Mercedes 2010 Annual Report Download - page 113

Management Report | Risk Report | 109
Production and technology risks. In order to achieve the tar-
geted levels of prices, factors such as brand image, design and
product quality play an important role, as well as additional
technical features resulting from our innovative research and devel-
opment. Convincing solutions, for example supporting accident-
free driving or further improving our vehicles’ fuel consumption
and emissions as with as the electrification of the drive train,
are of key importance for safe and sustainable mobility. Because
those solutions generally require higher advance expenditure
and greater technical complexity, there is an increasing challenge
to realize efficiency improvements while simultaneously fulfilling
Daimler’s own quality standards. If we fail to perform this task
optimally or cannot implement statutory requirements in good
time, that could negatively affect the Group’s future profitability.
The possible loss of acceptance for our products could have
a negative impact on pricing and capacity utilization.
Product quality has a major influence on a customer’s decision
to buy a passenger car or commercial vehicle. At the same time,
technical complexity continues to grow as a result of additional
features, for example for the fulfillment of various emission and
fuel-economy regulations, increasing the danger of vehicle mal-
functions. Technical problems could lead to recall and repair
campaigns, or could even necessitate new development work.
Furthermore, deteriorating product quality can lead to higher
warranty and goodwill costs.
Risks related to the legal and political framework. The legal
and political framework has a considerable impact on Daimler’s
future business success. Regulations concerning vehicles’ emis-
sions, fuel consumption and safety play a particularly impor-
tant role. Complying with these varied and often diverging regula-
tions all over the world requires strenuous efforts on the part
of the automotive industry. We expect that we have to significantly
increase our research and development spending in order to fulfill
those requirements in the future. Many countries have already
implemented stricter regulations to reduce vehicles’ emissions
and fuel consumption, or are about to do so, one example being
European regulations on exhaust emissions and fuel consump-
tion. For example, the key elements of the European Union’s reg-
ulation on carbon dioxide, which was passed by the EU parlia-
ment at the end of 2008, call for a significant reduction in new
cars’ CO2 emissions already as of 2012, and for phased improve-
ments whereby the average emissions of manufacturers’ entire
fleets of new cars have to meet new limits by 2015. Non-compli-
ance with those limits will lead to penalty payments for manufac-
turers. Similar legislation exists or has been proposed for cars in
the United States, China, South Korea, Japan and Switzerland.
In 2010, most of the new CO2 legislation for light-duty commer-
cial vehicles was passed in the European Union. The resulting tar-
gets constitute a long-term challenge in particular for Mercedes-
Benz Vans. Efforts are also being made worldwide to regulate the
CO2 emissions of heavy commercial vehicles. We assume that
we will meet those targets. As a result of customers’ future pur-
chase decisions, monetary sanctions cannot be completely ruled
out in the United States. In addition to emission, consumption and
safety regulations, traffic-policy restrictions for the reduction
of traffic jams and pollution are becoming increasingly important
in the cities and urban areas of the European Union and other
regions of the world. Drastic provisions such as general vehicle-
registration restrictions, for example in Beijing or Shanghai, can
have a dampening effect on the development of unit sales, espe-
cially in the growth markets. Daimler monitors these develop-
ments and attempts to anticipate foreseeable requirements and
long-term targets during the phase of product development.