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Moving People
Annual Report 2003

Table of contents

  • Page 1
    Moving People Annual Report 2003

  • Page 2
    Key Figures DaimlerChrysler Group Amounts in millions 2003 US $ 1 2003 â,¬ 2002 â,¬ 2001 â,¬ 03/02 Change in % Revenues European Union of which: Germany North America of which: USA Other markets Employees (at year-end) Investments in property, plant and equipment Research and development ...

  • Page 3
    Divisions Mercedes Car Group 2003 Amounts in millions US $ 2003 â,¬ Percentage of Sales 2002 â,¬ 03/02 Change in % 9% S-Class/SL/Maybach 25% E-Class Operating profit Revenues Investments in property, plant and equipment Research and development expenditure Unit sales Employees (Dec. 31) 3,938 ...

  • Page 4
    Our Automotive Brands at a glance Mercedes Car Group Chrysler Group Commercial Vehicles Division Alliance Partners Strategic Partner

  • Page 5
    ... ranges from small cars to sports cars and luxury sedans; and from versatile vans to heavy duty trucks or comfortable coaches. We are extremely well positioned worldwide with our strong passenger-car and commercial-vehicle brands, and have products in nearly every market and market segment. We aim...

  • Page 6
    Contents Essentials Moving People Divisions Cross-divisional Functions Corporate Governance Financial Reporting Additional Information Contents | Essentials | Moving People | Divisions | Cross-divisional Functions | Corporate Governance | Financial Reporting | Additional Information

  • Page 7
    ... Shares DaimlerChrysler Worldwide 46 50 54 Mercedes Car Group Chrysler Group Commercial Vehicles Substainability and Social Responsibility Research and Technology Alternative Drive Systems and Fuels Members of the Supervisory Board Report of the Supervisory Board Corporate Governance...

  • Page 8
    ... Group returned to profit in the third and fourth quarters, and came very close to its full-year goal of breaking even from ongoing business. The other divisions achieved very good results in 2003: - The Mercedes Car Group reported record earnings for the sixth time in a row. Mercedes-Benz generally...

  • Page 9
    ...your company became even stronger: both net liquidity and the equity ratio increased. With an operating profit at Group level of â,¬5.1 billion, excluding the effects from restructuring the Chrysler Group and from the sale of MTU Aero Engines, we achieved the goal we set ourselves for the year. This...

  • Page 10
    ... Mercedes-Benz C-Class and E-Class sedans in China. Furthermore, we plan far-reaching activities for commercial vehicles and financial services in that country. Ours is a holistic approach to business: - With activities in about 200 countries; - With products ranging from small cars to 40-ton trucks...

  • Page 11
    ... in our share price. Ladies and gentlemen, I would like to invite you to read the following pages for a detailed account of DaimlerChrysler's business developments in 2003. Our Annual Report also aims to update you on efforts directed at sustainability, as well as our environmental initiatives and...

  • Page 12
    ... Fleig (55) Human Resources & Labor Relations Director Appointed until 09/2009 Manfred Gentz (62) Finance & Controlling Appointed until 12/2004 Rüdiger Grube (52) Corporate Development Appointed until 09/2007 Bodo Uebber (44) Services Deputy Member of the Board of Management Appointed until 12...

  • Page 13
    ... Chief Operating Officer Chrysler Group Appointed until 09/2007 Manfred Bischoff (61) Aerospace & Industrial Businesses Retired from the Board of Management on December 16, 2003 Eckhard Cordes (53) Commercial Vehicles Appointed until 12/2008 Jürgen Hubbert (64) Mercedes Car Group Appointed until...

  • Page 14
    ...market environment (2002: â,¬6.9 billion). This result included restructuring expenditures related to the turnaround plan at Chrysler Group totaling â,¬469 million. Group operating profit in 2003 also included a positive special effect of â,¬1.0 billion from the sale of the MTU Aero Engines business...

  • Page 15
    ... profit, net income and earnings per share. In order to ensure comparability, a reference is made to the one-time effects included in the prior year's figures. DaimlerChrysler is following the new rules adopted by the Securities and Exchange Commission (SEC), which apply to the 2003 financial year...

  • Page 16
    ... prior year, the number of employees increased slightly at Mercedes Car Group, Commercial Vehicles and Services , while the Chrysler Group's workforce decreased as a result of its restructuring activities. The sale and deconsolidation of the MTU Aero Engines business unit at the end of 2003 resulted...

  • Page 17
    ...-duty trucks (including the Mercedes-Benz Actros range) as well as engines and additional components for the Chinese market. Investments in Property, Plant and Equipment 2003 In millions US $ 2003 â,¬ 2002 â,¬ DaimlerChrysler Group Mercedes Car Group Chrysler Group Commercial Vehicles Services...

  • Page 18
    ... | Mercedes Car Group to renew and expand its product range with second model offensive | Chrysler Group to launch nine new models in 2004 | Commercial Vehicles division on track for solid growth | Increasing sales support through financial services | Total investments of â,¬38 billion by the end of...

  • Page 19
    .... We plan to selectively expand our activities in China and to continue strengthening our sales organizations in Asian markets. Chrysler Group to launch numerous new products. The Chrysler Group expects that the US market for passenger cars and light trucks will continue to be extremely competitive...

  • Page 20
    ... expenditures at the Chrysler Group and excluding the gain from the sale of MTU Aero Engines). We anticipate significant improvements in earnings in the years 2005 and 2006, when the full effects are felt of both Mercedes Car Group's second model offensive and Chrysler Group's new products. In total...

  • Page 21
    ... 0.2 Research and Development Expenditure Plan 2004 In billions â,¬ 2004-2006 â,¬ DaimlerChrysler Group Mercedes Car Group Forward-Looking Statements in this Annual Report: This Annual Report contains forward-looking statements that reflect management's current views with respect to future events...

  • Page 22
    ... in Germany (2002: 1.5 billion). Investor relations activities. The Investor Relations department provided information on the Group in a timely manner to analysts, institutional investors, rating agencies and retail shareholders throughout the year. One of the most important events was the Annual...

