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Commitment toExcellence
Annual Report 2006

Table of contents

  • Page 1
    Commitment to Excellence Annual Report 2006

  • Page 2
    ... â,¬ 2005 2004 06/05 % change Revenues Western Europe thereof: Germany NAFTA thereof: United States Other markets Employees (at year-end) Investments in property, plant and equipment Research and development expenditure Cash provided by operating activities Operating profit Net income per share (in...

  • Page 3
    ... Truck Group Operating profit Revenues Investments in property, plant and equipment Research and development expenditure Unit sales Employees (Dec. 31) 2,020 31,988 907 1,023 536,956 83,237 1,606 30,368 966 944 529,499 84,254 789 25,207 638 789 420,644 82,633 +26 +5 -6 +8 +1 -1 Financial Services...

  • Page 4
    ...M-/R-/GL-/G-Class smart 23% 26% 20% 9% 14% 8% Chrysler Group Passenger cars Light trucks Sports tourers Minivans SUVs 25% 20% 10% 18% 27% Truck Group Trucks Europe/Latin America Trucks NAFTA Trucks Asia 26% 39% 35% Vans Vario Sprinter Vito/Viano 2% 61% 37% Buses Mercedes-Benz Setra Orion Chassis...

  • Page 5
    ... our activities and for a corporate culture in which we live and deliver peak performance. We aim to create lasting value, and we are working to achieve this goal with all our strength and passion. Dieter Zetsche Rüdiger Grube Thomas W. LaSorda Günther Fleig Thomas Weber Bodo Uebber Andreas...

  • Page 6
    ... the world's leading producer of hybrid buses. Financial Services With worldwide operations, the Financial Services division provides leasing, financing, fleet management and insurance for all of the Group's automotive brands. The DaimlerChrysler Bank in Germany also offers investment products and...

  • Page 7
    Commitment to Excellence | Our Portfolio | 3

  • Page 8
    ... of the 2006 Financial Year Risk Report Outlook 80 82 86 90 94 96 Overview Mercedes Car Group Chrysler Group Truck Group Financial Services Van, Bus, Other 98 Overview 100 Sustainability at DaimlerChrysler 102 Human Resources 104 Research and Development 106 Environment 108 Social Responsibility...

  • Page 9
    ... International Representative Offices Internet/Information/Addresses/ Financial Calendar 2007 The system of corporate management and supervision at DaimlerChrysler is oriented towards the German Corporate Governance Code and international standards. This chapter explains the functions, interactions...

  • Page 10
    .... In the North American market, the Chrysler Group posted a significant loss due to a dramatic shift in market demand. In contrast, we posted strong earnings at the Mercedes Car Group, the Truck Group and Financial Services. Although the Group's earnings surpassed last year's results, they came...

  • Page 11
    ... Process aims at redesigning the Chrysler Group's business model in such a way that it will remain profitable in the long term, even under difficult market conditions. In order to optimize and accelerate the presented plan we are looking into further strategic options with partners beyond business...

  • Page 12
    ...is the cleanest light truck on the world market. The Truck Group is also making substantial progress in the implementation of its program to harmonize processes and components across its global brands - creating powerful synergies from development all the way through production. As a result, we have...

  • Page 13
    ... developing realistic future-oriented solutions that will further reduce the fuel consumption and emissions of our vehicles. As a global company, we are also aware of our shared responsibility for the wellbeing of society as a whole. We know that we must achieve a balance of economic success, social...

  • Page 14
    Board of Management Günther Fleig | 58 Human Resources & Labor Relations Director Appointed until 2009 10 Thomas Weber | 52 Group Research & Mercedes Car Group Development Appointed until 2010 Eric R. Ridenour | 48 Chief Operating Officer (COO) Chrysler Group Appointed until 2008 Thomas W. LaSorda ...

  • Page 15
    ...of the Board of Management, Head of Mercedes Car Group Appointed until 2010 Bodo Uebber | 47 Finance & Controlling, Financial Services Appointed until 2011 Andreas Renschler | 48 Truck Group Appointed until 2010 Rüdiger Grube | 55 Corporate Development Appointed until 2010 Thomas W. Sidlik | 57...

  • Page 16

  • Page 17
    ...the E-Class, our customers experience maximum driving pleasure, the latest technology and outstanding quality. In addition to its fascinating design, exceptional ride and powerful, clean engines, the car's safety equipment sets new standards. The new-generation E-Class offers PRE-SAFE®, Intelligent...

  • Page 18
    ..., parts, components and vehicles were subjected to test programs on computers, on test benches and on the roads. Mercedes-Benz engineers drove a total of 5.6 million kilometers in E-Class test cars all over the world. The planning, development, purchasing, production and sales departments worked...

  • Page 19

  • Page 20

  • Page 21
    ... lines bring expressive design to the mid-size market, while the interior's modern, clean appearance features a strong focus on quality, detail and execution. Purposeful technology makes life easier and safer, while making the overall driving experience more enjoyable and adding value for customers...

  • Page 22
    ...cylinder World Engine rivals the best in its class. These engines, produced in five plants around the world, set new standards for fuel consumption at lower production costs. The World Engine also saves gas and reduces vehicle costs in other Chrysler Group models - creating added value for customers...

  • Page 23

  • Page 24

  • Page 25
    ... its customers: Trucks are commercial vehicles and as such have to earn money by offering optimal economy in use. This requires excellent drivability, high loading capacity, low fuel consumption, low maintenance costs, long lifetime and minimal service time. One example of the growing market success...

  • Page 26
    ... in the future. This will reduce development and production costs. Our truck engines are one example of this modular strategy: At present, eight different engine families are in use at the Truck Group - in the future there will be just three. This will enable the division to offer a full portfolio...

  • Page 27

  • Page 28

  • Page 29
    .... Our Financial Services division provides tailored financing, leasing and insurance services, so that our customers can not only drive their dream car, but also have financial scope for other personal desires. Worldwide, more than one third of all DaimlerChrysler vehicles are financed or leased by...

  • Page 30
    .... We offer our customers one-stop shopping for attractive and convenient automotive financial services. If desired, we integrate our individual service packages and insurance cover into the monthly leasing or financing installments. We simplify and accelerate the process of credit application...

  • Page 31

  • Page 32

  • Page 33
    ... on many years of experience, Mercedes-Benz can offer its customers not only outstanding service, but also the most comprehensive range of delivery vans. Outstanding service means professional assistance with extremely well-trained specialists and the best workshop equipment. Fast, value-for-money...

  • Page 34
    ...efficiently a van can be used. Mercedes-Benz CharterWay offers the possibility to integrate maintenance, repairs, tires, replacement vehicles and much more into the service package - if and when required. With approximately 2,500 service centers for commercial vehicles all over Europe, Mercedes-Benz...

  • Page 35

  • Page 36

  • Page 37
    ...At DaimlerChrysler, research and development are key factors for long-term market success: They help to put ...free driving". The new CL-Class is a further milestone along this road: It combines the utmost exclusiveness with a fascinating driving experience and trend-setting safety technology...

  • Page 38
    ...includes a number of groundbreaking safety features from Mercedes-Benz. Three examples are: the electronic Brake Assistant, which can shorten braking distances by up to 45%; PRE-SAFE® brakes with remote and proximity radar, to brake the car automatically if there is a danger of a rear-end collision...

