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Merger of Growth
Annual Report 1998

Table of contents

  • Page 1
    Merger of Growth Annual Report 1998

  • Page 2
    ...98 â,¬ 97 â,¬ 96 â,¬ Revenues Europe United States Other markets Employees (at Year-End) Research and development Costs Investments in Property, Plant and Equipment Cash Provided by Operating Activities Operating Profit Net Operating Income Net Income Per Share Net Income Adjusted 4) 257,744 154...

  • Page 3
    ...512 3,093,716 2,886,981 123,180 118,639 98 98 â,¬ 97 â,¬ COMMERCIAL VEHICLES Mercedes-Benz Freightliner Sterling Setra Amounts in Millions US $ Operating Profit Revenues *) Investments in Property, Plant and Equipment R&D Unit Sales Employees (12/31) 1,110 27,175 976 946 23,162 832 342 20...

  • Page 4
    ...Class C-Class, CLK, SLK E-Class S-Class/SL M-Class/G-Class smart 15 % 42 % 28 % 6% 7% 2% CHRYSLER FINANCIAL SERVICES Amounts in Millions US $ Operating Profit Revenues *) 765 3,376 652 2,877 3,513 586 2,407 3,405 Employees (12/31) 98 98 â,¬ 97 â,¬ SERVICES Financial Services IT Services...

  • Page 5
    ... will accomplish this by constantly delighting our customers with the quality and innovation oe our products and services, resulting erom the exellence oe our processes, our people and our unique porteolio oe strong brands. Board of Management 8 The Merger 10 People of DaimlerChrysler 12 Brands and...

  • Page 6
    ... value. For former Chrysler shareholders, this represents a continuation of the high dividend levels of recent years. For former Daimler-Benz shareholders, it is a significantly better return than in the past. Also, we are the first company in the world to introduce a "global share," which is traded...

  • Page 7
    ... quality assurance, corporate finance, legal, communications, and our information technology departments, which have been combined under one Chief Information Officer; ½ our worldwide executive management development - to rapidly align performance evaluation and career planning; ½ our research...

  • Page 8
    ... possible. After some initially tense exchanges, they came up with a win-win solution - same plant, separate production lines - that will enable the plant to deliver an additional 30,000 Mercedes-Benz M-Classes annually to European markets starting in the summer of 1999. As a result, we will achieve...

  • Page 9
    ... passion - to design, build and sell great products that customers love. Look at our upcoming new Chrysler PT Cruiser. Its fun, groundbreaking design promises to carve out a whole new niche for us in North America and, possibly, in Europe. Or at our new Mercedes-Benz S-Class. With its elegant lines...

  • Page 10
    ... always to look for new ideas, wherever they may be found. And in turn to share their own ideas openly with others in the company. Already this is happening. For example: We are currently looking at bringing an innovative paint technique developed in our German auto plants to America, where we could...

  • Page 11
    ..." half the world market for our products. We are at home in more than 200 countries. From our strong position in North America and Europe, we plan over time to expand in Asia, in Latin America and in other developing markets. One of the prerequisites is to add to our core of skilled global managers...

  • Page 12
    THE BOARD OF MANAGEMENT The Board of Management 8 R O B E R T J . E AT O N JÃœRGEN E. SCHREMPP Chairman Appointed until 2001 Chairman Appointed until 2003

  • Page 13
    ... the Chrysler, Plymouth, Jeep and Dodge brands & Jeep Operations Appointed until 2003 Human Resources & Labor Relations Director Appointed until 2003 Global Procurement and Supply Appointed until 2003 Brand Management Mercedes-Benz and smart & Sales and Marketing Europe, Asia, Africa, Australia...

  • Page 14
    ... in Detroit for North American International Auto Show, visits Robert J. Eaton, Chairman and Chief Executive Officer of Chrysler Corporation, to suggest discussion of possible merger M AY 6 , 19 9 8 Merger agreement signed in London J U N E 16 - 18 , 19 9 8 Daimler-Benz management team visits Auburn...

  • Page 15
    ...Merger Integration Team has the task of coordinating this process. N O V E M B E R 17, 1 9 9 8 DayOne: DaimlerChrysler stock begins A U G U S T 2 7 / 2 8 , 19 9 8 Daimler-Benz and Chrysler management teams meet in Greenbrier, West Virginia, to prepare the merger trading on stock exchanges worldwide...

  • Page 16
    ... head of world-wide Group Controlling, based in Stuttgart. The former chief controller from Auburn Hills intends to work together with his new colleagues to combine the best ideas from Germany and America, and is looking forward to the assignment: "If we can merge the outstanding capabilities of our...

