Mercedes 2009 Annual Report Download - page 114

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Risks from changes in credit ratings. Daimler’s creditworthi-
ness is assessed by the rating agencies Standard & Poor’s,
Moody’s Investors Service, Fitch Ratings and DBRS. Downgrades
of the credit ratings issued by the rating agencies would increase
the Group’s cost of borrowed capital. There is the chance of
upgraded ratings, which could lead to lower refinancing costs.
Further information on financial market risks, risk-minimizing
actions and the management of those risks is provided in Note 30
of the Notes to the Consolidated Financial Instruments. Infor-
mation on financial instruments and on the Group’s pension plans
can be found in Notes 29 and 21.
Risks connected with pension plans. Daimler has pension
obligations, and to a smaller extent obligations relating to health-
care and life-insurance benefits, which are not completely cov-
ered by plan assets. The balance of obligations less plan assets
constitutes the financing status for these employee-benefit plans.
Even small changes in the assumptions used for the valuation of
the benefit plans such a reduction in the discount rate could lead
to an increase in those obligations. On the other hand, the market
value of the plan assets is determined to a large degree by devel-
opments in the capital markets. Unfavorable developments, in par-
ticular relating to equity prices and fixed-interest securities, could
reduce the market value. Both higher obligations and reduced plan
assets or a combination of the two would have a negative impact
on the financing status of our benefit plans. Higher obligations and
lower yields from the plan assets could also increase the net
expenses relating to the benefit plans in the coming years.
Legal risks
Various legal proceedings are pending against Daimler or could
develop in the future. In our view, most of these proceedings con-
stitute ordinary, routine litigation that is incidental to Group’s
business. We recognize provisions for litigation risks if the result-
ing obligations are probable and can be reasonably estimated.
It is possible, however, that due to the final resolution of some of
these pending lawsuits, our provisions could prove to be insuf-
ficient and therefore substantial additional expenditures could
arise. This also applies to legal disputes for which the Group
has seen no requirement 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. In our opinion, the risks that increased
very substantially after the middle of 2008 due to the world-
wide economic crisis decreased slightly during the course of 2009
as a result of the stabilization of the world economy. Against
the backdrop of ongoing uncertainty in the automotive and finan-
cial markets, we continue to see a challenge in the growth tar-
gets we have set and in the advance expenditure required to fur-
ther reduce the pollutant emissions of our fleet of vehicles.