Mercedes 2003 Annual Report Download - page 162
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31. Contingent Obligations and Commercial Commitments
Contingent Obligations. Obligations from issuing guarantees as a
guarantor (excluding product warranties) are as follows:
Guarantees for third party liabilities principally represent guarantees
of indebtedness of non-consolidated affiliated companies and third
parties and commitments by Group companies as to contractual
performance by joint venture companies and certain non-incorpo-
rated companies, partnerships, and project groups. The term under
these arrangements generally covers the range of the related
indebtedness of the non-consolidated affiliated companies and
third parties or the contractual performance period of joint venture
companies, non-incorporated companies, partnerships, and project
groups. The parent company of the Group (DaimlerChrysler AG)
provides guarantees for certain obligations of its consolidated sub-
sidiaries towards third parties. At December 31, 2003, these guar-
antees amounted to €51.5 billion. To a lesser extent, consolidated
subsidiaries provide guarantees to third parties of obligations of
other consolidated subsidiaries. All intercompany guarantees are
eliminated in consolidation and therefore are not reflected in the
above table.
Guarantees under buy-back commitments principally represent
arrangements whereby the 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 ser-
vices. The table above excludes residual value guarantees related
to arrangements for which revenue recognition is precluded due to
the Group’s obligation to repurchase assets sold to unrelated guar-
anteed parties.
Performance guarantees principally represent pledges or indemni-
fications related to the quality or timing of performance by third
parties or participations in performance guarantees of consor-
tiums. Performance guarantees typically provide the purchaser of
goods or services with the right to be reimbursed for losses
incurred or other penalties if the third party or the consortium fails
to perform. Amounts accrued under performance guarantees
reflect estimates of probable losses resulting from a third party’s
failure to perform under obligating agreements.
As described in more detail in Note 3 the Group holds a 45% equi-
ty ownership interest in Toll Collect and has guaranteed, on a joint
and several basis with the other equity holders (collectively the
“Consortium”, individually the “Partners”), certain current and
future obligations of Toll Collect.
Pursuant to the Operating Agreement, the Partners have guaran-
teed, on a joint and several basis, the successful completion and
operation of the toll collection system by Toll Collect until August
31, 2004.
In addition, the partners of Toll Collect, on a joint and several basis,
have the obligation to fund Toll Collect in order to maintain an equity
ratio of Toll Collect of 20% (based on German GAAP) until August
31, 2004, and 15% thereafter (“Equity Maintenance Undertaking”)
until the Operating Agreement expires. These funding requirements
would be triggered by, among other events, losses incurred by Toll
Collect due to a further delay in the start of the operation of the
toll collection system. The start of operations was initially sched-
uled for August 31, 2003, but has been delayed.
In the event the toll collection system is not operational in time
the partner of the consortium or the operating company are liable
to pay penalties pursuant to the Operating Agreement. As the sys-
tem is not operating yet, the partners started to pay penalties on
December 2, 2003. (As Toll Collect did not join to the Operating
Agreement, Toll Collect is not obligated under the contract yet.)
The contractual penalties amount to €250,000 per day until the
end of February 2004 and will increase to €500,000 per day there-
after. Beside these penalties, in our opinion, the Operating Agree-
ment provides for exclusion of any further penalties or liabilities for
fault.
(in millions of €)
At December 31,
Amount recognized
as a liability
370
724
370
246
1,710
2003
At December 31,
Maximum potential
future obligation
2,119
2,663
581
830
6,193
2,647
1,957
513
118
5,235
355
583
352
109
1,399
Guarantees for third party liabilities
Guarantees under buy-back
commitments
Performance guarantees and
environmental risks
Other
2002 2003 2002