  • Page 17
    ... at the same time are open to new approaches and ideas - then the success of DaimlerChrysler will be guaranteed." 13 In the Post-Merger Integration teams, experts from Stuttgart and Auburn Hills are pushing hard to advance the merger. Questions about product strategy, purchasing and sales are on...

  • Page 18
    ... Mercedes road qualities, and the innovative A-Class with its revolutionary space and safety concept. Mercedes-Benz is demonstrating with the new S-Class not only the capability to produce innovative and technically brilliant products, but also elegance and dynamism. With the smart city coupe...

  • Page 19
    ... segment worldwide. The all-new 1999 Jeep Grand Cherokee is the flagship of the brand, with new levels of technology innovation, on-road ride and handling, four-wheel-drive leadership, refinement and style. D O D G E Dodge covers a wide range of cars, minivans, sport-utility vehicles and trucks...

  • Page 20
    ... of two tons and above to buses, commercial vehicles and heavy-duty trucks. The current strategy envisages the addition of a city delivery vehicle -- a move that would make DaimlerChrysler a genuine full-line supplier within Europe. Freightliner Corporation is number one in North America for heavy...

  • Page 21
    ...European and international partner. Worldwide the company's employees work in business units such as military aircraft, helicopters, aeroengines, space systems infrastructure, space systems satellites and defense electronics. The Civil Aircraft business is the largest unit in the division. Operating...

  • Page 22
    ... adjusted the minimum return on investment to the corresponding trends in the international capital markets, these values are not comparable with the figures published by Daimler-Benz and Chrysler in 1997. SLOWER GROWTH OF THE WORLD ECONOMY. The trend in the overall global economic environment was...

  • Page 23
    ... Passenger Cars & Trucks (Chrysler, Plymouth, Jeep®, Dodge) Commercial Vehicles (Mercedes-Benz, Freightliner, Sterling, Setra) 96 97 98 Chrysler Financial Services Services Aerospace Others 765 460 731 (171) 652 392 623 (146) 586 246 284 (225) Other Markets U.S.A. Europe REVENUES ROSE BY...

  • Page 24
    ... Cars & Trucks (Chrysler, Plymouth, Jeep®, Dodge) Passenger Cars & Trucks (Chrysler, Plymouth, Jeep®, Dodge) Commercial Vehicles (Mercedes-Benz, Freightliner, Sterling, Setra) Commercial Vehicles (Mercedes-Benz, Freightliner, Sterling, Setra) Chrysler Financial Services Services Aerospace...

  • Page 25
    ... from Mercedes-Benz and a new Chrysler Sebring, a completely new minivan and the successor to the Jeep Cherokee. The lion's share of research and development investment in the Commercial Vehicles Division was spent on product innovations in the Trucks Europe, vans Europe and the powertrain units. In...

  • Page 26
    ... adjustments for the special distribution of DM 20 (â,¬ 10.23) per share and for the capital increase of June 1998, share prices reached a new historical high at the end of July. After the announcement of the merger, Chrysler share prices rose more steeply than those of Daimler-Benz. In late July...

  • Page 27
    ... trends, the special distribution carried out by Daimler-Benz, the ensuing increase of share capital and finally the corporate merger itself. In June 1998, shortly before the capital increase, we organized a worldwide road show. As a result of the increase in capital stock amounting to approximately...

  • Page 28
    ...In the coming years, the Commercial Vehicle Division will focus on its product drive and on internationalization. The main area of growth will be in our North American business, which we are carefully expanding with the new Sterling brand and the integration of the Thomas Built Buses Corporation. As...

  • Page 29
    .... Passenger Cars & Trucks (Chrysler, Plymouth, Jeep®, Dodge) Commercial Vehicles (Mercedes-Benz, Freightliner, Sterling, Setra) Aerospace Others 1 2 0.5 0.7 1.6 2.1 2) ) Excluding third party contracts. ) Including Headquarters, Adtranz 100%. OUTLOOK EXPENDITURES TO SECURE THE FUTURE. In...

  • Page 30
    Mercedes-Benz P MERCEDES-BENZ AND SMART A S S E N G E R C A R S smart 26 Climb in and enjoy exclusivity: The new S-Class allows you to experience the future of the automobile today. With more than thirty innovations, this car once again sets new standards in comfort, safety and ...

  • Page 31
    ..., sales of Mercedes-Benz passenger cars increased in all important markets. As a result, we expanded our market share worldwide to 2.2% (1997: 1.7%). We were able to reach entirely new customer groups with the most attractive product program in the history of the MercedesBenz brand. The M-Class was...

  • Page 32
    ... - unspoiled driving enjoyment. The new Mercedes-Benz CL meets such exacting standards thanks to its ploneering technology. MERCEDES-BENZ AND SMART Western Europe outside Germany. In the United States sales of Mercedes-Benz passenger cars reached 170,200 vehicles (up 39%). In terms of revenues...

