Mercedes 2015 Annual Report Download - page 134

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 141
The ongoing growth dynamism of the US economy will be
mainly determined by reactions to the first increases in interest
rates by the central bank after such a long phase of extremely
low rates. Excessively fast increases in interest rates by the
US Federal Reserve (Fed) would have a significantly negative
impact on the US economy. Rising interest on loans could reverse
the recovery of the real-estate market and dampen companies’
investments. If the weakening of industrial activity that was to
be observed as of mid-2015 exacerbates, there will be a
perceptible impact on the growth of the US economy in 2016.
If the recovery of the labor market falters or if wages rise
more slowly than currently assumed, there will be negative conse-
quences for private consumption, which is now the main
driver of US economic growth. Political uncertainty in advance
of the presidential election in 2016 could also impact con-
sumer and investor confidence. Although the Fed could coun-
teract significantly weakening growth through its monetary
policy, it would have little scope for action in this field, so the
effectiveness of the potential measures would be limited.
A possible renewed wave of expansive measures would also
further increase the danger of speculative bubbles. Such a
development would have significant consequences because
the Daimler Group (especially the Mercedes-Benz Cars and
Daimler Trucks divisions) generates a considerable volume of its
unit sales in the United States and diminished growth could
also spread to other regions. However, if investment activity
in the United States turns out to be significantly more dynamic
than previously assumed, this could result in substantially
stronger growth. The resulting increased employment and income
effects could boost demand for all the automotive divisions.
If there is no continuation of the required consolidation of state
budgets and of reform efforts in the countries of the European
Monetary Union (EWU), this could cause renewed turmoil in the
financial markets, leading to increasing refinancing costs
through rising capital-market interest rates and thus jeopardizing
the still only moderate economic recovery. The extremely low
rate of inflation harbors an additional risk in that a long-lasting
and broad-based fall in prices would constitute a considerable
threat to the economic recovery of the EMU and make it even
more difficult for the debt-ridden countries of the euro zone to
finance their debts. Furthermore, there is concern that the very
expansive monetary policy of the European Central Bank could
further increase the danger of speculative bubbles in the stock
and bond markets. Major turbulence in the financial markets
would directly impact the economic outlook. Although the agree-
ment reached between Greece and its creditors in the summer
of 2015 reduced the direct risk of Greece’s exit from the euro
zone, that risk is by no means completely removed. A return
to that discussion could lead to renewed uncertainty and volatility
in the financial markets. A new factor is the risk of the United
Kingdom’s exit from the European Union. This would have signifi-
cantly larger economic effects, whereby a major portion of
the risk would relate to the UK itself. The possible burden on the
British economy would be immense. The European market
continues to be very important for Daimler across all divisions;
for the Mercedes-Benz Cars and Mercedes-Benz Vans divi-
sions, it is in fact still the biggest sales market. An opportunity
that is difficult to assess can be seen in a significantly improved
economic development in the euro zone. If countries such as
Italy and France implement reform measures more quickly and
decisively than has so far been assumed, economic growth
could also accelerate. That would benefit the development of
investment and demand for motor vehicles in the important
European market.
In Japan, the failure of the country’s expansive monetary and
fiscal policy and the lack of structural reforms could trigger a
significant growth slowdown or recession, although this should
be regarded as a regionally limited risk. A slowdown of eco-
nomic growth could lead to lower demand for cars and trucks,
which in turn could negatively affect the Mercedes-Benz Cars
and Daimler Trucks divisions, for which Japan is an important
sales market. A regionally limited opportunity exists in the
possibility of a distinct acceleration of economic growth in Japan.
This could be caused by a significant increase in investment
activity, resulting from the targeted structural reforms and the
expansive monetary and fiscal policies that have already
been initiated. The Mercedes-Benz Cars and Daimler Trucks
divisions could then benefit from this positive development.
Due to China’s enormous importance as a growth driver for the
world economy in recent years, an economic downturn in
China would represent a considerable risk to the world economy.
The stock-market slumps in the summer of 2015 and at the
beginning of 2016, the volatile development of the real-estate
sector along with falling exports and increasing capital out-
flows are indicators of structural weaknesses. If these structural
problems become more severe than currently assumed and
the growth slowdown turns out to be more pronounced as
a consequence, the world economy would cool off significantly.
Another factor is the significant risk inherent in the enormous
growth in debt that has been observed since the global financial
crisis, especially in the corporate sector. If the growth slow-
down results in an excessive increase in credit defaults, this could
lead to turbulences in the banking sector and the financial
markets. China is now a key sales market for the Mercedes-Benz
Cars and Mercedes-Benz Vans divisions in particular, which
means that any disruptions caused by the aforementioned risks
could result in lower-than-planned growth in unit sales. In addi-
tion, a drop in demand in China would further exacerbate the fall
in the price of oil and other raw materials, with extremely
disadvantageous effects for raw-material exporting countries
worldwide. This would have a massive negative impact on
Industry and business risks and opportunities
Risk category Probability of occurrence Impact Opportunity category Impact
General market risks Medium High General market opportunities High
Risks relating to leasing
and sales financing Low Low
Opportunities relating to leasing
and sales financing Low
Procurement market risks Low High Procurement market opportunities Low
Risks relating to the legal
and political framework Medium High
Opportunities relating to the legal
and political framework Low
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