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Unsere Marken. Unsere Tradition. Unsere Zukunft.
Our Brands. Our Heritage. Our Future.
Annual Report 2002

Table of contents

  • Page 1
    Unsere Marken. Unsere Tradition. Unsere Zukunft. Our Brands. Our Heritage. Our Future. Annual Report 2002

  • Page 2
    ... industry and the development of the automobile, and which continue to do so; brands, which are crucial for the future success of our company; and brands, which fascinate people around the world again and again - today and in the future. DaimlerChrysler AG Stuttgart, Germany Auburn Hills, USA...

  • Page 3
    ...51 +50 3 Change in % Revenues European Union of which: Germany North America of which: USA Other markets Employees (at year-end) Research and development costs Investments in property, plant and equipment Cash provided by operating activities Operating profit (loss) Operating profit adjusted 2 Net...

  • Page 4
    ...% Light Trucks 5,083 2,201 2,755,919 104,057 32% SUVs Commercial Vehicles 2002 Amounts in millions US $ Percentage of Sales 2002 3 2001 3 51% Vans (incl. V-Class) Operating profit (loss) Operating profit adjusted1 Revenues Investments in property, plant and equipment Research and development...

  • Page 5
    ...Governance | International Representative Offices | Seven-Year Summary | The DaimlerChrysler Share | Addresses / Information | Financial Diary 2003 2002 3 2001 3 6 8 12 16 Operating profit Operating profit adjusted1 Revenues Investments in property, plant and equipment Employees (Dec. 31) 3,208...

  • Page 6
    ... pages or videos. An extensive "Investor Relations" section is a part of the Group's Internet site at www.daimlerchrysler.com. It offers practically everything that interested persons, investors and analysts would like to know about the company's business and shares. It includes, for example, the...

  • Page 7
    ... this Annual Report we are delighted to present a range of vehicles from our brands, photographed in many locations all over the world. Welcome to the fascinating world of DaimlerChrysler. Mercedes Car Group Chrysler Group Commercial Vehicles Division DaimlerChrysler Services Strategic Partners

  • Page 8
    ... to 15.8 billion. While markets for passenger cars and commercial vehicles deteriorated, we recorded an Operating Profit of more than four times the previous year's level. In addition, we strengthened further the company's balance sheet, with amplified cash flow and significant debt reduction. This...

  • Page 9
    ... in Operating Profit. DaimlerChrysler Services continued to focus on the automotive business and strengthen its support for our car and truck brands - through extended financial services offered by the this year's founded DaimlerChrysler Bank, for example. Our alliance partner Mitsubishi Motors has...

  • Page 10
    ... The new Mercedes-Benz E-Class station wagon, the Mercedes McLaren SLR, the smart forfour, the Chrysler Crossfire and the Chrysler Pacifica, the Dodge LX, the Mercedes-Benz Accelo truck, and the new Mercedes-Benz Vito are but a few. Our partner Mitsubishi Motors expects to launch twelve new vehicles...

  • Page 11
    ...2004 the first products of joint development programs will be on the road. The DaimlerChrysler Share. The stock markets have not yet given tangible recognition to our achievements, nor to our potential. Many investors appreciate the substantial strides that our company has made. However, the current...

  • Page 12
    ... Bernhard Age: 42 Chief Operating Officer Chrysler Group Appointed until 09/2007 Manfred Bischoff Age: 60 Aerospace & Industrial Businesses Appointed until 12/2003 Eckhard Cordes Age: 52 Commercial Vehicles Appointed until 12/2008 Günther Fleig Age: 54 Human Resources & Labor Relations Director...

  • Page 13
    ...: 61 Finance & Controlling Appointed until 12/2004 Rüdiger Grube Age: 51 Corporate Development Appointed until 09/2007 Jürgen Hubbert Age: 63 Mercedes Car Group Appointed until 04/2005 Klaus Mangold Age: 59 Services Appointed until 12/2003 Thomas W. Sidlik Age: 53 Procurement & Supply Chrysler...

  • Page 14
    ... Commercial Vehicles and Services divisions (see pages 68-71). Despite higher expenditure on the introduction of new models and difficult market conditions, the contribution to earnings of 13.0 billion made by the Mercedes Car Group division slightly exceeded the high prior year's result. Chrysler...

  • Page 15
    ... purchases brought forward due to new exhaust emission regulations in the United States. In Western Europe there was a sharp downturn in demand for light and heavy-duty commercial vehicles. Operating Profit 2002 In millions US $ 2002 3 2001 3 DaimlerChrysler Group Mercedes Car Group 1 Chrysler...

  • Page 16
    ...the new Durango light truck and the new Viper and Crossfire sports cars. The main investments made by the Commercial Vehicles division were for the new Actros, the successor model to the Vito, and the new Freightliner Business Class M2. DaimlerChrysler's research and development departments employed...

  • Page 17
    ...'s third-largest market for commercial vehicles, South Korea, in which Hyundai is the biggest-selling manufacturer. In March 2003, we intend to acquire a 43% ownership interest for 1 760 million in Mitsubishi Fuso Truck & Bus Corporation (MFTBC) from our alliance partner Mitsubishi Motors. MFTBC is...

  • Page 18
    ... for Mercedes Car Group | Chrysler Group to continue progress and to boost competitiveness with new products | Commercial Vehicles division: continued optimization of products and production methods with more economies of scale | Further expansion of automotive services | 342 billion to secure the...

  • Page 19
    ... by a four-seater (smart forfour) in 2004. Mercedes Car Group will continue to launch numerous new models in the following years. Revenues Plan 2003 Target 2005 In billions 3 3 DaimlerChrysler Group Mercedes Car Group Chrysler Group Commercial Vehicles Services Other Activities 151 51 60 28 14...

