Mercedes 2010 Annual Report Download - page 117

Management Report | Risk Report | 113
Risks connected with pension benefit plans. Daimler has
pension benefit obligations, and to a smaller extent obligations
relating to healthcare benefits, which are not completely covered
by plan assets. The balance of obligations less plan assets consti-
tutes the funded status for these employee-benefit plans. Even
small changes in the assumptions used for the valuation of the
benefit plans such as a reduction in the discount rate could lead
to an increase in those obligations. On the other hand, the market
value of the plan assets is determined to a large degree by
developments in the capital markets. Unfavorable developments,
in particular relating to equity prices and fixed-interest securi-
ties, could reduce the market value. Higher obligations as well as
reduced plan assets or a combination of both would have a nega-
tive impact on the funded status of our benefit plans. Higher obli-
gations and lower yields from the plan assets could also increase
the net expenses relating to the benefit plans in the coming years.
Further information on financial market risks, risk-minimizing
actions and the management of those risks is provided in Note
31 of the Notes to the Consolidated Financial Instruments.
Information on financial instruments and on the Group’s pension
benefit plans can be found in Notes 30 and 22.
Legal risks
Various legal proceedings and administrative proceedings are
pending against Daimler or could develop in the future. In our
view, most of those proceedings constitute ordinary, routine litiga-
tion that is incidental to Group’s business, some of which
could also affect the Group’s reputation. We recognize provisions
for litigation risks if the resulting obligations are probable and
can be reasonably estimated. It is possible, however, that due to
the final resolution of some of those pending lawsuits, our pro-
visions could prove to be insufficient and therefore substantial
additional expenditures could arise. This also applies to legal
disputes for which the Group has seen no requirement to recog-
nize a provision. Although the final result of any such lawsuit
could have a material effect on the Group’s earnings in any par-
ticular period, Daimler believes that any resulting obligations
are unlikely to have a sustained effect on the Group’s cash flows,
financial position or profitability. Further information on legal
proceedings can be found in Note 28 of the Notes to the Consoli-
dated Financial Statements.
Overall risk
The Group’s overall risk situation is the sum of all the individual
risks of all risk categories for the divisions and the corporate
functions. There are no discernible risks that, either alone or in
combination with other risks, could jeopardize the continued
existence of the Group. In total, risks have decreased significantly
compared with crisis year 2009. But since considerable eco-
nomic and industry risks still exist, setbacks on the way to regu-
larly achieving our targeted growth and profitability targets
cannot be completely ruled out.