxation
that may be relevant to you in light of your particular circumstances. For example, our discussion does not address tax consequences resulting from shares acquired pursuant to the exercise of employee
stock options or shares otherwise received as compensation and it does not include tax consequences to shareholders who are subject to special treatment under United States federal income tax laws
(for example, financial institutions, traders in securities that elect a mark-to-market method of accounting for securities holdings, insurance companies,
tax-exempt organizations, broker dealers and corporations that own
101
10%
or more of our ordinary shares). This discussion does not address the tax consequences to any person who owns an interest in a partnership or any other pass-through entity that holds
Daimler ordinary shares. The discussion also does not address the consequences of the alternative minimum tax to any person or any aspects of state, local or non-United States tax law
other than some aspects of German tax law.
We
strongly urge you to consult your tax advisor as to the United States federal income and German tax consequences and any other tax consequences of holding our ordinary shares. You
should also discuss with your tax advisor any facts and circumstances that may be unique to you. To the extent the following discussion relates to withholding tax, refund procedures and other matters
regarding dividends, the discussion is intended as a general guideline and should not be interpreted to mean that dividends will be paid for any particular period.
Withholding Tax on Dividends
Effective as of January 1, 2009, the withholding tax rate on dividends paid by a German corporation to non-resident
stockholders has been increased from a total rate of 21.1% (consisting of a 20% withholding tax and an effective 1.1% surcharge) to a total effective rate of 26.375% (consisting of a 25% withholding
tax and an effective 1.375% surcharge). Following that change, Daimler AG will be required to withhold German tax on dividends paid to non-resident stockholders in 2010 at a total
effective rate of 26.375%. U.S. shareholders can obtain a partial refund of this 26.375% aggregate German withholding tax under the Income Tax Treaty.
Generally,
United States federal income tax law requires you to pay taxes on dividends you receive from a German corporation. You may be permitted to claim a foreign tax credit for
German withholding taxes that you paid on the dividend to the extent that you are not entitled to a refund for those taxes from the German tax authorities. The rules governing the foreign tax credit
are complex and U.S. shareholders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
The
Income Tax Treaty reduces the German withholding tax rate from 26.375% to 15% of the gross amount of any dividend you receive from a German corporation. Therefore, you may apply for
a refund of German withholding tax in an amount equal to 11.375% of the gross amount of the dividend you received (26.375% aggregate German withholding tax rate minus 15% Income Tax Treaty withholding
tax rate).
Thus,
as an example, each US$1,000 of gross dividend paid to you will be subject to a German withholding tax of US$263.75, of which US$113.75 may be refunded to you under the Income Tax
Treaty. Assuming you receive the US$113.75 refund, you will receive in total US$850 of cash for each US$1,000 of gross dividend (US$736.25 directly and US$113.75 by way of withholding tax refund). The
United States federal income tax rules will treat you as if you received a total dividend of US$1,000, and you will have to include US$1,000 in your gross income. You may also be entitled to a foreign
tax credit, subject to applicable limitations of United States federal income tax law, for the net US$150 of German withholding tax.
You
must include any euro-denominated dividends you receive in your gross income in a dollar equivalent amount that is based on the exchange rate on the date you receive or
are treated as having received the dividends. If you convert these dividends into dollars on the date you receive or are treated as having received the dividends, you should not be required to
recognize foreign currency gain or loss on the dividend. You may, however, be required to recognize foreign currency gain or loss on your receipt of refunds of German withholding tax to the extent
that (A) the dollar value of the refund you received or were treated as having received differs from (B) the dollar equivalent of the refund on the date you received or were treated as
having received the underlying dividend. United States federal income tax rules treat any such foreign currency gain or loss as ordinary income or loss.
102
Withholding Tax Refund Procedures
If you are a record holder of our ordinary shares who is registered in our share register, our U.S. transfer agent, The Bank of New
York, will initially receive any dividends you are entitled to and will then distribute them to you. The U.S. transfer agent will also assist you in obtaining the refund of German withholding tax
under the Income Tax Treaty. These arrangements may be amended or revoked at any time in the future.
The
U.S. transfer agent will prepare a German claim for refund on your behalf and file it electronically with the German tax authorities. In order for the U.S. transfer agent to file
this claim for refund, the U.S. transfer agent will prepare and mail to you, and request that you sign and return to the U.S. transfer agent:
-
-
a statement authorizing the U.S. transfer agent to perform these procedures and agreeing that the German tax authorities
may inform the IRS of any refunds of German taxes you receive; and
-
-
a document authorizing the German tax authorities to remit the refund of withholding tax to an account other than your
account.
The
U.S. transfer agent will attach this signed statement to the claim for refund of German withholding tax and file the claim with the German tax authorities. You should request IRS
Form 6166, Certification of United States Residency, and have it ready for presentation to the U.S. transfer agent upon request. Under German tax audit procedures, the German tax authorities
may request the U.S. transfer agent to provide them with your certification (IRS Form 6166). If you do not provide the U.S. transfer agent with this certification within a reasonable time, the
German tax authorities will deny your refund of the German withholding taxes. For more information about Form 6166 please refer to "Other Refund Procedures" below.
A
simplified refund procedure also applies to you if you hold your ordinary shares through a broker participating in the Depository Trust Company. Under this procedure, the Depository
Trust Company claims a refund of German withholding taxes on your behalf by certifying your U.S. taxpayer status to the German tax authorities. This certification is based on information that you
provide to your broker. Accordingly, if you hold your ordinary shares through a broker participating in the Depository Trust Company, you do not need to file refund claims through the U.S. transfer
agent.
The
German tax authorities will issue refunds denominated in euros. The German tax authorities will issue these refunds to the U.S. transfer agent or the Depository Trust Company, as the
case may be, which will convert the refunds to dollars and pay the dollar amounts to you or your broker. If the funds are remitted to your broker, your broker will in turn remit your refund amounts to
you.
If you are not eligible for the simplified refund procedures discussed above, you must submit a special claim for refund to the German
tax authorities to request your refund of German withholding tax. Your refund claim request must include with your claim the original or a certified copy of the bank voucher that you received from the
U.S. transfer agent. This voucher must show the amount of tax that was withheld. You must submit your claim within four years from the end of the calendar year in which you received the dividend. You
can obtain a form for your claim for refund from: (i) the German tax authorities at the same address where you will have to file your claim, which is: Bundeszentralamt für
Steuern, D-53221 Bonn, Germany, or (ii) the Embassy of the Federal Republic of Germany at 4645 Reservoir Road, N.W., Washington, D.C. 20007-1998.
You
must also submit to the German tax authorities IRS Form 6166, Certification of United States Residency. A shareholder seeking the Form 6166 certification must complete
IRS Form 8802, Application for United States Residency Certification. A user fee is charged by the IRS to process Form 8802. The user fee is US$35 for a request for up to twenty original
Forms 6166 issued under a single taxpayer identification number ("TIN"). Additional user fees apply to additional requests for Form 6166 under the same TIN or requests for
Form 6166
103
under
a different TIN. The user fee must be in the form of a check, money order or electronic payment payable in U.S. dollars to the United States Treasury.
If
you choose to submit the user fee in the form of a check or money order, you must send the completed Form 8802, all required statements and documentation and the appropriate
user fee to the Internal Revenue Service, P.O. Box 71052, Philadelphia, PA 19176-6052, USA, or by private delivery service to Citibank, Attn: IRS Lockbox Operations, 500
White Clay Center Drive, Building 500, Newark, DE 19711. If you choose to submit the user fee by electronic payment, you must send the completed Form 8802 and all required statements and
documentation to the Internal Revenue Service, P.O. Box 16347, Philadelphia, PA 19114-0447. The Certification requests are generally processed within 45 days from the
date received. Form 8802 and the related instructions can be found on the IRS website at
http://www.irs.gov
.
Reduced United States Tax Rate for Certain Dividends
The maximum rate of United States federal income tax on qualified dividend income received by an individual (and certain trusts and
estates) is 15%. This maximum rate applies to eligible dividends received before January 1, 2011. Qualified dividend income generally includes dividends paid by United States corporations and
qualified foreign corporations. A foreign corporation generally will be treated as a qualified foreign corporation for these purposes if:
-
(1)
-
it
is eligible for benefits of a comprehensive income tax treaty with the United States that the IRS determines is satisfactory for these purposes and that
includes an exchange of information program; or
-
(2)
-
the
stock of the foreign corporation on which the dividend is paid is readily tradable on an established securities market in the United States.
We
believe we are treated as a qualified foreign corporation under either of these tests.
In
addition, to qualify for the reduced rate, the share of stock on which the dividend is paid must be held more than 60 days in the 121-day period beginning
60 days before the ex-dividend date and the stockholder must not be under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to
positions in substantially similar or related property.
Form 1099-DIV
for 2009 will report the gross amount of Daimler qualified dividends in Box 1b. Nevertheless, shareholders are required to determine whether they
meet the necessary holding period requirements and to what extent they are eligible to claim a foreign tax credit with respect to the Daimler dividend.
Special
rules for determining a taxpayer's foreign tax credit limitation shall apply in the case of qualified dividend income. Rules similar to those of Internal Revenue Code
section 904(b)(2)(B) concerning adjustments to the foreign tax credit limitation to reflect any capital gain rate differential shall also apply to any qualified dividend income.
Taxation of Capital Gains
The Income Tax Treaty provides that the German capital gains tax does not apply to gains on the sale or other disposition of your
Daimler ordinary shares.
If
you sell or otherwise dispose of your Daimler ordinary shares, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between
the amount realized and your adjusted tax basis in those shares. If you are an individual and you have held the Daimler ordinary shares more than 12 months, the capital gain will generally be
subject to a maximum United States federal income tax rate of 15%.
104
German Capital Tax (
Vermögensteuer
)
As a result of a judicial decision, the German capital tax
(
Vermögensteuer
) is not imposed at the present time. In addition, under the Income Tax Treaty you would not have to pay German capital
tax (
Vermögensteuer
) even if it were currently in effect.
Other German Taxes
There are no German transfer, stamp or other similar taxes that apply to you in connection with receiving, purchasing, holding or
selling our ordinary shares.
DOCUMENTS ON DISPLAY
You may read and copy the reports and other information we file with the United States Securities and Exchange Commission (SEC),
including this annual report and the exhibits thereto, at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of these materials by mail
from the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the SEC's Public Reference Room by
calling the SEC in the United States at 1-800-SEC-0330. You may also access our annual reports and some of the other information we file with or submit to the SEC
electronically through the SEC's website at www.sec.gov. In addition, you may inspect materials we file at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005.
Item 11. Quantitative and Qualitative Disclosures About Market Risk.
The global nature of our businesses exposes us to market risks resulting from changes in foreign currency exchange rates and interest
rates. Accordingly, changes in foreign currency exchange rates and interest rates may adversely affect our operating results and financial condition.
We
are also exposed to commodity price risk associated with our business operations. In addition, we are exposed to equity price risk. Our equity price risk assessment does not include
non-controlling equity interests we hold in other companies, which we classify as long-term investments. The equity price risk of the remaining positions is not material to us.
We
seek to manage and control these market risks primarily through our regular operating and financing activities, but we also use derivative financial instruments when we deem it
appropriate. We evaluate these market risks by monitoring changes in key economic indicators and market information on an ongoing basis.
For
a detailed description of our risk management control systems and information about our exchange rate risk, interest rate risk as well as our equity price risk and commodity price
risk, please refer to the discussion under the sub-heading "Finance Market Risks" in Note 30 to our Consolidated Financial Statements. Any market sensitive instruments, including
equity and interest bearing securities that our pension and other post-employment benefit plans hold are not included in the quantitative or qualitative analyses presented in
Note 30. Please refer to Note 21 to our Consolidated Financial Statements for additional information regarding our pension plans. For a description of how we account for derivative
financial instruments refer to Notes 1 and 29 to our Consolidated Financial Statements.
Item 12. Description of Securities Other than Equity Securities.
Not applicable.
105
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
None.
Item 15. Controls and Procedures.
Disclosure controls and procedures.
Our disclosure controls and procedures are designed to provide reasonable assurance that
information required to
be disclosed in this report is recorded, processed, summarized and reported on a timely basis. Our management, with the participation of the chairman of our board of management and the member of our
board of management responsible for Finance & Controlling/Daimler Financial Services, has evaluated, as of December 31, 2009, the effectiveness of our disclosure controls and procedures,
as such term is defined under Rules 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based on such evaluation, the chairman of
our board of management and the member of the board of management responsible for Finance & Controlling/Daimler Financial Services have concluded that, as of December 31, 2009, our
disclosure controls and procedures are effective to achieve their intended objectives.
Management's annual report on internal control over financial reporting.
The management of Daimler is responsible for establishing and
maintaining
adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange
Act of 1934, as amended, as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a
material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Daimler's
management assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2009. In making this assessment, management used the
criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control Integrated Framework."
Based
on its assessment, management believes that, as of December 31, 2009, the company's internal control over financial reporting is effective.
KPMG
AG Wirtschaftsprüfungsgesellschaft, the independent registered public accounting firm that has audited our Consolidated Financial Statements, has issued an
attestation report on the company's internal control over financial reporting as of December 31, 2009. This attestation report appears on page F-3.
Changes in internal control over financial reporting.
During the period covered by this report, there have not been any changes in
Daimler AG's
internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that have
materially affected, or are reasonably likely to materially affect, Daimler AG's internal control over financial reporting.
106
Item 16A. Audit Committee Financial Expert.
Our supervisory board has made the formal determination that Bernhard Walter and Clemens Börsig are "audit committee
financial experts" as that term is defined by SEC rules, and that they are "independent" as that term is defined under applicable New York Stock Exchange listing standards.
Item 16B. Code of Ethics.
Our supervisory board has adopted our code of ethics, a code that applies to members of the board of management, including its chairman
and the member responsible for Finance & Controlling, and other senior officers, including the Chief Controller and the Chief Accounting Officer. This code is publicly available on our website
at
http://www.daimler.com/dccom/0-5-168351-1-168355-1-0-0-0-0-0-36-7155-0-0-0-0-0-0-0.html.
Item 16C. Principal Accountant Fees and Services.
At the annual meeting held on April 8, 2009, our shareholders appointed KPMG AG Wirtschaftsprüfungsgesellschaft
(KPMG AG), to serve as our independent auditor for the 2009 fiscal year. For additional information regarding the appointment of our independent auditor please refer to "Item 6. Directors,
Senior Management and Employees." The following table summarizes fees charged in connection with professional services provided by KPMG AG and other independent member firms within the international
KPMG network for each of the last two fiscal years.