  • Page 33
    ... mobility services. SMART MOBILITY. FORMULA ONE WORLD CHAMPION AND FIA GT CHAMPION. 29 Passenger Car Sales 1998 Mercedes-Benz A-Class C-Class of which CLK SLK E-Class S-Class/SL M-Class G-Class smart Sales worldwide Europe of which Germany Western Europe (excl. Germany) North America United...

  • Page 34
    Chrysler Plymouth P A S S E N G E R V E H I C L E S CHRYSLER, PLYMOUTH, JEEP, DODGE Jeep Dodge 30 The new Chrysler 300 M - The continuation of the traditional 300 series. A comfortable and roomy sedan for driving pleasure in the city and on long trips. With a powerful 2.7 or 3.5 liter V-6 engine...

  • Page 35
    ... in their respective categories in the Initial Quality Rankings for 1998. FAV ORABLE MARKET SITUATION IN NORTH AMERICA. CHRYSLER, PLYMOUTH, JEEP, DODGE Operating Profit Revenues Investm. in Property, Plant, Equipment R&D Production (Units) Sales (Units) Employees (12/31) 4,942 66,101 4,599 1,989...

  • Page 36
    .... In 1998, Chrysler launched the LHS and all-new 300M both to critical acclaim. The 300M, designed for sale in North America and export to international markets, was named Motor Trend magazine's "Car of the Year", and has also been well received by the European media and customers. The all-new Jeep...

  • Page 37
    ... company posted a 1% sales increase for 1998 models, with sales totaling 518,900 units. Record minivan sales were reported in Canada. Dodge Caravan ES: a family car offering an extra dimension - a spacious interior and variable seating combined with pure driving pleasure. CHRYSLER, PLYMOUTH, JEEP...

  • Page 38
    ... + 10 2 REDUCING COST BY SCORE. CHRYSLER, PLYMOUTH, JEEP, DOGDE Efforts to improve vehicle quality and value continue in part through a program that provides suppliers with initiatives to generate new ideas and improve their production processes. In August 1998, the Supplier Cost Reduction Effort...

  • Page 39
    .... Chrysler Financial Services (CFS) provides retail and lease financing for vehicles, dealer inventory and other financing needs, dealer property and casualty insurance, and dealership facility development and management, primarily for DaimlerChrysler dealers and their customers. Headquartered in...

  • Page 40
    ... E R C E D E S T E R L I N G , B S E E N Z , T R A F R E I G H T L I N E R , Commercial Vehicles COMMERCIAL VEHICLES VEHICLES The new Atego Series for delivery duty and light long-haul and building site traffic. First shown in 1998, the Atego was voted "truck of the year '98". 36

  • Page 41
    ... in South America revenues dropped to â,¬ 2.1 billion (-2%). With worldwide sales of 489,700 (1997: 417,400) units, Mercedes-Benz, Freightliner, Sterling and Setra commercial vehicle sales set a new record as well. The Commercial Vehicles North America, Vans Europe, and Trucks Europe units performed...

  • Page 42
    ... production and constructive relations with the suppliers were particularly important factors. MERCEDES-BENZ VANS LEAD MARKET IN WESTERN EUROPE. highest safety standards. In 1998, the product drive was continued in Europe with the new Atego delivery truck. This series is produced in Wörth, Germany...

  • Page 43
    ...-Benz Mexico S.A. increased production to 9,800 commercial vehicles in 1998 (1997: 6,400 units), most of which were exported to the United States and Canada. SPRINTER REMAINS SALES LEADER IN LATIN AMERICA. World of which Vans (incl. V-Class) Pick-ups Trucks Buses Unimog Europe of which Germany...

  • Page 44
    First class, reliable service and qualified friendly customer care: another area in which we aim to be VEHICLE SALES ORGANIZATION world leaders. 40 Vehicle Sales Organization

  • Page 45
    ... merger of Daimler-Benz and Chrysler we created a new worldwide sales structure as one of the first results of the integration process. This new organization lays the groundwork for achieving our growth goals for the vehicles businesses and realizing the synergy gains resulting from the merger. New...

  • Page 46
    ... debis, the services company of DaimlerChrysler, recorded business developments well above average in all areas in 1998. Operating profit and sales reached new heights, and a record number of new jobs were created. By merging the activities of Chrysler Financial Company L.L.C. and debis at the...

  • Page 47
    ...results. OPERATING PROFIT INCREASED BY 59%. IMPROVED PROSPECTS FOR GROWTH THROUGH DAIMLERCHRYSLER. The merger of Chrysler Corporation with DaimlerBenz AG has also opened up excellent new prospects for growth in the services sector. As a result of merging the activities of Chrysler Financial Company...

