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Driven by Values
Annual Report 2005

Table of contents

  • Page 1
    Driven by Values Annual Report 2005

  • Page 2
    Key Figures DaimlerChrysler Group 2005 Amounts in millions of â,¬ 2004 2003 05/04 Change in % Revenues Western Europe of which: Germany NAFTA of which: United States Other markets Discontinued operations Employees (at year-end) Investments in property, plant and equipment Research and development ...

  • Page 3
    Divisions 2005 Amounts in millions of â,¬ 2004 2003 05/04 Change in % Mercedes Car Group Operating profit (loss) Revenues Investments in property, plant and equipment Research and development expenditure Unit sales Employees (Dec. 31) (505) 50,015 1,629 2,418 1,216,838 104,345 1,666 49,630 2,...

  • Page 4
    Unit Sales Structure Mercedes Car Group S-Class/SL/Maybach E-Class/CLS C-Class/CLK/SLK/Sport Coupe A-Class/B-Class M-Class/R-Class/G-Class smart 6% 22% 33% 21% 8% 10% Chrysler Group Passenger cars Light trucks Sports tourers Minivans SUVs 23% 21% 11% 19% 26% Commercial Vehicles Trucks Vans Buses ...

  • Page 5
    .... To fulfill our customers' desire for mobile independence, we have been developing and producing innovative passenger cars and powerful commercial vehicles for 120 years. We also offer our customers a full range of sophisticated financial services. We at DaimlerChrysler are working on this all over...

  • Page 6
    Mercedes Car Group Chrysler Group Commercial Vehicles DaimlerChrysler Financial Services

  • Page 7
    ... Position Capital Expenditure Research and Development Procurement and Supply Workforce Events after the End of the 2005 Financial Year Risk Report Outlook 70 Divisions 72 76 80 84 86 Mercedes Car Group Chrysler Group Commercial Vehicles Financial Services Other Activities 88 Cross-Divisional...

  • Page 8
    ... Corporate Governance Code 116 Report of the Supervisory Board 120 Members of the Supervisory Board 121 Report of the Audit Committee 122 122 Overview 124 Statement by the Board of Management 125 Report of Independent Registered Public Accounting Firm 126 Consolidated Financial Statements 203...

  • Page 9
    ... producing innovative and appealing products, offering customer-oriented services and consistently delivering top performance in all of these areas - that's what we are doing to ensure that DaimlerChrysler maintains and enhances its leading position in global markets. We are working on this with all...

  • Page 10
    ... daily lives. We are continually developing new and sustainable solutions for greater traffic safety, lower fuel consumption, reduced pollutant and noise emissions, and future-oriented transportation concepts. We act responsibly, transparently and reliably - both inside and outside our company. 5

  • Page 11
    Open-mindedness We have clear ideas about the future of our company, and we pursue our goals for the benefit of our customers, shareholders and employees. Our continued success depends on our ability to respond creatively to change. We know that the world is constantly on the move, and we are ...

  • Page 12
    .... Through our product design, automotive engineering and safety technology, we are pioneering innovators developing groundbreaking automotive concepts that promote individual mobility for millions of people all over the world. So that our customers experience the fascinating values embodied by our...

  • Page 13

  • Page 14
    Christoph Goeser has big ambitions and the right partner.

  • Page 15

  • Page 16
    Innovative "Our customers expect innovative advisory services. They have high demands, which we have been satisfying for many years. They trust us and recommend us to others. I am aware of this responsibility and do my best every day - in my own company, as chairman of the REM AG and as Honorary ...

  • Page 17

  • Page 18
    For Janice Ford-Johnson and her Jeep® Commander there is always something new to discover.

  • Page 19

  • Page 20
    Individual "There are no two days alike in my life. My job and my lively family make sure of that. My grandchildren Tamir and Taariq are the liveliest of all: fishing for salmon, inline skating, playing the drums - it's a good thing that Grandma's so active and has a car you can fit nearly ...

  • Page 21

  • Page 22
    You can rely on Jürgen Behm and his Actros.

  • Page 23

  • Page 24
    ...the right time in good condition. In a word: 'reliability'. That's why I decided on the Actros BlackEdition. And I would do the same thing again. Because it's never let me down." In 1896, Gottlieb Daimler built the first motorized truck in Stuttgart. Up to the present day, Mercedes-Benz trucks have...

  • Page 25

  • Page 26
    For over twenty years Bill Golling has offered his customers the right vehicle with the right financing solution by Chrysler Financial.

  • Page 27

  • Page 28
    ... operations or retail or lease offerings, I have found that their people, products and processes are solely dedicated to helping me sell more vehicles. Currently, Chrysler Financial finances more than 90 percent of our retail and lease customers. They provide an outstanding blend of customer service...

  • Page 29

  • Page 30
    .... This Annual Report provides you with detailed information on business developments, our financial situation and DaimlerChrysler in general. I'll begin with a brief overview of the current situation. DaimlerChrysler is one of the world's most renowned automotive companies, offering a broad spectrum...

  • Page 31
    ... will continue to supply vehicles tailored to local markets at competitive prices. Thanks to strong products - such as the new vehicles of the Axor and Atego families, the new Mercedes-Benz and Setra buses and the FUSO Canter - we set new records for unit sales of commercial vehicles in 2005. We are...

  • Page 32
    ...to experience "driving values" with our products. I have great confidence in our company. DaimlerChrysler undoubtedly has the potential to create sustainable value for you, our shareholders, and concurrently for our customers, our employees and society in general. My colleagues and I will make every...

  • Page 33
    ... | 52 Chairman of the Board of Management / Head of Mercedes Car Group | Appointed until 2010 Thomas W. LaSorda | 51 Chrysler Group | Appointed until 2007 Andreas Renschler | 47 Truck Group | Appointed until 2007 Bodo Uebber | 46 Finance & Controlling / Financial Services | Appointed until 2011...

  • Page 34
    ... 2009 Rüdiger Grube | 54 Corporate Development | Appointed until 2007 Eric R. Ridenour | 47 Chief Operating Officer (COO) Chrysler Group | Appointed until 2008 Thomas W. Sidlik | 56 Global Procurement & Supply | Appointed until 2008 Retired from the Board of Management: Jürgen E. Schrempp | 61...

  • Page 35
    ...American International Auto Show, the Mercedes Car Group presents the new M-Class and the Chrysler Group presents the new Dodge Charger. New Van Technology Center (VTC) opened. A total of 1,000 jobs from the Stuttgart region are brought together at the new VTC. The VTC will enable the Vans business...

  • Page 36
    ... on staff reductions at the Mercedes Car Group. The Board of Management approves a package of measures with the goal of reducing the Mercedes Car Group's workforce in Germany by 8,500 jobs. New factory for World Engine. In Dundee, Michigan, series production starts of the World Engine, developed...