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
|
|
(€ in millions)
|
|
Audit Fees
|
|
|
44
|
|
|
50
|
|
Audit-Related Fees
|
|
|
2
|
|
|
2
|
|
Tax Fees
|
|
|
|
|
|
1
|
|
All Other Fees
|
|
|
1
|
|
|
2
|
|
|
|
|
|
|
|
Total
|
|
|
47
|
|
|
55
|
|
|
|
|
|
|
|
"Audit
Fees" are the aggregate fees billed or expected to be billed for the audit of our consolidated and annual financial statements, the audit of internal control over financial
reporting, reviews of interim financial statements, attestation services that are provided in connection with statutory and regulatory filings or engagements as well as business system controls
audits.
"Audit-Related
Fees" are fees billed for services rendered during the respective fiscal years for assurance and related services that are reasonably related to the performance of the
audit or review of our financial statements and are not reported under "Audit Fees." This category comprises fees for the audit of employee benefit plans and pension schemes, agreed-upon
procedure engagements and other attestation services subject to regulatory requirements as well as advisory services associated with our financial reporting.
"Tax
Fees" are fees billed for services rendered during the respective fiscal years for tax compliance services, tax advice on actual or contemplated transactions and tax consulting
associated with international transfer prices.
"All
Other Fees" are fees billed for services rendered during the respective fiscal years for advisory services in connection with our internal controls over financial reporting. This
category also includes other immaterial support services.
Audit Committee's Pre-approval Policies and Procedures.
Our audit committee nominates and engages our independent auditor to audit our financial statements. For additional information
regarding our audit committee and the appointment of our independent auditor, please
107
refer
to "Item 6. Directors, Senior Management and Employees." In 2003, our audit committee adopted a policy requiring management to obtain the Committee's approval before engaging our
independent auditors to provide any other audit or permitted non-audit services to us or our subsidiaries. Pursuant to this policy, which is designed to assure that such engagements do not
impair the independence of our auditors, the audit committee pre-approves annually a catalog of specific audit and non-audit services in the categories Audit Services, Audit
Related Services, Tax Services, and Other Services that may be performed by our independent auditors. In addition, the audit committee limited the aggregate amount in fees our independent auditors may
receive during the 2009 fiscal year for non-audit services in certain categories.
Our
Chief Accounting Officer reviews all individual management requests to engage our independent auditors as a service provider in accordance with this catalog and, if the requested
services are permitted pursuant to the catalog, approves the request accordingly. We inform the audit committee about these approvals on a semiannual basis. Services that are not included in the
catalog require pre-approval by the audit committee chairman on a case-by-case basis. The audit committee's chairman is not permitted to approve any engagement of
our independent auditors if the services to be performed either fall into a category of services that are not permitted by applicable law or the services would be inconsistent with maintaining the
auditors' independence.
Item 16D. Exemptions from the Listing Standards for Audit Committees.
Mr. Erich Klemm and Mr. Stefan Schwaab are employees of Daimler who are non-executive officers serving on our
supervisory board and our audit committee consistent with
German law (Co-determination Act) and the company's rules of procedure for the supervisory board. As such, they are exempt under Rule 10A-3(b)(1)(iv)(C) of the
Securities Exchange Act of 1934 from the New York Stock Exchange listing standard for audit committees relating to "independence." We do not believe that their status as employees materially adversely
affects the ability of our audit committee to act independently.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
In 2009, we did not repurchase any of our ordinary shares, including under a share buy-back program.
At
the annual general meeting held on April 9, 2008, our shareholders authorized us, until October 9, 2009, to repurchase ordinary shares up to 10% of our share capital as
of April 9, 2008. Pursuant to this authorization, the board of management decided, with the approval of the supervisory board, to conduct a further share buy-back program of up to 10% of the
share capital for a maximum consideration of €6 billion, which we announced on June 17, 2008. At December 31, 2008, Daimler AG had repurchased 37,283,831 shares
for an aggregate consideration of €1.45 billion under that program. The repurchased shares, which we continue to hold as treasury shares, represented 3.87% of the shares
outstanding as of April 9, 2008. As a result of the uncertainty in the automotive markets in the second half of 2008, we suspended the further execution of that buy-back program on
October 24, 2008 and did not reinstate the program before the related shareholder authorization expired on October 9, 2009. For additional information regarding our share buy-back
programs, please refer to Note 19 to our Consolidated Financial Statements.
We
also did not effect any purchases of ordinary shares in 2009 in connection with our employee stock purchase program. However, in connection with a stock ownership program established
for the benefit of Group employees in the United Kingdom, a fund owned by Daimler UK Share Trustee Ltd., a trust established by our UK distributor, purchased 4,666 ordinary shares of Daimler AG
ordinary shares at an average price per share of GBP25.30. An independent fiduciary administers the fund.
In
addition, in 2009, some of our sponsored pension and other post-employment benefit plans purchased 3,316,388 certificates on Daimler AG ordinary shares at an average price
per unit of 22.46 and 100,634 Daimler AG ordinary shares at an average price per share of €24.49.
108
Item 16F. Change in Registrant's Certifying Accountant.
Not applicable.
Item 16G. Corporate Governance.
Our corporate governance practices generally derive from the provisions of the German Stock Corporation Act
(
Aktiengesetz
), the German Co-determination Act (
Mitbestimmungsgesetz
), and the German
Corporate Governance Code (
Deutscher Corporate Governance Kodex
) adopted by the Government Commission on the German Corporate Governance Code. These
standards differ in some respects from the corporate governance practices followed by U.S. companies under the listing standards of the New York Stock Exchange (NYSE). A summary of the principal
differences follows.
Two-Tier Board
Like all German stock corporations (
Aktiengesellschaften
), Daimler AG has three
corporate bodies the general meeting of shareholders, the board of management (
Vorstand
) and the supervisory board
(
Aufsichtsrat
). The German Stock Corporation Act requires a clear separation of management and oversight functions and therefore prohibits simultaneous
membership on both boards. Members of the board of management and the supervisory board must exercise the standard of care of a prudent and diligent business person when carrying out their duties. In
complying with this standard of care, members of both boards must take into account the interests of the company, including the interests of its shareholders and employees and, to some extent, the
common interest.
Our
board of management is responsible for managing our business and representing Daimler AG in its dealings with third parties. The board of management's functions are comparable to
those performed in the ordinary course of business by the senior executive officers of a U.S. company. However, the members of the board of management, including its chairman, are regarded as peers
and share a collective responsibility for all management decisions.
The
supervisory board oversees our board of management and appoints and removes its members. Members of the supervisory board cannot be involved in the day-to-day
management of our business. Pursuant to German law requirements, however, our supervisory board has specified matters requiring its approval. Matters requiring such approval include decisions and
actions which would fundamentally change the company's assets, financial position or results of operations.
According
to the German Co-determination Act, the supervisory board of the company consists of twenty members, who are equally divided between shareholder representatives and
labor representatives. The chairman of the supervisory board is a representative of the shareholders. In the event of a deadlock, passing a resolution requires another vote and, in the case of a
second deadlock, the chairman of the supervisory board casts the deciding vote.
Independence
Unlike the NYSE listing standards, German law does not require the supervisory board to have a majority of independent directors nor
does it provide for an affirmative independence determination. If the supervisory board of a German stock corporation has established an audit committee, however, German law requires, since May 2009,
that at least one member of the audit committee be independent and have financial expertise. In addition, the members of our audit committee must meet the independence requirements of
Rule 10A-3 under the Securities Exchange Act of 1934. There are also several other rules under German law directed at the independence of supervisory board members. In addition to
prohibiting members of the board of management from serving on the supervisory board, German law prohibits former members of the board of management of a listed company, effective as of August 2009,
to serve on the supervisory board during the two years immediately following termination of their membership on the board of management, unless at least 25% of the outstanding
109
shareholder
voting rights propose the former board of management member for election to the supervisory board. German law further requires members of the supervisory board to act in the best interest
of the company. They are also not bound by directions or instructions from third parties. Moreover, according to German law, consulting or other service agreements between a German stock corporation
and any of its supervisory board members must be approved by the supervisory board.
The
German Corporate Governance Code contains additional corporate governance rules directed at the independence of supervisory board members. The Code recommends that the supervisory
board includes an adequate number of independent members. The rules of procedure of our supervisory board implement this recommendation by providing that more than half of the shareholder
representatives on the supervisory board should be independent. The Code also suggests that the head of the audit committee be independent, and the rules of procedure of our audit committee reflect
that suggestion. Moreover, in accordance with the Code, our supervisory board takes into account potential conflicts of interest when nominating candidates for election to the supervisory board as
shareholder representatives. If a significant conflict of interest that is more than
temporary arises during the term of a member of our supervisory board, the rules of procedure of our supervisory board require such member to resign. Contrary to the requirements of the NYSE listing
standards, the supervisory board is not required to meet at regularly scheduled executive sessions without the board of management attending. The supervisory board meets without members of the board
of management attending, however, if necessary or at the supervisory board's election.
In
an effort to introduce a broader range of experiences and expertise and a greater degree of independence, consistent with the German Corporate Governance Code, the articles of
incorporation of Daimler AG provide that no more than two former members of our board of management may be members of the supervisory board at any given time. In addition, no individual holding an
executive position or advisory role in a major competitor may be a member of our supervisory board, and no member of our supervisory board may hold more than three other supervisory board positions in
listed companies outside the Group, if he or she is also a member of the board of management of a listed company.
Supervisory Board Committees
German stock corporations that are subject to the German Co-determination Act are required to establish a mediation
committee (
Vermittlungsausschuss
). The charge of the mediation committee is to resolve any impasse among the members of the supervisory board in the
event the supervisory board is unable to achieve the two-thirds supermajority vote of its members required to appoint or dismiss a member of the board of management.
In
addition to the mediation committee, we have an audit committee (
Prüfungsausschuss
) which handles the formal engagement
of the company's independent auditor once the auditor has been elected by the annual meeting of shareholders. Our audit committee also addresses issues of accounting, risk management, internal
control, internal audit, compliance and auditor independence.
The
presidential committee (
Präsidialausschuss
) prepares and recommends to the supervisory board for resolution the
compensation structure and individual compensation packages for the members of our board of management. The presidential committee also makes recommendations regarding the individual performance
target achievement of our board of management members. In addition, the committee handles all matters unrelated to compensation that involve the service contracts and other contractual arrangements
with our board of management members. Since August 2009, German law requires that not only the overall compensation structure for the board of management but also the individual compensation of each
of its members be determined by the full supervisory board and not be delegated to a committee.
Finally,
our supervisory board established a nomination committee (
Nominierungsausschuss
) as recommended by the German Corporate
Governance Code. The nomination committee, which consists exclusively of shareholder representatives of the supervisory board, recommends candidates as future shareholder representatives to the
supervisory board for approval by the shareholders.
110
Shareholder
representatives and members of the supervisory board elected by employees are equally represented on the mediation committee, the presidential committee and the audit
committee.
Further Information
For additional information regarding our boards, including the audit and other committees of our supervisory board, please refer to the
discussion in "Item 6. Directors, Senior Management and Employees." For further information regarding our corporate governance in general, including compliance with the German Corporate
Governance Code, please refer to the discussion under the heading "Articles of Incorporation" in "Item 10. Additional Information". For further information regarding our code of ethics, please
refer to the discussion under "Item 16B. Code of Ethics".
111
PART III
Item 17. Financial Statements.
Not applicable.
Item 18. Financial Statements.
You can find our Consolidated Financial Statements on pages F1 through F-98.
Item 19. Exhibits.
We have filed the following documents as exhibits to this annual report:
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1.1
|
|
Articles of Incorporation (
Satzung
) of Daimler AG as amended to date.
|
|
2.1
|
|
The total amount of long-term debt securities of Daimler AG authorized under any instrument does not exceed 10% of the total assets of the Group on a consolidated basis. We hereby agree to furnish to the Commission, upon
its request, a copy of any instrument defining the rights of holders of long-term debt of Daimler AG or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
|
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4.1
|
|
The following agreements (without exhibits and schedules):
|
|
|
|
Contribution Agreement, dated May 14, 2007, among DaimlerChrysler AG, DaimlerChrysler North America Finance Corporation, DaimlerChrysler Holding Corporation and CG Investor, LLC (filed as an Exhibit to Daimler
AG's Annual Report on Form 20-F for the year ended December 31, 2007 and incorporated herein by reference); Second Lien Term Loan Agreement, dated as of August 3, 2007, among Carco Intermediate Holdco II, LLC, Chrysler LLC,
the several banks and other financial institutions or entities from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other agents party thereto, First Omnibus Amendment, dated as of September 28, 2007, to,
among others, Second Lien Credit Arrangement, and Second Amendment, dated as of November 29, 2007, to Second Lien Credit Agreement (filed as an Exhibit to Daimler AG's Annual Report on Form 20-F for the year ended December 31, 2007 and
incorporated herein by reference); Redemption Agreement, dated as of June 3, 2009, by and among Daimler North America Finance Corporation (formerly known as DaimlerChrysler North America Finance Corporation), Daimler Investments U.S. Corporation
(formerly known as DaimlerChrysler Holding Corporation), Chrysler Holding LLC, CG Investment Group, LLC, CG Investment Group II, LLC, Chrysler Holding Management LLC, FinCo Management LLC, and CarCo Management LLC;
Settlement Agreement III, dated as of June 5, 2009, by and among Daimler North America Finance Corporation (formerly known as DaimlerChrysler North America Finance Corporation), Daimler Investments U.S. Corporation (formerly known as
DaimlerChrysler Holding Corporation), Daimler AG (formerly known as DaimlerChrysler AG), CG Investment Group, LLC, CG Investor, LLC, Chrysler Holding LLC, CarCo Immediate HoldCo I LLC, Chrysler LLC, and the Pension Benefit
Guaranty Corporation; Investment Agreement, dated March 22, 2009, among Daimler AG, Semare Beteiligungsverwaltungs GmbH and Aabar Investments PJSC.
