Mercedes 2015 Annual Report Download - page 70

B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE 77
Efficiency programs take full effect
With the programs “Fit for Leadership” at Mercedes-Benz Cars,
“Daimler Trucks #1” at Daimler Trucks, “Performance Vans”
at Mercedes-Benz Vans and “GLOBE 2013” at Daimler Buses,
we were able to achieve earnings contributions totaling
approximately €4 billion by the end of 2014 as a result of mea-
sures taken for the sustained improvement of cost structures,
as well as through additional business activities. As planned,
those programs had their full effect in 2015. Further efficiency
enhancements are currently being implemented in all divisions.
In addition, we are taking fundamental measures for the
long-term and structural optimization of the business system.
For example, the “Fit for Leadership Next Stage” follow-up
program was launched at Mercedes-Benz Cars in 2015. We are
also continuing the standardization and modularization of
production processes throughout the Group, making intelligent
use of vehicle platforms in order to generate additional cost
benefits, for example. In parallel, we are systematically moving
ahead with digital connectivity at all divisions and along the
entire value chain – from development and production to sales
and service. Among other things, this approach gives us addi-
tional scope to become faster and more flexible and efficient,
to the benefit of our customers. These long-term structural
measures already had a positive impact on earnings in 2015 and
will facilitate further efficiency gains in the coming years.
Performance measurement system
Financial performance measures
The financial performance measures used at Daimler are
oriented toward our investors’ interests and expectations and
provide the foundation of our value-based management.
Value added
Value added is a key element of our performance measurement
system, which is applied at both the Group and the divisional
levels. It is calculated as the difference between operating profit
and the cost of capital of average net assets. Alternatively,
the value added of the industrial divisions can be determined
using the main value drivers of return on sales (quotient
of EBIT and revenue) and net assets’ productivity (quotient
of revenue and net assets).
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B.03
The use of a combination of return on sales and net assets’
productivity within the context of a strategy of profitable
revenue growth provides the basis for the positive development
of value added. Value added shows the extent to which the
Group and its divisions achieve or exceed the minimum return
requirements of shareholders and creditors, thus creating
additional value.
The quantitative development of value added and the
other financial performance measures is explained in the
“Profitability” chapter. E pages 85 ff
Profit measure
The measure of operating profit at the divisional level is EBIT
(earnings before interest and income taxes). EBIT thus reflects
the divisions’ responsibility for profit and loss. The measure
of operating profit used at the Group level is net operating profit.
It comprises the EBIT of the divisions as well as profit and
loss effects for which the divisions are not held responsible.
The latter include income taxes and other reconciliation items.
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B.12 on page 85
Net assets
Net assets are the basis for the investors’ required return.
The industrial divisions are accountable for the net operating
assets; all assets, liabilities and provisions which they are
responsible for in day-to-day operations are therefore allocated
to them. Performance measurement at Daimler Financial
Services is on an equity basis. Net assets at the Group level
include the net operating assets of the industrial divisions
and the equity of Daimler Financial Services, as well as assets
and liabilities from income taxes and other reconciliation
items that cannot be allocated to the divisions. Average annual
net assets are calculated from average quarterly net assets.
E page 90
B.03
Value added=–x Profit measure
Cost of capital
Cost of
capital (%)
Net assets
Value
added
Net assets
=–xx Net assets
productivity
Return on
sales
Cost of
capital (%)
Calculation
of value added