  • Page 39

  • Page 40
    ..., the Financial Services division extends its activities in the field of financing commercial vehicles in Asia. The new unit supports the sale of trucks and buses of the Mitsubishi Fuso brand throughout Japan. May Opening of new Mercedes-Benz Museum. The new Mercedes-Benz Museum in Stuttgart-Untert...

  • Page 41
    ...for full-year 2006 is reduced to an operating profit in the magnitude of â,¬5 billion. November World premiere of new smart fortwo. The second generation of the smart fortwo is unveiled on a department store rooftop in Stuttgart. Two of the new car's key features are its newly developed engines and...

  • Page 42
    ... profit forecasts for the coming years. And prices of some companies' stocks benefited from the acquisition of large numbers of shares by strategic investors. In 2006, the US index S&P Automobiles Industry rose by 29% and the European Dow Jones Stoxx Auto Index climbed by 26%. Positive development...

  • Page 43
    ... for the Chrysler Group and the DaimlerChrysler Group on September 15. But after a brief phase of sideways movement, the share price continued to climb. Demand from investors was supported by the positive development of business at the Mercedes Car Group and at the Truck Group. From the end of June...

  • Page 44
    ... market. At the Truck Group Division Day, the Truck Group presented itself for the first time with details of its long-term return goals, products, innovations and technologies. These Investor Relations events were rounded off with presentations and test drives of new models from the product ranges...

  • Page 45
    .... As part of the Investor Relations department's comprehensive approach, the "Personal Internet Service" provides support to our shareholders on all aspects of the Annual Meeting. In this way, we make it easier for shareholders to exercise their voting rights, as well as cutting costs and protecting...

  • Page 46
    ... their targets: The Mercedes Car Group significantly improved its profitability in 2006, the Truck Group posted record earnings, and the Financial Services division increased its operating profit once again. The Chrysler Group took additional measures to improve efficiency and launched various new...

  • Page 47
    ... management model Strategy Economy and the industry Business developments 63 Financial Position 65 Overall Assessment of the Economic Situation 66 Events after the End of the 2006 Financial Year 43 Profitability Operating profit Financial performance measures Return on net assets and value added...

  • Page 48
    ... competitive market. Of DaimlerChrysler's total revenues of â,¬151.6 billion in the year 2006, 33% was generated by the Mercedes Car Group, 31% by the Chrysler Group, 19% by the Truck Group, 9% by the Financial Services division and 8% by the Van, Bus, Other segment. At the end of 2006...

  • Page 49
    ... supports the unit sales of the DaimlerChrysler Group's automotive brands in more than 40 countries. Its product portfolio mainly comprises tailored financing and leasing packages for dealers and customers, but it also provides services such as insurance and fleet management. The focus of Financial...

  • Page 50
    ...this agreement refers to the beneficial ownership of the majority of the voting rights in the company, and with a stock-exchange listed company the beneficial ownership of at least 20% of the voting rights in the company if within 18 months after this limit is exceeded the majority of the members of...

  • Page 51
    ... Group", and since then has focused on its core business of producing and selling trucks; bus and van activities are directly managed as separate units within the new segment "Van, Bus, Other". The new structure allows a stronger orientation towards customers' specific requirements in these market...

  • Page 52
    ... with outstanding products and services. Exceptional results in terms of quality, customer satisfaction, customer perception, total vehicle costs and product appeal make a decisive contribution to our overall success. These success factors are quantified in the DaimlerChrysler ScoreCard; for example...

  • Page 53
    ... sales and our worldwide network of production plants and research and development facilities, we aim to strengthen our market presence and maintain a competitive cost situation over the long term. Especially with our commercial-vehicle business, we are already globally active along the entire value...

  • Page 54
    ..., we completed the sale of our off-highway activities to EQT, a Swedish financial investor, as previously agreed upon in December 2005. The transaction covers both MTU Friedrichshafen and the off-highway activities of Detroit Diesel Corporation (DDC) and had a positive impact on operating profit of...

  • Page 55
    ... in customer preferences: In a comparison of vehicle segments, small, fuel-efficient cars profited considerably at the expense of minivans, SUVs and pickups. Although demand in Western Europe increased slightly to 14.6 million passenger cars (2005: 14.5 million), car sales did not generally benefit...

  • Page 56
    ... medium trucks also rose in the year 2006. In China, there was a slight upturn of the commercial-vehicle market following the decline in the previous year. Business developments Unit sales. DaimlerChrysler sold a total of 4.7 million vehicles in 2006 (2005: 4.8 million). The Mercedes Car Group sold...

  • Page 57
    ... related dip in production. The new Sprinter was given a very positive reception by the market: 59,400 of the new model had already been sold by the end of 2006. In total, sales of the Sprinter amounted to 157,200 units (2005: 164,000). With the Vito/Viano series, the positive business development...

  • Page 58
    ... were 3% lower than in the prior year. In the rest of the world, we expanded our business volume by 5% to â,¬26.1 billion. Revenues 2006 In millions of â,¬ 2005 06/05 % change DaimlerChrysler Group Mercedes Car Group Chrysler Group Truck Group Financial Services Van, Bus, Other 151,589 54,579 47...

  • Page 59
    ... 2003 2004 2005 2006 Operating Profit Operating profit (loss) by segment 2006 Amounts in millions of â,¬ 2005 06/05 % change Amounts in millions of â,¬ Special items affecting operating profit 2006 2005 Mercedes Car Group Chrysler Group Truck Group Financial Services Van, Bus, Other Eliminations...

  • Page 60
    ... with the discontinuation of production of the smart forfour in 2006, while the realignment of the smart business model in 2005 resulted in charges of â,¬1,111 million. Charges relating to staff reductions at Mercedes-Benz Passenger Cars in the context of the CORE program decreased to â,¬286 million...

  • Page 61
    ... from the leasing business in Germany and the increase in floor-plan financing for European dealers. The resulting profits and losses on deliveries of vehicles between the divisions have not been realized from a Group perspective and have therefore been eliminated. Financial Services significantly...

  • Page 62
    ...before financial income Mercedes Car Group Amounts in millions of â,¬ Chrysler Group Truck Group Financial Services Van, Bus, Other Total Segments Eliminations DaimlerChrysler Group 2006 Operating profit (loss) Pension and postretirement benefit expenses, other than current and prior service costs...

  • Page 63
    ... the end of the financial year. For Financial Services, performance measurement is on an equity basis, in line with the usual practice in the banking business. Cost of capital. The required rate of return on net assets and thus the cost of capital are derived from the minimum returns that investors...

  • Page 64
    ... 2003 2004 2005 2006 Cost of capital 2006 In % 2005 Return on net assets and value added 7 11 14 7 11 14 Group, after taxes Industrial divisions, before taxes Financial Services, before taxes Return on net assets. The profitability ratio return on net assets (RONA) has special significance as...

  • Page 65
    ... (before interest and taxes) Mercedes Car Group Chrysler Group Truck Group Van, Bus, Other 1 Financial Services 56.7 55.3 6.9 6.6 1 Represents the value at year-end; the average for the year was â,¬56.7 billion (2005: â,¬55.3 billion). 2 Adjusted for the effects from the application of SFAS 133...

  • Page 66
    ... year, other operating expenses of â,¬0.2 billion were incurred in connection with the restructuring of smart. Revenues Cost of sales Gross profit Selling, administrative and other expenses Research and development Other income Goodwill impairment Income before financial income Financial income...

