Mercedes 2008 Annual Report Download - page 165

Consolidated Financial Statements |Notes to Consolidated Financial Statements |161
Headcount reduction initiative at Mercedes-Benz Cars.
In September 2005, Daimler initiated a program to enhance the
competitiveness of Mercedes-Benz Cars. The program encom-
passed a headcount reduction in Germany which was completed
as scheduled in 2006. The headcount reduction was primarily
realized through voluntary termination and early retirement con-
tracts.
For the contracts signed in 2006, the Group incurred expenses of
€286 million, primarily within cost of sales.
smart realignment. Following the unfavorable unit sales devel-
opment of the smart roadster and the smart forfour, the Group
initiated comprehensive restructuring measures in 2005 and 2006
to realign the smart business model. As a result of these mea-
sures, earnings before interest and taxes (EBIT) include expenses
of €946 million in 2006, which are attributable to the Mercedes-
Benz Cars segment.
These expenses were primarily the result of the decision to cease
production of the smart forfour in 2006. The smart forfour was
assembled by Mitsubishi Motors Corporation (MMC) under the
terms of a contract manufacturing agreement. Following the
termination of this agreement and based on the conditions defi-
ned in an exit agreement, the Group recorded charges of €592
million for 2006, primarily relating to termination payments to
MMC and suppliers. These charges are recognized in cost of
sales.
Additional charges totaling €334 million were recorded in 2006
for inventory write-downs, higher incentives, recognition of lower
estimated residual values of smart vehicles, and estimated pay-
ments for the reorganization of the distribution network. These
charges were recognized in cost of sales (€97 million), selling
expenses (€210 million) and as a reduction of revenue (€27 mil-
lion) within the 2006 consolidated statement of income.
The reduction of workforce levels resulted in additional charges
of €28 million, which were recognized in general administrative
expenses in 2006. Also in 2006, Daimler recorded income of €8
million due to refinements of estimates made in 2005 in the
course of the realignment of the smart business.
Personnel expenses and number of employees. The consoli-
dated statement of income for 2008 includes personnel expens-
es of €15,192 million (2007: €20,256 million; 2006: €23,574
million). Through August 3, 2007, personnel expenses of the dis-
continued Chrysler activities are included.
Net pension and net post-employment benefit cost are included
in the following line items within the consolidated statements
of income (see Notes 7 and 21):
In 2008, the Group employed, in an annual average, workforce
of 274,330 people (2007: 271,704; 2006: 277,771). Therein
included are 13,414 trainees/apprentices (2007: 12,672; 2006:
13,104). The numbers above do not include the workforce of
the Chrysler activities which were deconsolidated on August 3,
2007. Through August 3, 2007, we employed an average of
85,296 employees (2006: 87,982 employees) related to the
Chrysler activities.
Information on the remuneration of the current and former
members of the Board of Management and the current members
of the Supervisory Board is included in Note 35.
2006
20072008
in millions of €
(116)
(58)
(10)
(23)
17
–
(190)
(231)
(57)
(40)
(35)
169
(491)
(685)
(555)
(42)
(54)
(62)
154
(554)
(1,113)
Cost of sales
Selling expenses
General administrative expenses
Research and non-capitalized
development costs
Interest income (expense), net
Net profit (loss) from discontinued
operations