  • Page 20
    ... our partner Mitsubishi Motors should strengthen Chrysler Group's cost position and margins and enhance its innovative flair. Examples of the new long-term product strategy include the versatile Chrysler Pacifica sports tourer, the Chrysler Crossfire sports car and the new Dodge Durango light truck...

  • Page 21
    ... public sector. However, due to its sizeable order backlog, a structural shift towards larger Airbus versions, and a strong competitive position in both civil and military markets, EADS expects its revenues to grow in the coming years. Its current costreduction program and highly flexible production...

  • Page 22
    ... Asian markets through cooperation with Mitsubishi Motors Corporation and Hyundai Motor Company Europe Production locations Sales Revenues in outlets millions of 3 Employees Mercedes Car Group Chrysler Group Commercial Vehicles Sales Organization Automotive Businesses Services Other Activities...

  • Page 23
    ... | 17 South America Production locations Sales Revenues in outlets millions of 3 Employees Africa Production locations Sales Revenues in outlets millions of 3 Employees Mercedes Car Group Chrysler Group Commercial Vehicles Sales Organization Automotive Businesses Services Other Activities...

  • Page 24
    ... the brands, MercedesBenz, Maybach, smart, Mercedes-Benz AMG and Mercedes-Benz McLaren. 2002 Amounts in millions US $ 2002 3 2001 3 Operating profit Operating profit adjusted 1 Revenues Investments in property, plant and equipment Research and development expenditure Production (units) Sales...

  • Page 25
    ...'s car is simply the best. That's why this family of five's Mercedes-Benz C-Class station wagon is in daily use. Even the holiday to the South of France begins on the way there. If only all beautiful things were so practical, thinks Mom. But after surfing, Dad's wet suit has to go into the roof-box...

  • Page 26
    ... Mercedes-Benz brand was able to extend its lead in the premium segment, in which it now has a worldwide market share of more than 25%. We expect sales of approximately 250,000 E-Class vehicles in 2003, the first full year of production. The new CLK coupe also enjoyed strong demand. More than 33,300...

  • Page 27
    ... The Mercedes-Benz brand traditionally incorporates the highest degree of vehicle safety. Researchers and developers continually strive to ensure that the brand's pioneering role in safety is maintained through the application of forward-looking technologies. One example is PRE-SAFE, a pre-crash...

  • Page 28
    22 | Mercedes Car Group smart successfully launched in new markets Sales of smart brand city coupes and convertibles increased by 5% in 2002 to 122,300 units. This success is in particular due to the model update implemented in March 2002. Important markets were Germany, with sales of 43,600 ...

  • Page 29
    ... space with the smart if you feel like shopping or a coffee. Mirella and Bella have found the right shoes at last, Angelo and Maria are planning their first date, Donatella gets to know the details over a cappuccino. Ciao Roma! www.daimlerchrysler.com/livingbrands

  • Page 30
    ...agreed to gradually acquire the remaining shares by 2005. Ilmor Engineering Ltd. and DaimlerChrysler have been responsible for the development, design and production of Mercedes-Benz Formula 1 engines since 1993, and the company has now been renamed Mercedes-Ilmor. It will more closely combine Ilmor...

  • Page 31
    The arrival of the new Maybach in New York was a very important event for me and my family, says Irmgard Schmid-Maybach. Her grandfather's vision had come true at last. The best automobile in the world is back, and a highlight not only on German or American roads. The legend lives. www....

  • Page 32
    ... manufacturers Chrysler Group had the fewest problems per hundred vehicles after three years in service. Earnings goal significantly exceeded Despite the intense competition in North America and the need for generous sales incentives, Chrysler Group achieved an operating profit excluding one-time...

  • Page 33
    Drive is love - this was obvious at the final annual meeting of the official PT Cruiser Owner Club in Myrtle Beach, South Carolina. Jim and PT-Ken, Martha, PT-Brian and Ronald proudly presented their PTs. Like their cruisers, everybody is special. There are lively discussions on the beach and at the...

  • Page 34
    ...transaxles, transfer cases and axles, is fully transferable to subsequent owners, and is given on all new Chrysler Group vehicles purchased or leased. Unit Sales 2002 1 1,000 units 02/01 in % Total of which: Passenger cars Light trucks Minivans SUVs 2 United States Canada Mexico Rest of the world...

  • Page 35
    ... a new market segment. Production of the Chrysler Pacifica began in early 2003 at Chrysler Group's assembly plant in Windsor, Canada. The Pacifica is being built on a new platform, but will use existing corporate components from other vehicles such as the proven 3.5 liter V6 engine from the Chrysler...

  • Page 36
    ... the market for mass-produced pickup trucks. In December, Motor Trend magazine selected the Dodge Ram as its Truck of the Year. The strong demand for Dodge pickup trucks has led Chrysler Group to introduce a third shift at the assembly plant in Warren, Michigan, which will result in 1,000 more jobs...

  • Page 37
    ... pushing the limit for both man and machine. The terrain alternates between jungle-like forests, patches of desert and gushing rivers. Every hurdle is shared and overcome together. In the evening, beans and enchiladas are served in front of the tent, accompanied by conversations that could only take...

  • Page 38
    ... by Chrysler Group's Performance Vehicle Operations Team, such as the Dodge SRT-4, the Dodge Ram SRT-10 and the Dodge Viper SRT-10. - Close cooperation with the top after-market specialists to demonstrate that Chrysler Group vehicles are the best choice for customization. - Supplying Mopar parts and...

  • Page 39
    ... about cars and cruise together. Sure, Doug and his friends are also in the bleachers when the vehicles line up at the start for the NASCAR Closing Race Final in 2002. The Dodge Viper tuner from Miami doesn't miss a single race with Bill Elliot in Dodge No. 9. And in the evening, the Viper Club is...