  • Page 67
    ...year. The effective tax rate was reduced in both years by profit contributions from the Group's at-equity investment in EADS, which are mainly exempt from income tax, and by tax-free gains included in net periodic pension costs and net postretirement benefit costs. Management Report | Profitability...

  • Page 68
    ...Group's pre-tax earnings, which included largely tax-free income from two financial transactions to hedge the price risks of EADS shares. Furthermore, income tax benefits arose in 2006 as a result of an agreement with the U.S. Internal Revenue Service regarding the claim for research and development...

  • Page 69
    ... Car Group's Product Development department. At the end of 2006, 99,343 people were employed at the Mercedes Car Group (2005: 104,345), 80,735 at the Chrysler Group (2005: 83,130), 83,237 at the Truck Group (2005: 84,254) and 10,718 at the Financial Services division (2005: 11,129). In the year...

  • Page 70
    ... North American market. The number of financially distressed suppliers increased significantly. Within the framework of our supplier risk management, we are closely following the development of these companies' financial situations and have implemented appropriate risk-management processes. We make...

  • Page 71
    ... with BLUETEC technology. A precondition for this is the availability of low-sulfur diesel fuel all over Europe. Research and development expenditure 2006 Amounts in millions of â,¬ 2005 06/05 % change DaimlerChrysler Group Mercedes Car Group Chrysler Group Truck Group Van, Bus, Other 5,331 2,176...

  • Page 72
    ... structure management, cash and liquidity management, pension asset management, market price risk management (foreign exchange rates, interest rates and commodities) and credit and financial country risk management. Worldwide financial management is performed in a standardized way for all Group...

  • Page 73
    ..., bank guarantees are often demanded before delivery is initiated. The credit risk with end customers in the Financial Services business is managed on the basis of a standardized risk management process. This process defines minimum requirements for the sales-financing and leasing business and sets...

  • Page 74
    .... But the generally negative development of business at the Chrysler Group reduced cash provided by operating activities. Cash provided by operating activities was also reduced by higher tax payments than in the prior year, due in particular to payments for prior years in Germany. The development of...

  • Page 75
    ... the Group's financing capability, decreased slightly by â,¬0.2 billion to â,¬1.9 billion. The free cash flow was reduced by higher tax payments caused by payments for previous years as well as lower payments received by the industrial business from companies in the financial-services business in...

  • Page 76
    ... in Note 25 of the Notes to the Consolidated Financial Statements. Investments in property, plant and equipment 2006 Amounts in millions of â,¬ 2005 06/05 % change DaimlerChrysler Group Mercedes Car Group Chrysler Group Truck Group Financial Services Van, Bus, Other 5,938 1,663 2,892 907 29 447...

  • Page 77
    ...sells receivables under this program. The liquid reserves, short-term and long-term credit lines and the possibility to generate cash inflows by securitizing receivables give the Group sufficient financial flexibility of more than â,¬50 billion to cover its refinancing needs at any time. Management...

  • Page 78
    ...generates most of its revenues, to more fuel-efficient, less profitable smaller vehicles; (iii) the potential need for further structural measures to improve the Chrysler Group's operations. On February 14, 2007, following the presentation of the preliminary earnings figures for the year 2006 and of...

  • Page 79
    ... lease business. This was partially caused by a shift from sales-financing contracts, which are classified as receivables from financial services, to operating lease contracts. Offsetting effects from currency translation amounted to â,¬3.0 billion. Inventories net of advance payments received...

  • Page 80
    ...product warranties and negative market values of derivative financial instruments. Offsetting this decrease was the aforementioned increase in accruals for pensions and similar obligations. The Group's financial liabilities, which primarily serve to refinance the leasing and sales-financing business...

  • Page 81
    ... 2006. Stronger unit sales by the Mercedes Car Group and the Truck Group were more than offset by the declining development of unit sales at the Chrysler Group. Our operating profit of â,¬5.5 billion was lower than our target of more than â,¬6 billion, and value added for the year under review was...

  • Page 82
    ... End of the 2006 Financial Year Chrysler Group Recovery and Transformation Plan. On February 14, 2007, DaimlerChrysler announced the Chrysler Group's three-year "Recovery and Transformation Plan." This plan aims to return the Chrysler Group to profitability by 2008 and redesign the business model...

  • Page 83
    ...realestate prices in some parts of the world, and more restrictive fiscal policies. The smooth return of the global economy to its long-term growth trend that is predicted for the year 2007 by many economists and also by DaimlerChrysler mainly depends upon how these factors develop in the future and...

  • Page 84
    ...the assumed economic development would be jeopardized. Private households' purchasing power would fall and companies' costs would increase, and these two factors combined would have a negative impact on growth primarily in the oil-importing countries. An abrupt and long-term rise in the price of oil...

  • Page 85
    ...the profitability of the entire DaimlerChrysler Group is the successful implementation of the new management model and its related activities. Product quality has a major influence on a customer's decision to buy a particular brand of passenger car or commercial vehicle. At the same time, technical...

  • Page 86
    ... agreement in further negotiations with the UAW, the Chrysler Group would suffer a sustained competitive disadvantage. DaimlerChrysler's Financial Services division is primarily involved in the provision of financing and leasing for Group products. The international orientation of this business...

  • Page 87
    ...and equity prices. Furthermore, commodity price risks arise from procurement. These market risks may adversely affect DaimlerChrysler's financial position, cash flow, and profitability. The Group seeks to manage and control these risks primarily through its regular operating and financing activities...

  • Page 88
    ... is related to the leasing and sales financing business operated by DaimlerChrysler Financial Services. The leasing and sales financing business enters into transactions with customers which primarily result in fixed-rate receivables. DaimlerChrysler's general policy is to match funding in terms of...

  • Page 89
    ... Associated with DaimlerChrysler's business operations, the Group is exposed to changes in prices of commodities. DaimlerChrysler addresses these procurement risks by means of a concerted commodity and supplier risk management. To a minor extent, DaimlerChrysler uses derivative commodity instruments...

  • Page 90
    ... Global demand for automobiles will continue to grow in 2007, but generally at a slower pace than in the prior year. In line with the generally weaker development of the world economy, we expect the US market for passenger cars and commercial vehicles to slightly decrease from 17.1 to 17.0 million...

  • Page 91
    ...further growth in unit sales in the following years, aided by the launch of a station wagon version at the end of 2007 and a compact SUV version in 2008. The Mercedes Car Group continues to expect 70% of its unit sales to be generated in its five biggest core markets: Germany, the United States, the...

  • Page 92
    ... customer and dealer satisfaction. In this way, Financial Services will meet the challenge of intensified competition from international banks and in the automotive markets. We will further expand our comprehensive range of products in the fields of financing, leasing, insurance and fleet management...

  • Page 93
    ... the cost of capital, with significant support from the Global Excellence efficiency-improving program that is being implemented worldwide. As of the year 2008, the Truck Group intends to achieve a return on sales averaging more than 7% over its entire business cycle. The Financial Services division...

  • Page 94
    ... make automobiles even more efficient, cleaner and more economical, thus reducing emissions, including carbon dioxide. Investments in property, plant and equipment 2006 In billions of â,¬ 1 2007-2009 DaimlerChrysler Group Mercedes Car Group Chrysler Group Truck Group Financial Services Van, Bus...

