Mercedes 2010 Annual Report Download - page 93

Management Report | Liquidity and Capital Resources | 89
Cash management determines the Group’s cash requirements
and surpluses. The number of external bank transactions is mini-
mized by the Group’s internal netting of cash requirements and
surpluses. Netting is done by means of cash-concentration or cash-
pooling procedures. Daimler has established standardized pro-
cesses and systems to manage its bank accounts, internal cash-
clearing accounts and the execution of automated payment
transactions.
Management of market price risks aims to minimize the
impact of fluctuations in foreign exchange rates, interest rates
and commodity prices on the results of the divisions and the
Group. The Group’s overall exposure to these market price risks
is determined to provide a basis for hedging decisions, which
include the definition of hedging volumes and corresponding
periods as well as the selection of hedging instruments. Decisions
regarding the management of risks resulting from fluctuations
in foreign exchange rates and commodity prices, as well as deci-
sions on asset/liability management (interest rates), are regu-
larly made by the relevant committees.
Management of pension assets includes the investment of
pension assets to cover the corresponding pension obligations.
Pension assets are held in separate pension funds and are thus
not available for general business purposes. The funds are allocated
to different asset classes such as equities, fixed-interest securi-
ties, alternative investments and real estate, depending on the
expected development of pension obligations and based on
a process for risk-return optimization. The performance of asset
management is measured by comparing with defined reference
indices. Local custodians of the pension funds are responsible for
the risk management of the individual pension funds. The Global
Pension Committee limits these risks by means of a Group-wide
binding guideline with due consideration of applicable laws.
Additional information on pension benefit plans and similar obliga-
tions is provided in Note 22 of the Notes to the Consolidated
Financial Statements.
Principles and objectives of financial management
Financial management at Daimler consists of capital structure
management, cash and liquidity management, pension asset
management, market price risk management (foreign exchange
rates, interest rates, commodity prices) and credit and financial
country risk management. Worldwide financial management is
performed within the scope of legal requirements for all Group
entities by Treasury. Financial management operates within a frame-
work of guidelines, limits and benchmarks, and is organizationally
separate from other financial functions such as settlement, finan-
cial controlling, reporting and accounting.
Capital structure management designs the capital structure
for the Group and its subsidiaries. Decisions regarding the capi-
talization of financial services companies, as well as production,
sales and financing companies, are based on the principles of cost-
optimized and risk-optimized liquidity and capital resources.
In addition, it is necessary to adhere to various restrictions on
capital transactions and on the transfer of capital and currencies.
Liquidity management secures the Group’s ability to meet its
payment obligations at any time. For this purpose, liquidity plan-
ning provides information about all cash flows from operating
and financial activities in a rolling plan. The resulting financial
requirements are covered by the use of appropriate instruments
for liquidity management (e.g. bank credit, commercial paper, notes);
liquidity surpluses are invested in the money market or the capital
market to optimize risk and return. The goal is to ensure the level
of liquidity regarded as necessary at optimal costs. Besides
operational liquidity, Daimler keeps additional liquidity reserves
which are available in the short term. These additional financial
resources include a pool of receivables from the financial services
business which are available for securitization in the credit
market, as well as a contractually confirmed syndicated credit
line in a volume of €7 billion.
Liquidity and Capital Resources