  • Page 37
    ... for DaimlerChrysler's share price | Some 70,000 shareholders use our Personal Internet Service Development of DaimlerChrysler Shares and Important Indices End of 2005 End of 2004 05/04 % change DaimlerChrysler shares (in â,¬) DAX 30 Dow Jones Euro Stoxx 50 Dow Jones Industrial Average Nikkei...

  • Page 38
    ... share price benefited not only from an improved stock-market environment, but also from the growing confidence that the CORE efficiency-improving program at the Mercedes Car Group would be successfully implemented and that business was developing positively in the Commercial Vehicles and Financial...

  • Page 39
    ... capital-market communication included the Group's current development, the outlook for full-year 2005, the positioning of the divisions in their respective competitive environments and the strategic orientation of the Group. Expanded Investor Relations information service on the Internet. As a part...

  • Page 40
    ... electronic communication by Investor Relations. For example, it allows personal data in the share register to be viewed and processed online. In addition, shareholders can gain information on the company in electronic form even more effectively than before. Access to the Personal Internet Service...

  • Page 41
    Management Report Business developments at DaimlerChrysler in the year 2005 were generally satisfactory in view of the difficult market conditions. Revenues and unit sales increased again. We achieved the earnings target we had set for the Group - despite the substantial burdens of restructuring ...

  • Page 42
    ... Information Contents 30 Business and Strategy The company New management model Strategy Economy and the industry Business developments 55 Capital Expenditure 55 Research and Development 56 Procurement and Supply 56 Workforce 57 Events after the End of the 2005 Financial Year 58 Risk Report...

  • Page 43
    ...for special applications and the Unimog multi-function vehicle. The division's most important sales markets are the United States, with 22% of unit sales in 2005, Germany (13%), the other markets of Western Europe (20%), Asia (22%) and South America (7%). The Financial Services division supports the...

  • Page 44
    ...Vehicles Financial Services Other Activities 31% 33% 26% 9% 1% Mercedes Car Group Mercedes-Benz Passenger Cars smart Dodge Maybach Chrysler Group Chrysler Jeep ® Truck Group Financial Services Van, Bus, Others EADS (33%) Vans Buses & Coaches Trucks Europe/ Americas Latin America Europe, Africa...

  • Page 45
    ... from Mercedes-Benz, BlueTec diesel technology and Active Brake Assist for commercial vehicles, and the innovative Stow'n Goâ„¢ seating and storage system offered by the Chrysler Group's minivans. Most of these innovations benefit not just one of the Group's brands, but create competitive advantages...

  • Page 46
    ...Industry Holding Company (BAIC), obtained a license to produce the Mercedes-Benz C-Class and E-Class cars in August 2005. It is planned to produce 20,000 vehicles annually in China in the medium term. These models are to be produced at a new plant in the southeast of Beijing. The existing production...

  • Page 47
    ... product, growth rate (in %) 2004 2005 Global Automotive Markets Unit sales growth rate 2005/2004 (in %) Passenger cars Commercial vehicles 10 8 6 4 2 NAFTA Source: Global Insight Western Europe Japan Asia Other markets excluding Japan Western Europe Japan USA 1 South America 1 China Source...

  • Page 48
    ... Minivans SUVs 23% 21% 11% 19% 26% Commercial Vehicles Trucks Vans Buses 62% 33% 5% Sales of passenger cars and light trucks decreased in the United States towards the end of 2005 as a result of the repeated increase in fuel prices and lower sales incentives. However, the total market reached...

  • Page 49
    ... of 2005, the worldwide portfolio comprised 6.4 million leased and financed vehicles. New business decreased from â,¬50.9 billion to â,¬48.2 billion, largely due to the above-average volume of special-financing programs in 2004 (see pages 84 f). Revenues. DaimlerChrysler's total revenues increased...

  • Page 50
    ... relating to both the realignment of the smart business model (â,¬0.1 billion) and the headcount reduction program at Mercedes Car Group (â,¬0.1 billion). Selling expenses as a percentage of revenues were 8% in each of 2005 and 2004. General administrative expenses reached â,¬6.1 billion in 2005...

  • Page 51
    ...benefit costs. The comparatively low effective tax rate in 2005 primarily reflected the composition of the Group's pre-tax earnings, which included largely tax-free income from the settlement agreement associated with our investment in MFTBC, the sale of DaimlerChrysler's shares in MMC, and the sale...

  • Page 52
    ... Financial Statements | 203 Additional Information Operating profit Operating Profit (Loss) by Segment Amounts in millions of â,¬ Mercedes Car Group Chrysler Group Commercial Vehicles Financial Services Other Activities Eliminations DaimlerChrysler Group 1,666 1,427 1,332 1,250 456 (377) 5,754 2005...

  • Page 53
    ... development of unit sales in all business units, especially the international market success of the products of the Trucks business segment, as well as the efficiency improvements achieved by implementing the "Global Excellence" program. In total, unit sales increased by 16% to 824,900 trucks, vans...

  • Page 54
    ... of DASA AG in debis AirFinance, and MMC contributed an operating loss of â,¬27 million. Eliminations with an effect on the income statement resulted primarily from the leasing business in Germany and the increase in inventory financing of European dealers. Any gains or losses arising from vehicle...

  • Page 55
    .... -3 +56 . +16 Operating profit Pension and postretirement benefit expenses, other than current and prior service costs and settlement/ curtailment losses Operating (profit) loss from affiliated and associated companies and financial (income) loss from related operating companies Miscellaneous items...

  • Page 56
    ... in millions of â,¬ Mercedes Car Group Chrysler Group Commercial Vehicles Financial Services Other Activities Total Segments Eliminations DaimlerChrysler Group 2005 Operating profit (loss) Pension and postretirement benefit expenses, other than current and prior service costs and settlement...

  • Page 57
    ...required rates of return; in the year under review, the cost of capital amounted to 7% after taxes. At industrial division/business unit level, the cost of capital amounted to 11% before taxes; for the financial services business a cost of equity of 14% before taxes was used. Value Added = Profit...

  • Page 58
    ...Information Return on Net Assets (RONA) DaimlerChrysler Group (after taxes) (in %) 9 7.5 6 4.5 3 1.5 2001 2002 2003 2004 2005 Cost of Capital In % Group, after taxes Industrial divisions, before taxes Financial Services, before taxes 2005 2004 Return on net assets and value added Net operating...

  • Page 59
    ... related to industrial activities, after taxes Interest cost of pensions related to industrial activities, after taxes Net operating income 2,846 74 192 523 3,635 2,466 (108) 295 512 3,165 +15 . -35 +2 +15 Value Added Amounts in millions of â,¬ DaimlerChrysler Group 2005 2004 05/04 % change...

  • Page 60
    ..., pension asset management, market price risk management (foreign exchange rates, interest rates, and commodities) and credit and financial country risk management. Financial management is performed worldwide in a standardized way for all Group entities by Treasury. Financial management is guided by...

  • Page 61
    ... Financial country risk management includes various risk aspects: the risk from investments in subsidiaries and joint ventures, the risk from cross-border financing of Group companies in risk countries and the risk from direct sales to end customers in these countries. DaimlerChrysler has developed...