  • Page 48
    ...Division increased its revenues by 12% in 1998 to â,¬ 8.8 billion (1997: â,¬ 7.8 billion). Incoming orders reached an all-time high as well at â,¬ 13.9 billion (1997: â,¬ 9.9 billion). Almost all business units contributed to this favorable development. The integration of SI Sicherungstechnik was an...

  • Page 49
    ... us to carefully expand the work force in almost all business units. At the end of 1998, we employed a total of 45,858 persons in the Aerospace Division (1997: 43,521 persons). We gained 1,142 new employees as a result of the integration of SI Sicherungstechnik. REVENUES AND INCOMING ORDERS HIGHER...

  • Page 50
    46 Rail Systems Automotive Electronics MTU/Diesel Engines OTHER INDUSTRIAL BUSINESSES

  • Page 51
    ... AG. We also have extended our international presence to Africa with a joint venture for servicing and maintaining rail cars in Uganda. As a result, Adtranz is now active in 60 countries, operating under the aegis of proprietary companies. In January 1999, we decided to acquire the 50% share...

  • Page 52
    ...Commercial Vehicles (Mercedes-Benz, Freightliner, Sterling, Setra) Chrysler Financial Services DAIMLER CHRYSLER WORLDWIDE - - 2 5 40 12 6 34 2,827 2,780 1,510 273 3,480 1,488 283 1,773 Services Aerospace Others 48 DaimlerChrysler W O R L D W I D E South America Sales Production Organization...

  • Page 53
    ... Trucks (Chrysler, Plymouth, Jeep®, Dodge) Commercial Vehicles (Mercedes-Benz, Freightliner, Sterling, Setra) Chrysler Financial Services Services Aerospace Others - - 25 44 5 148 12 83 35 6,403 6,894 2,486 13 17,166 45,434 18,909 49 Africa Sales Production Organization Locations Locations...

  • Page 54
    ... concerned with primary safety in cars: a small camera on the vehicle and a computer inside the car assess the traffic situation and perform intelligent stop and go driving operations, for example RESEARCH AND TECHNOLOGY Research and Technology near traffic signs, lights and pedestrians, and warn...

  • Page 55
    ... of the European joint research project "Chauffeur", which was initiated by Daimler-Benz, is to prepare for the introduction of automatic driving functions in highway traffic. DaimlerChrysler has developed the "electronic hitch" for this purpose. It links two seven-and-a-half-ton trucks with each...

  • Page 56
    ... slurry" clear paint process used for the A-Class, solvent emissions have been reduced to well below threshold values and paint consumption reduced by 20 %. The National Association of German Industry rewarded this innovation with the DAIMLER CHRYSLER AND THE ENVIRONMENT Environment Prize for 1998...

  • Page 57
    ... raw materials and supplies and recycling production waste. From an environmental perspective, the paint processes used in our automotive plants are of special significance. In the past, in the assembly plants of Mercedes-Benz, Chrysler, Plymouth, Jeep and Dodge, we have introduced trendsetting...

  • Page 58
    ... and creativity of our employees. The results are successful products and services, and in consequence, more secure jobs, rising levels of employment and an HUMAN RESOURCES increased sharing in profits and capital by the staff at all levels of the company. 54 Lifelong learning: Everywhere at...

  • Page 59
    ... United States. Adjusted for changes resulting from the consolidation, DaimlerChrysler created more than 19,000 new jobs in 1998. Employees 1998 1997 DaimlerChrysler Passenger Cars (Mercedes-Benz, smart) 441,502 425,649 95,158 91,753 Passenger Cars & Trucks (Chrysler, Plymouth, Jeep®, Dodge...

  • Page 60
    ..., too, the dynamic business and income trend of recent years has continued unabated in 1998. Chrysler Financial Services were able to increase operating profit by 11% to â,¬ 0.7 billion. For the services integrated under debis the further increase in leasing and sales financing volume, together with...

  • Page 61
    ... resulting from the special distribution of â,¬ 10.23 (DM 20.00) per share of Daimler-Benz AG and from the reversal of valuation allowances on deferred tax assets. The net income for 1998 is reduced by costs amounting to â,¬ 401 million (after taxes) related to the implementation of the merger...

  • Page 62
    ...taxes); 1997: tax reduction due to the special distribution of â,¬ 10.23 (DM 20.00) per share of Daimler-Benz AG (â,¬ 1,487 million) and reversal of the valuation allowance on deferred tax assets (â,¬ 1,003 million) FURTHER DEVELOPMENT OF OPERATING PROFIT AND SEG- In 1997, the Financial Accounting...

