Mercedes 2008 Annual Report Download - page 80

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Entrepreneurial opportunities are not reported on within the
risk management system, but are included in the annual operative
planning and are followed up during the year in the context of
the periodic corporate reporting. The divisions have direct respon-
sibility for the early identification and utilization of opportunities.
Within the framework of the strategy process, opportunities for
further profitable growth are identified and included in the
decision-making process.
Economic risks
The world economy became substantially less dynamic during
the year 2008. In the second half of the year, growth in gross
domestic product came to a standstill in the industrialized coun-
tries and was actually negative in some of them. Most analysts
expect 2009 to be a difficult year for the world economy, but the
majority of those analysts assume that the turning point should
come during the second half of 2009. Investor and consumer un-
certainty is high at present, so the most minor of disturbances
would probably be sufficient to trigger further weakening and delay
the economic upturn. In our view, the biggest individual risks
for the global economy are to be seen in a sustained crisis of con-
fidence, a worsening credit crunch, a longer-lasting and deeper
recession in Western Europe, the United States and Japan, and an
economic slump in the major emerging economies. The deve-
lopment of the world economy in 2009 expected by the majority
of economic research institutions, and also by Daimler, is highly
dependent on the development of these risk factors. This means
that there are still considerable economic risks for the Group’s
financial position, cash flows and profitability.
The risk that the recession of the US economy could worsen
became greater at the end of 2008. The real economic effects of
the financial-market and real-estate crisis on investment and
consumption could be even more severe than assumed in most
analysts’ base scenarios. The financial market has a substantial
amount of risk potential, whether from additionally required write-
downs at banks, the spread of the financial crisis to the credit-
card sector, or the collapse of the market in financial derivatives.
Due to the importance of the US economy, a deeper and longer
recession would have significant negative consequences also
for the world economy. Although the United States’ current-
account deficit decreased in the year 2008, the US economy is
still dependent on capital inflows from abroad. If the required
capital inflows failed to materialize or were too low, a correction
of the current account deficit would be unavoidable. Such a
correction would place a substantial burden on domestic demand
and would trigger a devaluation of the US dollar. In total, such
occurrences could also have a negative impact on demand for
automobiles and commercial vehicles.
The economy of Western Europe was not immune to the effects
of the slowdown in global growth or the financial market crisis,
and expanded in 2008 at well below its long-term growth trend.
Most of the major European economies were in recession by
the end of the year. In view of the extent of the real economic im-
plications of the financial market crisis, the risk of a lasting and
substantial drop in growth rates has recently increased significantly.
Higher refinancing costs and more difficult access to borrowed
capital are placing a high burden on companies, especially small
and medium-sized enterprises with low equity ratios. Even only
a little further deterioration would necessitate substantial structural
adjustments. Economic developments will largely depend on
how effective the fiscal stimulus programs are in various countries
and whether the acute crisis of consumer and investor confidence
can be overcome. However, there are serious risks that both private
consumption and companies’ investments will fall much lower
than is currently predicted. This would have a corresponding nega-
tive impact on demand for motor vehicles, with considerable
risk potential for the Daimler Group due to the importance of Ger-
many and other countries of Western Europe as major sales
markets.