  • Page 62
    ... income in Germany. An additional factor was that increased payments were received by the industrial business from companies in the financial services business in connection with tax groups in the United States. The free cash flow was also increased by the sale of the Group's remaining shares in MMC...

  • Page 63
    ... from capital lease and residual value guarantees, amounted to â,¬80,932 million on December 31, 2005 (2004: â,¬76,270 million). Of the financial liabilities, â,¬76,786 million or 95% was accounted for by the financial services business (2004: â,¬67,940 million or 89%). Detailed information on the...

  • Page 64
    ... smaller issues of medium-term note programs in the form of private placements. In addition, the securitization of receivables, mainly in the field of financial services, was utilized particularly in the United States, but also in Canada and Germany. In 2005, DaimlerChrysler sold retail receivables...

  • Page 65
    ... of the Mercedes Car Group and competitive pressures at the Chrysler Group, an upgrade of the ratings for DaimlerChrysler is unlikely in the short term. Fitch noted that the financial profile of the Group remains strong. On August 2, 2005, Dominion Bond Rating Service (Dominion) changed the outlook...

  • Page 66
    ..., but also to the launch of new models and intense competition in the market. Receivables from financial services amounted to â,¬61.1 billion on December 31, 2005 (2004: â,¬56.8 billion). Adjusted for currency translation effects, the decrease amounted to â,¬1.5 billion. The outstanding balance...

  • Page 67
    ... rental payments resulting from the expanded operate lease portfolio and higher sales of vehicles with guaranteed residual values. At the balance sheet date 43% of all liabilities had a maturity of less than one year (2004: 42%). The funded status of the Group's pension obligations changed from...

  • Page 68
    ... in 2005 (2004: â,¬6.4 billion). For the Mercedes Car Group, the focus was on preparing for the production of the new M-Class and R-Class at the plant in Tuscaloosa, USA, the new V6 and V8 engines and the successors to the C-Class and the smart fortwo. The main areas for the Chrysler Group were...

  • Page 69
    ... by 2% at Commercial Vehicles, where employees were recruited due to the high demand for trucks, particularly in the Trucks Europe/Latin America and Trucks NAFTA business units. At the Mercedes Car Group (-1%), the Chrysler Group (-1%) and Financial Services (-1%), employment levels were slightly...

  • Page 70
    ... Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Events after the End of the 2005 Financial Year New management model for DaimlerChrysler. On January 24, 2006, DaimlerChrysler presented a new management model designed to improve the Group's competitiveness...

  • Page 71
    ... of applicable law and subject to continuous improvement, which is employed for the early detection, evaluation and management of risks. The risk management system is integrated into the value-based management and planning system. It is an integral part of the overall planning, control and reporting...

  • Page 72
    ... | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information The US economy is increasingly dependent on the inflow of foreign capital to finance its rapidly growing current-account deficit...

  • Page 73
    ...only reduce our earnings from the sale of new vehicles, but would also lead to lower prices in the usedcar market and thus to falling residual values. As a result of intensifying competition in Western Europe, the practice of offering discount financing and price incentives is spreading also in this...

  • Page 74
    ...| 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information DaimlerChrysler's Financial Services division is primarily involved in the provision of financing and leasing for Group products, as...

  • Page 75
    ... is related to the leasing and sales financing business operated by DaimlerChrysler Financial Services. The leasing and sales financing business enters into transactions with customers which primarily result in fixed-rate receivables. DaimlerChrysler's general policy is to match funding in terms of...

  • Page 76
    ...risk in 2005 and 2004 was not, and is currently not, material to the Group. Thus, DaimlerChrysler does not present the value-at-risk figures for the remaining equity price risk. Commodity price risks. Associated with DaimlerChrysler's business operations, the Group is exposed to changes in prices of...

  • Page 77
    ..., in South America, and increasingly in Central and Eastern Europe, due to the dynamic growth in purchasing power, improved infrastructures and the generally increasing need for mobility in those regions. The world economy Present economic conditions and global indicators for consumer, business and...

  • Page 78
    ..., the Chrysler Group will reduce costs by making more use of the existing know-how within the DaimlerChrysler Group and thus standardizing components and using shared vehicle architecture for several models. As a result of its generally improved competitiveness and the new products launched in...

  • Page 79
    ... to be supported with tailored financial services. For example, in November 2005 the division started business operations in China, where we are the first provider to offer customers and dealers financing and insurance packages for passenger cars and commercial vehicles from one source. In total, we...

  • Page 80
    ...-duty trucks. DaimlerChrysler also plans to invest substantial funds in the further expansion of its business activities in China. Investments in property, plant and equipment In billions of â,¬ DaimlerChrysler Group Mercedes Car Group Chrysler Group Commercial Vehicles Financial Services Other...

  • Page 81
    ... will be on the new models planned by the Mercedes Car Group and the Chrysler Group. Some of the key projects in the Commercial Vehicles division are the new truck platforms and new engines fulfilling future emission regulations in the United States, Western Europe and Japan. Significant expenditure...

  • Page 82
    ... America; changes in currency exchange rates, interest rates and in raw material prices; introduction of competing products; increased sales incentives; the effective implementation of our New Management Model, and the CORE program, including the new business model for smart, at the Mercedes Car...

  • Page 83
    ... of the prior year. The Chrysler Group slightly increased its unit sales compared with 2004, and the Commercial Vehicles division posted a significant rise. The Financial Services division continued its strategy of focusing on the core automotive business and supported the automotive divisions with...

  • Page 84
    ... • Numerous new products presented • Very high operating profit 84 Financial Services • Positive business developments in 2005 • Contract volume increases to â,¬117.7 billion • Market presence established to China • Toll Collect system running smoothly in Germany; conversion to new OBU...

  • Page 85
    ...Business developments affected by new models and restructuring measures. The Mercedes Car Group, comprising the brands Mercedes-Benz, Maybach, smart, Mercedes-Benz AMG and Mercedes-Benz McLaren, sold 1,216,800 vehicles in 2005 (2004 : 1,226,800). The success of the new models launched in the market...

  • Page 86
    ... of sporty sedans, station wagons, vans and sport-utility vehicles (SUV) into an independent individual profile, thereby enabling us to win over new customer groups for the Mercedes-Benz brand. The B-Class, which has been available in Europe since June 2005, met with a very positive response...

  • Page 87
    ... CORE program as a means of returning the Mercedes Car Group to lasting competitiveness. Our objective here is to achieve a return on sales of 7% by 2007. We systematically examined the entire value chain of the Mercedes Car Group in seven different task areas in terms of efficiency, costs and...

  • Page 88
    ...E-Class/CLS C-Class of which: CLK A/B-Class M/R-Class G-Class smart Mercedes Car Group of which: Germany Western Europe (excluding Germany) NAFTA United States (retail sales) South America Asia/Oceania (excluding Japan) Japan 1 Group sales, unless otherwise indicated (including leased vehicles) 75

  • Page 89
    ... remained difficult in North America, business developments at the Chrysler Group were generally positive in 2005, primarily due to successful new products and measures taken to reduce costs and improve quality. This was also reflected by the division's operating profit, which increased slightly...

