Mercedes 2013 Annual Report Download - page 129

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C | Combined Management Report | Risk and Opportunity Report
In view of the very low inflation rate in the European Monetary
Union (EMU) at the end of 2013, the danger of deflation
has been discussed, above all in the media. A lasting and broad-
based fall in prices would constitute a considerable threat
to the economic recovery of the EMU.
General market risks and opportunities. The situation of
the world economy is affected by volatilities, leading to risks but
also opportunities in the development of demand for motor
vehicles.
The assessment of market risks and opportunities is con-
nected with assumptions and forecasts on the overall develop-
ment of markets in the various regions. The potential effects
of the risks on the development of the Daimler Group’s unit sales
are included proportionately in risk scenarios. The danger
of worsening market developments generally exists for all the
divisions of the Daimler Group. Markets and competitors
are therefore continuously analyzed and monitored; if necessary,
specific marketing and sale programs are implemented.
Due to the competitive pressure in the automotive markets,
it is essential that production and cost structures are regularly
and successfully adapted to the changing conditions. Clear
strategies have been formulated for all the divisions. Each division
consistently pursues the goal of growing profitably and
increasing its efficiency.
One effect of the recent crisis years is that the financial
situation of some dealers and vehicle importers has wors-
ened. As a result, supporting actions still cannot be ruled
out, which would negatively impact the profitability, cash flows
and financial position of the Daimler Group. Details of the
risk and opportunity situation of our suppliers are provided
in the section “Procurement market risks and opportunities.”
In addition to these issues affecting all of the segments,
segment-specific risks also exist. In the Mercedes-Benz Cars
division, they include increasing competitive pressure
with the danger that sales will have to be promoted by means
of more attractive financing packages and other sales incen-
tives going beyond what is currently offered. Measures taken
to support the segment’s unit sales would adversely affect
the projected earnings. Depending on the magnitude of regional
unit sales, various measures are taken to support weaker
markets. They include the use of new sales channels, actions
designed to strengthen brand awareness and brand loyalty,
as well as sales and marketing campaigns. These measures can
also be extended to securing the business in the area of
after sales.
The Daimler Trucks division is also subject to increased
competitive pressure and the resulting risk that prices and
cost savings may not be achieved as expected. The same
applies to the Mercedes-Benz Vans and Daimler Buses divisions.
The measures described apply to all segments. The Daimler
Buses segment also sees uncertainty regarding the achievement
of its planned earnings targets, due to political and economic
uncertainties and possible increases in material prices.
Further risks and opportunities at Mercedes-Benz Cars relate
to the development of the used-car market. In the division’s
planning, certain assumptions are made on the expected level
of prices, on which basis the cars returned in the leasing business
are valued. If general market developments lead to a negative
or positive deviation from the assumptions, there is a risk of
lower residual values or an opportunity of higher residual values.
Depending on the region and current market situation, the
countermeasures taken generally include continuous market
monitoring as well as, if required, price-setting strategies
designed to regulate vehicle inventories.
As the target achievement of the Daimler Financial Services
division is closely connected with the development of business
in the automotive divisions, the existing volume risks and
opportunities are also reflected in the Daimler Financial Services
segment. In this context, Daimler Financial Services parti-
cipates in marketing expenses, especially for advertising cam-
paigns in the media.
In general, there is also the possibility that the overall market
for the automotive industry will develop better than assumed
in the internal forecasts upon which the Group’s target planning
is based. This includes positive deviations from planning
premises. China for example is regarded as a market offering
many potential opportunities. The existing market oppor-
tunities for the companies of the Daimler Group can only be
utilized if production activities are organized accordingly and
the gaps between demand and supply can be recognized and
covered in time. This could require increases in production
volumes. The Mercedes-Benz Cars division sees the possibility
of a market opportunity for sales of additional vehicles in
various model series. Opportunities exist also for Mercedes-
Benz Vans on the basis of positive market developments.
The possibility of higher unit sales of vehicles exists in the
Daimler Trucks segment as a result of improved market devel-
opments or changed conditions in the market. The measures
that could be taken by the Daimler Group to utilize this potential
opportunity include a combination of local sales and marketing
actions and central strategic product and capacity planning.