  • Page 23
    The DaimlerChrysler Annual Meeting 2003 Share Price Index 140 130 120 110 100 90 80 70 Dec. 31 02 DaimlerChrysler Feb. 28 April 30 June 30 Aug. 30 DAX Oct. 31 Dec. 30 Development of Important Indices Status End of 2003 Status End of 2002 % Change Dow Jones Industrial Average Nasdaq Composite FTSE...

  • Page 24
    ...and financial services | NAFTA and Europe once again main sources of revenues | Increasing importance of Asia Europe Production locations Sales outlets Revenues in millions of â,¬ South America Production locations Sales outlets Revenues in millions of â,¬ Employees Employees Mercedes Car Group...

  • Page 25
    ...Sindelfingen Africa Production locations Sales outlets Revenues in millions of â,¬ Australia / Oceania Production locations Sales outlets Revenues in millions of â,¬ Employees Employees Mercedes Car Group Chrysler Group Commercial Vehicles Sales Organization Automotive Businesses Services Other...

  • Page 26
    Moving People Moving People | Mercedes-Benz Passenger Cars | smart | Maybach | Chrysler | Jeep® | Dodge | Mercedes-Benz Trucks | Setra | Freightliner | DaimlerChrysler Services

  • Page 27
    ...Benz Passenger Cars smart Maybach 30 32 34 Chrysler Jeep® Dodge 36 38 40 Mercedes-Benz Trucks Setra Freightliner 42 DaimlerChrysler Services The Mercedes-Benz E-Class station wagon at the Cap Antibes On the following pages you will experience the world of DaimlerChrysler from a very special...

  • Page 28
    "Love at first sight."

  • Page 29
    Mercedes-Benz Passenger Cars Mari and Samuli Törönen live on the Côte d' Azur and work for their family business. When they travel home to Finland the couple needs a lot of space for their suitcases and dogs. "Our parents love and drive Mercedes-Benz - it's a family tradition. And when I saw the...

  • Page 30
    ... Gran Canaria. Since buying their smart roadsters, they explore all the bends this sunny island has to offer. Every moment behind the wheel is an experience in itself. "If you want to feel it, you've got to drive it", says Lorena, laughs and jumps back into her light, puristic car. "Our breaks...

  • Page 31
    Time for a break. And then rock the road. Again and again. 26 | 27

  • Page 32
    "Rendezvous in Miami"

  • Page 33
    Maybach Six months out of the year, Michael Fux lives and works in Miami, the other half he's in New Jersey, where his company is located. He is always working and creating new ideas. His Maybach 57 offers him all the possibilities of a business jet on wheels. "Business and cars are the major joys ...

  • Page 34
    "Juniors on tour"

  • Page 35
    ... to be taken along if you are travelling with three boys, even just for a weekend trip. Emma and Ken Fleming love to travel in their Chrysler Pacifica - the boys watch cartoons, all toys are on board and five stars in safety give a family a feeling of security. Did we mention the design? Three boys...

  • Page 36
    "Outdoor games"

  • Page 37
    Jeep® Franco and Leslie are just married. For their free time they have found a perfect companion - the Jeep® Liberty. On weekends, they grab a tent and their backpacks, jump in their Jeep® Liberty and stop somewhere in ...

  • Page 38
    ... a Dodge Durango. And with the HEMI engine you get best-in-class horsepower. But these are not the only convincing features for Sandy and Al Short. They really live, breathe and - for more than 36-years - have driven Dodge products. For building their own restaurant in Rancho Cucamango, California...

  • Page 39
    Big size. Smooth ride. And HEMI Power. 34 | 35

  • Page 40
    "Always on time"

  • Page 41
    Mercedes-Benz Commercial Vehicles The new Mercedes-Benz Actros has all the benefits of the popular Actros model series, as well as a number of new features that increase efficiency and improve transport performance even further. These features are also appreciated at the Fercam Logistics & Transport...

  • Page 42
    ..., buses in Spain are used less for weekend or study travel than as the basic form of public transportation. Many passengers know and value the yellow Setra buses of Continental Auto in Madrid, the largest private bus operator in Spain. Santos Fernandes from Continental is proud to say that he has...

  • Page 43
    Contented faces. Faithful customers. Welcome on board. 38 | 39

  • Page 44
    "Own the road"

  • Page 45
    Fr eightliner North America rides more miles with Freightliner Trucks than anyone else in the industry. Craig Smith is an owner-operator. His first truck was a Freightliner. That's 25 years ago. With his Coronado, Freightliner's newest truck, he hits the road: about 150.000 miles a year, delivering ...

  • Page 46
    "Love Chrysler"

  • Page 47
    ... And she is a successful entrepreneur. Monica is a Chrysler dealer in Corpus Christi, Texas and for her customers she is always looking for the best tailor-made financing solutions: she is working with DaimlerChrysler Services. Best financial solutions. Happy customers. Successful dealers. 42 | 43

  • Page 48
    Divisions Divisions | Mercedes Car Group | Chrysler Group | Commercial Vehicles | Executive Automotive Committee | Services | Other Activities

  • Page 49
    46 50 54 Mercedes Car Group Chrysler Group Commercial Vehicles 58 60 62 Executive Automotive Committee Services Other Activities The Mercedes-Benz E-Class station wagon in Antibes, France 44 | 45

  • Page 50
    ... wide range of attractive models, the Mercedes-Benz brand was able to generally stengthen its market position and remains the world's most successful premium brand. Divisions | Mercedes Car Group | Chrysler Group | Commercial Vehicles | Executive Automotive Committee | Services | Other Activities

  • Page 51
    ...the new series, thus strengthening the Mercedes-Benz brand's presence in this market segment. We are also investing US $ 600 million to expand the Tuscaloosa production site. Ten years after the decision to build the Tuscaloosa production site, the company will double both the number of employees at...