  • Page 63
    ... costs of pensions, net Operating income from affiliated, associated and related companies*) Gains on unallocated financial instruments Interest on advance payments on long term contracts Corporate research of DaimlerChrysler AG Merger costs Operating profit according to SFAS 131 (new) 7,613...

  • Page 64
    ... taxes) 56.5 51.4 11.6 10.2 ) Year-end values; annual average: â,¬ 56.5 billion (US $ 66.3 billion) 60 Industrial business (before interest and taxes) Passenger Cars (Mercedes-Benz, smart) 8.0 17.7 7.2 16.1 25.1 23.8 23.8 20.9 Passenger Cars and Trucks (Chrysler, Plymouth, Jeep®, Dodge...

  • Page 65
    ... Corporation funded a portion of its postretirement healthcare and life insurance benefits liability. ANALYSIS OF THE FINANCIAL SITUATION 6,576 5,252 ) 1998: merger costs (after taxes); 1997: tax reduction due to the special distribution of â,¬ 10.23 (DM 20.00) per share of Daimler-Benz AG...

  • Page 66
    ... OF THE FINANCIAL SITUATION In 1998, the leasing and sales financing activities in the DaimlerChrysler Group were performed mainly by Chrysler Financial Services and debis Financial Services. In 1999, these two business units will be merged within DaimlerChrysler Services (debis) AG. In order to...

  • Page 67
    ... of the financial services business. To meet this need and to optimize capital costs we are resorting primarily to international money and capital markets. In 1998 we again made use of asset backed securities to limit group debt by securitizing receivables from leasing and sales financing. The...

  • Page 68
    ...) On cash flow before taxes, in consideration of existing hedging contracts FUTURE RISKS. As a globally active company, DaimlerChrysler is subject to a number of risks intrinsic to its corporate activities. Above, we have described the risks resulting from the development of currency exchange rates...

  • Page 69
    ...the dealer organizations. In the main, the necessary conformance measures will be implemented decentrally within the operational business units. A global project organization will manage the exchange of know-how throughout the Group and coordinate the implementation process. Using a reporting system...

  • Page 70
    ...' equity for each of the years in the three-year period ended December 31, 1998) were prepared in accordance with the United States Generally Accepted Accounting Principles. In order to comply with § 292 a HGB (German Commercial Code), the consolidated financial statements were prepared in Deutsche...

  • Page 71
    ... financial position of DaimlerChrysler as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with United States generally accepted accounting principles. Frankfurt am Main March...

  • Page 72
    ...in millions, except per share amounts) (Note 1) $ 1998 â,¬ 1997 â,¬ 1996 â,¬ 1998 â,¬ 1997 â,¬ 1996 â,¬ Financial Services Year ended December 31, Revenues Cost of sales Gross margin Selling, administrative and other expenses Research and development CONSOLIDATED STATEMENTS OF CASH FLOW 30 5 154...

  • Page 73
    ... 1998 â,¬ 1997 â,¬ Financial Services At December 31, Intangible assets Property, plant and equipment, net Investments and long-term financial assets Equipment on operating leases, net Fixed assets Inventories Trade receivables Receivables from financial services Other receivables Securities Cash...

  • Page 74
    ...to long-term financial liabilities Repayment of financial liabilities Dividends paid (Financial Services: incl. profit transferred from subsidiaries) Proceeds from issuance of capital stock Purchase of treasury stock Proceeds from special distribution tax refund Cash provided by (used for) financing...

  • Page 75
    ... comprehensive income (loss) Total comprehensive income - - - - 4,820 - - (1,402) - 259 - (1) - - - - 4,820 (1,144) 3,676 Issuance of capital stock Purchase and retirement of capital stock Re-issuance of treasury stock Dividends Special Distribution Other Balance at December 31, 1998 163...

  • Page 76
    ...associated companies Investments in related companies Loans to associated and related companies Long-term securities Other loans Investments and long-term financial assets Equipment on operating leases2) 72 1 2 ) Currency translation changes with period end rates. ) Excluding initial direct costs...

  • Page 77
    ...Currency change Acquisitions/ disposals of businesses Additions Reclassifications Disposals Balance at December 31, 1998 Book Value1) Balance at December 31, 1998 Balance at December 31, 1997 341 1,144 1,485 (6) (6) (12) 2 - 2 137 227 364 - - - 88 11 99 386 1,354 1,740 351 2,210 2,561 313...

  • Page 78
    .... The Merger was accounted for as a pooling of interests and accordingly, the historical results of Daimler-Benz and Chrysler have been restated as if the companies had been combined for all periods presented. Adjustments were made to the restated consolidated financial statements to record the tax...

