Mercedes 2015 Annual Report Download - page 241

248 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30. Financial guarantees, contingent liabilities
and other financial obligations
Financial guarantees
Financial guarantees principally represent contractual
arrangements. These guarantees generally provide that in
the event of default or non-payment by the primary debtor,
the Group will be required to settle such financial obligations.
The maximum potential obligation resulting from these
guarantees amounted to €1,033 million at December 31, 2015
(2014: €786 million) and includes liabilities recognized in
the amount of €117 million (2014: €84 million). These amounts
include financial guarantees which the Group issued for the
benefit of Chrysler in connection with the Chrysler transactions
entered into in 2007 and 2009. At December 31, 2015, these
guarantees amounted to €0.3 billion. For a portion of these
financial guarantees, Chrysler provided collateral of €0.2 billion
to an escrow account.
Contingent liabilities
Table  E.65 shows estimates of the financial effects
of contingent liabilities at December 31.
Guarantees under buyback commitments represent arrange-
ments whereby the Group guarantees specified trade-in or
resale values for sold vehicles. Such guarantees provide the
holder with the right to return purchased vehicles to the Group,
the right being primarily contingent on the future purchase
of vehicles or services. The provisions recognized in connection
with these buyback commitments, amounted to €85 million
at December 31, 2015 (2014: €58 million). On the other hand,
residual value guarantees related to arrangements for which
revenue recognition is precluded due to the Group’s obligation
to repurchase assets are included in other financial liabilities.
Other contingent liabilities comprise contingent liabilities
which constitute other guarantees as well as potential
obligations from other tax and customs duty risks. At Decem-
ber 31, 2015, the best estimate for potential obligations
from other contingent liabilities for which no provisions had
yet been recognized was €360 million (2014: €383 million).
In 2002, our subsidiary Daimler Financial Services AG,
Deutsche Telekom AG and Compagnie Financière et Industrielle
des Autoroutes S.A. (Cofiroute) entered into a consortium
agreement in order to jointly develop, install and operate under
a contract with the Federal Republic of Germany (operating
agreement) a system for the electronic collection of tolls for all
commercial vehicles over 12 tons gross vehicle weight using
German highways. Daimler Financial Services AG and Deutsche
Telekom AG each hold a 45% equity interest and Cofiroute
holds the remaining 10% equity interest in both the consortium
(Toll Collect GbR) and the joint venture company (Toll Collect
GmbH) (together Toll Collect).
According to the operating agreement, the toll collection
system had to be operational no later than August 31, 2003.
After a delay of the launch date of the toll collection system,
which resulted in a loss of revenue for Toll Collect and in
payments of contractual penalties for delays, the toll collection
system was introduced on January 1, 2005 with on-board
units that allowed for slightly less than full technical performance
in accordance with the technical specification (phase 1).
On January 1, 2006, the toll collection system was installed
and started to operate with full effectiveness as specified
in the operating agreement (phase 2). On December 20, 2005,
Toll Collect GmbH received a preliminary operating permit
as specified in the operating agreement. Toll Collect GmbH
expects to receive the final operating permit, and continues
to operate the toll collection system under the preliminary
operating permit in the interim.
Failure to perform various obligations under the operating
agreement may result in penalties, additional revenue
reductions and damage claims that could become significant
over time.
However, penalties and revenue reductions are capped at
€150 million per year until the final operating permit has been
issued and at €100 million per year following the issuance
of the final operating permit. These cap amounts are subject
to a 3% increase for every year of operation.
E.65
Composition of contingent liabilities
At December 31,
2015 2014
In millions of euros
Guarantees under buyback commitments 1,560 1,208
Other contingent liabilities 360 383
1,920 1,591