  • Page 52
    ... high resale value. According to EurotaxSchwacke, which monitors pre-owned automobile prices in Germany, the smart city coupe retains 74% of its original value after two years. Divisions | Mercedes Car Group | Chrysler Group | Commercial Vehicles | Executive Automotive Committee | Services | Other...

  • Page 53
    ... product offensive, the name logic begun with the new four-seater was passed on to the city-coupé and the cabrio of the smart brand. Since January 1, 2004, these models have the new names, smart fortwo coupé and smart fortwo cabrio. Passenger Car Sales 20031 1,000 units 03/02 in % Mercedes-Benz...

  • Page 54
    ... to reduce costs, even exceeding the additional mid-year target of US $1 billion incremental savings, did not offset the losses from falling unit sales and higher incentives. Worldwide in 2003, the Chrysler Group sold 2.64 million passenger cars, minivans, sport-utility vehicles and light trucks of...

  • Page 55
    ... in terms of product design and engineering. Unit sales of the Pacifica in the US market increased every month throughout the year after its launch in March 2003, reaching total sales of 56,700 vehicles by the end of the year. Assembled in Germany by our partner, Karmann, the new Chrysler Crossfire...

  • Page 56
    ...strong start in the market and has already received three awards including the "Truck of the Year". The new Durango is manufactured at the Newark, Delaware, assembly plant, in which the Chrysler Group has invested approximately US $180 million. Through flexible manufacturing processes and by reusing...

  • Page 57
    ...-engine Chrysler ME FourTwelve super car is the most advanced Chrysler ever built, and a brilliant example of the Chrysler Group's capabilities. Taking less than one year to complete from start to finish, the Chrysler Group partnered with some of the best in the business to assist in its development...

  • Page 58
    ... and production efficiency was increased. Moreover, in the context of further developing our business model we improved sales activities and increased our market penetration. Divisions | Mercedes Car Group | Chrysler Group | Commercial Vehicles | Executive Automotive Committee | Services | Other...

  • Page 59
    ... and Mercedes-Benz components in Freightliner and Sterling vehicles. To benefit from additional economies of scale, in 2003 we decided to develop a new engine family for heavy-duty trucks to replace the four different engine series currently in use. The new generation of engines is scheduled to...

  • Page 60
    ...-month time lag. Business developed very positive in Japan during 2003, partially because new exhaust-emission regulations for trucks in metropolitan areas caused companies to bring forward planned vehicle purchases. Divisions | Mercedes Car Group | Chrysler Group | Commercial Vehicles | Executive...

  • Page 61
    ...plants in North America. The Mercedes-Benz Vans, DaimlerChrysler Buses and Coaches and DaimlerChrysler Off-Highway business units will be unaffected by these changes. In future, the Group's truck business will be managed and coordinated worldwide by a newly formed Truck Executive Committee. The new...

  • Page 62
    .... Last year, in connection with the commodity strategy, the procurement and development departments identified further parts and components which have the potential to be standardized. Divisions | Mercedes Car Group | Chrysler Group | Commercial Vehicles | Executive Automotive Committee | Services...

  • Page 63
    ...vehicles and financial services. Organization of the Executive Automotive Committee Board of Management Decisions Executive Automotive Committee Preparations Chairmen: Schrempp, Hubbert Mercedes Car Group Hubbert Chrysler Group Zetsche Commercial Vehicles Cordes Corporate Development Grube Alliance...

  • Page 64
    .... Financial services support vehicle sales. Despite the difficult market environment, the Services division leased out or financed 1.9 million vehicles in 2003. The company's broad range of financial services supported the sales activities of the Mercedes Car Group, Chrysler Group and Commercial...

  • Page 65
    ... the end of 2002. In close cooperation with fleet sales departments of the automotive divisions, DaimlerChrysler Services Fleet Management signed new contracts in Germany, France, Italy and the United Kingdom for 120,000 vehicles, thus further extending our business in the European market. Stronger...

  • Page 66
    ... to the negative contribution to earnings from Mitsubishi Motors Corporation and a lower contribution from EADS for the period of October 2002 through September 2003. Divisions | Mercedes Car Group | Chrysler Group | Commercial Vehicles | Executive Automotive Committee | Services | Other Activities

  • Page 67
    ... the first nine months of the year 2003, the company's revenues, which are determined in accordance with International Financial Reporting Standards (IFRS), amounted to â,¬18.5 billion, 7% lower than the prior-year figure. The decrease was mainly caused by lower deliveries of Airbus aircraft during...

  • Page 68
    ... year by 6%. Revenues in April through December 2003 fell slightly by 4% to Â¥1,832 billion (â,¬13.9 billion). This was mainly due to developments in North America, where revenues fell by 35% as a result of intense competition, a tightening of credit approval terms in the financial services business...

  • Page 69
    ... the NedCar assembly plant in the Netherlands. Within the alliance with DaimlerChrysler, MMC will also re-enter the North American market with Mitsubishi pickup trucks in the year 2005. MMC, Chrysler Group and Hyundai Motor Company are working together on the joint development and production of the...

  • Page 70
    ... natural resources in a way that people's current needs are fulfilled without imposing limitations on the life-style of future generations. Environmental compatibility, social responsibility, politics and success in business must not be mutually exclusive. In fact they need to be closely coordinated...

  • Page 71
    ... finite resources. Worldwide cooperation of businesses. The World Business Council for Sustainable Development (WBCSD) is an association of around 170 companies from over 35 countries and 20 industrial sectors that seeks to secure the sustainability of economic development. One of the Council's main...

  • Page 72
    .... On December 31, 2003, 2,900 men and women were employed in Corporate Research (2002: 2,600), with a further 23,800 (2002: 24,900) working in the development departments of Mercedes Car Group, Chrysler Group and the Commercial Vehicles division. DaimlerChrysler's main research work is done in the...

  • Page 73
    ...steering-wheel angle and the vehicle's speed. If a critical level is reached or exceeded, the system intervenes and stabilizes the vehicles by putting on the brakes and/or reducing the flow of fuel to the engine. Ths system was first used by Evo-Bus and is available on the market. With its CARE-SAFE...