  • Page 79
    ... accountants, financial printing, accelerated management compensation and other related charges. Commercial practices with respect to the products manufactured by DaimlerChrysler necessitate that sales financing, including leasing alternatives, be made available to the Group's customers. Accordingly...

  • Page 80
    ...rebates granted. Sales under which the Company conditionally guarantees the minimum resale value of the product are accounted for as operating leases with the related revenues and costs deferred at the time of title passage. Revenue on long-term contracts is generally recognized under the percentage...

  • Page 81
    ... estimated future losses on open contracts - all applicable costs are taken into consideration including price increases. The effects of accrued liabilities relating to personnel and social costs are valued at their net present value where appropriate. Use of Estimates - The preparation of financial...

  • Page 82
    ... statements using the equity method of accounting. The remaining associated companies are recorded under investments in related companies in as much as these companies are not material for the respective presentation of the financial position, results of operations and cash flows of the Group. NOTES...

  • Page 83
    .... ("DTAG"), formerly Pentastar Transportation Group, Inc., for net proceeds of â,¬ 343 ($387). The IPO of the common stock interest resulted in a pretax and after-tax gain of â,¬ 65 ($73). The gain was deferred and will be recognized over the remaining term of the vehicle supply agreements with DTAG...

  • Page 84
    ... transactions, the Group recorded charges to 1996 operations of approximately â,¬ 153. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the holding company using the equity method of accounting. In 1996, the Group sold Electrospace Systems, Inc. ("ESI") and Chrysler Technologies Airborne Systems...

  • Page 85
    ...Supervisory Board of DaimlerChrysler AG totaled â,¬ 2. Additionally, members of the Board of Management subscribed for convertible bonds at a notional amount of â,¬ 0.6 within the 1998 Stock Option Plan. Options totalling 1,755,000 and 12,000 to purchase Chrysler common stock were granted to members...

  • Page 86
    ... of which â,¬ 2,229 was generated by the Group's operations in Germany (1997: â,¬ 1,450; 1996: â,¬ 594). The provision (benefit) for income taxes consists of the following: Year ended December 31, 1998 1997 1996 Current taxes Germany Foreign Deferred taxes Germany Foreign 967 992 3,075 (910) 205...

  • Page 87
    ... in Germany are entitled to a tax credit in the amount of federal income taxes previously paid by the corporation. For German companies, the deferred taxes for 1998 and 1997 are calculated using an effective corporate income tax rate of 47.475% plus the after federal tax benefit rate for trade tax...

  • Page 88
    ... nonOrganschaft companies and are partly limited in their use to the Group. The Group's consolidated valuation allowances on deferred tax assets of domestic and foreign operations increased in the balance sheet by â,¬ 143. In future periods, depending upon the Group's financial results, management...

  • Page 89
    ... related components of shareholders' equity, the provision (benefit) for income taxes consists of the following: Year ended December 31, 1998 1997 1996 Provision (benefit) for income taxes before extraordinary items Income tax benefit of extraordinary items Stockholders' equity for employee stock...

  • Page 90
    ... supplies Work in process thereof relating to long-term contracts and programs in process â,¬ 919 (1997: â,¬ 705) Finished goods, parts and products held for resale Advance payments to suppliers 2,278 4,568 1,911 4,414 Certain of the Group's U.S. inventories are valued using the LIFO method...

  • Page 91
    ... secured by automobiles and commercial vehicles. Contractual maturities applicable to receivables from sales financing and finance leases maturing in each of the years following December 31, 1998 are as follows: Actual cash flows will vary from contractual maturities due to future sales of finance...

  • Page 92
    ... determinable are classified as follows: At December 31, 1998 Fair Unrealized value Gain At December 31, 1997 Fair Unrealized vaule Gain 88 Cost Loss Cost Loss Available-for-sale Trading Securities Investments and long-term financial assets available-for-sale 10,501 934 11,435 278 11,713 11...

  • Page 93
    ... cost and calculating realized gains or losses. Other securities classified as cash equivalents were approximately â,¬ 4,600 and â,¬ 3,900 at December 31, 1998 and 1997, respectively, and consisted primarily of purchase agreements, commercial paper and certificates of deposit. Due within one year...

  • Page 94
    ... effect resulting from the discount to market value at which the Daimler-Benz Ordinary Shares were sold in the rights offering. Treasury Stock In November 1998, Chrysler contributed 23.5 million shares of its common stock to the Chrysler Corporation Retirement Master Trust, which serves as a funding...

  • Page 95
    ... â,¬ 2,356 ( â,¬ 2.35 per share) of the 1998 earnings of DaimlerChrysler AG as a dividend to the stockholders. 21. S T O C K - B A S E D C O M P E N S AT I O N The Group currently has variable stock option plans, which were originally approved by Daimler-Benz and have been converted to options for...