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7.
|
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Ratios of Earnings to Fixed Charges.
|
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8.1
|
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List of subsidiaries.
|
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12.1
|
|
Certification of the Chairman of the Board of Management pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
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12.2
|
|
Certification of the Member of the Board of Management, Finance & Controlling/Daimler Financial Services pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
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13.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
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14.1
|
|
Consent of Independent Registered Public Accounting Firm.
|
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15.1
|
|
Declaration by the Board of Management and Supervisory Board of Daimler AG pursuant to §161 Joint Stock Corporation Act (AktG) regarding the German Corporate Governance Code as amended on June 18, 2009 with
effect as of August 5, 2009.
|
112
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.
Date:
March 3, 2010
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DAIMLER AG
|
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|
By:
|
|
/s/ DIETER ZETSCHE
Dr. Dieter Zetsche
Chairman of the Board of Management/Head of Mercedes-Benz Cars
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|
By:
|
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/s/ BODO UEBBER
Bodo Uebber
Member of the Board of Management Finance & Controlling/Daimler Financial Services
|
113
DAIMLER AG
Index to Consolidated Financial Statements
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Page
|
Reports of Independent Registered Public Accounting Firm
|
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F-2
|
Consolidated Financial Statements:
|
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|
|
Consolidated Statement of Income (Loss) for the years ended December 31, 2009, 2008 and 2007
|
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F-4
|
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Consolidated Statement of Comprehensive Income (Loss) for the years ended December 31, 2009, 2008 and 2007
|
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F-5
|
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Consolidated Statement of Financial Position at December 31, 2009 and 2008
|
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F-6
|
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Consolidated Statement of Changes in Equity for the years ended December 31, 2009, 2008 and 2007
|
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F-7
|
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Consolidated Statement of Cash Flows for the years ended December 31, 2009, 2008 and 2007
|
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F-8
|
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Notes to the Consolidated Financial Statements
|
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F-10
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Supervisory Board
Daimler AG:
We
have audited the accompanying consolidated statements of financial position of Daimler AG and subsidiaries ("Daimler") as of December 31, 2009 and 2008, and the related
consolidated statements of income (loss), changes in equity, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009.
These consolidated financial statements are the responsibility of Daimler's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Daimler as of December 31, 2009 and
2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with International Financial
Reporting Standards, as issued by the International Accounting Standards Board.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Daimler's internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated March 1, 2010 expressed an unqualified opinion on the effectiveness of Daimler's internal control over financial reporting.
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KPMG AG Wirtschaftsprüfungsgesellschaft
|
Stuttgart,
Germany
March 1, 2010
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Supervisory Board
Daimler AG:
We
have audited Daimler AG's and subsidiaries' ("Daimler") internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Daimler's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In
our opinion, Daimler maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of Daimler AG
and subsidiaries ("Daimler") as of December 31, 2009 and 2008, and the related consolidated statements of income (loss), changes in equity, comprehensive income (loss), and cash flows for each
of the years in the three-year period ended December 31, 2009, and our report dated March 1, 2010 expressed an unqualified opinion on those consolidated financial statements.
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KPMG AG Wirtschaftsprüfungsgesellschaft
|
Stuttgart,
Germany
March 1, 2010
F-3
DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Income (Loss)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Consolidated
|
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Industrial Business
(unaudited additional information)
|
|
Daimler Financial Services
(unaudited additional information)
|
|
|
|
|
|
Year ended December 31,
|
|
Year ended December 31,
|
|
Year ended December 31,
|
|
in millions of €
|
|
Note
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Revenue
|
|
|
3
|
|
|
78,924
|
|
|
98,469
|
|
|
101,569
|
|
|
66,928
|
|
|
86,505
|
|
|
90,602
|
|
|
11,996
|
|
|
11,964
|
|
|
10,967
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
4
|
|
|
(65,567
|
)
|
|
(76,910
|
)
|
|
(77,574
|
)
|
|
(54,268
|
)
|
|
(66,396
|
)
|
|
(68,082
|
)
|
|
(11,299
|
)
|
|
(10,514
|
)
|
|
(9,492
|
)
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
13,357
|
|
|
21,559
|
|
|
23,995
|
|
|
12,660
|
|
|
20,109
|
|
|
22,520
|
|
|
697
|
|
|
1,450
|
|
|
1,475
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
4
|
|
|
(7,608
|
)
|
|
(9,204
|
)
|
|
(8,956
|
)
|
|
(7,303
|
)
|
|
(8,887
|
)
|
|
(8,643
|
)
|
|
(305
|
)
|
|
(317
|
)
|
|
(313
|
)
|
|
|
|
|
|
|
General administrative expenses
|
|
|
4
|
|
|
(3,287
|
)
|
|
(4,124
|
)
|
|
(4,023
|
)
|
|
(2,838
|
)
|
|
(3,608
|
)
|
|
(3,492
|
)
|
|
(449
|
)
|
|
(516
|
)
|
|
(531
|
)
|
|
|
|
|
|
|
Research and non-capitalized development costs
|
|
|
4
|
|
|
(2,896
|
)
|
|
(3,055
|
)
|
|
(3,158
|
)
|
|
(2,896
|
)
|
|
(3,055
|
)
|
|
(3,158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income
|
|
|
5
|
|
|
693
|
|
|
1,234
|
|
|
741
|
|
|
589
|
|
|
1,181
|
|
|
701
|
|
|
104
|
|
|
53
|
|
|
40
|
|
|
|
|
|
|
|
Other operating expense
|
|
|
5
|
|
|
(503
|
)
|
|
(454
|
)
|
|
(714
|
)
|
|
(460
|
)
|
|
(432
|
)
|
|
(666
|
)
|
|
(43
|
)
|
|
(22
|
)
|
|
(48
|
)
|
|
|
|
|
|
|
Share of profit (loss) from investments accounted for using the equity method, net
|
|
|
12
|
|
|
72
|
|
|
(998
|
)
|
|
1,053
|
|
|
65
|
|
|
(1,029
|
)
|
|
1,051
|
|
|
7
|
|
|
31
|
|
|
2
|
|
|
|
|
|
|
|
Other financial income (expense), net
|
|
|
6
|
|
|
(1,341
|
)
|
|
(2,228
|
)
|
|
(228
|
)
|
|
(1,339
|
)
|
|
(2,226
|
)
|
|
(233
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
5
|
|
|
|
|
|
|
|
Earnings before interest and taxes (EBIT)
1
|
|
|
|
|
|
(1,513
|
)
|
|
2,730
|
|
|
8,710
|
|
|
(1,522
|
)
|
|
2,053
|
|
|
8,080
|
|
|
9
|
|
|
677
|
|
|
630
|
|
|
|
|
|
|
|
Interest income (expense), net
|
|
|
7
|
|
|
(785
|
)
|
|
65
|
|
|
471
|
|
|
(775
|
)
|
|
76
|
|
|
482
|
|
|
(10
|
)
|
|
(11
|
)
|
|
(11
|
)
|
|
|
|
|
|
|
Profit (loss) before income taxes
|
|
|
|
|
|
(2,298
|
)
|
|
2,795
|
|
|
9,181
|
|
|
(2,297
|
)
|
|
2,129
|
|
|
8,562
|
|
|
(1
|
)
|
|
666
|
|
|
619
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
8
|
|
|
(346
|
)
|
|
(1,091
|
)
|
|
(4,326
|
)
|
|
(350
|
)
|
|
(882
|
)
|
|
(4,101
|
)
|
|
4
|
|
|
(209
|
)
|
|
(225
|
)
|
|
|
|
|
|
|
Net profit (loss) from continuing operations
|
|
|
|
|
|
(2,644
|
)
|
|
1,704
|
|
|
4,855
|
|
|
(2,647
|
)
|
|
1,247
|
|
|
4,461
|
|
|
3
|
|
|
457
|
|
|
394
|
|
|
|
|
|
|
|
Net profit (loss) from discontinued operations
|
|
|
2
|
|
|
|
|
|
(290
|
)
|
|
(870
|
)
|
|
|
|
|
(290
|
)
|
|
(1,850
|
)
|
|
|
|
|
|
|
|
980
|
|
|
|
|
|
|
|
Net profit (loss)
|
|
|
|
|
|
(2,644
|
)
|
|
1,414
|
|
|
3,985
|
|
|
(2,647
|
)
|
|
957
|
|
|
2,611
|
|
|
3
|
|
|
457
|
|
|
1,374
|
|
|
|
|
|
|
|
Minority interest
|
|
|
|
|
|
4
|
|
|
(66
|
)
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) attributable to shareholders of Daimler AG
|
|
|
|
|
|
(2,640
|
)
|
|
1,348
|
|
|
3,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share (in €) for profit attributable to shareholders of Daimler AG
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) from continuing operations
|
|
|
|
|
|
(2.63
|
)
|
|
1.71
|
|
|
4.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) from discontinued operations
|
|
|
|
|
|
|
|
|
(0.30
|
)
|
|
(0.84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss)
|
|
|
|
|
|
(2.63
|
)
|
|
1.41
|
|
|
3.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) from continuing operations
|
|
|
|
|
|
(2.63
|
)
|
|
1.70
|
|
|
4.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) from discontinued operations
|
|
|
|
|
|
|
|
|
(0.30
|
)
|
|
(0.83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss)
|
|
|
|
|
|
(2.63
|
)
|
|
1.40
|
|
|
3.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1
-
EBIT
includes expenses from compounding of provisions (2009: €1,003 million; 2008: €429 million; 2007:
€444 million).
The accompanying notes are an integral part of these consolidated financial statements.
F-4
DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Comprehensive Income (Loss)
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
in millions of €
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
Net profit (loss)
|
|
|
(2,644
|
)
|
|
1,414
|
|
|
3,985
|
|
|
|
Unrealized gains (losses) from currency translation adjustments
|
|
|
267
|
|
|
(32
|
)
|
|
(790
|
)
|
|
|
Unrealized gains (losses) from financial assets available for sale
|
|
|
247
|
|
|
(274
|
)
|
|
(83
|
)
|
|
|
Unrealized gains (losses) from derivative financial instruments
|
|
|
(308
|
)
|
|
(54
|
)
|
|
505
|
|
|
|
Unrealized gains (losses) from investments accounted for using the equity method
|
|
|
195
|
|
|
(412
|
)
|
|
(425
|
)
|
|
|
Other comprehensive income (loss), net of taxes
|
|
|
401
|
|
|
(772
|
)
|
|
(793
|
)
|
|
|
|
Thereof minority interest
|
|
|
103
|
|
|
(31
|
)
|
|
69
|
|
|
|
|
Thereof profit (loss) attributable to shareholders of Daimler AG
|
|
|
298
|
|
|
(741
|
)
|
|
(862
|
)
|
|
|
Total comprehensive income (loss)
|
|
|
(2,243
|
)
|
|
642
|
|
|
3,192
|
|
|
|
|
Thereof minority interest
|
|
|
99
|
|
|
35
|
|
|
75
|
|
|
|
|
Thereof profit (loss) attributable to shareholders of Daimler AG
|
|
|
(2,342
|
)
|
|
607
|
|
|
3,117
|
|
|
|
-
1
-
For
other information regarding comprehensive income (loss), see Note 19.
The accompanying notes are an integral part of these consolidated financial statements.