  • Page 95
    ... with the end of 2006, the size of its workforce will continue to decrease during the planning period of 2007 through 2009. Research and development expenditure 2006 In billions of â,¬ 1 2007-2009 2 DaimlerChrysler Group Mercedes Car Group Chrysler Group Truck Group Van, Bus, Other 1 Figures...

  • Page 96
    ...new models, the Mercedes Car Group increased its unit sales by 3%, while the Chrysler Group's factory shipments fell significantly as a result of the intense competition and difficult market situation in the United States. The Truck Group continued its positive development of the prior year, setting...

  • Page 97
    ...and production network Operating profit at new record level 94 Financial Services Positive business development in 2006 Focus on improving market position and customer satisfaction Efficiency-improving programs implemented worldwide Significant increase in operating profit 96 Van, Bus, Other Sales...

  • Page 98
    ... boost efficiency as part of the CORE program, the Mercedes Car Group substantially improved its profitability as the year progressed. Combined with higher sales volumes and a favorable model mix, these measures played a key role in increasing operating profit to â,¬2.4 billion (2005: operating loss...

  • Page 99
    ... in the SUV segment in Germany and the rest of Western Europe. Unit sales of the smart brand totaled 102,700 vehicles in the year under review (2005: 124,300). Unit sales of the smart fortwo developed especially well throughout the year and the model's production volume exceeded the planned target...

  • Page 100
    ... service offensive forms an integral part of the brand campaign. The complete fascination and authenticity of the MercedesBenz brand is communicated by the new Mercedes-Benz World in Stuttgart, which consists of the new Mercedes-Benz Museum and the Mercedes-Benz Center. The museum, which opened...

  • Page 101
    ... of the Mercedes Car Group, with its own clear image and market presence. By developing a new business model for smart, DaimlerChrysler has created the right conditions to achieve a much more favorable cost structure, thus ensuring that the brand can enjoy a profitable future in the long term. In...

  • Page 102
    ... loss of â,¬1.1 billion | Recovery and Transformation Plan presented 2006 Amounts in millions of â,¬ 2005 06/05 % change Operating profit (loss) Revenues Investments in property, plant and equipment Research and development expenditure Production Unit sales Employees (Dec. 31) (1,118) 47,116...

  • Page 103
    ...2005. By the year 2010, the Chrysler Group plans to nearly double its unit sales outside North America. To achieve this goal, the Chrysler Group is also pushing ahead with activities in China. In 2006, DaimlerChrysler and Beijing Automotive Industry Holding Company (BAIC) opened a new joint assembly...

  • Page 104
    ...impact on production. This new process also makes the changeover to new-generation models faster and more cost-efficient. The Chrysler Group also installed more flexible manufacturing equipment and processes in the Sterling Heights (Michigan) Assembly Plant, where the new Chrysler Sebring sedan went...

  • Page 105
    ...Recovery and Transformation Plan" was developed and presented in February 2007. This plan aims to return the Chrysler Group to profitability by 2008 through a combination of measures designed to increase revenues and reduce costs, while also taking steps to change its business model for the longterm...

  • Page 106
    ...systems. Insurance companies are rewarding the utilization of safety technologies by granting lower premiums for liability and collision policies. Increases in unit sales, revenues and operating profit. In 2006, the Truck Group built on the very successful developments of the prior year, increasing...

  • Page 107
    ... Truck Group, and this effective partnership offers an example of the synergy potential available in the global development and production network. A total of 440 Sterling 360 models were sold in North America in 2006. At the Great American Truck Show in Dallas (Texas) in August 2006, we presented...

  • Page 108
    ... costs and fixed costs and harmonizing processes throughout the Group in order to create and utilize economies of scale across all truck brands. For example, we will use only three rather than the current eight engine families in our trucks in the future. We will also increase the level of shared...

  • Page 109
    ... close to our customers - for example, by opening additional service centers near highways and logistics centers and guaranteeing that our service teams are available round the clock. Truck Group unit sales in 20061 1,000 units 06/05 % Total Western Europe thereof: Germany United Kingdom France...

  • Page 110
    ... New business rose by 12% to â,¬35.7 billion. This was due in part to the high level of acceptance of our financial services products and our expansion into new market segments. Both Mercedes-Benz Financial and Chrysler Financial once again significantly improved their ratings in the annual dealer...

  • Page 111
    ...also developed a more standardized range of products and a more uniform customer-relations policy. We expanded our product range throughout Europe for leasing, financing, insurance and fleet management. At the end of 2006, we managed a portfolio of â,¬11.2 billion in Western Europe excluding Germany...

  • Page 112
    ... are directly allocated to the Mercedes Car Group as of 2007. Revenues for the Van, Bus, Other segment decreased by 9% to â,¬13.4 billion, reflecting the disposal of our off-highway business. The segment's operating profit declined from â,¬1,091 million in 2005 to â,¬913 million in the year under...

  • Page 113
    ... prior year in line with the overall market development (2005: 6,700). Safety and assistance systems enhance customer utility. Along with leadership in technology, the high comfort and safety standards of our products have played a decisive role in helping us maintain our competitiveness in the bus...

  • Page 114
    ...Economic success is a precondition for being able to make a lasting positive contribution to social and ecological developments. Although we had to make some difficult decisions in the year 2006 in order to secure our long-term competitiveness, we fulfilled our responsibilities to our employees, the...

  • Page 115
    ... flex-fuel vehicles delivered worldwide 108 Social Responsibility Worldwide social commitment supported by Board of Management and workforce Utilizing core competencies for society Ongoing dialogue with policymakers, the business community and society Focus on improved transatlantic relations and...

  • Page 116
    ... approach to sustainability. Only a financially sound company can make a positive contribution to social and environmental development over the long term. At the same time, business success obliges a company to take on specific responsibilities with regard to its employees, society as a whole and...

  • Page 117
    ... is based on long-term economic success; it gives due consideration to social aspects at the company and in the community, as well as to environmental concerns. Publication of first integrated report. Annual reporting forms a key component of sustainability management. In 2006, DaimlerChrysler...

  • Page 118
    ... management model implemented at the human resources level | Approximately 9,400 traineeships worldwide 2006 Employees (December 31) 2005 06/05 % change DaimlerChrysler Group Mercedes Car Group Chrysler Group Truck Group Sales Organization Automotive Businesses Financial Services Van, Bus, Other...

  • Page 119
    ... to the DaimlerChrysler Group's long-term success. Headcount reductions at the Mercedes Car Group. The CORE program approved by the Board of Management at the end of September 2005 called for a reduction of 8,500 jobs within 12 months at the German locations of the Mercedes Car Group. The goal was...

  • Page 120
    ... while conserving resources and helping to protect the environment. 25,200 people were working towards achieving exactly these goals at Corporate Research and in the development departments of the Mercedes Car Group, the Chrysler Group, the Truck Group and the Vans and Buses units at the end of 2006...

  • Page 121
    ...the long term is the fuel cell, which we have been developing intensively for many years now. Fuel cells for a zero-emission future. Many challenges must be overcome before fuel-cell technology is ready for the mass market, probably some time between 2012 and 2015. At present, 100 Mercedes-Benz fuel...

  • Page 122
    ...States and Canada in October 2006 opened up a new era in the history of diesel drive systems for passenger cars. Optimized engines and innovative technology for exhaust aftertreatment make it the world's cleanest diesel vehicle. Our goal is to produce extremely fuel-efficient, robust and high-torque...

