Mercedes 2004 Annual Report Download - page 157

As previously reported, Freightliner LLC, DaimlerChrysler’s North
American commercial vehicles subsidiary, acquired in September
2000 Western Star Trucks Holdings Ltd., a Canadian company
engaged in the design, assembly, and distribution of heavy duty
trucks and transit buses. Prior to its acquisition by Freightliner,
Western Star had completed the sale of ERF (Holdings) plc, a
company organized in England and Wales 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 agreement, alleging that ERF’s
accounts and financial statements were misstated. MAN seeks
damages in excess of GBP300 million. Freightliner Ltd. intends to
defend itself vigorously against such claims and has filed a
contribution claim against Ernst & Young, ERF’s auditors, with
the London Commercial Court in the second quarter of 2003.
As previously reported, DaimlerChrysler sold DaimlerChrysler
Rail Systems GmbH (“Adtranz”), to Bombardier Inc., on April 30,
2001 for $725 million. In connection with the sale, Daimler-
Chrysler deferred €300 million of the gain due to uncertainties
related to the final purchase price. In July 2002, Bombardier filed
a request for arbitration with the International Chamber of Com-
merce in Paris, and asserted claims for sales price adjustments
under the terms of the sale and purchase agreement as well as
claims for alleged breaches of contract and misrepresentations.
Bombardier sought total damages of approximately €960 million.
The original sales agreement limited the amount of such price
adjustments to €150 million and, to the extent legally permissi-
ble, the amount of other claims to an additional €150 million. On
September 28, 2004, DaimlerChrysler and Bombardier conclud-
ed a settlement agreement with respect to all claims asserted by
Bombardier in connection with the sale of Adtranz. The settle-
ment agreement provided for a purchase price adjustment of
€170 million to be paid to Bombardier and the cancellation of all
remaining claims and allegations asserted by Bombardier.
DaimlerChrysler paid the settlement amount on October 1, 2004.
DaimlerChrysler recognized the remaining deferred gain in 2004,
which was partially offset by expenses incurred. The €120 million
net amount recognized is classified as “Other income” in the
consolidated statements of income and is included in operating
profit of the Other Activities segment.
As previously reported, in the fourth quarter of 2000, Tracinda
Corporation filed a lawsuit in the United States District Court for
the District of Delaware against DaimlerChrysler AG and some of
the members of its Supervisory Board and Board of Management
(Messrs. Kopper, Prof. Schrempp and Dr. Gentz). Shortly there-
after, other plaintiffs filed a number of actions against the same
defendants, making claims similar to those in the Tracinda com-
plaint. Two individual lawsuits and one consolidated class action
lawsuit were originally pending. The plaintiffs, current or former
DaimlerChrysler shareholders, alleged that the defendants violat-
ed U.S. securities law and committed fraud in obtaining approval
from Chrysler stockholders of the business combination between
Chrysler and Daimler-Benz in 1998. In March 2003, the Court
granted Mr. Kopper’s motion to dismiss each of the complaints
against him on the ground that the Court lacked jurisdiction over
him. In August 2003, DaimlerChrysler agreed to settle the
consolidated class action case for $300 million (approximately
€230 million adjusted for currency effects), and shortly there-
after, DaimlerChrysler concluded a settlement with Glickenhaus,
one of the two individual plaintiffs. On February 5, 2004, the
Court issued a final order approving the settlement of the consol-
idated class action case and ordering its dismissal. The settle-
ments did not affect the case brought by Tracinda, which claims
to have suffered damages of approximately $1.35 billion. The
Tracinda trial was completed on February 11, 2004. There can be
no assurance as to the timing of a decision by the court. In
addition, a purported class action was filed against Daimler-
Chrysler AG and some members of its Board of Management in
2004 in the same court on behalf of current or former Daimler-
Chrysler shareholders who are not citizens or residents of the
United States, and who acquired their DaimlerChrysler shares
on or through a foreign stock exchange. The Court had previously
excluded such persons from the consolidated class action due
to practical difficulties in maintaining a class comprising such
persons. The complaint contains allegations similar to those in
the Tracinda and prior class action complaints.
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