Mercedes 2008 Annual Report Download - page 86

Outlook
82
Risks from changes in credit ratings
Daimler’s creditworthiness is assessed by the rating agencies
Standard & Poor’s, Moody’s Investors Service, Fitch Ratings and
DBRS. Downgrades resulting from a deterioration of the Group’s
financial situation would have a negative effect on our refinancing.
Legal risks
Various legal proceedings are pending against Daimler or could de-
velop in the future. In our view, most of these proceedings con-
stitute ordinary, routine litigation that is incidental to our business.
We recognize provisions for litigation risks if the resulting obliga-
tions are probable and can be reasonably estimated. It is possible,
however, that due to the final resolution of some of these pend-
ing lawsuits, our provisions could prove to be insufficient and
therefore substantial additional expenditures could arise. This
also applies to legal disputes for which the Group saw no require-
ment to recognize a provision. Although the final result of any
such lawsuit could have a material effect on the Group’s earnings
in any particular period, Daimler believes that any resulting
obligations are unlikely to have a sustained effect on the Group’s
cash flows, financial position or profitability. Further information
on legal proceedings can be found in Note 27 of the Notes to the
Consolidated Financial Statements.
Overall risk
The Group’s overall risk situation is the sum of all the individual
risks of all the risk categories for the divisions and the central
functions. There are no discernible risks that, either alone or in
combination with other risks, could jeopardize the continued
existence of the Group. However, risks increased very substantially
during 2008 due to the financial market crisis, which has mean-
while affected the real economy.
The statements made in the Outlook section are mainly based on
the operative planning of the Daimler Group for the years 2009
and 2010 as dealt with by the Supervisory Board at the beginning
of December 2008. But due to the dramatic changes in global
conditions that have occurred in recent months and great uncer-
tainty concerning the future development of the world economy
and the automotive markets, that operative planning can serve
only as a reference plan, which will be adapted and revised in
line with ongoing developments. The statements made below are
based on the information available to us in February 2009.
We are aware that forecasts made in the present environment
are connected with a high degree of uncertainty. Furthermore,
it is currently impossible to make any reliable statements on
how quickly the economic stimulus programs initiated by various
countries will lead to the stabilization of financial markets and
markets in general.
The world economy
At the beginning of the year 2009, it is too early to predict how
deep the worldwide recession will ultimately be and when the
global economy will emerge from it. Although governments and
central banks are taking various actions on the side of fiscal
and monetary policy, the shock of the financial market crisis is still
severe. Its effects on the real economy are meanwhile very
substantial, and consumer and investor confidence is still badly
shaken. In the industrialized countries, the general economic sit-
uation is worse than it has been for several decades. Due to the
difficult situation of financial markets, most analysts assume
that global growth will continue to weaken in the first half of the
year. According to our assessment, a slight economic revival
could gradually begin in the second half of the year. But it has re-
cently become more likely that major economies of Western
Europe, but also those of the United States and Japan, will contract
quite significantly in the year 2009 as a whole. The emerging
markets are likely to deliver the only stimulus for the world econo-
my. A decisive factor will be how severe the economic slowdown
that has already started in countries such as China, Russia,
India and Brazil actually becomes. In total, the risk has increased
that the global economy will not grow in the year 2009, which
would be the worst performance since the Second World War.
Investor and consumer uncertainty is still so great that even small
negative impulses could lead to a further weakening of the world
economy and postpone the hoped-for turnaround even further.