  • Page 123
    ... balance in terms of production, use and recycling. Environmentally friendly fuels support efficient engines. Clean, modern engines require clean, modern fuels. In fact, fuel consumption and emissions can be further reduced only in combination with enhanced fuels. This explains the importance...

  • Page 124
    ... Financial Services builds on its core business competencies as an automotive finance company to make a positive difference in its communities. For example, Chrysler Financial helps urban youth to help themselves with its "Get Your Money Right" program. It also provides financial support...

  • Page 125
    ... increase their purchasing volume from minorities in the second-tier supply chain. To help them do so, the Chrysler Group conducts a wide range of activities. Responsible partnerships create mutual trust. Sustainability and social responsibility are key elements of DaimlerChrysler's corporate vision...

  • Page 126
    ... fulfill the legitimate demands of our shareholders. On the following pages, the Board of Management and the Supervisory Board explain DaimlerChrysler's internationally oriented system of corporate governance. Further information can be found on our website at www.daimlerchrysler.com/corpgov_e. 110

  • Page 127
    ...'s corporate bodies Principles guiding our actions Directors' dealings 118 Compliance at DaimlerChrysler Compliance regulations developed Worldwide compliance organization set up Consistent advice and training programs established 120 Compensation Report Compensation of the Board of Management...

  • Page 128
    ... governance principles and those applicable to US companies under NYSE corporate-governance listing standards can be seen on our website at www.daimlerchrysler.com/corpgov_e. DaimlerChrysler's corporate bodies Shareholders and the Annual Meeting. The company's shareholders exercise their rights and...

  • Page 129
    ... of distributable profits and capital measures. Finally, the Audit Committee approves services provided to DaimlerChrysler AG or companies of the DaimlerChrysler Group by the company of independent auditors or its affiliates that are not directly related to the annual audit. The Supervisory Board is...

  • Page 130
    ... 10 and 11 of this Annual Report. Code of Ethics. We introduced our Code of Ethics in July 2003. This code addresses the members of the Board of Management and persons with special responsibility for the contents of financial disclosure. The provisions of the code aim to prevent mistakes by the...

  • Page 131
    ...rear cover of this Annual Report and on our website at www.daimlerchrysler.com/ir/calendar. Ad-hoc disclosure. In addition to its regular scheduled reporting, DaimlerChrysler discloses, in accordance with applicable law without delay, any so-called inside information which directly affects the Group...

  • Page 132
    ... Senior Officer Senior Officer Senior Officer Senior Officer Senior Officer Senior Officer Board of Management Board of Management Board of Management Sale of shares, Frankfurt Sale of shares, New York Acquisition of shares, Frankfurt Acquisition of shares by exercise of options, off-market Sale of...

  • Page 133
    ... Senior Officer Senior Officer Senior Officer Senior Officer Acquisition of shares by exercise of options, off-market Sale of new shares, Frankfurt Acquisition of shares by exercise of options, off-market Sale of new shares, Frankfurt Acquisition of shares by exercise of options, off-market Sale of...

  • Page 134
    ... Committee as a direct representative of the Board of Management on all compliance issues. It is composed of high-ranking and experienced executives from the departments Legal, Corporate Audit, Finance & Controlling, Sales, Procurement and Supply, and Human Resources, and generally meets every six...

  • Page 135
    .... Expansion of compliance advice. A Sales Practices Hotline was already established in November 2005, in order to support correct business-transaction processes at the Group. All of the Group's employees can turn to the Hotline with questions on the application of external and internal regulations...

  • Page 136
    ..., such as the development of total shareholder return in relation to comparable automotive companies. When setting the annual bonus, the Presidential Committee of the Supervisory Board also has the possibility to reward the Board of Management members' individual performance, which is not...

  • Page 137
    ... Share Plan, is linked to the long-term development of enterprise value and is based on the principles of performance orientation, benchmark comparison and share ownership. This component of compensation takes into consideration all of the key criteria recommended in connection with good corporate...

  • Page 138
    ...Share Plan in 2005. 2 In addition, options were exercisable from the stock option plans granted in prior years: two Board of Management members exercised a total of 148,000 options from 2003 Stock Option Plan. The figures in this column also include the variable compensation with long-term incentive...

  • Page 139
    ... salary is earned as a pension payment for each year of credited service. For the second plan, benefits are based on a percentage of annual bonuses (currently 4%). The company fulfilled its obligations for benefits earned last year relating to bonuses by providing investment contracts that will make...

  • Page 140
    ... specified in the respective plans. The German Board of Management members with pension agreements concluded with DaimlerChrysler AG before the year 2006 can also receive pension payments and the use of a company car for the period beginning after the end of the original service period. 124

  • Page 141
    ...is governed by the company's Articles of Incorporation. The current regulations specify that the members of the Supervisory Board receive, in addition to the refund of their expenses and the costs of any value-added tax incurred by them in the performance of their office, fixed compensation of â,¬75...

  • Page 142
    ... with the German Corporate Governance Code Section 161 of the German Stock Corporation Act (AktG) requires the Board of Management and the Supervisory Board of a listed stock corporation to declare each year that the recommendations of the "German Corporate Governance Code Government Commission...

  • Page 143
    ... not receive performance-related compensation. II. Deviations from the Suggestions of the German Corporate Governance Code 1. Broadcast of the Annual Meeting (Code Clause 2.3.4) The Annual Meeting of DaimlerChrysler AG is broadcast on the internet through the end of the Board of Management's report...

  • Page 144
    ... Group, particularly its business and financial developments, personnel situation, investment plans and questions of fundamental business policy and strategy. Outside the meetings, the Board of Management presented the Group's key performance figures to the Supervisory Board in the form of monthly...

  • Page 145
    ... topics of human-resources work in 2006. In December, the operative planning for the period of 2007 through 2009 and the financing limit for the 2007 financial year were dealth with in depth and decided upon, with the proviso of a planning adjustment relating to the Chrysler Group. The planning data...

  • Page 146
    ... "Truck Group" and Mr. Weber has been responsible for "Group Research & Mercedes Car Group Development". In July 2006, Mr. Thomas W. LaSorda was reappointed for another five years as of May 1, 2007 with unchanged responsibility for the "Chrysler Group". In October 2006, the Supervisory Board decided...

  • Page 147
    .... The Board of Management manages the company and represents it vis-a-vis third parties. The Board of Management must have at least two members, who, pursuant to Section 84 of the German Stock Corporation Act, are appointed by the Supervisory Board for a period of office of a maximum of five years...

  • Page 148
    ...this agreement refers to the beneficial ownership of the majority of the voting rights in the company, and with a stock-exchange listed company the beneficial ownership of at least 20% of the voting rights in the company if within 18 months after this limit is exceeded the majority of the members of...

  • Page 149
    ...Founding Partner, Palladium Equity Partners (retired on April 12, 2006) Dr. Thomas Klebe 1 Frankfurt/Main Director Department for General Shop Floor Policy and Codetermination, German Metalworkers' Union (IG Metall) 1 Employee representative Corporate Governance | Members of the Supervisory Board...

  • Page 150
    ... and to anchor such procedures as a key element of entrepreneurial action, the Board of Management established the department of Corporate Compliance Operations at the beginning of 2006 in consultation with the Audit Committee. Not only the Group's management, but also the Audit Committee of the...

  • Page 151
    ... of Management's proposal on the appropriation of distributable profits and approve the financial statements. Once again in the year 2006, the Audit Committee conducted a specific self-evaluation of its activities. Stuttgart, February 2007 The Audit Committee Bernhard Walter Chairman Corporate...