  • Page 74
    ... drive vehicles to customers for practical testing. Among these vehicles are 30 Mercedes-Benz Citaro buses that are being tested in ten major European cities. The fuelcell bus Citaro won the "Environmental Leadership Award" of DaimlerChrysler in the category product related environmental protection...

  • Page 75
    ... is therefore working on new drive technologies that fully exploit their advantages. Since the early 1990s, we have developed and tested hybrids that cover the entire automotive range, from passengers cars and vans to trucks and buses. Our latest research vehicle, the Mercedes-Benz F 500 Mind...

  • Page 76
    ...) ten years ago. As a result of the positive experience gained by Mercedes-Benz sales-and-services centers and dealerships with MeRSY, it was later adopted by the smart, Chrysler and Jeep® brands. The sorting, collection and recycling of waste now covers over 30 different materials. In 2003, more...

  • Page 77
    ... the scientific and business communities, environmental organizations and the media came together to develop new ideas and initiate new global projects. At this event, the European Natural Heritage Fund (EURONATUR) and the Bellagio Forum for Sustainable Development presented DaimlerChrysler with the...

  • Page 78
    ... in 2003, 47% was sourced in Germany, 8% in other member states of the European Union and 41% in North America. Supplier portal for global communication with suppliers. A number of measures, including the expansion of the Internet-based supplier portal, enabled us to broaden the international reach...

  • Page 79
    ...that have provided goods and services worth a total of at least â,¬1 million to Chrysler Group, Mercedes Car Group or Commercial Vehicles Division over the past year are eligible. Awards are presented to suppliers in the following commodity groups: chassis, electrical, exterior, interior, powertrain...

  • Page 80
    ... and working hours, and were drawn up in close cooperation with our World Employee Committee. These standards accord with the principles of the Global Compact initiative. As part of the Workplace Initiative on HIV/AIDS, we provide comprehensive medical care to our employees in South Africa who are...

  • Page 81
    ...on a global tour from 2003 to 2006. Called "80 artists from more than 60 years", the exhibition will be shown at major museums and art galleries in Germany, the United States, South Africa and Asia. The exhibition will be supported by a range of programs designed to make works of art more accessible...

  • Page 82
    ... to the acquisition of dealerships as part of the Metropolitan Strategy. However, the number of Chrysler Group employees fell by 3% as a result of efficiency-boosting measures. Due to the sale of the MTU Aero Engines business unit, announced in November 2003, the total workforce decreased by about...

  • Page 83
    ... company benefits. In view of the demographic development of the DaimlerChrysler workforce, we once again stepped up our health-management activities in 2003. For example, the various preventive programs offered by the plant medical services and Group sports facilities were extended, and plans...

  • Page 84
    Corporate Governance Corporate Governance | Supervisory Board | Report of the Supervisory Board | Corporate Governance at DaimlerChrysler

  • Page 85
    ... have been practiced at our company for many years. Due in particular to the fact that DaimlerChrysler is a company with its roots in Germany and the United States, the Board of Management and the Supervisory Board aim to make DaimlerChrysler's corporate governance system more international and...

  • Page 86
    ... Services and Mobility Concept, DaimlerChrysler AG (retired April 9, 2003) Peter Schönfelder 1 Augsburg Chairman of the Works Council, Augsburg Plant, EADS Deutschland GmbH (retired April 9, 2003) G. Richard Thoman New York Former President and Chief Executive Officer of Xerox Corporation; Managing...

  • Page 87
    ... procedures for dealing with complaints and criticism with regard to accounting, the internal monitoring systems and the annual audit, as well as for obtaining confidential and anonymous information from DaimlerChrysler employees with regard to accounting and financial statements. 82 | 83

  • Page 88
    ... informed by the Board of Management as regards the situation of the Group, particularly its business and financial developments, investment plans, questions of fundamental business policy and strategy and personnel requirements. The Board of Management presented the Group's key performance figures...

  • Page 89
    ... become a full member of the Board and assume the duties of the development area at Mercedes Car Group in addition to his present responsibility for Research & Development. Mr. Weber's term of office remains unchanged. Jürgen Hubbert will assume responsibility for the Executive Automotive Committee...

  • Page 90
    ... particularly the Stock Corporation Law, the Codetermination Law, and legislation concerning capital markets, and also from the Articles of Incorporation of DaimlerChrysler AG. As our shares are listed on stock exchanges outside Germany, and in particular on the New York Stock Exchange, we also have...

  • Page 91
    ... 2003, the Supervisory Board approved a Code of Ethics for DaimlerChrysler AG. This code addresses the members of the Board of Management and a larger number of senior officers who have a significant influence on planning and reporting in the context of the year-end and interim financial statements...

  • Page 92
    ... shares. For example, the members of the Board of Management had to use a part of their variable compensation paid for the year 2003 to purchase shares in the company. Compensation of the Supervisory Board. The Articles of Incorporation of DaimlerChrysler AG currently stipulate that the members...

  • Page 93
    ... of third-party companies' details is to be limited solely to non-consolidated companies, such details are presented as supplementary information for the first time in this Annual Report (see page 172 f). Deviations from the Suggestions of the German Corporate Governance Code. 1. Broadcast of the...

  • Page 94
    ... Plan for the Chrysler Group Financial Income (Expense), net Income Taxes Discontinued Operations Cumulative Effects of Changes in Accounting Principles Financial Reporting | Overview | Analysis of the Financial Situation | Statement by the Board of Management | Independent Auditors' Report...

  • Page 95
    ...and Commercial Commitments Information About Financial Instruments and Derivatives Retained Interests in Sold Receivables and Sales of Finance Receivables Segment Reporting Earnings (Loss) per Share Related Party Transactions Compensation and share ownership of the members of the Board of Management...

  • Page 96
    ... in 2002 | Mercedes Car Group surpasses high prior-year earnings | Earnings of Chrysler Group affected by difficult market conditions and ongoing restructuring activities | Operative income significantly improved at Commercial Vehicles and Services | Sale of the business unit MTU Aero Engines led to...