  • Page 90
    ... days' supply (end of 2004: 600,600 vehicles and 81 days). Product offensive in 2005. In addition to improving efficiency and product quality, another strategic goal of the Chrysler Group is to achieve a sustained improvement in its competitive position as a result of launching new models. Therefore...

  • Page 91
    ..., the Chrysler Group has improved its manufacturing productivity by an industry-leading 19%. More flexibility in the plants. In order to make the plants even more flexible and competitive, new manufacturing technologies and processes have been added, so that multiple vehicles can be assembled on...

  • Page 92
    ... 2006, the Chrysler Group will begin production of two new SUVs for global markets inspired by these vehicles. The powerful yet fuel-efficient 2.4-liter World Engine and the state-of-the-art 2.0-liter turbo-diesel (for international markets) will be available for these compact SUVs. Unit sales 2005...

  • Page 93
    Commercial Vehicles Favorable developments in global commercial-vehicle markets | Positive trend continues for all business units | Implementation of "Global Excellence" initiative | Numerous new products presented | Very high operating profit 2005 2004 05/04 % change 1,332 34,764 1,184 1,226 718...

  • Page 94
    ...Financial Statements | 203 Additional Information From the premium product portfolio of DaimlerChrysler, the world's largest manufacturer of commercial vehicles with strong, attractive brands: the Mercedes-Benz Actros, the Freightliner Coronado and the FUSO Canter. (from left to right) Truck sales...

  • Page 95
    ...in September 2005. At the Amsterdam Commercial Vehicle Show in October 2005, the Trucks Europe/Latin America business unit presented a range of impressive new truck products, such as the Actros "Cruiser" 1860 LS concept truck and equipment for new applications for Axor construction vehicles. We also...

  • Page 96
    ... in 2005 1 in 1,000 units 05/04 % change +16 +2 +24 +18 +12 +1 -0 +2 -2 +7 +1 +23 +21 +11 -2 +39 Total thereof: Vans Trucks 2 Buses & Coaches Other products 3 Europe thereof: Germany Western Europe (excluding Germany) thereof: United Kingdom France Italy NAFTA thereof: United States South America...

  • Page 97
    ... with the Group's vehicle brands in 2005. Detailed discussions with dealers led to the creation of new financial products for contract extensions (bridge leases) and for the signing of new leasing and financing contracts ahead of time (lease pull-ahead). Demand for Freightliner trucks was very...

  • Page 98
    ... market. In November 2005, the division became the first financial services company to offer passenger car and truck financing, as well as insurance, in China. The offerings target both dealers and retail customers. Through its activities, Financial Services is supporting the DaimlerChrysler Group...

  • Page 99
    ... on sale of DaimlerChrysler's Off-Highway business unit | Disposal of shares in Mitsubishi Motors Corporation 2005 Amounts in millions of â,¬ Operating profit Revenues Investments in property, plant and equipment Research and development expenditure Employees (Dec. 31) 2004 05/04 % change EADS...

  • Page 100
    ... will open up new business opportunities for the German aerospace industry. The agreement to further develop the Ariane program and recent European Mars research initiatives are particularly positive signals in this regard. Despite tight defense budgets in Europe, EADS expects to achieve further...

  • Page 101
    ... in which the Group is present. This is why economic, ecological and social responsibility is firmly anchored in our corporate strategy. We are convinced that entrepreneurial success and social responsibility go hand in hand, and that value creation always depends on value orientation within society...

  • Page 102
    ... Activities in 2005 92 Human Resources • Number of employees worldwide at prior year's level • Further enhancement of Global Human Resources Strategy • Workforce reduction program being implemented at Mercedes Car Group and in preparation for Group administrative functions • Implementation...

  • Page 103
    ... earth's resources and help to preserve an intact environment for present and future generations. We live up to our responsibilities toward our customers, employees, shareholders and society as a whole; the DaimlerChrysler Group regards itself as an integral part of all the communities within which...

  • Page 104
    ...is an integral part of our corporate strategy. It is in line with our internal guidelines and is a key component of our corporate values and business strategy, whose objectives are to ensure the Group's long-term business success. Activities in 2005. Sustainability management at DaimlerChrysler was...

  • Page 105
    ...Europe/Latin America and Trucks NAFTA regions. The number of employees at the Mercedes Car Group (- 1%), the Chrysler Group (- 1%) and Financial Services (- 1%) was slightly lower than the previous year's figures. Further enhancement of the Global Human Resources Strategy. Our Global Human Resources...

  • Page 106
    ... - In industry-related service units, we have so far transferred approximately 4,000 employees to the services-sector earnings agreement. - In 2005, approximately 3,500 new skilled workers were transferred to the internal staff-rotation program ("DCmove"). Of this total, 350 were deployed in jobs at...

  • Page 107
    ... identify in a timely manner the new demands that will be placed on our products and our company in the future. The vision of accident-free driving. Our long-term objective is to develop vehicles for our customers so that they can drive accident-free. As we work toward this goal, the new S-Class and...

  • Page 108
    ... in 2005 with three Mercedes-Benz Citaro fuel-cell buses. As a result, there are now 36 Citaro buses with fuel-cell drive on the road in regular service around the world - by far the largest test fleet. In the year under review, more than 100 of our fuel-cell vehicles were in use with customers...

  • Page 109
    ... board of TÃœV Management GmbH confirmed that we have integrated environmental protection considerations into the development process of the S-Class. BlueTec technology firmly established in the market. In 2004, we celebrated the market launch of BlueTec engines for Mercedes-Benz commercial vehicles...

  • Page 110
    .... In addition, we supply the Aero HEV low-entry city bus from FUSO with hybrid drive. Hybrid Sprinters are also in the trial stage and are being used by customers in everyday operations. And the FUSO Canter truck with hybrid drive is about to go into series production. Alternative fuels as a future...

  • Page 111
    ... Supply Chrysler Group and Procurement Commercial Vehicles, as well as International Procurement Services, which is responsible for purchasing non-production materials and services. Our primary objective is to increase corporate value by optimizing the Group's supply chain network. In concrete terms...

  • Page 112
    ... tools and processes, we are able to continuously evaluate the financial health of our suppliers and to react in sufficient time. We thus minimized the impact on production and financial risks. In addition, managing the continued increase in raw-material prices has developed into a key competitive...

  • Page 113
    ... Solidarity development aid program established in 1996, DaimlerChrysler is constructing new sports facilities in primary and middle schools in China and Tibet, primarily to the benefit of less privileged groups. In Germany, we supported various cultural events in 2005 with the aim of helping young...

  • Page 114
    ... - to other countries and Group companies. In 2005, we developed a global HIV/AIDS policy to provide a framework for tailored programs throughout all operations. Training gives young people a valuable opportunity. Job training not only helps individuals to make a living, it also contributes to the...