F-5
DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
Industrial Business
(unaudited additional information)
|
|
Daimler Financial Services
(unaudited additional information)
|
|
|
|
|
|
At December 31,
|
|
At December 31,
|
|
At December 31,
|
|
in millions of €
|
|
Note
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
9
|
|
|
6,753
|
|
|
6,113
|
|
|
6,690
|
|
|
6,040
|
|
|
63
|
|
|
73
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
10
|
|
|
15,965
|
|
|
16,087
|
|
|
15,911
|
|
|
16,022
|
|
|
54
|
|
|
65
|
|
|
|
|
|
|
|
Equipment on operating leases
|
|
|
11
|
|
|
18,532
|
|
|
18,672
|
|
|
8,651
|
|
|
7,185
|
|
|
9,881
|
|
|
11,487
|
|
|
|
|
|
|
|
Investments accounted for using the equity method
|
|
|
12
|
|
|
4,295
|
|
|
4,249
|
|
|
4,241
|
|
|
4,188
|
|
|
54
|
|
|
61
|
|
|
|
|
|
|
|
Receivables from financial services
|
|
|
13
|
|
|
22,250
|
|
|
25,003
|
|
|
(24
|
)
|
|
(302
|
)
|
|
22,274
|
|
|
25,305
|
|
|
|
|
|
|
|
Other financial assets
|
|
|
14
|
|
|
4,017
|
|
|
3,278
|
|
|
2,719
|
|
|
3,060
|
|
|
1,298
|
|
|
218
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
8
|
|
|
2,233
|
|
|
2,828
|
|
|
1,830
|
|
|
2,544
|
|
|
403
|
|
|
284
|
|
|
|
|
|
|
|
Other assets
|
|
|
15
|
|
|
496
|
|
|
606
|
|
|
305
|
|
|
454
|
|
|
191
|
|
|
152
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
|
|
|
74,541
|
|
|
76,836
|
|
|
40,323
|
|
|
39,191
|
|
|
34,218
|
|
|
37,645
|
|
|
|
|
|
|
|
Inventories
|
|
|
16
|
|
|
12,845
|
|
|
16,805
|
|
|
12,337
|
|
|
16,244
|
|
|
508
|
|
|
561
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
17
|
|
|
5,285
|
|
|
6,999
|
|
|
5,073
|
|
|
6,793
|
|
|
212
|
|
|
206
|
|
|
|
|
|
|
|
Receivables from financial services
|
|
|
13
|
|
|
16,228
|
|
|
17,384
|
|
|
(37
|
)
|
|
(67
|
)
|
|
16,265
|
|
|
17,451
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
9,800
|
|
|
6,912
|
|
|
6,735
|
|
|
4,664
|
|
|
3,065
|
|
|
2,248
|
|
|
|
|
|
|
|
Other financial assets
|
|
|
14
|
|
|
7,460
|
|
|
4,718
|
|
|
676
|
|
|
(2,489
|
)
|
|
6,784
|
|
|
7,207
|
|
|
|
|
|
|
|
Other assets
|
|
|
15
|
|
|
2,352
|
|
|
2,571
|
|
|
(1,346
|
)
|
|
181
|
|
|
3,698
|
|
|
2,390
|
|
|
|
|
|
|
|
Sub-total current assets
|
|
|
|
|
|
53,970
|
|
|
55,389
|
|
|
23,438
|
|
|
25,326
|
|
|
30,532
|
|
|
30,063
|
|
|
|
|
|
|
|
Assets held for sale from non-automotive leasing portfolios
|
|
|
18
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
54,280
|
|
|
55,389
|
|
|
23,438
|
|
|
25,326
|
|
|
30,842
|
|
|
30,063
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
128,821
|
|
|
132,225
|
|
|
63,761
|
|
|
64,517
|
|
|
65,060
|
|
|
67,708
|
|
|
|
|
|
|
|
Equity and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
|
|
3,045
|
|
|
2,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital reserves
|
|
|
|
|
|
11,864
|
|
|
10,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
16,163
|
|
|
19,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reserves
|
|
|
|
|
|
632
|
|
|
334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury shares
|
|
|
|
|
|
(1,443
|
)
|
|
(1,443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to shareholders of Daimler AG
|
|
|
|
|
|
30,261
|
|
|
31,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
|
|
|
1,566
|
|
|
1,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
19
|
|
|
31,827
|
|
|
32,730
|
|
|
27,157
|
|
|
28,098
|
|
|
4,670
|
|
|
4,632
|
|
|
|
|
|
|
|
Provisions for pensions and similar obligations
|
|
|
21
|
|
|
4,082
|
|
|
4,140
|
|
|
3,901
|
|
|
3,969
|
|
|
181
|
|
|
171
|
|
|
|
|
|
|
|
Provisions for income taxes
|
|
|
|
|
|
2,774
|
|
|
1,582
|
|
|
2,772
|
|
|
1,579
|
|
|
2
|
|
|
3
|
|
|
|
|
|
|
|
Provisions for other risks
|
|
|
22
|
|
|
4,696
|
|
|
4,910
|
|
|
4,585
|
|
|
4,801
|
|
|
111
|
|
|
109
|
|
|
|
|
|
|
|
Financing liabilities
|
|
|
23
|
|
|
33,258
|
|
|
31,209
|
|
|
13,390
|
|
|
10,505
|
|
|
19,868
|
|
|
20,704
|
|
|
|
|
|
|
|
Other financial liabilities
|
|
|
24
|
|
|
2,148
|
|
|
1,942
|
|
|
1,985
|
|
|
1,846
|
|
|
163
|
|
|
96
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
8
|
|
|
509
|
|
|
1,725
|
|
|
(2,987
|
)
|
|
(3,171
|
)
|
|
3,496
|
|
|
4,896
|
|
|
|
|
|
|
|
Deferred income
|
|
|
|
|
|
1,914
|
|
|
1,728
|
|
|
1,305
|
|
|
1,210
|
|
|
609
|
|
|
518
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
25
|
|
|
75
|
|
|
77
|
|
|
66
|
|
|
78
|
|
|
9
|
|
|
(1
|
)
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
|
|
|
49,456
|
|
|
47,313
|
|
|
25,017
|
|
|
20,817
|
|
|
24,439
|
|
|
26,496
|
|
|
|
|
|
|
|
Trade payables
|
|
|
|
|
|
5,622
|
|
|
6,478
|
|
|
5,422
|
|
|
6,268
|
|
|
200
|
|
|
210
|
|
|
|
|
|
|
|
Provisions for income taxes
|
|
|
|
|
|
509
|
|
|
774
|
|
|
75
|
|
|
39
|
|
|
434
|
|
|
735
|
|
|
|
|
|
|
|
Provisions for other risks
|
|
|
22
|
|
|
6,311
|
|
|
6,830
|
|
|
6,070
|
|
|
6,647
|
|
|
241
|
|
|
183
|
|
|
|
|
|
|
|
Financing liabilities
|
|
|
23
|
|
|
25,036
|
|
|
27,428
|
|
|
(7,874
|
)
|
|
(6,057
|
)
|
|
32,910
|
|
|
33,485
|
|
|
|
|
|
|
|
Other financial liabilities
|
|
|
24
|
|
|
7,589
|
|
|
8,376
|
|
|
6,280
|
|
|
7,193
|
|
|
1,309
|
|
|
1,183
|
|
|
|
|
|
|
|
Deferred income
|
|
|
|
|
|
1,397
|
|
|
1,239
|
|
|
755
|
|
|
573
|
|
|
642
|
|
|
666
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
25
|
|
|
1,074
|
|
|
1,057
|
|
|
859
|
|
|
939
|
|
|
215
|
|
|
118
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
47,538
|
|
|
52,182
|
|
|
11,587
|
|
|
15,602
|
|
|
35,951
|
|
|
36,580
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
|
|
|
|
128,821
|
|
|
132,225
|
|
|
63,761
|
|
|
64,517
|
|
|
65,060
|
|
|
67,708
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Changes in Equity
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reserves
|
|
|
|
|
|
|
|
|
|
in millions of €
|
|
Share
capital
|
|
Capital
reserves
|
|
Retained
earnings
|
|
Currency
translation
adjustment
|
|
Financial
assets
available-
for-sale
|
|
Derivative
financial
instruments
|
|
Share of
investments
accounted
for using
the equity
method
|
|
Treasury
shares
|
|
Equity
attributable
to share-
holders of
Daimler AG
|
|
Minority
interest
|
|
Total
equity
|
|
|
|
Balance at January 1, 2007
|
|
|
2,673
|
|
|
8,613
|
|
|
23,702
|
|
|
366
|
|
|
377
|
|
|
125
|
|
|
1,069
|
|
|
|
|
|
36,925
|
|
|
421
|
|
|
37,346
|
|
|
|
|
Net profit
|
|
|
|
|
|
|
|
|
3,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,979
|
|
|
6
|
|
|
3,985
|
|
|
Unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
(778
|
)
|
|
(96
|
)
|
|
682
|
|
|
(820
|
)
|
|
|
|
|
(1,012
|
)
|
|
68
|
|
|
(944
|
)
|
|
Deferred taxes on unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
(177
|
)
|
|
312
|
|
|
|
|
|
150
|
|
|
1
|
|
|
151
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
3,979
|
|
|
(778
|
)
|
|
(81
|
)
|
|
505
|
|
|
(508
|
)
|
|
|
|
|
3,117
|
|
|
75
|
|
|
3,192
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
(1,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,542
|
)
|
|
(37
|
)
|
|
(1,579
|
)
|
Share-based payment
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
36
|
|
Issue of new shares
|
|
|
93
|
|
|
1,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,642
|
|
|
14
|
|
|
1,656
|
|
Acquisition of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,510
|
)
|
|
(3,510
|
)
|
|
|
|
|
(3,510
|
)
|
Issue of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
27
|
|
|
|
|
|
27
|
|
Retirement of own shares
|
|
|
|
|
|
|
|
|
(3,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,483
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
1,039
|
|
|
1,062
|
|
|
|
Balance at December 31, 2007
|
|
|
2,766
|
|
|
10,221
|
|
|
22,656
|
|
|
(412
|
)
|
|
296
|
|
|
630
|
|
|
561
|
|
|
|
|
|
36,718
|
|
|
1,512
|
|
|
38,230
|
|
|
|
|
Net profit
|
|
|
|
|
|
|
|
|
1,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,348
|
|
|
66
|
|
|
1,414
|
|
|
Unrealized losses
|
|
|
|
|
|
|
|
|
|
|
|
(75
|
)
|
|
(285
|
)
|
|
(69
|
)
|
|
(513
|
)
|
|
|
|
|
(942
|
)
|
|
(70
|
)
|
|
(1,012
|
)
|
|
Deferred taxes on unrealized losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
15
|
|
|
174
|
|
|
|
|
|
201
|
|
|
39
|
|
|
240
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
1,348
|
|
|
(75
|
)
|
|
(273
|
)
|
|
(54
|
)
|
|
(339
|
)
|
|
|
|
|
607
|
|
|
35
|
|
|
642
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
(1,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,928
|
)
|
|
(92
|
)
|
|
(2,020
|
)
|
Share-based payment
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
(43
|
)
|
Issue of new shares
|
|
|
2
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
18
|
|
|
37
|
|
Acquisition of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,218
|
)
|
|
(4,218
|
)
|
|
|
|
|
(4,218
|
)
|
Issue of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
58
|
|
|
|
|
|
58
|
|
Retirement of own shares
|
|
|
|
|
|
|
|
|
(2,717
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,717
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
35
|
|
|
44
|
|
|
|
Balance at December 31, 2008
|
|
|
2,768
|
|
|
10,204
|
|
|
19,359
|
|
|
(487
|
)
|
|
23
|
|
|
576
|
|
|
222
|
|
|
(1,443
|
)
|
|
31,222
|
|
|
1,508
|
|
|
32,730
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
(2,640
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,640
|
)
|
|
(4
|
)
|
|
(2,644
|
)
|
|
Unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
274
|
|
|
255
|
|
|
(431
|
)
|
|
102
|
|
|
|
|
|
200
|
|
|
141
|
|
|
341
|
|
|
Deferred taxes on unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
123
|
|
|
(17
|
)
|
|
|
|
|
98
|
|
|
(38
|
)
|
|
60
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
(2,640
|
)
|
|
274
|
|
|
247
|
|
|
(308
|
)
|
|
85
|
|
|
|
|
|
(2,342
|
)
|
|
99
|
|
|
(2,243
|
)
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
(556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(556
|
)
|
|
(101
|
)
|
|
(657
|
)
|
Share-based payment
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
1
|
|
Issue of new shares
|
|
|
277
|
|
|
1,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,953
|
|
|
|
|
|
1,953
|
|
Other
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17
|
)
|
|
60
|
|
|
43
|
|
|
|
Balance at December 31, 2009
|
|
|
3,045
|
|
|
11,864
|
|
|
16,163
|
|
|
(213
|
)
|
|
270
|
|
|
268
|
|
|
307
|
|
|
(1,443
|
)
|
|
30,261
|
|
|
1,566
|
|
|
31,827
|
|
|
|
-
1
-
For
other information regarding changes in equity, see Note 19.
The accompanying notes are an integral part of these consolidated financial statements.
F-7
DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Cash Flows
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
in millions of €
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
Net profit (loss) adjusted for
|
|
|
(2,644
|
)
|
|
1,414
|
|
|
3,985
|
|
|
|
Depreciation and amortization
|
|
|
3,264
|
|
|
3,023
|
|
|
4,146
|
|
|
|
Other non-cash expense and income
|
|
|
(563
|
)
|
|
2,438
|
|
|
3,514
|
|
|
|
(Gains) losses on disposals of assets
|
|
|
(34
|
)
|
|
(720
|
)
|
|
(1,307
|
)
|
|
|
Change in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
4,232
|
|
|
(2,717
|
)
|
|
(1,751
|
)
|
|
|
|
Trade receivables
|
|
|
1,795
|
|
|
(527
|
)
|
|
215
|
|
|
|
|
Trade payables
|
|
|
(902
|
)
|
|
(644
|
)
|
|
208
|
|
|
|
|
Receivables from financial services
|
|
|
3,148
|
|
|
(2,453
|
)
|
|
831
|
|
|
|
|
Vehicles on operating leases
|
|
|
1,766
|
|
|
37
|
|
|
(3,395
|
)
|
|
|
|
Other operating assets and liabilities
|
|
|
899
|
|
|
(637
|
)
|
|
700
|
|
|
|
Cash provided by (used for) operating activities
|
|
|
10,961
|
|
|
(786
|
)
|
|
7,146
|
|
|
|
Additions to property, plant and equipment
|
|
|
(2,423
|
)
|
|
(3,559
|
)
|
|
(4,247
|
)
|
|
|
Additions to intangible assets
|
|
|
(1,422
|
)
|
|
(1,619
|
)
|
|
(1,354
|
)
|
|
|
Proceeds from disposals of property, plant and equipment and intangible assets
|
|
|
280
|
|
|
1,501
|
|
|
1,297
|
|
|
|
Investments in businesses
|
|
|
(141
|
)
|
|
(906
|
)
|
|
(159
|
)
|
|
|
Proceeds from disposals of businesses
|
|
|
67
|
|
|
515
|
|
|
3,799
|
|
|
|
Cash flow related to the transfer of the Chrysler activities
|
|
|
|
|
|
|
|
|
22,594
|
|
|
|
Acquisition of securities (other than trading)
|
|
|
(17,782
|
)
|
|
(10,134
|
)
|
|
(15,030
|
)
|
|
|
Proceeds from sales of securities (other than trading)
|
|
|
12,407
|
|
|
10,341
|
|
|
19,617
|
|
|
|
Change in other cash
|
|
|
64
|
|
|
(951
|
)
|
|
(38
|
)
|
|
|
Cash provided by (used for) investing activities
|
|
|
(8,950
|
)
|
|
(4,812
|
)
|
|
26,479
|
|
|
|
Change in short-term financing liabilities
|
|
|
(2,332
|
)
|
|
1,525
|
|
|
(9,763
|
)
|
|
|
Additions to long-term financing liabilities
|
|
|
24,900
|
|
|
28,825
|
|
|
16,195
|
|
|
|
Repayment of long-term financing liabilities
|
|
|
(22,807
|
)
|
|
(27,122
|
)
|
|
(28,230
|
)
|
|
|
Dividends paid
|
|
|
(657
|
)
|
|
(2,020
|
)
|
|
(1,579
|
)
|
|
|
Proceeds from issuance of share capital (including minority interest)
|
|
|
1,953
|
|
|
95
|
|
|
1,683
|
|
|
|
Purchase of treasury shares
|
|
|
|
|
|
(4,218
|
)
|
|
(3,510
|
)
|
|
|
Internal equity transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used for) financing activities
|
|
|
1,057
|
|
|
(2,915
|
)
|
|
(25,204
|
)
|
|
|
Effect of foreign exchange rate changes on cash and cash equivalents
|
|
|
(180
|
)
|
|
(206
|
)
|
|
(1,199
|
)
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
2,888
|
|
|
(8,719
|
)
|
|
7,222
|
|
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
6,912
|
|
|
15,631
|
|
|
8,409
|
|
|
|
Cash and cash equivalents at the end of the period
|
|
|
9,800
|
|
|
6,912
|
|
|
15,631
|
|
|
|
-
1
-
For
other information regarding consolidated statements of cash flows, see Note 26.
The accompanying notes are an integral part of these consolidated financial statements.