  • Page 40
    ... the long-term product and production strategy (see page 70). 2002 Amounts in millions US $ 2002 3 2001 3 Operating profit (loss) Operating profit adjusted 1 Revenues Investments in property, plant and equipment Research and development expenditure Production (units) Unit sales (units) Employees...

  • Page 41
    ... with the best service. It all started with a used Mercedes-Benz truck shortly after the Berlin wall came down. Today Michael Erck's transport company has a fleet of 150 trucks, which are on the road nationwide, night and day, to make sure that we have milk in our coffee at breakfast time. For 2003...

  • Page 42
    ... medium-duty Freightliner truck, the Business Class M2, was launched in February 2002. The Sterling and Western Star brands have also introduced new products and new equipment variants. As part of the restructuring program, production of Western Star trucks was transferred to the plant in Portland...

  • Page 43
    ... brand vehicle as well. We also plan to launch the Sprinter in Canada and Mexico. The licensing agreement with Volkswagen AG for the production of the Sprinter van by Volkswagen was renewed to cover successor models as well. The updated Mercedes-Benz Sprinter appeals with a new design and a world...

  • Page 44
    ... Axle Alliance Company in Detroit enables our axles to be used in the NAFTA region. In the year under review, the Powersystems business unit posted revenues of 15.1 billion, compared to 15.6 billion in 2001. Most of its products were supplied to the vehicle units of the Commercial Vehicles division...

  • Page 45
    ...off with Setra buses, says Georg Marti from a third generation bus-owning family in Switzerland. He only uses Setra buses, because customer satisfaction is the key to his success. After a journey in one of the new TopClass 400, his travel groups arrive at their destination in comfort and safety. Not...

  • Page 46
    ... Hyundai partner brands. Among its goals is to coordinate the production and marketing of commercial vehicles and to ensure the coordinated use of technologies, innovations and components. One of the first recommendations of the new committee was to link the product program of Mercedes-Benz trucks...

  • Page 47
    On the road again - with their Freightliner Columbia, Patricia and Don Richards cover over 250,000 miles a year in the USA. They are a typical trucking couple - the Freightliner is their home on wheels, and they value it highly for its strength, comfort and reliability. The Richards have no need for...

  • Page 48
    ... time, economies of scale must be achieved by means of cross-divisional cooperation and the exchange and common use of components, systems and platforms, in order to improve the overall cost position and thus to make the whole Group even more competitive. However, none of the Mercedes-Benz platforms...

  • Page 49
    ... shared is provided by the method developed by Mercedes-Benz for dealing with end-of-life vehicles. This is now also employed by Chrysler Group, and our alliance partner Mitsubishi Motors has decided to use it as well. Organization of the Executive Automotive Committee Board of Management Executive...

  • Page 50
    ... in the business of financing commercial vehicles. Operating profit was also impacted by the declining residual values of offlease vehicles in the United States, caused by the general fall in prices for used vehicles. Improvements to our processes and systems for limiting credit losses also...

  • Page 51
    ... its own business. That's why it uses the professional services of DaimlerChrysler Services Fleet Management to look after its fleet of vehicles. Because we take care of everything: We advise our customers on how to optimize their fleet costs, and deal with ordering and financing their vehicles. In...

  • Page 52
    ... the managed fleet totaling around 300,000 vehicles at year end, an increase of 10% on the prior year. Contract volume of 1109.3 billion was down 15% from the prior year, mainly due to changes in the relative value of the US dollar. The sale of a substantial part of the Capital Services portfolio...

  • Page 53
    ... As part of its activities to support DaimlerChrysler's long-term strategy, the Services division also expanded its business operations in Asia last year. In order to gain a solid foothold in Asia's second-largest automobile market, we established a leasing and sales-financing company in South Korea...

  • Page 54
    ... with its partners, the MTU Aero Engines business unit develops and manufactures civil and military aircraft engines as well as industrial gas turbines. As the world's largest independent provider of maintenance services for civil-aviation engines, MTU Aero Engines also performs repair and overhaul...

  • Page 55
    ... low fuel consumption and thus lower operating costs than any other long-haul aircraft. New projects safeguard future success Despite difficult markets, MTU Aero Engines plans to continue its growth strategy by winning a larger share of future engine projects. In this context the selection of...

  • Page 56
    ... other markets (+25%). Unit sales of commercial vehicles increased to 76,000 in the first six months of the financial year (1st half 2001/02: 72,000). This was largely due to higher sales in Asia, the Middle East and Africa. Revenues during the first six months of the financial year ending on March...

  • Page 57
    ... one month of sales, more than 15,000 vehicles had been ordered. The introduction of the new Colt marked the beginning of an extensive product offensive, in which the Mitsubishi brand is to be redefined worldwide with a new distinctive design to attract additional customers. MMC plans to launch some...

  • Page 58
    ... research and development for new products and technologies. On December 31, 2002, a total of 2,600 people (2001: 2,700) were employed at Corporate Research, with a further 24,900 (2001: 25,400) working in the development departments at the Mercedes Car Group, Chrysler Group, and Commercial Vehicles...

  • Page 59
    ... drivers find a parking space. Customer response to such developments is tested at our newly opened Customer Research Center (CRC) in Berlin-Marienfelde. Here we analyze a range of vehicle components as well as vehicle-related services and the operation of complete vehicles on the road. For example...

  • Page 60
    ...in exceptional cases, for example the Dodge RAM Contractor Special, can hybrid vehicles be marketed economically. DaimlerChrysler is therefore focusing on lowering the manufacturing costs of hybrids. First fuel-cell vehicles undergo customer tests Since 1994, when the company presented its inaugural...