  • Page 115
    ...governance to reflect international standards and to be transparent. On the following pages, the Board of Management and the Supervisory Board explain the principles of corporate governance at DaimlerChrysler. Further information can be found on our website at www.daimlerchrysler.com/corpgov_e. 102

  • Page 116
    ... Statements | 203 Additional Information Contents 104 Corporate Governance Report General conditions DaimlerChrysler's corporate bodies Principles guiding our actions Directors' Dealings 116 Report of the Supervisory Board • Cooperation between the Supervisory Board and the Board of Management...

  • Page 117
    ... law, particularly the Stock Corporation Act, the Codetermination Act and legislation concerning capital markets, as well as from the Memorandum and Articles of Incorporation of DaimlerChrysler AG. As our shares are listed on stock exchanges outside Germany, and in particular on the New York Stock...

  • Page 118
    ... AG comprised ten members. The duties of the Board of Management include setting the Group's strategic focus and managing its business. It is also responsible for preparing the individual and consolidated annual financial statements and the quarterly financial statements, and for installing...

  • Page 119
    ... processing of such complaints. Code of Ethics. In July 2003, we approved a "Code of Ethics". This code addresses the members of the Board of Management and a large number of senior officers who have a significant influence on planning and reporting in the context of the annual and interim financial...

  • Page 120
    ... Report and on our website at www.daimlerchrysler.com/ir/calendar. Ad-hoc publicity. In addition to its regular scheduled reporting, DaimlerChrysler discloses, in accordance with applicable law without delay, any so-called inside information which directly affects the Group. Major shareholdings...

  • Page 121
    ...officer Senior officer Board of Management Board of Management Senior officer Senior officer Acqusition of shares, Frankfurt Acqusition of shares, Frankfurt Acqusition of shares, New York Acqusition of shares, New York Acqusition of shares, New York Acqusition of shares, New York Sale of shares, New...

  • Page 122
    ... 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Date Name Function Type and place of transaction Number of shares 1 Price Total volume (rounded) Aug. 1, 2005 Aug. 1, 2005 Aug...

  • Page 123
    ... be taken into account, such as the development of total shareholder return in relation to comparable automotive companies. When setting the level of the annual bonus, the Presidential Committee of the Supervisory Board also has the possibility to reflect the Board of Management members' individual...

  • Page 124
    ...122 Consolidated Financial Statements | 203 Additional Information - The new model of stock-based compensation, which was applied for the first time in the 2005 financial year, is the socalled Performance Phantom Share Plan. This plan is linked to the long-term development of corporate value and is...

  • Page 125
    ... the Stock Option Plan 2003. Further details of directors' dealings can be found in the Corporate Governance Report (see page 107 ff). Information on stock-based compensation is given in Note 24 of the Notes to the Consolidated Financial Statements. Board of Management Members whose term of office...

  • Page 126
    ... paid in 2005 to the members of the Supervisory Board of DaimlerChrysler AG for their services to the Group therefore totaled â,¬2.0 million. Loans to members of the Board of Management or the Supervisory Board. In 2005, no advances or loans existed to members of the Board of Management or the...

  • Page 127
    ... on a deductible for negligence on the part of the members of the Supervisory Board, as DaimlerChrysler AG endeavors to staff its Supervisory Board with prominent members of the community from Germany and abroad who have extensive business experience, and the company may be impeded in this aim if...

  • Page 128
    04 Essentials | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information On the part of members of the Board of Management, the D&O insurance of DaimlerChrysler AG envisages a deductible for ...

  • Page 129
    ...and fully informed by the Board of Management about the situation of the Group, particularly its business and financial developments, personnel situation, investment plans and questions of fundamental business policy and strategy. The Board of Management presented the Group's key performance figures...

  • Page 130
    ... for the planned sale of a vehicle testing facility in the United States and for additional investments for the production of vehicles in China by the Chrysler Group. The Supervisory Board received reports on the course of business and the competitive situation at the Chrysler Group, the strategy of...

  • Page 131
    ...January 2006, the Board of Management reported to the Supervisory Board on plans for a new management structure at the Group and the schedule prepared for its implementation. In this context, the Supervisory Board approved various changes in Board of Management members' responsibilities. In February...

  • Page 132
    ... Essentials | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information the German Commercial Code (HGB), the US GAAP consolidated financial statements presented in this report grant exemption...

  • Page 133
    ...Floor Policy and Codetermination, German Metalworkers' Union (IG Metal) Lynton R. Wilson Toronto Chairman of the Board of CAE Inc.; Chairman Emeritus, Nortel Networks Corporation 1 Representative of the employees Gerd Rheude 1 Wörth Chairman of the Works Council, Wörth Plant, DaimlerChrysler AG...

  • Page 134
    ..., the company's risk reports and the risks from legal proceedings, the reports and programs of the Corporate Audit department, the Group's effective tax rate and tax structure, new statutory developments of relevance for the Audit Committee, and the Group's interest-rate and exchange-rate management...

  • Page 135
    ... of America (U.S. GAAP). In order to comply with Section 57 and 58 of the EGHGB (Introductory Law to German Commercial Code) in conjunction with Section 292a of the HGB (German Commercial Code), the consolidated financial statements were supplemented with the Group management report and additional...

  • Page 136
    ... Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Contents 122 Overview 124 Statement by the Board of Management 125 Report of Independent Registered Public Accounting Firm 126 Consolidated Statements of Income (Loss) 128 Consolidated...

  • Page 137
    ... The Board of Management of DaimlerChrysler AG is responsible for preparing the accompanying financial statements. We have implemented effective controlling and monitoring systems to guarantee compliance with accounting principles and the adequacy of reporting. These systems include the application...

  • Page 138
    04 Essentials | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Report of Independent Registered Public Accounting Firm The Supervisory Board DaimlerChrysler AG: We have audited the...

  • Page 139
    ...Statements of Income (Loss) Consolidated (in millions of â,¬, except per share amounts) Note Year ended December 31, 2003 2005 2004 Revenues Cost of sales Gross profit Selling, administrative and other expenses Research and development Other income Goodwill impairment Turnaround plan Chrysler Group...

  • Page 140
    ... - - 1,705 - Revenues Cost of sales Gross profit Selling, administrative and other expenses Research and development Other income Goodwill impairment Turnaround plan Chrysler Group Income before financial income Impairment of investment in EADS Other financial income (expense), net (therein loss on...

  • Page 141
    ... 31, 2005 2004 Industrial Business 1 At December 31, 2005 2004 Financial Services 1, 2 At December 31, 2005 2004 Assets Goodwill Other intangible assets Property, plant and equipment, net Investments and long-term financial assets Equipment on operating leases, net Fixed assets Inventories Trade...

  • Page 142
    ... | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Consolidated Statements of Changes in Stockholders' Equity Accumulated other comprehensive loss Capital stock Additional paid...