  • Page 152
    ... German Commercial Code). Therefore, the consolidated financial statements, which have to be filed with the operator of the electronic version of the Federal Gazette and published in the electronic version of the Federal Gazette, comply with the Fourth and Seventh Directive of the European Community...

  • Page 153
    ... Balance Sheets 143 Consolidated Statements of Changes in Stockholders' Equity 144 Consolidated Statements of Cash Flows 146 Consolidated Fixed Assets Schedule Notes to Consolidated Financial Statements 148 Basis of Presentation 162 Notes to the Consolidated Statements of Income 170 Notes...

  • Page 154
    ... to guarantee compliance with accounting principles and the adequacy of reporting. These systems include the application of uniform guidelines group-wide, the use of reliable software, the selection and training of qualified personnel, and regular reviews by our internal auditing department. In...

  • Page 155
    ... and 2005, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of DaimlerChrysler's management. Our responsibility is...

  • Page 156
    ... Year ended December 31, 2004 2005 Revenues Cost of sales Gross profit Selling, general administrative and other expenses Research and development Other income Goodwill impairment Income before financial income Financial income (expense), net (therein loss on issuance of associated company stock...

  • Page 157
    ... 1,187 - 1,187 Revenues Cost of sales Gross profit Selling, general administrative and other expenses Research and development Other income Goodwill impairment Income before financial income Financial income (expense), net (therein loss on issuance of associated company stock of â,¬135 million in...

  • Page 158
    ... 2005 Industrial Business 1 At December 31, 2006 2005 Financial Services 1, 2 At December 31, 2005 2006 Assets Goodwill Other intangible assets Property, plant and equipment, net Investments and long-term financial assets Equipment on operating leases, net Fixed assets Inventories Trade receivables...

  • Page 159
    ...Stock based compensation Issuance of new shares Purchase of capital stock Re-issuance of treasury stock Dividends Other Balance at December 31, 2005 Net income Other comprehensive income (loss) Initial application...integral part of these Consolidated Financial Statements. Consolidated Financial ...

  • Page 160
    ... Repayment of long-term financial liabilities Dividends paid (including profit transferred from subsidiaries) Proceeds from issuance of capital stock (including minority interests) Purchase of treasury stock Cash provided by (used for) financing activities Effect of foreign exchange rate changes...

  • Page 161
    ... Repayment of long-term financial liabilities Dividends paid (including profit transferred from subsidiaries) Proceeds from issuance of capital stock (including minority interests) Purchase of treasury stock Cash provided by (used for) financing activities Effect of foreign exchange rate changes...

  • Page 162
    ... 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 on operating leases 1 Currency translation changes with period end rates...

  • Page 163
    ... 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 on operating leases Consolidated Financial Statements | Consolidated Fixed Assets Schedule...

  • Page 164
    ...of DaimlerChrysler Financial Services AG. Transactions between the Group's industrial and financial services business activities principally represent intercompany sales of products, intercompany borrowings and related interest, and other support under special vehicle financing programs. The effects...

  • Page 165
    ... the product. The Group may offer a variety of sales incentive programs at any 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 offered to consumers. Consolidated Financial Statements...

  • Page 166
    ... with free service programs, the Group allocates revenue to the various elements based on their relative fair values when criteria for separation are met. When below market rate loans under special financing programs are used to promote sales of vehicles and the Financial Services segment finances...

  • Page 167
    ... generally does not originate or purchase receivables for resale. Loans that are classified as held for sale are carried at the lower of cost or market value when it is determined that the market price for the loan represents the estimated future cash flows on the loan. Research and development...

  • Page 168
    ... at acquisition cost, are amortized on a straight-line basis over their respective estimated useful lives (2 to 10 years) to their estimated residual values, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may...

  • Page 169
    .... Plant and equipment under capital leases are stated at the lower of present value of minimum lease payments or fair value less accumulated amortization. Depreciation expense is recognized using the straight-line method. The costs of internally produced equipment and facilities include all direct...

  • Page 170
    ... required by the securitization trust to pay the interest and principal to investors, servicing fees, and other required payments. The Group determines the value of its retained interests using discounted cash flow modeling upon the sale of receivables and at the end of each quarter. The valuation...

  • Page 171
    ...-related costs is 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...

  • Page 172
    ... or events, generally on an instrument by instrument basis. Items for which the fair value option is elected should be separately presented or parenthetically be disclosed in the statement of financial position. SFAS 159 also requires significant new disclosures that apply for interim and annual...

  • Page 173
    ...-party investors. The variable interest entities used the debt and equity proceeds to purchase property and equipment, which is partially leased by the Group and used in the normal course of business. Another part of the property and equipment is leased by suppliers and is used for the production of...

  • Page 174
    ... a consortium agreement in order to jointly develop, install, and operate under a contract with the Federal Republic of Germany (operating agreement) a system for the electronic collection of tolls for all commercial vehicles over 12t GVW using German highways. DaimlerChrysler Financial Services AG...

  • Page 175
    ... for additional information. Each of the consortium members (including DaimlerChrysler Financial Services AG) have provided guarantees supporting the obligations of Toll Collect GmbH towards the Federal Republic of Germany relating to the completion and operation of the toll collection system, which...

  • Page 176
    ... the Truck Group using the equity method of accounting (see also Note 34). Subsequent to DaimlerChrysler's acquisition of a controlling interest in MFTBC, a number of quality problems were identified. DaimlerChrysler was able to comprehensively assess those quality issues, define necessary technical...

  • Page 177
    ...that was allocated to goodwill of Van, Bus, Other. On December 27, 2005, as part of the Group's ongoing strategy to focus on its core automotive business, DaimlerChrysler entered into a share sale and purchase agreement with the Swedish investor group EQT regarding the sale of a major portion of its...

  • Page 178
    ... management model are corporate-level costs that will not be allocated to the operating segments and will remain included in corporate which forms a part of "Van, Bus, Other" (see Note 34). Headcount reduction initiative at Mercedes Car Group. In September 2005, DaimlerChrysler initiated a program...

  • Page 179
    .... Estimated payments to the dealer network are also included in this amount. These charges were recognized in "cost of sales" and in "selling expenses". DaimlerChrysler also decided in 2005 not to proceed with the development of the smart SUV that was scheduled to be launched in the markets in 2006...

  • Page 180
    ... The Mercedes Car Group expects the remaining balance of â,¬119 million to be paid in 2007. Personnel expenses and number of employees. Personnel expenses included in the statement of income are comprised of: 2006 (in millions of â,¬) Year ended December 31, 2005 2004 Wages and salaries Social...

  • Page 181
    ... current and former members of the Board of Management and the current members of the Supervisory Board is included in Note 37. 7. Financial Income (Expense), Net 2006 (in millions of â,¬) Year ended December 31, 2005 2004 Income from investments of which from affiliated companies â,¬ (5) (2005...

  • Page 182
    ...the deferred taxes at period-end were calculated using the enacted tax rates. In 2006, DaimlerChrysler Corporation, a wholly-owned subsidiary of DaimlerChrysler, reached an agreement with the US Internal Revenue Service regarding its claim for research and development credits for the tax years 2000...

  • Page 183
    ... of â,¬) At December 31, 2005 Intangible assets Property, plant and equipment Investments and long-term financial assets Equipment on operating leases Inventories Receivables and other assets Net operating loss and tax credit carryforwards Pension plans and similar obligations Other accrued...