  • Page 61
    ... says Rainer Bickel, responsible for prototyping and testing the Citaro fuel-cell bus. As part of an EU project, in 2003 a total of 30 Mercedes-Benz Citaro city buses will be delivered to customers in ten major European cities and proven in service over a period of two years. The necessary hydrogen...

  • Page 62
    ... emissions resulting from production processes. We have, for example, reduced specific solvent emissions by up to 80%. At the same time, significantly enhanced efficiency in dealing with resources and greater use of renewable raw materials in vehicle manufacturing are both helping to ease the burden...

  • Page 63
    ... among our employees, we have been awarding our own "Environmental Leadership Award" for several years now. This prize, which is presented to company employees or suppliers throughout the world, honors exceptional achievements in the field of environmental protection. At the same time, both the...

  • Page 64
    ... into the products, such as steel, paint or tires) so as to enhance communication and coordination among the procurement departments of Mercedes Car Group, Chrysler Group and the Commercial Vehicles division. The lead buyers oversee the procurement of certain materials and parts, worldwide, in...

  • Page 65
    ...example is an agreement among the Mercedes-Benz Trucks and Freightliner/Sterling/ Thomas Built Buses business units to use identical air-conditioning compressors in some of their vehicles. And together with the development departments we are currently analyzing whether Mercedes-Benz radiators can be...

  • Page 66
    ...good corporate citizen As an automotive and services company operating globally, DaimlerChrysler is part of a larger community. We are aware of our social responsibility at every location where we do business - and in the world as a whole. Our customers' acceptance of our products and services makes...

  • Page 67
    Sprinter for the main meal of the day. On behalf of various charities, the "Table Service" organization collects donated food every day and distributes it to the needy in the form of a warm lunch. So that they can do this work, DaimlerChrysler has provided 100 Mercedes-Benz Sprinters free of charge ...

  • Page 68
    ... company loses many highly skilled employees. As part of its Workplace Initiative on HIV/AIDS, DaimlerChrysler South Africa is providing medical care for those who need it as well as information on the disease and on methods to prevent it from spreading. Other members of this public-private project...

  • Page 69
    ... World Bank, DaimlerChrysler initiates its own projects. One of them, the "Fit for a Kid" project in the United States, shows parents how to properly install and use child-safety seats. The global MobileKids project meanwhile provides children between eight and twelve with trafficsafety information...

  • Page 70
    ...102 DaimlerChrysler Group Mercedes Car Group Chrysler Group Commercial Vehicles Sales Organization Automotive Businesses Services Other 1 365,571 101,778 95,835 94,111 42,142 10,521 21,184 1 MTU Aero Engines, Corporate Research department, real-estate activities, and holding and finance companies

  • Page 71
    We are the Berlin-Marienfelde facility. The oldest production plant in the DaimlerChrysler Group offers its employees, from apprentices to production manager, the right opportunities for individual development. The outstanding levels of qualification and motivation of the Berlin workforce, combined ...

  • Page 72
    ...virtual Travel Service Center that registers approximately 180 online bookings per day. In addition, the ePeople project has standardized web-based personnel management processes and established an online network for human resources departments throughout Germany. The first ePeople applications have...

  • Page 73
    ... Interests in Sold Receivables and Sales of Finance Receivables | Notes to Consolidated Statements of Income (Loss Functional Costs and Other Expenses Other Income Turnaround Plan for the Chrysler Group Financial Income, net Income Taxes Cumulative Effects of Changes in Accounting Principles 138...

  • Page 74
    .... Operating profit of Mercedes Car Group up on previous year The operating profit of the Mercedes Car Group segment was 13.0 billion in the current year, a slight increase compared to the previous year. In the 2002 financial year, the segment generated unit sales of 1,232,300 units and revenues of...

  • Page 75
    ... in connection with the partial sale of a subsidiary as well as with a change in the long-term product and production strategy. Operating Profit (Loss) adjusted for One-time Effects In millions 2002 US $ 2002 3 2001 3 Industrial Business Financial Services DaimlerChrysler Group 5,073 1,039 6,112...

  • Page 76
    ... and Space Company EADS N.V. ("EADS") and Mitsubishi Motors Corporation, both of which are accounted for using the equity method of accounting. In addition, the MTU Aero Engines business unit, the holding and finance companies, the real estate activities and central corporate research are included...

  • Page 77
    ... with the tax-free sales of the remaining debitel shares, the Rail Systems business unit, and 60% of the Group's interest in TEMIC. Because of the pre-tax loss reported in 2001, the tax-free gains realized in 2001 had the effect of increasing the effective tax rate. Additional information on income...

  • Page 78
    ... from the initial application of new accounting standards. 2001: Turnaround plan Chrysler Group, restructuring of Freightliner, Sterling and Thomas Built Buses business unit, Mitsubishi Motors restructuring, charge related to the recoverability of lease receivables of the capital services portfolio...

  • Page 79
    ...the previous year. Results from ordinary business activities amounted to 17.5 billion (2001: 11.4 billion). These results were impacted by the high financial result of 18.1 billion (2001: 11.0 billion) which reflected the increased profit transfer of DaimlerChrysler Services AG following the sale of...

  • Page 80
    ... cost of capital for the Group are derived from the minimum returns that investors and creditors expect for equity and capital provided by outside sources. The cost of equity is determined in accordance with the capital asset pricing model, using the interest rate for long-term, risk-free securities...

  • Page 81
    ... lease agreements to sales financing agreements, which are reported under receivables from financial services. DaimlerChrysler Group (after taxes) Industrial business (before interest and taxes) Mercedes Car Group Chrysler Group Commercial Vehicles Services 2 Other Industrial Activities 3 Financial...