  • Page 143
    ...Gains) losses on disposals of fixed assets/securities Change in trading securities Change in accrued liabilities Turnaround plan expenses (gains) - Chrysler Group Turnaround plan payments - Chrysler Group Net changes in inventory-related receivables from financial services Changes in other operating...

  • Page 144
    ...Gains) losses on disposals of fixed assets/securities Change in trading securities Change in accrued liabilities Turnaround plan expenses (gains) - Chrysler Group Turnaround plan payments - Chrysler Group Net changes in inventory-related receivables from financial services Changes in other operating...

  • Page 145
    ..., plant and equipment Investments in affiliated companies Loans to affiliated companies Investments in associated companies Investments in related companies Loans to associated and related companies Long-term securities Other loans Investments and long-term financial assets Equipment on operating...

  • Page 146
    ... | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Depreciation/Amortization Balance at January 1, 2005 Change in Currency consolidated change companies ReclassificaAdditions tions Balance at December 31, 2005 Balance at December 31, 2005 Book Value...

  • Page 147
    ...of DaimlerChrysler Financial Services AG. Transactions between the Group's industrial and financial services business activities principally represent intercompany sales of products, intercompany borrowings and related interest, and other support under special vehicle financing programs. The effects...

  • Page 148
    ... are not made available timely to DaimlerChrysler in order to apply the equity method of accounting, the Group's proportionate share of the results of operations of this associated company are included in DaimlerChrysler's consolidated financial statements on a three month lag. Foreign Currencies...

  • Page 149
    ... of market competition, and consumer demand for the product. The Group may offer a variety of sales incentive programs at any point in time, including: cash offers to dealers and consumers, lease subsidies which reduce the consumer's monthly lease payment, or reduced financing rate programs offered...

  • Page 150
    ... 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Sales of receivables. The Group transfers significant amounts of automotive finance receivables in the ordinary course of business to...

  • Page 151
    ... statements. The expected return on plan assets is determined based on the expected long-term rate of return on plan assets and the fair value or market-related value of plan assets. Amortization of an unrecognized net gain or loss is included as a component of the Group's net periodic benefit plan...

  • Page 152
    ... | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Property, Plant and Equipment. Property, plant and equipment is valued at acquisition or manufacturing costs plus the fair value of...

  • Page 153
    ... the change in the fair value of the retained interests, which are recorded in a manner similar to available-for-sale securities, net of related income taxes as a component of accumulated other comprehensive loss until realized. The Group is not aware of an active market for the purchase or sale of...

  • Page 154
    .... Liabilities for loss contingencies are regularly adjusted as further information develops or circumstances change. The accrued liability for expected warranty-related costs is established when the product is sold, upon lease inception, or when a new warranty program is initiated. Estimates...

  • Page 155
    ... early retirement program and other types of benefit arrangements with the same or similar terms. The ATZ program is an early retirement program in Germany designed to create an incentive for employees within a certain age group, to transition from full or part-time employment into retirement before...

  • Page 156
    ... proceeds to purchase property and equipment, which is leased by the Group and used in the normal course of business. At the end of the lease term, DaimlerChrysler generally has the option to purchase the property and equipment or re-lease the property and equipment under new terms. Total assets of...

  • Page 157
    ... market value at December 31, 2005, of DaimlerChrysler's investment in EADS based on quoted market prices was â,¬8,507 million. The following table presents summarized U.S. GAAP financial information for EADS, which was the basis for applying the equity method in the Group's consolidated financial...

  • Page 158
    04 Essentials | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information MMC. On April 22, 2004, the Board of Management and the Supervisory Board of DaimlerChrysler AG decided to withdraw ...

  • Page 159
    ... with the Federal Republic of Germany to develop and, within a joint venture company, install and operate a system for electronic collection of tolls from all commercial vehicles over 12t GVW using German highways. DaimlerChrysler Financial Services AG and Deutsche Telekom AG each hold a 45% equity...

  • Page 160
    .... See Note 31 for additional information. Each of the consortium members (including DaimlerChrysler Financial Services AG) have provided guarantees supporting the obligations of Toll Collect GmbH towards the Federal Republic of Germany relating to the completion and operation of the toll collection...

  • Page 161
    ... MFTBC. On March 14, 2003, as part of the Group's global commercial vehicle strategy, DaimlerChrysler acquired from MMC a 43% non-controlling interest in Mitsubishi Fuso Truck and Bus Corporation ("MFTBC") for â,¬764 million in cash plus certain direct acquisition costs. MFTBC is involved in the...

  • Page 162
    ... of the Other Activities segment. On December 27, 2005, as part of the Group's ongoing strategy to focus on its core automotive business, DaimlerChrysler entered into a share sale and purchase agreement with the Swedish investor group EQT regarding the sale of a major portion of its Off-Highway...

  • Page 163
    ... GmbH was accounted for using the equity method. In November 2005, the Group exercised its Put Option to sell its remaining 40%-stake in ThyssenKrupp Presta SteerTec (formerly: Mercedes-Benz Lenkungen GmbH) to ThyssenKrupp for a purchase price of â,¬28 million. In September 2003, as part of the...

  • Page 164
    ... recorded in income for 2005, primarily within cost of sales. An amount of â,¬100 million is available under the terms of a deferred compensation fund set up under the Compensation Framework Agreement (ERA), a collective bargaining agreement in Germany. Under this agreement, DaimlerChrysler had to...

  • Page 165
    ... Supervisory Board approved a multi-year turnaround plan for the Chrysler Group in February 2001. The related charges are presented as a separate line item on the accompanying consolidated statements of income (loss) and are not reflected in cost of sales or selling, administrative and...

  • Page 166
    ... related taxes and customs duties, income from various employee canteens and other miscellaneous items. Gains on sales of property, plant and equipment for the year ended December 31, 2005, include a â,¬240 million gain on the sale of the Chrysler Group's Arizona Proving Grounds vehicle testing...

  • Page 167
    ... AG approved a multi-year turnaround plan for the Chrysler Group. Key initiatives for the multi-year turnaround plan included a workforce reduction and an elimination of excess capacity. The net gains recorded for the plan in 2005 were â,¬36 million (â,¬23 million net of taxes) and are presented...

  • Page 168
    ... | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information 8. Financial Income (Expense), net (in millions of â,¬) Income from investments of which from affiliated companies â,¬ 28...

  • Page 169
    ...the purpose of financing the flood disaster in Germany and effective only for the calendar year 2003, the increased federal corporate tax rate of 26.5% instead of 25% was used for calculating the current taxes in Germany. For German companies, the deferred taxes at December 31, 2005 were calculated...

  • Page 170
    ... | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information In 2005, tax free income at foreign companies arose relating to the compensation for MFTBC, the sale of other securities and in connection with the net periodic postretirement benefit costs. The...

  • Page 171
    ... amounting to â,¬868 million (2004: â,¬1,640 million). The corporate tax NOLs mainly relate to losses of foreign companies and are partly limited in their use to the Group. Of the total amount of corporate tax NOLs at December 31, 2005, â,¬25 million expire at various dates from 2006 through 2009...