  • Page 97
    ... reductions and productivity. Worldwide in 2003, Chrysler Group sold 2,637,900 vehicles compared with 2,822,700 vehicles in the prior year. In 2003, Chrysler Group and Services agreed to adjusted rates charged on subsidized financing programs due to increasingly competitive financing options as well...

  • Page 98
    .... In both years, gains from the sale of businesses were included in operating profit. As of December 31, 2003, DaimlerChrysler sold the MTU Aero Engines Group to the financial investor, Kohlberg Kravis Roberts & Co. Ltd. In this connection, United Technologies Corporation, parent company of Pratt...

  • Page 99
    ... 7,163 5,686 6,854 2003 In millions US $ 2003 â,¬ 2002 â,¬ (1,096) (870) 257 Revenues Cost of sales Gross margin Selling, administrative and other expenses Research and development Other income Turnaround plan expenses - Chrysler Group Income (loss) before financial Income Impairment of...

  • Page 100
    ... financial income DaimlerChrysler Group Mercedes Car Group In millions of â,¬ Chrysler Group Commercial Vehicles Services Other Activities Total Segments Eliminations 2003 Operating profit (loss) Pension and postretirement benefit (expenses) income, other than current and prior service costs...

  • Page 101
    ... levels. At Group level, economic value added is calculated by subtracting the weighted average cost of capital from net operating income, an after-tax figure oriented towards the capital markets. In the calculation of return on net assets (RONA) as the corporate profitability ratio, net operating...

  • Page 102
    ...Assets 2003 2002 2003 2002 (annual average, in billions of â,¬) Net Assets % % Return on Net Assets DaimlerChrysler Group, (after taxes) Industrial business, (before interest and taxes) Mercedes Car Group Chrysler Group Commercial Vehicles Services 1 Other Industrial Activities 2 Financial Services...

  • Page 103
    ... from financial services increased by 12%. Due to exchange rate effects, the sale of receivables (asset backed securities, ABS) in 2003 was slightly lower than in 2002. Overall, the leasing and sales financing business accounted for â,¬77.0 billion, i.e. 43%, of total assets. The decrease in...

  • Page 104
    ... States. The current year was also negatively effected from income taxes paid. In the prior year there were net tax rebates, particularly in North America. The shift from operating lease agreements to sales financing agreements in our financial services business caused an additional decrease of the...

  • Page 105
    ..., usually in terms of their effect on operating profit. Local accountability is particularly important. The communication and reporting of relevant risks is controlled by value limits set by management. The responsible persons have also the task of developing, and initiating as required, measures...

  • Page 106
    ... risks relating to information technology, play a less important role. DaimlerChrysler's services business consists mainly of providing financing and leasing for the Group's products, insurance policies and other services in the fields of fleet management and telematics. The segment's international...

  • Page 107
    ... exchange rate, interest rate and equity price information. The Group does not use financial instruments for speculative purposes. Following organizational standards in the international banking industry, DaimlerChrysler maintains risk management control systems independent of Corporate Treasury...

  • Page 108
    ... and period-end value-at-risk of our portfolio of interest rate sensitive financial instruments decreased, primarily due to less volatile interest rates and a reduced mismatch in terms of interest rate maturities between both the receivables from the Group's leasing and sales financing business and...

  • Page 109
    ... we violated EC competition rules by impeding cross-border sales of Mercedes-Benz passenger cars to final customers in the European Economic Area. In October 2001, the European Commission found that we infringed EC competition rules and imposed a fine of approximately â,¬72 million. DaimlerChrysler...

  • Page 110
    ...and engaged in the assembly and sale of heavy duty trucks, to MAN AG and MAN Nutzfahrzeuge AG for CAD195 million. In September 2002, MAN filed a claim against Freightliner Ltd. (formerly Western Star) with the London Commercial Court for breach of representations and warranties in the share purchase...

  • Page 111
    ... Ministry of Transport, Building and Housing within a time period of two months following the receipt of the notification of termination of the operating agreement. A contract termination could have a substantial negative impact on the Group's operating results and financial condition. 106 | 107

  • Page 112
    ...' equity for each of the financial years 2003, 2002 and 2001) were prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP). In order to comply with Section 292a of the HGB (German Commercial Code), the consolidated financial statements were...

  • Page 113
    ...years in the three-year period ended December 31, 2003, in conformity with generally accepted accounting principles in the United States of America. As described in Note 1 to the consolidated financial statements, DaimlerChrysler changed its method of accounting for stock-based compensation in 2003...

  • Page 114
    ...) 2003 (Note 1) $ 2003 â,¬ Revenues Cost of sales Gross margin Selling, administrative and other expenses Research and development Other income (therein gain on issuance of related company stock of â,¬24 in 2003) Turnaround plan expenses - Chrysler Group Income (expense) before financial income...

  • Page 115
    ... 318 - - - 318 Revenues Cost of sales Gross margin Selling, administrative and other expenses Research and development Other income (therein gain on issuance of related company stock of â,¬24 in 2003) Turnaround plan expenses - Chrysler Group Income (expense) before financial income Impairment of...

  • Page 116
    ... Additional information about the Industrial Business and Financial Services is not required under U.S. GAAP and is unaudited. The accompanying notes are an integral part of these Consolidated Financial Statements. Financial Reporting | Overview | Analysis of the Financial Situation | Statement by...

  • Page 117
    ... translation adjustment Availablefor-sale securities Derivative financial instruments Minimum pension liability Treasure stock Total Balance at January 1, 2001 Net loss Other comprehensive income (loss) Total comprehensive loss Stock based compensation Purchase of capital stock Re-issuance of...

  • Page 118
    ... leases Depreciation and amortization of fixed assets Change in deferred taxes Equity (income) loss from associated companies Change in financial instruments (Gains) losses on disposals of fixed assets/securities Change in trading securities Change in accrued liabilities Turnaround plan expenses...