  • Page 96
    ...cost recognized in 1998 in connection with the variable stock option plans amounted to â,¬ 38 (1997: â,¬ 0; 1996: â,¬ 0). Stock Appreciation Rights In conjunction with the consummation of the Merger, the Group implemented a new Stock Appreciation Rights plan ("SARs"). SARs provide eligible employees...

  • Page 97
    ...CONSOLIDATED FINANCIAL STATEMENTS Chrysler Fixed Stock Option Compensation Plans A summary of the status of fixed stock option grants under Chrysler's stock-based compensation plans as of December 31, 1998, 1997 and 1996, and changes during the years ending on those dates is presented below (shares...

  • Page 98
    ... forma effect on the Group's consolidated net income and basic and diluted earnings per share for 1996 was not material. 1998 1997 The fair value of the variable stock options was calculated at the grant date based on a trinomial tree option pricing model which considers the terms of the issuance...

  • Page 99
    ... to the Group's pension plans is presented by U.S. Plans and Non-U.S. Plans which are principally comprised of plans in Germany. The schedules are in accordance with SFAS 132 which does not change the method of accounting for such plans. In 1998 DaimlerChrysler used the rates of the new Heubeck...

  • Page 100
    ... obligations together with long-term rates of return on plan assets vary according to the economic conditions of the country in which the 1998 retirement plans are situated. The weighted-average assumptions used in calculating the actuarial values for the principal pension plans were as follows...

  • Page 101
    ...companies. The schedules are in accordance with SFAS 132 which does not change the method of accounting for such plans. At December 31, 1998 Other Postretirement benefits Certain DaimlerChrysler operations in North America provide postretirement health and life insurance benefits to their employees...

  • Page 102
    ... with long-term rates of return on plan assets vary according to the economic conditions of the country in which the retirement plans are situated. The weighted-average assumptions used in calculating the actuarial values for the postretirement benefit plans were as follows: 1998 1997 1996...

  • Page 103
    ... for the payment of postretirement health care benefits. Therefore in 1998 the total of â,¬ 1,498 were assigned to the plan assets of the postretirement health care and life insurance benefit plans. In December 1997, Chrysler prepaid certain 1998 nonpension employee benefits by contributing...

  • Page 104
    ... production requirements resulted, especially for DaimlerChrysler Aerospace Airbus GmbH, in a reduction of approximately â,¬ 153 in certain restructuring provision made in 1995. Exit costs in 1998 and 1997 primarily result from the restructuring of directly managed businesses. In 1996 they relate...

  • Page 105
    ... rate (%) Maturities 1998 1997 Notes/Bonds Commercial paper Liabilities to financial institutions Liabilities to affiliated companies Loans, other financial liabilities Liabilities from capital lease and residual value guarantees Short-term financial liabilities (due within one year) Notes/Bonds...

  • Page 106
    ... related tax liabilities. As of December 31, 1998, tax liabilities include employee withholding taxes of â,¬ 1,025 (1997: â,¬ 711) and social benefits due of â,¬ 759 (1997: â,¬ 659). 26. DEFERRED INCOME As of December 31, 1998, â,¬ 986 of the total deferred income mature after more than one year...

  • Page 107
    ... to address various customer satisfaction, safety and emissions issues related to vehicles it sells. DaimlerChrysler establishes reserves for product warranty, including the estimated cost of these service and recall actions, when the related sale is recognized. The estimated future costs of these...

  • Page 108
    ...project groups. Total rentals under operating leases, charged as an expense in the statement of income, amounted to â,¬ 984 (1997: â,¬ 910; 1996: â,¬ 826). Future minimum lease payments under rental and lease agreements which have initial or remaining terms in excess of one year at December 31, 1998...

  • Page 109
    ... management, DaimlerChrysler purchases financial instruments, such as financial investments, variable- and fixed-interest bearing securities and stock, forward exchange contracts and currency options. The Group also sells financial instruments such as eurobonds, commercial paper and euro-medium-term...

  • Page 110
    ... sale transactions were estimated by discounting expected cash flows at current market rates. Financial Liabilities - Fair value of publicly traded debt was estimated using quoted market prices. The fair value of other long-term notes and bonds was estimated by discounting future cash flows using...

  • Page 111
    ... to market and any resulting unrealized gains and losses are recognized currently in financial income, net. Derivatives purchased by the Group under macro-hedging techniques, as well as those purchased to offset the Group's exposure to anticipated cash flows, do not generally meet the requirements...

  • Page 112
    ... names Mercedes-Benz and Freightliner. Chrysler Financial Services. This segment is comprised primarily of Chrysler Financial Company, L.L.C., which is engaged principally in retail and lease financing for vehicles, dealer inventory and other financing needs, dealer property and casualty insurance...