  • Page 82
    ... billion, in particular as a result of pending market launches for new products in the Mercedes Car Group and higher levels of used vehicles in the Services Division. On the other hand, the inventory in the Chrysler Group Division decreased. Trade accounts receivable decreased to 16.3 billion (2001...

  • Page 83
    ... the Chrysler Group, offset by higher trade payables in the Mercedes Car Group and Commercial Vehicles segments. The Group's financial liabilities amounted to 179.1 billion as of the balance sheet date, which are mainly used for refinancing of the leasing and sales financing business of the Services...

  • Page 84
    ... in the used vehicle business. In addition to industry-specific market developments, unit sales also depend on general political conditions. Conditions relating to emissions, fuel economy and energy prices affect growth in various product segments and therefore also the profitability of the company...

  • Page 85
    ... DaimlerChrysler's services business includes financial and mobility services. The financing and leasing of the Group's new vehicle business are extremely important. The necessary capital is largely refinanced by the external financial markets, with associated exchange rate and interest rate risks...

  • Page 86
    ...hold at the Chrysler Group and Freightliner. The long-term and short-term ratings remained unchanged, at BBB+ and A-2 respectively. The rating agency Moody's Investors Service (Moody's) did not change DaimlerChrysler's rating or outlook in 2002. At the year-end, the long-term rating from Moody's was...

  • Page 87
    ... 1982-1997 model year Chrysler, Plymouth, Jeep® and Dodge vehicles delaminates, peels or chips as the result of defective paint, paint primer, or application processes. Plaintiffs seek compensatory and punitive damages, costs of repair or replacement, attorneys' fees and costs. Six other previously...

  • Page 88
    ... costs in the future in resolving these lawsuits. In September 2000, Freightliner LLC, DaimlerChrysler's North American commercial vehicles subsidiary, acquired Western Star Trucks Holdings Ltd., a Canadian company engaged in the design, assembly, and distribution of heavy duty trucks and transit...

  • Page 89
    ... South Africa before 1994. In particular, on September 27, 2002, a putative class action covering claims arising between 1952 and 1994, captioned Digwamaje v. Bank of America, No. 02-CV-6218 (RCC) (S.D.N.Y.), was filed in the United States District Court for the Southern District of New York naming...

  • Page 90
    ...), cash flows and changes in stockholders' equity for each of the financial years 2002, 2001 and 2000) were prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). In order to comply with Section 292a of the HGB (German Commercial Code), the...

  • Page 91
    ..., and the related consolidated statements of income (loss), changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2002. These consolidated financial statements are the responsibility of DaimlerChrysler's management. Our responsibility is to...

  • Page 92
    ... per share amounts) 2002 (Note 1) $ 2002 3 Year ended December 31, 2000 2001 3 3 Revenues Cost of sales Gross margin Selling, administrative and other expenses Research and development Other income Turnaround plan expenses - Chrysler Group Income (loss) before financial income Financial income...

  • Page 93
    ... (10) 78 Revenues Cost of sales Gross margin Selling, administrative and other expenses Research and development Other income Turnaround plan expenses - Chrysler Group Income (loss) before financial income Financial income (expense), net (therein gain on issuance of associated company stock of 1747...

  • Page 94
    ... 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 and cash equivalents Non-fixed assets Deferred taxes Prepaid expenses...

  • Page 95
    ...-sale securities Derivative financial instruments Minimum pension liability Treasury stock Total Balance at January 1, 2000 Net income Other comprehensive income (loss) Total comprehensive income Increase in stated value of capital stock Issuance of capital stock Purchase of capital stock...

  • Page 96
    ...from sales of finance receivables Acquisitions of securities (other than trading) Proceeds from sales of securities (other than trading) Change in other cash Cash used for investing activities Change in commercial paper borrowings and short-term financial liabilities Additions to long-term financial...

  • Page 97
    ...from sales of finance receivables Acquisitions of securities (other than trading) Proceeds from sales of securities (other than trading) Change in other cash Cash used for investing activities Change in commercial paper borrowings and short-term financial liabilities Additions to long-term financial...

  • Page 98
    ... 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 leases 2 1 Currency translation changes with period end rates. 2 Excluding initial direct costs. 3,980...

  • Page 99
    ... Property, plant and equipment Investments in affiliated companies Loans to affiliated companies Investments in associated companies Investments in related companies Loans to associated and related companies Long-term securities Other loans Investments and long-term financial assets Equipment...

  • Page 100
    ...Noon Buying Rate of the Federal Reserve Bank of New York on December 31, 2002. Certain amounts reported in previous years have been reclassified to conform to the 2002 presentation. Commercial practices with respect to certain products manufactured by DaimlerChrysler necessitate that sales financing...

  • Page 101
    ... of market competition, and consumer demand for the product. The Group may offer a variety of sales incentive programs at any given point in time, including: cash offers to dealers and consumers, lease subsidies which reduce the consumer's monthly lease payment, or reduced financing rate programs...

  • Page 102
    ... established when the product is sold, upon lease inception, or when a new warranty program is initiated. Estimates for accrued warranty costs are primarily based on historical experience. Because portions of the products sold and warranted by the Group contain parts manufactured (and warranted) by...

  • Page 103
    ... is determined based on the expected long-term rate of return on plan assets and the fair value or market-related value of plan assets. Amortization of an unrecognized net gain or loss is included as a component of the Group's net periodic benefit plan cost for a year if, as of the beginning of...

  • Page 104
    ..., equipment and tooling of 1324 million (1206 million, net of taxes, or 10.20 per diluted share) for the year ended December 31, 2002. Leasing - The Group is a lessee of property, plant and equipment and lessor of equipment, principally passenger cars and commercial vehicles. All leases that meet...

  • Page 105
    ...obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. Deposits from Direct Banking Business - Demand deposit accounts are classified as financial liabilities. Interest paid...