  • Page 119
    ... (maturing within 3 months) Net increase (decrease) in cash and cash equivalents (maturing within 3 months) Cash and cash equivalents (maturing within 3 months) At beginning of period At end of period 1 Additional information about the Industrial Business and Financial Services is not required...

  • Page 120
    ... affiliated companies Investments in associated companies Investments in related companies Loans to associated and related companies Long-term securities Other loans Investments and long-term financial assets Equipment on operating leases 1 Currency translation changes with period end rates. 3,498...

  • Page 121
    ... Property, plant and equipment Investments in affiliated companies Loans to affiliated companies Investments in associated companies Investments in related companies Loans to associated and related companies Long-term securities Other loans Investments and long-term financial assets Equipment...

  • Page 122
    ... or financial services business activities. Transactions between the Group's industrial and financial services business activities principally represent intercompany sales of products, intercompany borrowings and related interest, and other support under special vehicle financing programs. The...

  • Page 123
    ... and handling costs are recorded as cost of sales in the period incurred. DaimlerChrysler uses price discounts (primarily at the Chrysler Group) to adjust market pricing in response to a number of market and product factors, including: pricing actions and incentives offered by competitors, economic...

  • Page 124
    ... 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. Because portions of the products sold and warranted by the Group contain parts...

  • Page 125
    ... is determined based on the expected long-term rate of return on plan assets and the fair value or market-related value of plan assets. Amortization of an unrecognized net gain or loss is included as a component of the Group's net periodic benefit plan cost for a year if, as of the beginning of the...

  • Page 126
    ...machinery, equipment and tooling of â,¬324 million (â,¬206 million, net of taxes, or â,¬0.20 per diluted share) for the year ended December 31, 2002. Leasing. Leasing includes all arrangements that transfer the right to use specified property, plant or equipment for a stated period of time, even if...

  • Page 127
    ... obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. Deposits from Direct Banking Business. Demand deposit accounts are classified as financial liabilities. Interest paid...

  • Page 128
    ... per share if the fair value based method had been applied to all outstanding and unvested awards in each period. Year ended December 31, 2001 2002 2003 (in millions of â,¬) Net income (loss) Add: Stock-based employee compensation expense included in reported net income, net of related tax effects...

  • Page 129
    ...fiscal years ending after December 15, 2003 (see Note 20). In December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 03-3, "Accounting for Certain Loans or Debt Securities Acquired in a Transfer." SOP...

  • Page 130
    ... equity securities to third party investors. The variable interest entities used the debt and equity proceeds to purchase property and equipment, which is leased by the Group and used in the normal course of business. At the end of the lease term, DaimlerChrysler generally has the option to purchase...

  • Page 131
    ...value, based on the quoted market price, which approximated â,¬3.5 billion at September 30, 2003 (see Note 8). The impairment charge is included in the Group's consolidated statement of income (loss) in the line item "financial income (expense), net" in 2003. As a result of the impairment a new cost...

  • Page 132
    ... On December 31, 2003, as part of the Group's ongoing strategy to focus on its core automotive business, DaimlerChrysler sold its 100% equity interest in MTU Aero Engines GmbH ("MTU Aero Engines") to Kohlberg, Kravis and Roberts & Co. Ltd. ("KKR"), an investment company. The purchase price for the...

  • Page 133
    ... in financial income (expense), net, of the Mercedes Car Group segment. Prior to the sale, DaimlerChrysler accounted for CTS Fahrzeug-Dachsysteme GmbH using the cost method. On January 6, 2003, MMC spun off its "Fuso Truck and Bus" division, creating Mitsubishi Fuso Truck and Bus Corporation ("MFTBC...

  • Page 134
    ... been accounted for using the equity method, for â,¬215 million in cash. The sale resulted in a pretax gain of â,¬128 million that is included in financial income (expense), net, of the Other Activities segment. In August 2000, as part of the Group's strategy to focus on its core automotive business...

  • Page 135
    ...Supervisory Board approved a multi-year turnaround plan for the Chrysler Group in February 2001. The related charges are presented as a separate line item on the accompanying consolidated statements of income (loss) and are not reflected in cost of sales or selling, administrative and other expenses...

  • Page 136
    ...the following: Year ended December 31, 2001 2002 2003 (in millions of â,¬) Gains of sales of property, plant and equipment Rental income, other than relating to financial services Gains on sales of companies Income from employee leasing programs Reimbursement of contract costs Government subsidies...

  • Page 137
    ... facilities. Additionally, the Chrysler Group has or is in the process of idling, closing or disposing of certain manufacturing plants. The net charges recorded for the plan in the year ended December 31, 2001 were â,¬3,064 million (â,¬1,934 million net of taxes) and are presented as a separate line...

  • Page 138
    ... for two years. In addition, the Chrysler Group sold the Graz, Austria plant to Magna International Inc. on July 12, 2002. The exit costs of these two plant sales were previously provided for in the Turnaround Plan charges. In January 2003, DaimlerChrysler Corporation contributed its New Castle...

  • Page 139
    ... on federal corporate taxes payable plus the after federal tax benefit rate for trade taxes of 11.842% (2002 and 2001: 12.125%) for a combined statutory rate of 39.8% in 2003 (2002 and 2001: 38.5%) is as follows: Year ended December 31, 2001 2002 2003 (in millions of â,¬) Current taxes Germany Non...

  • Page 140
    ...2002: â,¬1,788 million). The corporate tax NOLs mainly relate to losses of U.S. companies and are partly limited in their use to the Group. Of the total, corporate tax NOLs amounting to â,¬126 million expire at various dates from 2005 through 2013, â,¬2,524 million expire in the year 2023 and â,¬341...

  • Page 141
    ... gain on sale are reported as discontinued operations and the Group's consolidated financial statements for all prior periods have been adjusted to reflect this presentation. However, the operating profit of MTU Aero Engines is included in the Other Activities segment operating profit in 2003, 2002...