  • Page 113
    ... Cars MercedesBenz, smart 1998 Passenger Commercial Cars Vehicles Trucks MercedesChrysler, Benz, Plymouth, Freightliner, Jeep, Sterling, Dodge Setra Chrysler Financial Services Services Aero space Other Eliminations Consolidated Revenues Intersegment sales Total revenues Operating Profit...

  • Page 114
    ... 5.04 Non-recurring items1) Diluted earnings per share excluding non-recurring items 1 0.41 5.45 (2.57) 4.21 - 4.20 ) Non-recurring items comprise merger costs of â,¬ 401 (net of tax) in 1998 and tax benefits relating to a special distribution and to a decrease of the valuation allowance of...

  • Page 115
    ... to institute a SAR plan for Daimler- Chrysler employees currently holding options under the 1997 and 1998 plans and offer each employee the opportunity to substitute an SAR in exchange for each option currently held. All terms and conditions will be identical to the stock options which are being...

  • Page 116
    ... Member of the Works Council, DaimlerChrysler Aerospace AG Augsburg Plant G. Richard Thoman Stamford President and Chief Operating Officer of Xerox Corporation Bernhard Walter Frankfurt am Main Chairman of the Board of Managing Director of Dresdner Bank AG Lynton R. Wilson Toronto Chairman of the...

  • Page 117
    ...and science. It meets approximately twice a year at varying locations worldwide. The last meeting took place in November 1998 in Washingon D.C., and it was the first after the merger of DaimlerChrysler. The IAB was founded in 1995 as Daimler-Benz International Advisory Board. It is chaired by Victor...

  • Page 118
    ... the consolidated financial statements for 1998 and By a resolution of the Annual General Meeting on June 17, 1998 the name was changed to DaimlerChrysler AG and the merger of Daimler-Benz Aktiengesellschaft and Chrysler Corporation was adopted as the object of the company. The corporation has been...

  • Page 119
    ... for Labor and Public Order. He, too, receives our express thanks. The final meeting of the Supervisory Board of Daimler-Benz AG took place on November 4, 1998. The Supervisory Board considered among other matters the new structure of the Micro Compact Car Group and the capital measures involved, as...

  • Page 120
    ....0 86.0 100.0 Mercedes-Benz U.S. International, Inc., Tuscaloosa Mercedes-Benz India Ltd., Poona Mercedes-Benz Japan Co. Ltd., Tokyo Mercedes-Benz Group Indonesia, Jakarta 4) 95.0 Passenger Cars & Trucks Chrysler, Plymouth, Jeep, Dodge DaimlerChrysler Corporation, Auburn Hills Chrysler Canada Ltd...

  • Page 121
    ...97 Employment at Year-End 98 97 Services DaimlerChrysler Services (debis) AG, Berlin debis Systemhaus GmbH, Leinfelden-Echterdingen debitel Kommunikationstechnik GmbH & Co. KG, Stuttgart Mercedes-Benz Finanz GmbH, Stuttgart Mercedes-Benz Finance Ltd., Milton Keynes Mercedes-Benz Credit Corporation...

  • Page 122
    ...: wages and salaries Research and development costs Operating profit Operating margin Financial results Income before income taxes and extraordinary items Net operating income Net operating income as % of net assets (RONA) Net income (loss) Net income (loss) per share (â,¬) FIVE-YEAR-SUMMARY 95,965...

  • Page 123
    ... Fax: 0081 3 5572 7126 Warszawa Phone: 0048 22 6977041 Fax: 0048 22 6548633 Washington D.C. Phone: 001 202 414 6747 Fax: 001 202 414 6716 Windsor, Ontario Phone: 001 519 973 2101 Fax: 001 519 973 2226 Zagreb Phone: 0038 5 1 48123 21 Fax: 0038 5 1 48123 22 INTERNATIONAL REPRESENTATION OFFICES 119

  • Page 124
    ... at the County Court House in Stuttgart. The financial statements may be obtained from DaimlerChrysler free of charge. The above publications can be requested from: DaimlerChrysler AG D-70546 Stuttgart The information can also be ordered by phone or fax under the following number: (49) 711-1792287...

  • Page 125
    ... Hanns-Martin-Schleyer-Halle Stuttgart, Germany Half-Year Balance Sheet Press Conference: July 29, 1999 New York, U.S.A. Corporate Presentation to Analysts: July 29, 1999 New York, U.S.A. Interim Report January to September: End of October 1999 Investor Relations Stuttgart: Phone 0049 711 17 92197...

  • Page 126
    DaimlerChrysler Stuttgart, Germany Auburn Hills, U.S.A. www.DaimlerChrysler.com