Mercedes 1999 Annual Report Download - page 75

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ANALYSIS OF THE FINANCIAL SITUATION
69
Risks resulting from interest-rate and exchange-rate devel-
opments, including our hedging activities, have been de-
scribed in this section. Additional uncertainties arise from
further economic developments in those countries which
are important for our businesses, and can be increased by
the strong cyclical nature of demand in some of the markets
we serve.
The automotive sector, in particular, is marked by dynamic
competition which is likely to become even more intense in
the future as a result of worldwide excess capacity. The in-
troduction of the euro as a single currency in eleven mem-
ber states of the European Union and the growing impor-
tance of new distribution channels such as the Internet will
reinforce this trend. It will therefore continue to be impor-
tant for us to maintain our position in our traditional mar-
kets while exploiting additional market potential with inno-
vative new products. In this context the market success of
the smart and the addition of new models and versions to
the smart product range is of great significance.
Like all internationally active automobile manufacturers, the
DaimlerChrysler Group is affected by intensifying legal
regulations in its various markets concerning the exhaust
emissions and fuel consumption of its range of cars as well
as their safety standards. Furthermore, there are several ac-
tions for damages pending against companies of the
DaimlerChrysler Group – as well as an investigation by the
European Commission.
Our financial services business is primarily involved in leas-
ing and financing Group products, mainly vehicles, to our
customers and for our dealerships. Refinancing is carried
out to a considerable extent through external capital mar-
kets. This gives rise, not only to credit risks, but also to re-
sidual-value risks for the vehicles, which are given back to
us for remarketing at the end of their leasing periods.
Adtranz operates in an extremely competitive environment,
characterized by industry overcapacity and pricing pressure
resulting from the rationalization needs faced by railroad
operators. We are confident, however, that the measures we
are taking to restructure Adtranz will improve in its com-
petitive situation.
Using a newly developed country-rating system, CRISK-Ex-
plorer, we are striving to monitor not only the risk potential
but also the opportunities connected with business activi-
ties in emerging markets.
YEAR 2000 ADAPTATION SUCCESSFULLY COMPLETED. We
successfully completed the process of adapting our informa-
tion and communications systems for year 2000 compli-
ance. All of our computers, technical equipment and ma-
chinery in our plants, offices and spare parts centers
continued to function properly after the end of the year, so
there were no significant disturbances or failures. The
project team that was responsible for Group-wide conver-
sion and adaptation has now concluded its work and has
handed over responsibility for further system developments
to the appropriate functional departments. When carrying
out the necessary system adaptations for a smooth transi-
tion to the year 2000, it proved to be a great advantage that
we had already introduced the euro as our corporate cur-
rency on January 1, 1999.
For the DaimlerChrysler Group the costs of ensuring year
2000 compliance amounted to approximately €240 million.
Of this total, about €70 million was incurred in the 1999 fi-
nancial year.
EVENTS AFTER THE END OF THE 1999 FINANCIAL YEAR.
Since the end of the 1999 financial year there have been no
further developments, beyond the ones described above,
which are of major significance to DaimlerChrysler and
which would lead to a changed assessment of the Group’s
position. The course of business in the first months of 2000
confirms the statements made in the section Outlook.
This Annual Report contains forward-looking statements based on beliefs of DaimlerChrysler management. When used in this
document, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and “project” are intended to identify forward-
looking statements. Such statements reflect the current views of DaimlerChrysler with respect to future events and are subject to
risks and uncertainties. Many factors could cause the actual results to be materially different, including, among others, changes
in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing
products, lack of acceptance of new products or services and changes in business strategy. Actual results may vary materially
from those projected here. DaimlerChrysler does not intend or assume any obligation to update these forward-looking state-
ments.