Mercedes 2006 Annual Report Download - page 89
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Commodity price risks. 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 to reduce some of the Group’s commodity price risks,
primarily the risk associated with the purchase of precious metals.
The risk resulting from these derivative commodity instruments in
2006 and 2005 was not, and is currently not, significant to the
Group. Therefore, DaimlerChrysler does not separately present the
value-at-risk figures for its derivative commodity instruments.
Ratings
The rating agencies Standard & Poor’s, Moody’s Investors Service,
Fitch Ratings and Dominion Bond Rating Service assess the
creditworthiness of DaimlerChrysler. Downgrades of the ratings
provided by these agencies could have a negative impact on
the Group’s cost of capital.
Legal risks
Various legal proceedings are pending against DaimlerChrysler
or could develop in the future. In our view, most of these pro-
ceedings constitute ordinary, routine litigation that is incidental to
our business. We accrue for litigation risk with respect to a
matter if the resulting obligations are probable and can be rea-
sonable estimated. It is possible, however, that due to the final
resolutions of some of these pending lawsuits our accruals could
prove to be insufficient and therefore substantial additional
expenditures could arise. Although the final resolution of any such
lawsuit could have a material effect on the Group’s earnings in
any particular period, DaimlerChrysler believes that any resulting
obligations are unlikely to have a sustained effect on the Group’s
financial position and cash flow. Information about legal pro-
ceedings can be found in Note 30 of the Notes to the Consolidated
Financial Statements.
Overall risks
There are no discernible risks that, either alone or in combination
with other risks, could jeopardize the continued existence of
the company.
Management Report | Risk Report | 73