F-8
DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Cash Flows
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Business
(unaudited additional information)
|
|
Daimler Financial Services
(unaudited additional information)
|
|
|
|
in millions of €
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
(2,647
|
)
|
|
957
|
|
|
2,611
|
|
|
3
|
|
|
457
|
|
|
1,374
|
|
Net profit (loss) adjusted for
|
|
|
|
|
|
|
3,231
|
|
|
2,988
|
|
|
4,105
|
|
|
33
|
|
|
35
|
|
|
41
|
|
Depreciation and amortization
|
|
|
|
|
|
|
738
|
|
|
555
|
|
|
3,156
|
|
|
(1,301
|
)
|
|
1,883
|
|
|
358
|
|
Other non-cash expense and income
|
|
|
|
|
|
|
(35
|
)
|
|
(712
|
)
|
|
(1,306
|
)
|
|
1
|
|
|
(8
|
)
|
|
(1
|
)
|
(Gains) losses on disposals of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities
|
|
|
|
|
|
|
4,267
|
|
|
(2,628
|
)
|
|
(1,621
|
)
|
|
(35
|
)
|
|
(89
|
)
|
|
(130
|
)
|
Inventories
|
|
|
|
|
|
|
1,787
|
|
|
(517
|
)
|
|
198
|
|
|
8
|
|
|
(10
|
)
|
|
17
|
|
Trade receivables
|
|
|
|
|
|
|
(876
|
)
|
|
(644
|
)
|
|
246
|
|
|
(26
|
)
|
|
|
|
|
(38
|
)
|
Trade payables
|
|
|
|
|
|
|
(615
|
)
|
|
640
|
|
|
(277
|
)
|
|
3,763
|
|
|
(3,093
|
)
|
|
1,108
|
|
Receivables from financial services
|
|
|
|
|
|
|
167
|
|
|
405
|
|
|
57
|
|
|
1,599
|
|
|
(368
|
)
|
|
(3,452
|
)
|
Vehicles on operating leases
|
|
|
|
|
|
|
527
|
|
|
556
|
|
|
(23
|
)
|
|
372
|
|
|
(1,193
|
)
|
|
723
|
|
Other operating assets and liabilities
|
|
|
|
|
|
|
6,544
|
|
|
1,600
|
|
|
7,146
|
|
|
4,417
|
|
|
(2,386
|
)
|
|
|
|
Cash provided by (used for) operating activities
|
|
|
|
|
|
|
(2,409
|
)
|
|
(3,518
|
)
|
|
(4,206
|
)
|
|
(14
|
)
|
|
(41
|
)
|
|
(41
|
)
|
Additions to property, plant and equipment
|
|
|
|
|
|
|
(1,415
|
)
|
|
(1,599
|
)
|
|
(1,327
|
)
|
|
(7
|
)
|
|
(20
|
)
|
|
(27
|
)
|
Additions to intangible assets
|
|
|
|
|
|
|
268
|
|
|
1,490
|
|
|
1,263
|
|
|
12
|
|
|
11
|
|
|
34
|
|
Proceeds from disposals of property, plant and equipment and intangible assets
|
|
|
|
|
|
|
(139
|
)
|
|
(905
|
)
|
|
(153
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(6
|
)
|
Investments in businesses
|
|
|
|
|
|
|
61
|
|
|
468
|
|
|
3,796
|
|
|
6
|
|
|
47
|
|
|
3
|
|
Proceeds from disposals of businesses
|
|
|
|
|
|
|
|
|
|
|
|
|
24,029
|
|
|
|
|
|
|
|
|
(1,435
|
)
|
Cash flow related to the transfer of the Chrysler activities
|
|
|
|
|
|
|
(16,560
|
)
|
|
(10,134
|
)
|
|
(15,030
|
)
|
|
(1,222
|
)
|
|
|
|
|
|
|
Acquisition of securities (other than trading)
|
|
|
|
|
|
|
12,407
|
|
|
10,246
|
|
|
19,558
|
|
|
|
|
|
95
|
|
|
59
|
|
Proceeds from sales of securities (other than trading)
|
|
|
|
|
|
|
71
|
|
|
(1,015
|
)
|
|
(216
|
)
|
|
(7
|
)
|
|
64
|
|
|
178
|
|
Change in other cash
|
|
|
|
|
|
|
(7,716
|
)
|
|
(4,967
|
)
|
|
27,714
|
|
|
(1,234
|
)
|
|
155
|
|
|
(1,235
|
)
|
Cash provided by (used for) investing activities
|
|
|
|
|
|
|
(1,347
|
)
|
|
1,275
|
|
|
(7,347
|
)
|
|
(985
|
)
|
|
250
|
|
|
(2,416
|
)
|
Change in short-term financing liabilities
|
|
|
|
|
|
|
6,887
|
|
|
10,014
|
|
|
(19,508
|
)
|
|
18,013
|
|
|
18,811
|
|
|
35,703
|
|
Additions to long-term financing liabilities
|
|
|
|
|
|
|
(3,377
|
)
|
|
(11,936
|
)
|
|
5,240
|
|
|
(19,430
|
)
|
|
(15,186
|
)
|
|
(33,470
|
)
|
Repayment of long-term financing liabilities
|
|
|
|
|
|
|
(654
|
)
|
|
(2,010
|
)
|
|
(1,576
|
)
|
|
(3
|
)
|
|
(10
|
)
|
|
(3
|
)
|
Dividends paid
|
|
|
|
|
|
|
1,952
|
|
|
95
|
|
|
1,683
|
|
|
1
|
|
|
|
|
|
|
|
Proceeds from issuance of share capital (including minority interest)
|
|
|
|
|
|
|
|
|
|
(4,218
|
)
|
|
(3,510
|
)
|
|
|
|
|
|
|
|
|
|
Purchase of treasury shares
|
|
|
|
|
|
|
7
|
|
|
52
|
|
|
154
|
|
|
(7
|
)
|
|
(52
|
)
|
|
(154
|
)
|
Internal equity transactions
|
|
|
|
|
|
|
3,468
|
|
|
(6,728
|
)
|
|
(24,864
|
)
|
|
(2,411
|
)
|
|
3,813
|
|
|
(340
|
)
|
Cash provided by (used for) financing activities
|
|
|
|
|
|
|
(225
|
)
|
|
(135
|
)
|
|
(1,162
|
)
|
|
45
|
|
|
(71
|
)
|
|
(37
|
)
|
Effect of foreign exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
|
2,071
|
|
|
(10,230
|
)
|
|
8,834
|
|
|
817
|
|
|
1,511
|
|
|
(1,612
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
|
|
|
4,664
|
|
|
14,894
|
|
|
6,060
|
|
|
2,248
|
|
|
737
|
|
|
2,349
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
|
|
|
|
6,735
|
|
|
4,664
|
|
|
14,894
|
|
|
3,065
|
|
|
2,248
|
|
|
737
|
|
Cash and cash equivalents at the end of the period
|
|
|
|
|
|
-
1
-
For
other information regarding consolidated statements of cash flows, see Note 26.
The accompanying notes are an integral part of these consolidated financial statements.
F-9
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
1. Summary of significant accounting policies
General information
The consolidated financial statements of Daimler AG and its subsidiaries ("Daimler" or "the Group") have been prepared in accordance
with Section 315a of the German Commercial Code (HGB) and International Financial Reporting Standards (IFRS) and related interpretations as issued by the International Accounting Standards
Board (IASB) and as adopted by the European Union.
Daimler
AG is a stock corporation organized under the laws of the Federal Republic of Germany. The company is entered in the Commercial Register of the Stuttgart District Court under No.
HRB 19360 and its registered office is located at Mercedesstrasse 137, 70327 Stuttgart, Germany.
The
consolidated financial statements of Daimler AG are presented in euro (€).
The
Board of Management authorized the consolidated financial statements for publication on March 1, 2010.
Basis of presentation
Applied IFRSs.
The accounting policies applied in the consolidated financial statements comply with the IFRSs required to be
applied as of
December 31, 2009.
In
May 2008, the IASB published its omnibus standard for improvements to International Financial Reporting Standards (IFRS). One of the improvements was an amendment to the presentation
of the derecognition of assets held for rental within the consolidated statement of income (loss) and consolidated statement of cash flows. Proceeds from the sale of assets held for rental in the
course of ordinary activities must be recognized as revenue in accordance with the amended IAS 16 Property, Plant and Equipment. Cash flows resulting from these sales must be shown under cash
flows from operating activities in accordance with the amended IAS 7 Statement of Cash Flows. Daimler applies these amendments as of January 1, 2009 and has adjusted
prior-year presentations accordingly. As a result, revenue and cost of sales recognized in 2009 in the consolidated statement of income (loss) each increased by
€2,706 million (2008: increase of €2,596 million each; 2007: increase of €2,170 million each). The changes in the presentation of
the consolidated statement of cash flows result in cash flows from vehicles on
operating leases of the Daimler Financial Services business being presented within "Cash provided by (used for) operating activities" in the separate line item "Vehicles on operating leases" together
with the cash flows from vehicles on operating leases of the industrial business. This change in classification resulted in a decrease of €1,398 million in "Cash provided by
(used for) operating activities" in 2009 (2008: decrease of €2,338 million; 2007: decrease of €6,913 million). With an opposite effect, "Cash provided by
(used for) investing activities" changed to the same extent in all periods due to this reclassification. In the context of this mandatory reclassification of cash flows from vehicles on operating
leases of the Daimler Financial Services business, the Group decided also to reclassify changes in receivables from financial services from "Cash provided by (used for) investing activities" to "Cash
provided by (used for) operating activities." This change in classification resulted in an increase of €1,172 million in "Cash provided by (used for) operating activities" in
2009 (2008: decrease of €1,653 million; 2007: increase of €971 million). With this additional reclassification, the Group harmonizes the presentation of
the entire sales financing and leasing business in the Group's consolidated statement of cash flows within "Cash provided by (used for) operating activities." The reported changes above did not affect
the consolidated statement of financial position.
In
March 2007, the IASB issued an amendment of IAS 23 Borrowing Costs. The amendment removes the option of immediately recognizing borrowing costs as an expense. The amended
standard requires capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets. Assets are considered qualifying when a
substantial period of time is necessary to get them ready for use or sale. Adoption of the amendment is required prospectively as of January 1, 2009 for qualifying assets whose
F-10
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
construction
or production started after that date. In 2009, the Group capitalized borrowing costs of €1 million resulting from long-term development projects.
With
the amendment of IAS 1 Presentation of Financial Statements, the consolidated financial statements contain in addition to the consolidated statement of income (loss) a
consolidated statement of comprehensive income (loss). The latter comprises the profit or loss of the reporting period as well as equity changes other than those changes resulting from transactions
with owners in their capacity as owners that are not recognized in profit or loss (other comprehensive income or loss).
The
IASB issued amendments to IFRS 7 Financial Instruments: Disclosures which require enhanced disclosures about fair value measurement and liquidity risk. The amendments have no
influence on the Group's financial position, financial performance or statement of cash flows.
IFRSs issued and EU endorsed but not yet adopted.
In January 2008, the IASB published revisions of IFRS 3 Business
Combinations and
IAS 27 Consolidated and Separate Financial Statements. Major changes are: (a) the requirement that the assets acquired, the liabilities assumed and the equity interests be consistently
measured at fair value on the acquisition date; (b) costs incurred in an acquisition are to be recognized in the income statement of the period; (c) option of measuring any
non-controlling interest in the entity
acquired at fair value; and (d) once control is obtained, all other increases and decreases in ownership interest are reported in equity. Adoption of the standard is required prospectively for
annual periods beginning on or after July 1, 2009, with earlier adoption permitted. Daimler will adopt the standards as of January 1, 2010.
IFRSs issued but neither EU endorsed nor yet adopted.
In November 2009, the IASB published IFRS 9 Financial Instruments as
part of its project
of a revision of the accounting guidance for financial instruments. The new standard provides guidance on the accounting of financial assets as far as classification and measurement are concerned. The
standard will be effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The Group will not early adopt IFRS 9 Financial Instruments for
2010. Daimler will determine the expected effects on the Groups' consolidated financial statements.
Other
IFRSs issued but not required to be adopted are not expected to have significant influence on the Group's financial position, financial performance or statement of cash flows.
Presentation.
Presentation in the statement of financial position differentiates between current and non-current assets and
liabilities.
Assets and liabilities are classified as current if they mature within one year or within a longer operating cycle. Deferred tax assets and liabilities as well as assets and provisions for pensions
and similar obligations are presented as non-current items. The consolidated statement of income (loss) is presented using the cost-of-sales method.
Commercial
practices with respect to certain products manufactured by the Group necessitate that sales financing, including leasing alternatives, be made available to the Group's
customers. Accordingly, the Group's consolidated financial statements are also significantly influenced by the activities of its financial services business.
To
enhance readers' understanding of the Group's consolidated financial statements, the accompanying financial statements present, in addition to the audited consolidated financial
statements, unaudited information with respect to the results of operations and financial position of the Group's industrial and financial services business activities. Such information, however, is
not required by IFRS and is not intended to, and does not represent the separate IFRS results of operations and financial position of the Group's industrial or financial services business activities.
Eliminations of the effects of transactions between the industrial and financial services businesses have generally been allocated to the industrial business columns.
F-11
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
Measurement.
The consolidated financial statements have been prepared on the historical cost basis with the exception of certain
items such as
available-for-sale financial assets, derivative financial instruments or hedged items as well as pensions and similar obligations. Measurement models applied to those
exceptions are described below.
Use of estimates and judgments.
Preparation of the consolidated financial statements requires management to make estimates and
judgments related to
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and
expense for the period. Significant items related to such estimates and judgments include recoverability of investments in equipment on operating leases, investments in associated companies,
collectability of receivables from financial services, assumptions of future cash flows from cash-generating units or development projects, recoverability of deferred tax assets, useful
lives of plant and equipment, warranty obligations, and assets and obligations related to employee benefits. Actual amounts could differ from those estimates.
Risks and uncertainties.
Daimler's financial position, results of operations and cash flows are subject to numerous risks and
uncertainties. For
example, stagnation or a renewed downturn of the global economy could cause actual results to vary from current expectations. Additional parameters which may cause actual results to differ from
current expectations include further increases in overcapacity and the intensity of competition in the automotive industry; dependence on suppliers, especially single-source suppliers; a permanent
shift in consumer preference towards smaller cars; implementation of new technologies; fluctuations in currency exchange rates, interest rates and commodity prices; the resolution of significant legal
proceedings; and environmental and other government regulations.
Principles of consolidation.