  • Page 142
    ... value of goodwill, excluding investor level goodwill, allocated to the Group's reportable segments are: Mercedes Car Group â,¬160 million (2002: â,¬104 million), Chrysler Group â,¬969 million (2002: â,¬1,165 million), Commercial Vehicles â,¬588 million (2002: â,¬696 million), Services â,¬62 million...

  • Page 143
    ... At December 31, 2003 2002 (in millions of â,¬) Raw materials and manufacturing supplies Work-in-process Finished goods, parts and products held for resale Advance payments to suppliers Less: Advance payments received thereof relating to long-term contracts and programs in process â,¬70 (2002...

  • Page 144
    ... than one year (2002: â,¬110 million). Changes in the allowance for doubtful accounts for trade receivables were as follows: Year ended December 31, 2002 2001 Sales financing and finance lease receivables consist of retail installment sales contracts secured by automobiles and commercial vehicles...

  • Page 145
    ... as follows: Cost (in millions of â,¬) Fair value At December 31, 2003 Unrealized Unrealized Gain Loss Cost Fair value At December 31, 2002 Unrealized Unrealized Gain Loss Available-for-sale Trading Short-term securities Long-term securities Investments with quoted market price 3,107 122...

  • Page 146
    ... an employee share purchase plan, of which 1.3 million (2002: 1.1 million; 2001: 1.2 million) were re-issued to employees. The remaining 0.2 million in 2001 were resold in the market. Authorized and Conditional Capital. On April 9, 2003, the annual meeting authorized the Board of Management through...

  • Page 147
    ... (loss) are as follows: Pretax (in millions of â,¬) Tax effect Year ended December 31, 2003 Net Pretax Tax effect Year ended December 31, 2002 Net Pretax Tax effect Year ended December 31, 2001 Net Unrealized gains (losses) on securities (incl. retained interests): Unrealized holding gains...

  • Page 148
    ... the original option and the fair value of the Group's stock at the exercise date rather than receiving DaimlerChrysler Ordinary Shares. Financial Reporting | Overview | Analysis of the Financial Situation | Statement by the Board of Management | Independent Auditors' Report | Financial Statements

  • Page 149
    ...the merger between Daimler-Benz and Chrysler in 1998, the Group implemented a SAR plan through which 22.3 million SARs were issued at an exercise price of $75.56 each, of which 15.0 million SARs are outstanding and exercisable at year-end 2003. The initial grant of SARs replaced Chrysler fixed stock...

  • Page 150
    ... of corporate goals derived from competitive and internal planning benchmarks and the value of DaimlerChrysler Ordinary Shares at the end of three year performance periods. The benchmarks are return on net assets and return on sales. The Group issued 1.3 million medium term incentives in 2003 (2002...

  • Page 151
    ... at end of year Change in plan assets: Fair value of plan assets at beginning of year Foreign currency exchange rate changes Actual return on plan assets Employer contributions Plan participant contributions Dispositions Acquisitions and other Benefits paid Fair value of plan assets at end of year...

  • Page 152
    ...: At December 31, 2003 NonGerman German Plans Plans (in millions of â,¬) At December 31, 2002 NonGerman German Plans Plans Funded status Amounts not recognized: Unrecognized actuarial net losses Unrecognized prior service cost Unrecognized net obligation at date of initial application Net liability...

  • Page 153
    ... on surveys of large asset portfolio managers and peer group companies of future return expectations over the next ten years. Accordingly, negative returns during a one or two year period may not significantly change the historical long term rate of return such as to necessitate or warrant revision...

  • Page 154
    ...income (loss) of â,¬10,022 million and â,¬1,436 million for the years ended December 31, respectively. Funded Status. The following information is presented with respect to the Group's postretirement benefit plans: At December 31, 2003 2002 (in millions of â,¬) Change in accumulated postretirement...

  • Page 155
    ...the Group's postretirement benefit plans for the years ended December 31 were as follows (in %): 2003 Average assumptions: 2002 2001 Unrecognized prior service cost Net periodic postretirement benefit cost Settlement/curtailment loss Net postretirement benefit cost Discount rate Expected return on...

  • Page 156
    ... in 2003 for products sold in 2003. The Group also offers customers the opportunity to purchase separately priced extended warranty and maintenance contracts. The revenue from these contracts is deferred at the inception of the contract and recognized into income over the contract period in...

  • Page 157
    ... 1,100 employees. Short-term: Notes/Bonds Commercial paper Liabilities to financial institutions Liabilities to affiliated companies Deposits from direct banking business Loans, other financial liabilities Liabilities from capital lease and residual value guarantees Short-term financial liabilities...

  • Page 158
    ... 31, 2003, the Group had unused short-term credit lines of â,¬10,700 million (2002: â,¬11,026 million) and unused longterm credit lines of â,¬10,441 million (2002: â,¬10,597 million). The credit lines include an $18 billion revolving credit facility with a syndicate of international banks. The...

  • Page 159
    ... Court for the District of New Jersey against DaimlerChrysler's subsidiary Mercedes-Benz USA, LLC ("MBUSA"), and its wholly-owned subsidiary Mercedes-Benz Manhattan, Inc. The Department of Justice advised those companies in the third quarter of 2003 that it had closed the investigation and will take...

  • Page 160
    ... Group violated EC competition rules by impeding cross-border sales of Mercedes-Benz passenger cars to final customers in the European Economic Area. In October 2001, the European Commission found that DaimlerChrysler infringed EC competition rules and imposed a fine of approximately â,¬72 million...

  • Page 161
    ... Barclays National Bank Ltd., Civ. A. No. 02-5952 (E.D.N.Y.) in the United States District Court for the Eastern District of New York against 22 American, European, and Japanese companies, including DaimlerChrysler AG and Daimler-Benz Industrie. The lawsuit purports to relate to the period from 1960...

  • Page 162
    ... Group guarantees specified trade-in values for assets or products sold to non-consolidated affiliated companies and third parties. Such guarantees provide the holder with the right to return purchased assets or products back to the Group in connection with a future purchase of products or services...

