Mercedes 2013 Annual Report Download - page 136

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Risks from guarantees and legal risks
Furthermore, the Group is exposed to legal risks and risks
from guarantees. Provisions are recognized for those risks
if and to the extent that they are likely to be utilized and
the amounts of the obligations can be reasonably estimated.
Risks from guarantees. The issue of guarantees results in
liability risks for the Group. For example, Daimler holds an
equity interest in the system for recording and charging tolls
for the use of highways in Germany by commercial vehicles
of more than 12 metric tons gross vehicle weight. The operation
of the electronic toll-collection system is the responsibility
of the operator company, Toll Collect GmbH, in which Daimler
holds a 45% stake and which is included in the consolidated
financial statements using the equity method of accounting.
In addition to Daimler’s membership of the Toll Collect con-
sortium and its equity interest in Toll Collect GmbH, risks also
arise from guarantees that Daimler has assumed with the other
partners in the Toll Collect consortium (Deutsche Telekom AG
and Cofiroute SA) supporting obligations of Toll Collect GmbH
towards the Federal Republic of Germany in connection with
the toll system and a call option of the Federal Republic of
Germany. Claims could be made under those guarantees if toll
revenue is lost for technical reasons, if certain contractually
defined performance parameters are not fulfilled, if additional
claims are made by the Federal Republic of Germany, if the
final operating permit is not granted, if Toll Collect GmbH fails
to meet contractual obligations, if it fails to have the required
equipment available or if the Federal Republic of Germany takes
over Toll Collect GmbH. The maximum loss risk for the Group
from these risks can be substantial. Additional information is
provided in E Note 29 (Legal proceedings) and E Note 30
(Financial guarantees, contingent liabilities and other financial
commitments) of the Notes to the Consolidated Financial
Statements.
Legal risks. Various legal proceedings, claims and governmental
investigations (legal proceedings) are pending against Daimler
AG and its subsidiaries on a wide range of topics, including vehi-
cle safety, emissions, fuel economy, financial services, dealer,
supplier and other contractual relationships, intellectual prop-
erty rights, warranty claims, environmental matters, legal
proceedings relating to competition law, and shareholder litiga-
tion. Some of these proceedings allege defects in various
components in several different vehicle models or allege design
defects relating to vehicle stability, pedal misapplication,
brakes or crashworthiness. Some of the claims asserted by way
of class action suits seek repair or replacement of the vehicles
or compensation for their alleged reduction in value, while others
seek recovery for damage to property, personal injuries or
wrongful death. Adverse decisions in one or more of these pro-
ceedings could require us to pay substantial compensatory
and punitive damages or undertake service actions, recall cam-
paigns or other costly actions. Some of these proceedings
may have an impact on the Group’s reputation. It is possible,
as these proceedings are connected with a large degree
of uncertainty, that after the final resolution of litigation, some
of the provisions we have recognized for legal proceedings
could prove to be insufficient. As a result, substantial additional
expenditures may arise. This also applies to legal proceed-
ings for which the Group has seen no requirement to recognize
a provision.
Although the final result of any such litigation may influence the
Group’s earnings and cash flows in any particular 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 proceed-
ings is provided in E
Note 29 of the Notes to the Conso-
lidated Financial Statements.
Overall assessment of the risk and opportunity situation
The Group’s overall risk situation is the sum of the individual
risks of all risk categories for the divisions and the corporate
functions and legal entities. In addition to the risk categories
described above, unpredictable events are possible that
can disturb production and business processes such as natural
disasters or terrorist attacks. This could adversely affect
consumer confidence and could cause production interruptions
due to supplier problems and intensified safety measures
at national borders. In this context, Daimler also considers the
risks of additional earthquakes in Asia, the danger of weather
damage and political instability in sales regions. In the case of
natural disasters, emergency plans are developed to allow
the resumption of business activities. In addition, further pro-
tective measures are taken and, if possible, insurance cover
is obtained. Other smaller risks relate to project and process
risks as well as the shortage or lack of resources. In order
to avoid or minimize these risks, measures are defined for each
individual case and must be implemented accordingly.