  • Page 172
    04 Essentials | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information The assets held for sale and liabilities held for sale are shown on a consolidated basis and are comprised of the ...

  • Page 173
    ... Mercedes Car Group Chrysler Commerc. Group Vehicles Financial Services Other Activities At December 31, 2005 2004 1,628 (941) 687 2,504 3,191 1,309 (806) 503 2,168 2,671 total (in millions of â,¬) 2005 2004 199 177 1,035 898 547 670 63 62 37 196 1,881 2,003 The company conducts...

  • Page 174
    ... on Operating Leases, net Information with respect to changes in the Group's equipment on operating leases is presented in the Consolidated Fixed Assets Schedule included herein. Of the total equipment on operating leases, â,¬33,644 million represent automobiles and commercial vehicles (2004...

  • Page 175
    ... represent loans for floor financing programs for vehicles sold by the Group's automotive businesses to the dealer or loans for assets purchased by the dealer from third parties, primarily used vehicles traded in by the dealer's customer or real estate such as dealer showrooms. Other receivables...

  • Page 176
    ...Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Sales-type and direct-financing contracts. Finance leases consist of sales-type leases of vehicles to the Group's direct retail customers...

  • Page 177
    ... Available-for-sale Trading Participations with a quoted market price Participations without a quoted market price Total participations Long-term securities 332 256 588 Short-term securities At December 31, 2005 2004 3,725 159 3,884 (in millions of â,¬) 4,773 163 4,936 606 The main changes in...

  • Page 178
    ... among the line item "Proceeds from disposals of businesses", the remaining proceeds are disclosed in the line item "Proceeds from sales of securities (other than trading)". The unrealized losses included in the 2005 statement of income related to trading securities were â,¬6 million (2004 and 2003...

  • Page 179
    ...500 million as well as by issuing new, no par value registered shares in exchange for non-cash contributions totaling â,¬500 million and to increase capital stock by issuing Ordinary Shares to employees totaling â,¬26 million. Furthermore, the Board of Management, with the consent of the Supervisory...

  • Page 180
    ... period) times the quoted price of DaimlerChrysler's Ordinary Shares (determined as an average price over a specified period at the end of the four-year service). The number of phantom shares that vest will depend on the achievement of Group performance goals as compared with competitive and...

  • Page 181
    ... Option Plans into SARs. All terms and conditions of the new SARs are identical to the stock options which were replaced, except that the holder of a SAR has the right to receive cash equal to the difference between the exercise price of the original option and the fair value of the Group's stock at...

  • Page 182
    ... presents the underlying assumptions as well as the resulting fair values and total values (in millions of â,¬): Stock Appreciation Rights Plans. In 1999, DaimlerChrysler established a stock appreciation rights plan (the "SAR Plan 1999") which provides eligible employees of the Group with the right...

  • Page 183
    ...degree of achievement of corporate goals derived from competitive and internal planning benchmarks and the value of DaimlerChrysler Ordinary Shares at the end of three year performance periods. The benchmarks are return on net assets and return on sales. In 2005 no medium term incentive awards (2004...

  • Page 184
    ... | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information The increase in accrued other postretirement benefits of â,¬1.8 billion resulted mainly from currency exchange rate effects and...

  • Page 185
    ...changes Service cost Interest cost Plan amendments Actuarial losses Acquisitions and other Settlement/curtailment loss Benefits paid Projected benefit obligations at end of year Change in plan assets: Fair value of plan assets at beginning of year Foreign currency exchange rate changes Actual return...

  • Page 186
    ...and plan assets is generally December 31. The measurement date for the Group's net periodic pension cost is principally January 1. Assumed discount rates and rates of increase in remuneration used in calculating the projected benefit obligations together with long-term rates of return on plan assets...

  • Page 187
    ... rates used in 2005. Net Pension Cost. The components of net pension cost were for the years ended December 31, 2005, 2004 and 2003 as follows: (in millions of â,¬) Service cost Interest cost Expected return on plan assets Amortization of: Unrecognized net actuarial (gains) losses Unrecognized...

  • Page 188
    04 Essentials | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Contributions. Employer contributions to the Group's defined benefit pension plans were â,¬1,661 million and â,¬1,649 ...

  • Page 189
    ... beginning of year Foreign currency exchange rate changes Service cost Interest cost Plan amendments Actuarial losses Settlement/curtailment loss Benefits paid Accumulated postretirement benefit obligations at end of year Change in plan assets: Fair value of plan assets at beginning of year Foreign...

  • Page 190
    ... of return on plan assets is the same as the rate applied in 2005. The assumptions have a significant effect on the amounts reported for the Group's health care plans. The following schedule presents the effects of a one-percentage-point change in assumed ultimate health care cost inflation rates as...

  • Page 191
    ... in this year. In 2005, "Changes from prior period product guarantees issued" are partly offset by payments received from suppliers in settlement of claims for recovery of the costs for recall campaigns. (in millions of â,¬) Product guarantees Accrued sales incentives Accrued personnel and social...

  • Page 192
    ...| 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information The Group also offers customers the opportunity to purchase separately priced extended warranty and maintenance contracts. The revenue from these contracts is deferred at...

  • Page 193
    ... May 2006, and a multi-currency revolving credit facility for working capital purposes which allows DaimlerChrysler AG and several subsidiaries to borrow up to $7 billion until May 2008. A part of the $18 billion facility serves as backup for commercial paper drawings. 27. Trade Liabilities (in...

  • Page 194
    ... 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information As of December 31, 2005, other liabilities include tax liabilities of â,¬1,147 million (2004: â,¬803 million) and social benefits due...

  • Page 195
    ... claim. In October 2005, DaimlerChrysler Australia/Pacific Pty. Ltd. ("DCAuP") settled the previously reported actions filed in the Supreme Court of New South Wales by National Australia Bank Limited and the liquidator in connection with the financial failure of a customer. The settlement agreement...

  • Page 196
    ... in Daimler-Benz AG were involuntarily exchanged for DaimlerChrysler shares. Some shareholders claim that the ratio used in the course of the merger did not correspond to the actual value of the Daimler-Benz shares. An expert commissioned by the court presented his report in December 2005. In it...

  • Page 197
    ... Services North America LLC ("DCSNA") settled the two previously reported class action lawsuits alleging racially discriminatory credit practices. The court approved settlements require, among other things, training programs for employees, consumer financial literacy programs, and community...

  • Page 198
    ..., to MAN AG for CAD195 million. In September 2002, MAN filed a claim against Freightliner Ltd. (formerly Western Star) with the London Commercial Court for fraud and breach of representations and warranties in the share purchase agreement, alleging that ERF's accounts and financial statements were...

  • Page 199
    ... and certain of its employees, as well as additional changes to its business practices and compliance programs. DaimlerChrysler also determined that for a number of years a portion of the taxes related to compensation paid to expatriate employees was not properly reported. In connection with this...