The consolidated financial statements include the financial statements of Daimler and, in general,
the financial
statements of Daimler's subsidiaries, including special purpose entities which are directly or indirectly controlled by Daimler. Control means the power, directly or indirectly, to govern the
financial and operating policies of an entity so that the Group obtains benefits from its activities.
The
financial statements of consolidated subsidiaries are generally prepared as of the balance sheet date of the consolidated financial statements, except for Mitsubishi Fuso Truck and
Bus Corporation (MFTBC), a significant subgroup which is consolidated with a one-month time lag. Adjustments are made for significant events or transactions that occur during the time lag.
The
financial statements of Daimler and its subsidiaries included in the consolidated financial statements have been prepared using uniform recognition and valuation principles. All
significant intercompany accounts and transactions relating to consolidated subsidiaries and consolidated special purpose entities have been eliminated.
Business
combinations are accounted for using the purchase method.
As
a further funding source, Daimler transfers finance receivables, in particular receivables from the leasing and automotive business, to special purpose entities. Daimler thereby
principally retains significant risks of the transferred receivables. According to IAS 27 Consolidated and Separate Financial Statements and the Standing Interpretations Committee (SIC)
Interpretation 12 ConsolidationSpecial Purpose Entities, those special purpose entities have to be consolidated by the transferor. The transferred financial assets remain on Daimler's
consolidated statement of financial position.
Investments in associated companies and joint ventures.
Associated companies are equity investments in which Daimler has the
ability to exercise
significant influence over the financial and operating policies of the investee. Joint ventures are those entities over whose activities Daimler has joint control with partners,
F-12
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
established
by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associated companies and joint ventures are accounted for using the equity method.
The
excess of the cost of Daimler's initial investment in equity method companies over the Group's proportionate reassessed ownership interest is recognized as investor level goodwill
and included in the carrying amount of the investment accounted for using the equity method.
If
the carrying amount exceeds the recoverable amount of an investment in any associated company or joint venture, the carrying amount of the investment has to be reduced to the
recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. An impairment loss is recognized in the income statement in the line item "Share of profit
(loss) from investments accounted for using the equity method, net." Income and expenses from the sale of investments accounted for using the equity method are shown in the same line item.
Profits
from transactions with associated companies and joint ventures are eliminated by reducing the carrying amount of the investment.
For
the investments in the European Aeronautic Defence and Space Company EADS N.V. (EADS), Tognum AG (Tognum), Kamaz OAO (Kamaz) anduntil the redemption of the
remaining 19.9% equity interestChrysler Holding LLC (Chrysler), the Group's proportionate share of the results of operations is included in Daimler's consolidated financial
statements with a three-month time lag because the financial statements of those associated companies are not made available timely to Daimler. Adjustments are made for all significant events or
transactions that occur during the time lag (see also Note 12).
Foreign currency translation.
Transactions in foreign currency are translated at the relevant foreign exchange rates prevailing
at the transaction
date. Subsequent gains and losses from the remeasurement of financial assets and liabilities denominated in foreign currency are recognized in profit and loss (except for
available-for-sale equity instruments and financial liabilities designated as a hedge of a net investment in a foreign operation).
The
assets and liabilities of foreign companies for which the functional currency is not the euro are translated into euro using period-end exchange rates. The translation
adjustments generated after the transition to IFRS on January 1, 2005 are recorded directly in equity. The consolidated statements of income (loss) and cash flows are translated into euro using
average exchange rates during the respective periods.
The
exchange rates of the US dollar, the most significant foreign currency for Daimler, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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2009
|
|
2008
|
|
2007
|
|
|
|
|
|
€1 =
|
|
€1 =
|
|
€1 =
|
|
Exchange rate at December 31
|
|
|
1.4406
|
|
|
1.3917
|
|
|
1.4721
|
|
Average exchange rate
|
|
First quarter
|
|
|
1.3029
|
|
|
1.4976
|
|
|
1.3106
|
|
|
|
Second quarter
|
|
|
1.3632
|
|
|
1.5622
|
|
|
1.3481
|
|
|
|
Third quarter
|
|
|
1.4303
|
|
|
1.5050
|
|
|
1.3738
|
|
|
|
Fourth quarter
|
|
|
1.4785
|
|
|
1.3166
|
|
|
1.4487
|
|
Accounting policies
Revenue recognition.
Revenue from sales of vehicles, service parts and other related products is recognized when the risks and
rewards of ownership
of the goods are transferred to the customer, the amount of revenue can be estimated reliably and collectability is reasonably assured. Revenue is recognized net of discounts, cash sales incentives,
customer bonuses and rebates granted.
F-13
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
Daimler
uses price discounts in response to a number of market and product factors, including pricing actions and incentives offered by competitors, the amount of excess industry
production capacity, the intensity of market competition and consumer demand for the product. The Group may offer a variety of sales incentive programs at any point in time, including cash offers to
dealers and consumers, lease subsidies which reduce the consumers' monthly lease payment, or reduced financing rate programs offered to consumers.
Revenue
from receivables from financial services is recognized using the effective interest method. When loans are issued below market rates, related receivables are recognized at
present value and revenue is reduced for the interest incentive granted.
The
Group offers an extended, separately priced warranty for certain products. Revenue from these contracts is deferred and recognized into income over the contract period in proportion
to the costs expected to be incurred based on historical information. In circumstances in which there is insufficient historical information, income from extended warranty contracts is recognized on a
straight-line basis.
A
loss on these contracts is recognized in the current period if the sum of the expected costs for services under the contract exceeds unearned revenue.
For
transactions with multiple deliverables, such as when vehicles are sold with free or reduced in price service programs, the Group allocates revenue to the various elements based on
their estimated fair values.
Sales
in which the Group guarantees the minimum resale value of the product, such as sales to certain rental car company customers, are accounted for similar to an operating lease. The
guarantee of the resale value may take the form of an obligation by Daimler to pay any deficiency between the proceeds the customer receives upon resale in an auction and the guaranteed amount, or an
obligation to reacquire the vehicle after a certain period of time at a set price. Gains or losses from the resale of these vehicles are included in gross profit.
Revenue
from operating leases is recognized on a straight-line basis over the lease term. Among the assets subject to "Operating Leases" there are Group products, which are
purchased by Daimler Financial Services from independent third-party dealers and leased to customers. After revenue recognition from the sale of the vehicles to independent third-party dealers, these
vehicles create further revenue from leasing and remarketing as a result of lease contracts entered into. The Group estimates, that the revenue recognized following the sale of vehicles to dealers
equals approximately the additions to leased assets at Daimler
Financial Services. Additions to leased assets at Daimler Financial Services were approximately €4 billion in 2009 (2008: approximately €5 billion).
Research and non-capitalized development costs.
Expenditure for research and development that does not meet the conditions for
capitalization according to IAS 38 Intangible Assets is expensed as incurred.
Borrowing costs.
Borrowing costs are expensed as incurred, unless they are directly attributable to the acquisition,
construction or production of a
qualifying asset and therefore form part of the cost of that asset.
Government grants.
Government grants related to assets are deducted in calculating the carrying amount of the asset and are
recognized in profit or
loss over the life of a depreciable asset as a reduced depreciation expense.
Interest income (expense), net.
Interest income (expense), net includes interest expense from liabilities, interest income from
investments in
securities, cash and cash equivalents as well as interest and changes in fair values related to interest rate hedging activities. Income and expense resulting from the allocation of premiums and
discounts is also included. Furthermore, the interest component from pensions and similar obligations is disclosed under this line item.
F-14
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
An
exception to the afore mentioned principles is made for Daimler Financial Services. In this case the interest income and expense and the result from derivative financial instruments
are disclosed under revenue and cost of sales, respectively.
Other financial income (expense), net.
Other financial income (expense), net includes income and expense
from financial transactions which are not included under interest income (expense), net, e.g. expense from the compounding of interest on provisions for other risks.
Gains
and losses resulting from the issuance of shares by a Group subsidiary to third parties that reduces Daimler's percentage ownership ("dilution gains and losses") and Daimler's
share of any dilution gains and losses reported by its investees accounted for under the equity method are recognized in other financial income (expense), net, or in share of profit (loss) from
companies accounted for using the equity method, net.
Income taxes.
Current income taxes are determined based on respective local taxable income of the period and tax rules. In
addition, current income
taxes include adjustments for uncertain tax payments or tax refunds for periods not yet assessed as well as interest expense and penalties on the underpayment of taxes. Deferred tax is included in
income tax expense (benefit) and reflects the changes in deferred tax assets and liabilities except for changes recognized directly in equity.
Deferred
tax assets or liabilities are determined based on temporary differences between financial reporting and the tax basis of assets and liabilities including differences from
consolidation, loss carryforwards and tax credits. Measurement takes place on the basis of the tax rates whose effectiveness is expected for the period in which an asset is realized or a liability is
settled. For this purpose, the tax rates and tax rules are used which have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized to the extent that
taxable profit at the level of the relevant tax authority will be available for the utilization of the deductible temporary differences. Daimler recognizes a valuation allowance for deferred tax
assets when it is unlikely that a respective amount of future taxable profit will be available or when Daimler no longer has control over the tax advantage.
Tax
benefits resulting from uncertain income tax positions are recognized at the best estimate of the tax amount expected to be paid.
Discontinued operations.
The operating activities of Chrysler including the related financial services business in North America
until
August 3, 2007, the result from the deconsolidation of the Chrysler activities and adjustments of this result are presented as discontinued operations in the Group's consolidated statement of
income (loss) (see Note 2).
Earnings (loss) per share.
Basic earnings (loss) per share are calculated by dividing profit or loss attributable to shareholders
of Daimler by the
weighted average number of shares outstanding. Diluted earnings (loss) per share additionally reflect the potential dilution that would occur if all stock option plans were exercised.
Goodwill.
For acquisitions consummated after the transition to IFRS on January 1, 2005, goodwill represents the excess of
the cost of an
acquired business over the fair values assigned to the separately identifiable assets acquired and the liabilities assumed. The purchase of minority rights is treated in the same manner. In the case
of an adjustment for contingent consideration, such amount is principally included in goodwill.
Other intangible assets.
Intangible assets acquired are measured at cost less accumulated amortization. If necessary,
accumulated impairment losses
will be recognized. Intangible assets with indefinite lives are reviewed annually to determine whether indefinite-life assessment continues to be supportable. If not, the change in the
useful-life assessment from indefinite to finite is made on a prospective basis.
F-15
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
Intangible
assets other than development costs with finite useful lives are generally amortized on a straight-line basis over their useful lives (3 to 10 years) and
are reviewed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period for intangible assets with finite useful lives is reviewed at least at
each year-end. Changes in expected useful lives are treated as changes in accounting estimates. The amortization expense on intangible assets with finite useful lives is recorded in
functional costs.
Development
costs are recognized if the conditions for capitalization according to IAS 38 are met. Subsequent to initial recognition, the asset is carried at cost less accumulated
amortization and accumulated impairment losses. Capitalized development costs include all direct costs and allocable overheads and are amortized over the expected product life cycle (2 to
10 years). Amortization of capitalized development costs is an element of the manufacturing costs allocated to those vehicles and components by which they have been generated and is included in
cost of sales when the inventory is sold.
Property, plant and equipment.
Property, plant and equipment are valued at acquisition or manufacturing costs less accumulated
depreciation. If
necessary accumulated impairment losses will be recognized. The costs of internally produced equipment and facilities include all direct costs and allocable overheads. Acquisition or manufacturing
costs include the estimate of the costs of dismantling and removing the item and restoring the site, if any. Plant and equipment under finance leases are stated at the lower of present value of
minimum lease payments or fair value less the respective accumulated depreciation and any accumulated impairment losses. Depreciation expense is recognized using the straight-line method.
A
residual value of the asset is considered. Property, plant and equipment are depreciated over the following useful lives:
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|
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Buildings and site improvements
|
|
10 to 50 years
|
Technical equipment and machinery
|
|
6 to 25 years
|
Other equipment, factory and office equipment
|
|
2 to 30 years
|
Leasing.
Leasing includes all arrangements that transfer the right to use a specified asset for a stated period of time in
return for a payment, even
if the right to use such asset is not explicitly described in an arrangement. The Group is a lessee of property, plant and equipment and a lessor of its products, principally passenger cars, trucks,
vans and buses. It is evaluated on the basis of the risks and rewards of a leased asset whether the ownership of the leased asset is attributed to the lessee (finance lease) or to the lessor
(operating lease). Rent expense on operating leases where the Group is lessee is recognized over the respective lease terms on a straight-line basis. Equipment on operating leases where
the Group is lessor is carried initially at its acquisition or manufacturing cost and is depreciated to its expected residual value over the contractual term of the lease, on a
straight-line basis. The same accounting principles apply to assets if Daimler sells such assets and leases them back from the buyer.
Impairment of non-financial assets.
Daimler assesses at each reporting date whether there is an indication that an asset may be
impaired.
If such indication exists, or when annual impairment testing for an asset is required (goodwill, other intangible assets with indefinite useful lives and intangible assets not yet in use), Daimler
estimates the recoverable amount of the asset. The recoverable amount is determined for each individual asset unless the asset does not generate cash inflows that are largely independent of those from
other assets or groups of assets (cash-generating unit). The recoverable amount is the higher of fair value less costs to sell and value in use. Daimler determines the recoverable amount
as fair value less costs to sell and compares it with the carrying amount (including goodwill). Fair value is measured by discounting future cash flows using a risk-adjusted interest rate.
Cash flows, which influence the assessment of residual values, are estimated on the basis of the operative planning (two years period) supplemented by additional information to determine
F-16
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
subsequent
planning periods. Periods not covered by the forecast are taken into account by recognizing a residual value, which principally does not consider any growth rates. If fair value less costs
to sell cannot be determined or is lower than the carrying amount, value in use is calculated. If the carrying amount exceeds the recoverable amount, an impairment charge is recognized amounting to
the difference.
An
assessment for assets other than goodwill is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may
have decreased. If this is the case, Daimler records a partial or an entire reversal of the impairment.
Thereby,
the carrying amount is increased to its recoverable amount. However, the increased carrying amount shall not exceed the carrying amount that would have been determined (net of
depreciation) had no impairment loss been recognized in prior years.
Non-current assets held for sale and disposal groups.
Non-current assets held for sale or disposal groups are classified as
held for sale and disclosed separately in the statement of financial position. The assets or disposal groups are then measured at the lower of carrying amount and fair value less costs to sell and are
no longer depreciated. If fair value less costs to sell subsequently increases, any impairment loss previously recognized is reversed. The reversal is restricted to the impairment losses previously
recognized for the assets concerned.
