Mercedes 1998 Annual Report Download - page 64

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ANALYSIS OF THE FINANCIAL SITUATION
60
In addition to the minimum expected return on invested capi-
tal, the individual business units are managed on the basis of
strategic return targets and growth goals, which are oriented to
the best competitor in the respective industry. In addition, the
economic value added, defined as operating profit after deduc-
tion of the average capital costs, serves as a further measure
for achieving our profitable growth. In the individual business
units, specific value drivers were defined which are in accord-
ance with the control variables for the Group, complement
them and serve as parameters for the operating units for in-
creasing the value of the corporation.
For the individual industrial businesses, the net assets are de-
rived from the asset side, since these businesses are often not
legal units and therefore also do not have an evolved financing
structure. Net assets are derived from total assets by deducting
non-interest bearing debt. In terms of value, derivation from
liabilities and from assets comes to the same results.
The return on net assets for the DaimlerChrysler Group, based
on the net operating income in the amount of € 6.6 billion,
rose in the 1998 fiscal year to 11.6% (1997: 10.2%), and was
significantly higher than the average costs of capital. Especially
encouraging was the fact that all divisions succeeded in im-
proving their return on net assets or their return on equity
compared to 1997 and that the industrial units overall ex-
ceeded the minimum expected return of 15.5%. The return on
net assets for the rail systems was negative due to the business
problems at Adtranz.
1) Excluding financial services
2) The organization of business procedures in the aerospace industry
under which part of the capital employed is generally financed
by advanced payments results in a relatively low capital base and
correspondingly higher RONA value; this is therefore not directly
comparable with RONA values from other branches of industry
3) Before taxes
51.4
7.2
16.1
5.3
0.5
0.8
1.2
DaimlerChrysler Group
(after taxes)
Industrial business
(before interest and taxes)
Passenger Cars
(Mercedes-Benz, smart)
Passenger Cars and
Trucks
(Chrysler, Plymouth, Jeep®, Dodge)
Commercial Vehicles
(Mercedes-Benz, Freightliner,
Sterling, Setra)
Services1)
Aerospace2)
Rail Systems,
Automotive Electronics,
MTU/Diesel Engines
11.6
25.1
23.8
17.1
17.5
43.0
(18.4)
Net Assets and
Return on Net Assets
56.5
8.0
17.7
5.5
0.7
1.4
1.2
10.2
23.8
20.9
6.5
17.4
36.2
(11.2)
Return on Equity3)
Stockholders' equity
Financial Services
Chrysler
Financial Services
debis
Financial Services
3.0
1.6
2.9
1.2
21.8
17.4
20.0
16.3
Stockholders’ equity
Minority interests
Financial liabilities of the
industrial segment
Pension provisions of the
industrial segment
Net assets
30,367
691
9,264
16,530
56,852
Net Assets1)
of the DaimlerChrysler-Group
98
€
98
US $
35,629
810
10,869
19,394
66,702
1) Year-end values; annual average: € 56.5 billion (US $ 66.3 billion)
%%
Annual Average
Net Assets
In Billions
of €
199 8
1997
199 8 1997
In Billions
of €
Return on Net Assets
Net assets are determined on the basis of book values, as
shown in the following table.
in Millions