  • Page 184
    ...556 million can be carried forward indefinitely. The trade tax NOLs are not limited in their use. The companies of the Off-Highway business unit, which were shown in 2005 as held for sale, were included at December 31, 2005 in the corporate and trade tax NOLs with â,¬21 million each. The valuation...

  • Page 185
    ...), recognized separately in the consolidated statement of income in 2005. At December 31, 2005 (in millions of â,¬) Assets held for sale Intangible assets Goodwill Property, plant and equipment Investments and long-term financial assets Inventories Receivables and other assets Other 20 309 212...

  • Page 186
    ...687 2,375 129 3,191 Mercedes Car Group (in millions of â,¬) Chrysler Group Truck Group Financial Services Van, Bus, Other Total 2006 2005 192 199 927 1,035 386 469 71 63 107 115 1,683 1,881 The company conducts a goodwill impairment test at least annually to identify potential goodwill...

  • Page 187
    ...61 59 55 404 The reconciliation of future minimum lease payments from capital lease agreements to the corresponding liabilities is as follows: In 2006, the Group completed a securitization of future lease payments on operating leases and related vehicles. The securitization was accounted for as...

  • Page 188
    ... loans for floor-plan financing programs for vehicles sold to dealers by the Group's automotive businesses or loans for assets purchased by dealers from third parties, primarily used vehicles traded in by dealers' customers or real estate such as dealer showrooms. Other receivables mainly represent...

  • Page 189
    ... have a significant ownership in DaimlerChrysler companies or entities in which Group companies hold a significant investment. 2007 (in millions of â,¬) 2008 2009 2010 2011 thereafter As of December 31, 2006, â,¬3,362 million of other assets mature after more than one year (2005: â,¬2,618...

  • Page 190
    ...market price Participations without a quoted market price Total participations Long-term securities 399 267 666 565 332 256 588 606 Available-for-sale Trading Short-term securities 5,778 207 5,985 4,773 163 4,936 As of December 31, 2006, the table below shows the (amortized) costs, fair values...

  • Page 191
    ...At December 31, 2005 Due within one year Due after one year through five years Due after five years through ten years Due after more than ten years 2,885 1,904 282 961 6,032 1,164 1,976 508 1,170 4,818 Proceeds from disposals of long-term and short-term availablefor-sale securities were â,¬9,205...

  • Page 192
    ... value at December 31, 2006 (2005: 1,018,172,696). This increase relates to the issuance of new ordinary shares upon exercises in connection with the Stock Option Plan 2000 (tranches 2003 and 2004). Each share represents a nominal value of â,¬2.60 of capital stock. In 2006, DaimlerChrysler purchased...

  • Page 193
    ...Year ended December 31, 2006 Tax effect Net Pretax Year ended December 31, 2005 Tax effect Net Pretax Year ended December 31, 2004 Tax...Adjustment to initial application of SFAS ... (592) (315) 119 109 (473) (206) Consolidated Financial Statements | Notes to the Consolidated Balance Sheets | 177

  • Page 194
    ...as an average price over a specified period at the end of the four-year service). The number of phantom shares that vest will depend on the achievement of Group performance goals as compared with competitive and internal benchmarks (return on net assets and return on sales). The Group will not issue...

  • Page 195
    ... tax benefit amounts to â,¬23 million (2005: â,¬11 million). The Group records the performance phantom share plan awards as accrued liabilities. Because the payment per phantom share depends on the quoted price of one DaimlerChrysler ordinary share, the quoted price represents the fair value...

  • Page 196
    ...65.92 52.78 65.92 The development of stock options not vested at the beginning of the year 2006 is as follows: Number of stock options (in millions) Average fair value per share (in â,¬) Non-vested at beginning of year Options granted Vested Forfeited Disposals Non-vested at year-end 26.8 - (18...

  • Page 197
    ... of the merger became exercisable in two installments; 50% on the six-month and 50% on the one-year anniversaries of the consummation date. A summary of the activity related to the Group's SAR plans as of and for the years ended December 31, 2006, 2005, and 2004, is presented below: 2004...

  • Page 198
    ... achievement of corporate goals derived from competitive and internal planning benchmarks and the value of DaimlerChrysler ordinary shares at the end of three-year performance periods. The benchmarks are return on net assets and return on sales. In 2006 and 2005 no medium-term incentive awards (2004...

  • Page 199
    ... plans Total At December 31, 2005 German Non-German plans plans Funded status Unrecognized actuarial net losses Unrecognized prior service cost Net amounts recognized Amounts recognized in the consolidated balance sheets consist of: Prepaid pension cost Accrued pension liability Disposal group...

  • Page 200
    ... exchange rate changes Service cost Interest cost Plan amendments Actuarial (gains) losses Change in consolidated group and other changes Settlement/curtailment loss Compensation of benefit obligations Benefits paid Projected benefit obligations at end of year Change in plan assets: Fair value...

  • Page 201
    ... of debt and equity securities. Assets and income accruing on all pension trust and relief funds are used solely to pay pension benefits and administer the plans. The Group's pension asset allocation at December 31, 2006 and 2005, and target allocation for the year 2007, are presented in the...

  • Page 202
    ...4.5 The following weighted average assumptions were used to determine net periodic pension cost: 2006 (in %) 2005 German plans 2004 2006 2005 Non-German plans 2004 Average assumptions: Discount rate Expected return on plan assets (at beginning of year) Rate of long-term compensation increase...

  • Page 203
    ... respectively during 2005. The total estimated future pension benefits to be paid by the Group's pension plans for the next 10 years approximate â,¬23.3 billion and are expected to be paid as follows: 2007 (in billions of â,¬) 2008 2009 2010 2011 20122016 German plans Non-German plans Total...

  • Page 204
    ...obligations at beginning of year Foreign currency exchange rate changes Service cost Interest cost Plan amendments Actuarial losses Settlement/curtailment loss Benefits paid Accumulated postretirement benefit obligations at end of year Change in plan assets: Fair value of plan assets at beginning of...

  • Page 205
    ... are used solely to pay benefits and to administer the plans. The Group's other benefit plan asset allocation at December 31, 2006 and 2005 and target allocations for 2007 are as follows: The investment process is overseen by Investment Committees which consist of senior financial management and...

  • Page 206
    ...the Group's health care plans. The following schedule presents the effects of a one-percentage-point change in assumed ultimate health care cost inflation rates as from 2014: 2006 2005 2004 1-percentagepoint increase (in millions â,¬) 1-percentagepoint decrease Average assumptions: Discount rate...

  • Page 207
    ... that year. In 2005, "changes from prior period product guarantees issued" are partly offset by payments received from suppliers in settlement of claims for recovery of the costs for recall campaigns. The Group also offers customers the opportunity to purchase separately priced extended warranty and...

  • Page 208
    ... 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) Long-term: Notes/Bonds of which due in more than five years â,¬6,905 (2005: â,¬10,939...

  • Page 209
    ... affiliated companies Liabilities to related companies Other liabilities 93 68 7,632 7,793 - 5 289 294 - - 19 19 334 96 8,623 9,053 - 5 260 265 224 - 139 363 As of December 31, 2006, other liabilities include tax liabilities of â,¬1,190 million (2005: â,¬1,147 million) and social benefits due...