  • Page 200
    ...-consolidated affiliated companies and third parties. Such guarantees provide the holder with the right to return purchased assets or products back to the Group, partially also in connection with a future purchase of products or services. The table above excludes residual value guarantees related to...

  • Page 201
    ... Vehicle Division vans in Europe. It would also delay the launch of future vehicle projects in our Vans business unit. The Group also enters into noncancellable operating leases for facilities, plant and equipment. Total rentals under operating leases charged to expense in 2005 in the statement...

  • Page 202
    ... are summarized below: Financial Assets and Securities. The fair values of securities are determined using quoted market prices. The Group has certain equity investments in related and affiliated companies which are not presented in the table since they are not publicly traded and determination of...

  • Page 203
    .... Financial Liabilities. The fair value of publicly traded debt was determined using quoted market prices. The fair values of other long-term bonds were determined by discounting future cash flows, using market interest rates over the remaining term. The carrying amounts of commercial paper...

  • Page 204
    ... currently in revenues or cost of sales, if the transactions being hedged involve sales (including the leasing and sales financing business) or production of the Group's products. When the hedged items are recognized in financial income, net, net gains and losses from fluctuations in the fair value...

  • Page 205
    ... it does not retain a beneficial interest in the transferred receivables (whole loan sales). In whole loan sales, all risk of loss related to the sold receivables is transferred from DaimlerChrysler to the purchaser. The Group generally remains as servicer for the sold receivables. Trusts and Third...

  • Page 206
    ...a 10% and 20% adverse change in the discount rate used to compute the fair value of the retained subordinated securities would be a decrease of â,¬2 million and â,¬3 million, respectively. Similar changes to the monthly prepayment speed and the expected remaining net credit losses as a percentage of...

  • Page 207
    ... credit losses of sold receivables and other receivables, of those companies that sell receivables, as of and for the years ended December 31, 2005 and 2004, respectively, were as follows: (in millions of â,¬) Managed retail receivables Managed wholesale receivables Total receivables managed Less...

  • Page 208
    ..., assembly and sale of vans, trucks, buses and Unimogs as well as related parts and accessories. The products are sold mainly under the brand names Mercedes-Benz, Setra, Freightliner, and Mitsubishi and Fuso. Financial Services. The activities in this segment primarily extend to the marketing of...

  • Page 209
    ... the purchase of property, plant and equipment. Segment information as of and for the years ended December 31, 2005, 2004 and 2003 follows: (in millions of â,¬) Mercedes Car Group Chrysler Commercial Group Vehicles Financial Services Other Activities Discontinued Total Operations/ Segments...

  • Page 210
    ... values of certain leased vehicles. In addition, the Chrysler Group and Financial Services segments negotiated reduced pricing on certain retail financing programs offered by the Chrysler Group as sales incentives in 2003. The adjusted pricing reflected the then current favorable funding environment...

  • Page 211
    ...â,¬241 million related to the participation in Toll Collect. The charges in 2004 were mainly the result of revaluing the system's total costs and extra operating expenses required to guarantee the start of the system on January 1, 2005. In 2004, the operating profit of the Financial Services segment...

  • Page 212
    ... 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Revenues from external customers presented by geographic region are as follows: (in millions of â,¬) 2005 2004 2003 1 Excluding Germany Germany Western Europe 1 United States Other American countries...

  • Page 213
    ... are the joint development and production of engines, the shared use of vehicle architecture and the joint production of passenger cars, sports utility vehicles and pickup trucks in Europe, North America, China and South Africa. DaimlerChrysler has an agreement with McLaren Cars Ltd., a wholly owned...

  • Page 214
    ... Concerning German Corporate Governance Code Compensation. The total compensation paid by Group related companies to the members of the Board of Management of DaimlerChrysler AG is calculated from the amount of compensation paid in cash and from benefits in kind. Thereof â,¬9.3 million account for...

  • Page 215
    ... Board of DaimlerChrysler AG for services in all capacities to the Group amounted to â,¬2.0 million. The individual compensation paid to the members of the Supervisory Board is disclosed as part of the compensation report in accordance with a recommendation of the German corporate governance code...

  • Page 216
    04 Essentials | 28 Management Report | 70 Divisions | 88 Cross-Divisional Activities | 102 Corporate Governance | 122 Consolidated Financial Statements | 203 Additional Information Transition to International Financial Reporting Standards (IFRS) EU directive on the application of IFRS. In July ...

  • Page 217
    ...the balance sheets: Property, plant and equipment Leased equipment Current assets of which: Liquid assets Total assets Stockholders' equity of which: Capital stock Accrued liabilities Liabilities of which: Financial liabilities Debt-to-equity ratio Mid- and long-term provisions and liabilities Short...

  • Page 218
    ... Notes to the Consolidated Financial Statements. Excluding one-time positive tax effects, especially due to extra distribution of 10.23 â,¬ per share. For our stockholders who are taxable in Germany. There is no tax credit from 2001 due to a change in the corporate income tax system. Periods before...

  • Page 219
    ...that company's shares in total (see page 25). Goodwill. Goodwill is the term for the amount by which the price paid for a company exceeds the value of the shareholders' equity of that company when its assets and liabilities are valued at current market value. IFRS - International Financial Reporting...

  • Page 220
    ... CORE Corporate Governance Deferred taxes Dividends EADS Earnings per share (EPS) Equity method Financial income Goodwill Integrity Code Investor Relations Liabilities Net assets Net income Operating profit Pension obligations Portfolio changes Profitability Quality Ratings Revenues RONA - return on...

  • Page 221
    ...Representative Offices Berlin Phone +49 30 2594 1100 Fax +49 30 2594 1109 Hanoi Phone +84 8 8958 710 Fax +84 8 8958 714 Mexico City Phone +52 55 5081 7313 Fax +52 55 5081 7479 Skopje Phone +389 2 2580 000 Fax +389 2 2580 401 Abidjan Phone +225 21 75 1001 Fax +225 21 75 1090 Hong Kong Phone +86...

  • Page 222
    ....com/investors Additional information on the Internet. Special information on our shares and earnings developments can be found in the "Investor Relations" section of our website. It includes the Group's annual and interim reports, the company financial statements of DaimlerChrysler AG, and reports...

  • Page 223
    DaimlerChrysler Worldwide Mercedes Car Group Europe Production locations Sales outlets Revenues in millions of â,¬ Employees 10 30,088 92,930 Chrysler Group Commercial Vehicles Sales Organization Automotive Businesses Financial Services Other Activities 3,060 244 19 17,201 57,477 5,333 42,...

  • Page 224
    Financial Calendar 2006 Annual Press Conference Mercedes Event Center (MEC) Sindelfingen February 16, 2006 10 a.m. CET Analysts' and Investors' Conference Call February 16, 2006 2.30 p.m. CET Presentation of the Annual Report 2005 March 6, 2006 Annual Meeting Messe Berlin April 12, 2006 10 ...

  • Page 225
    DaimlerChrysler Stuttgart, Germany Auburn Hills, USA www.daimlerchrysler.com