Mercedes 2006 Annual Report Download - page 64

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Return on net assets. The profitability ratio return on net assets
(RONA) has special significance as a fundamental component
of value added in DaimlerChrysler’s performance-measurement
system. As a quotient of the profit measure and average net
assets,
RONA allows a statement to be made on the return on
capital of the Group or the industrial divisions. To assess the
profitability of Financial Services, return on equity (ROE) is used.
Return on net assets and value added
The DaimlerChrysler Group achieved a return on net assets of
6.9% in 2006 (2005: 6.6%), which was slightly lower than the
minimum required rate of return of 7%. Value added improved by
€0.2 billion to minus €0.1 billion. The higher net operating
income than in the prior year (2006: €3.9 billion; 2005: €3.6 bil-
lion) was partially offset by the increase in average net assets
(2006: €56.7 billion; 2005: €55.3 billion). The increase in net
assets was primarily due to higher deferred tax assets in the
industrial business, which were mainly related to the changed
accounting regulations for pensions and similar obligations.
The Mercedes Car Group division’s return on net assets of 19.6%
(2005: minus 3.8%) was significantly higher than the minimum
required rate of return. The substantial improvement was primarily
a result of increased earnings, following the efficiency enhance-
ments achieved through the CORE program, as well as higher vehi-
cle deliveries and an improved model mix. Another factor con-
tributing to the increased return on net assets was the decrease
in net assets. The development of net assets was particularly
affected by decreases in inventories and in property, plant and
equipment.
The Chrysler Group division’s return on net assets of minus 11.6%
(2005: 18.2%) was significantly lower than the minimum
required rate of return. The decline compared with the prior year
was caused by negative earnings as well as an increase in net
assets. The increase in net assets was primarily due to lower
accruals for product warranties as well as higher average levels
of inventories and property, plant and equipment in 2006.
With a return on net assets of 24.1% (2005: 21.0%), the Truck
Group once again surpassed the minimum required rate of return
by a substantial margin, despite increased net assets. In addition
to efficiency improvements, this positive result was primarily due
to higher unit sales caused by purchases brought forward
because of upcoming stricter emission regulations. To a slight
extent, there was an opposing effect from the increase in
net assets caused by lower accrued liabilities and investments
for new products.
2002 2003 2004 2005 2006
9
7.5
6
4.5
3
1.5
0
Return on net assets (RONA) DaimlerChrysler Group (after taxes)
(in %)
In %
Cost of capital
7
11
14
7
11
14
2006
Group, after taxes
Industrial divisions, before taxes
Financial Services, before taxes
2005