  • Page 210
    ... or its subsidiaries on a wide range of topics, including vehicle safety, emissions and fuel economy, financial services, dealer, supplier and other contractual relationships; intellectual property rights; product warranties; environmental matters; and shareholder matters. Some of these proceedings...

  • Page 211
    ..., as well as additional changes to its business practices and compliance programs. DaimlerChrysler also determined that for a number of years a portion of the taxes related to compensation paid to expatriate employees was not properly reported. DaimlerChrysler voluntarily reported potential...

  • Page 212
    ... related companies fail to meet their financial obligations. Guarantees under buy-back commitments principally represent arrangements whereby the Group guarantees specified trade-in or resale values for sold vehicles. Such guarantees provide the holder with the right to return purchased vehicles...

  • Page 213
    ... currency exchange rates. In addition, the Group uses for example, bonds, medium-term-notes, commercial paper and bank loans in various currencies to finance its operations, especially its leasing and sales financing business. As a consequence of using these types of financial instruments, the Group...

  • Page 214
    ... prices or valuation models that use market data. The Group has certain equity investments which are not presented in the table since they are not publicly traded and determination of fair values is impracticable. The investment in EADS is included in "financial assets." The derivatives related...

  • Page 215
    ...), or option pricing models. Therein included are also hedging instruments related to equity investments in publicly traded companies, which the Group accounts for using the equity method of accounting. c) Credit risk The Group is exposed to credit-related losses in the event of non-performance by...

  • Page 216
    ... is related to the leasing and sales financing business which is operated by DaimlerChrysler Financial Services. In particular, the Group's leasing and sales financing business enters into transactions with customers, primarily resulting in fixed rate receivables. DaimlerChrysler's general policy is...

  • Page 217
    ... receivables (whole loan sales). In whole loan sales, all risk of loss related to the sold receivables is transferred from DaimlerChrysler to the purchaser. The Group generally remains as servicer for the sold receivables. Sale of finance receivables. During the year ended December 31, 2006...

  • Page 218
    ... as follows (weighted average rates for securitizations completed during the respective year): At December 31, 2006, the significant assumptions used in estimating the residual cash flows from sold receivables and the sensitivity of the current fair value to immediate 10% and 20% adverse changes...

  • Page 219
    ... US $6.3 billion which expire in August 2007, and are subject to annual renewal. These liquidity facilities can only be drawn upon by the special purpose entity to which the Group's North American financial services companies may sell receivables under this program. As of December 31, 2006, none...

  • Page 220
    ... Group. This segment includes activities primarily related to the development, design, manufacture, assembly and sale of trucks, as well as related parts and accessories. The truck products are sold mainly under the brand names Mercedes-Benz, Freightliner, and Mitsubishi Fuso. Financial Services...

  • Page 221
    ... for the years ended December 31, 2006, 2005 and 2004 is as follows: Mercedes Car Group (in millions of â,¬) Chrysler Group Truck Group Financial Services Van, Bus, Other Total Segments Eliminations Consolidated 2006 Revenues Intersegment sales Total revenues Operating profit (loss) Capital...

  • Page 222
    .... In 2004, the operating profit of the Financial Services segment includes non-cash impairment charges of â,¬102 million associated with the investment made in dAF. Van, Bus, Other. In 2006 and 2005, operating profit of Van, Bus, Other includes the Group's share in the operating profit of EADS of...

  • Page 223
    ...2006 (in millions of â,¬) 2005 2004 Total segment operating profit Elimination and consolidation amounts Total Group operating profit Pension and postretirement benefit expenses, other than current and prior service costs and settlement/ curtailment losses Gain from the sale of the 12.4% stake in...

  • Page 224
    ... and sell or lease vehicles or provide financial services to, Lagardère Group companies in the ordinary course of business. Arnaud Lagardère, who became member of the Supervisory Board in April 2005, is the general partner and Chief Executive Officer of Lagadère SCA, a publicly traded company and...

  • Page 225
    ... of Mosaic Sales Solutions Holding Company for field marketing services. The chief executive officer of that company, Tony LaSorda, is the brother of Thomas LaSorda, a member of the Board of Management of DaimlerChrysler AG, who assumed responsibility for the Chrysler Group in September 2005. 37...

  • Page 226
    ... Chrysler Group to profitability by 2008 and redesign the business model for the Chrysler Group. The plan identifies a combination of measures designed to increase revenues and reduce costs, including: continuation of the product offensive; workforce reductions by 13,000 employees over three years...

  • Page 227
    ... publicly traded companies domiciled in an EU member state are obliged to prepare their consolidated financial statements in accordance with IFRS for financial years beginning on or after January 1, 2005. The member states are allowed, however, to defer the mandatory application of IFRS until 2007...

  • Page 228
    ... amortization of development costs is included in "cost of sales" and not in "research and non-capitalized development costs". Qualifying special-purpose entities (QSPE). DaimlerChrysler has entered into agreements to sell certain eligible receivables from financial services and trade receivables to...

  • Page 229
    ...Mercedes Car Group Chrysler Group Truck Group Sales Organization Automotive Businesses Financial Services Van, Bus, Other Europe Production locations Sales outlets Revenues in millions of â,¬ Employees NAFTA Production locations Sales outlets Revenues in millions of â,¬ Employees Latin America...

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    ... 2001 2002 2003 2004 2005 2006 Revenues Personnel expenses thereof: Wages and salaries Research and development expenditure Operating profit (loss) Operating margin Financial income Income (loss) before income taxes and extraordinary items Net operating income Net operating income as % of net...

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    ... per share. 2 For our stockholders who are taxable in Germany. There is no tax credit from 2001 due to a change in the corporate income tax system. 3 Periods before 2002 not adjusted for the effects of inventory-related receivables from Financial Services. Additional Information | Ten-Year Summary...

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    .... Goodwill. Goodwill is the term for the amount by which the price paid for a company exceeds the value of the shareholders' equity of that company when its assets and liabilities are valued at current market value. IFRS - International Financial Reporting Standards. IFRS are a set of standards and...

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    ...Integrity Code Investor Relations Liabilities Net assets Net income Operating profit Pension obligations Portfolio changes Quality Ratings Revenues RONA - return on net assets Safeguarding the Future 2012 Segment reporting Shareholders' equity Shares Strategy Unit sales Value added World Engine 139...

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    ... Offices Berlin Phone +49 30 2594 1100 Fax +49 30 2594 1109 Dubai Phone +97 14 8833 200 Fax +97 14 8833 201 Milton Keynes Phone +44 190 8245 800 Fax +44 190 8245 802 Skopje Phone +389 2 2580 000 Fax +389 2 2580 401 Bangkok Phone +66 2676 6222 Fax +66 2676 5234 Ho Chi Minh-City Phone...

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    Internet/Information/Addresses Information on the Internet. Special information on our shares and earnings developments can be found in the "Investor Relations" section of our website. It includes the Group's annual and interim reports, the company financial statements of DaimlerChrysler AG, and ...

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    Financial Calendar 2007 Annual Press Conference February 14, 2007 3.30 p.m. CET / 9.30 a.m. EST, Technology Center, Auburn Hills Analysts' and Investors' Conference Call February 14, 2007 6.30 p.m. CET / 12.30 a.m. EST Presentation of the Annual Report 2006 February 27, 2007 Annual Meeting April 4,...

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    DaimlerChrysler Stuttgart, Germany Auburn Hills, USA www.daimlerchrysler.com