Mercedes 2001 Annual Report Download - page 90

86 Notes to Consolidated Statements of Income (Loss)
5. Functional Costs and Other Expenses
Selling, administrative and other expenses are com-
prised of the following:
Notes to Consolidated Statements of Income (Loss)
As discussed in Note 7, the DaimlerChrysler Su-
pervisory Board approved a multi-year turnaround plan
for the Chrysler Group in February 2001. The related
charges are presented as a separate line item on the ac-
companying consolidated statements of income (loss)
and are not reflected in cost of sales or selling, admin-
istrative and other expenses.
In October 2001, the DaimlerChrysler Board of
Management approved a turnaround plan for its North
American truck subsidiary Freightliner. The turn-
around plan is designed to return Freightliner to sus-
tainable profitability and comprises four main ele-
ments: material cost savings, production cost savings,
overhead reductions and improvements to the existing
business model. The implementation of the turnaround
plan resulted in charges of €310 million, reflecting
employee termination benefits of €83 million, asset
impairment charges of €170 million, and other costs
to exit certain activities of €57 million (see Note 23b).
The charges were recorded in cost of sales (€173 mil-
lion) and selling, administrative and other expenses
(€137 million) in 2001. Employee termination benefits
related to voluntary and involuntary severance mea-
sures affect 4,440 hourly and salaried employees.
Based on its investment in MMC and the corre-
sponding strategic alliance entered into in the fourth
quarter 2000, DaimlerChrysler conducted a review of
its compact car strategy in 2000, and concluded that it
was necessary to revise the current strategic plan for
the smart brand, including restructuring of supplier
contracts. As a result, the carrying values of certain of
the brand’s long-lived assets were determined to be
impaired as the identifiable, undiscounted future cash
flows from the operation of such assets were less then
their respective carrying values. In accordance with
SFAS 121, DaimlerChrysler recorded an impairment
charge of €281 million. The impairment charge repre-
sents the amount by which the carrying values of such
assets exceeded their respective fair market values.
Selling expenses
Administration expenses
Goodwill amortization and
write-downs
Other expenses
(in millions of €) 1999
Year ended December 31,
11,823 11,666 10,087
5,539 5,921 5,333
184 279 215
785 437 428
18,331 18,303 16,063
20002001
The impairment relates principally to the carrying val-
ues of the manufacturing facility, equipment and tool-
ing. In addition, charges of €255 million were recorded
related to fixed cost reimbursement agreements with
MCC smart suppliers. The charges were recorded in
cost of sales (€494 million) and other expenses (€42
million) for the year 2000.
In 2000, DaimlerChrysler recorded an impairment
charge in cost of sales of approximately €500 million
for certain leased vehicles in the Services segment.
Declining resale prices of used vehicles in the North
American and the U.K. markets required the Group to
re-evaluate the recoverability of the carrying values of
its leased vehicles. This re-evaluation was performed
using product specific cash flow information. As a
result, the carrying values of these leased vehicles
were determined to be impaired as the identifiable
undiscounted future cash flows from such vehicles
were less than their respective carrying values. In ac-
cordance with SFAS 121, the resulting pre-tax impair-
ment charges represent the amount by which the car-
rying values of such vehicles exceeded their respective
fair market values.
Personnel expenses included in the statement of
income (loss) are comprised of:
Wages and salaries
Social levies
Net pension cost
(see Note 23a)
Net postretirement benefit
cost (see Note 23a)
Other expenses for pensions
and retirements
(in millions of €) 1999
Year ended December 31,
20,073 21,836 21,044
3,193 3,428 3,179
630 327 931
1,173 830 783
26 79 221
25,095 26,500 26,158
20002001