  • Page 106
    ... SFAS 142 was 1159 million (10.16 per share). This transitional impairment charge and the related per share amount are reported as the cumulative effect of a change in accounting principle in the Group's consolidated statement of income (loss) for the year ended December 31, 2002 (see Note 10). In...

  • Page 107
    ... expense. The Group is currently considering the adoption of SFAS 123 in 2003. Under SFAS 123, compensation expense of stock option plans is measured at the grant date based on the fair value of the award using an option-pricing model. Compensation expense is recognized over the service period with...

  • Page 108
    ... by issuing debt and equity securities to third party investors. The variable interest entity uses the debt and equity proceeds to purchase property and equipment, which is leased by the Group and used in the normal course of business. At the end of the lease term, DaimlerChrysler generally has the...

  • Page 109
    ... include 112 associated companies (2001: 96) accounted for at cost and recorded under investments in related companies as these companies are not material to the respective presentation of the financial position, results of operations or cash flows of the Group. 3. Equity Method Investments At...

  • Page 110
    ... purchase price will be allocated to investor-level goodwill. In June 2001, DaimlerChrysler entered into a commercial vehicle joint venture agreement with Hyundai Motor Company ("HMC"). In a first phase, the Group and HMC established DaimlerHyundai Truck Corporation ("DHTC"). The Group acquired...

  • Page 111
    ... for sales price adjustments under the terms of the sale and purchase agreement as ...annually, as a result of adopting SFAS 142. Information on the exchange of the Group's controlling interest in DaimlerChrysler Aerospace for shares of EADS and the related initial public offering of EADS in July 2000...

  • Page 112
    ...of used passenger cars and commercial vehicles in North America, DaimlerChrysler recognized impairment charges totaling 1256 million upon reevaluation of the recoverability of the carrying value of its leased vehicles. This re-evaluation was performed using product specific cash flow information. As...

  • Page 113
    ... 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...

  • Page 114
    ... reduction affected represented and non-represented hourly and salary employees. To eliminate excess capacity, the Chrysler Group is idling, closing or disposing of certain manufacturing plants, eliminating shifts and reducing line speeds at certain manufacturing facilities, and adjusting volumes at...

  • Page 115
    ...reduce the prices charged for materials and services. Under the revenue enhancement measures of the turnaround plan, certain dealer programs were replaced with a new performance-based incentive program under which dealers may earn cash payments based on levels of achievement compared to pre-assigned...

  • Page 116
    ..., 2001 2000 Current taxes Germany Non-German countries Deferred taxes Germany Non-German countries (430) 698 1,177 637 (1,695) (777) 1,490 (606) 1,999 1,195 (286) 793 (512) (45) 1,160 For German companies, the deferred taxes at December 31, 2002 are calculated using a federal corporate tax rate of...

  • Page 117
    ...111 (in millions of 3) 2002 Year ended December 31, 2000 2001 Expected expense (benefit) for income taxes Tax rate differential with non-German countries Gains from sales of business interests (T-Systems ITS, TEMIC, Adtranz, debitel) Trade tax rate differential Changes in valuation allowances on...

  • Page 118
    ...or credited directly to related components of accumulated other comprehensive income (loss) and the expense (benefit) for income taxes of extraordinary items and from changes in accounting principles, the expense (benefit) for income taxes consists of the following: (in millions of 3) 2002 2001 2000...

  • Page 119
    ... in the event of a voting deadlock on certain matters or at certain times after three years. The price is based on the average closing midmarket price of EADS shares during the 30 trading days prior to the exercise of the put option. In 2000, Ballard Power Systems Inc., a developer of fuel...

  • Page 120
    ... sales of two businesses in the Commercial Vehicles segment (see Note 4). The remaining changes in the carrying amount of goodwill primarily relate to currency translation adjustments. At December 31, 2002, the carrying value of goodwill, excluding investor level goodwill, allocated to the Group...

  • Page 121
    ... 3) At December 31, 2002 2001 Unearned income Unguaranteed residual value of leased assets Raw materials and manufacturing supplies Work-in-process thereof relating to long-term contracts and programs in process Finished goods, parts and products held for resale Advance payments to suppliers Less...

  • Page 122
    ... of year 1,602 1,004 (639) (36) (372) 1,559 890 1,446 (783) (88) 137 1,602 599 755 (455) (9) - 890 20. Securities, Investments and Long-Term Financial Assets Information with respect to the Group's investments and longterm financial assets is presented in the Consolidated Fixed Assets Schedule...

  • Page 123
    ... 31, 2002 Unrealized Gain Loss At December 31, 2001 Unrealized Gain Loss (in millions of 3) Cost Fair value Cost Fair value Available-for-sale Trading Securities Investments and long-term financial assets available-for-sale 3,085 202 3,287 685 3,972 3,086 207 3,293 728 4,021 19 6 25 43 68...

  • Page 124
    ... closing auction price for 1 Cash and cash equivalents are mainly comprised of cash at banks, cash on hand and checks in transit The following represents supplemental information with respect to cash flows: (in millions of 3) 2002 Year ended December 31, 2001 2000 Interest paid Income taxes...

  • Page 125
    ... minimum conversion price of 153.19, the number of shares was calculated based on the adjusted minimum conversion price. Thus each shareholder received 1.25643 Ordinary Shares of DaimlerChrysler AG per note. Fractions that remained after aggregation were settled in cash based on a conversion rate of...

  • Page 126
    ..., after tax (see Note 22 and Note 25a). 24. Stock-Based Compensation The Group currently has two stock option plans, various stock appreciation rights ("SARs") plans and medium term incentive awards, which are accounted for based on APB 25. Stock Option Plans In April 2000, the Group's shareholders...

