Mercedes 2001 Annual Report Download - page 60

56 Analysis of the Financial Situation
The MTU/Diesel Engines business unit – previ-
ously included in the Other segment – is reported
within the new Powersystems business unit as part of
the Commercial Vehicles segment since the beginning
of 2001. The respective prior year’s results have been
reclassified in order to achieve comparability.
Operating result of Services slightly below prior year.
The Services division recorded an operating profit of
€0.6 billion in 2001 compared to €2.5 billion in the
prior year. Those results are influenced by one-time
effects in both years. Operating profit for 2001 includes
a one-time gain of €0.3 billion from the sale of the
remaining 10% equity interest in debitel to Swisscom,
which was partially offset by a charge of €0.1 billion
relating to the monetary crisis in Argentina. In addition,
a charge of €0.2 billion related to the recoverability
of lease receivables was recorded in connection with
the intended sale of parts of the portfolio of Capital
Services in 2002. The operating profit of the prior year
was positively impacted by one-time effects totalling
€1.8 billion, which was the net result of a dilution gain
in connection with Deutsche Telekom’s investment in
debis Systemhaus and an impairment charge on the
carrying value of leased vehicles.
Excluding these one-time effects, operating profit
was €0.6 billion in 2001, slightly below prior year’s
level. The result was negatively influenced by continuing
pressure on margins, loss reserves for the receivables
of the Commercial Vehicles portfolio and residual value
losses of Chrysler Group vehicles. These negative
effects were offset by the use of more favorable
refinancing instruments, benefits from asset/liability
management and savings which were realized due
to cost reduction measures initiated within the Services
segment.
Operating profit of the Other Activities segment influ-
enced by EADS and Mitsubishi Motors. At the beginning
of 2001, the Aerospace segment, which consisted of
the equity method investment in EADS and the fully
consolidated MTU Aero Engines business unit, was
reclassified to the Other Activities segment. The previ-
ous year’s figures have been adjusted accordingly. This
segment also includes our equity method investments
in Mitsubishi Motors and TEMIC, as well as holding
and finance companies, real-estate activities and the
Group’s corporate research. The Rail Systems business
unit was included in the segment until its disposition
to Bombardier.
Adjusted to exclude one-time effects, the 2001
operating loss amounted to €2.2 billion (2000: €0.5
billion operating profit). The decline mainly resulted
from lower factory unit sales, an unfavorable shift in
product mix, increased sales incentives, and higher
customer satisfaction, depreciation and amortization
costs. The decrease in unit sales, higher sales incentives
and decline in market share were mainly attributable
to intense competitive pressures in the North American
market. This situation particularly affected two of
Chrysler Group’s historically more profitable market
segments of upper-middle sport utility vehicles and
pick-up trucks. The deterioration in operating results
was partially offset by cost reduction initiatives and
other actions taken as part of the turnaround plan.
Improvements resulting from higher vehicle pricing
were more than offset by the higher sales incentives.
Operating profit of Commercial Vehicles impacted by
North American market. In 2001, the Commercial Ve-
hicles segment posted an operating loss of €0.5 billion,
compared with an operating profit of €1.2 billion in the
prior year. The operating loss in 2001 includes one-time
charges of €0.5 billion at the Freightliner, Sterling and
Thomas Built Buses business unit relating to the initia-
tion of the turnaround plan and special costs associated
with unforeseen market developments. In addition, the
operating loss includes charges of €0.1 billion mainly
relating to the depreciation of the Argentine peso
against the U.S. dollar as a result of the economic crisis
in Argentina and allocated charges from the Group’s
e-business activities. In the prior year, the segment’s
operating profit was impacted by expenses relating to
the initial application of the end-of-life vehicle directive
passed by the European Union.
Adjusted for these one-time effects, the segment’s
operating profit was slightly positive (€0.1 billion),
compared to an operating profit of €1.3 billion in 2000.
This decline in operating profit was primarily caused
by the sharp contraction of the market for commercial
vehicles in North America, which led to significant
price reductions for new and used vehicles and to a 34%
decline in unit sales for the Freightliner, Sterling and
Thomas Built Buses business unit.
Further factors negatively impacting earnings
were the drop in vehicle demand due to the economic
crises in Argentina and Turkey and the lower demand
for trucks in Western Europe.