Inventories.
Inventories are measured at the lower of cost and net realizable value. The net realizable value is the estimated
selling price less any
remaining costs to sell. The cost of inventories is based on the average cost principle and includes expenditures incurred in acquiring the inventories and bringing them to their
existing location and condition. In the case of manufactured inventories and work in progress, cost also includes production overheads based on normal capacity.
Financial instruments.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity
instrument of another entity. Financial instruments in the form of financial assets and financial liabilities are generally presented separately. Financial instruments are recognized as soon as
Daimler becomes a party to the contractual provisions of the financial instrument.
Upon
initial recognition, financial instruments are measured at fair value. For the purpose of subsequent measurement, financial instruments are allocated to one of the categories
mentioned in IAS 39 Financial Instruments: Recognition and Measurement. Transaction costs directly attributable to acquisition or issuance are considered by determining the carrying amount if
the financial instruments are not measured at fair value through profit or loss. If the transaction date and the settlement date (i.e. the date of delivery) differ, Daimler uses the transaction
date for purposes of initial recognition or derecognition.
Financial assets.
Financial assets primarily comprise receivables from financial services, trade receivables, receivables from
banks, cash on hand,
derivative financial assets and marketable securities and investments.
Financial assets at fair value through profit or loss.
Financial assets at fair value through profit or loss include those financial
assets
designated as held for trading.
Financial
assets such as shares and interest-bearing securities are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives,
including embedded derivatives separated from the host contract, are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on financial
assets held for trading are recognized in profit or loss.
Loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted
in an active market, such as receivables from financial services or trade receivables.
F-17
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
After
initial recognition, loans and receivables are subsequently carried at amortized cost using the effective interest method less any impairment losses, if necessary. Gains and losses are
recognized in the income statement when the loans and receivables are derecognized or impaired. Interest effects on the application of the effective interest method are also recognized in profit or
loss.
Available-for-sale financial assets.
Available-for-sale financial assets are
non-derivative financial assets that are designated as available for sale or that are not classified in any of the preceding categories. This category includes, among others, equity
instruments and debt instruments such as government bonds, corporate bonds and commercial paper.
After
initial measurement, available-for-sale financial assets are measured at fair value with unrealized gains or losses being recognized in equity within other
reserves (reserves from financial assets available-for-sale). If objective evidence of impairment exists or if changes in the fair value of a debt instrument resulting from
currency fluctuations occur, these changes are recognized in profit or loss. Upon disposal of financial assets, the accumulated gains and losses recognized in equity resulting from measurement at fair
value are recognized in profit or loss. If a reliable estimate of the fair value of an unquoted equity instrument such as investments in German limited liability companies, cannot be made, this
instrument is measured at cost (less any impairment losses). Interest earned on these financial assets is generally reported as interest income using the effective interest rate method. Dividends are
recognized in profit or loss when the right of payment has been established.
Cash and cash equivalents.
Cash and cash equivalents consist primarily of cash on hand, checks, demand deposits at banks as well as
debt instruments
and certificates of deposits with an original term of up to three months. Cash and cash equivalents correspond with the classification in the consolidated statements of cash flows.
Impairment of financial assets.
At each reporting date, the carrying amounts of the financial assets other than those to be
measured at fair value
through profit or loss are assessed to determine whether there is objective, significant evidence of impairment (e.g. a debtor is facing serious financial difficulties or there is a substantial
change in the technological, economic, legal or market environment of the debtor).
For
quoted equity instruments, a significant or prolonged decline in fair value is an additional objective evidence for a possible impairment. Daimler has defined criteria for the
significance and duration of a decline in fair value.
A
decline in fair value is deemed significant if it exceeds 20% of the carrying amount of the investment; it is deemed prolonged to the extent that it does not reverse within nine
months.
Loans and receivables.
The amount of the impairment loss on loans and receivables is measured as the difference between the carrying
amount of the
asset and the present value of estimated future cash flows (excluding expected future credit losses that have not been incurred), discounted at the original effective interest rate of the financial
asset. The amount of the impairment loss is recognized in profit or loss.
If,
in a subsequent reporting period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized,
the impairment loss recorded in prior periods is reversed and recognized in profit or loss.
In
most cases, an impairment loss on loans and receivables (e.g. receivables from financial services including finance lease receivables, trade receivables) is recorded using
allowance accounts. The decision to account for credit risks using an allowance account or by directly reducing the receivable depends on the estimated probability of the loss of receivables. When
receivables are assessed as uncollectible, the impaired asset is derecognized.
F-18
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
Available-for-sale financial assets.
If an available-for-sale financial asset is impaired, the
difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in the income statement, is reclassified from
direct recognition in equity to the income statement. Reversals with respect to equity instruments classified as available for sale are recognized in equity. Reversals of impairment losses on debt
instruments are reversed through the statement of income if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment losses were recognized in
income.
Financial liabilities.
Financial liabilities primarily include trade payables, liabilities to banks, bonds, derivative financial
liabilities and
other liabilities.
Financial liabilities measured at amortized cost.
After initial recognition, financial liabilities are subsequently measured at
amortized cost using
the effective interest method.
Financial liabilities at fair value through profit or loss.
Financial liabilities at fair value through profit or loss include financial
liabilities
held for trading. Derivatives, including embedded derivatives separated from the host contract, are classified as held for trading unless they are designated as effective hedging instruments in hedge
accounting. Gains or losses on liabilities held for trading are recognized in profit or loss.
Derivative financial instruments and hedge accounting.
Daimler uses derivative financial instruments such as forward contracts,
swaps, options,
futures, swaptions, forward rate agreements, caps and floors mainly for the purpose of hedging interest rate and currency risks that arise from its operating, financing, and investing activities.
Embedded
derivatives are separated from the host contract which is not measured at fair value through profit or loss when the analysis shows that the economic characteristics and risks
of embedded derivatives are not closely related to those of the host contract.
Derivative
financial instruments are measured at fair value upon initial recognition and at each subsequent reporting date. The fair value of listed derivatives is equal to their
positive or negative market value. If a market value is not available, fair value is calculated using standard financial valuation models such as discounted cash flow or option pricing models.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
If
the requirements for hedge accounting set out in IAS 39 are met, Daimler designates and documents the hedge relationship from the date a derivative contract is entered into as
either a fair value hedge or a cash flow hedge. In a fair value hedge, the fair value of a recognized asset or liability or an unrecognized firm commitment is hedged. In a cash flow hedge, the
variability of cash flows to be received or paid related to a recognized asset or liability or a highly probable forecast transaction is hedged. The documentation of the hedging relationship includes
the objectives and strategy of risk management, the type of hedging relationship,
the nature of risk being hedged, the identification of the hedging instrument and the hedged item, as well as a description of the method used to assess hedge effectiveness. The hedging transactions
are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are regularly assessed to determine that they have actually been highly effective throughout the
financial reporting periods for which they are designated.
Changes
in the fair value of derivative financial instruments are recognized periodically in either earnings or equity, as a component of other reserves, depending on whether the
derivative is designated as a hedge of changes in fair value or cash flows. For fair value hedges, changes in the fair value of the hedged item and the derivative are recognized currently in earnings.
For cash flow hedges, fair value changes in the effective portion of the hedging instrument are recognized in other reserves, net of applicable taxes. Amounts taken to equity are
F-19
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
reclassified
to the income statement when the hedged transaction affects the income statement. The ineffective portion of the fair value changes is recognized in profit or loss.
If
derivative financial instruments do not or no longer qualify for hedge accounting because the qualifying criteria for hedge accounting are not or are no longer met, the derivative
financial instruments are classified as held for trading.
Pensions and similar obligations.
The measurement of defined benefit plans for pensions and other post-employment benefits
(e.g. medical care) in accordance with IAS 19 Employee Benefits is based on the projected unit credit method. For the valuation of defined post-employment benefit plans,
differences between actuarial assumptions used and actual results and changes in actuarial assumptions result in actuarial gains and losses, which have to be amortized in future periods. Amortization
of unrecognized actuarial gains and losses arising after the transition to IFRS on January 1, 2005 is recorded in accordance with the "corridor approach." This approach requires partial
amortization of actuarial gains and losses in the following year with an effect on earnings if the unrecognized gains and losses exceed 10 percent of the greater of (1) the defined
post-employment benefit obligation or (2) the fair value of the plan assets. In such cases, the amount of amortization recognized by the Group is the resulting excess divided by the
average remaining service period of active employees expected to receive benefits under the plan.
When
the benefits of a plan are changed, the portion of the change in benefit relating to past service by employees is recognized in profit or loss on a straight-line basis
over the average period until the benefits become vested. To the extent that the benefits vest immediately, the impact is recognized directly in profit or loss.
A
negative net obligation arising from prepaid future contributions is only recognized as an asset to the extent that a cash refund from the plan or reductions of future contributions to
the plan are available. Any exceeding amount is recognized in net periodic pension costs in the period when it is incurred ("asset ceiling").
Provisions for other risks and contingent liabilities.
A provision is recognized when a liability to third parties has been
incurred, an outflow of
resources is probable and the amount of the obligation can be reasonably estimated. In particular, restructuring provisions are recognized when the Group has a detailed formal plan that has either
commenced implementation or been announced. Provisions are regularly reviewed and adjusted as further information develops or circumstances change.
The
provision for expected warranty-related costs is established when the product is sold, upon lease inception, or when a new warranty program is initiated. Estimates for accrued
warranty costs are primarily based on historical experience.
Daimler
records the fair value of an asset retirement obligation from the period in which the obligation is incurred.
The
restructuring provisions arise from planned programs that materially change the scope of business performed by a segment or business unit or the manner in which business is
conducted. In most cases, restructuring expenses include termination benefits and compensation payments due to the termination of agreements with suppliers and dealers.
Share-based payment.
Share-based payment comprises cash-settled liability awards and equity-settled equity awards.
The
fair value of equity awards is generally determined by using a modified Black-Scholes option pricing model at grant date and represents the total payment expense to be recognized
during the service period with a corresponding increase in equity (paid-in capital).
F-20
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
Liability
awards are measured at fair value at each balance sheet date until settlement and are classified as provisions. The expense of the period comprises the addition to and the
reversal of the provision between two reporting dates and the dividend equivalent paid during the period.
Presentation in the consolidated statements of cash flows.
Interest and taxes paid as well as interest and dividends received
are classified as cash
provided by operating activities. Dividends paid are shown in cash provided by (used for) financing activities.
2. Significant acquisitions and dispositions of interests in companies and of other assets and liabilities
Acquisitions
Tognum.
In 2008, the Group acquired an aggregate 28.4% stake in Tognum AG (Tognum). The acquisition costs amounted to
€702 million in cash. The Group accounts for its equity interest in Tognum using the equity method (see also Note 12 for further information).
Dispositions
Daimler Financial Services.
In line with the ongoing concentration on the automotive business, Daimler Financial Services
disposed of
non-automotive assets subject to finance leases (mainly leveraged
leases) in 2009, which resulted in cash inflows of €825 million. After consideration of the costs of the transactions, the Group recorded a pre-tax loss of
€31 million within cost of sales in the 2009 consolidated statement of income (loss). The expense is allocated to the Daimler Financial Services segment.
In
addition, non-automotive assets subject to leveraged leases are presented separately as assets held for sale in the consolidated statement of financial position as of
December 31, 2009 (€310 million). Measurement of these assets at fair value less costs to sell resulted in a pre-tax expense of
€69 million in 2009, which is included in cost of sales in the consolidated statement of income (loss). The expense is allocated to the Daimler Financial Services segment. For
further information on sales of non-automotive assets from the leasing business, see Notes 13 and 18.
Chrysler.
On May 14, 2007, the Board of Management of Daimler AG decided to transfer a majority interest in Chrysler and the
related financial
services business in North America to a subsidiary of the private-equity firm Cerberus Capital Management, L.P. (Cerberus). On May 16, 2007, the Supervisory Board of Daimler AG approved
the transaction; the transaction was consummated on August 3, 2007.
On
August 3, 2007, Cerberus made a capital contribution of €5.2 billion (US$7.2 billion) in cash for an 80.1% equity interest in the newly
established company Chrysler Holding LLC (Chrysler Holding), which controlled the Chrysler activities. Of that cash, Daimler withdrew €0.9 billion
(US$1.2 billion). As a result, Daimler retained a 19.9% equity interest in this entity, which was accounted for using the equity method until the redemption of the remaining investment on
June 3, 2009 (see also Note 12).
In
connection with the closing of the transaction in August 2007, subsidiaries of Chrysler Holding LLC repaid €24.7 billion of liabilities to the Group in
cash.
In
addition, certain previously outstanding guarantees provided by the Group for the benefit of Chrysler continue to be outstanding. At December 31, 2009, the amount of those
guarantees was €0.3 billion. As coverage of the liabilities underlying these guarantees, Chrysler provided collateral to an escrow account of
€0.2 billion as of December 31, 2009.
F-21
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
Based
on a binding term sheet signed in April 2009, Daimler and Cerberus entered into a redemption agreement in June 2009. As a result, since June 3, 2009, Daimler no longer has
any equity interest in Chrysler Holding or its subsidiaries and all Daimler representatives resigned from the boards of Chrysler Holding and its subsidiaries.
The
binding term sheet also provided for a settlement agreement covering issues relating to Chrysler which Daimler, the US Pension Benefit Guaranty Corporation (PBGC),
Chrysler LLC (Chrysler) and Cerberus entered into in June 2009. Among other matters, Chrysler and Cerberus waived all claims that might arise from the representations and warranties made in the
contribution agreement dated August 3, 2007, including claims by Cerberus that Daimler allegedly improperly managed certain issues in the period between the signing of the contribution
agreement and the conclusion of the transaction, as well as certain other claims against Daimler.
In
addition, in June 2009, Daimler paid US$200 million into Chrysler's pension plans and will make further payments of US$200 million in each of the next two years. The
2007 Daimler pension guarantee of US$1 billion vis-à-vis the PBGC has been replaced by a new guarantee in an amount of US$200 million that will
remain in place until August 2012.