  • Page 127
    ... between Daimler-Benz and Chrysler in 1998, the Group implemented a SAR plan through which 22.3 million SARs were issued at an exercise price of $75.56 each, of which 17.0 million SARs are outstanding and exercisable at year-end 2002. The initial grant of SARs replaced Chrysler fixed stock options...

  • Page 128
    ... planning benchmarks and the value of DaimlerChrysler Ordinary Shares at the end of three year performance periods. The benchmarks include return on net assets and return on sales. The Group issued 1.2 million medium term incentives in 2002 (2001: 0.9 million; 2000: 0.7 million). For the year ended...

  • Page 129
    ...changes Service cost Interest cost Plan amendments Actuarial losses Dispositions Acquisitions and other Settlement/ curtailment loss Benefits paid Projected benefit obligations at end of year Change in plan assets: Fair value of plan assets at beginning of year Foreign currency exchange rate changes...

  • Page 130
    ... assumptions used in calculating the actuarial values for the principal pension plans were as follows (in %): 2002 2001 German Plans 2000 2002 Non-German Plans 2001 2000 Weighted-average assumptions: Discount rate Expected return on plan assets (at the beginning of the year) Rate of long-term...

  • Page 131
    ...rate changes Service cost Interest cost Plan amendments Actuarial losses Settlement/curtailment loss Acquisitions and other Benefits paid Accumulated postretirement benefit obligations at end of year Change in plan assets: Fair value of plan assets at beginning of year Foreign currency exchange rate...

  • Page 132
    ...2000 The following schedule presents the effects of a one-percentage-point change in assumed health care cost trend rates: (in millions of 3) 1%-increase 1%-decrease Weighted-average assumptions at December 31: Discount rate Expected return on plan assets (at the beginning of the year) Health care...

  • Page 133
    ... restructuring within Chrysler Group and Freightliner. In 2000 exit costs primarily result from the restructuring of industrial businesses. The Group issues various types of contractual product warranties under which it generally guarantees the performance of products delivered and services rendered...

  • Page 134
    ... Notes/Bonds Commercial paper Liabilities to financial institutions Liabilities to affiliated companies Deposits from direct banking business Loans, other financial liabilities Liabilities from capital lease and residual value guarantees Short-term financial liabilities (due within one year) Notes...

  • Page 135
    ... Trade liabilities 12,342 1 1 14,157 12 1 28. Other Liabilities At December 31, 2002 Due after Due after one year five years At December 31, 2001 Due after Due after one year five years (in millions of 3) Total Total Liabilities to affiliated companies Liabilities to ralated companies...

  • Page 136
    ... South Africa before 1994. In particular, on September 27, 2002, a putative class action covering claims arising between 1952 and 1994, captioned Digwamaje v. Bank of America, No. 02-CV-6218 (RCC) (S.D.N.Y.), was filed in the United States District Court for the Southern District of New York naming...

  • Page 137
    ... the complaints in this litigation are without merit and plans to continue defending against them vigorously. In September 2000, Freightliner LLC, DaimlerChrysler's North American commercial vehicles subsidiary, acquired Western Star Trucks Holdings Ltd., a Canadian company engaged in the design...

  • Page 138
    ... companies and third parties. Such guarantees provide the holder with the right to return purchased assets or products back to the Group in connection with a future purchase of products or services. The table above excludes residual value guarantees related to arrangements for which revenue...

  • Page 139
    ... cost of these service and recall actions, when the related sale is recognized based on historical experience as to product failures as well as current information on repair costs. The Group also enters into extended product warranty arrangements in consideration for a separate arrangement fee...

  • Page 140
    ... are summarized below: Financial Assets and Securities - The fair values of securities were estimated using quoted market prices. The Group has certain equity investments in related and affiliated companies not presented in the table, as these investments are not publicly traded and determination of...

  • Page 141
    ...costs relating to those revenues. This risk exposure primarily affects the Mercedes Car Group segment. The Mercedes Car Group segment generates its revenues mainly in the currencies of the countries in which cars are sold, but it incurs manufacturing costs primarily in euros. The Commercial Vehicles...

  • Page 142
    ... are recognized currently in revenues or cost of sales, as the transactions being hedged involve sales or production of the Group's products. Net gains and losses in fair value of both recognized financial assets and liabilities and derivative financial instruments designated as fair value hedges of...

  • Page 143
    ... 31, 2002 December 31, 2001 December 31, 2000 December 31, 1999 2.6% 2.2% 1.1% 1.0% 2.3% 1.7% 1.2% 2.4% 2.4% 2.6% The effect of a 10% and 20% adverse change in the discount rate used to compute the fair value of the retained subordinated securities would be a decrease of 118 million and 134...

  • Page 144
    ... brand names Mercedes-Benz and Freightliner. Services. The activities in this segment extend to the marketing of services related to financial services (principally retail and lease financing for vehicles and dealer financing), insurance brokerage, trading and information technology. In October 2000...

  • Page 145
    ... | 139 Segment information as of and for the years ended December 31, 2002, 2001 and 2000 follows: (in millions of 3) Mercedes Car Group Chrysler Group Commercial Vehicles Services Other Activities Eliminations Consolidated 2002 Revenues Intersegment sales Total revenues Operating Profit (Loss...

  • Page 146
    ... benifit expenses other than service costs Operating income (loss) from affiliated and associated companies, and financial income (loss) from related companies Gains (losses) from the sale of operating businesses Miscellaneous items Consolidated Operating Profit (Loss) 3,860 (1,637) 4,320...

  • Page 147
    ... Motors Corporation. DaimlerChrysler has an agreement with McLaren Cars Ltd., a wholly owned subsidiary of TAG McLaren Holdings Ltd., for the design and production of a new high-performance sports car, the SLR, which DaimlerChrysler expects to launch by the end of 2003. The Group owns a 40% equity...