  • Page 163
    ... sells. The Group records a liability for product warranty, including the estimated cost of these service and recall actions, when the related sale is recognized based on historical experience as to product failures as well as current information on repair costs. The Group also enters into extended...

  • Page 164
    .... In addition to the above guarantees and warranties, in connection with certain production programs, the Group has committed to purchase various levels of outsourced manufactured parts and components over extended periods at market prices. The Group has also committed to purchase or invest in the...

  • Page 165
    ... Liabilities. The fair value of publicly traded debt was estimated using quoted market prices. The fair values of other long-term bonds were estimated by discounting future cash flows using market interest rates over the remaining term. The carrying amounts of commercial paper and borrowings under...

  • Page 166
    ... Services. In particular, the Group's leasing and sales financing business enters into transactions with customers, primarily resulting in fixed rate receivables. DaimlerChrysler's general policy is to match funding in terms of maturities and interest rates. However, for a limited portion...

  • Page 167
    ... sold Residual cash flow discount rate, annualized 1.5% 1.2% 12.0% (15) (50) (18) (31) (100) (37) The effect of a 10% and 20% adverse change in the discount rate used to compute the fair value of the retained subordinated securities would be a decrease of â,¬9 million and â,¬17 million...

  • Page 168
    ...of December 31, 2003. The fair value of net servicing liability at December 31, 2003 was â,¬18 million and was determined by discounting estimated cash flows at current market rates. To support the Group's asset-backed commercial paper program in North America, a group of financial institutions have...

  • Page 169
    ..., assembly and sale of vans, trucks, buses and Unimogs as well as related parts and accessories. The products are sold mainly under the brand names Mercedes-Benz, Setra and Freightliner. Services. The activities in this segment extend to the marketing of services related to financial services...

  • Page 170
    ... certain retail financing programs offered by the Chrysler Group as sales incentives in 2003. The adjusted pricing reflects the current favorable funding environment as well as Services becoming the exclusive provider of selected discount consumer financing for the Chrysler Group. Both arrangements...

  • Page 171
    ...of changes in accounting principles is as follows: 2003 (in millions of â,¬) 2002 2001 Total segment operating profit (loss) Elimination and consolidation amounts Total Group operating profit (loss) Pension and postretirement benefit income (expenses), other than current and prior service costs and...

  • Page 172
    ... Motors Corporation. DaimlerChrysler has an agreement with McLaren Cars Ltd., a wholly owned subsidiary of TAG McLaren Holdings Ltd., for the design and production of a new high-performance sports car, the SLR, which DaimlerChrysler expects to launch in the first six months of 2004. The Group owns...

  • Page 173
    ... of Management based on a 3 year performance plan. For detailed information on stock based compensation programs, see Note 24. The remuneration paid in 2003 to the members of the Supervisory Board of DaimlerChrysler AG for services in all capacities to the Group amounted to â,¬2.8 million. Directors...

  • Page 174
    Additional Information Additional Information | Major Subsidiares | Eight-Year Summary | International Representative Offices | Addresses/Information | Internet Service | Finance Calendar 2004

  • Page 175
    172 174 175 Major Subsidiaries Eight-Year Summary International Representative Offices 176 Addresses / Information Internet Service Finance Calendar 2004 The Chrysler Pacifica in Miami 170 | 171

  • Page 176
    ... 1 in % Stockholders' equity 2 in â,¬ million Revenues 3 in â,¬ million 2003 2002 Employees at year-end 2003 2002 Mercedes Car Group smart GmbH, Böblingen Mercedes-Benz U.S. International, Inc., Tuscaloosa DaimlerChrysler India Private Limited, Poona DaimlerChrysler South Africa (Pty.) Ltd...

  • Page 177
    ... Corporation, Tokyo 8 Hyundai Motor Company, Seoul 9 1 Relating to the respective parent company. 2 Stockholders' equity as stated in national financial statements; currencies translated at year-end exchange rates. 3 Currencies translated at annual average exchange rates. 4 Preconsolidated financial...

  • Page 178
    ...share. 3 For our stockholders who are taxable in Germany. There is no tax credit from 2001 due to a change in the corporate income tax system. Additional Information | Major Subsidiares | Eight-Year Summary | International Representative Offices | Adresses/Information | Internet Service | Financial...

  • Page 179
    International Representative Offices Berlin Phone +49 30 2594 1100 Fax +49 30 2594 1109 Hanoi Phone +84 8 8958 710 Fax +84 8 8958 714 Moscow Phone +7 095 926 4018 Fax +7 095 745 2614 Taipei Phone +886 2 2715 9696 Fax +886 2 2719 2776 Abidjan Phone +225 21 75 1001 Fax +225 21 75 1090 Hong Kong ...

  • Page 180
    ...17 92287 Investor Relations Stuttgart Phone +49 711 17 92261 +49 711 17 95277 +49 711 17 95256 Fax +49 711 17 94075 +49 711 17 94109 New York Phone +1 212 909 9080 Fax +1 212 909 9085 Additional Information | Major Subsidiares | Eight-Year Summary | International Representative Offices | Addresses...

  • Page 181
    .... Special information on our shares and earnings developments can be found in the "Investor Relations" section of our website. It includes the Group's annual and interim reports, the company financial statements of DaimlerChrysler AG, and reports to the US Securities and Exchange Commission (SEC...

  • Page 182
    ... to our Personal Internet Service all the year round. This extends our Internet service connected with the Annual Meeting and enables our shareholders to access their personal data in the share register. As before, you can order admission tickets for the Annual Meeting online, or authorize proxies...

  • Page 183
    Finance Calendar 2004 Annual Results Press Conference Annual Report Presentation February 19, 2004, 10 a.m. Mercedes Event Center (MEC) Sindelfingen Analysts' and Investors' Conference Call February 19, 2004, 2:30 p.m. Annual Meeting April 7, 2004, 10 a.m. Messe Berlin Interim Report Q1 2004 April ...

  • Page 184
    DaimlerChrysler AG Stuttgart, Germany Auburn Hills, USA www.daimlerchrysler.com