Moreover,
the settlement agreement provides for the forgiveness of Daimler's receivables in connection with a subordinated loan and a credit line for Chrysler's automotive business which
was drawn in 2008. The Group provided the credit line in connection with the transaction contracted on August 3, 2007. The nominal amounts of these receivables, which were fully impaired at
December 31, 2008, were US$0.4 billion and US$1.5 billion. However, the forgiveness of the US$1.5 billion second lien loan by Daimler was subject to the condition that
certain unsecured creditors of Chrysler, represented by a committee under US bankruptcy law, will not bring litigation against Daimler in the course of the current Chrysler bankruptcy proceedings. In
the third quarter 2009, the committee of the unsecured creditors filed a complaint with the bankruptcy court. In consequence, the forgiveness was rescinded (see also Note 27).
The
contractual agreements described above negatively impacted 2009 EBIT by €379 million; these results are included in the reconciliation of total segments' EBIT
to Group EBIT.
In
connection with the legal transfer of Chrysler's international sales activities to Chrysler in the first quarter of 2009 and due to the valuation of Chrysler-related assets, the Group
recorded a total gain before income taxes of €85 million in 2009. This gain is included in the reconciliation of total segments' EBIT to Group EBIT in the segment reporting.
Daimler
and its Chinese partner Beijing Automotive Industry Holding Co. Ltd. (BAIC) each own a 50% equity interest in the joint venture
Beijing-Benz-DaimlerChrysler Automotive Co. Ltd. (BBDC), which manufactures and distributes Mercedes-Benz passenger cars and Chrysler vehicles in
China. In connection with the transfer of the majority interest in Chrysler in 2007, Daimler, Chrysler and Cerberus agreed on a framework dealing with the future business model at BBDC. Under the
framework agreement, the final terms of future cooperation at BBDC with respect to the manufacturing of Chrysler vehicles should be determined at a later point in time.
In
June 2008, it was agreed, subject to consent by BAIC and BBDC, that the manufacturing of Chrysler vehicles at BBDC should be discontinued by the end of the existing license
agreements.
In
this context, in December 2008, Daimler, BAIC and BBDC entered into a contract, which determines that Daimler should be responsible for certain costs related to Chrysler vehicles at
BBDC and reimburse such costs to BBDC, since they are directly connected to the transfer of the majority interest in Chrysler. The costs include in particular the impairment of plant and equipment,
the valuation of Chrysler inventories at BBDC and compensation payments to suppliers and dealers. Daimler does not obtain an additional interest in BBDC in exchange.
F-22
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
Therefore,
in 2007 and 2008, Daimler recognized charges of €103 million and €293 million, respectively, (before income taxes) within "Net
profit (loss) from discontinued operations" to record an estimated total cost of €396 million. An amount of €42 million was paid in 2009 (2008:
€186 million). Furthermore, estimated costs were partially offset with gains from the ongoing Mercedes-Benz passenger cars business at BBDC. The Group expects the
remaining amount of the provisions of €174 million (after currency translation) to be cash effective in 2010.
The
net profit or loss of the Chrysler activities is included in the Group's consolidated statement of income (loss) in the line item "Net profit (loss) from discontinued operations" for
2007. The Group ceased to depreciate or amortize the non-current assets of the disposal group upon classification as assets and liabilities held for sale on May 16, 2007.
In
2007, the assets and liabilities of the Chrysler activities were derecognized following the consummation of the transaction on August 3, 2007. The loss from the deconsolidation
of €753 million is also included in the line item "Net profit (loss) from discontinued operations."
The
future tax benefits of temporary differences related to the assets and liabilities of the transferred Chrysler activities continue to be available to Daimler with certain
limitations. At the closing date of the Chrysler transaction, the deferred tax assets with respect to these temporary differences amounted to €2.0 billion. As a result of the
Chrysler transaction, the conditions to use these deferred taxes changed; the necessary assessment of the recoverability of these assets in the third quarter of 2007 led to a valuation allowance of
€2.0 billion. Furthermore, the Group had to write off €0.2 billion on foreign tax credits. These expenses are included in income tax expense from
continuing operations in the consolidated statement of income for 2007.
Net
profit (loss) from discontinued operations for the years 2008 and 2007 is comprised as follows:
|
|
|
|
|
|
|
|
|
in millions of €
|
|
2008
|
|
2007
|
|
|
Revenue
|
|
|
|
|
|
30,037
|
|
|
Cost of sales
|
|
|
|
|
|
(26,410
|
)
|
|
Selling expenses
|
|
|
|
|
|
(1,579
|
)
|
|
General administrative expenses
|
|
|
|
|
|
(1,172
|
)
|
|
Research and non-capitalized development costs
|
|
|
|
|
|
(647
|
)
|
|
Other income and other expenses
|
|
|
|
|
|
(714
|
)
|
|
|
|
|
|
|
Profit (loss) before income taxes
|
|
|
|
|
|
(485
|
)
|
|
Income taxes
|
|
|
|
|
|
368
|
|
|
|
|
|
|
|
Profit (loss) of Chrysler activities, net of taxes
1
|
|
|
|
|
|
(117
|
)
|
|
|
|
|
|
|
|
Loss from deconsolidation before income taxes
|
|
|
(383
|
)
|
|
(658
|
)
|
|
Income taxes
|
|
|
93
|
|
|
(95
|
)
|
|
|
|
|
|
|
Loss from deconsolidation, net of taxes
|
|
|
(290
|
)
|
|
(753
|
)
|
|
|
|
|
|
|
Net profit (loss) from discontinued operations
|
|
|
(290
|
)
|
|
(870
|
)
|
|
|
|
|
|
|
-
1
-
In
2007, income and expenses of the Chrysler activities relate to the period from January 1 to August 3, 2007.
Net loss from discontinued operations for 2007 includes charges of €906 million before income taxes in connection with
Chrysler's Recovery and Transformation Plan, which was announced on February 14, 2007.
An
extinguishment loss of €0.5 billion (net of tax €0.3 billion) resulting from the early redemption of long-term debt of
Chrysler is included in net profit (loss) from discontinued operations in 2007.
F-23
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
The
cash flows of 2007 attributable to discontinued operations are as follows:
|
|
|
|
|
in millions of €
|
|
|
|
Cash flow from operating activities
|
|
|
1,593
|
|
Cash flow from investing activities
|
|
|
(1,404
|
)
|
Cash flow from financing activities
|
|
|
(2,655
|
)
|
For
further information on Chrysler, see also Note 12.
Potsdamer Platz.
On December 13, 2007, the Supervisory Board of Daimler AG approved the sale of real-estate properties at
Potsdamer Platz to the SEB Group. The transaction, which closed on February 1, 2008, resulted in a cash inflow of €1.4 billion (thereof
€0.1 billion included in 2007). The transaction had a positive effect on 2008 EBIT of €449 million. The pre-tax gain is recognized in other
operating income in the 2007 consolidated statement of income and is included in the 2007 reconciliation from total segments' EBIT to Group EBIT in the segment reporting.
At
the same time, the Group entered into leases for approximately half of the sold office space with a non-cancelable lease period ending December 31, 2012. At the end
of the non-cancelable lease terms, there are two renewal options for five years each.
MFTBC.
In 2007, Mitsubishi Fuso Truck and Bus Corporation (MFTBC) sold a number of real estate properties to Nippon Industrial
TMK for approximately
€1 billion in cash. At the same time, MFTBC entered into a leaseback arrangement for each of the properties sold with non-cancelable lease periods of fifteen years.
At the end of the non-cancelable lease terms, there are renewal options for up to fifteen years. As a result of this transaction, MFTBC derecognized assets with a carrying amount of
€865 million. After considering the costs of the transaction, Daimler recorded a gain of €78 million before income taxes on assets sold and leased back
under the terms of an operating lease. In addition, the Group recorded assets sold and leased back under the terms of finance leases
with a corresponding amount of debt of €110 million and deferred the recognition of the excess of the purchase price over the carrying amount of the assets sold of
€46 million, which will be recognized over the lease term. The pre-tax gain recorded is included in other operating income in the 2007 consolidated statement of
income and was allocated to the Daimler Trucks segment.
Other sales of real estate property.
In 2007, Daimler AG sold its 50% equity interest in Wohnstätten Sindelfingen GmbH
for a
sales price of €82 million. The sale resulted in a gain of €73 million before income taxes. The pre-tax gain is included in other financial
income (expense), net, in the 2007 consolidated statement of income and is included in the 2007 reconciliation from total segments' EBIT to Group EBIT in the segment reporting.
EADS.
For information on the disposal of equity interests in the European Aeronautic Defence and Space Company EADS N.V.
(EADS), please see
Note 12.
F-24
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
3. Revenue
Revenue at Group level consists of the following:
|
|
|
|
|
|
|
|
|
|
|
in millions of €
|
|
2009
|
|
2008
|
|
2007
|
|
Sales of goods
|
|
|
66,772
|
|
|
85,787
|
|
|
89,976
|
|
Rental and leasing business
|
|
|
8,886
|
|
|
9,300
|
|
|
8,498
|
|
Interest from the financial services business
|
|
|
2,885
|
|
|
3,009
|
|
|
2,715
|
|
Sales of services
|
|
|
381
|
|
|
373
|
|
|
380
|
|
|
|
|
|
|
|
|
|
|
|
|
78,924
|
|
|
98,469
|
|
|
101,569
|
|
|
|
|
|
|
|
|
|
Revenue
by segment and region is presented in Note 31.
4. Functional costs
Cost of sales.
Cost of sales includes the following items:
|
|
|
|
|
|
|
|
|
|
|
in millions of €
|
|
2009
|
|
2008
|
|
2007
|
|
Cost of goods sold
|
|
|
54,276
|
|
|
66,122
|
|
|
66,313
|
|
Depreciation of equipment on operating leases
|
|
|
3,450
|
|
|
3,553
|
|
|
3,280
|
|
Refinancing costs Daimler Financial Services
|
|
|
2,211
|
|
|
2,147
|
|
|
2,055
|
|
Impairment losses on receivables from financial services
|
|
|
853
|
|
|
730
|
|
|
487
|
|
Other cost of sales
|
|
|
4,777
|
|
|
4,358
|
|
|
5,439
|
|
|
|
|
|
|
|
|
|
|
|
|
65,567
|
|
|
76,910
|
|
|
77,574
|
|
|
|
|
|
|
|
|
|
In
addition, in 2007, costs of goods sold of the Chrysler activities (until August, 3) of €22,267 million were included in net profit (loss) from
discontinued operations.
Selling expenses.
In 2009, selling expenses amounted to €7,608 million (2008: €9,204 million; 2007:
€8,956 million). Selling expenses include direct selling costs as well as selling overhead expenses and consist of personnel costs, material costs and other selling costs.
General administrative expenses.
General administrative expenses amounted to €3,287 million in 2009 (2008:
€4,124 million; 2007: €4,023 million) and comprise expenses which were not attributable to production, sales, research and development functions,
including personnel expenses, depreciation and amortization on fixed and intangible assets, and other administrative costs.
Research and non-capitalized development costs.
Research and non-capitalized development costs were
€2,896 million in 2009 (2008: €3,055 million; 2007: €3,158) and primarily comprise personnel expenses and material costs.
Amortization
expense of capitalized development costs amounted to €647 million in 2009 (2008: €638 million; 2007:
€623 million) and are recognized in cost of sales.
Optimization programs.
Measures and programs with implementation costs that materially impacted EBIT are briefly described
below:
Mitsubishi Fuso Truck and Bus Corporation (MFTBC
). In May 2009, the Board of Management of Daimler AG decided on a major realignment of
the operations of its subsidiary MFTBC. Measures provided for in the plan
F-25
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)
include
the streamlining of the product portfolio, the realignment of manufacturing sites, the streamlining of the retail network in Japan, and other efficiency improvements. In connection with these
measures, the Group anticipates, among other things, the relocation and idling of selected production sites, headcount reductions of up to 2,300 employees by the end of 2010, and a reduction of the
dealer network. As a result of this plan, the Group recorded charges of €245 million in 2009. The charges primarily relate to headcount reduction measures
(€120 million) and to accelerated depreciation as a result of the reduction of useful lives (€49 million). The premature termination of utilization of
leased assets led to charges of €25 million.
Costs
associated with this plan are included in the following line items within the consolidated statement of income (loss):
|
|
|
|
|
in millions of €
|
|
2009
|
|
Cost of sales
|
|
|
61
|
|
Selling expenses
|
|
|
136
|
|
General administrative expenses
|
|
|
35
|
|
Research and non-capitalized development costs
|
|
|
13
|
|
|
|
|
|
|
|
|
245
|
|
|
|
|
|
The
measures initiated resulted in cash outflows in 2009 of €31 million.
For
the measures initiated, the Group recorded provisions of €156 million as of December 31, 2009, which are included in provisions for other risks and are
expected to lead to payments in 2010.
Daimler Trucks North America (DTNA).
In response to continuing depressed demand across the industry and
structural changes in the company's core markets, the Group adopted a wide-ranging plan in October 2008 to optimize and reposition the business operations of its subsidiary Daimler Trucks
North America (DTNA). Measures provided for in the plan include the discontinuation of the Sterling Trucks brand in 2009, further consolidation of the production network in the NAFTA region, capacity
adjustments, including the closing of two manufacturing plants in 2009 and 2010. In addition, the plan includes headcount reductions of up to 3,500 employees, which were primarily accomplished in
2009. Based on new information available, the Group decided in 2009 not to proceed with the closing of one truck manufacturing plant, which was originally scheduled for 2010. Relating to this plan,
the Group recorded charges of €95 million in 2009 (2008: €233 million). Costs associated with headcount reduction measures resulted in further charges of
€11 million (2008: €106 million). Additional charges of €15 million (2008: €81 million) were recorded in
connection with the termination of agreements with dealers of the Sterling Trucks. Accelerated depreciation of assets as a result of the reduction of useful lives led to charges of
€37 million (2008: €20 million) and supplier compensations resulted in further charges of €3 million (2008:
€14 million).
Costs
associated with this plan are included in the following line items within the consolidated statement of income (loss):
|
|
|
|
|
|
|
|
in millions of €
|
|
2009
|
|
2008
|
|
Cost of sales
|
|
|
11
|
|
|
44
|
|
Selling expenses
|
|
|
23
|
|
|
88
|
|
General administrative expenses
|
|
|
56
|
|
|
101
|
|
Research and non-capitalized development costs
|
|
|
1
|
|
|
|
|
Other operating expense
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
|
|
|
233
|
|
|
|
|
|
|
|
F-26
DAIMLER AG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Continued)