  • Page 148
    ... from the Stock Option Plan 2000 were granted to members of the Board of Management as a long-term remuneration component. Also in 2002, 476,500 performance-based awards were granted to the members of the Board of Management based on a 3 year performance plan. For detailed information on stock based...

  • Page 149
    ...America; - changes in currency exchange rates and interest rates; - introduction of competing products and lack of acceptance of our new products or services; - increased competitive pressures which limit our ability to reduce sales incentives and raise prices; - whether Chrysler Group, Freightliner...

  • Page 150
    ... 1 in % Stockholders' equity 2 in millions of 3 Revenues 3 in millions of 3 2002 2001 Employment at year-end 2002 2001 Mercedes Car Group smart GmbH, Böblingen Mercedes-Benz U.S. International, Inc., Tuscaloosa DaimlerChrysler India Private Limited, Poona DaimlerChrysler South Africa (Pty.) Ltd...

  • Page 151
    Major Subsidiaries of the DaimlerChrysler Group | 145 Ownership 1 in % Stockholders' equity 2 in millions of 3 Revenues 3 in millions of 3 2002 2001 Employment at year-end 2002 2001 Vehicle Sales Organization Mercedes-Benz USA, L.L.C., Montvale 4 DaimlerChrysler France S.A.S, Le Chesnay 4 ...

  • Page 152
    ...Council, DaimlerChrysler Group and DaimlerChrysler AG, Vice Chairman of the Labor Council Gaggenau Plant, DaimlerChrysler AG G. Richard Thoman New York Former President and Chief Executive Officer of Xerox Corporation; Managing Partner, Corporate Perspectives Bernhard Walter Frankfurt am Main Former...

  • Page 153
    ... were also dealt with. In connection with the commercial vehicles business, the main issue was the Asian strategy and cooperation with Mitsubishi Motors Corporation (MMC) and Hyundai Motor Company (HMC). Another topic was the further development of corporate governance at DaimlerChrysler, in view of...

  • Page 154
    ... division's strategic goals and their consequences, as well as on the present state of the market for commercial vehicles. The report on the first half of 2002 was presented and information was received on the engagement of KPMG as external auditors for the 2002 financial year and on the main areas...

  • Page 155
    ...management report and additional notes pursuant to Section 292a of the German Commercial Code (HGB). In accordance with Section 292a of the HGB, the US GAAP consolidated financial statements presented...its gratitude to the management and employees of DaimlerChrysler AG for their outstanding individual...

  • Page 156
    ...company agreements. The influence of the Annual Meeting on the management of the company is limited. Management decisions can only be taken by the Annual Meeting if it is requested to do so by the Board of Management. Dual management system DaimlerChrysler AG is obliged by the German Commercial Code...

  • Page 157
    ... of the company and its concentration on the automotive business, while facilitating a strong focus on markets and customers. The Board of Management of DaimlerChrysler is organized into five operative divisions (Mercedes Car Group, Chrysler Group, Commercial Vehicles, Services, Industrial Holdings...

  • Page 158
    ... only on the Group's strategy and business developments, but also to discuss the issue of risk management. Transparency DaimlerChrysler regularly informs its shareholders, financial analysts, shareholders' associations, the media and the interested public on the situation of the company and on any...

  • Page 159
    ... made available to shareholders at all times. The German Corporate Governance Code (the "Code") contains rules with varying binding effect. Apart from outlining aspects of the current German Stock Corporation Act, it contains recommendations from which companies are permitted to deviate. However, if...

  • Page 160
    .... The company plans to list such information separately from fiscal 2004. The shareholder representatives on the Supervisory Board will be up for re-election in 2004. For this reason it seems appropriate to start the separate listing from this point in time, and, until then, to present a summarized...

  • Page 161
    ... Code states that the company should make it possible for shareholders to follow the Annual Meeting using modern communication media (e.g. the Internet). The Annual Meeting will be broadcast on the Internet until the end of the Board of Management's report. To continue the broadcast after this point...

  • Page 162
    ... 39 566 9104 Fax +61 39 566 9110 Mexico City Phone +52 55 5081 7376 Fax +52 55 5081 7674 Moscow Phone +7 095 926 4018 Fax +7 095 745 2614 New Delhi Phone +91 1 1410 4959 Fax +91 1 1410 5226 Paris Phone Fax +359 2 91 988 77 +359 2 945 40 48 +886 2 2715 9696 +886 2 2715...

  • Page 163
    ... of which: Financial liabilities Debt-to-equity ratio Mid- and long-term provisions and liabilities Short-term provisions and liabilities Current ratio Net assets (annual average) Credit rating, long-term Standard & Poor's Moody's From the statements of cash flows: Investments in property, plant and...

  • Page 164
    ... in Germany (2001: 1,169 million). Investor relations activities Activities at DaimlerChrysler Investor Relations during the year under review focused particularly on providing consistent reliable and timely information on the company to institutional investors, financial analysts, rating agencies...

  • Page 165
    ...´02 Oct. ´02 Nov. ´02 Dec. ´02 Capital stock (in millions) Number of shares (in millions) Market capitalization (in billions) Number of shareholders (in millions) Weighting on share index DAX 30 Dow Jones Euro Stoxx 50 Credit rating, long-term Standard & Poor's Moody's 2,761 31.04 2,633 1,012...

  • Page 166
    ... be requested from: DaimlerChrysler AG, 70546 Stuttgart, Germany The information can also be ordered by phone or fax using the following number: +49 711 17 92287 Investor Relations Stuttgart Phone +49 711 17 92261 +49 711 17 95277 Fax +49 711 17 94075 +49 711 17 94109 New York Phone +1 212 909 9080...