Mercedes 2010 Annual Report Download - page 226

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Since, among other things, some of the contractual penalties are
dependent on time and further claims for contractual penalties
have been asserted by the Federal Republic of Germany, the
amount claimed as contractual penalties may increase.
Defendants submitted their response to the statement of claims
on June 30, 2006. The Federal Republic of Germany delivered its
reply to the arbitrators on February 15, 2007, and the defendants
delivered their rebuttal on October 1, 2007 (see also Note 29).
The arbitrators held the first hearing on June 16 and 17, 2008.
Additional briefs from the claimant and the defendants were filed
since then. A hearing of witnesses and experts took place be-
tween December 6 and 14, 2010. Further written statements shall
be submitted by the Parties until May 20, 2011. Daimler believes
the claims are without merit and will continue to defend itself
vigorously.
Litigation is subject to many uncertainties and Daimler cannot
predict the outcome of individual matters with assurance.
The Group establishes provisions in connection with pending
or threatened litigation if a loss is probable and can be reason-
ably estimated. Since these provisions, which are reflected in the
Group’s consolidated financial statements, represent estimates,
it is reasonably possible that the resolution of some of these
matters could require us to make payments in excess of the
amounts accrued in an amount or range of amounts that could not
be reasonably estimated at December 31, 2010. It is also rea-
sonably possible that the resolution of some of the matters for
which provisions could not be made may require the Group
to make payments in an amount or range of amounts that could
not be reasonably estimated at December 31, 2010. Although
the final resolution of any such matters could have a material
effect on Daimler’s operating results and cash flows for a
particular reporting period, Daimler believes that it should not
materially affect the Group’s financial position.
29. Guarantees and other financial commitments
Guarantees. The following table shows the amounts of provi-
sions and liabilities at December 31 which have been estab-
lished by the Group in connection with its issued guarantees
(excluding product warranties):
Amount recognized
as a liability
At December 31,
2010 2009
In millions of euros
Financial guarantees 227 183
Guarantees under buy-back commitments 66 66
Other guarantees 106 105
399 354
Financial guarantees. Financial guarantees principally rep-
resent contractual arrangements that require the Group as the
guarantor to make certain payments if guarantee holders fail
to meet their financial obligations. The maximum potential obli-
gation resulting from these guarantees amounted to €1,140
million at December 31, 2010 (December 31, 2009: €1,493 million).
These amounts include guarantees, which the Group issued
for the benefit of Chrysler in connection with the Chrysler trans-
actions entered into in 2007 and 2009. These guarantees
relate to Chrysler’s pension obligations and certain other finan-
cial obligations of Chrysler. For a portion of these financial
guarantees, Chrysler provided collateral to an escrow account.
See Note 3 for the amounts and further information.
Guarantees under buy-back commitments. Guarantees under
buy-back commitments 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 to the Group, the right being primarily
contingent on the future purchase of vehicles or services.
Residual value guarantees related to arrangements for which
revenue recognition is precluded due to the Group’s obligation
to repurchase assets sold to unrelated guaranteed parties are not
included in those amounts.